FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark One)

(X)             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1996
                                       OR
( )           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
            For the transition period from ___________ to ___________

                        Commission File Number 001-12138

                                PDV America, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Delaware                                        51-0297556
------------------------------                           -------------------
State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization                            Identification No.)

                              750 Lexington Avenue
                            New York, New York 10022
               --------------------------------------------------
               (Address of principal executive offices, Zip Code)

        Registrant's telephone number, including area code (212) 753-5340

              Securities registered pursuant to Section 12(b) of the Securities
Exchange Act of 1934:

                                                      Name of Each Exchange
      Title of Each Class                              on Which Registered
--------------------------------------------------------------------------------
7-1/4% Senior Notes, Due 1998                     New York Stock Exchange, Inc.
7-3/4% Senior Notes, Due 2000                     New York Stock Exchange, Inc.
7-7/8% Senior Notes, Due 2003                     New York Stock Exchange, Inc.


        Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X  No
                                      ---   ---

     Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K:
                                Not Applicable.

    Aggregate market value of the voting stock held by non-affiliates of the
                           registrant: Not Applicable

     Number of shares of Common Stock outstanding as of March 1, 1997: 1,000

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None


<PAGE>



                                Table of Contents
                                -----------------

                                                                            Page
                                                                            ----


FACTORS AFFECTING FORWARD LOOKING STATEMENTS................................ ii

                                     PART I

ITEMS 1. AND 2.    BUSINESS AND PROPERTIES..................................  1
ITEM 3.            LEGAL PROCEEDINGS........................................ 20
ITEM 4.            SUBMISSION OF MATTERS TO A VOTE OF
                   SECURITY HOLDERS......................................... 21

                                     PART II

ITEM 5.            MARKET FOR REGISTRANT'S COMMON EQUITY  AND
                   RELATED STOCKHOLDER MATTERS.............................. 22
ITEM 6.            SELECTED FINANCIAL DATA.................................. 22
ITEM 7.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                   FINANCIAL CONDITION AND RESULTS OF
                   OPERATIONS............................................... 24
ITEM 8.            FINANCIAL STATEMENTS AND SUPPLEMENTARY
                   DATA..................................................... 34
ITEM 9.            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                   ON ACCOUNTING AND FINANCIAL DISCLOSURE................... 34

                                    PART III

ITEM 10.           DIRECTORS AND EXECUTIVE OFFICERS OF THE
                   REGISTRANT............................................... 35
ITEM 11.           EXECUTIVE COMPENSATION................................... 36
ITEM 12.           SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                   OWNERS AND MANAGEMENT.................................... 36
ITEM 13.           CERTAIN RELATIONSHIPS AND RELATED
                   TRANSACTIONS............................................. 36

                                     PART IV

ITEM 14.           EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON
                   FORM 8-K................................................. 38



                                        i

<PAGE>



                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS

                  This  Annual  Report on Form 10-K  contains  certain  "forward
looking  statements"  within the meaning of Section 27A of the Securities Act of
1933,  as amended,  and Section 21E of the  Securities  Exchange Act of 1934, as
amended.   Specifically,   all  statements  under  the  captions  "Items  1  and
2--Business and Properties" and "Item 7--Management's Discussion and Analysis of
Financial Condition and Results of Operations" relating to expected increases in
production   capacity  and  related  capital   expenditures   and   investments,
environmental  compliance and remediation and related capital expenditures,  and
future capital  expenditures  in general are forward  looking  statements.  Such
statements  are subject to certain  risks and  uncertainties,  such as increased
inflation,  continued access to capital markets and commercial bank financing on
favorable terms,  increases in regulatory  burdens,  changes in prices or demand
for the  Company's  products  as a result of  competitive  actions  or  economic
factors and changes in the cost of crude oil, feedstocks, blending components or
refined products. Such statements are also subject to increased costs in related
technologies,  and such technologies  producing  anticipated results, as well as
performance  by  third  parties  in  accordance  with   contractual   terms  and
specifications,   in  particular,  but  without  limitation,   with  respect  to
construction  contracts and  indemnification  agreements.  Should one or more of
these risks or uncertainties,  or other risks and  uncertainties  (some of which
may be unforeseen at this time) materialize,  actual results may vary materially
from those  estimated,  anticipated  or projected.  Specifically,  capital costs
could increase, projects could be delayed or anticipated related improvements in
capacity or performance may not be fully realized. Although the Company believes
that  the  expectations   reflected  by  such  forward  looking  statements  are
reasonable  based  on  information   currently  available  to  the  Company,  no
assurances can be given that such expectations will prove to have been correct.



                                       ii

<PAGE>



                                     PART I

                     ITEMS 1. AND 2. BUSINESS AND PROPERTIES

Overview

                  PDV  America,  Inc.  ("PDV  America"  or  the  "Company"  and,
together with its subsidiaries, the "Companies") was incorporated in 1986 in the
State  of  Delaware  and is the  holding  company  for the  U.S.  operations  of
Petroleos de Venezuela,  S.A.  (together  with one or more of its  subsidiaries,
referred to herein as  "PDVSA"),  the  national  oil company of the  Republic of
Venezuela.  Through  its  wholly  owned  operating  subsidiary  CITGO  Petroleum
Corporation  ("CITGO")  and its 50%  ownership  interest in The UNO-VEN  Company
("UNO-VEN"),  PDV America refines, markets and transports gasoline, diesel fuel,
jet fuel,  heating oil,  petrochemicals,  lubricants,  asphalt and other refined
products,  mainly  within  the  continental  United  States  east  of the  Rocky
Mountains.

                  PDV  America's  aggregate  net  interest  in rated  crude  oil
refining capacity is 683 thousand barrels per day ("MBPD").  The following table
shows the capacity of each U.S.  refinery in which PDV America holds an interest
and PDV America's share of such capacity.

                          PDV America Refining Capacity

<TABLE>
<CAPTION>
                                                                                               Net PDV
                                                                                               America
                                                                                  Total       Interest
                                                                                  Rated          In
                                                                                  Crude         Rated
                                                                PDV America     Refining      Refining
                                               Owner              Interest      Capacity      Capacity
                                         ----------------   --------------------------------------------
                                                                    (%)          (MBPD)        (MBPD)

<S>                                       <C>                       <C>            <C>           <C>
Refinery Interests Held By PDV America
  as of December 31, 1996
  Lake Charles, LA                             CITGO                100            320           320
  Corpus Christi, TX                           CITGO                100            140           140
  Paulsboro, NJ                                CITGO                100             84            84
  Savannah, GA                                 CITGO                100             28            28
  Houston, TX (1)                         LYONDELL-CITGO             13            265            34
  Lemont, IL                                  UNO-VEN                50            153            77
                                                                             ---------------------------
Total Rated Refining Capacity
  as of December 31, 1996                                                          990           683
                                                                             ===========================


<FN>
-------------------------
(1)      Initial   interest   acquired  on  July  1,  1993.  CITGO  interest  in
         LYONDELL-CITGO  at December  31, 1996 was  approximately  13%, and will
         increase to  approximately  42% on April 1, 1997 in accordance with the
         agreements concerning such interest. CITGO has an option, for 18 months
         after the completion date and for an additional investment, to increase
         its   participation   interest   up   to  a   maximum   of   50%.   See
         "CITGO-Refining-LYONDELL-CITGO".
</FN>
</TABLE>


                                        1

<PAGE>



                  The  following  table shows  aggregate  refined  product sales
(excluding  lubricants  and  waxes) of PDV  America  for the three  years in the
period ended December 31, 1996.

                      PDV America Refined Product Sales (1)

<TABLE>
<CAPTION>
                             Year Ended December 31,       Year Ended December 31,
                        -------------------------------------------------------------
                            1996      1995      1994      1996      1995      1994
                        -------------------------------------------------------------
                                ($ in millions)                (MM gallons)

<S>                       <C>       <C>       <C>        <C>       <C>       <C>   
Light Fuels
     Gasoline             $ 7,927   $ 6,761   $ 5,611    11,995    11,747    10,387
     Jet Fuel               1,506     1,181     1,120     2,372     2,282     2,165
     Diesel/#2 fuel         2,522     1,508     1,625     4,052     3,023     3,319
Asphalt                       257       238       194       569       503       506
Industrial Products and
  Petrochemicals              936       904       773     1,660     1,810     1,731
                          ---------------------------------------------------------
    Total                 $13,148   $10,592   $ 9,323    20,648    19,365    18,108
                          =========================================================


<FN>
-------------------------
(1)  Includes all of CITGO  (excluding  lubricants and waxes) and 50% of UNO-VEN
     refined product sales.
</FN>
</TABLE>



                  CITGO and UNO-VEN are operated  independently  of one another,
and,  where their markets  overlap,  they compete  against each other for market
share.



                                        2

<PAGE>



                  The following table shows PDV America's  aggregate interest in
refining  capacity,  refinery input and product yield for the three years in the
period ended December 31, 1996.

                       PDV America Refinery Production (1)

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                       ---------------------------------------------------
                                             1996(2)        1995(3)          1994(4)
                                       ---------------------------------------------------
                                              (MBPD, except as otherwise indicated)

<S>                                       <C>    <C>     <C>      <C>     <C>      <C>  
Rated Refining Capacity (5)               683            681              678

Refinery Input
  Crude oil                               561    81.2%   543      80.8%   535      79.5%
  Other feedstocks                        130    18.8    129      19.2    138      20.5
                                       ---------------------------------------------------
   Total                                  691   100.0%   672     100.0%   673     100.0%
                                       ===================================================

Product Yield (6)
  Light fuels
       Gasoline                           313    44.9%   310      45.7%   317      46.5%
       Jet Fuel                            70    10.0     66       9.7     59       8.7
       Diesel/#2 fuel                     122    17.5    118      17.4    125      18.4
  Asphalt                                  34     4.9     32       4.7     30       4.4
  Petrochemical and Industrial Products   158    22.7    152      22.5    150      22.0
                                       ---------------------------------------------------
       Total                              697   100.0%   678     100.0%   681     100.0%
                                       ===================================================


<FN>
-------------------------
(1)  Includes  all  of  CITGO  and 50% of UNO-VEN refinery production, except as
     otherwise noted.
(2)  Includes a weighted average of 12.89% of the Houston refinery for 1996.
(3)  Includes a weighted average of 11.45% of the Houston refinery for 1995.
(4)  Includes a weighted average of 10.48% of the Houston refinery for 1994.
(5)  At year end.
(6)  Does  not   include  Paulsboro  Unit 1.   See   "CITGO--Refining--Paulsboro
     Refinery".
</FN>
</TABLE>


Competitive Nature of the Petroleum Refining Business

                  The  petroleum   refining  industry  is  cyclical  and  highly
volatile,  reflecting  capital  intensity with high fixed costs and low variable
costs. Petroleum industry operations and profitability are influenced by a large
number of factors,  some of which  individual  petroleum  refining and marketing
companies  cannot  entirely  control.  Governmental  regulations  and  policies,
particularly  in the  areas of  taxation,  energy  and the  environment,  have a
significant  impact on petroleum refining and marketing  activities,  regulating
the manner in which  companies  conduct their  operations  and  formulate  their
products,  and, in some cases, directly limiting their profits. In addition, the
U.S.  petroleum  refining  industry  is  highly  fragmented,   with  no  company
accounting  for more than 10% of the total  volume of gasoline  sold in the U.S.
market. Demand for crude oil and its products is largely driven by the condition
of local  and  worldwide  economies,  although  weather  patterns  and  taxation
relative to other energy  sources can also be  significant  factors.  Generally,
U.S.  refiners  compete  for sales on the basis of price and brand image and, in
some product areas, product quality.

                                        3

<PAGE>



CITGO

                  CITGO refines,  markets and transports gasoline,  diesel fuel,
jet fuel, petrochemicals,  lubricants,  refined waxes, asphalt and other refined
products,  and markets gasoline through over 14,000 CITGO branded  independently
owned  and  operated  retail  outlets  located  throughout  the  United  States,
primarily east of the Rocky Mountains.  CITGO also markets jet fuel primarily to
airline  customers.  A variety of lubricants  and waxes are sold to  independent
distributors,  mass  marketers  and  industrial  customers.  Petrochemicals  and
industrial  products are sold directly to various  manufacturers  and industrial
companies  throughout  the United  States.  Asphalt  is  marketed  primarily  to
independent paving contractors.

Refining

                  CITGO  produces its light fuels and  petrochemicals  primarily
through  its Lake  Charles  and  Corpus  Christi  refineries.  Asphalt  refining
operations are carried out through CITGO's Paulsboro and Savannah refineries. In
addition, CITGO purchases light fuels from LYONDELL-CITGO Refining Company, Ltd.
("LYONDELL-CITGO"), in which it holds an interest.

                  Lake Charles Refinery.  The Lake Charles refinery,  located in
Lake Charles,  Louisiana, was originally built in 1944 and, since then, has been
continuously upgraded.  Today it is a modern,  complex, high conversion refinery
and is the sixth  largest  such  refinery in the United  States.  It has a rated
refining  capacity  of 320 MBPD and is capable of  processing  large  volumes of
crude oil into a  flexible  slate of  refined  products,  including  significant
quantities of high-octane  unleaded  gasoline and, due to recent  modifications,
the new reformulated  gasoline.  The Lake Charles refinery has a Solomon Process
Complexity Factor of 15.2 (as compared to an average of 12.6 for U.S. refineries
in the most recently  available Solomon  Associates,  Inc. survey).  The Solomon
Process  Complexity  Rating is an industry  measure of a  refinery's  ability to
produce  higher  value-added  products.  A higher  rating  indicates  a  greater
capability to produce such products.



                                        4

<PAGE>



                  The  following  table  shows  the  rated  refining   capacity,
refinery  input and product  yield at the Lake  Charles  refinery  for the three
years in the period ended December 31, 1996.

                        Lake Charles Refinery Production

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                       --------------------------------------------------
                                               1996          1995            1994
                                       --------------------------------------------------
                                              (MBPD, except as otherwise indicated)

<S>                                       <C>    <C>      <C>     <C>      <C>    <C>  

Rated Refining Capacity (1)               320             320              320

Refinery Input
  Crude oil                               274     85.1%   275      85.4%   274     83.0%
  Other feedstocks                         48     14.9     47      14.6     56     17.0
                                        -------------------------------------------------
      Total                               322    100.0%   322     100.0%   330    100.0%
                                        =================================================

Product Yield
  Light fuels
       Gasoline                           164     50.3%   164      50.0%   169     50.0%
       Jet Fuel                            62     19.0     58      17.7     52     15.4
       Diesel/#2 fuel                      38     11.7     42      12.8     50     14.8
Petrochemicals and Industrial Products     62     19.0     64      19.5     67     19.8
                                        -------------------------------------------------
       Total                              326    100.0%   328     100.0%   338    100.0%
                                        =================================================

Utilization of Rated Refining Capacity           86%              86%             86%


<FN>
-------------------------
(1)  At year end.

</FN>
</TABLE>


                  Approximately  67%, 64% and 68% of the total crude runs at the
Lake Charles refinery in the years 1996, 1995 and 1994, respectively,  consisted
of crude oil with an  average  API  gravity of 24o or less.  Due to the  complex
processing  required  to refine  such crude  oil,  the Lake  Charles  refinery's
economic  crude oil  throughput  capacity is  approximately  290 MBPD,  which is
approximately 90% of its rated capacity of 320 MBPD.

                  The Lake Charles  refinery's  Gulf Coast location  provides it
with access to crude oil deliveries  from multiple  sources.  Imported crude oil
and  feedstocks  supplies  are  delivered  by ship  directly to the Lake Charles
refinery,  and domestic  crude oil supplies are delivered by pipeline and barge.
In addition,  the refinery is connected by pipelines to the  Louisiana  Offshore
Oil Port (the  "LOOP") and to terminal  facilities  in the Houston  area through
which it can  receive  crude  oil  deliveries  if the  Lake  Charles  docks  are
temporarily  inaccessible.  For  delivery of refined  products,  the refinery is
connected  through  the Lake  Charles  Pipeline  directly  to the  Colonial  and
Explorer Pipelines,  which are the major refined product pipelines supplying the
northeast and midwest regions of the United States,  respectively.  The refinery
also uses adjacent  terminals and docks,  which provide access for ocean tankers
and barges.

                  The Lake Charles  refinery's main  petrochemical  products are
propylene  and benzene.  Propylene  production  was 5.0,  5.7 and 5.2 MBPD,  and
benzene  production  was 3.2, 4.1 and 3.8 MBPD, in each case for the years 1996,
1995 and 1994, respectively. Industrial products include sulphur, residual fuels
and petroleum coke.

                                        5

<PAGE>




                  Located  adjacent to the Lake Charles refinery is a lubricants
refinery  operated  by CITGO and owned by Cit-Con Oil  Corporation  ("Cit-Con"),
which is owned  65% by  CITGO  and 35% by  Conoco,  Inc.  ("Conoco").  Primarily
because of its specific  design,  the Cit-Con refinery  produces  extremely high
quality  oils  and  waxes  and is one of few  such  refineries  in the  industry
designed as a stand-alone  lubricants refinery.  Following  enhancements made in
1995,  the Cit-Con  refinery  currently has a rated capacity of 9.6 MBPD of base
oils and 1.4 MBPD of wax.  In  addition,  the  Cit-Con  refinery  is the seventh
largest paraffin  lubricants  refinery,  based on rated capacity,  in the United
States.  For the years 1996, 1995 and 1994,  utilization at the Cit-Con refinery
was 100%, 101% and 110%,  respectively,  of its rated  capacity.  Feedstocks are
supplied 65% from CITGO's Lake  Charles  refinery and 35% from  Conoco's  nearby
refinery;  and  finished  refined  products are shared on that pro rata basis by
CITGO and Conoco.  Conoco is a participant  in a project to build a new refinery
that will produce base oils.  CITGO  anticipates that such refinery will be more
efficient than the Cit-Con  refinery and, as a result,  such new refinery may be
able to produce  base oils at a lower cost than those  produced  at the  Cit-Con
refinery.  CITGO is reviewing the  feasibility  of improving  the  manufacturing
efficiency of the Cit-Con refinery through  technological  improvements and cost
reductions  while continuing to evaluate various other responses to the expanded
supply of base oils which are  expected to be  available  in the Gulf Coast area
when such new refinery is placed in service.

                  Corpus Christi  Refinery.  The Corpus Christi refinery complex
consists of the East and West Plants, located within five miles of each other in
Corpus Christi,  Texas.  Construction began on the East Plant in 1937, which was
extensively  reconstructed and modernized during the 1970's and 1980's. The West
Plant was  completed in 1983.  The Corpus  Christi  refinery is an efficient and
highly complex facility,  capable of processing high volumes of crude oil into a
flexible slate of refined products,  with a Solomon Process Complexity Factor of
15.8 (as compared to an average 12.6 for U.S.  refineries  in the most  recently
available Solomon Associates, Inc. survey).

                  The following  table shows rated refining  capacity,  refinery
input and product  yield at the Corpus  Christi  refinery for the three years in
the period ended December 31, 1996.

                       Corpus Christi Refinery Production

<TABLE>
<CAPTION>
                                                    Year Ended December 31,
                                        ----------------------------------------------
                                              1996            1995           1994
                                        ----------------------------------------------
                                             (MBPD, except as otherwise indicated)

<S>                                       <C>    <C>      <C>    <C>     <C>    <C>  
Rated Refining Capacity (1)               140             140            140

Refinery Input
  Crude oil                               133    66.8%    121    64.7%   128    66.3%
  Other feedstocks                         66    33.2      66    35.3     65    33.7
                                        ----------------------------------------------
      Total                               199   100.0%    187   100.0%   193   100.0%
                                        ==============================================

Product Yield
  Light fuels
      Gasoline                             93     47.0%    90    48.4%    99    51.0%
      Diesel/#2 fuel                       59     29.8     53    28.5     55    28.4
 Petrochemicals and Industrial Products    46     23.2     43    23.1     40    20.6
                                        ----------------------------------------------
       Total                              198    100.0%   186   100.0%   194   100.0%
                                        ==============================================

Utilization of Rated Refining Capacity              95%            86%            91%


<FN>
-------------------------
(1)  At year end.
</FN>
</TABLE>

                                        6

<PAGE>



                  Corpus  Christi crude runs during 1996  consisted of 98% heavy
sour Venezuelan  crude.  Due to the complex  processing  required to refine such
heavy sour crude, the refinery's  economic crude oil throughput is approximately
130 MBPD, which is approximately 93% of its rated capacity of 140 MBPD.

                  Crude  oil  supplies  are  delivered  directly  to the  Corpus
Christi refinery through the Port of Corpus Christi.

                  CITGO operates the West Plant under a sublease  agreement (the
"Sublease") from Union Pacific Corporation ("Union Pacific").  The basic term of
the  Sublease  ends on  January 1, 2004,  but CITGO may renew the  Sublease  for
successive  renewal  terms  through  January  31,  2011.  CITGO has the right to
purchase the West Plant from Union Pacific at the end of the basic term, the end
of any renewal term, or on January 31, 2011, at a nominal price.

                  During  the  last  several  years,  CITGO  has  increased  the
capacity of the Corpus Christi refinery to produce petrochemical  products.  The
Corpus  Christi   refinery's  main   petrochemical   products   include  cumene,
cyclohexane,  methyl  tertiary  butyl ethers  ("MTBE") and aromatics  (including
benzene,  toluene,  and xylene).  The Company produces a significant quantity of
cumene,  an  important  petrochemical  product used in the  engineered  plastics
market. The production of xylene, a basic building block used in the manufacture
of consumer  plastics,  allows the refinery to take  advantage of its  reforming
capacity while staying within the new more stringent gasoline  specifications of
the Clean Air Act Amendments of 1990.

                  Paulsboro  Refinery.   The  Paulsboro  refinery,   located  in
Paulsboro,  New Jersey, is an asphalt refinery.  The Paulsboro refinery consists
of Unit I, which has a rated capacity of 44 MBPD, and Unit II, which has a rated
capacity of 40 MBPD.

                  Unit II,  originally  constructed  in 1980 to produce  asphalt
from high  sulphur,  heavy crude oil high in  naphthenic  acid, is a combination
atmospheric and vacuum distillation  facility.  The crude oil purchased by CITGO
from  PDVSA to supply  Unit II's crude oil  requirements  is  particularly  well
suited for the production of asphalt.  Unit II produced an average of 20.5, 19.1
and 19.4 MBPD of asphalt in the years 1996, 1995, and 1994, respectively,  which
accounted for 58%, 58% and 57% of Unit II's total  production in such years. The
remaining  Unit II  production  in 1996,  1995 and 1994  consisted of distillate
products such as naphthas,  marine diesel oil and vacuum gas oils, which, in the
aggregate,  averaged  approximately 14.5, 13.7 and 14.9 MBPD,  respectively,  in
such  years.  Unit II crude  oil  runs  were  35,  33 and 34 MBPD,  representing
processing  utilization  rates of 88%,  83% and 85%,  in  1996,  1995 and  1994,
respectively.

                  Unit I was  constructed in 1979 to process low sulphur,  light
crude  oil.  Unit I  produces  naphthas  and  diesel/#2  and #6 fuels and is run
primarily  when (i)  there is  demand  for toll  processing  of sweet  crudes at
attractive  economics  and (ii) to produce  asphalt  when a crude  oil,  such as
"Boscan" (a heavy  Venezuelan  crude oil that is rich in asphalt),  is available
for  running on this unit.  Crude oil runs for third party  processing  in 1996,
1995  and  1994  averaged  0.0,  2.1 and 0.0  MBPD,  respectively,  representing
processing  utilization rates of 0%, 5% and 0%, respectively.  In 1996 and 1995,
3.4 and 2.6  MBPD of  crude  oil  was  run on Unit I for  CITGO's  own  account,
producing  2.4 and 1.9 MBPD of asphalt  and 0.9 and 0.8 MBPD of other  products,
respectively.


                                        7

<PAGE>



                  Savannah  Refinery.   The  Savannah  Refinery,   located  near
Savannah,  Georgia,  is an asphalt  refinery.  The  facility  includes two crude
distillation units, with a combined rated capacity of 28 MBPD. The primary crude
oil run by the refinery is Boscan.

