by Morgan Smith
After evaluating the economics of restarting the refinery and following a discussion with community residents, it seems that the energy company has indeed made the decision to restart the refinery and get production back up to normal standards by the beginning of June this year. The refinery has been shut down since January for maintenance.
This is not the company's only refinery that has been experiencing problems lately. The company also reported earlier this week that its 180,000-barrel-per-day Memphis, Tennessee refinery initiated a power outage requiring the refinery to be temporarily shutdown. However production has since resumed and the company claims that "There was no material impact to production".
In addition, its 142,000 barrel-per-day (bpd) Corpus Christi, Texas, refinery was shut down as well, following a flash fire. Again the company claimed that there was no impact to production due to the fire.
Most recently its oil refinery in Port Arthur, Texas also suffered some difficulties when flaring occurred due to a wet gas compressor tripping at the plant's coker unit. At this point it is still unclear whether this event will impact production at the refinery or even if the unit has been restarted.
However, this may lead one to wonder whether or not the company is in complete control of its refineries and its integrity. This company is not in the news very often, but when it is it is because one of its refineries is experiencing some form of trouble. The question that stockholders need to ask themselves is whether or not this is a company that seems to know what it is doing.
Valero Energy shares recently rose significantly following the fact that oilman T. Boone Pickens purchased 188,000 of its shares. Just the name itself conjures up ideas of success for investors, and serves as a magnet for new money to pour in.
A short while ago Valero Retail Holdings, a subsidiary of Valero Energy, announced that it will begin using the "CorPoint: Deposit Manager" cash management solution offered by Fiserv (FISV). This new solution will be used at Valero's gas stations as well as at its retail stores. According to one source, this will allow Valero to "armored-carrier agnostic remote cash capture solution and select smart-safe hardware devices that best meet the needs of its retail stores". Basically the company has outgrown the solution it was using previously and needed to find a better and more advanced solution. The solution it has chosen is cost effective and automated, which means that the entire experience will be smoother for everyone involved. This is unlikely to have a major effect on the stock, however, especially in the light of the numerous refinery problems that it has experienced of late.
Valero Energy could be seen by some as a big player in the fuel industry. Using its subsidiaries it has become an international manufacturer of energy resources. It employs 22,000 people at a number of different locations and is a growing company. The company owns or operates more than 1,700 convenience stores and gas stations. However, it remains a relatively unknown company that does not seem to do very much. As options go, this is one of the less-than-certain horses to back.
The effects of the oil spill in the Gulf of Mexico for which competitor BP (BP) is still held responsible may well be even more far-reaching than initially thought. For one thing, effects of the spill are starting to become apparent in areas like Minnesota that are the homes to birds that migrate to the Gulf. Pelicans in Minnesota have been studied and petroleum as well as the chemicals used to clean up after the spill has been found in their eggs. The possible effects of this on the unborn embryos are hard to determine at this point, but they probably yield good news for the species or for BP. The company's name looks to remain sullied for the time being, and other oil companies should be taking advantage accordingly.
Competitor Chevron (CVX) says that its wells in Marshall County have been shut down due to safety reasons and not in any way connected to the decrease in the price of natural gases of late. In order to ensure that operation can continue safely, Chevron shut down some of the well. Some of these wells have since been back into action, and the rest will follow as soon as their safety can be conclusively determined. Specifics on the scope of the shutdown are not, at this time, available. The question does remain if Chevron wants to continue with these wells at full production if gas prices should keep falling.
Exxon Mobil (XOM) is still under scrutiny following the Yellowstone oil spill last year. Montana officials suspect that oil may yet be left over in the area. So far the tests have proven that at least one of the sites is completely oil-free. Evidence, such as oil sheens, can be seen all over the area. One report says that "Officials are on the lookout for more crude to get stirred up in coming weeks as high waters from mountain snowmelt shift sandbars that could hold trapped oil". The effect that these findings will have on Exxon stock is not clear.
The last competitor to Valero Energy that we will look at today is ConocoPhillips (COP). This is a company that is interested in expanding its operations in Australia. This follows it partnership with New Standard Energy (NSE) that was agreed on last year. In my opinion, this is a move to get in on the action that has been created by an increased need in Japan for energy sources. Most Australian based operations are being tapped by the Japanese market to account for the loss of the Fukushima nuclear power plant. Keep an eye on Conoco's expansion efforts.
Valero is fighting against giants. It's no small company itself, but its competition has a wider reach and more resources. Regardless, Valero has a chance to one day be amongst these giants. The recent string of production failures and stoppages will prevent that from happening soon, though. The company needs to keep things together and encourage investors like Mr. Pickens to join in and it can certainly achieve big things.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.