Valero Energy Corporation (NYSE: VLO) is a Fortune 500 international manufacturer and marketer of transportation fuels, other petrochemical products, and power based in San Antonio, Texas, United States.[1] The company owns and operates 14 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 2.6 million barrels per day, 10 ethanol plants with a combined production capacity of 1.1 billion gallons per year, and a 50-megawatt wind farm. Valero is also one of the US's largest retail operators with approximately 5,800 retail and branded wholesale outlets in the United States, Canada and the Caribbean under the Valero, Diamond Shamrock, Shamrock, Ultramar and Beacon brands.
Valero Energy Corporation is the leading independent oil refiner in the United States. The company owns and operates 15 refineries with a combined capacity of 2.5 million barrels per day. About 60 percent of this capacity is in the Gulf Coast region through refineries in Texas, Louisiana, and Aruba. The remaining refineries are on the West Coast, the Mid-Continent region, and in the Northeast. Valero also markets refined products on a wholesale basis through a bulk and rack marketing network and via more than 4,700 retail sites branded as Valero, Diamond Shamrock, Ultramar, Beacon, and Total. About 1,500 of the retail sites are company-operated outlets combining a fuel station with a convenience store. Valero's marketing reach extends to 40 U.S. states, Canada, Latin America, and the Caribbean region. The company also owns a 46 percent interest in Valero L.P., a publicly traded limited partnership that owns and operates crude oil and refined product pipelines, refined product terminals, and crude oil storage facilities mainly located in Texas, Oklahoma, New Mexico, Colorado, and California.
Valero Energy was founded as a natural gas pipeline on the first day of 1980. In an effort to diversify itself into a broad-based energy firm, the company purchased a petroleum refinery shortly after its inception. Renovation and start-up of this facility in a difficult world petroleum market nearly put Valero out of business. The company subsequently sold off its natural gas properties to a limited partnership to retain financial stability and concentrate on its refining activities. Conditions in the petroleum industry repaid this gamble, and Valero Energy thrived in the late 1980s and early 1990s. From there, the Valero of the early 21st century was largely engineered through acquisitions. From 1997 to 2004 the company acquired 14 of the 15 refineries it now operates. The biggest of these deals came in December 2001 when Valero bought Ultramar Diamond Shamrock Corporation for about $6 billion in cash, stock, and assumed debt, thereby gaining six refineries and vastly enlarging its retail operations.
Valero Energy Corporation (Valero), incorporated in 1981, is a North America’s independent petroleum refiner and marketer. As of December 31, 2010, the Company owned 14 petroleum refineries, which were located in the United States, Canada and Aruba. The Company’s refineries can produce conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined products, as well as a slate of premium products, including conventional blendstock for oxygenate blending (CBOB) and reformulated gasoline blendstock for oxygenate blending (RBOB), gasoline meeting the specifications of the California Air Resources Board (CARB), CARB diesel fuel, low-sulfur and ultra-low-sulfur diesel fuel and oxygenates (liquid hydrocarbon compounds containing oxygen). The Company also sells refined products through a network of about 5,800 retail and wholesale branded outlets in the United States, Canada, and Aruba. The Company also owns 10 ethanol plants in the Midwest with a combined ethanol production capacity of about 1.1 billion gallons per year. It operates in three segments: refining, ethanol and retail. On December 17, 2010, it sold its Paulsboro Refinery to PBF Holding Company LLC (PBF Holding). In November 2010, Valero sold its 50% interest in Cameron Highway Oil Pipeline Company (CHOPS) to Genesis Energy, L.P. On January 13, 2010, Valero completed the acquisition of two ethanol plants located in Linden, Indiana and Bloomingburg, Ohio.
Refining
The Company’s refining segment includes refining operations, wholesale marketing, product supply and distribution and transportation operations. The refining segment is segregated geographically into the Gulf Coast, Mid-Continent, West Coast and Northeast regions. On December 31, 2010, its refining operations included 14 refineries in the United States, Canada and Aruba with a combined total throughput capacity of approximately 2.6 million barrels per day (BPD). During the year ended December 31, 2010, its total combined throughput volumes averaged 2.129 million BPD. The Company’s Corpus Christi East and West Refineries are located on the Texas Gulf Coast along the Corpus Christi Ship Channel. The West Refinery specializes in processing primarily sour crude oil and residual fuel oil into premium products, such as RBOB.
The Company’s Port Arthur Refinery is located on the Texas Gulf Coast approximately 90 miles east of Houston. The refinery processes primarily heavy sour crude oils and other feedstocks into gasoline blendstocks, as well as diesel, jet fuel, petrochemicals, petroleum coke, and sulfur. The refinery receives crude oil over marine docks and through crude oil pipelines, and has access to the Sunoco and Oiltanking terminals at Nederland, Texas. Finished products are distributed into the Colonial, Explorer, and TEPPCO pipelines and across the refinery docks into ships or barges. The Company’s St. Charles Refinery is located approximately 15 miles from New Orleans along the Mississippi River. The refinery processes sour crude oils and other feedstocks into gasoline, distillates and other light products. The refinery receives crude oil over five marine docks and has access to the Louisiana Offshore Oil Port where it can receive crude oil through a 24-inch pipeline. Finished products can be shipped over these docks or through the Colonial pipeline network for distribution to the eastern United States.
