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The third quarter 2009 operating loss was $579 million versus $1.8 billion of operating income in the third quarter of 2008. Excluding the special items discussed above, the third quarter 2009 operating loss was $162 million compared to $1.6 billion of operating income in the third quarter of 2008. The decline in operating income, excluding special items, was primarily due to lower margins on diesel and jet fuel, and smaller discounts on sour crude oil and other feedstocks.
"Refining margins in the third quarter continued to suffer from a combination of weak demand for refined products and high inventories," said Bill Klesse, Valero's Chairman of the Board and Chief Executive Officer. "Given the difficult refining conditions, we took further action in the third quarter to improve our profitability. First, we extended the plantwide shutdown of the Aruba refinery. At the Delaware City refinery, we streamlined operations by closing the gasifier complex and idling the coker. In October, we began a focused effort to reduce costs at our Paulsboro refinery. Across our refining system, we have been taking advantage of our operating flexibility by shifting feedstocks and operating rates to optimize throughput margins.
"As to operating expenses, our efforts to reduce costs are paying off. Comparing the first nine months of 2008 versus 2009, our refinery operating expenses excluding depreciation and amortization were down more than $700 million. Much of this was due to lower energy and natural gas prices, but over $200 million was due to our ongoing cost-reduction efforts.
"Similar to last quarter, our retail and ethanol segments had outstanding results. Our retail business had the highest third-quarter and year-to-date operating income in company history on strong U.S. retail fuel margins and solid performance in Canada. Our ethanol business earned $49 million of operating income in the third quarter, more than double the second quarter results, as we increased run rates at all seven ethanol plants and captured very good margins. In October, ethanol margins have continued at strong levels."
Regarding cash flows in the third quarter of 2009, the company's capital spending was $521 million, of which $52 million was for turnaround and catalyst expenditures. The company paid $84 million in dividends on its common stock and ended the third quarter with $1.6 billion in cash and temporary cash investments.
"Our liquidity and balance sheet remain in great shape, and we will continue to focus on improving profitability by lowering costs and optimizing our system," Klesse said. "As we strive to lower costs and become even more competitive, we expect the improving world economy will drive demand growth for our products and support a recovery in refining margins and sour crude discounts. We view 2009 as a trough period for refined product demand, and we look forward to an upturn in fundamentals and demand in 2010."
As described in Note 13 to the company's Form 10-Q for the period ended June 30, 2009, the company is awaiting a decision from the Netherlands Arbitration Institute regarding the company's dispute of a turnover tax on export sales that the Government of Aruba enacted in 2007. If the decision is announced prior to filing the Form 10-Q for the period ended September 30, 2009 and if the decision has a material impact on the third quarter 2009 financial results, then the company will update its earnings release to conform with the Form 10-Q filing.
Valero's senior management will hold a conference call at 11 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.
Valero Energy Corporation is a Fortune 500 company based in San Antonio with approximately 22,000 employees and 2008 revenues of $119 billion. The company owns and operates 16 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately three million barrels per day, making it the largest refiner in North America. Valero is also a leading ethanol producer with seven ethanol plants in the Midwest with a combined capacity of 780 million gallons per year, and is one of the nation's 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. Please visit www.valero.com for more information.
