10-QPeriod: Q2 FY2017

VALERO ENERGY CORP/TX Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 7, 2017For Securities:VLO

Summary

Valero Energy Corporation (VLO) reported its financial results for the quarter and six months ended June 30, 2017. For the second quarter of 2017, net income attributable to stockholders was $548 million ($1.23 per diluted share), a decrease from $814 million ($1.73 per diluted share) in the same period of 2016. This decline was primarily driven by lower operating income, which fell to $871 million from $1.23 billion year-over-year. The company experienced strong performance in its Refining segment, with increased margins and throughput volumes, contributing positively to overall results. However, challenges in the Ethanol segment, including lower product prices and higher operating costs, weighed on profitability. Valero continues to invest in growth strategies, including significant capital expenditures and joint venture investments, while also returning capital to shareholders through dividends and share repurchases.

Financial Highlights

50 data points
Beta

Revenue

$22.25B

4.7% Gross Margin

Net Income

$548.00M

2.5% Net Margin

EPS (Diluted)

$1.23

Total Assets

$45.97B

Cash & Equivalents

$5.21B

Free Cash Flow

$1.50B

Financial Statements
Beta
Revenue$22.25B
Cost of Revenue$21.20B
Gross Profit$1.05B
Operating Expenses$21.38B
Operating Income$860.00M
Interest Expense$119.00M
Net Income$548.00M
EPS (Basic)$1.23
EPS (Diluted)$1.23
Shares Outstanding (Basic)444.00M
Shares Outstanding (Diluted)446.00M

Key Highlights

  • 1Net income attributable to Valero stockholders for Q2 2017 was $548 million, down from $814 million in Q2 2016.
  • 2Diluted earnings per share for Q2 2017 were $1.23, compared to $1.73 in Q2 2016.
  • 3Total assets slightly decreased to $45.97 billion as of June 30, 2017, from $46.17 billion as of December 31, 2016.
  • 4Operating income for Q2 2017 was $871 million, a decrease from $1.23 billion in Q2 2016, primarily due to lower refining margins and higher operating expenses.
  • 5The Refining segment showed resilience with an increase in operating income of $57 million (adjusted), driven by higher margins and throughput volumes.
  • 6The Ethanol segment experienced a decrease in operating income of $18 million (adjusted) due to lower product prices and increased operating expenses.
  • 7Valero returned $627 million to shareholders through dividends and $660 million through share repurchases in the first six months of 2017.

Frequently Asked Questions

The decrease in net income was primarily driven by a lower operating income, which fell by $360 million year-over-year. While the Refining segment saw improved margins and throughput, this was offset by higher operating expenses, increased costs for biofuel credits, and a decline in discounts on sour crude oils. The Ethanol segment also contributed negatively due to lower prices and higher operating expenses.

The Refining segment's operating income increased by $57 million (adjusted) due to higher margins and throughput volumes. The Ethanol segment's operating income decreased by $18 million (adjusted) due to lower product prices and higher operating expenses. The VLP segment saw an increase in operating income of $19 million (adjusted) driven by incremental revenues from acquired businesses and assets.

Valero expects product margins to remain supported by strong domestic and export demand. However, medium and heavy sour crude oil discounts are anticipated to be narrower, while sweet crude oil discounts might widen. Ethanol margins are expected to remain weak due to high inventory levels.

For 2017, Valero expects to invest approximately $2.7 billion, including $1.6 billion for stay-in-business capital and $1.1 billion for growth strategies. A key growth investment is the 50% interest in the Diamond Pipeline, expected to be completed in December 2017.