United Refining Company

Company DescriptionUnited Refining Company, a private company, is an integrated refiner and marketer of petroleumproducts in western New York and northwestern Pennsylvania. United owns and operates a mediumcomplexity 65,000 barrel per day (bpd) petroleum refinery in Warren, Pennsylvania (PADD I) where itproduces various grades of gasoline, diesel fuel, kerosene, jet fuel, No. 2 heating oil, and asphalt.Operations are organized into two business segments: wholesale (refinery) and retail (stations andconvenience stores). The retail segment sells petroleum products under the Kwik Fill, Citgo andKeystone brand names at a network of Company-operated retail units and convenience and groceryitems though Company-owned gasoline stations/convenience stores under Red Apple Food Mart andCountry Fair. At 8/31/03 (FYE), the Company operated 372 units, of which, 184 units are owned, 128units are leased and 60 operated under a management agreement. United also owns and operates theKiantone Pipeline, a 78-mile long crude oil pipeline which connects the refinery to Canadian, US andworld crude oil sources through the Enbridge Pipeline system.

Recommendation: BuyWe recommend United Refining Company's (Private) 10.75% Sr. Notes '07 as a BUY at 90 (14.6%YTW, +1,230 bps) due to: (i) the most attractive relative yield in our power and energy high yielduniverse, (ii) improving credit statistics, (iii) ample liquidity, (iv) adequate asset coverage, and (v) thepossibility that the 10.75s are refinanced (callable in June-04 at 101.792). United, a refining andmarketing company, based in Warren, Pennsylvania, reported strong fiscal 1Q04 (August FYE)EBITDA of $16.3 mm vs. $8.2 mm in the prior quarter and $1.7 mm last year; LTM EBITDA increasedto $40.0 mm from $25.3 mm last quarter. In addition to stronger crack spreads, the Company hasbenefited from increased retail gasoline/convenience station margins. We are also impressed by theCompany’s ability to reduce total debt to $213 mm in the most recent quarter from $230 mm in May-03.Our price target for United’s 10.75s is 98 based on a 11.5% YTW and the following highlights:

Highlights:! Improving credit statistics, which, on an LTM basis, include 1.9x interest coverage, and leverage

ratios of 5.3x total debt and 4.0x net debt.! Ample liquidity ($31 mm at 11/03) consisting of $12 mm of cash and $19 mm available under the

Revolver ($50 mm current borrow base), which provides United with ability to fund couponpayments through June-06 simultaneous with $12 mm in Sulfur upgrade requirements over thattime period.

! Liquidity proforma for the Dec-03 10.75s coupon payment in the amount of $9.7 mm is $21 mm -we estimate, however, that based on our $12 mm F2Q04 EBITDA estimate, liquidity will be $30mm before changes in working capital, representing only a marginal decline. In addition, webelieve the Company will be successful in signing a new bank deal (the 11/03Q notes that theCompany seeks to increase the Facility to $75 mm from $50 mm currently), which would improveliquidity to $55 mm by QE Feb-04.

! Buying the 10.75s at 90 creates the company at 3.6x LTM EBITDA and 2.2x LQA EBITDA – thisis a deep discount to its comparables which trade at 6.8x-7.1x LTM EBITDA and 5.2x-5.6x LQAEBITDA, based on the median and average multiples, respectively. (1)

EnergyRefining & Marketing

High Yield ResearchJanuary 22, 2004

Greg Imbruce800/937-5333

gimbruce@jefco.com

United Refining Company (Private)Strong Fiscal First Quarter 2004 Results

Amount Yrs. CouponSeniority Coupon Maturity O/S $MM Rating Price CY YTW STW to Mty. Pmts. Recommendation

Sr. Notes (1) 10.750% 6/15/2007 $180.1 Caa1/B- 90.0% 11.94% 14.59% 1,230 3.4 12/15,6/15 BUY

(1) Original $200 mm issue. During FYE 8/01, the Company purchased $19.9 mm of the Sr. Notes for $14.2 mm (71.4% purchase price) in cash.

Energy: Refining & Marketing High Yield Research

January 22, 2004 United Refining Company [Page 2 of 5]

! Healthy working capital balances which were $82.9 mm including retail merchandise andsupplies as well as crude oil and petroleum products inventories; excluding retail inventories, weestimate United’s working capital as $52.5 at 11/30/03 and utilize this figure in our net debtcalculation.

