Valero Energy Slips To Loss In Q2 - Update
Symbols:
VLO
(RTTNews) - Oil refiner Valero Energy Corp. (VLO | Quote | Chart | News | PowerRating) on Tuesday reported a net loss for the second quarter compared to a profit in the year-ago period, hurt by lower diesel and jet fuel margins as well as lower sour crude oil differentials compared to the year-ago period. Revenue for the quarter dropped 51% from a year ago.
In early June, Valero had said it expects a net loss for the second quarter, due to the extended downtime at its Delaware City and McKee refineries as well as the continuation of weak sour crude oil discounts and lower diesel margins. Refiners have been hurt by the downturn in demand for all types of fuels amid the recession and have temporarily shuttered refineries and individual processing units throughout the year. Also, crude oil prices have been climbing steadily for several weeks, even as demand for gasoline remains weak.
For the second quarter, the San Antonio, Texas-based company reported a net loss of $254 million or $0.48 per share, compared to net income of $734 million, or $1.37 per share in the prior-year quarter. On average, eighteen analysts polled by Thomson Reuters expected the company to to report a loss of $0.50 per share for the quarter. Analysts' estimates typically exclude special items.
Valero reported an operating loss for the quarter of $317 million, compared to operating income of $1.16 billion in the previous-year quarter. The loss for the quarter was primarily due to lower diesel and jet fuel margins as well as lower sour crude oil differentials compared to the same period last year.
Operating revenues for the quarter more than halved to $17.93 billion from $36.64 billion in the same period last year. Analysts had a consensus revenue estimate for the quarter of $16.28 billion.
Bill Klesse, Chairman of the Board and Chief Executive Officer of Valero, said, "The downturn in the global economy has sharply reduced demand for refined products at a time when new refining capacity is coming online around the world. Also, sour crude oil differentials have narrowed mainly because key supplies of lower quality crude oils have come off the market. As a result, global product inventories are high and refining margins are depressed."
Total costs and expenses for the quarter dropped by more than half to $18.24 billion from $35.48 billion in the year-ago period. Of the total costs, operating expenses declined to $1.02 billion from $1.13 billion in the previous-year quarter.
Valero's total throughput volumes for the second quarter declined to 2,489 Mbbls per day from 2,746 Mbbls per day a year ago, while total yields dropped to 2,485 Mbbls per day from 2,737 Mbbls per day in the previous-year quarter.
The company paid off $209 million of maturing debt and ended the second quarter with $1.62 billion in cash and temporary cash investments, up from $940 million as at December 31, 2008. Total debt as at the end of the second quarter was $7.37 billion compared to $6.58 billion as at December 31, 2008.
On a segmental basis, operating loss for the company's refining segment in the latest quarter was $268 million, compared to operating income of $1.24 billion a year ago. Throughput margin per barrel for the segment dropped to $4.64 from $10.82 in the year-ago period.
Operating income at the company's retail segment surged 33% to $65 million from $49 million in the year-ago period. Fuel margin per gallon at the U.S. retail division was $0.125 compared to $0.129 a year ago, while fuel margin per gallon at the Canada retail division declined to $0.253 from $0.270 in the prior-year period.
Operating income for the company's ethanol division, which was acquired in the latest quarter from VeraSun Energy Corp. (VSUNQ.OB), was $22 million. Ethanol production during the quarter was 1,617 thousand gallons per day. Gross margin per gallon of ethanol production was $0.47 for the quarter. The company said it now has all seven of the ethanol plants operating and added that the recent decrease in corn prices has been positive on ethanol margins and the profitability of its plants.
Year-To-Date Results
For the first six months of fiscal year 2009, Valero reported net income of $55 million, or $0.11 per share, down from $995 million, or $1.85 per share, in the previous-year period.
Operating revenues for the half year dropped to $31.75 billion from $64.59 billion in the previous-year period.
