SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
February 2, 1999
VALERO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-13175 74 -1828067
(State of incorporation) Commission File (I.R.S. Employer
jurisdiction Number Identification No.)
of incorporation
One Valero Place, San Antonio, Texas 78212
(Address of principal executive offices) (Zip Code)
(210) 370-2000
(Registrant's telephone number, including area code)
Not applicable
(Former name or address, if changed since last report)
Item 5. Other Events
Fourth Quarter and Year Ended December 31, 1998 Results
On February 2, 1999, Valero Energy Corporation published a news
release regarding its fourth quarter and full year 1998 results. That
news release is filed as a part of this report on Exhibit 99.1.
Item 7(c). Exhibits Filed
Exhibit 99.1 News release dated February 2, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Current Report on Form 8-K to be
signed on its behalf by the undersigned hereunto duly authorized.
VALERO ENERGY CORPORATION
By: /s/ John D. Gibbons
John D. Gibbons
Chief Financial Officer and
Vice President - Finance
Dated: February 4, 1999
EXHIBIT INDEX
Valero Energy Corporation
Current Report on Form 8-K
Dated February 2, 1999
EXHIBITS
EXHIBIT NO. DESCRIPTION
99.1 News release dated February 2, 1999.
Valero Energy Corporation
Reports Fourth Quarter and Full Year 1998 Results
SAN ANTONIO, February 2, 1999 -- Valero Energy Corporation (NYSE:VLO) today
reported fourth quarter 1998 net income of $.9 million, or $.02 per share,
before an $86.6 million ($1.55 per share) after-tax write-down of the value of
its refinery inventories, compared to fourth quarter 1997 net income of $12.4
million, or $.22 per share. For 1998, Valero reported net income of $63.8
million, or $1.14 per share, before after-tax inventory write-downs of $111.1
million ($1.98 pershare), compared to 1997 net income from continuing
operations of $111.8 million, or $2.03 per share. The inventory write-downs
recorded in the first and fourth quarters of 1998 resulted from the significant
decline in feedstock and refined product prices during those periods. After
the effect ofthe inventory write-downs, Valero reported a net loss of $85.7
million, or $1.53 per share for the fourth quarter, and a net loss of $47.3
million, or $.84 per share, for the full year 1998.
Operating income was $6.4 million for the fourth quarter of 1998, before the
$133.2 million pre-taxinventory write-down, compared to $22.7 million for the
same period last year. For 1998, operating income was $119.7 million, before
pre-tax inventory write-downs of $170.9 million, compared to $211.0 million for
the full year 1997. The decrease in operating income for the quarter
primarily was due to the significant decline in gasoline, distillate and
petrochemical margins. The decrease was partially offset by favorable
discounts for the company's purchases of crude oil feedstocks andthe positive
contribution from the company's Paulsboro, New Jersey, refinery, which was
purchased from Mobil Oil Corporation in September 1998.
"Our disappointing results underscore the difficult industry conditions we
experienced during the fourth quarter," said Bill Greehey, Valero's Chairman
of the Board and Chief Executive Officer."Lower worldwide energy demand and
oversupplied crude oil and product markets continued to exert downward
pressure on prices throughout the quarter, resulting in refining margins
falling to 15-year lows. Margins thus far in 1999 have been even weaker than
the fourth quarter and the near-term outlook for meaningful improvement is not
encouraging. In addition, the heavy oilcracker and related units at our
Corpus Christi refinery have been down for a turnaround since early January,
which have further reduced our earnings in the first quarter of this year.
More broadly, we are hopeful that recent industry announcements of refinery
production cuts and turnarounds will help lower supplies and, combined with
continued strong gasoline demand, willprovide needed market support. Refinery
runs at our Houston and Krotz Springs refineries, for example, have been cut
back due to economic reasons and will remain at reduced rates untilmarket
conditions show signs of sustained improvement," said Greehey.
"On a positive note, we achieved a number of accomplishments over the past year
that should enhance the company's profitability going forward. Our recent
acquisition of the Paulsboro refinery increased throughput capacity by over 25
percent, expanded and diversified our product slate, and has been accretive to
both earnings and cash flow. At Corpus Christi, we enhanced our feedstock
flexibility and lowered overall feedstock costs with a project that has
enabled us to process lower-cost sour crude oil instead of residual fuel oil.
