SAN ANTONIO--(BUSINESS WIRE)--April 25, 2006--Valero Energy
Corporation (NYSE:VLO) today reported record first quarter net income
of $849 million, or $1.32 per share, which compares to $534 million,
or $0.96 per share, in the first quarter of last year. As of March 31,
2006, the company's debt-to-capitalization ratio, net of cash, was
23.5 percent, compared to 24.8 percent as of December 31, 2005.
First quarter 2006 operating income for the company's refining
segment was $1.5 billion, compared to $0.9 billion for the same period
last year. The significant increase in operating income was primarily
due to stronger gasoline and distillate margins and higher throughput
volumes due to the acquisition of Premcor Inc. in September 2005.
"We had the highest first quarter earnings in the company's
history, and the outlook for the rest of the year is even better,"
said Bill Klesse, Valero's Chief Executive Officer. "Heavy turnaround
activity, implementation of more restrictive sulfur regulations on
gasoline and diesel, increased use of ethanol in the reformulated
gasoline pool and limited capacity expansions due to the high cost of
environmental regulations are resulting in tighter supplies of refined
products and outstanding margins.
"What's impressive about our first quarter was that we achieved
record earnings with a very high level of turnaround activity in our
system. We had major turnarounds at our Memphis, Aruba, Corpus
Christi, Krotz Springs, and Texas City refineries during the quarter,
which limited the financial results we were able to achieve at those
facilities. The first quarter clearly demonstrated the advantages of
having a large, geographically diverse, complex refining system.
Looking ahead to the second quarter, the only significant turnaround
activity we have is at Quebec, Aruba and Paulsboro.
"The second quarter is off to an outstanding start. Gulf Coast
gasoline and diesel margins are at record levels for April. The
forward curve is showing these record margins continuing through the
summer. Sour crude oil discounts also remain terrific with the heavy
Maya crude oil discount averaging more than $14 per barrel for April
and medium sour crude oils, such as Mars, averaging more than $6 per
barrel discount. Given that 60 percent of our feedstocks are purchased
at discounts to benchmark sweet crude oil prices, these discounts play
a significant role in our earnings. With our leverage to these
outstanding product margins and sour crude oil discounts, the second
quarter is shaping up to be the highest earnings quarter in Valero's
history.
"Looking at refining fundamentals for the rest of the year, we
feel very confident that the refining environment will remain strong.
The combination of growing refined product demand, despite higher
price levels globally, and regulatory pressures on supply should
support continued strength in refined product margins. Sour crude oil
discounts should continue to be wide due to ample supplies of sour
grades and higher demand for sweet crudes as refiners try to meet
lower sulfur specifications and increase yields of high-value clean
products," Klesse said.
Regarding the company's cash flow, capital spending for the first
quarter was approximately $975 million, of which $200 million was for
turnaround expenditures. For the year, the company anticipates capital
spending of approximately $3.5 billion. In addition, the company paid
off $221 million of long-term debt and purchased 10.7 million shares
of its common stock during the first quarter.
"We continue to execute our strategy of investing our cash flow to
increase shareholder value. The strategic capital investments we are
making are designed to improve our competitive position in the future.
For example, many of these projects will further reduce feedstock
costs, improve yields of high-value clean products, increase
reliability and lower operating costs. As for acquisitions, we
continue to look at opportunities in the market, but remain committed
to our proven strategy of buying assets at attractive prices that are
immediately accretive to earnings and give us superior growth
opportunities. Financially, this year we expect to purchase
approximately five percent of our outstanding common stock under
existing board-approved plans and continue to evaluate modest dividend
increases.
"We are obviously very bullish about our future. Quarter after
quarter, we continue to demonstrate our earnings and cash flow
potential. We are in an outstanding business environment and expect it
to continue well into the foreseeable future," Klesse said.
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 website at www.valero.com.
