Transcript: Valero's William Greehey

This is a partial transcript from "Your World with Neil Cavuto," April 25, 2005, that was edited for clarity.

NEIL CAVUTO, HOST: Skyrocketing oil prices haven't hurt everyone's pockets. Valero Energy Corporation (VLO), one of the top U.S. oil refiners, has seen its stock rise 149 percent in the last 12 months. It's the top performer in the S&P 500 and continues that pace. Another top performer, Premcor (PCO), it spiked 100 percent this year. And this morning, well, they announced a merger, creating the largest refiner in North America.

Please welcome the man behind that deal, still smiling — I heard him doing interviews at like 5:00 in the morning — Bill Greehey. He is the chairman and the CEO of Valero Energy Corporation.

You ought to stop wasting your time with those other interviews, but that's OK.


CAVUTO: But, anyway, you obviously saw a chance to pounce. What was it?

WILLIAM GREEHEY, CHAIRMAN & CEO, VALERO ENERGY: Well, it's a real opportunity.

If you look at the two companies, their strategy, their philosophies, their management styles were the same. In our industry, bigger is better. And by combining the two companies, we created $350 million in synergies a year. It's very accretive to earnings. And their shareholders will benefit, because half of what they get will be stock in the new company going forward.

CAVUTO: All right, but your stock is your currency, right?

GREEHEY: Well, it's half.

CAVUTO: Right.

GREEHEY: Half is currency.

CAVUTO: But if you didn't have this incredible run-up, would you be as acquisitive?

GREEHEY: Well, you know, last year, when our stock was down and their stock was down, it would have been actually a better deal then. But both companies had too much debt. So we decided to wait until this year.

So, we're paying more. But, obviously, refineries are worth more because of what's happened in the past year.

CAVUTO: We always talk in this country — I'm sure it came up with the president meting with Saudi Crown Prince Abdullah in Crawford — that we need to build refineries. That's the problem. It's not the oil swishing around-the-world, but the lack of refineries. Is that the problem?

GREEHEY: Well, that's part of the problem. But the economics don't work in building a new refinery.

Even as good as margins are today, you could not justify building a grassroots refinery. I mean, it would take seven years. And what would the costs be in seven years? What would the economics be in seven years? And, so, you know, no one is willing to take the risk.

CAVUTO: Could you take a risk and tell me where oil prices are going?

GREEHEY: No, I could not take the risk, based upon what prices are seven years out or what costs are seven years out. And to add to that, in the United States, the permitting process would really be difficult.

CAVUTO: Because the president, with his energy plan, as you know, sir, says, we've got to look for oil on our shores, rather depend on those abroad. And the environmentalists are fighting it. And it's a whole nasty give and take. Where do you see it going?

GREEHEY: I think that's great. But, in my lifetime, we're going to be dependent upon imported oil.

CAVUTO: So we still kowtow to the Saudis?

GREEHEY: Absolutely.

CAVUTO: They've apparently made a number of vague guarantees to us — that is, the Saudis — that they'll presumably open up the spigot more. That doesn't make a difference to your business, though. You make money in up or down oil markets. More often when it's up, though, right?

GREEHEY: Well, when it's up, the discount to sour is more. But when it's down, obviously, it's going to create more demand. But, in any case, we're strictly on a margin basis.


Bill Greehey, thank you very much. Appreciate it, the chairman and CEO of Valero. What have you had, $8 billion or so in acquisitions just recently?

GREEHEY: That's right.

CAVUTO: Yes, all right. Thank you, sir.

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