! Adequate asset coverage of 1.1x (Base Case) to 1.4x (Upside Case). We believe there isadditional upside in terms of asset coverage based on: (i) our conservative retail station valuationcompared to the recent Circle K transaction, in which CococoPhillips sold 1,663 conveniencestore outlets in 16 states (most of which were in Arizona) to a Canadian company AlimentationCouche-Tard for $830 mm – the transaction equates to $500k per station, well below our $225kto $275k valuation for United’s stations; and (ii) cash flow and asset enhancement if theCompany is successful in financing and installing a delayed coker unit, which will increaserefinery capacity to 70,000 bpd from 65,000 bpd currently. United intends to fund the $300 mmconstruction through project debt with construction expected to begin in the Summer '04/Spring'05 and be completed within 2-years (Summer '06/Spring '07). The Coker installation wouldimprove the percent of heavy crude capacity to nearly 100% from current 50% and enhance therefinery's Nelson complexity rating to 11.0.

! The Company's financial performance is somewhat insulated from volatile crack spreads throughits retail gasoline/convenience stations – based on the QE 11/03, the retail business represented42% ($6.8 mm) and 45% ($18.1 mm) of total EBITDA on an LQA and LTM basis, respectively.

! The Company’s $7 mm annual maintenance CapEx is minimal and implies a $27.3 mm annualEBITDA requirement ($6.8 mm quarterly), before having to utilize availability under the Revolver.This maintenance CapEx figure includes: $4.0 mm for the Refining business, $1.5 mm for theretail business, and an estimated $1.6 mm in annual turnaround costs. In addition to theseCapEx items, United plans to allocate up to an additional $12 mm for related sulfur reductionitems over the next 30-months to meet the June-06 EPA requirements. We estimate, however,that even after including these costs, EBITDA could average $29.5 annually ($7.4 mm quarterly)before requiring any additional funds be drawn under its Revolver, well within our $32 mmEBITDA estimate for FY04. And even in the case where the Company requires full availabilityunder its Revolver, EBITDA required could decline to $22.2 mm annually ($5.6 quarterly) in orderto fund all cash requirements. In the case the Facility is increased to $75 mm, minimum EBITDAcould decline to $13.1 mm annually ($3.3 quarterly), providing the Company with a high level offlexibility in meeting its Sulfur and other CapEx requirements.

(1) Comparables include: Frontier Oil Corp (FTO), Giant Industries Inc. (GI), Holly Corp.(HOC),Marathon Oil Corp. (MRO), Premcor Inc. (PCO), Sunoco Inc. (SUN), Tesoro Petroleum Corp. (TSO),and Valero Energy Corp. (VLO).

Energy: Refining & Marketing High Yield Research

January 22, 2004 United Refining Company [Page 3 of 5]

UNITED REFINING COMPANY (PRIVATE)

BOND SUMMARY:Jefco Amt O/S

Description: Rec. Maturity $MM Moody's S&P Date Price Price CY YTW STWSr. Nts. 10.750% '07 BUY 6/15/2007 $180.1 Caa1 B- 6/15/04 101.792 90.0 11.94% 14.59% 1,231

COMPANY DATA: ASSETS:Company United Refining Company Capacity Nelson ComplxSymbols (Equity/Debt) 24069Z / UNITED Bbls per Complx BblsHeadquarters Warren, PA 16365 Refineries: Day Rating (000's) Base Upside Base UpsidePhone 1-814-726-4674 Warren, PA 65,000 8.6 559 $225 $275 $126 $154 Website urc.comCurrency USD (1.000 per USD)Fiscal Year End AugustMost Recent Quarter 11/30/03Number of Employees 4,637Auditor BDO SEIDMAN LLP Val.-Refinery 65,000 8.6 559 $225 $275 $126 $154 Company Type PrivateCurrent Stock Price Retail: Stations Base Upside Base UpsideShares Outstanding (MM) 0.0 Ow ned 184 $0.250 $0.300 $46 $55 MarketCap / Enterprise Value $46 / $207 Leased 128 $0.050 $0.100 $6 $13 Shareholders' Equity/Net PP&E $46 / $186 Managed 60 $0.025 $0.050 $2 $3 Net Asset Value (NAV) $196,674 to $686,174/shr or $20 to $69 MM Val.-Retail 372 $0.145 $0.191 $54 $71 Stock Price / NAV 236% to 68% UnitDebt Amt. O/S Par: $213 Total Debt / $161 Net Debt* Other: Measure Units Base Upside Base Upside

