CITGO Petroleum Corporation Sheryll Dean ACG2021 Section 0H1 & 008 Annual Report CITGO Petroleum Corporation Sheryll Dean ACG2021 Section 0H1 & 008

Executive Summary Citgo is a refining company. They refine crude oil and transformed this in a variety of products which includes gasoline, diesel, fuel oil, asphalt, etc. They evaluate the 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 of company is that they faced some problems because the volatile market price, this is caused by the change in the price crude, weather problems, or government regulations which can increase or decrease Citgo’s company. The last 2 years were excellent for Citgo as a result of a high utilization rate of refining capacity excellent safety performance and favorable market conditions. www.citgo.com

Part A. Introduction Name of chief executive: Felix Rodriguez. Location of Home office: 1293 Eldridge Pkwy Houston, TX 77077. Ending date of latest fiscal year: 31 December 2004 Principal products and services: Citgo provides petroleum products as jet fuel, diesel fuel, heating oils, lubricants and waxes, asphalts, petrochemicals and Industrial products. Main geographic area of activity: Throughout the US and in some Latin American markets including Brazil, Ecuador and Mexico.

Part A Audit Report The Auditors are: KPMG LLP and DELOITTE & TOUCHE LLP, Tulsa-Oklahoma The auditors said that all of the information in the financial statements is present correctly

Stock Market Information Company’s Stock: it is $1.00 par value but the company’s common stock is not traded on any market. All of the Citgo’ s stock is held by PDV America. Dividend per Share: Data do not available. On 2004 Citgo paid $400 million dividend to PDV America

Part B. Industry Situation and Company Plans Citgo petroleum Corporation is doing well the past two years have been increasing their income. The last year they paid $400 million in dividends. Also The change in technology help Citgo to increase their profits. They estimate to spend $1.1 billion in capital between 2005 and 2009 to increase the quality of their products.

Part C. Income Statement The format is more like a single step where all revenues and incomes are listed first. As we see in the following data Citgo had an increase in their revenues in 2004. The company was not affected for the hurricanes and also the increase in the fuel prices help the company to increase their profits. *Data in US millions Year Gross profit Income from operations Net income 2003 825.4 529.8 438.8 2004 1260.3 932.4 625.0

Part C. Balance Sheet The accounts in the balance sheet maintain stable over the two years, The account that most changed was the asset. Year Assets= Liabilities + Stockholders equity 2003 7,273,493 4,772,009 2,501,484 2004 7,643,672 4,921,240 2,722,432

Statement of Cash Flows For 2003 the cash flows from operation were more than the net income , but in 2004 the cash flows were less than net income . The company is growing through investing the last year the company increase their investing activities. One of the principles investing for the company was LYONDELL-CITGO Refining. Citgo’s primary source of financing is the pay of long terms loans which is due 2001 in a term 11-3/8% and pay in dividends to PDV America. Over the two years the cash used has been increasing for financing activities. For operating and investing activities the cash maintain the same. Also Citgo has sufficient cash, available borrowing capacity and access to accounts receivable sales facility.

Part D. Accounting Policies Revenue Recognition: Revenue is generated from the sale of refined petroleum products to bulk purchasers, wholesale purchasers and final consumers. Cash and cash equivalents: consist of highly liquid short-term investments and bank deposits with initial maturities of three months or less. Property plant and equipment: is resorted at cost, less accumulated depreciation. Depreciation is estimated useful lives of the related assets using the straight line method. Depreciable lives are generally as follows: building and leaseholds – 10 to 24 years, machinery and equipment – 5 to 25 years; and vehicles – 3 to 10 years

Part D. Accounting Policies They Also talk about: Description of business Principles of consolidation Estimates, Risks and Uncertainties Impairment of long lived asset Supply and market activities Excise taxes Inventories Restricted cash Refinery Maintenance Environmental Expenditures Income Taxes New accounting standards

Part D. Accounting Policies Topics of the notes to the financial statements: 1- Significant Account policies 2- Refinery Agreements 3- Investment in LYONDELL-CITGO LP 4-Related Party Transactions 5-Accounts Receivable 6-Inventories 7- Property plant and equipment 8- Investments in affiliate 9- Long term debt and financing arrangements 10- Employee benefits plans 11- Commitments and contingencies 12- Leases 13- Fair value information 14- Insurance recoveries 15 – Corporate Headquarters Relocation 16- Subsequent events

Part E Financial Analysis Profitability Ratios Ratios for the past two years: 2004 2003 Profit Margin: .019% .017% Asset Turnover: 4.13% 3.41% Return On Assets: 0 .117% 0.74% Return on Equity: 0.239% 0.167%

Financial Analysis Liquidity Ratios 2004 2003 Working capital: 544,952 663,319 Current Ratios: 1.25 times 1.38 times Inventory Turnover: 28.1 times 28.1 times Average days’ inventory on hand: 13 days both years * For the others ratios Citgo do not have the data