Exhibit 99.1
Valero Energy Corporation Reports Second Quarter Earnings
SAN ANTONIO, July 31, 2007 — Valero Energy Corporation (NYSE: VLO) today reported second quarter 2007 net income of $2.2 billion, or $3.89 per share, which compares to $1.9 billion, or $2.98 per share, in the second quarter of 2006. The company’s second quarter 2007 results represent the highest quarterly net income in the company’s history. For the six months ended June 30, 2007, net income was $3.4 billion, or $5.68 per share, compared to the company’s net income of $2.7 billion, or $4.29 per share, for the six months ended June 30, 2006. These results include the operations of the recently divested Lima, Ohio refinery, which are classified as discontinued operations in the accompanying financial tables.
“We are enjoying another outstanding year in 2007, as the company posted its best ever quarterly profits,” said Bill Klesse, Valero’s Chairman of the Board and Chief Executive Officer. “The environment for refining margins was terrific in the second quarter, and we continued to benefit from our complex, geographically diverse refining system.
“Gasoline and diesel demand in the U.S. has been excellent, and growing worldwide demand has increased competition for refined products. On the supply side, the industry has suffered from higher than normal unplanned refinery downtime. Production also has been affected by more complicated refinery operations, which are partly due to more stringent product specifications, and by tightness in markets for skilled labor and equipment. These factors have contributed to the lowest inventory levels we’ve seen in years for gasoline and distillate on a days-of-supply basis.
“For the second quarter, the Gulf Coast gasoline margins averaged nearly $29 per barrel, which is 45 percent higher than in the second quarter of last year. Gulf Coast ultra-low-sulfur diesel margins were also robust, averaging over $22 per barrel, an increase of 15 percent from last year. Refined product margins were strong across all of Valero’s refining regions,” Klesse said.
Regarding feedstock differentials in the second quarter of 2007, the discount to WTI for Maya heavy sour crude oil averaged $9.60 per barrel, while the discount for Mars medium sour crude oil averaged $2.70 per barrel. Since the second quarter, discounts to WTI have widened as the July average for the Maya discount increased to nearly $10.40 per barrel, and the Mars discount expanded to more than $4.20 per barrel. Moreover, the discount to WTI for residual fuel oil, which can compete as a heavy sour feedstock in many of Valero’s complex refineries, has expanded from an average of $15.27 per barrel in the second quarter to an average of almost $18.40 per barrel in July.
As to uses of cash in the second quarter, capital spending was $592 million, of which $101 million was for turnaround expenditures. The company also paid off $230 million of maturing debt in April. Concerning stock buybacks, the company executed an accelerated stock repurchase (ASR) program in April for an upfront payment of $3 billion. The ASR was recently completed, requiring an additional cash payment of $94.5 million. The program was funded through the issuance of $2.25 billion of publicly traded notes plus cash on hand. The company purchased 42.1 million shares under the ASR, bringing the year-to-date total purchases to approximately 62 million shares.
“It’s a very exciting time to be in the refining business,” Klesse said. “Margins and earnings have been outstanding, and when you consider the underlying supply and demand trends, we see a great outlook for the industry. We are taking advantage of this strong earnings environment by allocating our cash across growth projects, dividends, and share buybacks, while maintaining our investment-grade credit rating. In fact, this year we intend to purchase another $2 billion of our stock. As we said we’d do, we are executing a disciplined and consistent plan to increase shareholder returns for the long term.”
Valero’s senior management will hold a conference call at 11 a.m. ET (10 a.m. CT) today to discuss this earnings release and provide an update on company operations. A live broadcast of the conference call will be available on the company’s web site atwww.valero.com.
Valero Energy Corporation is a Fortune 500 company based in San Antonio, with approximately 21,000 employees and 2006 annual revenues of more than $90 billion. The company owns and operates 17 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.1 million barrels per day, making it the largest refiner in North America. Valero is also one of the nation’s largest retail operators with approximately 5,800 retail and branded wholesale outlets in the United States, Canada and the Caribbean under various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon. Please visitwww.valero.com for more information.
