ITEM 1. BUSINESS
OVERVIEW
Frontier Oil Corporation (formerly known as Wainoco Oil Corporation) was originally incorporated in Canada in 1949 and changed its jurisdiction of incorporation to Wyoming in 1976. As used herein, the "Company" or "Frontier" refers to Frontier Oil Corporation and its subsidiaries. The Company's refining assets are held through its subsidiary, Frontier Holdings Inc. ("Frontier Holdings"), a Delaware corporation. The Company directs its activities from its corporate office in Houston, Texas and its refining subsidiary offices in Denver, Colorado and Cheyenne, Wyoming.
Frontier is engaged in the business of crude oil refining and wholesale marketing of refined petroleum products
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(the "refining operations"). Frontier conducts its refining operations in the Rocky Mountain region of the United States. The Company's Cheyenne, Wyoming refinery (the "Frontier Refinery") purchases the crude oil to be refined and markets the refined petroleum products produced, including various grades of gasoline, diesel fuel, asphalt and petroleum coke.
Prior to the third quarter of 1997, Frontier explored for and produced oil and gas in western Canada. On June 16, 1997, Frontier completed the sale of all its Canadian oil and gas properties. Prior to their sale in June 1997, the Company's Canadian oil and gas assets were held by Frontier Oil Corporation. Prior to the first quarter of 1996, Frontier also explored for and produced oil and gas in the United States. During the third quarter of 1994, the Company announced that it intended to cease all exploration activities in the United States and to sell its United States oil and gas assets. Frontier finalized the sale of all of its United States oil and gas properties during 1995.
Operating results for the Company's discontinued oil and gas operations segment, comprising the Canadian and United States oil and gas properties, are presented as discontinued operations in the Financial Statements to the 1998 Annual Report to Shareholders which is incorporated herein by reference.
REFINING OPERATIONS
Frontier's refining activities are conducted through its subsidiary Frontier Holdings, which was acquired in October 1991. The Frontier Refinery's permitted crude capacity is 41,000 barrels per day ("bpd"). The Frontier Refinery can also process in excess of 4,000 bpd of purchased natural gasoline, butanes and other petroleum liquids. The Frontier Refinery contains all of the major refinery units that comprise a complex refinery, including a coker. Therefore, the Frontier Refinery has the capability of producing a high yield of lighter, more valuable petroleum products such as gasoline and diesel fuel from heavy sour crude oil, which is less expensive than lighter sweet crude oil. The Frontier Refinery's units have the capacity to process up to 100% of heavy crude oil. The differential between the price of lower cost heavy crude oil and the price of more expensive lighter sweet crude oil is referred to as the light/heavy spread. Frontier also owns an undivided interest equal to 25,000 bpd in a crude oil pipeline (the "Centennial Pipeline") from Guernsey, Wyoming to Cheyenne. The Centennial Pipeline was constructed to help serve the Frontier Refinery's long-term strategic crude oil needs.
MARKETING, PRODUCTS AND DISTRIBUTION
The Company markets refined products primarily in eastern Colorado (including the Denver metropolitan area) and eastern Wyoming, or the "Eastern Slope area" of the Rocky Mountain region. The Company also markets refined products in western Nebraska and, through exchange agreements with other refiners, in the Dakotas and Utah. For the year ended December 1998, the Frontier Refinery's product mix included various grades of gasoline (40%), diesel fuel (34%) and asphalt and other refined petroleum products (26%).
The Company sells refined products to a broad base of independent retailers, jobbers and major oil companies. Prices are determined by local market conditions at the "terminal rack", and the customer typically supplies their own truck transportation. In 1998, approximately 10% of gasoline production and approximately 49% of diesel production was sold at the Frontier Refinery. The remaining gasoline and diesel produced by the Frontier Refinery is primarily shipped via pipeline to third party terminals for sale.
While it has in the past generally marketed unbranded products, in the second half of 1997, the Company entered into a seven-year marketing agreement with CITGO Petroleum Corporation ("CITGO") to market branded products to independent and other branded retail operators in its market area. The Company believes the CITGO agreement offers potential to increase its market share in the Eastern Slope area because CITGO currently has only a small share of the Eastern Slope market. The agreement allows the Company to produce gasoline and diesel to CITGO's specifications, sign up independent and other branded retail operators as CITGO branded locations and sell its own refined products to these operators. The agreement also allows the Company to offer additional benefits to its customers such as access to CITGO's proprietary credit card and pay-at-the-pump systems. Moreover, the Company believes that its affiliation with the nationally-recognized CITGO brand will allow it to continue to effectively compete in its market area as more independent regional retailers seek relationships with suppliers of branded products.
