Valero Energy Corporation Reports Record First Quarter Results Despite Heavy Turnarounds

Marks Company's Fifth Consecutive Quarter of Record Earnings



Apr 17, 2001, 01:00 ET from Valero Energy Corporation

    SAN ANTONIO, April 17 /PRNewswire/ -- Valero Energy Corporation
 (NYSE:   VLO) today reported record net income for the first quarter of 2001 of
 $136.1 million, or $2.13 per share, compared to net income of $30.7 million,
 or $.54 per share, in the first quarter of 2000.  This quarter's results
 represent the company's fifth consecutive quarter of record earnings.
     Operating income for the first quarter was $237.1 million, compared to
 operating income of $57.8 million for the same period last year.
 Approximately $70 million of the increase in operating income was attributable
 to the company's West Coast operations.  In addition, the company's Corpus
 Christi refinery contributed $90 million to operating income for the quarter.
 Gasoline and distillate margins were exceptionally strong in all of the
 company's markets primarily due to low inventories.  With respect to
 feedstocks, discounts on sour crude oil reached record levels during the
 quarter.  The quarter's strong results were achieved despite significant
 downtime resulting from planned turnarounds at three of the company's
 refineries.  Without the downtime, the company could have recognized
 additional pre-tax income of $60 million, or $.60 per share.
     "To post such strong earnings in the first quarter with three of our six
 refineries in major turnarounds is a testament to the earnings power of our
 assets," said Bill Greehey, Valero's Chairman of the Board and Chief Executive
 Officer.  "This quarter's turnarounds were a continuation of our upgrading and
 efficiency improvement program to bring our acquired refineries to the level
 of performance we expect of our facilities.  During the turnarounds, we made
 major capital improvements at the Houston, Texas City and Benicia refineries
 that should result in over $50 million in annual operating income.  That's on
 top of the over $40 million in annual operating income benefits that we expect
 to see from the projects we completed last year.
     "Industry fundamentals remain outstanding and are much better than last
 year at this time.  Gasoline inventories, particularly reformulated gasoline
 inventories, are near their lowest levels in the last five years and there is
 very little time left for refiners to rebuild inventories ahead of the summer
 driving season.  Normally, gasoline inventories build in the first quarter.
 However, with gasoline production trailing last year's levels by almost
 150,000 barrels per day and imports down 6.5%, gasoline inventories have
 actually drawn since the beginning of the year.  We've also recently seen
 demand for both gasoline and distillate improve over last year's levels,
 despite the weaker economic conditions.  On the feedstock side, we continue to
 enjoy record sour crude discounts.  In fact, our key sour crude contract
 discounts for April and May have already been set at levels which are over
 $3.00 per barrel better than the same period last year.
     "With the summer driving season set to begin shortly, very low gasoline
 inventories throughout the United States and sour crude discounts at near
 record levels, we believe margins this summer will be even better than last
 year's exceptional levels.  And looking forward, the fundamentals are in place
 for this strong refining cycle to last well into the future.
     "First Call consensus estimate for Valero for the second quarter is
 currently $1.80 per share.  Based on where the market is today and where the
 futures market is currently valuing the second quarter, we should report
 earnings in the range of $3.25 to $3.75 per share for the second quarter of
 2001.  Given the proven earnings power of our assets and the underlying
 fundamental strength of the business, we continue to believe that First Call
 earnings estimates for the company for 2001 and 2002 remain significantly
 understated.
     "We remain committed to our strategy of growth through accretive
 acquisitions and investments in high-return internal projects.  There continue
 to be attractive acquisition candidates in the refining business as well as a
 number of internal investment opportunities that will further enhance the
 profitability of our existing refineries.  Our strong cash flow and financial
 strength will allow us to continue aggressively implementing our strategic
 growth plan into the future," said Greehey.
     Valero Energy Corporation is a Fortune 500 company based in San Antonio,
 with more than 3,100 employees and annual revenues of more than $14 billion.
 The company currently owns and operates six refineries in Texas, California,
 Louisiana and New Jersey with a combined throughput capacity of more than
 one million barrels per day, making it the nation's largest independent
 refining company.  Valero is recognized throughout the industry as a leader in
 the production of premium, environmentally clean products such as reformulated
 gasoline, CARB Phase II gasoline, low-sulfur diesel and oxygenates.  The
 company markets its products in 34 states through an extensive wholesale bulk
 and rack marketing network, and in California through approximately 80 Valero
 branded retail and 270 other retail distributor locations.
     Valero Energy Corporation will host a live earnings conference call
 available on the Investor Relations portion of its website at
 http://www.valero.com commencing at 4:30 p.m. EDT on April 17, 2001.
     Statements contained in this press 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 the
 company's actual results could differ materially from those projected in its
 forward-looking statements.  For more information concerning factors that
 could cause actual results to differ from those expressed or forecast, see the
 company's annual report on Form 10-K and quarterly reports on Form 10-Q, filed
 with the Securities and Exchange Commission and available on the company's web
 site at http://www.valero.com.  These factors include potential changes in
 gasoline, crude oil, distillate and other commodity prices, varying market
 conditions, actions of government, hostilities in oil producing regions,
 adverse rulings in litigation and potential delays or other changes in work
 and repair schedules.  The company undertakes no obligation to update or
 publicly release the result of any revisions to any forward-looking statements
 that may be made to reflect events or circumstances that occur, or which the
 company becomes aware of, after the date of this release or to reflect the
 occurrence of unanticipated events.
 
