Valero Energy (VLO) Q4 2014 earnings summary

Executive summary

• Strong Q4 and FY 2014 results, supported by refining execution, higher throughput and operational reliability; disciplined investment and increased stockholder returns remained priorities.

• Strategy emphasized operations excellence, returning capital, rigorous project selection and unlocking logistics asset value through VLP.

Financial highlights

• Q4 continuing-operations earnings were $1.2B, or $2.22/share; adjusted earnings were $952M, or $1.83/share, versus $963M, or $1.78/share, in Q4 2013.

• FY 2014 continuing-operations earnings were $3.7B, or $6.97/share; adjusted earnings were $3.5B, or $6.68/share, versus $2.4B, or $4.41/share, in 2013.

• Q4 refining operating income was $1.9B versus $1.5B; nearly all of the $377M increase came from special items, leaving adjusted operating income flat YoY.

• Q4 G&A, excluding corporate depreciation, was $214M, up $35M YoY, primarily due to changes in legal reserves; net interest was $101M and D&A was $425M.

Outlook and guidance

• Q1 refining throughput guidance: Gulf Coast 1.45–1.50M bpd; Mid-Continent 430–450K; West Coast 240–260K; North Atlantic 450–470K; refining cash operating expense $4.20/bbl.

• Q1 ethanol production expected at 3.7M gallons/day; operating expense $0.37/gallon, including $0.04/gallon non-cash costs. G&A ex-depreciation $170M; net interest $100M; D&A $440M; tax rate 33%.

• 2015 capex guidance is $2.65B: $1.5B stay-in-business and $1.15B growth, excluding $150M for the St. Charles methanol project under evaluation; 2016 guidance is $2.4B, excluding $300M for that project.

• 2015–16 growth spending is weighted toward logistics and access to advantage crudes; most logistics investment is expected to qualify for future VLP drops.

• Management expected crude oversupply to persist and believed low flat prices could support product demand and refining margins; refinery-margin direction remained uncertain.