CRUDE OIL SUPPLY
The Company prefers to process locally produced heavy crude oil. In the year ended December 31, 1998, the Company obtained approximately 57% of its crude oil supply, or charge, from Wyoming producers while Canadian heavy crude oil made up a majority of the Frontier Refinery's remaining feedstocks. During the same period, heavy crude oil constituted approximately 94% of the Frontier Refinery's total crude oil charge. The Company believes it is able to obtain favorable pricing terms for the heavy crude oil it uses as feedstock because until the last half of 1998 available supply outstripped demand. None of the Company's direct refinery competitors and only three other refineries
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in the entire Rocky Mountain region operate coking units necessary to process high volumes of heavy crude oil. The Company benefitted from an increase in its light/heavy spread to $4.15 per barrel ("bbl") for the year ended December 1998 from $3.54 per bbl for the same period in 1997. Throughout 1998, and especially during the second half of 1998, the price of crude oil has declined significantly. The low price of crude oil has caused the production of some heavy crude oil in both Wyoming and Canada to become uneconomical. The reduced supply of heavy crude oil and strong demand for heavy crude oil due to attractive asphalt margins are major factors contributing to the second half of 1998 decline in the light/heavy spread. In addition, while Wyoming crude oil production is declining, the completion of the 785 mile Express Pipeline from Hardisty, Alberta to Casper, Wyoming in April 1997 immediately doubled available pipeline capacity for Canadian crude oil to the Wyoming market. The Express Pipeline has reduced transportation costs incurred by the Company for Canadian crude oils by approximately $.75 per bbl, and the Company believes the Express Pipeline has reduced transportation time for Canadian crude oils from approximately 30 days to 15 days. The Company has entered into a 15 year commitment with the Express Pipeline for the delivery of approximately 13,800 bpd, subject to an assignment of a portion of the capacity in early years for additional capacity in later years. The Company also receives a supply cost advantage on up to 25,000 bpd from its partial ownership in the Centennial Pipeline that runs from the regional hub at Guernsey, Wyoming to the Frontier Refinery.
COMPETITION
Frontier's business is highly competitive and price is the principal basis of competition. There are 15 crude oil refineries in the Rocky Mountain region (including several owned by major integrated oil companies). Many of the refineries in the Rocky Mountain region are owned by companies that have significantly greater financial resources and/or refining capacity than Frontier. Certain of these competitors, as integrated oil companies, also have the advantage of owning or controlling crude oil reserves or other sources of crude oil supply, crude oil and product pipelines and service stations and other product marketing outlets.
Principal Competitors. Of the 15 crude oil refineries in the Rocky Mountain region, the Company only considers the four other refineries (two in Denver and two in Wyoming) located within the Eastern Slope area to be competitors, although additional competition comes from refineries outside the Eastern Slope area that supply refined products to the area via pipeline. Based on proximity to the Denver and Cheyenne areas, Frontier's principal refinery competitors in the wholesale segment are Sinclair Oil Company ("Sinclair") with a 54,000 bpd refinery near Rawlins, Wyoming and a 22,000 bpd refinery in Casper, Wyoming, Ultramar Diamond Shamrock ("UDS") with a 28,000 bpd refinery in Denver, Colorado and Conoco, Inc. ("Conoco") with a 57,500 bpd refinery in Denver, Colorado. Frontier sells its products exclusively at wholesale, principally to independent retailers, jobbers and major oil companies, while Sinclair, UDS and Conoco service both the retail and wholesale markets. In addition, three product pipelines from outside the Rockies terminate in the area. The Company believes it has an advantage over (i) its four refinery competitors because only the Company operates a coking unit, which enables it to produce a higher yield of gasoline and diesel from heavy crude oil, and (ii) the pipeline competitors that ship product into the Eastern Slope area because they must incur a transportation cost, which for Gulf Coast refiners equates to approximately $1.60 per bbl.
Frontier and its principal competitors all service the Denver market. Because their refineries are located in Denver, UDS's and Conoco's product transportation costs in servicing that area are lower than those of Frontier. Conversely, Frontier has lower crude transportation costs due to its proximity to Guernsey, Wyoming, the major crude oil pipeline hub in the Rocky Mountain region, and further due to its ownership interest in the Centennial Pipeline.
General. Frontier competes with other oil and gas concerns and other investment opportunities, whether or not related to the petroleum industry, in raising capital. The Company's ability to compete successfully in the capital markets is largely dependent on the success of its refining activities and the economic environment in which it operates.
