EX-99.1 2 d48583exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1
Valero Energy Corporation Reports Second Quarter Earnings
SAN ANTONIO, July 31, 2007 — Valero Energy Corporation (NYSE: VLO) today reported second quarter 2007 net income of $2.2 billion, or $3.89 per share, which compares to $1.9 billion, or $2.98 per share, in the second quarter of 2006. The company’s second quarter 2007 results represent the highest quarterly net income in the company’s history. For the six months ended June 30, 2007, net income was $3.4 billion, or $5.68 per share, compared to the company’s net income of $2.7 billion, or $4.29 per share, for the six months ended June 30, 2006. These results include the operations of the recently divested Lima, Ohio refinery, which are classified as discontinued operations in the accompanying financial tables.
“We are enjoying another outstanding year in 2007, as the company posted its best ever quarterly profits,” said Bill Klesse, Valero’s Chairman of the Board and Chief Executive Officer. “The environment for refining margins was terrific in the second quarter, and we continued to benefit from our complex, geographically diverse refining system.
“Gasoline and diesel demand in the U.S. has been excellent, and growing worldwide demand has increased competition for refined products. On the supply side, the industry has suffered from higher than normal unplanned refinery downtime. Production also has been affected by more complicated refinery operations, which are partly due to more stringent product specifications, and by tightness in markets for skilled labor and equipment. These factors have contributed to the lowest inventory levels we’ve seen in years for gasoline and distillate on a days-of-supply basis.
“For the second quarter, the Gulf Coast gasoline margins averaged nearly $29 per barrel, which is 45 percent higher than in the second quarter of last year. Gulf Coast ultra-low-sulfur diesel margins were also robust, averaging over $22 per barrel, an increase of 15 percent from last year. Refined product margins were strong across all of Valero’s refining regions,” Klesse said.
Regarding feedstock differentials in the second quarter of 2007, the discount to WTI for Maya heavy sour crude oil averaged $9.60 per barrel, while the discount for Mars medium sour crude oil averaged $2.70 per barrel. Since the second quarter, discounts to WTI have widened as the July average for the Maya discount increased to nearly $10.40 per barrel, and the Mars discount expanded to more than $4.20 per barrel. Moreover, the discount to WTI for residual fuel oil, which can compete as a heavy sour feedstock in many of Valero’s complex refineries, has expanded from an average of $15.27 per barrel in the second quarter to an average of almost $18.40 per barrel in July.

 

 

As to uses of cash in the second quarter, capital spending was $592 million, of which $101 million was for turnaround expenditures. The company also paid off $230 million of maturing debt in April. Concerning stock buybacks, the company executed an accelerated stock repurchase (ASR) program in April for an upfront payment of $3 billion. The ASR was recently completed, requiring an additional cash payment of $94.5 million. The program was funded through the issuance of $2.25 billion of publicly traded notes plus cash on hand. The company purchased 42.1 million shares under the ASR, bringing the year-to-date total purchases to approximately 62 million shares.
“It’s a very exciting time to be in the refining business,” Klesse said. “Margins and earnings have been outstanding, and when you consider the underlying supply and demand trends, we see a great outlook for the industry. We are taking advantage of this strong earnings environment by allocating our cash across growth projects, dividends, and share buybacks, while maintaining our investment-grade credit rating. In fact, this year we intend to purchase another $2 billion of our stock. As we said we’d do, we are executing a disciplined and consistent plan to increase shareholder returns for the long term.”
Valero’s senior management will hold a conference call at 11 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 and 2006 annual revenues of more than $90 billion. The company owns and operates 17 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.1 million barrels per day, making it the largest refiner in North America. Valero is also 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 various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon. Please visit www.valero.com for more information.

 

 

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,” “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 and on Valero’s website at www.valero.com.

