SAN ANTONIO -- Valero Energy Corp. has reported record first-quarter net income of $849 million, or $1.32 per share, which compares to $534 million, or 96 cents per share, in the first quarter of last year. As of March 31, 2006, the company's debt-to-capitalization ratio, net of cash, was 23.5%, compared to 24.8% as of Dec. 31, 2005.
First-quarter 2006 operating income for the company's refining segment was $1.5 billion, compared to $900 million for the same period last year. The significant increase in operating income was primarily due to stronger [image-nocss] gasoline and distillate margins and higher throughput volumes due to the acquisition of Premcor Inc. in September 2005.
"We had the highest first-quarter earnings in the company's history, and the outlook for the rest of the year is even better," said Bill Klesse, Valero's CEO. "Heavy turnaround activity, implementation of more restrictive sulfur regulations on gasoline and diesel, increased use of ethanol in the reformulated gasoline pool and limited capacity expansions due to the high cost of environmental regulations are resulting in tighter supplies of refined products and outstanding margins.
He added, "What's impressive about our first quarter was that we achieved record earnings with a very high level of turnaround activity in our system. We had major turnarounds at our Memphis, Aruba, Corpus Christi, Krotz Springs, and Texas City refineries during the quarter, which limited the financial results we were able to achieve at those facilities. The first quarter clearly demonstrated the advantages of having a large, geographically diverse, complex refining system. Looking ahead to the second quarter, the only significant turnaround activity we have is at Quebec, Aruba and Paulsboro. The second quarter is off to an outstanding start. Gulf Coast gasoline and diesel margins are at record levels for April. The forward curve is showing these record margins continuing through the summer.
Klesse concluded, "Looking at refining fundamentals for the rest of the year, we feel very confident that the refining environment will remain strong. The combination of growing refined product demand, despite higher price levels globally, and regulatory pressures on supply should support continued strength in refined product margins. Sour crude oil discounts should continue to be wide due to ample supplies of sour grades and higher demand for sweet crudes as refiners try to meet lower sulfur specifications and increase yields of high-value clean products.
San Antonio-based Valero owns and operates 18 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.3 million barrels per day, making it the largest refiner in North America. It is also one of the nation's largest retail operators, with more than 5,000 retail and branded wholesale outlets in the United States, Canada and the Caribbean under brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon.
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