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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended September 30, 2004



OR



 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934



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|                       |  |                                                                                                                    |  |                        |  |                                   
|---------------------- |  | ------------------------------------------------------------------------------------------------------------------ |  | ---------------------- |  | ----------------------------------
|Commission File Number |  | Exact Name of Registrant as Specified in its Charter, Principal Office Address and Telephone Number                |  | State of Incorporation |  | I.R.S. Employer Identification No.
|1-16827                |  | Premcor Inc. 1700 East Putnam Avenue, Suite 400 Old
Greenwich, Connecticut 06870 (203) 698-7500                    |  | Delaware               |  | 43-1851087                        
|                       |  |                                                                                                                    | 
|1-11392                |  | The Premcor Refining Group Inc. 1700 East Putnam Avenue,
Suite 400 Old Greenwich, Connecticut 06870 (203) 698-7500 |  | Delaware               |  | 43-1491230                        



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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



|                                |  |        |  |    
|------------------------------- |  | ------ |  | ---
|Premcor Inc.                    |  | Yes  þ |  | No ̈
|The Premcor Refining Group Inc. |  | Yes  þ |  | No ̈



Indicate by check mark if the
registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  þ    No ̈



Number of
shares of the registrants common stock (only one class for each registrant) outstanding as of October 28, 2004:



|                                |  |                                                                                              
|------------------------------- |  | ---------------------------------------------------------------------------------------------
|Premcor Inc.                    |  | 89,201,110 shares                                                                            
|The Premcor Refining Group Inc. |  | 100 shares (100% owned by Premcor USA Inc., a direct wholly owned subsidiary of Premcor Inc.)



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##### Table of Contents

Form 10-Q

September 30, 2004

Table of Contents



|        |  |                                                                                                                 |  |   
|------- |  | --------------------------------------------------------------------------------------------------------------- |  | --
|        |  | PART I. FINANCIAL INFORMATION                                                                                   |  |   
|Item 1. |  | Financial Statements (unaudited)                                                                                |  |   
|        |  | Premcor Inc.:                                                                                                   |  |   
|        |  | Report of Independent Registered Public Accounting Firm                                                         |  | 2 
|        |  | Condensed Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003                            |  | 3 
|        |  | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2004 and 2003 |  | 4 
|        |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2004 and 2003           |  | 5 
|        |  |                                                                                                                
|        |  | The Premcor Refining Group Inc.:                                                                                |  |   
|        |  | Report of Independent Registered Public Accounting Firm                                                         |  | 6 
|        |  | Condensed Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003                            |  | 7 
|        |  | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2004 and 2003 |  | 8 
|        |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2004 and 2003           |  | 9 
|        |  | Notes to Condensed Consolidated Financial Statements (Premcor Inc. and The Premcor Refining Group Inc.)         |  | 10
|        |  |                                                                                                                
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                           |  | 38
|        |  |                                                                                                                
|Item 3. |  | Quantitative and Qualitative Disclosures about Market Risk                                                      |  | 54
|        |  |                                                                                                                
|Item 4. |  | Controls and Procedures                                                                                         |  | 55
|        |  | PART II. OTHER INFORMATION                                                                                      |  |   
|        |  |                                                                                                                
|Item 1. |  | Legal Proceedings                                                                                               |  | 56
|        |  |                                                                                                                
|Item 6. |  | Exhibits                                                                                                        |  | 56





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##### Table of Contents

FORM 10-Q - PART I. FINANCIAL INFORMATION



This Quarterly Report on Form 10-Q represents information for two registrants, Premcor Inc. and its indirect, wholly owned subsidiary, The Premcor Refining Group Inc. Premcor Inc. owns all of the outstanding common stock of Premcor USA Inc.
(Premcor USA), and Premcor USA owns all of the outstanding common stock of The Premcor Refining Group Inc. (together with its consolidated subsidiaries, PRG). The Premcor Refining Group Inc. and its indirect subsidiary, Port
Arthur Coker Company L.P. (PACC), are Premcor Inc.s principal operating subsidiaries. PRG owns and operates four refineries. The results of operations for Premcor Inc. principally reflect the results of operations of PRG, except
for certain pipeline operations, general and administrative costs, interest income and interest expense at stand-alone Premcor Inc. and/or its other subsidiaries. Included in this Quarterly Report on Form 10-Q are the condensed consolidated balance
sheets, statements of operations, and statements of cash flows for the applicable periods for Premcor Inc. and The Premcor Refining Group Inc. The information reflected in the condensed consolidated footnotes are equally applicable to both companies
except where indicated otherwise.



1



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##### Table of Contents

ITEM 1. FINANCIAL STATEMENTS



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors of Premcor Inc.:



We have reviewed the
accompanying condensed consolidated balance sheet of Premcor Inc. and subsidiaries (the Company) as of September 30, 2004, and the related condensed consolidated statements of operations for the three-month and nine-month periods ended
September 30, 2004 and 2003, and of cash flows for the nine-month periods ended September 30, 2004 and 2003. These interim financial statements are the responsibility of the Companys management.



We conducted our reviews in accordance with standards of the Public Company Accounting
Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.



Based on our reviews, we are not aware of any
material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.



We have previously audited, in accordance with standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2003, and the related consolidated statements of operations, stockholders equity, and cash flows for the year then ended (not presented herein);
and in our report dated February 20, 2004 (which report includes an explanatory paragraph relating to the Companys change in 2002 in its method of accounting for stock based compensation issued to employees as discussed in Note 2 to those 2003
consolidated financial statements), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2003 is fairly
stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.



Deloitte & Touche LLP



Stamford, Connecticut

October 27, 2004



2



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##### Table of Contents

Premcor Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited, in millions, except share data)



|                                                                                                                                                                                 |  |                   |         |                  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ---------------- | - | ------- | -
|                                                                                                                                                                                 |  | September 30,2004 |         | December 31,2003 |  
|ASSETS                                                                                                                                                                           |  |                   |         |                  |   |         |  
|CURRENT ASSETS:                                                                                                                                                                  |  |                   |         |                  |   |         |  
|Cash and cash equivalents                                                                                                                                                        |  | $                 | 648.7   |                  | $ | 426.7   |  
|Short-term investments                                                                                                                                                           |  |                   | 7.0     |                  |   | 5.9     |  
|Cash and cash equivalents restricted for debt service                                                                                                                            |  |                   | 54.6    |                  |   | 66.6    |  
|Accounts receivable, net of allowance of $1.8 and $1.9                                                                                                                           |  |                   | 786.4   |                  |   | 623.5   |  
|Inventories                                                                                                                                                                      |  |                   | 842.3   |                  |   | 630.3   |  
|Prepaid expenses and other                                                                                                                                                       |  |                   | 72.7    |                  |   | 92.7    |  
|Deferred income taxes                                                                                                                                                            |  |                   | 27.2    |                  |   |        |  
|                                                                                                                                                                                 |  |                   |         |                  |   |         |  
|Total current assets                                                                                                                                                             |  |                   | 2,438.9 |                  |   | 1,845.7 |  
|                                                                                                                                                                                 |  |                  
|PROPERTY, PLANT AND EQUIPMENT, NET                                                                                                                                               |  |                   | 2,686.5 |                  |   | 1,739.8 |  
|GOODWILL                                                                                                                                                                         |  |                   | 27.6    |                  |   | 14.2    |  
|OTHER ASSETS                                                                                                                                                                     |  |                   | 166.1   |                  |   | 115.6   |  
|                                                                                                                                                                                 |  |                   |         |                  |   |         |  
|                                                                                                                                                                                 |  | $                 | 5,319.1 |                  | $ | 3,715.3 |  
|                                                                                                                                                                                 |  |                   |         |                  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                             |  |                   |         |                  |   |         |  
|                                                                                                                                                                                 |  |                  
|CURRENT LIABILITIES:                                                                                                                                                             |  |                   |         |                  |   |         |  
|Accounts payable                                                                                                                                                                 |  | $                 | 918.5   |                  | $ | 779.9   |  
|Accrued expenses and other                                                                                                                                                       |  |                   | 230.0   |                  |   | 125.8   |  
|Accrued taxes other than income                                                                                                                                                  |  |                   | 49.6    |                  |   | 53.8    |  
|Current portion of long-term debt                                                                                                                                                |  |                   | 38.8    |                  |   | 26.1    |  
|                                                                                                                                                                                 |  |                   |         |                  |   |         |  
|Total current liabilities                                                                                                                                                        |  |                   | 1,236.9 |                  |   | 985.6   |  
|                                                                                                                                                                                 |  |                  
|LONG-TERM DEBT                                                                                                                                                                   |  |                   | 1,788.8 |                  |   | 1,426.0 |  
|DEFERRED INCOME TAXES                                                                                                                                                            |  |                   | 138.4   |                  |   | 0.6     |  
|OTHER LONG-TERM LIABILITIES                                                                                                                                                      |  |                   | 177.6   |                  |   | 157.9   |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                                                    |  |                   |         |                  |   |         |  
|                                                                                                                                                                                 |  |                  
|COMMON STOCKHOLDERS EQUITY:                                                                                                                                                     |  |                   |         |                  |   |         |  
|Common, $0.01 par value per share, 150,000,000 authorized, 89,194,610 issued and outstanding as of September 30, 2004; 74,119,694 issued and
outstanding as of December 31, 2003 |  |                   | 0.9     |                  |   | 0.7     |  
|Paid-in capital                                                                                                                                                                  |  |                   | 1,694.3 |                  |   | 1,186.8 |  
|Retained earnings (accumulated deficit)                                                                                                                                          |  |                   | 282.2   |                  |   | (42.3   | )
|                                                                                                                                                                                 |  |                   |         |                  |   |         |  
|Total common stockholders equity                                                                                                                                                |  |                   | 1,977.4 |                  |   | 1,145.2 |  
|                                                                                                                                                                                 |  |                   |         |                  |   |         |  
|                                                                                                                                                                                 |  | $                 | 5,319.1 |                  | $ | 3,715.3 |  
|                                                                                                                                                                                 |  |                   |         |                  |   |         |  



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



3



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##### Table of Contents

Premcor Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(unaudited, in millions, except per share data)



|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | - | -------------------------------------- | - | ------- | ---- |  | - | -------- | - |  | - | ------- | -
|                                                                                                               |  | For the Three MonthsEnded September 30, |         |   | For the Nine MonthsEnded September 30, |  
|                                                                                                               |  | 2004                                    |         |   | 2003                                   |   |         | 2004 |  |   | 2003     |  
|NET SALES AND OPERATING REVENUES                                                                               |  | $                                       | 4,407.7 |   |                                        | $ | 2,431.5 |      |  | $ | 10,533.1 |   |  | $ | 6,547.8 |  
|                                                                                                               |  |                                         |         |  
|EXPENSES:                                                                                                      |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|Cost of sales                                                                                                  |  |                                         | 3,845.0 |   |                                        |   | 2,119.1 |      |  |   | 9,114.2  |   |  |   | 5,702.7 |  
|Operating expenses                                                                                             |  |                                         | 219.2   |   |                                        |   | 134.8   |      |  |   | 563.7    |   |  |   | 386.4   |  
|General and administrative expenses                                                                            |  |                                         | 36.6    |   |                                        |   | 21.9    |      |  |   | 92.5     |   |  |   | 49.3    |  
|Stock-based compensation                                                                                       |  |                                         | 4.9     |   |                                        |   | 4.5     |      |  |   | 14.7     |   |  |   | 13.2    |  
|Depreciation                                                                                                   |  |                                         | 26.3    |   |                                        |   | 16.2    |      |  |   | 68.1     |   |  |   | 46.8    |  
|Amortization                                                                                                   |  |                                         | 14.2    |   |                                        |   | 11.7    |      |  |   | 43.3     |   |  |   | 30.3    |  
|Refinery restructuring and other charges                                                                       |  |                                         | 1.1     |   |                                        |   | 2.9     |      |  |   | 10.4     |   |  |   | 18.6    |  
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|                                                                                                               |  |                                         | 4,147.3 |   |                                        |   | 2,311.1 |      |  |   | 9,906.9  |   |  |   | 6,247.3 |  
|                                                                                                               |  |                                         |         |  
|OPERATING INCOME                                                                                               |  |                                         | 260.4   |   |                                        |   | 120.4   |      |  |   | 626.2    |   |  |   | 300.5   |  
|                                                                                                               |  |                                         |         |  
|Interest and finance expense                                                                                   |  |                                         | (35.1   | ) |                                        |   | (32.0   | )    |  |   | (101.7   | ) |  |   | (89.3   | )
|Loss on extinguishment of debt                                                                                 |  |                                         |        |   |                                        |   |        |      |  |   | (3.6     | ) |  |   | (10.4   | )
|Interest income                                                                                                |  |                                         | 1.7     |   |                                        |   | 1.5     |      |  |   | 5.0      |   |  |   | 4.4     |  
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                                                          |  |                                         | 227.0   |   |                                        |   | 89.9    |      |  |   | 525.9    |   |  |   | 205.2   |  
|                                                                                                               |  |                                         |         |  
|Income tax provision                                                                                           |  |                                         | (82.9   | ) |                                        |   | (32.3   | )    |  |   | (196.8   | ) |  |   | (71.3   | )
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|INCOME FROM CONTINUING OPERATIONS                                                                              |  |                                         | 144.1   |   |                                        |   | 57.6    |      |  |   | 329.1    |   |  |   | 133.9   |  
|                                                                                                               |  |                                         |         |  
|Loss from discontinued operations, net of income tax benefit of $1.8 and $2.9 for 2004; $0.3 and $4.3 for 2003 |  |                                         | (2.8    | ) |                                        |   | (0.4    | )    |  |   | (4.6     | ) |  |   | (6.9    | )
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|NET INCOME                                                                                                     |  | $                                       | 141.3   |   |                                        | $ | 57.2    |      |  | $ | 324.5    |   |  | $ | 127.0   |  
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|NET INCOME PER COMMON SHARE:                                                                                   |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|Basic:                                                                                                         |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|Income from continuing operations                                                                              |  | $                                       | 1.61    |   |                                        | $ | 0.78    |      |  | $ | 3.97     |   |  | $ | 1.85    |  
|Discontinued operations                                                                                        |  |                                         | (0.03   | ) |                                        |   | (0.01   | )    |  |   | (0.06    | ) |  |   | (0.09   | )
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|Net income                                                                                                     |  | $                                       | 1.58    |   |                                        | $ | 0.77    |      |  | $ | 3.91     |   |  | $ | 1.76    |  
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|Weighted average common shares outstanding                                                                     |  |                                         | 89.2    |   |                                        |   | 74.1    |      |  |   | 82.9     |   |  |   | 72.3    |  
|Diluted:                                                                                                       |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|Income from continuing operations                                                                              |  | $                                       | 1.58    |   |                                        | $ | 0.77    |      |  | $ | 3.88     |   |  | $ | 1.83    |  
|Discontinued operations                                                                                        |  |                                         | (0.03   | ) |                                        |   | (0.01   | )    |  |   | (0.05    | ) |  |   | (0.09   | )
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|Net income                                                                                                     |  | $                                       | 1.55    |   |                                        | $ | 0.76    |      |  | $ | 3.83     |   |  | $ | 1.74    |  
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|Weighted average common shares outstanding                                                                     |  |                                         | 91.3    |   |                                        |   | 75.0    |      |  |   | 84.8     |   |  |   | 73.1    |  



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



4



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##### Table of Contents

Premcor Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited, in millions)



|                                                                         |  |                                        |          |   |      |   |        |  
|------------------------------------------------------------------------ |  | -------------------------------------- | -------- | - | ---- | - | ------ | -
|                                                                         |  | For the Nine MonthsEnded September 30, |         
|                                                                         |  | 2004                                   |          |   | 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |  |                                        |          |   |      |   |        |  
|Net income                                                               |  | $                                      | 324.5    |   |      | $ | 127.0  |  
|                                                                         |  |                                       
|Adjustments:                                                             |  |                                        |          |   |      |   |        |  
|Loss from discontinued operations                                        |  |                                        | 4.6      |   |      |   | 11.2   |  
|Depreciation                                                             |  |                                        | 68.1     |   |      |   | 46.8   |  
|Amortization                                                             |  |                                        | 49.7     |   |      |   | 37.2   |  
|Deferred income taxes                                                    |  |                                        | 110.6    |   |      |   | 63.4   |  
|Stock-based compensation                                                 |  |                                        | 14.7     |   |      |   | 13.2   |  
|Refinery restructuring and other charges                                 |  |                                        | (4.8     | ) |      |   | 13.6   |  
|Write-off of deferred financing costs                                    |  |                                        | 3.6      |   |      |   | 5.4    |  
|Other, net                                                               |  |                                        | 2.4      |   |      |   | 6.0    |  
|Cash (reinvested in) provided by working capital:                        |  |                                        |          |   |      |   |        |  
|Accounts receivable, prepaid expenses and other                          |  |                                        | (130.7   | ) |      |   | (172.2 | )
|Inventories                                                              |  |                                        | (95.7    | ) |      |   | (170.0 | )
|Accounts payable, accrued expenses, taxes other than income, and other   |  |                                        | 241.8    |   |      |   | 93.4   |  
|Cash and cash equivalents restricted for debt service                    |  |                                        | 8.1      |   |      |   | 7.6    |  
|                                                                         |  |                                        |          |   |      |   |        |  
|Net cash provided by operating activities of continuing operations       |  |                                        | 596.9    |   |      |   | 82.6   |  
|Net cash used in operating activities of discontinued operations         |  |                                        | (4.6     | ) |      |   | (4.4   | )
|                                                                         |  |                                        |          |   |      |   |        |  
|Net cash provided by operating activities                                |  |                                        | 592.3    |   |      |   | 78.2   |  
|                                                                         |  |                                        |          |   |      |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |  |                                        |          |   |      |   |        |  
|Expenditures for property, plant and equipment                           |  |                                        | (253.4   | ) |      |   | (113.0 | )
|Expenditures for turnaround                                              |  |                                        | (83.9    | ) |      |   | (12.7  | )
|Expenditures for refinery acquisition, net                               |  |                                        | (874.8   | ) |      |   | (476.0 | )
|Earn-out payment associated with refinery acquisition                    |  |                                        | (13.4    | ) |      |   |       |  
|Proceeds from sale of asset                                              |  |                                        |         |   |      |   | 40.0   |  
|Purchase of short-term investments                                       |  |                                        | (1.1     | ) |      |   | (1.0   | )
|Cash and cash equivalents restricted for investment in capital additions |  |                                        |         |   |      |   | 2.2    |  
|                                                                         |  |                                        |          |   |      |   |        |  
|Net cash used in investing activities                                    |  |                                        | (1,226.6 | ) |      |   | (560.5 | )
|                                                                         |  |                                        |          |   |      |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |  |                                        |          |   |      |   |        |  
|Proceeds from issuance of common stock                                   |  |                                        | 493.0    |   |      |   | 306.5  |  
|Proceeds from issuance of long-term debt                                 |  |                                        | 400.0    |   |      |   | 825.0  |  
|Long-term debt and capital lease payments                                |  |                                        | (24.5    | ) |      |   | (309.3 | )
|Cash and cash equivalents restricted for debt repayment                  |  |                                        | 3.9      |   |      |   | 0.2    |  
|Deferred financing costs                                                 |  |                                        | (16.1    | ) |      |   | (25.5  | )
|                                                                         |  |                                        |          |   |      |   |        |  
|Net cash provided by financing activities                                |  |                                        | 856.3    |   |      |   | 796.9  |  
|                                                                         |  |                                        |          |   |      |   |        |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                |  |                                        | 222.0    |   |      |   | 314.6  |  
|CASH AND CASH EQUIVALENTS, beginning of period                           |  |                                        | 426.7    |   |      |   | 167.4  |  
|                                                                         |  |                                        |          |   |      |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                 |  | $                                      | 648.7    |   |      | $ | 482.0  |  
|                                                                         |  |                                        |          |   |      |   |        |  



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



5



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors of The Premcor Refining Group Inc.:



We
have reviewed the accompanying condensed consolidated balance sheet of The Premcor Refining Group Inc. and subsidiaries (the Company) as of September 30, 2004, and the related condensed consolidated statements of operations for the
three-month and nine-month periods ended September 30, 2004 and 2003, and of cash flows for the nine-month periods ended September 30, 2004 and 2003. These interim financial statements are the responsibility of the Companys management.



We conducted our reviews in accordance with standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less
in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.



Based on our reviews, we are not aware of
any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.



We have previously audited, in accordance with standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2003, and the related consolidated statements of operations, stockholders equity, and cash flows for the year then ended (not presented herein);
and in our report dated February 20, 2004 (which report includes an explanatory paragraph relating to the Companys change in 2002 in its method of accounting for stock based compensation issued to employees as discussed in Note 2 to those 2003
consolidated financial statements and the restatement in 2002 of the consolidated financial statements to give effect to the contribution of Sabine River Holding Corp. common stock owned by Premcor Inc. to the Company, which was accounted for in a
manner similar to a pooling of interests as described in Note 4 to those 2003 consolidated financial statements), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.



Deloitte & Touche LLP



Stamford, Connecticut

October 27, 2004



6



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##### Table of Contents

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(unaudited, in millions, except share data)



|                                                                                |  |                   |         |                  |   |        
|------------------------------------------------------------------------------- |  | ----------------- | ------- | ---------------- | - | -------
|                                                                                |  | September 30,2004 |         | December 31,2003
|ASSETS                                                                          |  |                   |         |                  |   |        
|                                                                                |  |                  
|CURRENT ASSETS:                                                                 |  |                   |         |                  |   |        
|Cash and cash equivalents                                                       |  | $                 | 528.5   |                  | $ | 376.9  
|Short-term investments                                                          |  |                   | 1.7     |                  |   | 1.7    
|Cash and cash equivalents restricted for debt service                           |  |                   | 54.6    |                  |   | 66.6   
|Accounts receivable, net of allowance of $1.8 and $1.9                          |  |                   | 786.0   |                  |   | 623.4  
|Receivables from affiliates                                                     |  |                   | 82.0    |                  |   | 22.5   
|Inventories                                                                     |  |                   | 842.3   |                  |   | 630.3  
|Prepaid expenses and other                                                      |  |                   | 72.8    |                  |   | 93.1   
|Deferred income taxes                                                           |  |                   | 24.3    |                  |   |       
|                                                                                |  |                   |         |                  |   |        
|Total current assets                                                            |  |                   | 2,392.2 |                  |   | 1,814.5
|                                                                                |  |                  
|PROPERTY, PLANT AND EQUIPMENT, NET                                              |  |                   | 2,641.6 |                  |   | 1,715.5
|GOODWILL                                                                        |  |                   | 27.6    |                  |   | 14.2   
|OTHER ASSETS                                                                    |  |                   | 166.1   |                  |   | 115.6  
|                                                                                |  |                   |         |                  |   |        
|                                                                                |  | $                 | 5,227.5 |                  | $ | 3,659.8
|                                                                                |  |                   |         |                  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                            |  |                   |         |                  |   |        
|                                                                                |  |                  
|CURRENT LIABILITIES:                                                            |  |                   |         |                  |   |        
|Accounts payable                                                                |  | $                 | 916.3   |                  | $ | 779.9  
|Payables to affiliates                                                          |  |                   | 209.2   |                  |   | 49.0   
|Accrued expenses and other                                                      |  |                   | 158.8   |                  |   | 127.9  
|Accrued taxes other than income                                                 |  |                   | 49.9    |                  |   | 53.8   
|Current portion of long-term debt                                               |  |                   | 38.5    |                  |   | 25.8   
|                                                                                |  |                   |         |                  |   |        
|Total current liabilities                                                       |  |                   | 1,372.7 |                  |   | 1,036.4
|                                                                                |  |                  
|LONG-TERM DEBT                                                                  |  |                   | 1,779.1 |                  |   | 1,416.0
|DEFERRED INCOME TAXES                                                           |  |                   | 139.5   |                  |   | 22.9   
|OTHER LONG-TERM LIABILITIES                                                     |  |                   | 177.6   |                  |   | 157.9  
|COMMITMENTS AND CONTINGENCIES                                                   |  |                   |         |                  |   |        
|                                                                                |  |                  
|COMMON STOCKHOLDERS EQUITY:                                                    |  |                   |         |                  |   |        
|Common, $0.01 par value per share, 1,000 authorized, 100 issued and outstanding |  |                   |        |                  |   |       
|Paid-in capital                                                                 |  |                   | 1,232.3 |                  |   | 822.7  
|Retained earnings                                                               |  |                   | 526.3   |                  |   | 203.9  
|                                                                                |  |                   |         |                  |   |        
|Total common stockholders equity                                               |  |                   | 1,758.6 |                  |   | 1,026.6
|                                                                                |  |                   |         |                  |   |        
|                                                                                |  | $                 | 5,227.5 |                  | $ | 3,659.8
|                                                                                |  |                   |         |                  |   |        



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



7



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##### Table of Contents

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(unaudited, in millions)



|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | - | -------------------------------------- | - | ------- | ---- |  | - | -------- | - |  | - | ------- | -
|                                                                                                               |  | For the Three MonthsEnded September 30, |         |   | For the Nine MonthsEnded September 30, |  
|                                                                                                               |  | 2004                                    |         |   | 2003                                   |   |         | 2004 |  |   | 2003     |  
|NET SALES AND OPERATING REVENUES                                                                               |  | $                                       | 4,407.3 |   |                                        | $ | 2,431.1 |      |  | $ | 10,531.4 |   |  | $ | 6,546.3 |  
|                                                                                                               |  |                                         |         |  
|EXPENSES:                                                                                                      |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|Cost of sales                                                                                                  |  |                                         | 3,847.5 |   |                                        |   | 2,121.0 |      |  |   | 9,120.4  |   |  |   | 5,707.4 |  
|Operating expenses                                                                                             |  |                                         | 217.9   |   |                                        |   | 133.5   |      |  |   | 560.5    |   |  |   | 383.4   |  
|General and administrative expenses                                                                            |  |                                         | 36.6    |   |                                        |   | 22.3    |      |  |   | 92.2     |   |  |   | 49.6    |  
|Stock-based compensation                                                                                       |  |                                         | 4.9     |   |                                        |   | 4.5     |      |  |   | 14.7     |   |  |   | 13.2    |  
|Depreciation                                                                                                   |  |                                         | 26.0    |   |                                        |   | 15.9    |      |  |   | 67.2     |   |  |   | 46.1    |  
|Amortization                                                                                                   |  |                                         | 14.2    |   |                                        |   | 11.7    |      |  |   | 43.3     |   |  |   | 30.3    |  
|Refinery restructuring and other charges                                                                       |  |                                         | 1.1     |   |                                        |   | 2.9     |      |  |   | 10.4     |   |  |   | 18.6    |  
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|                                                                                                               |  |                                         | 4,148.2 |   |                                        |   | 2,311.8 |      |  |   | 9,908.7  |   |  |   | 6,248.6 |  
|                                                                                                               |  |                                         |         |  
|OPERATING INCOME                                                                                               |  |                                         | 259.1   |   |                                        |   | 119.3   |      |  |   | 622.7    |   |  |   | 297.7   |  
|                                                                                                               |  |                                         |         |  
|Interest and finance expense                                                                                   |  |                                         | (34.7   | ) |                                        |   | (31.6   | )    |  |   | (100.6   | ) |  |   | (87.7   | )
|Loss on extinguishment of debt                                                                                 |  |                                         |        |   |                                        |   |        |      |  |   | (3.6     | ) |  |   | (8.1    | )
|Interest income                                                                                                |  |                                         | 1.2     |   |                                        |   | 1.4     |      |  |   | 4.2      |   |  |   | 4.0     |  
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                                                          |  |                                         | 225.6   |   |                                        |   | 89.1    |      |  |   | 522.7    |   |  |   | 205.9   |  
|                                                                                                               |  |                                         |         |  
|Income tax provision                                                                                           |  |                                         | (82.4   | ) |                                        |   | (32.1   | )    |  |   | (195.6   | ) |  |   | (71.5   | )
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|INCOME FROM CONTINUING OPERATIONS                                                                              |  |                                         | 143.2   |   |                                        |   | 57.0    |      |  |   | 327.1    |   |  |   | 134.4   |  
|                                                                                                               |  |                                         |         |  
|Loss from discontinued operations, net of income tax benefit of $1.8 and $2.9 for 2004; $0.3 and $4.3 for 2003 |  |                                         | (2.8    | ) |                                        |   | (0.4    | )    |  |   | (4.6     | ) |  |   | (6.9    | )
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  
|NET INCOME                                                                                                     |  | $                                       | 140.4   |   |                                        | $ | 56.6    |      |  | $ | 322.5    |   |  | $ | 127.5   |  
|                                                                                                               |  |                                         |         |   |                                        |   |         |      |  |   |          |   |  |   |         |  



