Valero Energy Reports Second Quarter 2011 Results

26.07.2011 | Business Wire

Valero Energy Reports Second Quarter 2011 Results

Valero Energy Corporation ('Valero?) (NYSE: VLO) today reported net
income attributable to Valero stockholders from continuing operations of
$745 million, or $1.30 per share, for the second quarter of 2011, versus
$520 million, or $0.92 per share, for the second quarter of 2010. For
the six months ended June 30, 2011, net income attributable to Valero
stockholders from continuing operations was $849 million, or $1.48 per
share, versus $440 million, or $0.78 per share for the six months ended
June 30, 2010.

Second quarter 2011 operating income was $1.3 billion versus second
quarter 2010 operating income of $904 million. The increase in operating
income was mainly due to an increase of $1.84 per barrel in refining
throughput margin combined with an increase of 136,000 barrels per day
in refining throughput volumes. The increase in throughput margin was
primarily due to higher margins for gasoline, diesel, and jet fuel plus
wider discounts for heavy-sour feedstocks on the Gulf Coast and
light-sweet crude oil in the Mid-Continent. The increase in throughput
volumes was mainly due to operating the Aruba refinery, which was not in
operation during the second quarter of 2010.

'Our earnings momentum continues to build,? said Valero Chairman and CEO
Bill Klesse. 'In the second quarter, refining industry margins and
feedstock discounts in our markets expanded from the strong
first-quarter levels as global refined product demand continued to grow.
To take advantage of this demand growth, we increased refining
throughput volumes to our highest utilization rate in three years ?
despite the impact of an apparent lightning strike to a critical motor
at our Port Arthur Refinery in early June. Our entire organization is
proud of our employees′ efforts to quickly mobilize and mitigate the
negative impact at Port Arthur to only two weeks.?

Klesse continued, 'Our McKee, Ardmore, and Three Rivers refineries
continued to benefit from processing WTI-type and Eagle Ford crude oils,
which have been pricing at a significant discount to waterborne
light-sweet crude oils such as Brent and LLS. We continued to increase
our processing of discounted Eagle Ford crude oil at our Three Rivers
refinery, and we plan to process additional volume there and at our
Corpus Christi refinery in the third quarter.

'Also in the second quarter, we progressed on key investments to enhance
our long-term profitability. We completed the cat-cracker revamp at our
St. Charles Refinery and are already seeing yield improvements. At our
Memphis Refinery, a third-party oxygen line was completed. As oxygen
volumes increase in August, we expect additional improvements to be
realized from the Memphis cat-cracker revamp completed last year. We
expect both of these projects will significantly improve our reliability
performance.?

Commenting on the industry outlook, Klesse said, 'With crude oil prices
holding in a range and global economic growth continuing, refined
product demand will grow. Benchmark margins in the third quarter have
increased from second-quarter levels, and the forward curve shows
margins are strong into 2012. We continue to see attractive
opportunities to export products from our Gulf Coast refineries.?

Valero′s retail segment continued its record-setting performance with
$135 million in operating income, which was the best second quarter in
Valero′s history. The increase in operating income was mainly due to
higher retail fuel margins plus the Canadian retail division achieved
its highest quarterly operating income on record with $48 million.

Valero′s ethanol segment operating income was $64 million in the second
quarter of 2011 versus $35 million in the second quarter of 2010. The
increase in operating income was mainly due to an increase in production
volumes to 3.4 million gallons per day, the highest quarterly production
volume in company history, combined with higher gross margins.

Regarding cash flows in the second quarter of 2011, capital spending was
$664 million, of which $133 million was for turnaround and catalyst
expenditures. Valero paid $29 million in dividends on its common stock
and paid $208 million to redeem long-term debt. Valero also spent $37
million to acquire a terminal and pipelines in eastern Kentucky, which
will enable the company to expand its wholesale fuels business. Valero
ended the second quarter with $4.1 billion in cash and temporary cash
investments as well as $7.6 billion of total debt. For the six months
ended June 30, 2011, Valero has reduced debt by approximately $700
million.

