• future retail margins, including gasoline, diesel, home heating oil, and convenience store merchandise margins;

• future ethanol margins and the effect of the acquisition from VeraSun Energy Corporation (VeraSun) of certain ethanol plants (the VeraSun Acquisition) on our results of operations;

• expectations regarding feedstock costs, including crude oil differentials, and operating expenses;

• anticipated levels of crude oil and refined product inventories;

• our anticipated level of capital investments, including deferred refinery turnaround and catalyst costs and capital expenditures for environmental and other purposes, and the effect of those capital investments on our results of operations;

• anticipated trends in the supply of and demand for crude oil and other feedstocks and refined products in the United States, Canada, and elsewhere;

• expectations regarding environmental, tax, and other regulatory initiatives; and

• the effect of general economic and other conditions on refining and retail industry fundamentals.

We based our forward-looking statements on our current expectations, estimates, and projections about ourselves and our industry. We caution that these statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual results may differ materially from the future performance that we have expressed or forecast in the forward-looking statements. Differences between actual results and any future performance suggested in these forward-looking statements could result from a variety of factors, including the following:
• acts of terrorism aimed at either our facilities or other facilities that could impair our ability to produce or transport refined products or receive feedstocks;

• political and economic conditions in nations that consume refined products, including the United States, and in crude oil producing regions, including the Middle East and South America;

• the domestic and foreign supplies of refined products such as gasoline, diesel fuel, jet fuel, home heating oil, and petrochemicals;

• the domestic and foreign supplies of crude oil and other feedstocks;

• the ability of the members of the Organization of Petroleum Exporting Countries (OPEC) to agree on and to maintain crude oil price and production controls;

• the level of consumer demand, including seasonal fluctuations;

• refinery overcapacity or undercapacity;

• the actions taken by competitors, including both pricing and adjustments to refining capacity in response to market conditions;

• environmental, tax, and other regulations at the municipal, state, and federal levels and in foreign countries;

• the level of foreign imports of refined products;

• accidents or other unscheduled shutdowns affecting our refineries, machinery, pipelines, or equipment, or those of our suppliers or customers;

• changes in the cost or availability of transportation for feedstocks and refined products;

• the price, availability, and acceptance of alternative fuels and alternative-fuel vehicles;

• delay of, cancellation of, or failure to implement planned capital projects and realize the various assumptions and benefits projected for such projects or cost overruns in constructing such planned capital projects;

• ethanol margins following the VeraSun Acquisition may be lower than expected;

• earthquakes, hurricanes, tornadoes, and irregular weather, which can unforeseeably affect the price or availability of natural gas, crude oil and other feedstocks, and refined products;

• rulings, judgments, or settlements in litigation or other legal or regulatory matters, including unexpected environmental remediation costs, in excess of any reserves or insurance coverage;

• legislative or regulatory action, including the introduction or enactment of federal, state, municipal, or foreign legislation or rulemakings, which may adversely affect our business or operations;

• changes in the credit ratings assigned to our debt securities and trade credit;

• changes in currency exchange rates, including the value of the Canadian dollar relative to the U.S. dollar; and

• overall economic conditions, including the stability and liquidity of financial markets.

Any one of these factors, or a combination of these factors, could materially affect our future results of operations and whether any forward-looking statements ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and actual results and future performance may differ materially from those suggested in any forward-looking statements. We do not intend to update these statements unless we are required by the securities laws to do so.
All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing. We undertake no obligation to publicly release the results of any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

