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29 octubre 2008

Valero Energy Corporation Reports Third Quarter Earnings

SAN ANTONIO --(Business Wire)-- -- Valero Energy Corporation (NYSE: VLO) today reported third quarter 2008 income from continuing operations of $1.2 billion, or $2.18 per share, which compares to $848 million, or $1.34 per share, in the third quarter of 2007. The third quarter 2008 results include the company's pre-tax gain of $305 million on the sale of its Krotz Springs, Louisiana refinery to a subsidiary of Alon USA Energy, Inc., which was effective July 1, 2008. Excluding this gain, third quarter 2008 income from continuing operations was $982 million, or $1.86 per share. Due to long-term product supply agreements between Valero and Alon, the results of operations related to the Krotz Springs refinery have not been presented as discontinued operations.

Income from continuing operations for the nine months ended September 30, 2008, was $2.1 billion, or $4.02 per share, compared to $4.0 billion, or $6.66 per share, for the nine months ended September 30, 2007. Excluding the gain on the sale of the Krotz Springs refinery, income from continuing operations for the nine months ended September 30, 2008 was $2.0 billion, or $3.70 per share.

Third quarter 2008 operating income was $1.8 billion compared to $1.2 billion for the third quarter of 2007. Excluding the gain on the sale of the Krotz Springs refinery, the increase in operating income was mainly due to higher margins for distillate products, such as diesel and jet fuels. Partially offsetting the higher margins for distillate products was a decrease in margins for gasoline.

"As a result of our good earnings, our financial position has continued to improve," said Bill Klesse, Valero's Chairman of the Board and Chief Executive Officer. "At the end of the third quarter, our net debt-to-capitalization ratio was 15.8%, one of the lowest in company history. In early October, Moody's recognized our financial strength by raising our investment-grade credit rating from Baa3 to Baa2 with a stable outlook.

"Given the very uncertain economic environment, we have significantly reduced our capital spending. We estimate total capital spending for 2008 will be approximately $3.0 billion, down $800 million from our last update, and down $1.5 billion from our original budget of $4.5 billion. For 2009, we estimate capital spending will be $3.5 billion, also down $500 million from our previous guidance. We will continue to review our capital spending considering our opportunities and the economic outlook."

Regarding uses of cash in the third quarter of 2008, the company's capital spending was $749 million, of which $76 million was for turnaround expenditures. The company also used $78 million for dividend payments and spent $74 million to purchase 2 million shares of its common stock. In October, the company purchased an additional 8.3 million shares, taking the year-to-date total purchases to nearly 23 million shares, or more than 4% of shares outstanding at the beginning of this year.

"Looking at market fundamentals, a key item in the third quarter was the sharp drop in the price of crude oil, and this decline has obviously continued so far in the fourth quarter," said Klesse. "The price of WTI light sweet crude oil began the third quarter at approximately $140 per barrel, but recently closed below $65 per barrel. Although the fall in crude oil prices has not translated into higher margins for all of Valero's products, the lower crude oil prices have led to substantially lower retail pump prices, which is positive for consumers and demand for our products. The lower prices will also provide consumers a clearer view of the magnitude of the subsidies necessary to make alternative fuels competitive.

"Regarding third quarter product margins, conditions were very volatile. Low gasoline margins in July were followed by higher margins in August as production adjusted to demand. When the hurricanes hit the Gulf Coast and reduced refinery production, gasoline inventories fell to historically low levels, and margins responded, which increased average margins for the third quarter. In contrast to the volatile movement of gasoline margins, distillate margins remained very good throughout the third quarter as global supply and demand balances were tight. With winter approaching, we continue to expect excellent distillate margins even though worldwide economic activity is slowing."

Margins for many of the company's secondary products, such as asphalt, heavy fuel oil, petroleum coke, and petrochemical feedstocks, increased in the third quarter compared to the prior quarter as the cost of crude oil fell faster than the prices of those products. This favorable margin relationship continues as crude prices continue to fall.

