Valero Energy Corporation · NYSE:VLO
Valero Energy — Lehman Brothers Energy/Power Conference 2007
20 slides from Valero Energy's conference presentation, Sep 4, 2007
Slide 1: Lehman Brothers Energy/Power Conference
Lehman Brothers Energy/Power Conference September 5, 2007 Bill Klesse Chairman and CEO
Slide 2: Refining Fundamentals Strong as Demand Keeps Growing
Refining Fundamentals Strong as Demand Keeps Growing U.S. Demand Global Petroleum Demand MMBPD MMBPD MMBPD 9.4 4.3 88 Gasoline 9.2 85 4.1 9.0 83 Distillate 8.8 80 3.9 8.6 78 8.4 3.7 75 2001 2002 2003 2004 2005 2006 2007E 2001 2002 2003 2004 2005 2006 2007E Source: U.S. Department of Energy and Valer
Slide 3: Asian Petroleum Demand Increasing
Asian Petroleum Demand Increasing MBPD Asian Crude Runs 23,000 2007 22,500 22,000 2006 21,500 2005 21,000 20,500 20,000 Jan Feb Mar Apr May Jun Jul ; Aug Sep Oct Nov Dec Source: Industry reports
Slide 4: New Era of Refining Filled with Challenges
New Era of Refining Filled with Challenges Operating costs higher More stringent More refining and increasingfuel units, more specifications complicated and operations regulations Construction Growth in costs higher variety of fuels and durations and longer blendstocks Turnarounds Alternative taking
Slide 5: Spare Global Refining Capacity Expected to Remain Tight
Spare Global Refining Capacity Expected to Remain Tight MMBPD 3.0 Petroleum Demand Growth CDU Capacity Growth 2.5 Conversion Capacity Growth 2 2.0 (FCC, HCU) 1.5 1.0 0.5 0.0 2004 2005 2006 2007E 2008E 2009E Source: Industry reports and Valero forecast 1 Includes capacity creep; 2 Conversion units (F
Slide 6: Refinery Downtime – Actual Exceeded Expectations
Refinery Downtime – Actual Exceeded Expectations Total U.S. Fluidized Catalytic Cracker Outages Fall 2006 Fall 2007 MBPD Expected Actual Expected Actual (as of August 21, 2006) (as of August 23, 2007) 800 600 400 200 0 Sep-06 Oct-06 Nov-06 Sep-06 Oct-06 Nov-06 Sep-07 Oct-07 Nov-07 Sep-07 Oct-07 Nov-
Slide 7: Strong Fundamentals Driving Refining Margins
Strong Fundamentals Driving Refining Margins Per Barrel 3/2/1 Crack Spreads $25 Gulf Coast (WTI) East Coast (WTI) Mid-Cont (WTI) $20 West Coast (ANS) $15 $10 $5 $0 2001 2002 2003 2004 2005 2006 2007E Sources: Historical data Platt’s; 2007 estimate based on historical data and Valero forecast Expect
Slide 8: Feedstock Discounts Favorable for Heavy Sour Refiners
Feedstock Discounts Favorable for Heavy Sour Refiners Per Barrel Feedstock Discounts Estimated Quality of Reserves (2006) $18 Maya vs. WTI $15 Mars vs. WTI $12 vs. LLS Light Sweet 20% $9 High Acid 2% $6 Sour 13% 66% $3 Heavy Sour $0 01 7 20 2002 2003 2004 2005 2006 0 / 0 2007YTD 8/3 Sources: Platt’s
Slide 9: Canadian Heavy Sour Crude Oil Heading to Gulf Coast
Canadian Heavy Sour Crude Oil Heading to Gulf Coast MBPD Canadian Heavy Crude Supply 2,500 Canadian heavy sour supply rapidly increasing 2,000 Forecast to grow to 1mmbpd by 2015 1,500 1,000 500 0 2007 2009 2011 2013 2015 Source: CAPP Multiple pipeline and logistics projects in progress Industry has
Slide 10: Valero's Strategy
Valero’s Strategy Improve operations • Achieve $1 billion in annual operating income improvements over next 5 years Energy, mechanical reliability, and other operating expenses • Higher performance expectations Optimize portfolio · Sold Lima, OH refinery · Strategic asset review Use balanced approac
Slide 11: 2008 Capital Expenditures Budget Focused on Growth Projects and Improvements
2008 Capital Expenditures Budget Focused on Growth Projects and Improvements Millions $4,700 to $5,000 Budgeted $3,500 $1,970 to $2,270 Strategic $3,200 Tier II $990 $60 Sustaining/ Other $350 $1,650 Turnarounds $1,020 $440 Regulatory $480 $580 $360 2007E 2008E 1 1 2008 estimated budget includes som
Slide 12: Valero Working on Reliability
Valero Working on Reliability % Crude Unit Utilization 94 92 90 88 U.S. Average 86 Valero 84 82 80 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Sources: DOE, Company reports Excluding the McKee outage, main issues are Issue Location Addressing Fluid Cat Crackers St. Charles 2009 Memphis 2009 Cok
Slide 13: Using Balanced Approach to Allocate Cash
Using Balanced Approach to Allocate Cash Billions Cumulative Allocations 2005-2007E Returning cash to shareholders $15 Buybacks in 2007 • Purchased 65 milli on shares with $10$ 4.5 billion YTD Net Acquisitions and • Plan to meet $6 billion commitment Growth Capital in 2007 $5 • Potential share count
Slide 14: Valero Energy – The Best Value in Refining
Valero Energy – The Best Value in Refining Refining Industry Strong fundamentals support high margin environment • Longer than Wall Street expects Valero Energy Geographically diversified, high conversion assets Highly liquid stock Improving operations Investing for growth in EPS and cash flow per s
Slide 15: Appendix
Appendix 16
Slide 16: Valero Operations Map
Valero Operations Map Quebec, Canada · 215,000 bpd capacity Benicia, California · 170,000 bpd capacity Paulsboro, New Je rsey · 195,000 bpd capacity Delaware City, Delaware Wilmington, California • 210,000 bpd capacity · 135,000 bpd capacity McKee, Texas · 170,000 bpd capacity Memphis, Tennessee · 1
Slide 17: Margins and Days of Supply
Margins and Days of Supply Gulf Coast Gasoline Margin (per bbl) Gulf Coast Diesel Margin (per bbl) $40$ 20 $35 2007 2007 $30$ 15 2006 $25 2006 $20 $10 $15 $10$ 5 5-Yr Avg 5-Yr Avg $5 $0$ 0 Jan Apr Jul Oct Jan Apr Jul ; Oct Source: Platts conventional unleaded 87; 2007 data through August 24 Source:
Slide 18: Key Initiatives for Operating Income Improvements
Key Initiatives for Operating Income Improvements Mechanical AvailabilityEnergy EfficiencyNon-Energy OPEX PSM initiative Energy stewardship program Maintenance expense • System wide • System wide (2010) improvement FCCU/MSCC revamps Crude preheat and heater imp. • System wide • Memphis, Port Arthur,
Slide 19: U.S. Crude Runs Expected to Be Lower by End of Year
13,000 13,500 14,000 14,500 15,000 15,500 16,000 16,500 17,000 17,500 18,000 MBPD Jan-05 Feb-05 Sources: DOE, Valero estimatesMar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Non-crude CDU input Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Crude Runs Sep-06 Known CDU
Slide 20: 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 1934
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