Market Value: $195 Total Debt / $143 Net Debt* Crude Oil Pipeline Miles 78 -- $0.050 -- $4 Debt/Complex Bbl. Par: $285 Total Debt / $191 Net Debt*

Market Value: $253 Total Debt / $159 Net Debt*Total Refinery Capacity (Bbls per Day) 65,000 Wtd. Avg. Complexity (Nelson) 8.6 Retail Stations: Ow ned/Leased/Total 184 / 128 / 372 Val.-Other Assets -- $4 Stations: Total Asset Val. $180 $229

ASSET COVERAGE & RECOVERY ANALYSIS: ASSET VALUATION METRICS:Values Sr. Sr. Sr. EBITDA

BASE CASE: $MM Sec. Unsec. Sub. Other Total LTM/LQA Base Upside Base Upside Base UpsideRefinery $126 3.78x 0.51x NA NA 0.59x Refinery $22/$38 $126 $154 5.7x 7.0x 3.3x 4.0xEnergy Assets $180 5.40x 0.81x NA NA 0.84x Retail $18/$27 $54 $71 3.0x 3.9x 2.0x 2.6xTotal Assets $180 5.40x 0.81x NA NA 0.84x Other …/… -- $4 NA NA NA NAAssets+WorkCap $232 6.98x 1.10x NA NA 1.09x Total $40/$65 $180 $229 4.5x 5.7x 2.8x 3.5xUPSIDE CASE: VALUATION:Refinery $154 4.62x 0.67x NA NA 0.72xEnergy Assets $225 6.75x 1.06x NA NA 1.05x Par Mkt. Par Mkt.Total Assets $229 6.87x 1.08x NA NA 1.07x Debt / EBITDA: LTM 5.3x 4.9x 4.0x 3.6x Assets+WorkCap $281 8.45x 1.38x NA NA 1.32x LQA 3.3x 3.0x 2.5x 2.2x Recovery-PV15 Base 100% 88% NA NA 87% EV / EBITDA: LTM 5.2x 4.7x 5.2x 4.7x

Upside 100% 100% NA NA 100% LQA 3.2x 2.9x 3.2x 2.9x Recovery-PV20 Base 100% 82% NA NA 81% Debt / Total Asset Value 119% 109% 90% 80%

Upside 100% 100% NA NA 98%DEBT SENIORITY: QUARTERLY SNAPSHOT: ###### 2/28/03 5/31/03 8/31/03 11/30/03Description Sr. Sec. Sr. Unsec. Sr. Sub Other Total 2/03Q 5/03Q 8/03Q 11/03Q LTMBank Revolver '07 (L+1.75%) $31 -- -- -- $31 Revenue $311.4 $331.1 $354.5 $330.8 $1,327.9Other Debt (Mtgs.) $3 -- -- -- $3 Gross Profit $41.5 $27.7 $34.6 $43.8 $147.6Sr. Nts. 10.750% '07 -- $180 -- -- $180 Gross Margin % 13% 8% 10% 13% 11%

EBITDA $14.5 $1.0 $8.2 $16.3 $40.0LTM EBITDA $19.0 $11.6 $25.3 $40.0 $40.0EBITDA Margin % 5% 0% 2% 5% 3%(Cash Interest Exp.) ($5.3) ($5.4) ($5.4) ($5.2) ($21.3)Funds from Operations $9.3 ($4.5) $2.8 $11.1 $18.7(CapEx) (2) ($1.6) ($1.6) ($2.8) ($2.2) ($8.2)

Total Debt $33 $180 -- -- $213 Free Cash Flow $7.7 ($6.1) ($0.0) $8.9 $10.5LIQUIDITY: WORKING CAPITAL: Total Debt $228.0 $229.8 $214.4 $213.4 $213.4Cash & Equivalents $12 Cash & Equivalents $12 Cash $10.0 $9.0 $13.8 $11.8 $11.8Revolver Avail. $19 +A/R + Inventories (1) $113 LTM EBITDA / Cash Int. Exp. 0.9x 0.5x 1.2x 1.9x 1.9xOther -- -Accounts Payable $72 Total Debt / LTM EBITDA 12.0x 19.9x 8.5x 5.3x 5.3xLiquidity $31 Working Capital (Deficit) $52 Net Debt* / LTM EBITDA 9.0x 15.1x 5.5x 4.0x 4.0xRECENT EVENTS:

