* Earnings of $1.88 per share beat Wall Street view of $1.18
* No longer importing foreign light, sweet crude
* 2013 Capex seen at $2.5 billion
* Shares hit highest level in more than four years
(Adds analyst comment, financial and industry details, updates
By Anna Driver
Jan 29 Valero Energy Corp posted a
surprisingly strong quarterly profit on Tuesday, as the largest
independent U.S. refiner drastically cut its dependence on
foreign crude in favor of cheaper domestic supplies.
The results, which sent shares up more than 11 percent, are
the latest sign of how the boom in U.S. shale oil production is
redefining the entire oil sector, from the wellhead to the gas
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.
To take advantage of the boom, refining companies are
investing heavily in railcars, barges and other means to bring
less expensive oil from Texas and North Dakota to their
refineries in many parts of the country.
Thanks to a bulked-up logistics system, Valero in the fourth
quarter replaced all imported light foreign crude with cheaper
domestic crude at its Gulf Coast and Memphis refineries, Chief
Executive Officer Bill Klesse said in a statement.
"Certainly (Valero) took advantage by backing out all their
foreign sweet barrels and running more attractively priced
domestic barrels," said Ann Kohler, analyst at Imperial Capital
LLC in New York. "We've had a real renaissance of domestic crude
With Valero expecting more lower-priced U.S. and Canadian
crudes to become available, the company said it is considering
ways to increase the amount of those fuels it processes.
A budgeting priority this year will be spending on railcars,
rail unloading facilities, pipelines and terminals, all
investments made to increase the company's access to shale oil
and less-expensive Canadian crudes, Valero said on a conference
call with analysts.
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.
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 receives clearance
from the Securities and Exchange Commission and a favorable tax
ruling from the Internal Revenue Service.
Refiners Marathon Petroleum Corp and Phillips 66
are reporting fourth-quarter earnings on Wednesday.
Valero shares were up 11.5 percent in midafternoon at
$43.29, the highest level in more than four-and-a-half years.
(Reporting by Anna Driver in Houston; additional reporting by
Krishna N. Das in Bangalore; editing by Saumyadeb Chakrabarty,
John Wallace, Lisa Von Ahn, Jeffrey Benkoe and Matthew Lewis)