UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4718
VALERO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1244795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
530 McCullough Avenue
San Antonio, Texas
(Address of principal executive offices)
78215
(Zip Code)
(210) 246-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicated below is the number of shares outstanding of the
registrant's only class of common stock, as of August 1, 1996.
Number of
Shares
Title of Class Outstanding
Common Stock, $1 Par Value 43,987,026
VALERO ENERGY CORPORATION AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995. . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income - For the Three
Months Ended and Six Months Ended June 30, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows - For the
Six Months Ended June 30, 1996 and 1995. . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . .
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . .
PART II. OTHER INFORMATION. . . . . . . . . . . . . . . .
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . .
PART I - FINANCIAL INFORMATION
VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
June 30,
1996 December 31,
(Unaudited) 1995
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments. . . . . . . . . . . . . . $ 19,156 $ 28,054
Cash held in debt service escrow . . . . . . . . . . . . . . . 20,067 36,627
Receivables, less allowance for doubtful accounts of
$1,449 (1996) and $1,193 (1995). . . . . . . . . . . . . . . 329,465 339,189
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . 165,435 140,822
Current deferred income tax assets . . . . . . . . . . . . . . 22,273 29,530
Prepaid expenses and other . . . . . . . . . . . . . . . . . . 6,430 47,321
562,826 621,543
PROPERTY, PLANT AND EQUIPMENT - including
construction in progress of $70,237 (1996)
and $37,472 (1995), at cost. . . . . . . . . . . . . . . . . . 2,749,740 2,697,494
Less: Accumulated depreciation. . . . . . . . . . . . . . . 665,599 622,123
2,084,141 2,075,371
INVESTMENT IN AND ADVANCES TO JOINT VENTURES . . . . . . . . . . 42,087 41,890
DEFERRED CHARGES AND OTHER ASSETS. . . . . . . . . . . . . . . . 119,113 137,876
$2,808,167 $2,876,680
<FN>
See Notes to Consolidated Financial Statements.
</FN>
PART I - FINANCIAL INFORMATION
VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
June 30,
1996 December 31,
(Unaudited) 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,700 $ -
Current maturities of long-term debt . . . . . . . . . . . . . . . 72,258 81,964
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 379,316 312,672
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . 29,390 31,104
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . 33,115 42,542
529,779 468,282
LONG-TERM DEBT, less current maturities. . . . . . . . . . . . . . . 879,356 1,035,641
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . 274,588 276,013
DEFERRED CREDITS AND OTHER LIABILITIES . . . . . . . . . . . . . . . 52,232 56,031
REDEEMABLE PREFERRED STOCK, SERIES A, issued
1,150,000 shares, outstanding 69,000 (1996 and 1995) shares. . . . 6,900 6,900
COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value - 20,000,000 shares authorized
including redeemable preferred shares:
$3.125 Convertible Preferred Stock, issued and outstanding
3,450,000 (1996 and 1995) shares ($172,500 aggregate
involuntary liquidation value) . . . . . . . . . . . . . . . 3,450 3,450
Common stock, $1 par value - 75,000,000 shares authorized;
issued 44,024,260 (1996) and 43,739,380 (1995) shares. . . . . . 44,024 43,739
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . 537,391 530,177
Unearned Valero Employees' Stock Ownership Plan
Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . (10,070) (11,318)
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . 491,617 467,943
Treasury stock, 38,907 (1996) and 6,904 (1995) common shares,
at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,100) (178)
1,065,312 1,033,813
$2,808,167 $2,876,680
<FN>
See Notes to Consolidated Financial Statements.
</FN>
VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
OPERATING REVENUES . . . . . . . . . . . . . . . . . . $1,152,737 $775,822 $2,262,835 $1,466,357
COSTS AND EXPENSES:
Cost of sales and operating expenses . . . . . . . . 1,050,396 678,380 2,063,802 1,297,923
Selling and administrative expenses. . . . . . . . . 22,147 17,784 41,255 35,240
Depreciation expense . . . . . . . . . . . . . . . 25,761 24,705 51,107 49,574
Total. . . . . . . . . . . . . . . . . . . . . . . 1,098,304 720,869 2,156,164 1,382,737
OPERATING INCOME . . . . . . . . . . . . . . . . . . . 54,433 54,953 106,671 83,620
EQUITY IN EARNINGS OF JOINT VENTURES . . . . . . . . . 599 1,530 821 3,399
OTHER INCOME, NET. . . . . . . . . . . . . . . . . . . 848 852 3,292 1,610
INTEREST AND DEBT EXPENSE:
Incurred . . . . . . . . . . . . . . . . . . . . . . (24,713) (26,107) (50,466) (52,183)
Capitalized. . . . . . . . . . . . . . . . . . . . . 974 1,494 1,537 2,435
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . 32,141 32,722 61,855 38,881
INCOME TAX EXPENSE . . . . . . . . . . . . . . . . . . 11,300 12,200 21,100 14,600
NET INCOME . . . . . . . . . . . . . . . . . . . . . . 20,841 20,522 40,755 24,281
Less: Preferred stock dividend requirements . . . . 2,841 2,964 5,682 5,928
NET INCOME APPLICABLE
TO COMMON STOCK. . . . . . . . . . . . . . . . . . . $ 18,000 $ 17,558 $ 35,073 $ 18,353
EARNINGS PER SHARE OF
COMMON STOCK . . . . . . . . . . . . . . . . . . . . $ .41 $ .40 $ .80 $ .42
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING (in thousands) . . . . . . . . . . . . . 43,901 43,644 43,825 43,609
DIVIDENDS PER SHARE OF
COMMON STOCK . . . . . . . . . . . . . . . . . . . . $ .13 $ .13 $ .26 $ .26
<FN>
See Notes to Consolidated Financial Statements.
