10-QPeriod: Q2 FY2018

VALERO ENERGY CORP/TX Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 6, 2018For Securities:VLO

Summary

Valero Energy Corporation (VLO) reported strong financial performance for the second quarter and first six months of 2018, demonstrating significant year-over-year growth in net income and operating income. This improvement was primarily driven by a robust refining segment, which benefited from higher distillate margins and favorable crude oil discounts. The ethanol and VLP segments also contributed positively, albeit to a lesser extent. Key financial highlights include a substantial increase in revenues and net income attributable to Valero stockholders, supported by effective cost management and favorable market conditions in the refining sector. The company also made strategic investments, notably the acquisition in Peru, which is expected to broaden its geographic reach. Despite certain headwinds such as lower gasoline margins and increased feedstock costs, Valero's diversified business model and strong operational execution position it well for continued performance.

Financial Highlights

49 data points
Beta

Revenue

$31.02B

4.9% Gross Margin

Net Income

$845.00M

2.7% Net Margin

EPS (Diluted)

$1.96

Total Assets

$50.68B

Cash & Equivalents

$4.45B

Free Cash Flow

$1.68B

Financial Statements
Beta
Revenue$31.02B
Cost of Revenue$29.48B
Gross Profit$1.53B
Operating Income$1.25B
Interest Expense$124.00M
Net Income$845.00M
EPS (Basic)$1.96
EPS (Diluted)$1.96
Shares Outstanding (Basic)429.00M
Shares Outstanding (Diluted)431.00M

Key Highlights

  • 1Net income attributable to Valero stockholders increased significantly to $845 million in Q2 2018, up from $548 million in Q2 2017.
  • 2Adjusted operating income rose by $470 million year-over-year in Q2 2018, primarily driven by the refining segment's improved margins and crude oil discounts.
  • 3The refining segment saw a substantial increase in operating income, largely due to strong distillate margins and wider discounts on certain crude oils.
  • 4Valero completed the acquisition of Pure Biofuels del Peru S.A.C. for $471 million, expanding its geographic footprint in the refined petroleum products market.
  • 5The company repurchased approximately $1.97 billion in common stock during Q2 2018 under its share repurchase programs.
  • 6Effective January 1, 2018, Valero adopted new accounting standards (ASC Topic 606 and ASU No. 2018-02) with no material impact on its financial statements.
  • 7Total assets grew to $50.68 billion as of June 30, 2018, up from $50.16 billion at the end of 2017, reflecting increased property, plant, and equipment and strategic acquisitions.

Frequently Asked Questions

Valero's increased profitability was primarily driven by the strong performance of its refining segment. This was fueled by improved distillate margins across all regions and wider discounts on certain crude oils, which more than offset lower gasoline margins and increased feedstock costs. The ethanol and VLP segments also contributed positively to the overall financial results.

The Peru Acquisition, completed in May 2018 for $471 million, added refined petroleum product marketing and logistics assets in Peru. This strategic move is expected to broaden Valero's geographic diversity. Financially, it contributed to an increase in total assets and has been included in the refining segment's results since the acquisition date. The acquisition also resulted in the recognition of significant goodwill and intangible assets.

Valero expects refined product margins to remain near current levels, supported by strong domestic and export demand. However, medium and heavy sour crude oil discounts are anticipated to be weaker than their five-year averages due to suppressed market supplies. Sweet crude oil discounts are expected to remain relatively stable, driven by strong export demand and increased Permian Basin supplies reaching the U.S. Gulf Coast.

Valero adopted new accounting standards, including ASC Topic 606 (Revenue from Contracts with Customers) and ASU No. 2018-02 (Income Statement—Reporting Comprehensive Income), effective January 1, 2018. The adoption of these standards did not have a material impact on the company's financial position or results of operations for the periods presented. The adoption of ASU No. 2018-02 did, however, result in a reclassification of $91 million of income tax benefits from accumulated other comprehensive loss to retained earnings.