What were the main drivers of Valero's improved financial performance in the second quarter of 2006?

The primary drivers were significantly higher refined product prices, increased throughput volumes due to the successful integration of the Premcor acquisition, and wider sour crude oil discounts. These factors led to a substantial increase in the refining segment's operating income and overall profitability.

How did the Premcor acquisition impact Valero's results?

The Premcor acquisition, completed in September 2005, significantly contributed to increased throughput volumes. In the second quarter of 2006, the acquired refineries generated approximately 831,000 barrels per day of throughput, boosting operating income and overall revenues.

What is Valero's outlook for the remainder of 2006?

Valero anticipates continued favorable industry fundamentals, including strong refined product margins and wide sour crude oil discounts. The company expects tight supply/demand balances for refined products due to slower global refining capacity growth, stringent specifications, and continued demand growth.

What is Valero's capital investment strategy?

For 2006, Valero expected to incur approximately $3.5 billion in capital investments, including $3.0 billion for capital expenditures (with a significant portion for environmental projects) and $540 million for deferred turnaround and catalyst costs. The company also continued its share repurchase program.

VLO 10-Q Quarterly Report Q2 FY2006 — Revenue, Net Income, EPS

Summary

Valero Energy Corp. (VLO) reported strong financial performance for the second quarter and first six months of 2006, driven by significantly higher refined product prices and increased throughput volumes, largely due to the integration of the Premcor acquisition. Operating revenues for the second quarter of 2006 more than doubled compared to the prior year, reaching $26.8 billion, while net income applicable to common stock surged to $1.9 billion ($2.98 per diluted share) from $843 million ($1.53 per diluted share) in the same period of 2005. The refining segment was the primary contributor to this growth, with operating income more than doubling year-over-year, benefiting from wider sour crude oil discounts and robust gasoline and distillate margins. For the first six months of 2006, operating revenues increased to $47.7 billion, and net income applicable to common stock reached $2.7 billion ($4.29 per diluted share), a significant increase from $1.4 billion ($2.49 per diluted share) in the first half of 2005. The company's outlook remains positive, with expectations of continued favorable industry fundamentals, including tight supply/demand balances for refined products and sustained wide sour crude oil discounts. Valero also continued its share repurchase program and managed its capital expenditures, with significant investments in environmental projects.

Key Highlights

1Net income applicable to common stock for Q2 2006 was $1.9 billion, a significant increase from $843 million in Q2 2005.
2Diluted earnings per share for Q2 2006 were $2.98, up from $1.53 in Q2 2005.
3Refining segment operating income more than doubled year-over-year, driven by increased throughput volumes and higher margins.
4The integration of the Premcor acquisition continued to positively impact results, contributing significant throughput volumes.
5Cash flows from operating activities more than doubled in the first six months of 2006 compared to the same period in 2005, reaching $3.8 billion.
6Valero repurchased approximately 20.4 million shares of its common stock for $1.2 billion in the first six months of 2006.
7The company expects continued favorable industry fundamentals for the remainder of 2006.

VALERO ENERGY CORP/TX Quarterly Report for Q2 Ended Jun 30, 2006

Summary

Key Highlights

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