EX-99.01 2 d58844exv99w01.htm PRESS RELEASE exv99w01
         
Exhibit 99.01
Valero Energy Corporation Reports Second Quarter Earnings
SAN ANTONIO, July 29, 2008 – Valero Energy Corporation (NYSE: VLO) today reported second quarter 2008 income from continuing operations of $734 million, or $1.37 per share. The company’s income from continuing operations in the second quarter of 2007 was $2.1 billion, or $3.57 per share. For the six months ended June 30, 2008, income from continuing operations was $995 million, or $1.85 per share, compared to the company’s income from continuing operations of $3.2 billion, or $5.28 per share, for the six months ended June 30, 2007. Income from discontinued operations relates to the Lima, Ohio refinery, which the company sold effective July 1, 2007.
Second quarter 2008 operating income was $1.2 billion, versus $3.2 billion reported in the second quarter of 2007. The decline in operating income was primarily attributable to lower margins for many of the company’s products in the second quarter of 2008 compared to the same quarter last year. Margins for refined products declined as the cost of crude oil and other feedstocks increased more rapidly than the prices of gasoline and other products, such as asphalt, fuel oils, petroleum coke, and petrochemical feedstocks. For example, benchmark Gulf Coast gasoline margins decreased about $22 per barrel, or 77 percent, from $28.95 per barrel in the second quarter of 2007 to $6.60 per barrel in the second quarter of 2008. Somewhat offsetting these weaker margins were significantly higher margins on distillate products such as diesel and jet fuels, which continued to experience strong global demand, and improved differentials for sour crude oil.
Other factors contributing to the decline in operating income include refinery operating expenses, which increased by $148 million from the second quarter of 2007 to the second quarter of 2008, primarily due to higher energy costs for electricity and natural gas. Also, throughput volumes decreased in the same time frame by an average of 48,000 barrels per day in large part due to maintenance and repairs at the Aruba, Port Arthur, and Delaware City refineries.
“Despite the difficult environment for margins on gasoline and many secondary products, Valero continued to be profitable,” said Bill Klesse, Valero’s Chairman of the Board and Chief Executive Officer. “Wide differentials for the heavy and sour feedstocks that we can process in our refineries benefited us significantly in the second quarter.
“In our refining operations, we’ve made great progress in shifting production to take advantage of the strong market for distillates. From 2008’s first quarter to the second quarter, we increased our distillate production by 110,000 barrels per day while maintaining steady gasoline production. In the same time frame, we increased our use of discounted feedstocks from 66% to 68%, partially due to improved operations at our heavy sour refineries where we completed a major turnaround at Delaware City, finished

 

 

our coke drum repair at Port Arthur, and repaired the vacuum tower at our Aruba refinery.
“Looking at market fundamentals, we expect distillate margins should be strong for the rest of the year and next. However, we expect gasoline margins to continue to be weak and industry utilization rates to decline. We expect secondary products to have a margin recovery, particularly if the price of crude oil stabilizes or falls, as the prices of these products lag changes in the price of crude oil.
“Our balance sheet continues to be in excellent shape with $1.6 billion in cash at the end of June. In July, we added further to our cash position with the proceeds from the sale of the Krotz Springs refinery. We continued to return cash to our shareholders in the second quarter by increasing our dividend by 25% and also by purchasing 3.8 million shares of our common stock. In early July, we purchased an additional 2 million shares, and for the year, we have purchased nearly 15 million shares. We continue to review our capital spending very closely and now expect this year’s expenditures to be approximately $3.8 billion, down $700 million from our original estimate.
“Concerning asset sales, although we have received preliminary indications of interest from parties regarding our Ardmore and Memphis refineries, we have not yet received a proposal that we believe is in the best interest of our employees and shareholders, so these refineries remain under strategic review. Obviously, gasoline margins have weakened and the availability of financing is clearly lacking as the financial markets continue in turmoil. However, we plan to continue to pursue a potential transaction for Aruba.
“We can manage industry challenges, but unfortunately, reckless rhetoric in Washington, D.C. complicates our forward progress. Too many in Congress fail to appreciate our industry’s efficiencies, they won’t acknowledge the excellent jobs we provide, they ignore the taxes we pay, and worst of all, many in Congress are more interested in scoring populist political points than reducing energy costs. To not allow companies to look for oil and gas when there are huge potential reserves in the U.S. is irresponsible. Instead, Congress wants to provide subsidies for inefficient technologies. Instead of solutions, they want to reduce CO2 emissions without regard for the economy. The direction we see Congress moving is not good for consumers, our shareholders, or our country. We will continue to advocate sound policies based on facts and market realities.
“As I’ve said before, the refining industry historically has been seasonal, volatile, and cyclical. Even when the industry faces challenges, our employees are committed to excellence in achieving cost efficiencies while continuing to improve our safety, environmental, and reliability performance. To make Valero a more valuable company for the long term, we expect to continue our balanced approach by investing in selected

