Valero nearly quadruples Q2 refining margin to over $8 billion
Valero Energy Corp., San Antonio, produced a net profit of nearly $4.8 billion in the second quarter, up from $292 million in the same period of 2021, as revenues climbed to nearly $52 billion from $28 billion. The company’s refining margin rose nearly fourfold to $8.1 billion; per barrel of throughput, adjusted refining operating income was $22.71 versus $1.71 in the prior-year period.
The 15 petroleum refineries run by Valero had second-quarter throughput of nearly 3 million b/d, up 4.4% from 2021’s quarter. Capacity utilization was 94% in the quarter, up from 89% in the year's first quarter, and 90% in second-quarter 2021. Looking to the third quarter, executives expect that number to dip slightly, although they are forecasting their Gulf Coast region – which accounted for 59% of second quarter throughput – will handle the same volumes.
On a conference call with analysts and investors, Gary Simmons, chief commercial officer, said demand for the company’s products remains strong and has bounced back from “a bit of a lull” in early July. Valero in June sold 911,000 b/d, breaking a monthly sales record that had stood since August 2018.
“We read a lot about demand destruction,” Simmons said. “We're not seeing in our system [...] Our 7-day averages now are back to kind of that June level, with gasoline at pre-pandemic levels and diesel continuing to trend above pre-pandemic levels.”
The Valero team used its profitable quarter to reduce its debt load by $300 million, adding to the $2 billion it has paid back since 2020, when it took on $4 billion. It is maintaining its full-year capital spending target at $2 billion, 40% of which is earmarked for growth projects.
On the company’s call, president and chief operating officer Lane Riggs said future expansion work could include a sustainable aviation fuel addition to the Diamond Green Diesel Holdings joint venture (DGD) in Louisiana – should a production tax credit be approved by lawmakers.
Riggs said Valero would also need to confer with Darling Ingredients Inc., its equal partner in DGD, which can produce 700 million gal/year of renewable diesel. “We certainly have a project in the wings that is waiting to see how this SAF credit is going to play out. […] We continue to do engineering on that would bolt on SAF capability to DGD 3 with roughly a 50-50 yield of SAF and renewable diesel.”
Shares of Valero (Ticker: VLO) fell nearly 2% in the regular session July 28 but recovered some after hours. Year to date, shares have climbed more than 40%, growing the company’s market capitalization to about $45 billion.
Geert De Lombaerde | Senior Editor
A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications Healthcare Innovation, IndustryWeek, FleetOwner, Oil & Gas Journal and T&D World. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.
