Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (June 2015)
60 slides from Valero Energy's investor presentation, Jun 17, 2015
Slide 1: Investor Presentation
Exhibit 99.01 Investor Presentation June 2015
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements contained in this presentation 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 193
Slide 3: Who We Are
Who We Are World’s Largest Independent Refiner • 15 refineries, 2.9 million barrels per day (BPD) of high-complexity throughput capacity • Greater than 70% of refining capacity located in U.S. Gulf Coast and Mid-Continent • Approximately 10,000 employees Large Logistics Infrastructure with Focus on
Slide 4: Assets Concentrated in Advantaged Locations
Assets Concentrated in Advantaged Locations Capacities (MBPD) Nelson Refinery Throughput Crude Index Corpus Christi 325 205 19.9 Houston 175 90 15.4 Meraux 135 125 9.7 Port Arthur 375 335 12.4 St. Charles 290 215 16.0 Texas City 260 225 11.1 ThreeRivers 100 89 13.2 Gulf Coast 1,660 1,284 14.0 Ardmor
Slide 5: Key Market Trends
Key Market Trends U.S. and Canadian crude oil, natural gas, and natural gas liquids (NGLs) production growth is providing cost advantages to North American refiners - Lower crude prices may temporarily constrain production growth rate Global refined products demand growth is expected to continue - E
Slide 6: Production Growth Provides Resource Advantage to North American Refiners
Production Growth Provides Resource Advantage to North American Refiners U.S. Crude Oil Production and U.S. Natural Gas Production MBPD Imports (Bcf/day) 10,500 80 Imports 9,500 Production 75 70 8,500 65 7,500 60 6,500 55 5,500 50 4,500 45 Source:DOE (for 2015, data through March) Source:DOE (for 20
Slide 7: Global Petroleum Demand Projected to Grow
Global Petroleum Demand Projected to Grow Emerging markets in Latin America, Middle East, Africa, and Asia lead demand growth World Petroleum Demand Growth MMBPD 3.5 2.5 1.5 0.5 -0.5 -1.5 U.S. OECD (excl. U.S.) Non-OECD -2.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E Source: Consu
Slide 8: U.S. Is Growing Product Exports Market Share
U.S. Is Growing Product Exports Market Share Refiners in U.S. Gulf Coast are the largest source of products exported to Latin America and countries in the Atlantic Basin U. S. Product Exports By Source U. S. Product Exports By Destination MMBPD 12 Month Moving Average 4.5 MMBPD 4.5 4.0 Other PADD V
Slide 9: Strategy to Enhance Stockholder Returns
Strategy to Enhance Stockholder Returns • Demonstrate commitment to safe and reliable operations Operations • Continuously improve operating performance Excellence • Optimize margins with refining system’s feedstock and product markets flexibility • Disciplined capital allocation Capital Returns to
Slide 10: Persistent Focus Drives Results in Safety, Environmental, and Regulatory Compliance
Persistent Focus Drives Results in Safety, Environmental, and Regulatory Compliance Personnel Safety Tier 1 Process Safety Environmental Events 1.8 0.20 40 20 1.6 Employees Contractors 1.4 Industry (1) 0.15 30 15 1.2 1.0 0.10 20 10 0.8 0.6 0.05 10 5 0.4 0.2 0.00 0 0 0.0 Total Air Emissions (U.S. Ref
Slide 11: Excellent Operating Performance through Continuous Improvements
Excellent Operating Performance through Continuous Improvements • Reliability drives safe and profitable operations 1 st Quartile 2012 Seven of our refineries are first 2010 quartile in mechanical availability 2 nd 2008 Quartile • Initiated new reliability programs and investments beginning mid- 3 r