</FN>
VALERO ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Six Months Ended
June 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,755 $ 24,281
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . 51,107 49,574
Amortization of deferred charges and other, net. . . . . . . . . . . . . 16,856 15,111
Changes in current assets and current liabilities. . . . . . . . . . . . 82,261 23,070
Deferred income tax expense. . . . . . . . . . . . . . . . . . . . . . . 6,700 5,200
Equity in earnings in excess of distributions of joint ventures. . . . . (821) (2,876)
Changes in deferred items and other, net . . . . . . . . . . . . . . . . 1,279 (2,074)
Net cash provided by operating activities. . . . . . . . . . . . . . . 198,137 112,286
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67,389) (65,366)
Deferred turnaround and catalyst costs . . . . . . . . . . . . . . . . . . . (2,540) (30,982)
Investment in and advances to joint ventures, net. . . . . . . . . . . . . . 1,665 (651)
Dispositions of property, plant and equipment. . . . . . . . . . . . . . . . 6,547 311
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458 54
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . (61,259) (96,634)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term debt. . . . . . . . . . . . . . . . . . . . . . . . . 15,700 16,000
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 96,500
Long-term debt reduction, net. . . . . . . . . . . . . . . . . . . . . . . . (165,143) (131,357)
Decrease in cash held in debt service escrow for principal . . . . . . . . . 15,804 14,554
Common stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,397) (11,339)
Preferred stock dividends. . . . . . . . . . . . . . . . . . . . . . . . . . (5,684) (5,928)
Issuance of common stock, net. . . . . . . . . . . . . . . . . . . . . . . . 4,944 970
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . (145,776) (20,600)
NET DECREASE IN CASH AND TEMPORARY
CASH INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,898) (4,948)
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,054 26,210
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,156 $ 21,262
<FN>
See Notes to Consolidated Financial Statements.
</FN>
VALERO ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Basis of Presentation
The consolidated financial statements included herein have
been prepared by Valero Energy Corporation ("Energy") and
subsidiaries (collectively referred to as the "Company"), without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. However, all adjustments have been made to
the accompanying financial statements which are, in the opinion of
the Company's management, necessary for a fair presentation of the
Company's results of operations for the periods covered. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented herein
not misleading. These consolidated financial statements should be
read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's latest Annual Report on
Form 10-K. Certain prior period amounts have been reclassified for
comparative purposes.
Note 2
Inventories
Refinery feedstocks and refined products and blendstocks are
carried at the lower of cost or market with cost determined
primarily under the last-in, first-out ("LIFO") method of inventory
pricing. The excess of the replacement cost of such inventories
over their LIFO values was approximately $31 million at
June 30, 1996. Natural gas in underground storage, natural gas
liquids ("NGLs") and materials and supplies are carried principally
at weighted average cost not in excess of market. Inventories as
of June 30, 1996 and December 31, 1995 were as follows (in
thousands):
June 30, December 31,
1996 1995
Refinery feedstocks . . . . . . . . . . . . . $ 78,367 $ 48,295
Refined products and blendstocks. . . . . . . 42,895 41,967
Natural gas in underground storage. . . . . . 24,462 31,156
NGLs . . . . . . . . . . . . . . . . . . . . 2,468 3,280
Materials and supplies. . . . . . . . . . . . 17,243 16,124
$165,435 $140,822
Note 3
Statements of Cash Flows
In order to determine net cash provided by operating
activities, net income has been adjusted by, among other things,
changes in current assets and current liabilities, excluding
changes in cash and temporary cash investments, cash held in debt
service escrow for principal, current deferred income tax assets,
short-term debt and current maturities of long-term debt. The
changes in the Company's current assets and current liabilities,
excluding the items noted above, are shown in the following table
as an (increase) decrease in current assets and an increase
(decrease) in current liabilities. The Company's temporary cash
investments are highly liquid, low-risk debt instruments which have
a maturity of three months or less when acquired. (Dollars in
thousands.)
Six Months Ended
June 30,
1996 1995
Cash held in debt service escrow for interest . . . . $ 756 $ 689
Receivables, net. . . . . . . . . . . . . . . . . . . 9,724 34,412
Inventories . . . . . . . . . . . . . . . . . . . . . (24,613) 36,326
Prepaid expenses and other. . . . . . . . . . . . . . 40,891 10,120
Accounts payable. . . . . . . . . . . . . . . . . . . 66,644 (59,583)
Accrued interest. . . . . . . . . . . . . . . . . . . (1,714) 54
Other accrued expenses. . . . . . . . . . . . . . . . (9,427) (6,987)
Income taxes payable. . . . . . . . . . . . . . . . . - 8,039
Total. . . . . . . . . . . . . . . . . . . . . . . $ 82,261 $ 23,070
The following table provides information related to cash
interest and income taxes paid by the Company for the periods
indicated (in thousands):
Six Months Ended
June 30,
1996 1995
Interest (net of amount capitalized of $1,537 (1996)
and $2,435 (1995)) . . . . . . . . . . . . . . . . . . . $50,025 $48,549
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . 10,714 457
Note 4
Litigation and Contingencies
The Company and Southern Union Company ("Southern Union") are
defendants in a lawsuit brought by the City of Edinburg, Texas (the
"City") regarding certain ordinances of the City that granted
franchises to Rio Grande Valley Gas Company ("RGV") and its
predecessors allowing RGV to sell and distribute natural gas within
the City. RGV was formerly owned by Energy. On September 30,
1993, Energy sold the common stock of RGV to Southern Union. The
City alleges that the defendants have used RGV's facilities to sell
or transport natural gas in Edinburg in violation of the ordinances
and franchises granted by the City, and that RGV (now Southern
Union) has not fully paid all franchise fees due the City. The
City also alleges that the defendants have used the public property
of the City without compensating the City for such use, and alleges
conspiracy and alter ego claims involving all defendants. The City
seeks alleged actual damages of $50 million and unspecified
punitive damages related to amounts allegedly due under the RGV
franchise, City ordinances and state law. In addition, the City of
Pharr, Texas, filed an intervention seeking certification of a
class, with itself as class representative, consisting of all
cities served by franchise by Southern Union. On June 24, 1996,
the court certified the class, approved a class notice, and severed
the claims of the City of Pharr and the class from the original
City of Edinburg lawsuit. In addition to appealing the class
certification ruling, the defendants are seeking mandamus relief in
the court of appeals for recusal or disqualification of the trial
judge. On July 11, 1996, Southern Union filed a cross-claim
against Energy, alleging, among other things, that Southern Union
is entitled to indemnification under provisions of the purchase
agreement between Energy and Southern Union. Southern Union also
asserts claims related to a 1985 settlement among Energy, RGV and
the Railroad Commission of Texas regarding certain pricing terms.
