One of the biggest U.S. refiners, Valero Energy (NYSE: VLO), beat Wall Street estimates even as it reported a widely expected plunge in its third-quarter earnings due to slumping refining margins.
Valero reported on Thursday earnings per share (EPS) of $1.14 for the third quarter, down by a massive 86% compared to the EPS of $7.49 for the same period last year. Yet, the earnings per share for July-September 2024 beat the analyst consensus estimate of $0.98.
All U.S. refiners are expected to report much lower profits for the third quarter compared to a year earlier, as refining margins slumped to multi-year lows amid tepid fuel demand and increased global fuel supply.
Valero is the first among America’s refiners to report earnings for Q3.
In the earnings release, Valero said that its refining segment reported operating income of $565 million for the third quarter of 2024, several times lower than the $3.4 billion for the third quarter of 2023.
Refining throughput volumes averaged 2.9 million barrels per day during a period of heavy maintenance activities in the third quarter of 2024, the company said.
The multi-year low refining margins were the biggest drag on Valero’s results, as they will be on the other refiners in the United States and on the integrated oil and gas supermajors. Some of Big Oil have already flagged they would be reporting over the next two weeks smaller profits on the back of slumping refining margins.
At Valero, the refining margin per barrel of throughput plunged to $9.09 for the third quarter, from $19.47 a year ago. Between January and September, this margin averaged $11.39, down from $19.13 for the same period of 2023.
Valero’s adjusted refining operating income per barrel of throughput crashed to $2.14 in Q3, from $12.41 a year ago.
Despite the lower margins and earnings, Valero said it remains committed to a through-cycle minimum annual shareholder payout ratio of 40 to 50%. Valero defines the payout ratio as the sum of dividends paid and the total cost of stock buybacks divided by adjusted net cash from operating activities.
By Charles Kennedy for Oilprice.com