The Company’s Texas City Refinery is located southeast of Houston on the Texas City Ship Channel. The refinery processes sour crude oils into a wide slate of products. The refinery receives and delivers its feedstocks and products by ship and barge through deepwater docking facilities along the Texas City Ship Channel and uses the Colonial, Explorer and TEPPCO pipelines for distribution of its products. The Company’s Aruba Refinery is located on the island of Aruba in the Caribbean Sea. It processes primarily heavy sour crude oil and produces intermediate feedstocks and finished distillate products. Significant amounts of the refinery's intermediate feedstock production are transported and further processed in its other refineries in the Gulf Coast and West Coast regions. The refinery receives crude oil by ship at its two deepwater marine docks, which can berth ultra-large crude carriers. The refinery's products are delivered by ship primarily into markets in the United States, the Caribbean, Europe and South America. The Company’s Houston Refinery is located on the Houston Ship Channel. It processes a mix of crude oils and low-sulfur residual fuel oil into reformulated gasoline and distillates. The refinery receives its feedstocks through tanker at deepwater docking facilities along the Houston Ship Channel and interconnecting pipelines with the Texas City Refinery. It delivers its products through refined-product pipelines, including the Colonial, Explorer, Orion and TEPPCO pipelines.
The Company’s Three Rivers Refinery is located in South Texas between Corpus Christi and San Antonio. It processes sweet and medium sour crude oils into gasoline, distillates, and aromatics. The refinery has access to crude oil from foreign sources delivered to the Texas Gulf Coast at Corpus Christi, as well as crude oil from domestic sources through third-party pipelines and trucks. A 70-mile pipeline transports crude oil through connections to the Three Rivers Refinery from Corpus Christi. The refinery distributes its refined products primarily through pipelines owned by NuStar Energy L.P.
The Company’s Benicia Refinery is located northeast of San Francisco on the Carquinez Straits of San Francisco Bay. It processes sour crude oils into premium products, primarily CARBOB gasoline. The refinery receives crude oil feedstocks through a marine dock that can berth crude oil carriers and a 20-inch crude oil pipeline connected to a southern California crude oil delivery system. Most of the refinery's products are distributed through the Kinder Morgan pipeline system in California.
The Company’s Wilmington Refinery is located near Los Angeles, California. The refinery processes a blend of lower-cost heavy and high-sulfur crude oils. The refinery can produce all of its gasoline as CARBOB gasoline and produces both ultra-low-sulfur diesel and CARB diesel. The refinery is connected by pipeline to marine terminals and associated dock facilities that can move and store crude oil and other feedstocks. Refined products are distributed through the Kinder Morgan pipeline system and various third-party terminals in southern California, Nevada, and Arizona.
The Company’s Memphis Refinery is located in Tennessee along the Mississippi River's Lake McKellar. It processes primarily sweet crude oils. Most of its production is light products, including regular and premium gasoline, diesel, jet fuels and petrochemicals. Crude oil is supplied to the refinery through the Capline pipeline and can also be received, along with other feedstocks, through barge. The refinery's products are distributed through truck racks at its three product terminals, barges and a pipeline network, including one pipeline directly to the Memphis airport.
The Company’s McKee Refinery is located in the Texas Panhandle. It processes primarily sweet crude oils into conventional gasoline, RBOB, low-sulfur diesel, jet fuels and asphalt. The refinery has access to crude oil from Texas, Oklahoma, Kansas and Colorado through third-party pipelines. The refinery also has access at Wichita Falls, Texas to third-party pipelines that transport crude oil from the Texas Gulf Coast and West Texas to the Mid-Continent region. The refinery distributes its products primarily through NuStar Energy L.P.'s pipelines to markets in Texas, New Mexico, Arizona, Colorado and Oklahoma.
The Company’s Ardmore Refinery is located in Ardmore, Oklahoma, approximately 100 miles south of Oklahoma City. It processes medium sour and sweet crude oils into conventional gasoline, ultra-low-sulfur diesel, liquefied petroleum gas products and asphalt. Local crude oil is gathered by TEPPCO's crude oil gathering/trunkline systems and trucking operations, and then transported to the refinery through third-party crude oil pipelines. Foreign, mid-continent, and other domestic crude oils are received through third-party pipelines.
The Company’s Quebec City Refinery is located in Levis, Canada. It processes sweet, high mercaptan crude oils and lower-quality, sweet acidic crude oils into conventional gasoline, low-sulfur diesel, jet fuels, heating oil and propane. The refinery receives crude oil by ship at its deepwater dock on the St. Lawrence River. The Company charters large ice-strengthened, double-hulled crude oil tankers that can navigate the St. Lawrence River year-round. The refinery transports its products to its terminals in Quebec and Ontario primarily by train, and also uses ships and trucks extensively throughout eastern Canada.
The Company’s Specialty Products include asphalt, lube oils, natural gas liquids (NGLs), petroleum coke, petrochemicals and sulfur. The Company produce asphalt at five of its refineries. The Company’s asphalt products are sold for use in road construction, road repair, and roofing applications through a network of refinery and terminal loading racks. The Company produces napthenic oils at one of its refineries suitable for a range of lubricant and process applications.
NGLs produced at its refineries include butane, isobutane and propane. These products can be used for gasoline blending, home heating and petrochemical plant feedstocks. The Company is a producer of petroleum coke, supplying primarily power generation customers and cement manufacturers. The Company produces and markets a number of commodity petrochemicals, including aromatic solvents (benzene, toluene, and xylene) and two grades of propylene. Aromatic solvents and propylenes are sold to customers in the chemical industry for further processing into such products as paints, plastics and adhesives. The Company is a producer of sulfur with sales primarily to customers in the agricultural sector.
