Valero Pops on Convenience Store Brands Spin-Off Debut

Michael Teague |

Shares for Valero Energy (VLO) were up more than 4.6 percent on Thursday to $37.02 as the company’s plan to spin off its convenience-store business into a separate publicly traded entity became official.

CST Brands Inc. (CST) is the name and ticker symbol of the new company that began trading today. It makes its debut on the market as North America’s second largest publicly traded convenience retailer. 2012 revenue for CST Brands alone was approximately $13 billion.

The move comes as Valero’s first quarter earnings report from Tuesday showed the company bringing in a profit after Q1 2012 was hampered by costs of some $1.09 per share, resulting primarily from trouble at one of its refineries in Aruba.

For the first quarter of 2013, Valero earned $654 million or $1.18 per share on revenue of $35.17 billion, versus the prior year period during which the company lost $432 million, or $0.78 per share on revenue of $35.17 billion. The numbers are a nice leap over analyst expectations of $0.98 per share earnings on revenue of $30.41 billion.

Valero said that by April, its shareholders will receive one share of the new company for each nine shares of Valero they currently hold. The company also said that it is in the process of deciding whether or not to spin-off its logistics, storage, and transportation business into a master limited partnership (MLP).

MLPs have been a preferred means for oil companies to manage midstream operations, as partnerships circumvent the relatively higher corporate taxes. Furthermore, the midstream energy business relies more on service fees for transportation and storage rather than the at times unpredictable price of oil.

During its first day of trading, shares for CST Brands were down 2.12 percent to $29.56.

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Companies

Symbol Name Price Change % Volume
VLO Valero Energy Corporation 68.00 -0.37 -0.54 5,124,518
CST CST Brands Inc. 48.15 0.00 0.00 295,382
MHR Magnum Hunter Resources Corp n/a n/a n/a 0

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