January 30, 2022 [San Antonio Express News] – Valero Energy Corp. cruised past Wall Street expectations in the last three months of 2022 as its profits tripled from a year ago and it wrapped up its best year ever.
Valero attributed its strong fourth quarter to the fact its 15 refineries were running at a 97 percent utilization rate at the end of the year, the highest level of usage in any quarter since 2018.
The San Antonio-based refiner’s full-year performance was boosted by tight crude supply and increasing demand that more than doubled profit margins from 2021.
CEO Joe Gorder said he expected that to continue this year.
Valero, which employs 10,000 people and is one of two Fortune 500 companies headquartered in San Antonio, posted $41.7 billion in revenue in the fourth quarter, up 16 percent from the same period in 2021. It reported profit of $3.1 billion, or $8.15 per share. That topped analysts’ estimates of $7.37 per share. Its profit a year earlier was $1 billion.
Valero’s refineries handled 3 million barrels of crude oil per day in the fourth quarter, roughly the same as a year earlier.
But tight supplies of crude oil in 2022 ran up against rebounding post-pandemic demand for energy, which pushed the refiner’s profit margin on each barrel to $21.82, more than double its margin of $9.04 per barrel in 2021.
Valero’s refining business produced $4.3 billion of income in the fourth quarter, up from $1.27 billion a year earlier.
Its growing renewable diesel business helped contribute to the jump in profits, too. The unit sold 2.4 million gallons of renewable diesel per day, up 55 percent from with a year ago. The segment brought in $261 million of income in the final three months of 2022, an increase from $150 million in the period a year earlier.
Since 2018, Valero has spent hundreds of millions of dollars expanding its production of renewable diesel, which can power diesel vehicles that are on the road today with lower emissions than traditional diesel.
The higher sales volumes come after Valero last year completed a renewable diesel expansion project at its St. Charles refinery, called DGD2. It started another green diesel production project during the fourth quarter at its refinery in Port Arthur.
Valero’s ethanol segment, meanwhile, posted earnings of just $7 million in the fourth quarter after generating $474 million a year ago. Valero said it generated far more income last year because prices for ethanol were then at an all-time-high.
For all of 2022, Valero generated record annual profit $11.5 billion, up from just $930 million in 2021.
It ended 2022 with $9.2 billion in debt — down from $13.9 billion a year earlier — and held $4.9 billion in cash.
“We think VLO is poised to benefit in ‘23, given that overall refined product demand remains very strong, yielding lower inventory levels for refined productions,” Jonnathan Handshoe, an analyst from New York-based CFRA Research, said in a note after Valero’s earnings report Thursday.
He maintained a “buy” opinion on Valero shares, with a price target of $120.
Shares of Valero closed Thursday at $149.96, up 4.6 percent from Wednesday’s close.
Valero’s shares have surged by 79 percent in the past year amid booming profits across the oil and gas industry. Funds that track the S&P 500, meanwhile, have fallen by 7 percent over that period.
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