瓦萊羅能源 (VLO) 2002 Q3 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Good morning, my name is Ursula, and I will be your conference facilitator today.

  • At this time I would like to welcome everyone to the Valero third quarter earnings conference call.

  • All lines have been placed on mute to prevent any background noise.

  • After the speaker's remarks there will be a question and answer period.

  • If you would like to ask a question during this time, simply press '*' then the number '1' on your telephone keypad.

  • If you would like to withdraw your question, press the '£' key.

  • I will now turn the call over to Mr. Lee Bailey, Vice President of Investor Relations.

  • Sir you may begin your conference.

  • Lee Bailey - Vice President of Investor Relations

  • Thank you operator.

  • Hello everyone, and welcome to Valero Energy's third quarter 2002 earnings conference call.

  • If you have not received the release and would like a copy, you may obtain one off of our website at Valero.com.

  • The tables attached to the earnings release provide additional financial information on our business segments.

  • If after reviewing the attached tables you have any additional questions, please feel to call either myself or Eric Fisher and we'd be glad to help you out.

  • With me today is Bill Greehey, Valero's Chairman and Chief Executive Officer, and other members of Valero's management team.

  • Before I turn it over to Bill I would like to direct your attention to the forward-looking statement disclaimer in the press release.

  • In summary it says, that statements in the press release and conference call that state company's or management's expectations or predictions of the future, are forward-looking statements intended to be covered by the Safe Harbor provisions under the Federal Securities laws.

  • There are many factors which could cause actual results to differ, including those we've described in our filings with the SEC.

  • Bill.

  • Bill Greehey - Chairman and Chief Executive Officer

  • Thank you, Lee.

  • As Lee mentioned, we have provided a lot of financial and operational information in the tables to the release, so I won't be going through as much detail on quarter's results as I usually do.

  • That way we can address the current business conditions and get to your questions.

  • Just a few highlights from the release.

  • Net income was $29.8mln, or $0.27 per share for the quarter.

  • As you will recall, last quarter we earned $0.10 per share.

  • Year-to-date our earnings are just slightly above breakeven, at $0.02 per share.

  • You will notice that in the release we focused on the third quarter over the second quarter for comparison and explanations, since we did not have UDS as part of our operations last year.

  • We reported operating income of $130.3mln, which compares to $100.1mln in the second quarter.

  • EBITDA was $231mln, compared to $202mln in the second quarter.

  • In the third quarter gasoline margins reflected their normal seasonal pattern of decline, with the end of the summer driving season, and were somewhat weaker than in the second quarter.

  • California gasoline margins, however, were considerably weaker during the third quarter, declining from $11.50 per barrel in the second quarter to $8.85 per barrel in the third quarter.

  • The decline was primarily due to the higher production levels and persistently high inventories.

  • Distillate margins improved from the exceptionally low levels we saw in the second quarter, but they remained well below historical levels.

  • However, by the end of the quarter Gulf Coast distillate margins had improved from an average of around $0.35 per barrel for July and August, to over $2 per barrel for September.

  • The sour crude discounts also improved throughout the quarter, improving by nearly 20% over the second quarter levels, and they continue to improve in the fourth quarter as well.

  • Looking at the fourth quarter, we've seen a steady improvement in margins, which are now well above historical average levels for this time of year.

  • In fact the Gulf Coast gasoline margins for the fourth quarter look to be the best we've seen in 15 years.

  • Just to give you a sense of how much gasoline margins have improved since September, the Gulf Coast gas [CRACs] has almost doubled, from an average of $3.09 per barrel for September, to $5.85 per barrel for October.

  • The Mid Continent gas CRACs have gone from $4.69 per barrel to $8.75 per barrel for October.

  • The North East Gas CRACs have gone from $3.12 for September, to $5.64 in October.

  • In California, however, gasoline margins remained relatively weak, although they have improved somewhat, primarily as a result of some recent refining outages.

  • CARB gasoline margins have increase by a little of a dollar per barrel, from $7.35 per barrel in September, to $9.11 in October, and currently they're around $13.60 per barrel.

  • And looking at the [E-CRAC] so far this quarter, they're up $0.15 to $0.75 per barrel from the September levels, averaging around $3.25 per barrel in the North East, and $2.75 per barrel on the Gulf Coast.

  • Another product that has recently staged a substantial rally, is MTBE.

  • Margins for MTBE are about $0.38 per gallon as a result of limited supply and demand.

  • As you will recall, Valero produces about 36,000 barrels per day of MTBE.

  • This strengthened MTBE margin should continue to help support good RFG margins, which are running about $0.04 per gallon over regular gasoline in the North East.

  • As you know in September, the high crude oil prices helped reduce crude inventories at refineries, because the [backwardation] in the crude markets gave the refiners an incentive to minimize the crude inventories.

  • At the same time, product inventories were also decline, with economic run cuts, and the heavy turnaround schedules at many of the refineries.

  • Also when the hurricanes hit, several Gulf Coast refineries were shut down for several days, and others were forced to cut runs further because they couldn't get crude into the refineries.

  • Domestic refinery utilization dropped to as low as 81%.

  • This drew down product inventories to below average levels, and set the stage for the recovery and margins that we're now seeing.

  • And what's especially bullish for distillate going forward, is that the rally in gasoline margin has delayed the typical season switchovers of refineries to maximize distillate, which should help keep distillate inventories tight and margins good, as we head into the winter.

  • As we talked about in the release, the other big improvement we've seen in the widening of the sour crude discount.

  • The increased seasonal demand for crude oil is drawing more sour crude barrels to the market, from both OPEC and non-OPEC sources.

  • In addition, Iraq is putting a lot more sour crude into the market, and based upon the most recent information we have, it looks like OPEC is producing about 2.7 million barrels over its quota, and Iraq is exporting around 1.7 million barrels per day.

  • We expect to see further widening of the sour crude discount for the remainder of the fourth quarter and into next year.

  • In fact, since the first of the month we've seen sour crude oil discounts widen further, by $0.50 to $0.75 per barrel.

  • For October and November deliveries, the average discount for a benchmark Saudi Arabian sour crude oil is about $3 per barrel.

  • That compares to $2.50 per barrel in the third quarter, and just over $2 per barrel in the second quarter.

  • With our leverage to the sour crude oils, each $0.25 per barrel change in the sour crude oil discount affects our annual after-tax earnings by roughly $0.45 per share.

  • In retail we continue to see relatively good fuel margins in the fourth quarter.