Earnings Decline at Valero, BP Downstream Divisions

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Earnings Decline at Valero, BP Downstream Divisions


SAN ANTONIO and LONDON -- Valero Energy Corp. and BP plc both saw fiscal first-quarter net earnings decline at their downstream divisions compared to the same timeframe last year.

At Valero, the company's retail division earned a net profit of $40 million vs. a $66-million gain during its 2011 fiscal first quarter. Broken down further, Valero earned a profit of $11 million in its U.S. retail division, with the remainder coming from its Canadian convenience stores.

During an earnings conference call this morning, Valero cited lower fuel margins for its decreased retail profits compared to last year. However, U.S. retail fuel volumes achieved a first-quarter record of 5,046 gallons per day per site, the company said.

"Our same-store gasoline sales were up 2.5 percent during the first quarter," said Gary Arthur, Valero's senior vice president of retail marketing. "Texas was very strong for us. In April, same-store gasoline sales were about even with March."

For the company as a whole, Valero lost $432 million in its latest quarter, compared to a $244-million profit in its 2011 first quarter. Lower margins for petrochemical feedstocks and petroleum, as well as one-time items, were cited as reasons for the loss.

"Given the high level of turnarounds and maintenance in the first quarter, we performed well and continued to execute our strategy," said Valero Chairman and CEO Bill Klesse.

Klesse added during today's investor conference call that despite many political roadblocks, he expects the Keystone XL pipeline project will be approved if President Obama is reelected in November. "We expect it to be approved in the first quarter of 2013," he said. "We think it can be completed by the end of 2014."

At BP, the company earned a profit of $2.35 billion in its downstream division for its 2012 fiscal first quarter. The parent of the company's c-stores enjoyed a profit of $4.36 billion last year. A "challenging first quarter" in BP's fuel business was blamed for the lower downstream earnings.

In the United States, the London-based company announced it made $1.5 billion worth of payments in its latest quarter regarding its 2010 Gulf of Mexico oil spill.

As a whole, the international petroleum company made $4.8 billion during its latest quarter vs. a profit of $5.56 billion in BP's 2011 fiscal first quarter.

"We have made a good start against our strategic priorities for 2012," said Bob Dudley, BP's group chief executive. "During the quarter, we gained access to new deepwater and U.S. shale exploration acreage, our ongoing divestment program reached $23 billion, and we have five deepwater rigs at work in the Gulf of Mexico."

Included in the divestment program was the $1.2-billion sale of gas assets in Kansas in March.