Klesse concluded, 'Valero has an excellent growth story over the next
few years, starting with the solid margin outlook. On August 1st, we
plan to close on our acquisition of the Pembroke refinery, marketing,
and logistics assets in the U.K. and Ireland. Our major growth projects
are on-budget and on-schedule for completion in 2012, including the two
hydrocrackers and hydrogen plants that are expected to contribute
significant earnings and cash flow when in operation. Those projects
benefit from high crude oil and low natural gas prices plus growing
global demand for diesel and gasoline, and do not depend on wide
discounts for WTI-priced crude oil.?

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.

About Valero

Valero Energy Corporation is an international manufacturer and marketer
of transportation fuels, other petrochemical products and power. Its
assets include 14 petroleum refineries with a combined throughput
capacity of approximately 2.6 million barrels per day, 10 ethanol plants
with a combined production capacity of 1.1 billion gallons per year, and
a 50-megawatt wind farm. Valero is also one of the 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. Based in San Antonio,
Valero is a Fortune 500 company with approximately 20,000 employees.
Please visit www.valero.com
for more information.

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,? 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 available 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,
	2011			2010			2011			2010
Statement of Income Data (a) (b) (c) :
Operating revenues (1)	$	31,293		$	20,561		$	57,601		$	39,054
Costs and expenses:
Cost of sales (d) (e)	28,380			18,227			52,948			35,283
Operating expenses:
Refining	813			693			1,557			1,457
Retail (d)	169			163			331			315
Ethanol	104			91			199			171
General and administrative expenses (f)	151			131			281			228
Depreciation and amortization expense	386			350			751			690
Asset impairment loss	?			2			?			2
Total costs and expenses	30,003			19,657			56,067			38,146
Operating income (e)	1,290			904			1,534			908
Other income, net	10			1			27			12
Interest and debt expense, net of capitalized interest	(107		)	(117		)	(224		)	(244		)
Income from continuing operations before income tax expense	1,193			788			1,337			676
Income tax expense	449			268			489			236
Income from continuing operations	744			520			848			440
Income (loss) from discontinued operations, net of income taxes	(1		)	63			(7		)	30
Net income	743			583			841			470
Less: Net loss attributable to noncontrolling interest (g)	(1		)	?			(1		)	?
Net income attributable to Valero Energy Corporation stockholders	$	744		$	583		$	842		$	470
Net income attributable to Valero Energy Corporation stockholders (g):
Continuing operations	$	745		$	520		$	849		$	440
Discontinued operations	(1		)	63			(7		)	30
Total	$	744		$	583		$	842		$	470
Earnings per common share:
Continuing operations	$	1.31		$	0.92		$	1.49		$	0.78
Discontinued operations	?			0.11			(0.01		)	0.05
Total	$	1.31		$	1.03		$	1.48		$	0.83
Weighted average common shares outstanding (in millions)	567			563			567			563
Earnings per common share ? assuming dilution:
Continuing operations	$	1.30		$	0.92		$	1.48		$	0.78
Discontinued operations	?			0.11			(0.01		)	0.05
Total	$	1.30		$	1.03		$	1.47		$	0.83
Weighted average common shares outstanding ? assuming dilution (in millions)	574			567			573			567
Supplemental information:
(1) Includes excise taxes on sales by our U.S. retail system	$	227		$	225		$	441		$	433



