8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 31, 2005

VALERO ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	1-13175	74-1828067
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of incorporation)		Identification No.)
One Valero Way
San Antonio, Texas		78249
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code: (210) 345-2000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02Results of Operations and Financial Condition.

On October 31, 2005, Valero Energy Corporation (the “Company”) issued a press release announcing financial results for the Company’s third quarter 2005 earnings.  A copy of the press release is furnished with this report as Exhibit 99.1, and is incorporated herein by reference.

The information in this report is being furnished, not filed, pursuant to Item 2.02 of Form 8-K.  Accordingly, the information in this report, including the press release, will not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

Item 9.01Financial Statements and Exhibits.

(c)Exhibits.

99.1Press Release dated October 31, 2005.

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	VALERO ENERGY CORPORATION
Date: October 31, 2005		By:	/s/ Jay D. Browning
		Jay D. Browning
		Vice President and Secretary

3

EXHIBIT INDEX

Number	Exhibit
99.1	Press Release dated October 31, 2005.

4

EX-99.1

Exhibit 99.1

Valero Energy Corporation Reports

Third Quarter Earnings

Ninth Consecutive Quarter of Record Results

SAN ANTONIO, October 31, 2005 — Valero Energy Corporation (NYSE: VLO) today reported net income for the third quarter of 2005 of $1.3 billion, or $4.37 per share, compared to $434 million, or $1.57 per share, for the same period last year.  The third quarter 2005 results exclude a $621 million pre-tax LIFO charge to cost of goods sold related to the difference between the fair market value of the inventories acquired from Premcor Inc. on September 1, 2005 and Valero’s recorded amounts under LIFO accounting attributable to those inventories.  Including this special non-cash item, net income for the third quarter of 2005 was $862 million, or $2.94 per share.

For the nine months ended September 30, 2005, Valero’s net income was $2.7 billion, or $9.42 per share, versus $1.3 billion, or $4.78 per share, for the nine months ended September 30, 2004.  Including the LIFO charge discussed above, the company’s net income for the nine months ended September 30, 2005 was $2.2 billion, or $7.92 per share.  The company’s debt-to-capitalization ratio, net of cash, was 29.1 percent as of September 30, 2005, compared to 30.7 percent as of December 31, 2004.

Excluding the LIFO charge, third quarter operating income for the company’s refining segment was $2.1 billion, compared to $760 million for the same period last year.  The significant increase in operating income was primarily due to the sharp rise in refined product margins as well as widening sour crude oil discounts.  The company also benefited from the addition of the four former Premcor Inc. refineries, which contributed approximately $330 million to operating income in September.

“This was a challenging quarter for Valero in so many ways given the hurricanes on the Gulf Coast and the addition of four new refineries to our system, but our employees did an outstanding job meeting these challenges,” said Bill Greehey, Valero’s Chairman of the Board and Chief Executive Officer.  “In particular, the efforts of our employees at the St. Charles and Port Arthur refineries were nothing short of heroic in restoring our operations in record time and helping their communities recover from these devastating storms.

“The impact of these hurricanes reflects what we’ve been saying for years - that refining capacity has gotten tighter, not just in the U.S., but globally.  Anytime there is a major disruption, margins are likely to spike.  Just as they did shortly after Hurricanes Katrina and Rita, pump prices spiked up, but then came down.  We believe that the impact of these hurricanes on pump prices will soon be behind us.  As more refineries come back on-line, pump prices should continue to fall and that is good for both refined product demand and the economy,” said Greehey.

“Looking at the remainder of the fourth quarter, the outlook is outstanding.  Gulf Coast gasoline margins based on the forward curve for November and December are trading around $4.00 per barrel and heating oil margins are around $17.00 per barrel.  As for sour crude discounts, they have continued to widen from what were already impressive levels.  For example, Maya crude oil discounts are currently at around $15.00 per barrel and are expected to widen further, just as they did at the end of last year.  And, the fourth quarter will be our first full quarter with the contribution of the Premcor assets.  As we have begun to integrate these refineries into our system, we have been very impressed by the quality of the workforce as well as the assets.  Despite the 3 week outage at the Port Arthur refinery during October, we expect that the fourth quarter will demonstrate how strongly accretive to our earnings the acquisition will be going forward.  Given all these positive factors, it’s clear that the current First Call consensus estimate of $3.67 per share for the fourth quarter is significantly too low.  In fact, we estimate that in October alone we will earn around $2.30 per share.