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," "could," "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.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per
Gallon Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 (1) 2008 (2) 2009 (1) 2008 (2)
STATEMENT OF INCOME DATA:
Operating Revenues (3) $ 19,489 $ 35,960 $ 51,238 $ 100,545
Costs and Expenses:
Cost of Sales 17,990 32,506 46,161 91,848
Operating Expenses 923 1,136 2,778 3,383
Retail Selling Expenses 182 201 522 579
General and Administrative Expenses 167 169 435 421
Depreciation and Amortization Expense 389 370 1,156 1,106
Asset Impairment Loss (4) 417 43 575 43
Gain on Sale of Krotz Springs Refinery (2) - (305) - (305)
Total Costs and Expenses 20,068 34,120 51,627 97,075
Operating Income (Loss) (579) 1,840 (389) 3,470
Other Income (Expense), Net 9 36 (16) 71
Interest and Debt Expense:
Incurred (143) (112) (380) (335)
Capitalized 19 31 95 74
Income (Loss) Before Income Tax Expense (Benefit) (694) 1,795 (690) 3,280
Income Tax Expense (Benefit) (205) 643 (256) 1,133
Net Income (Loss) $ (489) $ 1,152 $ (434) $ 2,147
Earnings (Loss) per Common Share (5) $ (0.87) $ 2.20 $ (0.81) $ 4.07
Weighted Average Common Shares
Outstanding (in millions) 561 522 534 526
Earnings (Loss) per Common Share - Assuming Dilution $ (0.87) $ 2.18 $ (0.81) $ 4.02
Weighted Average Common Shares Outstanding-
Assuming Dilution (in millions) (6) 561 529 534 535
September 30, December 31,
2009 2008
BALANCE SHEET DATA:
Cash and Temporary Cash Investments $ 1,605 $ 940
Total Debt $ 7,375 $ 6,576
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per
Gallon Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 (2) 2009 2008 (2)
Operating Income (Loss) by Business Segment:
Refining $ (560) $ 1,913 $ (221) $ 3,716
Retail:
U.S. 79 81 140 120
Canada 32 26 92 86
Total Retail 111 107 232 206
Ethanol (1) 49 - 71 -
Total Before Corporate (400) 2,020 82 3,922
Corporate (179) (180) (471) (452)
Total $ (579) $ 1,840 $ (389) $ 3,470
Depreciation and Amortization by Business Segment:
Refining $ 345 $ 331 $ 1,035 $ 998
Retail:
U.S. 17 18 52 51
Canada 8 10 22 26
Total Retail 25 28 74 77
Ethanol (1) 7 - 12 -
Total Before Corporate 377 359 1,121 1,075
Corporate 12 11 35 31
Total $ 389 $ 370 $ 1,156 $ 1,106
Operating Highlights:
Refining:
Throughput Margin per Barrel $ 4.86 $ 13.11 $ 6.09 $ 10.80
Operating Costs per Barrel (4):
Refining Operating Expenses $ 3.94 $ 4.78 $ 4.01 $ 4.66
Depreciation and Amortization 1.58 1.39 1.55 1.38
Total Operating Costs per Barrel $ 5.52 $ 6.17 $ 5.56 $ 6.04
Throughput Volumes (Mbbls per Day):
Feedstocks:
Heavy Sour Crude 443 565 489 580
Medium/Light Sour Crude 544 670 582 680
Acidic Sweet Crude 24 75 80 76
Sweet Crude 676 578 619 622
Residuals 211 282 193 242
Other Feedstocks 179 136 177 141
Total Feedstocks 2,077 2,306 2,140 2,341
Blendstocks and Other 302 281 305 306
Total Throughput Volumes 2,379 2,587 2,445 2,647
Yields (Mbbls per Day):
Gasolines and Blendstocks 1,207 1,136 1,176 1,197
Distillates 744 906 789 920
Petrochemicals 72 66 67 74
Other Products (7) 360 464 409 449
Total Yields 2,383 2,572 2,441 2,640
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per
Gallon Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Refining Operating Highlights by Region (8):
Gulf Coast (2):
Operating Income (Loss) $ (81) $ 1,159 $ 28 $ 2,639
Throughput Volumes (Mbbls per Day) 1,238 1,324 1,316 1,399
Throughput Margin per Barrel $ 4.66 $ 13.21 $ 5.22 $ 12.01
Operating Costs per Barrel (4):
Refining Operating Expenses $ 3.81 $ 4.83 $ 3.65 $ 4.62
Depreciation and Amortization 1.57 1.37 1.49 1.30
Total Operating Costs per Barrel $ 5.38 $ 6.20 $ 5.14 $ 5.92
Mid-Continent:
Operating Income $ 5 $ 296 $ 197 $ 514
Throughput Volumes (Mbbls per Day) 374 426 381 426
Throughput Margin per Barrel $ 5.38 $ 13.23 $ 7.18 $ 9.94
Operating Costs per Barrel (4):
Refining Operating Expenses $ 3.69 $ 4.41 $ 3.72 $ 4.25
Depreciation and Amortization 1.53 1.28 1.57 1.29
