Excellence Refined - 30 Years - Valero

Tough Times Build
A Stronger Future
Senior Vice President of Finance Ed Benninger (left) stands with Bill Greehey
before the bulletin board of the NYSE ceremonies on March 26, 1987. Valero
used proceeds from the formation of a limited partnership to solidify the
company’s finances.
time getting rid of the debt-ridden refinery …” Naysayers
in the media and elsewhere predicted that success was
simply not possible, especially for a company with no
refining experience. But Valero had done its homework
and knew refining low-cost feedstocks was a niche market
at the time that had yet to be filled. Feeling the surge of
a strong environmental movement, Valero’s leaders knew
unleaded gasoline and other high-grade, premium fuels
were the future. Environmentalists continually urged the
energy sector to stop using high-sulfur resid in industrial
fuel, which would lower the feedstock cost.
But for all the optimism, Valero was not immune to the
realities of oil refining and its market volatility. Former
Valero President Palmer Moe – who joined the company
in 1983 after serving customers’ interests in the LoVaca
settlement days – recalled dark times in the mid-1980s.
Saber losses were soaring at $250,000 a day, and stocks
were on the slide. But equally clear in Moe’s memory
was the resilience of Valero employees. “The refinery was
really in trouble, and the company came close to the line
in terms of potential problems financially,” Moe said in
2005. “I think what brought us through all of that were
the people … people just worked a little harder. Everyone
maintained a positive attitude. Through the very
difficult times, we kept at the problems we were facing
and didn’t give up.”
To shore up its balance sheet, Valero formed a joint
venture in February 1985 with a subsidiary of InterNorth
when it sold a 50 percent interest in Valero’s West Texas
pipeline for $81 million. The sale helped Valero dispose of
excess capacity and reduce debt. And because InterNorth
was a national pipeline company, Valero also was able
to increase its revenue through the additional volumes
of gas moving through the pipeline. A short time later,
InterNorth acquired Houston Natural Gas and paid
Valero another $23 million to leave the partnership – a
Bill Greehey surveys the Corpus Christi Refinery with facility manager
George Kain.
The problem for most refiners, however, was the expense
involved in transforming such low-grade feedstock into
premium products. But Valero viewed the challenge as
an opportunity and found the best experts and the best
technology in the field to help the company make clean
fuel products from the heaviest sour feedstock. Profits
were possible, the company believed, if the equipment
and climate were right. Valero wasn’t investing in the here
and now; it was preparing for the future.
A Company Is Born
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