 

 

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,  
    2007 (1)     2006 (1)     2007 (1)     2006 (1)  
STATEMENT OF INCOME DATA:
                                
Operating Revenues (2) (3)
   $ 24,202     $ 25,592     $ 42,957     $ 45,567  
 
                        
 
                                
Costs and Expenses:
                                
Cost of Sales (2)
     19,310       21,311       34,820       38,525  
Refining Operating Expenses
     985       911       1,919       1,795  
Retail Selling Expenses (2)
     200       182       371       354  
General and Administrative Expenses
     177       171       322       322  
Depreciation and Amortization Expense
     337       279       659       534  
 
                        
Total Costs and Expenses
    21,009       22,854       38,091       41,530  
 
                        
 
                                
Operating Income
     3,193       2,738       4,866       4,037  
 
                                
Equity in Earnings of NuStar Energy L.P. (4)
     —       10       —       22  
 
                                
Other Income (Expense), Net
     7       (5 )     12       (5 )
 
                                
Interest and Debt Expense:
                                
Incurred
     (110 )     (93 )     (199 )     (189 )
Capitalized
     27       45       58       81  
 
                        
 
                                
Income from Continuing Operations Before Income Tax Expense
     3,117       2,695       4,737       3,946  
 
                                
Income Tax Expense
     1,055       876       1,587       1,299  
 
                        
 
                                
Income from Continuing Operations
     2,062       1,819       3,150       2,647  
 
                                
Income from Discontinued Operations, Net of Income Taxes
    187       78       243       99  
 
                        
 
                                
Net Income
     2,249       1,897       3,393       2,746  
 
                                
Preferred Stock Dividends
     —       1       —       2  
 
                        
 
                                
Net Income Applicable to Common Stock
   $ 2,249     $ 1,896     $ 3,393     $ 2,744  
 
                        
 
                                
Earnings per Common Share:
                                
Continuing Operations
   $ 3.66     $ 2.97     $ 5.42     $ 4.30  
Discontinued Operations
     0.33       0.13       0.42       0.16  
 
                        
Total
   $ 3.99     $ 3.10     $ 5.84     $ 4.46  
 
                        
 
                                
Weighted Average Common Shares
                                
Outstanding (in millions)
     563       611       581       615  
Earnings per Common Share — Assuming Dilution:
                                
Continuing Operations
   $ 3.57     $ 2.86     $ 5.28     $ 4.13  
Discontinued Operations
     0.32       0.12       0.40       0.16  
 
                        
Total
   $ 3.89     $ 2.98     $ 5.68     $ 4.29  
 
                        
 
                                
Weighted Average Common Equivalent Shares
                                
Outstanding (in millions)
     578       636       597       640  
                 
    June 30,     December 31,  
    2007     2006  
BALANCE SHEET DATA (1):
                
Cash
   $ 2,336     $ 1,590  
 
                
Total Debt
   $ 6,921     $ 5,094  

 

 

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,  
    2007 (1)     2006 (1)     2007 (1)     2006 (1)  
Operating Income (Loss) by Business Segment:
                                
Refining
   $ 3,327     $ 2,873     $ 5,103     $ 4,311  
 
                        
Retail:
                                
U.S.
     37       24       61       24  
Canada
     19       22       48       43  
 
                        
Total Retail
     56       46       109       67  
 
                        
Total Before Corporate
     3,383       2,919       5,212       4,378  
Corporate
     (190 )     (181 )     (346 )     (341 )
 
                        
Total
   $ 3,193     $ 2,738     $ 4,866     $ 4,037  
 
                        
Depreciation and Amortization by Business Segment:
                                
Refining
   $ 302     $ 248     $ 595     $ 474  
 
                        
Retail:
                                
U.S
     16       15       27       28  
Canada
     6       6       13       13  
 
                        
Total Retail
     22       21       40       41  
 
                        
Total Before Corporate
     324       269       635       515  
Corporate
     13       10       24       19  
 
                        
Total
   $ 337     $ 279     $ 659     $ 534  
 
                        
Operating Highlights:
                                
Refining:
                                
Throughput Margin per Barrel
   $ 18.14     $ 15.59     $ 15.19     $ 13.02  
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 3.87     $ 3.52     $ 3.83     $ 3.55  
Depreciation and Amortization
     1.19       0.96       1.18       0.94  
 
                        
Total Operating Costs per Barrel
   $ 5.06     $ 4.48     $ 5.01     $ 4.49  
 
                        
Throughput Volumes (Mbbls per Day):
                                
Feedstocks:
                                
Heavy Sour Crude
     618       674       654       719  
Medium/Light Sour Crude
     650       641       632       597  
Acidic Sweet Crude
     86       51       85       58  
Sweet Crude
     717       736       711       737  
Residuals.
     273       278       259       217  
Other Feedstocks
     150       151       151       167  
 
                        
Total Feedstocks
     2,494       2,531       2,492       2,495  
Blendstocks and Other
     300       312       278       296  
 
                        
Total Throughput Volumes
     2,794       2,843       2,770       2,791  
 
                        
Yields (Mbbls per Day):
                                
