Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (May 2011)
51 slides from Valero Energy's investor presentation, May 18, 2011
Slide 1: Investor Presentation May 2011
Investor Presentation May 2011
Slide 2: 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
Slide 3: Valero Energy Overview
Valero Energy Overview World's largest independent refiner 14 refineries plus pending acquisition of Pembroke expected to close in 3Q11 2.6 million barrels per day (BPD) of throughput capacity, with average capacity of 185,000 BPD Including Pembroke: 2.9 million BPD and an average of 194,000 BPD One
Slide 4: Geographically Diverse Operations
Geographically Diverse Operations 4 Pending Refinery Capacities (000 bpd) Capacities (000 bpd) Nelson Index Refinery Total Through-put Crude Oil Nelson Index Aruba 235 235 8.0 Ardmore 90 86 12.0 Benicia 170 145 15.0 Corpus Chris. 325 205 20.6 Houston 160 90 15.1 McKee 170 168 9.5 Memphis 195 180 7.5
Slide 5: Continued Global Demand Growth Important to Refining Margins
(CHART) Continued Global Demand Growth Important to Refining Margins Refining is a global business - global demand growth impacts refiners in every market Strong growth in emerging markets is leading the surge in global petroleum demand 2010 - 2012 demand estimated at very high level like 2003 - 200
Slide 6: Simple Refining Margins Bottomed in 2009, Recovery Started in 2010
Simple Refining Margins Bottomed in 2009, Recovery Started in 2010 6 Gulf Coast LLS Margins Margins improving from strong global demand, particularly in emerging markets, and capacity rationalization per bbl Source: Argus; 2011 year-to-date through May 14; LLS prices are roll adjusted
Slide 7: Discounted WTI Is Another Discounted Crude Oil for Valero to Process
(CHART) Discounted WTI Is Another Discounted Crude Oil for Valero to Process 7 $/barrel Source: Argus; 2011 year-to-date through May 14; LLS prices are roll adjusted Heavy sour and WTI discounts have been strong Mars discounts continue to improve as waterborne sweet crude markets have tightened Vale
Slide 8: Key Drivers of Large Feedstock Discounts
Key Drivers of Large Feedstock Discounts 8 Light-sweet waterborne crude oils are the marginal feedstock when demand is strong Examples: LLS, Brent, among others Libyan outage has tightened market for these crudes Lower-quality and logistically constrained crude oils seeing wide discounts Maya, WTI,
Slide 9: Valero Has Significant Leverage to Lower-cost Feedstocks and Wider Throughput Margins
Valero Has Significant Leverage to Lower-cost Feedstocks and Wider Throughput Margins 9 9 Gulf Coast 62% (1,600 mbpd) Mid-Con 17% (455 mbpd) West Coast 12% (305 mbpd) Northeast (Canada) 9% (235 mbpd) Throughput Capacity (CHART) Maya/Mars Heavy Sour Coking WTI Cracking ANS Medium Sour Coking Brent Cr
Slide 10: Strong Rebound in Refinery Margins in Most Regions
Strong Rebound in Refinery Margins in Most Regions Most Regions Most Regions 10 Source: Argus; 2011 year-to-date through May 14; see Appendix for details on refinery configuration assumptions
Slide 11: Valero's Gulf Coast System Well-Positioned for Global Export Opportunities
Valero's Gulf Coast System Well-Positioned for Global Export Opportunities 11 Our large, complex refineries on Gulf Coast are competitive due to low-cost operations and feedstocks Structural supply-demand imbalance in Latin America and diesel-shortage in Europe provide higher-margin export opportuni
Slide 12: Rationalization of Industry Capacity Continues
(CHART) (CHART) Rationalization of Industry Capacity Continues Source: Valero Energy Note: 2011 and 2012 estimates include announced future capacity closures MBPD 12 Source: Valero Energy MBPD As we said previously, refining capacity continues to shut down in the industry, particularly marginal plan
Slide 13: Valero's Strategic Priorities