                  The units  produced  an average of 11.4 MBPD of asphalt in the
year ending December 31, 1996, which accounted for 76% of total  production.  An
additional 3.7 MBPD of production  included naphthas and light, medium and heavy
gas oils.  Total  crude  runs for the  period  were 15.1  MBPD,  representing  a
utilization rate of 54%.

                  LYONDELL-CITGO.  On July 1,  1993,  subsidiaries  of CITGO and
Lyondell  Petrochemical Company ("Lyondell") executed definitive agreements with
respect to  CITGO's  investment  in  LYONDELL-CITGO,  which owns and  operates a
sophisticated 265 MBPD refinery  previously owned by Lyondell and located on the
ship channel in Houston,  Texas.  Through  December 31, 1996, CITGO had invested
approximately  $579 million (excluding  reinvested  earnings) in LYONDELL-CITGO.
See "Consolidated  Financial  Statements of PDV America--Note 2". As of December
31, 1996,  LYONDELL-CITGO has spent  approximately  $1,073 million on a refinery
enhancement  project to increase the refinery's  heavy crude oil high conversion
capacity and  estimated  that  expenditures  to complete this project will total
approximately  $57 million to $67 million.  This refinery  enhancement  project,
which was  completed  at the end of 1996,  with an  in-service  date of March 1,
1997,  is intended to increase the  refinery's  heavy crude oil high  conversion
capacity  from  approximately  135 MBPD of 22o average API gravity  crude oil to
approximately 200 MBPD of 17o average API gravity crude oil.  LYONDELL-CITGO has
entered  into a long-term  oil supply  agreement  with PDVSA for the delivery of
approximately  135 MBPD of crude oil,  which  increased  to 200 MBPD on March 1,
1997. In 1996, LYONDELL-CITGO purchased approximately 134 MBPD of crude oil from
PDVSA pursuant to this supply agreement. LYONDELL-CITGO also purchases crude oil
from third parties to supplement the PDVSA supplies. At December 31, 1996, CITGO
had an approximate 13% participation  interest in LYONDELL-CITGO,  as defined in
the agreements with Lyondell.  CITGO's interest in LYONDELL-CITGO  will increase
with its  investment  in the capital  improvement  program  described  above and
otherwise,  up to  approximately  42% at April 1,  1997 in  accordance  with the
agreements  concerning such interest.  CITGO has an option,  for 18 months after
the  completion  date  and  for  an  additional  investment,   to  increase  its
participation interest up to a maximum of 50%. CITGO purchases substantially all
of  the   refined   products,   excluding   petrochemicals,   produced   at  the
LYONDELL-CITGO refinery, thereby significantly reducing CITGO's need to purchase
refined  products from other  sources to supply its  distribution  network.  See
"--Crude Oil and Refined Product Purchases". See also "Factors Affecting Forward
Looking Statements".

Crude Oil and Refined Product Purchases

                  CITGO owns no crude oil reserves or production  facilities and
must, therefore,  rely on purchases of crude oil and feedstocks for its refinery
operations.  In addition,  because  CITGO's  refinery  operations do not produce
sufficient  refined  products to meet the  demands of its branded  distributors,
CITGO  purchases  refined  products,  primarily  gasoline,  from other refiners,
including LYONDELL-CITGO.


                                        8

<PAGE>



                  Crude  Oil  Purchases.   The  following  chart  shows  CITGO's
purchases  of crude oil for the three  years in the period  ended  December  31,
1996.

                            CITGO Crude Oil Purchases

<TABLE>
<CAPTION>
                      Lake Charles, LA    Corpus Christi, TX     Paulsboro, NJ       Savannah, GA
                    --------------------------------------------------------------------------------
                      1996  1995  1994     1996  1995  1994    1996  1995  1994    1996  1995  1994
                    --------------------------------------------------------------------------------
                           (MBPD)               (MBPD)              (MBPD)              (MBPD)

<S>                    <C>   <C>   <C>     <C>   <C>   <C>     <C>   <C>   <C>     <C>   <C>   <C>
PDVSA                  142   150   129     130   122   128     39    35    36      17    14    12
PEMEX                   44    33    63       0     0     0      0     0     0       0     0     0
Occidental              43    43    42       0     0     0      0     0     0       0     0     0
Other Sources           45    52    40       3     0     0      0     0     0       0     0     0
                    --------------------------------------------------------------------------------
       Total           274   278   274     133   122   128     39    35    36      17    14    12
                    ================================================================================
</TABLE>


                  CITGO's largest  supplier of crude oil is PDVSA, and CITGO has
entered into long-term  crude oil supply  agreements  with PDVSA with respect to
the crude oil requirements for each of CITGO's refineries. See "Item 13--Certain
Relationships and Related Transactions".  The following table shows the base and
incremental  volumes of crude oil  contracted  for  delivery  and the volumes of
crude oil  actually  delivered  under these  contracts  in the three years ended
December 31, 1996.

                   CITGO Crude Oil Supply Contracts with PDVSA

<TABLE>
<CAPTION>
                                                           Volumes of Crude
                                                             Oil Purchased               Contract
                              Contract Crude              For the Year Ended            Expiration
                                Oil Volume                   December 31,                  Date
                         ---------------------------------------------------------------------------
                           Base   Incremental(1)     1996        1995        1994
                         ---------------------------------------------------------------------------
                                    (MBPD)                      (MBPD)                    (year)


<S>                         <C>        <C>           <C>         <C>         <C>           <C> 
Lake Charles, LA            120        50            121(2)      125(2)      123(2)        2006
Corpus Christi, TX          130        --            130         122         128           2012
Paulsboro, NJ                30        --             34(2)       35          36           2010
Savannah, GA                 12        --             11(2)       14          12           2013
Houston, TX(3)              135        --            134         136         135           2017


<FN>
--------------------
(1)  The supply agreement for the Lake Charles refinery gives PDVSA the right to
     sell to CITGO incremental volumes up to the maximum amount specified in the
     table, subject to certain restrictions relating to the type of crude oil to
     be supplied,  refining capacity and other operational considerations at the
     refinery.
(2)  Volumes  purchased under the supply agreements do not equal total purchases
     from PDVSA shown in the previous table as a result of spot purchases.
(3)  CITGO acquired a participation interest in LYONDELL-CITGO, the owner of the
     Houston  refinery,  on July 1, 1993. In connection  with such  transaction,
     LYONDELL-CITGO  entered into a long-term  crude oil supply  agreement  with
     PDVSA that provided for delivery  volumes of 135 MBPD until the  completion
     of a  planned  refinery  enhancement  project  at which  time the  delivery
     volumes increased to 200 MBPD.
</FN>
</TABLE>


                                        9

<PAGE>



                  Most of the crude oil and  feedstocks  purchased by CITGO from
PDVSA are  delivered on tankers  owned by PDV Marina,  S.A.  ("PDV  Marina"),  a
wholly owned subsidiary of PDVSA, or by other PDVSA  subsidiaries.  In 1996, 87%
of the PDVSA contract crude oil delivered to the Lake Charles and Corpus Christi
refineries was delivered on tankers operated by PDVSA subsidiaries.

                  CITGO purchases  additional crude oil under a 90 day evergreen
agreement with an affiliate of Petroleos Mexicanos ("PEMEX"). CITGO's refineries
are  particularly  well suited to refine  PEMEX's  heavy sour "Maya"  crude oil,
which is similar in many  respects  to several  types of  Venezuelan  crude oil.
Effective  January,  1996, PEMEX increased the crude contract to 27 MBPD of Maya
crude which  increased to 35 MBPD  effective  July,  1996.  This  contract  also
includes 8 MBPD of Olmeca,  a light sour  crude,  for 1995 and 10 MBPD of Olmeca
for 1996.

                  CITGO is a party to a long-term  contract with an affiliate of
Occidental Petroleum Corporation  ("Occidental") for the purchase of light sweet
crude oil to produce lubricants. Purchases under this contract, which expires on
August 31, 1998,  averaged 53 MBPD in 1996. CITGO also purchases sweet crude oil
under long-standing relationships with numerous other domestic producers.

                  Refined  Product  Purchases.  Refined  product  purchases  are
required to supplement  the  production  of the Lake Charles and Corpus  Christi
refineries  in order to meet the demand of  CITGO's  marketing  network.  During
1996, CITGO's shortage in gasoline  production  approximated 319 MBPD.  However,
due to logistical needs, timing differences and product grade imbalances,  CITGO
purchased  approximately  484 MBPD of gasoline and sold into the spot market, or
to  refined  product  traders  or  other  refiners,  approximately  160  MBPD of
gasoline.  The following table shows CITGO's  purchases of refined  products for
the three years in the period ended December 31, 1996.

                         CITGO Refined Product Purchases

                                      Year Ended December 31,
                           ---------------------------------------------------
                              1996               1995               1994
                           ---------------------------------------------------
                                              (MBPD)

Light Fuels
    Gasoline                   484                471                380
    Jet Fuel                    92                 87                 89
    Diesel/#2 fuel             153                 90                 98
                           ---------------------------------------------------
          Total                729                648                567
                           ===================================================



                  As of December 31, 1996, CITGO purchased  substantially all of
the refined products,  excluding petrochemicals,  produced at the LYONDELL-CITGO
refinery   under  a  long-term   contract   which  expires  in  the  year  2017.
LYONDELL-CITGO  was a major  supplier  of  refined  products  to  CITGO in 1996,
providing 101 MBPD of gasoline, 47 MBPD of distillate and 25 MBPD of jet fuel.
See "--Refining--LYONDELL-CITGO".


                                       10

<PAGE>



Marketing

                  CITGO's major  products are light fuels  (including  gasoline,
jet fuel and diesel fuel),  industrial products and petrochemicals,  asphalt and
lubricants and waxes. The following table shows revenue of each of these product
categories for the three years in the period ended December 31, 1996.

                           CITGO Refined Product Sales

<TABLE>
<CAPTION>
                                             Year Ended December 31,
                          ------------------------------------------------------------
                                  1996                 1995                 1994
                          ------------------------------------------------------------
                                  ($ in millions, except as otherwise indicated)

<S>                       <C>          <C>     <C>          <C>     <C>          <C>  
Light Fuels               $11,252      88.1%   $ 8,886      85.8%   $ 7,845      86.0%
Petrochemicals,
   Industrial Products,
   and Other Products         846       6.6        831       8.0        707       7.8
Asphalt                       257       2.0        238       2.3        194       2.1
Lubricants and Waxes          426       3.3        404       3.9        370       4.1
                          ------------------------------------------------------------
Total                     $12,781     100.0%   $10,359     100.0%   $ 9,116     100.0%
                          ============================================================
</TABLE>


                  Light  Fuels.  CITGO  markets  gasoline,  jet fuel  and  other
distillates through an extensive marketing network. The following table provides
a  breakdown  of the sales  made by type of product  for the three  years in the
period ended December 31, 1996.

                             CITGO Light Fuel Sales

                          Year Ended December 31,      Year Ended December 31,
                       ---------------------------------------------------------
                         1996      1995      1994      1996      1995      1994
                       ---------------------------------------------------------
                             ($ in millions)                (MM gallons)
Light Fuels
Gasoline               $ 7,451   $ 6,367   $ 5,252    11,308    11,075     9,747
Jet Fuel                 1,489     1,163     1,102     2,346     2,249     2,131
Diesel/#2 fuel           2,312     1,356     1,491     3,728     2,730     3,067
                       ---------------------------------------------------------
     Total             $11,252   $ 8,886   $ 7,845    17,382    16,054    14,945
                       =========================================================



                  Gasoline sales accounted for 58%, 61% and 57% of CITGO's total
revenues in the years 1996,  1995 and 1994,  respectively.  CITGO  markets CITGO
branded  gasoline  through over 14,000  independently  owned and operated  CITGO
branded  retail  outlets  (including  12,720  branded  retail  outlets owned and
operated by approximately  790 independent  distributors and 1,791  7-Eleven(TM)
convenience stores) located throughout the United States,  primarily east of the
Rocky Mountains.  In addition,  CITGO itself owns,  operates or leases 17 retail
outlets.  CITGO  purchases  gasoline  to supply its  marketing  network,  as the
gasoline production from the Lake Charles and Corpus Christi refineries was only
equivalent  to  approximately  49%,  53% and 60% of the volume of CITGO  branded
gasoline sold in 1996, 1995 and 1994, respectively. See "--Crude Oil and Refined
Product Purchases--Refined Product Purchases".

                  CITGO's strategy is to enhance the value of the CITGO brand in
order to obtain  premium  pricing  for its  products  by  appealing  to consumer
preference for quality petroleum products and

                                       11

<PAGE>



services.   As  a  result,  CITGO  has  focused  on  a  commitment  to  quality,
dependability  and  customer  service  to its  independent  distributors,  which
constitute  CITGO's  primary  distribution  channel.  The number of  independent
distributor-owned   or  operated   CITGO  branded   retail   outlets  has  grown
significantly since 1986 when there were approximately 7,000 independently owned
and operated branded outlets, including 7-Eleven(TM) convenience stores, and has
increased approximately 3%, 7% and 6% in 1996, 1995 and 1994,  respectively.  In
1990,  1992, 1994 and 1996,  customers  voted CITGO the top branded  supplier in
four successive  biannual Supplier's Cup Competitions which are sponsored by the
Petroleum  Marketers  Association  of America,  an  organization  of independent
refined products distributors.

                  In 1994, CITGO began offering their  distributors a program to
enhance their  stations with new card reader pumps which allow  customers to pay
for their  gasoline at the pumps with their credit  cards  instead of going into
the stores to pay. As of December 31, 1996,  approximately  3,500 retail outlets
had installed the card reader pumps.

                  Sales to independent branded  distributors  typically are made
under  contracts  that range from three to seven  years.  Sales to  7-Eleven(TM)
convenience stores are made under a contract that extends through the year 2006.
Under this  contract,  CITGO arranges all  transportation  and delivery of motor
fuels and handles all product ordering.  CITGO also acts as processing agent for
the  purpose  of  facilitating  and  implementing   orders  and  purchases  from
third-party suppliers. CITGO receives a processing fee for such services.

                  CITGO  markets jet fuel  directly to airline  customers  at 26
airports,  including  such major hub  cities as  Atlanta,  Chicago,  Dallas/Fort
Worth,  New York and Miami.  Jet fuel sales to airline  customers have increased
approximately 6%, 2% and 18% in the years 1996, 1995 and 1994, respectively. The
volume  increases in 1996,  1995 and 1994 were due to higher levels of purchases
by  existing  customers  and sales to new  customers.  Sales of bonded jet fuel,
which are exempt from import  duties as well as certain  state and local  taxes,
have increased from 531 million  gallons in 1994 to 539 million  gallons in 1996
(accounting for over 27% of total jet fuel sales volume to airline  customers in
both years).

                  CITGO's  diesel/#2  fuel  marketing  strategy is to obtain the
best value for the products  manufactured at the Lake Charles and Corpus Christi
refineries,  as well as those received from LYONDELL-CITGO.  Growth in wholesale
rack sales to distributors has been the primary focus of marketing efforts. Such
efforts  have  resulted in  increases  in the  wholesale  rack sales volume from
approximately  1,179  million  gallons in 1994 to  approximately  1,561  million
gallons in 1996. The remaining  diesel/#2 fuel production is sold either in bulk
through  contract  sales  (primarily as heating oil in the  Northeastern  United
States) or on a spot basis.

                  CITGO's   delivery  of  light  fuels  to  its   customers   is
accomplished in part through 54 refined  product  terminals  located  throughout
CITGO's primary market  territory.  Of these  terminals,  41 are wholly owned by
CITGO and 13 are jointly owned.  CITGO's  refined  product  terminals  provide a
total of nearly 24  million  barrels of storage  capacity.  Thirteen  of CITGO's
product terminals have waterborne docking facilities,  which greatly enhance the
flexibility of CITGO's logistical system. In addition, CITGO has active exchange
relationships  with  over  290  other  refined  product   terminals,   providing
flexibility and timely responses to distribution needs. CITGO operates fleets of
leased  and owned  trucks for  delivery  of refined  products  from the  product
terminals to retail stations.

                                       12

<PAGE>




                  Petrochemicals   and   Industrial   Products.    CITGO   sells
petrochemicals  in bulk to a variety of U.S.  manufacturers as raw materials for
finished  goods.  Sulphur  is  sold to the  U.S.  and  international  fertilizer
industry; cycle oils are sold for feedstock processing and blending; natural gas
liquids are sold to the U.S. fuel and petrochemical industry;  petroleum coke is
sold  primarily in  international  markets for use as kiln and boiler fuel;  and
residual  fuel  blendstocks  are  sold to a  variety  of fuel oil  blenders  and
customers.  The majority of CITGO's cumene production is sold to a joint venture
phenol  production plant in which CITGO is a limited  partner.  The phenol plant
produces  phenol and acetone for sale primarily to the principal  partner in the
phenol plant for the production of plastics.

                  Asphalt.  CITGO markets asphalt  through 10 terminals  located
along the East Coast,  from Savannah,  Georgia to Albany,  New York.  Asphalt is
sold  primarily  to  independent  contractors  for use in the  construction  and
resurfacing of roadways.  Demand for asphalt in the  Northeastern  United States
declines substantially in the winter months as a result of weather conditions.

                  Lubricants  and Waxes.  CITGO  markets many  different  types,
grades and  container  sizes of lubricants  and wax  products,  with the bulk of
sales  consisting of automotive oil and  lubricants  and industrial  lubricants.
Other  major  lubricant  products  include  2-cycle  engine  oil  and  automatic
transmission  fluid. In April 1995, CITGO acquired Cato Oil & Grease Corporation
("Cato") for a purchase price of approximately $47 million.

                  CITGO sells its  finished  lubricant  products  through  three
classes of trading  partners:  (i) independent  distributors  that specialize in
lubricant  sales  (representing  68% of 1996  sales),  (ii)  mass  merchandisers
(representing 9% of 1996 sales) and (iii) directly to large industrial end users
(representing  23%  of  1996  sales).  CITGO  emphasizes  sales  to  independent
distributors in its lubricants  marketing because of the higher margins realized
from these sales.  Large  industrial end users include steel  manufacturers  for
industrial  lubricants and  automobile  manufacturers  for "original  equipment"
quantities of automotive oils and fluids.

                  CITGO  markets the largest  portion of its wax  production  as
coating materials for the corrugated container industry. CITGO also provides wax
for the  manufacture of candles,  drinking  cups,  waxed papers and a variety of
building and rubber products.

Pipeline Operations

                  CITGO  owns  and  operates  884-miles  of crude  oil  pipeline
systems and approximately  1,100 miles of products  pipeline systems.  The crude
oil  pipeline  provides  CITGO  with  access  to  extensive   gathering  systems
throughout  major  production areas in Louisiana and Texas that provide the Lake
Charles  refinery with domestic  crude oil to supplement  supplies  delivered by
ship.  CITGO  also has  joint  equity  interests  in three  crude  oil  pipeline
companies with a total of nearly 5,800 miles of pipeline plus equity interest in
six refined product pipeline companies with a total of approximately 8,000 miles
of refined product pipeline. One of the refined product pipelines in which CITGO
has an interest,  Colonial Pipeline,  is the largest refined product pipeline in
the United States. It transports gasoline,  jet fuel and diesel/#2 fuel from the
Gulf Coast to the mid-Atlantic States.  CITGO's pipeline interests provide CITGO
with access to substantial  refinery  feedstocks and reliable  transportation to
refined  product  markets,  as  well as  provide  CITGO  with  cash  flows  from
dividends.


                                       13

<PAGE>



                  In early  1997,  CITGO sold  approximately  520 miles of crude
gathering/trunk lines in Texas and Louisiana.

Employees

                  CITGO and its subsidiaries have a total of approximately 4,900
employees,  approximately  1,700 of whom  are  covered  by 15  union  contracts.
Approximately 1,600 of the union employees are employed in refining  operations.
The remaining union employees are located primarily at a lubricant  blending and
packaging plant and at other refined product terminals.

UNO-VEN

                  UNO-VEN  was  formed  in  1989  as  a  joint  venture  between
subsidiaries  of PDV  America and Union Oil  Company of  California  ("Unocal").
UNO-VEN   manufactures   and  markets   gasoline,   diesel   fuel,   lubricants,
petrochemicals  and  industrial  products  primarily  in the  Midwestern  United
States. On December 26, 1996, PDV America executed a Letter of Intent which sets
forth  the  intent  of  PDV  America  and  Unocal  to  enter  into a  series  of
transactions  with  respect to the  distribution  of certain  assets,  including
refining and marketing  assets, a portion of inventory and accounts  receivable,
and  liabilities  of UNO-VEN to a  subsidiary  of PDV  America.  It is currently
contemplated  that such  series of  transactions  will be  completed  during the
second quarter of 1997.

Refining

                  The Lemont refinery,  which in its present configuration began
operations  in  1970,  is one of the  most  recently  designed  and  constructed
refineries  in the  United  States.  Its high  conversion  design  enables it to
convert  crude  oil  input  with  high  sulphur  and  high  metal  content  into
transportation fuels,  primarily gasoline,  diesel fuel and jet fuel. The Lemont
refinery  has a Solomon  Process  Complexity  factor of 10.6 (as  compared to an
average  of 12.6 for U.S.  refineries  in the most  recently  available  Solomon
Associates,  Inc. survey).  The Lemont refinery has a rated capacity of 153 MBPD
of crude oil and is  capable  of  processing  heavy  crude oil with  significant
operating  flexibility,  converting  sour crudes into a flexible slate of higher
value-added  refined  products,  such as high octane unleaded  gasoline.  During
1996,  the Lemont  refinery  increased  utilization  due  primarily  to improved
maintenance of operating equipment and efficient methods of operation.


                                       14

<PAGE>



                  The following  table shows refining  capacity,  refinery input
and product yield at the Lemont refinery for the three years in the period ended
December 31, 1996.

                           Lemont Refinery Production

                                            Year Ended December 31,
                                ------------------------------------------------
                                     1996           1995            1994
                                ------------------------------------------------
                                    (MBPD, except as otherwise indicated)
Rated Refining Capacity (1)      153             153              153

Refinery Input
       Crude oil                 146     88.4%   139     87.4%    122      85.9%
       Other feedstocks           19     11.6     20     12.6      20      14.1
                                ------------------------------------------------
            Total                165    100.0%   159    100.0%    142     100.0%
                                ================================================
Product Yield
       Light fuels
       Gasoline                   87     53.0%    86     54.5%     76      53.9%
       Jet Fuel                    7      4.3      8      5.1       7       4.9
       Diesel/#2 Fuel             37     22.6     34     21.5      30      21.3
       Industrial Products &
          Petrochemicals          33     20.1     30     19.0      28      19.9
                                ------------------------------------------------
            Total                164    100.0%   158    100.0%    141     100.0%
                                ================================================
Utilization of Rated
       Refining Capacity                 95%             91%               80%


-----------------------

(1) At year end.

                  Sour crude oil runs were 100% of the total  crude runs in each
of the years  1996,  1995 and 1994.  UNO-VEN  currently  intends to  continue to
process sour crude oil  exclusively.  Utilization was lower in 1994 than in 1995
and 1996  because of a scheduled  major  turn-around  at the Lemont  Refinery in
1994.

                  Petrochemical products at the Lemont refinery include benzene,
toluene and xylene, plus a range of different aliphatic solvents.

                  UNO-VEN owns a 50% interest in a partnership  which operates a
needle coke  production  facility  adjacent to the Lemont  refinery (the "Needle
Coker").  The  remaining  50%  interest is held by a subsidiary  of Unocal.  The
Needle Coker,  which began  production in 1985 and has a production  capacity of
100,000 tons per year,  converts  certain  residual crude products into a highly
specialized form of coke known as "calcined  needle coke".  This product is used
exclusively as a raw material in the manufacturing of graphite electrodes, which
are used in electric arc furnaces to melt down and refine scrap steel.  In 1996,
the Needle Coker produced approximately 102,000 tons of calcined needle coke.


