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Valero Energy Corporation (VLO - Analyst Report) posted adjusted third quarter 2013 income of 57 cents per share, surpassing the Zacks Consensus Estimate of 42 cents by 35.7%.

The quarterly earnings compare unfavorably with the year-ago adjusted earnings of $1.90 per share. The decline was mainly due to lower refining throughput margins in each of the company’s regions and higher refining operating expenses.

Total revenue for the quarter increased 4.1% year over year to $36,137.0 million from $34,726.0 million and beat the Zacks Consensus Estimate of $30,499.0 million.

Throughput Volumes

During the quarter, refining throughput volumes were approximately 2.77 million barrels per day, up from the year-earlier level of 2.60 million barrels a day. This was primarily due to less unplanned maintenance activity and less weather-related downtime.

By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 40%, 16% and 17%, respectively. The remaining volumes came from residuals, other feedstock as well as blendstocks and others.

The Gulf Coast accounted for approximately 56% of the total volume. The Mid-Continent, North Atlantic and West Coast regions accounted for 16%, 18% and 10%, respectively.

Throughput Margins

Company-wide throughput margins decreased considerably to $7.76 per barrel from the year-ago level of $13.12 per barrel. The decrease was due to lower discounts for gasoline and diesel margins as well as lesser light sweet and sour crude oil.

Average throughput margin realized was $7.88 per barrel in the U.S. Gulf Coast (down from $11.05 per barrel in the year-earlier quarter), $9.22 per barrel in the U.S. Mid-Continent (down from $22.07), $7.86 per barrel in the North Atlantic (down from $13.25) and $4.60 per barrel in the U.S. West Coast (down from $8.91).

Total operating cost per barrel was $5.41 during the quarter, 4.6% higher than the year-earlier figure of $5.17. Refining operating expenses per barrel were $3.74 versus $3.72 in the year-ago quarter. Depreciation and amortization expenses increased 15.2% year over year to $1.67 per barrel.

Capital Expenditure & Balance Sheet

Third quarter capital expenditure totaled $557.0 million, including $78 million for turnarounds and catalyst expenditures. At the end of the quarter, the company had cash and temporary cash investments of $1.9 billion. Valero also rewarded shareholders $122 million through dividends.

Valero maintained its total capital spending for 2013 at around $2.85 billion, including spending for turnarounds and catalyst expenditures as well as the retail segment. For 2014, Valero expects capital expenditures of $3.0 billion.

Zacks Rank

The stock retains a Zacks Rank #4 (Sell). However, there are certain Zacks Ranked #1 stocks – TransAtlantic Petroleum Ltd (TAT - Snapshot Report), Matador Resources Company (MTDR - Snapshot Report) and Northern Oil and Gas, Inc. (NOG - Snapshot Report) – that appear more rewarding in the short term.
 

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