Ethanol
The Company’s ethanol segment includes sales of internally produced ethanol and distillers grains. The Company’s ethanol operations are geographically located in the central plains region of the United States. As of December 31, 2010, the Company owned 10 ethanol plants with a combined ethanol production capacity of about 1.1 billion gallons per year. Its ethanol plants are dry mill facilities that process corn to produce ethanol and distillers grains. The Company sources its corn supply from local farmers and commercial elevators. The Company sell its ethanol to customers, primarily refiners and gasoline blenders, under term and spot contracts, and in bulk markets, such as New York, Chicago, Dallas, Florida and the West Coast. The Company also uses its ethanol for its own needs in blending gasoline. The Company ships its dry distillers grains (DDG) by truck or rail primarily to animal feed customers in the United States and Mexico, with some sales into the Far East. Valero also sells modified distillers grains locally at its plant sites. In 2010, it acquired Indiana, Ohio and Wisconsin plants.
Retail
The Company’s retail segment includes company-operated convenience stores, Canadian dealers/jobbers, truckstop facilities, cardlock facilities and home heating oil operations. The retail segment is segregated into two geographic regions. The Company’s retail operations are segregated geographically into two groups: Retail-U.S. and Retail-Canada. Its retail segment’s operations include sales of transportation fuels at retail stores and unattended self-service cardlocks; sales of convenience store merchandise and services in retail stores, and sales of home heating oil to residential customers.
Sales in Retail-U.S. represent sales of transportation fuels and convenience store merchandise and services through its company-operated retail sites. During the year ended December 31, 2010, total sales of refined products through Retail-U.S.’s retail sites averaged approximately 119,900 barrels per day (BPD). In addition to transportation fuels, its company-operated convenience stores sell tobacco products, beer, fast foods and sandwiches, snacks, fountain drinks, bagged ice and candy. On December 31, 2010, the Company had 994 company-operated sites in Retail-U.S. (of which 80% were owned and 20% were leased). Its company-operated stores are operated primarily under the Corner Store brand name. Transportation fuels sold in its Retail-U.S. stores are sold primarily under the Valero brand.
Sales in Retail-Canada include sales of refined products and convenience store merchandise through its company-operated retail sites and cardlocks; sales of refined products through sites owned by independent dealers and jobbers, and sales of home heating oil to residential customers.
Retail-Canada includes retail operations in eastern Canada where the Company is a supplier of refined products serving Quebec, Ontario, and the Atlantic Provinces of Newfoundland, Nova Scotia, New Brunswick and Prince Edward Island. In December 31, 2010, total retail sales of refined products through Retail-Canada averaged approximately 75,400 BPD. Transportation fuels are sold under the Ultramar brand through a network of 812 outlets throughout eastern Canada. On December 31, 2010, the Company owned or leased 392 retail stores in Retail-Canada and distributed gasoline to 420 dealers and independent jobbers. In addition, Retail-Canada operates 83 cardlocks, which are card- or key-activated, self-service, unattended stations that allow commercial, trucking and governmental fleets to buy transportation fuel around the clock. Retail-Canada operations also include a home heating oil business that provides home heating oil to approximately 138,000 households in eastern Canada.
After seeing its bottom line suffer in the late 1990s because of low crude oil prices, Valero, along with the rest of the U.S. refining industry, entered a new era of fat profits in the new century. Soaring crude oil prices, surging demand for refined products, and refineries operating at or near their capacities produced a volatile mix leading to higher prices at the pump and soaring net income for the refiners. As this new era began, Valero accelerated its strategic spending spree, which centered on buying plants for a slim fraction of their replacement value.
In 2000 the company gained further geographic diversity by buying Exxon Mobil Corporation's refinery in Benicia, California, for $895 million. The 165,000-barrel-a-day refinery, located near San Francisco, was a very good fit for Valero because it could process heavy crude oil and nearly 70 percent of its output was cleaner-burning gasoline, specifically the reformulated gasoline required by the California Air Resources Board. The deal also marked Valero's entry into the retailing market as it included about 350 gasoline stations, mainly in northern California. Valero envisioned the gasoline retailing business providing it with a buffer against the more volatile refining sector. It soon debuted the Valero retail brand at some of the acquired stations.
Valero truly catapulted itself into retailing--and into the ranks of the major players in the U.S. oil industry--through its unexpected acquisition of Ultramar Diamond Shamrock Corporation (UDS) in a deal completed on the last day of 2001. The price was shocking for a company that just a few years earlier had only one refinery: about $4 billion in cash and stock and the assumption of $2.1 billion in debt. Valero gained from UDS six refineries with a combined capacity of 682,000 barrels per day; they were located in Wilmington, California; Three Rivers and McKee, Texas; Ardmore, Oklahoma; Denver, Colorado; and Quebec, Canada. The deal also included UDS's nearly 5,000 retail gasoline stations operating under such names as Diamond Shamrock, Ultramar, and Beacon. Valero also gained control of Shamrock Logistics L.P. (soon renamed Valero L.P.), which owned and operated a 3,600-mile network of crude oil and refined products pipelines. Valero was now the top independent refiner in the United States and one of the leading gasoline retailers as well. With the completion of the UDS deal, Valero saw its revenues soar, jumping from $14.99 billion in 2001 to $26.98 billion the following year.
To gain regulatory approval for the UDS acquisition, Valero had to sell UDS's Golden Eagle refinery located in the San Francisco area along with 70 northern California service stations. These assets were sold to Tesoro Petroleum in 2002 for $945 million. The integration of UDS into Valero was completed without layoffs--a hallmark of the way Greehey did business. Even when Greehey sold the natural gas business to PG&E, he insisted on extracting a promise from the acquirer that none of his former employees would be laid off. Although in each of the several huge mergers that rocked the oil industry in the late 1990s and early 2000s, thousands of employees had lost their jobs as a result, Greehey, according to the San Antonio Express-News, simply said, "That's not the Valero way." The company under Greehey's leadership was also well known for its generous corporate giving program.