 
                    VALERO ENERGY CORPORATION AND SUBSIDIARIES
                                 EARNINGS RELEASE
                   (Millions of Dollars, Unless Otherwise Noted)
                                   (Unaudited)
 
                                                  Three Months Ended March 31,
                                                    2001             2000
 
     OPERATING REVENUES                           $3,769.3         $2,928.6
 
     COSTS AND EXPENSES:
      Cost of Sales and Operating Expenses         3,464.0          2,826.8
      Selling and Administrative Expenses             36.4             20.2
      Depreciation Expense                            31.8             23.8
       Total                                       3,532.2          2,870.8
 
     OPERATING INCOME                                237.1             57.8
 
     OTHER INCOME (EXPENSE), NET                      (0.3)             1.9
 
     INTEREST AND DEBT EXPENSE, NET                  (18.7)           (12.8)
 
     DISTRIBUTIONS ON PREFERRED SECURITIES
      OF SUBSIDIARY TRUST                             (3.4)             ---
 
     INCOME BEFORE INCOME TAXES                      214.7             46.9
 
     INCOME TAX EXPENSE                               78.6             16.2
 
     NET INCOME                                     $136.1            $30.7
 
     EARNINGS PER COMMON SHARE                       $2.23            $0.55
 
      Weighted Average Shares Outstanding
       (in millions)                                  61.1             55.9
 
     EARNINGS PER COMMON SHARE - ASSUMING
      DILUTION                                       $2.13            $0.54
 
      Weighted Average Shares Outstanding
       (in millions)                                  63.9             57.2
 
 
                   VALERO ENERGY CORPORATION AND SUBSIDIARIES
                                EARNINGS RELEASE
                                  (Unaudited)
 
                                                   Three Months Ended March 31,
                                                      2001             2000
     OPERATING HIGHLIGHTS:
      Sales Volumes (Mbbls per Day)                  1,255            1,002
      Throughput Volumes (Mbbls per Day)               877              744
      Average Throughput Margin per
       Barrel                                        $6.61            $3.60
 
      Operating Costs per Barrel:
       Cash (Fixed and Variable)                     $2.49            $1.93
       Depreciation and Amortization                  0.63             0.50
        Total Operating Costs per Barrel             $3.12            $2.43
 
      Charges:
       Crude Oils:
        Sour                                            60 %             52 %
        Heavy Sweet                                      5                9
        Light Sweet                                      8                9
         Total Crude Oils                               73               70
       High-Sulfur Resid                                 4                4
       Low-Sulfur Resid                                  3                4
       Other Feedstocks and Blendstocks                 20               22
        Total Charges                                  100 %            100 %
 
