Valero Energy Reports 2011 Fourth Quarter and Annual Results

Wednesday, Feb 01, 2012

Valero Energy Corporation ("Valero," NYSE: VLO) today reported income from continuing operations of $45 million, or $0.08 per share, for the fourth quarter of 2011, versus $180 million, or $0.32 per share, for the fourth quarter of 2010.  The fourth quarter 2011 results included an after-tax benefit of approximately $161 million, or $0.29 per share, from a year-end LIFO inventory decrement.  For the year ended December 31, 2011, income from continuing operations was $2.1 billion, or $3.69 per share, versus $923 million, or $1.62 per share for the year ended December 31, 2010.

Fourth quarter 2011 operating income was $167 million versus fourth quarter 2010 operating income of $378 million.  The decrease in operating income was mainly due to a decrease of $1.84 per barrel in the refining throughput margin, particularly in the Gulf Coast region where the throughput margin decreased by $4.21 per barrel.  The decrease in the throughput margin was primarily due to lower margins for gasoline and petrochemical feedstocks plus reduced discounts for medium and heavy sour feedstocks, such as Mars and Maya crude oils.

Refining throughput volumes increased by 523,000 barrels per day in the fourth quarter of 2011 versus the fourth quarter of 2010.  The increase in throughput volumes was mainly due to adding capacity from the acquisition of the Pembroke and Meraux refineries and operating the Aruba refinery, which was not in operation during the fourth quarter of 2010.

"Although the fourth quarter clearly showed the volatility of the refining business, 2011 was a great year for Valero," said Valero Chairman and CEO Bill Klesse.  "We had the highest annual earnings since 2008, acquired the Pembroke and Meraux refineries and related assets, completed several of our major capital projects, and paid off over $775 million in debt.  We also increased our cash returned to shareholders by tripling the common stock dividend and conducting stock buybacks in the third and fourth quarters."

"So far in 2012, product margins have improved versus the fourth quarter of 2011," Klesse continued.  "The macro view for refining in 2012 looks promising given the combination of positive economic trends in the U.S., expectations of global demand growth, and continuing capacity rationalization in the industry, particularly in Europe, the U.S. East Coast, and the Caribbean."

Valero's ethanol segment reported its highest quarter ever with $181 million in operating income, versus $70 million in the fourth quarter of 2010.  The increase in ethanol operating income was mainly due to higher gross margins and an increase in production volumes to a record-high quarterly average of 3.5 million gallons per day.  The ethanol segment also set an annual record with $396 million in operating income in 2011.

Valero's retail segment reported $83 million in operating income during the fourth quarter of 2011 versus $61 million in operating income in the fourth quarter of 2010.  The increase in operating income was mainly due to higher fuel margins and slightly higher volumes in U.S. retail operations.  For 2011, the retail segment reported its most profitable year in history with $381 million in operating income.  Contributing to the record-setting results was the Canadian retail business, which earned a record-high $168 million in annual operating income.

Regarding cash flows in the fourth quarter of 2011, capital spending was $899 million, of which $128 million was for turnaround and catalyst expenditures.  Valero paid $84 million in dividends on its common stock and paid $79 million to purchase Valero's shares.  Valero also spent $547 million to acquire the Meraux refinery plus related logistics assets and inventories.  Valero ended the fourth quarter with $1.0 billion in cash and temporary cash investments.  For the full-year 2011, Valero's total capital spending, including turnaround and catalyst expenditures, was $3.0 billion, or $200 million below previous guidance of $3.2 billion.

"2012 is a significant year for Valero as we focus on replacing the coker drums at St. Charles in April and completing the major hydrocracker projects at Port Arthur and St. Charles, which remain on-budget and on-schedule for completion later this year," Klesse said. "Our top priorities also include our common stock dividend and our investment grade credit rating.  After moving beyond the high capital spending levels in 2011 and 2012, we believe our slate of growth projects, recent acquisitions, and operational improvements will enable Valero to significantly grow free cash flow."

Valero's senior management will hold a conference call at 10 a.m. ET (9 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.

Source: Valero