Slide 12: Investments, Operations Excellence, and Commercial Optimization Drive High Utilization
Investments, Operations Excellence, and Commercial Optimization Drive High Utilization Valero Refinery Utilization Rates System-wide mechanical availability near st1 quartile since 2011 96% 95% 92% 92% 88% 87% 2010 2011 2012 2013 2014 1Q15 Sustained high availability and favorable margin environment
Slide 13: Refining and Logistics Growth Investments Enhance Feedstock Flexibility
Refining and Logistics Growth Investments Enhance Feedstock Flexibility Valero’sGulfCoastRegionQuarterlyFeedstockMix2010– 2015(1) 37% 34% 30% 23% 26% 17% 10% 12% 12% 4% Heavy sour Medium/light sour Sweet Residuals Other feedstocks (1) 2015 through March 31. • Feedstock mix and rates are adjusted to
Slide 14: Capital Allocation Framework Emphasizes Discipline and Stockholder Returns
Capital Allocation Framework Emphasizes Discipline and Stockholder Returns “Non-Discretionary” Sustaining Capex Dividends Debt and Cash • Estimate $1.5 billion or • Focus on sustainability • Maintain investment lower annual “stay-in- • Increase competition grade credit rating business” spend for cas
Slide 15: Increasing Dividends and Stock Buybacks
Increasing Dividends and Stock Buybacks Annual Dividend Per Share • Increased dividend by 45% in $1.20 1Q15 versus 4Q14 $1.00 $0.80 • Regular dividend increases over $0.60 2Q last three years $0.40 $0.20 1Q • Accelerated stock buybacks $0.00 beginning in 2013 2011 2012 2013 2014 2015* *2015 through
Slide 16: Advancing Growth Investments While Managing Capital Spending Lower
Advancing Growth Investments While Managing Capital Spending Lower millions $2,650 $2,400 Logistics Growth $400 $715 Refining, Renewables, & Other $790 Growth(1) $300 Turnarounds & Catalyst $695 $655 Sustaining $765 $730 2015E 2016E (1) Excludes estimated placeholder for methanol project of $150 mil
Slide 17: Logistics Investments Enhance Valero's Feedstock Flexibility and Export Capability
Logistics Investments Enhance Valero’s Feedstock Flexibility and Export Capability Pipelines • Connection to Centurion pipeline in Childress, TX and incremental 40 to 50 MBPD Midland-priced crude as substitute for Cushing-priced crude primarily at the McKee refinery • Expect Diamond Pipeline to supp
Slide 18: Crude Topper Investments Very Attractive
Crude Topper Investments Very Attractive • 160 MBPD new topping capacity Combined Projects Estimates designed to process up to 50 API Total investment (1) $750MM domestic sweet crude Annual EBITDA contribution (2) $500 MM Unlevered IRR on total spend (2) 50% Estimated 55 MBPD low sulfur (1) Excludin
Slide 19: Investments in Natural Gas and NGLs Upgrading
Investments in Natural Gas and NGLs Upgrading • Converts natural gas to incremental distillate via hydrogen • Completed Meraux’s 20 MBPD capacity expansion in 4Q14; Hydrocracker expect approximately $90 million annual EBITDA contribution Expansions at 2014(1) prices on total investment of approx. $2
Slide 20: Sponsored MLP Valero Energy Partners (NYSE:VLP)
Sponsored MLP Valero Energy Partners (NYSE:VLP) • Valero owns entire 2% general partner interest, all incentive Growth-oriented distribution rights, and 69.6% LP interest logistics MLP with • High-quality assets integrated with Valero’s refining system 100% fee-based • Primary vehicle to grow Valero
Slide 21: VLP Delivering Growth
