Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (September 2017)
51 slides from Valero Energy's investor presentation, Sep 6, 2017
Slide 1: Investor Presentation September 2017
Investor Presentation September 2017 Exhibit 99.01
Slide 2: Disclaimers
Disclaimers Statements contained in this presentation that state the company’s or management’s expectations or predictions of the future are forward-looking statements covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “believe,” “e
Slide 3: Who We Are
Who We Are Premier Independent Refiner 15 refineries, 3.1 million barrels per day (BPD) of high-complexity capacity Fuels marketed and distributed through bulk and wholesale channels General partner and majority owner of Valero Energy Partners LP Operator and 50% owner of Diamond Green Diesel renewa
Slide 4: Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent
Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent Refineries and ethanol plants are in advantaged locations See slide 30 for capacities.
Slide 5: Favorable Macro Environment Expected
Favorable Macro Environment Expected SUPPLY DEMAND See slide 19 for notes regarding this slide and slides 34 and 35 for supply and demand details. REGULATORY AND GEOPOLITICAL U.S. legislative reform remains uncertain U.S. regulatory landscape continues to evolve Emerging global developments Expect b
Slide 6: Our Strategy for Value Creation
Our Strategy for Value Creation Maintain manufacturing excellence: safe, reliable, environmentally responsible operations Focus on earnings growth: Market expansion, margin improvement, operating cost reduction Disciplined capital allocation: deliver distinctive financial results and peer-leading re
Slide 7: Safety and Reliability are Imperative for Profitability
Safety and Reliability are Imperative for Profitability See slide 19 for notes regarding this slide. VLO’s injury and process safety event rates in 2016 were the lowest in its history.
Slide 8: Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization
Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization and Lower Opex See slide 19 for notes regarding this slide. Source: company reports.
Slide 9: Advantaged Portfolio in U.S. Gulf Coast and Mid-Continent
Advantaged Portfolio in U.S. Gulf Coast and Mid-Continent See slide 19 for notes regarding this slide. See slide 31 for capacity and Nelson complexity by refinery. High weighted average Nelson Complexity Index for Valero’s refineries; ran 1.3 million BPD of sour crude in 2Q17. Flexibility to process
Slide 10: Our Portfolio Facilitates Global Optimization of Product Exports
Our Portfolio Facilitates Global Optimization of Product Exports See slide 19 for notes regarding this slide. Distillate Gasoline
Slide 11: Investing to Grow Export and Wholesale Fuels Volumes
Investing to Grow Export and Wholesale Fuels Volumes Mexico’s refined product demand is expected to grow with imports filling a large percentage of the supply shortage Approximately 700 MBPD of gasoline and diesel imported in 2016(1) Valero, a premier brand with high product quality, has reliably su
Slide 12: Disciplined Capital Management is a Constant in Our Strategy
Disciplined Capital Management is a Constant in Our Strategy Maintain Strong Balance Sheet (1)Debt-to-cap ratio based on total debt reduced by $2 billion of cash. (2)Peer group includes PSX, MPC, ANDV, HFC, and PBF. (3)Payout ratio is the sum of dividends and stock buybacks divided by net cash provi
Slide 13: Delivering Sustainable Dividend Growth
Delivering Sustainable Dividend Growth Targeting annual dividend increases at a sustainable level. (1) Annualized based on current quarterly dividend of $0.70 per share. (2) Annualized based on most recent quarterly dividend as of Aug 21, 2017. Peer group includes PSX, MPC, ANDV, HFC, and PBF. (1) P
Slide 14: Delivering Cash Returns to Stockholders Is One of Our Priorities
