Valero Energy Corporation (VLO) posted adjusted second quarter 2013 income of $0.90 per share, missing the Zacks Consensus Estimate of $0.94 by 4.3%.
The quarterly earnings compare unfavorably with the year-ago adjusted earnings of $1.50 per share. The decline was mainly due to lower refining throughput margins in each of the company’s regions and higher refining operating expenses.
Also during the reported quarter, the company spun off 80% stake of its retail arm – CST Brands Inc. (CST) – through a tax-advantaged distribution to shareholders, to unlock value.
Total revenue for the quarter decreased 1.8% year over year to $34,034.0 million from $34,662.0 million but beat the Zacks Consensus Estimate of $29,234 million.
Throughput Volumes
During the quarter, refining throughput volumes were approximately 2.61 million barrels per day, down from the year-earlier level of 2.66 million barrels a day. This was primarily due to major turnaround, maintenance and repair activity at refineries in Valero’s Quebec City, McKee, Meraux and Port Arthur refineries.
By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 34%, 18% and 19%, respectively. The remaining volumes came from residuals, other feedstock as well as blendstocks and others.
The Gulf Coast accounted for approximately 59% of the total volume. The Mid-Continent, North Atlantic and West Coast regions accounted for 16%, 14% and 11%, respectively.
Throughput Margins
Company-wide throughput margins decreased considerably to $9.26 per barrel from the year-ago level of $10.63 per barrel. The decrease was due to lower discounts for heavy sour and light crude oil.
Average throughput margin realized was $8.12 per barrel in the U.S. Gulf Coast (down from $9.50 per barrel in the year-earlier quarter), $14.20 per barrel in the U.S. Mid-Continent (down from $17.61), $7.18 per barrel in the North Atlantic (down from $8.01) and $10.81 per barrel in the U.S. West Coast (down from $10.95).
Total operating cost per barrel was $5.38 during the quarter, 7.8% higher than the year-earlier figure of $4.99. Refining operating expenses per barrel were $3.82 versus $3.59 in the year-ago quarter. Depreciation and amortization expenses increased 11.4% year over year to $1.56 per barrel.
Capital Expenditure & Balance Sheet
Second quarter capital expenditure totaled $796.0 million, including $162 million for turnarounds and catalyst expenditures. At the end of the quarter, the company had cash and temporary cash investments of $2.4 billion. Valero also rewarded shareholders $109 million through dividends.
Valero maintained its total capital spending for 2013 at around $2.85 billion, including spending for turnarounds and catalyst expenditures and the retail segment. For 2014, Valero expects capital expenditures in the range of $2.5 billion to $3.0 billion.
Zacks Rank
The stock retains a Zacks Rank #3 (Hold). However, there are certain Zacks Ranked #1 stocks – Gulfmark Offshore, Inc. (GLF) and Dril-Quip, Inc. (DRQ) – that appear more rewarding in the short term.
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