Jan 31, 2012
Executives
Ashley M. Smith - Vice President of Investor Relations Michael S.
Ciskowski - Chief Financial Officer, Principal Accounting Officer and Executive Vice President Joseph W. Gorder - Chief Commercial Officer and Executive Vice President of Marketing & Supply William R.
Klesse - Executive Chairman, Chief Executive Officer, President and Chairman of Executive Committee Jean Bernier - Executive Vice President S. Eugene Edwards - Chief Development Officer and Executive Vice President of Corporate Development & Strategic Planning Lane Riggs - Senior Vice President of Refining Operations
Analysts
Douglas Terreson - ISI Group Inc., Research Division Jeffrey A. Dietert - Simmons & Company International, Research Division Edward Westlake - Crédit Suisse AG, Research Division Douglas George Blyth Leggate - BofA Merrill Lynch, Research Division Paul Y.
Cheng - Barclays Capital, Research Division Blake Fernandez - Howard Weil Incorporated, Research Division Sam Margolin - Global Hunter Securities, LLC, Research Division Paul Sankey - Deutsche Bank AG, Research Division Evan Calio - Morgan Stanley, Research Division Mark Gilman - The Benchmark Company, LLC, Research Division Chi Chow - Macquarie Research Cory J. Garcia - Raymond James & Associates, Inc., Research Division Harry Mateer - Barclays Capital, Research Division
Operator
Welcome to the Valero Energy Corporation Reports Fourth Quarter and Annual 2011 Earnings Conference Call. My name is John, and I'll be your operator for today's call.
[Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr.
Ashley Smith, Vice President, Investor Relations. Mr.
Smith, you may begin.
Ashley M. Smith
Thank you, John. Good morning.
With me today are Bill Klesse, our Chairman and CEO; Mike Ciskowski, our CFO; Gene Edwards, our Chief Development Officer; Joe Gorder, Executive Vice President and President of European Operations; Kim Bowers, Executive Vice President and General Counsel; and Jean Bernier, Executive Vice President. If you have not received the earnings release and would like a copy, you can find one on our website at valero.com.
Also attached in the earnings release are tables that provide additional financial information on our business segments. If you have any questions after reviewing these tables, please feel free to contact me after the call.
Before we get started, I would like to direct your attention to the forward-looking statement disclaimer contained in the press release. In summary, it says that statements in the press release and on this conference call that state the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the Safe Harbor provisions under federal securities laws.
There are many factors that could cause actual results to differ from our expectations, including those we've described in our filings with the SEC. Now, I'll turn the call over to Mike.
Michael S. Ciskowski
Thanks, Ashley, and thank you all for joining us today. As noted in the release, we reported fourth quarter 2011 income from continuing operations of $45 million, or $0.08 per share.
This number includes an after-tax benefit of approximately $161 million, or $0.29 per share, from a year end LIFO inventory decrement. Our fourth quarter 2011 operating income was $167 million versus operating income of $378 million in the fourth quarter of '10.
Our fourth quarter refining throughput margin was $5.46 per barrel, which is a 25% decrease compared to the fourth quarter of '10. The decrease in throughput margins compared to the fourth quarter of '10 was due to lower margins for gasoline and petrochemical feedstocks, plus reduced discounts for medium and heavy sour feedstocks such as Mars and Maya crude oils.
These declines were partially offset by higher margins for diesel. In the fourth quarter of '11, Gulf Coast gasoline margins per barrel versus LLS decreased 185% to a negative $2.05 from a positive $2.42 in the fourth quarter of 2010.
Gulf Coast ULSD margins per barrel versus LLS increased 39% from $9.88 in the fourth quarter of 2010 to $13.71 in the fourth quarter of '11. So far in the first quarter of 2012, Gulf Coast margins have moved higher, averaging over $5.50 per barrel for gasoline and about $16 per barrel for ULSD.
The Maya heavy sour crude oil discounts versus LLS decreased 44% from $12.75 in the fourth quarter of '10 to $7.19 per barrel in the fourth quarter of '11. The Maya discount has narrowed some in the first quarter, with the average down to around $4.50 per barrel.
The WTI crude discount versus LLS increased over $13 per barrel from $3.34 per barrel in the fourth quarter of 2010 to $16.70 per barrel in the fourth quarter of '11, which helped improve throughput margins in our Mid-Continent region from the fourth quarter of '10 to the fourth quarter of '11. Our fourth quarter 2011 refinery throughput volume averaged to 2.7 million barrels per day, up 523,000 barrels per day from the fourth quarter of 2010.
The increase in throughput volumes was mainly the addition of capacity from the acquisition of Pembroke and Meraux refineries, plus operating the Aruba Refinery, which was not in operation during the fourth quarter of 2010. Refining cash operating expenses in the fourth quarter of '11 were $3.92 per barrel, which was higher than the third quarter of 2011 and our guidance, mainly due to costs of a legal settlement, plus higher regulatory and tax expense.
Our Ethanol segment reported its best quarter on record with $181 million of operating income, which was up $111 million from the fourth quarter of 2010 and up $74 million from the third quarter of 2011, mainly due to much higher gross margins. For the full year of 2011, our Ethanol segment reported operating income of $396 million, its best year ever.
In addition, since we bought the first 2 plants in 2009 through the end of 2011, we estimate that in less than 3 years, our Ethanol business has generated cumulative pretax cash flow exceeding the purchase price and recovering our $750 million investment. As good as the fourth quarter was for Ethanol, I should point out though that Ethanol margins declined significantly in December, and it remained low so far in the first quarter.
Our Retail segment reported fourth quarter operating income of $83 million, consisting of $48 million in U.S. and $35 million in Canada.
For the full year 2011, our Retail segment reported their most profitable year ever, with $381 million in operating income, which includes a record high from our Canadian retail, with $168 million in operating income. In the fourth quarter, general and administrative expenses, excluding corporate depreciation, were $129 million, which was below third quarter 2011 and our guidance, mainly due to favorable legal settlements.