Southern Union's claims include, among other things, damages for
indemnification, breach of contract, negligent misrepresentation
and fraud. The City of Edinburg lawsuit is set for trial
September 9, 1996.
Energy and certain of its subsidiaries have been sued by Teco
Pipeline Company ("Teco") regarding the operation of the Company's
340-mile West Texas pipeline. In 1985, a subsidiary of Energy sold
a 50% undivided interest in the pipeline and entered into a joint
venture through an ownership agreement and an operating agreement,
each dated February 28, 1985, with the purchaser of the interest.
In 1988, Teco succeeded to that purchaser's 50% interest. A
subsidiary of Energy has at all times been the operator of the
pipeline. Notwithstanding the written ownership and operating
agreements, the plaintiff alleges that a separate, unwritten
partnership agreement exists, and that the defendants have
exercised improper dominion over such alleged partnership's
affairs. The plaintiff also alleges that the defendants acted in
bad faith by negatively affecting the economics of the joint
venture in order to provide financial advantages to facilities or
entities owned by the defendants and by allegedly usurping for the
defendants' own benefit certain opportunities available to the
joint venture. The plaintiff asserts causes of action for breach
of fiduciary duty, fraud, tortious interference with business
relationships, and other claims, and seeks unquantified actual and
punitive damages. The Company has filed a motion to stay the
litigation and to compel arbitration pursuant to provisions of the
1985 agreements which require arbitration of disputes. The Company
has also filed a counterclaim alleging that the plaintiff breached
its own obligations to the joint venture and jeopardized the
economic and operational viability of the pipeline by its actions.
The Company is seeking unquantified actual and punitive damages. A
hearing is scheduled in September on the defendants' motion to
compel arbitration.
Approximately a dozen lawsuits have been filed against various
pipeline owners and other parties, including the Company, arising
from the rupture of several pipelines and fire as a result of
severe flooding of the San Jacinto River in Harris County, Texas on
October 20, 1994. The Company is a defendant in nine of these
lawsuits. The plaintiffs are property owners in surrounding areas
who allege that the defendant pipeline owners were negligent and
grossly negligent in failing to bury the pipelines at a proper
depth to avoid rupture or explosion and in allowing the pipelines
to leak chemicals and hydrocarbons into the flooded area. The
plaintiffs assert claims for property damage, costs for medical
monitoring, personal injury and nuisance, and seek an unspecified
amount of actual and punitive damages.
Energy and certain of its subsidiaries are defendants in a
lawsuit originally filed in January 1993. The lawsuit is based
upon construction work performed by the plaintiff at a gas
processing plant in 1991 and 1992. The plaintiff alleges that it
performed work for the defendants for which it was not compensated.
The plaintiff asserts claims for fraud, quantum meruit, and
numerous other tort claims. The plaintiff alleges actual damages
of approximately $1.5 million, plus retainage, interest and
attorneys fees, and punitive damages of at least four times the
amount of actual damages. In July 1996, the court granted the
defendants' motion to transfer the case from Duval County to Webb
County. A new trial date has not been set.
In 1987, certain subsidiaries of the Company entered into a
settlement agreement with a producer from whom they had purchased
natural gas to resolve a take-or-pay dispute between the parties.
In May 1995, certain mineral interest owners in South Texas brought
a lawsuit against the producer and several other defendants,
including the Company, asserting several claims in connection with
an alleged underpayment of royalties, and alleging that the
numerous "operator defendants" (excluding the Company) breached
certain covenants and duties thereby depriving the plaintiffs of
the full value of their royalty interests. The plaintiffs alleged
that the Company conspired with the producer to deprive the
plaintiffs of royalties that they would have earned but for the
settlement of the gas contract dispute. The plaintiffs, however,
have nonsuited the Company, dismissing all claims against the
Company.
On April 15, 1994, certain trusts named certain subsidiaries
of the Company as additional defendants (the "Valero Defendants")
to a lawsuit filed in 1989 against a supplier with whom the Valero
Defendants have contractual relationships under gas purchase
contracts. In order to resolve certain potential disputes with
respect to the gas purchase contracts, the Valero Defendants agreed
to bear a substantial portion of any settlement or any
nonappealable final judgment rendered against the supplier. In
January 1993, the District Court ruled in favor of the trusts'
motion for summary judgment against the supplier. Damages, if any,
were not determined. The trusts seek $50 million in damages from
the Valero Defendants as a result of the Valero Defendants' alleged
interference between the trusts and the supplier, plus punitive
damages in an amount in excess of treble the amount of actual
damages proven at trial. The trusts also seek approximately $56
million in take-or-pay damages from the supplier and $70 million as
damages for the supplier's failure to take the trusts' gas ratably.
