Valero Energy Reports Second Quarter 2011 Results

Klesse concluded, “Valero has an excellent growth story over the next few years, starting with the solid margin outlook. On August 1st, we plan to close on our acquisition of the Pembroke refinery, marketing, and logistics assets in the U.K. and Ireland. Our major growth projects are on-budget and on-schedule for completion in 2012, including the two hydrocrackers and hydrogen plants that are expected to contribute significant earnings and cash flow when in operation. Those projects benefit from high crude oil and low natural gas prices plus growing global demand for diesel and gasoline, and do not depend on wide discounts for WTI-priced crude oil.”

Valero’s senior management will hold a conference call at 11:00 a.m. ET (10 a.m. CT) today to discuss this earnings release and provide an update on company operations. A live broadcast of the conference call will be available on the company’s web site at www.valero.com.

About Valero

Valero Energy Corporation is an international manufacturer and marketer of transportation fuels, other petrochemical products and power. Its assets include 14 petroleum refineries with a combined throughput capacity of approximately 2.6 million barrels per day, 10 ethanol plants with a combined production capacity of 1.1 billion gallons per year, and a 50-megawatt wind farm. Valero is also one of the largest retail operators with approximately 5,800 retail and branded wholesale outlets in the United States, Canada and the Caribbean under the Valero, Diamond Shamrock, Shamrock, Ultramar and Beacon brands. Based in San Antonio, Valero is a Fortune 500 company with approximately 20,000 employees. Please visit www.valero.com for more information.

Safe Harbor Statement

Statements contained in this 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. The words “believe,” “expect,” “should,” “estimates,” and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero’s annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission, and available on Valero’s website at www.valero.com.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
			Three Months Ended									Six Months Ended
			June 30,									June 30,
			2011				2010					2011				2010
Statement of Income Data (a) (b) (c) :
Operating revenues (1)			$	31,293			$	20,561				$	57,601			$	39,054
Costs and expenses:
Cost of sales (d) (e)			28,380				18,227					52,948				35,283
Operating expenses:
Refining			813				693					1,557				1,457
Retail (d)			169				163					331				315
Ethanol			104				91					199				171
General and administrative expenses (f)			151				131					281				228
Depreciation and amortization expense			386				350					751				690
Asset impairment loss			—				2					—				2
Total costs and expenses			30,003				19,657					56,067				38,146
Operating income (e)			1,290				904					1,534				908
Other income, net			10				1					27				12
Interest and debt expense, net of capitalized interest			(107		)		(117		)			(224		)		(244		)
Income from continuing operations before income tax expense			1,193				788					1,337				676
Income tax expense			449				268					489				236
Income from continuing operations			744				520					848				440
Income (loss) from discontinued operations, net of income taxes			(1		)		63					(7		)		30
Net income			743				583					841				470
Less: Net loss attributable to noncontrolling interest (g)			(1		)		—					(1		)		—
Net income attributable to Valero Energy Corporation stockholders			$	744			$	583				$	842			$	470
Net income attributable to Valero Energy Corporation stockholders (g):
Continuing operations			$	745			$	520				$	849			$	440
Discontinued operations			(1		)		63					(7		)		30
Total			$	744			$	583				$	842			$	470
Earnings per common share:
Continuing operations			$	1.31			$	0.92				$	1.49			$	0.78
Discontinued operations			—				0.11					(0.01		)		0.05
Total			$	1.31			$	1.03				$	1.48			$	0.83
Weighted average common shares outstanding (in millions)			567				563					567				563
Earnings per common share – assuming dilution:
Continuing operations			$	1.30			$	0.92				$	1.48			$	0.78
Discontinued operations			—				0.11					(0.01		)		0.05
Total			$	1.30			$	1.03				$	1.47			$	0.83
Weighted average common shares outstanding – assuming dilution (in millions)			574				567					573				567
Supplemental information:
(1) Includes excise taxes on sales by our U.S. retail system			$	227			$	225				$	441			$	433