VOLATILITY OF CRUDE OIL PRICES AND REFINING MARGINS
Frontier's income and cash flow are derived from the margin between its costs to obtain and refine crude oil and the price for which it can sell products produced in its refining process. The price at which Frontier can sell gasoline and its other refined products will be strongly influenced by the price of crude oil. Frontier maintains inventories of crude oil, intermediate products and refined products, the value of each of which is subject to rapid fluctuations in market prices. Inventories are recorded at the lower of cost on a first in, first out ("FIFO") basis or market. A rapid and significant movement in the market prices for crude oil or refined products could have an adverse short-term impact on earnings and cash flow. The Company generally does not hedge its refined product prices. Crude oil prices, in general, are affected by a number of factors, including domestic and international demand, domestic and foreign energy legislation, production guidelines established by the Organization of Petroleum Exporting Countries ("OPEC"), relative supplies of other fuels, such as natural gas, and changing international economic and political conditions.
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LIGHT/HEAVY CRUDE OIL SPREAD
Frontier can process a high percentage of heavy crude oil, enabling it to benefit from the lower cost of heavy crude relative to light crude. Because income and cash flow from refining operations are dependent in part on this cost differential, any narrowing of the light/heavy crude spread would likely cause a reduction in operating margin and a decrease in earnings and cash flow of Frontier. A narrowing of the light/heavy crude spread could result from, among other things, a decrease in the supply of heavy crude due to a substantial drop in crude oil prices that could depress the spread by making it uneconomical for production companies to produce heavy crude oil or an increase in heavy crude refining capacity of the Frontier's competitors.
GOVERNMENT REGULATION
Safety Matters. The Company is subject to the requirements of the federal Occupational Safety and Health Act ("OSHA") and comparable state occupational safety statutes. The Company believes that it has operated in substantial compliance with OSHA requirements, including general industry standards, recordkeeping and reporting, hazard communication, and process safety management. The nature of the Company's business may result from time to time in industrial accidents. It is possible that changes in safety and health regulations or a finding of non-compliance with current regulations could result in additional capital expenditures or operating expenses.
Environmental Matters. The Company's refining and marketing operations are subject to a variety of federal, state and local health and environmental laws and regulations governing product specifications, the discharge of pollutants into the air and water, and the generation, treatment, storage, transportation and disposal of solid and hazardous waste and materials. Permits are required for the operation of the Frontier Refinery, and these permits are subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with these regulations and permits, and violators are subject to injunctions, civil fines and even criminal penalties. The Company believes the Frontier Refinery is in substantial compliance with existing environmental laws, regulations and permits.
Among these requirements are regulations recently promulgated by the EPA under the authority of Title III of the Clean Air Act Amendments. The Title III regulations required the Company to expend approximately $600,000 by the regulatory compliance deadline of August 1, 1998 to improve the Frontier Refinery's control of emissions of hazardous air pollutants. Subsequent rulemaking authorized by this or other titles of the Clean Air Act Amendments or similar laws may necessitate additional expenditures in future years. Because other refineries will be required to make similar expenditures, the Company does not expect such expenditures to materially adversely impact its competitive position.
Nevertheless, rules and regulations implementing federal, state and local laws relating to health and the environment will continue to affect operations of the Company, and the Company cannot predict what additional health and environmental legislation or regulations will be enacted or become effective in the future or how existing or future laws or regulations will be administered or interpreted with respect to products or activities to which they have not been applied previously. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of regulatory agencies, could have a materially adverse effect on the financial position and the results of operations of the Company as well as the refining industry in general, and may result in substantial expenditures for the installation and operation of pollution control or other environmental systems and equipment.
On March 21, 1995, the Company and the Wyoming Department of Environmental Quality entered into an administrative consent order ("State Order") that generally parallels a September 24, 1990 Administrative Order on Consent ("Federal Order") pursuant to the Resource Conservation and Recovery Act ("RCRA") and replaces the 1984 state consent decree ("Consent Decree"). Accordingly, the Consent Decree was dismissed in an Order entered March 21, 1995. The State Order eliminates certain of the Consent Decree requirements, unifies state and federal regulatory expectations regarding site investigation and remediation and, consequently, helps to streamline certain of the Company's current environmental obligations. The EPA withdrew the Federal Order on March 19, 1997 in recognition of the State Order and of Wyoming's assumption of RCRA corrective action authority. The ultimate cost of any environmental remediation projects that may be identified by the site investigation required by the State Order cannot be reasonably estimated at this time. However, the continuation of the present investigative process, other more extensive investigations over time or changes in regulatory requirements could result in future liabilities.
