Valero Boasts Big Profits in Second-Quarter 2010 as Refining, Retail Margins Improve

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Researched by Industrial Info Resources (Sugar Land, Texas)--Leading energy and gas company Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) showed strong overall results for the second quarter of 2010. The company reported large gains in operating income in all major segments, including $109 million in the U.S. and Canadian retail segments, which is a second-quarter record for Valero. Total net income for the quarter was reported to be $583 million, compared to a loss of $254 million in the same period last year.

Total revenues stood at $21.78 billion, a 25.32% increase from second-quarter 2009. Valero spent $223 million during the quarter to pay down debt, but earned $220 million from selling assets in Delaware City, Delaware.

Valero officials attributed the gains to higher margins for diesel and secondary products, such as petrochemicals, asphalt and lube oils. The company also cites continued improvement in ethanol production, particularly in acquiring production plants at discounts.

"We had a really good second quarter that demonstrated the earnings power of our assets, following the strategic actions and cost-reduction efforts we've taken over the last 12 months," said Chief Financial Officer Mike Ciskowski in a conference call.

The company saw strong improvements in its four major business segments, including a dramatic recovery in refining:

• Refining income stood at $921 million, compared to a loss of $143 million in the second quarter of 2009. Each of the four major regions saw gains:
• Gulf Coast operations reported income of $650 million, compared to an $81 million loss in the same period last year.
• Mid-Continent operations reported income of $151 million, compared to a gain of only $18 million in second-quarter 2009.
• Northeast operations reported income of $24 million, compared to a $42 million loss in the same period last year.
• West Coast operations reported income of $98 million, a 24.05% increase from second-quarter 2009.
• Retail operating income was reported to be $109 million, a second-quarter record for Valero and a 67.69% increase from the same period last year:
• U.S. retail operating income stood at $76 million, compared to a gain of only $36 million in second-quarter 2009.
• Canadian retail operating income stood at $33 million, a 13.79% increase.
• Ethanol operating income was reported to be $35 million, a 59.09% increase.

Valero Chairman and Chief Executive Officer Bill Klesse said the company is "cautiously optimistic" that the economic recovery will continue and drive growth in the demand for refined products. The company already has achieved $90 million in cost savings, out of a $100 million goal set early this year, and is expected to resume operations at an Aruba refinery by November after a maintenance turnaround. For more information, see July 26, 2010, article - Valero Expects Normal Operations at San Nicolas Refinery by Mid-November 2010.

"Going forward, we will remain focused on running our assets safe and reliably; maintaining our financial strength and investment-grade credit rating; reducing our costs; and improving our portfolio of assets," Ciskowski said in the conference call.

Industrial Info is tracking 124 active Valero projects in North America worth a total of more than $4 billion, including the $1 billion hydrocracker addition to the Saint Charles Refinery in Norco, Louisiana. The project involves the construction of a high-pressure, 50,000-barrel-per-day hydrocracker to process sour vacuum gas oil and increase distillate production. For more information, visit Industrial Info's North American Project Database.

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