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Valero Energy Reports 2012 Fourth Quarter and Annual Results 
 
1/29/2013 
San Antonio, Texas 

Valero Energy Corporation ("Valero," NYSE: VLO) today reported net income attributable to Valero stockholders of $1.0 billion, or $1.82 per share, for the fourth quarter of 2012 compared to net income attributable to Valero stockholders of $45 million, or $0.08 per share, for the fourth quarter of 2011. Included in the fourth quarter 2012 results was a noncash asset impairment loss of $37 million after taxes, or $0.06 per share.

For the year ended December 31, 2012, net income attributable to Valero stockholders was $2.1 billion, or $3.75 per share. Included in the results were noncash asset impairment losses of $983 million after taxes, or $1.77 per share, and severance expense of $41 million after taxes, or $0.07 per share, mainly related to the shutdown and impairment of the Aruba refinery.

Fourth quarter 2012 operating income was $1.6 billion versus $167 million of operating income in the fourth quarter of 2011. The increase in operating income was primarily due to higher refining throughput margins in each of the company's regions plus lower refining operating expenses. The increase in refining throughput margins was mainly due to the increase in discounts for medium sour, heavy sour, and domestic light crude oils. A significant decline in ethanol margins partially offset the increase in operating income.

Fourth quarter 2012 refining throughput volume averaged 2.64 million barrels per day, down 73,000 barrels per day from the fourth quarter of 2011 mainly due to the lack of throughput volume at the Aruba refinery, which was shut down in the first quarter of 2012.

"This was Valero's best fourth-quarter earnings per share since 2005, and we made important progress on our strategic goals," said Valero Chairman and CEO Bill Klesse. "In the fourth quarter, we had a smooth start-up of our new hydrocracker at the Port Arthur refinery, which was the largest project in Valero's history. We also continued construction on our St. Charles hydrocracker, which is scheduled for start-up in the second quarter of 2013. We believe these projects are perfectly suited for the current environment of strong distillate margins and inexpensive natural gas."

Klesse continued, "Also in the fourth quarter of 2012, we replaced all imported light foreign crude oils with cheaper domestic crude oils at our Gulf Coast and Memphis refineries. Since we expect U.S. and Canadian crude oils to become increasingly more available, we are pursuing options to process additional volumes of these cost-advantaged crudes throughout our refining system."

Valero's retail segment reported $95 million of operating income in the fourth quarter of 2012 versus $83 million of operating income in the fourth quarter of 2011. The increase in operating income was mainly due to higher fuel margins in the U.S., which was somewhat offset by lower fuel margins and a noncash asset impairment loss of $9 million before taxes in Canada. For the full-year 2012, the retail segment generated $348 million of operating income, and those results were second only to the 2011 record-high results of $381 million.

Valero continued to make progress in the separation of its retail business under a new company named CST Brands, Inc. ("CST"). The separation is planned by way of a pro rata distribution of 80 percent of the outstanding shares of CST common stock to Valero stockholders. The distribution is expected to take place in the second quarter of 2013, assuming a favorable private letter ruling from the Internal Revenue Service and clearance of all comments from the Securities and Exchange Commission ("SEC"). When the distribution occurs, Valero expects to receive approximately $1.1 billion of cash and incur a tax liability of approximately $300 million, primarily in Canada. Valero also expects to liquidate the remaining 20 percent of CST outstanding shares within 18 months of the distribution. Details of the separation and distribution are provided in filings with the SEC by CST (formerly known as Corner Store Holdings, Inc.).

Commenting on the retail separation, Klesse said, "We believe the separated retail business will perform well and unlock value for our shareholders. In addition to its large and geographically diverse network of high-quality sites, the retail business has a long history of strong brand recognition and financial performance, as well as significant growth opportunities in merchandise, food service, and new-build locations."

Valero's ethanol segment reported operating income of $12 million in the fourth quarter of 2012 versus $181 million of operating income in the fourth quarter of 2011. The decrease in ethanol operating income was due to significantly lower gross margins caused by a combination of high corn prices and high industry ethanol inventories attributable to lower ethanol and gasoline demand. Due to poor margins, Valero operated its ethanol capacity at reduced rates with three plants temporarily idled.

Regarding cash flows in the fourth quarter of 2012, capital spending was $942 million, of which $140 million was for turnaround and catalyst expenditures. Valero paid $97 million in dividends on its common stock and $133 million to purchase the company's shares. For the full-year 2012, Valero used $281 million to purchase 10.6 million shares of the company's stock. Valero ended the fourth quarter with $1.7 billion in cash and temporary cash investments.

For the full-year 2012, total capital spending, including turnaround and catalyst expenditures, was $3.4 billion, or $100 million below guidance. Valero expects total capital spending for 2013 to be approximately $2.5 billion, including approximately $200 million for the retail segment.

Regarding other uses of cash in 2013, Valero retired $180 million of 6.7% senior notes that matured in mid-January and expects to retire $300 million of maturing notes in the second quarter of 2013.

Klesse concluded, "Returning cash to stockholders remains a priority. We bought back shares in the fourth quarter, and last week, our Board of Directors approved a 14 percent increase in our quarterly dividend to make it 20 cents per share. We intend to maintain our investment grade credit rating, fund selective growth opportunities, and achieve one of the highest cash yields among our peers through regular dividends and share repurchases."

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.

Click here to view the Financial Tables.

About Valero
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. Approximately 6,800 retail and branded wholesale 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.

Safe-Harbor Statement
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.

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