Valero Energy Reports Third Quarter 2014 Results

in Earnings / Energy News   by—

Valero Energy Corporation (NYSE: VLO, “Valero”) today reported net income attributable to Valero stockholders of $1.1 billion, or $2.00 per share, for the third quarter of 2014 compared to $312 million, or $0.57 per share, for the third quarter of 2013.

Operating income in the third quarter of 2014 was approximately $1.7 billion versus $532 million in the third quarter of 2013.  The $1.1 billion increase in operating income resulted mainly from wider discounts for sweet and sour crude oils relative to Brent crude oil, stronger gasoline margins in most regions, and higher refining throughput volumes.  These positive drivers were partially offset by weaker distillate margins relative to Brent crude oil in most regions and higher natural gas costs in the third quarter of 2014 versus the third quarter of 2013.

Third quarter 2014 refining throughput volumes averaged 2.8 million barrels per day, an increase of 42,000 barrels per day from the third quarter of 2013.  The increase in volumes was due primarily to less turnaround activity and higher throughput capacity utilization, which was supported by strong product exports and increased availability of North American light crude oil on the U.S. Gulf Coast.  Valero’s refineries operated at 98 percent throughput capacity utilization in the third quarter of 2014.

“Our strong performance during the quarter reflects the capabilities of our team and our assets to capitalize on market opportunities,” said Valero CEO and President Joe Gorder. “Our ability to do so has been enhanced by the capital invested in our refineries and logistics systems. In addition to solid operations, we increased our dividend for the second time in 2014, and so far this year, we have returned more cash via stock buybacks than we did in all of 2013.

“We continued to advance our refining and logistics capital investments, which enable us to process more North American crude oil. We completed a 70,000 barrels-per-day rail unloading facility at our Port Arthur refinery, and we received additional rail cars. We secured the option to purchase a 50 percent interest in the announced Diamond Pipeline, which when completed, will connect our Memphis refinery to the crude oil hub at Cushing, Oklahoma. We also completed our first drop-down sale to Valero Energy Partners LP in the third quarter of 2014.”

“As we enter the fourth quarter, our business continues to perform well and our growth investments are progressing,” Gorder said. “We have completed investments and are ready to receive advantaged crude at our Quebec refinery when the Enbridge Line 9B pipeline reversal starts up.  Later this quarter, we expect to complete the hydrocracker revamp at our Meraux refinery, which will increase the refinery’s yield of ultra low sulfur diesel and jet fuel. The two crude topping units at our Corpus Christi and Houston refineries are progressing as planned, and we expect these units will significantly reduce feedstock costs for both of these refineries when complete in 2016.”

The ethanol segment reported record third quarter operating income of $198 million versus $113 million in the third quarter of 2013.  The $85 million increase in operating income was mainly due to higher gross margin per gallon driven by lower corn costs and increased volumes with the start-up of Valero’s eleventh ethanol plant in Mount Vernon, Indiana in August 2014.

“Our ethanol business continues to generate impressive returns for Valero, delivering a record $628 million in operating income in the first three quarters of 2014,” Gorder said. “We are also pleased with our Mount Vernon ethanol plant’s safe and timely start-up.”

Regarding cash flows in the third quarter of 2014, capital expenditures were $622 million, of which $123 million was for turnarounds and catalyst.  Valero increased its quarterly common stock dividend 10 percent to $0.275 per share, paid $145 million in dividends, and purchased 7 million shares of its common stock for $344 million.  Subsequent to the third quarter of 2014, Valero bought 3 million shares of its common stock for $138 million and announced a common stock dividend of $0.275 per share for the fourth quarter of 2014.  Valero has purchased 18.4 million shares for $937 million in 2014.

Valero ended the third quarter of 2014 with $6.4 billion in total debt and $4.2 billion of cash and temporary cash investments, of which $231 million was held by Valero Energy Partners LP.

Valero expects 2014 capital expenditures, including turnarounds and catalyst, to be approximately $2.9 billion, including $1.4 billion for stay-in-business capital and $1.5 billion for growth investments. More than 50 percent of the planned growth investments will be used to strengthen and expand the company’s logistics system.