OVERVIEW
In this overview, we describe some of the primary factors that we believe affected our results of operations in the second quarter and first six months of 2009. We reported a net loss of $254 million, or $0.48 per share, for the second quarter of 2009, compared to net income of $734 million, or $1.37 per share, for the second quarter of 2008. Net income was $55 million, or $0.11 per share, for the first six months of 2009, compared to $995 million, or $1.85 per share, for the first six months of 2008. The results of operations for the first six months of 2008 included a pre-tax benefit of approximately $100 million for a business interruption insurance settlement related to a 2007 fire at our McKee Refinery. Our profitability is substantially determined by the spread between the price of refined products and the price of crude oil, referred to as the "refined product margin." The current economic recession has caused a decline in demand for refined products, which put pressure on refined product margins during the second quarter and first six months of 2009. This reduced demand, combined with increased inventory levels attributable in large part to new worldwide refining capacity coming online, caused a significant decline in diesel and jet fuel margins in the second quarter and first six months of 2009 compared to the corresponding periods of 2008. However, margins on other refined products were favorable in 2009 compared to 2008. Gasoline margins were strong and improved significantly in the second quarter and first six months of 2009 compared to the same periods of 2008 due to a better balance of supply and demand. In addition, lower costs of crude oil and other feedstocks significantly improved margins on certain secondary products, such as asphalt, fuel oils, and petroleum coke, during the second quarter and first six months of 2009.
Because more than 65% of our total crude oil throughput generally consists of sour crude oil and acidic sweet crude oil feedstocks that historically have been purchased at prices less than sweet crude oil, our profitability is also significantly affected by the spread between sweet crude oil and sour crude oil prices, referred to as the "sour crude oil differential." Sour crude oil differentials for the second quarter and first six months of 2009 decreased significantly and were substantially lower than the 2008 differentials for the corresponding periods. We believe that this decline in sour crude oil differentials was partially caused by a reduction in sour crude oil production by OPEC and other producers, which reduced the supply of sour crude oil and increased the price of sour crude oils relative to sweet crude oils. In March 2009, we issued $750 million of 10-year notes and $250 million of 30-year notes. Proceeds from these notes have been used to make $209 million of scheduled debt payments in April 2009, fund our acquisition of certain ethanol plants from VeraSun, and maintain our capital investment program. In April and May of 2009, we acquired seven ethanol plants and a site under development from VeraSun for $477 million, plus $79 million primarily for inventory and certain other working capital. The new ethanol business reported $22 million of operating income in the second quarter of 2009, which represented only a partial quarter of operations for several of these plants.
In June 2009, we sold in a public offering 46 million shares of our common stock at a price of $18.00 per share and received proceeds, net of underwriting discounts and commissions and other issuance costs, of $799 million.

RESULTS OF OPERATIONS
Second Quarter 2009 Compared to Second Quarter 2008
                              Financial Highlights
                (millions of dollars, except per share amounts)

                                                         Three Months Ended June 30,
                                               2009 (a)          2008 (b)           Change

Operating revenues                           $  17,925         $  36,640         $  (18,715 )


Costs and expenses:
Cost of sales                                   16,543            33,673            (17,130 )
Operating expenses                               1,015             1,133               (118 )
Retail selling expenses                            171               190                (19 )
General and administrative expenses                124               117                  7
Depreciation and amortization expense:
Refining                                           346               336                 10
Retail                                              26                24                  2
Ethanol                                              5                 -                  5
Corporate                                           12                 9                  3

Total costs and expenses                        18,242            35,482            (17,240 )


Operating income (loss)                           (317 )           1,158             (1,475 )
Other income (expense), net                        (24 )              15                (39 )
Interest and debt expense:
Incurred                                          (118 )            (107 )              (11 )
Capitalized                                         36                24                 12


Income (loss) before income tax expense
(benefit)                                         (423 )           1,090             (1,513 )
Income tax expense (benefit)                      (169 )             356               (525 )


Net income (loss)                            $    (254 )       $     734         $     (988 )


Earnings (loss) per common share -
assuming dilution                            $   (0.48 )       $    1.37         $    (1.85 )

See the footnote references on page 49.

Refining (b):
Operating income (loss) $ (268 ) $ 1,235 $ (1,503 ) Throughput margin per barrel (c) $ 4.64 $ 10.82 $ (6.18 ) Operating costs per barrel:
Refining operating expenses $ 4.30 $ 4.53 $ (0.23 ) Depreciation and amortization 1.53 1.35 0.18

Total operating costs per barrel $ 5.83 $ 5.88 $ (0.05 )

Throughput volumes (thousand barrels per day):
Feedstocks:
Heavy sour crude 451 593 (142 ) Medium/light sour crude 582 715 (133 ) Acidic sweet crude 104 80 24 Sweet crude 616 658 (42 ) Residuals 248 253 (5 ) Other feedstocks 186 128 58

Total feedstocks 2,187 2,427 (240 ) Blendstocks and other 302 319 (17 )

Total throughput volumes 2,489 2,746 (257 )

Yields (thousand barrels per day):
Gasolines and blendstocks 1,196 1,232 (36 ) Distillates 793 982 (189 ) Petrochemicals 70 77 (7 ) Other products (d) 426 446 (20 )

Total yields 2,485 2,737 (252 )

Retail - U.S.:
Operating income $ 36 $ 25 $ 11 Company-operated fuel sites (average) 1,001 949 52 Fuel volumes (gallons per day per site) 5,119 5,104 15 Fuel margin per gallon $ 0.125 $ 0.129 $ (0.004 ) Merchandise sales $ 307 $ 282 $ 25 Merchandise margin (percentage of sales) 28.6 % 29.8 % (1.2 )% Margin on miscellaneous sales $ 21 $ 22 $ (1 ) Retail selling expenses $ 115 $ 121 $ (6 ) Depreciation and amortization expense $ 18 $ 16 $ 2

Retail - Canada:
Operating income $ 29 $ 24 $ 5 Fuel volumes (thousand gallons per day) 3,093 3,103 (10 ) Fuel margin per gallon $ 0.253 $ 0.270 $ (0.017 ) Merchandise sales $ 49 $ 54 $ (5 ) Merchandise margin (percentage of sales) 29.2 % 28.6 % 0.6 % Margin on miscellaneous sales $ 7 $ 10 $ (3 ) Retail selling expenses $ 56 $ 69 $ (13 ) Depreciation and amortization expense $ 8 $ 8 $ -

See the footnote references on page 49.

