Valero kicks off US refiners’ earnings with Q1 profit beat on robust margins

Reuters | April 27, 2023

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By Arunima Kumar

(Reuters) -Refiner Valero Energy Corp zoomed past quarterly profit estimates on Thursday, as margins received a boost from sustained fuel demand and tight crude supplies.

Refiners have been riding a wave of favorable pricing and demand as pandemic-era closings boosted margins.

San Antonio, Texas-based Valero said its refining margins for the January-March quarter soared 84% from a year earlier to $5.9 billion.

Higher demand for products have also helped, with jet fuel recently surging higher after China re-opened its economy following long COVID-induced lockdowns.

Valero, the second-largest U.S. refiner by capacity, said total refinery throughput volume averaged 2.9 million barrels per day (bpd) in the quarter, marginally higher than 2.8 million bpd a year earlier.

U.S. oil refiners dialed back operating runs as they catch up on maintenance activities during the quarter after sky-high utilization rates last year to keep up with demand recovery.

They had scaled back maintenance work in 2020 and 2021 to reduce the risk of contractors bringing in the COVID-19 virus.

“Our refineries operated at a 93% capacity utilization rate in the first quarter, despite planned maintenance at several of our facilities,” said Joe Gorder, Valero’s chief executive officer.

The refiner returned over $1.8 billion to stockholders through dividends and stock buybacks in the reported quarter.

“Shareholder returns came in above the high end of the payout ratio range. The stock should benefit given recent underperformance combined with beating the best Q1 consensus revision trend within the group,” said Jason Gabelman, analyst at TD Cowen.

Wall Street analysts viewed the results as positive. Valero’s shares rose 1% pre-market to $117.80.

The company reported adjusted net income of $8.27 per share for the three months ended March 31, topping analysts’ average estimate of $7.23 per share, according to Refinitiv data.

(Reporting by Arunima Kumar in Bengaluru; Editing by Krishna Chandra Eluri)


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