Valero Energy Corporation · NYSE:VLO
Valero Energy — Merger or Acquisition (April 2005)
36 slides from Valero Energy's merger presentation, Apr 25, 2005
Slide 1: Valero to Acquire Premcor
PLERO Premcor
Slide 2: Safe Harbor Statement
Safe Harbor Statement i Statements contained in this presentation that state either company’s or their management’s expectations or predictions of future events are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchan
Slide 3: Prospectus Disclaimer
Prospectus Disclaimer arias Investors and security halders are urged ta read the proxy statement/praspectus that will be filed with the Securities and Exchange Commission and will be sent ta Premcar stockholders regarding the proposed merger, when it becomes available, because it will contain import
Slide 4: Table of Contents
Table of Contents xm Page Summary of Transaction and Strategic Rationale 6 Refining Market Fundamentals 15 Overview of Premcor Assets 21 Key Assumptions and Financial Impact 28 Transaction Timeline 33 Appendix 35
Slide 5: Bill Greehey, Chairman and CEO, Valero Energy
Bill Greehey, Chairman and CEO Valero Energy
Slide 6: Transaction Overview
Transaction Overview = Consideration for Premcor of approximately $8 billion @ Fixed exchange ratio of 0.99 Valero shares for each share of Premcor ¢ 20% premium to recent Premcor price © 50% of consideration in cash — $3.43 billion ($72.76 per share) ¢ 50% of consideration in stock — 46.7 million s
Slide 7: Transaction Overview
Transaction Overview u Cash election merger (prorated if either cash or stock is oversubscribed) © Tax-free with respect to stock portion = No collar or walkaway rights a Customary one-way non-solicitation provisions, subject to fiduciary exception for Premcor to change shareholder recommendation in
Slide 8: Strategic Rationale
Strategic Rationale xm = Premcor assets a great fit with Valero @ Combined company would be largest refiner in North America @ Enhanced geographic diversity, which further increases earnings stability @ Aligned strategies that further increase exposure to light-heavy spread = Premcor’s assets provid
Slide 9: Financial Benefits
Financial Benefits xm = Significantly accretive to earnings per share ® 14% accretive to estimated 2006 Case earnings per share = Significantly accretive to cash flow per share @ 13% accretive to estimated 2006 Case cash flow per share = At least $350 million of annually recurring synergies = Expect
Slide 10: Geographically Diverse System
Geographically Diverse System *— Pa come, ee ¢ Qoaneee TI Sian, Bicmese, tig, ca Ptopuoapsespny hin bpaespacty & 2 yigeempeny ae : ——— Wome a i vatero Reta SSE sompa sy, 1D Sseombne Peehim pest, Togs cy Tees [7SBteolcapaony || Sean opesacny i Sanws, ate + Thteenpleny ee 1 tscomphiny 40
Slide 11: Premier Refiner in North America
Premier Refiner in North America a North American Crude Capacity (mbpd) 2,766 2536 2163-959 2,018 North American Conversion Capacity (mbpd) Gi cat cracking TBbvarocracking 1,566 EA coking 1,167 1,145 "
Slide 12: Enhanced Sour Crude Leverage
Enhanced Sour Crude Leverage 7 COMBINED HEAVY/SOUR CRUDE 2.250 PROCESSING (mbpd)* 2,000 1,150 1,500 = 1,250 1,900 ralero 150 1430 > cade Nghe sweet cre 300 250 of ps 2004 2005 2006 2007 = Transaction immediately increases exposure to sour crude discounts By 2007, expect to process over 1,000 mbpd of
Slide 13: Significant Synergy Opportunities
Significant Synergy Opportunities %— = Expect at least $350 million of annual recurring synergies Expect full realization in year 2 = Administrative synergies ¢ Reduced sales, general and administrative (SG&A) expenses of $130 million © Corporate overhead ($55 million) Bonus and stock options ($60 m
Slide 14: Operational Synergies
Operational Synergies “ns = Annual operational profit improvements of $205 million e Yield improvements = Delaware City coker and gasifier optimization projects ($100 million) = Expand Memphis FCC and crude unit ($50 million) e Operating expense reductions = Energy conservation opportunities at all
Slide 15: Strong Fundamentals to Continue
Strong Fundamentals to Continue a USGC Gas Crack, $ibbl. #400 USGC Heat Crack, $/bbl. WTI vs. Mars, $/bbl. _ WTI vs. GC Maya (FOB), $/bbl. pet x 2004 —— 2005 Forward Curve ——_ Syt avy | wore iemstcue v ofa 205 45
Slide 16: Tight Supply/Demand Fundamentals
Tight Supply/Demand Fundamentals xm Mepo 000 Global Demand Growth Compared To Refinery Capacity Expansion Demand 3,660 Exceeds Capacity 20% 1,000 o a =| Capacity Exceeds 2,000 Demand 5.000 ove! uh & Oe eA, i, ESA Conny infomaton "91 to 94 95 to'99 "00to'04 ‘050 '07 Est. = 2000 to 2004, demand growth
Slide 17: Regulatory Changes Impacting Supply
Regulatory Changes Impacting Supply }#¢—S Maximum Gasoline Sulfur Content. Maximum Diesel Sulfur Content 500500 sm (Parts Per Million) 1515 5050 Sato 300 (Parts Per Million) 10 459 20 Elo 03 "04°05 "06 oon 03°04 “05 "06 eros us. Europe "03 "04 "05 °08 ern US. "03 "04 "05 "06 orona Europe = Capital d
Slide 18: Favorable Sour Crude Fundamentals
Favorable Sour Crude Fundamentals de ne Estimated Quality of Reserves (2005) High Acid Lightedium Sour 8% oveesou8 Ga sown Company noma, Estimated World Crude Demand by Quality Type (2005) High Acid (Sweet) 3% LightMedium Sour 53% = Fundamental issue ... disconnect between global crude reserves and
Slide 19: Higher Highs, Higher Lows
Higher Highs, Higher Lows xm Rolling 5 - Year Average $ per barrel Product Margins & Sour Crude Discounts $6.00 $5.00 $2.00 + "98-02 "99-03 “00-04 "01-05 Bi usec 5-3-2 Product Margin [i 50/50 Arab LightMedium Sour Crude Discount Based en hidorical xd Valeo’s projection, 49
Slide 20: Jefferson F. Allen, Chief Executive Officer, Premcor Inc.