Two more refinery acquisitions followed in the wake of the UDS deal. In July 2003 Valero spent about $549 million for a refinery in St. Charles Parish, Louisiana, that had daily capacity of 215,000 barrels. Purchased from the financially troubled Orion Refining Corporation for 20 percent of its replacement cost, this refinery, located adjacent to the Mississippi River, was again a perfect fit for Valero in that it could process cheaper heavy, sour crude oil while meeting environmental regulations. In March 2004 Valero bought a 315,000-barrel-per-day refinery located on Aruba from El Paso Corporation for $465 million plus about $168 million for working capital--a price that represented only about 15 percent of the replacement cost. This refinery too was capable of processing heavy, sour crude.
Valero's strategy of basing its feedstock largely on sour crude oil, which was selling at a large discount to sweet crude oil--the discount having averaged more than $11 per barrel in 2004--paid off big in 2003 and 2004. After posting profits of $622 million on $37.97 billion in revenues in the former year, Valero then nearly tripled its profits one year later, making $1.8 billion on revenues of $54.62 billion. By 2004 the company, every day, was turning two million barrels of crude oil into 40 million gallons of gasoline, which amounted to 10 percent of the U.S. supply. While there were many skeptics who believed the next oil industry bust was right around the corner, Greehey for one remained quite optimistic, contending that the conditions that had created the boom--high crude oil prices, increasing demand for refined products, and refinery utilization at or near capacity--were likely to continue. He told the San Antonio Express-News in July 2004, "I think at least for the next four or five years, the refining business is going to be absolutely the best business to be in." Underscoring this conviction, and catapulting it into the lead in domestic crude oil refining, the company inked a deal in May 2005 to acquire Premcor Inc. by the end of the year for $3.4 billion in cash and $3.5 billion in stock. Valero was likely to pursue additional acquisitions of refinery assets as well as increase the capacity of a number of its existing refineries in the years to come.
Principal Subsidiaries: Colorado Refining Company; Valero Canada L.P.; Valero Refining and Marketing Company; Valero Refining Company--Aruba N.V.; Valero Refining Company--California; Valero Refining Company--Louisiana; Valero Refining Company--New Jersey; Valero Refining--New Orleans, L.L.C.; Valero Refining-Texas L.P.
Principal Competitors: BP p.l.c.; Exxon Mobil Corporation; Royal Dutch/Shell Group of Companies; ChevronTexaco Corporation; TOTAL S.A.; ConocoPhillips; Marathon Oil Corporation; CITGO Petroleum Corporation; Motiva Enterprises LLC; Amerada Hess Corporation; Sunoco, Inc.; Tesoro Corporation.
OVERALL
Beta: 1.15
Market Cap (Mil.): $15,214.28
Shares Outstanding (Mil.): 570.25
Annual Dividend: 0.20
Yield (%): 0.75
FINANCIALS
VLO.N Industry Sector
P/E (TTM): 13.78 19.18 11.76
EPS (TTM): 243.47 -- --
ROI: 3.85 0.96 4.62
ROE: 7.41 1.77 6.06
Statistics:
Public Company
Incorporated: 1980
Employees: 19,797
Sales: $54.62 billion (2004)
Stock Exchanges: New York
Ticker Symbol: VLO
NAIC: 324110 Petroleum Refineries; 422710 Petroleum Bulk Stations and Terminals; 424720 Petroleum and Petroleum Products Merchant Wholesalers (Except Bulk Stations and Terminals); 447110 Gasoline Stations with Convenience Stores; 447190 Other Gasoline Stations; 454311 Heating Oil Dealers
Key Dates:
1980: Valero Energy Corporation is formed as a spinoff of Coastal States Gas Corporation, specifically Coastal's intrastate Texas gas-gathering pipeline; based in San Antonio, Valero moves into refining by acquiring an interest in Saber Energy, Inc., which operates a small refinery in Corpus Christi, Texas.
1981: Valero begins a massive expansion of the Corpus Christi facility into a state-of-the-art refinery.
1984: The expanded Corpus Christi refinery is up and running.
1987: Valero spins off its natural gas pipeline and natural gas liquids business into Valero Natural Gas Partners, L.P., in which it holds a 49 percent share; company shuts down its exploration activities.
1994: Company buys the 51 percent of Valero Natural Gas Partners it does not already own.
1997: Valero divests its natural gas business in a deal with PG&E valued at $1.5 billion; company acquires Basis Petroleum, Inc. and its three Gulf Coast refineries.
1998: Refinery in Paulsboro, New Jersey, is purchased from Mobil Corporation.
2000: Valero buys a refinery in Benicia, California, from Exxon Mobil Corporation, along with 350 gasoline stations--marking the firm's entry into retailing.
2001: Ultramar Diamond Shamrock Corporation is acquired in a $6.1 billion deal.
2003: A refinery in St. Charles Parish, Louisiana, is purchased from Orion Refining Corporation.
2004: Valero acquires El Paso Corporation's Aruba refinery.
2005: Valero announces a definitive agreement to acquire Premcor Inc. for $6.9 billion in cash and stock.
Name Age Since Current Position
William Klesse 64 2008 Chairman of the Board, President, Chief Executive Officer
Michael Ciskowski 53 2003 Chief Financial Officer, Executive Vice President
Kimberly Bowers 46 2008 Executive Vice President, General Counsel
Joseph Gorder 53 2011 Executive Vice President, Chief Commercial Officer
S. Eugene Edwards 54 2011 Executive Vice President, Chief Development Officer
Jean Bernier 54 2010 EVP - Corporate Communications, Information Services and Supply Chain Management
Robert Profusek 61 2005 Lead Independent Director
Randall Weisenburger 52 2011 Director
Rayford Wilkins 60 2011 Director
Ruben Escobedo 73 1994 Independent Director
Ronald Calgaard 73 1996 Independent Director
Susan Purcell 68 1994 Independent Director
Jerry Choate 72 1999 Independent Director
Bob Marbut 75 2001 Independent Director
Donald Nickles 62 2005 Independent Director
Stephen Waters 64 2008 Independent Director
Address:
One Valero Way
San Antonio, Texas 78249-1112
U.S.A.
