BP, Valero and FamilyMart Report Mixed Earnings

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BP, Valero and FamilyMart Report Mixed Earnings

SAN ANTONIO -- A stalling economy and record crude oil prices depressed Valero's earnings in the second quarter of 2008, while BP saw net income rise due to high prices.

Valero Energy Corp. reported second quarter 2008 operating income of $1.2 billion, versus the $3.2 billion that was reported in the second quarter of 2007.

According to the report, the decline in operating income was primarily attributable to lower margins for many of the company's products. Other factors contributing to the decline in operating income included refinery expenses, which increased by $148 million from the second quarter of 2007 to the second quarter of 2008. This was due, in large part, to higher energy costs for electricity and natural gas.

"Despite the difficult environment for margins on gasoline and many secondary products, Valero continued to be profitable," Bill Klesse, Valero chairman of the board and CEO, said in a statement. "Wide differentials for the heavy and sour feedstocks that we can process in our refineries benefited us significantly in the second quarter."

He continued: "As I've said before, the refining industry historically has been seasonal, volatile, and cyclical. Even when the industry faces challenges, our employees are committed to excellence in achieving cost efficiencies while continuing to improve our safety, environmental and reliability performance."

In other earning news, due to a surge in crude oil prices and natural-gas prices, BP Plc second-quarter earnings rose 28 percent. Bloomberg News reported the company's net income climbed to $9.47 billion from $7.38 billion a year earlier.

Chief Executive Officer Tony Hayward told Bloomberg News he is bringing new production and refining capacity online to improve earnings, which he conceded are lagging behind Exxon Mobil Corp. and Royal Dutch Shell Plc. BP is expected to add approximately 650,000 barrels a day of oil equivalent to output through 2009.

The results "look very good. They are generating cash flow, the profits that everyone hopes they should be generating in the very high oil price markets," Andy Lynch, a portfolio manager who oversees $2.9 billion at Schroder Investment Management Ltd. in London, told Bloomberg News. "And they are actually also looking to invest more money into refinery assets."

BP plans to purchase Oklahoma gas properties from Chesapeake Energy Corp. for $1.75 billion, targeting fuel from rock formations that are more expensive to exploit than traditional fields, reported Bloomberg News, citing a company announcement from earlier this month.

In other earnings news, as of July, FamilyMart's same-store sales are up nearly 15 percent, which marks the company's largest monthly sales jump in roughly 17 years. FamilyMart President Junji Ueda told Reuters his company and its two bigger rivals, Seven & I Holdings Co. Ltd. and Lawson Inc., experienced a revenue boom in recent months as smokers are turning away from ID-requiring vending machines and flocking to stores.

"If we can keep rolling out competitive items, customers will keep coming," Ueda told Reuters. "We have to offset the (absence of the tobacco boost) by growing sales of our core merchandise. And we can do that."

The Japanese-based c-store is among a number of retailers that have expressed interest in farming to address growing consumer concerns over food safety. Ueda told Reuters the company might follow Seven & I, which recently entered the farming business.

"We will positively consider being directly involved in production in the agricultural sector," he said, adding growing its own rice would make sense as it is a staple of most boxed lunches in Japan.