VOL. 123 | NO. 19 | Tuesday, January 29, 2008
Valero Explores Sale of Memphis Refinery
By Bill Dries
Valero Energy Corp., the San Antonio, Texas-based oil refiner that owns a Memphis refinery, reported fourth-quarter earnings Tuesday that were about half of that earned during the same quarter of 2006.
With the figures, the largest oil refiner in North America also announced it has hired an investment bank to explore the idea of selling the Memphis refinery as well as another in Krotz Springs, La. A company statement said the investment bank would look at “strategic alternatives” for the two refineries. Such alternatives generally involve a partial or full sale of a property.
Valero executives announced in November they were considering the sale of a refinery in Aruba as well.
Valero bought the Memphis refinery on McKellar Lake in 2005 and has spent more than $245 million upgrading the plant. It makes light products including diesel and jet fuel as well as regular and premium gasoline. The refinery has had several owners since it was built in 1941.
The Q4 earnings of $567 million announced by Valero this week amount to $1.04 per share, compared to $1.11 billion or $1.85 per share, in the fourth quarter of 2006.
The earnings are a reaction to higher crude prices, the firm said. Higher expenses for maintenance and energy costs were also a factor.
The numbers were better than analysts had expected. Those surveyed by Thomson Financial expected the company to earn only 64 cents a share for Q4.
For the year, Valero earned $5.23 billion in 2007, compared to $5.46 billion in the previous year.
For the coming year, Valero officials said they expect gasoline markets to return to more seasonal patterns, with margins improving during the summer driving season. Diesel margins were expected to be strong because inventories are lower than last year and demand remains strong, officials said Tuesday.
Other products, such as asphalt and fuel oil, are still suffering lower margins, however, and that is expected to affect overall margins, the company said.
Including Memphis, Valero operates 16 refineries and 5,800 retail outlets in the United States, Canada and the Caribbean.
The Associated Press contributed to this report.