Valero Energy Corporation is the leading independent oil refiner in the United States. The company owns and operates 15 refineries with a combined capacity of 2.5 million barrels per day. About 60 percent of this capacity is in the Gulf Coast region through refineries in Texas, Louisiana, and Aruba. The remaining refineries are on the West Coast, the Mid-Continent region, and in the Northeast. Valero also markets refined products on a wholesale basis through a bulk and rack marketing network and via more than 4,700 retail sites branded as Valero, Diamond Shamrock, Ultramar, Beacon, and Total. About 1,500 of the retail sites are company-operated outlets combining a fuel station with a convenience store. Valero's marketing reach extends to 40 U.S. states, Canada, Latin America, and the Caribbean region. The company also owns a 46 percent interest in Valero L.P., a publicly traded limited partnership that owns and operates crude oil and refined product pipelines, refined product terminals, and crude oil storage facilities mainly located in Texas, Oklahoma, New Mexico, Colorado, and California.
Valero Energy was founded as a natural gas pipeline on the first day of 1980. In an effort to diversify itself into a broad-based energy firm, the company purchased a petroleum refinery shortly after its inception. Renovation and start-up of this facility in a difficult world petroleum market nearly put Valero out of business. The company subsequently sold off its natural gas properties to a limited partnership to retain financial stability and concentrate on its refining activities. Conditions in the petroleum industry repaid this gamble, and Valero Energy thrived in the late 1980s and early 1990s. From there, the Valero of the early 21st century was largely engineered through acquisitions. From 1997 to 2004 the company acquired 14 of the 15 refineries it now operates. The biggest of these deals came in December 2001 when Valero bought Ultramar Diamond Shamrock Corporation for about $6 billion in cash, stock, and assumed debt, thereby gaining six refineries and vastly enlarging its retail operations.
Valero Energy Corporation (Valero), incorporated in 1981, is a North America’s independent petroleum refiner and marketer. As of December 31, 2010, the Company owned 14 petroleum refineries, which were located in the United States, Canada and Aruba. The Company’s refineries can produce conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined products, as well as a slate of premium products, including conventional blendstock for oxygenate blending (CBOB) and reformulated gasoline blendstock for oxygenate blending (RBOB), gasoline meeting the specifications of the California Air Resources Board (CARB), CARB diesel fuel, low-sulfur and ultra-low-sulfur diesel fuel and oxygenates (liquid hydrocarbon compounds containing oxygen). The Company also sells refined products through a network of about 5,800 retail and wholesale branded outlets in the United States, Canada, and Aruba. The Company also owns 10 ethanol plants in the Midwest with a combined ethanol production capacity of about 1.1 billion gallons per year. It operates in three segments: refining, ethanol and retail. On December 17, 2010, it sold its Paulsboro Refinery to PBF Holding Company LLC (PBF Holding). In November 2010, Valero sold its 50% interest in Cameron Highway Oil Pipeline Company (CHOPS) to Genesis Energy, L.P. On January 13, 2010, Valero completed the acquisition of two ethanol plants located in Linden, Indiana and Bloomingburg, Ohio.
Refining
The Company’s refining segment includes refining operations, wholesale marketing, product supply and distribution and transportation operations. The refining segment is segregated geographically into the Gulf Coast, Mid-Continent, West Coast and Northeast regions. On December 31, 2010, its refining operations included 14 refineries in the United States, Canada and Aruba with a combined total throughput capacity of approximately 2.6 million barrels per day (BPD). During the year ended December 31, 2010, its total combined throughput volumes averaged 2.129 million BPD. The Company’s Corpus Christi East and West Refineries are located on the Texas Gulf Coast along the Corpus Christi Ship Channel. The West Refinery specializes in processing primarily sour crude oil and residual fuel oil into premium products, such as RBOB.
The Company’s Port Arthur Refinery is located on the Texas Gulf Coast approximately 90 miles east of Houston. The refinery processes primarily heavy sour crude oils and other feedstocks into gasoline blendstocks, as well as diesel, jet fuel, petrochemicals, petroleum coke, and sulfur. The refinery receives crude oil over marine docks and through crude oil pipelines, and has access to the Sunoco and Oiltanking terminals at Nederland, Texas. Finished products are distributed into the Colonial, Explorer, and TEPPCO pipelines and across the refinery docks into ships or barges. The Company’s St. Charles Refinery is located approximately 15 miles from New Orleans along the Mississippi River. The refinery processes sour crude oils and other feedstocks into gasoline, distillates and other light products. The refinery receives crude oil over five marine docks and has access to the Louisiana Offshore Oil Port where it can receive crude oil through a 24-inch pipeline. Finished products can be shipped over these docks or through the Colonial pipeline network for distribution to the eastern United States.
The Company’s Texas City Refinery is located southeast of Houston on the Texas City Ship Channel. The refinery processes sour crude oils into a wide slate of products. The refinery receives and delivers its feedstocks and products by ship and barge through deepwater docking facilities along the Texas City Ship Channel and uses the Colonial, Explorer and TEPPCO pipelines for distribution of its products. The Company’s Aruba Refinery is located on the island of Aruba in the Caribbean Sea. It processes primarily heavy sour crude oil and produces intermediate feedstocks and finished distillate products. Significant amounts of the refinery's intermediate feedstock production are transported and further processed in its other refineries in the Gulf Coast and West Coast regions. The refinery receives crude oil by ship at its two deepwater marine docks, which can berth ultra-large crude carriers. The refinery's products are delivered by ship primarily into markets in the United States, the Caribbean, Europe and South America. The Company’s Houston Refinery is located on the Houston Ship Channel. It processes a mix of crude oils and low-sulfur residual fuel oil into reformulated gasoline and distillates. The refinery receives its feedstocks through tanker at deepwater docking facilities along the Houston Ship Channel and interconnecting pipelines with the Texas City Refinery. It delivers its products through refined-product pipelines, including the Colonial, Explorer, Orion and TEPPCO pipelines.
