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Valero warns of financial hit due to Texas deep freeze

Valero 1Q results

Valero Energy Corporation reported this Thursday that stockholders will experience a bigger than expected loss, attributable to Texas deep freeze.

Firstly, on the company’s preliminary guidance on 1Q financial results, the company advanced a hit in the range of $2,05 or $1,81 per share, due to inflated costs of electricity and natural gas incurred in its refining and ethanol business segments, primarily located in the state.

Secondly, the company estimated an overall impact of excess electricity and natural gas costs to be between $1.14 and $1.18 per share. Valero will report full results on April 22, and will further discuss the results on a morning press conference.

Thirdly, U.S. Gulf Coast refining segment’s operative income would be hit by $480 million, due to additional costs; while the U.S. Mid-Continent’s income would endure a $45 million hit, according to Valero’s data.

Matthew Blair, Tudor, Pickering, Holt & Co analyst, said to Reuters. “The higher natgas and electricity costs were definitely above our expectations.”

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Valero preliminary results

Valero with increased exposure in Texas

He also explained that Valero’s exposure in the state has elevated, as 50% of its refining capacity lies in Texas soil. In contrast, Marathon Petroleum Corp has only 25% of its refining capacity in Texas; while Phillips 66 has only 16%.

Nevertheless, the company’s outlook on 1Q financial results was in line with the consensus and what was expected, after the havoc from the storm, Blair concluded. However, after the report was out, trade stock from Valero were down 2,6% at the early trading session.

In addition, last week, ExxonMobil estimated that the cold snap in Texas may cut its 1Q profits by $800 million; while Phillips 66 foresees a bigger-than-expected adjusted loss for the quarter, citing impact to its U.S. Gulf Coast petrochemical operations.

Finally, it was at late February when Valero Energy restarted operations; in the case of Valero, in Louisiana, also hit by the storm. It was the company’s 125,000 barrel per day refinery in Meraux, that first restarted operations.

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