Pinched by higher crude prices, Valero sees profits fall 29 percent
Valero Energy Corp. said Thursday it posted a profit of $609 million in the third quarter, down 29 percent from a year ago, as more expensive crude oil continued to squeeze the San Antoniobased refiner.
Valero’s third-quarter revenue also dropped to $27.2 billion from $30.8 billion in the same months of 2018.
The company earned $1.48 per share, beating the $1.35-per-share average consensus of 23 analysts surveyed by Blooomberg.
Valero and other refiners have been hurt by the declining global supply of crude, which has caused prices to rise. The U.S. embargo on Venezuelan crude and production cuts in Mexico, Canada and OPEC nations are responsible for the higher prices, analysts say.
Yet some easing of the crude supply problems helped Valero beat analysts’ expectations in the third quarter, energy analyst Stewart Glickman of the financial firm CFRA said.
Valero’s refining segment reported $1.1 billion in operating income for the quarter that ended Sept. 30, compared to $1.4 billion for the same period last year.
Bloomberg Intelligence Research Analyst James Blatchford said in a note that Valero, which had been
“typically the largest U.S. importer of crude oil from Venezuela, is more exposed to the South American nation's crisis and U.S. sanctions relative to peers.”
He added, “The crisis shows little sign of abating.”
The U.S. imposed sanctions on Venezuela on Jan. 28.
Valero’s ethanol segment also was hit hard in the quarter, reporting a $43 million operating loss. This compares with a $21 million gain a year ago.
Company officials attributed the decrease in ethanol earnings primarily to higher corn prices.
Joe Gorder, Valero’s chairman, president and CEO, said conditions are improving in the current quarter during a call with analysts Thursday.
“Fourth-quarter market conditions look favorable with improved gasoline and distillate cracks and wider discounts for medium and heavy sour crude oils,” Gorder said.
Glickman said a positive for Valero going forward will be new maritime standards. He said the refiner will be able to take advantage of a demand for lowsulfur fuel that ships will be required to use starting next year. The refiner is retooling operations to be able to produce fuel that will meet the new standards.