10-QPeriod: Q1 FY2015

VALERO ENERGY CORP/TX Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 7, 2015For Securities:VLO

Summary

Valero Energy Corp. (VLO) reported a strong first quarter for 2015, with net income attributable to stockholders from continuing operations increasing to $964 million ($1.87 per share) from $829 million ($1.54 per share) in the prior year's first quarter. This improvement was primarily driven by a significant increase in refining segment operating income, which rose by $361 million due to improved margins on gasoline and other refined products, as well as lower natural gas costs. However, the ethanol segment experienced a substantial decline in operating income, down $231 million, attributed to lower ethanol and co-product prices relative to corn feedstock costs. The company's liquidity position strengthened, with cash and temporary cash investments increasing by $1.2 billion to $4.9 billion. This was supported by robust operating cash flow and new debt issuances totaling $1.25 billion in March 2015. Valero also continued its capital allocation strategy, investing in capital expenditures and returning capital to shareholders through dividends and share repurchases. Management anticipates continued market volatility but expects slight improvements in refining margins, particularly for gasoline, in the second quarter.

Financial Highlights

47 data points
Beta

Net Income

$964.00M

EPS (Diluted)

$1.87

Total Assets

$45.74B

Cash & Equivalents

$4.87B

Free Cash Flow

$975.00M

Financial Statements
Beta
Operating Expenses$19.84B
Operating Income$1.50B
Interest Expense$101.00M
Net Income$964.00M
EPS (Basic)$1.87
EPS (Diluted)$1.87
Shares Outstanding (Basic)513.00M
Shares Outstanding (Diluted)516.00M

Key Highlights

  • 1Net income attributable to Valero stockholders increased by 16% to $964 million in Q1 2015 from $828 million in Q1 2014.
  • 2Earnings per diluted share from continuing operations rose to $1.87 in Q1 2015, up from $1.54 in Q1 2014.
  • 3Refining segment operating income saw a significant increase of $361 million, primarily driven by higher gasoline and other product margins, as well as lower natural gas costs.
  • 4Ethanol segment operating income decreased sharply by $231 million due to lower ethanol and co-product prices impacting margins.
  • 5Cash and temporary cash investments significantly increased by $1.2 billion to $4.87 billion as of March 31, 2015.
  • 6The company issued $1.25 billion in new senior notes in March 2015 to bolster liquidity and manage debt.
  • 7Valero continued to return capital to shareholders, paying $206 million in dividends and repurchasing $325 million of its stock during the quarter.

Frequently Asked Questions

The primary driver of Valero's improved financial performance was a substantial increase in the refining segment's operating income. This was fueled by higher margins on gasoline and other refined products, along with a decrease in natural gas costs, which offset unfavorable crude oil differentials and outweighed the significant decline in the ethanol segment's profitability.

Valero strengthened its liquidity position significantly, with cash and temporary cash investments rising by $1.2 billion to $4.87 billion. This was supported by strong operating cash flows and the successful issuance of $1.25 billion in new senior notes in March 2015. The company also continued its strategy of returning capital to shareholders through dividends and share repurchases.

Valero anticipates continued volatility in energy markets. Management expects refining margins, particularly for gasoline, to improve slightly in the second quarter, while ethanol margins are expected to remain depressed due to low gasoline prices. A potential decline in crude oil and refined product prices could negatively impact inventory carrying values. The company also highlighted risks related to regulatory changes, environmental matters, and operational disruptions.

In March 2015, Valero sold its Houston and St. Charles Terminal Services Business to its consolidated subsidiary, Valero Energy Partners LP (VLP), for $571 million in cash and VLP units. This transaction is part of Valero's strategy to use VLP to own, operate, and acquire logistics assets, contributing to its financial flexibility while maintaining control through consolidation.