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



8



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##### Table of Contents

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(unaudited, in millions)



|                                                                         |  |                                        |          |   |      |   |        |  
|------------------------------------------------------------------------ |  | -------------------------------------- | -------- | - | ---- | - | ------ | -
|                                                                         |  | For the Nine MonthsEnded September 30, |         
|                                                                         |  | 2004                                   |          |   | 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                    |  |                                        |          |   |      |   |        |  
|Net income                                                               |  | $                                      | 322.5    |   |      | $ | 127.5  |  
|                                                                         |  |                                       
|Adjustments:                                                             |  |                                        |          |   |      |   |        |  
|Loss from discontinued operations                                        |  |                                        | 4.6      |   |      |   | 11.2   |  
|Depreciation                                                             |  |                                        | 67.2     |   |      |   | 46.1   |  
|Amortization                                                             |  |                                        | 49.7     |   |      |   | 37.2   |  
|Deferred income taxes                                                    |  |                                        | 92.2     |   |      |   | 41.9   |  
|Stock-based compensation                                                 |  |                                        | 14.7     |   |      |   | 13.2   |  
|Refinery restructuring and other charges                                 |  |                                        | (4.8     | ) |      |   | 13.6   |  
|Write-off of deferred financing costs                                    |  |                                        | 3.6      |   |      |   | 5.4    |  
|Other, net                                                               |  |                                        | 3.2      |   |      |   | 5.8    |  
|Cash (reinvested in) provided by working capital:                        |  |                                        |          |   |      |   |        |  
|Accounts receivable, prepaid expenses and other                          |  |                                        | (130.7   | ) |      |   | (172.5 | )
|Inventories                                                              |  |                                        | (95.7    | ) |      |   | (170.0 | )
|Accounts payable, accrued expenses, taxes other than income, and other   |  |                                        | 167.2    |   |      |   | 93.6   |  
|Affiliate receivables and payables                                       |  |                                        | 100.6    |   |      |   | 22.8   |  
|Cash and cash equivalents restricted for debt service                    |  |                                        | 8.1      |   |      |   | 7.6    |  
|                                                                         |  |                                        |          |   |      |   |        |  
|Net cash provided by operating activities of continuing operations       |  |                                        | 602.4    |   |      |   | 83.4   |  
|Net cash used in operating activities of discontinued operations         |  |                                        | (4.6     | ) |      |   | (4.4   | )
|                                                                         |  |                                        |          |   |      |   |        |  
|Net cash provided by operating activities                                |  |                                        | 597.8    |   |      |   | 79.0   |  
|                                                                         |  |                                        |          |   |      |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                    |  |                                        |          |   |      |   |        |  
|Expenditures for property, plant and equipment                           |  |                                        | (231.8   | ) |      |   | (112.9 | )
|Expenditures for turnaround                                              |  |                                        | (83.9    | ) |      |   | (12.7  | )
|Expenditures for refinery acquisition, net                               |  |                                        | (874.8   | ) |      |   | (476.0 | )
|Earn-out payment associated with refinery acquisition                    |  |                                        | (13.4    | ) |      |   |       |  
|Proceeds from sale of asset                                              |  |                                        |         |   |      |   | 40.0   |  
|Cash and cash equivalents restricted for investment in capital additions |  |                                        |         |   |      |   | 2.2    |  
|                                                                         |  |                                        |          |   |      |   |        |  
|Net cash used in investing activities                                    |  |                                        | (1,203.9 | ) |      |   | (559.4 | )
|                                                                         |  |                                        |          |   |      |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |  |                                        |          |   |      |   |        |  
|Proceeds from issuance of long-term debt                                 |  |                                        | 400.0    |   |      |   | 825.0  |  
|Long-term debt and capital lease payments                                |  |                                        | (24.3    | ) |      |   | (269.1 | )
|Capital contributions, net                                               |  |                                        | 394.2    |   |      |   | 263.3  |  
|Cash and cash equivalents restricted for debt repayment                  |  |                                        | 3.9      |   |      |   | 0.2    |  
|Deferred financing costs                                                 |  |                                        | (16.1    | ) |      |   | (25.5  | )
|                                                                         |  |                                        |          |   |      |   |        |  
|Net cash provided by financing activities                                |  |                                        | 757.7    |   |      |   | 793.9  |  
|                                                                         |  |                                        |          |   |      |   |        |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                |  |                                        | 151.6    |   |      |   | 313.5  |  
|CASH AND CASH EQUIVALENTS, beginning of period                           |  |                                        | 376.9    |   |      |   | 119.7  |  
|                                                                         |  |                                        |          |   |      |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                 |  | $                                      | 528.5    |   |      | $ | 433.2  |  
|                                                                         |  |                                        |          |   |      |   |        |  



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



9



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##### Table of Contents

FORM 10-Q  PART I

ITEM 1. FINANCIAL STATEMENTS (continued)



Premcor Inc. and Subsidiaries

The Premcor Refining Group Inc. and Subsidiaries



Notes to Condensed Consolidated Financial Statements (Unaudited)



September 30, 2004

(Tabular amounts in millions, except per share data)



|1. | Nature of Business and Basis of Preparation
|-- | -------------------------------------------



Premcor Inc., together with its consolidated subsidiaries (the Company), is an independent petroleum refiner and supplier of unbranded
transportation fuels, heating oil, petrochemical feedstocks, petroleum coke and other petroleum products. Premcor Inc. owns all of the outstanding common stock of Premcor USA Inc. (Premcor USA), and Premcor USA owns all of the
outstanding common stock of The Premcor Refining Group Inc. (together with its consolidated subsidiaries, PRG). The Premcor Refining Group Inc. and its indirect subsidiary, Port Arthur Coker Company L.P. (PACC), are Premcor
Inc.s principal operating subsidiaries. PRG owns and operates four refineries with a combined total throughput capacity of 790,000 barrels per day (bpd). The refineries are located in Port Arthur, Texas; Memphis, Tennessee; Lima,
Ohio; and Delaware City, Delaware.



All of the operations of
the Company are in the United States. These operations are related to the refining of crude oil and other petroleum feedstocks into petroleum products and are all considered part of one business segment. The Companys earnings and cash flows
from operations are primarily dependent upon processing crude oil and selling quantities of refined petroleum products at margins sufficient to cover operating expenses. Crude oil and refined petroleum products are commodities, and factors largely
out of the Companys control can cause these commodity prices to vary, in a wide range, over a short period of time. This potential margin volatility can have a material effect on the Companys financial position, earnings, and cash flows.



The accompanying unaudited condensed consolidated financial
statements of Premcor Inc. and The Premcor Refining Group Inc., and their respective subsidiaries, are presented pursuant to the rules and regulations of the United States Securities and Exchange Commission in accordance with the disclosure
requirements for the quarterly report on Form 10-Q. In the opinion of management of the Company, the unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) necessary to fairly state
the results for the interim periods presented. Operating results for the three and nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004. These unaudited
condensed consolidated notes apply equally to the Company and PRG unless otherwise noted. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in Premcor
Inc.s and PRGs Annual Report on Form 10-K for the year ended December 31, 2003.



Certain reclassifications have been made to the prior years financial statements to conform to classifications used in the current year. In particular, net sales and operating revenues and cost of sales for 2003
have been reclassified to conform to the fourth quarter 2003 application of Emerging Issues Task Force (EITF) Issue No. 03-11, Reporting Gains and Losses on Derivative Instruments That Are Subject to SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, and Not Held for Trading Purposes.In accordance with EITF 03-11, cost of sales includes the net effect of the buying and selling of crude oil to supply the Companys refineries. The
reclassification had no effect on previously reported operating income or net income.



10



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##### Table of Contents

|2. | Acquisitions
|-- | ------------



Effective May 1, 2004, the Company completed an agreement with Motiva Enterprises LLC (Motiva) to purchase its Delaware City refining complex
located in Delaware City, Delaware. The Delaware City refinery has a rated crude unit throughput capacity of 180,000 bpd. Also included in the purchase is a 2,400 tons per day petroleum coke gasification unit, a 180 megawatt cogeneration facility,
8.5 million barrels of crude oil, intermediates, blendstock, and product tankage, and a 50,000 bpd truck-loading rack. The purchase price was $800 million ($780 million cash and $20 million assumed liabilities), plus additional petroleum inventories
valued at $90 million and approximately $5 million in transaction fees. In addition, Motiva will be entitled to receive contingent purchase payments of $25 million per year up to a total of $75 million over a three-year period depending on the
amount of crude oil processed at the refinery and the refining margins during that period, and a $25 million payment per year up to a total of $50 million over a two-year period depending on the achievement of certain performance criteria at the
gasification facility. Any amount the Company pays to Motiva for the contingent consideration will be recorded as goodwill.



The Delaware City refinery is a high-conversion medium and heavy sour crude oil refinery. Major process units include a crude unit, a fluid coking unit, a
fluid catalytic cracking unit, a hydrocracking unit with a hydrogen plant, a continuous catalytic reformer, an alkylation unit, and several hydrotreating units. Primary products include regular and premium conventional and reformulated gasoline,
low-sulfur diesel, and home heating oil. The refinerys production is sold in the U.S. Northeast via pipeline, barge, and truck distribution. The refinerys petroleum coke production is sold to third parties or gasified to fuel the
cogeneration facility, which is designed to supply electricity and steam to the refinery as well as outside electrical sales to third parties.



The Company financed the acquisition from a portion of the proceeds from its April 2004 public common stock offering of 14.9 million shares which provided
net proceeds of $490 million; from PRGs $400 million senior notes offering completed April 2004 of which $200 million, due in 2011, bear interest at 61/8% per annum and $200 million, due in 2014, bear interest at 63⁄4% per annum; and from available cash.



In conjunction with the acquisition of the Delaware City refinery, the Company entered into an agreement, effective May 1, 2004, with Saudi Arabian Oil
Company for the supply of approximately 105,000 bpd of crude oil, subject to certain restrictions. The agreement has terms extending to April 30, 2005, with automatic one-year extensions thereafter unless terminated at the option of either
party. The crude oil is priced by a market-based formula as defined in the agreement. The Company also entered into a product offtake agreement with Motiva that provides for the delivery by Premcor to Motiva of approximately 95,000 bpd of finished
light petroleum products, such as gasoline and heating oil. The agreement was effective May 1, 2004, and the main portion of the offtake agreement has terms extending for six months with automatic renewals until canceled by either party.



The purchase of the Delaware City refinery complex and results of
operations of these assets have been included in the Companys year-to-date results from the date of purchase. The preliminary purchase price allocation, which is subject to change pending completion of independent appraisals and other
evaluations, is as follows:



|                                                          |  |   |     |  
|--------------------------------------------------------- |  | - | --- | -
|Current assets                                            |  | $ | 12  |  
|Inventory                                                 |  |   | 116 |  
|Property, plant and equipment                             |  |   | 763 |  
|Intangible assets                                         |  |   | 4   |  
|Other liabilities (primarily post retirement obligations) |  |   | (20 | )
|                                                          |  |   |     |  
|                                                          |  | $ | 875 |  
|                                                          |  |   |     |  



Effective March 3,
2003, the Company acquired its Memphis, Tennessee refinery from The Williams Companies, Inc. and certain of its subsidiaries (Williams), for approximately $475 million, including inventory. The purchase of the Memphis refinery assets and
the results of operations of those assets have been included in the Companys results from the date of acquisition. In addition, Williams or its assignee will be entitled to receive contingent purchase payments up to a maximum aggregate of $75
million over the next seven years, depending on the refining margins during that period. Any amount the Company pays to Williams or its assignee for the contingent consideration will be recorded as goodwill. The Company paid $27.6 million of
contingent consideration through the third quarter of 2004.



11



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##### Table of Contents

The Company financed the Memphis refinery acquisition from a portion of the proceeds from a public
offering of 13.1 million shares of common stock and a private placement of 2.9 million shares of common stock resulting in net proceeds of approximately $306 million and from an offering of $525 million in senior notes. A portion of these proceeds
was also used to retire certain outstanding long-term debt.



|3. | Inventories
|-- | -----------



The carrying value of inventories consisted of the following:



|                                 |  |                    |       |                   |   |      
|-------------------------------- |  | ------------------ | ----- | ----------------- | - | -----
|                                 |  | September 30, 2004 |       | December 31, 2003
|Crude oil                        |  | $                  | 311.2 |                   | $ | 268.4
|Refined products and blendstocks |  |                    | 495.0 |                   |   | 334.7
|Warehouse stock and other        |  |                    | 36.1  |                   |   | 27.2 
|                                 |  |                    |       |                   |   |      
|                                 |  | $                  | 842.3 |                   | $ | 630.3
|                                 |  |                    |       |                   |   |      



The market value of
crude oil, refined products and blendstock inventories as of September 30, 2004 was approximately $560 million (December 31, 2003 - $174 million) above carrying value.



|4. | Other Assets
|-- | ------------



Other assets consisted of the following:



|                          |  |                    |       |                   |   |      
|------------------------- |  | ------------------ | ----- | ----------------- | - | -----
|                          |  | September 30, 2004 |       | December 31, 2003
|Deferred turnaround costs |  | $                  | 116.6 |                   | $ | 76.0 
|Deferred financing costs  |  |                    | 41.7  |                   |   | 35.6 
|Other                     |  |                    | 7.8   |                   |   | 4.0  
|                          |  |                    |       |                   |   |      
|                          |  | $                  | 166.1 |                   | $ | 115.6
|                          |  |                    |       |                   |   |      



Amortization of
deferred financing costs for the three months ended September 30, 2004 and 2003 was $2.1 million and $2.2 million, respectively, for both the Company and PRG and is included in Interest and finance expense. Amortization of deferred
financing costs for the nine months ended September 30, 2004 and 2003 was $6.4 million and $6.8 million, respectively, for both the Company and PRG.



For the three and nine months ended September 30, 2004, the Company incurred deferred financing costs of nil and $16.1 million, respectively, related to
the new $1 billion credit facility and the issuance of $400 million of senior notes. As a result of the early extinguishment of the $785 million credit facility, the Company and PRG recorded a loss of nil and $3.6 million for the three and nine
months ended September 30, 2004, respectively. The loss represented a write-off of unamortized deferred financing costs.



For the three and nine months ended September 30, 2003, the Company incurred deferred financing costs of $0.2 million and $25.5 million, respectively,
related to the amendment of its credit agreement and the issuance of $825 million in senior notes under two separate offerings.



As a result of the early extinguishment of long-term debt and credit agreement restructuring in 2003, the Company recorded a loss of nil (PRG nil) and
$10.4 million (PRG $8.1 million) for the three and nine months ended September 30, 2003, respectively. The loss included a cash premium of $5.0 million (PRG $2.7 million) and a write-off of unamortized deferred financing costs of $5.4 million for
the nine months ended September 30, 2003.



12



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##### Table of Contents

|5. | Employee Benefit Plans
|-- | ----------------------



The following table provides the components of net periodic benefit cost for the three and nine month periods ended September 30:



|                                          |  |                                          |      |                                        |      |                                          |      |  |                                        |      |   |      |   |     |      |   |      |      |  |   |      |   |  |   |      |   |  |   |      |  
|----------------------------------------- |  | ---------------------------------------- | ---- | -------------------------------------- | ---- | ---------------------------------------- | ---- |  | -------------------------------------- | ---- | - | ---- | - | --- | ---- | - | ---- | ---- |  | - | ---- | - |  | - | ---- | - |  | - | ---- | -
|                                          |  | Pension Benefits                         |      | Other Postretirement Benefits          |     
|                                          |  | For the Three Months Ended September 30, |      | For the Nine MonthsEnded September 30, |      | For the Three Months Ended September 30, |      |  | For the Nine MonthsEnded September 30, |     
|                                          |  | 2004                                     |      |                                        | 2003 |                                          | 2004 |  |                                        | 2003 |   | 2004 |   |     | 2003 |   |      | 2004 |  |   | 2003 |  
|Components of Net Periodic Benefit Costs: |  |                                          |      |                                        |      |                                          |      |  |                                        |      |   |      |   |     |      |   |      |      |  |   |      |   |  |   |      |   |  |   |      |  
|Service cost                              |  | $                                        | 3.5  |                                        |      | $                                        | 2.1  |  | $                                      | 8.6  |   |      | $ | 5.2 |      | $ | 0.9  |      |  | $ | 0.8  |   |  | $ | 2.5  |   |  | $ | 2.1  |  
|Interest cost                             |  |                                          | 0.2  |                                        |      |                                          | 0.1  |  |                                        | 0.6  |   |      |   | 0.2 |      |   | 1.7  |      |  |   | 1.8  |   |  |   | 5.0  |   |  |   | 4.5  |  
|Recognized actuarial loss                 |  |                                          |     |                                        |      |                                          |     |  |                                        |     |   |      |   |    |      |   | 0.5  |      |  |   | 0.5  |   |  |   | 1.6  |   |  |   | 1.5  |  
|Expected return on plan assets            |  |                                          | (0.2 | )                                      |      |                                          | 0.1  |  |                                        | (0.4 | ) |      |   | 0.2 |      |   | (0.1 | )    |  |   |     |   |  |   | (0.1 | ) |  |   |     |  
|Amortization of prior service costs       |  |                                          | 0.1  |                                        |      |                                          |     |  |                                        | 0.3  |   |      |   |    |      |   | (0.1 | )    |  |   | (0.1 | ) |  |   | (0.3 | ) |  |   | (0.3 | )
|                                          |  |                                          |      |                                        |      |                                          |      |  |                                        |      |   |      |   |     |      |   |      |      |  |   |      |   |  |   |      |   |  |   |      |  
|Net periodic benefit cost                 |  | $                                        | 3.6  |                                        |      | $                                        | 2.3  |  | $                                      | 9.1  |   |      | $ | 5.6 |      | $ | 2.9  |      |  | $ | 3.0  |   |  | $ | 8.7  |   |  | $ | 7.8  |  
|                                          |  |                                          |      |                                        |      |                                          |      |  |                                        |      |   |      |   |     |      |   |      |      |  |   |      |   |  |   |      |   |  |   |      |  



As of December 31,
2003, the Company expected to contribute a total of $9 million to its pension plans in 2004. As of September 30, 2004, the Company had contributed $11.5 million to its pension plans and does not expect to contribute any more funds to its pension
plans during the remainder of 2004. The increase in actual contributions over the expected contributions was due to the Company funding the pension plans earlier than expected.



In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Act) was signed
into law. The Act will provide prescription drug coverage to retirees beginning in 2006 and will provide subsidies to sponsors of post-retirement medical plans that provide prescription drug coverage.



In May 2004, the FASB issued FSP 106-2 Accounting and Disclosure
Requirements related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (FSP 106-2). The Company has applied FSP 106-2 retroactively to the date of enactment. The impact of adopting FSP 106-2 resulted in a
reduction in the Companys accumulated projected benefit obligation (APBO) of $15.5 million for the full year 2004 and a reduction of $0.8 and $1.5 million for net periodic pension cost for both the three and nine months ended
September 30, 2004, respectively. The Companys actuaries have determined the plan is actuarially equivalent. The Company is currently evaluating the expected gross receipts to be received from the subsidy; no subsidies have been received as of
September 30, 2004.



|6. | Refinery Restructuring and Other Charges
|-- | ----------------------------------------



During the three months ended September 30, 2004, the Company recorded refinery restructuring and other charges of $1.1 million. The charges relate to
expenses associated with safety and environmental matters at closed refineries. During the nine months ended September 30, 2004, the Company recorded refinery restructuring and other charges of $10.4 million. The charges include $7.3 million related
to the St. Louis administrative office closure and $3.1 million related to expenses associated with safety and environmental matters at closed refineries.



During the three months ended September 30, 2003, the Company recorded refinery restructuring and other charges of $2.9 million related to the
Companys plans to close the St. Louis administrative office. During the nine months ended September 30, 2003, the Company recorded refinery restructuring and other charges of $18.6 million. The nine month charge also included a $1.6 million
reversal of restructuring charges related to the administrative restructuring which began in 2002, a $0.7 million charge related to the St. Louis office closure and a $16.6 million charge related to the then potential sale of certain Hartford
refinery assets.



Below are further discussions of the Hartford refinery asset
sale and the administrative function restructuring.



Hartford Asset Sale. In September 2002, the Company ceased refining operations at its Hartford, Illinois refinery, but the Company continues to operate a storage and distribution facility at the refinery site. In the first quarter of
2003, the Company signed a memorandum of understanding with ConocoPhillips for the sale of refining assets and certain storage and distribution assets for $40 million. Accordingly, the Company recorded a charge of $16.6 million related to the
transaction, which included the write-down of the refining assets held for sale and the write-down of certain storage and distribution assets included in property, plant and equipment. The sale was completed in the third quarter of 2003.



13



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##### Table of Contents

Administrative Restructuring. In 2002, the Company began a restructuring of its administrative
functions, and at that time the elimination of certain positions in the St. Louis office was scheduled for early 2003. As a result of the Memphis refinery acquisition in early 2003, the number of positions to be eliminated at the St. Louis office
was reduced by 25 and the Company recorded a reduction in the restructuring liability of $1.6 million in the first quarter of 2003. In May 2003, the Company announced that it would be closing the St. Louis office and moving the administrative
functions to the Connecticut office over the next twelve months. The severance related costs were amortized over the remaining service period of the affected employees and the other costs, such as training, relocation, and the movement of physical
assets, are expensed as incurred.



The following table summarizes the expected
expenses associated with the administrative restructuring and provides a reconciliation of the administrative restructuring liability as of September 30, 2004:



|                                                               |  |           |      |   |             |   |      |             |  |   |       |  
|-------------------------------------------------------------- |  | --------- | ---- | - | ----------- | - | ---- | ----------- |  | - | ----- | -
|                                                               |  | Severance |      |   | Other Costs |   |      | Total Costs | 
|Summary of Restructuring Expenses:                             |  |           |      |   |             |   |      |             |  |   |       |  
|Expected total restructuring expenses                          |  | $         | 5.9  |   |             | $ | 10.5 |             |  | $ | 16.4  |  
|Expenses recorded for the nine months ended September 30, 2004 |  |           | 0.9  |   |             |   | 6.4  |             |  |   | 7.3   |  
|Cumulative expenses recorded to date                           |  |           | 5.9  |   |             |   | 10.5 |             |  |   | 16.4  |  
|Liability Activity:                                            |  |           |      |   |             |   |      |             |  |   |       |  
|Beginning balance, December 31, 2003                           |  | $         | 5.2  |   |             | $ |     |             |  | $ | 5.2   |  
|Expenses recorded for the nine months ended September 30, 2004 |  |           | 0.9  |   |             |   | 6.4  |             |  |   | 7.3   |  
|Cash outflows                                                  |  |           | (5.7 | ) |             |   | (6.4 | )           |  |   | (12.1 | )
|                                                               |  |           |      |   |             |   |      |             |  |   |       |  
|Ending balance, September 30, 2004                             |  | $         | 0.4  |   |             | $ |     |             |  | $ | 0.4   |  
|                                                               |  |           |      |   |             |   |      |             |  |   |       |  



|7. | Interest and Finance Expense
|-- | ----------------------------



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



|                     |  |                                         |      |   |                                        |   |      |      |  |   |       |   |  |   |      |  
|-------------------- |  | --------------------------------------- | ---- | - | -------------------------------------- | - | ---- | ---- |  | - | ----- | - |  | - | ---- | -
|                     |  | For the Three MonthsEnded September 30, |      |   | For the Nine MonthsEnded September 30, |  
|                     |  | 2004                                    |      |   | 2003                                   |   |      | 2004 |  |   | 2003  |  
|Interest expense     |  | $                                       | 38.8 |   |                                        | $ | 33.4 |      |  | $ | 110.0 |   |  | $ | 91.6 |  
|Financing costs      |  |                                         | 2.1  |   |                                        |   | 2.4  |      |  |   | 6.4   |   |  |   | 7.1  |  
|Capitalized interest |  |                                         | (5.8 | ) |                                        |   | (3.8 | )    |  |   | (14.7 | ) |  |   | (9.4 | )
|                     |  |                                         |      |   |                                        |   |      |      |  |   |       |   |  |   |      |  
|                     |  | $                                       | 35.1 |   |                                        | $ | 32.0 |      |  | $ | 101.7 |   |  | $ | 89.3 |  
|                     |  |                                         |      |   |                                        |   |      |      |  |   |       |   |  |   |      |  



PRGs interest
and finance expense included in the statements of operations was $34.7 million and $100.6 million for the three and nine months ended September 30, 2004, respectively and is the same as Premcor Inc.s interest expense, except that it excludes
interest expense on the $10.0 million of capital lease obligations (see Note 9). PRGs interest and finance expense included in the statements of operations was $31.6 million and $87.7 million for the three and nine months ended September 30,
2003, respectively and is the same as Premcor Inc.s interest expense, except that it excludes interest expense on the $10.4 million of capital lease obligations.



The Company paid cash for interest for the three months ended September 30, 2004 and 2003 of $52.8 million and $43.3
million, respectively. The Company paid cash for interest for the nine months ended September 30, 2004 and 2003 of $112.0 million and $81.5 million, respectively. PRG paid cash for interest for the three months ended September 30, 2004 and 2003 of
$52.3 million and $42.9 million, respectively. PRG paid cash for interest for the nine months ended September 30, 2004 and 2003 of $110.9 million and $78.7 million, respectively.



14



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##### Table of Contents

|8. | Credit Facility
|-- | ---------------



On April 13, 2004, PRG completed a new $1 billion senior secured revolving credit facility, maturing in April 2009, to replace its existing $785 million
credit facility. The facility is used primarily to secure crude oil purchase obligations for the Companys refinery operations and to provide for other working capital needs. The revolving credit facility allows for the issuance of letters of
credit and direct borrowings, individually or collectively, up to the lesser of $1 billion or the amount available under a defined borrowing base. The borrowing base includes, among other items, eligible cash and cash equivalents, eligible
investments, eligible receivables, and eligible petroleum inventories. The revolving credit facility also allows for an overall increase in the principal amount of the facility of up to $250 million under certain circumstances. The revolving credit
facility is secured by a lien on substantially all of PRGs cash and cash equivalents, receivables, crude oil and refined product inventories and intellectual property and is guaranteed by Premcor Inc. The collateral also includes the capital
stock of Sabine River Holding Corp. (Sabine) and certain other subsidiaries and certain PACC inventory. PRGs borrowings under this facility bear interest at a rate based on the highest of three U.S. based rate formulas, or the
Eurodollar rate plus a defined margin.



The covenants and
conditions under this new credit agreement are generally less restrictive than the covenants contained in the agreement governing PRGs terminated $785 million facility. The new credit agreement contains covenants and conditions that, among
other things, limit dividends, indebtedness, liens, investments, restricted payments as defined, and the sale of assets. The covenants also provide that in the event PRG does not maintain certain availability within the facility, additional
restrictions and a cumulative cash flow test will apply. PRG was in compliance with these covenants as of September 30, 2004.



As of September 30, 2004, the borrowing base for the new credit facility was $1,909.3 million, with $483.8 million of the facility utilized for letters of
credit. As of December 31, 2003, the borrowing base for the old credit facility was $1,348.9 million with $602.1 million of the facility utilized for letters of credit. There were no direct borrowings under the applicable credit facilities as of
September 30, 2004 or December 31, 2003.



