EX-99.01 2 c03810exv99w01.htm EXHIBIT 99.01 Exhibit 99.01
Exhibit 99.01
Valero Energy Corporation Reports Second Quarter 2010 Results
Best Quarterly Results Since Third Quarter 2008; Company Continues Focus on Cost
Reductions and Portfolio Improvements
SAN ANTONIO, July 27, 2010 — Valero Energy Corporation (NYSE: VLO) today reported income from continuing operations of $530 million, or $0.93 per share, for the second quarter of 2010, compared to a loss from continuing operations of $191 million, or $0.36 per share, for the second quarter of 2009. For the six months ended June 30, 2010, income from continuing operations was $429 million, or $0.76 per share, compared to income from continuing operations of $173 million, or $0.33 per share for the six months ended June 30, 2009. For all periods shown in the accompanying tables, discontinued operations relate to the refinery in Delaware City, Delaware, which the company shut down in 2009 and sold in the second quarter of 2010.
Operating income in the second quarter of 2010 was $921 million, versus an operating loss of $192 million in the second quarter of 2009. The $1.1 billion increase in operating income was mainly due to higher margins for diesel and many of the company’s secondary products, such as petrochemicals, asphalt, and lube oils, as well as better discounts for low-quality feedstocks.
“It’s great to be profitable again,” said Valero Chairman and CEO Bill Klesse. “Our second quarter results really showed the earnings power of our assets. Our system of high-conversion refineries was able to take advantage of higher margins on products and wider discounts on sour crude oils. Another highlight is that our refining operating expenses for the second quarter fell to $3.55 per barrel, which was our lowest cost per barrel since the second quarter of 2009.”
Commenting on the outlook for refining, Klesse said, “So far in the third quarter, product margins and feedstock discounts have continued at relatively good levels, although down from the second quarter in most of our regions. We remain cautiously optimistic that global economic expansion will drive growth in refined-products demand. Valero makes and sells fuels, so we need consumers to get back to work and the economy to grow faster.”
The company’s retail segment continued its record-setting performance with $109 million in operating income, which was the best second quarter in Valero’s history. The Canadian retail operations continued to perform well with $33 million of operating income, while the U.S. operations had impressive results of $76 million in operating income on strong fuel margins.

 

1

 

“Our ethanol business also continues to do well with $35 million of operating income in the second quarter despite difficult industry conditions,” said Klesse. “We have established a strong position as one of the largest, most competitive producers in the ethanol industry by building a portfolio of world-scale, cost-advantaged plants. Acquiring these plants at large discounts to new-build prices and leveraging our overhead structure has helped us to earn good returns on investment, even when margins were low.”
Regarding cash flows in the second quarter of 2010, capital spending was $517 million, of which $114 million was for turnaround and catalyst expenditures. Also in the second quarter, the company spent $223 million to pay down debt, paid $28 million in dividends on its common stock, and received $220 million in proceeds from the sale of the Delaware City assets. The company ended the second quarter with $2 billion in cash and temporary cash investments. For the full-year 2010, the company expects capital spending of approximately $2.3 billion.
“We continue to make progress on strengthening our portfolio of assets,” Klesse said. “In June, we closed on the sale of the Delaware City assets, and we started turnaround maintenance at our Aruba refinery. When complete in September, this work will provide us the option to resume operations at the Aruba refinery if conditions are profitable and will enhance strategic alternatives for the refinery. Despite the fact that the Paulsboro refinery was profitable in the second quarter, we are continuing to evaluate its strategic alternatives.”
Klesse concluded, “While we are pleased with the second quarter results, our priorities are to reduce costs and maintain our strong financial position. Early in 2010, we announced a goal to achieve $100 million in pre-tax cost savings this year. At the end of June, we were ahead of schedule and had already captured $90 million of cost savings through numerous initiatives and hard work by our employees. We remain focused on improving the long-term quality of our assets and our competitiveness in the global marketplace.”
Valero’s senior management will hold a conference call at 11:00 a.m. ET (10 a.m. CT) today to discuss this earnings release and provide an update on company operations. A live broadcast of the conference call will be available on the company’s web site at www.valero.com.
Valero Energy Corporation is a Fortune 500 company based in San Antonio with approximately 21,000 employees. The company owns or operates 15 refineries with a combined throughput capacity of approximately 2.8 million barrels per day. Valero is also a leading ethanol producer with ten ethanol plants in the Midwest with a combined capacity of 1.1 billion gallons per year, and is one of the nation’s largest retail operators with approximately 5,800 retail and branded wholesale outlets in the United States, Canada and the Caribbean under the Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon brands. Please visit www.valero.com for more information.

