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Valero Beats Earnings, Lags Rev

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Valero Energy Corporation (VLO - Free Report) posted adjusted first quarter 2013 income of $1.18 per share, beating the Zacks Consensus Estimate of $1.01 by 16.8%.

The quarterly earnings compare favorably with the year-ago adjusted earnings of 31 cents per share. This growth was bolstered by higher refining throughput margins in each of the company’s regions, except the U.S. West Coast, along with lower refining operating expenses.

Total revenue in the quarter decreased 4.8% year over year to $33,474.0 million from $35,167.0 million and missed the Zacks Consensus Estimate of $33,672 million.

Throughput Volumes

During the quarter, refining throughput volumes were approximately 2.57 million barrels per day, marginally up from the year-earlier level of 2.56 million barrels a day. This was primarily backed by major turnaround, maintenance and repair activity at refineries in Valero’s U.S. Gulf Coast region, including the Texas City, Corpus Christi and Port Arthur refineries; and at its Benicia and Wilmington refineries in the U.S. West Coast region.

By feedstock composition, sweet crude, medium/light sour crude and heavy sour crude accounted for 42%, 16% and 19%, respectively. The remaining volumes came from residuals, other feedstock as well as blendstocks and others.

The Gulf Coast accounted for approximately 55% of the total volume. The Mid-Continent, North Atlantic and West Coast regions accounted for 17%, 19% and 9%, respectively.

Throughput Margins

Company-wide throughput margins increased considerably to $10.59 per barrel from the year-ago level of $7.71 per barrel. The increase was buoyed by higher discounts for diesel and jet fuel as well as wider discounts on crude oil and feedstock.

Average throughput margin realized was $10.00 per barrel in the U.S. Gulf Coast (up from $6.92 per barrel in the year-earlier period), $17.41 per barrel in the U.S. Mid-Continent (up from $13.80), $8.45 per barrel in the North Atlantic (up from $5.64) and $6.26 per barrel in the U.S. West Coast (down from $6.32).

Total operating cost per barrel was $5.34 during the quarter, down 4.6% from the year-earlier figure of $5.60. Refining operating expenses per barrel were $3.79 versus $4.15 in the year-ago quarter. However, unit depreciation and amortization expenses were up 6.9% year over year at $1.55 per barrel.

Capital Expenditure & Balance Sheet

First quarter capital expenditure totaled $864.0 million, including $287 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 $111 million through dividends.

Valero raised its total capital spending for 2013 to around $2.85 billion, including spending for turnarounds and catalyst expenditures and the retail segment. This is higher by $140 million from earlier forecasts, mainly due to the addition or acceleration of growth projects including infrastructure as well as hydrocracker expansion.

Zacks Rank

The stock retains a Zacks Rank #3 (Hold). However, there are certain Zacks Ranked #1 stocks – Harvest Natural Resources, Inc. , Lehigh Gas Partners LP and EPL Oil & Gas, Inc. – that appear more rewarding in the short term.

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