The Company’s Three Rivers Refinery is located in South Texas between Corpus Christi and San Antonio. It processes sweet and medium sour crude oils into gasoline, distillates, and aromatics. The refinery has access to crude oil from foreign sources delivered to the Texas Gulf Coast at Corpus Christi, as well as crude oil from domestic sources through third-party pipelines and trucks. A 70-mile pipeline transports crude oil through connections to the Three Rivers Refinery from Corpus Christi. The refinery distributes its refined products primarily through pipelines owned by NuStar Energy L.P.
The Company’s Benicia Refinery is located northeast of San Francisco on the Carquinez Straits of San Francisco Bay. It processes sour crude oils into premium products, primarily CARBOB gasoline. The refinery receives crude oil feedstocks through a marine dock that can berth crude oil carriers and a 20-inch crude oil pipeline connected to a southern California crude oil delivery system. Most of the refinery's products are distributed through the Kinder Morgan pipeline system in California.
The Company’s Wilmington Refinery is located near Los Angeles, California. The refinery processes a blend of lower-cost heavy and high-sulfur crude oils. The refinery can produce all of its gasoline as CARBOB gasoline and produces both ultra-low-sulfur diesel and CARB diesel. The refinery is connected by pipeline to marine terminals and associated dock facilities that can move and store crude oil and other feedstocks. Refined products are distributed through the Kinder Morgan pipeline system and various third-party terminals in southern California, Nevada, and Arizona.
The Company’s Memphis Refinery is located in Tennessee along the Mississippi River's Lake McKellar. It processes primarily sweet crude oils. Most of its production is light products, including regular and premium gasoline, diesel, jet fuels and petrochemicals. Crude oil is supplied to the refinery through the Capline pipeline and can also be received, along with other feedstocks, through barge. The refinery's products are distributed through truck racks at its three product terminals, barges and a pipeline network, including one pipeline directly to the Memphis airport.
The Company’s McKee Refinery is located in the Texas Panhandle. It processes primarily sweet crude oils into conventional gasoline, RBOB, low-sulfur diesel, jet fuels and asphalt. The refinery has access to crude oil from Texas, Oklahoma, Kansas and Colorado through third-party pipelines. The refinery also has access at Wichita Falls, Texas to third-party pipelines that transport crude oil from the Texas Gulf Coast and West Texas to the Mid-Continent region. The refinery distributes its products primarily through NuStar Energy L.P.'s pipelines to markets in Texas, New Mexico, Arizona, Colorado and Oklahoma.
The Company’s Ardmore Refinery is located in Ardmore, Oklahoma, approximately 100 miles south of Oklahoma City. It processes medium sour and sweet crude oils into conventional gasoline, ultra-low-sulfur diesel, liquefied petroleum gas products and asphalt. Local crude oil is gathered by TEPPCO's crude oil gathering/trunkline systems and trucking operations, and then transported to the refinery through third-party crude oil pipelines. Foreign, mid-continent, and other domestic crude oils are received through third-party pipelines.
The Company’s Quebec City Refinery is located in Levis, Canada. It processes sweet, high mercaptan crude oils and lower-quality, sweet acidic crude oils into conventional gasoline, low-sulfur diesel, jet fuels, heating oil and propane. The refinery receives crude oil by ship at its deepwater dock on the St. Lawrence River. The Company charters large ice-strengthened, double-hulled crude oil tankers that can navigate the St. Lawrence River year-round. The refinery transports its products to its terminals in Quebec and Ontario primarily by train, and also uses ships and trucks extensively throughout eastern Canada.
The Company’s Specialty Products include asphalt, lube oils, natural gas liquids (NGLs), petroleum coke, petrochemicals and sulfur. The Company produce asphalt at five of its refineries. The Company’s asphalt products are sold for use in road construction, road repair, and roofing applications through a network of refinery and terminal loading racks. The Company produces napthenic oils at one of its refineries suitable for a range of lubricant and process applications.
NGLs produced at its refineries include butane, isobutane and propane. These products can be used for gasoline blending, home heating and petrochemical plant feedstocks. The Company is a producer of petroleum coke, supplying primarily power generation customers and cement manufacturers. The Company produces and markets a number of commodity petrochemicals, including aromatic solvents (benzene, toluene, and xylene) and two grades of propylene. Aromatic solvents and propylenes are sold to customers in the chemical industry for further processing into such products as paints, plastics and adhesives. The Company is a producer of sulfur with sales primarily to customers in the agricultural sector.
Ethanol
The Company’s ethanol segment includes sales of internally produced ethanol and distillers grains. The Company’s ethanol operations are geographically located in the central plains region of the United States. As of December 31, 2010, the Company owned 10 ethanol plants with a combined ethanol production capacity of about 1.1 billion gallons per year. Its ethanol plants are dry mill facilities that process corn to produce ethanol and distillers grains. The Company sources its corn supply from local farmers and commercial elevators. The Company sell its ethanol to customers, primarily refiners and gasoline blenders, under term and spot contracts, and in bulk markets, such as New York, Chicago, Dallas, Florida and the West Coast. The Company also uses its ethanol for its own needs in blending gasoline. The Company ships its dry distillers grains (DDG) by truck or rail primarily to animal feed customers in the United States and Mexico, with some sales into the Far East. Valero also sells modified distillers grains locally at its plant sites. In 2010, it acquired Indiana, Ohio and Wisconsin plants.