Asset Values $MM$/Station

177 Western New York, 182 Northw est Pennsylvania, and 13 in Ohio

Asset Values $MM$/Unit

$464,320.00

Values $MM Val./LTM EBITDA

12/15,6/15

$/Complx Bbl $MM

>>The Company is negotiating with PNC Bank to increase the facility to $75mm. >>In March '03, the facility was amended, revising covenants, including the fixed charge coverage ratio. >>United was granted until Jan-08 to reduce sulfur content of gasoline through a 3-phase approach. United successfully produced low sulfur gasoline in Oct-03 and met the 1st phase that went effective Jan-04. The Company estimates up to $12 mm add'l CapEx required to comply with phase-2 by June-06 >>Company plans to install a delayed coker unit which will increase refinery capacity to 70,000 bpd from 65,000 bpd currently and allow it to meet new low sulfur fuel requirements. United intends to fund the $300 mm construction through project debt with construction expected to begin in the Summer '04/Spring '05 and be completed within 2-years (Summer '06/Spring '07). Coker installation would improve % heavy crude capacity to nearly 100% from current 50% and enhance refinery's Nelson complexity rating to 11.0.

Asset Values

CouponPmt Dates

Next CallRatings Yield

United Refining Company (Private) is an integrated refiner and marketer of petroleum products in western New York and northwestern Pennsylvania. United owns and operates a medium complexity 65,000 barrel per day (bpd) petroleum refinery in Warren, Pennsylvania (PADD I) where it produces various grades of gasoline, diesel fuel, kerosene, jet fuel, No. 2 heating oil, and asphalt. Operations are organized into two business segments: wholesale (Refinery) and retail (stations and convenience stores). The retail segment sells petroleum products under the Kwik Fill, Citgo and Keystone brand names at a network of Company-operated retail units and convenience and grocery items though Company-owned gasoline stations/convenience stores under Red Apple Food Mart and Country Fair. At 8/31/03 (FYE), the Company operated 372 units, of which, 184 units are owned, 128 units are leased and 60 operated under a management agreement. United also owns and operates the Kiantone Pipeline, a 78-mile long crude oil pipeline which connects the refinery to Canadian, US and world crude oil sources through the Enbridge Pipeline system.

Total Debt Net Debt*

Val./LQA EBITDA

Energy: Refining & Marketing High Yield Research

January 22, 2004 United Refining Company [Page 4 of 5]

CAPITALIZATION: ISSUER RATINGSBook Mkt. Sr. Sr. Sr.

Total Debt $213 $195 Rating Date Outlook Watch Sec. Unsec. Sub.Preferred Stock (Liq. Value) -- -- Moody's Caa2 7/03 NEG NA NA Caa1 NA+Shareholders' Equity $46 $46 S&P B- 5/01 NEG NA NA NA NATotal Capital $260 $242CREDIT STATISTICS: BANK FACILITY:

LQA LTM Type: Revolver Tranche #: LN100259Adj. EBITDA / Cash Interest Expense 3.2x 1.9x Ratings: NR / NR Provider: PNC Bank[Adj. EBITDA - CapEx] / Cash Interest Exp. 2.7x 1.5x Amendment Date: 3/24/2003 Maturity: 5/9/2007Total Debt / Adj. EBITDA 3.3x 5.3xNet Debt* / Adj. EBITDA 2.5x 4.0x Bank Facility Interest Freq. QtrlyTotal Debt / Book Capitalization 82% 82% Borrow Base $50.0 Rate: LIBOR+ 1.75%Total Debt / Market Capitalization 88% 88% Amount Funded $30.5 L/C Subfacility $15FFO / Total Debt 3% 4% L/C's Outstanding $0.6 L/C Fee: 1.75%FFO / Net Debt* 4% 6% Amount Avail. $18.9

ENTERPRISE VALUE: NET ASSET VALUE:Base(1) Upside(2)

Par Mkt. Refinery $126 $154Stock Price $464,320 $464,320 Retail Stations $54 $71Shares Outstanding 0.0 0.0 Energy Assets $180 $225Market Capitalization $46 $46 Other Assets -- $4+LT Debt $213 $195 Total Assets $180 $229+Preferred Stock (Liq.) -- -- Working Capital (Deficit) $52 $52-Working Capital/(Deficit) $52 $52 Assets & WorkCap $232 $281Enterprise Value (EV) $207 $189 Less: LT Debt & Preferred Stock $213 $213

