Valero Energy was not only named after a mission (the Mission San Antonio de Valero), it is on a mission to be the largest independent refiner in the US. Valero churns out about 3 million barrels per day. Valero refines low-cost residual oil and heavy crude into cleaner-burning, higher-margin products, including low-sulfur diesels. It operates 16 refineries in the US, Canada, and the UK. It also has 10 ethanol plants. Through its CST Brands' spin off, Valero has a network of some 1,850 retail and wholesale gas stations bearing the Corner Store and Dépanneur du Coin names in the US and Canada.
Valero has refining, wholesale and/or retail operations in Aruba, Canada, Ireland, the UK, and the US. In 2012 the US accounted for 73% of the company's total revenues.
The company operates three business segments: Refining (refining operations, wholesale marketing, product supply and distribution, and transportation); Ethanol (sales of internally produced ethanol and distillers grains in the US); and Retail (company-operated convenience stores in the US and Canada; and filling stations, cardlock facilities, and heating oil operations in Canada).
Sales and Marketing
The company markets branded and unbranded refined products on a wholesale basis through an extensive bulk and rack marketing network. Valero sells refined products through 1,880 company-owned and leased retail sites in the US and Canada and 5,450 branded third-party wholesale sites in Aruba, Canada, Ireland, the UK, and the US.
Valero's revenues grew by 11% in 2012 thanks to higher refined product prices (reflecting higher oil prices) and higher throughput volumes (reflecting increased demand from an improving economy).
In 2012 the company's net income decreased slightly due to increased Asset impairment losses as a result to the impairment of the refining assets of company’s Aruba Refinery stemming from the company's decision that year to reorganize the refinery into a crude oil and refined products terminal. (Due to the high costs of operating its Aruba refinery, in 2010 Valero announced the suspension of activities at the refinery while it sought alternative uses of the facility).
Except for a recession-caused revenue slump in 2009, the company saw an upward trend in revenues from 2008 to 2012.
To get better shareholder returns, in 2013 the company spun off its retail business as an independent public company, CST Brands, Inc. Valero continues to supply fuel to CST Brands' retail sites through long-term supply agreements. (Valero subsequently announced it would sell its remaining 20% stake in the company.)
Valero is also pursuing a long-term strategy of ramping up its profitable businesses in the US while selling about a third of its high-cost North American refineries and other non-core US assets, in order to explore more cost-efficient projects in faster-growing markets in Europe, the Middle East, and Asia.
In 2013 the company’s Valero Terminaling and Distribution unit formed a joint venture with TGS Development to start construction on a new marine terminal on the lower Sabine-Neches Waterway near Port Arthur, Texas to support the expansion of oil receipts and the marine movements of other commodities at that strategic port.
Growing its foothold in the petrochemical segment, that year the company also announced plans to build a major methanol plant at its 270,000 barrel per day St. Charles refinery near New Orleans. Scheduled to commence operating in 2016, the $700 million plant will yield 1.6 million tons of methanol per year.
Expanding its global footprint, in 2011 Valero bought Chevron's Pembroke refinery and marketing and logistics assets across the UK for $1.7 billion. It also boosted its US assets that year, buying Murphy Oil's refinery outside New Orleans for $585 million to complement its St. Charles facility. Valero also bought Chevron USA Inc.’s Louisville and Lexington, Kentucky product terminals, expanding its wholesale marketing presence in eastern Kentucky with product supplied primarily from the Valero Memphis Refinery.
(To cut costs, in 2010 it sold its Delaware City refinery. It also sold its Paulsboro, New Jersey refinery that year to PBF Holding for $340 million. It also sold its 50% stake in a pipeline that brings deepwater crude oil from the Gulf of Mexico to the US to Genesis Energy for $330 million.)
Hedging its bets, Valero has also moved into the alternative fuel business. Given that ethanol is a requirement in many of the gasoline fuel mixes it sells, the company decided that it could cut costs by owning ethanol plants, rather than buying ethanol wholesale. It made its first foray into ethanol production in 2009, buying seven ethanol production facilities from VeraSun Energy, which was operating under Chapter 11 bankruptcy protection. Valero paid about $475 million for the facilities. After acquiring other ethanol companies, in 2012 the company owned a total of 10 ethanol plants, with a collective capacity of 1.1 billion gallons a year.