January 31, 2019 / 5:54 PM / 3 months ago

UPDATE 3-Valero beats on profit, has stopped buying Venezuela crude

(Adds CEO, analyst comments; updates share price)

By Arundhati Sarkar

Jan 31 (Reuters) - Independent U.S. refiner Valero Energy Corp beat quarterly profit estimates on Thursday and said it was well prepared for a fallout from sanctions imposed by the U.S. government on crude supplier Venezuela, sending its shares up 5 percent.

The San Antonio, Texas-based company, one of the largest buyers of Venezuelan crude in the United States, said it had stopped intake from the country after the U.S. slapped sanctions on Venezuelan state-owned oil firm PDVSA earlier this week. (reut.rs/2Gd1gMW)

PDVSA exports roughly 500,000 barrels per day (bpd) to the United States.

Valero has been substituting light crude oil from North America and other sources to make up for the lack of Venezuelan heavy crude, supply and international operations Senior Vice President Gary Simmons said on a conference call with Wall Street analysts.

Refiners like Valero, Phillips 66 and Marathon Petroleum Corp process crude into diesel, gasoline, and other products.

“The current economics are certainly pushing the country to maximize light sweet in the system,” Chief Executive Officer Joseph Gorder said.

During the quarter, refining margins rose 26 percent to $3.05 billion in the last three months of 2018.

“The main driver of the beat was solid performance in every region of the refining segment, but particular stand-outs were the Gulf Coast and North Atlantic regions,” Simmons Energy analysts Blake Fernandez and Patrick Flam said.

Valero plans to run its 14 refineries at up to 95 percent of their combined production capacity of 3.1 million bpd in the first quarter of 2019.

The company, which has also been investing heavily in pipelines and storage to reduce costs, said the completion of some projects provided it with greater access to discounted North American crudes in the fourth quarter.

“We also set a record on the volume of Canadian heavy that we ran in our system,” Valero’s Simmons said.

Access to cheaper crude helped boost profitability.

On an adjusted basis, income attributable to Valero shareholders rose to $900 million, or $2.12 per share, in the fourth quarter ended Dec. 31, from $509 million, or $1.16 per share, a year earlier.

Analysts had expected earnings of $1.07 per share, according to IBES data from Refinitiv. In the year-earlier quarter, the company had recorded a $1.9 billion gain from U.S. tax reforms.

The company’s shares rose 5 percent to $87.44 in midday trade. (Reporting by Arundhati Sarkar in Bengaluru; Editing by Anil D’Silva and Shounak Dasgupta)

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