Valero to Run Refineries at Up to 95% Capacity in Q2 as Margins Stay Strong
Valero plans to run refineries at up to 95% capacity in Q2 as supply disruptions support strong refining margins and drive improved earnings performance.
(Reuters) — Valero Energy Corp. is running its 13 refineries in the United States and Britain at up to 95% of their combined total throughput capacity of 3 million barrels per day (bpd).
The refineries will operate in a range between 92% and 95% in the second quarter, the company said in a conference call on Thursday to discuss first-quarter results.
The company's 380,000-bpd Port Arthur, Texas, refinery is restarting the large crude distillation unit (CDU) after the refinery was shut because of a March 23 explosion and fire on a hydrotreater, and expects to return the refinery to "fairly normal" production rates by May 1.
The small CDU restarted earlier in April and returned several other units to production. Until the large CDU restarts, the refinery is operating at reduced levels, Valero said.
Valero's second-quarter throughput levels reflect not only the Port Arthur refinery restart, but the permanent closure this month of Valero's refinery in Benicia, California.
The company expects refining margins, lifted because of the closure of the Strait of Hormuz amid the Iran conflict, to remain high for six months to a year after the strait reopens.
That is the time Valero believes will be necessary to restore refined product inventories to pre-conflict levels.
Valero said the Port Arthur hydrotreater explosion and fire could lead to higher capital spending in 2026, adding it will update guidance once costs and repair timelines are clearer.
Valero is also progressing with the optimization project of the gasoline-producing fluid catalytic cracker at the 215,000-bpd St. Charles Refinery in Norco, Louisiana. The project is a $230 million investment, expected to start in the third quarter.
The company's refining business posted operating earnings of $1.8 billion, compared with a loss of $530 million a year earlier. Refining margin per barrel rose to $14.90 from $9.78, while throughput volumes increased 3.6% to 2.9 million bpd.
Valero's renewable diesel swung to a profit of $139 million, while ethanol income rose to $90 million.
"We believe the bear case on Valero overlooks the magnitude of global supply disruptions and the resulting impact of product shortages on the earnings power of what we view as a best-in-class refiner," said UBS analysts.
Rival Phillips 66 posted a surprise first-quarter profit helped by higher refining margins and capacity utilization.
San Antonio, Texas-based Valero reported an adjusted profit of $4.22 per share for the three months ended March 31, compared with analysts' expectations of $3.16 per share, according to data compiled by LSEG.