Market Overview

Valero Energy Reports Second Quarter 2019 Results

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  • Reported net income attributable to Valero stockholders of $612 million, or $1.47 per share, and adjusted net income attributable to Valero stockholders of $629 million, or $1.51 per share.
  • Invested $740 million of capital and successfully completed the Houston alkylation project.
  • Returned $588 million in cash to stockholders through dividends and stock buybacks.

SAN ANTONIO, July 25, 2019 (GLOBE NEWSWIRE) -- Valero Energy Corporation (NYSE:VLO, "Valero")) today reported net income attributable to Valero stockholders of $612 million, or $1.47 per share, for the second quarter of 2019 compared to $845 million, or $1.96 per share, for the second quarter of 2018.  Excluding adjustments shown in the accompanying earnings release tables, second quarter 2019 adjusted net income attributable to Valero stockholders was $629 million, or $1.51 per share, compared to second quarter 2018 adjusted net income attributable to Valero stockholders of $928 million, or $2.15 per share.

"We had solid operating performance while also completing major turnarounds at our Memphis, Houston and Benicia refineries in the second quarter," said Joe Gorder, Valero Chairman, President and Chief Executive Officer. "In addition, we successfully commissioned the new alkylation unit at the Houston refinery to improve our margin capture going forward."

Refining
The refining segment reported $1.0 billion of operating income for the second quarter of 2019 compared to $1.4 billion for the second quarter of 2018.  The decrease was primarily driven by narrower discounts for medium and heavy sour crude oils relative to Brent crude oil.

"We saw a strong rebound in gasoline cracks in all regions in the second quarter," Gorder said. "We continue to optimize our system with domestic, Canadian and Latin American crudes, and we set a new record of over 190,000 barrels per day of Canadian heavy crude oil processed during the quarter."

Refinery throughput capacity utilization was 94 percent, with throughput volumes averaging 3.0 million barrels per day in the second quarter of 2019, which was 70,000 barrels per day higher than the second quarter of 2018.  The company exported a total of 344,000 barrels per day of gasoline and distillate during the second quarter of 2019. 

Ethanol
The ethanol segment reported $7 million of operating income for the second quarter of 2019 compared to $43 million for the second quarter of 2018.  The decrease in operating income was attributed primarily to higher corn prices.  Ethanol production volumes averaged 4.5 million gallons per day in the second quarter of 2019, an increase of 531,000 gallons per day versus the second quarter of 2018, which was largely due to added production from the three ethanol plants acquired in November 2018. 

Renewable Diesel
The renewable diesel segment reported $77 million of operating income for the second quarter of 2019 compared to $30 million for the second quarter of 2018.  Renewable diesel sales volumes averaged 769,000 gallons per day in the second quarter of 2019, an increase of 387,000 gallons per day versus the second quarter of 2018. The increases in operating income and sales volumes were attributed primarily to the expansion of the Diamond Green Diesel plant in the third quarter of 2018.

Corporate and Other
General and administrative expenses were $199 million in the second quarter of 2019 compared to $248 million in the second quarter of 2018.  The decrease was mainly due to environmental reserve adjustments recorded in the second quarter of 2018.  The effective tax rate for the second quarter of 2019 was 20 percent, compared to 22 percent for the second quarter of 2018. 

Investing and Financing Activities
Capital investments totaled $740 million in the second quarter of 2019, of which $514 million was for sustaining the business, including costs for turnarounds, catalysts and regulatory compliance.  

Valero returned $588 million to stockholders in the second quarter of 2019, of which $376 million was paid as dividends and $212 million was for the purchase of approximately 2.6 million shares of common stock, resulting in a year-to-date return of $1.0 billion to stockholders and a total payout ratio of 50 percent of adjusted net cash provided by operating activities. 

Net cash provided by operating activities was $1.5 billion in the second quarter of 2019.  Included in this amount is a $283 million favorable impact from working capital. Excluding the change in working capital, adjusted net cash provided by operating activities was $1.2 billion. 

Valero continues to target a total payout ratio between 40 and 50 percent of adjusted net cash provided by operating activities for 2019.  Valero defines total payout ratio as the sum of dividends and stock buybacks divided by net cash provided by operating activities adjusted for changes in working capital. 

Liquidity and Financial Position
Valero ended the second quarter of 2019 with $9.5 billion of total debt and $2.0 billion of cash and cash equivalents.  The debt to capital ratio, net of $2.0 billion in cash, was 26 percent. 

Strategic Update
The Houston alkylation unit was successfully commissioned in the second quarter of 2019.  This project upgrades isobutane and refinery olefins into high value alkylate product.  The Central Texas pipelines and terminals project is on target to be fully operational in the third quarter.  Other projects, including the Pasadena terminal, St. Charles alkylation unit, and Pembroke cogeneration unit, remain on track to be complete in 2020.  The Diamond Green Diesel expansion and Port Arthur Coker are expected to be complete in late 2021 and 2022, respectively.

