Valero Energy Corporation · NYSE:VLO
Valero Energy — Simmons & Company Management Presentation, March 3-5, 2008
23 slides from Valero Energy's conference presentation, Mar 3, 2008
Slide 1: Simmons & Company Management Presentation
Simmons & Company March 3 - 5, 2008 Management Presentation
Slide 2: 2007 Was a Great Year for Valero
2007 Was a Great Year for Valero Financial Earned $7.72 per share from continuing operations, one of our best years ever Purchased 14% of our shares that were outstanding at the end of 2006 For 2006 and 2007, purchased nearly 20% of our shares that were outstanding at the end of 2005 Raised dividend
Slide 3: Worldwide Fundamentals Constructive for Refining Margins
Worldwide Fundamentals Constructive for Refining Margins Worldwide supply and demand is balanced High costs and long lead-times affecting growth of refining capacity Existing refinery units less productive, lower utilization 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E Total Global Petroleum Dema
Slide 4: U.S. Upgrading Downtime
PIRA Survey 2007 Actual 2007 Downtime PIRA Survey 2008 Estimated 2008 Downtime Jan 875 950 575 841 Feb 625 1460 775 1080 Mar 570 1255 940 Apr 500 1240 715 May 150 820 340 Jun 190 690 262 Sep 790 850 Oct 740 1345 Nov 560 1187 Dec 385 500 U.S. Upgrading Downtime Source: PIRA Energy Group as of January
Slide 5: Expect Seasonal Expansion in Gasoline Margins
Expect Seasonal Expansion in Gasoline Margins Gasoline demand has begun its seasonal increase Summer-grade gasoline more difficult to make Southern California transitioned in mid- February Switch occurs in March/April timeframe for rest of country 5-Yr Avg 2008 2007 Forward Curve Low 1/1/2007 5.1 5.
Slide 6: Diesel Inventories at Historically Low Levels
2003 2004 2005 2006 2007 2008 Jan 447.565 446.4115 475.236 498.046 444.4381099 Feb 417.4465 420.8245 454.6865 476.3925 423.5175382 Mar 390.2595 408.3075 417.915 454.6205 Apr 389.313 408.7475 429.118 457.0445 May 400.7005 423.2805 440.041 461.8005 Jun 416.5515 419.7565 451.422 463.678 Jul 442.424 448
Slide 7: Distillate Margin Outlook
5-Yr Avg 2008 2007 2008 Forward Curve 1/1/2007 7.97 13.67 11.96716669 1/8/2007 7.6 12.07 14.0877 1/15/2007 7.9 14.21 15.11475 1/22/2007 8.59 14.81 14.6863 1/29/2007 8.78 15.83 14.2115 2/5/2007 8.76 17.46 13.647 2/12/2007 9.29 20.24 14.795 2/19/2007 11.17 22.39 18.16475 22.39 2/26/2007 11.36 19.2107
Slide 8: Feedstock Differentials Remain Wide
Feedstock Differentials Remain Wide Worldwide crude supply mix expected to be stable going forward Sour crude oils continue to dominate worldwide reserves More high TAN crude entering the market Expect increasing sour crude production in Gulf of Mexico in 2008 and 2009 Canadian production growing, m
Slide 9: Building a Better Valero
Building a Better Valero Optimizing Refining Portfolio Investing in Growth Projects at Core Refineries Focusing on Reliability and Cost Efficiency Using Balanced Approach to Allocate Cash Continuing to Seek Acquisitions That Meet Our Criteria Achieve best returns on investment in the industry!