Depreciation and amortization expense was $393 million, and net interest expense was $89 million. The effective tax rate on continuing operations in the fourth quarter was 52%, which is higher than our guidance rate of 36% due to the combination of year-end tax adjustments and low pretax income.
Regarding cash flows in the fourth quarter, capital spending was $899 million, which includes $128 million of turnaround and catalyst expenditures. For the full year of 2011, Valero's total capital spending, including turnaround and catalyst expenditures, was $3 billion, or $200 million below the previous guidance of $3.2 billion.
Our expected capital spending for 2012 is consistent with previous guidance at around $3.4 billion. Also in the fourth quarter, we paid $84 million in dividends and $79 million to purchase 3.5 million shares of our common stock.
We also spent $547 million to acquire the Meraux Refinery and related logistics assets, which included approximately $219 million for inventory. With respect to our balance sheet at the end of December, total debt was $7.7 billion, cash was $1 billion, and our debt to capitalization ratio net of cash was 29%.
At the end of the fourth quarter, we also had nearly $4.5 billion of additional liquidity available. As to our refining operations in the fourth quarter, we completed the hydrogen plants at Memphis and McKee, which were 2 of our key economic projects.
Start-up is underway at Memphis, and we are planning to start up the McKee plant in February. These projects are designed to take advantage of the large spread between natural gas and crude oil prices, which is very valuable given that natural gas is only trading at 15% to 20% of the price of oil on an energy equivalent basis.
Our 2 hydrocracker projects at Port Arthur and St. Charles remain on budget and on time for completion in the second half of 2012.
These projects were designed to capitalize on high crude oil and low natural gas prices while producing diesel and gasoline to meet growing global demand. And now, I'll turn the call over to Ashley to cover the earnings model assumptions.
Ashley M. Smith
Thanks, Mike. For modeling our first quarter operations, you should expect the refinery throughput volumes to fall within the following ranges: the Gulf Coast at 1.38 million to 1.42 million barrels per day; the Mid-Continent at 390,000 to 400,000 barrels per day; the West Coast at 220,000 to 230,000 barrels per day; and the North Atlantic at 450,000 to 460,000 barrels per day.
The lower throughput volumes in our Gulf Coast and West Coast regions are due to substantial turnaround activities planned for this quarter, particularly at our St. Charles and Wilmington refinery.
A listing of our planned turnaround activities was posted this morning to our website under the News Room. Refining cash operating expenses in the first quarter are expected to be around $4.50 per barrel, which is higher than last quarter due mainly to lower throughput volumes and some higher maintenance cost related to the turnaround activity.
Regarding our Ethanol operations in the first quarter, we expect total throughput volumes of 3.5 million gallons per day, and operating expenses should average approximately $0.34 per gallon, including $0.03 per gallon for non-cash costs such as depreciation and amortization. With respect to some of the other items for the first quarter, we expect G&A expense, excluding depreciation, to be around $160 million; net interest expense should be around $85 million; total depreciation and amortization expense should be around $400 million; and our effective tax rate should be approximately 36%.
Okay, John, that concludes our opening statements. We will now open the call for questions.
Operator
[Operator Instructions] Our first question comes from Doug Terreson from ISI.
Douglas Terreson - ISI Group Inc., Research Division
Mike mentioned in his opening remarks that Refining margins have improved versus Q4. And on this point, I wanted to see if you could provide your view on product balances in the Atlantic basin over the immediate term, meaning while demand has not been great and capacity growth was pretty significant during the second half of '11, the next couple of quarters appear to be more promising, especially with the closures announced in recent months.
And so I just wanted to see if you could provide your perspective on the demand and the supply sides of the equation for the basin in coming quarters? And also, update us on the status of Aruba, too?
Joseph W. Gorder
Okay. Well, Doug, this is Joe.
I mean, I'll speak for a minute to the gasoline piece, then somebody else can speak to Aruba. But obviously, with what's happened in the marketplace from a supply perspective, things look encouraging.
You've got plant closures in the Northeast U.S., you've got the situation with Petro Plus in Europe. We have Hovensa making announcements.
Isla still is running well. So from a supply perspective, products tend to be a bit tighter than they have been.
If you look at U.S. gasoline demand, of course it's not particularly strong.
But the real story in gasoline continues to be the export markets, where year-to-date through December, we exported 511,000 barrels a day of gasoline, which is up 175,000 from the previous year. So that continues to look good.
Now will it continue? I think it probably will.
You've got Latin America growing, and they continue to import. Venezuela still has issues at their domestic refineries.
And then they're involved of course with Isla and Hovensa. Mexico gasoline imports were up to 405,000 barrels a day, and Petrobras continues to pool gasoline.
So if you look at the gasoline markets in general, I think that we're going to continue to see very strong demand, and our export business should continue to be strong. On the distillate side again, you have just average distillate markets here in the U.S., but their exports were also very strong.
The industry exported almost 850,000 barrels a day. So that continues, and the same refinery issues that are affecting gasoline are out there for diesel also.
The heart [ph] to Europe, which was closed a little bit earlier this year, is now open again, and so we're seeing barrels move that way. Our exports for the quarter were 65,000 barrels a day of gasoline and slightly over 180,000 barrels a day of diesel fuel.
So that continues to be good for us. So I hope that answers your question.
William R. Klesse
Concerning Aruba, Doug, we continue to look at our strategic alternatives, but we're in the same boat as was announced by one of our competitors operating in the Caribbean. And so we intend to have a decision here very shortly here within the first quarter.
Operator
Our next question comes from Jeff Dietert from Simmons & Company.
Jeffrey A. Dietert - Simmons & Company International, Research Division
My question evolves around heavy sour discounts in Maya. You talked about Maya premiums being -- or discounts being soft in the first quarter.
Lots of things influencing that. The K factor is moving around, resid inventories are low, which is propping up Maya pricing.
You got Hovensa coming out of the market, and then eventually Seaway deliveries coming later in June. Could you talk about your expectation for Maya and heavy sours as we look through 2012?
