NEW YORK (AP) — Valero Energy Corp. said Tuesday it lost $3.28 billion in the fourth quarter as a plunge in the company's stock price forced it to absorb a huge writedown in goodwill while a slowing economy kept profit margins tight.
Valero said it would slash capital spending by nearly $1 billion this year, an action that investors took as yet another sign that oil refiners were headed toward an extended period of weak demand.
The company's shares fell $1.59, or 6.2 percent, to close at $24.26 Tuesday.
The nation's largest independent oil refiner reported a loss of $6.36 per share in the three months ended Dec. 31. It earned $567 million, or $1.04 per share, in the quarter a year ago.
The driving habits of Americans have changed drastically since 2007 because of the economic downturn, cutting demand for the gasoline that is produced by refiners. The nation's gasoline stocks are likely to have swelled by another 1.8 million barrels last week, according to a survey of this week's oil inventories by Platts, the energy information arm of McGraw-Hill Cos.
"There's too much capability to make gasoline in this environment," Bill Klesse, Valero's chairman and chief executive, said in a conference call with analysts. "And if the industry does not balance supply with demand, we will have negative magins again."
San Antonio-based Valero said Tuesday it is shutting down its massive Texas City refinery instead of running portions of it during the regular maintenance as was planned. At its Corpus Christi East plant, Valero shut down the unit primarily used to make gasoline.
The latest financial results include a non-cash impairment charge of $4.1 billion. Company officials said the charge reflects a plunge in Valero's stock price, which dropped from a high of $62.97 per share to $13.94 per share during the past 12 months.
Thomson Reuters says analysts it surveyed expected earnings of 89 cents per share. Analysts typically exclude one-time items from their estimates.
Revenue dropped 35 percent to $18.6 billion from $28.7 billion a year ago.
The company said it would cut 2009 capital spending to $2.7 billion, down $800 million from its previous estimate. Valero Chief Financial Officer Mike Ciskowski said the cuts include discretionary projects at many of its refineries.
In addition, Ciskowski said the completion of the company's hydrocracker project in St. Charles, La., will be pushed back to the fourth quarter of 2012. An aromatics project at St. Charles also will be reduced in scope. "We will continue to look for ways to reduce spending on capital expenditures, operating costs and overhead," he said.
Fadel Gheit, an analyst with Oppenheimer & Co. said other refiners will likely follow Valero's lead in curbing production this year.
"It's the prudent thing," Gheit said. "They're not going to spend money hoping for margins to improve."
Oil refiners have struggled to adjust to crude prices that shot up last year to more than $147 a barrel before dropping below $33 a barrel this year.
Profit margins from turning crude into fuel was extremely volatile.
Valero saw higher margins for distillate products such as diesel and jet fuels and secondary products such as asphalt and petroleum coke. But those gains were offset by lower gasoline margins and lower overall refinery activity in the quarter.
For the year, the company reported a loss of $1.13 billion, or $2.16 per share, compared with a profit of $5.23 billion, or $8.88 per share, in 2007.
Copyright 2009 The Associated Press.