Total Operating Costs per Barrel $ 5.22 $ 5.69 $ 5.29 $ 5.54
Northeast:
Operating Income (Loss) $ (134) $ 387 $ (203) $ 357
Throughput Volumes (Mbbls per Day) 485 552 467 545
Throughput Margin per Barrel $ 2.86 $ 13.53 $ 4.94 $ 8.50
Operating Costs per Barrel (4):
Refining Operating Expenses $ 4.26 $ 4.54 $ 4.90 $ 4.69
Depreciation and Amortization 1.59 1.36 1.62 1.42
Total Operating Costs per Barrel $ 5.85 $ 5.90 $ 6.52 $ 6.11
West Coast:
Operating Income $ 67 $ 114 $ 331 $ 249
Throughput Volumes (Mbbls per Day) 282 285 281 277
Throughput Margin per Barrel $ 8.51 $ 11.60 $ 10.59 $ 10.55
Operating Costs per Barrel (4):
Refining Operating Expenses $ 4.35 $ 5.53 $ 4.60 $ 5.50
Depreciation and Amortization 1.58 1.70 1.67 1.76
Total Operating Costs per Barrel $ 5.93 $ 7.23 $ 6.27 $ 7.26
Operating Income (Loss) for Regions Above $ (143) $ 1,956 $ 353 $ 3,759
Asset Impairment Loss Applicable to Refining (417) (43) (574) (43)
Total Refining Operating Income (Loss) $ (560) $ 1,913 $ (221) $ 3,716
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per
Gallon Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Retail - U.S.:
Company-Operated Fuel Sites (Average) 998 984 1,001 961
Fuel Volumes (Gallons per Day per Site) 4,963 4,946 5,022 4,997
Fuel Margin per Gallon $ 0.231 $ 0.273 $ 0.157 $ 0.173
Merchandise Sales $ 315 $ 292 $ 888 $ 819
Merchandise Margin (Percentage of Sales) 28.7% 29.8% 29.2% 30.0%
Margin on Miscellaneous Sales $ 22 $ 24 $ 66 $ 74
Selling Expenses $ 120 $ 134 $ 349 $ 375
Retail - Canada:
Fuel Volumes (Thousand Gallons per Day) 3,115 3,126 3,155 3,169
Fuel Margin per Gallon $ 0.263 $ 0.261 $ 0.255 $ 0.278
Merchandise Sales $ 58 $ 56 $ 146 $ 156
Merchandise Margin (Percentage of Sales) 28.6% 28.6% 29.1% 28.5%
Margin on Miscellaneous Sales $ 10 $ 10 $ 25 $ 29
Selling Expenses $ 62 $ 67 $ 173 $ 204
Ethanol (1):
Ethanol Production (Thousand Gallons per Day) 2,116 N/A 1,229 N/A
Gross Margin per Gallon of Ethanol Production $ 0.59 N/A $ 0.55 N/A
Operating Costs per Gallon of Ethanol Production:
Ethanol Operating Expenses $ 0.31 N/A $ 0.31 N/A
Depreciation and Amortization 0.03 N/A 0.03 N/A
Total Operating Costs per Gallon of Ethanol Production $ 0.34 N/A $ 0.34 N/A
Average Market Reference Prices and Differentials
(Dollars per Barrel):
Feedstocks (at U.S. Gulf Coast):
West Texas Intermediate (WTI) Crude Oil $ 68.18 $ 117.83 $ 56.90 $ 113.25
WTI Less Sour Crude Oil (9) $ 1.72 $ 4.05 $ 1.25 $ 5.20
WTI Less Mars Crude Oil $ 1.78 $ 5.26 $ 1.06 $ 6.40
WTI Less Maya Crude Oil $ 5.01 $ 11.36 $ 4.68 $ 16.39
Products:
U.S. Gulf Coast:
Conventional 87 Gasoline Less WTI $ 7.85 $ 12.13 $ 8.85 $ 7.66
No. 2 Fuel Oil Less WTI $ 4.53 $ 19.27 $ 6.40 $ 19.17
Ultra-Low-Sulfur Diesel Less WTI $ 6.99 $ 23.91 $ 8.59 $ 24.38
Propylene Less WTI $ 8.22 $ 7.21 $ (3.05) $ (0.11)
U.S. Mid-Continent:
Conventional 87 Gasoline Less WTI $ 8.11 $ 8.62 $ 9.09 $ 6.49
Low-Sulfur Diesel Less WTI $ 8.01 $ 25.55 $ 8.63 $ 25.10
U.S. Northeast:
Conventional 87 Gasoline Less WTI $ 8.34 $ 5.80 $ 8.78 $ 4.62
No. 2 Fuel Oil Less WTI $ 4.95 $ 19.86 $ 7.68 $ 20.85
Lube Oils Less WTI $ 28.89 $ 89.33 $ 40.54 $ 51.75
U.S. West Coast:
CARBOB 87 Gasoline Less WTI $ 18.00 $ 11.28 $ 18.40 $ 12.13
CARB Diesel Less WTI $ 9.29 $ 22.94 $ 10.30 $ 24.57
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per
Gallon Amounts)
(Unaudited)
(1) The information presented for the three and nine months ended
September 30, 2009 includes the operations related to the
acquisition of certain ethanol plants from VeraSun Energy
Corporation. Ethanol plants located in Charles City, Fort Dodge
and Hartley, Iowa; Aurora, South Dakota; and Welcome, Minnesota
were purchased on April 1, 2009, and ethanol plants in Albert
City, Iowa and Albion, Nebraska were purchased on April 9, 2009
and May 8, 2009, respectively. The ethanol production volumes
reflected in this earnings release for the nine months ended
September 30, 2009 are based on 273 calendar days rather than the
actual daily production, which varied by facility.