                                       15

<PAGE>



Crude Oil and Refined Product Purchases

                  UNO-VEN  owns no crude oil reserves or  production  facilities
and,  therefore,  relies on purchases of crude oil for its refining  operations.
Substantially  all crude oil refined at the Lemont refinery is supplied by PDVSA
to UNO-VEN under a crude oil supply agreement that expires in the year 2009. The
contract  calls for  delivery  of a base volume of 135 MBPD.  In 1996,  1995 and
1994,  UNO-VEN  purchased  143,  135  and 120  MBPD,  respectively,  under  this
contract.  Crude oil is  supplied  to the Lemont  refinery  mainly  through  the
LOCAP/Capline/Chicap  common carrier pipeline system,  which connects the Lemont
refinery to the LOOP where vessels discharge. Substantially all of the crude oil
sourced from  Venezuela  purchased by UNO-VEN from PDVSA is delivered on tankers
owned by PDVSA  subsidiaries.  The  refinery  also has  access to two  alternate
pipeline  systems for the  delivery of crude oil from the Gulf Coast and Canada.
UNO-VEN does not have any equity interest in any crude oil pipelines.

Marketing

                  UNO-VEN's major products are light fuels (including  gasoline,
jet  fuel  and  diesel   fuel),   lubricants,   and   industrial   products  and
petrochemicals.  The  following  table shows  revenues of each of these  product
categories for the three years in the period ended December 31, 1996.


                          UNO-VEN Refined Product Sales

                                          Year Ended December 31,
                             ---------------------------------------------------
                                   1996             1995               1994
                             ---------------------------------------------------
                                 ($ in millions, except as otherwise indicated)

Light Fuels                  $1,406    85.7%  $1,126     85.5%   $1,021    85.2%
Industrial Products and
   Petrochemicals               179    10.9      145     11.0      131     10.9
Lubricants                       56     3.4       46      3.5       47      3.9
                             ---------------------------------------------------
        Total                $1,641   100.0%  $1,317    100.0%  $1,199    100.0%
                             ===================================================



                  The  following  table  provides a breakdown  of the light fuel
sales made by product type for the three years in the period ended  December 31,
1996.

                            UNO-VEN Light Fuel Sales

                              Year Ended December 31,    Year Ended December 31,
                             ---------------------------------------------------
                               1996     1995     1994     1996     1995     1994
                             ---------------------------------------------------
                                  ($ in millions)              (MM gallons)
Light Fuels
Gasoline                     $  952   $  787   $  718   $1,374    1,341    1,280
Jet Fuel                         34       35       36       52       66       68
Diesel#2 fuel                   420      304      267      647      585      504
                             ---------------------------------------------------
        Total                $1,406   $1,126   $1,021   $2,073    1,992    1,852
                             ===================================================



                  UNO-VEN markets gasoline, diesel fuel and lubricants under the
"76" brand through  approximately  72 directly served branded retail outlets (58
of which are owned by UNO-VEN) and approximately  190 independent  distributors,
which own, operate or supply over 2,300 branded retail

                                       16

<PAGE>



outlets.  Branded  retail  outlets are located  primarily in Illinois,  Indiana,
Iowa, Michigan, Minnesota, Ohio and Wisconsin, with less extensive operations in
Kentucky, Missouri, Nebraska, New York, North Dakota, Pennsylvania, South Dakota
and West Virginia.

                  UNO-VEN   operates  a  wholesale   product   terminal   system
consisting of eleven owned distribution terminals. In addition,  product is made
available to UNO-VEN's  customers through  approximately 123 exchange  terminals
and 17 common carrier  pipeline  terminals.  The Lemont refinery and its refined
product  terminals  provide a total of approximately 11 MMB of storage capacity.
Refined  products are  distributed  to UNO-VEN's  owned  distribution  terminals
primarily  by  pipeline.  Trucks,  rail tank  cars and  barges  account  for the
remainder of the Lemont refinery's product shipments.

                  UNO-VEN  sells  most  of  its  industrial  and   petrochemical
products  to  Unocal  pursuant  to a  long-term  purchase  and  sale  agreement.
Lubricants are sold mostly through branded distributors, gasoline retail outlets
and  industrial  customers  through  three  proprietary  lubricant  distribution
terminals.  Jet fuel is sold directly to airline customers.

Employees

                  UNO-VEN  has  a  total  of   approximately   1,005  employees,
approximately  428 of whom are covered by union contracts.  Approximately 400 of
the union  employees are employed at the Lemont  refinery and are represented by
the Oil, Chemical and Atomic Workers  International  Union Local 7-517 ("OCAW").
UNO-VEN and the OCAW were  parties to a labor  contract  for a  three-year  term
ended  February 1, 1996.  That labor  contract  was extended by agreement of the
parties  while they  engaged in  bargaining  on a new  contract.  However,  OCAW
terminated such extension  effective March 23, 1996. On March 24, 1996 UNO-VEN's
managerial,  supervisory and other salaried  employees assumed all operating and
maintenance  duties at the  refinery.  On December  21, 1996,  OCAW  ratified an
agreement in a labor  contract  effective  through  February 1, 1999 (subject to
mandatory extension). The union employees returned to work between January 6 and
January 29, 1997.

Environment and Safety

Environment - General

                  Beginning in 1994, the U.S.  refining industry was required to
comply  with  stringent  product  specifications  under  the 1990  Clean Air Act
("CAA") Amendments for reformulated  gasoline and low sulphur diesel fuel. These
requirements  necessitated  additional  capital and operating  expenditures  and
altered  significantly  the U.S.  refining  industry and the return  realized on
refinery investments.  In addition, numerous other factors affect the Companies'
plans with respect to  environmental  compliance and related  expenditures.  See
"Factors Affecting Forward Looking Statements".

                  In addition,  the  Companies  are subject to various  federal,
state  and local  environmental  laws and  regulations  which  may  require  the
Companies to take action to correct or improve the effects on the environment of
prior  disposal or release of  petroleum  substances  by the  Companies or other
parties. Management believes the Companies are in compliance with these laws and
regulations in all material aspects.  Maintaining  compliance with environmental
laws  and   regulations  in  the  future  could  require   significant   capital
expenditures and additional operating costs.


                                       17

<PAGE>



Environment - CITGO

                  Pursuant to a 1992 agreement with a state agency, CITGO ceased
usage of  certain  surface  impoundments  at  CITGO's  Lake  Charles,  Louisiana
refinery in 1994. A mutually acceptable closure plan was filed with the state in
1993.  CITGO and a former owner agreed to share closure costs.  Final closure of
these  impoundments is expected to be completed no earlier than 1998.  Equipment
to replace these  impoundments  required  approximately  $146 million of capital
expenditures.

                  CITGO is in  litigation  with  the  contractor  who  performed
sludge removal and treatment work at one of the Lake Charles  Refinery's surface
impoundments.  CITGO is seeking  contractual  penalties for  non-performance and
breach of contract,  and is vigorously  contesting  claims and  allegations  for
additional  compensation  from the contractor.  CITGO does not believe that this
litigation  will affect the  remediation  and closure of the  impoundments.  See
"Item 3--Legal Proceedings".

                  Pursuant to New Jersey's  Environmental Cleanup Responsibility
Act ("ECRA"),  CITGO has entered into administrative consent orders with the New
Jersey  Department of  Environmental  Protection and Energy to  investigate  and
remediate three New Jersey properties.

                  While  CITGO  is  named  as a  potentially  responsible  party
("PRP") at a number of "Superfund" sites, pursuant to a 1992 agreement, OXY USA,
Inc. and  Occidental  have agreed to  indemnify  CITGO with respect to Superfund
damages where offsite  hazardous  waste disposal  occurred prior to September 1,
1983.  Based on  publicly  available  information,  PDV  America  believes  that
Occidental has the financial  capability to fulfill all of its  responsibilities
under this  agreement.  Accordingly,  PDV America  believes that CITGO's offsite
liability  exposure  under the federal  Superfund  and similar state laws is not
material. In addition,  under the 1992 agreement,  CITGO assumed  responsibility
for certain other environmental  contamination at certain terminal properties in
return for cash payments and other agreements.

                  During 1994 and 1995, CITGO Asphalt Refining Company ("CARCO")
received  two  Notices of  Violation  and two  Compliance  Orders  from the U.S.
Environmental  Protection  Agency  ("EPA")  relating to the operation of certain
units at the  Paulsboro  Refinery.  A Consent Order  resolving  these issues was
entered by a federal  court in  February  1997.  Under the terms of the  Consent
Order, CARCO paid a $1,230,000 penalty. The Consent Order will terminate January
30, 1998.

                  On September  30, 1996,  CITGO  received a Notice of Violation
from  the  EPA,  Washington,  D.C.,  alleging  violations  of  the  CAA  in  the
Chicago-Gary-Lake County, Illinois-Indiana-Wisconsin area, arising from the sale
of  gasoline  that  failed to meet the  applicable  minimum  or  maximum  oxygen
content. The EPA has not yet proposed penalties,  but CITGO anticipates that the
proposed  penalty could possibly  exceed  $100,000.  PDV America does not expect
that  such  penalties  will have a  material  adverse  effect  on PDV  America's
financial condition, results of operations or liquidity.

                  CITGO's accounting policy establishes  environmental  reserves
as probable site  restoration  and  remediation  obligations  become  reasonably
capable of estimation.  At December 31, 1996 and 1995, CITGO had $56 million and
$60  million,   respectively,   of  environmental  accruals  included  in  other
noncurrent liabilities. Based on currently available information,  including the
continuing  participation of former owners in remediation  actions,  PDV America
believes that these  accruals are  sufficient to address  CITGO's  environmental
clean-up obligations.

                                       18

<PAGE>




                  Conditions  which require  additional  expenditures  may exist
with respect to various  Company sites  including,  but not limited to,  CITGO's
operating refinery complexes, closed refineries,  service stations and crude oil
and petroleum product storage terminals. The amount of such future expenditures,
if any, is indeterminable.

                  Increasingly  stringent  regulatory  provisions   periodically
require   additional   capital   expenditures.   During  1996,   CITGO  expended
approximately $69 million for environmental and regulatory capital  improvements
in its operations.  CITGO currently  estimates that it will spend  approximately
$320  million  for  environmental  and  regulatory  capital  projects  over  the
five-year  period  1997-2001.  These  estimates  may  vary due to a  variety  of
factors.  See  "Item  7--Management's   Discussion  and  Analysis  of  Financial
Condition and Results of Operations--Liquidity and Capital Resources".  See also
"Factors Affecting Forward Looking Statements".

Environment - UNO-VEN

                  UNO-VEN's  operations are subject to extensive Federal,  state
and local  environmental  laws and  regulations  governing air emissions,  water
discharges,  site  remediation  and the  generation,  handling  and  disposal of
wastes.  UNO-VEN has informed PDV America that UNO-VEN  believes its  operations
are in substantial  compliance  with these laws and  regulations.  These matters
include, for example,  properties requiring presently  undeterminable amounts of
cleanup efforts and expenses  (including the ongoing  Resource  Conservation and
Recovery Act ("RCRA")  Corrective  Action program requiring  identification  and
cleanup of Solid  Waste  Management  Units),  soil  and/or  water  contamination
resulting from activities of the Partnership and/or its predecessors  (including
past  overflows and spills from  refinery  premises into the Illinois & Michigan
Canal and the Chicago  Metropolitan  Sanitary and Ship Canal and  overflows  and
spills at various  terminals and retail  locations),  air  pollution  (including
emissions  of carbon  monoxide  and  particulates  at the FCC unit),  claims for
injuries allegedly caused by exposure to toxic materials (including illnesses or
diseases),  and  expenses  to comply  with  regulatory  requirements  (including
Prevention of  Significant  Deterioration  regulations  and noise  regulations).
However,  the present state of these laws and regulations  that impose joint and
several liability on defendants, the potential number of claimants for any given
site or exposure,  the uncertainty  related to the possible imposition of fines,
penalties  or  punitive  damages,  the  imprecise  and  conflicting  engineering
evaluations  and estimates of proper  clean-up  methods and costs,  and judicial
recognition   of  new  causes  of  action  all   contribute   to  the  practical
impossibility of making any reasonable estimate of UNO-VEN's potential liability
in connection with these claims and remediation  projects.  UNO-VEN is currently
negotiating with state and federal authorities in connection with certain claims
and  remediation  projects with regard to these matters.  Settlements  and costs
incurred  in these  matters  that have been  resolved  in the past have not been
material to UNO-VEN's financial condition, liquidity or results of operations.

                  Past and present refining,  storage, blending and distribution
activities have resulted in  contamination at certain UNO-VEN  properties.  Upon
the discovery of  contamination  at refineries,  terminals or other  properties,
UNO-VEN  investigates  and,  where  required,  undertakes  remedial  measures in
accordance with applicable laws and regulations. UNO-VEN has not been named as a
potentially responsible party at any Superfund sites.

                  Increasingly  stringent  regulatory  provisions   periodically
require   additional  capital   expenditures.   During  1996,  UNO-VEN  expended
approximately $3 million for environmental, health

                                       19

<PAGE>



and safety capital improvements in its operations. UNO-VEN anticipates budgeting
approximately $37 million for environmental,  health and safety capital projects
over the next five years.

                  In  addition  to these  costs,  the CAA  Amendments  mandate a
series of changes in certain fuel specifications.  UNO-VEN currently anticipates
spending  approximately  $18 million over the next five years to modify refinery
operations to produce  reformulated  fuels. These estimates may change as future
regulatory events under the CAA unfold.

                  Under  the  terms  of  the  Asset  Purchase  and  Contribution
Agreement  among PDV America,  Unocal,  certain  affiliates of each and UNO-VEN,
Unocal has agreed to indemnify UNO-VEN for certain environmental  compliance and
clean-up  costs  identified  during the first six years of UNO-VEN's  operations
relating to conditions that existed as of December 1, 1989.

                  At the present time,  UNO-VEN  estimates that its share of any
liability from any of these known environmental matters would not be material to
its financial condition, liquidity or results of operations.

Safety

                  Due to the nature of petroleum refining and distribution, both
CITGO and UNO-VEN are subject to stringent  occupational  health and safety laws
and regulations.  CITGO and UNO-VEN maintain comprehensive safety,  training and
maintenance  programs,  and PDV  America  believes  that both  companies  are in
substantial compliance with occupational health and safety laws.


                            ITEM 3. LEGAL PROCEEDINGS

                  Various  lawsuits and claims arising in the ordinary course of
business are pending against the Companies. Among the lawsuits pending, CITGO is
involved  in  litigation  in the United  States  District  Court for the Western
District of Louisiana  concerning a contract for sludge removal and treatment at
CITGO's Lake Charles,  Louisiana refinery, in which CITGO is seeking contractual
penalties for non-performance  and breach of contract,  and also a determination
that a portion of any damages awarded would be recoverable  from a former owner.
In this lawsuit,  the contractor has counterclaimed  seeking monetary damages of
$42,000,000,  including interest and profits. A trial (previously  scheduled for
March 1997) is currently  scheduled for 1998,  concerning the nonperformance and
breach of contract issues.  In addition,  CITGO is involved in litigation in the
United States  District Court for the Northern  District of Louisiana in which a
number of current and former  employees and applicants,  on behalf of themselves
and a class of similarly  situated  persons,  have asserted claims under federal
and state  laws of racial  discrimination,  in  connection  with the  employment
practices at CITGO's Lake Charles,  Louisiana  refining complex.  The plaintiffs
seek injunctive relief and monetary  damages.  The Court has denied a motion for
certification of similarly  situated persons as a class, and the plaintiffs have
appealed the Court's denial of class certification.  The initial trials relating
to this litigation are currently scheduled for July 1997.

                  In January 1997, the Louisiana Supreme Court ruled in favor of
certain Louisiana  refiners in an industry case regarding an assessment of a use
tax on petroleum coke which  accumulates on catalyst during refining  operations
and a change to the calculation of the sales/use tax on fuel gas generated by

                                       20

<PAGE>



refinery  operations.  The Company  believes that it has no further  exposure to
losses related to these matters.

                  Following  the  announcement  that PDV  America and Unocal had
executed the Letter of Intent  dated  December  26,  1996,  several  independent
distributors  notified  UNO-VEN that the withdrawal of the "76" brand,  which is
expected to occur  after  completion  of the  transactions  contemplated  by the
Letter of Intent,  will result in significant  economic injury to their business
operations.  While the  amount  claimed  is  generally  not  specified,  UNO-VEN
believes that the aggregate amount of these claims will substantially  exceed $1
million.  In  addition,  arbitration  proceedings  have been  initiated  against
UNO-VEN by a convenience  store  franchising  company to recover $2.5 million in
liquidated  damages for UNO-VEN's alleged breach of contract  resulting from the
expected withdrawal of the "76" brand.

                  The  Companies  are  vigorously  contesting  or  pursuing,  as
applicable,  such  lawsuits  and claims  and the  Companies  believe  that their
positions are sustainable.  The Companies have recorded accruals for losses they
consider  probable  and  reasonably  estimable.  However,  due to  uncertainties
involved in litigation,  there are cases including the significant matters noted
above, in which the ultimate  outcomes are not reasonably  predictable,  and the
losses, if any, are not reasonably  estimable.  If such lawsuits and claims were
to be determined in a manner adverse to the Companies,  and in amounts in excess
of the Companies'  accruals,  it is reasonably possible that such determinations
could have a material adverse effect on the Companies'  results of operations in
a given year.  The term  "reasonably  possible"  is used herein to mean that the
chance of a future  transaction or event  occurring is more than remote but less
than likely.  However,  based upon  management's  current  assessments  of these
lawsuits  and claims and those  provided  by  counsel in such  matters,  and the
capital  resources  available to the  Companies,  management  believes  that the
ultimate  resolution of these lawsuits and claims would not exceed the aggregate
of the amounts  accrued in respect of such lawsuits and claims and the insurance
coverages  available to the Companies by a material amount and should not have a
material  adverse  effect on the  Companies'  consolidated  financial  position,
results of  operations,  or liquidity.  PDV America is not party to any material
claims or lawsuits.


                       ITEM 4. SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS

                  Not Applicable.



                                       21

<PAGE>



                                     PART II

                  ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
                         AND RELATED STOCKHOLDER MATTERS

                  The Company's common stock is not publicly traded.  All of the
Company's common stock is held by Propernyn B.V. ("Propernyn"),  a Dutch limited
liability company whose ultimate parent is PDVSA. PDV America did not declare or
pay any dividends in 1996 and 1995.


                         ITEM 6. SELECTED FINANCIAL DATA

                  The  following  tables set forth certain  selected  historical
consolidated  financial and  operating  data of PDV America as of the end of and
for each of the five years in the period ended  December 31, 1996. The following
tables should be read in conjunction with the consolidated  financial statements
of PDV America as of December  31, 1996 and 1995 and for each of the three years
in the  period  ended  December  31,  1996,  included  in  Item 8.  The  audited
consolidated  financial  statements of PDV America for each of the five years in
the period  ended  December  31, 1996 have been  prepared on the basis of United
States generally  accepted  accounting  principles.  The consolidated  financial
statements  of PDV America as of December  31,  1994,  1993 and 1992 and for the
years ended December 31, 1993 and December 31, 1992,  not  separately  presented
herein, have been audited by Deloitte & Touche LLP, independent auditors.


                                       22

<PAGE>




<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                             ------------------------------------------------------
                                                  1996      1995(7)   1994       1993(8)    1992
                                             ------------------------------------------------------
<S>                                             <C>       <C>       <C>        <C>        <C>    
Income Statement Data
Sales                                           $12,952   $10,522   $ 9,247    $ 9,112    $ 9,178
Equity in earnings (losses) of affiliates (1)        45        48        55         52         54
Net revenues                                     13,071    10,647     9,374      9,193      9,227
Income before extraordinary charges
  and cumulative effect of accounting
  changes                                           138       143       205        155        101
Extraordinary gain (charges) (2)                   --           3        (2)      --         --
Cumulative effect of accounting
  changes (3)                                      --        --          (4)      (235)       (86)
Net income (loss)                                   138       146       199        (80)       (15)

Ratio of Earnings to Fixed Charges (4)            1.94x     2.04x     2.65x      2.57x      2.09x

Balance Sheet Data
Total assets                                    $ 6,938   $ 6,220   $ 5,770    $ 5,138    $ 3,710
Long-term debt (excluding current
  portion) (5)                                    2,595     2,297     2,155      2,069      1,655
Total debt (6)                                    2,755     2,428     2,279      2,117      1,672
Shareholder's equity                              2,111     1,973     1,812      1,584      1,017


-------------------------

<FN>
(1)      Includes  the  equity in the  earnings  of  UNO-VEN  $23  million,  $15
         million,  $27 million,  $22 million and $29 million for the years ended
         December 31, 1996, 1995, 1994, 1993 and 1992, respectively.
(2)      Represents extraordinary gain or (charges) for the early extinguishment
         of debt (net of related  income tax  provision of $2 million and income
         tax benefits of $1 million in 1995 and 1994, respectively).
(3)      Represents the cumulative  effect of the accounting change to Statement
         of  Financial   Accounting  Standards  ("SFAS")  No.  112,  "Employers'
         Accounting for Postemployment  Benefits" in 1994 (net of related income
         tax benefits of $3 million),  the  cumulative  effect of the accounting
         change to SFAS No. 109,  "Accounting  for Income Taxes" in 1993 and the
         cumulative effect of the accounting change to SFAS No. 106, "Employers'
         Accounting  for  Postretirement  Benefits  Other than Pensions" in 1992
         (net of related income tax benefits of $51 million).
(4)      For the purpose of calculating  the ratio of earnings to fixed charges,
         "earnings"  consist of income before income taxes and cumulative effect
         of  accounting  changes  plus  fixed  charges  (excluding   capitalized
         interest),  amortization of previously capitalized interest and certain
         adjustments to equity in income of affiliates.  "Fixed charges" include
         interest expense,  capitalized interest,  amortization of debt issuance
         costs  and a portion  of  operating  lease  rent  expense  deemed to be
         representative of interest.
(5)      Includes long-term debt to third parties, note payable to affiliate and
         capital lease obligations.
(6)      Includes  short-term  bank  loans,  current  portion of  capital  lease
         obligations   and  long-term  debt,   long-term  debt,   capital  lease
         obligations and note payable to affiliate.
(7)      Includes operations of Cato Oil and Grease Company since May 1, 1995.
(8)      Includes  operations of the Savannah  Asphalt  Refinery since April 30,
         1993.
</FN>
</TABLE>



                                       23

<PAGE>



                  ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

                  The  following  discussion  of  the  financial  condition  and
results of  operations  of PDV America  should be read in  conjunction  with the
Consolidated Financial Statements of PDV America included elsewhere herein.

                  Petroleum industry operations and profitability are influenced
by a large number of factors,  some of which individual  petroleum  refining and
marketing  companies  cannot  entirely  control.  Governmental  regulations  and
policies,  particularly  in the areas of taxation,  energy and the  environment,
have a  significant  impact on petroleum  activities,  regulating  how companies
conduct their  operations  and  formulate  their  products,  and, in some cases,
directly limiting their profits.  PDV America's  consolidated  operating results
are affected both by industry-specific  factors,  such as movements in crude oil
and refined product prices, and by company-specific factors, such as the success
of wholesale marketing programs and refinery operations.

                  The  earnings  and cash  flows  of  companies  engaged  in the
refining and marketing  business in the United  States are  primarily  dependent
upon producing and selling  quantities of refined products at margins sufficient
to cover fixed and  variable  costs.  The  refining  and  marketing  business is
characterized by high fixed costs resulting from the significant capital outlays
associated with refineries,  terminals and related facilities and by substantial
fluctuations in variable costs,  particularly costs of crude oil, feedstocks and
blending components,  and by the prices realized for refined products. Crude oil
and refined products are commodities whose price levels are determined by market
forces beyond the control of the Companies.

