Valero Earnings Up, Continues Major Capital Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Valero Energy Corporation (NYSE:VLO) (San Antonio, Texas) has allocated $2.7 billion for capital investments in 2017, including turnarounds, catalyst and joint venture investments, according to company executives. "This consists of approximately $1.6 billion for sustaining and $1.1 billion for growth," said John Locke, Valero's vice president for investor relations, in the company's fourth-quarter earnings conference call on Tuesday. The company had a capital program of $2.6 billion in 2016. Industrial Info is tracking $2.13 billion in projects involving Valero.

"In the fourth quarter, we invested over $600 million to sustain and grow our business," said Valero chief executive officer Joe Gorder. "Construction continued on our $450 million Diamond Pipeline project, which we believe is on track for completion at the end of this year." Valero is partnering with Plains All American Pipeline LP (NYSE:PAA) (Houston, Texas) in the construction of the Diamond crude oil pipeline, which will carry domestic, sweet crude from Cushing, Oklahoma, to Valero's refinery in Memphis, Tennessee. Construction on the project began early in the fourth quarter of last year. The pipeline has a length of approximately 424 miles and will carry about 200,000 barrels per day (BBL/d) of crude oil. For more information, see Industrial Info's project reports on the Oklahoma, Arkansas and Tennessee segments of the pipeline.

"We continue to work on our $300 million Houston alkylation unit, which we expect to be mechanically complete in the first half of 2019," said Gorder. "We also have additional growth investment opportunities under development around octane enhancement, cogeneration and feedstock flexibility." Construction on the 13,000 BBL/d alkylation unit at the company's refinery in Houston, Texas, began this quarter. The unit will convert natural gas liquids into alkylates to produce a higher-value gasoline blendstock. Burns & McDonnell Incorporated (Kansas City, Missouri) is acting as engineering and construction firm on the project. For more information, see Industrial Info's project report.

The company reported fourth-quarter 2016 net income of $367 million, compared to $298 million in the fourth quarter of 2015.

When asked about the effect that TransCanada Corporation's (NYSE:TRP) (Calgary, Alberta) recently reinvigorated Keystone XL crude oil pipeline could have on the company, Gary Simmons, senior vice president for supply, international operations and systems optimization, said, "We're working with TransCanada as they try to better understand the executive order and drum up customer support. Our belief is that the direct connection from western Canadian production to the U.S. Gulf Coast is a good thing because we have the most efficient capacity to really process those growing areas of production. Our intent would be to process those barrels in our system, not to export the barrels." For more on recent developments in the Keystone XL Pipeline, see January 31, 2017, article - Trump Orders Benefit KXL, DAPL and Other 'High Priority' Infrastructure Projects.

The company's refining segment reported $715 million of operating income for fourth-quarter 2016, compared to $876 million for fourth-quarter 2015. In a press release accompanying the earnings, the company said the decline in operating income "was due primarily to narrower discounts for most sweet and sour crude oils relative to the Brent benchmark and weaker gasoline margins in some regions." The company's refining throughput volumes averaged 2.9 million BBL/d, which was in line with the fourth quarter of 2015. Valero's refineries operated at 95% capacity utilization through the fourth quarter, despite major turnarounds at the company's refineries in Port Arthur, Texas, and Ardmore, Oklahoma, which began in the third quarter and were completed in the fourth quarter.

Among the other Valero projects being tracked by Industrial Info are the $150 million hydrotreater unit upgrades at the company's Houston refinery. The project involves enhancing two existing 25,000-BBL/d gasoline hydrotreater units by installing reactors to reduce octane loss and reduce sulfur content from 30 parts per million (ppm) to 10 ppm to meet Tier 3 gasoline regulations. The project is planned to kick off this quarter and be completed early in the second quarter. For more information, see Industrial Info's project report.

In the slightly more distant future, the company is considering installing a methanol unit at its refinery in Norco, Louisiana. The new methanol unit would produce up to 1.6 million tons per year of methanol from shale gas. The project has an estimated total investment value of $700 million and could begin construction early next year, taking about two years to complete. For more information, see Industrial Info's project report.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.