"In our refining operations, the hurricanes certainly complicated matters," said Klesse. "We had four refineries shut down, but we were fortunate to avoid major damage from the hurricanes. We thank all of our employees for a dedicated and committed effort to return our refineries and most of our retail stores to normal operations as quickly as possible.

"Uncertainty in the financial markets and a pessimistic economic outlook have noticeably added to the inherent volatility in the refining industry. Valero's stock price, like those of nearly all companies in the energy sector, has been hit hard. Obviously, we feel that our stock price has been beaten down unfairly when you consider our balance sheet strength, cash position, operations, and continuing profitability. You can expect us to maintain our balanced approach by investing in growth projects, paying off debt, buying back stock, and increasing dividends, but clearly we intend to hold much more cash than in the past."

Valero's senior management will hold a conference call at 11 a.m. ET (10 a.m. CT) today to discuss this earnings release and provide an update on company operations. A live broadcast of the conference call will be available on the company's web site at www.valero.com.

Valero Energy Corporation is a Fortune 500 company based in San Antonio, with approximately 22,000 employees and 2007 revenues of more than $95 billion. The company owns and operates 16 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.1 million barrels per day, making it the largest refiner in North America. Valero is also one of the nation's largest retail operators with approximately 5,800 retail and branded wholesale outlets in the United States, Canada and the Caribbean under various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon. Please visit www.valero.com for more information.

Statements contained in this release that state the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words "believe," "expect," "should," "could," "estimates," and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero's annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission and on Valero's website at www.valero.com.

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon
Amounts)
(Unaudited)


Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ------------------
2008 2007 2008 2007 (1)
------------- ------------ --------- --------
STATEMENT OF INCOME
DATA:
Operating Revenues (2) $ 35,960 $ 23,699 $100,545 $66,656
------------- ------------ --------- --------

Costs and Expenses:
Cost of Sales 32,506 20,810 91,848 55,630
Refining Operating
Expenses 1,179 1,036 3,426 2,955
Retail Selling
Expenses 201 190 579 561
General and
Administrative
Expenses 169 152 421 474
Depreciation and
Amortization
Expense 370 343 1,106 1,002
Gain on Sale of
Krotz Springs
Refinery (3) (305) - (305) -
------------- ------------ --------- --------
Total Costs and
Expenses 34,120 22,531 97,075 60,622
------------- ------------ --------- --------

Operating Income 1,840 1,168 3,470 6,034

Other Income, Net (4) 36 145 71 157

Interest and Debt
Expense:
Incurred (112) (148) (335) (347)
Capitalized 31 25 74 83
------------- ------------ --------- --------

Income from Continuing
Operations Before
Income Tax Expense 1,795 1,190 3,280 5,927

Income Tax Expense 643 342 1,133 1,929
------------- ------------ --------- --------

Income from Continuing
Operations 1,152 848 2,147 3,998

Income from
Discontinued
Operations, Net of
Income Taxes (1) - 426 - 669
------------- ------------ --------- --------

Net Income $ 1,152 $ 1,274 $ 2,147 $ 4,667
============= ============ ========= ========

Earnings per Common
Share:
Continuing
Operations $ 2.21 $ 1.54 $ 4.08 $ 7.00
Discontinued
Operations - 0.77 - 1.17
------------- ------------ --------- --------
Total $ 2.21 $ 2.31 $ 4.08 $ 8.17
============= ============ ========= ========

Weighted Average
Common Shares
Outstanding (in
millions) 522 551 526 571

Earnings per Common
Share - Assuming
Dilution:
Continuing
Operations (5) $ 2.18 $ 1.34 $ 4.02 $ 6.66
Discontinued
Operations - 0.75 - 1.14
------------- ------------ --------- --------
Total $ 2.18 $ 2.09 $ 4.02 $ 7.80
============= ============ ========= ========