Gasolines and Blendstocks
     1,277       1,354       1,263       1,337  
Distillates
     913       879       912       870  
Petrochemicals
     81       74       82       77  
Other Products (5)
     517       530       513       506  
 
                        
Total Yields
     2,788       2,837       2,770       2,790  
 
                        

 

 

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,  
    2007     2006     2007     2006  
Refining Operating Highlights by Region: (6)
                                
Gulf Coast:
                                
Operating Income
   $ 1,935     $ 1,715     $ 3,018     $ 2,718  
 
                                
Throughput Volumes (Mbbls per Day)
     1,543       1,589       1,534       1,550  
 
                                
Throughput Margin per Barrel
   $ 18.52     $ 15.92     $ 15.47     $ 13.73  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 3.65     $ 3.28     $ 3.55     $ 3.23  
Depreciation and Amortization
     1.09       0.78       1.05       0.81  
 
                        
Total Operating Costs per Barrel
   $ 4.74     $ 4.06     $ 4.60     $ 4.04  
 
                        
 
                                
Mid-Continent (1):
                                
Operating Income
   $ 483     $ 456     $ 574     $ 523  
 
                                
Throughput Volumes (Mbbls per Day)
     373       430       363       391  
 
                                
Throughput Margin per Barrel
   $ 19.96     $ 15.70     $ 14.81     $ 11.72  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 4.42     $ 2.97     $ 4.57     $ 3.37  
Depreciation and Amortization
     1.34       1.06       1.50       0.96  
 
                        
Total Operating Costs per Barrel
   $ 5.76     $ 4.03     $ 6.07     $ 4.33  
 
                        
 
                                
Northeast:
                                
Operating Income
   $ 523     $ 291     $ 812     $ 470  
 
                                
Throughput Volumes (Mbbls per Day)
     577       520       575       548  
 
                                
Throughput Margin per Barrel
   $ 14.83     $ 11.73     $ 12.73     $ 10.05  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 3.62     $ 4.34     $ 3.69     $ 4.22  
Depreciation and Amortization
     1.25       1.26       1.24       1.08  
 
                        
Total Operating Costs per Barrel
   $ 4.87     $ 5.60     $ 4.93     $ 5.30  
 
                        
 
                                
West Coast:
                                
Operating Income
   $ 386     $ 411     $ 699     $ 600  
 
                                
Throughput Volumes (Mbbls per Day).
     301       304       298       302  
 
                                
Throughput Margin per Barrel
   $ 20.35     $ 20.29     $ 18.97     $ 16.50  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 4.81     $ 4.20     $ 4.60     $ 4.24  
Depreciation and Amortization
     1.42       1.24       1.41       1.28  
 
                        
Total Operating Costs per Barrel
   $ 6.23     $ 5.44     $ 6.01     $ 5.52  
 
                        

 

 

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,  
    2007     2006     2007     2006  
Retail — U.S.:
                                
Company-Operated Fuel Sites (Average)
     958       988       961       992  
Fuel Volumes (Gallons per Day per Site)
     5,006       4,916       4,994       4,899  
Fuel Margin per Gallon
   $ 0.202     $ 0.145     $ 0.163     $ 0.122  
Merchandise Sales
   $ 269     $ 251     $ 502     $ 470  
Merchandise Margin (Percentage of Sales)
     29.8 %     30.5 %     29.9 %     30.1 %
Margin on Miscellaneous Sales (2)
   $ 24     $ 22     $ 49     $ 42  
Selling Expenses (2)
   $ 139     $ 123     $ 252     $ 239  
 
                                
Retail — Canada:
                                
Fuel Volumes (Thousand Gallons per Day)
     3,144       3,114       3,257       3,199  
Fuel Margin per Gallon
   $ 0.222     $ 0.237     $ 0.234     $ 0.231  
Merchandise Sales
   $ 47     $ 43     $ 84     $ 79  
Merchandise Margin (Percentage of Sales)
     28.3 %     28.0 %     28.8 %     28.0 %
Margin on Miscellaneous Sales
   $ 9     $ 7     $ 18     $ 15  
Selling Expenses
   $ 61     $ 59     $ 119     $ 115  
 
                                
Average Market Reference Prices and Differentials
                                
(Dollars per Barrel):
                                
Feedstocks (at U.S. Gulf Coast, except as Noted):
                                