“With respect to next year, the industry is facing the implementation of the Tier II low-sulfur fuels standards, the removal of MTBE from the gasoline pool and the likelihood of low inventories headed into the year.  The futures market is already reflecting these challenges and if you look at the forward curve, refined product margins for next year are currently trading at higher levels than they are for this year.  So, when you consider the strong market fundamentals,  a full-year contribution of the Premcor assets, and the additional 100,000 barrels per day of capacity coming on-line in our refining system next year from our strategic projects, you can see why we believe that 2006 will be another record-setting year for Valero,” he said.

Valero’s senior management will hold a conference call at 10:00 a.m. ET (9:00 a.m. CT) today, to discuss this earnings release and provide an update on company operations.  A live broadcast of the conference call will be available on the company’s website at www.valero.com.

Valero Energy Corporation is a Fortune 500 company based in San Antonio, with approximately 22,000 employees and expected annual revenue of more than $75 billion.  The company owns and operates 18 refineries throughout the United States, Canada and the Caribbean with a combined throughput capacity of approximately 3.3 million barrels per day, making it the largest refiner in North America.  Valero is also one of the nation’s largest retail operators with more than 4,700 retail and branded wholesale outlets in the United States, Canada and the Caribbean under various brand names including Valero, Diamond Shamrock, Shamrock, Ultramar, and Beacon.  Please visit www.valero.com for more information.

Statements contained in this press release 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 of the Securities Act of 1933 and the Securities Exchange Act of 1934.  The words “believe,” “expect,” “should,” “estimates,” and other similar expressions identify forward-looking statements.  It is important to note that actual results could differ materially from those projected in such forward-looking statements.  For more information concerning factors that could cause actual results to differ from those expressed or forecast, see the proxy statement/prospectus dated July 13, 2005 regarding the merger of Valero and Premcor, and the amended Form S-4 Registration Statement filed with the Securities and Exchange Commission (as the same may be supplemented or amended).  Also see both companies’ reports, including annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission and available on the Valero web site at www.valero.com.

VALERO ENERGY CORPORATION AND SUBSIDIARIES

EARNINGS RELEASE

(Millions of Dollars, Except per Share, per Barrel and per Gallon Amounts)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005 (1)			2004			2005 (1)			2004
STATEMENT OF INCOME DATA: (See note below)
Operating Revenues (including $2,263, $1,330, $5,083 and $3,489, respectively, related to buy/sell arrangements) (2) (3)	$	23,283		$	14,339		$	56,268		$	39,228
Costs and Expenses:
Cost of Sales (2)	20,017			12,683			48,768			34,260
Refining Operating Expenses	772			529			1,938			1,553
Retail Selling Expenses	201			177			561			518
General and Administrative Expenses	129			87			303			263
Depreciation and Amortization Expense	232			164			615			464
Total Costs and Expenses	21,351			13,640			52,185			37,058
Operating Income	1,932			699			4,083			2,170
Equity in Earnings of Valero L.P.	13			10			32			29
Other Income (Expense), Net	11			7			(4		)	4
Interest and Debt Expense:
Incurred	(85		)	(73		)	(230		)	(222		)
Capitalized	18			10			39			27
Income Before Income Tax Expense	1,889			653			3,920			2,008
Income Tax Expense	605			219			1,255			693
Net Income	1,284			434			2,665			1,315
Preferred Stock Dividends	4			3			12			9
Net Income Applicable to Common Stock	$	1,280		$	431		$	2,653		$	1,306
Earnings per Common Share	$	4.65		$	1.69		$	10.10		$	5.13
Weighted Average Common Shares Outstanding (in millions)	276			256			263			255
Earnings per Common Share - Assuming Dilution	$	4.37		$	1.57		$	9.42		$	4.78
Weighted Average Common Equivalent Shares Outstanding (in millions)	294			276			283			275

	September 30,			December 31,
	2005			2004
BALANCE SHEET DATA:
Cash	$	737		$	864
Total Debt	$	6,388		$	4,313
Debt-to-Capitalization Ratio (net of cash) (4)	29.1		%	30.7		%