      Yields:
       Gasolines and Blendstocks                        53 %             50 %
       Distillates                                      27               30
       Petrochemicals                                    3                5
       Lubes and Asphalts                                2                3
       Other Products                                   15               12
        Total Yields                                   100 %            100 %
 
     AVERAGE MARKET REFERENCE PRICES AND DIFFERENTIALS
      (Dollars per Barrel):
       Feedstocks (at U.S. Gulf Coast,
        except as Noted):
        WTI Crude Oil                               $28.78           $28.90
        WTI Less Sour Crude Oil (A)                  $5.33            $2.38
        WTI Less ANS (U.S. West Coast)               $3.75            $1.71
        WTI Less Sweet Crude Oil (B)                 $0.35           $(0.68)
 
       Products:
        U.S. Gulf Coast:
         Conventional 87 Gasoline Less WTI           $5.76            $4.27
         No. 2 Fuel Oil Less WTI                     $3.47            $1.84
         Propylene Less WTI                          $2.67            $2.32
        U.S. East Coast:
         Conventional 87 Gasoline Less WTI           $5.28            $4.78
         No. 2 Fuel Oil Less WTI                     $4.32            $5.46
         Lube Oils Less WTI                         $26.24            $7.98
        U.S. West Coast:
         CARB 87 Gasoline Less ANS                  $19.47           $11.23
         Low-Sulfur Diesel Less ANS                  $9.38            $8.04
 
     (A) The market reference differential for sour crude oil is based on 50%
         Arab Medium and 50% Arab Light posted prices.
     (B) The market reference differential for sweet crude oil is based on 50%
         LLS and 50% Cusiana posted prices, with LLS adjusted for
         backwardation.
 
     Contact:  investors, Lee Bailey, Vice President, Investor Relations,
 210-370-2139, or media, Mary Rose Brown, Vice President, Corporate
 Communications, 210-370-2314, both of Valero Energy Corporation.
 
 