Retail
The Company’s retail segment includes company-operated convenience stores, Canadian dealers/jobbers, truckstop facilities, cardlock facilities and home heating oil operations. The retail segment is segregated into two geographic regions. The Company’s retail operations are segregated geographically into two groups: Retail-U.S. and Retail-Canada. Its retail segment’s operations include sales of transportation fuels at retail stores and unattended self-service cardlocks; sales of convenience store merchandise and services in retail stores, and sales of home heating oil to residential customers.
Sales in Retail-U.S. represent sales of transportation fuels and convenience store merchandise and services through its company-operated retail sites. During the year ended December 31, 2010, total sales of refined products through Retail-U.S.’s retail sites averaged approximately 119,900 barrels per day (BPD). In addition to transportation fuels, its company-operated convenience stores sell tobacco products, beer, fast foods and sandwiches, snacks, fountain drinks, bagged ice and candy. On December 31, 2010, the Company had 994 company-operated sites in Retail-U.S. (of which 80% were owned and 20% were leased). Its company-operated stores are operated primarily under the Corner Store brand name. Transportation fuels sold in its Retail-U.S. stores are sold primarily under the Valero brand.
Sales in Retail-Canada include sales of refined products and convenience store merchandise through its company-operated retail sites and cardlocks; sales of refined products through sites owned by independent dealers and jobbers, and sales of home heating oil to residential customers.
Retail-Canada includes retail operations in eastern Canada where the Company is a supplier of refined products serving Quebec, Ontario, and the Atlantic Provinces of Newfoundland, Nova Scotia, New Brunswick and Prince Edward Island. In December 31, 2010, total retail sales of refined products through Retail-Canada averaged approximately 75,400 BPD. Transportation fuels are sold under the Ultramar brand through a network of 812 outlets throughout eastern Canada. On December 31, 2010, the Company owned or leased 392 retail stores in Retail-Canada and distributed gasoline to 420 dealers and independent jobbers. In addition, Retail-Canada operates 83 cardlocks, which are card- or key-activated, self-service, unattended stations that allow commercial, trucking and governmental fleets to buy transportation fuel around the clock. Retail-Canada operations also include a home heating oil business that provides home heating oil to approximately 138,000 households in eastern Canada.
After seeing its bottom line suffer in the late 1990s because of low crude oil prices, Valero, along with the rest of the U.S. refining industry, entered a new era of fat profits in the new century. Soaring crude oil prices, surging demand for refined products, and refineries operating at or near their capacities produced a volatile mix leading to higher prices at the pump and soaring net income for the refiners. As this new era began, Valero accelerated its strategic spending spree, which centered on buying plants for a slim fraction of their replacement value.
In 2000 the company gained further geographic diversity by buying Exxon Mobil Corporation's refinery in Benicia, California, for $895 million. The 165,000-barrel-a-day refinery, located near San Francisco, was a very good fit for Valero because it could process heavy crude oil and nearly 70 percent of its output was cleaner-burning gasoline, specifically the reformulated gasoline required by the California Air Resources Board. The deal also marked Valero's entry into the retailing market as it included about 350 gasoline stations, mainly in northern California. Valero envisioned the gasoline retailing business providing it with a buffer against the more volatile refining sector. It soon debuted the Valero retail brand at some of the acquired stations.
Valero truly catapulted itself into retailing--and into the ranks of the major players in the U.S. oil industry--through its unexpected acquisition of Ultramar Diamond Shamrock Corporation (UDS) in a deal completed on the last day of 2001. The price was shocking for a company that just a few years earlier had only one refinery: about $4 billion in cash and stock and the assumption of $2.1 billion in debt. Valero gained from UDS six refineries with a combined capacity of 682,000 barrels per day; they were located in Wilmington, California; Three Rivers and McKee, Texas; Ardmore, Oklahoma; Denver, Colorado; and Quebec, Canada. The deal also included UDS's nearly 5,000 retail gasoline stations operating under such names as Diamond Shamrock, Ultramar, and Beacon. Valero also gained control of Shamrock Logistics L.P. (soon renamed Valero L.P.), which owned and operated a 3,600-mile network of crude oil and refined products pipelines. Valero was now the top independent refiner in the United States and one of the leading gasoline retailers as well. With the completion of the UDS deal, Valero saw its revenues soar, jumping from $14.99 billion in 2001 to $26.98 billion the following year.
To gain regulatory approval for the UDS acquisition, Valero had to sell UDS's Golden Eagle refinery located in the San Francisco area along with 70 northern California service stations. These assets were sold to Tesoro Petroleum in 2002 for $945 million. The integration of UDS into Valero was completed without layoffs--a hallmark of the way Greehey did business. Even when Greehey sold the natural gas business to PG&E, he insisted on extracting a promise from the acquirer that none of his former employees would be laid off. Although in each of the several huge mergers that rocked the oil industry in the late 1990s and early 2000s, thousands of employees had lost their jobs as a result, Greehey, according to the San Antonio Express-News, simply said, "That's not the Valero way." The company under Greehey's leadership was also well known for its generous corporate giving program.
Two more refinery acquisitions followed in the wake of the UDS deal. In July 2003 Valero spent about $549 million for a refinery in St. Charles Parish, Louisiana, that had daily capacity of 215,000 barrels. Purchased from the financially troubled Orion Refining Corporation for 20 percent of its replacement cost, this refinery, located adjacent to the Mississippi River, was again a perfect fit for Valero in that it could process cheaper heavy, sour crude oil while meeting environmental regulations. In March 2004 Valero bought a 315,000-barrel-per-day refinery located on Aruba from El Paso Corporation for $465 million plus about $168 million for working capital--a price that represented only about 15 percent of the replacement cost. This refinery too was capable of processing heavy, sour crude.