Jefferson F. Allen, Chief Executive Officer Premcor Inc.
Slide 21: Great Deal for Premcor Shareholders
Great Deal for Premcor Shareholders de ne ee = Combined company to become largest refiner in North America Wall positioned to benefit from positive trends in future @ Valero has investment grade credit rating @ Valero’s financial position increases growth opportunities @ Valero has a proven ability
Slide 22: Premcor Refineries Overview
Lima, OH 170 Mbpd light sweet crude refinery @Nelson complexity of 8.5 Delaware aay mas 0250 sour — crude refinery meee @ Nelson complexity of 11.6 Memphis, TN © 190 Mbpd light sweet crude refinery @Nelson complexity of 6.5 180 Mpbd heavy sour crude refinery ‘@ Nelson complexity of 11.8 2
Slide 23: Premcor Assets: Port Arthur
Premcor Assets x = Port Arthur, Texas — 250 mbpd capacity ¢ Highly complex, heavy sour refinery on Gulf Coast Refinery is supported by extensive logistics system e Expansion of crude and vacuum units underway = Increases ability to process lower cost, heavy sour crude oil = Crude unit from 250 to 32
Slide 24: Premcor Assets: Delaware City
Premcor Assets = = Delaware City, Delaware — 180 mbpd capacity ¢ Acquired from Motiva on May 1, 2004 ¢ High conversion, heavy sour crude refinery 1,800 TPD petroleum-coke gasification unit capacity e Currently processing 1,200 TPD ¢ Plans to increase processing rate in the future 160 MW cogeneration
Slide 25: Premcor Assets: Memphis
Premcor Assets x = Memphis, Tennessee — 190 mbpd capacity ¢ Current economic throughput rate of approx. 155 mbpd High conversion sweet crude refinery ¢ Logistics assets support refinery Access to Capline crude oil pipeline and Mississippi River Jet fuel pipeline to Memphis Airport (FedEx and Northwe
Slide 26: Premcor Assets: Lima
Premcor Assets = = Lima, Ohio - 170 mbpd capacity Current economic throughput rate of approx. 140 mbpd ® Sweet crude refinery ¢ Includes 23 mbpd of coking capacity @ Allows Valero entry into attractive upper Mid-West market Tier II gasoline to be completed in 2005 Plans being developed to process Ca
Slide 27: Mike Ciskowski, Chief Financial Officer, Valero Energy
Mike Ciskowski, Chief Financial Officer Valero Energy
Slide 28: Key Assumptions
Key Assumptions xm = Key Price Drivers Mid-Cycdle (Sper barrel) 2004 2005 2006 701-05 Avg. WII 41.45 53.15, 52.00 35.55, GC Gas Crack 7.69 691 7.50 5.87 GC High Sulfur Heat Crack 3.95 746 8.00 3.73, Arab Medium crude vs. WIT (6.36) (9.06) (8.25) (5.60) Maya crude vs. WIT (11.47) (46.44) (15.00) (9.7
Slide 29: 2006 Case Capital Forecast
2006 Case Capital Forecast xm Pro-forma Projected Capital Expenditures (Daltars in Mition=) $2,255 lm Strategic Ba Tieril Bl Sustaining/Other ll Regulatory 2004 2005 2006 2007 = Expect to fund all capex with available cash flow Would reduce capital in lower margin environment = Significant improveme
Slide 30: Financial Impact
Financial Impact nm 2006 Earnings Per Share 2006 Free Cash Flow ($MM) on THs Accretion Hai — ta 2000 bt) 10% Accretion uunals 100 te —_ se00 a0 86:79 som. ae see ‘ ancy 6 case atyae 2 tae vad ne wvaer anes 2006 Free Cash Flow / Debt 2006 Year-End Net Debt / Capitalization: « 0% Con = c os we 10% ann
Slide 31: Commitment to Reducing Leverage
Commitment to Reducing Leverage #¢— (eS Valero Net Debt to Capitalization Ratio Arua St. Charles a ie 2006 Case Mid-Cycle Case SF SFE EEF EFS SS SEF SK SK 31
Slide 32: Bill Greehey, Chairman and CEO, Valero Energy
Bill Greehey, Chairman and CEO Valero Energy
Slide 33: Transaction Timeline
Transaction Timeline kh April 25 Early May Late-June 4 Quarter 4 Quarter December 31 Announce Transaction File Hart Scott Rodino File Form S-4 Prospectus/Registration Statement/Notice of Meeting & Proxy Statement with SEC Mail Proxy Statements Premcor Stockholder Meeting to approve transaction Compl
Slide 34: Q&A
Q&A
Slide 35: Link
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Searchable text section of graphics shown above [ GRA PHIC] Valero to Acquire Premcor April 25, 2005 [LOGO] [LOGO] Saf e Harbor Statement [LOGO] Statements contained in this presentation that state either company’s or their management’s expectations or predictions of future events are forward-lookin