WRAPUP 3-Valero, Marathon Petroleum profits rise

Tue Nov 1, 2011 3:15pm EDT

* Valero, Marathon Petroleum beat street

* Valero sees Q4 margins slipping

* Export demand still good -Valero

* Valero, Marathon eyeing plants for sale

* Marathon Oil sees no quick return to Libya

By Anna Driver

Nov 1 (Reuters) - U.S. refining companies Valero Energy Corp and Marathon Petroleum Corp reported sharply higher quarterly profits that topped Wall Street estimates as margins were lifted by the ability to process cheaper grades of crude oil and improved fuel demand.

A supply glut at the Cushing, Oklahoma, delivery point has weighed on prices for West Texas Intermediate crude, providing an advantage to companies with plants that can process the cheaper oil into fuel.

"It looks like the worst of it is over as far as the recession downturn," said Brian Youngberg, an analyst at Edward Jones in St. Louis. "Things have definitely picked up in the refining sector."

Marathon Petroleum and Valero both have plants that can process less-expensive "heavy and sour" oil.

The better-than-expected results come at a time of flux in the industry. Marathon Petroleum was spun off from Marathon Oil Corp as a separate company in June, and Valero has been a buyer of assets and the subject of recent takeover speculation.

Other companies such as ConocoPhillips and Sunoco have plants for sale as they scale back exposure to refining.

Both Valero and Marathon Petroleum told investors on conference calls that they were looking at some of the plants up for sale.

"While fourth-quarter refining margins have declined from the high levels of the second and third quarters and we are experiencing very high price volatility, crude oil prices are in a range that is supportive of global demand growth," Bill Klesse, Valero's chief executive, said in a statement.

Valero is also seeing continued demand for fuel from international markets despite the economic uncertainty in Western Europe, Klesse said.

Valero's profit soared to $1.2 billion, or $2.11 per share, up from $303 million, or 53 cents per share, in the year-ago quarter. Wall Street analysts had forecast earnings of $1.94 per share, according to Thomson Reuters I/B/E/S.

Valero, the largest independent U.S. refining company, spent about $1.6 billion to acquire businesses in Britain and Ireland, including the purchase of the Pembroke refinery from Chevron Corp .

Last month, it finalized the purchase of the Meraux refinery in Louisiana from Murphy Oil Corp.

Marathon Petroleum posted a third-quarter profit of $1.13 billion, or $3.16 per share, compared with $277 million, or 77 cents per share, a year earlier.

Analysts had expected Marathon Petroleum to report a profit of $2.58 per share, according to data from Thomson Reuters I/B/E/S.

Marathon Oil Corp reported a 42 percent drop in third-quarter profit on higher taxes and lower production, but results topped Wall Street estimates.

Marathon Oil plans to sell up to $3 billion in assets it no longer considers strategic over the next two to three years to focus on growing acreage in basins like the Eagle Ford Shale in South Texas, the company said in a statement.

Oil and natural gas production was 343,000 barrels oil equivalent (boe) per day, down 15 percent from a year ago when Libyan output was available.

Marathon Oil does not expect a quick return to Libya because time is needed to secure its operations and to assess whatever damage may have been done to equipment, Dave Roberts, head of Marathon Oil's exploration and production unit, told investors on a conference call.

"(It will be) still some time away before you will see us talk with any confidence about Libya," Roberts said.

Still, the National Transitional Council is eager for the company's return and has said it will honor contracts struck with the previous government, Roberts said.

Valero's shares edged down 20 cents to $24.40 and Marathon Petroleum's edged down 7 cents to $35.83. Marathon Oil shares rose 2 cents to $35.92.

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