Valero Energy reports 1Q loss of $113 million on weak demand for gasoline and diesel

Valero posts fourth straight quarterly loss

NEW YORK — Valero Energy Corp. said Tuesday it lost money for the fourth straight quarter as the country burned less fuel.

The results beat analysts’ expectations, however, and CEO Bill Klesse said the string of losses has probably ended.

“As the economic activity increases it will help our business,” Klesse said in a conference call with investors. “I’ve told everyone that we expect to be profitable for the year.”

Valero, America’s largest independent oil refiner, reported a loss of $113 million, or 20 cents per share, in the first three months of the year. That compares with profit of $309 million, or 60 cents per share, in the same period a year ago.

Revenue rose 47.4 percent to $19.6 billion, compared with the first quarter of 2009. Operating costs climbed to $19.7 billion from $12.7 billion.

Not counting a loss from shuttering the company’s Delaware City refinery, the San Antonio company said it would have lost 18 cents per share for the quarter.

Analysts expected a loss of 30 cents per share on revenue of $18 billion.

Refineries that turn oil into gasoline, diesel and other fuels have struggled financially as crude prices rebounded last year. Oil, which is used as an investment tool, nearly doubled in price over the past 12 months as investors bet the economy would recover and consumers would need more fuel.

They’re still waiting.

U.S. petroleum consumption dropped in the first quarter for the third year in a row, according to the Energy Information Administration. That helped squeeze profit margins at Valero’s refineries nearly 35 percent from the previous year.

Valero responded by producing less. It idled a refinery in Aruba last June and shut down its Delaware City refinery in November, laying off 550 workers. The company now plans to sell the Delaware refinery to subsidiaries of PBF Energy Partners for $220 million.

Spokesman Bill Day said Valero also has received offers for another refinery in Paulsboro, N.J., but it hasn’t yet decided to sell. The company still operates 15 refineries.

After a tough year, refineries have started to see signs of life in the American economy. Motorists are starting to drive more, and gasoline prices have risen.

Throughout the first quarter, pump prices increased nearly 6 percent while oil prices rose only 3 percent. The Energy Department and some analysts expect gasoline to hit a national average of $3 or more a gallon by this summer.

Valero’s first-quarter loss was the smallest of the previous four, and the company said it found huge advantages in refining cheaper varieties of crude oil. The sour, mars and maya crudes that Valero refined were considerably less expensive during the quarter than benchmark oil.

Blake Fernandez, an analyst with Howard Weil, Inc. said those varieties will stay cheap because OPEC, a major source for those kinds of crude, is expected to boost production this year.

“It really plays to (Valero’s) competitive advantage,” Fernandez said.

So far this month, Klesse said margins are “very good” in several markets for gasoline, diesel and other products. He expects to turn a profit next quarter for the first time in more than a year.

Company shares fell 22 cents to close at $19.90 after financial troubles in Europe dragged U.S. stocks sharply lower.