Valero Energy (VLO) Tops Q4 EPS by 50c

Valero Energy (NYSE: VLO) reported Q4 EPS of $1.83, $0.50 better than the analyst estimate of $1.33. Revenue for the quarter came in at $27.86 billion versus the consensus estimate of $25.79 billion.

Strategic Update

As part of its strategy to increase growth of VLP and unlock value, Valero is targeting an estimated $1 billion of drop-down transactions to VLP in 2015. As a result, Valero expects VLP's fourth quarter 2015 annualized EBITDA to be approximately $200 million, or 126 percent higher than VLP's third quarter 2014 annualized EBITDA of $88 million. VLP's fourth quarter 2015 results and distribution growth are expected to drive Valero's general partner and incentive distribution rights in VLP into the 50-percent tier, with such distributions being payable in the first quarter of 2016.

Valero continued to advance its refining and logistics capital investments, which are designed to increase its ability to access and process more North American crude oil. Valero completed the Meraux hydrocracker revamp in the fourth quarter of 2014, which is expected to increase the refinery's yield of ultra-low-sulfur diesel and jet fuel. Also, the two crude topping units at the Corpus Christi and Houston refineries are progressing as planned. When complete, these units are expected to reduce feedstock costs at both of these refineries.

Valero expects 2015 capital spending, including turnarounds and catalyst, to be $2.65 billion, which includes $1.5 billion for stay-in-business capital and $1.15 billion for growth investment, and excludes $150 million for a St. Charles methanol project that remains under evaluation. Valero expects 35 percent of growth investments in 2015 will be for light crude oil processing and more than 30 percent will be for logistics. Valero believes that most of the logistics investments will be eligible for future drops to VLP.

Valero expects 2016 capital spending, including turnarounds and catalyst, to be $2.4 billion, which includes $1.4 billion for stay-in-business capital and $1 billion for growth investment, and excludes $300 million for a St. Charles methanol project that remains under evaluation.

For earnings history and earnings-related data on Valero Energy (VLO) click here.

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