SAN ANTONIO, Jan. 28, 2016 /PRNewswire/ — Valero Energy Corporation (NYSE: VLO, “Valero”) today reported adjusted net income from continuing operations attributable to Valero stockholders of $862 million, or $1.79 per share, for the fourth quarter of 2015 compared to $952 million, or $1.83 per share, for the fourth quarter of 2014. Actual net income from continuing operations attributable to Valero stockholders was $298 million, or $0.62 per share, for the fourth quarter of 2015 compared to $1.2 billion, or $2.22 per share, for the fourth quarter of 2014.
For the year ended December 31, 2015, adjusted net income from continuing operations attributable to Valero stockholders was $4.6 billion, or $9.24 per share, compared to $3.5 billion, or $6.68 per share, for 2014. Actual net income from continuing operations attributable to Valero stockholders was $4.0 billion, or $7.99 per share, in 2015 compared to $3.7 billion, or $6.97 per share, for 2014.
Reconciliations of actual to adjusted amounts are shown in the accompanying financial tables.
“In 2015, we had solid operations, completed multiple strategic refinery projects, and expanded our logistics system,” said Joe Gorder, Valero Chairman, President and Chief Executive Officer. “We invested over $2.4 billion into our business and returned 80 percent of our adjusted net income to stockholders.”
The refining segment reported adjusted operating income for the fourth quarter of 2015 of $1.5 billion, which was in line with $1.5 billion in the fourth quarter of 2014.
Fourth quarter 2015 refining throughput volumes averaged 2.9 million barrels per day, an increase of 34,000 barrels per day from the fourth quarter of 2014. Valero’s refineries operated at 97 percent throughput capacity utilization in the fourth quarter of 2015.
The ethanol segment reported adjusted operating income for the fourth quarter of 2015 of $37 million compared to $154 million in the fourth quarter of 2014. The $117 million decrease was mainly due to lower gross margin per gallon driven by a decline in ethanol prices versus relatively stable corn prices. Ethanol production volumes were 3.9 million gallons per day in the fourth quarter of 2015, an increase of 131,000 gallons per day versus the fourth quarter of 2014. The increase in production compared to the fourth quarter of 2014 was due to ongoing optimization and plant improvements.
Corporate and Other
General and administrative expenses were $206 million in the fourth quarter of 2015 compared to $214 million in the fourth quarter of 2014. The effective tax rate was 28 percent in the fourth quarter of 2015.
In the fourth quarter of 2015, capital investment was $732 million, of which $164 million was for turnarounds and catalyst and $136 million was for joint venture investments. In 2015, capital investment was $2.4 billion for turnarounds, catalyst, strategic, and joint venture investments consisting of $1.4 billion for stay-in-business capital and $1.0 billion to advance Valero’s growth strategies. Approximately 40 percent of the 2015 growth capital spending was allocated to investments in logistics assets that support Valero’s operations and potential drop-down transactions to Valero Energy Partners LP (“VLP”).
Valero paid $240 million in dividends and purchased 11.1 million shares of its common stock for $767 million, resulting in total cash returned to stockholders of $1 billion in the fourth quarter of 2015. In 2015, Valero returned $3.7 billion to stockholders, or 80 percent of adjusted net income from continuing operations attributable to Valero stockholders, consisting of $848 million in dividends and $2.8 billion in stock buybacks. The company is targeting a payout ratio of 75 percent of net income in 2016. Valero defines total payout ratio as the sum of dividends plus stock buybacks divided by adjusted net income from continuing operations attributable to Valero stockholders.
On January 21, Valero announced a 20 percent increase in its quarterly common stock dividend from $0.50 per share to $0.60 per share, payable on March 3, 2016, to holders of record on February 9, 2016.
“This latest increase in our dividend further demonstrates our confidence in Valero’s earnings power, which is anchored by our high quality portfolio concentrated in the U.S. Gulf Coast,” said Gorder. “Having a dividend among the top of our peer group is an important part of our team’s core objectives to deliver significant, sustainable value to our stockholders while maintaining safe and reliable operations and disciplined capital allocation.”
Liquidity and Financial Position
Valero ended the fourth quarter of 2015 with $7.4 billion in total debt and $4.1 billion of cash and temporary cash investments, of which $81 million was held by VLP. The company’s debt to capital ratio, net of $2 billion in cash, was 20 percent.
In the fourth quarter of 2015, the company commissioned its new crude unit at the Corpus Christi refinery, completed the hydrocracker expansion at the Port Arthur refinery, and completed the crude unit expansion at the McKee refinery. Valero also acquired a 50 percent interest in the Diamond Pipeline that will connect Cushing, OK to Memphis, TN and began receiving crude oil at the Quebec City refinery from Enbridge’s Line 9B pipeline. The company expects the new crude unit under construction at the Houston refinery to be completed in the second quarter of 2016.
In January 2016, Valero’s Board of Directors approved the construction of a 13,000 barrel per day alkylation unit at the Houston refinery. The unit will upgrade low-cost natural gas liquids into premium priced alkylate. Management expects the project to be completed in the first half of 2019 for an estimated cost of $300 million.
Valero expects 2016 capital investments, including turnarounds, catalyst, and joint venture investments, to be $2.6 billion, which includes $1.6 billion for stay-in-business capital and $1.0 billion for growth investments. Approximately 55 percent of planned growth investment in 2016 is allocated for logistics projects and 45 percent for refining asset optimization. The company believes that most of the logistics investments will be eligible for future drop-down transactions to VLP.