UPDATE 2-Valero Energy quarterly profit lower

Tue Oct 30, 2012 1:37pm EDT

* Good exports seen in Q4

* Retail separation seen next year

* MLP still an option

Oct 30 (Reuters) - U.S. refining company Valero Energy Corp on Tuesday said its quarterly profit fell, as margins for its plants on the West Coast and U.S. Gulf Coast declined from year-ago levels.

Valero and others have benefited as cheaper supplies of domestic crude oil from vast shale formations in North America are shipped to their plants. This quarter the company recognized smaller discounts on crude oil and other feedstocks.

The company's results topped expectations on a better-than-expected refining performance even as its ethanol and retail units had a weak quarter, analysts at Houston-based energy investment bank Simmons & Co, told clients.

The San Antonio-based company had a third-quarter profit of $674 million or $1.21 per share, compared with $1.2 billion, or $2.11 per share a year ago.

Excluding items, Valero had a profit of $1.90 per share. Wall Street analysts had forecast earnings of $1.75 per share, according to Thomson Reuters I/B/E/S.

In the fourth quarter, gasoline margins have narrowed significantly, distillate margins and sour crude discounts remain wide and exports are strong, Valero said.

The company is looking to take advantage of increased demand in Brazil, Venezuela and Mexico.

"We think we can go into these (export) markets and be doggone competitive," said Chief Executive Officer Bill Klesse.

For the full year, Valero said it will spend less than originally projected. Spending is forecast at $3.5 billion, down $100 million. For 2013, capital expenditures are estimated at $2.5 billion.

Valero said its plan to separate its retail operations was progressing, with completion seen late in the first quarter or early in the second quarter of next year.

After the separation, which may involve a spin off or sale, Valero will consider forming a tax-advantaged master limited partnership (MLP) for some of its terminal assets, Klesse said on the conference call.

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