VLP Delivering Growth • 1 st acquisition –Texas Crude Adjusted EBITDA Attributable to VLP (millions) Systems Business in July 2014 for $154 million $200 • 2 nd acquisition –Houston and St. Charles Terminal Services Business in March 2015 for $671 million • Plan to grow VLP’s 4Q15 $95 annualized EBIT
Slide 22: Significant Inventory of Estimated MLP Eligible EBITDA at Valero
Significant Inventory of Estimated MLP Eligible EBITDA at Valero millions $46 $814 $800 ($15) $34 $24 ($75) Dec 2013 July 2014 DropMarch 2015 Drop 2014 -2015 2016 -2017 Diamond Pipeline Current Guidance (1) Guidance (with Down Down Additional Logistics Projects Option base + 2014-2015 Logisitics Pro
Slide 23: Estimated Inventory of Eligible MLP Assets
Estimated Inventory of Eligible MLP Assets Pipelines (1) • Over 1,200 miles of active pipelines • Expect start-up of 440-mile Diamond Pipeline from Cushing to Memphis refinery in 1H17 Racks, Terminals, and Storage (1) • Over 100 million barrels of active shell capacity for crude and products • 139 t
Slide 24: We Believe VLO Is an Excellent Investment
We Believe VLO Is an Excellent Investment • Majority of capacity has access to cost-advantaged crude, natural gas, NGLs, and corn • Proven operations excellence • Emphasis on capital allocation to stockholders • Discipline and rigor in capital projects and M&A selection and execution • Unlocking val
Slide 25: Appendix
Appendix Topic Page Valero 2015 Goals 26 Ethanol Segment 27 Investment Management Process 28 Capital Spending and Investment Details 29 –38 Valero Energy Partners LP 39 –40 Refining Operations Highlights 41 –45 Macro Outlook 46 Estimated Crude Oil Transportation Costs 47 Regional Indicator Margins 4
Slide 26: Key Goals Expected in 2015
Key Goals Expected in 2015 Operations Excellence • Start up Montreal crude terminal with the Enbridge Line 9B reversal and lower Quebec refinery’s crude costs versus Brent compared to 2014 • Grow product export market share and increase branded wholesale fuels volume Capital Returns to Stockholders
Slide 27: Ethanol Investments Have Performed Well
Ethanol Investments Have Performed Well • 11 plants acquired between Cumulative Capex and EBITDA 2Q09 and 1Q14 for $794MM, millions Excellent less than 35% of replacement $2,254 Acquisitions value • 1.3 billion gallons total annual production • $2.3 billion cumulative EBITDA EBITDA generated since O
Slide 28: Gated Investment Management Process
Gated Investment Management Process PHASE 1 PHASE 2 PHASE 3 PHASE 4 APPROVED Opportunity Lead Case Refinement Execution Startup and Evaluation Development • Define project • Detail Evaluate • Identify • Select lead case scope and engineering, • Post-audit back- opportunities and define execution pla
Slide 29: Refining & Renewables Capital Focused on Capturing Benefits of Key Long-Term Trends
Refining& Renewables CapitalFocusedon CapturingBenefitsof KeyLong-Term Trends millions $790 $40 $150 Nat Gas & Petchems $110 Other Projects $300 Hydrocracking $490 $115 Advantaged Crude Processing $105 $30 $50 2015E 2016E • Advantaged crude processing optimizes feedstock flexibility, mainly for ligh
Slide 30: Allocating Significant Growth Capital to Logistics
Allocating Significant Growth Capital to Logistics millions $715 $5 Marine, Docks and Other Logistics Pipelines and Tanks $400 $45 $665 Railcars and Unloading $180 $175 $45 2015E 2016E • Railcars spending declines as receipt of railcars order concludes • Future spending focuses on pipelines 30
Slide 31: McKee Diesel Recovery Improvement and CDU Expansion Startup Expected in 2H15