Valero Energy Corporation is a Fortune 500 company based in San
Antonio, with approximately 22,000 employees and annual revenues of
more than $80 billion. The company owns and operates 18 refineries
throughout the United States, Canada and the Caribbean with a combined
throughput capacity of approximately 3.3 million barrels per day,
making it the largest refiner in North America. Valero is also one of
the nation's largest retail operators with more than 5,000 retail and
branded wholesale outlets in the United States, Canada and the
Caribbean under various brand names including Valero, Diamond
Shamrock, Shamrock, Ultramar, and Beacon. 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," "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 and on Valero's website at
www.valero.com.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel and per Gallon
Amounts)
Three Months Ended
March 31,
----------------------------
2006 (1) 2005 (2)
----------- -----------
STATEMENT OF INCOME DATA:
Operating Revenues (including $0 and
$1,228, respectively, related to
buy/sell arrangements) (3) (4) $ 20,941 $ 14,953
----------- -----------
Costs and Expenses:
Cost of Sales (3) 18,082 13,072
Refining Operating Expenses 926 580
Retail Selling Expenses 189 172
General and Administrative Expenses 151 104
Depreciation and Amortization Expense 260 179
----------- -----------
Total Costs and Expenses 19,608 14,107
----------- -----------
Operating Income 1,333 846
Equity in Earnings of Valero L.P. 12 9
Other Income (Expense), Net - (2)
Interest and Debt Expense:
Incurred (96) (74)
Capitalized 37 11
----------- -----------
Income Before Income Tax Expense 1,286 790
Income Tax Expense 437 256
----------- -----------
Net Income 849 534
Preferred Stock Dividends 1 4
----------- -----------
Net Income Applicable to Common Stock $ 848 $ 530
=========== ===========
Earnings per Common Share (5) $ 1.37 $ 1.03
Weighted Average Common Shares
Outstanding (in millions) (5) 619 512
Earnings per Common Share - Assuming
Dilution (5) $ 1.32 $ 0.96
Weighted Average Common Equivalent
Shares
Outstanding (in millions) (5) 644 556
March 31, December 31,
2006 2005
----------- -----------
BALANCE SHEET DATA:
Cash $ 436 $ 436
Total Debt $ 5,138 $ 5,378
Debt-to-Capitalization Ratio (net of
cash) (6) 23.5% 24.8%
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel and per Gallon
Amounts)
Three Months Ended
March 31,
--------------------------
2006 (1) 2005 (2)
---------- ----------
Operating Income (Loss) by Business
Segment:
Refining $ 1,472 $ 944
---------- ----------
Retail:
U.S. - (13)
Northeast 21 27
---------- ----------
Total Retail 21 14
---------- ----------
Total Before Corporate 1,493 958
Corporate (160) (112)
---------- ----------
Total $ 1,333 $ 846
========== ==========
Depreciation and Amortization by
Business Segment:
Refining $ 231 $ 153
---------- ----------
Retail:
U.S. 13 13
Northeast 7 5
---------- ----------
Total Retail 20 18
---------- ----------
Total Before Corporate 251 171
Corporate 9 8
---------- ----------
Total $ 260 $ 179
========== ==========
Operating Highlights:
Refining:
Throughput Margin per Barrel $ 10.11 $ 8.40
Operating Costs per Barrel:
Refining Operating Expenses $ 3.56 $ 2.90
Depreciation and Amortization 0.89 0.77
---------- ----------
Total Operating Costs per Barrel $ 4.45 $ 3.67
========== ==========
Throughput Volumes (Mbbls per Day):
Feedstocks:
Heavy Sour Crude 765 520
Medium/Light Sour Crude 553 596
Acidic Sweet Crude 66 106
Sweet Crude 875 545
Residuals 155 116
Other Feedstocks 182 121
---------- ----------
Total Feedstocks 2,596 2,004
Blendstocks and Other 294 216
