July 30, 2008

Valero Reports Lower Q2 Income

US-based oil refiner and fuel marketer Valero Energy reported second quarter 2008 income from continuing operations of $734 million, or $1.37 per share. The company's income from continuing operations in the second quarter of 2007 was $2.1 billion, or $3.57 per share.

For the six months ended June 30, 2008, income from continuing operations was $995 million, or $1.85 per share, compared to the company's income from continuing operations of $3.2 billion, or $5.28 per share, for the six months ended June 30, 2007. Income from discontinued operations relates to the Lima refinery in Ohio, which the company sold effective July 1, 2007.

Second quarter 2008 operating income was $1.2 billion, versus $3.2 billion reported in the second quarter of 2007. The decline in operating income was primarily attributable to lower margins for many of the company's products in the second quarter of 2008 compared to the same quarter last year.

Margins for refined products declined as the cost of crude oil and other feedstocks increased more rapidly than the prices of gasoline and other products, such as asphalt, fuel oils, petroleum coke and petrochemical feedstocks, the company said. These weaker margins were slightly offset by significantly higher margins on distillate products such as diesel and jet fuels, which continued to experience strong global demand, and improved differentials for sour crude oil.

Other factors contributing to the decline in operating income include refinery operating expenses, which increased by $148 million from the second quarter of 2007 to the second quarter of 2008, primarily due to higher energy costs for electricity and natural gas. Throughput volumes decreased in the same time frame by an average of 48,000 barrels per day in large part due to maintenance and repairs at the company's Aruba, Port Arthur and Delaware City refineries.

Bill Klesse, Valero's chairman and CEO, said: "Despite the difficult environment for margins on gasoline and many secondary products, Valero continued to be profitable. Wide differentials for the heavy and sour feedstocks that we can process in our refineries benefited us significantly in the second quarter."