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,
	2011			2010			2011			2010
Operating income (loss) by business segment:
Refining (e)	$	1,253		$	904		$	1,529		$	889
Retail	135			109			201			180
Ethanol	64			35			108			92
Corporate	(162		)	(144		)	(304		)	(253		)
Total	$	1,290		$	904		$	1,534		$	908
Depreciation and amortization expense by business segment:
Refining	$	339		$	301		$	655		$	595
Retail	27			27			55			53
Ethanol	9			9			18			17
Corporate	11			13			23			25
Total	$	386		$	350		$	751		$	690
Operating highlights:
Refining (a) (b) (e):
Throughput margin per barrel	$	11.41		$	9.57		$	9.35		$	7.89
Operating costs per barrel:
Operating expenses	3.86			3.49			3.89			3.91
Depreciation and amortization expense	1.61			1.52			1.64			1.59
Total operating costs per barrel	5.47			5.01			5.53			5.50
Operating income per barrel	$	5.94		$	4.56		$	3.82		$	2.39
Throughput volumes (thousand barrels per day):
Feedstocks:
Heavy sour crude	450			472			412			456
Medium/light sour crude	418			409			395			397
Acidic sweet crude	128			58			100			50
Sweet crude	679			668			672			628
Residuals	293			211			271			174
Other feedstocks	105			116			121			117
Total feedstocks	2,073			1,934			1,971			1,822
Blendstocks and other	243			246			241			238
Total throughput volumes	2,316			2,180			2,212			2,060
Yields (thousand barrels per day):
Gasolines and blendstocks	1,054			1,084			1,005			1,025
Distillates	786			720			741			659
Other products (h)	487			395			476			397
Total yields	2,327			2,199			2,222			2,081



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,
	2011			2010			2011		2010
Refining operating highlights by region (i):
Gulf Coast:
Operating income	$	786		$	650		$	897	$	639
Throughput volumes (thousand barrels per day)	1,432			1,329			1,366		1,234
Throughput margin per barrel	$	11.30		$	10.28		$	9.01	$	8.35
Operating costs per barrel:
Operating expenses	3.74			3.34			3.80		3.85
Depreciation and amortization expense	1.54			1.57			1.58		1.64
Total operating costs per barrel	5.28			4.91			5.38		5.49
Operating income per barrel	$	6.02		$	5.37		$	3.63	$	2.86
Mid-Continent:
Operating income	$	393		$	151		$	560	$	140
Throughput volumes (thousand barrels per day)	398			390			401		377
Throughput margin per barrel	$	16.50		$	9.13		$	13.09	$	7.32
Operating costs per barrel:
Operating expenses	4.01			3.54			3.83		3.79
Depreciation and amortization expense	1.65			1.36			1.54		1.48
Total operating costs per barrel	5.66			4.90			5.37		5.27
Operating income per barrel	$	10.84		$	4.23		$	7.72	$	2.05
Northeast:
Operating income (loss)	$	(17	)	$	7		$	39	$	45
Throughput volumes (thousand barrels per day)	207			199			208		187
Throughput margin per barrel	$	3.36		$	4.40		$	5.19	$	5.99
Operating costs per barrel:
Operating expenses	3.04			2.55			2.93		3.10
Depreciation and amortization expense	1.22			1.47			1.20		1.56
Total operating costs per barrel	4.26			4.02			4.13		4.66
Operating income (loss) per barrel	$	(0.90	)	$	0.38		$	1.06	$	1.33
West Coast:
Operating income	$	91		$	98		$	33	$	67
Throughput volumes (thousand barrels per day)	279			262			237		262
Throughput margin per barrel	$	10.65		$	10.55		$	8.60	$	7.89
Operating costs per barrel:
Operating expenses	4.84			4.87			5.37		4.92
Depreciation and amortization expense	2.21			1.57			2.46		1.55
Total operating costs per barrel	7.05			6.44			7.83		6.47
Operating income per barrel	$	3.60		$	4.11		$	0.77	$	1.42
Operating income for regions above	$	1,253		$	906		$	1,529	$	891
Asset impairment loss applicable to refining	?			(2		)	?		(2		)
Total refining operating income	$	1,253		$	904		$	1,529	$	889



