NEW YORK (Reuters) - Valero Energy Corp <VLO.N>, the largest independent U.S. refiner, said on Monday its first-quarter earnings could fall as much as 95 percent due to weak profits from gasoline production and unplanned outages at its refineries.
By Michael Erman
NEW YORK (Reuters) - Valero Energy Corp <VLO.N>, the largest independent U.S. refiner, said on Monday its first-quarter earnings could fall as much as 95 percent due to weak profits from gasoline production and unplanned outages at its refineries.
Refining margins for gasoline in the United States have been much weaker than in 2007, as refiners have not been able to pass through soaring crude oil prices to customers. They have been hit especially hard in the West Coast and Midwest regions.
Valero said margins would also be significantly lower for petroleum coke, residual fuel oil and petrochemicals.
!ADVERTISEMENT!The company expects net income for the quarter to be in the range of 10 cents to 35 cents a share. It earned $1.86 a share in the year-ago period.
Analysts, on average, had forecast earnings of 98 cents a share in the quarter, but the figures may not be comparable because some analysts back out lost profits from unplanned downtime at refineries.
The company said unplanned outages at its facilities would reduce profits by about $400 million, or 48 cents a share before taxes. It said it was especially hurt by problems at its Port Arthur, Aruba and Delaware City refineries.
Oppenheimer analyst Fadel Gheit said weak earnings could be expected across the sector.
"The $40 or $50 increase in oil prices from a year ago -- there's no way for refiners to push that at the pump," Gheit said.
They are betting the ranch on the summer driving season, he said, "which barring a miracle is going to be a bust -- because the economy is weak, consumer confidence is low, oil prices are high, and people are afraid of losing their jobs ... People will definitely curtail their discretionary driving. That's a typical consumer reaction."
Earlier this month, Valero Chief Executive Bill Klesse said the era of soaring profits, which the company called "the golden age of refining," had ended.
He is considering selling nearly a third of the company's North American refineries as the U.S. economic slowdown crimps fuel demand.
The company has slowed fuel production as gasoline inventories have remained high and demand slows.
It said in a slide presentation for investors that it was running its gasoline producing fluid catalytic crackers at 73 percent of its capacity -- or 255,000 barrels per day below capacity -- due to weak margins.
Valero's shares fell 4.3 percent to $48 in after-the-bell trading. They have lost more than 30 percent of their value since the beginning of the year.
(Editing by Phil Berlowitz; Editing by Gary Hill)