The Company believes that the claims brought by the trusts have
been significantly overstated, and that the supplier and the Valero
Defendants have a number of meritorious defenses to the claims.
A federal securities fraud lawsuit was filed against Energy
and certain of its subsidiaries by a former owner of approximately
19,500 units of limited partnership interests of Valero Natural Gas
Partners, L.P. ("VNGP, L.P."). The plaintiff alleges that the
proxy statement used in connection with the solicitation of votes
for approval of a merger (the "Merger") of the Company and VNGP,
L.P. contained fraudulent misrepresentations. The plaintiff also
alleges breach of fiduciary duty in connection with the merger
transaction. The subject matter of this lawsuit was the subject
matter of a prior Delaware class action lawsuit which was settled
prior to consummation of the Merger. The Company believes that the
plaintiff's claims have been settled and released by the prior
class action settlement. The lawsuit is scheduled for trial on
December 2, 1996. On July 26, 1996, the magistrate assigned to the
case issued a memorandum recommending to the district court that
the Company's motion for summary judgment be granted. If adopted
by the district court, the plaintiff's claims against the Company
will be dismissed.
The Company owns a 20% general partner interest in Javelina
Company ("Javelina"), a general partnership that owns a refinery
off-gas processing plant in Corpus Christi. Javelina has been
named as a defendant in ten lawsuits filed since 1992 in state
district courts in Nueces County and Duval County, Texas. Six of
the suits include as defendants other companies that own refineries
or other industrial facilities in Nueces County. These suits were
brought by a number of plaintiffs who reside in neighborhoods near
the facilities. The plaintiffs claim injuries relating to an
alleged exposure to toxic chemicals, and generally claim that the
defendants were negligent, grossly negligent and committed
trespass. The plaintiffs claim personal injury and property
damages resulting from soil and ground water contamination and air
pollution allegedly caused by the operations of the defendants.
The plaintiffs seek an unspecified amount of actual and punitive
damages. The remaining four suits were brought by plaintiffs who
either live or have businesses near the Javelina plant. The
plaintiffs in these suits allege claims similar to those described
above and seek unspecified actual and punitive damages.
The Company is also a party to additional claims and legal
proceedings arising in the ordinary course of business. The
Company believes it is unlikely that the final outcome of any of
the claims or proceedings to which the Company is a party,
including those described above, would have a material adverse
effect on the Company's financial statements; however, due to the
inherent uncertainty of litigation, the range of possible loss, if
any, cannot be estimated with a reasonable degree of precision and
there can be no assurance that the resolution of any particular
claim or proceeding would not have an adverse effect on the
Company's results of operations for the interim period in which
such resolution occurred.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following are the Company's financial and operating
highlights for the three months ended and six months ended June 30,
1996 and 1995. The 1995 amounts of operating revenues and
operating income (loss) by segment and certain natural gas/natural
gas liquids operating statistics have been restated to conform to
the 1996 presentation. The amounts in the following table are in
thousands of dollars, unless otherwise noted:
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
OPERATING REVENUES:
Refining and marketing . . . . . . . . . . . . . . . . . . . $ 674,994 $483,429 $1,249,501 $ 887,610
Natural gas/natural gas liquids. . . . . . . . . . . . . . . 523,059 330,160 1,100,983 657,365
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 31 63 63
Intersegment eliminations. . . . . . . . . . . . . . . . . . (45,347) (37,798) (87,712) (78,681)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . $1,152,737 $775,822 $2,262,835 $1,466,357
OPERATING INCOME (LOSS):
Refining and marketing . . . . . . . . . . . . . . . . . . . $ 41,356 $ 45,792 $ 56,589 $ 60,903
Natural gas/natural gas liquids. . . . . . . . . . . . . . . 22,712 18,186 70,178 39,930
Corporate general and administrative expenses and
other, net . . . . . . . . . . . . . . . . . . . . . . . . (9,635) (9,025) (20,096) (17,213)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,433 $ 54,953 $ 106,671 $ 83,620
Equity in earnings of joint ventures . . . . . . . . . . . . . $ 599 $ 1,530 $ 821 $ 3,399
Other income, net. . . . . . . . . . . . . . . . . . . . . . . $ 848 $ 852 $ 3,292 $ 1,610
Interest and debt expense, net . . . . . . . . . . . . . . . . $ 23,739 $ 24,613 $ 48,929 $ 49,748
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,841 $ 20,522 $ 40,755 $ 24,281
Net income applicable to common stock. . . . . . . . . . . . . $ 18,000 $ 17,558 $ 35,073 $ 18,353
Earnings per share of common stock . . . . . . . . . . . . . . $ .41 $ .40 $ .80 $ .42
OPERATING STATISTICS:
Refining and marketing:
Throughput volumes (Mbbls per day) . . . . . . . . . . . . 168 154 169 152
Average throughput margin per barrel . . . . . . . . . . . $ 6.43 $ 7.25 $ 5.49 $ 6.08
Natural gas/natural gas liquids:
Gas volumes (MMcf per day):
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . 1,595 1,334 1,685 1,397
Transportation . . . . . . . . . . . . . . . . . . . . . 1,914 1,399 1,670 1,384
Total gas volumes. . . . . . . . . . . . . . . . . . . 3,509 2,733 3,355 2,781
Average gas sales margin per Mcf . . . . . . . . . . . . . $ .109 $ .150 $ .181 $ .155
Average gas transportation fee per Mcf . . . . . . . . . . $ .083 $ .097 $ .091 $ .097
NGL plant production:
Production volumes (Mbbls per day) . . . . . . . . . . . 79.5 82.8 79.2 84.1
Average NGL market price per gallon. . . . . . . . . . . $ .307 $ .266 $ .306 $ .264
Average gas cost per Mcf . . . . . . . . . . . . . . . . $ 1.69 $ 1.36 $ 1.64 $ 1.39
Average NGL margin per gallon. . . . . . . . . . . . . . $ .106 $ .087 $ .100 $ .082
Consolidated Results
The Company reported net income of $20.8 million, or $.41 per
share, for the second quarter of 1996 compared to $20.5 million, or
$.40 per share, for the same period in 1995. For the first six
months of 1996, net income was $40.8 million, or $.80 per share,
compared to $24.3 million, or $.42 per share, for the first six
months of 1995. During the second quarter, net income and earnings
per share increased slightly as an increase in operating income
from the Company's natural gas/natural gas liquids operations was
mostly offset by a decrease in operating income from the Company's
refining and marketing operations. During the year-to-date period,
net income and earnings per share increased substantially due to a
significant increase in natural gas/natural gas liquids operating
income, partially offset by a decrease in refining and marketing
operating income and increases in corporate expenses and income tax
expense. The 1996 second quarter and year-to-date results were
adversely affected by two power outages at the Refinery caused by
external factors which reduced operating income by an estimated $12
million or approximately $.18 per share on an after-tax basis. See
"Segment Results - Refining and Marketing" below.