Valero's strategy of basing its feedstock largely on sour crude oil, which was selling at a large discount to sweet crude oil--the discount having averaged more than $11 per barrel in 2004--paid off big in 2003 and 2004. After posting profits of $622 million on $37.97 billion in revenues in the former year, Valero then nearly tripled its profits one year later, making $1.8 billion on revenues of $54.62 billion. By 2004 the company, every day, was turning two million barrels of crude oil into 40 million gallons of gasoline, which amounted to 10 percent of the U.S. supply. While there were many skeptics who believed the next oil industry bust was right around the corner, Greehey for one remained quite optimistic, contending that the conditions that had created the boom--high crude oil prices, increasing demand for refined products, and refinery utilization at or near capacity--were likely to continue. He told the San Antonio Express-News in July 2004, "I think at least for the next four or five years, the refining business is going to be absolutely the best business to be in." Underscoring this conviction, and catapulting it into the lead in domestic crude oil refining, the company inked a deal in May 2005 to acquire Premcor Inc. by the end of the year for $3.4 billion in cash and $3.5 billion in stock. Valero was likely to pursue additional acquisitions of refinery assets as well as increase the capacity of a number of its existing refineries in the years to come.
Principal Subsidiaries: Colorado Refining Company; Valero Canada L.P.; Valero Refining and Marketing Company; Valero Refining Company--Aruba N.V.; Valero Refining Company--California; Valero Refining Company--Louisiana; Valero Refining Company--New Jersey; Valero Refining--New Orleans, L.L.C.; Valero Refining-Texas L.P.
Principal Competitors: BP p.l.c.; Exxon Mobil Corporation; Royal Dutch/Shell Group of Companies; ChevronTexaco Corporation; TOTAL S.A.; ConocoPhillips; Marathon Oil Corporation; CITGO Petroleum Corporation; Motiva Enterprises LLC; Amerada Hess Corporation; Sunoco, Inc.; Tesoro Corporation.
OVERALL
Beta: 1.15
Market Cap (Mil.): $15,214.28
Shares Outstanding (Mil.): 570.25
Annual Dividend: 0.20
Yield (%): 0.75
FINANCIALS
VLO.N Industry Sector
P/E (TTM): 13.78 19.18 11.76
EPS (TTM): 243.47 -- --
ROI: 3.85 0.96 4.62
ROE: 7.41 1.77 6.06
Statistics:
Public Company
Incorporated: 1980
Employees: 19,797
Sales: $54.62 billion (2004)
Stock Exchanges: New York
Ticker Symbol: VLO
NAIC: 324110 Petroleum Refineries; 422710 Petroleum Bulk Stations and Terminals; 424720 Petroleum and Petroleum Products Merchant Wholesalers (Except Bulk Stations and Terminals); 447110 Gasoline Stations with Convenience Stores; 447190 Other Gasoline Stations; 454311 Heating Oil Dealers
Key Dates:
1980: Valero Energy Corporation is formed as a spinoff of Coastal States Gas Corporation, specifically Coastal's intrastate Texas gas-gathering pipeline; based in San Antonio, Valero moves into refining by acquiring an interest in Saber Energy, Inc., which operates a small refinery in Corpus Christi, Texas.
1981: Valero begins a massive expansion of the Corpus Christi facility into a state-of-the-art refinery.
1984: The expanded Corpus Christi refinery is up and running.
1987: Valero spins off its natural gas pipeline and natural gas liquids business into Valero Natural Gas Partners, L.P., in which it holds a 49 percent share; company shuts down its exploration activities.
1994: Company buys the 51 percent of Valero Natural Gas Partners it does not already own.
1997: Valero divests its natural gas business in a deal with PG&E valued at $1.5 billion; company acquires Basis Petroleum, Inc. and its three Gulf Coast refineries.
1998: Refinery in Paulsboro, New Jersey, is purchased from Mobil Corporation.
2000: Valero buys a refinery in Benicia, California, from Exxon Mobil Corporation, along with 350 gasoline stations--marking the firm's entry into retailing.
2001: Ultramar Diamond Shamrock Corporation is acquired in a $6.1 billion deal.
2003: A refinery in St. Charles Parish, Louisiana, is purchased from Orion Refining Corporation.
2004: Valero acquires El Paso Corporation's Aruba refinery.
2005: Valero announces a definitive agreement to acquire Premcor Inc. for $6.9 billion in cash and stock.
Name Age Since Current Position
William Klesse 64 2008 Chairman of the Board, President, Chief Executive Officer
Michael Ciskowski 53 2003 Chief Financial Officer, Executive Vice President
Kimberly Bowers 46 2008 Executive Vice President, General Counsel
Joseph Gorder 53 2011 Executive Vice President, Chief Commercial Officer
S. Eugene Edwards 54 2011 Executive Vice President, Chief Development Officer
Jean Bernier 54 2010 EVP - Corporate Communications, Information Services and Supply Chain Management
Robert Profusek 61 2005 Lead Independent Director
Randall Weisenburger 52 2011 Director
Rayford Wilkins 60 2011 Director
Ruben Escobedo 73 1994 Independent Director
Ronald Calgaard 73 1996 Independent Director
Susan Purcell 68 1994 Independent Director
Jerry Choate 72 1999 Independent Director
Bob Marbut 75 2001 Independent Director
Donald Nickles 62 2005 Independent Director
Stephen Waters 64 2008 Independent Director
Address:
One Valero Way
San Antonio, Texas 78249-1112
U.S.A.