U.S. refining company Valero Energy Corporation (VLO) has successfully commenced its new hydrocracker unit at the Valero St. Charles Refinery and is rapidly moving towards implementing planned rates.
The throughput at the new hydrocracker unit is rated at 60,000 barrels per day. A similar hydrocracker was set up by Valero at its Port Arthur refinery in Dec 2012.
The hydrocrackers were intended to take advantage of high crude oil and low natural gas prices. The unit was mainly designed to produce diesel to meet escalating demand in both domestic and export markets. The construction cost for each unit was about $1.6 billion.
Valero’s projects are aimed at increasing throughput capacity at each of its new hydrocrackers to 75,000 barrels per day. The expansion projects are anticipated to be complete in 2015, subject to necessary permissions.
Moreover, Valero is working on increasing the capacity of the existing hydrocracker at its Meraux refinery by 20,000 barrel per day, which is scheduled for completion by the end of 2014.
Valero remains optimistic on the ongoing economic growth projects. Valero already has several new projects, such as the Parkway Pipeline project with Kinder Morgan Energy Partners LP (KMP), with start-up scheduled in mid 2013, and the recently completed Montreal product pipeline. These projects are expected to drive significant earnings improvement in 2013. The company also replaced all imported light sweet crude oil used at its Gulf Coast and Memphis, Tennessee, refineries with cheaper North American crude oil during the fourth quarter of 2012.
Among all the independent refiners, Valero offers the most diversified refinery base with a capacity of about 3.0 million barrels per day in its 16 refineries located throughout the U.S., Canada and the Caribbean. More importantly, Valero is best positioned to profit from increased refining margins mainly on account of its strategic refinery structure that enables it to use cheaper oil for over one-half of its needs.
Valero carries a Zacks Rank #3 (Hold). Other stocks to consider include Zacks Ranked #1 (Strong Buy) Newpark Resources Inc (NR) and PetroQuest Energy Inc. (PQ).
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