 

 

growth projects, improving our operating performance, buying back more stock, and increasing dividends, while maintaining our investment-grade credit rating.”
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 22,000 employees and 2007 revenues of more than $95 billion. The company owns and operates 16 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,  
    2008     2007 (1)     2008     2007 (1)  
STATEMENT OF INCOME DATA:
                                
Operating Revenues (2)
   $ 36,640     $ 24,202     $ 64,585     $ 42,957  
 
                        
 
                                
Costs and Expenses:
                                
Cost of Sales
     33,673       19,310       59,342       34,820  
Refining Operating Expenses
     1,133       985       2,247       1,919  
Retail Selling Expenses
     190       200       378       371  
General and Administrative Expenses
     117       177       252       322  
Depreciation and Amortization Expense
     369       337       736       659  
 
                        
Total Costs and Expenses
     35,482       21,009       62,955       38,091  
 
                        
 
                                
Operating Income
     1,158       3,193       1,630       4,866  
 
                                
Other Income, Net
     15       7       35       12  
 
                                
Interest and Debt Expense:
                                
Incurred
     (107 )     (110 )     (223 )     (199 )
Capitalized
     24       27       43       58  
 
                        
 
                                
Income from Continuing Operations Before Income Tax Expense
     1,090       3,117       1,485       4,737  
 
                                
Income Tax Expense
     356       1,055       490       1,587  
 
                        
 
                                
Income from Continuing Operations
     734       2,062       995       3,150  
 
                                
Income from Discontinued Operations, Net of Income Taxes (1)
     —       187       —       243  
 
                        
 
                                
Net Income
   $ 734     $ 2,249     $ 995     $ 3,393  
 
                        
 
                                
Earnings per Common Share:
                                
Continuing Operations
   $ 1.40     $ 3.66     $ 1.88     $ 5.42  
Discontinued Operations
     —       0.33       —       0.42  
 
                        
Total
   $ 1.40     $ 3.99     $ 1.88     $ 5.84  
 
                        
 
                                
Weighted Average Common Shares Outstanding (in millions)
     526       563       529       581  
 
                                
Earnings per Common Share — Assuming Dilution:
                                
Continuing Operations
   $ 1.37     $ 3.57     $ 1.85     $ 5.28  
Discontinued Operations
     —       0.32       —       0.40  
 
                        
Total
   $ 1.37     $ 3.89     $ 1.85     $ 5.68  
 
                        
 
                                
Weighted Average Common Shares Outstanding- Assuming Dilution (in millions)
     534       578       537       597  
                 
    June 30,   December 31,
    2008   2007
BALANCE SHEET DATA:
                
Cash and Temporary Cash Investments
   $ 1,644     $ 2,464  
 
                
Total Debt
   $ 6,475     $ 6,862  

 

 

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,  
    2008     2007 (1)     2008     2007 (1)  
Operating Income (Loss) by Business Segment:
                                
Refining
   $ 1,235     $ 3,327     $ 1,803     $ 5,103  
 
                        
Retail:
                                
U.S.
     25       37       39       61  
Canada
     24       19       60       48  
 
                        
Total Retail
     49       56       99       109  
 
                        
Total Before Corporate
     1,284       3,383       1,902       5,212  
Corporate
     (126 )     (190 )     (272 )     (346 )
 
                        
Total
   $ 1,158     $ 3,193     $ 1,630     $ 4,866  
 
                        
 
                                
Depreciation and Amortization by Business Segment:
                                
Refining
   $ 336     $ 302     $ 667     $ 595  
 
                        
Retail:
                                
U.S.
     16       16       33       27  
Canada
     8       6       16       13  
 
                        
Total Retail
     24       22       49       40  
 
                        
Total Before Corporate
     360       324       716       635  
Corporate
     9       13       20       24  
 