Statements contained in this release that state the company’s or management’s expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “believe,” “expect,” “should,” “estimates,” and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero’s annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission and on Valero’s website atwww.valero.com.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
Three Months Ended | SIx Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2007 (1) | 2006 (1) | 2007 (1) | 2006 (1) | |||||||||||||
STATEMENT OF INCOME DATA: | ||||||||||||||||
Operating Revenues (2) (3) | $ | 24,202 | $ | 25,592 | $ | 42,957 | $ | 45,567 | ||||||||
Costs and Expenses: | ||||||||||||||||
Cost of Sales (2) | 19,310 | 21,311 | 34,820 | 38,525 | ||||||||||||
Refining Operating Expenses | 985 | 911 | 1,919 | 1,795 | ||||||||||||
Retail Selling Expenses (2) | 200 | 182 | 371 | 354 | ||||||||||||
General and Administrative Expenses | 177 | 171 | 322 | 322 | ||||||||||||
Depreciation and Amortization Expense | 337 | 279 | 659 | 534 | ||||||||||||
Total Costs and Expenses | 21,009 | 22,854 | 38,091 | 41,530 | ||||||||||||
Operating Income | 3,193 | 2,738 | 4,866 | 4,037 | ||||||||||||
Equity in Earnings of NuStar Energy L.P. (4) | — | 10 | — | 22 | ||||||||||||
Other Income (Expense), Net | 7 | (5 | ) | 12 | (5 | ) | ||||||||||
Interest and Debt Expense: | ||||||||||||||||
Incurred | (110 | ) | (93 | ) | (199 | ) | (189 | ) | ||||||||
Capitalized | 27 | 45 | 58 | 81 | ||||||||||||
Income from Continuing Operations Before Income Tax Expense | 3,117 | 2,695 | 4,737 | 3,946 | ||||||||||||
Income Tax Expense | 1,055 | 876 | 1,587 | 1,299 | ||||||||||||
Income from Continuing Operations | 2,062 | 1,819 | 3,150 | 2,647 | ||||||||||||
Income from Discontinued Operations, Net of Income Taxes | 187 | 78 | 243 | 99 | ||||||||||||
Net Income | 2,249 | 1,897 | 3,393 | 2,746 | ||||||||||||
Preferred Stock Dividends | — | 1 | — | 2 | ||||||||||||
Net Income Applicable to Common Stock | $ | 2,249 | $ | 1,896 | $ | 3,393 | $ | 2,744 | ||||||||
Earnings per Common Share: | ||||||||||||||||
Continuing Operations | $ | 3.66 | $ | 2.97 | $ | 5.42 | $ | 4.30 | ||||||||
Discontinued Operations | 0.33 | 0.13 | 0.42 | 0.16 | ||||||||||||
Total | $ | 3.99 | $ | 3.10 | $ | 5.84 | $ | 4.46 | ||||||||
Weighted Average Common Shares | ||||||||||||||||
Outstanding (in millions) | 563 | 611 | 581 | 615 | ||||||||||||
Earnings per Common Share — Assuming Dilution: | ||||||||||||||||
Continuing Operations | $ | 3.57 | $ | 2.86 | $ | 5.28 | $ | 4.13 | ||||||||
Discontinued Operations | 0.32 | 0.12 | 0.40 | 0.16 | ||||||||||||
Total | $ | 3.89 | $ | 2.98 | $ | 5.68 | $ | 4.29 | ||||||||
Weighted Average Common Equivalent Shares | ||||||||||||||||
Outstanding (in millions) | 578 | 636 | 597 | 640 |
June 30, | December 31, | |||||||
2007 | 2006 | |||||||
BALANCE SHEET DATA (1): | ||||||||
Cash | $ | 2,336 | $ | 1,590 | ||||
Total Debt | $ | 6,921 | $ | 5,094 |
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
Three Months Ended | SIx Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2007 (1) | 2006 (1) | 2007 (1) | 2006 (1) | |||||||||||||
Operating Income (Loss) by Business Segment: | ||||||||||||||||
Refining | $ | 3,327 | $ | 2,873 | $ | 5,103 | $ | 4,311 | ||||||||
Retail: | ||||||||||||||||
U.S. | 37 | 24 | 61 | 24 | ||||||||||||
