Just got off the Credit Suisse energy conference broadcast. Kleese is still very bullish on Valero. He says even with the run up in the stock we are "still" a buy.
1)Retail spin-off will unlock $1.5 to $2 Billion of unrealized value or $3 to $5 per share. Still scheduled for 2nd quarter.
2)Kleese said he is "very optimistic' based on the fundamentals for a good year in 2013.
3)Says there is more refinery additions coming on world wide than there is increase in demand but Valero can compete in this environment. Says one new refinery in Brazil is cosing $20 Billion. (That is about the entire market cap of Valero). Other South American and Central American refiners are struggling. Says China's increase in refining capacity equals their oil demand growth so they are a wash.
4)He said it is "utterly rediculous" that the Keystone XL North leg has no been approved. South leg of Keystone will be completed by end of year.
5)Valero's cash operating expenses to refine oil is 9 cents a gallon of $3.60 a barrel.
6)80% of Valero's products are gasoline, diesel, and jet fuel
7)2014 cap ex will be similar to 2013 at $2.5 Billion
8)Diesel demand is growing world wide at twice the rate of gasoline demand. Valero will be getting close to a 1:1 production ratio of gasoline and diesel once there second hydrocracker is finished.
9)Crack spreads have fallen in 2013 from 4th quarter but Kleese says it is early on and they are making better money on propylene (BTX).
10)Kleese mentioned the order that they made of the purchase the rail cars recently and said "can you believe a guy like me is buying rail cars?!" Obviously he has been resisting this and finally gave in.
11)Every dollar lower in natural gas prices equals an additonal savings to Valero of 25 cents a barrel in either cash savings or cost of goods sold which is huge when your cash operating expenes is only $3.60 a barrel. This makes Valero competitive to ship products to many places around the world.
12)Says the LLS will eventually go to a bigger discount to Brent and the bottleneck of US crude will shift from Cushing to the Gulf Coast once the logistics projects of getting more oil to the Gulf get completed.
He seemed very positive and bullish on Valero.
Good luck and holding my shares for more appreciation.
Posted on February 6, 2013 at 6:53 pm by Vicki Vaughan in Refining
Valero Energy Corp. has advantages over its competitors because of the San Antonio refiner’s increasing production of high-margin distillates and its low operating costs, CEO Bill Klesse said Wednesday at a conference.
Klesse, who provided a company update at the Credit Suisse Energy Summit in Colorado, said Valero is taking advantage of growing U.S. shale oil production, including from the Eagle Ford Shale and Canada.
The crude from shale is cheaper to acquire than foreign crude, and Valero has increased the amount of domestic light crude oils as more crude has become available.
As Klesse reminded analysts during the company’s most recent earnings call on Jan. 29, Valero has stopped all imports of foreign light crude to its Gulf Coast and Memphis, Tenn., refineries.
Valero’s low operating costs — and the low cost of U.S. natural gas needed to run its plants — means it can ship products for about $2 dollars a barrel less than foreign competitors, Klesse said. That advantage outweighs the cost of shipping products, he said.
Cheap natural gas is “why the U.S. can have a manufacturing resurgence,” he said. “It’s very unique to our country.”
Klesse noted that demand for distillate fuels — such as diesel and jet fuel — is growing about two times faster than demand for gasoline throughout the world. “Europe is systemically short” of distillate, he said.
“Distillates are where we want to be. Valero is a little different from the other guys because we have built these projects,” Klesse added, referring to two hydrocrackers — the biggest and most expensive projects in the company’s history — at its Port Arthur refinery and its St. Charles plant in Louisiana.
The $1.6 billion Port Arthur hydrocracker was completed in December, and Valero expects its St. Charles hydrocracker to begin operating in the second quarter.
Klesse said he expects the company’s ratio of gasoline to distillates will become 1-to-1 soon, which would be “very unique for a U.S. refiner.”
When the St. Charles hydrocracker begins operations, the company will be close to producing as much diesel as gasoline, company spokesman Bill Day said.