Valero 2004 Annual Report Download - page 7
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ChairmanoftheBoard
andChiefExecutiveOfficer
THEBESTISYETTOCOME!
And,ourfutureisbright!Allofthefundamentalsare
inplacetomake2005anevenbetteryearthan2004.
Worldwidedemandforrefinedproducts–fueled
byastrongglobaleconomy–continuestooutpace
refiningcapacityincreasesandsupportsstrong
productmarginsgoingforward.
And,asoildemandcontinuestogrow,thedemand
increaseisbeingmetbymediumandheaviersour
crudeoil.Sincethereislimitedrefiningcapacity
capableofupgradingthesetypesofcrudes,they
becomeincreasinglymoresurplus,whichhelpskeep
thediscountsonthesourfeedstocksthatmakeup
approximately60percentofValero’sfeedstockslate
athistoriclevels.Infact,westartedout2005with
discountsthataretwiceaswideasthoseweenjoyed
duringthesametimeperiodin2004.
And,thereisnothingonthehorizontodaytochange
thesebullishfundamentals.
In2005,mostexpertsareprojectingthatthecrude
oildemandincreasewillbesecondonlyto2004,
whichwasthelargestdemandincreaseinrecent
history.Obviously,thismeanssourcrudediscounts
areexpectedtoremainwide.
And,themovementtocleanerfuelscontinuesto
supportboththesourcrudediscountandrefined
productmargins.Themaximumsulfurcontentin
gasolinedropsfrom90partspermillion(ppm)to
30ppmin2006.And,on-roaddieseldropsfrom
500ppmto15ppm.Thesereductionsshould
furtherreducesupplyandfurtherlimitimports–
strengtheningproductmargins.And,sincemany
refinersdependuponsweetcrudetomeetthese
lowersulfurspecifications,theyalsosupportwide
sourcrudediscountsgoingforward.
Wewillalsobenefitfromafullyearofoperations
atourArubarefinery,whichisexpectedtoadd
$85millioninincrementaloperatingincomein
2005.And,thestrategicprojectswecompletedin
ourrefineriesareexpectedtoadd$175millionin
incrementaloperatingincome.
So2005isshapinguptobeyetanotherrecordyear.
Asyoucanclearlysee,ourdifferencehaspaidbig
dividendsforValeroanditsshareholders,andallthe
fundamentalsindicatethatitshouldcontinuetopay
offinabigwayfortheforeseeablefuture!
ThatiswhyIalwayssay,TheBestisYettoCome!
P.S.Inayearofsuchtremendoussuccess,wewouldbe
remissifwedidnotacknowledgethesignificantrole
thatJohnHohnholt,Sr.VicePresidentofTechnology,
PlanningandDevelopment,playedinthatsuccess.
AlthoughwelostJohntoheartfailureinMayof2004,
everyoneatValerowillalwaysbegratefultohimfor
hisvision,hardwork,dedication,caringnatureand
technicalbrilliance,whichhelpedshapeValero’s
winningstrategyaswellasourcaringculture.John
trulyepitomizedtheValerocaringandsharingspirit
and“cando”attitude.Wearethankfulforhiscountless
contributionstoValeroandtothecommunity–
allofwhichhelpedmakeValerothegreatcompany
thatitistoday.
GLOBALDEMANDGROWTH
COMPAREDTOCAPACITYGROWTH
Source:Purvin&Gertz
MBPD