15



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##### Table of Contents

|9. | Long-term Debt
|-- | --------------



Long-term debt consisted of the following:



|                                                                                                                            |  |                    |         |   |                   |   |         |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | -
|                                                                                                                            |  | September 30, 2004 |         |   | December 31, 2003 |  
|121⁄2% Senior Notes due January 15, 2009 (121⁄2% Senior Notes) (1)                                                            |  | $                  | 197.6   |   |                   | $ | 221.8   |  
|91⁄4% Senior Notes due February 1, 2010 (91⁄4% Senior Notes) (2)                                                              |  |                    | 175.0   |   |                   |   | 175.0   |  
|63⁄4% Senior Notes due February 1, 2011 (63⁄4% 2011 Senior Notes) (2)                                                         |  |                    | 210.0   |   |                   |   | 210.0   |  
|61/8%
Senior Notes due February 1, 2011 (61/8% Senior Notes) (2)                                                          |  |                    | 200.0   |   |                   |   |        |  
|73⁄4% Senior Subordinated Notes due February 1, 2012 (73⁄4% Senior Subordinated Notes) (2)                                    |  |                    | 175.0   |   |                   |   | 175.0   |  
|91⁄2% Senior Notes due February 1, 2013 (91⁄2% Senior Notes) (2)                                                              |  |                    | 350.0   |   |                   |   | 350.0   |  
|63⁄4% Senior Notes due February 1, 2014 (63⁄4% 2014 Senior Notes) (2)                                                         |  |                    | 200.0   |   |                   |   |        |  
|71⁄2% Senior Notes due June 15, 2015 (71⁄2% Senior Notes) (2)                                                                 |  |                    | 300.0   |   |                   |   | 300.0   |  
|Ohio Water Development Authority Environmental Facilities Revenue Bonds due December 1, 2031 (Series 2001 Ohio Bonds)
(2) |  |                    | 10.0    |   |                   |   | 10.0    |  
|Obligation under capital leases (3)                                                                                         |  |                    | 10.0    |   |                   |   | 10.3    |  
|                                                                                                                            |  |                    |         |   |                   |   |         |  
|                                                                                                                            |  |                    | 1,827.6 |   |                   |   | 1,452.1 |  
|Less current portion                                                                                                        |  |                    | (38.8   | ) |                   |   | (26.1   | )
|                                                                                                                            |  |                    |         |   |                   |   |         |  
|Total long-term debt at Premcor Inc.                                                                                        |  | $                  | 1,788.8 |   |                   | $ | 1,426.0 |  
|                                                                                                                            |  |                    |         |   |                   |   |         |  

---

|(1) | Issued or borrowed by Port Arthur Finance Corp., a subsidiary of PACC
|--- | ---------------------------------------------------------------------

|(2) | Issued or borrowed by stand-alone PRG
|--- | -------------------------------------

|(3) | Assumed by The Premcor Pipeline Co., a subsidiary of Premcor USA Inc.
|--- | ---------------------------------------------------------------------



On April 23, 2004, PRG completed an offering of $400 million in senior notes, of which $200 million, due in 2011, bear interest at 61/8% per annum and $200 million, due in 2014, bear interest at 63⁄4% per annum. A portion of the proceeds was used
to purchase the Delaware City refining complex. The senior notes are unsecured. Premcor Inc. has fully and unconditionally guaranteed the principal payments on these senior notes and any applicable premiums and interest.



PRGs long-term debt, including current maturities, as of September 30,
2004 was $1,817.6 million and is the same as Premcor Inc.s long-term debt as noted in the table above except that it excludes the $10.0 million of capital lease obligations. The Premcor Pipeline Co. assumed these lease obligations as part of
the Memphis acquisition. PRGs long-term debt, including current maturities, as of December 31, 2003 was $1,441.8 million and is the same as Premcor Inc.s long-term debt as noted in the table above except that it excludes the $10.3
million of capital lease obligations.



10. Stockholders Equity



On April 23, 2004, Premcor Inc. completed a public
offering of 14,950,000 shares of common stock, which included 1,950,000 shares related to the overallotment option, which was exercised by the underwriter. The shares were issued at a price of $34.00 per share and the Company received proceeds, net
of underwriters discount and commissions, of $490 million. A portion of the proceeds was used to purchase the Delaware City refinery complex, which is discussed in Note 2. Stockholders equity also reflects the receipt of proceeds from
the exercise of stock options.



11. Income Taxes



Our effective tax rate was 37.4% for the nine months ended September 30,
2004 as compared to 34.7% in 2003. Our subsidiaries are subject to different statutory tax rates. These differing tax rates and the differing amount of taxable income or loss recognized by each subsidiary impact our consolidated effective tax rate.
The increase in our 2004 consolidated effective tax rate as compared to 2003 resulted from a lower percentage of our 2004 consolidated income being recognized by Sabine, which has a lower effective tax rate than other subsidiaries.



16



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##### Table of Contents

The Company made net cash income tax payments of $3.3 million and $5.6 million for the three and nine
months ended September 30, 2004, respectively. The Company received net cash income tax refunds of $0.3 million for the three months ended September 30, 2003 and made net cash income tax payments of $2.0 million for the nine months ended September
30, 2003. PRG made no net cash income tax payments for the three months ended September 30, 2004. PRG made net cash income tax payments of $0.1 million for the nine months ended September 30, 2004. PRG received net cash income tax refunds of $0.3
and $0.1 million for the three and nine months ended September 30, 2003, respectively.



For federal income tax purposes, the Company has incurred, as a result of the April 2004 equity offering, a stock ownership change of more than 50%, determined over the preceding three-year period. Under federal tax
law, the more than 50% stock ownership change has resulted in an annual limitation being placed on the amount of regular and alternative minimum tax net operating losses, and certain other losses and tax credits (collectively tax
attributes) that may be utilized in any given year. Accordingly, the Companys ability to utilize tax attributes could be affected in both timing and amount. However, management believes such annual limitation will not restrict the
Companys ability to significantly utilize its tax attributes over the applicable carryforward periods. Therefore, at this time, the Company does not anticipate the need for an additional valuation allowance as a result of this more than 50%
stock ownership change.



12. Discontinued Operations



In connection with the 1999 sale of PRGs retail assets to Clark Retail
Enterprises, Inc. (CRE), PRG assigned certain leases and subleases of retail stores to CRE. Subject to certain defenses, PRG remained jointly and severally liable for CREs obligations under approximately 150 of these leases,
including payment of rent and taxes. PRG may also be contingently liable for environmental obligations at these sites. In 2002, CRE and its parent company, Clark Retail Group, Inc., filed a voluntary petition for reorganization under Chapter 11 of
the U.S. Bankruptcy Code. In July 2004, the CRE bankruptcy estate was liquidated and the case dismissed. As of September 30, 2004, PRG was subleasing 28 operating stores, the leases on 18 stores had either been terminated or expired, the leases on
103 operating stores were held by third parties, and PRG is in the process of buying out the leases on the remaining two stores. For the three and nine months ended September 30, 2004, PRG recorded an after-tax charge of $2.8 million and $4.6
million, respectively. These charges represent the estimated net present value of its remaining liability under the current operating stores that were subleased, net of estimated sublease income, and other direct costs. For the three and nine months
ended September 30, 2003, PRG recorded an after-tax charge of $0.4 million and $6.9 million, respectively representing the estimated net present value of its remaining liability under the current operating stores that were subleased, net of
estimated sublease income, and other direct costs. The following table reconciles the activity and balance of the liability for the lease obligations as well as the Companys environmental liability for previously owned and leased retail sites:



|                                     |  |                  |      |   |                                                               |   |      |                               |  |   |      |  
|------------------------------------ |  | ---------------- | ---- | - | ------------------------------------------------------------- | - | ---- | ----------------------------- |  | - | ---- | -
|                                     |  | LeaseObligations |      |   | Environmental Obligations of Previously Ownedand Leased Sites |   |      | Total Discontinued Operations | 
|Beginning balance, December 31, 2003 |  | $                | 7.4  |   |                                                               | $ | 21.2 |                               |  | $ | 28.6 |  
|Accretion and other expenses         |  |                  | 7.5  |   |                                                               |   |     |                               |  |   | 7.5  |  
|Net cash outlays                     |  |                  | (3.6 | ) |                                                               |   | (1.0 | )                             |  |   | (4.6 | )
|                                     |  |                  |      |   |                                                               |   |      |                               |  |   |      |  
|Ending balance, September 30, 2004   |  | $                | 11.3 |   |                                                               | $ | 20.2 |                               |  | $ | 31.5 |  



The primary obligation
under a majority of the non-rejected leases and subleases was transferred in a CRE bankruptcy sale process to various unrelated third parties; however, the Company may remain jointly and severally liable on the assigned leases. PRG could still
become potentially obligated on the remaining 103 operating store leases which are held by third parties if the current lessee defaults on its lease obligations.



17



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##### Table of Contents

13. Earnings per Share



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



|                                                              |  |                                          |  |                                         |  |      |  |     
|------------------------------------------------------------- |  | ---------------------------------------- |  | --------------------------------------- |  | ---- |  | ----
|                                                              |  | For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
|                                                              |  | 2004                                     |  | 2003                                    |  | 2004 |  | 2003
|Weighted average common shares outstanding                    |  | 89.2                                     |  | 74.1                                    |  | 82.9 |  | 72.3
|Dilutive effect of stock options                              |  | 2.1                                      |  | 0.9                                     |  | 1.9  |  | 0.8 
|                                                              |  |                                          |  |                                         |  |      |  |     
|Weighted average common shares outstanding, assuming dilution |  | 91.3                                     |  | 75.0                                    |  | 84.8 |  | 73.1
|                                                              |  |                                          |  |                                         |  |      |  |     



Outstanding stock
options totaling 3.7 million (2003  3.7 million) and 3.8 million (2003  3.7 million) common shares for the three and nine month periods ended September 30, 2004, respectively, were excluded from the diluted earnings per share calculation
because they did not have a dilutive effect under the treasury stock method. In addition, outstanding stock options totaling nil (2003  0.5 million) and nil (2003  0.5 million) common shares for the three and nine month periods ended
September 30, 2004, respectively, were excluded from the diluted earnings per share calculation because they were anti-dilutive.



14. Condensed Consolidating Financial Statements of PRG as Co-guarantor of PAFCs Senior Notes



Presented below are the PRG condensed consolidating balance sheets, statements of operations, and statements of cash flows
as required by Rule 3-10 of the Securities Exchange Act of 1934, as amended. PRG along with PACC, Sabine, and various other subsidiaries of Sabine are full and unconditional guarantors of Port Arthur Finance Corps (PAFC) 121⁄2%
Senior Notes. Sabine indirectly owns PACC through its 100% ownership of PACCs general and limited partners. PAFC is a wholly owned subsidiary of PACC. Under Rule 3-10, the condensed consolidating balance sheets, statements of operations, and
statements of cash flows presented below meet the requirements for financial statements of the issuer and each guarantor of the notes since the issuer and guarantors are all direct or indirect wholly owned subsidiaries of PRG, and all guarantees are
full and unconditional on a joint and several basis.



18



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##### Table of Contents

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of September 30, 2004

(unaudited, in millions)



|                                              |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|--------------------------------------------- |  | --- | ------- | ---- | - | --------------------------- |  | - | ------------ | - |  | --------------- | ------ | - |  | - | -------
|                                              |  | PRG |         | PAFC |   | Other GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedPRG
|ASSETS                                        |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|                                              |  |     |         |      |  
|CURRENT ASSETS:                               |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|Cash and cash equivalents                     |  | $   | 528.5   |      | $ |                            |  | $ |             |   |  | $               |       |   |  | $ | 528.5  
|Cash restricted for debt service              |  |     |        |      |   |                            |  |   | 54.6         |   |  |                 |       |   |  |   | 54.6   
|Short-term investments                        |  |     | 1.7     |      |   |                            |  |   |             |   |  |                 |       |   |  |   | 1.7    
|Accounts receivable                           |  |     | 785.5   |      |   |                            |  |   | 0.8          |   |  |                 | (0.3   | ) |  |   | 786.0  
|Receivable from affiliates                    |  |     | 85.4    |      |   | 44.0                        |  |   |             |   |  |                 | (47.4  | ) |  |   | 82.0   
|Inventories                                   |  |     | 823.5   |      |   |                            |  |   | 19.0         |   |  |                 | (0.2   | ) |  |   | 842.3  
|Prepaid expenses and other                    |  |     | 70.3    |      |   |                            |  |   | 2.5          |   |  |                 |       |   |  |   | 72.8   
|Current deferred tax asset                    |  |     | 24.3    |      |   |                            |  |   |             |   |  |                 |       |   |  |   | 24.3   
|                                              |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|Total current assets                          |  |     | 2,319.2 |      |   | 44.0                        |  |   | 76.9         |   |  |                 | (47.9  | ) |  |   | 2,392.2
|                                              |  |     |         |      |  
|PROPERTY, PLANT AND EQUIPMENT, NET            |  |     | 2,055.9 |      |   |                            |  |   | 585.7        |   |  |                 |       |   |  |   | 2,641.6
|DEFERRED INCOME TAXES                         |  |     | 15.4    |      |   |                            |  |   |             |   |  |                 | (15.4  | ) |  |   |       
|INVESTMENT IN AFFILIATES                      |  |     | 85.7    |      |   |                            |  |   |             |   |  |                 | (85.7  | ) |  |   |       
|GOODWILL                                      |  |     | 27.6    |      |   |                            |  |   |             |   |  |                 |       |   |  |   | 27.6   
|OTHER ASSETS                                  |  |     | 153.3   |      |   |                            |  |   | 12.8         |   |  |                 |       |   |  |   | 166.1  
|NOTE RECEIVABLE FROM AFFILIATE                |  |     |        |      |   | 171.6                       |  |   |             |   |  |                 | (171.6 | ) |  |   |       
|                                              |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|                                              |  | $   | 4,657.1 |      | $ | 215.6                       |  | $ | 675.4        |   |  | $               | (320.6 | ) |  | $ | 5,227.5
|                                              |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY          |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|                                              |  |     |         |      |  
|CURRENT LIABILITIES:                          |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|Accounts payable                              |  | $   | 751.4   |      | $ |                            |  | $ | 164.9        |   |  | $               |       |   |  | $ | 916.3  
|Payable to affiliates                         |  |     | 89.2    |      |   |                            |  |   | 128.9        |   |  |                 | (8.9   | ) |  |   | 209.2  
|Accrued expenses and other                    |  |     | 151.9   |      |   | 5.5                         |  |   | 1.7          |   |  |                 | (0.3   | ) |  |   | 158.8  
|Accrued taxes other than income               |  |     | 45.2    |      |   |                            |  |   | 4.7          |   |  |                 |       |   |  |   | 49.9   
|Current portion of long-term debt             |  |     |        |      |   | 38.5                        |  |   |             |   |  |                 |       |   |  |   | 38.5   
|Current portion of notes payable to affiliate |  |     |        |      |   |                            |  |   | 38.5         |   |  |                 | (38.5  | ) |  |   |       
|                                              |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|Total current liabilities                     |  |     | 1,037.7 |      |   | 44.0                        |  |   | 338.7        |   |  |                 | (47.7  | ) |  |   | 1,372.7
|                                              |  |     |         |      |  
|LONG-TERM DEBT                                |  |     | 1,620.0 |      |   | 171.6                       |  |   |             |   |  |                 | (12.5  | ) |  |   | 1,779.1
|DEFERRED INCOME TAXES                         |  |     | 64.3    |      |   |                            |  |   | 90.8         |   |  |                 | (15.6  | ) |  |   | 139.5  
|OTHER LONG-TERM LIABILITIES                   |  |     | 176.5   |      |   |                            |  |   | 1.1          |   |  |                 |       |   |  |   | 177.6  
|NOTE PAYABLE TO AFFILIATE                     |  |     |        |      |   |                            |  |   | 171.6        |   |  |                 | (171.6 | ) |  |   |       
|COMMITMENTS AND CONTINGENCIES                 |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|                                              |  |     |         |      |  
|COMMON STOCKHOLDERS EQUITY:                  |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|Common stock                                  |  |     |        |      |   |                            |  |   | 0.1          |   |  |                 | (0.1   | ) |  |   |       
|Paid-in capital                               |  |     | 1,232.3 |      |   |                             |  |   | (324.1       | ) |  |                 | 324.1  |   |  |   | 1,232.3
|Retained earnings                             |  |     | 526.3   |      |   |                            |  |   | 397.2        |   |  |                 | (397.2 | ) |  |   | 526.3  
|                                              |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|Total common stockholders equity             |  |     | 1,758.6 |      |   |                            |  |   | 73.2         |   |  |                 | (73.2  | ) |  |   | 1,758.6
|                                              |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        
|                                              |  | $   | 4,657.1 |      | $ | 215.6                       |  | $ | 675.4        |   |  | $               | (320.6 | ) |  | $ | 5,227.5
|                                              |  |     |         |      |   |                             |  |   |              |   |  |                 |        |   |  |   |        



19



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##### Table of Contents

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2004

(unaudited, in millions)



|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|----------------------------------------------------- |  | --- | ------- | - | ---- | - | ---- | --------------------------- |  | - | ------------ | - |  | --------------- | ------ | - |  | - | ------- | -
|                                                      |  | PRG |         |   | PAFC |   |      | Other GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedPRG |       
|Net sales and operating revenues                      |  | $   | 4,440.8 |   |      | $ |     |                             |  | $ | 889.5        |   |  | $               | (923.0 | ) |  | $ | 4,407.3 |  
|Equity in earnings of affiliates                      |  |     | 93.3    |   |      |   |     |                             |  |   |             |   |  |                 | (93.3  | ) |  |   |        |  
|                                                      |  |     |         |   |     
|Expenses:                                             |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|Cost of sales                                         |  |     | 4,081.4 |   |      |   |     |                             |  |   | 680.0        |   |  |                 | (913.9 | ) |  |   | 3,847.5 |  
|Operating expenses                                    |  |     | 175.0   |   |      |   |     |                             |  |   | 52.0         |   |  |                 | (9.1   | ) |  |   | 217.9   |  
|General and administrative expenses                   |  |     | 35.6    |   |      |   |     |                             |  |   | 1.0          |   |  |                 |       |   |  |   | 36.6    |  
|Stock-based compensation                              |  |     | 4.9     |   |      |   |     |                             |  |   |             |   |  |                 |       |   |  |   | 4.9     |  
|Depreciation                                          |  |     | 20.4    |   |      |   |     |                             |  |   | 5.6          |   |  |                 |       |   |  |   | 26.0    |  
|Amortization                                          |  |     | 14.1    |   |      |   |     |                             |  |   | 0.1          |   |  |                 |       |   |  |   | 14.2    |  
|Refinery restructuring and other charges              |  |     | 1.1     |   |      |   |     |                             |  |   |             |   |  |                 |       |   |  |   | 1.1     |  
|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|                                                      |  |     | 4,332.5 |   |      |   |     |                             |  |   | 738.7        |   |  |                 | (923.0 | ) |  |   | 4,148.2 |  
|                                                      |  |     |         |   |     
|Operating income                                      |  |     | 201.6   |   |      |   |     |                             |  |   | 150.8        |   |  |                 | (93.3  | ) |  |   | 259.1   |  
|                                                      |  |     |         |   |     
|Interest and finance expense                          |  |     | (27.6   | ) |      |   | (6.7 | )                           |  |   | (7.5         | ) |  |                 | 7.1    |   |  |   | (34.7   | )
|Loss on extinguishment of debt                        |  |     |        |   |      |   |     |                             |  |   |             |   |  |                 |       |   |  |   |        |  
|Interest income                                       |  |     | 1.4     |   |      |   | 6.7  |                             |  |   | 0.2          |   |  |                 | (7.1   | ) |  |   | 1.2     |  
|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|Income from continuing operations before income taxes |  |     | 175.4   |   |      |   |     |                             |  |   | 143.5        |   |  |                 | (93.3  | ) |  |   | 225.6   |  
|                                                      |  |     |         |   |     
|Income tax provision                                  |  |     | (32.2   | ) |      |   |     |                             |  |   | (50.2        | ) |  |                 |       |   |  |   | (82.4   | )
|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|Income from continuing operations                     |  |     | 143.2   |   |      |   |     |                             |  |   | 93.3         |   |  |                 | (93.3  | ) |  |   | 143.2   |  
|                                                      |  |     |         |   |     
|Loss from discontinued operations, net of tax         |  |     | (2.8    | ) |      |   |     |                             |  |   |             |   |  |                 |       |   |  |   | (2.8    | )
|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|Net income                                            |  | $   | 140.4   |   |      | $ |     |                             |  | $ | 93.3         |   |  | $               | (93.3  | ) |  | $ | 140.4   |  
|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  



20



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##### Table of Contents

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2004

(unaudited, in millions)



|                                                      |  |     |          |   |      |   |       |                              |  |   |              |   |  |                 |          |   |  |   |          |  
|----------------------------------------------------- |  | --- | -------- | - | ---- | - | ----- | ---------------------------- |  | - | ------------ | - |  | --------------- | -------- | - |  | - | -------- | -
|                                                      |  | PRG |          |   | PAFC |   |       | Other Guarantor Subsidiaries |  |   | Eliminations |   |  | ConsolidatedPRG |         
|Net sales and operating revenues                      |  | $   | 10,613.0 |   |      | $ |      |                              |  | $ | 2,162.8      |   |  | $               | (2,244.4 | ) |  | $ | 10,531.4 |  
|Equity in earnings of affiliates                      |  |     | 142.7    |   |      |   |      |                              |  |   |             |   |  |                 | (142.7   | ) |  |   |         |  
|                                                      |  |     |          |   |     
|Expenses:                                             |  |     |          |   |      |   |       |                              |  |   |              |   |  |                 |          |   |  |   |          |  
|Cost of sales                                         |  |     | 9,588.2  |   |      |   |      |                              |  |   | 1,750.3      |   |  |                 | (2,218.1 | ) |  |   | 9,120.4  |  
|Operating expenses                                    |  |     | 436.5    |   |      |   |      |                              |  |   | 150.3        |   |  |                 | (26.3    | ) |  |   | 560.5    |  
|General and administrative expenses                   |  |     | 89.3     |   |      |   |      |                              |  |   | 2.9          |   |  |                 |         |   |  |   | 92.2     |  
|Stock-based compensation                              |  |     | 14.7     |   |      |   |      |                              |  |   |             |   |  |                 |         |   |  |   | 14.7     |  
|Depreciation                                          |  |     | 50.6     |   |      |   |      |                              |  |   | 16.6         |   |  |                 |         |   |  |   | 67.2     |  
|Amortization                                          |  |     | 42.8     |   |      |   |      |                              |  |   | 0.5          |   |  |                 |         |   |  |   | 43.3     |  
|Refinery restructuring and other charges              |  |     | 10.4     |   |      |   |      |                              |  |   |             |   |  |                 |         |   |  |   | 10.4     |  
|                                                      |  |     |          |   |      |   |       |                              |  |   |              |   |  |                 |          |   |  |   |          |  
|                                                      |  |     | 10,232.5 |   |      |   |      |                              |  |   | 1,920.6      |   |  |                 | (2,244.4 | ) |  |   | 9,908.7  |  
|                                                      |  |     |          |   |     
|Operating income                                      |  |     | 523.2    |   |      |   |      |                              |  |   | 242.2        |   |  |                 | (142.7   | ) |  |   | 622.7    |  
|                                                      |  |     |          |   |     
|Interest and finance expense                          |  |     | (78.7    | ) |      |   | (20.8 | )                            |  |   | (23.1        | ) |  |                 | 22.0     |   |  |   | (100.6   | )
|Loss on extinguishment of debt                        |  |     | (3.6     | ) |      |   |      |                              |  |   |             |   |  |                 |         |   |  |   | (3.6     | )
|Interest income                                       |  |     | 5.0      |   |      |   | 20.8  |                              |  |   | 0.4          |   |  |                 | (22.0    | ) |  |   | 4.2      |  
|                                                      |  |     |          |   |      |   |       |                              |  |   |              |   |  |                 |          |   |  |   |          |  
|Income from continuing operations before income taxes |  |     | 445.9    |   |      |   |      |                              |  |   | 219.5        |   |  |                 | (142.7   | ) |  |   | 522.7    |  
|                                                      |  |     |          |   |     
|Income tax provision                                  |  |     | (118.8   | ) |      |   |      |                              |  |   | (76.8        | ) |  |                 |         |   |  |   | (195.6   | )
|                                                      |  |     |          |   |      |   |       |                              |  |   |              |   |  |                 |          |   |  |   |          |  
|Income from continuing operations                     |  |     | 327.1    |   |      |   |      |                              |  |   | 142.7        |   |  |                 | (142.7   | ) |  |   | 327.1    |  
|                                                      |  |     |          |   |     
|Loss from discontinued operations, net of tax         |  |     | (4.6     | ) |      |   |      |                              |  |   |             |   |  |                 |         |   |  |   | (4.6     | )
|                                                      |  |     |          |   |      |   |       |                              |  |   |              |   |  |                 |          |   |  |   |          |  
|Net income                                            |  | $   | 322.5    |   |      | $ |      |                              |  | $ | 142.7        |   |  | $               | (142.7   | ) |  | $ | 322.5    |  
|                                                      |  |     |          |   |      |   |       |                              |  |   |              |   |  |                 |          |   |  |   |          |  



21



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##### Table of Contents

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2004

(unaudited, in millions)



|                                                                       |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|---------------------------------------------------------------------- |  | --- | -------- | - | ---- | - | ----- | --------------------------- |  | - | ------------ | - |  | --------------- | ------ | - |  | - | -------- | -
|                                                                       |  | PRG |          |   | PAFC |   |       | Other GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedPRG |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                  |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|Net income                                                             |  | $   | 322.5    |   |      | $ |      |                             |  | $ | 142.7        |   |  | $               | (142.7 | ) |  | $ | 322.5    |  
|                                                                       |  |     |          |   |     
|Adjustments:                                                           |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|Loss from discontinued operations                                      |  |     | 4.6      |   |      |   |      |                             |  |   |             |   |  |                 |       |   |  |   | 4.6      |  
|Depreciation                                                           |  |     | 50.6     |   |      |   |      |                             |  |   | 16.6         |   |  |                 |       |   |  |   | 67.2     |  
|Amortization                                                           |  |     | 47.1     |   |      |   |      |                             |  |   | 2.6          |   |  |                 |       |   |  |   | 49.7     |  
|Deferred income taxes                                                  |  |     | 61.0     |   |      |   |      |                             |  |   | 31.3         |   |  |                 | (0.1   | ) |  |   | 92.2     |  
|Stock-based compensation                                               |  |     | 14.7     |   |      |   |      |                             |  |   |             |   |  |                 |       |   |  |   | 14.7     |  
|Refinery restructuring and other charges                               |  |     | (4.8     | ) |      |   |      |                             |  |   |             |   |  |                 |       |   |  |   | (4.8     | )
|Write-off of deferred financing costs                                  |  |     | 3.6      |   |      |   |      |                             |  |   |              |   |  |                 |       |   |  |   | 3.6      |  
|Equity in earnings of affiliates                                       |  |     | (142.7   | ) |      |   |      |                             |  |   |             |   |  |                 | 142.7  |   |  |   |         |  
|Other, net                                                             |  |     | 2.2      |   |      |   |      |                             |  |   | 0.9          |   |  |                 | 0.1    |   |  |   | 3.2      |  
|                                                                       |  |     |          |   |     
|CASH (REINVESTED IN) PROVIDED BY WORKING CAPITAL :                     |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|Accounts receivable, prepaid expenses and other                        |  |     | (132.6   | ) |      |   |      |                             |  |   | 2.4          |   |  |                 | (0.5   | ) |  |   | (130.7   | )
|Inventories                                                            |  |     | (101.5   | ) |      |   |      |                             |  |   | 5.8          |   |  |                 |       |   |  |   | (95.7    | )
|Accounts payable, accrued expenses, taxes other than income, and other |  |     | 82.3     |   |      |   | (8.0  | )                           |  |   | 92.4         |   |  |                 | 0.5    |   |  |   | 167.2    |  
|Affiliate receivables and payables                                     |  |     | 16.9     |   |      |   | 33.8  |                             |  |   | 49.9         |   |  |                 |       |   |  |   | 100.6    |  
|Cash and cash equivalents restricted for debt service                  |  |     |         |   |      |   |      |                             |  |   | 8.1          |   |  |                 |       |   |  |   | 8.1      |  
|                                                                       |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|Net cash provided by operating activities of continuing operations     |  |     | 223.9    |   |      |   | 25.8  |                             |  |   | 352.7        |   |  |                 |       |   |  |   | 602.4    |  
|Net cash used in operating activities of discontinued operations       |  |     | (4.6     | ) |      |   |      |                             |  |   |             |   |  |                 |       |   |  |   | (4.6     | )
|                                                                       |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|Net cash provided by operating activities                              |  |     | 219.3    |   |      |   | 25.8  |                             |  |   | 352.7        |   |  |                 |       |   |  |   | 597.8    |  
|                                                                       |  |     |          |   |     
|CASH FLOWS FROM INVESTING ACTIVITIES:                                  |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|Expenditures for property, plant and equipment                         |  |     | (231.5   | ) |      |   |      |                             |  |   | (0.3         | ) |  |                 |       |   |  |   | (231.8   | )
|Expenditures for turnaround                                            |  |     | (83.0    | ) |      |   |      |                             |  |   | (0.9         | ) |  |                 |       |   |  |   | (83.9    | )
|Expenditures for refinery acquisition, net                             |  |     | (874.8   | ) |      |   |      |                             |  |   |             |   |  |                 |       |   |  |   | (874.8   | )
|Earn-out payment associated with refinery acquisition                  |  |     | (13.4    | ) |      |   |      |                             |  |   |             |   |  |                 |       |   |  |   | (13.4    | )
|Purchases and maturities of investments, net                           |  |     | 1.5      |   |      |   |      |                             |  |   |             |   |  |                 | (1.5   | ) |  |   |         |  
|                                                                       |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|Net cash used in investing activities                                  |  |     | (1,201.2 | ) |      |   |      |                             |  |   | (1.2         | ) |  |                 | (1.5   | ) |  |   | (1,203.9 | )
|                                                                       |  |     |          |   |     
|CASH FLOWS FROM FINANCING ACTIVITIES:                                  |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|Proceeds from issuance of long-term debt                               |  |     | 400.0    |   |      |   |      |                             |  |   |             |   |  |                 |       |   |  |   | 400.0    |  
|Long-term debt and capital lease payments                              |  |     |         |   |      |   | (25.8 | )                           |  |   |             |   |  |                 | 1.5    |   |  |   | (24.3    | )
|Capital contributions, net                                             |  |     | 749.6    |   |      |   |      |                             |  |   | (355.4       | ) |  |                 |       |   |  |   | 394.2    |  
|Cash and cash equivalent restricted for debt repayment                 |  |     |          |   |      |   |      |                             |  |   | 3.9          |   |  |                 |       |   |  |   | 3.9      |  
|Deferred financing costs                                               |  |     | (16.1    | ) |      |   |      |                             |  |   |             |   |  |                 |       |   |  |   | (16.1    | )
|                                                                       |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|Net cash provided by (used in) financing activities                    |  |     | 1,133.5  |   |      |   | (25.8 | )                           |  |   | (351.5       | ) |  |                 | 1.5    |   |  |   | 757.7    |  
|                                                                       |  |     |          |   |     
|NET INCREASE IN CASH AND CASH EQUIVALENTS                              |  |     | 151.6    |   |      |   |      |                             |  |   |             |   |  |                 |       |   |  |   | 151.6    |  
|CASH AND CASH EQUIVALENTS, beginning of period                         |  |     | 376.9    |   |      |   |      |                             |  |   |             |   |  |                 |       |   |  |   | 376.9    |  
|                                                                       |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  
|CASH AND CASH EQUIVALENTS, end of period                               |  | $   | 528.5    |   |      | $ |      |                             |  | $ |             |   |  | $               |       |   |  | $ | 528.5    |  
|                                                                       |  |     |          |   |      |   |       |                             |  |   |              |   |  |                 |        |   |  |   |          |  