Note:The statement of income information reflected above excludes the effect of a $621 million pre-tax LIFO charge in the third quarter of 2005 primarily related to the difference between the fair market value of the acquired Premcor inventories on September 1, 2005 and Valero’s recorded amounts under LIFO accounting attributable to those inventories.  This special non-cash charge will be included in cost of sales in the Company’s financial statements prepared in accordance with generally accepted accounting principles, resulting in earnings per common share and earnings per common share assuming dilution of $3.11 and $2.94, respectively, for the third quarter of 2005 and $8.49 and $7.92, respectively, for the nine months ended September 30, 2005.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005 (1)			2004			2005 (1)			2004
Operating Income (Loss) by Business Segment:
Refining	$	2,063		$	760		$	4,360		$	2,341
Retail:
U.S.	5			22			21			56
Northeast	16			14			57			66
Total Retail	21			36			78			122
Total Before Corporate	2,084			796			4,438			2,463
Corporate	(152		)	(97		)	(355		)	(293		)
Total	$	1,932		$	699		$	4,083		$	2,170
Depreciation and Amortization by Business Segment:
Refining	$	187		$	140		$	504		$	392
Retail:
U.S.	16			8			42			26
Northeast	6			6			17			16
Total Retail	22			14			59			42
Total Before Corporate	209			154			563			434
Corporate	23			10			52			30
Total	$	232		$	164		$	615		$	464
Operating Highlights:
Refining:
Throughput Margin per Barrel	$	13.43		$	6.92		$	10.80		$	7.31
Operating Costs per Barrel:
Refining Operating Expenses	$	3.43		$	2.56		$	3.08		$	2.65
Depreciation and Amortization	0.83			0.68			0.80			0.67
Total Operating Costs per Barrel	$	4.26		$	3.24		$	3.88		$	3.32
Throughput Volumes (Mbbls per Day):
Feedstocks:
Heavy Sour Crude	484			508			495			472
Medium/Light Sour Crude	579			635			582			564
Acidic Sweet Crude	125			89			112			100
Sweet Crude	668			507			591			534
Residuals	248			176			183			127
Other Feedstocks	114			114			124			133
Total Feedstocks	2,218			2,029			2,087			1,930
Blendstocks and Other	227			214			220			208
Total Throughput Volumes	2,445			2,243			2,307			2,138
Yields (Mbbls per Day):
Gasolines and Blendstocks	1,165			1,050			1,086			1,036
Distillates	741			674			697			638
Petrochemicals	66			71			67			70
Other Products (5)	464			455			459			402
Total Yields	2,436			2,250			2,309			2,146

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005 (1)		2004		2005 (1)		2004
Refining Operating Highlights by Region: (6)
Gulf Coast: (7)
Operating Income	$	1,163	$	488	$	2,616	$	1,337
Throughput Volumes (Mbbls per Day) (8)	1,328		1,273		1,289		1,185
Throughput Margin per Barrel	$	13.82	$	7.34	$	11.17	$	7.40
Operating Costs per Barrel:
Refining Operating Expenses	$	3.52	$	2.54	$	3.01	$	2.65
Depreciation and Amortization	0.77		0.63		0.72		0.64
Total Operating Costs per Barrel	$	4.29	$	3.17	$	3.73	$	3.29
Mid-Continent: (9)
Operating Income	$	345	$	37	$	492	$	212
Throughput Volumes (Mbbls per Day) (8)	352		291		302		292
Throughput Margin per Barrel	$	14.85	$	4.77	$	9.93	$	5.88
Operating Costs per Barrel:
Refining Operating Expenses	$	3.39	$	2.71	$	3.27	$	2.65
Depreciation and Amortization	0.80		0.64		0.70		0.58
Total Operating Costs per Barrel	$	4.19	$	3.35	$	3.97	$	3.23
Northeast:
Operating Income	$	279	$	100	$	501	$	358
Throughput Volumes (Mbbls per Day) (8)	451		381		406		377
Throughput Margin per Barrel	$	10.27	$	5.33	$	7.88	$	5.92
Operating Costs per Barrel:
Refining Operating Expenses	$	2.79	$	1.89	$	2.58	$	1.87
Depreciation and Amortization	0.76		0.59		0.79		0.58
Total Operating Costs per Barrel	$	3.55	$	2.48	$	3.37	$	2.45
West Coast:
Operating Income	$	276	$	135	$	751	$	434
Throughput Volumes (Mbbls per Day)	314		298		310		284
Throughput Margin per Barrel	$	14.78	$	9.29	$	13.94	$	10.25
Operating Costs per Barrel:
Refining Operating Expenses	$	4.00	$	3.40	$	3.81	$	3.69
Depreciation and Amortization	1.22		1.00		1.24		1.00
Total Operating Costs per Barrel	$	5.22	$	4.40	$	5.05	$	4.69

