Operating income down US$211 million on year; throughput up 523,000bpd on year.

Valero Energy Corporation (Valero) today reported income from continuing operations of US$45 million, or $0.08 per share, for 4Q11, versus US$180 million, or US$0.32 per share, for the fourth quarter of 2010. The fourth quarter 2011 results included an after-tax benefit of approximately US$161 million, or US$0.29 per share, from a year-end LIFO inventory decrement. For the year ended December 31, 2011, income from continuing operations was US$2.1 billion, or US$3.69 per share, versus US$923 million, or US$1.62 per share for the year ended December 31, 2010.

4Q11 operating income was US$167 million versus 4Q10 operating income of US$378 million. The decrease in operating income was mainly due to a decrease of US$1.84/bbl in the refining throughput margin, particularly in the Gulf Coast region where the throughput margin decreased by US$4.21/bbl. The decrease in the throughput margin was primarily due to lower margins for gasoline and petrochemical feedstocks plus reduced discounts for medium and heavy sour feedstocks, such as Mars and Maya crude oils.

Refining throughput volumes increased by 523,000bpd in 4Q11 versus 4Q10. The increase in throughput volumes was mainly due to adding capacity from the acquisition of the Pembroke and Meraux refineries and operating the Aruba refinery, which was not in operation during 4Q10.

"Although the fourth quarter clearly showed the volatility of the refining business, 2011 was a great year for Valero," says Valero chairman and CEO Bill Klesse. "We had the highest annual earnings since 2008, acquired the Pembroke and Meraux refineries and related assets, completed several of our major capital projects, and paid off over US$775 million in debt. We also increased our cash returned to shareholders by tripling the common stock dividend and conducting stock buybacks in the third and fourth quarters."

"So far in 2012, product margins have improved versus the fourth quarter of 2011," Klesse adds. "The macro view for refining in 2012 looks promising given the combination of positive economic trends in the US, expectations of global demand growth, and continuing capacity rationalisation in the industry, particularly in Europe, the US East Coast, and the Caribbean."

Valero's ethanol segment reported its highest quarter ever with US$181 million in operating income, versus $70 million in the fourth quarter of 2010. The increase in ethanol operating income was mainly due to higher gross margins and an increase in production volumes to a record-high quarterly average of 3.5 million gallons per day. The ethanol segment also set an annual record with US$396 million in operating income in 2011.

Valero's retail segment reported US$83 million in operating income during 4Q11 versus US$61 million in operating income in 4Q10. The increase in operating income was mainly due to higher fuel margins and slightly higher volumes in US retail operations. For 2011, the retail segment reported its most profitable year in history with US$381 million in operating income. Contributing to the record-setting results was the Canadian retail business, which earned a record-high US$168 million in annual operating income.

Regarding cash flows in 4Q11, capital spending was US$899 million, of which US$128 million was for turnaround and catalyst expenditures. Valero paid US$84 million in dividends on its common stock and paid US$79 million to purchase Valero's shares. Valero also spent US$547 million to acquire the Meraux refinery plus related logistics assets and inventories. Valero ended 4Q11 with US$1.0 billion in cash and temporary cash investments. For the full-year 2011, Valero's total capital spending, including turnaround and catalyst expenditures, was US$3.0 billion, or US$200 million below previous guidance of US$3.2 billion.

"2012 is a significant year for Valero as we focus on replacing the coker drums at St. Charles in April and completing the major hydrocracker projects at Port Arthur and St. Charles, which remain on-budget and on-schedule for completion later this year," Klesse says. "Our top priorities also include our common stock dividend and our investment grade credit rating. After moving beyond the high capital spending levels in 2011 and 2012, we believe our slate of growth projects, recent acquisitions, and operational improvements will enable Valero to significantly grow free cash flow."

Valero has also issued its maintenance turnaround schedule for 1Q–2Q12.

It is as follows:

Refinery	Unit	Month	Duration
Wilmington	Crude/coker	Jan.	4 weeks
St. Charles	Crude/Coker	Feb.	10 weeks
Memphis	Crude	Mar.	5 weeks
McKee	FCC	Apr.	5 Weeks

This list includes only major projects that will have a material impact on production, and it is subject to change. While Valero provides general guidance on the start and duration of the maintenance, it does not disclose specific beginning and end dates.

About Valero
Valero Energy Corporation, through its subsidiaries, is an international manufacturer and marketer of transportation fuels, other petrochemical products and power. Valero subsidiaries employ approximately 22,000 people, and assets include 16 petroleum refineries with a combined throughput capacity of approximately 3mbpd, 10 ethanol plants with a combined production capacity of 1.2 billion gallons per year, and a 50MW wind farm. Approximately 6,800 retail and branded wholesale outlets carry the Valero, Diamond Shamrock, Shamrock and Beacon brands in the United States and the Caribbean; Ultramar in Canada; and Texaco in the United Kingdom and Ireland. Valero is a Fortune 500 company based in San Antonio.