---------- ----------
Total Throughput Volumes 2,890 2,220
========== ==========
Yields (Mbbls per Day):
Gasolines and Blendstocks 1,403 1,009
Distillates 909 685
Petrochemicals 89 72
Other Products (7) 494 464
---------- ----------
Total Yields 2,895 2,230
========== ==========
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel and per Gallon
Amounts)
Three Months Ended
March 31,
----------------------
2006 (1) 2005 (2)
--------- ---------
Refining Operating Highlights by Region: (8)
Gulf Coast:
Operating Income $ 1,003 $ 628
Throughput Volumes (Mbbls per Day) (9) 1,512 1,253
Throughput Margin per Barrel $ 11.40 $ 8.98
Operating Costs per Barrel:
Refining Operating Expenses $ 3.18 $ 2.76
Depreciation and Amortization 0.85 0.66
--------- ---------
Total Operating Costs per Barrel $ 4.03 $ 3.42
========= =========
Mid-Continent: (10)
Operating Income $ 101 $ 35
Throughput Volumes (Mbbls per Day) (9) 504 291
Throughput Margin per Barrel $ 6.56 $ 5.13
Operating Costs per Barrel:
Refining Operating Expenses $ 3.64 $ 3.11
Depreciation and Amortization 0.69 0.69
--------- ---------
Total Operating Costs per Barrel $ 4.33 $ 3.80
========= =========
Northeast:
Operating Income $ 179 $ 73
Throughput Volumes (Mbbls per Day) (9) 575 377
Throughput Margin per Barrel $ 8.50 $ 5.59
Operating Costs per Barrel:
Refining Operating Expenses $ 4.11 $ 2.63
Depreciation and Amortization 0.93 0.80
--------- ---------
Total Operating Costs per Barrel $ 5.04 $ 3.43
========= =========
West Coast:
Operating Income $ 189 $ 208
Throughput Volumes (Mbbls per Day) 299 299
Throughput Margin per Barrel $ 12.61 $ 12.67
Operating Costs per Barrel:
Refining Operating Expenses $ 4.29 $ 3.66
Depreciation and Amortization 1.31 1.26
--------- ---------
Total Operating Costs per Barrel $ 5.60 $ 4.92
========= =========
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel and per Gallon
Amounts)
Three Months Ended
March 31,
------------------------
2006 (1) 2005 (2)
---------- ----------
Retail - U.S.:
Company - Operated Fuel Sites (Average) 996 1,036
Fuel Volumes (Gallons per Day per Site) 4,882 4,647
Fuel Margin per Gallon $ 0.100 $ 0.068
Merchandise Sales $ 219 $ 214
Merchandise Margin (Percentage of Sales) 29.7% 29.2%
Margin on Miscellaneous Sales $ 37 $ 28
Selling Expenses $ 133 $ 120
Retail - Northeast:
Fuel Volumes (Thousand Gallons per Day) 3,284 3,350
Fuel Margin per Gallon $ 0.225 $ 0.227
Merchandise Sales $ 36 $ 33
Merchandise Margin (Percentage of Sales) 27.9% 25.6%
Margin on Miscellaneous Sales $ 8 $ 8
Selling Expenses $ 56 $ 52
Average Market Reference Prices and
Differentials
(Dollars per Barrel):
Feedstocks (at U.S. Gulf Coast, except
as Noted):
West Texas Intermediate (WTI) Crude Oil $ 63.29 $ 49.70
WTI Less Sour Crude Oil (11) $ 7.98 $ 8.06
WTI Less Alaska North Slope (ANS)
Crude Oil (U.S. West Coast) $ 2.41 $ 4.85
WTI Less Maya Crude Oil $ 15.61 $ 17.08
Products:
U.S. Gulf Coast:
Conventional 87 Gasoline Less WTI $ 8.00 $ 5.86
No. 2 Fuel Oil Less WTI $ 8.85 $ 7.36
Propylene Less WTI $ 7.14 $ 22.17
U.S. Mid-Continent:
Conventional 87 Gasoline Less WTI $ 8.08 $ 7.25
Low-Sulfur Diesel Less WTI $ 13.27 $ 9.24
U.S. Northeast:
Conventional 87 Gasoline Less WTI $ 6.76 $ 4.93
No. 2 Fuel Oil Less WTI $ 9.03 $ 9.34
Lube Oils Less WTI $ 46.92 $ 26.15
U.S. West Coast:
CARBOB 87 Gasoline Less ANS $ 15.21 $ 19.12
Low-Sulfur Diesel Less ANS $ 19.56 $ 18.03
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel and per Gallon
Amounts)
(1) The information presented for the three months ended March 31,
2006 includes the operations related to the acquisition of Premcor
Inc., which was acquired on September 1, 2005.
