Valero Energy Corporation · NYSE:VLO
Valero Energy — Merger or Acquisition (February 2004)
22 slides from Valero Energy's merger presentation, Feb 5, 2004
Slide 1: Acquisition of the Aruba Refinery and Related Assets
Acquisition of the Aruba Refinery and Related Assets February 5, 2004
Slide 2: 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 1934. It is important to n
Slide 3: Special Note Regarding Projections
The unaudited projections contained in this presentation were subject to and prepared on the basis of estimates, limitations, qualifications and assumptions and involved judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions and other
Slide 4: The Aruba Refinery
The Aruba Refinery 315,000 BPD Heavy Sour Crude Oil Refinery Replacement cost of $2.4 billion Nelson complexity of 6.2 $640 million invested since 1998 Processes very heavy sour crudes High yield of distillates and intermediate feedstocks Excellent logistics 2 deepwater docks for ULCCs 6 refined pro
Slide 5: Major Units and Related Assets
Major Units and Related Assets Capacity (bpd) 2 Crude Units 315,000 Vacuum Unit 160,000 Visbreaker 42,000 2 Delayed Cokers 64,000 Hydrotreating 225,000 Power Generation 100 MW Aruba Marine and Bunkering Nine vessels Primarily for refueling and docking of ships Marketing Assets 10 retail sites on Aru
Slide 6: Transaction Summary
Transaction Summary (Dollars in millions) Valero and El Paso have executed a purchase and sale agreement for $465 million Estimated $250 million for working capital No earnouts Financing Plan Sources of Funds: Common Equity Offering, net $350 Cash 200 Bank Borrowings 165 Total Sources $715 Use of Fu
Slide 7: Strategic Rationale
Strategic Rationale Expected to be accretive to earnings in 2004 and beyond Poor financial and operating history provides opportunity Expect to significantly increase reliability Key units are relatively new or recently upgraded Initial focus on improving power reliability Proven track record - St.
Slide 8: Other Key Considerations
Other Key Considerations Tax Holiday in place through 2011 (excluding retail) Environmental liability governed by, and limited to, Trust Fund established by 1989 Aruban Refinery Agreement No liability for environmental occurrences prior to July 1990 Excellent relationship with Aruban government Stro
Slide 9: Key Assumptions
Key Assumptions Key Price Drivers 10 Mos. Mid-Cycle ($ per barrel) 2004 2005 '00-'03 Avg. Maya vs. WTI (8.00) (7.50) (7.08) Basrah vs. WTI (4.40) (4.40) (4.06) GC Heat Crack 2.62 3.00 2.71 Key Assumptions - Information presented assumes: 78% utilization 2004, 89% utilization 2005 $35 million margin
Slide 10: Income Analysis
Income Analysis 10 Mos. Mid-Cycle 2004 Case 2005 Case Case Throughputs (MBPD) 245 280 280 Gross Margin $320 $475 $440 Operating Expenses (215) (275) (275) Contribution to Income 105 200 165 Administrative Expense (5) (3) (3) Interest Expense (11) (13) (13) Income Taxes (7) (9) (9) Net Income $82 $17
Slide 11: Cash Flow Analysis
Cash Flow Analysis 10 Mos. Mid-Cycle 2004 Case 2005 Case Case Net Income $82 $175 $140 Depreciation & Amortization 11 41 41 Deferred Tax 6 8 8 Cash Flow 99 224 189 Capital Investments (105) (130) (130) Net $(6) $94 $59 (Dollars in millions)
Slide 12: Timing Couldn't Be Better
Timing Couldn't Be Better Industry fundamentals for gasoline, distillates and sour crudes are outstanding Distillate demand increasing due to cold weather in the Northeast Margins well above average in January Gasoline demand at high levels; inventories remain tight Tier II and MTBE bans impacting s
Slide 13: 2004 forward curve exceptionally strong
2004 forward curve exceptionally strong Gas crack for 2004 currently over $7.00 per barrel Heat crack also strong - around $3.00 per barrel Margins Keep Improving '95-'99 '96-'00 '97-'01 '98-'02 '99-'03 '00-'04 USGC 3-2-1 2.59 2.96 3.26 3.25 3.67 4.38 USGC 3-2-1 Rolling 5-yr. Avg. As of Jan. 27, 200
Slide 14: New Era for Refining
Over $5.00/bbl 2% of time Over $5.00/bbl 29% of time Higher highs and higher lows a reality Best positioned refiner to benefit from the New Era New Era for Refining
Slide 15: Appendix
Appendix
Slide 16: Great Fit with Valero's Refining System
Great Fit with Valero's Refining System Equal distance to the New York harbor and Gulf Coast Venezuela Colombia Brazil To Paulsboro Refinery Distillates & Intermediate feedstocks Gulf Coast Refining System To West Coast Intermediate feedstocks ARUBA Intermediate feedstocks Sour crude oil Three River
Slide 17: Aruba Charges & Yields Profile
Aruba Charges & Yields Profile
Slide 18: Capital Expenditures
Capital Expenditures 10 Mos. 2004 2005 Maintenance & Reliability $20 $50 Strategic 10 20 Logistics, IS & G&A 15 15 Safety & Environmental 10 10 Turnarounds 50 35 Total Capital $105 $130 Capital spending focused on reliability enhancement No Tier II investment until 2008 for Ultra Low Sulfur Diesel (
Slide 19: Aruba historical operating results
9 Mos. Ended 2001 2002 9/30/2003 Operating Income (Loss) $57 $(154) $(82) Impairment Provision $ -- $ -- $(879) Net Income (Loss) $77 $(124) $(980) In June 2003, El Paso's Board of Directors authorized the sale of its Aruba refinery and related businesses, according to El Paso's audited financial st
Slide 20: 2004 Planned Major Turnarounds
2004 Planned Major Turnarounds Duration (days) 1Q St. Charles Crude/Coker/Vacuum 24 Wilmington: FCC/Alkylation unit 33 Crude/Coker 17 Corpus Christi Reformer 18 Benicia Alkylation Unit (expansion) 26 Houston Crude/Alkylation/FCC 14 3Q Paulsboro FCC (Scrubber) 20 Aruba Crude/Coker/Hydrotreater 20 4Q
Slide 21: Key Refining Margin Data
Est. Volumes EPS (BPD) 2003 '00-'03 Avg Sensitivity Feedstocks (per bbl): WTI - Med. Sour Crude (2) 825,000 $3.39 $3.62 $0.35 WTI - Maya (Hvy. Sour) 500,000 $6.87 $7.08 $0.21 Products (per bbl): Gulf Coast Gasoline - WTI 500,000 $5.50 $4.84 $0.21 Heating Oil - WTI 430,000 $2.76 $2.71 $0.18 West Coas
Slide 22: Forward-Looking Statements
Forward-Looking Statements
Valero Energy — Merger or Acquisition (February 2004) on 6ix