Valero's Strategic Priorities 13 Manage overhead and maintain investment grade credit rating Improve margin capture, operating costs, and reliability at refineries Complete major, value-added capital projects at key refineries Optimize portfolio - continue "high-grading" strategy of the last several
Slide 14: Getting Results from Self-Help Initiatives
Getting Results from Self-Help Initiatives Achieved significant cost savings Annual general and administrative costs have fallen about $100 million since 2006 Refinery cash operating expenses have fallen from a 2008 high of $4.41 per barrel to a recent four-quarter average of $3.69 per barrel, the l
Slide 15: Refinery Yield Improvements Contribute to Higher Margin Capture
Refinery Yield Improvements Contribute to Higher Margin Capture 15 Note: Does not include Aruba, Paulsboro or Delaware City refineries Higher-value products and liquid volume are very important when crude oil prices are high Liquid products generally have a much higher value than solid products like
Slide 16: Valero Increasing Use of Lower-Cost Crude Oils
Valero Increasing Use of Lower-Cost Crude Oils Constantly evaluating opportunities to process lower-cost crude oils In 2010, we ran 86 different crude oils Rapid growth in crude oil from Eagle Ford shale, prices similarly to WTI Current discount of $16 per bbl versus light-sweet alternatives Two of
Slide 17: Financial Strength Provides Opportunity for Growth Investment
(CHART) (CHART) Financial Strength Provides Opportunity for Growth Investment grade credit rating Ended 1Q11 with $4.1 billion of cash and nearly $4 billion of additional liquidity Paid off $510 million of debt in 1Q11 Net debt-to-cap ratio at 3/31/11 was 19.5%, down from 25% at 12/31/10 and far bel
Slide 18: Capital Program Focused on Completion of Large Economic Growth Projects
Capital Program Focused on Completion of Large Economic Growth Projects 18 "Stay-in- business" spending Preliminary 2012 capital spending is expected to be similar to 2011 as we complete our large economic growth projects
Slide 19: Economic Projects Offer Significant Earnings Growth Potential
Economic Projects Offer Significant Earnings Growth Potential Potential for significant earnings power and project returns Projects developed based on our "bullish crude, bearish natural gas" price outlook 19 1D&A = depreciation and amortization expense; 2estimated IRR is unlevered and could improve
Slide 20: Pembroke Acquisition: High-Quality Assets at Attractive Price
Pembroke Acquisition: High-Quality Assets at Attractive Price Valero agreed to acquire Chevron's Pembroke refinery, marketing and logistics assets in the United Kingdom and Ireland for $730 million Working capital and inventories with estimated value of $1 billion at current market prices; actual va
Slide 21: Pembroke Enhances Valero's Margin Optimization Strategy in the Atlantic Basin
Pembroke Enhances Valero's Margin Optimization Strategy in the Atlantic Basin 21 Quebec U.S. Gulf Coast Aruba Pembroke
Slide 22: Why Invest in Valero Today?
Why Invest in Valero Today? 22
Slide 23: Appendix
Wy = VALERO Appendix
Slide 24: Valero's Retail Business Continues to Perform Well
Valero's Retail Business Continues to Perform Well (CHART) Retail Operating Income Per Store (Trailing 4Q Avg.) (U.S. and Canada) 24 Retail achieved excellent per store results Improvement in retail earnings with smaller asset base = better returns Since 2005, more nearly tripled per store operating
Slide 25: Strong Contribution from Ethanol
Strong Contribution from Ethanol 25 Large, efficient plants in great location have competitive advantage on costs Acquired world-class ethanol plants at an average of 35% of replacement cost In less than 2 years, cumulative operating income less depr. & amort. expense (EBITDA) was $471 million, or 6
Slide 26: Impact of Cost Savings Programs
