Valero looks to keep fourth-quarter utilization around 95%

The executives of Valero Energy Corp., San Antonio, said Oct. 26 they plan to continue to run their refinery network at around 95% of capacity in the fourth quarter, when they also are forecasting that operating costs should improve from a higher-than-expected number last quarter.

Valero reported net income of nearly $2.7 billion during the 3 months ended Sept. 30, a drop of about 9% from the same period in 2022 as lower gasoline prices weighed on margins. Revenues fell more than 13% to $38.4 billion but—mainly due to higher energy prices—operating expenses per barrel of throughput rose to $4.91/bbl, up from $4.46 in second-quarter 2023 and higher than the $4.70/bbl president and chief executive officer Lane Riggs and his team had expected.

The company’s 15 refineries in North America and Wales processed an average of 3.02 million b/d during the third quarter, up slightly from the same period last year and enough to lift the company’s year-to-date volumes to 2.97 million b/d. That output, which executives said was helped by strong demand from Valero’s wholesale system, amounted to a capacity utilization rate of 95%.

For the current quarter, Valero’s leaders are targeting operating expenses of $4.60/bbl and throughput of 2.94-3.04 million b/d:

• The Gulf Coast region is expected to handle 1.77-1.82 million b/d, versus third quarter's 1.83 million b/d.
• Valero’s Mid-continent region is forecast to have throughput of 455,000-465,000 b/d, in line with the 456,000 b/d from the past 3 months.
• North Atlantic refineries’ throughput is expected to grow to 470,000-490,000 b/d, up from 461,000 last quarter.
• On the West Coast, the Valero team is looking to process 245,000-265,000 b/d, down from 271,000.

Looking ahead to the coming months, chief operating officer Gary Simmons told analysts on a conference call that crack spreads should shrink in line with seasonal patterns but was more upbeat about next spring and beyond.

“The fundamental that looks good to us is the market structure still doesn’t really support storing summer-grade gasoline […] for driving season next year,” Simmons said. “As long as that’s the case, our view would be that, when you get to driving season next year [and] demand picks back up, you’ll see cracks respond.”

Shares of Valero (Ticker: VLO) fell about 1% to $125.36 Oct. 26. Over the past 6 months, they are up about 5%, growing the company’s market capitalization to roughly $44 billion.