Valero Energy Corp., the world’s largest independent refiner by processing capacity, rose to the highest level since June 2008 after reporting a 20-fold increase in fourth-quarter profit driven by cheap U.S. crude.
Valero climbed 13 percent to $43.77 at the close in New York, the biggest gain on the Standard & Poor’s 500 Index, after the San Antonio-based company said net income rose to $1.01 billion, or $1.82 a share, from $45 million a year ago.
Per-share profit excluding a loss stemming from the shutdown of its Aruba refinery was 68 cents more than the $1.20 average of 18 analysts’ estimates compiled by Bloomberg. Sales rose less than 1 percent to $34.7 billion.
Valero ceased all imports of light oil at its refineries in Memphis and the U.S. Gulf Coast in the fourth quarter, relying instead on cheaper crude produced in new U.S. fields, Valero Chairman and Chief Executive Officer Bill Klesse said in the statement. The company is looking for ways to process more North American crude, which it expects “to become increasingly more available.”
“This was a blowout, the best quarter for the company in years,” Fadel Gheit, a New York-based analyst at Oppenheimer & Co., said in a telephone interview today. “The question they need to answer now is how they are going to boost the stock price, which is undervalued. What are they going to do for the shareholder?”
Valero’s refining gross margin was 20 percent higher than expected, Paul Sankey, a New York-based analyst with Deutsche bank, said in a note to clients. The company benefited particularly from a high profit margin at its refineries on the U.S. Gulf Coast and in the midwest, Sankey said.
Refiners rose more than any other energy sector in 2012 as U.S. crude production rose to the highest level since 1993, exceeding demand and keeping U.S. prices an average $21.85 a barrel lower than the global benchmark. Buying oil for less and selling fuel at a price linked to more expensive crude fueled the highest fourth-quarter per share profit Valero has seen since 2005, according to the statement.
Valero, which has 13 buy ratings, nine holds and two sells from analysts, has gained 27 percent this year.