The Company has a 34.72% undivided ownership interest in the Centennial Pipeline. Conoco Pipe Line Company is the sole operator of the Centennial Pipeline as the holder of the remaining ownership interest. The Centennial Pipeline runs approximately 88 miles from Guernsey to Cheyenne, Wyoming. The Frontier Refinery receives up to 25,000 bpd of crude oil feed through the Centennial Pipeline. Under the terms of the operating agreement for the Centennial Pipeline, the costs and expenses incurred to operate and maintain the Centennial Pipeline are allocated to the Company on the basis of either its throughput or ownership interest. The Centennial Pipeline is subject to
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numerous federal, state and local laws and regulations relating to the protection of health, safety and the environment. The Company believes the Centennial Pipeline is operated in accordance with all applicable laws and regulations. The Company is not aware of any material pending legal proceedings to which the Centennial Pipeline is a party.
In 1997, the Company completed divesting itself of its former oil and gas properties and assets. While the transactions that conveyed these properties and assets to new owners were intended to transfer any attendant environmental liabilities to new owners, there can be no assurances that the Company will never be subject to liability for any former activity respecting the divested oil and gas properties. The Company has been named as a potentially responsible party ("PRP") under CERCLA (as defined herein) at the Gulf Coast Vacuum Services Superfund Site located in Vermilion Parish, Louisiana, one of the divested properties. The Company has entered into a consent decree resolving its liabilities as a PRP at this Superfund site. The Company believes that any future liabilities related to this site will not have a material adverse effect on the financial condition of the Company. The Company also believes that any liability relating to its historical practices respecting the oil and gas properties will not have a material adverse effect on the financial condition of the Company.
The Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also known as "Superfund", imposes liability, without regard to fault or the legality of the original conduct, on certain classes of persons who are considered to be responsible for the release of a "hazardous substance" into the environment. These persons include the owner or operator of the disposal site or sites where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources, and for the costs of certain health studies. It is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants released into the environment. Analogous state laws impose similar responsibilities and liabilities on responsible parties. In the course of its historical operations, as well as in its current ordinary operations, the Company has generated waste, some which falls within the statutory definition of a "hazardous substance" and some of which may have been disposed of at sites that may require cleanup under Superfund.
As is the case with all companies engaged in similar industries, the Company faces potential exposure from future claims and lawsuits involving environmental matters. These matters include soil and water contamination, air pollution, and personal injuries or property damage allegedly caused by substances manufactured, handled, used, released or disposed of by the Company.
Product Specifications. The provisions of the Clean Air Act Amendments of 1990 requiring the EPA to reassess the adequacy of existing limits on automobile emissions, coupled with the recent promulgation of new National Ambient Air Quality Standards ("NAAQS") for ozone and particulate matter have resulted, in part, in initial state and federal agency consideration of requirements to modify certain transportation fuel characteristics including, but not limited to, gasoline sulfur content and vapor pressure. Although no such regulations have yet been proposed, Frontier may in the future incur certain, as yet unquantified, costs necessary to assure compliance.
SEASONALITY
Due to seasonal increases in tourist related volume and road construction work, a higher demand exists in the Rocky Mountain region for gasoline and asphalt products during the summer months than during the winter months. Diesel demand is relatively constant throughout the year because two major east-west truck routes, and at least two railroads, extend into or through Frontier's principal marketing area. However, reduced road construction and agricultural work during the winter months does somewhat reduce demand for diesel. As a result, the Company's operating results for the first and fourth calendar quarters are generally lower than those for the second and third calendar quarters. The Frontier Refinery normally schedules its maintenance turnaround work during the spring or fall of each year. During the first quarter of 1999, Frontier has scheduled turnaround work on its crude unit.
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OPERATING HAZARDS; SINGLE REFINERY
All of the Company's refining activities currently are conducted at the Frontier Refinery, which is the Company's principal operating asset. As a result, the operations of the Company are subject to significant interruption if the Frontier Refinery were to experience a major accident or fire, be damaged by severe weather or other natural disaster, or otherwise be forced to curtail its operations or shutdown. Should the Centennial Pipeline, which runs from the Guernsey Station hub to the Frontier Refinery, become inoperative, crude oil would have to be supplied to the Frontier Refinery through an alternative pipeline or from additional tank trucks, the economic impact of which could be adverse to the Company. In addition, despite safety procedures put in place by the Company, a major accident, fire or other event could damage the Frontier Refinery or the environment or cause personal injuries. Although the Company maintains business interruption, property and other insurance against these risks in amounts it believes to be economically prudent, if the Frontier Refinery were to experience a major accident or fire or an interruption in supply or operations, the Company's business could be materially adversely affected. In addition, the Frontier Refinery consists of many processing units, a number of which have been in operation for a long time. Although the Company schedules down time for repair, or "turnaround," for each unit every one to three years, there can be no assurance that one or more of such units will not require additional, unscheduled turnarounds for unanticipated maintenance or repairs. During the first quarter of 1999, the Company has scheduled a turnaround on one of its major units at the Frontier Refinery.