                  In general,  prices for  refined  products  are  significantly
influenced  by the  price of crude  oil,  feedstocks  and  blending  components.
Although an increase  or  decrease  in the price for crude oil,  feedstocks  and
blending  components  generally results in a corresponding  change in prices for
refined  products,  there  is  usually  a time  lag in  the  realization  of the
corresponding increase or decrease in prices for refined products. The effect of
changes  in crude oil prices on PDV  America's  consolidated  operating  results
therefore  depends  in part on how  quickly  refined  product  prices  adjust to
changes in crude oil,  feedstock or blending  component prices. A substantial or
prolonged  increase  in crude oil prices  without a  corresponding  increase  in
refined product prices,  a substantial or prolonged  decrease in refined product
prices without a corresponding decrease in crude oil prices, or a substantial or
prolonged  decrease  in demand for  refined  products  could have a  significant
negative  effect on the  Company's  earnings  and cash  flows.  PDV  America  is
insulated to a substantial  degree from the price  volatility  that the industry
experiences  due to the  pricing  mechanism  in the  long-term  crude oil supply
agreements  (expiring in the years 2006 through 2013) that CITGO has with PDVSA,
which are designed to provide a relatively stable level of gross margin on crude
oil  supplied  by PDVSA.  These  supply  agreements  are  designed to reduce the
volatility  of  earnings  and cash flows from  CITGO's  refining  operations  by
providing a  relatively  stable  level of gross  margin on crude oil supplied by
PDVSA.  This  supply  represented  approximately  two-thirds  of the  crude  oil
processed in refineries  operated by CITGO in the year ended  December 31, 1996.
However,  CITGO  also  purchases  significant  volumes of  refined  products  to
supplement the production  from its refineries to meet marketing  demands and to
resolve logistical issues.  CITGO's earnings and cash flows are also affected by
the cyclical nature of petrochemical prices. Inflation was

                                       24

<PAGE>



not a  significant  factor in the  operations of CITGO for the three years ended
1996.  As a result  of these  factors,  CITGO's  earnings  and  cash  flows  may
experience substantial fluctuations.

                  CITGO's  revenues  accounted  for  over  99% of PDV  America's
consolidated revenues in 1996, 1995 and 1994.

                  Effective  January,  1, 1992,  the supply  agreements  between
PDVSA and CITGO with respect to the Lake Charles,  Corpus  Christi and Paulsboro
refineries  were  modified  to reduce the price  levels to be paid by CITGO by a
fixed amount per barrel of crude oil purchased from PDVSA.  Such reductions were
intended  to  defray   CITGO's   costs  of  certain   environmental   compliance
expenditures.  This modification resulted in a decrease in the cost of crude oil
purchased under these agreements of  approximately  $70 million per year for the
years 1992 through 1994 as compared to the amount that would otherwise have been
payable  thereunder.  This  modification  was to expire at  December  31,  1996;
however, in 1995, PDVSA and CITGO agreed to adjust this modification so that the
1992 fixed  amount per barrel  would be reduced  and the  adjusted  modification
would not expire until December 31, 1999.  The effect of this  adjustment to the
original  modification  was to increase  the cost of crude oil  purchased  under
these agreements by approximately  $22 million and $44 million in 1995 and 1996,
respectively,  as compared to the amount that would  otherwise have been payable
thereunder  based on the original  modification  (resulting in a net decrease of
approximately $48 million and $26 million in 1995 and 1996,  respectively,  from
the amount  otherwise  payable  under the  agreement  prior to the 1992 original
modification).  CITGO  anticipates  that the  effect of the  adjustments  to the
original  modifications  will be to reduce the price of crude oil purchased from
PDVSA  under  these  agreements  by  approximately  $25 million per year in 1997
through 1999, in each case as compared to the original  modification and without
giving  effect to any other  factors that may affect the price payable for crude
oil  under  these  agreements.  Due to the  pricing  formula  under  the  supply
agreements, the aggregate price actually paid for crude oil purchased from PDVSA
under these  agreements  in each of these years will depend  primarily  upon the
current  prices for refined  products and certain  actual costs of CITGO.  These
estimates  are also based on the  assumption  that CITGO will  purchase the base
volumes of crude oil under the agreements.

                  The following  table  summarizes  the sources of PDV America's
sales revenue and sales volumes.

                                PDV America Sales

<TABLE>
                                          Year Ended December 31,                Year Ended December 31,
                                      ------------------------------         ------------------------------
                                      1996         1995         1994         1996         1995         1994
                                      ----         ----         ----         ----         ----         ----
                                              ($ in millions)                        (MM gallons)

<S>                               <C>          <C>          <C>              <C>          <C>          <C>
Gasoline                          $    7,451   $    6,367   $    5,252       11,308       11,075        9,747
Jet fuel                               1,489        1,163        1,102        2,346        2,249        2,131
Diesel/#2 fuel                         2,312        1,356        1,491        3,728        2,730        3,067
Petrochemicals, industrial
 products and other                      846          831          707        1,408        1,572        1,509
Asphalt                                  257          238          194          569          503          506
Lubricants and waxes                     426          404          370          202          215          213
                                  ----------   ----------   ----------       ------       ------       ------
     Total refined product sales  $   12,781   $   10,359   $    9,116       19,579       18,344       17,173

Other sales                              171          163          131         --           --           --
                                  ----------   ----------   ----------       ------       ------       ------
         Total sales              $   12,952   $   10,522   $    9,247       19,579       18,344       17,173
                                  ==========   ==========   ==========       ======       ======       ======
</TABLE>




                                       25

<PAGE>



              The following  table  summarizes  PDV America's  cost of sales and
operating expenses.

                PDV America Cost of Sales and Operating Expenses

                                                       Year Ended December 31,
                                                     1996       1995       1994
                                                   -------    -------    -------
                                                          ($ in millions)

Crude oil                                          $ 3,053    $ 2,428    $ 2,180
Refined products                                     7,139      5,504      4,547
Intermediate feedstocks                              1,000        898        854
Refining and manufacturing costs                       801        755        725
Other operating costs and expenses
     and inventory changes                             498        481        425
                                                   -------    -------    -------
Total cost of sales and operating expenses         $12,491    $10,066    $ 8,731
                                                   =======    =======    =======




Results of Operations--1996 Compared to 1995

                  Sales revenues and volumes. Sales increased by $2,430 million,
representing a 23% increase from 1995 to 1996. The increase was primarily due to
an increase in sales  volumes of 7% and an average  increase in sales  prices of
16%.  Sales  volumes of light  fuels  (gasoline,  diesel/#2  fuel and jet fuel),
excluding bulk sales made for logistical reasons, were up 10% from 1995 to 1996,
and their average unit price increased $0.10.  Gasoline sales volumes  increased
primarily due to  successful  marketing  efforts,  including the net addition of
approximately 470 new  independently  owned CITGO branded outlets since December
31, 1995.  Petrochemical sales volume rose 14% from 1995 to 1996. This increase,
combined  with an average  decrease  in unit  prices of $0.16,  resulted in a 3%
decrease in petrochemical  sales revenue from 1995 to 1996.  Industrial products
sales volumes  decreased 31% and average unit prices increased $0.02,  resulting
in a 27%  decrease  in  industrial  products  sales  revenue  from 1995 to 1996.
Asphalt  sales  revenue  increased  8% from  1995 to  1996.  This  increase  was
primarily due to increases in sales  volumes.  Lubricants  and wax sales revenue
increased 5% from 1995 to 1996 due to increases in both sales price and volume.

                  Equity in earnings (losses) of affiliates.  Equity in earnings
(losses) of affiliates decreased by approximately $3 million,  representing a 7%
decrease,  from $48 million in 1995 to $45 million in 1996.  This  decrease  was
primarily due to a $13 million  decrease in equity  earnings of  LYONDELL-CITGO,
partially offset by an increase in the equity earnings of UNO-VEN of $9 million.
Almost all of the shortfall in LYONDELL-CITGO's  earnings was due to lower fuels
margins,  lower aromatics prices, higher natural gas prices,  operating problems
in the first half of the year and the impact of the expansion project startup on
existing operations. The increase in the earnings of UNO-VEN is due primarily to
higher refining product margins.

                  Interest   income.   Interest  income  from  PDVSA  represents
interest income on the $1 billion notes  receivable  (hereafter  "Mirror Notes")
from PDVSA. The Mirror Notes were issued by PDVSA to PDV America in August 1993,
in connection with the Company's issuance of $1 billion of Senior Notes.

                  Cost of  sales  and  operating  expenses.  Cost of  sales  and
operating  expenses  increased by $2,425  million,  representing a 24% increase,
from  1995 to 1996.  Higher  crude oil  purchases  in 1996 as  compared  to 1995
resulted from a 22% increase in crude oil prices in 1996 as compared to 1995, or

                                       26

<PAGE>



approximately  $3.21 per barrel which  includes  approximately  $0.14 per barrel
related  to the  1995  adjustments  of the  PDVSA  crude  and  feedstock  supply
agreements  discussed in the  overview,  and a 3% increase in volumes in 1996 as
compared  to  1995.  Higher  costs  of  intermediate  feedstock  purchases  were
attributable to a 20% increase in prices,  partially  offset by a 7% decrease in
volumes purchased.  Refinery  production was higher in 1996 as compared to 1995;
however, due to the increased sales volumes mentioned above, the cost of refined
product  purchases  increased  30%.  The increase in refined  product  purchases
results  from a 13%  increase in volumes and a 15%  increase in refined  product
prices.  The increases in refining and manufacturing  costs are due primarily to
increased  costs of purchased  fuel and  electricity at CITGO's Lake Charles and
Corpus Christi refineries as well as the additional  manufacturing costs related
to the lubricants plant acquired in May 1995.

                  CITGO purchases  refined products to supplement the production
from its refineries to meet marketing demands and resolve logistical issues. The
refined product purchases  represented 52%, 55% and 57% of cost of sales for the
years  1994,  1995 and 1996,  respectively.  CITGO  estimates  that  margins  on
purchased  products,  on average,  are  somewhat  lower than margins on produced
products  due to the fact that CITGO can only receive the  marketing  portion of
the total margin received on the produced refined products.  However,  purchased
products are not segregated  from CITGO  produced  products and margins may vary
due to market  conditions  and other factors  beyond the Company's  control.  As
such,  it is  difficult  to measure the effects on  profitability  of changes in
volumes  of  purchased   products.   CITGO  anticipates  its  purchased  product
requirements will continue to increase, in volume and as a percentage of refined
products  sold, in order to meet  marketing  demands.  CITGO does not anticipate
operational  actions or market  conditions  in the near term  (other than normal
refinery  turnaround  maintenance)  which  might  cause  a  material  change  in
anticipated  purchased  product  requirements;  however,  there  could be events
beyond  the  control  of CITGO  which  impact  the  volume of  refined  products
purchased. See also "Factors Affecting Forward Looking Statements".

                  Gross margin.  The gross margin for 1996 was $461 million,  or
3.6%,  compared to $456 million,  or 4.3%, for 1995.  Gross margins in 1996 have
been  adversely  affected  by  refinery  operations  in the first  quarter,  the
scheduled  modifications  to the pricing  provisions  in the crude and feedstock
supply agreements, the decline in petrochemical profitability, increased volumes
of refined  products  purchased  as a percentage  of sales volume and  increased
costs of purchased fuel and  electricity  at the refineries  throughout the year
(in each case, as discussed above).

                  Selling, general and administrative expenses. Selling, general
and administrative expenses increased by $3 million, representing a 2% increase,
due  primarily to increases  in salaries  and benefits and  increased  marketing
expenses  in 1996  including  the  effect  of the  change  in focus  of  CITGO's
marketing  programs  initiated  in April  1996.  The  primary  program in effect
through  March 1996 was designed to increase  the number of branded  outlets and
improve  CITGO's  overall  image.  Accordingly,  costs were and  continue  to be
expensed as incurred.  The program  initiated in April 1996 primarily focuses on
defending market share and increasing  volumes sold to existing  distributors by
providing an incentive  which is earned over time.  The  accounting  for the new
program recognizes the program expenses when the incentives are earned.

                  Interest expense. Interest expense increased $7.8 million from
1995 to 1996. The increase was due primarily to increased borrowings,  offset by
a slightly lower weighted average interest rate on indebtedness.


                                       27

<PAGE>



                  Income taxes. PDV America's provision for income taxes in 1996
was $78  million,  representing  an  effective  tax rate of 36%.  In  1995,  PDV
America's provision for income taxes was $84 million,  representing an effective
tax rate of 37%.

                  Net income.  Net income was $138 million for 1996.  Net income
of $146 million for 1995 included an after-tax  extraordinary gain of $3 million
on early extinguishment of debt.

Results of Operations--1995 Compared to 1994

                  Sales revenues and volumes.  Sales increased by $1,275 million
representing  a 14% increase,  from 1994 to 1995. The increase was due to higher
sales  volumes and a slight  increase in market  prices.  Sales volumes of light
fuels  (gasoline,  diesel/#2  fuel and jet fuel),  excluding bulk sales made for
logistical  reasons,  were up 8% from 1994 to 1995, and their average unit price
increased $0.03.  Gasoline sales volumes  increased  primarily due to successful
marketing  efforts,   including  the  net  addition  of  approximately  920  new
independently owned CITGO branded outlets since December 31, 1994. Petrochemical
sales volume rose 3% from 1994 to 1995. This increase,  combined with an average
increase in unit prices of $0.14,  resulted in a 19%  increase in  petrochemical
sales revenue from 1994 to 1995.  Industrial  products  sales volumes  increased
14%, and average  unit prices  increased  $0.05,  resulting in a 32% increase in
industrial products sales revenue from 1994 to 1995. Asphalt sales increased 23%
from 1994 to 1995 which increase was primarily due to increases in sales prices.
Lubricants  and wax sales  increased  9% from 1994 to 1995 due to  increases  in
sales prices.

                  Equity in earnings (losses) of affiliates.  Equity in earnings
(losses) of affiliates  decreased by approximately $7 million representing a 13%
decrease,  from $55 million in 1994 to $48 million in 1995.  This  decrease  was
primarily due to a $6 million  decrease in equity earnings of Nelson  Industrial
Steam Company ("NISCO") and a $12 million decrease in the equity in the earnings
of UNO-VEN,  partially  offset by  increases  in equity in the earnings of joint
interest   pipelines  and   LYONDELL-CITGO,   of  $2  million  and  $8  million,
respectively.  The decrease in NISCO earnings in 1995 is  attributable to higher
interest  costs in 1995 as a result of the NISCO debt  refinancing  in September
1994. The UNO-VEN  decrease is due primarily to higher operating costs resulting
from  additional  waste  disposal  costs in 1995  related to a specific  cleanup
project and an increase in 1995 depreciation  expense as a result of an increase
in capital spending in 1994.

                  Cost of  sales  and  operating  expenses.  Cost of  sales  and
operating expenses increased by $1,335 million, representing a 15% increase from
1994 to 1995. Higher crude oil costs in 1995 as compared to 1994 resulted from a
13% increase in crude oil prices in 1995 as compared to 1994,  of  approximately
$1.74 per barrel which  includes  approximately  $0.13 per barrel related to the
1995 adjustments of the PDVSA crude and feedstock supply agreements, even though
volumes were down 2%. Higher  refined  product costs in 1995 as compared to 1994
resulted  from a 7%  increase  in  refined  product  purchase  prices  and a 14%
increase in purchased  volumes.  The increased  purchased volumes were necessary
primarily to supply the increased sales to branded distributors.

                  In addition,  in the third quarter of 1995, CITGO entered into
a contract  with  National  Response  Corporation  ("NRC")  for marine oil spill
removal services  capability and terminated its  relationship  with the previous
provider  of  that  service  for  which  CITGO  paid  a   cancellation   fee  of
approximately  $16  million  which is  included  in cost of sales and  operating
expenses.  Also,  a fire  damaged an operating  unit at CITGO's  Corpus  Christi
refinery during the third quarter of 1995 resulting

                                       28

<PAGE>



in no injuries.  Property and business  interruption  insurance policies were in
place and  mitigated  the losses.  Approximately  $6 million has been charged to
cost of sales to cover among other things the  deductible  amount under property
insurance policies. The fire did not materially affect the operations of CITGO.

                  Gross  margin.  The gross  margin  for 1995 was $456  million,
representing  4.3%,  compared to $516 million,  representing  5.6% for 1994. The
1995 gross  margin  percentage  was  adversely  affected by the PDVSA  agreement
changes, the oil spill removal services termination fee, the Corpus Christi fire
and  increased  volumes of refined  product  purchases as a percentage  of sales
volumes.

                  Selling, general and administrative expenses. Selling, general
and administrative expenses increased by $6 million, representing a 4% increase,
due primarily to increases in marketing  expenses  partially offset by decreases
in  the  amortization  of  unrecognized  net  gain  on  post-retirement  benefit
obligations during 1995.

                  Interest expense.  Interest expense increased $29 million from
1994 to 1995.  The  increase  was due to a decrease  of the  amount of  interest
capitalized  for  1995 as  compared  to 1994  and an  increase  in the  level of
outstanding  debt due to the acquisition of Cato for  approximately  $47 million
and investments in LYONDELL-CITGO.

                  Income taxes.  PDV  America's  provision for taxes in 1995 was
$84 million,  representing  an effective tax rate of 37%. In 1994, PDV America's
provision for taxes was $118 million, also representing an effective tax rate of
37%.

                  Net  income.  Net income of $146  million in 1995  included an
extraordinary   gain  of  $3  million,   after  taxes,   related  to  the  early
extinguishment  of  debt.  Net  income  of  $199  million  in 1994  included  an
extraordinary  charge of $2 million,  after taxes, for the write-off of deferred
loan fees and other costs related to the early  extinguishment  of debt reported
by NISCO and an after-tax  charge of $4 million due to the adoption of Statement
of Financial Accounting  Standards ("SFAS") No. 112, "Employers'  Accounting for
Postemployment Benefits".

Liquidity and Capital Resources

                  For the year ended  December 31, 1996,  PDV America's net cash
provided by operating activities totaled  approximately $265 million,  primarily
reflecting  $138  million  of net income and $193  million of  depreciation  and
amortization,partially  offset by net cash used by other  items of $66  million.
The more  significant  changes in other items  included the increase in accounts
receivable,   including  receivables  from  affiliates,  of  approximately  $198
million,  the  increase in accounts  payable  and other  liabilities,  including
payables to affiliates,  of approximately $227 million and the increase of other
assets of approximately $84 million.  The increase in accounts receivable is due
primarily to an increase in crude oil receivables  and credit card  receivables.
The  increase in crude oil  receivables  is a result of an increase in crude oil
sales volumes and prices.  The increase in credit card  receivables is primarily
the result of an  increase  in the number of active  accounts,  higher  gasoline
prices and increased use of revolving  credit.  The increase in accounts payable
is related  primarily to purchases of domestic  crude oil and refined  products.
The  increase  in payables  to  affiliates  is the result of the timing of cargo
shipments,  higher  crude oil costs and a specific  year-end  crude oil purchase
related to CARCO's planned 1997 production.  The increase of other assets is due
primarily to refinery turnarounds.

                                       29

<PAGE>




                  Net cash used in  investing  activities  in 1996  totaled $585
million,  consisting  primarily  of capital  expenditures  of $438  million  and
investments in LYONDELL-CITGO of $143 million.

                  During the same period,  consolidated  net cash  provided from
financing activities totaled approximately $326 million, consisting primarily of
proceeds of  approximately  $200 million from the issuance of senior notes,  the
issuance of $120 million in taxable revenue bonds, $60 million of net borrowings
under revolving bank  facilities,  $28 million net borrowings on short-term bank
loans and  proceeds  of $25  million  from a  tax-exempt  bond  issuance.  Funds
received from these financing  activities were partially offset by repayments of
$59 million on privately placed senior notes and $29 million on a term loan.
                  CITGO currently  estimates capital  expenditures for the years
1997-2001  will total  approximately  $1.6 billion,  exclusive of investments in
LYONDELL-CITGO, as shown in the following table.

          CITGO Estimated Capital Expenditures - 1997 through 2001 (1)

Strategic                                         $  880 million
Maintenance                                          400 million
Regulatory/Environmental                             320 million
                                                  --------------
Total                                             $1,600 million
                                                  ==============

-------------------------
(1)  These estimates may change as future regulatory events unfold. See "Factors
     Affecting Forward Looking Statements".

                  In addition,  as of December 31, 1996,  CITGO was committed to
make additional  investments in LYONDELL-CITGO  consisting of (i) $30 million at
the  in-service  date of the refinery  enhancement  project,  which is currently
scheduled  for early 1997,  (ii) up to an additional  approximately  $10 million
through the in-service date and (iii)  additional  funding for operations in the
event  that  the  refinery  enhancement  project  startup  did  not  proceed  as
anticipated.  In  addition,  CITGO is  committed  to fund up to $22  million for
certain  maintenance  and  environmental  costs,  to the extent  that such costs
exceed certain estimates. CITGO expects to fund its remaining commitment through
cash generated from operations and available credit facilities.

                  The LYONDELL-CITGO  expansion project was completed at the end
of 1996 and the in-service date was March 1, 1997. CITGO has made its additional
investment of $30 million which was required at the in-service date.

                  PDV  America's  $1  billion  senior  notes  issued in 1993 are
comprised of (i) $250 million 7 1/4% Senior Notes Due August 1, 1998,  (ii) $250
million of 7 3/4% Senior Notes Due August 1, 2000 and (iii) $500  million  77/8%
Senior Notes Due August 1, 2003  (collectively the "Senior Notes").  Interest on
these  notes  is  payable  in  semiannual   installments  of  $38  million,   or
approximately $77 million in total for 1996.

                  As of December  31,  1996,  CITGO had an  aggregate  of $1,617
million of  indebtedness  outstanding  that matures on various dates through the
year 2026.  As of December 31, 1996,  CITGO's  contractual  commitments  to make
principal  payments on this indebtedness were $148.2 million,  $95.2 million and
$426.5  million  for 1997,  1998 and 1999,  respectively.  CITGO's  bank  credit
facility  consists  of  an  $88.2  million  term  loan,   payable  in  quarterly
installments of principal and interest  through December 1999 and a $675 million
revolving credit facility maturing in December 1999, of which $350

                                       30

<PAGE>



million was  outstanding  at December  31, 1996.  Cit-Con has a separate  credit
agreement  under  which $35.7  million was  outstanding  at December  31,  1996.
CITGO's other  principal  indebtedness  consists of (i) $199.7 million in senior
notes  issued in 1996,  (ii) $260  million in  outstanding  principal  amount of
senior  notes  issued  pursuant to a master  shelf  agreement  with an insurance
company,  (iii) $294  million in  outstanding  principal  amount of senior notes
issued  in  1991,  (iv)  $216.3  million  in  outstanding  principal  amount  of
obligations related to tax exempt bonds issued by various governmental units and
(v) $120  million in  outstanding  principal  amount of  obligations  related to
taxable  bonds  issued  by a  governmental  unit.  See Note 11 to  "Consolidated
Financial Statements".

                  The  debt   instruments   of  PDV  America  and  CITGO  impose
significant   restrictions  on  PDV  America's  and  CITGO's  ability  to  incur
additional debt, grant liens,  make  investments,  sell or acquire fixed assets,
make restricted payments, including dividends, and engage in other transactions.
In  addition,  restrictions  exist  over the  payment  of  dividends  and  other
distributions to PDV America.  PDV America and CITGO were in compliance with all
their respective covenants under such debt instruments at December 31, 1996.

                  As of December 31, 1996,  capital  resources  available to the
Companies  include cash generated by operations,  available  borrowing  capacity
under  CITGO's  revolving  credit  facility of $325  million and $127 million in
unused  availability  under  uncommitted  short-term  borrowing  facilities with
various  banks.  Additionally,  the  remaining  $400 million from CITGO's  shelf
registration  with the  Securities  and Exchange  Commission for $600 million of
debt securities may be offered and sold from time to time. The Companies believe
that  they have  sufficient  capital  resources  to carry  out  planned  capital
spending programs,  including regulatory and environmental  projects in the near
terms,   anticipated  operating  needs,  debt  service  and  to  meet  currently
anticipated future  obligations as they arise. In addition,  PDV America intends
that payments received from PDVSA under the $1 billion Mirror Notes will provide
funds to service PDV America's Senior Notes. The Companies periodically evaluate
other  sources of capital  in the  marketplace  and  anticipate  that  long-term
capital requirements will be satisfied with current capital resources and future
financing  arrangements.  Of  course,  the  Companies'  ability  to obtain  such
financings will depend on numerous factors,  including market conditions and the
perceived creditworthiness of the Companies at that time. See "Factors Affecting
Forward Looking Statements".

                  PDV  America and its direct  subsidiaries  are also party to a
tax  allocation  agreement,  which is  designed  to  provide  PDV  America  with
sufficient cash to pay its consolidated income tax liabilities.