Weighted Average
Common Shares
Outstanding-
Assuming Dilution
(in millions) 529 564 535 587

September 30, December 31,
2008 2007
------------- ------------
BALANCE SHEET DATA:
Cash and Temporary
Cash Investments $ 2,767 $ 2,464

Total Debt $ 6,475 $ 6,862

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon
Amounts)
(Unaudited)


Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2008 2007 2008 2007 (1)
---------- ------- -------- --------
Operating Income (Loss) by
Business Segment:
Refining $ 1,913 $1,259 $3,716 $6,362
---------- ------- -------- --------
Retail:
U.S. 81 54 120 115
Canada 26 20 86 68
---------- ------- -------- --------
Total Retail 107 74 206 183
---------- ------- -------- --------
Total Before Corporate 2,020 1,333 3,922 6,545
Corporate (180) (165) (452) (511)
---------- ------- -------- --------
Total $ 1,840 $1,168 $3,470 $6,034
========== ======= ======== ========

Depreciation and Amortization by
Business Segment:
Refining $ 331 $ 307 $ 998 $ 902
---------- ------- -------- --------
Retail:
U.S. 18 15 51 42
Canada 10 8 26 21
---------- ------- -------- --------
Total Retail 28 23 77 63
---------- ------- -------- --------
Total Before Corporate 359 330 1,075 965
Corporate 11 13 31 37
---------- ------- -------- --------
Total $ 370 $ 343 $1,106 $1,002
========== ======= ======== ========

Operating Highlights:
Refining:
Throughput Margin per Barrel $ 13.11 $ 9.94 $10.80 $13.39

Operating Costs per Barrel:
Refining Operating Expenses $ 4.96 $ 3.96 $ 4.72 $ 3.87
Depreciation and
Amortization 1.39 1.17 1.38 1.18
---------- ------- -------- --------
Total Operating Costs per
Barrel $ 6.35 $ 5.13 $ 6.10 $ 5.05
========== ======= ======== ========

Throughput Volumes (Mbbls per
Day):
Feedstocks:
Heavy Sour Crude 565 594 580 633
Medium/Light Sour Crude 670 663 680 643
Acidic Sweet Crude 75 79 76 83
Sweet Crude 578 760 622 728
Residuals 282 265 242 261
Other Feedstocks 136 181 141 161
---------- ------- -------- --------
Total Feedstocks 2,306 2,542 2,341 2,509
Blendstocks and Other 281 302 306 286
---------- ------- -------- --------
Total Throughput
Volumes 2,587 2,844 2,647 2,795
========== ======= ======== ========

Yields (Mbbls per Day):
Gasolines and
Blendstocks 1,136 1,324 1,197 1,283
Distillates 906 932 920 919
Petrochemicals 66 84 74 83
Other Products (6) 464 495 449 507
---------- ------- -------- --------
Total Yields 2,572 2,835 2,640 2,792
========== ======= ======== ========

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon
Amounts)
(Unaudited)


Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2008 2007 2008 2007
--------- -------- -------- --------
Refining Operating Highlights by
Region (7):
Gulf Coast:
Operating Income (3) $ 1,117 $ 763 $ 2,597 $ 3,781

Throughput Volumes (Mbbls per
Day) 1,324 1,527 1,399 1,532

Throughput Margin per Barrel $ 13.21 $10.49 $ 12.01 $ 13.80

Operating Costs per Barrel:
Refining Operating Expenses $ 5.17 $ 3.98 $ 4.73 $ 3.69
Depreciation and
Amortization 1.37 1.08 1.30 1.06
--------- -------- -------- --------
Total Operating Costs per
Barrel $ 6.54 $ 5.06 $ 6.03 $ 4.75
========= ======== ======== ========

