Valero cites loss; temporarily shuts some units

Valero Energy reported a $3.3 billion loss in fourth quarter 2008 compared with a fourth quarter 2007 net income of $567 million.

Jan. 28, 2009

2 min read

By OGJ editors
HOUSTON, Jan. 28 -- Valero Energy Corp. reported a $3.3 billion loss in fourth quarter 2008 compared with a fourth quarter 2007 net income of $567 million, and Valero executives are temporarily shutting down the 225,000 b/cd Texas City, Tex., refinery.

Calling the sluggish economy "a headwind against demand growth for refined products," Bill Klesse, Valero's chairman and chief executive officer, said Valero will manage its refinery run rates according to market demand.

"For example, we will shut down the entire Texas City refinery instead of running portions of it during scheduled maintenance this quarter," Klesse said. "At our Corpus Christi East plant, we have shut down the fluid catalytic cracking unit, which primarily produces gasoline. Across our system, the average utilization rate at our fluid catalytic cracking units is currently in the range of 70% to 75% of capacity."

The latest quarter financial results included a $4.1 billion noncash goodwill impairment loss, which is the difference between the purchase price of assets and their net worth, the San Antonio company announced.

For the year ended Dec. 31, 2008, the company reported a net loss of $1.1 billion. Excluding the goodwill impairment loss, full year 2008 net income was $2.9 billion, which compares with full year 2007 income from continuing operations of $4.6 billion.

"Despite very low gasoline margins in the fourth quarter, we reported solid operating results that showed the competitiveness of our operations," Klesse said. The goodwill write-down "does not affect the cash flow generation from our assets or Valero's competitive position within the refining industry," he said during a Jan. 27 conference call.

"Considering the uncertain outlook for the economy, we are severely reducing our estimate for full-year 2009 capital spending to $2.7 billion from the previous estimate of $3.5 billion," he added.

Valero plans to cut discretionary projects at many of its refineries and delay other projects, although safety and regulatory projects remain scheduled as planned, he said.