Valero Energy Beats Q2 Earnings on Strong Refining Margins - Analyst Blog

Valero Energy Corporation VLO posted adjusted second-quarter 2015 earnings of $2.66 per share surpassing the Zacks Consensus Estimate of $2.41. The bottom line also showed massive improvement from the year-ago adjusted income of $1.22 per share. The growth was bolstered by higher refining throughput margins in each of the company’s regions.

Valero Energy Corporation - Earnings Surprise | FindTheBest

Total quarterly revenue of $25,118 million beat the Zacks Consensus Estimate of $19,388 million but decreased 28% year over year.

Throughput Volumes

During the quarter, refining throughput volumes were 2.8 million barrels per day (bbls/d), 87,000 bbls/d higher than the year-earlier level. This was primarily due to less maintenance activity during the quarter.

By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 42%, 17% and 16%, respectively. The remaining volumes came from residuals, other feedstock as well as blendstocks and others.

The Gulf Coast accounted for about 57% of the total volume, while the Mid-Continent, North Atlantic and West Coast regions accounted for 16%, 17% and 10%, respectively.

Throughput Margins

Company-wide throughput margins increased to $13.71 per barrel from the year-ago level of $9.84 per barrel. The increase was backed by strong gasoline and other product margins, in addition to lower natural gas costs.

Average throughput margin realized was $12.62 per barrel in the U.S. Gulf Coast (up from $10.03 per barrel in the year-earlier period), $15.27 per barrel in the U.S. Mid-Continent (up from $12.07), $13.02 per barrel in the North Atlantic (up from $7.78) and $18.63 per barrel in the U.S. West Coast (up from $8.66).

Total operating cost per barrel was $5.25 during the quarter, down 4.2% from the prior-year figure of $5.48. Refining operating expenses per barrel were $3.66 as against $3.90 in the year-ago quarter. However, unit depreciation and amortization expenses increased marginally year over year to $1.59 per barrel from $1.58.

Capital Expenditure & Balance Sheet

Second-quarter capital expenditure totaled $530 million, which included $160 million for turnarounds and catalyst expenditures.

At the end of the quarter under review, the company had cash and temporary cash equivalents of $5.8 billion. Valero also returned $203 million to shareholders through dividends and repurchased 11.3 million shares worth $667 million.

Valero expects its total capital spending projection for 2015 at around $2.65 billion. About $1.5 billion of the above-mentioned capital spending is apportioned for stay-in-business capital and the other $1.15 billion is for growth investments. It, however, excludes investments for St. Charles methanol project that remains under evaluation.  

Zacks Rank

Valero Energy currently carries a Zacks Rank #3 (Hold).

Some better-ranked players from the oil refining and marketing space are CVR Refining, LP CVRR, Marathon Petroleum Corporation MPC and Tesoro Corporation TSO. While CVR Refining sports a Zacks Rank #1 (Strong Buy), Marathon Petroleum and Tesoro Corporation hold a Zacks Rank #2 (Buy).

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