Valero Energy Corporation · NYSE:VLO
Valero Energy — Howard Weil 39th Annual Energy Conference 2011
52 slides from Valero Energy's conference presentation, Mar 28, 2011
Slide 1: Howard Weil 39th Annual Energy Conference
Howard Weil 39th Annual Energy Conference March 27 - 28, 2011
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: Valero Energy Overview
Valero Energy Overview World's largest independent refiner 14 refineries 2.6 million barrels per day (BPD) of throughput capacity Average refinery throughput capacity of 185,000 BPD One of the nation's largest fuel retailers with approximately 5,800 branded marketing sites One of the largest ethanol
Slide 4: Acquisition of Chevron's Pembroke Refinery, Marketing and Logistics Assets in the U.K. and Ireland
Acquisition of Chevron's Pembroke Refinery, Marketing and Logistics Assets in the U.K. and Ireland Valero has agreed to acquire Chevron's Pembroke refinery, marketing and logistics assets in the United Kingdom and Ireland for $730 million 270,000 barrels-per-day refinery with estimated value of $480
Slide 5: Strategic Rationale: Competitive, high-quality assets
Strategic Rationale Competitive, high-quality assets One of the largest, most complex refineries in Western Europe Refinery was profitable and cash flow positive in 2009 Well-maintained refinery with cash-operating-costs-per barrel 25% below Valero's 2010 average Largest branded dealer site network
Slide 6: Strategic Rationale: EPS accretion creates shareholder value
Strategic Rationale EPS accretion creates shareholder value Valero estimates earnings accretion of $0.26/share with 2010 market prices and $0.30/share with 2011 forward curve prices Valero estimates $10 to $20 million of annual operating synergies, primarily in trading and optimization Consistent wi
Slide 7: Geographically Diverse Operations
Geographically Diverse Operations 7 Refinery Capacities (000 bpd) Capacities (000 bpd) Nelson Index Refinery Total Through-put Crude Oil Nelson Index Aruba 235 235 8.0 Ardmore 90 86 12.0 Benicia 170 145 15.0 Corpus Chris. 325 205 20.6 Houston 160 90 15.1 McKee 170 168 9.5 Memphis 195 180 7.5 Port Ar
Slide 8: Continued Global Demand Growth Important to Refining Margins
(CHART) Continued Global Demand Growth Important to Refining Margins Refining is a global business - global demand growth matters to refiners everywhere Strong growth in emerging markets is leading the surge in global petroleum demand estimated at 2.6 million BPD in 2010 8 Source: Consultant and Val
Slide 9: Simple Refining Margins Bottomed in 2009, Recovery Started in 2010
Simple Refining Margins Bottomed in 2009, Recovery Started in 2010 9 Gulf Coast LLS Margins Margins improving from strong global demand, particularly in emerging markets, and capacity rationalization Cold weather and restocking from 4Q10 French strike in OECD countries helped distillate demand and m
Slide 10: Strong Demand for Waterborne Light-Sweet Crude Oils Creating Large Feedstock Discounts
Strong Demand for Waterborne Light-Sweet Crude Oils Creating Large Feedstock Discounts 10 (CHART) $/barrel Source: Argus; 2011 year-to-date through March 21
Slide 11: Strong Demand for Waterborne Light-Sweet Crude Oils Creating Large Feedstock Discounts
Strong Demand for Waterborne Light-Sweet Crude Oils Creating Large Feedstock Discounts 11 Light-sweet waterborne crude oils are the marginal feedstock in strong demand Examples: LLS, Brent, among others Lower-quality and logistically constrained crude oils seeing wide discounts Maya, WTI, Mars, ANS
Slide 12: Valero Has Significant Leverage to Lower-cost Feedstocks and Wider Throughput Margins
Valero Has Significant Leverage to Lower-cost Feedstocks and Wider Throughput Margins 12 12 Gulf Coast 62% (1,600 mbpd) Mid-Con 17% (455 mbpd) West Coast 12% (305 mbpd) Northeast (Canada) 9% (235 mbpd) Throughput Capacity (CHART) Maya/Mars Heavy Sour Coking WTI Cracking ANS Medium Sour Coking Brent
Slide 13: Mid-Con Margins Leading the Recovery
