For all periods shown in the accompanying tables, discontinued operations relate to the refinery in Delaware City, Del., which the company shut down during the fourth quarter [image-nocss] of 2009.
The first-quarter 2010 operating loss was $32 million, versus first-quarter 2009 operating income of $593 million. The decline in operating income was mainly due to lower margins for most of the company's refined products. Additionally, throughput volumes decreased from first-quarter 2009 to first-quarter 2010 by 254,000 barrels per day in large part due to the extended shutdown of the Aruba refinery.
"Industry refining margins and sour crude discounts expanded in the first quarter from the low levels experienced in the fourth quarter," said Valero chairman and CEO Bill Klesse. "Valero captured some of the margin expansion, but our performance was limited due to heavy maintenance at key refineries, including Port Arthur, Corpus Christi, St. Charles, Quebec, and Memphis. As a result of downtime, lost income in the first quarter is estimated at just over $200 million, or approximately 24 cents per share."
He added, "The second quarter looks much better considering those refineries are back online, Memphis is completing a major turnaround, and our refining system is running well. So far in April, we've seen favorable sour crude discounts and very good margins in several of our markets for gasoline, diesel and other products such as petrochemical feedstocks and asphalt. Also, West Coast margins are beginning to show improvement. At this rate, we expect to be profitable in April as well as the entire second quarter.
"Looking at the rest of the year, we are cautiously optimistic about our business. U.S. and global economic indicators continue to trend higher, which should lead to improved demand for our products; however, refining margins are likely to be constrained due to the ongoing abundance of spare refining capacity in the U.S., Western Europe, and Japan.
"Our other business units reported strong results in the first quarter. Retail had its best first quarter in Valero's history with $71 million of operating income. Both the U.S. and Canadian retail operations continued to perform well. Ethanol earned $57 million of operating income in the first quarter, which was our second-highest quarter for ethanol since we entered the business last year. Also in the first quarter, we acquired three ethanol plants at values below replacement cost, and we were able to quickly restart the two plants that had not been operating. All 10 of our ethanol plants are now operating."
San Antonio, Texas-based Valero Energy owns or operates 15 refineries with a combined throughput capacity of approximately 2.8 million barrels per day. It is also a leading ethanol producer with 10 ethanol plants in the Midwest with a combined capacity of 1.1 billion gallons per year, and is 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 the Valero, Diamond Shamrock, Shamrock, Ultramar and Beacon brands.
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