McKee Diesel Recovery Improvement and CDU Expansion Startup Expected in 2H15 Project Estimates Investment Highlights Total investment $140 MM • Adding 25 MBPD crude unit capacity Annual EBITDA contribution (1) $100 MM and parallel light ends processing train Unlevered IRR on total spend (1) 45% • Ex
Slide 32: Meraux Hydrocracker Conversion Completed December 2014
Meraux Hydrocracker Conversion Completed December 2014 Project Estimates Investment Highlights Total investment $260 MM • Converted hydrotreaterinto high- Annual EBITDA contribution (1) $90 MM pressure hydrocracker and Unlevered IRR on total spend (1) 25% repurposed old FCC gas plant for (1) Estimat
Slide 33: Houston and Corpus Christi Crude Topping Units Expected Online in 1st Half of 2016
Houston and Corpus Christi Crude Topping Units Expected Online in 1st Half of 2016 Houston Corpus Christi Estimates Incremental Volume (MBPD) Estimates Incremental Volume (MBPD) Feeds Feeds Eagle Ford crude 90 Eagle Ford crude 70 Lowsulfur atmos resid (29) Lowsulfur atmosresid (24) Distillate (2) Pr
Slide 34: Diamond Pipeline
Diamond Pipeline Project Estimates Investment Highlights Total investment(1) $484MM • Valero holds option until January 2016 Cumulative spend through 2014 Zero to acquire 50% interest in pipeline (2) Annual EBITDA contribution $46 MM Unlevered pre-tax IRR on total spend at least 12% • Increases Memp
Slide 35: Estimated Key Price Sensitivities on Project Economics
Estimated Key Price Sensitivities on Project Economics McKee Diesel Corpus Change in Estimated (1) Relative to 2014 EBITDA (2) Prices Recovery & CDU Meraux HCU Christi Houston ($millions/year) Expansion Expansion Topper Topper ICE Brent, +$1/bbl none $0.8 $0.4 none ICE Brent – WTI, +$1/bbl $5.5 none
Slide 36: Project Price Set Assumptions
Project Price Set Assumptions Driver ($/bbl) 2014 Average ICE Brent 99.49 ICE Brent W – TI 6.35 ICE Brent L –LS 2.75 USGC CBOB – ICE Brent 3.52 G3 CBOB – WTI 12.27 USGC ULSDICEBrent – 14.25 G3ULSD –WTI 23.88 Naturalgas (Houston Ship Channel, $/mmBtu) 4.34 Naphtha– ICE Brent -0.67 LSVGO–ICE Brent 8.8
Slide 37: Port Arthur and St. Charles Hydrocrackers Performing Better Than Expected
Port Arthur and St. Charles Hydrocrackers Performing Better Than Expected • 120 MBPD of combined new capacity successfully started end of 2012 and mid-2013 • Designed to produce high-quality distillates from low-quality feedstocks and natural gas • Realized annual EBITDA estimated at $800 million fo
Slide 38: Port Arthur and St. Charles Hydrocrackers Performance Details
Port Arthur and St. Charles Hydrocrackers Performance Details Benefits Realized in Reported Results Trailing 4 Quarters $mm, except /bbl amounts 4Q12 3Q14 Increase Gulf Coast Capture Rate 58.8% 63.2% 4.4% x Gulf Coast Indicator/bbl, trailing 4Q 3Q14 $19 = Extra margin captured/bbl $0.83 x Gulf Coast
Slide 39: Drop Down of Houston and St. Charles Terminal Services Business to VLP
Drop Down of Houston and St. Charles Terminal Services Business to VLP Operations Financing • Crude oil, intermediates, and refined • $671 million transaction closed on petroleum product terminaling services March 1, 2015 in Houston, Texas and Norco, Louisiana • $411 million in cash to VLO 3.6 milli
Slide 40: Valero's GP Interest in VLP Nearing the "High Splits"
Valero’s GP Interest in VLP Nearing the “High Splits” Marginal Percentage Interest in Distributions Target Quarterly Distribution per Unit Unitholders GP Minimum quarterly $0.2125 98% 2% First target above $0.2125 up to $0.244375 98% 2% Second target above $0.244375 up to $0.265625 85% 15% Third tar
