When you visit your local CITGO to fill-up with gas, grab a snack, a hot cup of coffee, some groceries, and your breakfast, lunch or dinner, you're walking into a locally owned and operated business.
February 15 marked the one-year anniversary of the appointment of the new CITGO Petroleum Corporation Board of Directors. This milestone offers an ideal opportunity to share with you the progress we have made in strengthening CITGO performance and to highlight a few key 2020 priorities we are advancing to build on this positive momentum.
We are deeply aware that CITGO’s success depends on the incredible support and partnership of our stakeholders – the company’s employees, suppliers, customers, regulators, creditors, contractors, communities and, of course, our shareholder. To strengthen the bond of trust needed to sustain these relationships, the Board embraces a commitment to all our stakeholders to be accountable for our actions and transparent in our decisions.
All our efforts in 2019 were intensely focused on making CITGO financially and operationally sustainable, while at the same time improving the Company’s systems of governance and control aimed at raising CITGO to the highest standards and best practices of the energy industry. We are proud to report significant progress in three critical areas.
First, we have taken action to enhance CITGO’s financial stability.
When we assumed our role as board members last February, our first task was to put CITGO on a sound financial foundation. During 2019, we successfully refinanced 70 percent of CITGO and CITGO Holding’s aggregate debt, managing to reduce CITGO Holding’s debt costs by $220 million over 5 years. As a result, the credit rating agency Fitch upgraded its rating of CITGO Holding’s debt, while Standard & Poors and Moodys reaffirmed CITGO and CITGO Holding’s ratings with stable outlooks.
Second, we have significantly improved CITGO’s operations and strengthened our position in the marketplace.
In 2019 we recognized an increase of 20,000 barrels-per-day in refining capacity (only the second capacity increase in 20 years), accomplished with throughput optimization projects, and we set a new record in overall refinery reliability. We are pleased to report that these improvements in operational efficiency were achieved during one of the best years of refinery safety in our company’s history.
We also took critical steps to enhance the resilience of our operations by quickly and efficiently optimizing our crude slate, replacing Venezuelan crude with economical crudes from Colombia, Mexico and Ecuador and at the same time increasing our U.S. light crude runs. Low-priced light American crude oil now accounts for 48 percent of the CITGO total crude supply and 64% of the total U.S. Gulf Coast crude slate.
Our goal is to buy the most economical crude to maximize our returns improving shareholder value.
These efforts have not only helped us better serve the American market, but also enabled us to become a significant exporter of refined products; in fact, exports now account for 25 percent of CITGO’s total production.
Third, we have made important progress in raising the level of CITGO’s governance and internal controls.
One of the core responsibilities of the Board is to ensure that CITGO operates at the highest levels of integrity and with the highest standards for ethical behavior. Upon assuming this role, the Board immediately initiated a thorough review of the Company’s existing governance and internal controls environment with the goal of achieving best industry practices in all of our internal processes.
As a result of this intensive process, we have restructured several positions and reformed the procurement process. To ensure we have the best talent in place to lead CITGO’s transformation, we conducted an open, competitive process that led to the hiring of CEO and President Carlos Jordá, a new Vice President of Legal and Government Affairs, and the first-ever woman to serve as CITGO’s General Auditor. After a thorough review of our compliance systems and following best practices, the current VP of Legal was also named the company’s new Chief Compliance & Ethics Officer, overseeing all facets of the CITGO compliance and ethics program.
These changes demonstrate our commitment as a Board to doing business the right way, to raising our standards and to earning the confidence of our partners and stakeholders. Because of these efforts, CITGO is now in a far stronger position to maximize our value to all constituencies, serve the energy needs of our American customers and deliver greater returns to our shareholders.
Our Priorities for Year Two:
As we enter 2020, the Board is committed to building on the strong foundation we laid in 2019.
We have come a long way in a short time. We are proud of the accomplishments of 2019. But we are not resting on them. With your continued support, we are confident that the strategy we are pursuing will not only enhance CITGO’s financial and operational stability, but enhance the value we provide to all of our stakeholders and the role we play as a socially responsible enterprise.