SAN ANTONIO -- Valero Energy Corp. has reported fourth-quarter 2007 income from continuing operations of $567 million, or $1.02 per share, which compares to $1.1 billion, or $1.74 per share, in fourth-quarter 2006.
For the year ended Dec. 31, 2007, income from continuing operations was $4.6 billion, or $7.72 per share, compared to the company's income from continuing operations of $5.3 billion, or $8.36 per share, for the year ended Dec. 31, 2006.
Fourth-quarter 2007 operating income was $884 million versus $1.4 billion reported in the same period of 2006. Several factors combined [image-nocss] to reduce operating income in fourth-quarter 2007 versus fourth-quarter 2006. Refined product margins were lower because the cost of crude oil and other feedstocks increased more than product prices. For example, the Gulf Coast gasoline margin was around 30% lower when compared to the fourth quarter of 2006. And refinery operating expenses increased by $123 million, primarily due to increases in maintenance expense and energy costs.
Bill Klesse, Valero's chairperson and CEO, said the company "benefited from having a large and geographically diverse refining system, which provides relatively more earnings stability through exposure to multiple refining regions."
Regarding uses of cash, capital spending in the fourth quarter was about $890 million, of which $180 million was for turnaround expenditures. For the full year 2007, capital spending was $2.8 billion, of which approximately $520 million was for turnaround expenditures. Concerning stock buybacks, the company spent $1.0 billion to purchase 15.4 million shares of its common stock during the fourth quarter. For the full year 2007, the company spent $5.8 billion to purchase 84.3 million shares of its common stock.
"2007 was another solid year for Valero," Klesse said. "During the year, we had strong earnings, sold the Lima, Ohio, refinery, increased our dividend by 50%, and our retail and Canadian operations had their best years ever. Also in 2007, we purchased 14% of the company's outstanding shares. Combining stock purchases in 2006 and 2007, we have purchased nearly 120 million shares of our common stock which represents almost 20% of our outstanding shares at the end of 2005."
He added, "For gasoline markets, we expect a repeat of the normal seasonal pattern in which supplies fall, demand grows and margins rise as we head toward the summer driving season. Similar to previous years, winter-grade gasoline inventories have been building ahead of the industry-wide plant maintenance period that generally begins in late January. Due to lower production during maintenance, winter-grade gasoline stocks typically decline before the transition to summer-grade gasoline, which is much more difficult to produce because of tighter specifications. Another limitation on gasoline production is that the strong diesel margins create an incentive to maximize diesel production over gasoline. We think the combination of these supply constraints with seasonal demand growth will result in stronger gasoline margins this spring and summer."
Klesse said, "With regard to our strategy of optimizing our portfolio, we initiated a process to explore strategic alternatives for our Memphis and Krotz Springs refineries, and we have retained JPMorgan to assist us in that process. We are also continuing the strategic review of our Aruba refinery."
San Antonio-based Valero owns and operates 17 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.1 million barrels per day, making it the largest refiner in North America. It is also one of the nation's largest retail operators with approximately 5,800 retail and branded wholesale outlets in the United States, Canada and the Caribbean under brands including Valero, Diamond Shamrock, Shamrock, Ultramar and Beacon.
Separately, Hess Corp., New York, reported net income of $510 million for fourth-quarter 2007 compared with net income of $359 million for fourth-quarter 2006.
Exploration and production earnings were $583 million in fourth-quarter 2007 compared with $350 million in fourth-quarter 2006.
Marketing and refining earnings were $31 million in fourth-quarter 2007 compared with $67 million in fourth-quarter 2006, reflecting reduced margins and trading results. Refining earnings were $27 million in fourth-quarter 2007 compared with $45 million in fourth-quarter 2006. Marketing earnings were $19 million in fourth-quarter 2007 compared with $17 million in fourth-quarter 2006.
Hess is a global integrated energy company engaged in the exploration, production, purchase, transportation and sale of crude oil and natural gas, as well as the production and sale of refined petroleum products.
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