Delivering Cash Returns to Stockholders Is One of Our Priorities 2017 dividends and buybacks through Jun 30. (1) Total payout defined as sum of dividends and stock buybacks sourced from company reports. Peer group includes PSX, MPC, ANDV, HFC, and PBF. Reduced share count by over 120 million shares,
Slide 15: Demonstrated Discipline in Capital Allocation
Demonstrated Discipline in Capital Allocation Steady investments in maintaining asset base and enhancing margin capability of portfolio. (1)Approximately $265 MM growth capex carried forward for Diamond Pipeline from 2016 to 2017. Non-discretionary
Slide 16: Steady Pipeline of High Return Projects
Steady Pipeline of High Return Projects Texas City Refinery photo Expect to spend $1 billion annually on growth investments through 2021 Approximately 50/50 allocation between refining and logistics projects Projects in execution phase (by expected completion date) Diamond Pipeline (4Q17) Wilmington
Slide 17: We Believe Valero is an Excellent Investment
We Believe Valero is an Excellent Investment See slide 19 for notes regarding this slide. Chart data sources: Bloomberg and company reports. See slides 41 - 47 for VLO non-GAAP disclosures. Premier asset portfolio and best in class operations Proven operations excellence Safety and reliability drive
Slide 18: Appendix Contents
Appendix Contents Topic Pages Notes 19 Guidance 20 Projects in Execution Phase 21 – 23 Prior Investments in Light Crude Processing 24 Historical Market Price Drivers 25 Equity Performance, Stockholder Returns, Financial Results 26 – 29 Shift in Refining Valuation 30 Refining Capacity and Nelson Comp
Slide 19: Notes
Notes Slide 5 Macro environment themes represent industry consultant views. Slide 7 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. I
Slide 20: Guidance
Guidance 3Q17 (guidance provided on 2Q17 earnings call) Throughput (MBPD) U.S. Gulf Coast1,650 to 1,700 U.S. Mid-Continent 445 to 465 North Atlantic440 to 460 U.S. West Coast280 to 300 Refining operating expenses per barrel throughput$3.80 Ethanol Production (millions of gallons per day)3.9 Operatin
Slide 21: Investing to Improve Margins and Operating Cost Structure
Investing to Improve Margins and Operating Cost Structure Expect octane demand growth (Tier 3 regulations) Completion expected in 1H19 13 MBPD unit upgrades low value isobutane and amylenes into high value alkylate High octane, low vapor pressure component enables the blending of incremental butane
Slide 22: Investing to Improve Access to North American Crude
Investing to Improve Access to North American Crude Diamond Pipeline 440 miles of 20-inch pipe (200 MBPD capacity) connecting Memphis to Cushing Project is on track for completion in 4Q17 Improves crude supply flexibility and blend quality Approximately $460 MM of project cost for Valero’s 50% share
Slide 23: Investing to Increase Premium Renewable Fuels Production
Investing to Increase Premium Renewable Fuels Production Adds 6 MBPD of renewable diesel production capacity Renewable diesel margins expected to be supported by increased usage mandates and carbon pricing $200 MM project cost, 50% of which is Valero’s portion Completion expected in mid-2018 Diamond
Slide 24: Previous Investment in Light Crude Processing Delivering Earnings Growth
Previous Investment in Light Crude Processing Delivering Earnings Growth 160 MBPD combined topping capacity addition at Corpus Christi and Houston Designed to process up to 50 API domestic sweet crude Replaces approximately 55 MBPD purchased low sulfur resid for FCCs (priced at a premium to crude) w
Slide 25: Historical Market Price Drivers
Historical Market Price Drivers Driver ($/bbl) 2015 Average 2016 Average 2017 Average(1) ICE Brent 53.60 45.13 52.23 ICE Brent – WTI Houston 2.88 0.39 1.07 USGC CBOB – ICE Brent 9.81 9.18 10.21 USGC ULSD – ICE Brent 12.58 10.18 11.79 Naphtha – ICE Brent 4.53 1.15 1.16 Low sulfur resid – ICE Brent 2.