                        
Total
   $ 369     $ 337     $ 736     $ 659  
 
                        
 
                                
Operating Highlights:
                                
Refining:
                                
Throughput Margin per Barrel
   $ 10.82     $ 18.14     $ 9.68     $ 15.19  
 
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 4.53     $ 3.87     $ 4.61     $ 3.83  
Depreciation and Amortization
     1.35       1.19       1.37       1.18  
 
                        
Total Operating Costs per Barrel
   $ 5.88     $ 5.06     $ 5.98     $ 5.01  
 
                        
 
                                
Throughput Volumes (Mbbls per Day):
                                
Feedstocks:
                                
Heavy Sour Crude
     593       618       587       654  
Medium/Light Sour Crude
     715       650       685       632  
Acidic Sweet Crude
     80       86       77       85  
Sweet Crude
     658       717       643       711  
Residuals
     253       273       223       259  
Other Feedstocks
     128       150       144       151  
 
                        
Total Feedstocks
     2,427       2,494       2,359       2,492  
Blendstocks and Other
     319       300       318       278  
 
                        
Total Throughput Volumes
     2,746       2,794       2,677       2,770  
 
                        
 
                                
Yields (Mbbls per Day):
                                
Gasolines and Blendstocks
     1,232       1,277       1,228       1,263  
Distillates
     982       913       927       912  
Petrochemicals
     77       81       77       82  
Other Products (3)
     446       517       442       513  
 
                        
Total Yields
     2,737       2,788       2,674       2,770  
 
                        

 

 

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,  
    2008     2007     2008     2007  
Refining Operating Highlights by Region (4):
                                
Gulf Coast:
                                
Operating Income
   $ 1,043     $ 1,935     $ 1,480     $ 3,018  
 
                                
Throughput Volumes (Mbbls per Day)
     1,495       1,543       1,437       1,534  
 
                                
Throughput Margin per Barrel
   $ 13.25     $ 18.52     $ 11.46     $ 15.47  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 4.34     $ 3.65     $ 4.52     $ 3.55  
Depreciation and Amortization
     1.24       1.09       1.28       1.05  
 
                        
Total Operating Costs per Barrel
   $ 5.58     $ 4.74     $ 5.80     $ 4.60  
 
                        
 
                                
Mid-Continent (1):
                                
Operating Income
   $ 103     $ 483     $ 218     $ 574  
 
                                
Throughput Volumes (Mbbls per Day)
     439       373       426       363  
 
                                
Throughput Margin per Barrel
   $ 7.85     $ 19.96     $ 8.28     $ 14.81  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 3.99     $ 4.42     $ 4.16     $ 4.57  
Depreciation and Amortization
     1.27       1.34       1.30       1.50  
 
                        
Total Operating Costs per Barrel
   $ 5.26     $ 5.76     $ 5.46     $ 6.07  
 
                        
 
                                
Northeast:
                                
Operating Income (Loss)
   $ (35 )   $ 523     $ (30 )   $ 812  
 
                                
Throughput Volumes (Mbbls per Day)
     527       577       541       575  
 
                                
Throughput Margin per Barrel
   $ 5.81     $ 14.83     $ 5.91     $ 12.73  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 5.06     $ 3.62     $ 4.77     $ 3.69  
Depreciation and Amortization
     1.49       1.25       1.45       1.24  
 
                        
Total Operating Costs per Barrel
   $ 6.55     $ 4.87     $ 6.22     $ 4.93  
 
                        
 
                                
West Coast:
                                
Operating Income
   $ 124     $ 386     $ 135     $ 699  
 
                                
Throughput Volumes (Mbbls per Day)
     285       301       273       298  
 
                                
Throughput Margin per Barrel
   $ 11.92     $ 20.35     $ 9.99     $ 18.97  
 
                                
Operating Costs per Barrel:
                                
Refining Operating Expenses
   $ 5.41     $ 4.81     $ 5.48     $ 4.60  
Depreciation and Amortization
     1.73       1.42       1.80       1.41  
 
                        
Total Operating Costs per Barrel
   $ 7.14     $ 6.23     $ 7.28     $ 6.01  
 
                        

 

 

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,
    2008   2007   2008   2007
Retail — U.S.:
                                