SOURCE Valero Energy Corporation
    SAN ANTONIO, April 17 /PRNewswire/ -- Valero Energy Corporation
 (NYSE:   VLO) today reported record net income for the first quarter of 2001 of
 $136.1 million, or $2.13 per share, compared to net income of $30.7 million,
 or $.54 per share, in the first quarter of 2000.  This quarter's results
 represent the company's fifth consecutive quarter of record earnings.
     Operating income for the first quarter was $237.1 million, compared to
 operating income of $57.8 million for the same period last year.
 Approximately $70 million of the increase in operating income was attributable
 to the company's West Coast operations.  In addition, the company's Corpus
 Christi refinery contributed $90 million to operating income for the quarter.
 Gasoline and distillate margins were exceptionally strong in all of the
 company's markets primarily due to low inventories.  With respect to
 feedstocks, discounts on sour crude oil reached record levels during the
 quarter.  The quarter's strong results were achieved despite significant
 downtime resulting from planned turnarounds at three of the company's
 refineries.  Without the downtime, the company could have recognized
 additional pre-tax income of $60 million, or $.60 per share.
     "To post such strong earnings in the first quarter with three of our six
 refineries in major turnarounds is a testament to the earnings power of our
 assets," said Bill Greehey, Valero's Chairman of the Board and Chief Executive
 Officer.  "This quarter's turnarounds were a continuation of our upgrading and
 efficiency improvement program to bring our acquired refineries to the level
 of performance we expect of our facilities.  During the turnarounds, we made
 major capital improvements at the Houston, Texas City and Benicia refineries
 that should result in over $50 million in annual operating income.  That's on
 top of the over $40 million in annual operating income benefits that we expect
 to see from the projects we completed last year.
     "Industry fundamentals remain outstanding and are much better than last
 year at this time.  Gasoline inventories, particularly reformulated gasoline
 inventories, are near their lowest levels in the last five years and there is
 very little time left for refiners to rebuild inventories ahead of the summer
 driving season.  Normally, gasoline inventories build in the first quarter.
 However, with gasoline production trailing last year's levels by almost
 150,000 barrels per day and imports down 6.5%, gasoline inventories have
 actually drawn since the beginning of the year.  We've also recently seen
 demand for both gasoline and distillate improve over last year's levels,
 despite the weaker economic conditions.  On the feedstock side, we continue to
 enjoy record sour crude discounts.  In fact, our key sour crude contract
 discounts for April and May have already been set at levels which are over
 $3.00 per barrel better than the same period last year.
     "With the summer driving season set to begin shortly, very low gasoline
 inventories throughout the United States and sour crude discounts at near
 record levels, we believe margins this summer will be even better than last
 year's exceptional levels.  And looking forward, the fundamentals are in place
 for this strong refining cycle to last well into the future.
     "First Call consensus estimate for Valero for the second quarter is
 currently $1.80 per share.  Based on where the market is today and where the
 futures market is currently valuing the second quarter, we should report
 earnings in the range of $3.25 to $3.75 per share for the second quarter of
 2001.  Given the proven earnings power of our assets and the underlying
 fundamental strength of the business, we continue to believe that First Call
 earnings estimates for the company for 2001 and 2002 remain significantly
 understated.
     "We remain committed to our strategy of growth through accretive
 acquisitions and investments in high-return internal projects.  There continue
 to be attractive acquisition candidates in the refining business as well as a
 number of internal investment opportunities that will further enhance the
 profitability of our existing refineries.  Our strong cash flow and financial
 strength will allow us to continue aggressively implementing our strategic
 growth plan into the future," said Greehey.
     Valero Energy Corporation is a Fortune 500 company based in San Antonio,
 with more than 3,100 employees and annual revenues of more than $14 billion.
 The company currently owns and operates six refineries in Texas, California,
 Louisiana and New Jersey with a combined throughput capacity of more than
 one million barrels per day, making it the nation's largest independent
 refining company.  Valero is recognized throughout the industry as a leader in
 the production of premium, environmentally clean products such as reformulated
 gasoline, CARB Phase II gasoline, low-sulfur diesel and oxygenates.  The
 company markets its products in 34 states through an extensive wholesale bulk
 and rack marketing network, and in California through approximately 80 Valero
 branded retail and 270 other retail distributor locations.
     Valero Energy Corporation will host a live earnings conference call
 available on the Investor Relations portion of its website at
 http://www.valero.com commencing at 4:30 p.m. EDT on April 17, 2001.
     Statements contained in this press 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 the
 company's actual results could differ materially from those projected in its
 forward-looking statements.  For more information concerning factors that
 could cause actual results to differ from those expressed or forecast, see the
 company's annual report on Form 10-K and quarterly reports on Form 10-Q, filed
 with the Securities and Exchange Commission and available on the company's web
 site at http://www.valero.com.  These factors include potential changes in
 gasoline, crude oil, distillate and other commodity prices, varying market
 conditions, actions of government, hostilities in oil producing regions,
 adverse rulings in litigation and potential delays or other changes in work
 and repair schedules.  The company undertakes no obligation to update or
 publicly release the result of any revisions to any forward-looking statements
 that may be made to reflect events or circumstances that occur, or which the
 company becomes aware of, after the date of this release or to reflect the
 occurrence of unanticipated events.
 
 
                    VALERO ENERGY CORPORATION AND SUBSIDIARIES
                                 EARNINGS RELEASE
                   (Millions of Dollars, Unless Otherwise Noted)
                                   (Unaudited)
 
                                                  Three Months Ended March 31,
                                                    2001             2000
 
     OPERATING REVENUES                           $3,769.3         $2,928.6
 
     COSTS AND EXPENSES:
      Cost of Sales and Operating Expenses         3,464.0          2,826.8
      Selling and Administrative Expenses             36.4             20.2
      Depreciation Expense                            31.8             23.8
       Total                                       3,532.2          2,870.8
 