Slide 26: We Believe Valero is One of the Best Investment Ideas Across the Energy Sector
We Believe Valero is One of the Best Investment Ideas Across the Energy Sector Chart data sources: Bloomberg and company reports. See slides 41 - 47 for VLO non-GAAP disclosures. (1) Peer group includes XLE constituents with positive EBIT (8 companies) and PBF. (2) Peer group includes refiners PSX,
Slide 27: Now vs. Then – A Shift In Refining Valuation
Now vs. Then – A Shift In Refining Valuation New Paradigm INDUSTRY/MACRO EV/EBITDA multiple expansion and dispersion by company Peer group of larger scale, efficient and complex refiners Methodical and continuing growth in all major economies Tight global product market expected to continue Product
Slide 28: Outperformed All Companies in the XLE Index on TSR Since 2014
Outperformed All Companies in the XLE(1) Index on TSR Since 2014 (1) XLE includes refining peers PSX, MPC, ANDV, and 28 other energy companies such as XOM, CVX, SLB, COP, EOG, OXY, and KMI. (2) Total stockholder return (TSR) from Dec 31, 2014, through Aug 28, 2017. TSR includes stock price appreciat
Slide 29: Solid Operational Performance Across the Cycle Has Contributed to Distinctive Financial Results
Solid Operational Performance Across the Cycle Has Contributed to Distinctive Financial Results Peer group includes PSX, MPC, ANDV, HFC, and PBF. See slides 41 - 47 for VLO non-GAAP disclosures. (1) Total stockholder return (TSR) from Dec 31, 2014, through Dec 31, 2016. TSR includes stock price appr
Slide 30: Delivered Solid Earnings, FCF, and Stockholder Returns Across the Recent Margin Cycle
Peer group includes PSX, MPC, ANDV, HFC, and PBF. See slides 41 - 47 for VLO non-GAAP disclosures. (1) Total stockholder return (TSR) from Dec 31, 2014, through Dec 31, 2016. TSR includes stock price appreciation and dividends paid. (2) EPS adjusted to exclude special or nonrecurring items. Source:
Slide 31: Our Refining Capacity and Nelson Complexity
Our Refining Capacity and Nelson Complexity Refinery Capacities (MBPD)(1) Nelson Complexity Index Throughput Crude Corpus Christi(2) 370 275 15.1 Houston(4) 235 180 8.9 Meraux 135 125 9.8 Port Arthur(5) 395 335 12.9 St. Charles(6) 340 215 17.1 Texas City 260 225 11.6 Three Rivers 100 89 13.2 U.S. Gu
Slide 32: U.S. Natural Gas Provides Opex and Feedstock Cost Advantages
U.S. Natural Gas Provides Opex and Feedstock Cost Advantages 2017 average natural gas prices through Aug 17 for U.S. and Europe. Estimated per barrel cost of 915,000 mmBtu/day of natural gas consumption at 12-month rolling average refinery throughput of 2.9 MMBPD. Our refining operations consume app
Slide 33: Pipeline Takeaway Capacity Additions Have Increased Crude Competition in the U.S. Gulf Coast
Pipeline Takeaway Capacity Additions Have Increased Crude Competition in the U.S. Gulf Coast KEY Capacities in MBPD. Pipeline completion and startup dates are subject to change. Bayou Bridge Phase 1 operational with Phase 2 completion expected in 2018. Midland to Sealy 450 completion expected Nov 20
Slide 34: Global Petroleum Demand Growth Expected to Outpace Refinery Capacity Expansion
Source: Consultant and Valero estimates. Net Global Refinery CDU Additions = New Capacity + Restarts – Announced Closures. (Does not include Condensate Splitters.) Updated August 17, 2017. Global Petroleum Demand Growth Expected to Outpace Refinery Capacity Expansion Expect that methodical economic
Slide 35: High Demand Continues for U.S. Products in Primary Export Markets
High Demand Continues for U.S. Products in Primary Export Markets North America +2.2% GDP annual average +11 MM population +70 MBPD product demand +245 MBPD CDU capacity High utilization needed to meet domestic and export demand Latin America +2.7% GDP annual average +21 MM population +310 MBPD prod
Slide 36: Ethanol Business Operations
Ethanol Business Operations 11 plants with 1.4 billion gallons annual production capacity Dry mill production process, where corn is ground into flour and mixed with water before fermentation Plants purchased for 35% of replacement cost Efficient plants with scale, located in corn belt Operational b
Slide 37: Our Sponsored MLP Valero Energy Partners LP Strategy & Financial Highlights
Grow VLP through drop downs from VLO, organic projects, and midstream deals that are strategic to VLO’s core business or that provide third party revenue Grow annual distributions at target rates of 25% for 2017 and at least 20% for 2018 Our Sponsored MLP Valero Energy Partners LP (NYSE:VLP) Strateg
Slide 38: Diversified VLP Portfolio