EMPLOYEES
At December 31, 1998 the Company employed 298 full-time employees, 46 at the Houston and Denver offices and 252 at the Frontier Refinery. The Frontier Refinery employees include 83 administrative and technical personnel and 169 union members. The union members are represented by seven bargaining units, the largest being the Paper, Allied-Industrial, Chemical and Energy Workers International Union ("PACE"). Six AFL-CIO affiliated unions represent Frontier's craft workers. In December 1998, the Company concluded new bargaining agreements, with the three year PACE agreement due to expire in July 1999 extended to July 2002, while the six year AFL-CIO contract due to expire in June 2002 extended to June 2005. The Company considers its current relations with its employees to be good.
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ITEM 2.
ITEM 2. PROPERTIES
REFINING OPERATIONS
The refining facilities are located on approximately 125 acres in Cheyenne, Wyoming, on property owned by Frontier. The following table sets forth the Frontier Refinery's charges, yields and margins achieved for the past three years:
OTHER PROPERTIES
The Company leases approximately 4,600 square feet of office space in Houston for its corporate headquarters under a six and one half year lease expiring in October 2004. Frontier leases approximately 16,000 square feet in Englewood, Colorado for its refining operations headquarters under a seven-year lease expiring in July 2002.
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ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings which in the opinion of management would have a material adverse impact on the Company. See Item 1. Business - Government Regulation regarding certain ongoing proceedings regarding environmental matters.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information in the 1998 Annual Report to Shareholders under the heading "Common Stock" is incorporated herein by reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The information in the 1998 Annual Report to Shareholders under the heading "Five Year Financial Data" is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in the 1998 Annual Report to Shareholders under the heading "Management's Discussion and Analysis" is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and the data contained in the 1998 Annual Report to Shareholders are incorporated herein by reference. See index to financial statements and supplemental data appearing under Item 14(a)1.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The information called for by Part III of this Form is incorporated by reference from the Company's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the close of its last fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements and Supplemental Data Page* -----
Consolidated Statements of Operations 17 Consolidated Balance Sheets 18 Consolidated Statements of Cash Flows 19 Consolidated Statements of Changes in Shareholders' Equity 20 Notes to Consolidated Financial Statements 21 Report of Independent Public Accountants 28 Selected Quarterly Financial Data 13
*Reference to pages in the 1998 Annual Report to Shareholders (as published), which portions thereof are incorporated herein by reference.
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(a)2. Financial Statements Schedules
Report of Independent Public Accountants Schedule I - Condensed Financial Information of Registrant Other Schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements or notes thereto.
(a)3. List of Exhibits
* 3.1 - Articles of Domestication of the Company, as amended (filed as Exhibit 2.3 to Registration Statement No. 2-62518 and Exhibit 2.2 to Registration Statement No. 2-69149).
* 3.2 - Articles of Amendment to the Restated Articles of Incorporation of the Company (filed as Exhibit 3.2 to Registration Statement No. 333-47745 dated May 4, 1998).
* 3.3 - Fourth restated By-Laws of the Company as amended through February 20, 1992 (filed as Exhibit 3.2 to Form 10-K dated December 31, 1992).
* 4.1 - Indenture dated as of February 9, 1998 between the Company and Chase Bank of Texas, National Association, as Trustee relating to the Company's 9-1/8% Senior Notes due 2006 (filed as Exhibit 4.8 to Registration Statement No. 333-47745 dated May 4, 1998).
* 10.1 - Amended and Restated Revolving Credit and Letter of Credit Agreement dated June 30, 1997 among Frontier Oil and Refining Company, certain banks and Union Bank of California (filed as Exhibit 10.1 to Form 10-K dated June 30, 1997).
* 10.2 - First Amendment to Amended and Restated Revolving Credit and Letter of Credit Agreement dated June 30, 1998 among Frontier Oil and Refining Company, certain banks and Union Bank of California (filed as Exhibit 10.01 to Form 10-Q dated June 30, 1998).
* 10.3 - Purchase and Sale Agreement, dated May 5, 1997, for the sale of Canadian oil and gas properties (filed as an Exhibit to From 8-K filed June 30, 1997).
*+ 10.4 - The 1968 Incentive Stock Option Plan as amended and restated (filed as Exhibit 10.1 to Form 10-K dated December 31, 1987).
*+ 10.5 - The 1977 Stock Option Plan as amended and restated (filed as Exhibit 10.2 to Form 10-K dated December 31, 1989).
*+ 10.6 - 1995 Stock Grant Plan for Non-employee Directors (filed as Exhibit 10.14 to Form 10-Q dated June 30, 1995).
*+ 10.7 - Wainoco Deferred Compensation Plan dated October 29, 1993 (filed as Exhibit 10.19 to Form 10-K dated December 31, 1994).
