After paying preferred dividends, net income surged to $1.6 billion, or $2.55 per share, for the July-September period from $858 million, or $1.47 per share, in the year-earlier quarter.
Valero noted that the recent quarter includes a $132 million pretax gain on the July sale of its 41 percent stake in Valero GP Holdings. Valero GP holds the general partner interest in energy pipeline operator Valero LP. The year-ago quarter includes a $621 million pretax charge related to last-in, first-out accounting.
Excluding those items, earnings totaled $1.5 billion, or $2.42 per share, compared with $1.3 billion, or $2.19 per share, in the 2005 third quarter. Analysts polled by Thomson Financial forecast earnings of $2.30 per share, excluding one-time items.
Operating revenue rose 4 percent to $24.32 billion from $23.28 billion a year ago. Total costs and expenses held roughly flat at $21.99 billion versus $21.97 billion a year earlier.
"The strong sour crude oil discounts, coupled with more reliable plant operations and outstanding U.S. marketing margins, allowed us to capture more of the margin as compared to last quarter," said Chief Executive Bill Klesse, in a statement.
Margins came down slightly from the prior year, however.
Valero's shares rose 12 cents to close at $52.26 on the New York Stock Exchange.
In the first nine months of the year, Valero earned $4.3 billion, or $6.83 per share, compared to $2.2 billion, or $3.96 per share, in the same period in 2005. Revenue rose to $72.04 billion from $56.27 billion a year ago.
The company said in a conference call Tuesday that this third quarter was the best in its history and largely attributed it to higher volumes.
The company also predicted a strong fourth quarter, saying that planned turnaround activity is moderate, with equipment modification and reliability upgrades at its Houston refinery due to be completed by late November. Turnaround activity also took place at the St. Charles, La., refinery.
The turnaround activity has reduced crude volume by an average of 275,000 barrels per day in October, the company said.
Valero plans to bring online by the end of the year an expansion at its Port Arthur, Texas, refinery, increasing crude capacity there to 325,000 barrels per day, the company said Tuesday.
Valero operates 18 refineries in the U.S., Canada and the Caribbean.
Analysts expect earnings per share of $1.42 in the fourth quarter and $8.05 per share for the full year.
"The company's outlook for the balance of the year and next year is certainly consistent with industry expectations given tight supply demand balances and limited new refining capacity coming online," said Ann Kohler, an energy analyst with Caris & Company.
Kohler said that 2006 has been a particularly heavy turnaround year for refiners in general because they put off maintenance scheduled for 2005 due to Hurricane Katrina.
"It'll be a lighter maintenance turnaround season than what we saw this year," Kohler said of 2007. "That's beneficial from the standpoint of view that Valero will have higher utilization and higher volumes."
Valero said Tuesday it expects turnaround activity in 2007 to be lower than average.
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