Valero’s refining throughput margins rose to $7.87/b, up from $5.08 in the same period a year ago. Of course a year ago Valero also paid about $8 less per barrel for crude than it did this year. The largest contribution to the higher earnings came from distillate production and sales, up from 708,000 b/d a year ago to 829,000 b/d this year. Distillate prices are around $5/b higher this year as well.
The company noted that it is on target to achieve $185 million cost reductions this year and plans to reduce costs by another $100 million in 2011. The big drop in expenses has come from a reduction in Valero’s asset impairment losses. For the first nine months of 2009, the company canceled $135 million in capital projects, compared with just $1 million in the first nine months of this year. Operationally, nothing much has changed, although G&A expenses are down $67 million for the nine months.
US companies aren’t the only refiners with good news today. The Chinese government’s economic planning agency has permitted the country’s refiners to increase their prices by about 4%. Both Sinopec (NYSE:SNP), officially China Petroleum & Chemical Corp., and Petrochina Co. Ltd. (NYSE:PTR) will benefit from this increase. The government is expected to issue a new pricing mechanism for refiners by the end of this year. Because Chinese refiners must buy oil on the open market, but sell refined products at a state-mandated price, the companies often have trouble showing profitability.
Valero’s earnings haven’t helped any refiner’s shares this morning. All US refiners are trading down slightly, while the two Chinese refiners are up slightly.
Paul Ausick
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