Joseph W. Gorder
Jeff, I mean, this is Joe again. I think you cited on so many of the facts that are going to affect this market.
I mean, right now, the discounts are weak. And as you've said, resid is very tight.
We also had the compression of the WTI-Brent spread which -- where WTS moves with. And so as that came in, as with respect of the relative prices of WTS, so 80% of the Maya formula was affected by those 2 components.
And as you mentioned the K factor, we saw the Mexicans adjust the K by $1.90 a month the last 2 months, and we expect them to continue to move that going forward. So although the discounts are weak today, I think our expectation is that we'll see discounts somewhere close to last year's levels, or slightly below as the year moves on.
Jeffrey A. Dietert - Simmons & Company International, Research Division
And secondly, you guys have been supporters of TransCanada's Keystone Pipeline, and that's experienced some government delays. Are you free to pursue whatever options are best in moving Canadian crude down to the Gulf Coast?
Are you considering both TransCanada Keystone and Enbridge? Or are you focused on one or the other more intently?
Joseph W. Gorder
Well, Jeff, we continue to be big supporters of Keystone. We think it's a great project, and we're committed to that pipeline.
That being said, we have a strong appetite for heavy sour crudes in the Gulf Coast. And we're watching the other projects as they develop.
Obviously, we've got Enbridge and Enterprise that have one project in place. We've got an open season now on another pipeline that would parallel the Seaway project.
It runs from [indiscernible] south, the Cushing and then on down to the Gulf Coast. And we support all of these projects that would bring additional crudes into the Gulf.
Operator
Our next question comes from Ed Westlake from Crédit Suisse.
Edward Westlake - Crédit Suisse AG, Research Division
I guess, on the call, signaling higher payouts and rising free cash flow, maybe just give us some color about your thoughts about shareholder distributions? And then I have a follow-up.
William R. Klesse
We increased our dividend last year, and we bought shares in the fourth quarter. There's a few shares that carried over into the first quarter that we purchased because of settlement dates.
But clearly, we will look at increasing our dividend, buying some of our shares as we complete our projects. Now first, we're going to maintain our investment-grade rating.
Then we have the Port Arthur hydrocrackers should be done at the end of the second quarter, starting up in the third. And in the fourth quarter, we'd finish the one at St.
Charles. So as these projects are getting completed, we'll look at how we manage our cash.
The other thing that we have said when we've spoken to you all, as we look into '13, we expect our capital spending to fall from our $3.4 billion where we are today for 2012, down into $2.5 billion to the low $2 billion for next year.
Edward Westlake - Crédit Suisse AG, Research Division
Very helpful. Just a follow-on, separate area -- but you're actually making money in the North Atlantic even as everyone else closes around you.
Given that you are able to make money from the assets that you've chosen to invest in, I mean, are you tempted to add more to the European refining portfolio if you can find a sort of similar advantaged assets as Pembroke?
William R. Klesse
We have a very good base in the U.K. and Ireland.
So with all of the noise that's going on with some of the refineries that are available, yes, we would take a look at this. We say that about everything anyhow.
But if you actually look at it, we want a very strong strategic fit. It needs to be compatible in the sense of moving streams between refineries.
It needs to bring marketing or at least support our trading in the Atlantic basin and then the exports that Joe spoke about. So it has to have strategic or synergy value to us in fitting into an overall system.
But obviously, we read the news and we see what's going on as well. And we have a good base there that we didn't have prior to our acquisition of Chevron's business.
Edward Westlake - Crédit Suisse AG, Research Division
And my interpretation of good base, is this correct, is that you could just stick with your current assets and therefore, the bar for any further acquisitions would have to be that much higher?
William R. Klesse
That would be absolutely right.
Operator
And our next question comes from Doug Leggate from Bank of America.
Douglas George Blyth Leggate - BofA Merrill Lynch, Research Division
I'm going to try a couple of questions also, if I may. The first one, Bill, when you talk about your strategic options for Aruba, and obviously you brought in Europe to the discussion as well, can I ask you to bring us up to date with your thoughts on the West Coast, particularly as it alludes to the free cash flow in the West Coast as opposed to the earnings, specifically if you have continued the requirements for regulatory spending?
Does that remain a core area in the perhaps redesign portfolio as you move forward? And I have a follow-up, please.
William R. Klesse
As of today, the West Coast is a very key part of our business. So you use the word core, it is a core asset for us.
We have a good position there. We have very good operations.
We have had to spend a lot of money at our Benicia refinery here for environmental. And that is true.
But the thing that you cannot forget on the West Coast is they're still in a recession or a depression. They have unemployment headline number of 11%, little over that, which means underemployment is probably 2x that.
TARP is absolutely out of control. They do not work for the common good, and they're hurting the economy in the West Coast.
But for us now, we continue to work on our cost structure, we're attacking that. The refinery operations are reducing costs in that business, and we're in a competitive position.
And we're well positioned there. But the macro is the problem, and it needs to be solved.
Douglas George Blyth Leggate - BofA Merrill Lynch, Research Division
My follow-up is really more of a micro question on gasoline. We see how strong distillate cracks are, gasoline less so.
You've announced your turnaround program which, if I'm not mistaken, looks like it's relatively heavy by historical standards. Could you maybe characterize how do you see the outlook for cleaning up gasoline inventories, the overhang that we have right now?
And perhaps if you have a view as to how industry maintenance could perhaps help out over the next couple of months, that would be great. And I'll leave it there.
William R. Klesse
Well for us, these turnarounds have been scheduled. The one at St.
Charles, Ashley said we put up our turnaround schedule on the web page. But these have been scheduled turnarounds.
So St. Charles would be down for 66 days.
In April, McKee goes down to do work on the cracker, which will reduce gasoline production up in the Texas Panhandle. So ours have been scheduled.
Now there's no question that gasoline is sloppy, although, quite frankly, the cracks have improved significantly here just in the last couple of weeks. But part of the issue again is in North America and in Europe, we have growing but -- at least in North America -- growing but very slow economy.
