Valero Energy Corporation (NYSE: VLO) today reported record net income of $534 million, or $1.92 per share, for the first quarter of 2005, which is more than double last year’s first quarter net income of $248 million, or $.91 per share (split adjusted). The company’s debt-to-capitalization ratio, net of cash, was 29.6 percent as of March 31, 2005, compared to 30.7 percent as of December 31, 2004.
First quarter operating income for the company’s refining segment was $933 million, compared to $495 million for the same period last year. The significant increase in operating income was primarily the result of record sour crude discounts and distillate margins, which were nearly double last year’s levels. In addition, throughput volumes were higher largely due to a full quarter contribution from the March 2004 acquisition of the Aruba refinery.
“2005 is off to a great start and we are right on track to have another record year,” said Bill Greehey, Valero’s Chairman of the Board and Chief Executive Officer. “Despite having three major turnarounds during the quarter, our earnings were nearly two dollars per share. We continue to demonstrate the benefits of having a large, complex and geographically diverse refining system and the tremendous earnings power we have achieved through our leverage to sour crude processing.
“During the quarter, we processed approximately 1.2 million barrels per day of sour and acidic crudes, which is approximately seventy percent of our total crude throughputs. And, of the sour crude oils we processed, 520,000 barrels per day were heavy sour crude oils, such as Maya, that were purchased at discounts of around $17 per barrel. That compares to a Maya discount of only $9.38 per barrel last year in the first quarter.
“Refined product fundamentals were outstanding in the first quarter and reflect the strong demand for gasoline, distillate and petrochemical feedstocks that we continue to see. U.S. gasoline demand is up one and a half percent year-to-date over last year’s record levels, despite high pump prices. Gasoline margins on the Gulf Coast in April have averaged $11.00 per barrel and the outlook, based on the forward curve, is indicating a $7.30 per barrel Gulf Coast gasoline margin for the full year. Distillate margins are also outstanding and it has become clear that distillate margins are no longer driven primarily by the weather. Growing global demand for distillate as a transportation fuel has caused on-road diesel and jet fuel to become more of an equal partner with gasoline on a margin basis. For example, on the U.S. Gulf Coast, distillate margins for April have averaged around $10.00 per barrel, compared to just $0.85 per barrel in April of last year. Distillate margins for the full year, based on the forward curve, are at about $8.00 per barrel, around $4.00 per barrel better than last year’s record average.
“Clearly, the refining industry has entered a new era. As a result, we believe that we will continue to see higher highs and higher lows for both product margins and sour crude discounts in the future. Last year, we delivered a 98 percent total shareholder return and the fundamentals for this year and next look just as good or better than in 2004. That’s why I have consistently said our 2005 results should significantly exceed our record 2004 earnings. And, given our expectation that worldwide refined product demand will continue to outpace growth in refining capacity and the fact that sulfur specifications for gasoline and diesel will further tighten in 2006, we believe our trend of record-setting quarterly results will continue into 2006 and beyond. For all these reasons, we are convinced that our stock continues to represent a tremendous value to investors,” said Greehey.
Valero’s senior management will hold a conference call at 3:00 p.m. ET (2:00 p.m. CT) today, April 21, to discuss this earnings release. Analysts interested in listening to the presentation may access it by dialing 866/558-0225, reservation passcode 5518188. International callers may access the presentation by dialing 706/634-0875, passcode 5518188. The company intends to have a playback available following the presentation that may be accessed by calling 800/642-1687, reservation passcode 5518188. A live broadcast of the conference call will also 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 20,000 employees and annual revenues of approximately $55 billion. The company owns and operates 15 refineries throughout the United States, Canada and the Caribbean. Valero’s refineries have a combined throughput capacity of approximately 2.5 million barrels per day, which represents approximately 12 percent of the total U.S. refining capacity. Valero is also one of the nation’s largest retail operators with more than 4,700 retail and wholesale branded outlets in the United States, Canada and the Caribbean under various brand names including Diamond Shamrock, Shamrock, Ultramar, Valero, and Beacon. For more information, please visit www.valero.com.
Statements contained in this press 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 the company’s actual results could differ materially from those projected in its forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecast, see the company’s annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission and available on the company’s website at http://www.valero.com. These factors include potential changes in gasoline, crude oil, distillate and other commodity prices, varying market conditions, actions of government, hostilities in oil producing regions, adverse rulings in litigation and potential delays or other changes in work and repair schedules. The company undertakes no obligation to update or publicly release the result of any revisions to any forward-looking statements that may be made to reflect events or circumstances that occur or which the company becomes aware of after the date of this release, or to reflect the occurrence of unanticipated events.