Derivative Commodity and Financial Instruments

                  CITGO enters into  petroleum  futures  contracts  primarily to
reduce its inventory exposure to price risk. CITGO also buys and sells commodity
options  for  delivery  and  receipt  of crude oil and  refined  products.  Such
contracts are entered into through major brokerage houses and traded on national
exchanges  and  although  usually  settled  in cash,  can be  settled in cash or
through delivery of the commodity.  Such contracts  generally  qualify for hedge
accounting and correlate to price  movements of crude oil and refined  products.
In order for a transaction  to qualify as a hedge,  CITGO requires that the item
to be hedged expose CITGO to price risk and that the commodity  contract  reduce
that risk and be  designated  as a hedge.  The high  correlation  between  price
movements  of a product  and the  commodity  contract  in that  product  is well
demonstrated  in the petroleum  industry and,  generally,  CITGO relies on those
historical  relationships and on periodic comparisons of market price changes to
price changes of

                                       31

<PAGE>



futures  and  options  contracts  accounted  for as  hedges.  Gains or losses on
contracts which qualify as hedges are recognized  when the related  inventory is
sold or the hedged  transaction is  consummated.  Changes in the market value of
futures  and option  positions  which are not hedges  are  recorded  as gains or
losses in the period in which they occur.

                  Since the  contracts  described  above  generally  qualify for
hedge  accounting  and  correlate  to price  movements  of crude oil and refined
products,  gains or losses resulting from market changes in these contracts will
generally  be offset by losses or gains on CITGO's  hedged  inventory  or future
purchases and sales.  CITGO's derivative commodity activity is closely monitored
by its management.  Contract periods are generally less than 30 days. Unrealized
and deferred  gains and losses on these  contracts at December 31, 1996 and 1995
and the  effects on cost of sales and pretax  earnings  for 1996,  1995 and 1994
were not  material.  At times,  CITGO enters into  commodity  futures and option
agreements that are not related to the hedging  program  discussed  above.  This
activity and its results were not  material to CITGO's  consolidated  results of
operations in 1996, 1995 or 1994.

                  CITGO from time to time  enters  into  other  over-the-counter
derivative commodity agreements.  No premiums are required for these agreements.
Gains and  losses  under  these  agreements,  which  primarily  fix  margins  on
anticipated  sales, are accrued as receivables or payables and as adjustments of
the carrying amount of inventories. The amounts are recognized in income through
cost of sales when the related  petroleum  products are sold,  unless an earlier
write-down is required to recognize anticipated nonrecovery of deferred amounts.
At December 31, 1996 and 1995, CITGO had no such agreements in place.

                  CITGO  has only  limited  involvement  with  other  derivative
financial instruments and does not use them for trading purposes.  They are used
to manage well defined  interest rate and  commodity  price risks arising out of
CITGO's core  activities.  PDV America itself has no involvement with derivative
financial instruments.

                  CITGO has  entered  into  various  interest  rate swap and cap
agreements  to manage its risk  related to  interest  rate  changes on its debt.
Premiums paid for purchased  interest rate swap and cap agreements are amortized
to interest expense over the terms of the agreements.  Unamortized  premiums are
included in other assets.  The interest rate  differentials  received or paid by
CITGO related to these  agreements  are  recognized as  adjustments  to interest
expense  over the term of the  agreements.  Gains or losses on  terminated  swap
agreements are either  amortized over the original term of the swap agreement if
the  hedged  borrowings  remain in place or are  recognized  immediately  if the
hedged borrowings are no longer held.


                                       32

<PAGE>



                  CITGO  has  entered  into the  following  interest  rate  swap
agreements  to reduce  the  impact of  interest  rate  changes  on its  variable
interest rate debt:

                       CITGO Interest Rate Swap Agreements

                       Expiration                      Notional Principal Amount
Variable Rate Index       Date        Fixed Rate Paid      1996       1995
-------------------  ---------------  ---------------  -------------------------
                                                            (in thousands)
One-month LIBOR      September  1998        4.85%       $ 25,000   $ 25,000
One-month LIBOR      November   1998        5.09          25,000     25,000
One-month LIBOR      May        2000        6.28          25,000     25,000
J. J. Kenny          May        2000        4.72          25,000     25,000
J. J. Kenny          February   2005        5.30          12,000     12,000
J. J. Kenny          February   2005        5.27          15,000     15,000
J. J. Kenny          February   2005        5.49          15,000     15,000
                                                        --------   --------
                                                        $142,000   $142,000
                                                        ========   ========


                  The fair value of the interest  rate swap  agreements in place
at December 31, 1996 based on the  estimated  amount that CITGO would receive or
pay to terminate the agreements as of that date and taking into account  current
interest  rates,  was an  unrealized  loss of  approximately  $1.1  million.  In
connection with the determination of such fair market value, CITGO considers the
creditworthiness of the  counterparties,  but no adjustment was determined to be
necessary as a result.

                  Interest expense includes $1.1 million,  $0.1 million and $0.4
million in 1996, 1995 and 1994, respectively,  related to interest paid on these
agreements.  During 1995,  CITGO  converted $25 million of variable rate debt to
fixed rate borrowings and terminated the interest rate swap agreement matched to
the  variable  rate debt.  Other  income in 1995  included a $2.4  million  gain
related to the termination of this interest rate swap  agreement.  There were no
transactions of this type in 1996.

                  During  1995,  CITGO  entered  into  a 9%  interest  rate  cap
agreement with a notional amount of $25 million, a reference rate of three-month
LIBOR,  and an  expiration  date of  February  1997.  Other  interest  rate  cap
agreements  to which CITGO was a party expired in November  1994.  The effect of
these agreements was not material in 1996, 1995 or 1994.

                  Neither   CITGO  nor  the   counterparties   are  required  to
collateralize  their obligations under these derivative  commodity and financial
instruments.  CITGO is exposed to credit loss in the event of  nonperformance by
the counterparties to these agreements, but has no off-balance-sheet credit risk
of accounting loss for the notional amounts.

New Accounting Standard

                  Effective  January 1, 1996, the Company  adopted  Statement of
Financial  Accounting  Standards  No.  121  ("SFAS  121"),  "Accounting  for the
Impairment of Long-lived  Assets and for  Long-lived  Assets to Be Disposed Of".
SFAS 121  establishes  the accounting  for the impairment of long-lived  assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used and the  accounting  for  long-lived  assets and  certain  identifiable
intangibles  to be disposed of. The adoption of SFAS 121 did not have a material
effect on the  consolidated  financial  position or results of operations of the
Company.



                                       33

<PAGE>



                        ITEM 8. FINANCIAL STATEMENTS AND
                               SUPPLEMENTARY DATA

                  The   Consolidated   Financial   Statements,   the   Notes  to
Consolidated  Financial  Statements  and the  Independent  Auditors'  Report are
included in Item 14a of this report.  The Quarterly  results of  Operations  are
reported in Note 17 of the Notes to Consolidated  Financial  Statements included
in Item 14a.


                      ITEM 9. CHANGES IN AND DISAGREEMENTS
                         WITH ACCOUNTANTS ON ACCOUNTING
                            AND FINANCIAL DISCLOSURE


                  None.




                                       34

<PAGE>



                                    PART III

                  ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
                                 THE REGISTRANT

                  The  directors  and  executive  officers of PDV America are as
follows:

Name                       Age          Position
----                       ---          --------

Claus Graf                 58           Chairman of the Board and Director
Alonso Velasco             55           President, Chief Executive and Financial
                                           Officer and Director
Angel E. Olmeta            59           Vice President and Director
Jose M. Portas             60           Secretary and Director
Francisco Bustillos        44           Treasurer and Chief Accounting Officer

                  Directors are elected to serve until their successors are duly
elected and  qualified.  Executive  officers  are  appointed by and serve at the
discretion of the Board of Directors.

                  Claus Graf has been a director of PDV America and  Chairman of
the Board  since  October  1994.  In March 1994,  Mr. Graf was  appointed a Vice
President  of  PDVSA.  From  1991 to 1994,  he  served  as a Vice  President  of
Corpoven,  S.A.,  and,  prior to that time, he was  Production  and  Exploration
Coordinator of PDVSA.

                  Alonso  Velasco has been a director of PDV America  since 1991
and President, Chief Executive and Financial Officer since 1993. Mr. Velasco was
Control and Finances  Coordinator  of PDVSA from 1991 until March 1994, at which
time he was  appointed  a director  of PDVSA.  Between  1987 and 1991,  he was a
director of Interven, S.A., an affiliate of PDVSA.

                  Angel E.  Olmeta has been a director  of PDV  America and Vice
President since October 1994. Mr. Olmeta has been a director of CITGO since 1986
and was its Executive Vice President and Chief Operating Officer from 1991 until
1994. He was Managing Director of Petroleos de Venezuela (USA) Corp. in New York
from 1987 to 1991.

                  Jose M. Portas has been a director  of PDV America  since 1986
and Secretary  since 1987. Mr. Portas worked with various  subsidiaries of PDVSA
in Venezuela from 1976 until 1986.

                  Francisco  Bustillos has been  Treasurer and Chief  Accounting
Officer of PDV  America  since March  1996.  Mr.  Bustillos  was  appointed  the
Corporate  Finance  Functional  Manager of PDVSA in November 1995. Prior to that
time, he was a Finance Manager with Maraven,  S.A., an affiliate of PDVSA,  and,
throughout his career, he has held numerous  positions in accounting and finance
at Maraven, S.A. and other PDVSA affiliates.

                  PDV America's Board of Directors currently has no committees.



                                       35

<PAGE>



                         ITEM 11. EXECUTIVE COMPENSATION

                  For the year  ended  December  31,  1996,  the  directors  and
executive  officers of PDV America  received  compensation  in the  aggregate of
approximately $850,000.


                         ITEM 12. SECURITY OWNERSHIP OF
                            CERTAIN BENEFICIAL OWNERS
                                 AND MANAGEMENT

                  Not applicable.


                       ITEM 13. CERTAIN RELATIONSHIPS AND
                              RELATED TRANSACTIONS

                  PDV America is a wholly owned indirect subsidiary of PDVSA. As
a result,  PDVSA,  either  directly  or  indirectly,  nominates  and selects the
members of the Board of Directors of PDV America and its  subsidiaries.  Certain
members of the Board of Directors of PDV America are also directors or executive
officers of PDVSA.

                  CITGO,  UNO-VEN and  LYONDELL-CITGO  have entered into several
transactions  with PDVSA or other  affiliates of PDVSA,  including crude oil and
feedstock supply agreements, agreements for the purchase of refined products and
transportation  agreements.  These crude oil supply agreements  require PDVSA to
supply minimum  quantities of crude oil and other  feedstocks to CITGO,  UNO-VEN
and  LYONDELL-CITGO  for a fixed  period,  usually  20 to 25 years.  The  supply
agreements differ somewhat for each entity and each CITGO refinery but generally
incorporate  formula  prices  based on the  market  value of a slate of  refined
products deemed to be produced from or for each particular grade of crude oil or
feedstock,  less (i) certain deemed refining  costs;  (ii) certain actual costs,
including  transportation  charges,  import duties and taxes; and (iii) a deemed
margin, which varies according to the grade of crude oil or feedstock delivered.
Under each  supply  agreement,  deemed  margins  and deemed  costs are  adjusted
periodically  by a formula  primarily  based on the rate of  inflation.  Because
deemed  operating costs and the slate of refined  products deemed to be produced
for a given barrel of crude oil or other  feedstock do not  necessarily  reflect
the actual costs and yields in any period,  the actual refining margin earned by
a purchaser  under the various supply  agreements  will vary depending on, among
other things,  the efficiency with which such purchaser  conducts its operations
during such period.  These supply agreements are designed to reduce the inherent
earnings volatility of the refining and marketing  operations of CITGO,  UNO-VEN
and  LYONDELL-CITGO.  Prior to 1995, certain costs were used in the CITGO supply
agreement formulas, aggregating approximately $70 million per year for the years
1992  through  1994 as  compared to the amount  that would  otherwise  have been
payable  thereunder.  This  modification  was to expire at  December  31,  1996;
however,  in the third  quarter  of 1995,  PDVSA and CITGO  agreed to adjust the
modification, so that the 1992 fixed amount per barrel would be reduced, and the
adjusted  modification  would not expire until  December 31, 1999. The impact of
this  adjustment  was an increase in crude cost of $44 million for 1996 and $ 22
million for 1995, over what would otherwise have been payable under the original
1992  modification.  CITGO anticipates that the effect of the adjustments to the
original  modifications  will be to reduce the price of crude oil purchased from
PDVSA under these  agreements  by $25 million per year in 1997 through  1999, in
each case without giving effect to any other

                                       36

<PAGE>



factors that may affect the price payable for crude oil under these  agreements.
These  estimates are also based on the  assumption  that CITGO will purchase the
base volumes of crude oil under the agreements.

                  Under such long-term  supply  agreements  and refined  product
purchase agreements,  CITGO, UNO-VEN and LYONDELL-CITGO  purchased approximately
$2.4  billion.  $0.9  billion  and $0.7  billion,  respectively,  of crude  oil,
feedstocks and refined  products at market related prices from PDVSA in 1996. At
December 31, 1996, $237 million was included in PDV America's current payable to
affiliates  as a result  of these  transactions.  The  LYONDELL-CITGO  crude oil
supply agreement increased to 200 MBPD on March 1, 1997.

                  During 1996,  CITGO  purchased  approximately  $1.6 billion of
crude oil, feedstocks and refined products from LYONDELL-CITGO primarily under a
long-term product sales agreement.  Such agreement  incorporates  formula prices
based on published  market  prices,  defined  marketing  discounts  and variable
factors.  At  December  31,  1996,  $38  million  was  included  in  payables to
affiliates as a result of these transactions.

                  The notes receivable from PDVSA are unsecured and comprised of
(i) $250 million  7.35% Notes Due August 1, 1998,  (ii) $250 million 7.75% Notes
Due August 1, 2000 and (iii) $500 million  7.995% Notes Due August 1, 2003;  all
such notes have  maturities  that are less one business  day.  Interest on these
notes is payable semiannually by PDVSA to PDV America on February 1 and August 1
of each year,  less one  business  day.  For the year ended  December  31, 1996,
approximately  $78 million of interest income is attributable to such notes with
$32 million  included in due from  affiliates  at December 31, 1996.  Due to the
related  party  nature  of these  notes  receivable,  it is not  practicable  to
estimate their fair value.

                  CITGO had refined  product,  feedstock and crude oil and other
product sales of $254 million to  affiliates,  including the Mount Vernon Phenol
plant and  LYONDELL-CITGO,  in 1996.  At  December  31,  1996,  $28  million was
included in due from affiliates as a result of these transactions.

                  During 1995, the Company entered into a service agreement with
PDVSA to provide  financial  and  foreign  agency  services.  Income  from these
services was $0.3 million in 1996.

                  Under a  separate  guarantee  of  rent  agreement,  PDVSA  has
guaranteed  payment of rent,  stipulated  loss value and  termination  value due
under  the  lease of the  Corpus  Christi  refinery  facilities  by  CITGO.  See
"Consolidated Financial Statements--Note 15".

                  PDV America and its direct  subsidiaries  are parties to a tax
allocation  agreement,  which is designed to provide PDV America with sufficient
cash to pay its consolidated income tax liabilities.


                                       37

<PAGE>



                                     PART IV

                   ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND
                               REPORTS ON FORM 8-K


a.       Certain Documents Filed as Part of this Report

         (1)     Financial Statements:

                 Independent Auditors' Report
                 Consolidated Balance Sheets as of December 31, 1996 and 1995
                 Consolidated Statements of Income for the years ended
                          December 31, 1996, 1995 and 1994
                 Consolidated Statements of Shareholder's Equity
                          for the years ended December 31, 1996, 1995 and 1994
                 Consolidated Statements of Cash Flows
                          for the years ended December 31, 1996, 1995 and 1994

                 Notes to the Consolidated Financial Statements

         (2)     Financial Statement Schedules:

                 Schedule I - Condensed Financial Information of the Registrant.

         (3)     Exhibits:

                 The Exhibit  Index in part c., below lists the  exhibits  that
                 are filed as part of, or  incorporated by reference into, this
                 report.

b.       Reports on Form 8-K

         *       Form 8-K, dated November 5, 1996,  reporting  contemplation of
                 increases  or  decreases  of   investments  in  certain  joint
                 ventures.

         **      Form 8-K, dated December 26, 1996,  reporting the execution by
                 PDV  America  of a letter of intent for the  restructuring  of
                 UNO-VEN's refinery and marketing business.

--------
*        Previously filed with the Commission on November 5, 1996.
**       Previously filed with the Commission on December 26, 1996.

                                       38

<PAGE>



c.       Exhibits

         *3.1              Certificate   of   Incorporation,    Certificate   of
                           Amendment of Certificate of Incorporation and By-laws
                           of PDV America.

         *4.1              Indenture,  dated as of  August  1,  1993,  among PDV
                           America,  Propernyn,  PDVSA and  Citibank,  N.A.,  as
                           trustee,  relating  to PDV  America's  7-1/4%  Senior
                           Notes  Due  1998,  7-3/4%  Senior  Notes Due 2000 and
                           7-7/8% Senior Notes Due 2003.

         *4.2              Form of Senior Note (included in Exhibit 4.1).

         *10.1             Crude Supply  Agreement,  dated as of  September  30,
                           1986,   between  CITGO   Petroleum   Corporation  and
                           Petroleos de Venezuela, S.A.

         *10.2             Supplemental  Crude  Supply  Agreement,  dated  as of
                           September   30,   1986,   between   CITGO   Petroleum
                           Corporation and Petroleos de Venezuela, S.A.

         *10.3             Crude Oil and Feedstock Supply Agreement, dated as of
                           March 31, 1987, between Champlin Refining Company and
                           Petroleos de Venezuela, S.A.

         *10.4             Supplemental   Crude   Oil   and   Feedstock   Supply
                           Agreement,  dated  as  of  March  31,  1987,  between
                           Champlin Refining Company and Petroleos de Venezuela,
                           S.A.

         *10.5             Contract for the  Purchase/Sale  of Boscan Crude Oil,
                           dated as of June 2, 1994 between Tradecal,  S.A., and
                           CITGO Asphalt Refining Company.

         *10.6             Restated    Contract   for   the   Purchase/Sale   of
                           Heavy/Extra Heavy Crude Oil, dated December 28, 1990,
                           among Maraven,  S.A., Lagoven,  S.A.. and Seaview Oil
                           Company.

         *10.7             Sublease  Agreement,  dated  as of  March  31,  1987,
                           between Champlin Petroleum Company, as Sublessor, and
                           Champlin Refining Company, as Sublessee.

         *10.8             Operating  Agreement,  dated as of May 1, 1984, among
                           Cit-Con Oil Corporation,  CITGO Petroleum Corporation
                           and Conoco, Inc.

         *10.9             Amended  and  Restated  Limited   Liability   Company
                           Regulations of LYONDELL-CITGO  Refining Company, Ltd.
                           dated July 1, 1993.

         *10.10            Contribution Agreement between Lyondell Petrochemical
                           Company and LYONDELL-CITGO Refining Company, Ltd.

--------
*        Previously  filed  in  connection  with the  Registrant's  Registration
         Statement on Form F-1, Registration No. 33-63742, originally filed with
         the Commission on June 2, 1993.

                                       39

<PAGE>



         *10.11            Crude Oil Supply Agreement,  dated as of May 5, 1993,
                           between  LYONDELL- CITGO Refining  Company,  Ltd. and
                           Lagoven, S.A.

         *10.12            Supplemental  Supply  Agreement,  dated  as of May 5,
                           1993, between LYONDELL- CITGO Refining Company,  Ltd.
                           and Petroleos de Venezuela, S.A.

         *10.13            The UNO-VEN Company Partnership  Agreement,  dated as
                           of December  4, 1989,  between  Midwest 76, Inc.  and
                           VPHI Midwest, Inc.

         *10.14            Supply  Agreement,  dated  as of  December  1,  1989,
                           between  The  UNO-VEN   Company  and   Petroleos   de
                           Venezuela, S.A.

         *10.15            Supplemental  Supply Agreement,  dated as of December
                           1, 1989, between The UNO-VEN Company and Petroleos de
                           Venezuela, S.A.

         *10.16            Tax Allocation Agreement,  dated as of June 24, 1993,
                           among PDV America,  Inc., VPHI Midwest,  Inc.,  CITGO
                           Petroleum Corporation and PDV USA, Inc., as amended.

         **10.17           Amendment and Supplement to Supply  Agreement,  dated
                           as of May 11, 1994,  between The UNO-VEN  Company and
                           Tradecal,   S.A.,   as  assignee  of   Petroleos   de
                           Venezuela, S.A.

         12.1              Computation of Ratio of Earnings to Fixed Charges

         21.1              List of Subsidiaries of the Registrant

         27.1              Financial Data Schedule

d.       Financial Statement Schedules

         The  schedules  filed by the  Company  are  listed in Item 14a above as
required.


*        Previously  filed  in  connection  with the  Registrant's  Registration
         Statement on Form F-1, Registration No. 33-63742, originally filed with
         the Commission on June 2, 1993.

**       Previously filed in connection with the  Registrant's  Annual Report on
         Form 10-K for the fiscal year ended December 31, 1994.


                                       40

<PAGE>



                                   SIGNATURES

                  Pursuant  to the  requirements  of  Section 13 or 15(d) of the
Securities Exchange Act 1934, the Registrant has caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 28, 1997.

                                                PDV AMERICA, INC.


                                                By        /s/Alonso Velasco
                                                  ------------------------------
                                                         Alonso Velasco
                                                  President, Chief Executive and
                                                       Financial Officer

                  Pursuant to the requirements of the Securities Exchange Act of
1934,  this report has been signed below by the  following  persons on behalf of
the Registrant in the capacities and on the dates indicated.

         Signatures                         Title                     Date
         ----------                         -----                     ----


By    /s/ Claus Graf                Chairman of the Board,        March 28, 1997
  ------------------------------       Director
      Claus Graf                



By    /s/ Alonso Velasco            President, Chief Executive    March 28, 1997
  ------------------------------       and Financial Officer,
      Alonso Velasco                   Director


By    /s/ Jose M. Portas            Secretary, Director           March 28, 1997
  ------------------------------
      Jose M. Portas



By    /s/ Francisco Bustillos       Treasurer, Chief              March 28, 1997
  ------------------------------       Accounting Officer
      Francisco Bustillos       




                                       41

<PAGE>




Deloitte &
 Touche LLP
                         Two World Financial Center Telephone:    (212) 436-2000
                         New York, New York 10281-1414 Facsimile: (212) 436-5000




INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholder of
PDV America, Inc.:

We have audited the accompanying consolidated balance sheets of PDV America,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholder's equity and cash flows for each
of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the Index as Item 14(a)2.
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of PDV America, Inc. and subsidiaries
as of December 31, 1996 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for postemployment benefits to conform
with Statement of Financial Accounting Standards No. 112.



February 14, 1997



<PAGE>



PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(Dollars in Thousands)
--------------------------------------------------------------------------------

ASSETS                                                       1996         1995

CURRENT ASSETS:
    Cash and cash equivalents                            $   32,845   $   25,794
    Accounts receivable, net                              1,004,098      817,990
    Due from affiliates                                      60,123       61,376
    Inventories                                             833,191      785,275
    Prepaid expenses and other                               25,093       37,625
                                                         ----------   ----------

         Total current assets                             1,955,350    1,728,060

NOTES RECEIVABLE FROM PDVSA                               1,000,000    1,000,000
PROPERTY, PLANT AND EQUIPMENT - Net                       2,786,941    2,492,146
RESTRICTED CASH                                               9,369        1,258
INVESTMENTS IN AFFILIATES                                 1,040,525      881,960
OTHER ASSETS                                                146,142      116,860
                                                         ----------   ----------
TOTAL                                                    $6,938,327   $6,220,284
                                                         ==========   ==========

LIABILITIES AND SHAREHOLDER'S EQUITY

CURRENT LIABILITIES:
    Short-term bank loans                                $   53,000   $   25,000
    Accounts payable                                        530,758      438,664
    Due to affiliates                                       275,551      176,800
    Taxes other than income                                 200,863      173,915
    Other current liabilities                               237,115      241,796
    Income taxes payable                                     21,137        6,068
    Current portion of long-term debt                        95,240       95,240
    Current portion of capital lease obligation              11,778       10,562
                                                         ----------   ----------

         Total current liabilities                        1,425,442    1,168,045

LONG-TERM DEBT                                            2,465,336    2,155,316
CAPITAL LEASE OBLIGATIONS                                   129,726      141,504
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                 183,370      167,905
OTHER NONCURRENT LIABILITIES                                196,979      188,707
DEFERRED INCOME TAXES                                       399,768      400,137
MINORITY INTEREST                                            26,631       25,618
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY
    Common stock, $1.00 par value - authorized,
         issued and outstanding, 1,000 shares                     1            1
    Additional capital                                    1,232,435    1,232,435
    Retained earnings                                       878,639      740,616
                                                         ----------   ----------

         Total shareholder's equity                       2,111,075    1,973,052
                                                         ----------   ----------

TOTAL                                                    $6,938,327   $6,220,284
                                                         ==========   ==========


See notes to consolidated financial statements.