Impact of Cost Savings Programs Impact of Cost Savings Programs 26 Ongoing cost savings programs have contributed to Valero's competitiveness and improved financial performance millions (CHART)
Slide 27: Valero Has Competitive, Low-Cost Refining Operations
Valero Has Competitive, Low-Cost Refining Operations 27 Refining Cash Operating Expenses less Natural Gas Usage ($/bbl) Source: Macquarie Capital (CHART)
Slide 28: Valero Has High Conversion Refining System
Valero Has High Conversion Refining System Valero Has High Conversion Refining System 28 Note: CDU = crude distillation unit; conversion capacity is the sum of each company's FCC, hydrocracking, and coking capacity Source: PIRA Energy Group 12/16/10 (CHART) We believe size and conversion ratio matte
Slide 29: Memphis FCC Revamp Project
Memphis FCC Revamp Project Investment Highlights Favorable economics driven by better reliability and gains on margin and volume Improves flexibility to run lower- quality feedstocks Improves FCC reliability and increases run length between turnarounds to four years from 1.5 years Increase in run le
Slide 30: St. Charles MSCC to FCC Conversion Project
St. Charles MSCC to FCC Conversion Project Investment Highlights Favorable economics driven by better reliability and gains on margin and volume Improves FCC reliability and increases run length between turnarounds to four years from 1.5 years Adds 5%+ volume expansion through FCC Improves energy ef
Slide 31: Hydrogen Plant Projects
Hydrogen Plant Projects 31 Summary of Project Status and Economics1 Summary of Project Status and Economics1 Summary of Project Status and Economics1 Estimated completion date 1Q12 1Q12 Estimated total investment (mil.) $180 $180 Cumulative spend thru 1Q11 (mil.) $40 $40 Incremental Operating Income
Slide 32: Port Arthur Hydrocracker Project
Port Arthur Hydrocracker Project Investment Highlights Favorable economics driven by margin and volume gains Main unit is 50,000 barrels/day hydrocracker plus facilities to process over 150,000 barrels/day of high-acid, heavy sour Canadian crude Creates high-value products from low- value feedstocks
Slide 33: Montreal Pipeline Project
Montreal Pipeline Project Investment Highlights Favorable economics driven by reducing transportation costs and growing volumes New pipeline with 100,000 barrels/day of throughput capacity Planned closure of Shell Montreal refinery allows Valero to place additional products into Montreal and Ontario
Slide 34: St. Charles Hydrocracker Project
St. Charles Hydrocracker Project Investment Highlights Favorable economics driven by margin and volume gains Main unit is 50,000 barrels/day hydrocracker Creates high-value products from low- value feedstocks plus hydrogen sourced from relatively inexpensive natural gas Unit has volume expansion of
Slide 35: Project Price Set Assumptions
Project Price Set Assumptions 35 Commodity Base Case ($/barrel) 2011 Fwd Curve as of 5/14/11 ($/barrel) WTI 85.00 99.97 WTI - USGC HS Gas Oil -3.45 -16.15 USGC Gas Crack 6.00 19.12 USGC ULSD Crack 11.00 25.42 Natural Gas, $/MMBTU (HHV) 5.00 4.36 Prices shown below are for illustrating a potential es
Slide 36: Project Price Sensitivities
Project Price Sensitivities 36 Operating Income before D&A1 Sensitivities (Delta $ millions/year) Port Arthur HCU St. Charles HCU Memphis & McKee Hydrogen Plants Memphis FCC St. Charles FCC Montreal Products Pipeline WTI, + $1/BBL 3.5 3 2.5 0.4 1.2 N/A WTI - USGC HS Gas Oil, + $1/BBL 14.1 14.1 N/A N
Slide 37: Global CDU Capacity and Additions
37 Source: Valero and Consultant Estimates MMBPD (CHART) Global CDU Capacity and Additions Gross Adds 1.7 MMBPD Closures 0.7 MMBPD Gross Adds 1.8 MMBPD Closures 0.1 MMBPD Gross Adds 1.6 MMBPD Closures 0.5 MMBPD
Slide 38: Continued Global Demand Growth Important to Refining Margins
(CHART) (CHART) Continued Global Demand Growth Important to Refining Margins 38 Source: Consultant and Valero estimates Source: Consultant and Valero estimates MMBPD MMBPD Forecast Forecast
