Valero Energy

(VLO) - Get Report

reported stronger first-quarter earnings Thursday, though the results fell short of Wall Street expectations.

The shares lost 94 cents, or 1.3%, to $72.55 in morning trading.

The San Antonio, Texas-based refiner said net income more than doubled to $534 million, or $1.92 a share, from $248 million, or 91 cents a share, a year ago. The results reflect record crude prices and distillate margins, the company said.

Analysts on average were expecting $1.97 earnings per share, according to Thomson First Call.

Valero has about 15 refineries for turning low-grade, high-sulfur oil into gasoline. The company can buy cheap low-grade oil for as little as $17 a barrel, produce it into fuel, and market it at high gasoline prices.

The company's "large, complex and geographically diverse refining system" and "its leverage to sour crude processing," is the driver behind its earnings growth, said Bill Greehey, Valero's chairman and CEO, in a statement.

First-quarter operating income from refining was $933 million, up from $495 million for the same period last year.

The company also reported a lower debt-to-capitalization ratio of 29.6% as of March 31, 2005, compared with 30.7% at the end of last years' fourth quarter.