(2) Effective July 1, 2008, Valero sold its Krotz Springs Refinery to
Alon Refining Krotz Springs, Inc. (Alon), a subsidiary of Alon USA
Energy, Inc. The nature and significance of Valero's post-closing
participation in an offtake agreement with Alon represents a
continuation of activities with the Krotz Springs Refinery for
accounting purposes, and as such the results of operations related
to the Krotz Springs Refinery have not been presented as
discontinued operations in the Statement of Income Data for the
three and nine months ended September 30, 2008. The refining
operating highlights, both consolidated and for the Gulf Coast
region, presented in this earnings release include the Krotz
Springs Refinery for the nine months ended September 30, 2008. The
pre-tax gain of $305 million on the sale of the Krotz Springs
Refinery is included in the Gulf Coast operating income for the
three and nine months ended September 30, 2008.
(3) Includes excise taxes on sales by Valero's U.S. retail system of
$226 million and $207 million for the three months ended September
30,2009 and 2008, respectively, and $659 million and $605 million
for the nine months ended September 30, 2009 and 2008,
respectively.
(4) The asset impairment loss for the three months ended September 30,
2009 relates primarily to charges of approximately $340 million
resulting from the permanent shutdown of the gasification unit at
Valero's Delaware City Refinery. The remaining loss for the three
months ended September 30, 2009 relates to the permanent
cancellation of certain capital projects in progress as a result
of the unfavorable impact of the continuing economic slowdown on
refining industry fundamentals. Losses resulting from the
permanent cancellation of certain capital projects in progress in
prior periods have been reclassified from Operating Expenses and
presented separately for comparability with the third quarter 2009
presentation. The asset impairment loss amounts for all periods
have been excluded from operating costs in determining operating
costs per barrel, resulting in an adjustment to the operating
costs per barrel previously reported in 2008.
(5) Effective January 1, 2009, Valero adopted certain new accounting
rules that require restricted stock granted under Valero's
stock-based compensation plans to be treated as participating
securities under the two-class method of determining basic
earnings per common share. Basic earnings per common share for
prior periods are to be adjusted to conform to these new rules.
The adoption of the new rules did not have any effect on the
calculation of basic earnings per common share for the three and
nine months ended September 30, 2009, but did reduce the $2.21 and
$4.08 basic earnings per common share amounts originally reported
for the three and nine months ended September 30, 2008,
respectively.
(6) Common equivalent shares have been excluded from the computation
of diluted earnings (loss) per common share for the three and nine
months ended September 30, 2009 as the effect of including such
shares would be antidilutive.
(7) Primarily includes gas oils, No. 6 fuel oil, petroleum coke, and
asphalt.
(8) The regions reflected herein contain the following refineries: Gulf
Coast-Corpus Christi East, Corpus Christi West, Texas City,
Houston, Three Rivers, Krotz Springs (prior to its sale effective
July 1, 2008), St. Charles, Aruba, and Port Arthur Refineries; Mid-Continent-McKee,
Ardmore, and Memphis Refineries; Northeast-Quebec City,
Paulsboro, and Delaware City Refineries; and West Coast-Benicia
and Wilmington Refineries.
(9) The market reference differential for sour crude oil is based on
50% Arab Medium and 50% Arab Light posted prices.
SOURCE: Valero Energy Corporation
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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