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,
	2011			2010		2011			2010
Average market reference prices and differentials (j):
Feedstocks (dollars per barrel):
Louisiana Light Sweet (LLS) crude oil	$	117.96		$	80.06	$	111.49		$	79.70
LLS less West Texas Intermediate (WTI) crude oil	15.47			2.26		13.27			1.46
LLS less Alaska North Slope (ANS) crude oil	2.94			3.00		3.36			1.90
LLS less Brent crude oil	(0.64		)	1.61		(0.52		)	2.34
LLS less Mars crude oil	6.04			2.62		4.81			3.12
LLS less Maya crude oil	14.58			12.01		15.13			10.79
WTI crude oil	$	102.49		$	77.80	$	98.22		$	78.24
WTI less Mars crude oil	(9.43		)	0.36		(8.46		)	1.66
WTI less Maya crude oil	(0.89		)	9.75		1.86			9.33
Products (dollars per barrel):
U.S. Gulf Coast:
Conventional 87 gasoline less LLS	$	10.26		$	7.97	$	7.04		$	7.22
Ultra-low-sulfur diesel less LLS	11.49			9.88		12.54			8.36
Propylene less LLS	26.03			3.85		22.76			10.40
Conventional 87 gasoline less WTI	25.73			10.23		20.31			8.68
Ultra-low-sulfur diesel less WTI	26.96			12.14		25.81			9.82
Propylene less WTI	41.50			6.11		36.03			11.86
U.S. Mid-Continent:
Conventional 87 gasoline less WTI	$	26.38		$	10.39	$	21.14		$	8.55
Ultra-low-sulfur diesel less WTI	28.83			13.29		26.97			10.00
U.S. Northeast:
Conventional 87 gasoline less Brent	$	7.44		$	8.85	$	5.69		$	9.57
Ultra-low-sulfur diesel less Brent	12.53			12.93		13.78			12.14
Conventional 87 gasoline less WTI	23.55			9.50		19.48			8.69
Ultra-low-sulfur diesel less WTI	28.64			13.58		27.57			11.26
U.S. West Coast:
CARBOB 87 gasoline less ANS	$	14.54		$	17.24	$	14.95		$	13.97
CARB diesel less ANS	19.21			15.19		19.96			11.87
CARBOB 87 gasoline less WTI	27.07			16.50		24.86			13.53
CARB diesel less WTI	31.74			14.45		29.87			11.43
New York Harbor corn crush (dollars per gallon)	$	0.07		$	0.36	$	0.07		$	0.41



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,
	2011			2010			2011			2010
Retail - U.S. (d):
Operating income	$	87		$	76		$	106		$	109
Company-operated fuel sites (average)	995			990			994			989
Fuel volumes (gallons per day per site)	5,094			5,196			4,995			5,070
Fuel margin per gallon	$	0.204		$	0.186		$	0.142		$	0.148
Merchandise sales	$	323		$	316		$	606		$	588
Merchandise margin (percentage of sales)	28.4		%	28.1		%	28.3		%	28.1		%
Margin on miscellaneous sales	$	22		$	22		$	44		$	44
Operating expenses	$	103		$	104		$	201		$	198
Depreciation and amortization expense	$	18		$	18		$	37		$	36
Retail - Canada (d):
Operating income	$	48		$	33		$	95		$	71
Fuel volumes (thousand gallons per day)	3,182			3,098			3,208			3,088
Fuel margin per gallon	$	0.319		$	0.260		$	0.318		$	0.272
Merchandise sales	$	68		$	61		$	125		$	113
Merchandise margin (percentage of sales)	29.8		%	29.9		%	29.8		%	30.3		%
Margin on miscellaneous sales	$	11		$	9		$	22		$	19
Operating expenses	$	66		$	59		$	130		$	117
Depreciation and amortization expense	$	9		$	9		$	18		$	17
Ethanol (c):
Operating income	$	64		$	35		$	108		$	92
Production (thousand gallons per day)	3,397			3,190			3,340			2,864
Gross margin per gallon of production	$	0.57		$	0.47		$	0.54		$	0.54
Operating costs per gallon of production:
Operating expenses	0.33			0.31			0.33			0.33
Depreciation and amortization expense	0.03			0.03			0.03			0.03
Total operating costs per gallon of production	0.36			0.34			0.36			0.36
Operating income per gallon of production	$	0.21		$	0.13		$	0.18		$	0.18

							June 30,			December 31,
							2011			2010
Balance Sheet Data:
Cash and temporary cash investments							$	4,107		$	3,334
Total debt							7,623			8,337

VALERO ENERGY CORPORATION AND SUBSIDIARIES

NOTES TO
EARNINGS RELEASE

(a) On December 17, 2010, Valero sold its refinery in Paulsboro, New
Jersey, and associated inventory to PBF Holding Company LLC for $707
million. The results of operations of the refinery for the three and six
months ended June 30, 2010 are reflected in discontinued operations. In
addition, the refining segment and Northeast region operating highlights
for the three and six months ended June 30, 2010 exclude the Paulsboro
Refinery.