Company-Operated Fuel Sites (Average)
     949       958       949       961  
Fuel Volumes (Gallons per Day per Site)
     5,104       5,006       5,023       4,994  
Fuel Margin per Gallon
   $ 0.129     $ 0.202     $ 0.121     $ 0.163  
Merchandise Sales
   $ 282     $ 269     $ 527     $ 502  
Merchandise Margin (Percentage of Sales)
     29.8 %     29.8 %     30.1 %     29.9 %
Margin on Miscellaneous Sales
   $ 22     $ 24     $ 50     $ 49  
Selling Expenses
   $ 121     $ 139     $ 241     $ 252  
 
                                
Retail — Canada:
                                
Fuel Volumes (Thousand Gallons per Day)
     3,103       3,144       3,191       3,257  
Fuel Margin per Gallon
   $ 0.270     $ 0.222     $ 0.286     $ 0.234  
Merchandise Sales
   $ 54     $ 47     $ 100     $ 84  
Merchandise Margin (Percentage of Sales)
     28.6 %     28.3 %     28.5 %     28.8 %
Margin on Miscellaneous Sales
   $ 10     $ 9     $ 19     $ 18  
Selling Expenses
   $ 69     $ 61     $ 137     $ 119  
 
                                
Average Market Reference Prices and Differentials (Dollars per Barrel):
                                
Feedstocks (at U.S. Gulf Coast, except as Noted):
                                
West Texas Intermediate (WTI) Crude Oil
   $ 123.98     $ 64.89     $ 110.96     $ 61.45  
WTI Less Sour Crude Oil (5)
   $ 5.70     $ 3.08     $ 5.77     $ 4.50  
WTI Less Mars Crude Oil
   $ 6.96     $ 2.70     $ 6.97     $ 3.81  
WTI Less Alaska North Slope (ANS)
                                
Crude Oil (U.S. West Coast)
   $ 0.19     $ (0.86 )   $ 0.75     $ 0.72  
WTI Less Maya Crude Oil
   $ 20.99     $ 9.60     $ 18.90     $ 11.11  
 
                                
Products:
                                
U.S. Gulf Coast:
                                
Conventional 87 Gasoline Less WTI
   $ 6.60     $ 28.95     $ 5.42     $ 19.58  
No. 2 Fuel Oil Less WTI
   $ 23.03     $ 14.95     $ 19.11     $ 12.38  
Ultra-Low-Sulfur Diesel Less WTI
   $ 28.85     $ 22.26     $ 24.61     $ 19.81  
Propylene Less WTI
   $ (6.77 )   $ 16.67     $ (3.77 )   $ 16.44  
U.S. Mid-Continent:
                                
Conventional 87 Gasoline Less WTI
   $ 5.89     $ 34.09     $ 5.43     $ 23.11  
Low-Sulfur Diesel Less WTI
   $ 28.84     $ 25.61     $ 24.88     $ 22.97  
U.S. Northeast:
                                
Conventional 87 Gasoline Less WTI
   $ 4.34     $ 26.15     $ 3.70     $ 19.08  
No. 2 Fuel Oil Less WTI
   $ 24.94     $ 15.41     $ 21.35     $ 13.38  
Lube Oils Less WTI
   $ 33.65     $ 53.25     $ 32.97     $ 58.53  
U.S. West Coast:
                                
CARBOB 87 Gasoline Less ANS
   $ 16.27     $ 37.36     $ 13.32     $ 33.67  
CARB Diesel Less ANS
   $ 31.02     $ 26.16     $ 26.14     $ 26.35  

 

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
 
(1)   Effective July 1, 2007, Valero Energy Corporation sold its Lima Refinery to Husky Refining Company, a wholly owned subsidiary of Husky Energy Inc. The results of operations of the Lima Refinery prior to its sale are reported as discontinued operations in the Statement of Income Data for the three and six months ended June 30, 2007, and all refining operating highlights, both consolidated and for the Mid-Continent region, presented in this earnings release exclude the Lima Refinery.
 
(2)   Includes excise taxes on sales by Valero’s U.S. retail system of $204 million and $203 million for the three months ended June 30, 2008 and 2007, respectively, and $398 million and $399 million for the six months ended June 30, 2008 and 2007, respectively.
 
(3)   Primarily includes gas oils, No. 6 fuel oil, petroleum coke, and asphalt.
 
(4)   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.
 
(5)   The market reference differential for sour crude oil is based on 50% Arab Medium and 50% Arab Light posted prices.