Mid-Continent (1):
Operating Income $ 295 $ 233 $ 513 $ 807

Throughput Volumes (Mbbls per
Day) 426 445 426 391

Throughput Margin per Barrel $ 13.23 $10.35 $ 9.94 $ 13.10

Operating Costs per Barrel:
Refining Operating Expenses $ 4.42 $ 3.52 $ 4.25 $ 4.17
Depreciation and
Amortization 1.28 1.15 1.29 1.36
--------- -------- -------- --------
Total Operating Costs per
Barrel $ 5.70 $ 4.67 $ 5.54 $ 5.53
========= ======== ======== ========

Northeast:
Operating Income $ 387 $ 147 $ 357 $ 959

Throughput Volumes (Mbbls per
Day) 552 566 545 572

Throughput Margin per Barrel $ 13.53 $ 8.21 $ 8.50 $ 11.22

Operating Costs per Barrel:
Refining Operating Expenses $ 4.55 $ 4.11 $ 4.69 $ 3.83
Depreciation and
Amortization 1.36 1.27 1.42 1.25
--------- -------- -------- --------
Total Operating Costs per
Barrel $ 5.91 $ 5.38 $ 6.11 $ 5.08
========= ======== ======== ========

West Coast:
Operating Income $ 114 $ 116 $ 249 $ 815

Throughput Volumes (Mbbls per
Day) 285 306 277 300

Throughput Margin per Barrel $ 11.60 $ 9.82 $ 10.55 $ 15.84

Operating Costs per Barrel:
Refining Operating Expenses $ 5.55 $ 4.24 $ 5.51 $ 4.48
Depreciation and
Amortization 1.70 1.45 1.76 1.42
--------- -------- -------- --------
Total Operating Costs per
Barrel $ 7.25 $ 5.69 $ 7.27 $ 5.90
========= ======== ======== ========

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon
Amounts)
(Unaudited)


Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2008 2007 2008 2007
---------- ------- --------- -------
Retail - U.S.:
Company-Operated Fuel Sites
(Average) 984 956 961 959
Fuel Volumes (Gallons per Day
per Site) 4,946 5,068 4,997 5,019
Fuel Margin per Gallon $ 0.273 $0.197 $ 0.173 $0.174
Merchandise Sales $ 292 $ 272 $ 819 $ 774
Merchandise Margin (Percentage
of Sales) 29.8% 29.7% 30.0% 29.9%
Margin on Miscellaneous Sales $ 24 $ 26 $ 74 $ 75
Selling Expenses $ 134 $ 125 $ 375 $ 377

Retail - Canada:
Fuel Volumes (Thousand Gallons
per Day) 3,126 3,180 3,169 3,231
Fuel Margin per Gallon $ 0.261 $0.238 $ 0.278 $0.235
Merchandise Sales $ 56 $ 53 $ 156 $ 137
Merchandise Margin (Percentage
of Sales) 28.6% 26.9% 28.5% 28.1%
Margin on Miscellaneous Sales $ 10 $ 9 $ 29 $ 27
Selling Expenses $ 67 $ 65 $ 204 $ 184

Average Market Reference Prices
and Differentials
(Dollars per Barrel):
Feedstocks (at U.S. Gulf
Coast, except as Noted):
West Texas Intermediate (WTI)
Crude Oil $ 117.83 $75.48 $ 113.25 $66.12
WTI Less Sour Crude Oil (8) $ 4.05 $ 3.00 $ 5.20 $ 4.00
WTI Less Mars Crude Oil $ 5.26 $ 5.93 $ 6.40 $ 4.52
WTI Less Alaska North Slope
(ANS)
Crude Oil (U.S. West Coast) $ 0.93 $(1.01) $ 0.81 $ 0.15
WTI Less Maya Crude Oil $ 11.36 $12.42 $ 16.39 $11.55