Valero expects 2015 capital expenditures, including turnarounds and catalyst, to be approximately $2.8 billion, including $1.5 billion for stay-in-business capital and $1.3 billion for growth investments.  Consistent with its strategy, Valero expects over 35 percent of its 2015 growth investments will be for light crude oil processing and more than 30 percent will be for logistics. The company believes that most of the logistics investments will be eligible for future sales to Valero Energy Partners LP.

Valero’s senior management will hold a conference call at 11 a.m. ET 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 website at www.valero.com.

About Valero

Valero Energy Corporation, through its subsidiaries, is an international manufacturer and marketer of transportation fuels, other petrochemical products and power. Valero subsidiaries employ approximately 10,000 people, and assets include 15 petroleum refineries with a combined throughput capacity of approximately 2.9 million barrels per day, 11 ethanol plants with a combined production capacity of 1.3 billion gallons per year, a 50-megawatt wind farm, and renewable diesel production from a joint venture. Through subsidiaries, Valero owns the general partner of Valero Energy Partners LP (VLP), a midstream master limited partnership.  Approximately 7,400 outlets carry the Valero, Diamond Shamrock, Shamrock, and Beacon brands in the United States and the Caribbean; Ultramar in Canada; and Texaco in the United Kingdom and Ireland.  Valero is a Fortune 500 company based in San Antonio. Please visit www.valero.com for more information.

Valero Contacts
Investors:
John Locke, Executive Director – Investor Relations, 210-345-3077
Karen Ngo, Manager – Investor Relations, 210-345-4574
Media:
Bill Day, Vice President – Media and Community Relations, 210-345-2928

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Safe-Harbor Statement

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,” “intend,” 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

Nine Months Ended

September 30,

September 30,

2014

2013

2014

2013

Statement of Income Data (a):

Operating revenues

$

34,408

$

36,137

$

102,985

$

103,645

Costs and expenses:

  Cost of sales

31,023

33,931

93,820

96,139

  Operating expenses:

  Refining

987

954

2,926

2,742

  Retail

—

—

—

226

  Ethanol

118

102

358

281

  General and administrative expenses (b)

180

170

510

579

  Depreciation and amortization expense

430

448

1,265

1,283

  Total costs and expenses

32,738

35,605

98,879

101,250

  Operating income

1,670

532

4,106

2,395

Other income, net

11

17

38

42

Interest and debt expense, net of capitalized interest

(98)

(102)

(296)

(263)

Income from continuing operations before income tax expense

1,583

447

3,848

2,174

Income tax expense

521

123

1,293

739

Income from continuing operations

1,062

324

2,555

1,435

Income (loss) from discontinued operations (a)

—

—

(64)

6

Net income

1,062

324

2,491

1,441

  Less: Net income attributable to noncontrolling interests (c)

3

12

16

9

Net income attributable to Valero Energy Corporation stockholders

$

1,059

$

312

$

2,475

$

1,432

Net income attributable to Valero Energy Corporation stockholders:

  Continuing operations

$

1,059

$

312

$

2,539

$

1,426

  Discontinued operations

—

—

(64)

6

  Total

$

1,059

$

312

$

2,475

$

1,432

Earnings per common share:

  Continuing operations

$

2.01

$

0.58

$

4.78

$

2.61

  Discontinued operations

—

—

(0.12)

0.01

  Total

$

2.01

$

0.58

$

4.66

$

2.62

  Weighted-average common shares outstanding (in millions)

526

540

529

544

Earnings per common share – assuming dilution:

  Continuing operations

$

2.00

$

0.57

$

4.76

$

2.60

  Discontinued operations

—

—

(0.12)

0.01

  Total

$

2.00

$

0.57

$

4.64

$

2.61

  Weighted-average common shares outstanding –
assuming dilution (in millions)

530

545

533

549

Dividends per common share

$

0.275

$

0.225

$

0.775

$

0.625

 

See Notes to Earnings Release.

