VLO: Valero Energy Corp. Message Board

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Gold/Mining/Energy : VLO: Valero Energy Corp.

VLO 179.19

+2.0%

Nov 10 3:59 PM EST

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From: Dennis Roth	11/7/2007 10:32:07 AM
	of 299

Valero Energy Corp. (VLO): Asset high grading strategy continues; reiterate Conviction Buy - Goldman Sachs - 11/06/07 News As part of its 3Q2007 earnings release, Valero Energy announced that it had decided to seek strategic alternatives for its Aruba refinery. The company reported adjusted 3Q2007 EPS of $1.40, in line with its $1.30-$1.40 guidance from October 10, our $1.35 estimate, and the $1.36 First Call consensus projection. Analysis We view favorably Valero's ongoing asset high grading strategy, where it is selling noncore refineries and using the combination of asset sales proceeds and ongoing free cash flow to both return cash to shareholders and grow capacity at retained advantaged facilities. With a nameplate capacity of 275,000 b/d, we believe Aruba is likely to generate several billion dollars of value for Valero. Implications We believe Valero's ongoing asset high grading strategy will be viewed favorably by investors, and we reiterate our Conviction Buy rating on its shares. The most important driver of Valero shares remains our continued bullish outlook for US refining margins for 2008. Our EPS estimates are under review given the release of 3Q results. There is no change to our $110 12-month price target (based on asset value, P/E, and cash-flow valuation analyses; key risk is sustained lower refining margins).

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