Products:
U.S. Gulf Coast:
Conventional 87 Gasoline
Less WTI $ 12.13 $12.20 $ 7.66 $17.12
No. 2 Fuel Oil Less WTI $ 19.27 $10.82 $ 19.17 $11.86
Ultra-Low-Sulfur Diesel Less
WTI $ 23.91 $16.23 $ 24.38 $18.61
Propylene Less WTI $ 7.21 $ 8.75 $ (0.11) $13.88
U.S. Mid-Continent:
Conventional 87 Gasoline
Less WTI $ 8.62 $20.17 $ 6.49 $22.13
Low-Sulfur Diesel Less WTI $ 25.55 $22.41 $ 25.10 $22.78
U.S. Northeast:
Conventional 87 Gasoline
Less WTI $ 5.80 $11.72 $ 4.40 $16.63
No. 2 Fuel Oil Less WTI $ 19.86 $11.72 $ 20.85 $12.83
Lube Oils Less WTI $ 89.33 $43.81 $ 51.75 $53.62
U.S. West Coast:
CARBOB 87 Gasoline Less ANS $ 12.21 $14.22 $ 12.95 $27.18
CARB Diesel Less ANS $ 23.87 $17.86 $ 25.39 $23.52

VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE
(Millions of Dollars, Except per Share, per Barrel, and per Gallon
Amounts)
(Unaudited)


(1) Effective July 1, 2007, Valero Energy Corporation (Valero) sold
its Lima Refinery to Husky Refining Company, a wholly owned
subsidiary of Husky Energy Inc. The results of operations of the
Lima Refinery for the six months of 2007 prior to its sale are
reported as discontinued operations in the Statement of Income
Data, and all refining operating highlights, both consolidated
and for the Mid-Continent region, presented in this earnings
release exclude the Lima Refinery. The sale resulted in a pre-tax
gain of $827 million ($426 million after tax), which is included
in "Income from Discontinued Operations, Net of Income Taxes" in
the Statement of Income for the three and nine months ended
September 30, 2007.

(2) Includes excise taxes on sales by Valero's U.S. retail system of
$207 million and $207 million for the three months ended
September 30, 2008 and 2007, respectively, and $605 million and
$606 million for the nine months ended September 30, 2008 and
2007, respectively.

(3) Effective July 1, 2008, Valero sold its Krotz Springs Refinery to
Alon Refining Krotz Springs, Inc. (Alon), a subsidiary of Alon
USA Energy, Inc. The nature and significance of Valero's post-
closing participation in an offtake agreement with Alon
represents a continuation of activities with the Krotz Springs
Refinery for accounting purposes, and as such the results of
operations related to the Krotz Springs Refinery have not been
presented as discontinued operations in the Statement of Income
Data for any of the periods presented, and all refining operating
highlights, both consolidated and for the Gulf Coast region,
presented in this earnings release include the Krotz Springs
Refinery for all periods presented. The pre-tax gain of $305
million on the sale of the Krotz Springs Refinery is included in
the Gulf Coast operating income for the three and nine months
ended September 30, 2008.

(4) "Other Income, Net" for the three and nine months ended September
30, 2007 includes a $91 million pre-tax gain resulting from the
repayment of a loan by a foreign subsidiary.

(5) The calculation of earnings per common share assuming dilution for
the three and nine months ended September 30, 2007 includes the
effect of a $94 million deduction from net income representing
cash paid in the third quarter of 2007 in final settlement of an
accelerated share repurchase program entered into in the second
quarter of 2007.

(6) Primarily includes gas oils, No. 6 fuel oil, petroleum coke, and
asphalt.

(7) The regions reflected herein contain the following refineries:
Gulf Coast - Corpus Christi East, Corpus Christi West, Texas
City, Houston, Three Rivers, Krotz Springs (for periods prior to
its sale effective July 1, 2008), St. Charles, Aruba, and Port
Arthur Refineries; Mid-Continent - McKee, Ardmore, and Memphis
Refineries; Northeast - Quebec City, Paulsboro, and Delaware City
Refineries; and West Coast - Benicia and Wilmington Refineries.

(8) The market reference differential for sour crude oil is based on
50% Arab Medium and 50% Arab Light posted prices.