Valero Energy Corporation (VLO) reported stellar third-quarter 2014 results with the fifth consecutive earnings beat. The performance benefited from a higher refining throughput margin and expanded volumes.
The company reported third-quarter earnings from continuing operations of $2.00 per share, beating the Zacks Consensus Estimate of $1.57. The bottom line also improved from the year-ago quarter level of 57 cents per share.
Total revenue in the quarter decreased from $36,137 million a year ago to $34,408 million. However, this came above the Zacks Consensus Estimate of $31,798 million.
Throughput Volumes
During the quarter, refining throughput volumes were approximately 2.8 million barrels per day, up from the year-earlier level by 42,000 barrels per day. The increase in volumes was driven primarily by less turnaround activity and higher throughput capacity utilization.
The increase in throughput capacity utilization was supported by strong product exports and increased availability of North American light crude oil on the U.S. Gulf Coast. Valero's refineries operated at 98% throughput capacity utilization in the reported quarter.
By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 48.2%, 18.6% and 18.9%, respectively. The remaining volumes came from residuals, other feedstock as well as blendstocks and others.
Throughput Margins
Company-wide throughput margins increased to $11.81 per barrel from the year-ago level of $7.76 per barrel.
Average throughput margin realized was $9.14 per barrel in the U.S. Gulf Coast (up from $4.60 per barrel in the year-earlier period), $16.24 per barrel in the U.S. Mid-Continent (up from $9.22), $10.02 per barrel in the North Atlantic (up from $7.86) and $9.14 per barrel in the U.S. West Coast (up from $4.60).
Total operating cost per barrel was $5.38 during the quarter, down from the year-earlier figure of $5.41. Refining operating expenses per barrel were $3.63 versus $3.69 in the year-ago quarter. Unit depreciation and amortization expenses decreased from $1.67 per barrel in the year-ago quarter to $1.57 per barrel.
Capital Expenditure & Balance Sheet
Valero ended the third quarter with $6.4 billion in total debt and $4.2 billion of cash and temporary cash investments, of which $231 million was held by Valero Energy Partners LP (VLP).
In the reported quarter, capital expenditure was $622 million. Valero bought 3 million shares of its common stock for $138 million and announced a common stock dividend of 27.5 cents per share for the fourth quarter of 2014.
The company completed the first drop-down sale to Valero Energy Partners LP in the quarter under review.
Zacks Rank
Valero Energy currently carries a Zacks Rank #3 (Hold). Better-ranked players in the industry include Murphy USA Inc (MUSA) and Cobalt International Energy Inc. (CIE), both of which sport a Zacks Rank #1 (Strong Buy).
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