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES

EARNINGS RELEASE

(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2014

2013

2014

2013

Operating income by business segment:

Refining (a)

$

1,664

$

600

$

4,023

$

2,727

Retail

—

—

—

81

Ethanol

198

113

628

222

Corporate (b)

(192)

(181)

(545)

(635)

  Total

$

1,670

$

532

$

4,106

$

2,395

Depreciation and amortization expense by business segment:

Refining

$

406

$

426

$

1,194

$

1,153

Retail

—

—

—

41

Ethanol

12

11

36

33

Corporate (d)

12

11

35

56

    Total

$

430

$

448

$

1,265

$

1,283

Operating highlights:

Refining (a):

Throughput margin per barrel

$

11.81

$

7.76

$

10.86

$

9.16

Operating costs per barrel:

  Operating expenses

3.81

3.74

3.90

3.79

  Depreciation and amortization expense

1.57

1.67

1.59

1.60

    Total operating costs per barrel

5.38

5.41

5.49

5.39

Operating income per barrel

$

6.43

$

2.35

$

5.37

$

3.77

Throughput volumes (thousand barrels per day):

Feedstocks:

  Heavy sour crude oil

473

464

460

482

  Medium/light sour crude oil

465

453

482

445

  Sweet crude oil

1,208

1,096

1,119

1,027

  Residuals

237

344

225

295

  Other feedstocks

123

107

134

103

  Total feedstocks

2,506

2,464

2,420

2,352

Blendstocks and other

308

308

326

297

  Total throughput volumes

2,814

2,772

2,746

2,649

Yields (thousand barrels per day):

Gasolines and blendstocks

1,338

1,328

1,317

1,269

Distillates

1,087

1,047

1,049

956

Other products (e)

420

428

413

450

  Total yields

2,845

2,803

2,779

2,675

 

See Notes to Earnings Release.

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES

EARNINGS RELEASE

(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2014

2013

2014

2013

Refining operating highlights by region (f):

U.S. Gulf Coast (a):

  Operating income

$

927

$

350

$

2,470

$

1,349

  Throughput volumes (thousand barrels per day)

1,613

1,560

1,589

1,505

  Throughput margin per barrel

$

11.47

$

7.88

$

11.00

$

8.62

  Operating costs per barrel:

  Operating expenses

3.63

3.69

3.69

3.70

  Depreciation and amortization expense

1.59

1.75

1.61

1.63

    Total operating costs per barrel

5.22

5.44

5.30

5.33

  Operating income per barrel

$

6.25

$

2.44

$

5.70

$

3.29

U.S. Mid-Continent:

  Operating income

$

470

$

153

$

950

$

973

  Throughput volumes (thousand barrels per day)

469

441

431

429

  Throughput margin per barrel

$

16.24

$

9.22

$

13.76

$

13.52

  Operating costs per barrel:

  Operating expenses

3.80

3.67

4.03

3.58

  Depreciation and amortization expense

1.56

1.77

1.66

1.64

    Total operating costs per barrel

5.36

5.44

5.69

5.22

  Operating income per barrel

$

10.88

$

3.78

$

8.07

$

8.30

North Atlantic:

  Operating income

$

239

$

175

$

582

$

431

  Throughput volumes (thousand barrels per day)

467

495

466

450

  Throughput margin per barrel

$

10.02

$

7.86

$

9.10

$

7.88

  Operating costs per barrel:

  Operating expenses

3.29

3.06

3.40

3.38

  Depreciation and amortization expense

1.17

0.97

1.13

0.99

    Total operating costs per barrel

4.46

4.03

4.53

4.37

  Operating income per barrel

$

5.56

$

3.83

$

4.57

$

3.51

U.S. West Coast:

  Operating income (loss)

$

28

$

(78)

$

21

$

(26)

  Throughput volumes (thousand barrels per day)

265

276

260

265

  Throughput margin per barrel

$

9.14

$

4.60

$

8.38

$

7.30

  Operating costs per barrel:

  Operating expenses

5.84

5.39

5.91

5.31

  Depreciation and amortization expense

2.14

2.28

2.17

2.34

    Total operating costs per barrel

7.98

7.67

8.08

7.65

  Operating income (loss) per barrel

$

1.16

$

(3.07)

$

0.30

$

(0.35)

 

See Notes to Earnings Release.