Slide 41: Valero Is Currently Utilizing 82 Percent of Its Available Light Crude Capacity in North America
Valero Is Currently Utilizing 82 Percent of It’s Available Light Crude Capacity in North America MBPD McKee Crude Unit Expansion • 25 MBPD additional capacity expected in 2H15 • Distillate recovery improvements Houston Crude Topper 1,410 • 90 MBPD capacity expected 1H16 1,220 • Displaces 30 MBPD int
Slide 42: Valero Leads Peers in Total Location-Advantaged Crude Capacity
Valero Leads Peers in Total Location-Advantaged Crude Capacity MBPD 1,948 1,731 Eastern Canada U.S. Gulf Coast 1,230 U.S. Midcontinent 443 129 VLO MPC PSX HFC TSO Source: Company 10-Ks and IR slides. Crude distillation capacity based on geographic location. Access to lower cost North American crude
Slide 43: Expect Quebec City Refinery to Have Cost-Advantaged Access to 100% North American Crude in 2015
Expect Quebec City Refinery to Have Cost-Advantaged Access to 100% North American Crude in 2015 Quebec City Refinery Crude Slate 100% 80% Foreign 60% Imports 40% North American 20% 0% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 Shifted to cost-advantaged crudes via rail and foreign flagged ships fr
Slide 44: U.S. Natural Gas Provides Opex and Feedstock Cost Advantages
U.S. Natural Gas Provides Opex and Feedstock Cost Advantages • Our refining operations consume approximately 864,000 mmBtu/day of natural gas, split almost equally between operating expense and cost of goods sold • Significant annual pre-tax cost savings compared to refiners in Europe or Asia • Pric
Slide 45: Capacity to Export Additional Product
Capacity to Export Additional Product Export markets pull volume from Valero’s U.S. Product Exports (MBPD) U.S., enabling high refinery 700 utilization and improved margins 600 Gasoline Diesel Supported by global refined 500 products demand growth 412 400 Logistics investments also support 300 segre
Slide 46: Long-Term Macro Market Expectations
Long-Term Macro Market Expectations • Economic activity and total petroleum demand increases • Transportation fuels demand grows Global Outlook • Refining capacity growth slows after 2015; utilization stabilizes then expected to increase • Refinery rationalization pressure continues in Europe, Japan
Slide 47: Estimated Crude Oil Transportation Costs
Estimated Crude Oil Transportation Costs Alberta to Eastern Canada Rail $11 to $12/bbl Rail $9/bbl Alberta to Bakken $1 to $2/bbl U.S. Ship Bakken $4 to USGC to Canada $5/bbl Foreign Ship $2/bbl to West Coast to USEC Rail $13 to $15/bbl Rail $12 to to Cushing $15/bbl Brent to Rail USEC $9/bbl $2/bbl
Slide 48: Regional Indicator Margins Defined
Regional Indicator Margins Defined • GulfCoastIndicator:(GCColonial85 CBOBA grade- LLS)x 60%+ (GCULSD10ppm ColonialPipelineprompt - LLS)x 40%+ (LLS- MayaFormulaPricing)x 40%+ (LLS- Mars Month 1) x 40% • MidcontinentIndicator:[(Group3 CBOBprompt - WTIMonth 1) x 60%+ (Group3 ULSD 10ppm promptWTI - Mon
Slide 49: World Refinery Capacity Growth
World Refinery Capacity Growth • New capacity additions expected in Asia and the Middle East • Announced new capacity in Latin America likely to be smaller and start later than planned • Capacity rationalization expected to continue in Europe Estimated Net Global Refinery Crude Distillation Addition
Slide 50: Capacity Rationalization in Atlantic Basin
