SAN ANTONIO -- Valero Energy Corp. has marked its 10th consecutive quarter of record earnings with net income for fourth-quarter 2005 of $1.3 billion, or $2.06 per share, compared to $489 million, or 88 cents per share, for the same period last year.
For the year ended Dec. 31, 2005, Valero's net income was a record $3.6 billion, or $6.10 per share, versus $1.8 billion, or $3.27 per share, in 2004. The company's debt-to-capitalization ratio, net of cash, was 24.8% as of December 31, compared to 30.7% as of Dec. 31, 2004.
Fourth-quarter [image-nocss] operating income for the company's refining segment was $2.1 billion, compared to $884 million for the same period in 2004. The company benefited from the addition of the four former Premcor Inc. refineries, which contributed approximately $485 million to operating income during the quarter, and the higher refined product margins in October resulting from the refinery shutdowns due to hurricanes Katrina and Rita.
Our outstanding fourth-quarter results completed what was another record year for Valero, said Bill Klesse, Valero's CEO. These strong earnings demonstrate not only the sustainably higher refining margin environment, but also the high-quality, diverse asset base that has been put together under the leadership of Chairman Bill Greehey.
He added, With respect to refinery operations in the fourth quarter, our throughputs exceeded three million barrels per day for the first time in our history and would have been even higher had Port Arthur not been down for part of October due to the damage done by Hurricane Rita and an extended turnaround at Delaware City.
Regarding the company's cash flows, capital spending for the fourth quarter was $1 billion and $2.6 billion for the full year. With respect to other uses of cash during the quarter, the company paid off the remaining $800 million outstanding under the $1.5 billion term loan used to fund a portion of the Premcor purchase price, a full year earlier than originally projected. The company also purchased about $380 million of its common stock. For the full year, the company repaid $2.4 billion of debt and purchased approximately $570 million of its common stock.
So far in the first quarter, we've seen a continuation of solid refined product margins and wide sour crude discounts. Compared to last year, gasoline demand is up around 1% and distillate demand is up about half of 1%. On a days-of-supply basis, gasoline is currently at an all-time low for this time of year. With respect to distillate, despite the warm weather in January, days-of-supply is at normal levels for this time of year, primarily due to tight low-sulfur diesel supplies. And, keep in mind that this year's spring turnaround season is projected to be one of the heaviest on record. So, looking at the forward curve, gasoline and distillate margins are headed higher. As far as sour crude discounts are concerned, we expect them to continue to be wide for the foreseeable future, Klesse said.
Looking at refining fundamentals for 2006, we feel very confident that refined product supplies are going to remain tight given the likelihood of continued economic growth, both in the U.S. and abroad, limited new refining capacity coming online this year and the anticipated impact of regulatory changes on transportation fuels. The convergence of dramatically lower sulfur limitations in gasoline and diesel and the removal of MTBE [methyl tertiary butyl ether] from gasoline in the U.S. will not only affect the ability of U.S. refiners to produce on-spec product, but will also impact imports. We expect that sustained high prices are going to be required to attract the necessary supply to meet growing U.S. refined product demand. Compounding these challenges is the fact that 2006 is forecast to be one of the heaviest turnaround seasons on record for the U.S. refining industry, so building inventory ahead of this summer's driving season will be more difficult. For these and many other reasons, we strongly believe that 2006 will be the best year yet for the refining industry and another record year for Valero, he concluded.
Valero, based in San Antonio, 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. Valero 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 various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar and Beacon.
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