*+ 10.8 - Wainoco Deferred Compensation Plan for Directors dated May 1, 1994 (filed as Exhibit 10.20 to Form 10-K dated December 31, 1994).
*+ 10.9 - Executive Employment Agreement dated April 2, 1998 between the Company and James R. Gibbs (filed as Exhibit 10.01 to Form 10-Q dated March 31, 1998).
*+ 10.10 - Executive Employment Agreement dated April 2, 1998 between the Company and Julie H. Edwards (filed as Exhibit 10.02 to Form 10-Q dated March 31, 1998).
*+ 10.11 - Executive Employment Agreement dated April 2, 1998 between the Company and S. Clark Johnson (filed as Exhibit 10.03 to Form 10-Q dated March 31, 1998).
*+ 10.12 - Executive Employment Agreement dated April 2, 1998 between the Company and J. Currie Bechtol (filed as Exhibit 10.04 to Form 10-Q dated March 31, 1998).
*+ 10.13 - Executive Employment Agreement dated April 2, 1998 between the Company and Gerald B. Faudel (filed as Exhibit 10.05 to Form 10-Q dated March 31, 1998).
*+ 10.14 - Executive Employment Agreement dated April 2, 1998 between the Company and Jon D. Galvin (filed as Exhibit 10.06 to Form 10-Q dated March 31, 1998).
13.1 - Portions of the Company's 1998 Annual Report covering pages 9 through 28.
21.1 - Subsidiaries of the Registrant.
23 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule.
* Asterisk indicates exhibits incorporated by reference as shown. + Plus indicates management contract or compensatory plan or arrangement.
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(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the fourth quarter of 1998.
(c) Exhibits
The Company's 1998 Annual Report is available upon request. Shareholders of the Company may obtain a copy of any other exhibits to this Form 10-K at a charge of $.25 per page. Requests should be directed to:
Larry Bell Corporate Communications Frontier Oil Corporation 10000 Memorial Drive, Suite 600 Houston, Texas 77024-3411
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(d) Schedules
Report of Independent Public Accountants on Financial Statement Schedules:
To Frontier Oil Corporation:
We have audited in accordance with generally accepted auditing standards, the financial statements included in Frontier Oil Corporation's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 5, 1999. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index above is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas February 5, 1999
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FRONTIER OIL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS AS OF DECEMBER 31, SCHEDULE I
(in thousands)
The "Notes to Condensed Financial Information of Registrant" and the "Notes to Financial Statements of Frontier Oil Corporation and Subsidiaries" are an integral part of these financial statements.
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FRONTIER OIL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, SCHEDULE I
(in thousands)
The "Notes to Condensed Financial Information of Registrant" and the "Notes to Financial Statements of Frontier Oil Corporation and Subsidiaries" are an integral part of these financial statements.
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FRONTIER OIL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOW FOR THE THREE YEARS ENDED DECEMBER 31, SCHEDULE I
(in thousands)
The "Notes to Condensed Financial Information of Registrant" and the "Notes to Financial Statements of Frontier Oil Corporation and Subsidiaries" are an integral part of these financial statements.
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FRONTIER OIL CORPORATION NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT DECEMBER 31, 1998 SCHEDULE I
(1) General
The accompanying condensed financial statements of Frontier Oil Corporation (Registrant) should be read in conjunction with the consolidated financial statements of the Registrant and its subsidiaries included in the Registrant's 1998 Annual Report to Shareholders.
(2) Sale of oil and gas properties
All of the Registrant's oil and gas properties were located in Canada. On June 16, 1997, the Company completed the sale of all its Canadian oil and gas properties. The contract purchase price of C$133.6 million was adjusted from the January 1, 1997 effective date of the sale to June 16, 1997. Net proceeds after these adjustments, transaction expenses and severance costs were approximately C$126.7 million (US$91.3 million) as of June 16, 1997.
The Company's subsidiary, Wainoco Oil & Gas Company, ceased oil and gas exploration activities in the United States in 1994 and sold all of its United States oil and gas properties in 1994 and 1995. Information relating to the sales are disclosed in the "Notes to Financial Statements of Frontier Oil Corporation and Subsidiaries."
Operating results for the Company's oil and gas operations segment, comprising the Canadian and United States oil and gas properties, are presented as discontinued operations.
(3) Long-term debt
The components (in thousands) of long-term debt are as follows:
(4) Five-year maturities of long-term debt
The 9-1/8% Senior Notes are due 2006, until then there are no maturities of long-term debt.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the date indicated.
FRONTIER OIL CORPORATION
By: /s/ James R. Gibbs ----------------------- James R. Gibbs President (chief executive officer)
Date: February 26, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Frontier Oil Corporation and in the capacities and on the date indicated.