                                      - 2 -

<PAGE>



PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
THREE YEARS ENDED DECEMBER 31, 1996
(Dollars in Thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                          1996            1995            1994

<S>                                                  <C>             <C>             <C>         
REVENUES:
   Net sales                                         $ 12,698,366    $ 10,279,579    $  9,093,562
   Sales to affiliates                                    253,694         242,581         153,147
                                                     ------------    ------------    ------------
                                                       12,952,060      10,522,160       9,246,709
   Equity in earnings (losses) of affiliates - net         44,906          48,130          55,369
   Interest income from PDVSA                              77,725          77,725          77,725
   Other income (expense) - net                            (3,373)         (1,289)         (6,074)
                                                     ------------    ------------    ------------
                                                       13,071,318      10,646,726       9,373,729
                                                     ------------    ------------    ------------
COST OF SALES AND EXPENSES:
   Cost of sales and operating expenses
     (including purchases of $4,001,471,
     $3,321,128 and $2,915,696 from affiliates)        12,491,003      10,066,012       8,730,971
   Selling, general and administrative expenses           169,159         165,693         159,849
   Interest expense:
     Capital leases                                        16,818          17,913          18,893
     Other                                                177,544         168,633         138,682
   Minority interest                                        1,013           1,993           2,394
                                                     ------------    ------------    ------------
                                                       12,855,537      10,420,244       9,050,789
                                                     ------------    ------------    ------------
INCOME BEFORE INCOME TAXES,
   EXTRAORDINARY ITEMS AND
   CUMULATIVE EFFECT OF ACCOUNTING
   CHANGES                                                215,781         226,482         322,940
INCOME TAXES                                               77,758          83,996         117,824
                                                     ------------    ------------    ------------
INCOME BEFORE EXTRAORDINARY
   ITEMS AND CUMULATIVE EFFECT OF
   ACCOUNTING CHANGES                                     138,023         142,486         205,116
EXTRAORDINARY ITEMS:
   Gain related to the early extinguishment of
     debt, net of related income taxes of $2,160             --             3,380            --
   Charge related to the early extinguishment of
     debt, net of related income tax benefit of
     $956                                                    --              --            (1,627)
CUMULATIVE EFFECT OF ACCOUNTING
   CHANGES:
   Postemployment benefits, net of related
     income tax benefit of $2,823                            --              --            (4,477)
                                                     ------------    ------------    ------------
NET INCOME                                           $    138,023    $    145,866    $    199,012
                                                     ============    ============    ============
</TABLE>



See notes to consolidated financial statements.



                                      - 3 -

<PAGE>



PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
THREE YEARS ENDED DECEMBER 31, 1996
(Amounts in Thousands)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                           Common Stock

                                                                                            Total
                                                               Additional    Retained    Shareholder's
                                         Shares     Amount       Capital     Earnings      Equity

<S>                                      <C>      <C>          <C>          <C>          <C>       
BALANCE, JANUARY 1, 1994                     1    $        1   $1,188,294   $  395,738   $1,584,033

  Capital contributions received from
     Parent                                 --          --         29,141         --         29,141

  Net income                                --          --           --        199,012      199,012
                                         -----    ----------   ----------   ----------   ----------

BALANCE, DECEMBER 31, 1994                   1             1    1,217,435      594,750    1,812,186

  Capital contributions received
   from Parent                              --          --         15,000         --         15,000

Net income                                  --          --           --        145,866      145,866
                                         -----    ----------   ----------   ----------   ----------

BALANCE, DECEMBER 31, 1995                   1             1    1,232,435      740,616    1,973,052

  Net income                                --          --           --        138,023      138,023
                                         -----    ----------   ----------   ----------   ----------

BALANCE, DECEMBER 31, 1996                   1    $        1   $1,232,435   $  878,639   $2,111,075
                                         =====    ==========   ==========   ==========   ==========
</TABLE>



See notes to consolidated financial statements.


                                      - 4 -

<PAGE>



PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1996
(Dollars in Thousands)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                       1996         1995         1994
CASH FLOWS FROM OPERATING
  ACTIVITIES:
<S>                                                 <C>          <C>          <C>      
  Net income                                        $ 138,023    $ 145,866    $ 199,012
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Extraordinary items                                  --         (3,380)       1,627
    Cumulative effect of accounting changes              --           --          4,477
    Depreciation and amortization                     192,585      167,885      160,155
    Provision for losses on accounts receivable        13,275        9,070        6,250
    Deferred income taxes                               5,159       18,777       44,706
    Distributions in excess of (less than) equity
      in earnings (losses) of affiliates               (8,672)     (19,090)     (14,991)
    Postretirement benefits                            15,465       (7,404)      10,512
    Other adjustments                                   2,549        3,661        5,583
    Change in operating assets and liabilities,
      exclusive of acquisitions of businesses:
      Accounts receivable                            (199,333)     (68,072)    (170,939)
      Due from affiliates                               1,253       (9,340)         254
      Inventories                                     (47,916)       2,212      (46,878)
      Prepaid expenses and other                        6,525      (38,764)     (40,652)
      Accounts payable                                 92,265       36,995       78,723
      Income taxes payable                              3,725        3,076      (23,375)
      Due to affiliates                                98,580       27,185       27,455
      Other assets                                    (83,874)     (24,565)       4,607
      Other liabilities                                35,833       85,809       45,022
                                                    ---------    ---------    ---------

      Net cash provided by operating activities:      265,442      329,921      291,548
                                                    ---------    ---------    ---------

CASH FLOWS FROM INVESTING
  ACTIVITIES:
  Capital expenditures                               (437,763)    (314,230)    (350,498)
  Proceeds from sales of property, plant and
    equipment                                           3,929          843        2,742
  Decrease (increase) in restricted cash               (8,111)      41,629      (42,887)
  Return of partnership capital                          --           --         49,256
  Investments in LYONDELL-CITGO Refining
    Company Ltd.                                     (142,638)    (178,875)    (138,416)
  Investments in subsidiary and advances to
    other affiliates                                      (10)     (46,805)      (1,531)
                                                    ---------    ---------    ---------

      Net cash used in investing activities          (584,593)    (497,438)    (481,334)
                                                    ---------    ---------    ---------
</TABLE>



See notes to consolidated financial statements                       (Continued)


                                      - 5 -

<PAGE>



PDV AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1996
(Dollars in Thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                       1996         1995         1994
<S>                                                 <C>          <C>          <C>      
CASH FLOWS FROM FINANCING
  ACTIVITIES:
  Net proceeds from (repayments of) short-term
    bank loans                                      $  28,000    $ (28,500)   $  16,500
  Net borrowings of revolving bank loan                60,000       95,000       55,000
  Payments on term bank loan                          (29,412)      (7,353)    (150,000)
  Payments on private placement senior notes          (58,685)     (47,321)        --
  Proceeds from issuance of senior notes              199,694         --           --
  Proceeds from master shelf agreement                   --        100,000      160,000
  Proceeds from issuance of taxable bonds             120,000         --           --
  Proceeds from issuance of tax-exempt bonds           25,000       90,700       70,000
  Payments of tax-exempt bonds                           --        (40,237)        --
  Payments on capital lease obligations               (11,252)      (9,017)      (8,722)
  (Repayments) borrowings of other debt                (7,143)       2,397       18,510
  Capital contributions received from parent             --         15,000       29,141
                                                    ---------    ---------    ---------
      Net cash paid by financing activities           326,202      170,669      190,429
                                                    ---------    ---------    ---------
INCREASE IN CASH AND
  CASH EQUIVALENTS                                      7,051        3,152          643
CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR                                    25,794       22,642       21,999
                                                    ---------    ---------    ---------
CASH AND CASH EQUIVALENTS,
  END OF YEAR                                       $  32,845    $  25,794    $  22,642
                                                    =========    =========    =========
SUPPLEMENTAL DISCLOSURE OF
  CASH FLOW INFORMATION
  Cash paid during the year for:
    Interest (net of amount capitalized)            $ 197,798    $ 175,515    $ 151,989
                                                    =========    =========    =========
    Income taxes, net of refunds of $546 and
    $3,682 in 1996 and 1995, respectively           $  58,492    $  64,204    $  96,498
                                                    =========    =========    =========
</TABLE>


See notes to consolidated financial statements.                      (Concluded)


                                      - 6 -

<PAGE>



PDV AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------

1.   SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation - PDV America, Inc. (the "Company") was incorporated
     on November 14, 1986 and is a wholly-owned subsidiary of Propernyn B.V.
     ("Propernyn"), a Dutch corporation. The Company's ultimate parent is
     Petroleos de Venezuela, S.A. ("PDVSA"), the national oil company of the
     Republic of Venezuela.

     Description of Business - The Companies (as defined below) manufacture or
     refine and market quality transportation fuels as well as lubricants,
     refined waxes, petrochemicals, asphalt and other industrial products.
     Transportation fuel customers include primarily CITGO (as defined below)
     branded wholesale distributors, convenience stores and airlines located
     primarily east of the Rocky Mountains. Crude oil and refined products are
     also sold for refinery supply, logistical and marketing purposes. Such
     sales are primarily to major and independent oil companies and traders.
     Lubricants are sold to independent distributors, mass marketers and
     industrial customers and petrochemical feedstocks and industrial products
     are sold to various manufacturers and industrial companies throughout the
     United States. Sales are made primarily on account, based on pre-approved
     unsecured credit terms established by CITGO management, except sales to
     airlines, which are made primarily on a prepaid basis. CITGO also has a
     proprietary credit card program and a Companion Visa bank card program
     which allow retail consumers to purchase fuel and convenience items at
     CITGO branded outlets. Allowances for uncollectible accounts are
     established based on several factors which include, but are not limited to,
     analysis of specific customers, historical trends, current economic
     conditions and other information.

     Principles of Consolidation - The consolidated financial statements include
     the accounts of the Company, its wholly-owned subsidiaries (including CITGO
     Petroleum Corporation ("CITGO") and its wholly-owned subsidiaries and VPHI
     Midwest, Inc. ("Midwest"), which has a 50 percent interest in The Uno-Ven
     Company ("Uno-Ven"), an Illinois general partnership) and Cit-Con Oil
     Corporation, which is 65 percent owned (collectively, the "Companies"). All
     material intercompany transactions and accounts have been eliminated.

     The Companies' investments in affiliates are accounted for by the equity
     method. The excess of the investments over the equity in the underlying net
     assets of the affiliates is amortized on a straight-line basis over 40
     years, which is based upon the estimated useful lives of the affiliates'
     assets.

     Pervasiveness of Estimates - The preparation of financial statements in
     conformity with generally accepted accounting principles requires
     management to make estimates and assumptions that affect the reported
     amounts of assets and liabilities and disclosure of contingent assets and
     liabilities at the date of the financial statements and the reported
     amounts of revenues and expenses during the reporting period. Actual
     results could differ from those estimates.



                                      - 7 -

<PAGE>



     Revenue Recognition - Revenue is recognized upon transfer of title to
     products sold, based upon the terms of delivery.

     Supply and Marketing Activities - The Companies engage in the buying and
     selling of crude oil to supply their refineries. The net results of this
     activity are recorded in cost of sales. The Companies also engage in the
     buying and selling of refined products to facilitate the marketing of their
     refined products. The results of this activity are recorded in cost of
     sales and sales.

     Refined product exchange transactions that do not involve the payment or
     receipt of cash are not accounted for as purchases or sales. Any resulting
     volumetric exchange balances are accounted for as inventory in accordance
     with the Companies' LIFO (as defined below) inventory method. Exchanges
     that are settled through payment or receipt of cash are accounted for as
     purchases or sales.

     Excise Taxes - The Companies collect excise taxes on sales of gasoline and
     other motor fuels. Excise taxes of approximately $2.7 billion, $2.2 billion
     and $2.1 billion were collected from customers and paid to various
     governmental entities in 1996, 1995 and 1994, respectively. Excise taxes
     are not included in sales.

     Inventories - Crude oil and refined product inventories are stated at the
     lower of cost or market and cost is primarily determined using the last-in,
     first-out ("LIFO") method. Materials and supplies are valued primarily
     using the average cost method.

     Property, Plant and Equipment - Property, plant and equipment is reported
     at cost, less accumulated depreciation. Depreciation is based upon the
     estimated useful lives of the related assets using the straight-line
     method. Depreciable lives are generally as follows: buildings and
     leaseholds - 10 to 24 years; machinery and equipment - 5 to 24 years; and
     vehicles - 3 to 10 years.

     Upon disposal or retirement of property, plant and equipment, the cost and
     related accumulated depreciation are removed from the accounts and any
     resulting gain or loss is recognized in income.

     The Companies capitalize interest on projects when construction takes
     considerable time and entails major expenditures. Such interest is
     allocated to property, plant and equipment and amortized over the estimated
     useful lives of the related assets. Capitalized interest totaled $12
     million, $5 million and $12 million in 1996, 1995 and 1994, respectively.

     Futures Contracts and Commodity Options Activity and Other Derivatives -
     The Companies enter into petroleum futures contracts primarily to hedge a
     portion of the price risk associated with crude oil and refined products.
     The Companies also buy and sell commodity options for delivery and receipt
     of crude oil and refined products. In order for a transaction to qualify as
     a hedge, the Companies require that the item to be hedged expose the
     Companies to price risk and that the commodity contract reduce that risk
     and be designated as a hedge. The high correlation between price movements
     of a product and the commodity contract in that product is well
     demonstrated in the petroleum industry and generally the Companies rely on
     those historical relationships and on periodic comparisons of market price
     changes to price changes of futures and options contracts accounted for as
     hedges. Gains or losses on contracts which


                                      - 8 -

<PAGE>



     qualify as hedges are recognized when the related inventory is sold or the
     hedged transaction is consummated. Changes in the market value of futures
     and option positions which are not hedges are recorded as gains or losses
     in the period in which they occur.

     The Companies have only limited involvement with other derivative financial
     instruments, and do not use them for trading purposes. They are used to
     manage well defined interest rate and commodity price risks arising out of
     the Companies' core activities.

     The Companies have entered into various interest rate swap and cap
     agreements to manage their risk related to interest rate changes on their
     debt. Premiums paid for purchased interest rate swap and cap agreements are
     amortized to interest expense over the terms of the agreements. Unamortized
     premiums are included in other assets. The interest rate differentials
     received or paid by the Companies related to these agreements are
     recognized as adjustments to interest expense over the term of the
     agreements. Gains or losses on terminated swap agreements are either
     amortized over the original term of the swap agreement if the hedged
     borrowings remain in place or are recognized immediately if the hedged
     borrowings are no longer held.

     The Companies from time to time enter into other over-the-counter
     derivative commodity agreements. No premiums are required for these
     agreements. Gains and losses under these agreements, which primarily fix
     margins on anticipated sales, are accrued as receivables or payables and as
     adjustments of the carrying amount of inventories. The amounts are
     recognized in income through cost of sales when the related petroleum
     products are sold, unless an earlier write-down is required to recognize
     anticipated nonrecovery of deferred amounts.

     Refinery Maintenance - Costs of refinery turnaround maintenance are charged
     to operations over the average period between turnarounds. Turnaround
     periods range approximately from one to seven years. Unamortized costs are
     included in other assets. Amortization of refinery turnaround costs is
     included in depreciation and amortization expense. Amortization was $53
     million, $43 million, and $54 million for 1996, 1995, and 1994,
     respectively. Ordinary maintenance is expensed as incurred.

     Environmental Expenditures - Environmental expenditures that relate to
     current or future revenues are expensed or capitalized as appropriate.
     Expenditures that relate to an existing condition caused by past operations
     and do not contribute to current or future revenue generation are expensed.
     Liabilities are recorded when environmental assessments and/or cleanups are
     probable, and the costs can be reasonably estimated. Environmental
     liabilities are not discounted to their present value. Subsequent
     adjustments to estimates, to the extent required, may be made as more
     refined information becomes available.

     Income Taxes - The Companies account for income taxes using an asset and
     liability approach, in accordance with Statement of Financial Accounting
     Standards ("SFAS") No. 109, "Accounting for Income Taxes."

     Postretirement Benefits - In addition to pension benefits, the Companies,
     at present, provide certain health care and life insurance benefits to
     eligible employees at retirement. The Company accounts for these benefits
     in accordance with SFAS No. 106, "Employers' Accounting for Postretirement
     Benefits Other Than Pensions." This statement requires costs


                                      - 9 -

<PAGE>



     related to postretirement benefits to be accrued during the period an
     employee provides service.

     Postemployment Benefits - The Companies provide various postemployment
     benefits for eligible former or inactive employees, including disability,
     severance, and salary continuation benefits. Effective January 1, 1994, the
     Company adopted SFAS No. 112, "Employers' Accounting for Postemployment
     Benefits." The principal effect of adopting this standard is the accrual of
     postemployment benefits during the period the employees provide service
     rather than expensing costs as paid. The cumulative effect of adopting this
     standard was $4.5 million, which is net of an income tax benefit of $2.8
     million. The effect on 1994 net income, excluding the cumulative effect,
     was not material.

     Restricted Cash - Restricted cash represents short-term, highly liquid
     investments held in trust accounts in accordance with a tax-exempt bond
     agreement. Funds are released solely for financing environmental facilities
     as defined in the bond agreements.

     Consolidated Statement of Cash Flows - For purposes of the consolidated
     statement of cash flows, the Company considers highly liquid short-term
     investments with original maturities of three months or less to be cash
     equivalents. In addition, borrowings with original maturities of three
     months or less are presented net of repayments.

     Accounting for Long-Lived Assets - Effective January 1, 1996, the Company
     adopted Statement of Financial Accounting Standards No. 121, "Accounting
     for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
     Disposed Of" ("SFAS 121"). SFAS 121 establishes the accounting for the
     impairment of long-lived assets, certain identifiable intangibles and
     goodwill related to those assets to be held and used and the accounting for
     long-lived assets and certain identifiable intangibles to be disposed of.
     The adoption of SFAS 121 did not have a material effect on the consolidated
     financial position or results of operations of the Company.

     Reclassifications - Certain reclassifications have been made to the 1995
     and 1994 financial statements to conform with the classifications used in
     1996.

2.   INVESTMENT IN LYONDELL-CITGO REFINING COMPANY LTD.

     On July 1, 1993, subsidiaries of CITGO and Lyondell Petrochemical Company
     ("Lyondell") executed definitive agreements with respect to LYONDELL-CITGO
     Refining Company Ltd. ("LYONDELL-CITGO"), a Texas limited liability company
     which owns and operates a 265 MBPD refinery previously owned by Lyondell
     and located in Houston, Texas. As of December 31, 1996, CITGO has invested
     approximately $579 million in cash for a minority participation interest in
     LYONDELL-CITGO and to fund the initial portion of CITGO's commitment to the
     refinery enhancement project described below, while Lyondell contributed
     the refinery and related assets in exchange for the remaining participation
     interest in the new company. As of December 31, 1996, LYONDELL-CITGO has
     spent approximately $1,073 million on a refinery enhancement project to
     increase the refinery's heavy crude oil high conversion capacity. This
     heavy crude oil will be entirely supplied by a subsidiary of PDVSA under a
     long-term crude oil supply contract. CITGO purchases substantially all of
     the refined products produced at the Houston refinery under a long-term
     contract through the year 2017, thereby significantly reducing its need to
     purchase refined products from third-


                                     - 10 -

<PAGE>



     party sources to supply its distribution network. As of December 31, 1996,
     LYONDELL-CITGO estimates expenditures to complete this project will total
     approximately $57 million to $67 million.

     As of December 31, 1996, CITGO is committed to invest an additional (i) $30
     million at the in-service date (as defined in the definitive agreement) of
     the refinery enhancement project, which is currently scheduled for early
     1997, (ii) up to an additional approximately $10 million through the
     in-service date, and (iii) additional funding for operations in the event
     that the refinery enhancement project startup does not proceed as
     anticipated. In addition, CITGO is required to fund certain fees, expenses
     and interest on LYONDELL-CITGO's initial $450 million of construction
     loans, and is committed to fund up to $22 million for certain maintenance
     and environmental costs, to the extent that maintenance and environmental
     costs exceed expectations. Although CITGO is committed to fund the
     investments described above, CITGO does not currently expect that its
     aggregate investments will exceed $626 million (including the initial
     investment, but exclusive of reinvested earnings) through the in-service
     date. CITGO's expected aggregate investment in LYONDELL-CITGO, plus its
     share of LYONDELL-CITGO's earnings, which must be reinvested through the
     in-service date, will give CITGO approximately a 42% participation interest
     in LYONDELL-CITGO; CITGO also has a one-time option within 18 months of the
     in-service date to make an additional investment which, if made, would
     increase CITGO's participation interest to 50%. As of December 31, 1996,
     the Company has made $258 million of equity contributions to CITGO to fund
     its investments in LYONDELL-CITGO. CITGO expects to fund its remaining
     commitment through cash generated from operations and available credit
     facilities.

     CITGO accounts for its investment in LYONDELL-CITGO using the equity method
     based on allocations of income agreed to by the owners. At December 31,
     1996 and 1995, CITGO's investment, including reinvested earnings, was $605
     million and $461 million, which represented an approximate 13 percent and
     12 percent participation interest, respectively, as defined by the
     agreement. CITGO's equity in the earnings of LYONDELL-CITGO was $1 million,
     $14 million and $6 million for 1996, 1995 and 1994, respectively.

3.   ACQUISITION OF BUSINESS

     On May 1, 1995, CITGO purchased Cato Oil & Grease Company ("Cato"). Cato is
     primarily engaged in the manufacture and distribution of lubricants. The
     results of operations of Cato are included in the accompanying financial
     statements since the date of acquisition. Pro forma results of operations
     for this business are not material to the Companies' consolidated statement
     of income. The total cost of this acquisition was $46.805 million, which
     was allocated as follows:

                                                             (000's Omitted)

     Property, plant and equipment                               $27,000
     Inventory                                                     8,643
     Accounts receivable                                           6,144
     Other assets                                                  5,018
                                                                 -------
                                                                 $46,805
                                                                 =======




                                     - 11 -

<PAGE>



4.   RELATED PARTY TRANSACTIONS

     The Company's subsidiaries purchase approximately two-thirds of the crude
     oil processed in Company refineries from subsidiaries of PDVSA under
     long-term supply agreements. Under these supply agreements, which extend
     through years 2006 and 2013, and other agreements, including feedstock and
     product purchase agreements and vessel transportation contracts, the
     Companies purchased $2.4 billion, $1.9 billion, and $1.8 billion of crude
     oil, feedstocks and other products from wholly-owned subsidiaries of PDVSA
     in 1996, 1995 and 1994, respectively. These crude oil, feedstock, and other
     product purchases comprised 29 percent, 31 percent, and 34 percent of the
     Company's total acquisitions in 1996, 1995 and 1994, respectively. The
     crude oil supply contracts incorporate formula prices based on the market
     value of a number of refined products deemed to be produced from each
     particular crude oil, less (i) certain deemed refining costs adjustable for
     inflation, (ii) certain actual costs, including transportation charges,
     import duties and taxes and (iii) a deemed margin, which varies according
     to the grade of crude oil. Effective January 1, 1992, the supply agreements
     with respect to CITGO's Lake Charles, Corpus Christi and Paulsboro
     refineries were modified to reduce the price levels to be paid by CITGO by
     a fixed amount per barrel of crude oil purchased from PDVSA. Such
     reductions were intended to defray CITGO's costs of certain environmental
     compliance expenditures. This modification resulted in a decrease in the
     cost of crude oil purchased under these agreements of approximately $70
     million per year for the years 1992 through 1994 as compared to the amount
     that would otherwise have been payable thereunder. This modification was to
     expire at December 31, 1996; however, in the third quarter of 1995, PDVSA
     and CITGO agreed to adjust this modification so that the 1992 fixed amount
     per barrel would be reduced and the adjusted modification would not expire
     until December 31, 1999. The impact of this adjustment was an increase in
     crude cost of $44 million for 1996 and $22 million for 1995, over what
     would otherwise have been payable under the original 1992 modification. The
     Company anticipates that the effect of the adjustments to the original
     modifications will be to reduce the price of crude oil purchased from PDVSA
     under these agreements by $25 million per year in 1997 through 1999, in
     each case without giving effect to any other factors that may affect the
     price payable for crude oil under these agreements. Due to the pricing
     formula under the supply agreements, the aggregate price actually paid for
     crude oil purchased from PDVSA under these agreements in each of these
     years will depend primarily upon the then current prices for refined
     products and certain actual costs of CITGO. These estimates are also based
     on the assumption that CITGO will purchase the base volumes of crude oil
     under the agreements. At December 31, 1996 and 1995, $237 million and $146
     million, respectively, were included in payables to affiliates as a result
     of these transactions.

