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Valero Energy Corp. Reports Operating Results (10-Q)

November 05, 2009 | About:
10qk

10qk

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Valero Energy Corp. (VLO) filed Quarterly Report for the period ended 2009-09-30.

Valero Energy Corporation owns and operates refineries in the United States and Canada with a combined throughput capacity of approximately two million BPD making it one of the nation's top refiners of petroleum products. Valero is also one of the nation's leading retail operators with retail outlets in the United States and Canada under various brand names including Diamond Shamrock Ultramar Valero Beacon and Total. Valero Energy Corp. has a market cap of $9.97 billion; its shares were traded at around $17.72 with a P/E ratio of 15.7 and P/S ratio of 0.1. The dividend yield of Valero Energy Corp. stocks is 3.4%. Valero Energy Corp. had an annual average earning growth of 35.9% over the past 10 years. GuruFocus rated Valero Energy Corp. the business predictability rank of 4.5-star.

Highlight of Business Operations:

In this overview, we describe some of the primary factors that we believe affected our results of operations in the third quarter and first nine months of 2009. We reported a net loss of $629 million, or $1.12 per share, for the third quarter of 2009, compared to net income of $1.2 billion, or $2.18 per share, for the third quarter of 2008. We reported a net loss of $574 million, or $1.08 per share, for the first nine months of 2009, compared to net income of $2.1 billion, or $4.02 per share, for the first nine months of 2008. The results of operations for the third quarter and first nine months of 2009 were unfavorably impacted by asset impairment losses of $417 million ($0.48 per share) and $575 million ($0.70 per share), respectively, which are discussed further below, as well as a $140 million ($0.25 per share and $0.26 per share, respectively, for the third quarter and first nine months of 2009) loss contingency accrual (including interest) recorded in the third quarter of 2009 related to our dispute of a turnover tax on export sales and other tax matters involving the Government of Aruba. The results of operations for the third quarter and first nine months of 2008 included a $0.32 per share benefit from the gain on the sale of our Krotz Springs Refinery. In addition, results of operations for the first nine months of 2008 included a pre-tax benefit of approximately $100 million, or $0.12 per share, resulting from a settlement of our business interruption insurance claims related to a 2007 fire at our McKee Refinery.

Due to the impact of the continuing economic slowdown on refining industry fundamentals, during the third quarter of 2009, we continued to assess our assets for potential impairment. This evaluation included an assessment of our operating assets as well as an evaluation of our capital projects classified as construction in progress. As a result of this analysis, we recorded asset impairment losses of $417 million and $575 million for the third quarter and first nine months of 2009, respectively. Of these amounts, approximately $340 million related to the write-off in the third quarter of 2009 of costs related to the gasification unit at our Delaware City Refinery. The remaining write-offs related to the permanent cancellation of various capital projects at various refineries.

In March 2009, we issued $750 million of 10-year notes and $250 million of 30-year notes. Proceeds from these notes were used to make $209 million of scheduled debt payments in April 2009, fund our acquisition of certain ethanol plants from VeraSun, and maintain our capital investment program.

In April and May of 2009, we acquired seven ethanol plants and a site under development from VeraSun for $477 million, plus $79 million primarily for inventory and certain other working capital. The new ethanol business reported $49 million and $71 million of operating income for the three and nine months ended September 30, 2009, respectively.

In June 2009, we sold in a public offering 46 million shares of our common stock at a price of $18.00 per share and received proceeds, net of underwriting discounts and commissions and other issuance costs, of $799 million.

Read the The complete ReportVLO is in the portfolios of Charles Brandes of Brandes Investment, Richard Pzena of Pzena Investment Management LLC, Michael Price of MFP Investors LLC, David Dreman of Dreman Value Management, Kenneth Fisher of Fisher Asset Management, LLC.

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