 

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Statements contained in this release that state the company’s or management’s expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “believe,” “expect,” “should,” “could,” “estimates,” and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero’s annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission.
-30-

 

3

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
STATEMENT OF INCOME DATA (1) (2):
                                
Operating Revenues (3)
   $ 21,775     $ 17,376     $ 41,418     $ 30,704  
 
                        
 
                                
Costs and Expenses:
                                
Cost of Sales
     19,320       16,014       37,456       27,218  
Operating Expenses
     847       781       1,759       1,626  
Retail Selling Expenses
     187       171       360       340  
General and Administrative Expenses (4)
     131       122       228       267  
Depreciation and Amortization Expense
     367       361       724       711  
Asset Impairment Loss (5)
     2       119       2       141  
 
                        
Total Costs and Expenses
     20,854       17,568       40,529       30,303  
 
                        
 
                                
Operating Income (Loss)
     921       (192 )     889       401  
 
                                
Other Income (Expense), Net
     1       (23 )     12       (24 )
 
                                
Interest and Debt Expense:
                                
Incurred
     (138 )     (118 )     (285 )     (237 )
Capitalized
     22       34       42       73  
 
                        
 
                                
Income (Loss) from Continuing Operations Before Income Tax Expense (Benefit)
     806       (299 )     658       213  
 
                                
Income Tax Expense (Benefit)
     276       (108 )     229       40  
 
                        
 
                                
Income (Loss) from Continuing Operations
     530       (191 )     429       173  
 
                                
Income (Loss) from Discontinued Operations, Net of Income Taxes
     53       (63 )     41       (118 )
 
                        
 
                                
Net Income (Loss)
   $ 583     $ (254 )   $ 470     $ 55  
 
                        
 
                                
Earnings (Loss) per Common Share:
                                
Continuing Operations
   $ 0.94     $ (0.36 )   $ 0.76     $ 0.33  
Discontinued Operations
     0.10       (0.12 )     0.07       (0.22 )
 
                        
Total
   $ 1.04     $ (0.48 )   $ 0.83     $ 0.11  
 
                        
 
                                
Weighted Average Common Shares Outstanding (in millions)
     563       525       563       520  
 
                                
Earnings (Loss) per Common Share — Assuming Dilution:
                                
Continuing Operations
   $ 0.93     $ (0.36 )   $ 0.76     $ 0.33  
Discontinued Operations
     0.10       (0.12 )     0.07       (0.22 )
 
                        
Total
   $ 1.03     $ (0.48 )   $ 0.83     $ 0.11  
 
                        
 
                                
Weighted Average Common Shares Outstanding — Assuming Dilution (in millions) (6)
     567       525       567       525  
                 
    June 30,     December 31,  
    2010     2009  
BALANCE SHEET DATA:
                
Cash and Temporary Cash Investments
   $ 2,001     $ 825  
 
Total Debt
   $ 8,034     $ 7,400  

 

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VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
Operating Income (Loss) by Business Segment:
                                
Refining
   $ 921     $ (143 )   $ 870     $ 550  
 
                        
Retail:
                                
U.S.
     76       36       109       61  
Canada
     33       29       71       60  
 
                        
Total Retail
     109       65       180       121  
 
                        
Ethanol
     35       22       92       22  
 
                        
Total Before Corporate
     1,065       (56 )     1,142       693  
Corporate
     (144 )     (136 )     (253 )     (292 )
 
                        
Total
   $ 921     $ (192 )   $ 889     $ 401  
 
                        
 
Depreciation and Amortization by Business Segment:
                                
Refining
   $ 318     $ 318     $ 629     $ 634  
 
                        
Retail:
                                
U.S.
     18       18       36       35  
Canada
     9       8       17       14  
 
                        
Total Retail
     27       26       53       49  
 
                        
Ethanol
     9       5       17       5  
 
                        
Total Before Corporate
     354       349       699       688  
Corporate
     13       12       25       23  
 