Valero said that it plans to review the margin outlook for the Aruba refinery in September to decide whether to restart the plant or keep it down. Further, the company said it expects to have a decision from the arbitration panel on the turnover tax arbitration by that time. The previously announced shutdown of the company's Aruba refinery was completed in mid-July mainly due to poor margins. The facility processes heavy crude into distillate products that are shipped to U.S. refineries to be made into lighter fuels including gasoline.
Valero added that it will continue to monitor its other refineries for situations in which it makes economic sense to slow or shut down specific units or an entire plant.
While reporting its financial results for the first quarter in April, Valero had lowered its forecast for estimated 2009 capital spending to $2.5 billion from the earlier estimate of $2.7 billion in order to further conserve cash. In June, the company said it continues to expect total capital expenditures in 2009 to be about $2.5 billion, of which about $1 billion is for strategic projects.
The company also expressed concern that a hidden tax imposed by the carbon legislation in the form of a cap-and-trade system on hydrocarbons will significantly raise the consumer price of gasoline and other fuels. Refiners that have invested heavily in the past decade to shift their plants to run cheaper heavy, sour crude oil grades will likely face new hurdles in rules to limit carbon emissions expected to take effect within 10 years.
Valero urged its investors to contact their congressmen and senators to express opposition to the 'American Clean Energy and Security Act of 2009,' which was narrowly passed in the United States House of Representatives in June. The company noted that the carbon legislation, in some form, will be before the Senate early this fall. According to Valero, a hidden tax imposed by this legislation in the form of a cap-and-trade system on hydrocarbons will significantly raise the consumer price of gasoline and other fuels.
In June, Valero said it does not expect to acquire Dow Chemical Company's (DOW | Quote | Chart | News | PowerRating) 45% stake in the Total Raffinaderij Nederland N.V. or TRN crude oil refinery. Valero said Dow informed the company that Total S.A.(TOT | Quote | Chart | News | PowerRating), which owns the remaining 55% in TRN, has announced its intention to exercise its right-of-first refusal.
In Tuesday's regular trading session, VLO is currently trading at $18.20, down $0.57 or 3.04% on a volume of 5.87 million shares. The stock has been trading in a range of $13.94-$36.22 in the past 52 weeks.
For comments and feedback: contact editorial@rttnews.com
Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved
In early June, Valero had said it expects a net loss for the second quarter, due to the extended downtime at its Delaware City and McKee refineries as well as the continuation of weak sour crude oil discounts and lower diesel margins. Refiners have been hurt by the downturn in demand for all types of fuels amid the recession and have temporarily shuttered refineries and individual processing units throughout the year. Also, crude oil prices have been climbing steadily for several weeks, even as demand for gasoline remains weak.
For the second quarter, the San Antonio, Texas-based company reported a net loss of $254 million or $0.48 per share, compared to net income of $734 million, or $1.37 per share in the prior-year quarter. On average, eighteen analysts polled by Thomson Reuters expected the company to to report a loss of $0.50 per share for the quarter. Analysts' estimates typically exclude special items.
Valero reported an operating loss for the quarter of $317 million, compared to operating income of $1.16 billion in the previous-year quarter. The loss for the quarter was primarily due to lower diesel and jet fuel margins as well as lower sour crude oil differentials compared to the same period last year.
Operating revenues for the quarter more than halved to $17.93 billion from $36.64 billion in the same period last year. Analysts had a consensus revenue estimate for the quarter of $16.28 billion.
Bill Klesse, Chairman of the Board and Chief Executive Officer of Valero, said, "The downturn in the global economy has sharply reduced demand for refined products at a time when new refining capacity is coming online around the world. Also, sour crude oil differentials have narrowed mainly because key supplies of lower quality crude oils have come off the market. As a result, global product inventories are high and refining margins are depressed."
Total costs and expenses for the quarter dropped by more than half to $18.24 billion from $35.48 billion in the year-ago period. Of the total costs, operating expenses declined to $1.02 billion from $1.13 billion in the previous-year quarter.