Canada | 19 | 22 | 48 | 43 | ||||||||||||
Total Retail | 56 | 46 | 109 | 67 | ||||||||||||
Total Before Corporate | 3,383 | 2,919 | 5,212 | 4,378 | ||||||||||||
Corporate | (190 | ) | (181 | ) | (346 | ) | (341 | ) | ||||||||
Total | $ | 3,193 | $ | 2,738 | $ | 4,866 | $ | 4,037 | ||||||||
Depreciation and Amortization by Business Segment: | ||||||||||||||||
Refining | $ | 302 | $ | 248 | $ | 595 | $ | 474 | ||||||||
Retail: | ||||||||||||||||
U.S | 16 | 15 | 27 | 28 | ||||||||||||
Canada | 6 | 6 | 13 | 13 | ||||||||||||
Total Retail | 22 | 21 | 40 | 41 | ||||||||||||
Total Before Corporate | 324 | 269 | 635 | 515 | ||||||||||||
Corporate | 13 | 10 | 24 | 19 | ||||||||||||
Total | $ | 337 | $ | 279 | $ | 659 | $ | 534 | ||||||||
Operating Highlights: | ||||||||||||||||
Refining: | ||||||||||||||||
Throughput Margin per Barrel | $ | 18.14 | $ | 15.59 | $ | 15.19 | $ | 13.02 | ||||||||
Operating Costs per Barrel: | ||||||||||||||||
Refining Operating Expenses | $ | 3.87 | $ | 3.52 | $ | 3.83 | $ | 3.55 | ||||||||
Depreciation and Amortization | 1.19 | 0.96 | 1.18 | 0.94 | ||||||||||||
Total Operating Costs per Barrel | $ | 5.06 | $ | 4.48 | $ | 5.01 | $ | 4.49 | ||||||||
Throughput Volumes (Mbbls per Day): | ||||||||||||||||
Feedstocks: | ||||||||||||||||
Heavy Sour Crude | 618 | 674 | 654 | 719 | ||||||||||||
Medium/Light Sour Crude | 650 | 641 | 632 | 597 | ||||||||||||
Acidic Sweet Crude | 86 | 51 | 85 | 58 | ||||||||||||
Sweet Crude | 717 | 736 | 711 | 737 | ||||||||||||
Residuals. | 273 | 278 | 259 | 217 | ||||||||||||
Other Feedstocks | 150 | 151 | 151 | 167 | ||||||||||||
Total Feedstocks | 2,494 | 2,531 | 2,492 | 2,495 | ||||||||||||
Blendstocks and Other | 300 | 312 | 278 | 296 | ||||||||||||
Total Throughput Volumes | 2,794 | 2,843 | 2,770 | 2,791 | ||||||||||||
Yields (Mbbls per Day): | ||||||||||||||||
Gasolines and Blendstocks | 1,277 | 1,354 | 1,263 | 1,337 | ||||||||||||
Distillates | 913 | 879 | 912 | 870 | ||||||||||||
Petrochemicals | 81 | 74 | 82 | 77 | ||||||||||||
Other Products (5) | 517 | 530 | 513 | 506 | ||||||||||||
Total Yields | 2,788 | 2,837 | 2,770 | 2,790 | ||||||||||||
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
Three Months Ended | SIx Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Refining Operating Highlights by Region: (6) | ||||||||||||||||
Gulf Coast: | ||||||||||||||||
Operating Income | $ | 1,935 | $ | 1,715 | $ | 3,018 | $ | 2,718 | ||||||||
Throughput Volumes (Mbbls per Day) | 1,543 | 1,589 | 1,534 | 1,550 | ||||||||||||
Throughput Margin per Barrel | $ | 18.52 | $ | 15.92 | $ | 15.47 | $ | 13.73 | ||||||||
�� | ||||||||||||||||
Operating Costs per Barrel: | ||||||||||||||||
Refining Operating Expenses | $ | 3.65 | $ | 3.28 | $ | 3.55 | $ | 3.23 | ||||||||
Depreciation and Amortization | 1.09 | 0.78 | 1.05 | 0.81 | ||||||||||||
Total Operating Costs per Barrel | $ | 4.74 | $ | 4.06 | $ | 4.60 | $ | 4.04 | ||||||||
Mid-Continent (1): | ||||||||||||||||
Operating Income | $ | 483 | $ | 456 | $ | 574 | $ | 523 | ||||||||
Throughput Volumes (Mbbls per Day) | 373 | 430 | 363 | 391 | ||||||||||||
Throughput Margin per Barrel | $ | 19.96 | $ | 15.70 | $ | 14.81 | $ | 11.72 | ||||||||
Operating Costs per Barrel: | ||||||||||||||||
Refining Operating Expenses | $ | 4.42 | $ | 2.97 | $ | 4.57 | $ | 3.37 | ||||||||