Valero continues to expect to invest approximately $2.5 billion of capital in both 2019 and 2020, of which approximately 60 percent is for sustaining the business and approximately 40 percent is for growth projects.    

Conference Call
Valero's senior management will hold a conference call at 10 a.m. ET today to discuss this earnings release and to provide an update on operations and strategy.

About Valero
Valero Energy Corporation, through its subsidiaries (collectively, "Valero"), is an international manufacturer and marketer of transportation fuels and petrochemical products. Valero is a Fortune 50 company based in San Antonio, Texas, and it operates 15 petroleum refineries with a combined throughput capacity of approximately 3.1 million barrels per day and 14 ethanol plants with a combined production capacity of 1.73 billion gallons per year. The petroleum refineries are located in the United States (U.S.), Canada and the United Kingdom (U.K.), and the ethanol plants are located in the Mid-Continent region of the U.S. Valero also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America's largest biomass-based diesel plant. Valero sells its products in the wholesale rack or bulk markets in the U.S., Canada, the U.K., Ireland and Latin America. Approximately 7,000 outlets carry Valero's brand names. Please visit www.valero.com for more information.

Valero Contacts
Investors:
Homer Bhullar, Vice President – Investor Relations, 210-345-1982
Gautam Srivastava, Manager – Investor Relations, 210-345-3992
Tom Mahrer, Manager – Investor Relations, 210-345-1953

Media:
Lillian Riojas, Executive Director – Media Relations and Communications, 210-345-5002

Safe-Harbor Statement
Statements contained in this release that state the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.  The words "believe," "expect," "should," "estimates," "intend," "target," "will," "plans," and other similar expressions identify forward-looking statements.  It is important to note that actual results could differ materially from those projected in such forward-looking statements based on numerous factors, including those outside of the company's control, such as delays in construction timing and other factors.  For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero's annual reports on Form 10-K, quarterly reports on Form 10-Q, and other reports filed with the Securities and Exchange Commission and on Valero's website at www.valero.com

Use of Non-GAAP Financial Information
This earnings release and the accompanying earnings release tables include references to financial measures that are not defined under U.S. generally accepted accounting principles (GAAP).  These non-GAAP measures include adjusted net income attributable to Valero stockholders, adjusted earnings per common share – assuming dilution, refining margin, ethanol margin, renewable diesel margin, adjusted refining operating income, adjusted ethanol operating income, adjusted renewable diesel operating income, and adjusted net cash provided by operating activities.  These non-GAAP financial measures have been included to help facilitate the comparison of operating results between periods.  See the accompanying earnings release tables for a reconciliation of non-GAAP measures to their most directly comparable U.S. GAAP measures.  Note (f) to the earnings release tables provides reasons for the use of these non-GAAP financial measures.

VALERO ENERGY CORPORATION
EARNINGS RELEASE TABLES
FINANCIAL HIGHLIGHTS
(millions of dollars, except per share amounts)
(unaudited)
  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2019   2018   2019   2018
Statement of income data              
Revenues $ 28,933     $ 31,015     $ 53,196     $ 57,454  
Cost of sales:              
Cost of materials and other (a) 26,083     27,860     48,061     51,616  
Operating expenses (excluding depreciation and amortization expense reflected below) 1,175     1,110     2,390     2,246  
Depreciation and amortization expense 552     510     1,089     995  
Total cost of sales 27,810     29,480     51,540     54,857  
Other operating expenses (b) 2     21     4     31  
General and administrative expenses (excluding depreciation and amortization expense reflected below) (c) 199     248     408     486  
Depreciation and amortization expense 14     13     28     26  
Operating income 908     1,253     1,216     2,054  
Other income (expense), net (d) 12     (5 )   34     46  
Interest and debt expense, net of capitalized interest (112 )   (124 )   (224 )   (245 )
Income before income tax expense 808     1,124     1,026     1,855  
Income tax expense 160     249     211     398  
Net income 648     875     815     1,457  
Less: Net income attributable to noncontrolling interests (a) 36     30     62     143  
Net income attributable to Valero Energy Corporation stockholders $ 612     $ 845     $ 753     $ 1,314  
               
Earnings per common share $ 1.47     $ 1.96     $ 1.80     $ 3.05  
Weighted-average common shares outstanding (in millions) 415     429     416     430  
               
Earnings per common share – assuming dilution $ 1.47     $ 1.96     $ 1.80     $ 3.04  
Weighted-average common shares outstanding – assuming dilution (in millions) 417     431     417     432  

See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION
EARNINGS RELEASE TABLES
FINANCIAL HIGHLIGHTS BY SEGMENT (e)
(millions of dollars)
(unaudited)
 
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