10-QPeriod: Q1 FY2012

VALERO ENERGY CORP/TX Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 8, 2012For Securities:VLO

Summary

Valero Energy Corporation (VLO) reported a net loss attributable to stockholders of $(432) million, or $(0.78) per share, for the first quarter of 2012. This contrasts with a net income of $98 million, or $0.17 per share, in the same period of the prior year. The significant loss in the current quarter was heavily influenced by an asset impairment charge of $611 million related to the decision to suspend operations at the Aruba Refinery. Excluding this one-time impairment charge, the company's adjusted net income from continuing operations was $173 million, or $0.31 per share, a decrease from $456 million, or $0.80 per share, in Q1 2011. This decline was primarily driven by a substantial drop in operating income from the refining segment, which was down $395 million year-over-year, largely due to narrower sour crude oil differentials and increased operating expenses, partially offset by improved gasoline and distillate margins in certain regions. The company is navigating a volatile energy market with expectations of continued margin pressure due to refining capacity rationalization and potential shifts in crude oil pricing.

Financial Highlights

45 data points
Beta

Net Income

-$432.00M

EPS (Diluted)

$-0.78

Total Assets

$42.63B

Cash & Equivalents

$1.56B

Free Cash Flow

$1.54B

Financial Statements
Beta
Operating Expenses$35.41B
Operating Income-$244.00M
Interest Expense$99.00M
Net Income-$432.00M
EPS (Basic)$-0.78
EPS (Diluted)$-0.78
Shares Outstanding (Basic)551.00M
Shares Outstanding (Diluted)551.00M

Key Highlights

  • 1Reported a net loss of $(432) million for Q1 2012, compared to a net income of $98 million in Q1 2011.
  • 2A significant asset impairment loss of $611 million was recognized, primarily related to the Aruba Refinery, impacting the net loss.
  • 3Operating income for the refining segment declined by $395 million year-over-year, driven by lower sour crude oil differentials and higher operating expenses.
  • 4The company benefited from a wider discount of WTI-type crude oil compared to Brent and LLS, positively impacting gasoline and distillate margins in certain regions.
  • 5Net cash provided by operating activities was $1.7 billion, down from $2.1 billion in the prior year's comparable period.
  • 6Capital expenditures for the quarter were $726 million, with a full-year projection of approximately $3.0 billion.
  • 7The company declared a quarterly cash dividend of $0.15 per common share.

Frequently Asked Questions

The primary driver of the net loss was a substantial asset impairment charge of $611 million. This charge was recognized due to the company's decision to suspend operations at its Aruba Refinery and the potential sale of this asset.

The refining segment experienced a significant decrease in operating income, falling to a loss of $(119) million in Q1 2012 from an income of $276 million in Q1 2011. This was largely due to less favorable sour crude oil differentials and increased operating expenses, though certain product margins saw improvements.

Valero expects energy markets and margins to remain volatile in the near to mid-term. Factors contributing to this outlook include the potential narrowing of WTI crude oil discounts as pipeline projects are completed, continued refining capacity rationalization, and potential refinery closures, particularly in Europe and the U.S. East Coast.

Valero has a $3 billion revolving credit facility with a debt-to-capitalization ratio well within its covenants. The company generated $1.7 billion in operating cash flow in Q1 2012 and is undertaking significant capital expenditures. They also utilize an accounts receivable sales facility for liquidity. Management believes they have sufficient funds from operations and credit facilities to meet ongoing requirements.