Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (March 2020)
42 slides from Valero Energy's investor presentation, Mar 2, 2020
Slide 1: Investor Presentation March 2020
Investor Presentation March 2020 Exhibit 99.01
Slide 2: Disclaimers
Disclaimers This presentation contains forward-looking statements made by Valero Energy Corporation (“VLO” or “Valero”) within the meaning of federal securities laws. These statements discuss future expectations, contain projections of results of operations or of financial condition or state other f
Slide 3: Who We Are
Who We Are (NYSE: VLO) Refining Premier assets and low cost operations 15 refineries, 3.2 million barrels per day (BPD) of high-complexity capacity Logistics assets, including approximately 3,100 miles of active pipelines, 130 million barrels of storage and over 50 docks Fuels marketing and distribu
Slide 4: Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent
4 Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent UNITED STATES WHOLESALE MARKETING PRESENCE VALERO ETHANOL PLANTS VALERO REFINERIES BRANDED WHOLESALE PRESENCE VALERO TERMINALS DIAMOND GREEN DIESEL PIPELINES PERU LIMA PEMBROKE LONDON UNITED KINGDOM IRELAND CANADA BENICIA WILMINGTON M
Slide 5: Demonstrated Strategy for Value Creation
Demonstrated Strategy for Value Creation Proven history of operations excellence: Safe, reliable, environmentally responsible operations have driven higher profitability and lower volatility through multiple commodity cycles The lowest cash operating costs among peer group Visibility to earnings gro
Slide 6: Disciplined Capital Management is a Constant in Our Strategy
Disciplined Capital Management is a Constant in Our Strategy Maintain Strong Balance Sheet (1) Targeted debt-to-cap ratio based on total debt reduced by $2 billion of cash. (2) Peer group includes PSX, MPC, HFC, and PBF. (3) Payout ratio is the sum of dividends and stock buybacks divided by adjusted
Slide 7: Demonstrated Discipline in Capital Allocation
Growth 40% Sustaining 60% Estimated Total Capex $2.5 Billion for 2020 Demonstrated Discipline in Capital Allocation $0.8 $1.1 $1.2 $1.4 $1.5 $1.6 $1.5 $1.2 $1.4 $1.4 $1.3 $1.9 $1.7 $1.8 $1.3 $1.6 $1.0 $0.6 $1.0 $0.7 $0.9 $0.3 $0.9 $1.3 $2.8 $1.3 $1.4 $1.7 $0.8 $0.4 $0.5 $0.6 2012 2013 2014 2015 2016
Slide 8: Delivering on our Commitment of Cash Returns to Stockholders
$0.30 $0.65 $0.85 $1.05 $1.70 $2.40 $2.80 $3.20 $3.60 $3.92 570 million shares 98% 96% 93% 88% 81% 78% 75% 414 million shares 73% Annual Dividend Per Share and Weighted Average Shares Outstanding as a Percentage Relative to 2011 Dividend/shareWASO Delivering on our Commitment of Cash Returns to Stoc
Slide 9: Safety and Reliability are Imperative for Profitability
Safety and Reliability are Imperative for Profitability 0.25 0.39 0.90 0.40 Total Recordable Incident Rate (TRIR) Personnel Safety EmployeesContractors Industry 0.19 0.07 Process Safety Event Rate Tier 1 Process Safety (Three-year rolling averages) 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
Slide 10: Increased Refinery Availability Has Driven Valero to be the Lowest Cost Producer
$3.00 $6.50 2010 2013 2016 2019 Refining Cash Operating Expenses Per Barrel of Throughput (Excludes Turnaround and D&A Expenses) Peer Range Peer group includes PSX, MPC, HFC, and PBF. Increased Refinery Availability Has Driven Valero to be the Lowest Cost Producer See slide 22 for notes regarding th
Slide 11: Advantaged Crude Supply in the U.S. Gulf Coast
Advantaged Crude Supply in the U.S. Gulf Coast 1,484 1,149 779 190 57% 38% 36% 19% 0 VLOMPCPSXPBFHFC Valero’s refineries have operational flexibility to process a wide range of feedstocks and access to a deep pool of skilled labor in the U.S. Gulf Coast. (1) CDU capacity from EIA data and company pr
