Valero Expects Capex to Be around $2.6 Billion in 2016



Valero’s stock performance

Valero Energy Corporation (VLO) announced its results on January 28, 2016, before the market hours. As Valero surpassed its estimates for 4Q15, the stock received a boost up to its opening. VLO opened at $67.3 per share higher than the previous close of $65.9. VLO saw highs of $67.6 and lows of $62.2 during the day. But eventually, VLO closed at $64.5, around 2% lower than its previous day’s close.

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On January 28, 2016, VLO’s peers Marathon Petroleum Corporation (MPC), Tesoro Corporation (TSO), and Phillips 66 (PSX) rose by 0.9%, 1.1%, and 1.2%, respectively. For exposure to VLO, MPC, and PSX, you can consider the PowerShares Dynamic Large Cap Value Portfolio (PWV). The ETF has ~10% exposure to energy sector stocks.

VLO’s 4Q15 capex

As recently guided by Valero, the capex (capital expenditure) for the fourth quarter stood lower at $732 million. With some portion of the fourth quarter’s capex spilling over to 2016, the capex for 2015 stood at $2.4 billion, or below its target of $2.7 billion.

Valero (VLO) completed its crude unit expansion at the McKee refinery in 4Q15 as expected. This is expected to increase its gasoline and diesel production from lower-cost crude in the region. VLO also completed the hydrocracker expansion at its Port Arthur refinery. Plus, the new crude unit at the Corpus Christi refinery came on-stream in 4Q15.

Valero expects capex to be around $2.6 billion in 2016. Out of that, $1 billion would be allocated to growth projects. The capex is aimed at increasing feedstock flexibility, yielding higher value products, sustaining growth, and improving logistics capabilities. Out of the growth capital, 55% is for logistics and 45% for refinery projects.


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