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The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of December 31, 2003

(unaudited, in millions)



|                                              |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|--------------------------------------------- |  | --- | ------- | ---- | - | ---------------------------- |  | ------------ | ----- |  | --------------- | ------ | - |  | - | -------
|                                              |  | PRG |         | PAFC |   | Other Guarantor Subsidiaries |  | Eliminations |       |  | ConsolidatedPRG
|ASSETS                                        |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|                                              |  |     |         |      |  
|CURRENT ASSETS:                               |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|Cash and cash equivalents                     |  | $   | 376.9   |      | $ |                             |  | $            |      |  | $               |       |   |  | $ | 376.9  
|Cash restricted for debt service              |  |     |        |      |   |                             |  |              | 66.6  |  |                 |       |   |  |   | 66.6   
|Short-term investments                        |  |     | 1.7     |      |   |                             |  |              |      |  |                 |       |   |  |   | 1.7    
|Accounts receivable                           |  |     | 623.4   |      |   |                             |  |              | 0.8   |  |                 | (0.8   | ) |  |   | 623.4  
|Receivable from affiliates                    |  |     | 77.7    |      |   | 39.3                         |  |              | 38.2  |  |                 | (132.7 | ) |  |   | 22.5   
|Inventories                                   |  |     | 605.5   |      |   |                             |  |              | 24.8  |  |                 |       |   |  |   | 630.3  
|Prepaid expenses and other                    |  |     | 88.6    |      |   |                             |  |              | 4.5   |  |                 |       |   |  |   | 93.1   
|                                              |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|Total current assets                          |  |     | 1,773.8 |      |   | 39.3                         |  |              | 134.9 |  |                 | (133.5 | ) |  |   | 1,814.5
|                                              |  |     |         |      |  
|PROPERTY, PLANT AND EQUIPMENT, NET            |  |     | 1,113.5 |      |   |                             |  |              | 602.0 |  |                 |       |   |  |   | 1,715.5
|DEFERRED INCOME TAXES                         |  |     | 36.6    |      |   |                             |  |              |      |  |                 | (36.6  | ) |  |   |       
|INVESTMENT IN AFFILIATES                      |  |     | 300.0   |      |   |                             |  |              |      |  |                 | (300.0 | ) |  |   |       
|GOODWILL                                      |  |     | 14.2    |      |   |                             |  |              |      |  |                 |       |   |  |   | 14.2   
|OTHER ASSETS                                  |  |     | 100.5   |      |   |                             |  |              | 15.1  |  |                 |       |   |  |   | 115.6  
|NOTE RECEIVABLE FROM AFFILIATE                |  |     |        |      |   | 210.1                        |  |              |      |  |                 | (210.1 | ) |  |   |       
|                                              |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|                                              |  | $   | 3,338.6 |      | $ | 249.4                        |  | $            | 752.0 |  | $               | (680.2 | ) |  | $ | 3,659.8
|                                              |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|LIABILITIES AND STOCKHOLDERS EQUITY          |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|                                              |  |     |         |      |  
|CURRENT LIABILITIES:                          |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|Accounts payable                              |  | $   | 707.1   |      | $ |                             |  | $            | 72.8  |  | $               |       |   |  | $ | 779.9  
|Payable to affiliates                         |  |     | 64.5    |      |   |                             |  |              | 91.4  |  |                 | (106.9 | ) |  |   | 49.0   
|Accrued expenses and other                    |  |     | 114.1   |      |   | 13.5                         |  |              | 1.1   |  |                 | (0.8   | ) |  |   | 127.9  
|Accrued taxes other than income               |  |     | 49.2    |      |   |                             |  |              | 4.6   |  |                 |       |   |  |   | 53.8   
|Current portion of long-term debt             |  |     |        |      |   | 25.8                         |  |              |      |  |                 |       |   |  |   | 25.8   
|Current portion of notes payable to affiliate |  |     |        |      |   |                             |  |              | 25.8  |  |                 | (25.8  | ) |  |   |       
|                                              |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|Total current liabilities                     |  |     | 934.9   |      |   | 39.3                         |  |              | 195.7 |  |                 | (133.5 | ) |  |   | 1,036.4
|                                              |  |     |         |      |  
|LONG-TERM DEBT                                |  |     | 1,220.0 |      |   | 210.1                        |  |              |      |  |                 | (14.1  | ) |  |   | 1,416.0
|DEFERRED INCOME TAXES                         |  |     |        |      |   |                             |  |              | 59.5  |  |                 | (36.6  | ) |  |   | 22.9   
|OTHER LONG-TERM LIABILITIES                   |  |     | 157.1   |      |   |                             |  |              | 0.8   |  |                 |       |   |  |   | 157.9  
|NOTE PAYABLE TO AFFILIATE                     |  |     |        |      |   |                             |  |              | 210.1 |  |                 | (210.1 | ) |  |   |       
|COMMITMENTS AND CONTINGENCIES                 |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|                                              |  |     |         |      |  
|COMMON STOCKHOLDERS EQUITY:                  |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|Common stock                                  |  |     |        |      |   |                             |  |              | 0.1   |  |                 | (0.1   | ) |  |   |       
|Paid-in capital                               |  |     | 822.7   |      |   |                             |  |              | 206.0 |  |                 | (206.0 | ) |  |   | 822.7  
|Retained earnings                             |  |     | 203.9   |      |   |                             |  |              | 79.8  |  |                 | (79.8  | ) |  |   | 203.9  
|                                              |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|Total common stockholders equity             |  |     | 1,026.6 |      |   |                             |  |              | 285.9 |  |                 | (285.9 | ) |  |   | 1,026.6
|                                              |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        
|                                              |  | $   | 3,338.6 |      | $ | 249.4                        |  | $            | 752.0 |  | $               | (680.2 | ) |  | $ | 3,659.8
|                                              |  |     |         |      |   |                              |  |              |       |  |                 |        |   |  |   |        



23



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##### Table of Contents

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2003

(unaudited, in millions)



|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|----------------------------------------------------- |  | --- | ------- | - | ---- | - | ---- | --------------------------- |  | - | ------------ | - |  | --------------- | ------ | - |  | - | ------- | -
|                                                      |  | PRG |         |   | PAFC |   |      | Other GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedPRG |       
|Net sales and operating revenues                      |  | $   | 2,546.2 |   |      | $ |     |                             |  | $ | 554.0        |   |  | $               | (669.1 | ) |  | $ | 2,431.1 |  
|Equity in earnings of affiliates                      |  |     | (3.1    | ) |      |   |     |                             |  |   |             |   |  |                 | 3.1    |   |  |   |        |  
|                                                      |  |     |         |   |     
|Expenses:                                             |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|Cost of sales                                         |  |     | 2,280.9 |   |      |   |     |                             |  |   | 500.8        |   |  |                 | (660.7 | ) |  |   | 2,121.0 |  
|Operating expenses                                    |  |     | 98.4    |   |      |   |     |                             |  |   | 43.5         |   |  |                 | (8.4   | ) |  |   | 133.5   |  
|General and administrative expenses                   |  |     | 21.3    |   |      |   |     |                             |  |   | 1.0          |   |  |                 |       |   |  |   | 22.3    |  
|Stock-based compensation                              |  |     | 4.5     |   |      |   |     |                             |  |   |             |   |  |                 |       |   |  |   | 4.5     |  
|Depreciation                                          |  |     | 10.5    |   |      |   |     |                             |  |   | 5.4          |   |  |                 |       |   |  |   | 15.9    |  
|Amortization                                          |  |     | 11.6    |   |      |   |     |                             |  |   | 0.1          |   |  |                 |       |   |  |   | 11.7    |  
|Refinery restructuring and other charges              |  |     | 2.9     |   |      |   |     |                             |  |   |             |   |  |                 |       |   |  |   | 2.9     |  
|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|                                                      |  |     | 2,430.1 |   |      |   |     |                             |  |   | 550.8        |   |  |                 | (669.1 | ) |  |   | 2,311.8 |  
|                                                      |  |     |         |   |     
|Operating income                                      |  |     | 113.0   |   |      |   |     |                             |  |   | 3.2          |   |  |                 | 3.1    |   |  |   | 119.3   |  
|                                                      |  |     |         |   |     
|Interest and finance expense                          |  |     | (24.1   | ) |      |   | (7.4 | )                           |  |   | (8.0         | ) |  |                 | 7.9    |   |  |   | (31.6   | )
|Interest income                                       |  |     | 1.8     |   |      |   | 7.4  |                             |  |   | 0.1          |   |  |                 | (7.9   | ) |  |   | 1.4     |  
|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|Income from continuing operations before income taxes |  |     | 90.7    |   |      |   |     |                             |  |   | (4.7         | ) |  |                 | 3.1    |   |  |   | 89.1    |  
|                                                      |  |     |         |   |     
|Income tax provision                                  |  |     | (33.7   | ) |      |   |     |                             |  |   | 1.6          |   |  |                 |       |   |  |   | (32.1   | )
|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|Income from continuing operations                     |  |     | 57.0    |   |      |   |     |                             |  |   | (3.1         | ) |  |                 | 3.1    |   |  |   | 57.0    |  
|                                                      |  |     |         |   |     
|Loss from discontinued operations, net of tax         |  |     | (0.4    | ) |      |   |     |                             |  |   |             |   |  |                 |       |   |  |   | (0.4    | )
|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  
|Net income                                            |  | $   | 56.6    |   |      | $ |     |                             |  | $ | (3.1         | ) |  | $               | 3.1    |   |  | $ | 56.6    |  
|                                                      |  |     |         |   |      |   |      |                             |  |   |              |   |  |                 |        |   |  |   |         |  



24



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##### Table of Contents

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2003

(unaudited, in millions)



|                                                      |  |     |         |   |      |   |       |                             |  |   |              |   |  |                 |          |   |  |   |         |  
|----------------------------------------------------- |  | --- | ------- | - | ---- | - | ----- | --------------------------- |  | - | ------------ | - |  | --------------- | -------- | - |  | - | ------- | -
|                                                      |  | PRG |         |   | PAFC |   |       | Other GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedPRG |         
|Net sales and operating revenues                      |  | $   | 6,910.2 |   |      | $ |      |                             |  | $ | 1,838.3      |   |  | $               | (2,202.2 | ) |  | $ | 6,546.3 |  
|Equity in earnings of affiliates                      |  |     | 102.4   |   |      |   |      |                             |  |   |             |   |  |                 | (102.4   | ) |  |   |        |  
|                                                      |  |     |         |   |     
|Expenses:                                             |  |     |         |   |      |   |       |                             |  |   |              |   |  |                 |          |   |  |   |         |  
|Cost of sales                                         |  |     | 6,375.8 |   |      |   |      |                             |  |   | 1,508.5      |   |  |                 | (2,176.9 | ) |  |   | 5,707.4 |  
|Operating expenses                                    |  |     | 281.3   |   |      |   |      |                             |  |   | 127.4        |   |  |                 | (25.3    | ) |  |   | 383.4   |  
|General and administrative expenses                   |  |     | 46.7    |   |      |   |      |                             |  |   | 2.9          |   |  |                 |         |   |  |   | 49.6    |  
|Stock-based compensation                              |  |     | 13.2    |   |      |   |      |                             |  |   |             |   |  |                 |         |   |  |   | 13.2    |  
|Depreciation                                          |  |     | 29.8    |   |      |   |      |                             |  |   | 16.3         |   |  |                 |         |   |  |   | 46.1    |  
|Amortization                                          |  |     | 30.2    |   |      |   |      |                             |  |   | 0.1          |   |  |                 |         |   |  |   | 30.3    |  
|Refinery restructuring and other charges              |  |     | 18.6    |   |      |   |      |                             |  |   |             |   |  |                 |         |   |  |   | 18.6    |  
|                                                      |  |     |         |   |      |   |       |                             |  |   |              |   |  |                 |          |   |  |   |         |  
|                                                      |  |     | 6,795.6 |   |      |   |      |                             |  |   | 1,655.2      |   |  |                 | (2,202.2 | ) |  |   | 6,248.6 |  
|                                                      |  |     |         |   |     
|Operating income                                      |  |     | 217.0   |   |      |   |      |                             |  |   | 183.1        |   |  |                 | (102.4   | ) |  |   | 297.7   |  
|                                                      |  |     |         |   |     
|Interest and finance expense                          |  |     | (63.2   | ) |      |   | (22.8 | )                           |  |   | (25.3        | ) |  |                 | 23.6     |   |  |   | (87.7   | )
|Loss on extinguishment of debt                        |  |     | (7.4    | ) |      |   |      |                             |  |   | (0.7         | ) |  |                 |         |   |  |   | (8.1    | )
|Interest income                                       |  |     | 4.3     |   |      |   | 22.8  |                             |  |   | 0.5          |   |  |                 | (23.6    | ) |  |   | 4.0     |  
|                                                      |  |     |         |   |      |   |       |                             |  |   |              |   |  |                 |          |   |  |   |         |  
|Income from continuing operations before income taxes |  |     | 150.7   |   |      |   |      |                             |  |   | 157.6        |   |  |                 | (102.4   | ) |  |   | 205.9   |  
|                                                      |  |     |         |   |     
|Income tax provision                                  |  |     | (16.3   | ) |      |   |      |                             |  |   | (55.2        | ) |  |                 |         |   |  |   | (71.5   | )
|                                                      |  |     |         |   |      |   |       |                             |  |   |              |   |  |                 |          |   |  |   |         |  
|Income from continuing operations                     |  |     | 134.4   |   |      |   |      |                             |  |   | 102.4        |   |  |                 | (102.4   | ) |  |   | 134.4   |  
|                                                      |  |     |         |   |     
|Loss from discontinued operations, net of tax         |  |     | (6.9    | ) |      |   |      |                             |  |   |             |   |  |                 |         |   |  |   | (6.9    | )
|                                                      |  |     |         |   |      |   |       |                             |  |   |              |   |  |                 |          |   |  |   |         |  
|Net income                                            |  | $   | 127.5   |   |      | $ |      |                             |  | $ | 102.4        |   |  | $               | (102.4   | ) |  | $ | 127.5   |  
|                                                      |  |     |         |   |      |   |       |                             |  |   |              |   |  |                 |          |   |  |   |         |  



25



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##### Table of Contents

The Premcor Refining Group Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2003

(unaudited, in millions)



|                                                                             |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|---------------------------------------------------------------------------- |  | --- | ------ | - | ---- | - | ----- | ---------------------------- |  | - | ------------ | - |  | --------------- | ------ | - |  | - | ------ | -
|                                                                             |  | PRG |        |   | PAFC |   |       | Other Guarantor Subsidiaries |  |   | Eliminations |   |  | ConsolidatedPRG |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                        |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|Net income                                                                   |  | $   | 127.5  |   |      | $ |      |                              |  | $ | 102.4        |   |  | $               | (102.4 | ) |  | $ | 127.5  |  
|                                                                             |  |     |        |   |     
|Adjustments:                                                                 |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|Loss from discontinued operations                                            |  |     | 11.2   |   |      |   |      |                              |  |   |             |   |  |                 |       |   |  |   | 11.2   |  
|Depreciation                                                                 |  |     | 29.8   |   |      |   |      |                              |  |   | 16.3         |   |  |                 |       |   |  |   | 46.1   |  
|Amortization                                                                 |  |     | 34.5   |   |      |   |      |                              |  |   | 2.7          |   |  |                 |       |   |  |   | 37.2   |  
|Deferred income taxes                                                        |  |     | 27.1   |   |      |   |      |                              |  |   | 14.8         |   |  |                 |       |   |  |   | 41.9   |  
|Stock-based compensation                                                     |  |     | 13.2   |   |      |   |      |                              |  |   |             |   |  |                 |       |   |  |   | 13.2   |  
|Refinery restructuring and other charges                                     |  |     | 13.6   |   |      |   |      |                              |  |   |             |   |  |                 |       |   |  |   | 13.6   |  
|Write-off of deferred financing costs                                        |  |     | 4.7    |   |      |   |      |                              |  |   | 0.7          |   |  |                 |       |   |  |   | 5.4    |  
|Equity in earnings of affiliates                                             |  |     | (102.4 | ) |      |   |      |                              |  |   |             |   |  |                 | 102.4  |   |  |   |       |  
|Other, net                                                                   |  |     | 5.1    |   |      |   | 0.1   |                              |  |   | 0.6          |   |  |                 |       |   |  |   | 5.8    |  
|                                                                             |  |     |        |   |     
|CASH (REINVESTED IN) PROVIDED BY WORKING CAPITAL :                           |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|Accounts receivable, prepaid expenses and other                              |  |     | (169.6 | ) |      |   |      |                              |  |   | (3.3         | ) |  |                 | 0.4    |   |  |   | (172.5 | )
|Inventories                                                                  |  |     | (161.4 | ) |      |   |      |                              |  |   | (8.6         | ) |  |                 |       |   |  |   | (170.0 | )
|Accounts payable, accrued expenses, taxes                                    |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|other than income, and other                                                 |  |     | 177.5  |   |      |   | (8.3  | )                            |  |   | (75.2        | ) |  |                 | (0.4   | ) |  |   | 93.6   |  
|Affiliate receivables and payables                                           |  |     | (129.2 | ) |      |   | 23.0  |                              |  |   | 129.0        |   |  |                 |       |   |  |   | 22.8   |  
|Cash and cash equivalents restricted for debt service                        |  |     |       |   |      |   |      |                              |  |   | 7.6          |   |  |                 |       |   |  |   | 7.6    |  
|                                                                             |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|Net cash (used in) provided by operating activities of continuing operations |  |     | (118.4 | ) |      |   | 14.8  |                              |  |   | 187.0        |   |  |                 |       |   |  |   | 83.4   |  
|Net cash used in operating activities of discontinued operations             |  |     | (4.4   | ) |      |   |      |                              |  |   |             |   |  |                 |       |   |  |   | (4.4   | )
|                                                                             |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|Net cash (used in) provided by operating activities                          |  |     | (122.8 | ) |      |   | 14.8  |                              |  |   | 187.0        |   |  |                 |       |   |  |   | 79.0   |  
|                                                                             |  |     |        |   |     
|CASH FLOWS FROM INVESTING ACTIVITIES:                                        |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|Expenditures for property, plant and equipment                               |  |     | (104.0 | ) |      |   |      |                              |  |   | (8.9         | ) |  |                 |       |   |  |   | (112.9 | )
|Expenditures for turnaround                                                  |  |     | (9.5   | ) |      |   |      |                              |  |   | (3.2         | ) |  |                 |       |   |  |   | (12.7  | )
|Expenditures for refinery acquisition, net                                   |  |     | (476.0 | ) |      |   |      |                              |  |   |             |   |  |                 |       |   |  |   | (476.0 | )
|Proceeds from sale of assets                                                 |  |     | 40.0   |   |      |   |      |                              |  |   |             |   |  |                 |       |   |  |   | 40.0   |  
|Purchases and maturities of investments, net                                 |  |     | (14.1  | ) |      |   |      |                              |  |   |             |   |  |                 | 14.1   |   |  |   |       |  
|Cash and cash equivalents restricted for investment in capital additions     |  |     | 2.6    |   |      |   |      |                              |  |   | (0.4         | ) |  |                 |       |   |  |   | 2.2    |  
|                                                                             |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|Net cash (used in) provided by investing activities                          |  |     | (561.0 | ) |      |   |      |                              |  |   | (12.5        | ) |  |                 | 14.1   |   |  |   | (559.4 | )
|                                                                             |  |     |        |   |     
|CASH FLOWS FROM FINANCING ACTIVITIES:                                        |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|Proceeds from issuance of long-term debt                                     |  |     | 825.0  |   |      |   |      |                              |  |   |             |   |  |                 |       |   |  |   | 825.0  |  
|Long-term debt and capital lease payments                                    |  |     | (240.2 | ) |      |   | (14.8 | )                            |  |   |             |   |  |                 | (14.1  | ) |  |   | (269.1 | )
|Capital contributions, net                                                   |  |     | 438.0  |   |      |   |      |                              |  |   | (174.7       | ) |  |                 |       |   |  |   | 263.3  |  
|Cash and cash equivalent restricted for debt repayment                       |  |     |       |   |      |   |      |                              |  |   | 0.2          |   |  |                 |       |   |  |   | 0.2    |  
|Deferred financing costs                                                     |  |     | (25.5  | ) |      |   |      |                              |  |   |             |   |  |                 |       |   |  |   | (25.5  | )
|                                                                             |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|Net cash provided by (used in) financing activities                          |  |     | 997.3  |   |      |   | (14.8 | )                            |  |   | (174.5       | ) |  |                 | (14.1  | ) |  |   | 793.9  |  
|                                                                             |  |     |        |   |     
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                    |  |     | 313.5  |   |      |   |      |                              |  |   |             |   |  |                 |       |   |  |   | 313.5  |  
|CASH AND CASH EQUIVALENTS, beginning of period                               |  |     | 119.7  |   |      |   |      |                              |  |   |             |   |  |                 |       |   |  |   | 119.7  |  
|                                                                             |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                     |  | $   | 433.2  |   |      | $ |      |                              |  | $ |             |   |  | $               |       |   |  | $ | 433.2  |  
|                                                                             |  |     |        |   |      |   |       |                              |  |   |              |   |  |                 |        |   |  |   |        |  



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15. Condensed Consolidating Financial Statements of Premcor Inc. as Guarantor of PRGs Senior Notes



Presented below are the Premcor Inc. condensed
consolidating balance sheets, statements of operations, and statements of cash flows as required by Rule 3-10 of the Securities Exchange Act of 1934, as amended. Premcor Inc. is a full and unconditional guarantor of PRGs 61/8% 2011 Senior Notes and 63/4% 2014 Senior Notes. Premcor Inc. indirectly owns PRG through its 100% ownership of Premcor USA. PRG is a wholly owned subsidiary of Premcor USA. Under Rule 3-10, the condensed
consolidating balance sheets, statements of operations, and statements of cash flows presented below meet the requirements for financial statements of the issuer and the guarantor of the notes, and all guarantees are full and unconditional on a
joint and several basis.