Slide 12: Our Portfolio Facilitates Global Optimization of Product Exports
12 Our Portfolio Facilitates Global Optimization of Product Exports See slide 22 for notes regarding this slide. Distillate volumes include diesel, jet fuel and ULSK. 423 108 538 335 227 928 505 1,083 545 GasolineDistillate Distillate Gasoline Product shortages in Latin America, Eastern Canada, Euro
Slide 13: Visibility to Growth with a Steady Pipeline of High Return Projects
Visibility to Growth with a Steady Pipeline of High Return Projects Expect to spend approximately $1 billion annually on growth investments Approximately $350 MM of incremental EBITDA in 2019 from completed projects −Diamond Green Diesel expansion, Houston alkylation unit, Sunrise Pipeline and other
Slide 14: Investing to Improve Margins and Light Product Yields
Investing to Improve Margins and Light Product Yields $975 MM anticipated cost for 55 MBPD delayed coker and sulfur recovery unit, with expected startup in 2022 Creates two independent CDU-VDU-coker trains, which should improve turnaround efficiency and reduce maintenance-related lost margin opportu
Slide 15: Investing to Increase Renewable Diesel Production
Independent parallel renewable diesel plant and renewable naphtha finishing facility adjacent to existing St. Charles plant is expected to be completed in 2021 Expect increase in annual renewable diesel production capacity by 400 million gallons per year and enables recovery of renewable naphtha Com
Slide 16: Ethanol Operations
39 53 51 63 72 87 76 40 55 54 76 13 91 19 112 25 95 19 2017 2018 2019* U.S. Fuel Ethanol Exports (MBPD) Rest of IndustryValero Ethanol Operations 14 plants with 1.73 billion gallons annual production capacity Dry mill production process, where corn is ground into flour and mixed with water before fe
Slide 17: Valero is Well Positioned for IMO 2020
Valero is Well Positioned for IMO 2020 Expected Impacts to Crude and Products Sour crude oil and resid discounts are expected to widen as low complexity refineries switch to sweeter crude and feedstocks to reduce high sulfur fuel oil production Diesel demand and cracks are expected to increase as so
Slide 18: Delivered Solid Earnings and Free Cash Flow Even in a Low Margin Environment
$1,844 $4.62 2016 results are not a representation of management’s expectations for 2020. See slide 22 for notes regarding this slide. Peer group includes PSX, MPC, HFC, and PBF. See slides 37 – 41 for non-GAAP disclosures. Refining EBITDA Per Barrel of Throughput BETTER $3.72 Delivered Solid Earnin
Slide 19: Demonstrated Lower Volatility in Earnings and Free Cash Flow
Demonstrated Lower Volatility in Earnings and Free Cash Flow Volatility 2012 – 2019 Free Cash Flow BETTER Peer Range Valero has demonstrated lower volatility in earnings and free cash flow than refining and diversified peers, while delivering higher total stockholder return. See slide 22 for notes r
Slide 20: We Believe Valero is a Compelling Investment
We Believe Valero is a Compelling Investment 5.5% 14% 76% 1.3x 5.0x Consensus EBITDA CAGR 2019-2021 Dividend Yield TSR Since 2014(1) EV / 2020 EBITDA(3) Net Debt to TTM Adjusted EBITDA(2) VLO Percent Rank Versus S&P 500 Constituents Premier asset portfolio and operations Managed risks Proven operati
Slide 21: Appendix Contents
Appendix Contents Topic Pages Notes 22 Guidance 23 Environmental, Social and Governance (ESG) 24 Macro Environment Themes 25 Logistics Investments to Improve Feedstock Flexibility, Cost & Crude Quality 26 Valero Logistics Assets 27 Investing to Grow Product Placement into Higher Netback Markets 28 P
Slide 22: Notes Slide