Operating revenues increased $376.9 million, or 49%, to $1.2
billion, and $796.5 million, or 54%, to $2.3 billion, during the
second quarter and first six months of 1996, respectively, compared
to the same periods in 1995 due to increases in operating revenues
from both the Company's refining and marketing operations and
natural gas/natural gas liquids operations. Operating income
decreased $.5 million to $54.4 million during the second quarter of
1996 compared to the same period in 1995 as an increase in
operating income from natural gas/natural gas liquids operations
was more than offset by a decrease in operating income from
refining and marketing operations and an increase in corporate
expenses. Operating income increased $23.1 million, or 28%, to
$106.7 million during the first six months of 1996 compared to the
same period in 1995 due primarily to an increase in natural
gas/natural gas liquids operating income, partially offset by a
decrease in refining and marketing operating income and an increase
in corporate expenses resulting from higher employee-related costs.
Changes in operating revenues and operating income by business
segment are explained below under "Segment Results."
Equity in earnings of joint ventures decreased $2.6 million
during the first six months of 1996 compared to the same period in
1995 due to a decrease in the Company's equity in earnings of
Javelina resulting primarily from continued lower petrochemical
product prices and higher feedstock costs. Partially offsetting
the decrease in equity in earnings of joint ventures in the
year-to-date period was a $1.7 million increase in Other income, net,
resulting primarily from income recognized in 1996 in connection
with a minor investment in a natural gas development project.
Income tax expense increased $6.5 million to $21.1 million in the
first six months of 1996 compared to the same period in 1995 due
primarily to higher pre-tax income partially offset by the
recognition in the 1996 period of certain income tax credits
related to the natural gas development project noted above.
Segment Results
Refining and Marketing
Operating revenues from the Company's refining and marketing
operations increased $191.6 million, or 40%, to $675 million during
the second quarter of 1996 compared to the same period in 1995 due
primarily to an increase in sales volumes resulting from increased
trading and rack marketing activities and to a lesser extent from
an increase in throughput volumes. Average daily throughput
volumes increased 9% due to various unit improvements and
enhancements made during 1995 and the nonrecurrence of certain unit
turnarounds which were completed during the second quarter of 1995,
partially offset by the effects of the two power outages at the
Refinery during the second quarter of 1996 noted above.
Operating income from the Company's refining and marketing
operations decreased $4.4 million, or 10%, to $41.4 million during
the second quarter of 1996 compared to the same period in 1995 due
primarily to a 3% decrease in total throughput margins and an
increase in operating expenses. Total throughput margins decreased
due to a decrease in margins between conventional gasoline prices
and crude oil, the effect of the two second quarter 1996 power
outages noted above, lower oxygenate margins, and continued lower
prices on sales of petrochemical feedstocks. These decreases in
throughput margins were partially offset by increases resulting
from higher average daily throughput volumes as discussed above,
sales of inventoried refined products, improvement in feedstock
discounts, and higher premiums on sales of CARB (California Air
Resources Board) Phase II gasoline. The power outages occurred in
the earlier part of the quarter when product prices and refining
fundamentals were strong, while the decrease in conventional
gasoline margins occurred primarily in the latter half of the
quarter as a result of decreasing demand, both negatively affecting
throughput margins. Discounts for the Company's feedstocks
improved due to widening residual oil ("resid") discounts and
improved results from the Company's price risk management
activities. Operating expenses increased due primarily to higher
variable costs resulting from increased throughput and costs
associated with the methanol plant which commenced operations in
the latter half of 1995.
Operating revenues from the Company's refining and marketing
operations increased $361.9 million, or 41%, to $1.25 billion
during the first six months of 1996 compared to the same period in
1995 due primarily to an increase in trading and rack marketing
sales volumes and an 11% increase in throughput volumes. Operating
income decreased $4.3 million, or 7%, to $56.6 million during the
first six months of 1996 compared to the same period in 1995 due to
an increase in operating and other expenses, partially offset by a
slight increase in total throughput margins. Increases in total
throughput margins resulting from higher throughput volumes as
noted above and higher margins on sales of oxygenates were mostly
offset by the effect of the second quarter 1996 power outages
discussed above, lower prices on sales of petrochemical feedstocks,
and a decrease in conventional gasoline margins. Operating
expenses increased due to the factors discussed above.