                        
Total
   $ 367     $ 361     $ 724     $ 711  
 
                        
 
Operating Highlights:
                                
Refining (2) (5):
                                
Throughput Margin per Barrel
   $ 9.39     $ 4.74     $ 7.70     $ 6.77  
 
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 3.55     $ 3.39     $ 3.96     $ 3.69  
Depreciation and Amortization
     1.50       1.47       1.57       1.48  
 
                        
Total Operating Costs per Barrel
   $ 5.05     $ 4.86     $ 5.53     $ 5.17  
 
                        
 
Throughput Volumes (Mbbls per Day):
                                
Feedstocks:
                                
Heavy Sour Crude
     472       451       457       505  
Medium/Light Sour Crude
     522       550       493       559  
Acidic Sweet Crude
     59       103       51       105  
Sweet Crude
     689       609       666       582  
Residuals
     211       226       174       172  
Other Feedstocks
     128       176       128       169  
 
                        
Total Feedstocks
     2,081       2,115       1,969       2,092  
Blendstocks and Other
     256       277       248       279  
 
                        
Total Throughput Volumes
     2,337       2,392       2,217       2,371  
 
                        
 
Yields (Mbbls per Day):
                                
Gasolines and Blendstocks
     1,148       1,141       1,090       1,097  
Distillates
     780       775       720       792  
Petrochemicals
     76       70       72       65  
Other Products (7)
     352       408       355       416  
 
                        
Total Yields
     2,356       2,394       2,237       2,370  
 
                        

 

5

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
Refining Operating Highlights by Region (8):
                                
Gulf Coast:
                                
Operating Income (Loss)
   $ 650     $ (81 )   $ 639     $ 109  
 
                                
Throughput Volumes (Mbbls per Day)
     1,329       1,395       1,234       1,355  
 
                                
Throughput Margin per Barrel
   $ 10.28     $ 3.94     $ 8.35     $ 5.48  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 3.34     $ 3.17     $ 3.85     $ 3.58  
Depreciation and Amortization
     1.57       1.41       1.64       1.46  
 
                        
Total Operating Costs per Barrel
   $ 4.91     $ 4.58     $ 5.49     $ 5.04  
 
                        
 
                                
Mid-Continent:
                                
Operating Income
   $ 151     $ 18     $ 140     $ 191  
 
                                
Throughput Volumes (Mbbls per Day)
     390       370       377       385  
 
                                
Throughput Margin per Barrel
   $ 9.13     $ 6.03     $ 7.32     $ 8.07  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 3.54     $ 3.75     $ 3.79     $ 3.73  
Depreciation and Amortization
     1.36       1.72       1.48       1.59  
 
                        
Total Operating Costs per Barrel
   $ 4.90     $ 5.47     $ 5.27     $ 5.32  
 
                        
 
                                
Northeast:
                                
Operating Income (Loss)
   $ 24     $ (42 )   $ 26     $ 125  
 
                                
Throughput Volumes (Mbbls per Day)
     356       343       344       351  
 
                                
Throughput Margin per Barrel
   $ 5.49     $ 3.05     $ 5.64     $ 6.46  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 3.38     $ 3.12     $ 3.81     $ 3.25  
Depreciation and Amortization
     1.35       1.30       1.40       1.25  
 
                        
Total Operating Costs per Barrel
   $ 4.73     $ 4.42     $ 5.21     $ 4.50  
 
                        
 
                                
West Coast:
                                
Operating Income
   $ 98     $ 79     $ 67     $ 264  
 
                                
Throughput Volumes (Mbbls per Day)
     262       284       262       280  
 
                                
Throughput Margin per Barrel
   $ 10.55     $ 9.03     $ 7.89     $ 11.66  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 4.87     $ 4.37     $ 4.92     $ 4.73  
Depreciation and Amortization
     1.57       1.61       1.55       1.73  
 
                        
Total Operating Costs per Barrel
   $ 6.44     $ 5.98     $ 6.47     $ 6.46  
 
                        
 
                                
Operating Income (Loss) for Regions Above
   $ 923     $ (26 )   $ 872     $ 689  
Asset Impairment Loss Applicable to Refining
     (2 )     (117 )     (2 )     (139 )
 
