Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (June 2017)
45 slides from Valero Energy's investor presentation, Jun 20, 2017
Slide 1: Investor Presentation June 2017
Investor Presentation June 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 26 for capacities.
Slide 5: Current Macro Environment
Current Macro Environment Forecasted world GDP growth Product shortages in Mexico, Central and South America, Europe, Africa, and Eastern Canada Healthy product demand in lower price environment SUPPLY DEMAND See slide 21 for notes regarding this slide and slides 29 and 30 for supply and demand deta
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 21 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 21 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 21 for notes regarding this slide. See slide 26 for capacity and Nelson complexity by refinery. High weighted average Nelson Complexity Index for Valero’s refineries. Capable of accessing and processing wide range of crudes and inte
Slide 10: 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, TSO, HFC, and PBF. (3)Payout ratio is the sum of dividends and stock buybacks divided by net income from
Slide 11: Committed to Delivering Returns to Shareholders
Committed to Delivering Returns to Shareholders Targeting annual dividend increases at a sustainable level. See slide 21 for notes regarding this slide. (1) Annualized based on current quarterly dividend of $0.70 per share. (2) Total payout for last 12 months (LTM) defined as sum of dividends and st
Slide 12: 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. Sustaining Non-discretionary
Slide 13: Steady Pipeline of High Return Projects
Steady Pipeline of High Return Projects Texas City Refinery Expect to spend $1 billion annually on growth investments through 2021 Approximately 50/50 allocation between refining and logistics projects 25% targeted IRR for refining projects Lower hurdle rate for logistics projects Projects in execut
Slide 14: 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 15: 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 Provides supply flexibility and ability to improve crude blend quality Approximately $460 MM of project cost for
Slide 16: 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 1H18 Diamond Gre
Slide 17: Our Portfolio Facilitates Global Optimization of Product Exports
Our Portfolio Facilitates Global Optimization of Product Exports See slide 21 for notes regarding this slide. Distillate Gasoline
Slide 18: Delivered Solid Earnings, FCF, and Stockholder Returns Across the Recent Margin Cycle
See slide 21 for notes regarding this slide. (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: Bloomberg and company reports. (3) Average free cash f
Slide 19: We Believe Valero is an Excellent Investment
We Believe Valero is an Excellent Investment Chart data sources: Bloomberg and company reports. See slide 21 for notes and slides 36 - 40 for VLO non-GAAP disclosures. We Believe VLO is Undervalued Disciplined management team Proven operations excellence Safety and reliability drive profitability Pr
Slide 20: Appendix Contents
Appendix Contents Topic Pages Notes 21 Guidance 22 Equity Performance, Stockholder Returns, Financial Results 23 – 25 Refining Capacity and Nelson Complexity 26 Natural Gas Cost Sensitivity 27 Crude Oil Transportation 28 Fundamentals 29 – 30 Ethanol Segment 31 VLP Segment 32 – 35 Non-GAAP Disclosure
Slide 21: 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 22: Guidance
Guidance 2Q17 (guidance provided on 1Q17 earnings call) Throughput (MBPD) U.S. Gulf Coast1,690 to 1,740 U.S. Mid-Continent440 to 460 North Atlantic455 to 475 U.S. West Coast285 to 305 Refining operating expenses per barrel throughput$3.70 Ethanol Production (millions of gallons per day)3.8 Operating
Slide 23: 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, TSO, and 29 other energy companies such as XOM, CVX, SLB, EOG, OXY, HAL, and KMI. (2) Total stockholder return (TSR) from Dec 31, 2014, through Jun 15, 2017. TSR includes stock price appreciati
Slide 24: 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, TSO, HFC, and PBF. (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 e
Slide 25: 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 Mar 31. (1) WASO from company 10-K and 10-Q filings. WASO for MPC adjusted for stock split. Peer group includes PSX, MPC, TSO, HFC, and PBF. Reduced share count by over 110 million shares, or 21% sin
Slide 26: 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 27: 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 Jun 1 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 2.8 MMBPD. $797 MM pre-tax annual cost advantag
Slide 28: 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 2017. Pipeline capacity additions increased market li
Slide 29: 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 Jun 6, 2017. Global Petroleum Demand Growth Expected to Outpace Refinery Capacity Expansion
Slide 30: 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 Net product exports continue to increase Latin America +2.7% GDP annual average +21 MM population +310 MBPD product demand +72 MBP
Slide 31: Ethanol Business
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 32: Our Sponsored MLP Valero Energy Partners LP: Strategy & Financial Highlights
Grow VLP primarily through drop downs from VLO Target organic growth opportunities and midstream deals strategic to VLO’s core business or that provide third party revenue Grow annual distributions at target rates of 25% through 2017 and at least 20% for 2018 Our Sponsored MLP Valero Energy Partners
Slide 33: Diversified VLP Portfolio
Diversified VLP Portfolio(1) (1)Portfolio assets as of Jan 18, 2017.
Slide 34: VLP's Competitive Strengths
VLP’s Competitive Strengths Strong Sponsor Strategic relationship with investment grade sponsor VLO Quality Assets High quality, well maintained assets integrated with VLO’s refineries and located in advantaged regions Stable and Predictable Revenues Fee-based agreements with no direct exposure to c
Slide 35: 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 36: 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 37: 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) Three Months Ended March 31, 2016 Year Ended December 31, 2016 Three Mo
Slide 38: 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) Three Months Ended March 31, 2016 Year Ended December 31, 2016 Three Months Ended March 31, 2017 Net income $513 $2,417 $321 Less: De
Slide 39: 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 December 31, 2016 Year Ended Dece
Slide 40: 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) Three Months Ended March 31, 2016 Year Ended December 31, 2016 Three Months Ende
Slide 41: 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 42: VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, and Debt-to-EBITDA (continued)
VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, and Debt-to-EBITDA (continued) VLP uses distributable cash flow to measure whether it has generated from its operations, or “earned,” an amount of cash sufficient to support the payment of the minimum quarterly distributions. VLP’s partnersh
Slide 43: 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) March 31, 2017 Numerator: Total debt and capital lease obligations $895,057 Three Months Ended Mar
Slide 44: 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 Net
1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 Net income ($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 Plus: Depreciation expense 8,319 8,632 10,398 10,560 10,364 10,578 13,760 10,976 11,512 11
Slide 45: 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