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005 (1)			2004			2005 (1)			2004
Retail - U.S.:
Company - Operated Fuel Sites (Average)	1,029			1,103			1,029			1,123
Fuel Volumes (Gallons per Day per Site)	4,966			4,787			4,862			4,640
Fuel Margin per Gallon	$	0.121		$	0.128		$	0.118		$	0.128
Merchandise Sales	$	250		$	247		$	710		$	705
Merchandise Margin (Percentage of Sales)	30.1		%	27.8		%	29.7		%	28.3		%
Margin on Miscellaneous Sales	$	33		$	25		$	91		$	73
Selling Expenses	$	145		$	127		$	400		$	374
Retail - Northeast:
Fuel Volumes (Thousand Gallons per Day)	3,122			3,148			3,192			3,234
Fuel Margin per Gallon	$	0.206		$	0.190		$	0.210		$	0.209
Merchandise Sales	$	42		$	38		$	112		$	103
Merchandise Margin (Percentage of Sales)	25.0		%	23.9		%	25.4		%	24.1		%
Margin on Miscellaneous Sales	$	8		$	7		$	23		$	17
Selling Expenses	$	56		$	50		$	161		$	144
Average Market Reference Prices and Differentials (Dollars per Barrel):
Feedstocks (at U.S. Gulf Coast, except as Noted):
West Texas Intermediate (WTI) Crude Oil	$	63.05		$	43.82		$	55.26		$	39.13
WTI Less Sour Crude Oil (10)	$	5.26		$	4.95		$	6.68		$	4.54
WTI Less Alaska North Slope (ANS) Crude Oil (U.S. West Coast)	$	2.26		$	2.06		$	3.36		$	1.49
WTI less Maya Crude Oil	$	15.46		$	11.65		$	15.20		$	9.91
Products:
U.S. Gulf Coast:
Conventional 87 Gasoline Less WTI	$	19.38		$	7.24		$	11.63		$	9.47
No. 2 Fuel Oil Less WTI	$	13.48		$	4.42		$	10.15		$	2.89
Propylene Less WTI	$	(4.95	)	$	4.44		$	6.61		$	7.76
U.S. Mid-Continent:
Conventional 87 Gasoline Less WTI	$	17.41		$	8.18		$	11.70		$	10.29
Low-Sulfur Diesel Less WTI	$	16.35		$	7.89		$	13.09		$	6.07
U.S. Northeast:
Conventional 87 Gasoline Less WTI	$	15.98		$	7.83		$	9.60		$	9.62
No. 2 Fuel Oil Less WTI	$	12.47		$	5.29		$	10.80		$	4.01
Lube Oils Less WTI	$	32.32		$	21.40		$	29.74		$	23.27
U.S. West Coast:
CARBOB 87 Gasoline Less ANS	$	25.54		$	18.84		$	22.04		$	20.44
Low-Sulfur Diesel Less ANS	$	24.56		$	15.77		$	20.94		$	14.90

(1)The information presented for the three months and nine months ended September 30, 2005 includes the operations related to the acquisition of Premcor Inc. commencing on September 1, 2005.  As indicated in the Note on the first page of this earnings release, the statement of income information presented herein excludes the effect of a $621 million pre-tax LIFO charge for the three months and nine months ended September 30, 2005.  The following provides a reconciliation of the statement of income data excluding the LIFO charge to the statement of income data including the LIFO charge for each of the captions affected as required in accordance with generally accepted accounting principles (GAAP).

