Valero expects Aruba refinery to add US$100mn in 1Q05

Wednesday, February 2, 2005

Texas-based oil company Valero Energy (NYSE: VLO) expects its Aruba refinery to add about US$100mn to the company's operating income in the first quarter this year, company chairman and CEO Bill Greehey said in a conference call Tuesday.

Valero generated US$209mn in operating income from its Aruba refinery operations in the 2004, he said, adding that by 1Q05 the acquisition will have been "paid out."

Valero acquired the refinery from US energy company El Paso (NYSE: EP) in March 2004 for US$365mn, plus US$100mn for the related marine, bunkering and marketing operations.

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Throughput volumes for the refinery during the 302 days of its operation in 2004 averaged 221,000 barrels a day (b/d), the company said in its Q4 financial statement.

Valero predicts that company earnings will improve in 2005 due to sour crude production at the Aruba refinery among other refineries in the US. The Aruba refinery will be online for the full year, Greehey said.

The Aruba refinery contributed about 17% of Valero's pre-tax income in the fourth quarter 2004, a company official said during the call.

The company's Aruba operations are tax-free through 2010.

"After 2010, we will invest additional capital at the refinery and they will extend that tax holiday if you spend additional dollars so I don't think we'll be paying taxes any time soon. They want you to continue making investments and that is the pay off," Greehey said.