Valero sees sharply lower first-quarter earnings

By Michael Erman

NEW YORK (Reuters) - Valero Energy Corp (VLO.N: Quote, Profile, Research), the largest independent U.S. refiner, said on Monday its first-quarter earnings could fall as much as 95 percent due to weak profits from gasoline production and unplanned outages at its refineries.

Refining margins for gasoline in the United States have been much weaker than in 2007, as refiners have not been able to pass through soaring crude oil prices to customers. They have been hit especially hard in the West Coast and Midwest regions.

Valero said margins would also be significantly lower for petroleum coke, residual fuel oil and petrochemicals.

The company expects net income for the quarter to be in the range of 10 cents to 35 cents a share. It earned $1.86 a share in the year-ago period.

Analysts, on average, had forecast earnings of 98 cents a share in the quarter, but the figures may not be comparable because some analysts back out lost profits from unplanned downtime at refineries.

The company said unplanned outages at its facilities would reduce profits by about $400 million, or 48 cents a share before taxes. It said it was especially hurt by problems at its Port Arthur, Aruba and Delaware City refineries.

Oppenheimer analyst Fadel Gheit said weak earnings could be expected across the sector.

"The $40 or $50 increase in oil prices from a year ago -- there's no way for refiners to push that at the pump," Gheit said.