Mid-Con Margins Leading the Recovery Mid-Con Margins Leading the Recovery 13 Source: Argus; 2011 year-to-date through March 21; see Appendix for details on refinery configuration assumptions
Slide 14: Valero's Gulf Coast System Well-Positioned for Global Export Opportunities
Valero's Gulf Coast System Well-Positioned for Global Export Opportunities 14 Our large, complex refineries on Gulf Coast are competitive due to low-cost operations and feedstocks Structural supply-demand imbalance in Latin America and diesel-shortage in Europe provide higher-margin export opportuni
Slide 15: Rationalization of Industry Capacity Continues
(CHART) (CHART) Rationalization of Industry Capacity Continues Source: Valero Energy Note: 2011 and 2012 estimates include announced future capacity closures MBPD 15 Source: Valero Energy MBPD As we said previously, refining capacity continues to shut down in the industry, particularly marginal plan
Slide 16: Valero's Strategic Priorities
Valero's Strategic Priorities 16 Manage overhead and maintain investment grade credit rating Improve margin capture, operating costs, and reliability at refineries Complete major, value-added capital projects at key refineries Optimize portfolio - continue "high-grading" strategy of the last several
Slide 17: Achieving Significant Cost Reductions
Achieving Significant Cost Reductions 17 (CHART) (CHART) Since beginning of 2007, we have achieved $620 million in pre-tax cost savings In 2011, targeting another $100 million in pre-tax cost savings
Slide 18: Continuing to Make Our Refineries More Competitive
Continuing to Make Our Refineries More Competitive 18 1st Quartile Industry Rank 2nd Quartile 1st Quartile Industry Rank 2nd Quartile Industry benchmarking survey shows Valero is continuing to improve on its competitive, low-cost operations 2010 was Valero's best companywide performance in five year
Slide 19: Continuing to Make Our Refineries More Competitive
Continuing to Make Our Refineries More Competitive 19 1st Quartile Industry Rank 2nd Quartile 1st Quartile 2nd Quartile Our goal is to be a 1st-quartile refiner in industry benchmark surveys Expect big reliability improvement after major 1Q11 turnarounds, particularly for Port Arthur coke drums and
Slide 20: Strong Contribution from Retail
Strong Contribution from Retail (CHART) Retail Performance (Trailing 4Q Avg.) (U.S. and Canada) 20 In 2010, retail had best 1st and 2nd quarters and 2nd best year in Valero history Improvement in retail earnings with smaller asset base = better returns Since 2005, more than doubled total operating i
Slide 21: Strong Contribution from Ethanol
Strong Contribution from Ethanol 21 Large, efficient plants in great location have competitive advantage on costs Acquired world-class ethanol plants at an average of 35% of replacement cost In less than 2 years, cumulative operating income less depr. & amort. expense (EBITDA) was $427 million, or 5
Slide 22: Adding to Financial Strength
(CHART) (CHART) Adding to Financial Strength Investment grade credit rating Ended 4Q10 with $3.3 billion of cash and nearly $4 billion of additional liquidity Net debt-to-cap ratio at 12/31/10 was 25%, far below credit facility covenant of 60% No other coverage-type ratios or borrowings on bank revo
Slide 23: Shifting Capital Spending to Economic Growth Projects
Shifting Capital Spending to Economic Growth Projects 23 "Stay-in- business" spending 2011 estimated Regulatory spending estimated to decline as Benicia scrubber and MSAT2 projects were completed in 2010 There are potential benefits of a recently passed tax law allowing 100% deduction on capital pro
Slide 24: Economic Growth Projects Mainly Geared Toward High Oil/Low Natural Gas Prices
Economic Growth Projects Mainly Geared Toward High Oil/Low Natural Gas Prices Potential for significant earnings power and project returns Projects developed based on our "bullish crude, bearish natural gas" price outlook These projects represent over 75% of strategic capital spending in 2010 and 90
Slide 25: Why Invest in Valero Today?