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Premcor Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of September 30, 2004

(unaudited, in millions)



|                                     |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|------------------------------------ |  | ------- | ------- | --------------- | - | ------------------------------- |  | - | ------------ | - |  | --------------------- | -------- | - |  | - | -------
|                                     |  | Premcor |         | ConsolidatedPRG |   | Other Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedStatement
|ASSETS                               |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|                                     |  |         |         |                 |  
|CURRENT ASSETS:                      |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|Cash and cash equivalents            |  | $       | 118.2   |                 | $ | 528.5                           |  | $ | 2.0          |   |  | $                     |         |   |  | $ | 648.7  
|Cash restricted for debt service     |  |         |        |                 |   | 54.6                            |  |   |             |   |  |                       |         |   |  |   | 54.6   
|Short-term investments               |  |         |        |                 |   | 1.7                             |  |   | 5.3          |   |  |                       |         |   |  |   | 7.0    
|Accounts receivable                  |  |         | 0.1     |                 |   | 786.0                           |  |   | 0.3          |   |  |                       |         |   |  |   | 786.4  
|Receivable from affiliates           |  |         | 208.6   |                 |   | 82.0                            |  |   | 52.0         |   |  |                       | (342.6   | ) |  |   |       
|Inventories                          |  |         |        |                 |   | 842.3                           |  |   |             |   |  |                       |         |   |  |   | 842.3  
|Prepaid expenses and other           |  |         |        |                 |   | 72.8                            |  |   | 3.6          |   |  |                       | (3.7     | ) |  |   | 72.7   
|Deferred income taxes                |  |         |        |                 |   | 24.3                            |  |   | 2.9          |   |  |                       |         |   |  |   | 27.2   
|                                     |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|Total current assets                 |  |         | 326.9   |                 |   | 2,392.2                         |  |   | 66.1         |   |  |                       | (346.3   | ) |  |   | 2,438.9
|                                     |  |         |         |                 |  
|PROPERTY, PLANT AND EQUIPMENT, NET   |  |         |        |                 |   | 2,641.6                         |  |   | 44.9         |   |  |                       |         |   |  |   | 2,686.5
|INVESTMENT IN AFFILIATES             |  |         | 1,840.6 |                 |   |                                |  |   | 1,722.9      |   |  |                       | (3,563.5 | ) |  |   |       
|GOODWILL                             |  |         |        |                 |   | 27.6                            |  |   |             |   |  |                       |         |   |  |   | 27.6   
|OTHER ASSETS                         |  |         |        |                 |   | 166.1                           |  |   |             |   |  |                       |         |   |  |   | 166.1  
|                                     |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|                                     |  | $       | 2,167.5 |                 | $ | 5,227.5                         |  | $ | 1,833.9      |   |  | $                     | (3,909.8 | ) |  | $ | 5,319.1
|                                     |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|                                     |  |         |         |                 |  
|LIABILITIES AND STOCKHOLDERS EQUITY |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|                                     |  |         |         |                 |  
|CURRENT LIABILITIES:                 |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|Accounts payable                     |  | $       |        |                 | $ | 916.3                           |  | $ | 2.2          |   |  | $                     |         |   |  | $ | 918.5  
|Payable to affiliates                |  |         | 117.8   |                 |   | 209.2                           |  |   | 15.8         |   |  |                       | (342.8   | ) |  |   |       
|Accrued expenses and other           |  |         | 71.5    |                 |   | 158.8                           |  |   | 3.4          |   |  |                       | (3.7     | ) |  |   | 230.0  
|Accrued taxes other than income      |  |         |        |                 |   | 49.9                            |  |   | (0.3         | ) |  |                       |         |   |  |   | 49.6   
|Current portion of long-term debt    |  |         |        |                 |   | 38.5                            |  |   | 0.3          |   |  |                       |         |   |  |   | 38.8   
|                                     |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|Total current liabilities            |  |         | 189.3   |                 |   | 1,372.7                         |  |   | 21.4         |   |  |                       | (346.5   | ) |  |   | 1,236.9
|                                     |  |         |         |                 |  
|LONG-TERM DEBT                       |  |         |        |                 |   | 1,779.1                         |  |   | 9.7          |   |  |                       |         |   |  |   | 1,788.8
|DEFERRED INCOME TAXES                |  |         | 0.8     |                 |   | 139.5                           |  |   | (1.9         | ) |  |                       |         |   |  |   | 138.4  
|OTHER LONG-TERM LIABILITIES          |  |         |        |                 |   | 177.6                           |  |   |             |   |  |                       |         |   |  |   | 177.6  
|COMMITMENTS AND CONTINGENCIES        |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|                                     |  |         |         |                 |  
|COMMON STOCKHOLDERS EQUITY:         |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|Common stock                         |  |         | 0.9     |                 |   |                                |  |   | 0.1          |   |  |                       | (0.1     | ) |  |   | 0.9    
|Paid-in capital                      |  |         | 1,694.3 |                 |   | 1,232.3                         |  |   | 1,507.4      |   |  |                       | (2,739.7 | ) |  |   | 1,694.3
|Retained earnings                    |  |         | 282.2   |                 |   | 526.3                           |  |   | 297.2        |   |  |                       | (823.5   | ) |  |   | 282.2  
|                                     |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|Total common stockholders equity    |  |         | 1,977.4 |                 |   | 1,758.6                         |  |   | 1,804.7      |   |  |                       | (3,563.3 | ) |  |   | 1,977.4
|                                     |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        
|                                     |  | $       | 2,167.5 |                 | $ | 5,227.5                         |  | $ | 1,833.9      |   |  | $                     | (3,909.8 | ) |  | $ | 5,319.1
|                                     |  |         |         |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |        



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Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Three Months Ended
September 30, 2004

(unaudited, in millions)



|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|----------------------------------------------------- |  | ------- | ----- | - | --------------- | - | ------- | -------------------------------- |  | - | ------------ | - |  | --------------------- | ------ | - |  | - | ------- | -
|                                                      |  | Premcor |       |   | ConsolidatedPRG |   |         | Other Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | ConsolidatedStatement |       
|Net sales and operating revenues                      |  | $       |      |   |                 | $ | 4,407.3 |                                  |  | $ | 6.6          |   |  | $                     | (6.2   | ) |  | $ | 4,407.7 |  
|Equity in earnings of affiliates                      |  |         | 141.1 |   |                 |   |        |                                  |  |   | 140.9        |   |  |                       | (282.0 | ) |  |   |        |  
|                                                      |  |         |       |   |                
|Expenses:                                             |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|Cost of sales                                         |  |         |      |   |                 |   | 3,847.5 |                                  |  |   | 2.1          |   |  |                       | (4.6   | ) |  |   | 3,845.0 |  
|Operating expenses                                    |  |         |      |   |                 |   | 217.9   |                                  |  |   | 2.8          |   |  |                       | (1.5   | ) |  |   | 219.2   |  
|General and administrative expenses                   |  |         |      |   |                 |   | 36.6    |                                  |  |   |             |   |  |                       |       |   |  |   | 36.6    |  
|Stock-based compensation                              |  |         |      |   |                 |   | 4.9     |                                  |  |   |             |   |  |                       |       |   |  |   | 4.9     |  
|Depreciation                                          |  |         |      |   |                 |   | 26.0    |                                  |  |   | 0.3          |   |  |                       |       |   |  |   | 26.3    |  
|Amortization                                          |  |         |      |   |                 |   | 14.2    |                                  |  |   |             |   |  |                       |       |   |  |   | 14.2    |  
|Refinery restructuring and other charges              |  |         |      |   |                 |   | 1.1     |                                  |  |   |             |   |  |                       |       |   |  |   | 1.1     |  
|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|                                                      |  |         |      |   |                 |   | 4,148.2 |                                  |  |   | 5.2          |   |  |                       | (6.1   | ) |  |   | 4,147.3 |  
|                                                      |  |         |       |   |                
|Operating income                                      |  |         | 141.1 |   |                 |   | 259.1   |                                  |  |   | 142.3        |   |  |                       | (282.1 | ) |  |   | 260.4   |  
|                                                      |  |         |       |   |                
|Interest and finance expense                          |  |         |      |   |                 |   | (34.7   | )                                |  |   | (0.4         | ) |  |                       |       |   |  |   | (35.1   | )
|Interest income                                       |  |         | 0.3   |   |                 |   | 1.2     |                                  |  |   | 0.1          |   |  |                       | 0.1    |   |  |   | 1.7     |  
|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|Income from continuing operations before income taxes |  |         | 141.4 |   |                 |   | 225.6   |                                  |  |   | 142.0        |   |  |                       | (282.0 | ) |  |   | 227.0   |  
|                                                      |  |         |       |   |                
|Income tax provision                                  |  |         | (0.1  | ) |                 |   | (82.4   | )                                |  |   | (0.4         | ) |  |                       |       |   |  |   | (82.9   | )
|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|Income from continuing operations                     |  |         | 141.3 |   |                 |   | 143.2   |                                  |  |   | 141.6        |   |  |                       | (282.0 | ) |  |   | 144.1   |  
|                                                      |  |         |       |   |                
|Loss from discontinued operations, net of tax         |  |         |      |   |                 |   | (2.8    | )                                |  |   |             |   |  |                       |       |   |  |   | (2.8    | )
|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|Net income                                            |  | $       | 141.3 |   |                 | $ | 140.4   |                                  |  | $ | 141.6        |   |  | $                     | (282.0 | ) |  | $ | 141.3   |  
|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  



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Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Nine Months Ended
September 30, 2004

(unaudited, in millions)



|                                                      |  |         |       |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|----------------------------------------------------- |  | ------- | ----- | - | --------------- | - | -------- | -------------------------------- |  | - | ------------ | - |  | --------------------- | ------ | - |  | - | -------- | -
|                                                      |  | Premcor |       |   | ConsolidatedPRG |   |          | Other Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | ConsolidatedStatement |       
|Net sales and operating revenues                      |  | $       |      |   |                 | $ | 10,531.4 |                                  |  | $ | 14.3         |   |  | $                     | (12.6  | ) |  | $ | 10,533.1 |  
|Equity in earnings of affiliates                      |  |         | 324.1 |   |                 |   |         |                                  |  |   | 323.9        |   |  |                       | (648.0 | ) |  |   |         |  
|                                                      |  |         |       |   |                
|Expenses:                                             |  |         |       |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Cost of sales                                         |  |         |      |   |                 |   | 9,120.4  |                                  |  |   | 2.1          |   |  |                       | (8.3   | ) |  |   | 9,114.2  |  
|Operating expenses                                    |  |         |      |   |                 |   | 560.5    |                                  |  |   | 7.5          |   |  |                       | (4.3   | ) |  |   | 563.7    |  
|General and administrative expenses                   |  |         | 0.1   |   |                 |   | 92.2     |                                  |  |   | 0.2          |   |  |                       |       |   |  |   | 92.5     |  
|Stock-based compensation                              |  |         |      |   |                 |   | 14.7     |                                  |  |   |             |   |  |                       |       |   |  |   | 14.7     |  
|Depreciation                                          |  |         |      |   |                 |   | 67.2     |                                  |  |   | 0.9          |   |  |                       |       |   |  |   | 68.1     |  
|Amortization                                          |  |         |      |   |                 |   | 43.3     |                                  |  |   |             |   |  |                       |       |   |  |   | 43.3     |  
|Refinery restructuring and other charges              |  |         |      |   |                 |   | 10.4     |                                  |  |   |             |   |  |                       |       |   |  |   | 10.4     |  
|                                                      |  |         |       |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|                                                      |  |         | 0.1   |   |                 |   | 9,908.7  |                                  |  |   | 10.7         |   |  |                       | (12.6  | ) |  |   | 9,906.9  |  
|                                                      |  |         |       |   |                
|Operating income                                      |  |         | 324.0 |   |                 |   | 622.7    |                                  |  |   | 327.5        |   |  |                       | (648.0 | ) |  |   | 626.2    |  
|                                                      |  |         |       |   |                
|Interest and finance expense                          |  |         | (0.3  | ) |                 |   | (100.6   | )                                |  |   | (1.1         | ) |  |                       | 0.3    |   |  |   | (101.7   | )
|Loss on extinguishment of debt                        |  |         |      |   |                 |   | (3.6     | )                                |  |   |             |   |  |                       |       |   |  |   | (3.6     | )
|Interest income                                       |  |         | 1.0   |   |                 |   | 4.2      |                                  |  |   | 0.1          |   |  |                       | (0.3   | ) |  |   | 5.0      |  
|                                                      |  |         |       |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Income from continuing operations before income taxes |  |         | 324.7 |   |                 |   | 522.7    |                                  |  |   | 326.5        |   |  |                       | (648.0 | ) |  |   | 525.9    |  
|                                                      |  |         |       |   |                
|Income tax provision                                  |  |         | (0.2  | ) |                 |   | (195.6   | )                                |  |   | (1.0         | ) |  |                       |       |   |  |   | (196.8   | )
|                                                      |  |         |       |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Income from continuing operations                     |  |         | 324.5 |   |                 |   | 327.1    |                                  |  |   | 325.5        |   |  |                       | (648.0 | ) |  |   | 329.1    |  
|                                                      |  |         |       |   |                
|Loss from discontinued operations, net of tax         |  |         |      |   |                 |   | (4.6     | )                                |  |   |             |   |  |                       |       |   |  |   | (4.6     | )
|                                                      |  |         |       |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Net income                                            |  | $       | 324.5 |   |                 | $ | 322.5    |                                  |  | $ | 325.5        |   |  | $                     | (648.0 | ) |  | $ | 324.5    |  
|                                                      |  |         |       |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  



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Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended
September 30, 2004

(unaudited, in millions)



|                                                                             |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|---------------------------------------------------------------------------- |  | ------- | ------ | - | --------------- | - | -------- | -------------------------------- |  | - | ------------ | - |  | --------------------- | ------ | - |  | - | -------- | -
|                                                                             |  | Premcor |        |   | ConsolidatedPRG |   |          | Other Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | ConsolidatedStatement |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                        |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Net income                                                                   |  | $       | 324.5  |   |                 | $ | 322.5    |                                  |  | $ | 325.5        |   |  | $                     | (648.0 | ) |  | $ | 324.5    |  
|                                                                             |  |         |        |   |                
|Adjustments:                                                                 |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Loss from discontinued operations                                            |  |         |       |   |                 |   | 4.6      |                                  |  |   |             |   |  |                       |       |   |  |   | 4.6      |  
|Depreciation                                                                 |  |         |       |   |                 |   | 67.2     |                                  |  |   | 0.9          |   |  |                       |       |   |  |   | 68.1     |  
|Amortization                                                                 |  |         |       |   |                 |   | 49.7     |                                  |  |   |             |   |  |                       |       |   |  |   | 49.7     |  
|Deferred income taxes                                                        |  |         | 1.0    |   |                 |   | 92.2     |                                  |  |   | 17.4         |   |  |                       |        |   |  |   | 110.6    |  
|Stock-based compensation                                                     |  |         |       |   |                 |   | 14.7     |                                  |  |   |             |   |  |                       |       |   |  |   | 14.7     |  
|Refinery restructuring and other charges                                     |  |         |       |   |                 |   | (4.8     | )                                |  |   |             |   |  |                       |       |   |  |   | (4.8     | )
|Write-off of deferred financing costs                                        |  |         |       |   |                 |   | 3.6      |                                  |  |   |             |   |  |                       |       |   |  |   | 3.6      |  
|Equity in earnings of affiliates                                             |  |         | (324.1 | ) |                 |   |         |                                  |  |   | (323.9       | ) |  |                       | 648.0  |   |  |   |         |  
|Other, net                                                                   |  |         | (0.7   | ) |                 |   | 3.2      |                                  |  |   | (0.1         | ) |  |                       |       |   |  |   | 2.4      |  
|                                                                             |  |         |        |   |                
|CASH (REINVESTED IN) PROVIDED BY WORKING CAPITAL :                           |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Accounts receivable, prepaid expenses and other                              |  |         | (0.1   | ) |                 |   | (130.7   | )                                |  |   | (0.4         | ) |  |                       | 0.5    |   |  |   | (130.7   | )
|Inventories                                                                  |  |         |       |   |                 |   | (95.7    | )                                |  |   |             |   |  |                       |       |   |  |   | (95.7    | )
|Accounts payable, accrued expenses,                                          |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |       |   |  |   |         |  
|taxes other than income, and other                                           |  |         | 73.8   |   |                 |   | 167.2    |                                  |  |   | 1.3          |   |  |                       | (0.5   | ) |  |   | 241.8    |  
|Affiliate receivables and payables                                           |  |         | (92.9  | ) |                 |   | 100.6    |                                  |  |   | (7.7         | ) |  |                       |       |   |  |   |         |  
|Cash and cash equivalents restricted for debt service                        |  |         |       |   |                 |   | 8.1      |                                  |  |   |             |   |  |                       |       |   |  |   | 8.1      |  
|                                                                             |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Net cash (used in) provided by operating activities of continuing operations |  |         | (18.5  | ) |                 |   | 602.4    |                                  |  |   | 13.0         |   |  |                       |       |   |  |   | 596.9    |  
|Net cash used in operating activities of discontinued operations             |  |         |       |   |                 |   | (4.6     | )                                |  |   |             |   |  |                       |       |   |  |   | (4.6     | )
|                                                                             |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Net cash (used in) provided by operating activities                          |  |         | (18.5  | ) |                 |   | 597.8    |                                  |  |   | 13.0         |   |  |                       |       |   |  |   | 592.3    |  
|                                                                             |  |         |        |   |                
|CASH FLOWS FROM INVESTING ACTIVITIES:                                        |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Expenditures for property, plant and equipment                               |  |         |       |   |                 |   | (231.8   | )                                |  |   | (21.6        | ) |  |                       |       |   |  |   | (253.4   | )
|Expenditures for turnaround                                                  |  |         |       |   |                 |   | (83.9    | )                                |  |   |             |   |  |                       |       |   |  |   | (83.9    | )
|Expenditures for refinery acquisition, net                                   |  |         |       |   |                 |   | (874.8   | )                                |  |   |             |   |  |                       |       |   |  |   | (874.8   | )
|Earn-out payment associated with refinery acquisition                        |  |         |       |   |                 |   | (13.4    | )                                |  |   |             |   |  |                       |       |   |  |   | (13.4    | )
|Maturities of investments                                                    |  |         |       |   |                 |   |         |                                  |  |   | (1.1         | ) |  |                       |       |   |  |   | (1.1     | )
|                                                                             |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Net cash used in investing activities                                        |  |         |       |   |                 |   | (1,203.9 | )                                |  |   | (22.7        | ) |  |                       |       |   |  |   | (1,226.6 | )
|                                                                             |  |         |        |   |                
|CASH FLOWS FROM FINANCING ACTIVITIES:                                        |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Proceeds from issuance of common stock                                       |  |         | 493.0  |   |                 |   |         |                                  |  |   |             |   |  |                       |       |   |  |   | 493.0    |  
|Proceeds from issuance of long-term debt                                     |  |         |       |   |                 |   | 400.0    |                                  |  |   |             |   |  |                       |       |   |  |   | 400.0    |  
|Long-term debt and capital lease payments                                    |  |         |       |   |                 |   | (24.3    | )                                |  |   | (0.2         | ) |  |                       |       |   |  |   | (24.5    | )
|Cash and cash equivalent restricted for debt repayment                       |  |         |       |   |                 |   | 3.9      |                                  |  |   |             |   |  |                       |       |   |  |   | 3.9      |  
|Capital contributions, net                                                   |  |         | (404.3 | ) |                 |   | 394.2    |                                  |  |   | 10.1         |   |  |                       |       |   |  |   |         |  
|Deferred financing costs                                                     |  |         |       |   |                 |   | (16.1    | )                                |  |   |             |   |  |                       |       |   |  |   | (16.1    | )
|                                                                             |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|Net cash provided by financing activities                                    |  |         | 88.7   |   |                 |   | 757.7    |                                  |  |   | 9.9          |   |  |                       |       |   |  |   | 856.3    |  
|                                                                             |  |         |        |   |                
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                    |  |         | 70.2   |   |                 |   | 151.6    |                                  |  |   | 0.2          |   |  |                       |       |   |  |   | 222.0    |  
|CASH AND CASH EQUIVALENTS, beginning of period                               |  |         | 48.0   |   |                 |   | 376.9    |                                  |  |   | 1.8          |   |  |                       |       |   |  |   | 426.7    |  
|                                                                             |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  
|CASH AND CASH EQUIVALENTS, end of period                                     |  | $       | 118.2  |   |                 | $ | 528.5    |                                  |  | $ | 2.0          |   |  | $                     |       |   |  | $ | 648.7    |  
|                                                                             |  |         |        |   |                 |   |          |                                  |  |   |              |   |  |                       |        |   |  |   |          |  



31



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##### Table of Contents

Premcor Inc. and Subsidiaries

Condensed Consolidating Balance Sheet

As of December 31, 2003

(unaudited, in millions)



|                                              |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|--------------------------------------------- |  | ------- | ------- | - | --------------- | - | ------------------------------- |  | - | ------------ | - |  | --------------------- | -------- | - |  | - | ------- | -
|                                              |  | Premcor |         |   | ConsolidatedPRG |   | Other Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedStatement |         
|ASSETS                                        |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|                                              |  |         |         |   |                
|CURRENT ASSETS:                               |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|Cash and cash equivalents                     |  | $       | 48.0    |   |                 | $ | 376.9                           |  | $ | 1.8          |   |  | $                     |         |   |  | $ | 426.7   |  
|Cash restricted for debt service              |  |         |        |   |                 |   | 66.6                            |  |   |             |   |  |                       |         |   |  |   | 66.6    |  
|Short-term investments                        |  |         |        |   |                 |   | 1.7                             |  |   | 4.2          |   |  |                       |         |   |  |   | 5.9     |  
|Accounts receivable                           |  |         |        |   |                 |   | 623.4                           |  |   | 0.1          |   |  |                       |         |   |  |   | 623.5   |  
|Receivable from affiliates                    |  |         | 99.0    |   |                 |   | 22.5                            |  |   | 43.8         |   |  |                       | (165.3   | ) |  |   |        |  
|Inventories                                   |  |         |        |   |                 |   | 630.3                           |  |   |             |   |  |                       |         |   |  |   | 630.3   |  
|Prepaid expenses and other                    |  |         |        |   |                 |   | 93.1                            |  |   | 3.5          |   |  |                       | (3.9     | ) |  |   | 92.7    |  
|Income tax receivable                         |  |         | 2.3     |   |                 |   |                                |  |   |             |   |  |                       | (2.3     | ) |  |   |        |  
|                                              |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|Total current assets                          |  |         | 149.3   |   |                 |   | 1,814.5                         |  |   | 53.4         |   |  |                       | (171.5   | ) |  |   | 1,845.7 |  
|                                              |  |         |         |   |                
|PROPERTY, PLANT AND EQUIPMENT, NET            |  |         |        |   |                 |   | 1,715.5                         |  |   | 24.3         |   |  |                       |         |   |  |   | 1,739.8 |  
|INVESTMENT IN AFFILIATES                      |  |         | 1,096.8 |   |                 |   |                                |  |   | 994.6        |   |  |                       | (2,091.4 | ) |  |   |        |  
|GOODWILL                                      |  |         |        |   |                 |   | 14.2                            |  |   |             |   |  |                       |         |   |  |   | 14.2    |  
|OTHER ASSETS                                  |  |         |        |   |                 |   | 115.6                           |  |   |             |   |  |                       |         |   |  |   | 115.6   |  
|                                              |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|                                              |  | $       | 1,246.1 |   |                 | $ | 3,659.8                         |  | $ | 1,072.3      |   |  | $                     | (2,262.9 | ) |  | $ | 3,715.3 |  
|                                              |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|                                              |  |         |         |   |                
|LIABILITIES AND STOCKHOLDERS EQUITY          |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|                                              |  |         |         |   |                
|CURRENT LIABILITIES:                          |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|Accounts payable                              |  | $       |        |   |                 | $ | 779.9                           |  | $ |             |   |  | $                     |         |   |  | $ | 779.9   |  
|Payable to affiliates                         |  |         | 92.1    |   |                 |   | 49.0                            |  |   | 15.3         |   |  |                       | (156.4   | ) |  |   |        |  
|Accrued expenses and other                    |  |         |        |   |                 |   | 127.9                           |  |   | 4.1          |   |  |                       | (6.2     | ) |  |   | 125.8   |  
|Accrued taxes other than income               |  |         |        |   |                 |   | 53.8                            |  |   |             |   |  |                       |         |   |  |   | 53.8    |  
|Current portion of long-term debt             |  |         |        |   |                 |   | 25.8                            |  |   | 0.3          |   |  |                       |         |   |  |   | 26.1    |  
|Current portion of notes payable to affiliate |  |         | 8.9     |   |                 |   |                                |  |   |             |   |  |                       | (8.9     | ) |  |   |        |  
|                                              |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|Total current liabilities                     |  |         | 101.0   |   |                 |   | 1,036.4                         |  |   | 19.7         |   |  |                       | (171.5   | ) |  |   | 985.6   |  
|                                              |  |         |         |   |                
|LONG-TERM DEBT                                |  |         |        |   |                 |   | 1,416.0                         |  |   | 10.0         |   |  |                       |         |   |  |   | 1,426.0 |  
|DEFERRED INCOME TAXES                         |  |         | (0.1    | ) |                 |   | 22.9                            |  |   | (22.2        | ) |  |                       |         |   |  |   | 0.6     |  
|OTHER LONG-TERM LIABILITIES                   |  |         |        |   |                 |   | 157.9                           |  |   |             |   |  |                       |         |   |  |   | 157.9   |  
|COMMITMENTS AND CONTINGENCIES                 |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|                                              |  |         |         |   |                
|COMMON STOCKHOLDERS EQUITY:                  |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|Common stock                                  |  |         | 0.7     |   |                 |   |                                |  |   | 0.1          |   |  |                       | (0.1     | ) |  |   | 0.7     |  
|Paid-in capital                               |  |         | 1,186.8 |   |                 |   | 822.7                           |  |   | 1,093.1      |   |  |                       | (1,915.8 | ) |  |   | 1,186.8 |  
|Retained earnings                             |  |         | (42.3   | ) |                 |   | 203.9                           |  |   | (28.4        | ) |  |                       | (175.5   | ) |  |   | (42.3   | )
|                                              |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|Total common stockholders equity             |  |         | 1,145.2 |   |                 |   | 1,026.6                         |  |   | 1,064.8      |   |  |                       | (2,091.4 | ) |  |   | 1,145.2 |  
|                                              |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  
|                                              |  | $       | 1,246.1 |   |                 | $ | 3,659.8                         |  | $ | 1,072.3      |   |  | $                     | (2,262.9 | ) |  | $ | 3,715.3 |  
|                                              |  |         |         |   |                 |   |                                 |  |   |              |   |  |                       |          |   |  |   |         |  



32



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##### Table of Contents

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Three Months Ended
September 30, 2003

(unaudited, in millions)



|                                                      |  |         |      |   |                 |   |         |                                 |  |   |              |   |  |                       |        |   |  |   |         |  
|----------------------------------------------------- |  | ------- | ---- | - | --------------- | - | ------- | ------------------------------- |  | - | ------------ | - |  | --------------------- | ------ | - |  | - | ------- | -
|                                                      |  | Premcor |      |   | ConsolidatedPRG |   |         | Other Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedStatement |       
|Net sales and operating revenues                      |  | $       |     |   |                 | $ | 2,431.1 |                                 |  | $ | 3.3          |   |  | $                     | (2.9   | ) |  | $ | 2,431.5 |  
|Equity in earnings of affiliates                      |  |         | 57.3 |   |                 |   |        |                                 |  |   | 56.8         |   |  |                       | (114.1 | ) |  |   |        |  
|                                                      |  |         |      |   |                
|Expenses:                                             |  |         |      |   |                 |   |         |                                 |  |   |              |   |  |                       |        |   |  |   |         |  
|Cost of sales                                         |  |         |     |   |                 |   | 2,121.0 |                                 |  |   |             |   |  |                       | (1.9   | ) |  |   | 2,119.1 |  
|Operating expenses                                    |  |         |     |   |                 |   | 133.5   |                                 |  |   | 2.3          |   |  |                       | (1.0   | ) |  |   | 134.8   |  
|General and administrative expenses                   |  |         |     |   |                 |   | 22.3    |                                 |  |   | (0.4         | ) |  |                       |       |   |  |   | 21.9    |  
|Stock-based compensation                              |  |         |     |   |                 |   | 4.5     |                                 |  |   |             |   |  |                       |       |   |  |   | 4.5     |  
|Depreciation                                          |  |         |     |   |                 |   | 15.9    |                                 |  |   | 0.3          |   |  |                       |       |   |  |   | 16.2    |  
|Amortization                                          |  |         |     |   |                 |   | 11.7    |                                 |  |   |             |   |  |                       |       |   |  |   | 11.7    |  
|Refinery restructuring and other charges              |  |         |     |   |                 |   | 2.9     |                                 |  |   |             |   |  |                       |       |   |  |   | 2.9     |  
|                                                      |  |         |      |   |                 |   |         |                                 |  |   |              |   |  |                       |        |   |  |   |         |  
|                                                      |  |         |     |   |                 |   | 2,311.8 |                                 |  |   | 2.2          |   |  |                       | (2.9   | ) |  |   | 2,311.1 |  
|                                                      |  |         |      |   |                
|Operating income                                      |  |         | 57.3 |   |                 |   | 119.3   |                                 |  |   | 57.9         |   |  |                       | (114.1 | ) |  |   | 120.4   |  
|                                                      |  |         |      |   |                
|Interest and finance expense                          |  |         | (0.3 | ) |                 |   | (31.6   | )                               |  |   | (0.3         | ) |  |                       | 0.2    |   |  |   | (32.0   | )
|Interest income                                       |  |         | 0.1  |   |                 |   | 1.4     |                                 |  |   | 0.1          |   |  |                       | (0.1   | ) |  |   | 1.5     |  
|                                                      |  |         |      |   |                 |   |         |                                 |  |   |              |   |  |                       |        |   |  |   |         |  
|Income from continuing operations before income taxes |  |         | 57.1 |   |                 |   | 89.1    |                                 |  |   | 57.7         |   |  |                       | (114.0 | ) |  |   | 89.9    |  
|Income tax provision                                  |  |         | 0.1  |   |                 |   | (32.1   | )                               |  |   | (0.3         | ) |  |                       |       |   |  |   | (32.3   | )
|                                                      |  |         |      |   |                 |   |         |                                 |  |   |              |   |  |                       |        |   |  |   |         |  
|Income from continuing operations                     |  |         | 57.2 |   |                 |   | 57.0    |                                 |  |   | 57.4         |   |  |                       | (114.0 | ) |  |   | 57.6    |  
|                                                      |  |         |      |   |                
|Loss from discontinued operations, net of tax         |  |         |     |   |                 |   | (0.4    | )                               |  |   |             |   |  |                       |       |   |  |   | (0.4    | )
|                                                      |  |         |      |   |                 |   |         |                                 |  |   |              |   |  |                       |        |   |  |   |         |  
|Net income                                            |  | $       | 57.2 |   |                 | $ | 56.6    |                                 |  | $ | 57.4         |   |  | $                     | (114.0 | ) |  | $ | 57.2    |  
|                                                      |  |         |      |   |                 |   |         |                                 |  |   |              |   |  |                       |        |   |  |   |         |  



