SAN ANTONIO — Significantly lower margins for gasoline and diesel fuel, as well as less favorable discounts for the oil it buys, led to a drop in net income for Valero Energy Corp. in the third quarter, the San Antonio company said Tuesday.
Valero also said net income was affected by higher costs to comply with the federal renewable fuel standard and higher prices for corn used to produce ethanol.
Net income for the refiner fell 48 percent, to $324 million, or 57 cents a share, compared with net income of $673 million, or $1.21 a share, for the year-ago period.
Yet Valero’s per-share results beat analysts’ estimates, as polled by Bloomberg News, that the company would earn 43 cents a share.
Operating revenue rose to $36.1 billion compared with $34.7 a year ago and topped Wall Street estimates of $35.3 billion.
“Third quarter refining margins were challenged, but our story remains intact,” CEO Bill Klesse said in a statement, citing improving conditions in the fourth quarter.
Klesse said that discounts for light sweet crude relative to international crude benchmark prices have improved in the fourth quarter. In addition, he said discounts for medium and heavy sour crudes on the U.S. Gulf Coast have improved.
“Against a tough backdrop, Valero performed better than expected,” Roger Read, senior analyst at Wells Fargo Securities, said in a note to clients.
Read noted that Valero beat his expectations “mostly due to a lower tax rate.”
Also, Valero processed more oil than Read expected, mainly because of less refinery downtime.
At mid-morning, Valero’s shares rose 62 cents on the news to trade at $40.08 a share.
Valero said it would maintain its 2013 capital expenditure budget of $2.85 billion, which includes $1.3 billion for growth projects. The company also said its 2014 capital budget would be $3 billion, an estimate on the high end of its earlier announcement that it would spend $2.5 billion to $3 billion.
The company also said it intends “to continue returning cash to stockholders through dividends and share buybacks.”