Europe, Western Europe, I don't know if they're technically in recession today or not. But you combine the uncertainty we have economically, we do have higher prices.
We have in the U.S., this housing overhang. And remember, we sell fuels to everybody.
And there's a large segment of our customer base who either is unemployed or facing economic uncertainty. So to me, we have to have people getting back to work and economic activity picking up, and we'll see demand recover.
And I think we'll see higher demand this year than we had last year. And the turnarounds when we're down obviously reduced production, just as all the shutdowns that had been announced are doing.
But I'm optimistic that gasoline's going to be fine this year, but we do need to get people back to work. Distillates is still doing just fine.
And as Joe said, the orders [ph] open again in Europe. Economies around us are growing.
And from our U.S. Gulf Coast business, we'll continue to export.
Operator
And our next question comes from Paul Cheng from Barclays Capital.
Paul Y. Cheng - Barclays Capital, Research Division
Mike, can I ask some balance sheet data? In terms of working capital, the long-term debt of the total debt component and inventory market value in excess of both?
Michael S. Ciskowski
Sure, Paul. Our total current assets at the end of the year was at $16 billion.
Total current liabilities was $12.7 billion. So our net working capital was $3.3 billion.
Our market value in excess of LIFO was about $6.8 billion. Total debt at the end of the year was $7.7 billion.
And our stockholders equity was $16.4 billion.
Paul Y. Cheng - Barclays Capital, Research Division
Mike, out of the $7.7 billion in total debt, how much is long-term debt?
Michael S. Ciskowski
Pretty much almost all of that is long-term debt. We did have $250 million that was under our AR program.
And included in those numbers is about $45 million of capitalized leases.
Paul Y. Cheng - Barclays Capital, Research Division
Okay, perfect. Bill or maybe both Bill and Mike, you're talking about that raising the dividend and maybe doing a bit of the share buyback and returning cash.
And next year, your budget is at $2 billion, $2.5 billion, and locking on that, that's a January, a pretty substantial sum of free cash, with your DD&A already in the $1.7 billion, $1.8 billion. How are you looking at that?
I mean, historically, I think rising cash flow environment that you tends to spend more as a percentage in the share buybacks and dividend. Going forward, how do you look at it with a recent Baron [ph] article talking about the 4% yield, which for you guys at current share price is about $1 per share, do you think the volatility in your business still way too high therefore, you are trying to search for that kind of yield?
William R. Klesse
Well, I've said that once we get through this spending that we're doing, which we think are very good projects -- so you're asking me how do I look at this? And so we have said that we want to pay one of the highest dividends among our peer group, and that is what we're going to do.
And then when I try to match it up between dividend and stock buyback, if we don't add better projects that add shareholder value, then we're going to have our dividend that's high or one of the highest of our peer group. And then we'll use the rest of our cash to maintain our investment-grade ratings.
So we may buy back some of our debt or redeem it and at the same time retire some of our shares.
Paul Y. Cheng - Barclays Capital, Research Division
Bill, do you have a target ratio between in terms of the cash returned to your shareholders, say, 40, 60 between dividend and share buyback; or 30, 70 or any kind of target?
William R. Klesse
No, I do not. But I will go ahead and add, we as a company do not see benefits of special dividends.
So we would tend to act in a more regular manner in the sense of what I just said, paying a dividend that's one of the highest of our peer group. And at the same time then, buying our shares.
Paul Y. Cheng - Barclays Capital, Research Division
That's great. Bill, in the past, you have said you've been in discussion with Murphy on Milford Haven.
Can you update us whether you are still in discussion on that? And also that you have laid out some of the criteria when you're looking at all that, wondering whether BP Texas City will fit into your criteria in general?
William R. Klesse
Okay. So there's always confidentiality agreements associated when we look at things.
But I have said our Pembroke refinery is right across the Haven. From Milford Haven.
And I have also said there would be some advantages. However, we are not talking to Murphy.
Paul Y. Cheng - Barclays Capital, Research Division
You are not talking to Murphy now?
William R. Klesse
That's correct. And then as far as Texas City, we have said in the past we've looked at that.
But there's a confidentiality agreement, and nothing seems to be happening.
Operator
Our next question comes from Blake Fernandez from Howard Weil.
Blake Fernandez - Howard Weil Incorporated, Research Division
A couple of questions for you. One, as I understand it, the results in the quarter were negatively impacted from your long-haul crude purchases that were kind of tied to the WTI-Brent spread, which compressed.
I'm just curious if there's any way to, one, quantify that? And then secondly, is there any discussions of maybe changing the way that you struck through the purchasing going forward?
Michael S. Ciskowski
Okay. Yes, Blake, we have estimated what that impact we believe was in the fourth quarter, and the number is about $200 million.
And as far as like how we -- I mean, we have an estimate of the number of barrels that we had WTI exposure on. We have been transitioning away from purchasing some of our crudes and hedging away from WTI and reducing that exposure.
Joe, do you want to...
Joseph W. Gorder
No. I mean, you're exactly right.
During the quarter -- I mean, we looked at the market, we saw the spread had blown out to where it was, and we didn't think it was sustainable. And it was affected by Libyan oil being out of the market and then coming back in.
And then the announcement of the Seaway reversal of course had a significant effect on it also. And so we anticipated that it would come back in, and so we started shifting as Mike said, to different basins for our hedging and acquisitions.
Blake Fernandez - Howard Weil Incorporated, Research Division
Okay. But it's fair to think that, that is not really going to be prevalent in the first quarter?
Joseph W. Gorder
Right.
Blake Fernandez - Howard Weil Incorporated, Research Division
Okay. And then secondly, Joe, I know you already pretty much covered the export dynamics, but if you don't mind, as I understand it, Valero is increasing their export capacity this year, and I was just curious if you could give us some timing of when that occurs?
And is there really incremental demand as it stands right now to actually increase the amount of exports from your system?
