01—Abstract
Summary
Summary of the 10-K filed February 24, 2012. Cited figures are marked; the original filing is the authoritative source.
Valero Energy Corporation (VLO) reported strong financial performance in 2011, driven primarily by its refining segment.
Net income attributable to stockholders more than doubled year-over-year, reaching $2.1 billiona, or $3.69 per share. This significant improvement was largely fueled by favorable crude oil differentials, particularly the discount on WTI-type crude oil compared to LLS and Brent crude oils, which benefited refineries in the U.S. Mid-Continent region. The company also made strategic acquisitions, adding two refineries (Pembroke and Meraux) to its portfolio, expanding its operational footprint.
The company's refining segment saw a substantial increase in operating income due to improved refining margins, especially in the Mid-Continent region. The ethanol segment also performed well with increased production volumes and improved operating margins.
The retail segment experienced modest growth in operating income, driven by higher fuel margins and volumes in Canadian operations. Valero continues to manage its operations with a focus on efficiency and strategic growth, while navigating the volatile energy markets.
02—Key points
Key Highlights
- Valero reported a significant increase in net income attributable to stockholders, reaching $2.1 billion ($3.69 per share) in 2011, up from $923 million ($1.62 per share) in 2010.
- The refining segment was the primary driver of this performance, with operating income nearly doubling to $3.5 billion, largely due to favorable crude oil price differentials (WTI vs. LLS/Brent) boosting Mid-Continent refinery margins.
- The company completed two strategic refinery acquisitions during 2011: the Pembroke Refinery (U.K.) in August for $1.7 billion and the Meraux Refinery (Louisiana) in October for $547 million.
- Ethanol segment operating income increased by 90% to $396 million, driven by improved margins and higher production volumes.
- Retail segment operating income saw a modest increase to $381 million, supported by stronger fuel margins and volumes in Canada and a favorable Canadian dollar.
- Valero's total throughput volumes averaged 2.4 million barrels per day in 2011, an increase from 2.1 million barrels per day in 2010.
- The company maintained a strong liquidity position, with $1.024 billion in cash and temporary cash investments as of December 31, 2011, and had $3.5 billion remaining under its common stock purchase programs.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 24, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Operating Expenses | $122.31B$80.36B | +52.2% |
| Operating Income | $3.68B$1.88B | +96.2% |
| Interest Expense | $401.00M$484.00M | −17.1% |
| Net Income | $2.09B$324.00M | +545.1% |
| EPS (Basic) | $3.69$0.57 | +547.4% |
| EPS (Diluted) | $3.68$0.57 | +545.6% |
| Shares Outstanding (Basic) | 563.00M563.00M | 0.0% |
| Shares Outstanding (Diluted) | 569.00M568.00M | +0.2% |
05—Questions
Frequently Asked Questions
What were the main drivers of Valero's improved financial performance in 2011?
The primary driver of Valero's significantly improved financial performance in 2011 was the strong performance of its refining segment. This was largely due to a favorable differential between the price of WTI-type crude oil and benchmark sweet crude oils like LLS and Brent. This discount allowed Valero's U.S. Mid-Continent refineries to process cheaper feedstock, leading to substantially higher refining margins and operating income for the segment.
Did Valero make any significant acquisitions in 2011?
Yes, Valero made two significant refinery acquisitions in 2011. In August, it acquired the Pembroke Refinery in the U.K. for approximately $1.7 billion. In October, it acquired the Meraux Refinery in Louisiana for $547 million. These acquisitions expanded Valero's refining capacity and geographic reach.
How did Valero's ethanol business perform in 2011?
Valero's ethanol segment showed strong performance in 2011, with operating income increasing to $396 million from $209 million in 2010. This growth was attributed to improved operating margins and an increase in production volumes, with the company's ethanol plants averaging 3.4 million gallons per day.
What are the key risks Valero highlighted in its 2011 report?
Valero highlighted several key risks, including the volatility of refining margins dependent on crude oil prices and market demand, the potential impact of economic turmoil and political unrest on energy consumption, and the risk of increased competition from new refinery capacity. They also noted the potential adverse effects of environmental regulations, including those related to greenhouse gas emissions, and risks associated with disruptions in crude oil supply or transportation.
06—Continue