[R1:00PM New York - Valero Energy Corporation earnings drop 48%, as margins fell.[/R]

Revenue Review

Valero Energy Corporation, the giant oil refiner, reported Tuesday fourth quarter revenue climbed 52.3% to $28.67 billion from $18.83 billion although margins came under pressure from high crude oil prices.

Higher crude oil prices reduced product margins, as feedstocks rose more than product prices, said the company.

Global oil prices topped $100 last December whereas, over the year ago quarter, Valero reported margin declines much as 30% on Gulf Coast gasoline.

Also, margins for the company’s secondary products, such as asphalt, fuel oils and petrochemical feedstocks dropped because of higher input costs.

Refinery operating cost rose to $123 million, as a result of increased maintenance expense and energy costs.

For fiscal 2007, revenues climbed to $95.32 billion from $87.64 billion.

Earnings Review

Valero Energy Corporation reported Tuesday income from continuing operations crashed 48.9% to $567 million from $1.1 billion a year earlier, as margins weakened.

Earnings fell similarly, dropping 41.4% to $1.02 per share compared with $1.74 posted in the year ago quarter.

The figures, however, beat forecasts. Consensus estimates were at 64 cents per share, according to analysts surveyed by Thomson Financial.

Valero said that fourth quarter numbers included a pre-tax gain of $196 million or 21 cents per share from the sale of a 59% stake in NuStar Holdings. Minus this gain income was $954 million or $1.53 per share.

In the quarter, operating income fell 36.9% to $884 million from $1.4 billion.

For fiscal 2007, the company earned $4.6 billion from $5.3 billion in 2006. Earnings fell 7.6% to $7.72 from $8.36 per share.

In the quarter, the oil refiner said it spent $890 million on capex and $2.8 billion in the year.

Valero also repurchased 15.4 million of own ordinary shares for $1 billion. It spent $5.8 billion to buy 84.3 million shares in 2007 and increased dividend by 50%.

""2007 was another solid year for Valero,"" said Bill Klesse, company chairman and chief executive.

""During the year, we had strong earnings, sold the Lima, Ohio refinery…, and our retail and Canadian operations had their best years ever.

Earnings Guidance