Valero's total throughput volumes for the second quarter declined to 2,489 Mbbls per day from 2,746 Mbbls per day a year ago, while total yields dropped to 2,485 Mbbls per day from 2,737 Mbbls per day in the previous-year quarter.
The company paid off $209 million of maturing debt and ended the second quarter with $1.62 billion in cash and temporary cash investments, up from $940 million as at December 31, 2008. Total debt as at the end of the second quarter was $7.37 billion compared to $6.58 billion as at December 31, 2008.
On a segmental basis, operating loss for the company's refining segment in the latest quarter was $268 million, compared to operating income of $1.24 billion a year ago. Throughput margin per barrel for the segment dropped to $4.64 from $10.82 in the year-ago period.
Operating income at the company's retail segment surged 33% to $65 million from $49 million in the year-ago period. Fuel margin per gallon at the U.S. retail division was $0.125 compared to $0.129 a year ago, while fuel margin per gallon at the Canada retail division declined to $0.253 from $0.270 in the prior-year period.
Operating income for the company's ethanol division, which was acquired in the latest quarter from VeraSun Energy Corp. (VSUNQ.OB), was $22 million. Ethanol production during the quarter was 1,617 thousand gallons per day. Gross margin per gallon of ethanol production was $0.47 for the quarter. The company said it now has all seven of the ethanol plants operating and added that the recent decrease in corn prices has been positive on ethanol margins and the profitability of its plants.
Year-To-Date Results
For the first six months of fiscal year 2009, Valero reported net income of $55 million, or $0.11 per share, down from $995 million, or $1.85 per share, in the previous-year period.
Operating revenues for the half year dropped to $31.75 billion from $64.59 billion in the previous-year period.
Valero said that it plans to review the margin outlook for the Aruba refinery in September to decide whether to restart the plant or keep it down. Further, the company said it expects to have a decision from the arbitration panel on the turnover tax arbitration by that time. The previously announced shutdown of the company's Aruba refinery was completed in mid-July mainly due to poor margins. The facility processes heavy crude into distillate products that are shipped to U.S. refineries to be made into lighter fuels including gasoline.
Valero added that it will continue to monitor its other refineries for situations in which it makes economic sense to slow or shut down specific units or an entire plant.
While reporting its financial results for the first quarter in April, Valero had lowered its forecast for estimated 2009 capital spending to $2.5 billion from the earlier estimate of $2.7 billion in order to further conserve cash. In June, the company said it continues to expect total capital expenditures in 2009 to be about $2.5 billion, of which about $1 billion is for strategic projects.
The company also expressed concern that a hidden tax imposed by the carbon legislation in the form of a cap-and-trade system on hydrocarbons will significantly raise the consumer price of gasoline and other fuels. Refiners that have invested heavily in the past decade to shift their plants to run cheaper heavy, sour crude oil grades will likely face new hurdles in rules to limit carbon emissions expected to take effect within 10 years.
Valero urged its investors to contact their congressmen and senators to express opposition to the 'American Clean Energy and Security Act of 2009,' which was narrowly passed in the United States House of Representatives in June. The company noted that the carbon legislation, in some form, will be before the Senate early this fall. According to Valero, a hidden tax imposed by this legislation in the form of a cap-and-trade system on hydrocarbons will significantly raise the consumer price of gasoline and other fuels.
In June, Valero said it does not expect to acquire Dow Chemical Company's (DOW | Quote | Chart | News | PowerRating) 45% stake in the Total Raffinaderij Nederland N.V. or TRN crude oil refinery. Valero said Dow informed the company that Total S.A.(TOT | Quote | Chart | News | PowerRating), which owns the remaining 55% in TRN, has announced its intention to exercise its right-of-first refusal.
In Tuesday's regular trading session, VLO is currently trading at $18.20, down $0.57 or 3.04% on a volume of 5.87 million shares. The stock has been trading in a range of $13.94-$36.22 in the past 52 weeks.
For comments and feedback: contact editorial@rttnews.com
Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved
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