Capacity Rationalization in Atlantic Basin • Marginal refiners continue to rationalize capacity • Closures in the last few years have been focused in Japan, Australia, and Europe MPBD Annual Global CDU Capacity MBPD Cumulative Global CDU Capacity 1,800 Closures 7,000 Closures 1,600 6,000 1,400 Rest
Slide 51: Global Refining Capacity Rationalization
Global Refining Capacity Rationalization CDU Capacity Year CDU Capacity Year Location Owner Closed (MBPD) Closed Location Owner Closed (MBPD) Closed Perth Amboy, NJ Chevron 80 2008 Rome, Italy Total/Erg 88 2012 Bakersfield, CA Big West 65 2008 Fawley, U.K.* ExxonMobil 80 2012 Ingolstadt, Germany* Ba
Slide 52: U.S. Refining Capacity Is Globally Competitive and Continues to Take Market Share
U.S. Refining Capacity Is Globally Competitive and Continues to Take Market Share • U.S. flipped from importer to exporter on lower local product demand and higher refinery utilization, particularly in PADDS 2, 3, and 4, driven by structural cost advantages for crude oil and natural gas • Gulf Coast
Slide 53: Increase in U.S. Gasoline Exports
Increase in U.S. Gasoline Exports 800 12 Month Moving Average, MBPD 700 Other Europe 600 Other Latin America 500 Mexico Canada 400 Latest 4 Wk avg estimate (Finished only) 300 200 100 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Note: Gasoline represents all finished gasoline plus all bl
Slide 54: Increase in U.S. Diesel Exports
Increase in U.S. Diesel Exports 1400 12 Month Moving Average, MBPD 1200 Other 1000 Europe Other Latin America 800 Mexico Canada 600 Latest 4 Wk avg estimate 400 200 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: DOE Petroleum Supply Monthly with data through March 2015. 4 Week Aver
Slide 55: U.S. Shifted to Net Exporter
U.S. Shifted to Net Exporter • Net refined products exports increased from 335 MBPD in 2010 to 2,399 MBPD in 2015 • Diesel net exports averaged 919 MBPD in 2014; 666 MBPD in 2015 (Jan-Mar) • Gasolinenet exportsaveraged66 MBPDin 2014;145MBPDin 2015(Jan– Mar) • Gasoline and blendstocks have shifted to
Slide 56: U.S. Transport Indicators
U.S. Transport Indicators U.S. VMT Growth vs. Gasoline Demand Growth Airline Traffic Indicators U.S. Gasoline Demand Growth 3.0 90% 7.0% U.S. VMT Growth International Domestic Load Factor U.S. Gasoline Demand Growth 12MMA 5.0% U.S. VMT Growth 12MMA 2.5 85% 3.0% 1.0% 2.0 80% -1.0% 1.5 75% -3.0% Sourc
Slide 57: U.S. Transport Indicators: Trucking
U.S. Transport Indicators: Trucking ATA Seasonally Adj Truck Tonnage Index ATA Non-Seasonally Adj Truck Tonnage Index 140 145 Current Year Current Year 135 12-Mth Moving Avg 12-Mth Moving Avg 135 130 125 125 120 115 115 110 105 105 95 100 Data Through Apr15 - Data Through Apr15 - 85 95 Source: ATA S
Slide 58: Mexico Statistics
Mexico Statistics Crude Unit Throughput (MBPD) Crude Unit Utilization 1,400 90% 1,350 85% 1,300 80% 1,250 1,200 75% 1,150 70% 1,100 65% 1,050 1,000 60% 950 55% 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 Diesel Gross Imports (MBPD) Gasoline Gross Imports (MBPD) 550 200 180 500 160 45
Slide 59: Non-GAAP Reconciliations
Non-GAAP Reconciliations Reconciliation of VLO Ethanol Operating Income to EBITDA Ethanol (millions) 2Q09 –4Q09 2010 2011 2012 2013 2014 1Q15 Cumulative Operating income $165 $209 $396 $(47) $491 $786 $12 $2,012 + Depreciation and amortizationexpense $18 $36 $39 $42 $45 $49 $13 $242 = EBITDA $183 $2
Slide 60: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: John Locke Executive Director, Investor Relations 210-345-3077 john.locke@valero.com Karen Ngo Manager, Investor Relations 210-345-4574 karen.ngo@valero.com 60