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.