Joseph W. Gorder
Yes. And that's a good question, Blake.
I mean, we're working on multiple things that are going to facilitate our ability to export more effectively in the future, some logistics projects. But the 2 hydrocracker projects will be a big plus for that.
I mean, we will be able to produce diesel fuels that are of a high quality and allow us to move them anywhere. And the European spec is a more stringent spec than just a generic grade, and so we'll be able to move more barrels that direction.
And then it all goes to demand. So I'm telling you, we're going to have the ability to export, then it goes to demand.
And with what we're seeing in our industry now with refinery closures and shutdowns and reduced run rates, I think we're going to see strong demand. Plus, you have growth in these markets, as Bill said earlier.
You got growth in South America, Latin America. You have growth in Mexico.
And so in addition to the supply being constrained, you're going to have higher demand. And we're going to be the beneficiaries of that.
We always forget how efficient the Gulf Coast refining system is globally, but it is very efficient. And I think we can compete with anybody.
Operator
Our next question comes from Sam Margolin from Global Hunter Securities.
Sam Margolin - Global Hunter Securities, LLC, Research Division
It's somewhat related to the WTI-linked long-haul barrels. It's regarding the buy/sell contract mechanics in the Gulf Coast, which presumably also had an impact in 4Q.
Are there any initiatives underway or talks with producers here domestically in the Gulf about using a different kind of contract in that mechanism during the delivery lag?
Joseph W. Gorder
Yes. I guess we would rather not tell you.
Okay? I mean, it's a fair question, but we would rather not tell you specifically what we're doing relative to our crude acquisitions.
I mean, I think we had a pretty good feel for the market. We made some good decisions, and I'd rather just kind of stop there.
William R. Klesse
But I will add, so you have some feel for it, that what you typically are doing is locking in the differentials. You can do that with WTI.
You can do that with Brent. You can do it with a lot of things.
And so how we manage that really becomes a company's internal decision. And that's why Joe is saying to us, it's doing our business every day, and it is a competitive world.
But it's really locking in the diffs. And obviously, we had some dips locked in on Brent, right?
Or we would've lost more money.
Sam Margolin - Global Hunter Securities, LLC, Research Division
Okay. Well, here's one that should be less controversial.
On the retail numbers, the same-store sales were flat year-over-year. It stands in pretty stark contrast to the DOE demand figures.
It looks like there's some kind of error in that data set just based on the massiveness of the drop-off. Your retail numbers, is that reflective of a broader picture of better-than-expected demand?
Or is that just your location and exposure and company-specific items?
Jean Bernier
This is Jean Bernier here. No, you are right.
Our fourth quarter volume, when compared to the same quarter last year, was better in the fourth quarter than our year-to-date trend. Overall, we're up about 1.5% in the fourth quarter versus a drop of 0.5% year-to-date.
And on a same-store basis, we had a similar trend. So we did better in the fourth quarter compared to last year, and some regions did better.
And Texas, in particular, was a good market for us.
Sam Margolin - Global Hunter Securities, LLC, Research Division
Okay. Yes, I mean, it's just noteworthy because the weekly DOE numbers have been -- were putting actually a strain on the exchange-traded commodity prices for most of the fourth quarter, and this rebound might reflect some changes in the understanding of that demand picture.
So I was just curious if it was a national thing.
Michael S. Ciskowski
Yes. Sam, you just have to remember where our stores are located.
They tend to be Southwest, with most of them in Texas. And Texas has a good economy.
William R. Klesse
And then in Canada.
Michael S. Ciskowski
Yes, same thing in our Canadian.
Jean Bernier
Yes. The Canadian volumes are a bit softer when you look at the overall volumes.
But that is mainly from our heating and carte blanche segments. If you look at our retail gasoline, we were about flat to last year.
Operator
And our next question comes from Paul Sankey from Deutsche Bank.
Paul Sankey - Deutsche Bank AG, Research Division
There's quite a significant union issue. Today, I believe, is the deadline.
Bill, can you talk a little bit about any potential impacts that we may have? What you expect to happen, what's happened in the past?
And also, if you could widen that out from not only a Valero impact potentially but also to a wider industry impact, I'd be grateful.
William R. Klesse
Well, Paul, I'll first speak to Valero. We had 2 refineries that have agreements that terminate tonight.
And we continue to negotiate, and I have the expectation that we will have an agreement. At Port Arthur, we have actually 5 agreements, and we tentatively have reached agreement on 4.
And so really, there's just one agreement. Now we have -- we're served with notice that they -- I guess it's a notice that says they can strike or will strike if we don't have an agreement here at Port Arthur.
And at Port Arthur, we intend to operate, if that's the case. Now as to other companies in the industry, I don't -- some companies were served.
We've heard there were 2 companies that were notified that they could have a strike. Remember, we're part of a pattern.
Valero is a member of this group that negotiates. Shell has the lead and is negotiating the pattern.
So we'll see what happens today, but we expect that we're going to have an agreement. So we'll see what happens.
Paul Sankey - Deutsche Bank AG, Research Division
And I think Memphis is the other affected refinery for you guys?
William R. Klesse
Memphis for us is an agreement that expires tonight. At Memphis, we have negotiated with the union an orderly shutdown.
And so if they decided to strike, we will shut down at Memphis.
Paul Sankey - Deutsche Bank AG, Research Division
But on balance, you expect an agreement?
William R. Klesse
Yes, we expect an agreement. We're a great company to work for.
Paul Sankey - Deutsche Bank AG, Research Division
Yes, I knew that, Bill. I knew that.
But it's worth repeating.
William R. Klesse
Maybe there's a job for you here.
Paul Sankey - Deutsche Bank AG, Research Division
Yes, I might need one if Wall Street keeps going the way it's going. So the other question I have is on ethanol.
I mean, there's been a significant change between Q4 and Q1 in Washington. I wondered if you could just -- I know that you had a record quarter.