Natural Gas/Natural Gas Liquids
Operating revenues from the Company's natural gas/natural gas
liquids operations increased $192.9 million, or 58%, to $523.1
million during the second quarter of 1996 compared to the same
period in 1995 due primarily to a 37% increase in average natural
gas sales prices and a 20% increase in daily natural gas sales
volumes, primarily off-system sales. These increases were due to
continued strong natural gas demand resulting from hot weather and
lower industry-wide natural gas storage inventories during the 1996
period. Revenues were also impacted by an increase in NGL marketing
activities.
Operating income from the Company's natural gas/natural gas
liquids operations increased $4.5 million, or 25%, to $22.7 million
during the second quarter of 1996 compared to the same period in
1995 due primarily to an increase in margins on NGL production. Total
margins on NGL production were higher due to a 15% increase in the
average NGL sales price resulting from firm petrochemical and refining
demand, historically low NGL inventory levels and strong crude oil
prices, partially offset by an increase in natural gas fuel and shrinkage
costs and a 4% decrease in NGL production volumes. The increase in
fuel and shrinkage costs was limited by an approximate $6 million
increase in benefits from price risk management activities which
reduced such costs to below-market levels. NGL production volumes
were down primarily due to the sale of the Company's two West Texas
processing plants in August 1995, which more than offset production
increases at the remaining plants resulting from the completion in
1995 of certain operational improvements and production
enhancements. Increases in natural gas sales and transportation
volumes were offset by lower unit margins due to continued intense
industry-wide competition for market share.
Operating revenues from the Company's natural gas/natural gas
liquids operations increased $443.6 million, or 67%, to $1.1
billion during the first six months of 1996 compared to the same
period in 1995 due primarily to a 46% increase in average natural
gas sales prices and a 21% increase in daily natural gas sales
volumes resulting from the factors noted above and the extreme cold
winter weather during the 1996 first quarter, and to increased NGL
marketing activities. Operating income from the Company's natural
gas/natural gas liquids operations increased $30.2 million, or 76%,
to $70.2 million during the first six months of 1996 compared to the
same period in 1995 due primarily to an approximate $16 million
increase in total gas sales margins, higher margins on NGL production
of approximately $10 million and an approximate $3 million increase
in natural gas transportation revenues. Total gas sales margins
increased due to the significant increase in gas sales volumes and
prices noted above and to an increased contribution of approximately
$8 million from price risk management activities, partially offset by
reduced volumetric gains. Total margins on NGL production were higher
due to a 16% increase in the average NGL sales price for the reasons
described above and to an approximate $11 million increase in benefits
from price risk management activities which limited the increase in
natural gas fuel and shrinkage costs, partially offset by a 6% decrease
in NGL production volumes. Natural gas transportation revenues
increased due primarily to a 21% increase in transportation volumes.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by the Company's operating activities
increased $85.9 million during the first six months of 1996
compared to the same period in 1995 due primarily to the increase
in income described above under "Results of Operations" and to the
changes in current assets and current liabilities detailed in
Note 3 of Notes to Consolidated Financial Statements. Included in
such changes was an increase in accounts payable in the 1996 period
compared to a decrease in the 1995 period resulting, in part, from
changes in refining inventories and changes related to refining,
natural gas and NGL purchases. Refining inventories increased in
the 1996 period in advance of a scheduled turnaround of the
hydrodesulfurization unit which began in mid-July, while such
inventories decreased in 1995 resulting from a decrease in volumes
available under feedstock contracts and higher-than-normal refined
product inventory levels at the end of 1994. Also included in such
changes in current assets and current liabilities was a decrease in
prepaid expenses and other resulting from lower balances of
commodity deposits and deferrals at the end of the 1996 period.
During the 1996 period, the Company utilized the cash provided by
its operating activities, a portion of its existing cash balances,
proceeds from dispositions of various nonessential properties, and
proceeds from issuances of common stock related to the Company's
employee benefit plans to fund capital expenditures, reduce bank
debt, repay principal on certain outstanding nonbank debt including
the Management Partnership's First Mortgage Notes, and pay common
and preferred stock dividends.
Energy currently maintains an unsecured $300 million
revolving bank credit and letter of credit facility. As of
June 30, 1996, Energy had approximately $276 million available
under this committed bank credit facility for additional borrowings
and letters of credit. Energy also has $140 million of uncommitted
short-term bank credit lines and $170 million of uncommitted bank
letter of credit facilities. As of June 30, 1996, $15.7 million
was outstanding under these short-term bank lines, and letters of
credit aggregating $20.5 million were issued and outstanding under
these uncommitted letter of credit facilities. The Company was in
compliance with all covenants contained in its various debt
facilities as of June 30, 1996.
During the first six months of 1996, the Company expended
approximately $70 million for capital investments, primarily
capital expenditures, $36 million of which related to refining and
marketing operations while $31 million related to natural
gas/natural gas liquids operations. For total year 1996, the
Company currently expects to incur approximately $175 million for
capital expenditures and deferred turnaround and catalyst costs.
In addition, the Company is reviewing the economics of accelerating
a planned first quarter 1997 turnaround and catalyst change on its
hydrocracker and reformer units, estimated to cost $10 million,
into the fourth quarter of 1996. The Company has also entered into
an operating lease commitment in connection with a xylene
fractionation facility being constructed at the Refinery. The
lease term is for a period of 33 months beginning from the date the
facility is completed, currently estimated to be late 1996.
The Company currently owns a 35% interest in Productos
Ecologicos, S.A. de C.V. ("Proesa"), a Mexican corporation which is
involved in a project (the "Project") to design, construct and
operate a plant in Mexico to produce MTBE. In January 1995, the
Company suspended further investment in the Project pending the
resolution of certain key issues. Since that time, the Project
participants have engaged in negotiations among themselves and with
potential additional participants to restructure the participants'
ownership interests in Proesa and arrange funding for the Project.