/s/ James R. Gibbs /s/ Paul B. Loyd, Jr. - ----------------------------------- ----------------------------- James R. Gibbs Paul B. Loyd, Jr. President and Director Director (chief executive officer)
/s/ Julie H. Edwards /s/ James S. Palmer - ----------------------------------- ----------------------------- Julie H. Edwards James S. Palmer Senior Vice President - Finance and Director Chief Financial Officer (principal financial officer)
/s/ Jon D. Galvin /s/ Derek A. Price - ----------------------------------- ----------------------------- Jon D. Galvin Derek A. Price Vice President - Controller Director (principal accounting officer)
/s/ Douglas Y. Bech /s/ Carl W. Schafer - ----------------------------------- ----------------------------- Douglas Y. Bech Carl W. Schafer Director Director
Date: February 25, 1999
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements and Supplemental Data Page* -----
Consolidated Statements of Operations 17 Consolidated Balance Sheets 18 Consolidated Statements of Cash Flows 19 Consolidated Statements of Changes in Shareholders' Equity 20 Notes to Consolidated Financial Statements 21 Report of Independent Public Accountants 28 Selected Quarterly Financial Data 13
*Reference to pages in the 1998 Annual Report to Shareholders (as published), which portions thereof are incorporated herein by reference.
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(a)2. Financial Statements Schedules
Report of Independent Public Accountants Schedule I - Condensed Financial Information of Registrant Other Schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements or notes thereto.
(a)3. List of Exhibits
* 3.1 - Articles of Domestication of the Company, as amended (filed as Exhibit 2.3 to Registration Statement No. 2-62518 and Exhibit 2.2 to Registration Statement No. 2-69149).
* 3.2 - Articles of Amendment to the Restated Articles of Incorporation of the Company (filed as Exhibit 3.2 to Registration Statement No. 333-47745 dated May 4, 1998).
* 3.3 - Fourth restated By-Laws of the Company as amended through February 20, 1992 (filed as Exhibit 3.2 to Form 10-K dated December 31, 1992).
* 4.1 - Indenture dated as of February 9, 1998 between the Company and Chase Bank of Texas, National Association, as Trustee relating to the Company's 9-1/8% Senior Notes due 2006 (filed as Exhibit 4.8 to Registration Statement No. 333-47745 dated May 4, 1998).
* 10.1 - Amended and Restated Revolving Credit and Letter of Credit Agreement dated June 30, 1997 among Frontier Oil and Refining Company, certain banks and Union Bank of California (filed as Exhibit 10.1 to Form 10-K dated June 30, 1997).
* 10.2 - First Amendment to Amended and Restated Revolving Credit and Letter of Credit Agreement dated June 30, 1998 among Frontier Oil and Refining Company, certain banks and Union Bank of California (filed as Exhibit 10.01 to Form 10-Q dated June 30, 1998).
* 10.3 - Purchase and Sale Agreement, dated May 5, 1997, for the sale of Canadian oil and gas properties (filed as an Exhibit to From 8-K filed June 30, 1997).
*+ 10.4 - The 1968 Incentive Stock Option Plan as amended and restated (filed as Exhibit 10.1 to Form 10-K dated December 31, 1987).
*+ 10.5 - The 1977 Stock Option Plan as amended and restated (filed as Exhibit 10.2 to Form 10-K dated December 31, 1989).
*+ 10.6 - 1995 Stock Grant Plan for Non-employee Directors (filed as Exhibit 10.14 to Form 10-Q dated June 30, 1995).
*+ 10.7 - Wainoco Deferred Compensation Plan dated October 29, 1993 (filed as Exhibit 10.19 to Form 10-K dated December 31, 1994).
*+ 10.8 - Wainoco Deferred Compensation Plan for Directors dated May 1, 1994 (filed as Exhibit 10.20 to Form 10-K dated December 31, 1994).
*+ 10.9 - Executive Employment Agreement dated April 2, 1998 between the Company and James R. Gibbs (filed as Exhibit 10.01 to Form 10-Q dated March 31, 1998).
*+ 10.10 - Executive Employment Agreement dated April 2, 1998 between the Company and Julie H. Edwards (filed as Exhibit 10.02 to Form 10-Q dated March 31, 1998).
*+ 10.11 - Executive Employment Agreement dated April 2, 1998 between the Company and S. Clark Johnson (filed as Exhibit 10.03 to Form 10-Q dated March 31, 1998).
*+ 10.12 - Executive Employment Agreement dated April 2, 1998 between the Company and J. Currie Bechtol (filed as Exhibit 10.04 to Form 10-Q dated March 31, 1998).