Notes Slide 9 Contractor total recordable incident rate from U.S. Bureau of Labor Statistics. Tier 1 three-year rolling averages of process safety events per 20,000 work hours. Tier 1 defined within API Recommended Practice 754. Industry benchmarking and Valero’s performance statistics from Solomon
Slide 23: VLO Guidance
VLO Guidance 1Q20(1) Throughput (MBPD) U.S. Gulf Coast U.S. Mid-Continent North Atlantic U.S. West Coast 1,630 to 1,680 410 to 430 470 to 490 230 to 250 $4.15 Refining cash operating expense per barrel of throughput Ethanol Production (millions of gallons per day) Operating expense per gallon of pro
Slide 24: Environmental, Social and Governance (ESG)
Largest renewable fuels producer in North America Significant investment in renewable fuels of $2.6 billion(1) An industry safety leader Record low environmental events driven by improvements in process safety and reliability with growing throughput capacity 21% reduction in refining GHG emissions s
Slide 25: Supportive Macro Environment Expected
FEEDSTOCK SUPPLY Abundant and growing supply of crude oil and natural gas Expanding North American logistics capacity continues to add efficiency to crude oil movements, particularly in the U.S. Gulf Coast Supportive Macro Environment Expected PRODUCT DEMAND Macro environment themes represent indust
Slide 26: Logistics Investments to Improve Feedstock Flexibility, Cost and Crude Quality
Logistics Investments to Improve Feedstock Flexibility, Cost and Crude Quality Competitive Supply in the Mid-Continent Taking Advantage of Increasing Permian Production with Investments in Corpus Christi Crude Supply Flexibility for Quebec Jean-Gaulin (Quebec City) Montreal East Terminal Enbridge Li
Slide 27: Valero Logistics Assets
Valero Logistics Assets Racks, Terminals and Storage(1) Approximately 130 million barrels of active shell capacity for crude oil and products Over 200 truck rack bays Rail Approximately 5,250 purchased railcars Expected to serve long-term needs of ethanol, asphalt, aromatics, and other products Pipe
Slide 28: Investing to Grow Product Placement into Higher Netback Markets
'09 '11 '13 '15 '17 '19 Other Europe Canada Other Latin America Mexico Investing to Grow Product Placement into Higher Netback Markets U.S. Product Exports 12 Month Moving Average (MBPD) 86% Advantaged Refineries and Logistics Expansion of supply chain to high demand growth markets provides ratable
Slide 29: Project Price Set Assumptions
Project Price Set Assumptions Driver ($/bbl) 2018 Average(1) ICE Brent 71.56 ICE Brent – WCS Houston 9.41 HSVGO – ICE Brent 6.03 3.5%S Fuel Oil – ICE Brent (10.39) USGC CBOB – ICE Brent 4.85 USGC ULSD – ICE Brent 14.05 Naphtha – ICE Brent (1.38) LPG – ICE Brent (34.77) $200 100 200 0 2014 2015 2016
Slide 30: Investing to Improve Margins: Alkylation Units
Investing to Improve Margins Octane demand expected to grow due to Tier 3 sulfur regulations and CAFE standards Abundant, low cost North American NGL supply provides advantage for Gulf Coast capacity additions Both units upgrade low value isobutane and amylenes into high value alkylate –High octane,
Slide 31: Investing to Improve Access to North American Crude and Refinery Operating Cost Structure
Investing to Improve Access to North American Crude and Refinery Operating Cost Structure Diamond 200 MBPD capacity connecting Memphis to Cushing ($460 MM cost(1)), and Sunrise 100 MBPD undivided interest connecting Midland to Wichita Falls ($135 MM cost(1)) 200 MBPD expansion and extension of Diamo
Slide 32: Investing to Improve Margins, Product Export Capability and Biofuels Blending