     CITGO purchases substantially all of the refined products produced at the
     LYONDELL-CITGO refinery under a long-term contract through the year 2017.
     During 1996, 1995 and 1994, CITGO purchased $1.6 billion, $1.4 billion, and
     $1.1 billion of crude oil, feedstocks and refined products from
     LYONDELL-CITGO primarily under this product sales agreement. The products
     sales agreement incorporates formula prices based on published market
     prices and defined marketing discounts and variable factors. At December
     31, 1996 and 1995, $38 million and $31 million were included in payables to
     affiliates as a result of these transactions.

     CITGO had refined product, feedstock, crude oil and other product sales of
     $254 million, $243 million and $153 million to affiliates in 1996, 1995 and
     1994, respectively. At


                                     - 12 -

<PAGE>



     December 31, 1996 and 1995, $28 million and $29 million, respectively, were
     included in due from affiliates as a result of these transactions.

     During 1995, the Company entered into a service agreement with PDVSA to
     provide financial and foreign agency services. Income from these services
     was $.3 million and $1.3 million in 1996 and 1995, respectively.

     Under a separate guarantee of rent agreement, PDVSA has guaranteed payment
     of rent, stipulated loss value and terminating value due under the lease of
     the Corpus Christi refinery facilities described in Note 15.

     The notes receivable from PDVSA are unsecured and are comprised of $250
     million of 7.35% notes maturing on August 1, 1998, $250 million of 7.75%
     notes maturing on August 1, 2000, and $500 million of 7.995% notes maturing
     on August 1, 2003. Interest on these notes is payable semiannually by PDVSA
     to the Company on February 1 and August 1 of each year, less one business
     day. For each of the years ended December 31, 1996, 1995 and 1994,
     approximately $78 million of interest income is attributable to such notes
     with $32 million included in due from affiliates at December 31, 1996 and
     1995. Due to the related party nature of these notes receivable, it is not
     practicable to estimate their fair value.

5.   ACCOUNTS RECEIVABLE

                                                           1996         1995
                                                            (000's Omitted)

     Trade                                              $  770,069   $  620,690
     Credit card                                           203,329      166,492
     Other                                                  48,406        9,105
                                                        ----------   ----------

                                                         1,021,804      836,287

     Less allowance for uncollectible accounts             (17,706)     (18,297)
                                                        ----------   ----------

                                                        $1,004,098   $  817,990
                                                        ==========   ==========



6.   INVENTORIES

                                                           1996         1995
                                                            (000's Omitted)

     Refined product                                    $  616,527   $  588,696
     Crude oil                                             165,564      149,414
     Materials and supplies                                 51,100       47,165
                                                        ----------   ----------

                                                        $  833,191   $  785,275
                                                        ==========   ==========




                                     - 13 -

<PAGE>



     As of December 31, 1996 and 1995, replacement costs exceed LIFO carrying
     values by approximately $294 million and $112 million respectively.

7.   PROPERTY, PLANT AND EQUIPMENT

                                                           1996         1995
                                                            (000's Omitted)

     Land                                               $  113,158   $  112,542
     Buildings and leaseholds                              440,175      411,081
     Machinery and equipment                             2,421,803    2,185,277
     Vehicles                                               42,977       44,211
     Construction in process                               373,006      218,146
                                                        ----------   ----------

                                                         3,391,119    2,971,257

     Less accumulated depreciation and amortization       (604,178)    (479,111)
                                                        ----------   -----------

                                                        $2,786,941   $2,492,146
                                                        ==========   ==========


     Depreciation expense for 1996, 1995 and 1994 was $136 million, $122 million
     and $103 million, respectively.

     Other income includes gains and losses on disposals and retirements of
     property, plant and equipment. Such net losses were approximately $2
     million, $4 million and $7 million in 1996, 1995, and 1994, respectively.

8.   CITGO'S INVESTMENTS IN AFFILIATES

     In addition to LYONDELL-CITGO (Note 2), CITGO's investments in affiliates
     consist of equity interests of 6.8 to 50 percent in joint interest
     pipelines and terminals, including a 13.98 percent interest in Colonial
     Pipeline Company; a 49.5 percent partnership interest in Nelson Industrial
     Steam Company ("NISCO"), which is a qualified cogeneration facility; and a
     49 percent partnership interest in Mount Vernon Phenol Plant. The carrying
     value of these investments exceeded the equity in the underlying net assets
     by approximately $160 million and $164 million at December 31, 1996 and
     1995, respectively.

     In September 1994, NISCO refinanced its long-term debt. In connection with
     this transaction, CITGO received a $75 million cash distribution from NISCO
     and NISCO wrote off deferred loan fees and other costs associated with the
     extinguished debt. CITGO's share of NISCO's write-off, $1.6 million, was
     reported as an extraordinary after-tax charge in 1994. The distribution
     received exceeded CITGO's investment and capital account in NISCO by
     approximately $26 million. This amount was recorded in other noncurrent
     liabilities based on the terms of the NISCO partnership agreement and has
     subsequently been adjusted to reflect capital transactions and CITGO's
     share of NISCO's earnings and losses. At December 31, 1996 and 1995, other
     noncurrent liabilities include approximately $47 million and $40 million,
     respectively, related to CITGO's partnership interest in NISCO.



                                     - 14 -

<PAGE>



     CITGO's equity in net income of affiliates, excluding the NISCO
     extraordinary charge, is included in equity in earnings (losses) of
     affiliates. Information on CITGO's investments, including LYONDELL-CITGO,
     follows:

                                                    1996       1995       1994
                                                         (000's Omitted)

     Investments in affiliates                    $790,576   $650,360   $461,807
     Equity in net income (losses) of affiliates    21,481     33,530     28,585
     Dividends received from affiliates             31,157     29,040     26,282


     Selected financial information provided by the affiliates is summarized as
     follows:

                                                1996        1995         1994
                                                      (000's Omitted)

     Summary of financial position:
     Current assets                         $  543,692   $  547,479   $  529,206
          Noncurrent assets                  2,859,091    2,345,695    1,876,688
          Current liabilities                  697,046      596,723      510,613
          Noncurrent liabilities             1,999,276    1,659,729    1,400,805

     Summary of operating results:
          Revenues                          $4,158,684   $3,900,653   $3,474,306
          Gross profit                         475,227      574,103      522,059
          Net income                           242,434      344,817      276,633



9.   INVESTMENT IN UNO-VEN

     On December 1, 1989, Midwest purchased an interest in a refinery in
     Illinois, and a distribution and marketing system, located in various
     midwestern states, from Union Oil Company of California ("Unocal"). Midwest
     then contributed these assets to Uno-Ven in exchange for a 50 percent
     interest in the partnership. Unocal contributed the balance of the refinery
     and distribution assets, as well as approximately $172 million of
     liabilities, to Uno-Ven. Information with respect to Uno-Ven is as follows:

                                                    1996       1995       1994
                                                         (000's Omitted)

     Investment in Uno-Ven                        $249,949   $231,600   $217,000
     Equity in net income                           23,425     14,600     26,785
     Dividends received from Uno-Ven                 5,076          -     15,724





                                     - 15 -

<PAGE>



     Financial information of Uno-Ven is as follows:

                                               1996         1995         1994
                                                      (000's Omitted)

     Summary of financial position:
          Current assets                    $  360,900   $  319,800   $  280,900
          Noncurrent assets                    562,700      570,100      573,900
          Current liabilities                  265,800      259,600      239,600
          Noncurrent Liabilities               158,000      167,100      181,200

     Summary of operating results:
          Revenues                          $1,663,277   $1,352,100   $1,236,600
          Gross profit                         150,000      139,000      155,000
          Net income                            46,890       29,200       53,700


     Under a long-term crude oil supply agreement through the year 2009, and
     vessel transportation contracts, Uno-Ven purchased $964 million, $684
     million and $571 million of crude oil from a wholly-owned subsidiary of
     PDVSA in 1996, 1995 and 1994, respectively. The terms and pricing formulas
     are similar to the Company's subsidiaries' crude oil supply agreements (see
     Note 4). However, at the direction of the partners, in 1994 Uno-Ven entered
     into an amendment of the supply agreement, in lieu of taking certain
     actions provided in the supply agreement to change the method of
     calculating the price of crude oil upon completion of the Agreed Capital
     Improvements (as defined in the Uno-Ven Partnership Agreement). This
     amendment increased the price payable by Uno-Ven for all crude oil
     purchased under the supply agreement on and after May 1, 1993, by $0.2841
     per barrel. As a result of this amendment, Uno-Ven's 1994 earnings reflect
     a charge of $9.4 million for the price increase allocable to 1993. The
     supply agreement does not require any future pricing adjustments.

     Uno-Ven buys and sells refined products from/to Unocal. Agreements
     underlying these transactions define the obligations and responsibilities
     of the parties. Pricing is in accordance with formulas based, in part, upon
     market-related prices of finished products. Uno-Ven also has a number of
     agreements with Unocal covering certain marketing, administrative, and
     technical functions.

     Under the terms of the asset purchase and contribution agreement, Unocal
     has agreed to indemnify Uno-Ven for certain environmental compliance and
     cleanup costs identified during the first six years of the partnership's
     operations relating to conditions that existed as of December 1, 1989. This
     indemnification ended November 30, 1995. At the present time, Uno-Ven
     estimates that its share of any ultimate liability from any known
     environmental matters would not be material to its financial condition.

     In December 1996, the Company signed a letter of intent with Unocal for the
     Company or an affiliate to purchase the refining, distribution and
     marketing assets representing Unocal's 50% interest in Uno-Ven. CITGO is
     expected to operate the Illinois refinery and distribution network and
     purchase refined products produced at the refinery under various agreements
     with affiliates. The transaction is expected to close in the second quarter
     of 1997.



                                     - 16 -

<PAGE>



10.  SHORT-TERM BANK LOANS

     CITGO has established $180 million of uncommitted, unsecured, short-term
     borrowing facilities with various banks. Interest rates on these facilities
     are determined daily based upon the Federal funds interest rates, and
     maturity options vary up to 30 days. The weighted average interest rates
     actually incurred in 1996, 1995 and 1994 were 5.7, 6.2 and 6.4 percent,
     respectively. CITGO had $53 million and $25.0 million of borrowings
     outstanding under these facilities at December 31, 1996 and 1995,
     respectively.

11.  LONG-TERM DEBT
<TABLE>
<CAPTION>
                                                                        1996           1995
                                                                          (000's Omitted)
     <S>                                                            <C>            <C>        
     Senior Notes:
         7.25% Senior Notes $250 million face amount due 1998       $   249,631    $   249,420
     
         7.75% Senior Notes $250 million face amount due 2000           250,000        250,000
     
         7.875% Senior Notes $500 million face amount due 2003          496,967        496,633
     
     Shelf registration:
         7.875% Senior Notes $200 million face amount due 2006          199,715           --
     
     Revolving bank loan                                                350,000        290,000
     
     Term bank loan                                                      88,235        117,647
     
     Private Placement:
         8.75% Series A Senior Notes due 1998                            37,500         56,250
         9.03% Series B Senior Notes due 2001                           142,857        171,429
         9.30% Series C Senior Notes due 2006                           113,637        125,000
     
     Master Shelf Agreement:
         8.55% Senior Notes due 2002                                     25,000         25,000
         8.68% Senior Notes due 2003                                     50,000         50,000
         7.29% Senior Notes due 2004                                     20,000         20,000
         8.59% Senior Notes due 2006                                     40,000         40,000
         8.94% Senior Notes due 2007                                     50,000         50,000
         7.17% Senior Notes due 2008                                     25,000         25,000
         7.22% Senior Notes due 2009                                     50,000         50,000
     
     Tax Exempt Bonds:
         Pollution control revenue bonds due 2004                        15,800         15,800
         Port facilities revenue bonds due 2007                          11,800         11,800
         Louisiana wastewater facility revenue bonds due 2023             3,020          3,020
         Louisiana wastewater facility revenue bonds due 2024            20,000         20,000
         Louisiana wastewater facility revenue bonds due 2025            40,700         40,700
         Gulf Coast solid waste facility revenue bonds due 2025          50,000         50,000
         Gulf Coast solid waste facility revenue bonds due 2026          50,000         50,000
         Port of Corpus Christi sewage and solid waste disposal
               revenue bonds due 2026                                    25,000           --

     Taxable Louisiana wastewater facility revenue bonds due 2026       120,000           --

     Cit-Con bank credit agreement                                       35,714         42,857
                                                                    -----------    -----------

                                                                      2,560,576      2,250,556

     Less current portion of long-term debt                             (95,240)       (95,240)
                                                                    -----------    -----------

                                                                    $ 2,465,336    $ 2,155,316
                                                                    ===========    ===========
</TABLE>



                                     - 17 -

<PAGE>




     In August 1993, the Company issued $1 billion principal amount of Senior
     Notes (the "Senior Notes") with interest rates ranging from 7.25 to 7.875
     percent with due dates ranging from 1998 to 2003. Interest on the Senior
     Notes is payable semiannually, commencing February 1, 1994. The Senior
     Notes represent senior unsecured indebtedness of the Company, and are
     structurally subordinated to the liabilities of the Company's subsidiaries.
     The Senior Notes are guaranteed by Propernyn and PDVSA. The Senior Notes
     contain certain covenants that restrict, among other things, the ability of
     the Company and its subsidiaries to incur additional debt, to pay
     dividends, place liens on property, and sell certain assets. The Company
     was in compliance with the debt covenants at December 31, 1996.

     In April 1996, CITGO filed a registration statement with the Securities and
     Exchange Commission relating to the shelf registration of $600 million of
     debt securities that may be offered and sold from time to time. In May
     1996, the registration became effective and CITGO sold a tranche of debt
     securities with an aggregate offering price of $200 million. CITGO used the
     net proceeds from the sale of the notes for working capital and the
     repayment of borrowings under the Company's revolving credit facility. This
     repayment will not permanently reduce CITGO's borrowing capacity
     thereunder. CITGO may, in the future, borrow additional amounts under its
     revolving credit facility to fund capital expenditures, to fund working
     capital requirements, or for other corporate purposes.

     CITGO's credit agreement with various banks was amended during 1994. The
     primary result of the amendments was a reduction in borrowings under the
     term bank loan of $150 million. At December 31, 1996, this agreement
     consists of a $125 million term loan and a $675 million revolving loan. The
     term loan is unsecured, has various interest rate options (year-end rate of
     6.8, 6.3 and 6.6 percent at December 31, 1996, 1995 and 1994, respectively)
     and principal amounts are payable in quarterly installments commencing in
     December 1995. The revolving loan is unsecured, has various borrowing
     maturities and interest rate options (year-end rate of 6.7, 6.4 and 6.7
     percent at December 31, 1996, 1995 and 1994, respectively), and is
     committed through December 31, 1999.

     At December 31, 1996, CITGO has outstanding approximately $294 million of
     privately placed, unsecured Senior Notes (the "Notes"). Guarantees of these
     Notes by significant subsidiaries of CITGO were released during 1995.
     Principal amounts are payable in annual installments commencing in November
     1995 for the Series A and Series B Notes and November 1996 for the Series C
     Notes. Interest is payable semiannually in May and November.

     During 1994, CITGO entered into an unsecured Master Shelf Agreement with an
     insurance company to place up to $260 million of senior notes in private
     markets. A total of $260 million has been drawn under this facility as of
     December 31, 1996, with various fixed interest rates and maturities.

     The various CITGO agreements above contain certain covenants that,
     depending upon the level of the Company's capitalization and earnings,
     could impose limitations on the Company for paying dividends, incurring
     additional debt, placing liens on property, and selling fixed assets. The
     Company was in compliance with the debt covenants at December 31, 1996.


                                     - 18 -

<PAGE>




     Through state entities, CITGO has issued $27.6 million of industrial
     development bonds for certain Lake Charles, Louisiana port facilities and
     pollution control equipment and $188.7 million of environmental revenue
     bonds to finance a portion of the Company's environmental facilities at its
     Lake Charles, Louisiana and Corpus Christi, Texas refineries and at the
     LYONDELL-CITGO refinery.

     The pollution control and port facilities revenue bonds are secured by
     letters of credit. Interest rates vary weekly and the interest rates at
     December 31, 1996, 1995 and 1994 were 4.1, 5.1 and 5.5 percent,
     respectively. The Louisiana Revenue Bonds due in the year 2023 have a fixed
     interest rate of 6 percent. Guarantees of these bonds by certain CITGO
     subsidiaries were released during 1995. During 1995 CITGO repurchased
     approximately $47 million of these bonds at a discount, resulting in an
     extraordinary gain of approximately $3.4 million net of related income
     taxes of approximately $2.2 million. The remaining tax-exempt revenue bonds
     are secured by letters of credit and have a floating interest rate which
     was 5.1 percent, 6.2 percent, and 5.7 percent at December 31, 1996, 1995,
     and 1994, respectively, as applicable.

     Through a state entity, the Company has issued $120 million of taxable
     environmental revenue bonds to finance a portion of the Company's
     environmental facilities at its Lake Charles, Louisiana refinery. Such
     bonds are secured by a letter of credit and have a floating interest rate
     which was 5.5% at December 31, 1996. At the option of the Company and upon
     the occurrence of certain specified conditions, all or any portion of such
     taxable bonds may be converted to tax-exempt bonds. At December 31, 1996,
     no such bonds had been converted to tax-exempt bonds.

     The Cit-Con Oil Corporation bank credit agreement was converted to a term
     loan during 1995. The agreement is collateralized by throughput agreements
     of the owner companies, has various interest rate options (weighted average
     effective rates of 6.3, 6.8 and 6.7 percent in 1996, 1995 and 1994,
     respectively), and requires quarterly principal payments through December
     2001.

     CITGO has entered into the following interest rate swap agreements to
     reduce the impact of interest rate changes on its variable interest rate
     debt: 

                                                            Notional Principal
                                                                  Amount
                             Expiration    Fixed Rate        1996        1995
Variable Rate Index             Date          Paid          (000's Omitted)

     One-month LIBOR       September 1998     4.85%       $  25,000   $  25,000
     One-month LIBOR       November 1998      5.09           25,000      25,000
     One-month LIBOR       May 2000           6.28           25,000      25,000
     J.J. Kenny            May 2000           4.72           25,000      25,000
     J.J. Kenny            February 2005      5.30           12,000      12,000
     J.J. Kenny            February 2005      5.27           15,000      15,000
     J.J. Kenny            February 2005      5.49           15,000      15,000
                                                          ---------   ---------
                                                          $ 142,000   $ 142,000
                                                          =========   =========




                                     - 19 -

<PAGE>




     Interest expense includes $1.1 million, $0.1 million, and $0.4 million in
     1996, 1995 and 1994, respectively, related to interest paid on these
     agreements. During 1995, CITGO converted $25 million of variable rate debt
     to fixed rate borrowings and terminated the interest rate swap agreement
     matched to the variable rate debt. Other income in 1995 includes a $2.4
     million gain related to the termination of this interest rate swap
     agreement.

     During 1995, CITGO entered into a 9% interest rate cap agreement with a
     notional amount of $25 million, a reference rate of three-month LIBOR and
     an expiration date of February 1997. Other interest rate cap agreements to
     which CITGO was a party expired in November 1994. The effect of these
     agreements was not material in 1996, 1995 or 1994.

     Future maturities of long-term debt as of December 31, 1996 are: 1997-$95.2
     million; 1998-$345.2 million; 1999-$426.5 million; 2000-$297.1 million;
     2001-$47.1 million and $1,353 million thereafter.

12.  EMPLOYEE BENEFIT PLANS

     Employee Savings - CITGO sponsors three qualified defined contribution
     retirement and savings plans covering substantially all eligible salaried
     and hourly employees. Participants make voluntary contributions to the
     plans and CITGO makes contributions, including matching of employee
     contributions, based on plan provisions. CITGO charged $16 million, $16
     million and $15 million to operations related to its contributions to these
     plans in 1996, 1995 and 1994, respectively.

     Pension Benefits - CITGO sponsors three qualified noncontributory defined
     benefit pension plans, two of which cover eligible hourly employees and one
     of which covers eligible salaried employees. CITGO also sponsors three
     nonqualified defined benefit plans for certain eligible employees. The
     qualified plans' assets include corporate securities, a fixed income mutual
     fund, and a short-term investment fund. The nonqualified plans are not
     funded.

     CITGO's policy is to fund the qualified pension plans in accordance with
     applicable laws and regulations and not to exceed the tax deductible
     limits. The nonqualified plans are funded as necessary to pay retiree
     benefits. The plan benefits for each of the qualified pension plans are
     primarily based on an employee's years of plan service and compensation as
     defined by each plan.

     The Company's net periodic pension costs for these plans included the
     following components:

<TABLE>
<CAPTION>
                                                        1996        1995         1994
                                                               (000's Omitted)

<S>                                                  <C>         <C>          <C>      
     Service cost-benefits earned during the year    $  13,356   $  11,498    $  11,757
     Interest cost on projected benefit obligation      12,787      11,496       10,164
     Actual (return) loss on plan assets              (24,645)    (34,784)        3,166
     Net amortization and deferral                      10,068      23,777     (14,529)
                                                     ---------   ----------   ---------

     Net periodic pension cost                       $  11,566   $  11,987    $  10,558
                                                     =========   =========    =========
</TABLE>



                                     - 20 -

<PAGE>



     The following table summarizes the funded status of these plans and the
     related amounts recognized in the Company's consolidated financial
     statements:


<TABLE>
<CAPTION>
                                                          1996                       1995

                                                   Over-        Under-       Over-        Under-
                                                   funded       funded       funded       funded
                                                   Plans        Plans        Plans        Plans

                                                     (000's Omitted)           (000's Omitted)


     <S>                                         <C>          <C>          <C>          <C>    
     Plan assets at fair value                   $ 184,236    $    --      $ 155,997    $    --
                                                 ---------    ---------    ---------    ---------
     
     Actuarial present value of 
      benefit obligation:
      Vested benefits                             (114,259)     (13,643)    (103,046)     (10,292)
      Nonvested benefits                           (18,569)         (85)     (16,661)        --
                                                 ---------    ---------    ---------    ---------
     
     Accumulated benefit obligation               (132,828)     (13,728)    (119,707)     (10,292)
     
     Effect of projected long-term
       compensation increases                      (46,140)        (380)     (41,012)      (1,729)
                                                 ---------    ---------    ---------    ---------
     
     Total projected benefit obligation
       ("PBO")                                    (178,968)     (14,108)    (160,719)     (12,021)
                                                              ---------    ---------    ---------
     
     Plan assets in excess of (less
       than) PBO                                 $   5,268    $ (14,108)   $  (4,722)   $ (12,021)
                                                 =========    =========    ---------    =========
     
     Pension liability recognized in the
       consolidated balance sheets               $ (27,974)   $ (13,728)   $ (27,467)   $ (10,292)
     
     Amounts not recognized:
       Prior service costs                           1,731       (1,956)       1,928       (1,786)
       Net gain at date of adoption                  1,816         --          2,085         --
       Net amount resulting from plan
         experience and changes in
         actuarial assumptions                      29,695       (1,582)      18,732         (862)
       Additional minimum liability                   --          3,158         --            919
                                                 ---------    ---------    ---------    ---------
     
     Funded status as of year end                $   5,268    $ (14,108)   $  (4,722)   $ (12,021)
                                                 =========    =========    =========    =========
</TABLE>


     The underfunded plans relate to the plans in which assets at fair value are
     exceeded by the accumulated benefit obligation.