Proesa and the Project participants have also engaged in
discussions with Petroleos Mexicanos, S.A. ("Pemex"), the Mexican
state-owned oil company, to renegotiate the purchase and sales
agreements between Proesa and Pemex. To date, little progress has
been made in resolving financial and ownership structure issues, or
in acquiring commitments from potential project participants, and
there can be no assurance that the Project will continue. At
June 30, 1996, the Company had a total investment in the Project of
approximately $16.5 million. If the Project is terminated, there
can be no assurance that the Company's investment in the Project
could be recovered. Proesa also has incurred additional
obligations totaling approximately $11 million which have not been
funded and has furnished a surety bond in connection with the
plant's first year of operations under the existing MTBE sales
agreement between Proesa and Pemex. Such bond is subject to being
called upon by Pemex under certain conditions and, based on the
exchange rate at July 31, 1996, has an insurable value of
approximately $5.4 million. Proesa has no independent source of
funding. Therefore, in the event of any cash requirements
resulting from the above, Proesa would necessarily request
additional funding from its owners.
The Company has entered into a sublease agreement for unused
space in its corporate headquarters office complex. The sublease
has a primary term of 20 years, with the sublessee having an option
to terminate the lease after 10 years. The sublessee is scheduled
to occupy the premises in phases, with full occupancy currently
expected in 1997.
The Company believes it has sufficient funds from operations,
and to the extent necessary, from the public and private capital
markets and bank markets, to fund its ongoing operating
requirements. The Company expects that it will raise additional
funds from time to time through equity or debt financings; however,
except for borrowings under bank credit agreements or debt
securities that may be issued from time to time under the Company's
$250 million shelf registration statement, the Company has no
specific financing plans as of the date hereof.
The foregoing discussion contains certain estimates,
predictions, projections and other "forward-looking statements"
(within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934) that
involve various risks and uncertainties. While these forward-looking
statements, and any assumptions upon which they are based,
are made in good faith and reflect the Company's current judgment
regarding the direction of its business, actual results will almost
always vary, sometimes materially, from any estimates, predictions,
projections, assumptions, or other future performance suggested
herein. Some important factors (but not necessarily all factors)
that could affect the Company's sales volumes, growth strategies,
future profitability and operating results, or that otherwise could
cause actual results to differ materially from those expressed in
any forward-looking statement include the following: market,
political or other forces affecting the pricing and availability of
resid and other refinery feedstocks, refined products, natural gas
supplies or natural gas liquids; accidents or other unscheduled
shutdowns affecting the Company's, its suppliers' or its customers'
pipelines, plants, machinery or equipment; excess industry
capacity, particularly in the natural gas pipeline industry;
competition from products and services offered by other energy
enterprises; changes in the cost or availability of third-party
vessels, pipelines and other means of transporting feedstocks and
products; state and federal environmental, economic, safety and
other policies and regulations, any changes therein, and any legal
or regulatory delays or other factors beyond the Company's control;
execution of planned capital projects; weather conditions affecting
the Company's operations or the areas in which the Company's
products are marketed; adverse rulings, judgments, or settlements
in litigation or other legal matters, including unexpected
environmental remediation costs in excess of any reserves; and
adverse changes in the credit ratings assigned to the Company's
debt securities and trade credit. Certain of these risk factors
are more fully discussed in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995. The Company
undertakes no obligation to publicly release the result of any
revisions to any such forward-looking statements that may be made
to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Alonso, et al. v. Fina Oil and Chemical Company, Forest Oil
Corporation, Valero Energy Corporation, Valero Natural Gas Company,
et al., 370th State District Court, Hidalgo County, Texas (filed
May 17, 1995). In 1987, certain subsidiaries of the Company
entered into a settlement agreement with Forest Oil Corporation
("Forest"), a natural gas producer, to resolve a take-or-pay
dispute between the parties. In May 1995, certain mineral interest
owners in South Texas brought a lawsuit against Forest and several
other defendants, including the Company, asserting several claims
in connection with an alleged underpayment of royalties, and
alleging that the numerous "operator defendants" (excluding the
Company) breached certain covenants and duties thereby depriving
the plaintiffs of the full value of their royalty interests. The
plaintiffs alleged that the Company conspired with Forest to
deprive plaintiffs of royalties that they would have earned but for
the settlement of the gas contract dispute. The plaintiffs,
however, have nonsuited the Company, dismissing all claims against
the Company.
City of Edinburg v. Rio Grande Valley Gas Company, Valero
Energy Corporation, Southern Union Company, et al., 92nd State
District Court, Hidalgo County, Texas (filed August 31, 1995).
This lawsuit is based upon ordinances of the City of Edinburg,
Texas (the "City") that granted franchises to Rio Grande Valley Gas
Company ("RGV") and its predecessors allowing RGV to sell and
distribute natural gas within the City. RGV was formerly owned by
Energy. On September 30, 1993, Energy sold the common stock of RGV
to Southern Union Company ("Southern Union"). The City alleges
that the defendants have used RGV's facilities to sell or transport
natural gas in Edinburg in violation of the ordinances and
franchises granted by the City, and that RGV (now Southern Union)
has not fully paid all franchise fees due the City. The City also
alleges that the defendants have used the public property of the
City without compensating the City for such use, and alleges
conspiracy and alter ego claims involving all defendants. The City
seeks alleged actual damages of $50 million and unspecified
punitive damages related to amounts allegedly due under the RGV
franchise, City ordinances and state law. In addition, the City of
Pharr, Texas, filed an intervention seeking certification of a
class, with itself as class representative, consisting of all
cities served by franchise by Southern Union. On June 24, 1996,
the court certified the class, approved a class notice, and severed
the claims of the City of Pharr and the class from the original
City of Edinburg lawsuit. In addition to appealing the class
certification ruling, the defendants are seeking mandamus relief in
the court of appeals for recusal or disqualification of the trial
judge. On July 11, 1996, Southern Union filed a cross-claim
against Energy, alleging, among other things, that Southern Union
is entitled to indemnification under provisions of the purchase
agreement between Energy and Southern Union. Southern Union also
asserts claims related to a 1985 settlement among Energy, RGV and
the Railroad Commission of Texas regarding certain pricing terms.
