Valero (NYSE: VLO) is not one of the famous "big oil" companies, but with a market cap of $39 billion and trading volume that averages nine million shares a day, it is big enough.
The difference between the price of crude and what Valero could charge for finished petroleum-based products hurt its earnings as it has other oil companies that have reported Q3 results.
Third quarter 2007 operating income was $1.2 billion versus $2.3 billion reported in the same period last year. The $1.1 billion reduction in operating income was mainly due to higher prices for light sweet crude oils. Revenue was up only slightly to $23.7 billion.
The company was not high on its Q4 prospects either. "So far in the fourth quarter, the margin environment has been difficult as prices for refined products have failed to keep pace with the increase in feedstock costs," said Bill Klesse, Valero's Chairman of the Board and Chief Executive Officer. "In particular, the seasonal supply and demand patterns and higher feedstock prices have squeezed gasoline margins."
So Valero finds itself in the difficult position of not being able to pass rising oil prices on to end-users fast enough to drive up earnings.
Ironic that an oil company cannot make more money as its primary commodity's price moves up sharply on an almost weekly basis.
Douglas A. McIntyre is an editor for 247wallst.com.
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Reader Comments (Page 1 of 1)
11-06-2007 @ 10:06AM
Chuck McDowell said...
VLO is an excellent stock for any investor. Its stock buy back program should add 10% per year to its earnings. Margins in the 4th qtr of 07 and all quarters of 08 will improve as gasoline and diesel prices will increase faster than the price of crude. VLO will reward any investor at least 20% over the next 12 months.
11-06-2007 @ 2:01PM
Greg Feskoe said...
VLO can't make money because of the wide RBOB Gasoline crack spreads (The sharp incline of Crude)--so why is it up 4% on the day when this morning they announced a 21% profit decline in the 3Q...the same day Crude is up $2 and change? Are there that many amateur traders in oil stocks?