Ethanol (a):
Operating income $ 22 N/A $ 22 Ethanol production (thousand gallons per day) 1,547 N/A 1,547 Gross margin per gallon of ethanol production $ 0.49 N/A $ 0.49 Operating costs per gallon of ethanol production:
Ethanol operating expenses $ 0.30 N/A $ 0.30 Depreciation and amortization 0.03 N/A 0.03

Total operating costs per gallon of ethanol production $ 0.33 N/A $ 0.33

See the footnote references on page 49.

                  Refining Operating Highlights by Region (e)
                (millions of dollars, except per barrel amounts)

                                                        Three Months Ended June 30,
                                                      2009         2008        Change

   Gulf Coast (b):
   Operating income (loss)                         $   (176 )   $  1,043     $  (1,219 )
   Throughput volumes (thousand barrels per day)      1,395        1,495          (100 )
   Throughput margin per barrel (c)                $   3.94     $  13.25     $   (9.31 )
   Operating costs per barrel:
   Refining operating expenses                     $   3.92     $   4.34     $   (0.42 )
   Depreciation and amortization                       1.41         1.24          0.17

   Total operating costs per barrel                $   5.33     $   5.58     $   (0.25 )


   Mid-Continent:
   Operating income                                $     18     $    103     $     (85 )
   Throughput volumes (thousand barrels per day)        370          439           (69 )
   Throughput margin per barrel (c)                $   6.03     $   7.85     $   (1.82 )
   Operating costs per barrel:
   Refining operating expenses                     $   3.76     $   3.99     $   (0.23 )
   Depreciation and amortization                       1.72         1.27          0.45

   Total operating costs per barrel                $   5.48     $   5.26     $    0.22


   Northeast:
   Operating loss                                  $   (169 )   $    (35 )   $    (134 )
   Throughput volumes (thousand barrels per day)        440          527           (87 )
   Throughput margin per barrel (c)                $   2.88     $   5.81     $   (2.93 )
   Operating costs per barrel:
   Refining operating expenses                     $   5.39     $   5.06     $    0.33
   Depreciation and amortization                       1.71         1.49          0.22

   Total operating costs per barrel                $   7.10     $   6.55     $    0.55


   West Coast:
   Operating income                                $     59     $    124     $     (65 )
   Throughput volumes (thousand barrels per day)        284          285            (1 )
   Throughput margin per barrel (c)                $   9.03     $  11.92     $   (2.89 )
   Operating costs per barrel:
   Refining operating expenses                     $   5.15     $   5.41     $   (0.26 )
   Depreciation and amortization                       1.61         1.73         (0.12 )

   Total operating costs per barrel                $   6.76     $   7.14     $   (0.38 )

See the footnote references on page 49.

             Average Market Reference Prices and Differentials (f)
                              (dollars per barrel)

                                                         Three Months Ended June 30,
                                                      2009          2008         Change

  Feedstocks:
  West Texas Intermediate (WTI) crude oil          $   59.54     $  123.98     $  (64.44 )
  WTI less sour crude oil at U.S. Gulf Coast (g)        0.33          5.70         (5.37 )
  WTI less Mars crude oil                               2.19          6.96         (4.77 )
  WTI less Maya crude oil                               4.57         20.99        (16.42 )

  Products:
  U.S. Gulf Coast:
  Conventional 87 gasoline less WTI                    10.57          6.60          3.97
  No. 2 fuel oil less WTI                               3.84         23.03        (19.19 )
  Ultra-low-sulfur diesel less WTI                      6.16         28.85        (22.69 )
  Propylene less WTI                                  (10.89 )       (6.77 )       (4.12 )
  U.S. Mid-Continent:
  Conventional 87 gasoline less WTI                    10.58          5.89          4.69
  Low-sulfur diesel less WTI                            6.24         28.84        (22.60 )
  U.S. Northeast:
  Conventional 87 gasoline less WTI                     9.85          4.34          5.51
  No. 2 fuel oil less WTI                               4.69         24.94        (20.25 )
  Lube oils less WTI                                   25.64         33.65         (8.01 )
  U.S. West Coast:
  CARBOB 87 gasoline less WTI                          18.07         16.08          1.99
  CARB diesel less WTI                                  7.92         30.83        (22.91 )

The following notes relate to references on pages 45 through 49.
(a) The information presented for the three months ended June 30, 2009 includes the operations related to the acquisition of certain ethanol plants from VeraSun. Ethanol plants located in Charles City, Fort Dodge, and Hartley, Iowa; Aurora, South Dakota; and Welcome, Minnesota were purchased on April 1, 2009, and ethanol plants in Albert City, Iowa and Albion, Nebraska were purchased on April 9, 2009 and May 8, 2009, respectively. The ethanol production volumes reflected for the three months ended June 30, 2009 are based on 91 calendar days rather than the actual daily production, which varied by facility.