Net Asset Value $20 $69Shares O/S 0.0 0.0NAV per Share $196,674 $686,174

COUPON PAYMENTS: DEBT MARKET VALUEDescription Pmt/Per. Description Coupon Maturity Rating Face Price MktBank Revolver '07 (L+1.75%) $0.3 Quarterly Bank Revolver 2.858% 05/07 NR/NR $30.5 100.0 $30.5Other Debt (Mtgs.) -- Monthly Other Debt NA NA NR/NR $2.8 100.0 $2.8Sr. Nts. 10.750% '07 $9.7 12/15 6/15 Sr. Nts. 10.750% 06/07 Caa1/B- $180.1 90.0 $162.1

Total Debt 9.482% $213.4 $195.4Net Debt* $160.9 $142.9

LARGEST SHAREHOLDERS: % O/S MATURITY SCHEDULE:JOHN CATSIMATIDIS 100.0% Year Debt Leases Total

2004 $0.3 $9.8 $10.12005 $0.3 $8.8 $9.12006 $0.3 $8.1 $8.42007 $210.9 $7.8 $218.72008 $0.3 $7.1 $7.42009 $0.3 $7.1 $7.4Thereafter $1.1 $62.5 $63.6

Total 100.0% Total $213.4 $111.2 $324.6NOTES: MANAGEMENT

JOHN CATSIMATIDIS, CHAIRMAN & CEOMYRON TURFITT, PRESIDENTJAMES MURPHY, CFOASHTON DITKA, SR. VP. MARKETINGTHOMAS SKARADA, VP REFININGFREDERICK MARTIN JR., VP SUPPLY & TRANSPORTJOHN WAGNER, VP GENERAL COUNSELDENNIS BEE JR, TREASURER

All dollar figures are in millions unless noted otherwise.*Net debt applies working capital to total debt.

(1) Inventory excludes merchandise/supplies and is est. of crude oil and petroleum products inventory, w hich is based on 66% of total inventory as reported in FY03. (2) Excludes turnaround costs. OTHER NOTES:>>Company may incur additional debt if the Consolidated Fixed Charge Coverage Ratio on the date thereof w ould be at least 2.0x on an LTM basis. >>Bank Revolver is secured by cash accounts, accounts receivable, and inventory. >>Annual Ref inery maintenance CapEx is $4.0 mm and approx. $4.0 mm for turnaround costs every 2-2.5 yrs; total refinery maintenance CapEx is, therefore, $6 mm per year. >>Debt balance excludes deferred retirement benef its, w hich w ere $28.7 mm at 11/30/03.

Payment Dates

Debt @

Issuer

Energy: Refining & Marketing High Yield Research

January 22, 2004 United Refining Company [Page 5 of 5]

!2001 Jefferies & Company, Inc. All rights reserved

I, Greg Imbruce, certify that all of the views expressed in this research report accurately reflect my personal viewsabout the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, orwill be, directly or indirectly, related to the specific recommendations or views expressed in this research report.

This material has been prepared by Jefferies & Company, Inc. ("Jefferies") a U.S.-registered broker-dealer, employing appropriateexpertise, and in the belief that it is fair and not misleading. It is approved for distribution in the United Kingdom by JefferiesInternational Limited ("JIL") regulated by the Financial Services Authority ("FSA"). The information upon which this material isbased was obtained from sources believed to be reliable, but has not been independently verified. Therefore except for anyobligations under the rules of the FSA, we do not guarantee its accuracy. Additional and supporting information is available uponrequest. This is not an offer or solicitation of an offer to buy or sell any security or investment. Any opinion or estimatesconstitute our best judgment as of this date, and are subject to change without notice. Jefferies and JIL and their affiliates andtheir respective directors, officers and employees may buy or sell securities mentioned herein as agent or principal for their ownaccount. This material is intended for use only by professional or institutional investors falling within articles 19 or 49 of theFinancial Services and Markets Act 2000 (Financial Promotion) Order 2001and not the general investing public. None of theinvestments or investment services mentioned or described herein are available to other persons in the U.K. and in particular arenot available to "private customers" as defined by the rules of the FSA or to anyone in Canada who is not a "DesignatedInstitution" as defined by the Securities Act (Ontario)."