Refiner Valero Energy $VLO Beats Earnings

Valero Energy Corporation $VLO, the largest independent refiner and marketer of petroleum products in the U.S. reported better than expected second-quarter results Thursday before the open.

Valero Energy Corporation $VLO based in San Antonio, Texas reported better than expected second-quarter results Thursday before the open. Valero higher throughput margin due to 96% throughput capacity utilization supported Valero Energy’s strong results. Valero is the largest independent refiner and marketer of petroleum products in the U.S., dominating the central and southwestern U.S. and eastern Canada with refined petroleum products.

Earnings: Adjusted income of $1.23 per share beating consensus estimate of $1.08 and year-ago adjusted profit of $1.08. Revenue up 13.6% year over year to $22,254 million from $19,584 million and above consensus estimate of $21,530 million.

Reaction: Valero Energy Corporation NYSE: VLO Pre-market68.15  +.16 +0.24%

  • Returned $658 million in cash to stockholders through dividends and stock buybacks.
  • Expect Diamond Pipeline and Wilmington cogeneration projects to be complete and online by the end of 2017.

VLO is in a good position to take advantage of discounts on Gulf Coast crude oil, compared with more expensive Brent crude. Investors will look to see if the asphalt terminal leaks at one of Valero’s Corpus Christi refineries affects Valero’s results.

 Reported net income attributable to Valero stockholders of $548 million, or $1.23 per share.
  • Invested $461 million of growth and sustaining capital in the second quarter.
  • Returned $658 million in cash to stockholders through dividends and stock buybacks.
  • Expect Diamond Pipeline and Wilmington cogeneration projects to be complete and online by the end of 2017.

With continued focus on safe and reliable operations, we delivered another quarter of solid operating and financial performance,” said Joe Gorder, Valero Chairman, President and Chief Executive Officer.  “We’re encouraged by resilient product demand and the bullish trend in product inventory draws.” 

Refining
The refining segment reported $959 million of operating income for the second quarter of 2017 compared to $1.3 billion for the second quarter of 2016.  Second quarter 2017 operating income was in line with second quarter 2016 adjusted operating income of $902 million.  The 2016 refining segment results have been retrospectively revised to reflect the operating results of Valero Energy Partners LP $VLP as a separate segment consistent with Valero’s current segment presentation, and those revised results have been adjusted to exclude the lower of cost or market inventory valuation adjustment and asset impairment loss, as shown in the accompanying earnings release tables.    

Refinery throughput capacity utilization was 96 percent, despite an external power failure at the Benicia refinery that caused an abrupt shutdown and unplanned maintenance.  Throughput volumes averaged 3.0 million barrels per day in the second quarter of 2017, which was 192,000 barrels per day higher than the second quarter of 2016.

The company exported a total of 369,000 barrels per day of gasoline and diesel during the second quarter. 

Biofuel blending costs were $255 million in the second quarter of 2017, which was $82 million higher than the second quarter of 2016, mainly due to higher Renewable Identification Number (RIN) expenses.

Ethanol
The ethanol segment reported $31 million of operating income for the second quarter of 2017 compared to $69 million for the second quarter of 2016.  Adjusted operating income for the second quarter of 2016 was $49 million.  The decrease in operating income in the second quarter of 2017 compared to the second quarter 2016 adjusted amount is attributed primarily to higher energy costs and strong industry ethanol production that pressured margins.  Ethanol production volumes averaged 3.8 million gallons per day in the second quarter of 2017, which was in line with the second quarter of 2016. 

VLP
The VLP segment reported $71 million of operating income for the second quarter of 2017 compared to $52 million for the second quarter of 2016.  The increase in operating income was driven primarily by contributions from the Meraux and Three Rivers terminals, which were acquired subsequent to the second quarter of last year, and the Red River pipeline segment, which was acquired in January 2017.

Last year Valero had to deal with the possible leaking of toxic materials from an asphalt terminal it leases to Ergon Asphalt & Emulsions at one of Valero’s Corpus Christi refineries in the fourth quarter.  Corpus Christi banned the drinking and use of city water to hundreds of thousands of residents for up to three days and spawned more than a dozen civil lawsuits against Valero by individuals and businesses. It is unclear how the incident may affect Valero’s future results.

 Source: Valero Energy Corporation

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