*+ 10.13 - Executive Employment Agreement dated April 2, 1998 between the Company and Gerald B. Faudel (filed as Exhibit 10.05 to Form 10-Q dated March 31, 1998).
*+ 10.14 - Executive Employment Agreement dated April 2, 1998 between the Company and Jon D. Galvin (filed as Exhibit 10.06 to Form 10-Q dated March 31, 1998).
13.1 - Portions of the Company's 1998 Annual Report covering pages 9 through 28.
21.1 - Subsidiaries of the Registrant.
23 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule.
* Asterisk indicates exhibits incorporated by reference as shown. + Plus indicates management contract or compensatory plan or arrangement.
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(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the fourth quarter of 1998.
(c) Exhibits
The Company's 1998 Annual Report is available upon request. Shareholders of the Company may obtain a copy of any other exhibits to this Form 10-K at a charge of $.25 per page. Requests should be directed to:
Larry Bell Corporate Communications Frontier Oil Corporation 10000 Memorial Drive, Suite 600 Houston, Texas 77024-3411
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(d) Schedules
Report of Independent Public Accountants on Financial Statement Schedules:
To Frontier Oil Corporation:
We have audited in accordance with generally accepted auditing standards, the financial statements included in Frontier Oil Corporation's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 5, 1999. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in the index above is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Houston, Texas February 5, 1999
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FRONTIER OIL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT BALANCE SHEETS AS OF DECEMBER 31, SCHEDULE I
(in thousands)
The "Notes to Condensed Financial Information of Registrant" and the "Notes to Financial Statements of Frontier Oil Corporation and Subsidiaries" are an integral part of these financial statements.
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FRONTIER OIL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, SCHEDULE I
(in thousands)
The "Notes to Condensed Financial Information of Registrant" and the "Notes to Financial Statements of Frontier Oil Corporation and Subsidiaries" are an integral part of these financial statements.
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FRONTIER OIL CORPORATION CONDENSED FINANCIAL INFORMATION OF REGISTRANT STATEMENTS OF CASH FLOW FOR THE THREE YEARS ENDED DECEMBER 31, SCHEDULE I
(in thousands)
The "Notes to Condensed Financial Information of Registrant" and the "Notes to Financial Statements of Frontier Oil Corporation and Subsidiaries" are an integral part of these financial statements.
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FRONTIER OIL CORPORATION NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT DECEMBER 31, 1998 SCHEDULE I
(1) General
The accompanying condensed financial statements of Frontier Oil Corporation (Registrant) should be read in conjunction with the consolidated financial statements of the Registrant and its subsidiaries included in the Registrant's 1998 Annual Report to Shareholders.
(2) Sale of oil and gas properties
All of the Registrant's oil and gas properties were located in Canada. On June 16, 1997, the Company completed the sale of all its Canadian oil and gas properties. The contract purchase price of C$133.6 million was adjusted from the January 1, 1997 effective date of the sale to June 16, 1997. Net proceeds after these adjustments, transaction expenses and severance costs were approximately C$126.7 million (US$91.3 million) as of June 16, 1997.
The Company's subsidiary, Wainoco Oil & Gas Company, ceased oil and gas exploration activities in the United States in 1994 and sold all of its United States oil and gas properties in 1994 and 1995. Information relating to the sales are disclosed in the "Notes to Financial Statements of Frontier Oil Corporation and Subsidiaries."
Operating results for the Company's oil and gas operations segment, comprising the Canadian and United States oil and gas properties, are presented as discontinued operations.
(3) Long-term debt
The components (in thousands) of long-term debt are as follows:
(4) Five-year maturities of long-term debt
The 9-1/8% Senior Notes are due 2006, until then there are no maturities of long-term debt.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the date indicated.
FRONTIER OIL CORPORATION
By: /s/ James R. Gibbs ----------------------- James R. Gibbs President (chief executive officer)
Date: February 26, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Frontier Oil Corporation and in the capacities and on the date indicated.
/s/ James R. Gibbs /s/ Paul B. Loyd, Jr. - ----------------------------------- ----------------------------- James R. Gibbs Paul B. Loyd, Jr. President and Director Director (chief executive officer)
/s/ Julie H. Edwards /s/ James S. Palmer - ----------------------------------- ----------------------------- Julie H. Edwards James S. Palmer Senior Vice President - Finance and Director Chief Financial Officer (principal financial officer)
/s/ Jon D. Galvin /s/ Derek A. Price - ----------------------------------- ----------------------------- Jon D. Galvin Derek A. Price Vice President - Controller Director (principal accounting officer)
/s/ Douglas Y. Bech /s/ Carl W. Schafer - ----------------------------------- ----------------------------- Douglas Y. Bech Carl W. Schafer Director Director
Date: February 25, 1999