33



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##### Table of Contents

Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Operations

For the Nine Months Ended
September 30, 2003

(unaudited, in millions)



|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|----------------------------------------------------- |  | ------- | ----- | - | --------------- | - | ------- | -------------------------------- |  | - | ------------ | - |  | --------------------- | ------ | - |  | - | ------- | -
|                                                      |  | Premcor |       |   | ConsolidatedPRG |   |         | Other Non-Guarantor Subsidiaries |  |   | Eliminations |   |  | ConsolidatedStatement |       
|Net sales and operating revenues                      |  | $       |      |   |                 | $ | 6,546.3 |                                  |  | $ | 9.0          |   |  | $                     | (7.5   | ) |  | $ | 6,547.8 |  
|Equity in earnings of affiliates                      |  |         | 127.0 |   |                 |   |        |                                  |  |   | 128.5        |   |  |                       | (255.5 | ) |  |   |        |  
|                                                      |  |         |       |   |                
|Expenses:                                             |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|Cost of sales                                         |  |         |      |   |                 |   | 5,707.4 |                                  |  |   |             |   |  |                       | (4.7   | ) |  |   | 5,702.7 |  
|Operating expenses                                    |  |         |      |   |                 |   | 383.4   |                                  |  |   | 5.9          |   |  |                       | (2.9   | ) |  |   | 386.4   |  
|General and administrative expenses                   |  |         | 0.1   |   |                 |   | 49.6    |                                  |  |   | (0.4         | ) |  |                       |       |   |  |   | 49.3    |  
|Stock-based compensation                              |  |         |      |   |                 |   | 13.2    |                                  |  |   |             |   |  |                       |       |   |  |   | 13.2    |  
|Depreciation                                          |  |         |      |   |                 |   | 46.1    |                                  |  |   | 0.7          |   |  |                       |       |   |  |   | 46.8    |  
|Amortization                                          |  |         |      |   |                 |   | 30.3    |                                  |  |   |             |   |  |                       |       |   |  |   | 30.3    |  
|Refinery restructuring and other charges              |  |         |      |   |                 |   | 18.6    |                                  |  |   |             |   |  |                       |       |   |  |   | 18.6    |  
|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|                                                      |  |         | 0.1   |   |                 |   | 6,248.6 |                                  |  |   | 6.2          |   |  |                       | (7.6   | ) |  |   | 6,247.3 |  
|                                                      |  |         |       |   |                
|Operating income                                      |  |         | 126.9 |   |                 |   | 297.7   |                                  |  |   | 131.3        |   |  |                       | (255.4 | ) |  |   | 300.5   |  
|                                                      |  |         |       |   |                
|Interest and finance expense                          |  |         | (0.7  | ) |                 |   | (87.7   | )                                |  |   | (1.5         | ) |  |                       | 0.6    |   |  |   | (89.3   | )
|Loss on extinguishment of debt                        |  |         |      |   |                 |   | (8.1    | )                                |  |   | (2.3         | ) |  |                       |       |   |  |   | (10.4   | )
|Interest income                                       |  |         | 0.8   |   |                 |   | 4.0     |                                  |  |   | 0.2          |   |  |                       | (0.6   | ) |  |   | 4.4     |  
|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|Income from continuing operations before income taxes |  |         | 127.0 |   |                 |   | 205.9   |                                  |  |   | 127.7        |   |  |                       | (255.4 | ) |  |   | 205.2   |  
|Income tax provision                                  |  |         |      |   |                 |   | (71.5   | )                                |  |   | 0.2          |   |  |                       |       |   |  |   | (71.3   | )
|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|Income from continuing operations                     |  |         | 127.0 |   |                 |   | 134.4   |                                  |  |   | 127.9        |   |  |                       | (255.4 | ) |  |   | 133.9   |  
|                                                      |  |         |       |   |                
|Loss from discontinued operations, net of tax         |  |         |      |   |                 |   | (6.9    | )                                |  |   |             |   |  |                       |       |   |  |   | (6.9    | )
|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  
|Net income                                            |  | $       | 127.0 |   |                 | $ | 127.5   |                                  |  | $ | 127.9        |   |  | $                     | (255.4 | ) |  | $ | 127.0   |  
|                                                      |  |         |       |   |                 |   |         |                                  |  |   |              |   |  |                       |        |   |  |   |         |  



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Premcor Inc. and Subsidiaries

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended
September 30, 2003

(unaudited, in millions)



|                                                                             |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|---------------------------------------------------------------------------- |  | ------- | ------ | - | --------------- | - | ------ | ------------------------------- |  | - | ------------ | - |  | --------------------- | ------ | - |  | - | ------ | -
|                                                                             |  | Premcor |        |   | ConsolidatedPRG |   |        | Other Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedStatement |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                        |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|Net income                                                                   |  | $       | 127.0  |   |                 | $ | 127.5  |                                 |  | $ | 127.9        |   |  | $                     | (255.4 | ) |  | $ | 127.0  |  
|                                                                             |  |         |        |   |                
|Adjustments:                                                                 |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|Loss from discontinued operations                                            |  |         |       |   |                 |   | 11.2   |                                 |  |   |             |   |  |                       |       |   |  |   | 11.2   |  
|Depreciation                                                                 |  |         |       |   |                 |   | 46.1   |                                 |  |   | 0.7          |   |  |                       |       |   |  |   | 46.8   |  
|Amortization                                                                 |  |         |       |   |                 |   | 37.2   |                                 |  |   |             |   |  |                       |       |   |  |   | 37.2   |  
|Deferred income taxes                                                        |  |         | 1.4    |   |                 |   | 41.9   |                                 |  |   | 20.0         |   |  |                       | 0.1    |   |  |   | 63.4   |  
|Stock-based compensation                                                     |  |         |       |   |                 |   | 13.2   |                                 |  |   |             |   |  |                       |       |   |  |   | 13.2   |  
|Refinery restructuring and other charges                                     |  |         |       |   |                 |   | 13.6   |                                 |  |   |             |   |  |                       |       |   |  |   | 13.6   |  
|Write-off of deferred financing costs                                        |  |         |       |   |                 |   | 5.4    |                                 |  |   |             |   |  |                       |       |   |  |   | 5.4    |  
|Equity in earnings of affiliates                                             |  |         | (127.0 | ) |                 |   |       |                                 |  |   | (128.5       | ) |  |                       | 255.5  |   |  |   |       |  
|Other, net                                                                   |  |         | 0.3    |   |                 |   | 5.8    |                                 |  |   |             |   |  |                       | (0.1   | ) |  |   | 6.0    |  
|                                                                             |  |         |        |   |                
|CASH PROVIDED BY (REINVESTED IN) WORKING CAPITAL :                           |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|Accounts receivable, prepaid expenses and other                              |  |         | 0.1    |   |                 |   | (172.5 | )                               |  |   | 2.5          |   |  |                       | (2.3   | ) |  |   | (172.2 | )
|Inventories                                                                  |  |         |       |   |                 |   | (170.0 | )                               |  |   |             |   |  |                       |       |   |  |   | (170.0 | )
|Accounts payable, accrued expenses, taxes                                    |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |       |   |  |   |       |  
|other than income, and other                                                 |  |         | 1.1    |   |                 |   | 93.6   |                                 |  |   | (3.7         | ) |  |                       | 2.4    |   |  |   | 93.4   |  
|Affiliate receivables and payables                                           |  |         | (1.6   | ) |                 |   | 22.8   |                                 |  |   | (21.0        | ) |  |                       | (0.2   | ) |  |   |       |  
|Cash and cash equivalents restricted for debt service                        |  |         |       |   |                 |   | 7.6    |                                 |  |   |             |   |  |                       |       |   |  |   | 7.6    |  
|                                                                             |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|Net cash provided by (used in) operating activities of continuing operations |  |         | 1.3    |   |                 |   | 83.4   |                                 |  |   | (2.1         | ) |  |                       |       |   |  |   | 82.6   |  
|Net cash used in operating activities of discontinued operations             |  |         |       |   |                 |   | (4.4   | )                               |  |   |             |   |  |                       |       |   |  |   | (4.4   | )
|                                                                             |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|Net cash provided by (used in) operating activities                          |  |         | 1.3    |   |                 |   | 79.0   |                                 |  |   | (2.1         | ) |  |                       |       |   |  |   | 78.2   |  
|                                                                             |  |         |        |   |                
|CASH FLOWS FROM INVESTING ACTIVITIES:                                        |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|Expenditures for property, plant and equipment                               |  |         |       |   |                 |   | (112.9 | )                               |  |   | (0.1         | ) |  |                       |       |   |  |   | (113.0 | )
|Expenditures for turnaround                                                  |  |         |       |   |                 |   | (12.7  | )                               |  |   |             |   |  |                       |       |   |  |   | (12.7  | )
|Expenditures for refinery acquisition, net                                   |  |         |       |   |                 |   | (476.0 | )                               |  |   |             |   |  |                       |       |   |  |   | (476.0 | )
|Proceeds from sale of assets                                                 |  |         |       |   |                 |   | 40.0   |                                 |  |   |             |   |  |                       |       |   |  |   | 40.0   |  
|Purchases of investments                                                     |  |         |       |   |                 |   |       |                                 |  |   | (1.0         | ) |  |                       |       |   |  |   | (1.0   | )
|Cash and cash equivalents restricted for investment in capital additions     |  |         |       |   |                 |   | 2.2    |                                 |  |   |             |   |  |                       |       |   |  |   | 2.2    |  
|                                                                             |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|Net cash used in investing activities                                        |  |         |       |   |                 |   | (559.4 | )                               |  |   | (1.1         | ) |  |                       |       |   |  |   | (560.5 | )
|                                                                             |  |         |        |   |                
|CASH FLOWS FROM FINANCING ACTIVITIES:                                        |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|Proceeds from issuance of common stock                                       |  |         | 306.5  |   |                 |   |       |                                 |  |   |             |   |  |                       |       |   |  |   | 306.5  |  
|Proceeds from issuance of long-term debt                                     |  |         |       |   |                 |   | 825.0  |                                 |  |   |             |   |  |                       |       |   |  |   | 825.0  |  
|Long-term debt and capital lease payments                                    |  |         |       |   |                 |   | (269.1 | )                               |  |   | (40.2        | ) |  |                       |       |   |  |   | (309.3 | )
|Cash and cash equivalent restricted for debt repayment                       |  |         |       |   |                 |   | 0.2    |                                 |  |   |             |   |  |                       |       |   |  |   | 0.2    |  
|Capital contributions, net                                                   |  |         | (297.5 | ) |                 |   | 263.3  |                                 |  |   | 34.2         |   |  |                       |       |   |  |   |       |  
|Deferred financing costs                                                     |  |         |       |   |                 |   | (25.5  | )                               |  |   |             |   |  |                       |       |   |  |   | (25.5  | )
|                                                                             |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|Net cash provided by (used in) financing activities                          |  |         | 9.0    |   |                 |   | 793.9  |                                 |  |   | (6.0         | ) |  |                       |       |   |  |   | 796.9  |  
|                                                                             |  |         |        |   |                
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         |  |         | 10.3   |   |                 |   | 313.5  |                                 |  |   | (9.2         | ) |  |                       |       |   |  |   | 314.6  |  
|CASH AND CASH EQUIVALENTS, beginning of period                               |  |         | 37.3   |   |                 |   | 119.7  |                                 |  |   | 10.4         |   |  |                       |       |   |  |   | 167.4  |  
|                                                                             |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  
|CASH AND CASH EQUIVALENTS, end of period                                     |  | $       | 47.6   |   |                 | $ | 433.2  |                                 |  | $ | 1.2          |   |  | $                     |       |   |  | $ | 482.0  |  
|                                                                             |  |         |        |   |                 |   |        |                                 |  |   |              |   |  |                       |        |   |  |   |        |  



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16. Stock-based Compensation Expense



As of September 30, 2004, the Company had outstanding stock awards granted prior to January 1, 2002 that are accounted for
under the intrinsic value method of APB Opinion No. 25, Accounting for Stock Issued to Employees. The stock awards granted or modified after January 1, 2002 are being expensed based on the fair value recognition provisions of SFAS No. 123,
Accounting for Stock-based Compensation. The effect on net income and earnings per share if the fair value based method of SFAS No. 123 had been applied to all outstanding awards in each period as opposed to only the awards granted or
modified after January 1, 2002 is not material.



17. Commitments and
Contingencies



Legal and Environmental Liabilities



As a result of its normal course of business, the closure
of two refineries, and continuing obligations related to previously owned retail operations (as disclosed in Note 12), the Company is party to certain legal proceedings and environmental-related obligations. As of September 30, 2004, the Company had
accrued a total of approximately $96 million (December 31, 2003$98 million), on primarily an undiscounted basis, for legal and environmental-related obligations. Should a development in any of these matters cause a change in our determination
as to an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result in a final adverse judgment or be settled for significant amounts in excess of our accrual, they could have a material adverse
effect on the Companys operating results, cash flows and financial position in the period or periods in which such change in determination, judgment or settlement occurs.



Environmental Product Standards



The Environmental Protection Agency, or EPA, has promulgated regulations under the Clean Air Act that establish stringent
sulfur content specifications for gasoline and diesel fuel designed to reduce air emissions from the use of these products. The Company expects to incur, in the aggregate, approximately $645 million, of which $317 million has been incurred as of
September 30, 2004, in order to comply with environmental regulations related to the new stringent sulfur content specifications. Future revisions to the current cost estimates may be necessary as the Company continues to finalize its engineering
and procurement plans. Additionally, the increase in worldwide prices and demand for steel and equipment may also require us to further revise our estimates. Information related to the expected expenditures in relation to these new regulations is
shown below.



|                              |  |                             |     |                                   |   |                                           |  |   |    
|----------------------------- |  | --------------------------- | --- | --------------------------------- | - | ----------------------------------------- |  | - | ---
|                              |  | Total EstimatedExpenditures |     | TotalExpendituresIncurred To-Date |   | RemainingExpendituresat September 30,2004
|Gasoline low sulfur standards |  | $                           | 315 |                                   | $ | 284                                       |  | $ | 31 
|Diesel low sulfur standards   |  |                             | 330 |                                   |   | 33                                        |  |   | 297
|                              |  |                             |     |                                   |   |                                           |  |   |    
|Total                         |  | $                           | 645 |                                   | $ | 317                                       |  | $ | 328
|                              |  |                             |     |                                   |   |                                           |  |   |    



As of September 30,
2004, the Company had outstanding contractual commitments of $147 million related to the design and construction activity at the refineries for the gasoline and diesel low sulfur standards compliance.



Long-Term Contracts



PACC has a long-term crude oil supply agreement with PMI Comercio
Internacional, S.A. de C.V., an affiliate of Petroleos Mexicanos, or PEMEX, the Mexican state oil company, which currently supplies approximately 167,000 barrels per day of Maya crude oil to the Port Arthur refinery. On November 1, 2004, the supply
agreement will increase to 186,000 barrels per day of Maya crude oil. Under the terms of this agreement, PACC is obligated to buy Maya crude oil from the affiliate of PEMEX, and the affiliate of PEMEX is obligated to sell Maya crude oil to PACC at
market prices.



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The Company has certain long-term contracts for services and products that have minimum contract volumes
or dollar amounts, based on quarterly or annual activity. These contracts are based on market prices, and the minimum requirements are waived in certain instances defined in the contracts. The service contracts have terms extending into 2011 and a
hydrogen supply contract expires in 2020.



18. Subsequent Events



On October 26, 2004 the Board of Directors declared a
dividend of $0.02 per share payable on December 15, 2004 to all stockholders of record on December 1, 2004.



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ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Forward-Looking Statements



This Quarterly Report on Form 10-Q contains both historical and forward-looking statements within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are not historical facts, but only predictions and generally can be identified by use of statements that include phrases such as believe,
expect, anticipate, intend, plan, foresee or other words or phrases of similar import. Similarly, statements that describe our objectives, plans or goals also are forward-looking
statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those currently anticipated. Factors that could materially affect these forward-looking statements include,
but are not limited to, changes in:



| |  | Industry-wide refining margins and crude oil price differentials;
| | - | -----------------------------------------------------------------



| |  | Crude oil and other raw material costs, the cost of transportation of crude oil, embargoes, military conflicts between, or internal instability in, one or more oil-producing
countries, governmental actions, and other disruptions of our ability to obtain crude oil;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The ability of members of the Organization of the Petroleum Exporting Countries (OPEC) to agree on and to maintain production controls and crude oil price;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Market volatility due to world and regional events;
| | - | ---------------------------------------------------



| |  | Availability and cost of debt and equity financing;
| | - | ---------------------------------------------------



| |  | Labor relations;
| | - | ----------------



| |  | U.S. and world economic conditions;
| | - | -----------------------------------



| |  | Supply and demand for refined petroleum products;
| | - | -------------------------------------------------



| |  | Reliability and efficiency of our operating facilities which are affected by such potential hazards as equipment malfunctions, plant construction/repair delays, explosions, fires,
oil spills and the impact of severe weather and other factors which could result in significant unplanned downtime;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Actions taken by competitors which may include both pricing and expansion or retirement of refinery capacity;
| | - | -------------------------------------------------------------------------------------------------------------



| |  | Civil, criminal, regulatory or administrative actions, claims or proceedings and regulations dealing with protection of the environment, including refined petroleum product
specifications and characteristics;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Natural gas prices, as our refineries purchase and consume significant amounts of natural gas to fuel their operations;
| | - | -----------------------------------------------------------------------------------------------------------------------



| |  | Other unpredictable or unknown factors not discussed, including acts of nature, war or terrorism; and
| | - | -----------------------------------------------------------------------------------------------------



| |  | Changes in the credit ratings assigned to Premcor Inc.s subsidiaries debt securities or credit facilities.
| | - | ------------------------------------------------------------------------------------------------------------



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Readers are urged to consider these factors carefully in evaluating the forward-looking statements and
are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this report are made only as of the date of this report and we undertake no obligation to publicly update these forward-looking
statements to reflect new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events might or might not occur. We cannot assure you that projected results or events will be achieved.



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Overview



This Managements Discussion and Analysis of Financial Condition and Results of Operations reflects the results of operations and financial condition
of Premcor Inc. and subsidiaries, which are materially the same as the results of operations and financial condition of PRG. Therefore, the discussions provided are equally applicable to Premcor Inc. and PRG except where otherwise noted.



We are an independent petroleum refiner and supplier of unbranded
transportation fuels, heating oil, petrochemical feedstocks, petroleum coke and other petroleum products in the United States. PRG owns and operates four refineries with a combined total throughput capacity of approximately 790,000 barrels per day,
or bpd. The refineries are located in Port Arthur, Texas; Memphis, Tennessee; Lima, Ohio; and Delaware City, Delaware. The Delaware City refinery was acquired in May 2004. We sell petroleum products in the Midwest, the Gulf Coast, the Northeastern
and the Southeastern United States on an unbranded basis to approximately 1,200 distributors and chain retailers through a combination of our own product distribution system and an extensive third-party owned product distribution system, as well as
in the spot market.



Delaware City Refinery Acquisition



Effective May 1, 2004, the Company completed an agreement with Motiva
Enterprises LLC (Motiva) to purchase its Delaware City refining complex located in Delaware City, Delaware. The Delaware City refinery has a rated crude unit throughput capacity of 180,000 bpd. Also included in the purchase is a 2,400
tons per day petroleum coke gasification unit, a 180 megawatt cogeneration facility, 8.5 million barrels of crude oil, intermediates, blendstock, and product tankage, and a 50,000 bpd truck-loading rack. The purchase price is $800 million ($780
million cash and $20 million assumed liabilities), plus additional petroleum inventories valued at $90 million and approximately $5 million in transaction fees. In addition, Motiva will be entitled to receive contingent purchase payments of $25
million per year up to a total of $75 million over a three-year period depending on the amount of crude oil processed at the refinery and the refining margins during that period, and a $25 million payment per year up to a total of $50 million over a
two-year period depending on the achievement of certain performance criteria at the gasification facility. Any amount the Company pays to Motiva for the contingent consideration will be recorded as goodwill.



The Delaware City refinery is a high-conversion medium and heavy sour crude
oil refinery. Major process units include a crude unit, a fluid coking unit, a fluid catalytic cracking unit, a hydrocracking unit with a hydrogen plant, a continuous catalytic reformer, an alkylation unit, and several hydrotreating units. Primary
products include regular and premium conventional and reformulated gasoline, low-sulfur diesel, and home heating oil. The refinerys production is sold in the U.S. Northeast via pipeline, barge, and truck distribution. The refinerys
petroleum coke production is sold to third parties or gasified to fuel the cogeneration facility, which is designed to supply electricity and steam to the refinery as well as outside electrical sales to third parties.



The Company financed the acquisition from a portion of the proceeds from its
April 2004 public common stock offering of 14.9 million shares which provided net proceeds of $490 million; from PRGs $400 million senior notes offering completed April 2004 of which $200 million, due in 2011, bear interest at 61/8% per annum and $200 million, due in 2014, bear interest at 63/4% per annum; and from available cash.



In conjunction with the acquisition of the Delaware City refinery, the Company entered into an agreement, effective May 1, 2004, with Saudi Arabian Oil
Company for the supply of approximately 105,000 bpd of crude oil, subject to certain restrictions. The agreement has terms extending to April 30, 2005, with automatic one-year extensions thereafter unless terminated at the option of either
party. The crude oil is priced by a market-based formula as defined in the agreement. The Company also entered into a product offtake agreement with Motiva that provides for the delivery by Premcor to Motiva of approximately 95,000 bpd of finished
light petroleum products, such as gasoline and heating oil. The agreement was effective May 1, 2004, and the main portion of the offtake agreement has terms extending for six months with automatic renewals until canceled by either party.



For federal income tax purposes, we have incurred, as a result of the
April 2004 equity offering, a stock ownership change of more than 50%, determined over the preceding three-year period. Under federal tax law,



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the more than 50% stock ownership change has resulted in an annual limitation being placed on the amount of regular and
alternative minimum tax net operating losses, and certain other losses and tax credits (collectively tax attributes) that may be utilized in any given year. Accordingly, our ability to utilize tax attributes could be affected in both
timing and amount. However, management believes such annual limitation will not restrict our ability to significantly utilize our tax attributes over the applicable carryforward periods. Therefore, at this time, we do not anticipate the need for an
additional valuation allowance as a result of this more than 50% stock ownership change.



Results of Operations



The following tables reflect Premcor Inc.s financial and operating highlights for the three and nine month periods ended September 30, 2004 and 2003.



|                                                      |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |         |  
|----------------------------------------------------- |  | ------------------------------- | ------- | - | ------------------------------ | - | ------- | ---- |  | - | -------- | - |  | - | ------- | -
|Financial Results (in millions except per share data) |  | Three months endedSeptember 30, |         |   | Nine months endedSeptember 30, |  
|                                                      |  | 2004                            |         |   | 2003                           |   |         | 2004 |  |   | 2003     |  
|Net sales and operating revenues                      |  | $                               | 4,407.7 |   |                                | $ | 2,431.5 |      |  | $ | 10,533.1 |   |  | $ | 6,547.8 |  
|Cost of sales                                         |  |                                 | 3,845.0 |   |                                |   | 2,119.1 |      |  |   | 9,114.2  |   |  |   | 5,702.7 |  
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |         |  
|Gross margin (1)                                      |  |                                 | 562.7   |   |                                |   | 312.4   |      |  |   | 1,418.9  |   |  |   | 845.1   |  
|Operating expenses                                    |  |                                 | 219.2   |   |                                |   | 134.8   |      |  |   | 563.7    |   |  |   | 386.4   |  
|General and administrative expenses                   |  |                                 | 36.6    |   |                                |   | 21.9    |      |  |   | 92.5     |   |  |   | 49.3    |  
|Stock-based compensation                              |  |                                 | 4.9     |   |                                |   | 4.5     |      |  |   | 14.7     |   |  |   | 13.2    |  
|Depreciation and amortization                         |  |                                 | 40.5    |   |                                |   | 27.9    |      |  |   | 111.4    |   |  |   | 77.1    |  
|Refinery restructuring and other charges              |  |                                 | 1.1     |   |                                |   | 2.9     |      |  |   | 10.4     |   |  |   | 18.6    |  
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |         |  
|Operating income                                      |  |                                 | 260.4   |   |                                |   | 120.4   |      |  |   | 626.2    |   |  |   | 300.5   |  
|Interest and finance expense, net                     |  |                                 | (33.4   | ) |                                |   | (30.5   | )    |  |   | (96.7    | ) |  |   | (84.9   | )
|Loss on extinguishment of debt                        |  |                                 |        |   |                                |   |        |      |  |   | (3.6     | ) |  |   | (10.4   | )
|Income tax provision                                  |  |                                 | (82.9   | ) |                                |   | (32.3   | )    |  |   | (196.8   | ) |  |   | (71.3   | )
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |         |  
|Income from continuing operations                     |  |                                 | 144.1   |   |                                |   | 57.6    |      |  |   | 329.1    |   |  |   | 133.9   |  
|Loss from discontinued operations, net of tax         |  |                                 | (2.8    | ) |                                |   | (0.4    | )    |  |   | (4.6     | ) |  |   | (6.9    | )
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |         |  
|Net income available to common stockholders           |  | $                               | 141.3   |   |                                | $ | 57.2    |      |  | $ | 324.5    |   |  | $ | 127.0   |  
|                                                      |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |         |  
|Income from continuing operations per common share:   |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |         |  
|Basic                                                 |  | $                               | 1.61    |   |                                | $ | 0.78    |      |  | $ | 3.97     |   |  | $ | 1.85    |  
|Diluted                                               |  |                                 | 1.58    |   |                                |   | 0.77    |      |  |   | 3.88     |   |  |   | 1.83    |  
|                                                      |  |                                 |         |  
|Weighted average common shares outstanding:           |  |                                 |         |   |                                |   |         |      |  |   |          |   |  |   |         |  
|Basic                                                 |  |                                 | 89.2    |   |                                |   | 74.1    |      |  |   | 82.9     |   |  |   | 72.3    |  
|Diluted                                               |  |                                 | 91.3    |   |                                |   | 75.0    |      |  |   | 84.8     |   |  |   | 73.1    |  

---

|(1) | In order to assess our operating performance, we compare our actual gross margin (net sales and operating revenues less cost of sales) to industry gross margin benchmarks, such as
the crack spread and crude oil price differentials defined in the table below.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



41



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|                                                               |  |                                 |       |      |                                |       |      |  |      |       |  |   |       |  
|-------------------------------------------------------------- |  | ------------------------------- | ----- | ---- | ------------------------------ | ----- | ---- |  | ---- | ----- |  | - | ----- | -
|                                                               |  | Three Months EndedSeptember 30, |       |      | Nine Months EndedSeptember 30, |      
|                                                               |  | 2004                            |       | 2003 |                                |       | 2004 |  | 2003 |      
|Market Indicators (dollars per barrel, unless otherwise noted) |  |                                 |       |      |                                |       |      |  |      |       |  |   |       |  
|                                                               |  |                                 |       |     
|West Texas Intermediate, or WTI (sweet)                      |  | $                               | 43.80 |      | $                              | 30.20 |      |  | $    | 39.12 |  | $ | 31.13 |  
|Crack Spreads:                                                 |  |                                 |       |      |                                |       |      |  |      |       |  |   |       |  
|Gulf Coast 2/1/1                                               |  |                                 | 5.84  |      |                                | 4.32  |      |  |      | 6.13  |  |   | 4.23  |  
|Chicago 3/2/1                                                  |  |                                 | 7.40  |      |                                | 8.03  |      |  |      | 8.41  |  |   | 6.98  |  
|NYH RFG 3/2/1 (since May 1, 2004)                              |  |                                 | 7.80  |      |                                | *     | *    |  |      | 9.32  |  |   | *     | *
|Crude Oil Differentials:                                       |  |                                 |       |      |                                |       |      |  |      |       |  |   |       |  
|WTI less Maya (heavy sour)                                     |  |                                 | 11.64 |      |                                | 5.82  |      |  |      | 9.91  |  |   | 6.88  |  
|WTI less Arab Medium (since May 1, 2004)                       |  |                                 | 6.02  |      |                                | *     | *    |  |      | 5.97  |  |   | *     | *
|WTI less WTS (light sour)                                      |  |                                 | 3.86  |      |                                | 2.63  |      |  |      | 3.41  |  |   | 2.84  |  
|WTI less Dated Brent (foreign)                                 |  |                                 | 2.22  |      |                                | 1.82  |      |  |      | 2.82  |  |   | 2.49  |  
|Natural Gas (per mmbtu)                                        |  |                                 | 5.40  |      |                                | 4.84  |      |  |      | 5.60  |  |   | 5.49  |  