Southern Union's claims include, among other things, damages for
indemnification, breach of contract, negligent misrepresentation
and fraud. The City of Edinburg lawsuit is set for trial
September 9, 1996.
Mizel v. Valero Energy Corporation, Valero Natural Gas
Company, and Valero Natural Gas Partners, L.P., removed to the
United States District Court for the Western District of Texas
(originally filed May 1, 1995 in the United States District Court
for the Southern District of California). This is a federal
securities fraud lawsuit filed by a former owner of approximately
19,500 units of limited partnership interests of VNGP, L.P.
Plaintiff alleges that the proxy statement used in connection with
the solicitation of votes for approval of the merger of VNGP, L.P.
with a wholly owned subsidiary of the Company contained fraudulent
misrepresentations. Plaintiff also alleges breach of fiduciary
duty in connection with the merger transaction. The subject matter
of this lawsuit was the subject matter of a prior Delaware class
action lawsuit which was settled prior to consummation of the
merger. The Company believes that plaintiff's claims have been
settled and released by the prior class action settlement. The
lawsuit is scheduled for trial on December 2, 1996. On July 26,
1996, the magistrate assigned to the case issued a memorandum
recommending to the district court that the Company's motion for
summary judgment be granted. If adopted by the district court,
plaintiff's claims against the Company will be dismissed.
Teco Pipeline Company v. Valero Energy Corporation, et al.,
215th State District Court, Harris County, Texas (filed April 24,
1996). In 1985, Valero Transmission Company, a wholly owned
subsidiary of Energy, sold a 50% undivided interest in its 340-mile
West Texas pipeline and entered into a joint venture through an
ownership agreement and an operating agreement, each dated
February 28, 1985, with the purchaser of the interest. In 1988,
plaintiff succeeded to that purchaser's 50% interest. A subsidiary
of Energy has at all times been the operator of the pipeline.
Notwithstanding the written ownership and operating agreements,
plaintiff alleges that a separate, unwritten partnership agreement
exists, and that the defendants have exercised improper dominion
over such alleged partnership's affairs. The plaintiff also
alleges that the defendants acted in bad faith by negatively
affecting the economics of the joint venture in order to provide
financial advantages to facilities or entities owned by the
defendants and by allegedly usurping for the defendants' own
benefit certain opportunities available to the joint venture.
Plaintiff asserts causes of action for breach of fiduciary duty,
fraud, tortious interference with business relationships, and other
claims, and seeks unquantified actual and punitive damages. The
Company has filed a motion to stay the litigation and to compel
arbitration pursuant to provisions of the 1985 agreements which
require arbitration of disputes. The Company has also filed a
counterclaim alleging that plaintiff breached its own obligations
to the joint venture and jeopardized the economic and operational
viability of the pipeline by its actions. The Company is seeking
unquantified actual and punitive damages. A hearing is scheduled
in September on the defendants' motion to compel arbitration.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held
April 30, 1996. Matters voted on at the meeting and the results
thereof included (i) a proposal to ratify the appointment of Arthur
Andersen LLP as independent public accountants (approved with
39,033,780 affirmative votes, 62,259 negative votes, and
90,254 abstentions); (ii) a proposal to approve the Company's
Non-Employee Director Stock Option Plan (approved with
36,359,385 affirmative votes, 2,473,608 negative votes, and
353,301 abstentions), and (iii) a proposal to elect three Class I
directors to serve until 1999: F. Joseph Becraft (approved with
38,693,980 affirmative votes, and 492,313 votes withheld),
Ronald K. Calgaard (approved with 38,689,669 affirmative votes, and
496,624 votes withheld), and Susan Kaufman Purcell (approved with
38,692,289 affirmative votes, and 494,004 votes withheld).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
11.1 Computation of Earnings Per Share.
12.1 Computation of Ratio of Earnings to Fixed Charges.
27.1* Financial Data Schedule (reporting financial information
as of and for the six months ended June 30, 1996).
27.2* Restated Financial Data Schedule (reporting financial
information as of and for the six months ended June 30, 1995).
__________
* The Financial Data Schedule and Restated Financial Data
Schedule shall not be deemed "filed" for purposes of
Section 11 of the Securities Act of 1933 or Section 18
of the Securities Exchange Act of 1934, and are included
as exhibits only to the electronic filing of this Form
10-Q in accordance with Item 601(c) of Regulation S-K
and Section 401 of Regulation S-T.
(b) Reports on Form 8-K.
(i) The Company did not file a Current Report on Form 8-K
during the quarter ended June 30, 1996.
Pursuant to subparagraph 601(b)(4)(iii)(A) of Regulation S-K,
the registrant has omitted from the foregoing list of exhibits, and
hereby agrees to furnish to the Commission upon its request, copies
of certain instruments, each relating to long-term debt not
exceeding 10 percent of the total assets of the registrant and its
subsidiaries on a consolidated basis.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VALERO ENERGY CORPORATION
(Registrant)
By: /s/ Edward C. Benninger
Edward C. Benninger
Executive Vice President and Chief
Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
Date: August 14, 1996