Annual ReportAnnual ReportCITGO Petroleum CITGO Petroleum CorporationCorporationSheryll DeanSheryll DeanACG2021 Section 0H1 & 008ACG2021 Section 0H1 & 008

Executive SummaryExecutive Summary

Citgo is a refining company. They refine crude oil and Citgo is a refining company. They refine crude oil and transformed this in a variety of products which includes transformed this in a variety of products which includes gasoline, diesel, fuel oil, asphalt, etc. They evaluate the gasoline, diesel, fuel oil, asphalt, etc. They evaluate the

price of the crude oil and then the cost of the refining to get price of the crude oil and then the cost of the refining to get the final price of their products. The problem with this kind the final price of their products. The problem with this kind of company is that they faced some problems because the of company is that they faced some problems because the volatile market price, this is caused by the change in the volatile market price, this is caused by the change in the

price crude, weather problems, or government regulations price crude, weather problems, or government regulations which can increase or decrease Citgo’s company. The last 2 which can increase or decrease Citgo’s company. The last 2 years were excellent for Citgo as a result of a high utilization years were excellent for Citgo as a result of a high utilization

rate of refining capacity excellent safety performance and rate of refining capacity excellent safety performance and favorable market conditions.favorable market conditions.

www.citgo.comwww.citgo.com

Part A. IntroductionPart A. Introduction

Name of chief executive:Name of chief executive: Felix Rodriguez.Felix Rodriguez. Location of Home office:Location of Home office: 1293 Eldridge Pkwy 1293 Eldridge Pkwy

Houston, TX 77077.Houston, TX 77077. Ending date of latest fiscal year:Ending date of latest fiscal year: 31 December 31 December

20042004 Principal products and services:Principal products and services: Citgo provides Citgo provides

petroleum products as jet fuel, diesel fuel, petroleum products as jet fuel, diesel fuel, heating oils, lubricants and waxes, asphalts, heating oils, lubricants and waxes, asphalts, petrochemicals and Industrial products.petrochemicals and Industrial products.

Main geographic area of activity:Main geographic area of activity: Throughout Throughout the US and in some Latin American markets the US and in some Latin American markets including Brazil, Ecuador and Mexico.including Brazil, Ecuador and Mexico.

Part A Audit ReportPart A Audit Report

The Auditors are:The Auditors are: KPMG LLP and KPMG LLP and DELOITTE & TOUCHE LLP, Tulsa-DELOITTE & TOUCHE LLP, Tulsa-OklahomaOklahoma

The auditors said that all of the The auditors said that all of the information in the financial information in the financial statements is present correctly statements is present correctly

Stock Market InformationStock Market Information

Company’s Stock:Company’s Stock: it is $1.00 par it is $1.00 par value but the company’s common value but the company’s common stock is not traded on any market. All stock is not traded on any market. All of the Citgo’ s stock is held by PDV of the Citgo’ s stock is held by PDV America.America.

Dividend per Share: Dividend per Share: Data do not Data do not availableavailable.. On 2004 Citgo paid $400 On 2004 Citgo paid $400 million dividend to PDV Americamillion dividend to PDV America

Part B. Industry Situation Part B. Industry Situation and Company Plansand Company Plans

Citgo petroleum Corporation is doing well Citgo petroleum Corporation is doing well the past two years have been the past two years have been

increasing their income. The last year increasing their income. The last year they paid $400 million in dividends. they paid $400 million in dividends. Also The change in technology help Also The change in technology help Citgo to increase their profits. They Citgo to increase their profits. They estimate to spend $1.1 billion in estimate to spend $1.1 billion in

capital between 2005 and 2009 to capital between 2005 and 2009 to increase the quality of their products.increase the quality of their products.

Part C. Income StatementPart C. Income Statement

The format is more like a single step where all The format is more like a single step where all revenues and incomes are listed first.revenues and incomes are listed first.

As we see in the following data Citgo had an As we see in the following data Citgo had an increase in their revenues in 2004. The company increase in their revenues in 2004. The company was not affected for the hurricanes and also the was not affected for the hurricanes and also the increase in the fuel prices help the company to increase in the fuel prices help the company to increase their profits.increase their profits.

YearYear Gross profitGross profit Income from Income from operationsoperations

Net incomeNet income

20032003 825.4825.4 529.8529.8 438.8438.8

20042004 1260.31260.3 932.4932.4 625.0625.0

*Data in US millions

Part C. Balance SheetPart C. Balance Sheet

The accounts in the balance sheet The accounts in the balance sheet maintain stable over the two years, maintain stable over the two years, The account that most changed was The account that most changed was the assetthe asset..

YearYear Assets= Liabilities + Assets= Liabilities + Stockholders equityStockholders equity

20032003 7,273,4937,273,493 4,772,0094,772,009 2,501,4842,501,484

20042004 7,643,6727,643,672 4,921,2404,921,240 2,722,4322,722,432

Statement of Cash Statement of Cash FlowsFlows For 2003 the cash flows from operation were more than For 2003 the cash flows from operation were more than

the net income , but in 2004 the cash flows were less the net income , but in 2004 the cash flows were less than net income .than net income .

