Valero Energy (VLO) Q3 2014 earnings summary

Executive summary

• Q3 2014 earnings were $1.1 billion, or $2 per share; operating income rose $1.1 billion YoY to $1.7 billion, driven mainly by refining and also by ethanol.

• Refining margins, record ethanol earnings, and 98% refinery utilization supported a strong quarter; strategic investment focused on advantaged crude access and logistics.

Financial highlights

• Refining throughput margin was $11.81/bbl, up $4.05/bbl YoY; refining throughput averaged 2.8 MMbpd, up 42,000 bpd YoY.

• G&A excluding corporate depreciation was $180 million; net interest expense was $98 million, D&A was $430 million, and the effective tax rate was 32.9%.

• Cash increased $700 million during the quarter, including a ~$300 million working-capital contribution, primarily from timing-related payables and receivables.

Outlook and guidance

• 2014 CapEx guidance, including turnarounds and catalysts, was reduced by $100 million to ~$2.9 billion; slightly less than half was expected for stay-in-business spending.

• 2015 CapEx was projected at ~$2.8 billion, including $1.5 billion stay-in-business and $1.3 billion growth spending; the $150 million methanol placeholder was subject to a Q2 2015 go/no-go review.

• Q4 refining throughput guidance: Gulf Coast 1.55–1.6 MMbpd, Midcontinent 450,000–470,000 bpd, West Coast 260,000–280,000 bpd, and North Atlantic 410,000–430,000 bpd; cash operating expense ~ $4/bbl.

• Q4 ethanol production was expected at 3.7 million gallons/day; operating expense $0.41/gallon, including $0.04 non-cash costs. G&A ex-depreciation ~$190 million, net interest ~$95 million, D&A ~$425 million, tax rate ~35%.

• Q4 refining signals still favored running the system relatively full, though less strongly than in Q3; gasoline exports were expected to rise slightly, with distillate exports roughly flat.