Oil refiner Valero Energy Corp. (VLO) on Tuesday posted a net loss for the third quarter, reflecting lower margins on diesel and jet fuel, and smaller discounts on sour crude oil and other feedstocks. Further, the company said it sees 2009 as a trough period for refined product demand.
The San Antonio, Texas-based company's third-quarter net loss was $489 million or $0.87 per share, compared to a profit of $1.2 billion or $2.18 per share in the year-ago quarter.
Special items in the latest quarter included an asset impairment loss of $417 million before taxes, or $0.48 per share after taxes, related primarily to the permanent shutdown of the gasifier complex at the company's Delaware City refinery. The third quarter 2008 special items included a gain of $305 million on the sale of the Krotz Springs, Louisiana refinery and $43 million of asset impairment losses before taxes, which together amount to $0.27 per share after taxes.
Excluding the special items, the company posted a net loss of $219 million or $0.39 per share, compared to a profit of $1.0 billion or $1.91 per share earned in the same quarter of last year.
On average, 19 analysts polled by Thomson Reuters expected the company to post a loss of $0.33 per share. Analysts' estimates typically exclude special items.
The third quarter 2009 operating loss was $579 million, compared to an operating income of $1.8 billion in the third quarter of 2008. Excluding the special items, operating loss was $162 million, versus the previous year's operating income of $1.6 billion of operating income, primarily due to lower margins on diesel and jet fuel, and smaller discounts on sour crude oil and other feedstocks.
Quarterly operating revenues declined to $19.5 billion from the previous year's operating revenue of $35.9 billion, yet surpassed the $18.84 billion consensus revenue estimate of four Wall Street analysts.
On a segmental basis, the company's Refining segment incurred a operating loss of $560 million for the most recent quarter, compared to a operating income of $1.91 billion a year ago. Refining margins continued to suffer from a combination of weak demand for refined products and high inventories.
Bill Klesse, Chairman of the Board and Chief Executive Officer of Valero, said, "Given the difficult refining conditions, we took further action in the third quarter to improve our profitability."
Initially, the company extended the plantwide shutdown of the Aruba refinery. At the Delaware City refinery, Hospira streamlined operations by closing the gasifier complex and idling the coker. The company, in October, began a focused effort to reduce costs at its Paulsboro refinery. Across its refining system, the company shifted feedstocks and operating rates to optimize throughput margins.
Total retail operating income was $111 million, up from the prior-year's operating income of $107 million, driven by strong U.S. retail fuel margins and solid performance in Canada. Ethanol business earned $49 million of operating income for the latest quarter, as the company increased run rates at all seven ethanol plants and captured very good margins.
For the nine-month period, the company reported a net loss of $434 million or $0.81 per share, compared to a profit of $2.15 billion or $4.02 per share in the year-earlier period.
Operating revenues plunged to $51.2 billion from $100.5 billion reported in the corresponding period of the previous year.
Klesse added, "As we strive to lower costs and become even more competitive, we expect the improving world economy will drive demand growth for our products and support a recovery in refining margins and sour crude discounts."
Further, the company noted that it sees 2009 as a trough period for refined product demand, and looks forward to an upturn in fundamentals and demand in 2010.
Among Valero's rivals, BP Plc (BP,BP.L) reported lower profit for the third quarter that totaled $5.34 billion or 28.18 cents per share, compared to $8.05 billion or 42.56 cents per share last year, as a 7% growth in production was offset by lower oil and gas prices. Total revenues and other income for the quarter declined to $67.86 billion from $104.83 billion in the previous year.
Another peer, ExxonMobil Corp. (XOM) is scheduled to release its third-quarter results on October 29, with analysts expecting earnings of $1.06 per share on revenues of $79.29 billion. In the prior-year period, the company posted earnings, excluding special items, of $2.59 per share, on revenues and other income of $137.7 billion.
VLO is currently trading at $19.95, down 32 cents or 1.58%. In the past 52 weeks, the stock has been trading between $13.94 and $26.20.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.