Slide 39: Global Refining Capacity Rationalization
*Partial closure of refinery captured in capacity Note: This data represents refineries currently closed, ownership may choose to restart or sell listed refinery Sources: Industry and Consultant reports and Valero estimates Global Refining Capacity Rationalization 2008 Limited refinery closures, beg
Slide 40: Global Refining Capacity For Sale or Under Strategic Review
Global Refining Capacity For Sale or Under Strategic Review 40 Location Owner CDU Capacity (MBPD) Stanlow, UK Shell 267 Gothenburg, Sweden Shell 80 Kapolei, HI Chevron 54 Meraux, LA Murphy 125 Superior, WI Murphy 35 Milford Haven, UK Murphy 108 Whitegate, Ireland ConocoPhillips 70 Mazeikai, Lithuani
Slide 41: Global Spare Refining Capacity
Note: Availability of world CDU capacity assumed to average ~94%; Historical CDU capacity data from the DOE; USGC 5/3/2 = 3*USGC Gasoline+2*USGC ULSD-5*WTI Estimated global spare refining capacity fell from 7 million BPD of at end of 2009 to 5.7 million BPD at end of 2010 (CHART) MMBPD Margin/bbl Go
Slide 42: Made Excellent Ethanol Acquisitions
Made Excellent Ethanol Acquisitions Built position for average of only 35% of estimated replacement cost 2Q09: acquired 7 plants with 780 million gallons per year of world-scale capacity in advantaged locations 1Q10: Added 3 plants with 330 million gallons per year of capacity 42 Favorable margin ou
Slide 43: Ethanol Grows as Part of the Fuel Mix
U.S. Ethanol Demand BGal/yr We expect ethanol volumes to meet corn RFS requirements, but expect advanced (cellulosic) ethanol to develop more slowly than prescribed Current corn ethanol capacity is approximately 13.7 BGPY (13.1 BGPY operational) and the 2015 RFS for corn-based ethanol is 15 BGPY Sou
Slide 44: World Demand Favors Diesel
World Demand Favors Diesel World Demand Favors Diesel World Demand MMBPD Diesel demand is expected to recover past prior highs and grow rapidly Diesel demand has grown to become much larger than gasoline globally Growing global diesel demand is an export opportunity for U.S. refineries History Forec
Slide 45: Gasoline Fundamentals
Gasoline Fundamentals 45 45 (CHART) USGC Gasoline Crack (per bbl) U.S. Gasoline Demand (mmbpd) (CHART) Source: Argus; 2011 data through May 14 Source: DOE weekly data; 2011 data through week ending May 7 Source: DOE weekly data; 2011 data through week ending May 7 Source: DOE weekly data; 2011 data
Slide 46: Distillate Fundamentals
Distillate Fundamentals 46 46 (CHART) USGC On-road Diesel Crack (per bbl) U.S. Distillate Demand (mmbpd) (CHART) (CHART) Source: Argus; 2011 data through May 14 Source: DOE weekly data; 2011 data through week ending May 7 Source: DOE weekly data; 2011 data through week ending May 7 Source: DOE month
Slide 47: U.S. Transport Indicators: Trucking Indicators
U.S. Transport Indicators: Trucking Indicators 47
Slide 48: U.S. Transport Indicators
(CHART) U.S. Transport Indicators 48 48 Latest data 17 W 2011
Slide 49: Mexico Statistics
(CHART) (CHART) Mexico Statistics Diesel Net Imports (MBPD) Source: PEMEX, latest data Mar-11 Gasoline Net Imports (MBPD) Source: PEMEX, latest data Mar-11 (CHART) Crude Unit Throughput (MBPD) Crude Unit Utilization (CHART) 49 Source: PEMEX, latest data Mar-11 Source: PEMEX, latest data Mar-11
Slide 50: Assumed Refinery Configuration Margins
Assumed Refinery Configuration Margins Gulf Coast Heavy-Sour Coking = 0.6*USGC 87 Gasoline + 0.4*USGC On-road Diesel - (0.5*Maya Crude Oil + 0.5* Mars Crude Oil) Mid-Con WTI Cracking = 0.6*Group 3 87 Gasoline + 0.4*Group 3 On-road Diesel - WTI Crude Oil West Coast Medium-Sour Coking = 0.6*CARBOB + 0
Slide 51: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: Ashley Smith Vice President, Investor Relations 210.345.2744 ashley.smith@valero.com Matthew Jackson Investor Analyst 210.345.2564 matthew.jackson@valero.com 51