Valero CEO: Reliance Takeover Just a Rumor

SAN ANTONIO -- Valero Energy Corp.CEO William Klesse today spoke publicly for the first time about an Oct. 26 UK Daily Mail report claiming Indian petroleum refiner and explorer Reliance Industries could buy his company.

"Reliance is a rumor out there," Klesse said during a company conference call this morning, placing extra emphasis on the word "rumor." "There is one benefit to this rumor though. People can see how much earnings power Valero has. We clearly think our stock is undervalued."

As Convenience Store News Online reported yesterday, Reliance also quashed the rumor in a publicly released statement. However, Netherlands-based Royal Dutch Shell and China's CNOOC's have also been seen as possible Valero buyers, perhaps recognizing the earnings power Klesse referenced.

Klesse did not speak about Shell or CNOOC during the conference call. He did discuss the possibility of Valero making acquisitions itself, though."We would only make a purchase if it fits us strategically and is accretive [to earnings]," he said. "There's nothing out there that fits that definition right now."

As for Valero's earnings, the company's retail segment saw its income drop to $97 million for its fiscal third quarter, compared to $105 million during the same quarter in 2010.

Retail was perhaps the only segment of Valero's business that did not "run on all cylinders" during its latest quarter. Overall, the company earned a net income of $1.2 billion for its latest quarter, more than quadruple the $292 million it earned during its 2010 third quarter.

Ethanol can be thanked for a good percentage of the gain. Valero's third quarter featured record-setting ethanol operating income. The company earned $107 million on the ethanol segment of its business. That compares to $47 million in ethanol operating income during the same period last year.

"We had an excellent third quarter," Michael Ciskowski, Valero's CFO, said during this morning's conference call. "We had strong financial reports throughout our business and have excellent opportunities for growth."