                        
Total Refining Operating Income (Loss)
   $ 921     $ (143 )   $ 870     $ 550  
 
                        

 

6

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
Retail — U.S.:
                                
Company-Operated Fuel Sites (Average)
     990       1,001       989       1,003  
Fuel Volumes (Gallons per Day per Site)
     5,196       5,119       5,070       5,052  
Fuel Margin per Gallon
   $ 0.220     $ 0.125     $ 0.181     $ 0.121  
Merchandise Sales
   $ 316     $ 307     $ 588     $ 573  
Merchandise Margin (Percentage of Sales)
     28.9 %     28.6 %     28.9 %     29.5 %
Margin on Miscellaneous Sales
   $ 22     $ 21     $ 44     $ 44  
Selling Expenses
   $ 122     $ 115     $ 233     $ 229  
 
                                
Retail — Canada:
                                
Fuel Volumes (Thousand Gallons per Day)
     3,098       3,093       3,088       3,176  
Fuel Margin per Gallon
   $ 0.276     $ 0.253     $ 0.287     $ 0.252  
Merchandise Sales
   $ 61     $ 49     $ 113     $ 88  
Merchandise Margin (Percentage of Sales)
     30.6 %     29.2 %     31.0 %     29.5 %
Margin on Miscellaneous Sales
   $ 9     $ 7     $ 19     $ 15  
Selling Expenses
   $ 65     $ 56     $ 127     $ 111  
 
                                
Ethanol (1):
                                
Ethanol Production (Thousand Gallons per Day)
     3,190       1,547       2,864       778  
Gross Margin per Gallon of Ethanol Production
   $ 0.47     $ 0.49     $ 0.54     $ 0.49  
Operating Costs per Gallon of Ethanol Production:
                                
Ethanol Operating Expenses
   $ 0.31     $ 0.30     $ 0.33     $ 0.30  
Depreciation and Amortization
     0.03       0.03       0.03       0.03  
 
                        
Total Operating Costs per Gallon of Ethanol Production
   $ 0.34     $ 0.33     $ 0.36     $ 0.33  
 
                        
 
                                
Average Market Reference Prices and Differentials (Dollars per Barrel):
                                
Feedstocks (at U.S. Gulf Coast):
                                
West Texas Intermediate (WTI) Crude Oil
   $ 77.80     $ 59.54     $ 78.24     $ 51.26  
WTI Less Sour Crude Oil (9)
   $ 3.78     $ 0.33     $ 3.44     $ 1.02  
WTI Less Mars Crude Oil
   $ 0.36     $ 2.19     $ 1.65     $ 0.70  
WTI Less Maya Crude Oil
   $ 9.75     $ 4.57     $ 9.33     $ 4.51  
 
                                
Products:
                                
U.S. Gulf Coast:
                                
Conventional 87 Gasoline Less WTI
   $ 10.22     $ 10.57     $ 8.68     $ 9.36  
No. 2 Fuel Oil Less WTI
   $ 9.21     $ 3.84     $ 7.44     $ 7.34  
Ultra-Low-Sulfur Diesel Less WTI
   $ 12.14     $ 6.16     $ 9.82     $ 9.38  
Propylene Less WTI
   $ 6.11     $ (10.89 )   $ 11.86     $ (8.69 )
U.S. Mid-Continent:
                                
Conventional 87 Gasoline Less WTI
   $ 10.39     $ 10.58     $ 8.55     $ 9.58  
Low-Sulfur Diesel Less WTI
   $ 13.29     $ 6.24     $ 10.00     $ 8.94  
U.S. Northeast:
                                
Conventional 87 Gasoline Less WTI
   $ 9.49     $ 9.85     $ 8.68     $ 8.99  
No. 2 Fuel Oil Less WTI
   $ 10.12     $ 4.69     $ 8.50     $ 9.06  
Lube Oils Less WTI
   $ 52.36     $ 25.64     $ 43.34     $ 46.37  
U.S. West Coast:
                                
CARBOB 87 Gasoline Less WTI
   $ 16.50     $ 18.07     $ 13.54     $ 18.60  
CARB Diesel Less WTI
   $ 14.45     $ 7.92     $ 11.44     $ 10.81  
New York Harbor Corn Crush (Dollars per Gallon)
   $ 0.36     $ 0.29     $ 0.41     $ 0.30  

