Energy

Valero... Pain Today, Pain Tomorrow (VLO)

Refinery ImageValero Energy Corp. (NYSE: VLO) did manage to beat earnings, at least if you consider a two-penny beat versus a wide loss after a warning as a beat.  The refiner’s loss came to -$0.48 EPS versus the Thomson Reuters figure of -$0.50 EPS.   The company had already warned that it was going to lose money, and things seem like they will remain tough for the refining giant.

The company said that the decline in operating income was mostly as a result of lower diesel and jet fuel margins, as well as from lower sour crude oil differentials versus the same quarter last year because key supplies of lower quality crude oils have come off the market.

Valero also called this “a very challenging environment for sour crude oil refiners.”

As far as the demand picture, Valero said that the global economic downturn has sharply reduced demand for refined products, and that is at the same time as when new refining capacity is coming online in the rest of the world.

This is a problem for ahead… global product inventories are high and refining margins are depressed.

Valeros does expect that product demand, sour crude oil production, and refining margins will improve, after the global economy improves.

The mid-July shutdown of the Aruba refinery was completed because of very poor margins, and Valero will review the margin outlook in September to decide whether to restart the plant or whether it will keep it off-line. By that time, it feels it will have a decision from the arbitration panel on the turnover tax arbitration.

Elsewhere, the company will continue to monitor its other refineries for situations where it will slow or shut down specific units or entire plants.

The long and short of this sounds like the weatherman took over.  Pain today, 80% chance of pain tomorrow.  Valero shares are down 3% at $18.17 in pre-market trading.  The 52-week trading range is $13.94 to $36.22.

JON C. OGG
JULY 28, 2009

Want to Retire Early? Start Here (Sponsor)

Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?

Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.

Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.

 

Have questions about retirement or personal finance? Email us at [email protected]!

By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.

By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.