Why Invest in Valero Today? 25
Slide 26: Appendix
Wy - VALERO Appendix
Slide 27: Impact of Cost Savings Programs
Impact of Cost Savings Programs Impact of Cost Savings Programs 27 Ongoing cost savings programs have contributed to Valero's competitiveness and improved financial performance millions (CHART)
Slide 28: Valero Has Competitive, Low-Cost Refining Operations
Valero Has Competitive, Low-Cost Refining Operations 28 Refining Cash Operating Expenses less Natural Gas Usage ($/bbl) Source: Macquarie Capital (CHART)
Slide 29: Valero Has High Conversion Refining System
Valero Has High Conversion Refining System Valero Has High Conversion Refining System 29 Note: CDU = crude distillation unit; conversion capacity is the sum of each company's FCC, hydrocracking, and coking capacity Source: PIRA Energy Group 12/16/10 (CHART) We believe size and conversion ratio matte
Slide 30: Memphis FCC Revamp Project
Memphis FCC Revamp Project Investment Highlights Favorable economics driven by better reliability and gains on margin and volume Improves flexibility to run lower- quality feedstocks Improves FCC reliability and increases run length between turnarounds to four years from 1.5 years Increase in run le
Slide 31: St. Charles MSCC to FCC Conversion Project
St. Charles MSCC to FCC Conversion Project Investment Highlights Favorable economics driven by better reliability and gains on margin and volume Improves FCC reliability and increases run length between turnarounds to four years from 1.5 years Adds 5%+ volume expansion through FCC Improves energy ef
Slide 32: Hydrogen Plant Projects
Hydrogen Plant Projects 32 Summary of Project Status and Economics1 Summary of Project Status and Economics1 Summary of Project Status and Economics1 Estimated completion date 1Q12 1Q12 Estimated total investment (mil.) $180 $180 Cumulative spend thru 4Q10 (mil.) $25 $25 Incremental Operating Income
Slide 33: Port Arthur Hydrocracker Project
Port Arthur Hydrocracker Project Investment Highlights Favorable economics driven by margin and volume gains Main unit is 50,000 barrels/day hydrocracker plus facilities to process over 150,000 barrels/day of high-acid, heavy sour Canadian crude Creates high-value products from low- value feedstocks
Slide 34: Montreal Pipeline Project
Montreal Pipeline Project Investment Highlights Favorable economics driven by reducing transportation costs and growing volumes New pipeline with 100,000 barrels/day of throughput capacity Planned closure of Shell Montreal refinery allows Valero to place additional products into Montreal and Ontario
Slide 35: St. Charles Hydrocracker Project
St. Charles Hydrocracker Project Investment Highlights Favorable economics driven by margin and volume gains Main unit is 50,000 barrels/day hydrocracker Creates high-value products from low- value feedstocks plus hydrogen sourced from relatively inexpensive natural gas Unit has volume expansion of
Slide 36: Project Price Set Assumptions
Project Price Set Assumptions 36 Commodity Base Case($/barrel) 2011 Fwd Curve as of 3/22/11 ($/barrel) WTI 85.00 101.91 WTI - USGC HS Gas Oil -3.45 -13.00 USGC Gas Crack 6.00 14.50 USGC ULSD Crack 11.00 25.18 Natural Gas, $/MMBTU (HHV) 5.00 4.35 Prices shown below are for illustrating a potential es
Slide 37: Project Price Sensitivities
Project Price Sensitivities 37 Operating Income before D&A1 Sensitivities (Delta $ millions/year) Port Arthur HCU St. Charles HCU Memphis & McKee Hydrogen Plants Memphis FCC St. Charles FCC Montreal Products Pipeline WTI, + $1/BBL 3.5 3 2.5 0.4 1.2 N/A WTI - USGC HS Gas Oil, + $1/BBL 14.1 14.1 N/A N
Slide 38: Global CDU Capacity and Additions
38 Source: Valero and Consultant Estimates MMBPD (CHART) Global CDU Capacity and Additions Gross Adds 1.7 MMBPD Closures 0.7 MMBPD Gross Adds 1.8 MMBPD Closures 0.1 MMBPD Gross Adds 1.6 MMBPD Closures 0.4 MMBPD
Slide 39: Continued Global Demand Growth Important to Refining Margins