Investing to Improve Margins, Product Export Capability and Biofuels Blending (1) Valero owns ~70 mile pipeline from Hearne to Williamson County and 40% undivided interest in 135 mile pipeline from Houston to Hearne. Extending Product Supply Chain in Central Texas and the U.S. Gulf Coast Central Tex
Slide 33: Our Refining Capacity and Nelson Complexity
Our Refining Capacity and Nelson Complexity Refinery Capacities (MBPD)(1) Nelson Complexity Index Throughput Crude Corpus Christi(2) 370 290 14.4 Houston 255 205 8.0 Meraux 135 125 9.7 Port Arthur 395 335 12.7 St. Charles 340 215 16.1 Texas City 260 225 11.1 Three Rivers 100 89 13.2 U.S. Gulf Coast
Slide 34: U.S. Natural Gas Provides Opex and Feedstock Cost Advantages
U.S. Natural Gas Provides Opex and Feedstock Cost Advantages $2.53/mmBtu $0.79/bbl throughput $4.85/mmBtu $1.51/bbl throughput U.S.Europe 2019 average natural gas prices for U.S. and Europe. Estimated cost is derived using 920,000 mmBtu/day of natural gas consumption and a throughput of 3.0 MMBPD (1
Slide 35: Total Stockholder Return
-100 185 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 % Total Stockholder Return XLE RangeVLO VLO Dow Jones Index S&P 500 Index XLE XLE Constituents Min +76% +71% +68% -27% -71% Outperformed the Dow Jones Index, the S&P 500 Index and the XLE Index(1) on TSR Since 2014 History of energy sector and broader mark
Slide 36: A Shift In Refining Valuation
Range bound industry wide EV/EBITDA multiple +/- 4.5x Peer group fragmented with smaller scale, less efficient refiners U.S. importing products to meet domestic product shortage Stock prices driven by seasonal refining trading cycles Higher interest rates (10-yr Treasury ~5 percent) VALERO Marginal
Slide 37: Non-GAAP Disclosures
Non-GAAP Disclosures Adjusted EBITDA and Net Debt-to-Adjusted EBITDA VLO defines EBITDA as net income before income tax expense, interest and debt expense, net of capitalized interest, and depreciation and amortization expense. VLO defines net debt-to-adjusted EBITDA as the ratio of total debt, net
Slide 38: Non-GAAP Disclosures (continued)
Non-GAAP Disclosures (continued) Adjusted Earnings Per Common Share – assuming dilution VLO defines adjusted earnings per common share – assuming dilution as earnings per common share – assuming dilution excluding the lower of cost or market inventory valuation adjustment and its related income tax
Slide 39: Non-GAAP Disclosures: Adjusted EBITDA and Net Debt-to-Adjusted EBITDA
Non-GAAP Disclosures: Adjusted EBITDA and Net Debt-to-Adjusted EBITDA RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND NET DEBT-TO-ADJUSTED EBITDA (Unaudited, in Millions, Except Ratio Amount) Year Ended December 31, 2019 Net income $2,784 Less: Deferred turnaround and catalyst cost expenditures
Slide 40: Non-GAAP Disclosures: Refining EBITDA Per Barrel of Throughput
Non-GAAP Disclosures: Refining EBITDA Per Barrel of Throughput RECONCILIATION OF REFINING EBITDA PER BARREL OF THROUGHPUT (Unaudited, in Millions, Except Per Barrel Amount) Year Ended Dec 31, 2016 Refining operating income $3,730 Plus: Operating expenses (excluding depreciation and amortization expe
Slide 41: Non-GAAP Disclosures: Adjusted Earnings Per Share and Free Cash Flow
Non-GAAP Disclosures: Adjusted Earnings Per Share and Free Cash Flow RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES UNDER GAAP TO FREE CASH FLOW (Unaudited, in Millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 Net cash provided by operating activities $5,270 $5,5
Slide 42: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: Homer Bhullar Vice President, Investor Relations 210.345.1982 Homer.Bhullar@Valero.com Eric Herbort Senior Manager, Investor Relations 210.345.3331 Eric.Herbort@Valero.com Gautam Srivastava Manager, Investor Relations 210.345.3992 Gau