I believe things are pretty poor right now. And if you could just talk to the way ethanol has shifted and whether we're now in a secular change actually because of what happened in Washington on the credits and stuff?
S. Eugene Edwards
Yes, Paul, this is Gene. Our margins in the fourth quarter averaged about $0.56 a gallon on an EBITDA basis, which is the strongest quarter we ever had obviously.
And the year, averaged about $0.35 a gallon. Since then, the margins have come off.
Right now, in January, we're somewhere between breakeven to $0.05 a gallon. Pretty weak.
Remember last year at this time, we were pretty weak as well. I think I'll let you know what's happening.
We lost the blenders' credit, but I don't think that itself has had much to do with the margins because ethanol today is up $0.60 a gallon under gasoline in the East Coast. So it's still a big margin for blenders to blend regardless of whether the credit is there or not.
I think what's going on is just supply/demand. Demand in kind of the fall was around 850,000 barrels a day, plus we were exporting 100,000, 120,000 barrels a day.
So you add those together, you needed the supply. And supply ramped up from 900,000 barrels a day to about 950,000 barrels.
So it's a very tight market. And what happened in December, January, just a seasonal reduction in gasoline demand, has reduced ethanol blending down to around 750,000, 760,000 barrels a day.
And everybody's still running those 940,000 barrels a day. So we've been building inventories.
The exports haven't been enough to consume all that with the seasonal drop-off in demand. So going forward, I think what's going to happen, these poor margins we're seeing -- remember these that are even in our plants located in the corn belt.
Plants that are outside of the corn belt are negative cash flow right now. So we'll see productions fall off.
At the same time, remember the mandate this year is 860,000 barrels a day. So we're blending below the mandate.
People are probably using credits right now to blend -- to solve the difference. But at some point, in the near term, we're going to ask the ethanol blending move higher to average 860,000 barrels a day for the year.
We factor in exports, which have been strong into Brazil, Canada and Europe, I think they're going to stay in this 100,000, 120,000 barrel a day range. I think the markets are going to get -- just going to tighten back up, and we're just going through a soft period right now.
Paul Sankey - Deutsche Bank AG, Research Division
I see the time's okay now. So I'm going to throw in a third, and it might be a little bit of a question I should know the answer to.
But I believe the Gulf margins right now are pretty much an all-time record for January. And we've talked about weak gasoline demand.
Obviously, we know the export story. But could you just make any observations you've got on just what's driving that strength?
It does seem very impressive.
S. Eugene Edwards
Well, one thing -- it's Gene again. One thing we're seeing on gasoline, the exports have gone up over 600,000 barrels a day.
Joe mentioned the number earlier, 500,000. That was for the year.
Just on a weekly basis, the numbers continue to look quite good. We talked about Hovensa shutting down and the Petrol Plus issues and some of the East Coast refinery shut down.
I think all of those things just kind of tightened up the projections for a stronger spring.
William R. Klesse
And let me add, we don't see the issue per se on supply in the sense that supply is in reasonably good balance for this time of year. It's been a demand conversation.
And we're like a lot of people, we see the economy starting to recover. So we think that demand will be better as we get into the summer.
And as Gene said, when you think about how the supply side has been affected here, that actually we see good margins as we go into summer.
Paul Sankey - Deutsche Bank AG, Research Division
Great. And then just to finalize on that, is there anything strange or unusual about the capture that you're achieving with current margins?
Is there anything we should be aware of as we work through Q1?
Joseph W. Gorder
I would say no.
William R. Klesse
Our answer is no. There should be nothing that we're [ph] aware.
Operator
Our next question comes from Evan Calio from Morgan Stanley.
Evan Calio - Morgan Stanley, Research Division
A follow-up on the Atlantic basin. I mean, I see the clear benefits on supply for Pembroke from Atlantic basin tightness and closures.
Yet, where do you see the volume limitations on Colonial product into the East Coast? And do you see a potential to move more product out of the Gulf Coast into the East Coast?
Clearly, you'd think Aruba [ph] would be a lot tighter this summer into that market, x Hovensa events and the 2 other assets that shuttered in November?
Joseph W. Gorder
At Colonial, we'll see it prorated, right? I mean, it's going to stay full all the time.
A lot of barrels are moving out of the Gulf to Florida. They can also move around to the East Coast.
It always becomes, from our perspective, an arbitrage opportunity. Where can you supply the East Coast demand that we have most efficiently?
Is it out of the Gulf, or is it out of Québec or is it out of Pembroke? And so that's the way we would view this.
But as far as the Atlantic basin goes -- I mean, there's just volume coming off from a refining perspective, as we've talked about now everywhere. And it's just making it a much more attractive market for the refiner that can move effectively.
We look at our supply opportunities, they're significant. And the issue in trying to determine the ultimate -- that bet that you're looking at, comes down to shipping oftentimes.
And foreign flag vessels moving from Quebec and from Pembroke into the New York harbor are advantaged.
Evan Calio - Morgan Stanley, Research Division
Right. And what's the kind of barge arbitrage out of the Gulf Coast?
Is that the widest of those 3, obviously Pembroke and Montréal being easier?
Joseph W. Gorder
I'm sorry, I'm not sure what you're asking.
Evan Calio - Morgan Stanley, Research Division
I mean, does the arbitrage have to be the widest in order to justify barging product from the Gulf Coast around Florida into the East Coast? Or is that...
Joseph W. Gorder
No, not always. Not always.
It comes down to just being sure that you're efficient in the supply. And there are factors within the refinery that will affect your decision to move one way or the other, okay, in addition to the barge.
But generally, we are trying to optimize the margin.
Evan Calio - Morgan Stanley, Research Division
And I have a follow-up question really to differentials. And I guess, first with Maya.
I mean, I guess we're constructive on that spread. I mean, what is your ability or what's the spread that -- and since Valero deflects away from Maya and into LLS's, LLS is trading under Brent, and you have a lot of issues, there's a lot of different differentials there.
