Valero Energy Corporation
) has posted second quarter 2012 income from continuing operations
of $1.50 per share, surpassing the Zacks Consensus Estimate of
$1.42 and last year's earnings from continuing operations of $1.30
The year-over-year increase is attributable to higher throughput
margins in the U.S. Mid-Continent, U.S. West Coast and North
Atlantic. Further, the addition of the Pembroke and Meraux
refineries increased the refinery throughput volume by 342,000
barrels per day.
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Total revenue in the quarter increased nearly 11% year over year to
$34,662 million from $31,293 million and outpaced the Zacks
Consensus Estimate of $31,722 million.
During the quarter, refining throughput volumes were approximately
2.66 million barrels per day, up nearly 15% year over year. By
feedstock composition, sweet crude, medium/light sour crude and
heavy sour crude accounted for 33%, 23% and 15%, respectively. The
remaining volumes came from acidic sweet crude, residuals,
blend-stocks and other feedstock.
The Gulf Coast accounted for approximately 56% of the total volume.
The Mid-Continent, North Atlantic and West Coast regions accounted
for 15%, 18% and 11%, respectively.
Company-wide throughput margins decreased 78 cents per barrel year
over year in the reported quarter.
Average throughput margin realized was $9.50 per barrel in the U.S.
Gulf Coast (down from $11.30 per barrel in the year-earlier
period), $17.61 per barrel in the U.S. Mid-Continent (up from
$16.50), $8.01 per barrel in the North Atlantic (up from $3.36) and
$10.95 per barrel in the U.S. West Coast (up from $10.65).
Total operating cost per barrel was $4.99 during the quarter, down
8.8% from the year-earlier quarter. Refining operating expenses per
barrel were $3.59 versus $3.86 in the year-ago quarter. Unit
depreciation and amortization expenses dropped more than 13% year
over year to $1.40 per barrel.
Capital Expenditure & Balance Sheet
Second quarter capital expenditure totaled $800 million, including
$106 million for turnarounds and catalyst expenditures. At the end
of the quarter, the company had cash and temporary cash investments
of $1,300 million. Valero also rewarded shareholders $83 million in
dividends and repurchased shares worth $41 million.
Management increased its total capital spending, including
turnaround and catalyst expenditures, to $3.6 billion from $3.5
billion for 2012. The increase is primarily due to a ramp up of
certain projects initially scheduled for completion in 2013. For
2013, Valero expects total capital spending between $2 million and
We remain upbeat on Valero for 2012 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 that do not fit into the
Valero has announced its plan to separate its retail business from
the remainder of the company. The company is hopeful that this move
would place it advantageously to concentrate on their
Again, Valero remains optimistic about the ongoing economic growth
projects. During the quarter, the company completed its major
turnaround maintenance at its St. Charles and McKee refineries.
Further, the hydrocrackers at Port Arthur are likely to be become
fully operation by the fourth quarter.
However, threats include government regulations, weather
conditions, crude oil and natural gas prices as well as renewable
fuel prices. These can result in increased costs, reduced growth
and fines or other sanctions.
The company has a Zacks #3 Rank, which translates to a short-term
Hold rating. We are maintaining our long-term Neutral
recommendation on Valero. The company's peers include