The second-quarter 2009 operating loss was $317 million, versus $1.2 billion of operating income in second-quarter 2008. The decline in operating income was primarily due to lower [image-nocss] diesel and jet fuel margins and lower sour crude oil differentials versus the same quarter last year
"This is a very challenging environment for sour crude oil refiners," said Bill Klesse, Valero's chairman and CEO. "The downturn in the global economy has sharply reduced demand for refined products at a time when new refining capacity is coming online around the world."
He added, "In our other lines of business, we are achieving solid results. Operating income in our retail operations increased an impressive 33% from $49 million in the second quarter of 2008 to $65 million in the second quarter of 2009."
Klesse continued, "Our ethanol business, which we acquired at an outstanding value in the second quarter, is off to a great start. Despite only partial operations and startup costs in the second quarter, our ethanol business earned $22 million of operating income. We now have all seven of the ethanol plants operating. The recent decrease in corn prices has been positive on ethanol margins and the profitability of our plants."
Regarding cash flows in the second quarter of 2009, the company spent $556 million for the acquisition of the ethanol plants and working capital from VeraSun Energy Corp. and $698 million for capital expenditures, of which $82 million was for turnaround and catalyst expenditures. The company paid $78 million in dividends on its common stock and received net proceeds of $799 million from the issuance of 46 million shares of common stock. The company paid off $209 million of maturing debt and ended the second quarter with $1.6 billion in cash and temporary cash investments.
"Due in part to our recent equity offering, we have a healthy cash balance that we plan to safeguard," Klesse said. "Although this is a market in which buying refining capacity is cheaper than building it, we will patiently wait for the right opportunity at an attractive price."
Commenting on carbon legislation, Klesse said, "A very important issue that every consumer, taxpayer and investor should examine is the deceptively titled 'American Clean Energy & Security Act of 2009,' which the [House] narrowly passed in June. This legislation, in some form, will be before the Senate early this fall. We recognize the concerns about climate change and increasing carbon dioxide levels; however, a hidden tax imposed by this legislation in the form of a cap-and-trade system on hydrocarbons will significantly raise the consumer price of gasoline and other fuels, and more than a million high-paying jobs will disappear from our already weakened economywith no measurable improvement in global climate change. I urge all Valero investors to contact their congressmen, senators, and the president to express opposition to any potential bill. To assist you with this effort, Valero has created a resource at http://www.voicesforenergy.com."
San Antonio-based Valero, with 2008 revenues of $119 billion, owns and operates 16 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately three million barrels per day, making it the largest refiner in North America. Valero is also a leading ethanol producer with seven ethanol plants in the Midwest with a combined capacity of 780 million 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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