	Three Months Ended September 30, 2005							Nine Months Ended September 30, 2005
	Amounts as Presented		LIFO Effect			Amounts in Accordance with GAAP		Amounts as Presented		LIFO Effect			Amounts in Accordance with GAAP
Cost of Sales	$	20,017	$	621		$	20,638	$	48,768	$	621		$	49,389
Total Costs and Expenses	21,351		621			21,972		52,185		621			52,806
Operating Income	1,932		(621		)	1,311		4,083		(621		)	3,462
Income Before Income Tax Expense	1,889		(621		)	1,268		3,920		(621		)	3,299
Income Tax Expense	605		(199		)	406		1,255		(199		)	1,056
Net Income	1,284		(422		)	862		2,665		(422		)	2,243
Net Income Applicable to Common Stock	1,280		(422		)	858		2,653		(422		)	2,231
Earnings per Common Share	4.65		(1.54		)	3.11		10.10		(1.61		)	8.49
Earnings per Common Share - Assuming Dilution	4.37		(1.43		)	2.94		9.42		(1.50		)	7.92

(2)Valero Energy Corporation’s buy/sell arrangements involve linked purchases and sales related to crude oil contracts entered into to address location, quality or grade requirements. Included in cost of sales are amounts which approximate the revenues resulting from these transactions.

(3)Includes excise taxes on sales by Valero’s U.S. retail system of $210 and $215 for the three months ended September 30, 2005 and 2004, respectively, and $611 and $631 for the nine months ended September 30, 2005 and 2004, respectively.

(4)The following is a reconciliation of the debt-to-capitalization ratio.  This information is presented because Valero is required to maintain a certain debt-to-capitalization ratio under its bank credit facilities.

	September 30,			December 31,
	2005			2004
Debt:
Debt, including current maturities and capital lease obligations, per the balance sheet	$	6,388		$	4,313
Less: Cash and temporary cash investments	(737		)	(864		)
Total debt (net of cash)	5,651			3,449
Stockholders’ equity	13,794			7,798
Total capitalization	$	19,445		$	11,247
Debt-to-capitalization ratio (net of cash)	29.1		%	30.7		%

(5)Primarily includes gas oils, No. 6 fuel oil, petroleum coke and asphalt.

(6)The regions depicted herein contain the following refineries subsequent to the Premcor acquisition: Gulf Coast- Corpus Christi East and West Refineries, Texas City Refinery, Houston Refinery, Three Rivers Refinery, Krotz Springs Refinery, St. Charles Refinery, Aruba Refinery and Port Arthur Refinery; Mid-Continent- McKee Refinery, Ardmore Refinery, Memphis Refinery and Lima Refinery; Northeast- Quebec Refinery, Paulsboro Refinery and Delaware City Refinery; and West Coast- Benicia Refinery and Wilmington Refinery. The Mid-Continent region also included the Denver Refinery for periods prior to its disposition on May 31, 2005.

(7)The information presented for the nine months ended September 30, 2004 includes the operations of the Aruba Refinery and certain related businesses commencing on March 5, 2004, the date of Valero’s acquisition of these facilities from El Paso Corporation. Throughput volumes for the Gulf Coast region for the nine months ended September 30, 2004 are based on a 274-day period, which results in 170 Mbbls per day being included for Aruba.  Throughput volumes for Aruba for the 210 days of its operations during the nine-month period averaged 222 Mbbls per day.

(8)Throughput volumes for the Gulf Coast, Mid-Continent and Northeast regions for the three months ended September 30, 2005 include 66, 100 and 66 Mbbls per day, respectively, and for the nine months ended September 30, 2005, include 22, 34 and 22 Mbbls per day, respectively, related to the operations of the refineries acquired from Premcor Inc. commencing on September 1, 2005. Throughput volumes for those acquired refineries for the 30 days of their operations subsequent to the acquisition date of September 1, 2005 were 203, 306 and 203 Mbbls per day, respectively, for the Gulf Coast, Mid-Continent and Northeast regions.

(9)The information presented for the Mid-Continent region includes the operations of the Denver Refinery through May 31, 2005, the date of Valero’s sale of this facility to Suncor Energy Inc.  Throughput volumes for the Mid-Continent region include 0, 38, 21 and 37 Mbbls per day, respectively, related to the Denver Refinery for the three months ended September 30, 2005 and 2004 and the nine months ended September 30, 2005 and 2004.

(10)The market reference differential for sour crude oil is based on 50% Arab Medium and 50% Arab Light posted prices.