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES

EARNINGS RELEASE

(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2014

2013

2014

2013

Average market reference prices and differentials:

Feedstocks (dollars per barrel):

  Brent crude oil

$

103.28

$

109.69

$

106.97

$

108.56

  Brent less West Texas Intermediate (WTI) crude oil

5.78

3.86

7.21

10.45

  Brent less Alaska North Slope (ANS) crude oil

1.77

(1.28)

1.44

0.04

  Brent less Louisiana Light Sweet (LLS) crude oil

3.07

(1.72)

3.12

(2.00)

  Brent less Mars crude oil

6.73

3.44

7.12

3.10

  Brent less Maya crude oil

12.45

10.21

14.95

8.45

  LLS crude oil

100.21

111.41

103.85

110.56

  LLS less Mars crude oil

3.66

5.16

4.00

5.10

  LLS less Maya crude oil

9.38

11.93

11.83

10.45

  WTI crude oil

97.50

105.83

99.76

98.11

Natural gas (dollars per million British Thermal Units)

3.96

3.55

4.58

3.66

Products (dollars per barrel, unless otherwise noted):

  U.S. Gulf Coast:

  CBOB gasoline less Brent

6.04

3.97

5.05

5.39

  Ultra-low-sulfur diesel less Brent

13.92

16.86

13.96

16.87

  Propylene less Brent

3.39

(5.18)

0.34

(1.82)

  CBOB gasoline less LLS

9.11

2.25

8.17

3.39

  Ultra-low-sulfur diesel less LLS

16.99

15.14

17.08

14.87

  Propylene less LLS

6.46

(6.90)

3.46

(3.82)

  U.S. Mid-Continent:

  CBOB gasoline less WTI

13.96

14.46

14.35

21.47

  Ultra-low-sulfur diesel less WTI

21.73

22.86

22.86

29.21

  North Atlantic:

  CBOB gasoline less Brent

11.57

10.99

9.55

10.41

  Ultra-low-sulfur diesel less Brent

15.20

18.11

17.33

18.33

  U.S. West Coast:

  CARBOB 87 gasoline less ANS

17.48

10.70

15.80

15.33

  CARB diesel less ANS

20.19

17.98

18.26

18.81

  CARBOB 87 gasoline less WTI

21.49

15.84

21.57

25.74

  CARB diesel less WTI

24.20

23.12

24.03

29.22

  New York Harbor corn crush (dollars per gallon)

0.81

0.64

0.90

0.28

 

See Notes to Earnings Release.

 

VALERO ENERGY CORPORATION AND SUBSIDIARIES

EARNINGS RELEASE

(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2014

2013

2014

2013

Ethanol:

Operating income

$

198

$

113

$

628

$

222

Production (thousand gallons per day)

3,556

3,376

3,311

3,201

Gross margin per gallon of production

$

1.00

$

0.73

$

1.13

$

0.61

Operating costs per gallon of production:

  Operating expenses

0.36

0.33

0.40

0.32

  Depreciation and amortization expense

0.04

0.04

0.04

0.04

  Total operating costs per gallon of production

0.40

0.37

0.44

0.36

Operating income per gallon of production

$

0.60

$

0.36

$

0.69

$

0.25

September 30,

December 31,

2014

2013

Balance Sheet Data:

Current assets

$

19,666

$

19,277

Cash and temporary cash investments, including $231 and $375, respectively, held by Valero Energy Partners LP, included in current assets

4,191

4,292

Inventories included in current assets

6,860

5,758

Replacement cost (market value) of inventories in excess of LIFO carrying amounts

5,773

6,851

Current liabilities

13,460

13,123

Current portion of debt and capital lease obligations included in current liabilities

600

303

Debt and capital lease obligations, less current portion

5,783

6,261

Total debt and capital lease obligations

6,383

6,564

Valero Energy Corporation stockholders’ equity

20,554

19,460
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