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
			Three Months Ended									Six Months Ended
			June 30,									June 30,
			2011				2010					2011				2010
Operating income (loss) by business segment:
Refining (e)			$	1,253			$	904				$	1,529			$	889
Retail			135				109					201				180
Ethanol			64				35					108				92
Corporate			(162		)		(144		)			(304		)		(253		)
Total			$	1,290			$	904				$	1,534			$	908
Depreciation and amortization expense by business segment:
Refining			$	339			$	301				$	655			$	595
Retail			27				27					55				53
Ethanol			9				9					18				17
Corporate			11				13					23				25
Total			$	386			$	350				$	751			$	690
Operating highlights:
Refining (a) (b) (e):
Throughput margin per barrel			$	11.41			$	9.57				$	9.35			$	7.89
Operating costs per barrel:
Operating expenses			3.86				3.49					3.89				3.91
Depreciation and amortization expense			1.61				1.52					1.64				1.59
Total operating costs per barrel			5.47				5.01					5.53				5.50
Operating income per barrel			$	5.94			$	4.56				$	3.82			$	2.39
Throughput volumes (thousand barrels per day):
Feedstocks:
Heavy sour crude			450				472					412				456
Medium/light sour crude			418				409					395				397
Acidic sweet crude			128				58					100				50
Sweet crude			679				668					672				628
Residuals			293				211					271				174
Other feedstocks			105				116					121				117
Total feedstocks			2,073				1,934					1,971				1,822
Blendstocks and other			243				246					241				238
Total throughput volumes			2,316				2,180					2,212				2,060
Yields (thousand barrels per day):
Gasolines and blendstocks			1,054				1,084					1,005				1,025
Distillates			786				720					741				659
Other products (h)			487				395					476				397
Total yields			2,327				2,199					2,222				2,081

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
			Three Months Ended									Six Months Ended
			June 30,									June 30,
			2011				2010					2011				2010
Refining operating highlights by region (i):
Gulf Coast:
Operating income			$	786			$	650				$	897			$	639
Throughput volumes (thousand barrels per day)			1,432				1,329					1,366				1,234
Throughput margin per barrel			$	11.30			$	10.28				$	9.01			$	8.35
Operating costs per barrel:
Operating expenses			3.74				3.34					3.80				3.85
Depreciation and amortization expense			1.54				1.57					1.58				1.64
Total operating costs per barrel			5.28				4.91					5.38				5.49
Operating income per barrel			$	6.02			$	5.37				$	3.63			$	2.86
Mid-Continent:
Operating income			$	393			$	151				$	560			$	140
Throughput volumes (thousand barrels per day)			398				390					401				377
Throughput margin per barrel			$	16.50			$	9.13				$	13.09			$	7.32
Operating costs per barrel:
Operating expenses			4.01				3.54					3.83				3.79
Depreciation and amortization expense			1.65				1.36					1.54				1.48
Total operating costs per barrel			5.66				4.90					5.37				5.27
Operating income per barrel			$	10.84			$	4.23				$	7.72			$	2.05
Northeast:
Operating income (loss)			$	(17	)		$	7				$	39			$	45
Throughput volumes (thousand barrels per day)			207				199					208				187
Throughput margin per barrel			$	3.36			$	4.40				$	5.19			$	5.99
Operating costs per barrel:
Operating expenses			3.04				2.55					2.93				3.10
Depreciation and amortization expense			1.22				1.47					1.20				1.56
Total operating costs per barrel			4.26				4.02					4.13				4.66
Operating income (loss) per barrel			$	(0.90	)		$	0.38				$	1.06			$	1.33
West Coast:
Operating income			$	91			$	98				$	33			$	67
Throughput volumes (thousand barrels per day)			279				262					237				262
Throughput margin per barrel			$	10.65			$	10.55				$	8.60			$	7.89
Operating costs per barrel:
Operating expenses			4.84				4.87					5.37				4.92
Depreciation and amortization expense			2.21				1.57					2.46				1.55
Total operating costs per barrel			7.05				6.44					7.83				6.47
Operating income per barrel			$	3.60			$	4.11				$	0.77			$	1.42
Operating income for regions above			$	1,253			$	906				$	1,529			$	891
Asset impairment loss applicable to refining			—				(2		)			—				(2		)
Total refining operating income			$	1,253			$	904				$	1,529			$	889