The company is growing through investing the last year The company is growing through investing the last year the company increase their investing activities. One of the company increase their investing activities. One of the principles investing for the company was LYONDELL-the principles investing for the company was LYONDELL-CITGO Refining.CITGO Refining.

Citgo’s primary source of financing is the pay of long Citgo’s primary source of financing is the pay of long terms loans which is due 2001 in a term 11-3/8% and terms loans which is due 2001 in a term 11-3/8% and pay in dividends to PDV America.pay in dividends to PDV America.

Over the two years the cash used has been increasing for Over the two years the cash used has been increasing for financing activities. For operating and investing activities financing activities. For operating and investing activities the cash maintain the same. Also Citgo has sufficient the cash maintain the same. Also Citgo has sufficient cash, available borrowing capacity and access to cash, available borrowing capacity and access to accounts receivable sales facility.accounts receivable sales facility.

Part D. Accounting Part D. Accounting PoliciesPolicies

Revenue RecognitionRevenue Recognition:: Revenue is generated from Revenue is generated from the sale of refined petroleum products to bulk the sale of refined petroleum products to bulk purchasers, wholesale purchasers and final purchasers, wholesale purchasers and final consumers.consumers.

Cash and cash equivalents:Cash and cash equivalents: consist of highly consist of highly liquid short-term investments and bank deposits liquid short-term investments and bank deposits with initial maturities of three months or less.with initial maturities of three months or less.

Property plant and equipment:Property plant and equipment: is resorted at is resorted at cost, less accumulated depreciation. Depreciation is cost, less accumulated depreciation. Depreciation is estimated useful lives of the related assets using estimated useful lives of the related assets using the straight line method. Depreciable lives are the straight line method. Depreciable lives are generally as follows: building and leaseholds – 10 to generally as follows: building and leaseholds – 10 to 24 years, machinery and equipment – 5 to 25 years; 24 years, machinery and equipment – 5 to 25 years; and vehicles – 3 to 10 yearsand vehicles – 3 to 10 years

Part D. Accounting Part D. Accounting PoliciesPolicies

They Also talk about:They Also talk about:- Description of businessDescription of business- Principles of consolidationPrinciples of consolidation- Estimates, Risks and UncertaintiesEstimates, Risks and Uncertainties- Impairment of long lived assetImpairment of long lived asset- Supply and market activitiesSupply and market activities- Excise taxesExcise taxes- InventoriesInventories- Restricted cashRestricted cash- Refinery MaintenanceRefinery Maintenance- Environmental ExpendituresEnvironmental Expenditures- Income TaxesIncome Taxes- New accounting standardsNew accounting standards

Part D. Accounting Part D. Accounting PoliciesPoliciesTopics of the notes to the financial Topics of the notes to the financial

statements:statements:1- Significant Account policies1- Significant Account policies2- Refinery Agreements2- Refinery Agreements3- Investment in LYONDELL-CITGO LP3- Investment in LYONDELL-CITGO LP4-Related Party Transactions4-Related Party Transactions5-Accounts Receivable5-Accounts Receivable6-Inventories6-Inventories7- Property plant and equipment7- Property plant and equipment8- Investments in affiliate8- Investments in affiliate9- Long term debt and financing arrangements9- Long term debt and financing arrangements10- Employee benefits plans10- Employee benefits plans11- Commitments and contingencies11- Commitments and contingencies12- Leases12- Leases13- Fair value information13- Fair value information14- Insurance recoveries14- Insurance recoveries15 – Corporate Headquarters Relocation15 – Corporate Headquarters Relocation16- Subsequent events16- Subsequent events

Part E Financial Analysis Part E Financial Analysis Profitability RatiosProfitability Ratios

Ratios for the past two years:Ratios for the past two years: 2004 20032004 2003

Profit Margin:Profit Margin: .019% .017%.019% .017%

Asset Turnover:Asset Turnover: 4.13% 3.41%4.13% 3.41% Return On AssetsReturn On Assets:: 0 .117% 0.74% 0 .117% 0.74% Return on Equity:Return on Equity: 0.239% 0.239%

0.167%0.167%

Financial Analysis Financial Analysis Liquidity RatiosLiquidity Ratios

2004 20032004 2003 Working capitalWorking capital:: 544,952 663,319 544,952 663,319 Current Ratios:Current Ratios: 1.25 times 1.38 times 1.25 times 1.38 times Inventory Turnover:Inventory Turnover: 28.1 times 28.1 times 28.1 times 28.1 times Average days’ inventory on hand:Average days’ inventory on hand: 13 days both 13 days both

yearsyears

* * For the others ratios Citgo do not have the dataFor the others ratios Citgo do not have the data