Curious what that price was, or if you were incented in the 4Q to shift away from Maya runs? And then conversely, to the West Coast where crudes are relatively bid into Asian refining start-up capacity, kind of the converse of the Atlantic basin, are you seeing most crude options pricing in the same direction of ANS, which is a tricky marker to follow?
S. Eugene Edwards
Well, this is Gene. Let me turn the Gulf Coast first.
I think what we're seeing with Maya prices and where they are today, we're more advantaged on medium sour crudes as opposed to Maya. So we're shifting some there.
Also, the LLS is cheaper, much cheaper than foreign sweet. So some of our refineries like Houston can run those sweet -- would lighten up our barrel, our crude side a little bit there.
I think the Maya will widen back out. There is competition, more Venezuelan crude coming on.
There's still lots of barrels coming out of Columbia. So I think you'll reach more of an equilibrium, so we don't want to just completely go off of Maya and the crudes.
But short-term, we just have the ability to flex a little bit. As far as the West Coast, Joe, do you...
Joseph W. Gorder
Well, I mean, I don't think that ANS is behaving any differently than the other crudes out there.
Evan Calio - Morgan Stanley, Research Division
Okay. So it's reasonably indicative of kind of what should be realized?
Joseph W. Gorder
Yes. I mean, really, you go to -- the only crude that's out of step with the rest of the market is WTI.
I mean, LLS, frankly, no. We're starting to see it move away from Brent, and you'll see that number.
I mean, I guess LLS is $1.62 below Dated Brent today, which is a change from where it was last year. But it's weakening.
And it's weakening because you're seeing more sweet barrels pushed into the Gulf Coast. And it goes to the thesis that I think Bill and Gene have shared with you guys in the past, that ultimately, domestic sweet crude pushing to the Gulf Coast is going to put pressure on LLS margin.
It'll put pressure on foreign sweet pricing. And ultimately, you could see foreign sweet crudes completely backed out of the market.
It'll be a benefit to the Gulf Coast refiners. I mean, we've run sweet crude at Meraux.
We run sweet crude in Houston, as Gene said. And if you back the foreign sweets out of the Gulf, you're going to benefit Pembroke and Québec also as those prices come down.
William R. Klesse
So that's probably for a 4-year or 5-year conversation. But we would say, in the U.S.
Gulf Coast, on what we see on the production and the capability to move the oil to the Gulf Coast, that the industry may push out all the sweet crude imports into the Gulf Coast, not the East Coast.
Evan Calio - Morgan Stanley, Research Division
But would you think that would change your diet of Maya, I guess is what I'm saying, especially if Maya was supported on resid tightness?
William R. Klesse
Well, I think Gene told you today, we're better off running a medium sours out of our plants than the heavy sours. So what that tells you is you're not going to build new coking today.
And in some coker, there's not probably a lot of fun.
Evan Calio - Morgan Stanley, Research Division
If I could slip in one last one if I could. I know you mentioned supporting other various pipelines.
I mean, are you seeking nominations on Seaway, I mean, to commit to a potentially advantaged crude source?
William R. Klesse
I think on that one, we probably -- we will decline to answer, except go back to what Joe said earlier. We want the heavy crude to the Gulf Coast.
And so we're very public on Keystone, but he also said that we're, in a way, talking to all of these companies.
Operator
Our next question comes from Mark Gilman from Benchmark Company.
Mark Gilman - The Benchmark Company, LLC, Research Division
A couple of quick ones, if I could. Aruba, cash positive in the fourth quarter?
William R. Klesse
Absolutely no.
Mark Gilman - The Benchmark Company, LLC, Research Division
That was at a negative? I'm sorry, I didn't catch it.
William R. Klesse
Yes -- no, we're not cash positive. We're not.
Mark Gilman - The Benchmark Company, LLC, Research Division
Okay. Could you update us a little bit on the Eagle Ford crude takes at Corpus and Three Rivers in the fourth quarter and where you expect to be in the first?
Joseph W. Gorder
Yes, Mark. This is Joe.
We ran about 60 in the quarter. We're running 80 today.
And we expect by the end of the second quarter, we'll be running 100.
Mark Gilman - The Benchmark Company, LLC, Research Division
Joe, how does that split up between the 2 plants?
Joseph W. Gorder
I mean, the bulk of it and certainly in the fourth quarter, I would tell you, 55 of the 60 went to Three Rivers. I think we're going to -- and I don't have it specifically, Mark, but I think we're going to be running 30 of the 80 in Corpus today.
And then about that same range in the first quarter.
Mark Gilman - The Benchmark Company, LLC, Research Division
Okay. The 100 that you mentioned at end of first quarter or second?
Joseph W. Gorder
It'll be during the second quarter.
Mark Gilman - The Benchmark Company, LLC, Research Division
Okay. Any specific plans in place for diesel yield enhancement at Pembroke?
Lane Riggs
Mark, this is Lane. We're currently looking at different ways to reoptimize their FCC catalyst and trying to get to a more distillate selective for riser conditions with catalysts.
And obviously, we're looking at their distillations, make sure the right molecule is in the right place. We don't have a project per se right now lined up to increase their diesel production up.
Mark Gilman - The Benchmark Company, LLC, Research Division
Okay. I'm a little bit confused as to what Mike's $200 million number represented in discussing the long-haul crude.
Is that pretax, after-tax? Does that encompass what I believe would've been a very negative crude oil impact in the mid-con?
And if you could identify roughly what that might have been in the fourth quarter, I'd appreciate it.
Michael S. Ciskowski
Okay. What that does represent, it's a pretax number.
And in the volumes, I don't think I can disclose due to...
William R. Klesse
It's a pretax number, and it is -- the question was that we answered on the long-haul crudes, which basically are the crudes that we had exposed to WTI as we set our differentials and locked those crudes in. That is $200 million.
Now the other piece you're asking is yes, this negatively impacted our performance when it went from $25 to $10 at Mckee and Ardmore for sure. And we still made money at those refineries, but now we have a $10 diff instead of a $25 diff.