Going forward in this difficult environment, we have significantly reduced our
discretionary capital spending plans for the current year and will continue to
pursue aggressive cost cutting measures throughout the company. Our primary
goal in 1999 will be to maintain the necessary financial strength to allow us
to pursue additional growth and expansion opportunities as market conditions
improve," Greehey said.
Valero Energy Corporation is a Fortune 500 company based in San Antonio, with
2,500 employees and 1998 revenues of approximately $5.5 billion. The company
currently owns and operates five refineries in Texas, Louisiana and New Jersey
with a combined throughput capacity of approximately 735,000 barrels per day,
making it one of the nation's largest independent refining companies. Valero
is recognized throughout the industry as a leader in the production of
premium, environmentally clean products such as reformulated gasoline, CARB
Phase II gasoline, low-sulfurdiesel and oxygenates. The company also has an
extensive wholesale bulk and rack marketing business and markets in more than
30 states through 170 terminals.
Statements contained in this press release that state the Company's or
management's expectations or predictions of the future are forward-looking
statements intended to be covered by the safe harbor provisions of the
Securities Act of 1933 and the Securities Exchange Act of 1934. It is
important to note that the Company's actual results could differ materially
from those projected in such forward-lookingstatements.
-30-
For more information about Valero Energy Corporation, please visit our web
site, http://www.valero.com.
VALERO ENERGY CORPORATION
SUMMARY EARNINGS INFORMATION
(Millions of Dollars, Except per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended December 31, Twelve Months Ended December 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Excluding Effect of Inventory Write-downs to Market:
Operating Income . . . . . . . . . . . . . $6.4 $22.7 $119.7 $211.0
Pre-tax Income (Loss) from Continuing Operations . $(4.4) $18.7 $87.8 $175.6
Income Tax Expense (Benefit) . . . . . . . $(5.3) $6.3 $24.0 $63.8
Net Income from Continuing Operations . . $0.9 $12.4 $63.8 $111.8
Earnings per Common Share. . . . . . . . . $0.02 $0.22 $1.14 $2.03
Effect of Inventory Write-downs to Market:
Operating Loss . . . . . . . . . . . . . . $(133.2) $- $(170.9) $-
Income Tax Benefit . . . . . . . . . . . . $(46.6) $- $(59.8) $-
Loss from Continuing Operations. . . . . . $(86.6) $- $(111.1) $-
Loss per Common Share. . . . . . . . . . . $(1.55) $- $(1.98) $-
</TABLE>
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Unless Otherwise Noted)
<TABLE>
<CAPTION>
Three Months Ended December 31, Twelve Months Ended December 31,
1998 1997 % Change 1998 1997 % Change
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . $1,390.2 $1,596.1 (13) $5,539.3 $5,756.2 (4)
COSTS AND EXPENSES:
Cost of Sales and Operating Expenses . . . 1,344.7 1,539.3 13 5,271.5 5,426.4 3
Inventory Write-Downs to Market. . . . . . 133.2 - - 170.9 - -
Selling and Administrative Expenses. . . . 16.7 16.6 (1) 69.4 53.6 (30)
Depreciation Expense . . . . . . . . . . . 22.4 17.5 (28) 78.7 65.2 (21)
Total. . . . . . . . . . . . . . . . . . 1,517.0 1,573.4 4 5,590.5 5,545.2 (1)
OPERATING INCOME (LOSS). . . . . . . . . . . (126.8) 22.7 - (51.2) 211.0 -
OTHER INCOME (EXPENSE), NET. . . . . . . . . 0.6 2.5 (76) 0.6 7.0 (91)
INTEREST AND DEBT EXPENSE, NET . . . . . . . (11.4) (6.5) (75) (32.5) (42.4) 23
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES . (137.6) 18.7 - (83.1) 175.6 -
INCOME TAX EXPENSE (BENEFIT) . . . . . . . . (51.9) 6.3 - (35.8) 63.8 -
INCOME (LOSS) FROM CONTINUING OPERATIONS . . (85.7) 12.4 - (47.3) 111.8 -
LOSS FROM DISCONTINUED OPERATIONS, NET OF
INCOME TAXES . . . . - - - - (15.7) 100
NET INCOME (LOSS). . . . . . . . . . . . . . (85.7) 12.4 - (47.3) 96.1 -
LESS: PREFERRED STOCK DIVIDENDS AND
REDEMPTION PREMIUM . . . - - - - 4.6 100
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK. . $( 85.7) $12.4 - $(47.3) $91.5 -
EARNINGS (LOSS) PER COMMON SHARE:
Continuing Operations. . . . . . . . . . . $(1.53) $0.22 - $(0.84) $2.16 -
Discontinued Operations. . . . . . . . . . - - - - ( 0.39) 100
Total. . . . . . . . . . . . . . . . . . $(1 .53) $0.22 - $(0.84) $1.77 -
Weighted Average Shares Outstanding
(in millions) 55.9 56.1 - 56.1 51.7 (9)
EARNINGS (LOSS) PER COMMON SHARE - ASSUMING
DILUTION:
Continuing Operations. . . . . . . . . . . $(1.53) $0.22 - $(0.84) $2.03 -
Discontinued Operations. . . . . . . . . . - - - - (0.29) 100
Total. . . . . . . . . . . . . . . . . . $(1 .53) $0.22 - $(0.84) $1 .74 -
Weighted Average Shares Outstanding
(in millions) 55.9 57.2 2 56.1 55.1 (2)
</TABLE>
Note: Variances in excess of 100% are not reflected herein.
