Valero Energy Corporation
(
VLO
) posted adjusted fourth quarter 2012 income of $1.88 per share,
beating the Zacks Consensus Estimate of $1.17 by 60.7%.
The quarterly earnings compare favorably with the year-ago
adjusted loss of 21 cents per share. This bolstered performance
was attributable to higher refining throughput margins in each of
the company's regions along with lower refining operating
expenses.
Total revenue in the quarter increased marginally (by 0.1%) year
over year to $34,695.0 million from $34,673.0 million and
outpaced the Zacks Consensus Estimate of $31,539 million.
Full-year 2012 adjusted earnings came in at $5.59 a share,
surpassing our expectation of $4.90 and increasing 39.8% from the
year-ago level of $4.00. Full-year revenues also increased 10.5%
year over year to $139,250 million and outperformed the Zacks
Consensus Estimate of $132,883 million.
Throughput Volumes
During the quarter, refining throughput volumes were
approximately 2.64 million barrels per day, down from the
year-earlier level of 2.71 million barrels a day. This primarily
stemmed from the lack of throughput volume at the Aruba refinery.
This unit was shut down in the first quarter of 2012.
By feedstock composition: sweet crude, medium/light sour crude
and heavy sour crude accounted for 34%, 21% and 19%,
respectively. The remaining volumes came from acidic sweet crude,
residuals and other feedstock.
The Gulf Coast accounted for approximately 60% of the total
volume. The Mid-Continent, North Atlantic and West Coast regions
accounted for 18%, 12% and 10%, respectively.
Throughput Margins
Company-wide throughput margins increased considerably to $12.27
per barrel from the year-ago level of $5.46 per barrel. The
increase was buoyed by the increase in discounts for medium sour,
heavy sour and domestic light crude oils.
Average throughput margin realized was $11.08 per barrel in the
U.S. Gulf Coast (up from $3.57 per barrel in the year-earlier
period), $19.75 per barrel in the U.S. Mid-Continent (up from
$12.17), $10.48 per barrel in the North Atlantic (up from $5.63)
and $8.58 per barrel in the U.S. West Coast (up from $5.01).
Total operating cost per barrel was $5.17 during the quarter,
down 2.3% from the year-earlier figure of $5.29. Refining
operating expenses per barrel were $3.73 versus $3.92 in the
year-ago quarter. However, unit depreciation and amortization
expenses were up 5.1% year over year at $1.44 per barrel.
Capital Expenditure & Balance Sheet
Fourth quarter capital expenditure totaled $942.0 million,
including $140 million for turnarounds and catalyst expenditures.
At the end of the quarter, the company had cash and temporary
cash investments of $1.7 billion. Valero also rewarded
shareholders $97 million through dividends.
Valero expects total capital spending for this year of around
$2.5 billion, including approximately $200 million for the retail
segment. This compares with the $3.4 billion spending level in
2012.
Our Take
We remain upbeat on Valero for 2013 as well as the next year and
foresee attractive opportunities that will position it uniquely
among refiners to grow earnings and cash flow per share going
forward. We also appreciate Valero's endeavor of consistently
reviewing its refining portfolio, and upgrading its asset base by
selling or acquiring refinery properties as deemed right.
Recently, Valero announced its plan to separate its retail arm --
CST Brands, Inc. (CST) -- from the company, likely through a
tax-advantaged distribution to shareholders, to unlock value. The
company remains hopeful that the move would help it to
concentrate on its industry-specific strategies.
Again, Valero remains optimistic on the ongoing economic growth
projects. The company considered its fourth quarter earnings per
share as the most significant one since 2005 and is progressing
on its important strategic goals. The company also replaced all
imported light sweet crude oil used at its Gulf Coast and
Memphis, Tennessee, refineries with cheaper North American crude
oil during the quarter.
Moreover, a new hydrocracker unit at the Port Arthur refinery
became operational in the quarter. St. Charles is expected to be
fully operational in the second quarter of 2013. These projects
position Valero to increase diesel production and diversify its
market exposure.
The stock retains a Zacks Rank #2 (Buy). Other than Valero, the
companies in the oil refining and marketing industry that are
expected to perform well in the coming one to three months
include
CVR Energy, Inc.
(
CVI
) and
Global Partners LP
(
GLP
) with a Zacks Rank #1 (Strong Buy) and
Marathon Petroleum Corporation
(
MPC
) with a Zacks Rank #2 (Buy).
CVR ENERGY INC (CVI): Free Stock Analysis
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GLOBAL PARTNERS (GLP): Free Stock Analysis
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MARATHON PETROL (MPC): Free Stock Analysis
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VALERO ENERGY (VLO): Free Stock Analysis
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