Valero Energy Corp. (ticker: VLO, exchange: New York Stock Exchange (.N)) News Release - 1/31/2006
Valero Energy Corporation Reports Fourth Quarter and Full Year 2005 Earnings; Tenth Consecutive Quarter of Record Earnings
SAN ANTONIO--(BUSINESS WIRE)--Jan. 31, 2006--Valero Energy Corporation (NYSE:VLO) today marked its tenth consecutive quarter of record earnings with net income for the fourth quarter of 2005 of $1.3 billion, or $2.06 per share, compared to $489 million, or $0.88 per share, for the same period last year. Results for the fourth quarter include a $55 million pre-tax gain on the sale of the company's 20 percent interest in the Javelina off-gas processing joint venture in Corpus Christi. Excluding this special item, earnings per common share for the fourth quarter of 2005 would have been $2.00. There were no special items related to LIFO impacts in the fourth quarter. The company's per share results for all periods reflect the two-for-one common stock split distributed on December 15, 2005.
For the year ended December 31, 2005, Valero's net income was a record $3.6 billion, or $6.10 per share, versus $1.8 billion, or $3.27 per share, in 2004. Excluding the special item discussed above and the $621 million pre-tax LIFO charge in the third quarter of 2005, the company's net income for 2005 was $4 billion, or $6.76 per share. The company's debt-to-capitalization ratio, net of cash, was 24.8 percent as of December 31, 2005, compared to 30.7 percent as of December 31, 2004.
Fourth quarter operating income for the company's refining segment was $2.1 billion, compared to $884 million for the same period in 2004. The company benefited from the addition of the four former Premcor Inc. refineries, which contributed approximately $485 million to operating income during the quarter, and the higher refined product margins in October resulting from the refinery shutdowns due to hurricanes Katrina and Rita.
"Our outstanding fourth quarter results completed what was another record year for Valero," said Bill Klesse, Valero's Chief Executive Officer. "These strong earnings demonstrate not only the sustainably higher refining margin environment, but also the high-quality, diverse asset base that has been put together under the leadership of Chairman Bill Greehey. We remain as committed as ever to growing our company, supporting our employees and their communities, and creating additional value for our stockholders.
"With respect to refinery operations in the fourth quarter, our throughputs exceeded 3 million barrels per day for the first time in our history and would have been even higher had Port Arthur not been down for part of October due to the damage done by Hurricane Rita and an extended turnaround at Delaware City," said Klesse.
Regarding the company's cash flows, capital spending for the fourth quarter was $1 billion and $2.6 billion for the full year. With respect to other uses of cash during the quarter, the company paid off the remaining $800 million outstanding under the $1.5 billion term loan used to fund a portion of the Premcor purchase price, a full year earlier than originally projected. The company also purchased approximately $380 million of its common stock. For the full year, the company repaid $2.4 billion of debt and purchased approximately $570 million of its common stock.
"For 2006, our capital budget is $3.4 billion and debt maturities are only $220 million. With our continued strong earnings, it's likely that we will have a record amount of free cash flow available in 2006, giving us ample resources to create additional shareholder value," said Klesse.
"So far in the first quarter, we've seen a continuation of solid refined product margins and wide sour crude discounts. Compared to last year, gasoline demand is up around one percent and distillate demand is up about half of a percent. On a days-of-supply basis, gasoline is currently at an all-time low for this time of year. With respect to distillate, despite the warm weather in January, days-of-supply is at normal levels for this time of year, primarily due to tight low-sulfur diesel supplies. And, keep in mind that this year's spring turnaround season is projected to be one of the heaviest on record. So, looking at the forward curve, gasoline and distillate margins are headed higher. As far as sour crude discounts are concerned, we expect them to continue to be wide for the foreseeable future.
"Looking at refining fundamentals for 2006, we feel very confident that refined product supplies are going to remain tight given the likelihood of continued economic growth, both in the U.S. and abroad, limited new refining capacity coming online this year and the anticipated impact of regulatory changes on transportation fuels. The convergence of dramatically lower sulfur limitations in gasoline and diesel and the removal of MTBE from gasoline in the U.S. will not only affect the ability of U.S. refiners to produce on-spec product, but will also impact imports. We expect that sustained high prices are going to be required to attract the necessary supply to meet growing U.S. refined product demand. Compounding these challenges is the fact that 2006 is forecast to be one of the heaviest turnaround seasons on record for the U.S. refining industry, so building inventory ahead of this summer's driving season will be more difficult. For these and many other reasons, we strongly believe that 2006 will be the best year yet for the refining industry and another record year for Valero," said Klesse.
Valero's senior management will hold a conference call at 11:00 a.m. ET (10:00 a.m. CT) today, to discuss this earnings release and provide an update on company operations. A live broadcast of the conference call will be available on the company's website at www.valero.com.
Valero Energy Corporation is a Fortune 500 company based in San Antonio, with approximately 22,000 employees and annual revenues of more than $80 billion. The company owns and operates 18 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.3 million barrels per day, making it the largest refiner in North America. Valero is also one of the nation's largest retail operators with more than 5,000 retail and branded wholesale outlets in the United States, Canada and the Caribbean under various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon. Please visit www.valero.com for more information.
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 actual results could differ materially from those projected in such forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecast, see the proxy statement/prospectus dated July 13, 2005 regarding the merger of Valero and Premcor, and the amended Form S-4 Registration Statement filed with the Securities and Exchange Commission (as the same may be supplemented or amended). Also, see both companies' reports, including annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission and available on the Valero web site at www.valero.com. |
