Refiner's Earnings Mixed (VLO, MRO, TSO)

The best thing to say about the 2009 first quarter at refiner Valero Energy Corporation (NYSE:VLO) is that it was better than the first quarter a year ago. Refining margins are higher now, and the cost of energy to run the refinery is lower. Revenues, though, are sinking.  Valero is the first of the major refiners to report. Marathon Oil Corp. reports first quarter earnings on Thursday and Tesoro Corp. (NYSE:TSO) reports earnings next week. The overall story story line will probably not be much different.

For the quarter, Valero reported EPS of $0.59, up from $0.48 a year ago. Revenue, however, fell by 51%, from $27.95 billion to $13.82 billion. Total costs fell by an equal percentage. Analysts had expected EPS of $0.50 on revenues of $19.86 billion.

Margin/barrel increased to $8.77, compared with $8.48 a year ago, and operating costs/barrel fell from $6.09 to $6.04. Total throughput volume was down 142,000 barrels per day from the year ago quarter.

Capital spending projections for the year have fallen from $2.7 billion to $2.5 billion. Valero expects its purchase of seven ethanol plants from bankrupt VeraSun to “fit strategically” with the refining business, and is looking forward to growing ethanol demand through 2010 “under the federal mandate.”

Valero shares are down slightly in pre-market trading, to $20.66. The company’s 52-week stock price range is $13.94-$53.94.

Paul Ausick
April 28, 2009