Diversified VLP Portfolio UY VALERO Memphis Logistics ® NERS LP ‘System McKee Logistics System pecemliae|
Slide 39: VLP's Competitive Strengths
VLP’s Competitive Strengths Strong Sponsor Strategic relationship with investment grade sponsor VLO Quality Assets High quality, well maintained assets located in advantaged regions Stable and Predictable Revenues Fee-based agreements with no direct exposure to commodity price risks Contracts with 1
Slide 40: Approximately $1 Billion of Estimated MLP Eligible EBITDA
Approximately $1 Billion of Estimated MLP Eligible EBITDA(1) Inventory Racks, Terminals, and Storage(2) Over 70 million barrels of active shell capacity for crude oil and products 139 truck rack bays Rail Approximately 5,250 purchased railcars, expected to serve long-term needs of ethanol, asphalt,
Slide 41: VLO Non-GAAP Disclosures: Free Cash Flow
VLO Non-GAAP Disclosures: Free Cash Flow VLO defines free cash flow as net cash provided by operating activities less capital expenditures; deferred turnaround and catalyst costs; investments in joint ventures; and working capital adjustments. VLO believes that the presentation of free cash flow pro
Slide 42: VLO Non-GAAP Disclosures: Return on Invested Capital
VLO Non-GAAP Disclosures: Return on Invested Capital VALERO ENERGY CORPORATION RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited, in Millions, Except Percentage and Ratio Amounts) Six Months Ended Mar 31, 2016 Year Ended Dec 31, 2016 Six Months Ended
Slide 43: VLO Non-GAAP Disclosures: Return on Invested Capital
VLO Non-GAAP Disclosures: Return on Invested Capital VALERO ENERGY CORPORATION RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited, in Millions, Except Percentage and Ratio Amounts) Year Ended Dec 31, 2016 Numerator: Operating income $3,572 Effective ta
Slide 44: VLO Non-GAAP Disclosures: EBITDA and Net Debt-to-EBITDA
VLO Non-GAAP Disclosures: EBITDA and Net Debt-to-EBITDA VALERO ENERGY CORPORATION RECONCILIATION OF NET INCOME TO EBITDA (Unaudited, in Millions, Except Ratio Amount) Six Months Ended Jun 30, 2016 Year Ended Dec 31, 2016 Six Months Ended Jun 30, 2017 Net income $1,356 $2,417 $893 Less: Deferred turn
Slide 45: VLO Non-GAAP Disclosures: EBITDA and Net Debt-to-EBITDA
VLO Non-GAAP Disclosures: EBITDA and Net Debt-to-EBITDA VALERO ENERGY CORPORATION RECONCILIATION OF NET INCOME TO EBITDA (Unaudited, in Millions, Except Ratio Amount) Year Ended Dec 31, 2016 Net income $2,417 Less: Deferred turnaround and catalyst costs (718) Plus: Depreciation and amortization expe
Slide 46: VLO Non-GAAP Disclosures: Adjusted Earnings Per Common Share
VLO Non-GAAP Disclosures: Adjusted Earnings Per Common Share VALERO ENERGY CORPORATION Reconciliation of earnings per common share – assuming dilution, to adjusted earnings per common share – assuming dilution (Unaudited, in Millions, Except Ratio Amount) Year Ended Dec 31, 2016 Year Ended Dec 31, 2
Slide 47: VLO Non-GAAP Disclosures: Price to Earnings
VLO Non-GAAP Disclosures: Price to Earnings VALERO ENERGY CORPORATION RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited, in Millions, Except Percentage and Ratio Amounts) Six Months Ended Jun 30, 2016 Year Ended Dec 31, 2016 Six Months Ended Jun 30, 2
Slide 48: VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, and Debt-to-EBITDA
VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, and Debt-to-EBITDA VLP defines EBITDA as net income before income tax expense, interest expense, and depreciation expense. VLP defines distributable cash flow as EBITDA less (i) EBITDA attributable to its Predecessor and cash payments during
Slide 49: VLP Non-GAAP Disclosures: Debt-to-EBITDA
VLP Non-GAAP Disclosures: Debt-to-EBITDA VALERO ENERGY PARTNERS LP RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited, in Thousands, Except Ratio Amount) Jun 30, 2017 Numerator: Total debt and capital lease obligations $900,000 Six Months Ended Jun 30,
Slide 50: VLP quarterly EBITDA reconciliation
4Q2013 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 Net income ($6,900) ($8,280) ($6,929) ($7,934) ($10,218) ($269) $19,161 $15,625 $36,795 $35,780 $44,545 $48,707 $59,799 $58,137 $58,443 Plus: Depreciation expense 8,958 8,319 8,632 10,398 10,560
Slide 51: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: John Locke Vice President, Investor Relations 210.345.3077 john.locke@valero.com Karen Ngo Senior Manager, Investor Relations 210.345.4574 karen.ngo@valero.com Tom Mahrer Manager, Investor Relations 210.345.1953 tom.mahrer@valero.com
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