(2) Amounts previously reported in 2005 for refining operating
expenses, retail selling expenses, general and administrative
expenses, and depreciation and amortization expense have been
reclassified for comparability with amounts reported in 2006. The
reclassifications resulted from the following changes that took
effect on January 1, 2006: (i) information services costs that
were previously allocated to the operating units are now being
reported as general and administrative expenses to better reflect
the area responsible for such costs and (ii) Statement of
Financial Accounting Standards No. 123 (revised 2004),
"Share-Based Payment," was implemented, which resulted in amounts
previously reported as amortization expense now being reported as
operating, selling or general and administrative expenses.
(3) Valero Energy Corporation's buy/sell arrangements involve linked
purchases and sales related to crude oil contracts entered into to
address location, quality or grade requirements. Commencing
January 1, 2006, Valero adopted Emerging Issues Task Force Issue
No. 04-13, "Accounting for Purchases and Sales of Inventory with
the Same Counterparty," which requires that such buy/sell
arrangements be accounted for as one transaction, thereby
resulting in no recognition of revenues and cost of sales for
these transactions. For buy/sell arrangements prior to 2006, cost
of sales includes amounts which approximate the revenues resulting
from these transactions.
(4) Includes excise taxes on sales by Valero's U.S. retail system of
$194 million and $193 million for the three months ended March 31,
2006 and 2005, respectively.
(5) Weighted average common and common equivalent shares outstanding
and earnings per common share amounts for the three months ended
March 31, 2005 have been restated to reflect the effect of a
two-for-one split of Valero's common stock which was effected in
the form of a common stock dividend distributed on December 15,
2005.
(6) The following is a reconciliation of the debt-to-capitalization
ratio. This information is presented because Valero is required to
maintain a certain debt-to-capitalization ratio under its bank
credit facilities.
March 31, December 31,
2006 2005
----------- -----------
Debt:
Debt, including current maturities and
capital lease obligations, per the
balance sheet $ 5,138 $ 5,378
Letter of credit supporting indebtedness
of others 37 18
Less: Cash and temporary cash
investments (436) (436)
----------- -----------
Total debt (net of cash) 4,739 4,960
----------- -----------
Stockholders' equity 15,398 15,050
----------- -----------
Total capitalization $ 20,137 $ 20,010
=========== ===========
Debt-to-capitalization ratio (net of
cash) 23.5% 24.8%
=========== ===========
(7) Primarily includes gas oils, No. 6 fuel oil, petroleum coke and
asphalt.
(8) The regions reflected herein contain the following refineries
subsequent to the Premcor acquisition: Gulf Coast-Corpus Christi
East, Corpus Christi West, Texas City, Houston, Three Rivers,
Krotz Springs, St. Charles, Aruba and Port Arthur Refineries;
Mid-Continent-McKee, Ardmore, Memphis and Lima Refineries;
Northeast-Quebec, Paulsboro and Delaware City Refineries; and West
Coast-Benicia and Wilmington Refineries. The Mid-Continent region
also included the Denver Refinery prior to its disposition on May
31, 2005.
(9) Throughput volumes for the Gulf Coast, Mid-Continent and Northeast
regions for the three months ended March 31, 2006 include 295, 247
and 194 Mbbls per day, respectively, related to the operations of
the refineries acquired from Premcor Inc. on September 1, 2005.
(10) The information presented for the Mid-Continent region for the
three months ended March 31, 2005 includes the operations of
the Denver Refinery, which was sold to Suncor Energy (U.S.A.)
Inc. on May 31, 2005. Throughput volumes include 40 Mbbls per
day related to the Denver Refinery for the three months ended
March 31, 2005.
(11) The market reference differential for sour crude oil is based on
50% Arab Medium and 50% Arab Light posted prices.
CONTACT: Valero Energy Corporation, San Antonio
Investors, Eric Fisher, Vice President,
Investor Relations: 210-345-2896
or
Media, Mary Rose Brown, Senior Vice President,
Corporate Communications: 210-345-2314
Website: http://www.valero.com
SOURCE: Valero Energy Corporation
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