 

7

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
     
(1)  
Valero acquired seven ethanol plants in the second quarter of 2009 and three ethanol plants in the first quarter of 2010. The Statement of Income Data includes the results of operations of those plants commencing on their respective acquisition or closing dates. The ethanol plants acquired in 2009 were purchased from VeraSun Energy Corporation under three closings that occurred on April 1, 2009, April 9, 2009 and May 8, 2009. The first closing included plants in Charles City, Fort Dodge, and Hartley, Iowa; Aurora, South Dakota; and Welcome, Minnesota. The second closing was for a plant in Albert City, Iowa, and the final closing was for a plant in Albion, Nebraska. Of the three plants acquired in the first quarter of 2010, two plants located in Bloomingburg, Ohio and Linden, Illinois were purchased from ASA Ethanol Holdings, LLC on January 13, 2010, and the third plant in Jefferson, Wisconsin was purchased from Renew Energy LLC on February 4, 2010. Ethanol production volumes reflected herein are based on total production during each period divided by actual calendar days per period.
 
(2)  
During the fourth quarter of 2009, Valero permanently shut down its refinery in Delaware City, Delaware, and wrote down the book value of the refinery assets to net realizable value. On June 1, 2010, Valero sold the shutdown refinery assets and the terminal and pipeline assets also located in Delaware City to PBF Energy Partners LP for $220 million in proceeds. The results of operations of the shutdown refinery are reflected as discontinued operations for all periods presented. For the three and six months ended June 30, 2010, those results include a gain of $92 million ($58 million after taxes) on the sale of the refinery assets. The gain primarily results from the scrap value of the refinery assets and the reversal of certain liabilities recorded in the fourth quarter of 2009 associated with the shut down of the refinery, which will not be incurred because of the sale. The terminal and pipeline assets previously associated with the refinery were not shut down and continued to be operated until the date of their sale. The results of operations of those assets, including an insignificant gain on the sale, are reflected in continuing operations for all periods presented. The refining segment and Northeast Region operating highlights presented in this earnings release exclude the Delaware City Refinery for all periods.
 
(3)  
Includes excise taxes on sales by Valero’s U.S. retail system of $225 million and $229 million for the three months ended June 30, 2010 and 2009, respectively, and $433 million and $433 million for the six months ended June 30, 2010 and 2009, respectively.
 
(4)  
General and administrative expenses for the six months ended June 30, 2010 includes the recognition of a favorable settlement with one of Valero’s third-party insurers for $40 million. The settlement relates to Valero’s claim of insurance coverage in connection with losses incurred in prior periods, including a $40 million charge in the third quarter of 2009, related to certain litigation.
 
(5)  
The asset impairment loss for all periods presented relates primarily to the permanent cancellation of certain capital projects classified as “construction in progress” as a result of the unfavorable impact of the economic slowdown on refining industry fundamentals. Such loss has been reclassified from Operating Expenses and presented separately for comparability with the current presentation. The asset impairment loss has been excluded from operating costs in determining operating costs per barrel, resulting in an adjustment to the operating costs per barrel previously reported in 2009. The after-tax amounts pertaining to the asset impairment loss reflected in the Statement of Income Data are $1 million and $78 million for the three months ended June 30, 2010 and 2009, respectively, and $1 million and $92 million for the six months ended June 30, 2010 and 2009, respectively.
 
(6)  
Common equivalent shares have been excluded from the computation of diluted loss per common share for the three months ended June 30, 2009 as the effect of including such shares would be antidilutive.
 
(7)  
Primarily includes gas oils, No. 6 fuel oil, petroleum coke, and asphalt.
 
(8)  
The regions reflected herein contain the following refineries: Gulf Coast — Corpus Christi East, Corpus Christi West, Texas City, Houston, Three Rivers, St. Charles, Aruba, and Port Arthur Refineries; Mid-Continent — McKee, Ardmore, and Memphis Refineries; Northeast — Quebec City and Paulsboro Refineries; and West Coast — Benicia and Wilmington Refineries.
 
(9)  
The market reference differential for sour crude oil is based on 50% Arab Medium and 50% Arab Light posted prices.

 

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