Valero Energy (NYSE: VLO), one of the largest refiners in the U.S., is now making its move abroad. The company will acquire Chevron's (NYSE: CVX) U.K. refinery for $1.7 billion. This deal could be the cornerstone of Valero's diversification plans in Europe -- a region in which the company has long attempted to secure a foothold.

Valero has agreed to buy Chevron's Pembroke refinery in Wales and other related assets for $1.7 billion. Valero already owns 14 U.S. refineries, with a total throughput capacity of approximately 2.6 million barrels per day. At 270,000 barrels per day, or close to 10% of Valero's existing output, the Pembroke refinery is one of Western Europe's largest -- yet it has a 25% lower operating cost than Valero's average facility. Considering the recent hike in oil prices globally, the increase in capacity will be a huge advantage for Valero.

A boost to the recovery
Valero's revenue rose from $63.7 million in 2009 to $81.3 million last year. Its earnings per share also improved to $0.57 in 2010, from a loss of $3.66 in the preceding year. Management believes that Chevron's U.K. refinery and assets will be a valuable addition to Valero's portfolio, further boosting its numbers in the year ahead.

Even Standard & Poor's revised its rating outlook on Valero to "Stable," up from "Negative." Standard & Poor's credit analyst Scott Sprinzen expects that the favorable refining margins on distillate products, and increased discounts on heavy crude oil feedstocks, will help Valero sustain strong financial performance over the next two years.

The Foolish bottom line
Valero shares jumped 6.7% after the company announced its new purchase. But beyond the short-term pop, its new stronghold in the U.K. should continue to drive profitable growth for the company for years to come.

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