                                     - 21 -

<PAGE>



     Following are the significant assumptions used in determining the costs and
     funded status of these plans:

                                                       1996      1995      1994

     Discount rate:
          Pension costs                                7.5%      8.0%      7.5%
          Benefit obligations                          7.5       7.5       8.0
     Rate of long-term compensation increase:
          Pension costs                                5.0       5.0       5.0
          Benefit obligations                          5.0       5.0       5.0
     Expected long-term rate of return on assets       8.5       8.5       9.0

     Postretirement Benefits Other Than Pensions - In addition to pension
     benefits, CITGO also provides certain health care and life insurance
     benefits for eligible salaried and hourly employees at retirement. These
     benefits are subject to deductibles, copayment provisions and other
     limitations and are primarily funded on a pay-as-you-go basis. The Company
     reserves the right to change or to terminate the benefits at any time.

     The following sets forth the funded status of the accumulated
     postretirement benefit obligation reconciled with amounts reported in the
     Company's consolidated balance sheet:

<TABLE>
<CAPTION>
                                                                      1996       1995
                                                                      (000's Omitted)

     <S>                                                            <C>        <C>     
     Accumulated postretirement benefit obligation ("APBO"):
          Retirees                                                  $ 45,793   $ 49,853
          Fully eligible active employees                             38,955     38,393
          Other active employees                                      64,402     73,295
                                                                    --------   --------

                  Total APBO                                         149,150    161,541

     Trust assets at fair value                                          843        799
                                                                    --------   --------

     APBO in excess of trust assets                                 148,307    160,742
     Plus unrecognized net gain                                      38,763     10,863
                                                                    --------   --------

     Postretirement benefit liability recognized in the 
          consolidated balance sheets including $3.7 million in
          other current liabilities at December 31, 1996 and 1995   $187,070   $171,605
                                                                    ========   ========
</TABLE>


                                     - 22 -

<PAGE>



     The Company's net periodic benefit cost included the following components:

<TABLE>
<CAPTION>
                                                              1996         1995        1994
                                                                     (000's Omitted)

     <S>                                                   <C>          <C>         <C>      
     Service cost - benefits earned during the year        $   7,047    $   5,819   $   7,421
     Interest cost on APBO                                    11,982       12,089      11,833
     Actual return on trust assets                               (50)        (43)         (41)
     Other - amortization of unrecognized net gain                 -      (21,603)     (5,333)
                                                           ---------    ---------   ---------

     Net periodic postretirement benefit cost (credit)     $  18,979    $ (3,738)   $  13,880
                                                           =========    ========    =========
</TABLE>



     The amortization of unrecognized net gain (or loss) is due to changes in
     the APBO resulting from experience different from that assumed and from
     changes in assumptions. Gains (or losses) are recognized as a component of
     net postretirement benefit cost by the amount the beginning of year
     unrecognized net gain (or loss) exceeds 7.5 percent of the APBO. Increases
     in the per capita costs of covered health care benefits of 10 percent, 11
     percent and 12 percent were assumed for 1996, 1995 and 1994, respectively,
     gradually decreasing to a 5.5 percent ultimate rate by the year 2002.
     Increasing the assumed health care cost trend rates by one percentage point
     in each future year would increase the accumulated postretirement benefit
     obligation as of December 31, 1996 by $26 million and increase the
     aggregate of the service cost and interest cost components of net periodic
     postretirement benefit cost for 1996 by $4.3 million. Discount rates of 7.5
     percent, 8 percent and 7.5 percent for 1996, 1995 and 1994, respectively,
     were used to determine the net periodic postretirement cost. A discount
     rate of 7.5 percent for 1996 and 1995 was used to determine the accumulated
     postretirement benefit obligation.

13.  INCOME TAXES

     The provisions for income taxes are comprised of the following:

                                        1996             1995             1994
                                                   (000's Omitted)

     Current:
          Federal                     $ 69,698         $ 60,152         $ 67,443
          State                          2,901            5,067            5,675
                                      --------         --------         --------

                                        72,599           65,219           73,118

          Deferred                       5,159           18,777           44,706
                                      --------         --------         --------

                                      $ 77,758         $ 83,996         $117,824
                                      ========         ========         ========




                                     - 23 -

<PAGE>




     The Federal statutory tax rate differs from the effective rate due to the
     following:

                                             1996          1995          1994

     Federal statutory tax rate              35.0%         35.0%         35.0%
     State taxes, net of Federal benefit      3.2           3.4           2.7
     Dividend exclusions                     (3.5)         (3.2)         (2.0)
     Other                                    1.3           1.9           0.8
                                           ------        ------        ------

     Effective tax rate                      36.0%         37.1%         36.5%
                                           ======        ======        ======



     Under SFAS 109, deferred income taxes reflect the net tax effects of (a)
     temporary differences between the carrying amounts of assets and
     liabilities for financial reporting purposes and the amounts used for
     income tax purposes, and (b) loss and tax credit carryforwards. The tax
     effects of significant items comprising the Company's net deferred tax
     liability as of December 31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                         1996           1995
                                                                           (000's Omitted)
     <S>                                                             <C>            <C>        
     Deferred tax liabilities
          Property, plant and equipment                              $   466,889    $   429,287
          Inventories                                                     70,420         65,650
          Investments in affiliates                                       70,368         65,915
          Other                                                           30,513          8,423
                                                                     -----------    -----------

                                                                         638,190        569,275
                                                                     -----------    -----------
     Deferred tax assets:
          Postretirement benefit obligations                              77,905         71,579
          Marketing and promotional accruals                              23,236         23,603
          Employee benefit accruals                                       30,027         27,280
          Alternative minimum tax credit carryforward                     59,543         21,277
          Other                                                           60,762         43,943
                                                                     -----------    -----------

                                                                         251,473        187,682
                                                                     -----------    -----------
     Net deferred tax liability (of which $13,051 and $18,544 is
          included in prepaid expenses and other at December 31,
          1996 and 1995, respectively)                               $   386,717    $   381,593
                                                                     ===========    ===========
</TABLE>



     The Company's alternative minimum tax credit carryforwards are available to
     offset regular Federal income taxes in future years without expiration,
     subject to certain alternative minimum tax limitations.



                                     - 24 -

<PAGE>



     At December 31, 1996, the Company has capital loss carryforwards of $10.9
     million, $9 million of which expire in 1998, $0.4 million of which expire
     in 2000, and $1.5 million of which expire in 2001.

14.  COMMITMENTS AND CONTINGENCIES

     Litigation and Injury Claims - Various lawsuits and claims arising in the
     ordinary course of business are pending against the Companies. Included
     among these are: (i) litigation with a contractor who is claiming
     additional compensation of approximately $42 million, including interest
     and profits, for sludge removal and treatment at CITGO's Lake Charles,
     Louisiana refinery; CITGO is seeking contractual penalties for
     non-performance and breach of contract and also a determination that a
     portion of any damages awarded would be recoverable from a former owner; a
     trial is currently scheduled for March 1997 concerning the nonperformance
     and breach of contract issues; and (ii) litigation against CITGO by a
     number of current and former employees and applicants on behalf of
     themselves and a class of similarly situated persons asserting claims under
     Federal and state laws of racial discrimination in connection with the
     employment practices at CITGO's Lake Charles, Louisiana refining complex;
     the plaintiffs have appealed the Court's denial of class certification; the
     initial trials on this litigation are scheduled for July 1997. The
     Companies are vigorously contesting or pursuing, as applicable, such
     lawsuits and claims and believes that its positions are sustainable. The
     Companies have recorded accruals for losses it considers to be probable and
     reasonably estimable. However, due to uncertainties involved in litigation,
     there are cases, including the significant matters noted above, in which
     the outcome is not reasonably predictable and the losses, if any, are not
     reasonably estimable. If such lawsuits and claims were to be determined in
     a manner adverse to the Companies, and in amounts in excess of the
     Companies' accruals, it is reasonably possible that such determinations
     could have a material adverse effect on the Companies' results of
     operations in a given year. The term "reasonably possible" is used herein
     to mean that the chance of a future transaction or event occurring is more
     than remote but less than likely. However, based upon management's current
     assessments of these lawsuits and claims and that provided by counsel in
     such matters, and the capital resources available to the Companies,
     management of the Companies believes that the ultimate resolution of these
     lawsuits and claims would not exceed the aggregate of the amounts accrued
     in respect of such lawsuits and claims and the insurance coverages
     available to the Companies by a material amount and, therefore, should not
     have a material adverse effect on the Companies, financial condition,
     results of operations or liquidity.

     In January 1997, the Louisiana Supreme Court ruled in favor of certain
     Louisiana refiners in an industry case regarding an assessment of a use tax
     on petroleum coke which accumulates on catalyst during refining operations
     and a change to the calculation of the sales/use tax on fuel gas generated
     by refinery operations. The Companies believe that they have no further
     exposure to losses related to these matters.

     Environmental Matters - The Companies are subject to various Federal, state
     and local environmental laws and regulations which may require the
     Companies to take action to correct or improve the effects on the
     environment of prior disposal or release of petroleum substances by the
     Companies or other parties. Management believes the Companies are in
     compliance


                                     - 25 -

<PAGE>



     with these laws and regulations in all material aspects. Maintaining
     compliance with environmental laws and regulations could require
     significant capital expenditures and additional operating costs.

     In 1992, CITGO reached an agreement with a state agency to cease usage of
     certain surface impoundments at CITGO's Lake Charles, Louisiana refinery by
     1994. A mutually acceptable closure plan was filed with the state in 1993.
     CITGO and a former owner are participating in the closure and sharing the
     related costs based on estimated contributions of waste and ownership
     periods. The remediation commenced in December 1993 and is expected to be
     completed no earlier than 1998.

     In 1992, an agreement was reached between CITGO and a former owner
     concerning a number of environmental issues. The agreement consisted, in
     part, of payments to CITGO totaling $46 million, of which $31 million was
     received in 1992 and $5 million in each of the years 1993, 1994, and 1995.
     The former owner will continue to share the costs of certain specific
     environmental remediation and certain tort liability actions based on
     ownership periods and specific terms of the agreement.

     At December 31, 1996 and 1995 the Company had $56 million and $60 million,
     respectively, of environmental accruals included in other noncurrent
     liabilities. Based on currently available information, including the
     continuing participation of former owners in remediation actions and other
     environmental-related matters, management believes these accruals are
     adequate. Conditions which require additional expenditures may exist for
     various Company sites including, but not limited to, the Company's
     operating refinery complexes, closed refineries, service stations and crude
     oil and petroleum product storage terminals. The amount of such future
     expenditures, if any, is indeterminable.

     Capital Expenditures - CITGO's anticipated capital expenditures, excluding
     CITGO's investments in LYONDELL-CITGO, for the five-year period 1997 to the
     year 2001 total approximately $1.6 billion (unaudited). The expenditures
     include environmental and regulatory capital projects as well as strategic
     capital expenditures. At December 31, 1996, authorized expenditures on
     incomplete capital projects totaled approximately $229 million.

     Supply Agreements - CITGO has a long-term contract through August 31, 1998
     which provides the option to purchase domestic crude oil at contract
     reference prices from an independent supplier. Purchases under this
     contract totaled $318 million, $261 million and $239 million in 1996, 1995
     and 1994, respectively.

     CITGO has various other crude oil, refined product and feedstock purchase
     agreements with unaffiliated entities with terms ranging from monthly to
     annual renewal. CITGO believes numerous sources of supply are readily
     available on comparable terms.

     Throughput Agreements - CITGO has throughput agreements with certain
     pipeline affiliates (Note 8). These throughput agreements may be used to
     secure obligations of the pipeline affiliates. Under these agreements,
     CITGO may be required to provide its pipeline affiliates with additional
     funds through advances against future charges for the shipping of petroleum


                                     - 26 -

<PAGE>



     products. CITGO currently ships on these pipelines and has not been
     required to advance funds in the past. At December 31, 1996, CITGO has no
     fixed and determinable, unconditional purchase obligations under these
     agreements.

     Marine Spill Response Arrangements - During the third quarter of 1995 CITGO
     entered into a contract with National Response Corporation for marine oil
     removal services capability and terminated its relationship with the
     previous provider of that service. CITGO paid a cancellation fee of
     approximately $16 million, which is included in cost of sales and operating
     expenses in 1995.

     Derivative Commodity Activity - CITGO enters into petroleum futures
     contracts primarily to reduce its inventory exposure to price risk. CITGO
     also buys and sells commodity options for delivery and receipt of crude oil
     and refined products. Such contracts are entered into through major
     brokerage houses and traded on national exchanges and although usually
     settled in cash, can be settled through delivery of the commodity. Such
     contracts generally qualify for hedge accounting and correlate to price
     movements of crude oil and refined products. Resulting gains or losses on
     such contracts, therefore, will generally be offset by gains and losses on
     CITGO's hedged inventory or future purchases and sales. CITGO's derivative
     commodity activity is closely monitored by management. Contract periods are
     generally less than 30 days. Unrealized and deferred gains and losses on
     these contracts at December 31, 1996 and 1995 and the effects on cost of
     sales and pretax earnings for 1996, 1995 and 1994 were not material. At
     times, the Company enters into commodity futures and option agreements that
     are not related to the hedging program discussed above. This activity and
     its results were not material in 1996, 1995 or 1994.

     From time to time, CITGO uses other over-the-counter derivative commodity
     agreements to hedge exposure to changes in prices of refined products. At
     December 31, 1996 and 1995, CITGO had no such agreements in place. At
     December 31, 1993, CITGO had one turbine fuel price collar in effect which
     effectively established a ceiling and floor price for 52 thousand barrels
     of turbine fuel sales per month. The agreement expired in August 1994.

     Other Credit and Off-Balance-Sheet Risk Information as of December 31, 1996
     - CITGO has guaranteed approximately $13 million of debt of certain of its
     distributors and an affiliate. Such debt is substantially collateralized by
     assets of these entities. CITGO has outstanding letters of credit totaling
     approximately $364 million which includes $218 million related to its
     tax-exempt bonds. CITGO has also acquired surety bonds totaling $24 million
     primarily due to requirements of various government entities. CITGO does
     not expect liabilities to be incurred related to such guarantees, letters
     of credit or surety bonds.

     Neither CITGO nor the counterparties are required to collateralize their
     obligations under interest rate swaps or caps or over-the-counter
     derivative commodity agreements. CITGO is exposed to credit loss in the
     event of nonperformance by the counterparties to these agreements, but has
     no off-balance-sheet risk of accounting loss for the notional amounts.
     CITGO does not anticipate nonperformance by the counterparties, which
     consist primarily of major financial institutions at December 31, 1996.



                                     - 27 -

<PAGE>



     Management considers the market risk to the Companies related to futures
     contracts, commodity options activity, and other derivatives to be
     insignificant during the periods presented.

15.  LEASES

     CITGO leases certain of its Corpus Christi refinery facilities under a
     long-term lease. The basic term of the lease expires on January 1, 2004;
     however, CITGO may renew the lease until January 31, 2011, the date of its
     purchase option. Capitalized costs included in property, plant and
     equipment related to the leased assets were approximately $209 million at
     December 31, 1996 and 1995. Accumulated amortization related to the leased
     assets was approximately $86 million and $78 million at December 31, 1996
     and 1995, respectively. Amortization is included in depreciation expense.

     The Companies also have various noncancellable operating leases, primarily
     for product storage facilities, office space, computer equipment and
     vehicles. Rent expense on all operating leases totaled $33 million, $33
     million and $34 million in 1996, 1995 and 1994, respectively. Future
     minimum lease payments for the capital lease and noncancellable operating
     leases are as follows:

<TABLE>
<CAPTION>
                                                  Capital      Operating
                                                   Lease         Leases        Total
     Year                                                   (000's Omitted)

     <S>                                        <C>          <C>           <C>       
     1997                                       $   27,375   $    25,424   $   52,799
     1998                                           27,375        22,345       49,720
     1999                                           27,375        16,880       44,255
     2000                                           27,375        15,356       42,731
     2001                                           27,375        14,165       41,540
     Thereafter                                     90,750        48,131      138,881
                                                ----------

     Total minimum lease payments                  227,625    $  142,301   $  369,926
                                                              ==========   ==========

     Amount representing interest                  (86,121)
                                                ----------

     Present value of minimum lease payments       141,504
     Current portion                                11,778
                                                ----------

                                                $  129,726
                                                ==========
</TABLE>





                                     - 28 -

<PAGE>



16.  FAIR VALUE INFORMATION

     The following disclosure of the estimated fair value of financial
     instruments is made in accordance with the requirements of SFAS No. 107,
     "Disclosures about Fair Value of Financial Instruments." The estimated fair
     value amounts have been determined by the Companies, using available market
     information and appropriate valuation methodologies. However, considerable
     judgment is necessarily required in interpreting market data to develop the
     estimates of fair value. Accordingly, the estimates presented herein are
     not necessarily indicative of the amounts that the Companies could realize
     in a current market exchange. The use of different market assumptions
     and/or estimation methodologies may have a material effect on the estimated
     fair value amounts.

     The carrying amounts of cash and cash equivalents, and restricted cash
     approximate fair values because of the short maturity of these instruments.
     The carrying amounts and estimated fair values of the Companies' other
     financial instruments are as follows:

<TABLE>
<CAPTION>
                                                      1996                        1995
                                           -------------------------------------------------------
                                           Carrying        Fair         Carrying         Fair
                                            Amount         Value         Amount          Value
                                                             (000's Omitted)
     <S>                                  <C>           <C>            <C>            <C>        
     Liabilities:
          Short-term bank loans           $    53,000   $    53,000    $    25,000    $    25,000
          Long-term debt                    2,560,576     2,597,556      2,250,556      2,289,733

     Derivative and Off-Balance
          Sheet Financial Instruments -
          Unrealized Gains (Losses):
          Interest rate swap agreements          --          (1,093)          --           (3,030)
          Interest rate cap agreements           --             --            --              --
          Guarantees of debt                     --             (60)          --              (48)
          Letters of credit                      --          (1,741)          --             (842)
          Surety bonds                           --            (100)          --              (90)
</TABLE>



     Short-Term Bank Loans and Long-Term Debt - The fair value of short-term
     bank loans and long-term debt is based on interest rates that are currently
     available to the Companies for issuance of debt with similar terms and
     remaining maturities, except for the Company's $1 billion principle amount
     senior notes which were based upon quoted market prices.

     Interest Rate Swap and Cap Agreements - The fair value of these agreements
     is based on the estimated amount that CITGO would receive or pay to
     terminate the agreements at the reporting date, taking into account current
     interest rates and the current creditworthiness of the counterparties.

     Guarantees, Letters of Credit and Surety Bonds - The estimated fair value
     of contingent guarantees of third-party debt, letters of credit and surety
     bonds is based on fees currently


                                     - 29 -

<PAGE>


     charged for similar one-year agreements or on the estimated cost to
     terminate them or otherwise settle the obligations with the counterparties
     at the reporting dates.

     The fair value estimates presented herein are based on pertinent
     information available to management as of the reporting dates. Although
     management is not aware of any factors that would significantly affect the
     estimated fair value amounts, such amounts have not been comprehensively
     revalued for purposes of these financial statements since that date, and
     current estimates of fair value may differ significantly from the amounts
     presented herein.

17.  QUARTERLY RESULTS OF OPERATIONS - UNAUDITED

     The following is a summary of the quarterly results of operations for the
     years ended December 31, 1996 and 1995 (in thousands):


<TABLE>
<CAPTION>
                                             1st Qtr.     2nd Qtr.     3rd Qtr.      4th Qtr.

     1996

     <S>                                    <C>          <C>          <C>          <C>       
     Sales                                  $2,607,195   $3,333,996   $3,310,456   $3,700,413
                                            ==========   ==========   ==========   ==========

     Cost of sales and operating expenses   $2,521,101   $3,229,290   $3,186,413   $3,554,199
                                            ==========   ==========   ==========   ==========

     Net income                             $   14,755   $   36,002   $   36,212   $   51,054
                                            ==========   ==========   ==========   ==========

     1995

     Sales                                  $2,357,482   $2,952,144   $2,707,483   $2,505,051
                                            ==========   ==========   ==========   ==========

     Cost of sales and operating expenses   $2,237,491   $2,848,045   $2,596,525   $2,383,951
                                            ==========   ==========   ==========   ==========

     Income before extraordinary gain       $   48,015   $   30,756   $   32,782   $   30,933

     Extraordinary gain                          3,380         --           --           --
                                            ----------   ----------   ----------   ----------

              Net income                    $   51,395   $   30,756   $   32,782   $   30,933
                                            ==========   ==========   ==========   ==========
</TABLE>




                                   * * * * * *




                                     - 30 -

<PAGE>

                                                                      SCHEDULE I

                       PDV AMERICA, INC. AND SUBSIDIARIES

                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                             (Dollars in thousands)

                        Financial Position of Registrant

                                                             December 31,
                                                             ------------
                                                          1996          1995
                                                      -----------   ------------
Assets
     Investment in and advances to affiliates         $ 2,090,010   $ 1,948,959
     Notes receivable from PDVSA                        1,000,000     1,000,000
     Other assets                                          50,653        53,134
                                                      -----------   -----------
                                                      $ 3,140,663    $ 3,002,093
                                                      ===========    ===========
Liabilities and shareholder's equity
     Long-term debt                                   $   996,598   $   996,053
     Other liabilities                                     32,990        32,988
     Shareholder's equity                               2,111,075     1,973,052
                                                      -----------   -----------
                                                      $ 3,140,663    $ 3,002,093
                                                      ===========    ===========

                          Operations of the Registrant
<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                              1996          1995           1994
                                                       -----------   -----------    -----------
<S>                                                    <C>           <C>            <C>        
Revenues
     Interest income from PDVSA                        $    77,725   $    77,725    $    77,725
     Other Income                                            8,231         9,168          8,953
                                                       -----------   -----------    -----------
                                                       $    85,956   $    86,893    $    86,678
                                                       -----------   -----------    -----------
Expenses
     Interest Expense                                       80,075        79,830         79,605
     Other                                                   2,676         3,020          1,713
                                                       -----------   -----------    -----------
                                                            82,751        82,850         81,318
                                                       -----------   -----------    -----------

Equity in net income of subsidiaries                       136,008       139,959        201,643
                                                       -----------   -----------    -----------
Income before income taxes, extraordinary
     charge and cumulative effect of accounting
     changes                                               139,213       144,002        207,003
Provision for income taxes                                   1,190         1,516          1,887
                                                       -----------   -----------    -----------
Income before extraordinary charge and
     cumulative effect of accounting change                138,023       142,486        205,116
Extraordinary gain (charge) - early
     extinguishment of debt                                   --           3,380         (1,627)
Cumulative effect of accounting changes -
     Postemployment benefits                                  --            --           (4,477)
                                                       -----------   -----------    -----------
                  Net Income                           $   138,023   $   145,866    $   199,012
                                                       ===========   ===========    ===========

</TABLE>


<PAGE>



                                                                      SCHEDULE I

                       PDV AMERICA, INC. AND SUBSIDIARIES

                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                             (Dollars in thousands)

                          Cash Flows of the Registrant

                                                    Year Ended December 31,
                                                 1996         1995        1994
                                               --------    --------    --------
Cash provided by operating activities         $  5,517    $  6,021    $  6,112
                                               --------    --------    --------

Cash used in investing activities

     Investments in and advances to 
          subsidiaries                           (5,343)    (21,317)    (36,961)
                                               --------    --------    --------
                                                 (5,343)    (21,317)    (36,961)
                                               --------    --------    --------

Cash provided by financing activities              --        15,000      29,141
                                               --------    --------    --------
     Capital contribution from parent              --        15,000      29,141
                                               --------    --------    --------
Net increase (decrease) in cash end cash
     equivalents                                    174        (296)     (1,708)
Cash and cash equivalents - beginning of year     5,207       5,503       7,211
                                               --------    --------    --------
Cash and cash equivalents - end of year        $  5,381    $  5,207    $  5,503
                                               ========    ========    ========