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
			Three Months Ended									Six Months Ended
			June 30,									June 30,
			2011				2010					2011				2010
Average market reference prices and differentials (j):
Feedstocks (dollars per barrel):
Louisiana Light Sweet (LLS) crude oil			$	117.96			$	80.06				$	111.49			$	79.70
LLS less West Texas Intermediate (WTI) crude oil			15.47				2.26					13.27				1.46
LLS less Alaska North Slope (ANS) crude oil			2.94				3.00					3.36				1.90
LLS less Brent crude oil			(0.64		)		1.61					(0.52		)		2.34
LLS less Mars crude oil			6.04				2.62					4.81				3.12
LLS less Maya crude oil			14.58				12.01					15.13				10.79
WTI crude oil			$	102.49			$	77.80				$	98.22			$	78.24
WTI less Mars crude oil			(9.43		)		0.36					(8.46		)		1.66
WTI less Maya crude oil			(0.89		)		9.75					1.86				9.33
Products (dollars per barrel):
U.S. Gulf Coast:
Conventional 87 gasoline less LLS			$	10.26			$	7.97				$	7.04			$	7.22
Ultra-low-sulfur diesel less LLS			11.49				9.88					12.54				8.36
Propylene less LLS			26.03				3.85					22.76				10.40
Conventional 87 gasoline less WTI			25.73				10.23					20.31				8.68
Ultra-low-sulfur diesel less WTI			26.96				12.14					25.81				9.82
Propylene less WTI			41.50				6.11					36.03				11.86
U.S. Mid-Continent:
Conventional 87 gasoline less WTI			$	26.38			$	10.39				$	21.14			$	8.55
Ultra-low-sulfur diesel less WTI			28.83				13.29					26.97				10.00
U.S. Northeast:
Conventional 87 gasoline less Brent			$	7.44			$	8.85				$	5.69			$	9.57
Ultra-low-sulfur diesel less Brent			12.53				12.93					13.78				12.14
Conventional 87 gasoline less WTI			23.55				9.50					19.48				8.69
Ultra-low-sulfur diesel less WTI			28.64				13.58					27.57				11.26
U.S. West Coast:
CARBOB 87 gasoline less ANS			$	14.54			$	17.24				$	14.95			$	13.97
CARB diesel less ANS			19.21				15.19					19.96				11.87
CARBOB 87 gasoline less WTI			27.07				16.50					24.86				13.53
CARB diesel less WTI			31.74				14.45					29.87				11.43
New York Harbor corn crush (dollars per gallon)			$	0.07			$	0.36				$	0.07			$	0.41

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon Amounts)
(Unaudited)
			Three Months Ended									Six Months Ended
			June 30,									June 30,
			2011				2010					2011				2010
Retail - U.S. (d):
Operating income			$	87			$	76				$	106			$	109
Company-operated fuel sites (average)			995				990					994				989
Fuel volumes (gallons per day per site)			5,094				5,196					4,995				5,070
Fuel margin per gallon			$	0.204			$	0.186				$	0.142			$	0.148
Merchandise sales			$	323			$	316				$	606			$	588
Merchandise margin (percentage of sales)			28.4		%		28.1		%			28.3		%		28.1		%
Margin on miscellaneous sales			$	22			$	22				$	44			$	44
Operating expenses			$	103			$	104				$	201			$	198
Depreciation and amortization expense			$	18			$	18				$	37			$	36
Retail - Canada (d):
Operating income			$	48			$	33				$	95			$	71
Fuel volumes (thousand gallons per day)			3,182				3,098					3,208				3,088
Fuel margin per gallon			$	0.319			$	0.260				$	0.318			$	0.272
Merchandise sales			$	68			$	61				$	125			$	113
Merchandise margin (percentage of sales)			29.8		%		29.9		%			29.8		%		30.3		%
Margin on miscellaneous sales			$	11			$	9				$	22			$	19
Operating expenses			$	66			$	59				$	130			$	117
Depreciation and amortization expense			$	9			$	9				$	18			$	17
Ethanol (c):
Operating income			$	64			$	35				$	108			$	92
Production (thousand gallons per day)			3,397				3,190					3,340				2,864
Gross margin per gallon of production			$	0.57			$	0.47				$	0.54			$	0.54
Operating costs per gallon of production:
Operating expenses			0.33				0.31					0.33				0.33
Depreciation and amortization expense			0.03				0.03					0.03				0.03
Total operating costs per gallon of production			0.36				0.34					0.36				0.36
Operating income per gallon of production			$	0.21			$	0.13				$	0.18			$	0.18
												June 30,				December 31,
												2011				2010
Balance Sheet Data:
Cash and temporary cash investments												$	4,107			$	3,334
Total debt												7,623				8,337

VALERO ENERGY CORPORATION AND SUBSIDIARIES NOTES TO EARNINGS RELEASE

(a) On December 17, 2010, Valero sold its refinery in Paulsboro, New Jersey, and associated inventory to PBF Holding Company LLC for $707 million. The results of operations of the refinery for the three and six months ended June 30, 2010 are reflected in discontinued operations. In addition, the refining segment and Northeast region operating highlights for the three and six months ended June 30, 2010 exclude the Paulsboro Refinery.

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