(b) On June 1, 2010, Valero sold the assets of its shutdown refinery in
Delaware City, Delaware, and associated terminal and pipeline assets to
PBF Energy Partners LP for $220 million, resulting in a gain on the sale
of $92 million ($58 million after taxes). The results of operations,
which include the gain on the sale, of the shutdown refinery for the
three and six months ended June 30, 2010 are reflected in discontinued
operations. In addition, the refining segment and Northeast region
operating highlights for the three and six months ended June 30, 2010
exclude the Delaware City Refinery.

(c) Valero acquired 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 dates. Two plants were
acquired from ASA Ethanol Holdings, LLC and the third plant was acquired
from Renew Energy LLC. Ethanol production volumes reflected herein are
based on total production during each period divided by actual calendar
days per period.

(d) Credit card transaction processing fees incurred by Valero′s Retail
business segment of $24 million and $45 million for the three and six
months ended June 30, 2010, respectively, were reclassified from Retail
operating expenses to cost of sales to conform to the current period
classification. In addition, the Retail-U.S. and Retail-Canada operating
highlights for the three and six months ended June 30, 2010 have been
restated to reflect this reclassification.

(e) Cost of sales for the six months ended June 30, 2011 includes a loss
of $542 million ($352 million after tax) on derivative contracts related
to forward sales of refined products. These contracts were closed and
realized during the first quarter of 2011. The $542 million loss is
reflected in refining segment operating income, resulting in a $1.35
reduction in refining throughput margin per barrel for the six months
ended June 30, 2011, and is allocated to refining operating income by
region, excluding Northeast, based on relative throughput volumes for
each region as follows: Gulf Coast- $372 million, or $1.51 per
barrel; Mid-Continent- $122 million, or $1.68 per barrel; and West
Coast- $48 million, or $1.11 per barrel.

(f) 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.

(g) Valero owns a 50 percent member interest in Diamond Green Diesel
Holdings LLC (DGD) and consolidates the financial statements of DGD due
to its controlling financial interest in DGD. The loss incurred by DGD
that is attributable to the owner of the other 50 percent member
interest has been added back to net income to arrive at net income
attributable to Valero. DGD is currently building a plant that will
process animal fats, used cooking oils, and other vegetable oils into
renewable green diesel. The plant will be located next to Valero′s St.
Charles Refinery in Norco, Louisiana.

(h) Primarily includes petrochemicals, gas oils, No. 6 fuel oil,
petroleum coke, and asphalt.

(i) 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 West Coast- Benicia and Wilmington Refineries.

(j) Average market reference prices for Louisiana Light Sweet (LLS)
crude oil, along with price differentials between the price of LLS crude
oil and other types of crude oil, have been included in the table of
Average Market Reference Prices and Differentials. The table also
includes price differentials by region between the prices of certain
products and the benchmark crude oil that provides the best indicator of
product margins for each region.  Prior to the first quarter of 2011,
feedstock and product differentials presented herein were based on the
price of West Texas Intermediate (WTI) crude oil. However, the price of
WTI crude oil no longer provides a reasonable benchmark price of crude
oil for all regions.  Beginning in late 2010, WTI light-sweet crude oil
began to price at a discount to waterborne light-sweet crude oils, such
as LLS and Brent, because of increased WTI supplies resulting from
greater domestic production and increased deliveries of crude oil from
Canada into the Mid-Continent region.  Therefore, the use of the price of
WTI crude oil as a benchmark price for regions that do not process WTI
crude oil is no longer reasonable.

Valero Energy Corporation, San Antonio

Investors, Ashley Smith,
Vice President,

Investor Relations: 210-345-2744

or

Media,
Bill Day, Executive Director, Corporate Communications:

210-345-2928

Website:
http://www.valero.com/

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