---

|** | Not meaningful
|-- | --------------



|                                                                               |      |                                 |       |                                |      |       |      |   |       |  |   |      
|------------------------------------------------------------------------------ | ---- | ------------------------------- | ----- | ------------------------------ | ---- | ----- | ---- | - | ----- |  | - | -----
|Selected Volumetric and Per Barrel Data (in thousands of bpd, except as noted) |      | Three months endedSeptember 30, |       | Nine months endedSeptember 30,
|                                                                               | 2004 |                                 | 2003  |                                | 2004 |       | 2003
|Total throughput by refinery:                                                  |      |                                 |       |                                |      |       |      |   |       |  |   |      
|Port Arthur                                                                    |      |                                 | 239.5 |                                |      | 240.6 |      |   | 230.4 |  |   | 248.8
|Lima                                                                           |      |                                 | 147.1 |                                |      | 149.4 |      |   | 126.4 |  |   | 138.9
|Memphis (1)                                                                    |      |                                 | 153.9 |                                |      | 168.6 |      |   | 154.4 |  |   | 130.9
|Delaware City (2)                                                              |      |                                 | 180.9 |                                |      |      |      |   | 99.7  |  |   |     
|                                                                               |      |                                 |       |                                |      |       |      |   |       |  |   |      
|Total throughput                                                               |      |                                 | 721.4 |                                |      | 558.6 |      |   | 610.9 |  |   | 518.6
|                                                                               |      |                                 |       |                               
|Total throughput (in millions of barrels)                                      |      |                                 | 66.4  |                                |      | 51.4  |      |   | 167.4 |  |   | 141.6
|                                                                               |      |                                 |       |                               
|Per barrel of total throughput: (in dollars)                                   |      |                                 |       |                                |      |       |      |   |       |  |   |      
|Gross margin                                                                   |      | $                               | 8.47  |                                | $    | 6.08  |      | $ | 8.48  |  | $ | 5.97 
|Operating expenses                                                             |      |                                 | 3.30  |                                |      | 2.62  |      |   | 3.37  |  |   | 2.73 

---

|(1) | We acquired the Memphis refinery effective March 3, 2003 and the total throughput for the nine months ended September 30, 2003 reflected 212 days of operations averaged over that
period. Total throughput averaged 168.6 mbpd during the 212 days of operations in 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | We acquired the Delaware City refinery effective May 1, 2004 and the total throughput for the nine months ended September 30, 2004 reflected 153 days of operations averaged over
that period. Total throughput averaged 178.6 mbpd during the 153 days of operations in 2004.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



42



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##### Table of Contents

|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|---------------------------------------------- |  | ------------------------------------- |  | ----- | ------------------------------------- | ------- | ------------------------------------ | ---------------- |  | ----- |  | --------------- | - |  | ---------- |  | ----- | - |  | ----------- |  | ----- |  | --------------- | -
|                                               |  | Three months ended September 30, 2004 |  |       | Three months ended September 30, 2003 |        
|Selected Volumetric Data (in thousands of
bpd) |  | PortArthur                            |  | Lima  |                                       | Memphis |                                      | DelawareCity (3) |  | Total |  | Percentof Total |   |  | PortArthur |  | Lima  |   |  | Memphis (2) |  | Total |  | Percentof Total |  
|Throughput:                                    |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Crude unit throughput                          |  | 226.0                                 |  | 144.3 |                                       | 140.4   |                                      | 169.9            |  | 680.6 |  | 94              | % |  | 221.5      |  | 150.2 |   |  | 154.8       |  | 526.5 |  | 94              | %
|Other throughputs                              |  | 13.5                                  |  | 2.8   |                                       | 13.5    |                                      | 11.0             |  | 40.8  |  | 6               | % |  | 19.1       |  | (0.8  | ) |  | 13.8        |  | 32.1  |  | 6               | %
|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Total throughput                               |  | 239.5                                 |  | 147.1 |                                       | 153.9   |                                      | 180.9            |  | 721.4 |  | 100             | % |  | 240.6      |  | 149.4 |   |  | 168.6       |  | 558.6 |  | 100             | %
|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Production:                                    |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Light products:                                |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Conventional gasoline                          |  | 95.9                                  |  | 59.4  |                                       | 63.6    |                                      | 57.3             |  | 276.2 |  | 37              | % |  | 79.1       |  | 55.4  |   |  | 69.3        |  | 203.8 |  | 36              | %
|Premium and reformulated gasoline              |  | 20.9                                  |  | 24.3  |                                       | 11.3    |                                      | 30.6             |  | 87.1  |  | 12              | % |  | 34.1       |  | 30.7  |   |  | 18.8        |  | 83.6  |  | 15              | %
|Diesel fuel                                    |  | 59.7                                  |  | 19.7  |                                       | 42.3    |                                      | 37.3             |  | 159.0 |  | 22              | % |  | 73.5       |  | 20.0  |   |  | 45.4        |  | 138.9 |  | 25              | %
|Jet fuel                                       |  | 23.7                                  |  | 24.3  |                                       | 25.2    |                                      | 23.3             |  | 96.5  |  | 13              | % |  | 16.5       |  | 24.9  |   |  | 23.4        |  | 64.8  |  | 11              | %
|Other products / blendstocks, net              |  | 18.9                                  |  | 15.2  |                                       | 6.2     |                                      | 15.9             |  | 56.2  |  | 7               | % |  | 10.4       |  | 15.2  |   |  | 5.9         |  | 31.5  |  | 6               | %
|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Total light products                           |  | 219.1                                 |  | 142.9 |                                       | 148.6   |                                      | 164.4            |  | 675.0 |  | 91              | % |  | 213.6      |  | 146.2 |   |  | 162.8       |  | 522.6 |  | 93              | %
|Solid by products / residual oil (1)           |  | 32.2                                  |  | 5.5   |                                       | 5.2     |                                      | 19.9             |  | 62.8  |  | 9               | % |  | 35.2       |  | 4.4   |   |  | 3.6         |  | 43.2  |  | 7               | %
|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Total production                               |  | 251.3                                 |  | 148.4 |                                       | 153.8   |                                      | 184.3            |  | 737.8 |  | 100             | % |  | 248.8      |  | 150.6 |   |  | 166.4       |  | 565.8 |  | 100             | %
|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|                                               |  |                                       | 
|                                               |  | Nine months ended September 30, 2004  |  |       |                                       |         | Nine months ended September 30, 2003 |                 
|Selected Volumetric Data (in thousands of
bpd) |  | PortArthur                            |  | Lima  |                                       | Memphis |                                      | DelawareCity (3) |  | Total |  | Percentof Total |   |  | PortArthur |  | Lima  |   |  | Memphis (2) |  | Total |  | Percentof Total |  
|Throughput:                                    |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Crude unit throughput                          |  | 215.6                                 |  | 126.1 |                                       | 141.4   |                                      | 94.4             |  | 577.5 |  | 95              | % |  | 237.1      |  | 138.9 |   |  | 125.4       |  | 501.4 |  | 97              | %
|Other throughputs                              |  | 14.8                                  |  | 0.3   |                                       | 13.0    |                                      | 5.3              |  | 33.4  |  | 5               | % |  | 11.7       |  |      |   |  | 5.5         |  | 17.2  |  | 3               | %
|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Total throughput                               |  | 230.4                                 |  | 126.4 |                                       | 154.4   |                                      | 99.7             |  | 610.9 |  | 100             | % |  | 248.8      |  | 138.9 |   |  | 130.9       |  | 518.6 |  | 100             | %
|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Production:                                    |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Light products:                                |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Conventional gasoline                          |  | 86.7                                  |  | 53.2  |                                       | 64.3    |                                      | 32.4             |  | 236.6 |  | 38              | % |  | 83.2       |  | 51.4  |   |  | 54.3        |  | 188.9 |  | 36              | %
|Premium and reformulated gasoline              |  | 21.8                                  |  | 19.7  |                                       | 10.3    |                                      | 18.3             |  | 70.1  |  | 11              | % |  | 33.8       |  | 28.4  |   |  | 12.0        |  | 74.2  |  | 14              | %
|Diesel fuel                                    |  | 58.8                                  |  | 17.6  |                                       | 44.0    |                                      | 19.4             |  | 139.8 |  | 22              | % |  | 80.1       |  | 20.8  |   |  | 36.9        |  | 137.8 |  | 26              | %
|Jet fuel                                       |  | 22.8                                  |  | 19.8  |                                       | 24.1    |                                      | 14.4             |  | 81.1  |  | 13              | % |  | 17.3       |  | 22.5  |   |  | 19.2        |  | 59.0  |  | 11              | %
|Other products / blendstocks, net              |  | 23.2                                  |  | 12.5  |                                       | 6.0     |                                      | 7.5              |  | 49.2  |  | 8               | % |  | 9.0        |  | 13.0  |   |  | 4.9         |  | 26.9  |  | 5               | %
|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Total light products                           |  | 213.3                                 |  | 122.8 |                                       | 148.7   |                                      | 92.0             |  | 576.8 |  | 92              | % |  | 223.4      |  | 136.1 |   |  | 127.3       |  | 486.8 |  | 92              | %
|Solid by products / residual oil (1)           |  | 28.7                                  |  | 4.4   |                                       | 5.3     |                                      | 9.8              |  | 48.2  |  | 8               | % |  | 33.7       |  | 4.2   |   |  | 2.9         |  | 40.8  |  | 8               | %
|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  
|Total production                               |  | 242.0                                 |  | 127.2 |                                       | 154.0   |                                      | 101.8            |  | 625.0 |  | 100             | % |  | 257.1      |  | 140.3 |   |  | 130.2       |  | 527.6 |  | 100             | %
|                                               |  |                                       |  |       |                                       |         |                                      |                  |  |       |  |                 |   |  |            |  |       |   |  |             |  |       |  |                 |  

---

|(1) | Volumes are per barrel equivalents.
|--- | -----------------------------------

|(2) | We acquired the Memphis refinery effective March 3, 2003 and the total throughput for the nine months ended September 30, 2003 reflected 212 days of operations averaged over that
period. Total throughput averaged 168.6 mbpd during the 212 days of operations in 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | We acquired the Delaware City refinery effective May 1, 2004 and the total throughput for the nine months ended September 30, 2004 reflected 153 days of operations averaged over
that period. Total throughput averaged 178.6 mbpd during the 153 days of operations in 2004.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Three and Nine Months Ended September 30, 2004 and 2003



Overview. Net income available to common stockholders was $141.3
million ($1.55 per diluted share) for the three months ended September 30, 2004 as compared to $57.2 million ($0.76 per diluted share) in 2003. Our operating income was $260.4 million for the three months ended September 30, 2004 as compared to
$120.4 million in 2003. For the three months ended September 30, 2004, our operating income benefited from a stronger refining margin environment, significantly wider crude oil price differentials and three months of operations at our Delaware City
refinery as compared to 2003.



Net income available to common
stockholders was $324.5 million ($3.83 per diluted share) for the nine months ended September 30, 2004 as compared to $127.0 million ($1.74 per diluted share) in 2003. Our operating income was $626.2 million for the nine months ended September 30,
2004 as compared to $300.5 million in 2003. The increase was principally due to stronger market conditions and five months of operations at our Delaware City refinery as compared to 2003.



The results of operations for the nine months ended September 30, 2004 include the operations of our Delaware City refinery
beginning May 1, 2004, the date of purchase. The results of operations for the nine months ended September 30, 2003 include the operations of our Memphis refinery beginning March 3, 2003, the date of purchase.



Net Sales and Operating Revenues.Net sales and operating revenues
increased $1,976.2 million, or 81%, to $4,407.7 million for the three months ended September 30, 2004 from $2,431.5 million in 2003. Net sales and operating revenues increased $3,985.3 million, or 61%, to $10,533.1 million for the nine months ended
September 30, 2004 from $6,547.8 million in 2003. The increase in net sales and operating revenue is primarily due to the nine months of operations at Memphis and five months of operations at Delaware City in 2004 as compared to only seven months
and no operations, respectively in 2003. In addition, average product prices in 2004 have been higher than average prices in 2003. We believe the favorable market conditions were driven in part by increased world-wide product demand and limited
product refining capacity.



Net sales and operating revenues
and cost of sales for 2003 have been reclassified to conform to the fourth quarter 2003 application of Emerging Issues Task Force, or EITF, Issue No. 03-11, Reporting Gains and Losses on Derivative Instruments That Are Subject to SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, and Not Held for Trading Purposes.In accordance with EITF 03-11, cost of sales includes the net effect of the buying and selling of crude oil to supply our refineries. The
reclassification had no effect on previously reported gross margin or net income.



Gross Margin. Gross margin increased $250.3 million, or 80% to $562.7 million for the three months ended September 30, 2004 from $312.4 million in 2003. Gross margin increased $573.8 million, or 68%, to
$1,418.9 million for the nine months ended September 30, 2004 from $845.1 million in 2003. The increase in gross margin for the three and nine months ended September 30, 2004 was principally driven by the nine months of operations at Memphis and
five months of operations at Delaware City in 2004 as compared to only seven months and no operations, respectively in 2003. Additionally, the increase in gross margin for the three and nine months ended September 30, 2004 was also impacted by
strong crude oil price differentials and refining margins in our markets.



It is common practice in our industry to look to benchmark market indicators as a predictor of actual refining margins. We utilize the Gulf Coast 2/1/1 as an indicator of refining margins at our Port Arthur and
Memphis refineries, the Chicago 3/2/1 as an indicator of refining margins at our Lima refinery and the New York Harbor Reformulated Gasoline 3/2/1, or NYH RFG 3/2/1 at our Delaware City refinery. Our actual results will vary as our crude oil and
product slates differ from the benchmarks and for other ancillary costs that are not included in the benchmarks, such as crude oil and product grade differentials, transportation costs, storage and credit fees, inventory fluctuations and price risk
management activities.



Average crack spreads for the three and
nine months ended September 30, 2004 were at very strong levels as compared to similar periods in 2003. The Gulf Coast 2/1/1 crack spread was approximately 35% and 45% higher for the three and nine months ended September 30, 2004 as compared to
similar periods in 2003. The Chicago 3/2/1 crack spread was approximately 8% lower and 20% higher for the three and nine months ended September 30, 2004 as compared to similar periods in 2003. The NYH RFG 3/2/1 crack spread has increased



44



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##### Table of Contents

approximately 19% from the three months to five months ended September 30, 2004, respectively. We believe the strong
refining margins for the three and nine months ended September 30, 2004 were driven in part by strong crude oil price differentials and a limited availability of additional refining capacity.



The WTI less Maya crude oil price differential was approximately 100% and 44%
higher for the three and nine months ended September 30, 2004 than in 2003. The WTI less WTS crude oil differential was approximately 47% and 20% higher for the three and nine months ended September 30, 2004 than in 2003. The WTI less Arab Medium
crude oil price differential has remained fairly consistent from the three months to five months ended September 30, 2004. These strong sour crude oil price differentials had a significant positive impact on Port Arthurs and Delaware
Citys gross margin because the refineries normal crude unit throughput is primarily medium to heavy sour crude oil. Both Lima and Memphis process primarily light sweet crude oils, and accordingly, do not require an adjustment for crude oil
price differentials except to the extent to which their crude oil is purchased in a foreign market versus a domestic market. The WTI less Brent crude oil price differential was approximately 22% and 13% higher for the three and nine months ended
September 30, 2004 than in 2003.



Approximately 15% and 8% of
the product slate at Port Arthur and Delaware City, respectively, is lower value petroleum coke, sulfur, and residual oils, which negatively impacted the refinerys gross margin against the benchmark crack spread. Less than 5% of the product
slate at Lima and Memphis is the lower value residual oils or petroleum coke. In addition to these adjustments to the crack spreads, savings from our marine charter agreements for Port Arthur continued to be favorable to the current market rates for
the three and nine months ended September 30, 2004. These agreements primarily are used for the transportation of Maya crude oil to our Port Arthur refinery.



Although benchmark market indicators such as the Gulf Coast 2/1/1, Chicago 3/2/1, and the NYH RFG 3/2/1 are useful in predicting refining gross margin,
changes in absolute hydrocarbon prices, the structure of the hydrocarbon futures market and our specific price risk mitigation activities have an effect on our results that do not correlate with the benchmark market indicators. Based on
our current refinery operations, we have an average net fixed price purchase commitment position of approximately 8 million barrels. To mitigate the absolute price risk while holding these net fixed price purchase commitments, we may buy or sell
futures contracts on the New York Mercantile Exchange, or NYMEX, that correspond volumetrically with all or a portion of our net fixed price purchase commitments. We may also take positions on the NYMEX or over the counter market to reduce the risk
that future crack spreads will contract from market based expectations. See Quantitative and Qualitative Disclosures about Market RiskCommodity Risk for a description of our price risk management strategies and policies. Our price
risk mitigation activities for the three months ended September 30, 2004 and 2003 resulted in a loss of approximately $5 million and $2 million, respectively. Our price risk mitigation activities for the nine months ended September 30, 2004 and 2003
resulted in a loss of approximately $31 million and $39 million, respectively. These amounts for the three and nine months ended September 30, 2004 include a gain of approximately $1 million and a loss of $30 million, respectively, for the forward
sales of crack spreads and nil for the three and nine months ended September 30, 2003. The losses in 2003 were primarily due to the severely backwardated crude oil market during the period. At September 30, 2004 there were no outstanding forward
sales of crack spread commitments.



Refinery Operations



The total throughput rate at our Port Arthur refinery was
239,500 bpd and 230,400 bpd for the three and nine months ended September 30, 2004, as compared to 240,600 bpd and 248,800 bpd in the corresponding period of 2003. For the three months ended September 30, 2004, the throughput rates were restricted
due to an unplanned shutdown of the crude unit for about ten days. For the nine months ended September 30, 2004, the throughput rates were restricted due to two unplanned shutdowns of the crude unit, a scheduled maintenance turnaround and subsequent
mechanical issues at the reformer unit.



The total throughput
rate at our Lima refinery was 147,100 bpd and 126,400 bpd for the three and nine months ended September 30, 2004, as compared to 149,400 bpd and 138,900 bpd in the corresponding period of 2003. For the three months ended September 30, 2004, the
total throughput rate was reduced due to lower than expected demand and margins on high-sulfur diesel. For the nine months ended September 30, 2004, the throughput rates were restricted due to the scheduled 33 day full refinery maintenance
turnaround.



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The total throughput rate at our Memphis refinery was 153,900 bpd and 154,400 bpd for the three and nine
months ended September 30, 2004. For the three and seven months ended September 30, 2003, the newly acquired Memphis refinery operated at a total throughput rate of 168,600 bpd and 130,900 bpd. Total throughput was reduced as the crude oil
throughput was supplemented with more economical intermediate feedstocks in order to keep the downstream units operating at full rates and to take advantage of the strong refinery margins. Additionally, total throughput for the three and nine months
ended September 30, 2004 was impacted by a refinery power outage in August 2004, reformer operating problems in September 2004 and due to the hurricane storm activity in the Gulf.



The total throughput rate at our newly acquired Delaware City refinery for the three months ended September 30, 2004 and
five months of operations since May 1, 2004 was 180,900 bpd and 178,600 bpd, respectively. The total throughput rate averaged over the nine months ended September 30, 2004 was 99,700 bpd. Total throughput for the third quarter 2004 was slightly
reduced due to the planned turnaround of the fluid catalytic cracking unit which started on September 25, 2004.



Operating Expenses. Operating expenses increased $84.4 million to $219.2 million in the three months ended September 30, 2004 from $134.8 million
in the corresponding period of 2003. Operating expenses increased $177.3 million to $563.7 million in the nine months ended September 30, 2004 from $386.4 million in the corresponding period of 2003. The increase in operating expenses for both the
three and nine months ended September 30, 2004 is primarily due to the five months of operations at Delaware City in 2004 and natural gas prices increased 12% and 2% for the three and nine months ended September 30, 2004 as compared to 2003.



General and Administrative Expenses. General and
administrative expenses increased $14.7 million to $36.6 million for the three months ended September 30, 2004 from $21.9 million in the corresponding period in 2003. General and administrative expenses increased $43.2 million to $92.5 million in
the nine months ended September 30, 2004 from $49.3 million in the corresponding period in 2003. The increase in general and administrative expenses for both the three and nine months ended September 30, 2004 is primarily related to higher employee
related costs and the five months of operations at Delaware City in 2004. The employee costs primarily consisted of a higher accrual for incentive compensation, an increase in expenses related to the Senior Executive Retirement Plan following its
reinstatement in the second quarter of 2003, an increase in postretirement benefit expense due to higher health care costs, and increases in wages and salaries. Incentive compensation was $43 million for the nine months ended September 30, 2004 as
compared to $7 million for the corresponding period in 2003.



Stock-Based CompensationExpense. Stock-based compensation expense increased $0.4 million to $4.9 million for the three months ended September 30, 2004 from $4.5 million in the corresponding period in 2003. Stock-based
compensation expense increased $1.5 million to $14.7 million for the nine months ended September 30, 2004 from $13.2 million in the corresponding period in 2003. The increases relate to the grant of additional options in 2004.



Depreciation and Amortization. Depreciation and amortization increased
$12.6 million to $40.5 million in the three months ended September 30, 2004 from $27.9 million in the corresponding period in 2003. Depreciation and amortization increased $34.3 million to $111.4 million in the nine months ended September 30, 2004
from $77.1 million in the corresponding period in 2003. This increase for the nine months ended September 30, 2004 was principally due to accelerating the full refinery turnaround at Lima, capital expenditure activity, five months of depreciation
for Delaware City in 2004 and a full nine months of depreciation for Memphis in 2004.



Refinery Restructuring and Other Charges. During the three months ended September 30, 2004, the Company recorded refinery restructuring and other charges of $1.1 million. The charges relate to expenses
associated with safety and environmental matters at closed refineries. During the nine months ended September 30, 2004, the Company recorded refinery restructuring and other charges of $10.4 million. The charges included $7.3 million related to the
St. Louis administrative office closure and $3.1 million related to expenses associated with safety and environmental matters at closed refineries.



During the three months ended September 30, 2003, the Company recorded refinery restructuring and other charges of $2.9 million related to the
Companys plans to close the St. Louis administrative office. During the



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nine months ended September 30, 2003, the Company recorded refinery restructuring and other charges of $18.6 million. The
nine month charge also included a $1.6 million reversal of restructuring charges related to the administrative restructuring which began in 2002, a $0.7 million charge related to the St. Louis office closure and a $16.6 million charge related to the
then potential sale of certain Hartford refinery assets. Below are further discussions of the Hartford refinery asset sale and the administrative function restructuring.



Hartford Asset Sale. In September 2002, we ceased refining operations at our Hartford, Illinois refinery, but we
continue to operate a storage and distribution facility at the refinery site. In the first quarter of 2003, we signed a memorandum of understanding with ConocoPhillips for the sale of refining assets and certain storage and distribution assets for
$40 million. Accordingly, we recorded a charge of $16.6 million related to the transaction, which included the write-down of the refining assets held for sale and the write-down of certain storage and distribution assets included in property, plant
and equipment. The sale was completed in the third quarter of 2003.



Administrative Restructuring. In 2002, we began a restructuring of our administrative functions, and at that time the elimination of certain positions in the St. Louis office was scheduled for early 2003. As a
result of the Memphis refinery acquisition in early 2003, the number of positions to be eliminated at the St. Louis office was reduced by 25, and we recorded a reduction in the restructuring liability of $1.6 million in the first quarter of 2003. In
May 2003, we announced that we would be closing the St. Louis office and moving the administrative functions to the Connecticut office over the next twelve months. The severance related costs were amortized over the remaining service period of the
affected employees and the other costs, such as training, relocation, and the movement of physical assets, are expensed as incurred.



The following table summarizes the expected expenses associated with the administrative restructuring and provides a reconciliation of the administrative
restructuring liability as of September 30, 2004:



|                                                               |  |           |      |   |             |   |      |             |  |   |       |  
|-------------------------------------------------------------- |  | --------- | ---- | - | ----------- | - | ---- | ----------- |  | - | ----- | -
|                                                               |  | Severance |      |   | Other Costs |   |      | Total Costs | 
|Summary of Restructuring Expenses:                             |  |           |      |   |             |   |      |             |  |   |       |  
|Expected total restructuring expenses                          |  | $         | 5.9  |   |             | $ | 10.5 |             |  | $ | 16.4  |  
|Expenses recorded for the nine months ended September 30, 2004 |  |           | 0.9  |   |             |   | 6.4  |             |  |   | 7.3   |  
|Cumulative expenses recorded to date                           |  |           | 5.9  |   |             |   | 10.5 |             |  |   | 16.4  |  
|Liability Activity:                                            |  |           |      |   |             |   |      |             |  |   |       |  
|Beginning balance, December 31, 2003                           |  | $         | 5.2  |   |             | $ |     |             |  | $ | 5.2   |  
|Expenses recorded for the nine months ended September 30, 2004 |  |           | 0.9  |   |             |   | 6.4  |             |  |   | 7.3   |  
|Cash outflows                                                  |  |           | (5.7 | ) |             |   | (6.4 | )           |  |   | (12.1 | )
|                                                               |  |           |      |   |             |   |      |             |  |   |       |  
|Ending balance, September 30, 2004                             |  | $         | 0.4  |   |             | $ |     |             |  | $ | 0.4   |  
|                                                               |  |           |      |   |             |   |      |             |  |   |       |  



Interest and
Finance Expense, net. Interest and finance expense, net increased by $2.9 million to $33.4 million for the three months ended September 30, 2004 from $30.5 million in the corresponding period in 2003. This increase is primarily due to additional
interest expense related to a net increase in long-term debt in 2003 that is fully reflected in our 2004 interest expense amount. This increase is partially offset by higher capitalized interest in 2004. Interest and finance expense, net increased
by $11.8 million to $96.7 million for the nine months ended September 30, 2004 from $84.9 million in the corresponding period in 2003.



Loss on Extinguishment of Debt. As a result of the early extinguishment of the $785 million credit facility, the Company and PRG recorded a loss of
nil and $3.6 million for the three and nine months ended September 30, 2004, respectively. As a result of the early extinguishment of long-term debt and credit agreement restructuring, the Company recorded a loss of $10.4 million (PRG $8.1 million)
for the nine months ended September 30, 2003. The loss included a cash premium of $5.0 million (PRG $2.7 million) and a write-off of unamortized deferred financing costs of $5.4 million.



Income Tax Provision. We recorded a $82.9 million and a $196.8 million income tax provision in the three and nine
months ended September 30, 2004, respectively compared to a $32.3 million and a $71.3 million income tax provision in the corresponding period in 2003, respectively. Our effective tax rate was 37.4% for the nine months ended September 30, 2004
versus 34.7% in 2003. Our subsidiaries are subject to different statutory tax rates. These differing tax rates and the differing amount of taxable income or loss recognized by each



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subsidiary impact our consolidated effective tax rate. The increase in our 2004 consolidated effective tax rate as
compared to 2003 resulted from a lower percentage of our 2004 consolidated income being recognized by Sabine, which has a lower effective tax rate than other subsidiaries.