(CHART) (CHART) Continued Global Demand Growth Important to Refining Margins 39 Source: Consultant and Valero estimates Source: Consultant and Valero estimates MMBPD MMBPD Forecast Forecast
Slide 40: Global Refining Capacity Rationalization
*Partial closure of refinery captured in capacity Note: This data represents refineries currently closed, ownership may choose to restart or sell listed refinery Sources: Industry and Consultant reports and Valero estimates Global Refining Capacity Rationalization 2008 Limited refinery closures, beg
Slide 41: Global Refining Capacity For Sale or Under Strategic Review
Global Refining Capacity For Sale or Under Strategic Review 41 Location Owner CDU Capacity (MBPD) Stanlow, UK Shell 267 Gothenburg, Sweden Shell 80 Kapolei, HI Chevron 54 Pembroke, UK Chevron 210 Meraux, LA Murphy 125 Superior, WI Murphy 35 Milford Haven, UK Murphy 108 Lindsey, UK Total 221 Whitegat
Slide 42: Global Spare Refining Capacity
Note: Availability of world CDU capacity assumed to average ~94%; Historical CDU capacity data from the DOE; USGC 5/3/2 = 3*USGC Gasoline+2*USGC ULSD-5*WTI Estimated global spare refining capacity fell from 7 million BPD of at end of 2009 to 5.7 million BPD at end of 2010 (CHART) MMBPD Margin/bbl Go
Slide 43: Made Excellent Ethanol Acquisitions
Made Excellent Ethanol Acquisitions Built position for average of only 35% of estimated replacement cost 2Q09: acquired 7 plants with 780 million gallons per year of world-scale capacity in advantaged locations 1Q10: Added 3 plants with 330 million gallons per year of capacity 43 Favorable margin ou
Slide 44: Ethanol Grows as Part of the Fuel Mix
U.S. Ethanol Demand BGal/yr We expect ethanol volumes to meet corn RFS requirements, but expect advanced (cellulosic) ethanol to develop more slowly than prescribed Current corn ethanol capacity is approximately 13.7 BGPY (13.1 BGPY operational) and the 2015 RFS for corn-based ethanol is 15 BGPY Sou
Slide 45: World Demand Favors Diesel
World Demand Favors Diesel World Demand Favors Diesel World Demand MMBPD Diesel demand is expected to recover past prior highs and grow rapidly Diesel demand has grown to become much larger than gasoline globally Growing global diesel demand is an export opportunity for U.S. refineries History Forec
Slide 46: Gasoline Fundamentals
Gasoline Fundamentals 46 46 (CHART) USGC Gasoline Crack (per bbl) U.S. Gasoline Demand (mmbpd) (CHART) Source: Argus; 2011 data through March 18 Source: DOE weekly data; 2011 data through week ending March 18 Source: DOE weekly data; 2011 data through week ending March 18 Source: DOE weekly data; 20
Slide 47: Distillate Fundamentals
Distillate Fundamentals 47 47 (CHART) USGC On-road Diesel Crack (per bbl) U.S. Distillate Demand (mmbpd) (CHART) (CHART) Source: Argus; 2011 data through March 18 Source: DOE weekly data; 2011 data through week ending March 18 Source: DOE weekly data; 2011 data through week ending March 18 Source: D
Slide 48: U.S. Transport Indicators: Trucking Indicators
U.S. Transport Indicators: Trucking Indicators 48
Slide 49: U.S. Transport Indicators
(CHART) U.S. Transport Indicators 49 49 Latest data 10 W 2011
Slide 50: Mexico Statistics
(CHART) (CHART) Mexico Statistics Diesel Net Imports (MBPD) Source: PEMEX, latest data Jan-11 Gasoline Net Imports (MBPD) Source: PEMEX, latest data Jan-11 (CHART) Crude Unit Throughput (MBPD) Crude Unit Utilization (CHART) 50 Source: PEMEX, latest data Jan-11 Source: PEMEX, latest data Jan-11
Slide 51: Assumed Refinery Configuration Margins
Assumed Refinery Configuration Margins Gulf Coast Heavy-Sour Coking = 0.6*USGC 87 Gasoline + 0.4*USGC On-road Diesel - (0.5*Maya Crude Oil + 0.5* Mars Crude Oil) Mid-Con WTI Cracking = 0.6*Group 3 87 Gasoline + 0.4*Group 3 On-road Diesel - WTI Crude Oil West Coast Medium-Sour Coking = 0.6*CARBOB + 0
Slide 52: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: Ashley Smith Vice President, Investor Relations 210.345.2744 ashley.smith@valero.com Matthew Jackson Investor Analyst 210.345.2564 matthew.jackson@valero.com 52
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