Depreciation and Amortization | 1.34 | 1.06 | 1.50 | 0.96 | ||||||||||||
Total Operating Costs per Barrel | $ | 5.76 | $ | 4.03 | $ | 6.07 | $ | 4.33 | ||||||||
Northeast: | ||||||||||||||||
Operating Income | $ | 523 | $ | 291 | $ | 812 | $ | 470 | ||||||||
Throughput Volumes (Mbbls per Day) | 577 | 520 | 575 | 548 | ||||||||||||
Throughput Margin per Barrel | $ | 14.83 | $ | 11.73 | $ | 12.73 | $ | 10.05 | ||||||||
Operating Costs per Barrel: | ||||||||||||||||
Refining Operating Expenses | $ | 3.62 | $ | 4.34 | $ | 3.69 | $ | 4.22 | ||||||||
Depreciation and Amortization | 1.25 | 1.26 | 1.24 | 1.08 | ||||||||||||
Total Operating Costs per Barrel | $ | 4.87 | $ | 5.60 | $ | 4.93 | $ | 5.30 | ||||||||
West Coast: | ||||||||||||||||
Operating Income | $ | 386 | $ | 411 | $ | 699 | $ | 600 | ||||||||
Throughput Volumes (Mbbls per Day). | 301 | 304 | 298 | 302 | ||||||||||||
Throughput Margin per Barrel | $ | 20.35 | $ | 20.29 | $ | 18.97 | $ | 16.50 | ||||||||
Operating Costs per Barrel: | ||||||||||||||||
Refining Operating Expenses | $ | 4.81 | $ | 4.20 | $ | 4.60 | $ | 4.24 | ||||||||
Depreciation and Amortization | 1.42 | 1.24 | 1.41 | 1.28 | ||||||||||||
Total Operating Costs per Barrel | $ | 6.23 | $ | 5.44 | $ | 6.01 | $ | 5.52 | ||||||||
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
Three Months Ended | SIx Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Retail — U.S.: | ||||||||||||||||
Company-Operated Fuel Sites (Average) | 958 | 988 | 961 | 992 | ||||||||||||
Fuel Volumes (Gallons per Day per Site) | 5,006 | 4,916 | 4,994 | 4,899 | ||||||||||||
Fuel Margin per Gallon | $ | 0.202 | $ | 0.145 | $ | 0.163 | $ | 0.122 | ||||||||
Merchandise Sales | $ | 269 | $ | 251 | $ | 502 | $ | 470 | ||||||||
Merchandise Margin (Percentage of Sales) | 29.8 | % | 30.5 | % | 29.9 | % | 30.1 | % | ||||||||
Margin on Miscellaneous Sales (2) | $ | 24 | $ | 22 | $ | 49 | $ | 42 | ||||||||
Selling Expenses (2) | $ | 139 | $ | 123 | $ | 252 | $ | 239 | ||||||||
Retail — Canada: | ||||||||||||||||
Fuel Volumes (Thousand Gallons per Day) | 3,144 | 3,114 | 3,257 | 3,199 | ||||||||||||
Fuel Margin per Gallon | $ | 0.222 | $ | 0.237 | $ | 0.234 | $ | 0.231 | ||||||||
Merchandise Sales | $ | 47 | $ | 43 | $ | 84 | $ | 79 | ||||||||
Merchandise Margin (Percentage of Sales) | 28.3 | % | 28.0 | % | 28.8 | % | 28.0 | % | ||||||||
Margin on Miscellaneous Sales | $ | 9 | $ | 7 | $ | 18 | $ | 15 | ||||||||
Selling Expenses | $ | 61 | $ | 59 | $ | 119 | $ | 115 | ||||||||
Average Market Reference Prices and Differentials | ||||||||||||||||
(Dollars per Barrel): | ||||||||||||||||
Feedstocks (at U.S. Gulf Coast, except as Noted): | ||||||||||||||||
West Texas Intermediate (WTI) Crude Oil | $ | 64.89 | $ | 70.40 | $ | 61.45 | $ | 66.84 | ||||||||
WTI Less Sour Crude Oil (7) | $ | 3.08 | $ | 7.24 | $ | 4.50 | $ | 7.61 | ||||||||
WTI Less Mars Crude Oil | $ | 2.70 | $ | 6.67 | $ | 3.81 | $ | 7.19 | ||||||||
WTI Less Alaska North Slope (ANS) Crude Oil (U.S. West Coast) | $ | (0.86 | ) | $ | 1.62 | $ | 0.72 | $ | 2.02 | |||||||
WTI Less Maya Crude Oil | $ | 9.60 | $ | 15.68 | $ | 11.11 | $ | 15.65 | ||||||||
Products: | ||||||||||||||||
U.S. Gulf Coast: | ||||||||||||||||
Conventional 87 Gasoline Less WTI | $ | 28.95 | $ | 20.01 | $ | 19.58 | $ | 14.00 | ||||||||
No. 2 Fuel Oil Less WTI | $ | 14.95 | $ | 11.78 | $ | 12.38 | $ | 10.32 | ||||||||
