Valero earnings up on increased volumes

SAN ANTONIO — More crude oil processed at its refineries helped Valero Energy Corp. report a 26 percent increase in net income for the second quarter.

San Antonio-based Valero’s profit rose to $588 million compared with $466 million for the year-earlier period.

The crude oil that Valero made into fuels averaged 2.7 million barrels a day, an increase of 115,000 barrels a day compared with the second quarter of 2013.

The increase was mostly due to fewer of its plants undergoing maintenance, and higher utilization rates at its refineries and use of discounted North American light crude on the U.S. Gulf Coast.

Net income from continuing operations attributable to Valero stockholders climbed to $651 million, or $1.22 a share, compared to $463 million, or 84 cents a share, for the year-earlier period.

“Valero delivered solid financial results for the quarter despite generally weaker product margins relative to Brent crude oil,” CEO Joe Gorder said in a statement.

He added that the company continued its plan to reduce the cost of crude oil by processing more favorably priced North American crude oil and investing in logistics assets to deliver the oil to its refineries.

Valero’s stock rose 40 cents a share to change hands at $50.25 in midday trading on the New York Stock Exchange.

“Valero’s ability to refine cost-advantaged crudes is a big advantage, as is the ability to shift production to a higher-valued slate of products, particularly diesel fuel for export,” said Phil Adams, senior high-yield analyst at Gimme Credit, an independent research service on corporate bonds.

In addition, “Valero’s financial performance has rebounded with the global recovery, and with the ascension of low-cost, domestic crude supplies,” Adams said in a note to clients.

Analysts as polled by Bloomberg News had expected Valero to earn $1.20 a share. Analysts usually ignore one-time charges, and in the quarter, Valero logged a $63 million charge related to its refinery in Aruba. Production at the plant ended in 2012.

Valero said it decided to “abandon” its Aruba refinery in the Caribbean in May, although it still owns and operates a terminal there.

The company said the government of Aruba will enforce “certain land lease provisions that will require the company to dismantle” the plant, resulting in the charge.

Also during the quarter, Valero said it ran as much as 83 percent of North American crude at its Quebec City refinery, up from 8 percent for the same period a year ago. The company expects to hit its goal of 100 percent North American crude at the plant by year’s end.

Gorder, who succeeded former CEO Bill Klesse on May 1, told analysts in a conference call that they shouldn’t expect any major shifts in strategy. Valero will maintain a balanced program of projects for growth and returns to shareholders, he said.

In the second quarter, Valero said it paid $133 million in dividends on its common stock and $228 million to purchase 4 million shares of common stock.