Valero's results beat on strong demand for refined products
(Reuters) -- Valero Energy Corp reported better-than-expected results as sales in its refining business shot up 40%, helped by robust gasoline demand and declining refined product inventories in the United States.
Inventories of refined products in the US have come down in recent months, offering a glimmer of hope to refiners, whose margins fell sharply in 2016 due to a glut of gasoline and diesel.
"Demand for gasoline and distillate remains strong both domestically and internationally," Chief Executive Joe Gorder said in a statement.
"Combined with expectations for continued sweet crude oil production growth and relatively low prices for crude and refined products, consumer demand should be robust this year."
Operating revenue in Valero's refining business soared to $20.89 B in the three months ended March 31, from $14.92 B.
"With VLO being the first out of the gate and the bellwether for refining, we believe the stronger-than-expected R&M (refining and marketing) results, strong export volumes and bullish market commentary could start setting the pace for improved investor sentiment towards the sector," Morgan Stanley analysts wrote in a note.
The analysts said Valero's net margins of $2.53 per barrel topped their estimates of $2.49.
The company also processed more barrels of crude oil than expected in the first quarter, pushing down operating costs.
Valero's refineries averaged 2.8 MMbpd of throughput volume in the quarter, 3.7% higher than the midpoint of the company's guidance range.
Operating cost was $3.85 per barrel in the quarter, lower than the $4.15 per barrel Valero had estimated.
The largest US oil refiner said net income attributable to its shareholders fell 38.4% to $305 MM, or 68 cents per share in the first quarter.
Excluding items, the company earned 68 cents per share, beating the average analyst estimate of 60 cents, according to Thomson Reuters I/B/E/S.
Operating revenue rose 38.6% to $21.77 B, beating analysts' estimates of $18.59 B.
Valero's shares rose 1.3% to $67.67 in morning trade, before reversing to trade down 1.5% at $65.78.
Reporting by Muvija M in Bengaluru; Editing by Maju Samuel
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