Valero fourth-quarter profit boosted by cheaper domestic oil
(Reuters) - Valero Energy Corp (VLO.N), the largest independent U.S. refiner, reported a bigger-than-expected jump in fourth-quarter profit on Tuesday as it processed more cheaper crude oil from U.S. shale basins.
Shares of Valero rose 8.5 percent to $42.11 in morning New York Stock Exchange trading.
Growing supplies of crude produced from shale formations in the United States have been a boon to refining companies, which are processing more of the less expensive oil.
In November, the International Energy Agency forecast that U.S. oil output, aided by surging volumes from shale and other onshore rock formations, could top production from Saudi Arabia and Russia by 2017.
In the fourth quarter, Valero replaced all imported light foreign crude with cheaper domestic crude from the Eagle Ford and Bakken formation at its Gulf Coast and Memphis refineries, said company spokesman Bill Day.
With Valero expecting more lower-priced U.S. and Canadian crudes to become available, the company is considering ways to increase the amount of those fuels it processes, the company said.
Fourth-quarter profit rose to $1.0 billion, or $1.82 per share, from $45 million, or 8 cents per share, a year earlier. Revenue was flat at $34.7 billion.
Excluding a noncash asset impairment charge, Valero posted a profit of $1.88 per share. On that basis, Wall Street analysts, on average, expected $1.18.
Valero's profit was driven by higher-than-expected margins in all of its markets and was "impressive" in what is typically a weak quarter, Roger Read, an oil analyst at Wells Fargo said.
The company forecast capital spending this year at about $2.5 billion, down from $3.4 billion last year.
Valero also said it plans to spin off its retail business to shareholders in the second quarter, once it gets clearance from the Securities and Exchange Commission and a favorable tax ruling from the Internal Revenue Service.
(Reporting by Anna Driver in Houston; Additional reporting by Krishna N. Das; Editing by Saumyadeb Chakrabarty, John Wallace, Lisa Von Ahn and Jeffrey Benkoe)