Valero Energy Corporation ("Valero," NYSE: VLO) today reported net income attributable to Valero stockholders of $654 million, or $1.18 per share, for the first quarter of 2013 compared to a net loss attributable to Valero stockholders of $432 million, or $0.78 per share, for the first quarter of 2012. Included in the first quarter 2012 results was a noncash asset impairment loss of $605 million after taxes, or $1.09 per share, predominately related to the Aruba refinery.
First quarter 2013 operating income was $1.1 billion versus an operating loss of $244 million in the first quarter of 2012. Excluding the noncash asset impairment loss noted above, first quarter 2012 operating income was $367 million. The resulting increase in operating income of approximately $700 million in 2013 was primarily due to higher refining throughput margins in each of Valero's operating regions, except the U.S. West Coast. The increase in refining throughput margins was mainly due to an increase in margins for diesel and jet fuel and wider discounts on crude oil and feedstocks.
First quarter 2013 refining throughput volumes averaged 2.6 million barrels per day, an increase of 11,000 barrels per day from the first quarter of 2012. Significant turnaround, maintenance, and repair activity occurred at refineries in Valero's U.S. Gulf Coast region, including the Texas City, Corpus Christi, and Port Arthur refineries; and at its Benicia and Wilmington refineries in the U.S. West Coast region. Turnaround activity continues in the second quarter of 2013 with work at the Meraux and McKee refineries plus a plantwide turnaround planned for approximately two months at the Quebec City refinery.
"Valero achieved solid results in the first quarter," said Valero Chairman and CEO Bill Klesse. "Despite a heavy turnaround and maintenance workload, our refineries had good performance that was aided by wider diesel margins and crude oil discounts plus contribution from our new hydrocracker at the Port Arthur refinery. Our strong cash flow enabled us to return $415 million in cash to our shareholders through dividends and stock buybacks in the first quarter."
On strategic initiatives, Klesse commented, "We progressed on growth investments at our St. Charles refinery, with start-up of the new hydrocracker and Diamond Green Diesel project both planned by the end of June. Also in the first quarter, we ordered 2,500 additional rail cars and invested in other logistics assets. In mid-April, our Quebec City refinery successfully processed its first cargo of Eagle Ford crude oil, which we shipped from Texas using a lower-cost, foreign-flagged vessel."
Valero's retail segment reported $42 million of operating income in the first quarter of 2013 versus $40 million of operating income in the first quarter of 2012. U.S. retail operating income increased from $11 million in the first quarter of 2012 to $18 million in the first quarter of 2013, mainly due to higher fuel margins. Canadian retail operating income decreased from $29 million in the first quarter of 2012 to $24 million in the first quarter of 2013, mainly due to lower fuel volumes in Canada.
Valero continued to make progress on the spinoff to its stockholders of its retail business under a new company named CST Brands, Inc. ("CST Brands"). On May 1, Valero intends to distribute 80 percent of the outstanding shares of CST Brands common stock to Valero stockholders. Valero has received its requested private letter ruling from the Internal Revenue Service and clearance from the Securities and Exchange Commission for the transaction. CST Brands common stock will begin regular-way trading on the New York Stock Exchange under the ticker symbol "CST" on May 2. CST Brands common stock has been trading on the when-issued market under the ticker symbol "CST WI" since April 17 and will continue to trade on that market through May 1.
Valero's ethanol segment reported operating income of $14 million in the first quarter of 2013 versus $9 million in the first quarter of 2012. The increase in operating income was due to a higher gross margin per gallon of production, which was somewhat offset by lower production volumes. As gross margins improved in the first quarter of 2013, Valero restarted its three ethanol plants that had been temporarily shut down. All ten ethanol plants in Valero's system are currently operating near capacity.
Regarding cash flows in the first quarter of 2013, capital expenditures were $864 million, of which $287 million was for turnarounds and catalyst and $34 million was for the retail segment. Valero paid $111 million in dividends on its common stock, reflecting an increase of 2.5 cents per share per quarter, and Valero paid $304 million to purchase 6.9 million shares of its common stock. Also, Valero retired $180 million of 6.7% senior notes that matured in mid-January. Valero ended the first quarter of 2013 with $1.9 billion of cash and temporary cash investments, $6.9 billion in total debt, and approximately $3 billion available under its stock purchase authorizations.
Regarding uses of cash in the second quarter of 2013, Valero continued to purchase shares of its common stock with 2.8 million shares purchased for $118 million in April. Also, Valero expects to retire $300 million of maturing notes in June.
Valero expects full-year 2013 capital expenditures to be approximately $2.85 billion, which includes turnarounds and catalyst, as well as capital expenditures related to the retail segment for the first four months of 2013. Estimated capital expenditures for 2013 increased approximately $140 million from previous guidance, mainly due to the addition or acceleration of growth projects, including logistics and hydrocracker expansions.
"Valero's capital expenditures are focusing on key areas to add long-term shareholder value - logistics, processing cost-advantaged crude oil, and distillates-focused hydrocracking," Klesse said. "Given the significant growth of crude oil production in the U.S. and Canada, we are investing in more logistics projects to get cost-advantaged crude oil into our refineries and to increase our ability to export refined products. Since much of the new production is light crude oil, we are investing at certain refineries to increase the front-end flexibility to process more volumes of cost-advantaged light crude oil. Our other growth investments focus on expanding our hydrocrackers at the Meraux, St. Charles, and Port Arthur refineries to produce more diesel and jet fuel."
"After we complete the spinoff of our retail business, we will evaluate a master limited partnership for our growing portfolio of logistics assets," Klesse said. "In addition to these company-specific actions, many of our refineries are well-positioned to receive growing volumes of cost-advantaged crude oil as new pipelines come into service in the industry, particularly in our U.S. Gulf Coast region."
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.
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Valero Energy Corporation, through its subsidiaries, is an international manufacturer and marketer of transportation fuels, other petrochemical products and power. Valero subsidiaries employ approximately 22,000 people, and assets include 16 petroleum refineries with a combined throughput capacity of approximately 3 million barrels per day, 10 ethanol plants with a combined production capacity of 1.2 billion gallons per year, and a 50-megawatt wind farm. More than 7,300 outlets carry the Valero, Diamond Shamrock, Shamrock, and Beacon brands in the United States and the Caribbean; Ultramar in Canada; and Texaco in the United Kingdom and Ireland. Valero is a Fortune 500 company based in San Antonio. Please visit www.valero.com for more information.
Investors: Ashley Smith, Vice President - Investor Relations, 210-345-2744
Media: Bill Day, Executive Director - Corporate Communications, 210-345-2928
About CST Brands
CST Brands, to be based in San Antonio, Texas, is expected to be one of the largest independent retailers of motor fuels and convenience merchandise in the United States and eastern Canada, with nearly 1,900 sites and approximately 12,000 employees. For more information about CST Brands, please visit www.cstbrands.com.
CST Brands Contact
Randy Palmer, Director - Investor Relations, 800-456-3533
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," "intend," 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.