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VOL. 124 | NO. 18 | Wednesday, January 28, 2009

Valero Energy Posts $3.28B Q4 Loss; Shuts Gas Unit

By CHRIS KAHN | AP Energy Writer

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NEW YORK (AP) - Valero Energy Corp. said Tuesday it lost $3.28 billion in the fourth quarter as it absorbed a huge one-time valuation charge and a slowing economy kept profit margins tight.

Valero said it would slash capital spending by nearly $1 billion this year.

The nation's largest independent oil refiner reported a loss of $6.36 per share in the three months ended Dec. 31. It earned $567 million, or $1.04 per share, in the quarter a year ago.

The driving habits of Americans has been altered drastically because of the economic downturn, cutting demand for the gasoline that is produced by refiners. The nation's gasoline stocks are likely to have swelled by another 1.8 million barrels last week, according to a survey of this week's oil inventories by Platts, the energy information arm of McGraw-Hill Cos.

Valero said Tuesday it is shutting down its massive Texas City refinery instead of running portions of it during regular maintenance as was planned. At its Corpus Christi East plant, Valero shut down the unit primarily used to make gasoline.

The latest results include a non-cash impairment charge of $4.1 billion.

The charge reflects a plunge in Valero's stock price. Company stock dropped from a high of $62.97 per share to $13.94 per share during the past 12 months.

Thomson Reuters says analysts it surveyed expected earnings of 93 cents per share. Analysts typically exclude one-time items from their estimates.

San Antonio-based Valero says revenue dropped 35 percent to $18.6 billion.

Valero's shares fell $1.55, or 6 percent, to $24.30 on Tuesday.

Bill Klesse, Valero's Chairman of the Board and Chief Executive Officer, said Valero would cut 2009 capital spending to $2.7 billion, down $800 million from its previous estimate.

"Looking at market conditions for the coming year, the sluggish economy is clearly a headwind against demand growth for refined products," Klesse said in a statement. "We are cutting discretionary projects at many of our refineries and delaying other projects."

Oil refiners have struggled to adjust to crude prices that shot up last year to more than $147 a barrel before dropping below $33 a barrel this year.

Profit margins from turning crude into fuel were extremely volatile.

Valero saw higher margins for distillate products such as diesel and jet fuels and secondary products such as asphalt and petroleum coke. But those gains were offset by lower gasoline margins and lower overall refinery activity in the quarter.

For the year, the company reported a loss of $1.13 billion, or $2.16 per share, compared with a profit of $5.23 billion, or $8.88 per share, in 2007.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

PROPERTY SALES 81 277 20,909
MORTGAGES 85 329 24,074
BUILDING PERMITS 219 672 43,265
BANKRUPTCIES 64 238 13,418