Slide 10: Optimizing Refining Portfolio
Optimizing Refining Portfolio Valero Marketing Presence Quebec, Canada 215,000 bpd capacity 7.8 Nelson complexity Three Rivers, Texas 100,000 bpd capacity 12.4 Nelson complexity Corpus Christi, Texas 315,000 bpd capacity 18.4 Nelson complexity Wilmington, California 135,000 bpd capacity 15.9 Nelson
Slide 11: Core Refineries Have Advantages
Core Refineries Have Advantages Nelson Non-Core Refineries 7.8 Core Refineries 12.3 Nelson Complexity Index 1 "Non-Core Refineries" consist of Lima, Aruba, Krotz Springs, and Memphis Diluted Shares Outstanding Non-Core Refineries 0.4 Core Refineries 0.7 2006 % Discounted Feedstocks Core refineries u
Slide 12: Core Refineries Have Advantages: Margin and ROCE
Core Refineries Have Advantages Gross Margin per Barrel Non-Core Refineries 8.71 Core Refineries 13.19 2006 Throughput Gross Margin per Barrel ROCE Non-Core Refineries 0.27 Core Refineries 0.3 2006 Return on Capital Employed Core refineries have higher returns on capital employed Result of stronger
Slide 13: Investing in Growth Projects at Core Refineries
Investing in Growth Projects at Core Refineries Refinery Project Total Cost1 $mm Start-Up Est. Annual EBITDA2 $mm IRR2 Description St. Charles Crude/ Coker/ Hydrocracker $1,400 2010 $350 20% Crude unit expansion - 45 mbpd Coker expansion - 10 mbpd New hydrocracker - 50 mbpd Port Arthur Crude/ Coker/
Slide 14: Focusing on Reliability and Cost Efficiency
Focusing on Reliability and Cost Efficiency Unbudgeted downtime in 2007 resulted in $2 billion in lost opportunity Based on actual less budgeted throughput volumes and actual market prices Represents an example of profit improvement potential Problems have been identified, plans are in-place for imp
Slide 15: Improving Energy Efficiency Index
2006 100.3 2007 100.1 2008E 96.4 2009E 94.4 2010E 90.7 2011E 88.5 Focusing on Reliability and Cost Efficiency Projects: New hydrogen plant at Corpus Christi and more efficient heater at Benicia, new boilers, heater controls, and operations focus US 1st Qtl US 2nd Qtl US 3rd Qtl US 4th Qtl Improving
Slide 16: Reducing Non-Energy Operating Costs per EDC
2006 94.1 2007 94.4 2008E 84.5 2009E 82 2010E 79.8 2011E 79.6 Focusing on Reliability and Cost Efficiency Reliability improvements, accounting and procurement centralization, contractor efficiencies, and other administrative consolidations US 1st Qtl US 2nd Qtl US 3rd Qtl US 4th Qtl Worse Better Red
Slide 17: Using Balanced Approach to Allocate Cash
Using Balanced Approach to Allocate Cash Capex and Turnarounds Stock Buybacks 2001 0.536 0.157 2002 0.779 0.046 2003 1.112 0.073 2004 1.596 0.318 2005 2.574 0.571 2006 3.756 2.02 2007 2.778 5.788 2008E 4.5 3.1 Capital Expenditures and Stock Buybacks Billions Diluted Shares Outstanding 4Q05 654.1 1Q0
Slide 18: Valero Clearly Advantaged - But Undervalued
Valero Clearly Advantaged - But Undervalued Source: Oil & Gas Journal and Valero estimates EC GC MC WC RM DK 0 1 0 0 0 ALJ 0 0.6 0 0.4 0 WNR 0.3 0 0 0 0.7 HOC 0 1 TSO 0.27 0.83 FTO 0.7 0.3 SUN 0.74 0.26 VLO 0.24 0.54 0.1 0.12 Geographical Mix of Refining Capacity Source: Oil & Gas Journal and Valero
Slide 19: Committed to Creating Long-Term Shareholder Value
Committed to Creating Long-Term Shareholder Value Most geographically diverse independent refiner in North America Most conversion capacity in North America Committed to safe and environmentally compliant operations Optimizing portfolio Resulting in a system that can compete in any margin environmen
Slide 20: Appendix
VALERO Appendix
Slide 21: 2007 and 2008 Capital Budget
2007 and 2008 Capital Budget 2007A 2008E Regulatory 290 535 Turnarounds 520 420 Sustaining/Other 895 1570 Tier II 325 40 Strategic 750 1935 Budgeted 330 $2,780 $4,500 Millions Strategic Tier II Sustaining/ Other Turnarounds Regulatory Came in below $3,500 budget 2008 estimate includes all 17 refiner
Slide 22: Comparison of Conversion Capacity
Comparison of Conversion Capacity Valero is an industry leader in upgrading capacity Valero's upgrading capacity provides superior operational flexibility Significant capital investment and long lead time required to add conversion capacity Coking Capacity Hydrocracking Capacity Cat Cracking Capacit
Slide 23: 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
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