Valero Energy reports on record first quarter

Valero Energy Corporation reported net income from continuing operations attributable to Valero stockholders of US$964 million, or US$1.87 per share, in the first quarter of 2015 compared to US$829 million, or US$1.54 per share, in the first quarter of 2014. The results were a record first quarter for the company.

“Our team’s solid performance and favourable margins helped us deliver impressive results during a heavy planned maintenance period in the first quarter,” said Joe Gorder, Valero Chairman, President and Chief Executive Officer. “Valero’s financial position is strong, and we are clearly executing our strategy, which includes investing to optimise our operations, growing VLP and returning cash to stockholders.”

Refining

The refining segment reported first quarter 2015 operating income of US$1.6 billion versus US$1.3 billion in the first quarter of 2014. The US$361 million increase in operating income primarily resulted from the US$1.49 increase in throughput margin per barrel from US$10.90 in the first quarter of 2014 to US$12.39 in the first quarter of 2015. The increase in throughput margin per barrel was mainly driven by stronger gasoline and secondary product margins per barrel relative to Brent crude oil and lower natural gas costs. These positive drivers were partially offset by lower discounts per barrel for most sweet and sour crude oils relative to Brent crude oil.

First quarter 2015 refining throughput volumes averaged 2.7 million bpd, an increase of 9000 bpd from the first quarter of 2014. Valero’s refineries operated at 92% throughput capacity utilisation in the first quarter of 2015.

“We continue to pursue operations excellence, which is the foundation for safe, reliable, and profitable operations,” Gorder said. “In the first quarter of 2015, we safely completed almost double the amount of planned turnaround work compared to first quarter of 2014. With the majority of our refineries having completed their planned maintenance for 2015, we expect the bulk of our refining system to be ready and available to capture market opportunities.”

Ethanol

The ethanol segment reported first quarter 2015 operating income of US$12 million versus US$243 million in the first quarter of 2014. The US$231 million decrease in operating income was mainly due to lower gross margin per gallon driven by a decline in gasoline and ethanol prices, which more than offset a decline in corn prices. Average quarterly ethanol production volumes were 3.8 million gal./d in the first quarter of 2015, an increase of 681 000 gal./d versus the first quarter of 2014. The increase in production was due to less weather related rail disruptions in the first quarter of 2015 compared to 2014 combined with incremental production volumes from the new Mount Vernon plant.

Corporate and other

General and administrative expenses were US$147 million in the first quarter of 2015 versus US$160 million in the first quarter of 2014. The effective tax rate was 31.7% in the first quarter of 2015.

Strategic update

As part of its strategy to grow VLP and unlock value, Valero executed its second drop down transaction to VLP on 1 March for US$671 million consisting of the Houston and St Charles Terminal Services Business. Valero is on track to complete its goal of US$1 billion of drop down transactions in 2015.

Valero continued to advance its refining and logistics capital investments, which are designed to increase its ability to access and process more North American crude oil. The construction of the two crude topping units at the Corpus Christi and Houston refineries is progressing as planned. When complete, these units are expected to reduce feedstock costs at both of these refineries.

In April, Valero completed its 25 000 bpd dock and tank expansion project at its Corpus Christi refinery. This increases the total capacity of the crude oil loading facility to 50 000 bpd and improves Valero’s ability to optimise logistically bottlenecked crude oil across its system.

Valero expects 2015 capital spending, including turnarounds and catalyst, to be US$2.65 billion, as previously guided. This estimate includes US$1.5 billion for stay in business capital and US$1.15 billion for growth investment, and excludes US$150 million for the St Charles methanol project that remains under evaluation. Valero expects the majority of growth investments in 2015 will be for light crude oil processing and logistics. Valero believes that most of the logistics investments will be eligible for future drop down transactions to VLP.

Adapted from press release by Rosalie Starling

Read the article online at: https://www.hydrocarbonengineering.com/refining/29042015/valero-energy-reports-on-record-first-quarter-684/