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
<TABLE>
<CAPTION>
Three Months Ended December 31, Twelve Months Ended December 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
FINANCIAL AND OPERATING HIGHLIGHTS:
Throughput Volumes (Mbbls per Day) . . . . 680 540 579 417
Throughput Margin per Barrel . . . . . . . $3.09 (1) $3.33 $3.53 (1) $4.35
Operating Cost per Barrel:
Cash (Fixed and Variable). . . . . . . . $2.13 $2.04 $2.06 $2.00
Depreciation and Amortization. . . . . . 0.58 0.49 0.57 0.61
Total Operating Costs per Barrel. . . $2.71 $2.53 $2.63 $2.61
Sales Volumes (Mbbls per Day). . . . . . . 999 784 894 630
Charges:
Crude Oils:
Sour. . . . . . . . . . . . . . . . . 45% 34% 36% 25%
Heavy Sweet . . . . . . . . . . . . . 17 16 20 21
Light Sweet . . . . . . . . . . . . . 7 13 11 11
Total Crude Oils . . . . . . . . 69 63 67 57
Resid. . . . . . . . . . . . . . . . . . 10 13 11 18
Other Feedstocks and Blendstocks . . . . 21 24 22 25
Total Charges . . . . . . . . . . . . 100% 100% 100% 100%
Yields:
Gasoline and Blending Components . . . . 47% 48% 48% 48%
Distillates. . . . . . . . . . . . . . . 28 27 28 25
Petrochemicals . . . . . . . . . . . . . 4 5 4 6
NGLs and Naphtha . . . . . . . . . . . . 5 6 6 6
Lubes and Asphalts . . . . . . . . . . . 4 - 2 -
Other Products . . . . . . . . . . . . . 12 14 12 15
Total Yields. . . . . . . . . . . . . 100% 100% 100% 100%
MARKET PRICES AND DIFFERENTIALS (U.S. Gulf Coast):
Dollars per Barrel:
Feedstocks:
WTI Crude Oil . . . . . . . . . . . . $12.89 $19.92 $14.41 $20.61
WTI - Sour Crude Oil. . . . . . . . . $3.09 $2.75 $3.37 $3.05
WTI - Heavy Sweet Crude Oil . . . . . $1.50 $0.59 $1.40 $1.08
WTI - Resid . . . . . . . . . . . . . ($0.63) $1.80 $1.57 $2.61
Products:
Unleaded 87 Gasoline - WTI. . . . . . $1.77 $2.13 $2.98 $3.97
No.2 Fuel Oil - WTI . . . . . . . . . $1.24 $2.27 $1.45 $1.96
Propylene - WTI . . . . . . . . . . . $1.89 $4.40 $2.23 $8.14
</TABLE>
Note: The operating statistics reflect the acquisition of the Texas City,
Houston and Krotz Springs Refineries on May 1, 1997 and the Paulsboro
Refinery on September 17, 1998. The 1997 volumes include 356 Mbbls/day
and 238 Mbbls/day for the fourth quarter and total year, respectively,
related to the Texas City, Houston and Krotz Springs Refineries while
the 1998 volumes include 160 Mbbls/day and 46 Mbbls/day for the fourth
quarter and total year, respectively, related to the Paulsboro Refinery.
(1) Excludes a $2.13/Bbl and $.81/Bbl decrease in the 1998 fourth quarter and
total year, respectively, resulting from inventory write-downs to market of
$37.7 million in the first quarter and $133.2 million in the fourth quarter.