And so with the volumes we run at those plants, the difference between in a way $25 down to $10 is about another $200 million. But we were still profitable at those refineries.
Obviously, there's a $10 advantage.
Mark Gilman - The Benchmark Company, LLC, Research Division
Okay. That $200 million, Bill, that you just mentioned, that's also a pretax number I assume?
William R. Klesse
Yes. We're giving you everything, Mark, in operating profit.
Mark Gilman - The Benchmark Company, LLC, Research Division
Okay. Just one more real quick one because I got to jump, the decision to participate in both cellulosic ethanol as well as biodiesel, it sounds to me as if you're willing to put a reasonable amount of money on the table here.
William R. Klesse
If I can answer you, Mark, we think that in the United States, we are going to have the continuation of the mandates to use it. So we have this renewable volume obligation.
And when you look at it, is a large number for us. And even though we manage these in the sense of profit centers, when you look at the overall company, we want to control some of our destinies.
Now even if we have a new Congress or whatever, we still think those mandates are going to continue. So the answer is last year, for rents, we spent, how much?
Joseph W. Gorder
$155.
William R. Klesse
$155 million for rent. Does that include the diesel rents?
Joseph W. Gorder
Yes.
William R. Klesse
So that our total. We spent $155 million buying rents.
Our estimate for this year is nearly 2x that for rents when you count diesel and cellulosic and regular. So yes, your answer is right.
We think it's part of the fuel mix. And we have a good project on biodiesel, or renewable diesel.
We have a good partner. So we're going to run that like a refining project.
And the Ken Ross project that's been announced with wood we think is a good opportunity to get our toe in.
Operator
And our next question comes from Chi Chow from Macquarie Capital.
Chi Chow - Macquarie Research
So back on the crude hedging loss in the fourth quarter, I'm assuming that you had also a pretty sizable hedging gain then in the first quarter to the third quarter of last year. Mike, could you quantify what those gains might've been?
William R. Klesse
So your question is because we're -- I'm asking you -- because we're buying crude, that we set the differentials against WTI then we benefited just like every other Mid-Continent refiner on that. Is that your question?
Chi Chow - Macquarie Research
Yes, yes. I'm assuming that you use NYMEX TI contracts to hedge long-haul.
So when the spread blew out from $3 to $28 in the first 3 quarters, I'm assuming there was a hedging gain in the first 3 quarters then.
William R. Klesse
All right. So there was.
So we're going to answer you for the long haul barrels, okay. Mike?
Michael S. Ciskowski
Okay, yes. That should be -- I mean, that number is estimated to be a little bit over $700 million benefit.
Chi Chow - Macquarie Research
And Mike, do you have that broken out by quarter?
Michael S. Ciskowski
I do. It's roughly about $250 million in the first quarter; $210 million, second; $250 million, third.
Chi Chow - Macquarie Research
Okay, great. And on all these contracts, is there a particular region that's hitting?
Is it all in the Gulf Coast? Or is it spread out between West Coast and Gulf?
Joseph W. Gorder
I mean, our volume is so skewed to the Gulf. That's where you're going to have the biggest effect.
Chi Chow - Macquarie Research
And then, Mike, in 2012 here, your debt maturities, do you just have the one 6 7/8% notes coming due?
Michael S. Ciskowski
Right. Well, that's correct.
We have $750 million that comes due in April. And then if you look at our balance sheet when you see it, it'll show $250 million of current maturities associated with our AR program.
But that renews annually, and we anticipate renewing that.
Chi Chow - Macquarie Research
Right. Okay, then in the fourth quarter, do you have -- what sort of working capital impact did you have on free cash flow?
Michael S. Ciskowski
Actually, we had about -- it's about a $700 million requirement, cash requirement associated with working capital. So what makes that up is our receivables, payables net increase.
That was about a little over $300 million. We had an increase in our income tax receivable of about $200 million.
And then we also had some prepayments on crude. It's more of a timing deal from January to December.
And that was another roughly $200 million.
Chi Chow - Macquarie Research
Okay. Do these items reverse out here in the first quarter?
Michael S. Ciskowski
I'm not exactly sure the timing on the income tax receivable. I mean, on the payables, the receivables payables net, I'm not -- that should reverse over time, yes.
Operator
Our next question comes from Cory Garcia from Raymond James.
Cory J. Garcia - Raymond James & Associates, Inc., Research Division
One quick question out of me, sort of switching up the export angle a bit. Are you guys sending any gasoline or diesel off California coast?
And maybe quickly, your views on the West Coast export trend?
Joseph W. Gorder
We are not. And my views on the export trend, you got a view on West Coast?
William R. Klesse
Well, we think that there eventually could be an opportunity there. We need to have that capability.
That's one reason we're working our cost structure so that we can compete. And that would be into the West Coast of South America.
Might have a freight advantage of not going through the Panama Canal. And also, there's action going on, on refining capacity in Hawaii, as you know.
But we haven't done anything as of yet, but we're looking at this type of optionality because we believe a key part for all refiners in the United States is having the ability to export.
Operator
Our next question comes from Harry Mateer from Barclays Capital.
Harry Mateer - Barclays Capital, Research Division
Just a quick one. Given the rate of spending this year, you do have a $750 million maturity coming up in April.
Can you just tell us what your plans are with respect to that?
William R. Klesse
Well, as of right now, we will go ahead and redeem that. But we're actually looking at how our cash flow goes for the next month or 2 from operations.
And our projects look like they're on budget and on time. And so we'll make a decision here in February, latter part of February, on how we're going to address that, whether we're just going to redeem it, or whether we'll need to issue something.
That's a foreign item for us, so we'll go back to our board and explain to our board how we're going to do it.
Operator
We have no further questions at this time.
Ashley M. Smith
Okay. Thank you, John, and thank you for listening to our call.
If you have any further questions, please contact the Investor Relations department.
Operator
Thank you, ladies and gentlemen. This concludes today's conference.
Thank you for participating. You may now disconnect.