West Texas Intermediate (WTI) Crude Oil
   $ 64.89     $ 70.40     $ 61.45     $ 66.84  
WTI Less Sour Crude Oil (7)
   $ 3.08     $ 7.24     $ 4.50     $ 7.61  
WTI Less Mars Crude Oil
  $ 2.70     $ 6.67     $ 3.81     $ 7.19  
WTI Less Alaska North Slope (ANS) Crude Oil (U.S. West Coast)
   $ (0.86 )   $ 1.62     $ 0.72     $ 2.02  
WTI Less Maya Crude Oil
   $ 9.60     $ 15.68     $ 11.11     $ 15.65  
 
                                
Products:
                                
U.S. Gulf Coast:
                                
Conventional 87 Gasoline Less WTI
   $ 28.95     $ 20.01     $ 19.58     $ 14.00  
No. 2 Fuel Oil Less WTI
   $ 14.95     $ 11.78     $ 12.38     $ 10.32  
Ultra-Low-Sulfur Diesel Less WTI (8)
   $ 22.26     $ 19.31     $ 19.81       N/A  
Propylene Less WTI
   $ 16.67     $ 10.54     $ 16.44     $ 8.84  
U.S. Mid-Continent:
                                
Conventional 87 Gasoline Less WTI
   $ 34.09     $ 19.03     $ 23.11     $ 13.56  
Low-Sulfur Diesel Less WTI
   $ 25.61     $ 20.73     $ 22.97     $ 17.00  
U.S. Northeast:
                                
Conventional 87 Gasoline Less WTI
   $ 26.15     $ 16.94     $ 19.08     $ 11.85  
No. 2 Fuel Oil Less WTI
   $ 15.41     $ 11.73     $ 13.38     $ 10.38  
Lube Oils Less WTI
  $ 53.25     $ 49.81     $ 58.53     $ 48.36  
U.S. West Coast:
                                
CARBOB 87 Gasoline Less ANS
   $ 37.36     $ 33.11     $ 33.67     $ 24.16  
CARB Diesel Less ANS
   $ 26.16     $ 28.14     $ 26.35     $ 24.55  

 

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
         
(1)   On May 2, 2007, Valero Energy Corporation entered into an agreement to sell its Lima Refinery to Husky Refining
 
      Company, a wholly owned subsidiary of Husky Energy Inc. Therefore, the results of operations of the Lima Refinery are reported as discontinued operations in the Statement of Income Data for all periods presented, and all refining operating highlights, both consolidated and for the Mid-Continent region, presented in this earnings release exclude the Lima Refinery for all periods presented. The sale of the Lima Refinery was consummated effective July 1, 2007.
 
        
(2)   Certain amounts previously reported in 2006 for operating revenues, cost of sales, and retail selling expenses have
 
      been reclassified for comparability with amounts reported in 2007.
 
        
(3)   Includes excise taxes on sales by Valero’s U.S. retail system of $203 million and $196 million for the three months
 
      ended June 30, 2007 and 2006, respectively, and $399 million and $390 million for the six months ended June 30, 2007 and 2006, respectively.
 
        
(4)   On December 22, 2006, Valero Energy Corporation sold its remaining ownership interest in NuStar GP Holdings,
 
      LLC (formerly Valero GP Holdings, LLC), which indirectly owns the general partner interest, the incentive distribution rights, and a 21.4% limited partner interest in NuStar Energy L.P. (formerly Valero L.P.) As a result, the statement of income reflects no equity in earnings of NuStar Energy L.P. subsequent to December 21, 2006.
 
        
(5)   Primarily includes gas oils, No. 6 fuel oil, petroleum coke, and asphalt.
 
        
(6)   The regions reflected herein contain the following refineries: Gulf Coast- Corpus Christi East, Corpus Christi West,
 
      Texas City, Houston, Three Rivers, Krotz Springs, St. Charles, Aruba, and Port Arthur Refineries; Mid-Continent- McKee, Ardmore, and Memphis Refineries; Northeast- Quebec City, Paulsboro, and Delaware City Refineries; and West Coast- Benicia and Wilmington Refineries.
 
        
(7)   The market reference differential for sour crude oil is based on 50% Arab Medium and 50% Arab Light posted
 
      prices.
 
        
(8)   The market reference differential for ultra-low-sulfur diesel for the three months ended June 30, 2006 represents
 
      only the months of May and June, since the ultra-low-sulfur diesel less WTI market reference was not available prior to May 1, 2006.