(b) Effective July 1, 2008, we sold our Krotz Springs Refinery to Alon Refining Krotz Springs, Inc. (Alon), a subsidiary of Alon USA Energy, Inc. The nature and significance of our post-closing participation in an offtake agreement with Alon represents a continuation of activities with the Krotz Springs Refinery for accounting purposes, and as such the results of operations related to the Krotz Springs Refinery have not been presented as discontinued operations, and all refining operating highlights, both consolidated and for the Gulf Coast region, include the Krotz Springs Refinery for the three months ended June 30, 2008.

(c) Throughput margin per barrel represents operating revenues less cost of sales divided by throughput volumes.

(d) Other products primarily include gas oils, No. 6 fuel oil, petroleum coke, and asphalt.

(e) The regions reflected herein contain the following refineries: the Gulf Coast refining region includes the Corpus Christi East, Corpus Christi West, Texas City, Houston, Three Rivers, Krotz Springs (for the three months ended June 30, 2008), St. Charles, Aruba, and Port Arthur Refineries; the Mid-Continent refining region includes the McKee, Ardmore, and Memphis Refineries; the Northeast refining region includes the Quebec City, Paulsboro, and Delaware City Refineries; and the West Coast refining region includes the Benicia and Wilmington Refineries.

(f) The average market reference prices and differentials, with the exception of the propylene and lube oil differentials, are based on posted prices from Platts Oilgram. The propylene differential is based on posted propylene prices in Chemical Market Associates, Inc. and the lube oil differential is based on Exxon Mobil Corporation postings provided by Independent Commodity Information Services - London Oil Reports. The average market reference prices and differentials are presented to provide users of the consolidated financial statements with economic indicators that significantly affect our operations and profitability.

(g) The market reference differential for sour crude oil is based on 50% Arab Medium and 50% Arab Light posted prices.

General
Operating revenues decreased 51% for the second quarter of 2009 compared to the second quarter of 2008 primarily as a result of lower refined product prices between the two periods. Operating income declined $1.5 billion and net income decreased $1.0 billion for the three months ended June 30, 2009 compared to amounts reported for the three months ended June 30, 2008 primarily due to a $1.5 billion decrease in refining segment operating income discussed below. Refining
Results of operations of our refining segment decreased from operating income of $1.2 billion for the second quarter of 2008 to an operating loss of $268 million for the second quarter of 2009, resulting from a 57% decrease in throughput margin per barrel and a 9% decline in throughput volumes, partially offset by a 10% decrease in refining operating expenses (including depreciation and amortization expense).
Total refining throughput margins for the second quarter of 2009 compared to the second quarter of 2008 were impacted by the following factors:
• Distillate margins in the second quarter of 2009 decreased significantly in all of our refining regions from the high margins in the second quarter of 2008. The decrease in distillate margins was primarily due to reduced demand attributable to the global slowdown in economic activity, combined with an increase in inventory levels resulting largely from new worldwide refining capacity.
• Sour crude oil feedstock differentials to WTI crude oil during the second quarter of 2009 declined significantly compared to the differentials in the second quarter of 2008. These unfavorable sour crude oil differentials were attributable mainly to reduced production of sour crude oil by OPEC and other producers. The sour crude oil differentials were also affected by high relative prices for residual fuel oil as reduced worldwide demand for residual fuel oil was more than offset by lower production resulting from reduced refinery throughput due to lower refined product demand.
• Gasoline margins were strong in all of our refining regions in the second quarter of 2009, and improved significantly from the second quarter of 2008. The improvement in gasoline margins for the second quarter of 2009 was primarily due to a better balance of supply and demand. Although demand for gasoline decreased slightly during the period, lower production and lower imports resulted in inventories similar to historical levels.
• Margins on various secondary refined products such as asphalt, fuel oils, and petroleum coke improved significantly from the second quarter of 2008 to the second quarter of 2009 as prices for these products did not decrease in proportion to the large decrease in the costs of the feedstocks used to produce them.
• Throughput volumes decreased 257,000 barrels per day during the second . . .