Ultra-Low-Sulfur Diesel Less WTI (8) | $ | 22.26 | $ | 19.31 | $ | 19.81 | N/A | |||||||||
Propylene Less WTI | $ | 16.67 | $ | 10.54 | $ | 16.44 | $ | 8.84 | ||||||||
U.S. Mid-Continent: | ||||||||||||||||
Conventional 87 Gasoline Less WTI | $ | 34.09 | $ | 19.03 | $ | 23.11 | $ | 13.56 | ||||||||
Low-Sulfur Diesel Less WTI | $ | 25.61 | $ | 20.73 | $ | 22.97 | $ | 17.00 | ||||||||
U.S. Northeast: | ||||||||||||||||
Conventional 87 Gasoline Less WTI | $ | 26.15 | $ | 16.94 | $ | 19.08 | $ | 11.85 | ||||||||
No. 2 Fuel Oil Less WTI | $ | 15.41 | $ | 11.73 | $ | 13.38 | $ | 10.38 | ||||||||
Lube Oils Less WTI | $ | 53.25 | $ | 49.81 | $ | 58.53 | $ | 48.36 | ||||||||
U.S. West Coast: | ||||||||||||||||
CARBOB 87 Gasoline Less ANS | $ | 37.36 | $ | 33.11 | $ | 33.67 | $ | 24.16 | ||||||||
CARB Diesel Less ANS | $ | 26.16 | $ | 28.14 | $ | 26.35 | $ | 24.55 |
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
(1) | On May 2, 2007, Valero Energy Corporation entered into an agreement to sell its Lima Refinery to Husky Refining | |||
Company, a wholly owned subsidiary of Husky Energy Inc. Therefore, the results of operations of the Lima Refinery are reported as discontinued operations in the Statement of Income Data for all periods presented, and all refining operating highlights, both consolidated and for the Mid-Continent region, presented in this earnings release exclude the Lima Refinery for all periods presented. The sale of the Lima Refinery was consummated effective July 1, 2007. | ||||
(2) | Certain amounts previously reported in 2006 for operating revenues, cost of sales, and retail selling expenses have | |||
been reclassified for comparability with amounts reported in 2007. | ||||
(3) | Includes excise taxes on sales by Valero’s U.S. retail system of $203 million and $196 million for the three months | |||
ended June 30, 2007 and 2006, respectively, and $399 million and $390 million for the six months ended June 30, 2007 and 2006, respectively. | ||||
(4) | On December 22, 2006, Valero Energy Corporation sold its remaining ownership interest in NuStar GP Holdings, | |||
LLC (formerly Valero GP Holdings, LLC), which indirectly owns the general partner interest, the incentive distribution rights, and a 21.4% limited partner interest in NuStar Energy L.P. (formerly Valero L.P.) As a result, the statement of income reflects no equity in earnings of NuStar Energy L.P. subsequent to December 21, 2006. | ||||
(5) | Primarily includes gas oils, No. 6 fuel oil, petroleum coke, and asphalt. | |||
(6) | The regions reflected herein contain the following refineries:Gulf Coast-Corpus Christi East, Corpus Christi West, | |||
Texas City, Houston, Three Rivers, Krotz Springs, St. Charles, Aruba, and Port Arthur Refineries;Mid-Continent-McKee, Ardmore, and Memphis Refineries;Northeast-Quebec City, Paulsboro, and Delaware City Refineries; andWest Coast-Benicia and Wilmington Refineries. | ||||
(7) | The market reference differential for sour crude oil is based on 50% Arab Medium and 50% Arab Light posted | |||
prices. | ||||
(8) | The market reference differential for ultra-low-sulfur diesel for the three months ended June 30, 2006 represents | |||
only the months of May and June, since the ultra-low-sulfur diesel less WTI market reference was not available prior to May 1, 2006. |