Discontinued Operations In connection with the 1999 sale of PRGs retail assets to Clark Retail Enterprises,
Inc. (CRE), PRG assigned certain leases and subleases of retail stores to CRE. Subject to certain defenses, PRG remained jointly and severally liable for CREs obligations under approximately 150 of these leases, including payment
of rent and taxes. PRG may also be contingently liable for environmental obligations at these sites. In 2002, CRE and its parent company, Clark Retail Group, Inc., filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. In July 2004, the CRE bankruptcy estates was liquidated and the case dismissed. As of September 30, 2004, PRG was subleasing 28 operating stores, the leases on 18 stores had either been terminated or expired, the leases on 103 operating stores
were held by third parties, and PRG is in the process of buying out the leases on the remaining two stores. For the three and nine months ended September 30, 2004, PRG recorded an after-tax charge of $2.8 million and $4.6 million, respectively.
These charges represent the estimated net present value of its remaining liability under the current operating stores that were subleased, net of estimated sublease income, and other direct costs. For the three and nine months ended September 30,
2003, PRG recorded an after-tax charge of $0.4 million and $6.9 million, respectively representing the estimated net present value of its remaining liability under the current operating stores that were subleased, net of estimated sublease income,
and other direct costs. The following table reconciles the activity and balance of the liability for the lease obligations as well as the Companys environmental liability for previously owned and leased retail sites:



|                                     |  |                  |      |   |                                                             |   |      |                             |  |   |      |  
|------------------------------------ |  | ---------------- | ---- | - | ----------------------------------------------------------- | - | ---- | --------------------------- |  | - | ---- | -
|                                     |  | LeaseObligations |      |   | EnvironmentalObligations ofPreviously Ownedand Leased Sites |   |      | TotalDiscontinuedOperations | 
|Beginning balance, December 31, 2003 |  | $                | 7.4  |   |                                                             | $ | 21.2 |                             |  | $ | 28.6 |  
|Accretion and other expenses         |  |                  | 7.5  |   |                                                             |   |     |                             |  |   | 7.5  |  
|Net cash outlays                     |  |                  | (3.6 | ) |                                                             |   | (1.0 | )                           |  |   | (4.6 | )
|                                     |  |                  |      |   |                                                             |   |      |                             |  |   |      |  
|Ending balance, September 30, 2004   |  | $                | 11.3 |   |                                                             | $ | 20.2 |                             |  | $ | 31.5 |  



The primary obligation
under a majority of the non-rejected leases and subleases was transferred in a CRE bankruptcy sale process to various unrelated third parties; however, the Company may remain jointly and severally liable on the assigned leases. PRG could still
become potentially obligated on the remaining 103 operating store leases which are held by third parties if the current lessee defaults on its lease obligations.



Outlook



This Outlook section contains forward-looking statements that reflect our current judgment regarding future operations. Even though we believe our
expectations regarding future events are reasonable assumptions, forward-looking statements are not guarantees of future performance. Factors beyond our control could cause our actual results to vary materially from our expectations and are
discussed on the first page of the Managements Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q, under the heading Forward-Looking Statements.



Market. Market conditions for the beginning of the fourth quarter of
2004 through October to date have been very strong. The Gulf Coast 2/1/1 crack spread has averaged approximately $5.80 per barrel, the Chicago 3/2/1 crack spread has averaged approximately $6.40 per barrel and the NYH RFG 3/2/1 crack spread has
averaged approximately $6.10 per barrel. The WTI/Maya differential has averaged approximately $14.30 per barrel, and the WTI/Arab Medium differential has averaged approximately $8.00 per barrel. Based on the world-wide shortage in refining capacity
to manufacture clean transportation fuels and heating oils, we believe margins will stay strong and the heavy sour crude differentials will continue to provide extraordinary margins for refineries for the next few years.



It is common practice in our industry to look to benchmark market indicators
as a predictor of actual refining margins, such as the Gulf Coast 2/1/1, Chicago 3/2/1 and NYH RFG 3/2/1. To improve the reliability of this benchmark as a predictor of actual refining margins, it must first be adjusted for a crude oil slate that is



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not 100% light and sweet. Secondly, it must be adjusted to reflect variances from the benchmark product slate to the
actual, or anticipated, product slate. Lastly, it must be adjusted for any other factors not anticipated in the benchmark, including product grade differentials, ancillary crude and product costs such as transportation, storage and credit fees,
inventory fluctuations and price risk management activities.



Refinery Operations. Our Port Arthur refinery has historically produced roughly equal parts gasoline and distillate. For this reason, we believe the Gulf Coast 2/1/1 crack spread appropriately reflects our product slate. However,
approximately 15% of Port Arthurs product slate is lower value petroleum coke and residual oils which will negatively impact the refinerys performance against the benchmark crack spread. Port Arthurs normal crude unit throughput is
approximately 80% heavy sour crude oil and 20% medium sour crude oil. Accordingly, the WTI/Maya crude oil price differential can be used as an adjustment to the benchmark crack spread. Ancillary crude costs, primarily transportation, at Port Arthur
averaged $0.63 per barrel of crude unit throughput for the three months ended September 30, 2004. Based on current operations and market conditions, we expect the total throughput rate at our Port Arthur refinery to approximate 240,000 bpd to
250,000 bpd in the fourth quarter of 2004.



Our Lima refinery
has a product slate of approximately 97% light products, of which 60% is gasoline and 30% distillate, and we believe the Chicago 3/2/1 is an appropriate benchmark crack spread. This refinery consumes over 95% light sweet crude oil with the balance
being light sour crude oils. We opportunistically buy a mix of domestic and foreign sweet crude oils. The foreign crude oils consumed at Lima are priced relative to Brent and the WTI/Brent differential can be used to adjust the benchmark. Ancillary
crude costs for Lima averaged $1.56 per barrel of crude unit throughput in the three months ended September 30, 2004. Based on current operations and market conditions, we expect the total throughput rate at our Lima refinery to approximate 140,000
bpd to 150,000 bpd in the fourth quarter of 2004.



Our Memphis
refinery has a product slate of approximately 98% light products, of which 50% is gasoline and 45% distillate. We expect that the operating results will track a Gulf Coast 2/1/1 benchmark crack spread. Ancillary crude costs for Memphis averaged
$0.60 per barrel of crude unit throughput in the three months ended September 30, 2004. This refinery consumes approximately 100% light sweet crude oil, but often supplements its crude oil feedstocks with intermediate feedstocks. Based on current
operations and market conditions, we expect the total throughput rate at our Memphis refinery to approximate 145,000 bpd to 155,000 bpd in the fourth quarter of 2004. This throughput rate may be reduced depending on sulfur levels and overall crude
quality from the Gulf of Mexico.



Our Delaware City refinery
has a product slate of approximately 60% gasoline, 35% distillate and 5% petroleum coke. We believe the NYH RFG 3/2/1 is an appropriate benchmark crack spread. This refinery typically consumes medium and heavy sour crude oil. Accordingly, the
WTI/Arab Medium crude oil differential can be used as an adjustment to the benchmark crack spread, as it generally reflects our crude oil mix. Ancillary crude costs, primarily transportation, averaged $1.25 per barrel of crude unit throughput for
the three months ended September 30, 2004. Based on current operations and market conditions, we expect the total throughput rate at our Delaware City refinery to approximate 170,000 bpd to 180,000 bpd in the fourth quarter of 2004.



Operating Expenses.Natural gas is the most variable component of our
operating expenses. On an annual basis, our Port Arthur, Memphis, Lima and Delaware City refineries purchase approximately 34 million mmbtu of natural gas, with most of these purchases relating to our Port Arthur refinery. In a $5.60 per mmbtu
natural gas price environment and assuming average throughput levels, our annual operating expenses should range between $800 million and $820 million. It is also important to note that we contract for the purchase of natural gas on a calendar month
basis and set the price at the beginning of the month. From time to time we may also employ various risk management strategies to mitigate our price risk for natural gas.



General and Administrative Expenses We expect fourth quarter general and administrative expenses, excluding incentive
compensation expense, will approximate $18 million. We have accrued approximately $43 million for incentive compensation as of September 30, 2004.



Stock-based Compensation Expense. We expect stock-based compensation expense in 2004 will approximate $19 million to $20 million.



Depreciation and Amortization. Depreciation and amortization in the
third quarter of 2004 was $40.5 million. This quarterly rate will increase in future periods based upon the completion and placing into service of our capital expenditure activity and the full impact of the Delaware City refinery acquisition.
Capital activity is generally depreciated over a 25-year life. Turnaround activity is generally amortized over four years.



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Interest Expense. Based on our outstanding long-term debt as of September 30, 2004, our full year
2004 gross interest expense will be approximately $150 million and amortization of deferred financing costs will be approximately $10 million. All of our outstanding debt is at fixed rates with the exception of $10 million in floating rate notes
tied to LIBOR. Reported interest expense is reduced by capitalized interest, which we estimate will be approximately $25 million to $30 million in 2004 due to significant capital expenditure activity.



Income Taxes. We expect our effective income tax rate for 2004 will
range from approximately 35% to 39%.



Capital Expenditures
and Turnarounds. Capital expenditures and turnarounds for the three and nine months ended September 30, 2004 totaled $129 million and $337 million, respectively. We plan to spend approximately $600 million to $610 million for turnarounds and
capital expenditures, excluding capitalized interest, in 2004. We plan to fund capital expenditures with internally generated funds and cash on hand. If internally generated funds and cash on hand are insufficient, we will reduce our capital
expenditure plans accordingly.



Dividends.On October
26, 2004 the Board of Directors declared a dividend of $0.02 per share payable on December 15, 2004 to all stockholders of record on December 1, 2004.



Liquidity and Capital Resources



Cash Balance



As of September 30, 2004, we had a cash and short-term investment balance of $655.7 million, of which $530.2 million was held by PRG, $118.2 million was
held by Premcor Inc., and $7.3 million was held by other Premcor Inc. subsidiaries. As of December 31, 2003, we had a cash and short-term investment balance of $432.6 million, of which $378.6 million was held by PRG, $48.0 million was held by
Premcor Inc., and $6.0 million was held by other Premcor Inc. subsidiaries. We also had cash restricted under certain long-term debt indentures totaling $54.6 million and $66.6 million as of September 30, 2004 and December 31, 2003, respectively.



Cash Flows from Operating Activities



Net cash provided by operating activities for the nine months ended
September 30, 2004 was $592.3 million compared to net cash provided from operations of $78.2 million in the corresponding period in 2003. Overall, the increase in cash provided by operating activities was due to strong market conditions, which
resulted in strong operating results partially offset by an increase in working capital.



Working capital as of September 30, 2004 was $1,202.0 million, a 2-to-1 current ratio, versus $860.1 million as of December 31, 2003, a 1.9-to-1 current ratio. The components of current assets and current liabilities
experienced some significant changes as of September 30, 2004 as compared to December 31, 2003. Inventories increased from $630.3 million to $842.3 million primarily due to the acquisition of the Delaware City refinery and the associated inventory.
The change in accounts payable less accounts receivable, related to our overall crude purchases and product sales, decreased from $156.4 million in December 31, 2003 to $132.1 million in September 30, 2004. This primarily reflects a significant
reduction in crude oil payables as we now purchase much of the Lima crude oil on shorter payment terms through our Morgan Stanley Capital Group, or MSCG arrangement. This decrease was almost fully offset by the significant increase in crude oil and
product prices.



Cash and cash equivalents increased
significantly from $426.7 million to $648.7 million, reflecting the strong operating environment. We currently expect that funds generated from operating activities together with existing cash, cash equivalents and short-term investments and
availability under our credit facility will be adequate to fund our ongoing operating requirements.



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Environmental and Legal Liabilities. As a result of our normal course of business, the closure of
two of our refineries, and continuing obligations related to our previously owned retail operations, we are party to certain legal proceedings and environmental-related obligations. In relation to these matters and obligations, we have accrued, on
primarily an undiscounted basis, $96 million as of September 30, 2004 (December 31, 2003$98 million).



Upon closure of our Blue Island and Hartford refineries we recorded a liability for environmental remediation obligations associated with their closure.
The environmental obligations take into account costs that are reasonably foreseeable at this time. In relation to the Blue Island refinery site, we have been in discussions with state and local governmental agencies concerning remediation of the
site. A consent order for the investigation of Blue Island was completed and entered by the court in the first quarter of 2004. We believe our recorded liability is sufficient based on this recent consent order. We have other environmental
remediation activity related to previously owned assets and currently operating assets for which we have also recorded a liability. These liabilities may require adjustments in the future as more information becomes available.



Long-Term Crude Oil Contract. PACC has a long-term crude oil supply
agreement with PMI Comercio Internacional, S.A. de C.V., an affiliate of Petroleos Mexicanos or PEMEX, the Mexican state oil company, which currently supplies approximately 167,000 barrels per day of Maya crude oil to the Port Arthur refinery. On
November 1, 2004, the supply agreement will increase to 186,000 barrels per day of Maya crude oil. Under the terms of this agreement, PACC is obligated to buy Maya crude oil from the affiliate of PEMEX, and the affiliate of PEMEX is obligated to
sell Maya crude oil to PACC at market prices.



Crude Oil
Supply Arrangement.We currently have a crude oil supply agreement with MSCG through which we can arrange to purchase foreign or domestic crude oils in quantities sufficient to fulfill the crude oil requirements of our Memphis and Lima
refineries. Availability of crude supply is not guaranteed under this arrangement. We rely on the spot crude oil market for supply and have the ability to arrange purchases through MSCG. In March 2004, we amended this agreement to facilitate our
crude oil purchase requirements at both our Memphis and Lima refineries and extended the maturity date of the contract to March 2006.



Cash Flows from Investing Activities



Cash flows used in investing activities for nine months ended September 30, 2004 were $1,226.6 million as compared to $560.5 million in 2003. The nine
months ended September 30, 2004 reflected the acquisition of the Delaware refinery and in 2003 reflected the acquisition of the Memphis refinery. Aside from these acquisitions, activity in 2004 and 2003 primarily reflected capital expenditures,
including turnarounds.



We classify our capital expenditures
into two main categories, mandatory and discretionary. Mandatory capital expenditures, such as for turnarounds and maintenance, are required to maintain safe and reliable operations or to comply with regulations pertaining to soil, water and air
contamination or pollution, regulations pertaining to new product standards, and regulations pertaining to occupational safety and health issues. Summarized below are the forecasted capital expenditures for the full year 2004 and our actual capital
expenditures for the nine months ended September 30, 2004 and 2003.



|                             |  |                           |     |                                           |   |                                           |  |   |    
|---------------------------- |  | ------------------------- | --- | ----------------------------------------- | - | ----------------------------------------- |  | - | ---
|                             |  | Forecast forFull Year2004 |     | For the NineMonths EndedSeptember 30,2004 |   | For the NineMonths EndedSeptember 30,2003
|Low-sulfur product standards |  | $                         | 244 |                                           | $ | 116                                       |  | $ | 76 
|Turnaround activity          |  |                           | 125 |                                           |   | 84                                        |  |   | 13 
|Other mandatory projects     |  |                           | 165 |                                           |   | 86                                        |  |   | 25 
|Discretionary projects       |  |                           | 71  |                                           |   | 51                                        |  |   | 12 
|                             |  |                           |     |                                           |   |                                           |  |   |    
|Total capital expenditures   |  | $                         | 605 |                                           | $ | 337                                       |  | $ | 126
|                             |  |                           |     |                                           |   |                                           |  |   |    



Low-sulfur Product
Standards. The Environmental Protection Agency, or EPA, has promulgated regulations under the Clean Air Act that establish stringent sulfur content specifications for gasoline and on-road diesel fuel designed to reduce air emissions from the use
of these products. We expect to incur in the aggregate



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approximately $645 million, of which $317 million has been incurred as of September 30, 2004, in order to comply with
environmental regulations related to the new stringent sulfur content specifications. Future revisions to the current cost estimates may be necessary as we continue to finalize our engineering and procurement plans. Further, the increase in
worldwide prices and demand for steel and equipment may also require us to further revise our estimates as they put pressure on our project cost. Information related to the expected expenditures in relation to these new regulations is shown below.



|                              |  |                             |     |                                   |   |                                           |  |   |    
|----------------------------- |  | --------------------------- | --- | --------------------------------- | - | ----------------------------------------- |  | - | ---
|                              |  | Total EstimatedExpenditures |     | TotalExpendituresIncurred To-Date |   | RemainingExpendituresat September 30,2004
|Gasoline low sulfur standards |  | $                           | 315 |                                   | $ | 284                                       |  | $ | 31 
|Diesel low sulfur standards   |  |                             | 330 |                                   |   | 33                                        |  |   | 297
|                              |  |                             |     |                                   |   |                                           |  |   |    
|Total                         |  | $                           | 645 |                                   | $ | 317                                       |  | $ | 328
|                              |  |                             |     |                                   |   |                                           |  |   |    



As of September 30,
2004, we had outstanding contractual commitments of $147 million related to the design and construction activity at the refineries for the gasoline and diesel low sulfur standards compliance.



Discretionary Projects. Our main discretionary project is the Port
Arthur expansion project, which is intended to increase Port Arthurs crude unit throughput capacity from its current rate of 250,000 bpd to approximately 325,000 bpd, and expand the coker unit capacity from its current rated capacity of 80,000
bpd to 105,000 bpd. The expansion will increase our ability to process lower cost, heavy sour crude oil. This project is estimated to cost between $200 million and $220 million with $70 million forecasted to be spent in 2004. We expect to complete
the project in the second quarter of 2006.



We plan to fund
mandatory and discretionary capital expenditures with available cash and cash flow from operations and will adjust our annual expenditures accordingly.



Cash Flows from Financing Activities



Cash flows provided by financing activities were $856.3 million for the nine months ended September 30, 2004 as compared to cash flows provided by
financing activities of $796.9 million for 2003. During the nine months ended September 30, 2004, our cash flows from financing activities reflected cash provided by the receipt of net proceeds of approximately $490 million from a public offering of
14,950,000 common shares by Premcor Inc. and the receipt of proceeds from the sale of $400 million in senior notes, of which $200 million, due in 2011, bear interest at 61/8% per annum and $200 million, due in 2014, bear interest at 63⁄4% per annum by PRG. The majority of these proceeds were used to finance the Delaware City refinery acquisition.
PACC made $24.2 million of scheduled principal payments on its 121⁄2% senior notes. Cash flows from our financing activities during the nine months ended September 30, 2004 and 2003 also reflected the receipt of proceeds from the exercise of
stock options.



In 2003, Premcor Inc. received net
proceeds of approximately $306 million from a public offering of 13.1 million shares of common stock and a private offering of 2.9 million shares of common stock with Blackstone Capital Partners III Merchant Banking Fund L.P. and its affiliates, a
subsidiary of Occidental Petroleum Corporation, and certain Premcor executives. In February 2003, PRG completed an offering of $525 million in senior notes, of which $350 million, due in 2013, bear interest at 91⁄2% per annum and $175 million,
due in 2010, bear interest at 91⁄4% per annum. A portion of the net proceeds of these transactions was utilized to redeem the remaining $40.1 million principal balance of Premcor USAs 111⁄2% subordinated debentures at a $2.3 million
premium, to repay PRGs $240 million floating rate loan at par, and to purchase, in the open market, $14.7 million in face value of a portion of PACCs 121⁄2% senior notes at a $2.7 million premium. In June 2003, PRG completed a private
placement offering of $300 million in senior notes, due 2015, bearing interest at 71⁄2% per annum.



In 2004, Premcor Inc. made capital contributions to Premcor USA of $403.5 million and Premcor USA subsequently contributed $403.5 million to PRG primarily
to fund a portion of the Delaware refinery acquisition. In 2003, Premcor Inc. made capital contributions to Premcor USA of $297.5 million and Premcor USA subsequently contributed $263.3 million to PRG primarily to fund a portion of the Memphis
refinery acquisition and to repay certain long-term debt.



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For the nine months ended September 30, 2004, we incurred $16.1 million of deferred financing costs for
completing the new $1 billion credit agreement and the issuance of the new senior notes. For the nine months ended September 30, 2003, we incurred $25.5 million of deferred financing costs in relation to the amendment of the credit agreement and the
issuance of the new senior notes.



We continue to evaluate the
most efficient use of capital and, from time to time, depending upon market conditions, may seek to purchase certain of our outstanding debt securities in the open market or by other means, in each case to the extent permitted by existing covenant
restrictions.



Credit Facilities



On April 13, 2004, PRG completed a new $1 billion senior secured revolving
credit facility, maturing in April 2009, to replace its existing $785 million credit facility. The facility is used primarily to secure crude oil purchase obligations for our refinery operations and to provide for other working capital needs. The
revolving credit facility allows for the issuance of letters of credit and direct borrowings, individually or collectively, up to the lesser of $1 billion or the amount available under a defined borrowing base. The borrowing base includes, among
other items, eligible cash and cash equivalents, eligible investments, eligible receivables, and eligible petroleum inventories. The revolving credit facility also allows for an overall increase in the principal amount of the facility of up to $250
million under certain circumstances. The revolving credit facility is secured by a lien on substantially all of PRGs cash and cash equivalents, receivables, crude oil and refined product inventories and intellectual property and is guaranteed
by Premcor Inc. The collateral also includes the capital stock of Sabine and certain other subsidiaries and certain PACC inventory. PRGs borrowings under this facility would bear interest at a rate based on the highest of three U.S. based rate
formulas, or the Eurodollar rate plus a defined margin.



The
covenants and conditions under this new credit agreement are generally less restrictive than the covenants contained in the agreement governing our terminated $785 million facility. The new credit agreement contains covenants and conditions that,
among other things, limit dividends, indebtedness, liens, investments, restricted payments as defined, and the sale of assets. The covenants also provide that in the event PRG does not maintain certain availability within the facility, additional
restrictions and a cumulative cash flow test will apply. PRG was in compliance with these covenants as of September 30, 2004.



As of September 30, 2004, the borrowing base was $1,909.3 million (December 31, 2003  $1,348.9 million), with $483.8 million (December 31,
2003$602.1 million) of the facility utilized for letters of credit. As of September 30, 2004 and December 31, 2003, there were no direct cash borrowings under the credit facility. The portion of the facility utilized for letters of credit was
lower as of September 30, 2004 as compared to December 31, 2003 due to the increase of open trade credit and the addition of purchases of domestic crude for Lima through the MSCG supply contract, partially offset by the addition of purchases for the
Delaware City refinery.



PRG also has a $40 million
cash-collateralized credit facility which was renewed effective June 1, 2004 for one year. This facility was initially arranged in support of lower interest rates on the Series 2001 Ohio Bonds. In addition, this facility can be utilized for other
non-hydrocarbon purposes. As of September 30, 2004, $39.7 million (December 31, 2003$18.0 million) of the line of credit was utilized for letters of credit.



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



The risk inherent in our market risk sensitive instruments and positions is the potential loss from adverse changes in commodity prices and interest
rates. None of our market risk sensitive instruments are held for trading.



Commodity Risk



Our earnings, cash flow and
liquidity are significantly affected by a variety of factors beyond our control, including the supply of, and demand for, commodities such as crude oil, other feedstocks, gasoline, other refined products and natural gas. The demand for these refined
products depends on, among other factors, changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, planned and unplanned downtime in refineries, pipelines and production facilities, production levels,
the availability of imports, the marketing of competitive fuels and the extent of government regulation. As a result, the prices of these commodities fluctuate significantly. The movement in petroleum prices does not necessarily have a direct
long-term relationship to net income. The effect of changes in crude oil prices on our operating results is determined more by the rate at which the prices of refined products adjust to reflect such changes.



In order to supply our refineries with crude oil on a timely basis, we enter
into net fixed price purchase commitments which are purchase contracts that fix the price of crude oil from one to several weeks in advance of receiving and processing that crude oil. In addition, it is common as part of our marketing activities to
fix the price of a portion of our product sales in advance of producing and delivering that refined product. As a result, we are exposed to crude oil price movements relative to refined product price movements during this period. Our results are
measured by recording these commitments at market value at the end of each accounting period. Based on our current refinery operations, our average fixed price purchase commitments when offset by our fixed price sale commitments equate to a net long
inventory position of approximately 8 million barrels. Accordingly, if the market price of these net fixed price commitments had been lower by $1 per barrel as of September 30, 2004, we would have recorded additional cost of sales of approximately
$8 million, based on our treatment of these contracts as derivatives. An increase in the market price would reduce cost of sales by a like amount. We may actively mitigate some or all of the price risk related to our fixed price purchase and sale
commitments. These risk management decisions are based on many factors including the relative level and volatility of absolute hydrocarbon prices and the extent to which the futures market is in backwardation or contango. When the contract price of
the following month futures contract is less than the contract price of the current, or prompt, month contract, a backwardated market structure exists, and when the contract price of the following month futures contract is greater than
the contract price of the prompt month contract, a contango market structure exists. The cost of our risk management activities generally increases in a backwardated market.



We use several strategies to minimize the impact on profitability of volatility in feedstock costs and refined product
prices. These strategies generally involve the purchase and sale of exchange traded, energy related futures and options with a duration of six months or less. To a lesser extent we use energy swap agreements similar to those traded on the exchanges,
such as crack spreads and crude oil options, to better match the specific price movements in our markets. These strategies are designed to minimize, on a short-term basis, our exposure to the risk of fluctuations in crude oil prices and refined
product margins. The number of barrels of crude oil and refined products covered by such contracts varies from time to time. Such purchases and sales are closely managed and subject to internally established risk policies. The results of these price
risk mitigation activities affect refining cost of sales and inventory costs.



We prepared a sensitivity analysis to estimate our exposure to market risk associated with our futures and options derivative positions at September 30, 2004. This analysis may differ from actual results. The fair
value of each position is based on quoted futures prices. As of September 30, 2004, a $1 change in quoted futures prices would result in an approximate $8 million change to the fair market value of the derivative commodity position and
correspondingly the same change in operating income. As of December 31, 2003, a $1 change in quoted futures prices would result in an approximate $10 million change to the fair market value of the derivative commodity position and correspondingly
the same change in operating income.



Our results are also
sensitive to the fluctuations in natural gas prices due to the use of natural gas to fuel our refinery operations. Based on our average annual consumption of approximately 34 million mmbtu of natural gas, a $1 change per mmbtu in the price of
natural gas would generally change our natural gas costs by



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$34 million. Our sensitivity to a change in the price of natural gas would also be impacted by our method of purchasing
natural gas. We contract for the purchase of natural gas on a calendar month basis and set the price at the beginning of the month. Therefore, our natural gas costs will reflect the price of natural gas on the day the contract is set, and not the
average price for the period. We are reviewing options to mitigate our exposure to natural gas price fluctuations.



ITEM 4.  Controls and Procedures



We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operations of our disclosure
controls and procedures pursuant to Exchange Act Rules 13a-14 and 15d-14. Based upon that evaluation as of the end of the period covered by this report, the chief executive officer and chief financial officer concluded that our disclosure controls
and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings. There have not been any changes in our internal control over
financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II. - OTHER INFORMATION



ITEM 1.  Legal Proceedings



There were no updates of developments during the three months ended September 30, 2004 of material pending legal proceedings to which we or any of our subsidiaries are a party or to which any of our or their property is subject, including
environmental proceedings that involve potential monetary sanctions of $100,000 or more and to which a governmental authority is a party. For additional discussion of our material pending legal proceedings, see Premcor Inc.s and PRGs
Annual Report on Form 10-K for the period ended December 31, 2003 and the Quarterly Reports on Form 10-Q for the periods ended March 31, 2004 and June 30, 2004.



I
TEM 6. - Exhibits and Reports on Form 8-K



|(a) | Exhibits
|--- | --------



|               |  |                                                                                                                                                                                               
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                   
|10.1           |  | Second Amendment to the Premcor Inc. Flexible Benefits Plan dated October 1, 2004.                                                                                                            
|               | 
|10.2           |  | Ninth Amendment to the Premcor Retirement Savings Plan dated August 12, 2004.                                                                                                                 
|               | 
|15.1           |  | Awareness letter dated October 27, 2004, from Deloitte & Touche LLP concerning the unaudited interim financial information of Premcor Inc. for September 30, 2004 and
2003.                   
|               | 
|15.2           |  | Awareness letter dated October 27, 2004, from Deloitte & Touche LLP concerning the unaudited interim financial information of The Premcor Refining Group Inc. for September 30, 2004 and
2003.
|               | 
|31.1           |  | Section 302 Chief Executive Officer certificate for Premcor Inc.                                                                                                                              
|               | 
|31.2           |  | Section 302 Chief Financial Officer certificate for Premcor Inc.                                                                                                                              
|               | 
|31.3           |  | Section 302 Chief Executive Officer certificate for PRG.                                                                                                                                      
|               | 
|31.4           |  | Section 302 Chief Financial Officer certificate for PRG.                                                                                                                                      
|               | 
|32.1           |  | Section 906 Chief Executive Officer certificate for Premcor Inc.                                                                                                                              
|               | 
|32.2           |  | Section 906 Chief Financial Officer certificate for Premcor Inc.                                                                                                                              
|               | 
|32.3           |  | Section 906 Chief Executive Officer certificate for PRG.                                                                                                                                      
|               | 
|32.4           |  | Section 906 Chief Financial Officer certificate for PRG.                                                                                                                                      



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SIGNATURE



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.



PREMCOR INC.THE PREMCOR REFINING GROUP INC.(Co-Registrants)By:

/s/ Dennis R. EichholzDennis R. EichholzSenior Vice President and Controller (principal
accounting officer)




October 28, 2004