     OPERATING INCOME                                237.1             57.8
 
     OTHER INCOME (EXPENSE), NET                      (0.3)             1.9
 
     INTEREST AND DEBT EXPENSE, NET                  (18.7)           (12.8)
 
     DISTRIBUTIONS ON PREFERRED SECURITIES
      OF SUBSIDIARY TRUST                             (3.4)             ---
 
     INCOME BEFORE INCOME TAXES                      214.7             46.9
 
     INCOME TAX EXPENSE                               78.6             16.2
 
     NET INCOME                                     $136.1            $30.7
 
     EARNINGS PER COMMON SHARE                       $2.23            $0.55
 
      Weighted Average Shares Outstanding
       (in millions)                                  61.1             55.9
 
     EARNINGS PER COMMON SHARE - ASSUMING
      DILUTION                                       $2.13            $0.54
 
      Weighted Average Shares Outstanding
       (in millions)                                  63.9             57.2
 
 
                   VALERO ENERGY CORPORATION AND SUBSIDIARIES
                                EARNINGS RELEASE
                                  (Unaudited)
 
                                                   Three Months Ended March 31,
                                                      2001             2000
     OPERATING HIGHLIGHTS:
      Sales Volumes (Mbbls per Day)                  1,255            1,002
      Throughput Volumes (Mbbls per Day)               877              744
      Average Throughput Margin per
       Barrel                                        $6.61            $3.60
 
      Operating Costs per Barrel:
       Cash (Fixed and Variable)                     $2.49            $1.93
       Depreciation and Amortization                  0.63             0.50
        Total Operating Costs per Barrel             $3.12            $2.43
 
      Charges:
       Crude Oils:
        Sour                                            60 %             52 %
        Heavy Sweet                                      5                9
        Light Sweet                                      8                9
         Total Crude Oils                               73               70
       High-Sulfur Resid                                 4                4
       Low-Sulfur Resid                                  3                4
       Other Feedstocks and Blendstocks                 20               22
        Total Charges                                  100 %            100 %
 
      Yields:
       Gasolines and Blendstocks                        53 %             50 %
       Distillates                                      27               30
       Petrochemicals                                    3                5
       Lubes and Asphalts                                2                3
       Other Products                                   15               12
        Total Yields                                   100 %            100 %
 
     AVERAGE MARKET REFERENCE PRICES AND DIFFERENTIALS
      (Dollars per Barrel):
       Feedstocks (at U.S. Gulf Coast,
        except as Noted):
        WTI Crude Oil                               $28.78           $28.90
        WTI Less Sour Crude Oil (A)                  $5.33            $2.38
        WTI Less ANS (U.S. West Coast)               $3.75            $1.71
        WTI Less Sweet Crude Oil (B)                 $0.35           $(0.68)
 
       Products:
        U.S. Gulf Coast:
         Conventional 87 Gasoline Less WTI           $5.76            $4.27
         No. 2 Fuel Oil Less WTI                     $3.47            $1.84
         Propylene Less WTI                          $2.67            $2.32
        U.S. East Coast:
         Conventional 87 Gasoline Less WTI           $5.28            $4.78
         No. 2 Fuel Oil Less WTI                     $4.32            $5.46
         Lube Oils Less WTI                         $26.24            $7.98
        U.S. West Coast:
         CARB 87 Gasoline Less ANS                  $19.47           $11.23
         Low-Sulfur Diesel Less ANS                  $9.38            $8.04
 
     (A) The market reference differential for sour crude oil is based on 50%
         Arab Medium and 50% Arab Light posted prices.
     (B) The market reference differential for sweet crude oil is based on 50%
         LLS and 50% Cusiana posted prices, with LLS adjusted for
         backwardation.
 
     Contact:  investors, Lee Bailey, Vice President, Investor Relations,
 210-370-2139, or media, Mary Rose Brown, Vice President, Corporate
 Communications, 210-370-2314, both of Valero Energy Corporation.
 
 SOURCE  Valero Energy Corporation