Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (January 2017)
41 slides from Valero Energy's investor presentation, Jan 4, 2017
Slide 1: Investor Presentation
Exhibit 99.01 Investor Presentation January 2017
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 1934
Slide 3: Who We Are
Who We Are One of North America’s World’s Largest Independent Refiner Largest Ethanol Producers • 15 refineries, 3 million barrels per day (BPD) of high-complexity capacity • 11 plants with 1.4 billion Greater than 70% of capacity located in U.S. advantaged Gulf Coast and Mid-Continent gallons per y
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 23 for capacities. 4
Slide 5: Current Macro Environment
Current Macro Environment SUPPLY DEMAND 1 3 Abundant global supply of crude oil Forecasted world GDP growth and natural gas 4 Demand response to lower 2 product prices North American logistics build out added efficiency and removed 5 Product shortages in Latin America, Mid-Continent bottlenecks Euro
Slide 6: Our Strategy for Value Creation
Our Strategy for Value Creation Operate safely and reliably and demonstrate environmental responsibility Maintain manufacturing excellence and grow commercial and operational flexibility Demonstrate disciplined capital management and deliver peer leading returns 6
Slide 7: Safety and Reliability are Imperative for Profitability
Safety and Reliability are Imperative for Profitability Personnel Safety Tier 1 Process Safety 1.60 Employees Contractors Industry 0.19 0.60 0.08 VLO’s Performance Versus Industry Benchmarks st 1 Quartile 2008 2 nd 2010 Quartile 2012 3 rd Quartile 2014 4th Quartile Mechanical Availability Personnel
Slide 8: Advantaged Location in U.S. Gulf Coast
Advantaged Location in U.S. Gulf Coast Over 55% of our throughput capacity is U.S Gulf Coast CDU Capacity located in U.S. Gulf Coast (MBPD) • Access to low cost natural gas and abundant North 1,444 American and foreign crudes • Access to deep pool of skilled labor • Pipeline capacity additions have
Slide 9: High Complexity Refineries and Lowest Cost Operator
High Complexity Refineries and Lowest Cost Operator Feedstock Ranges in U.S. Gulf Coast 2016 Refining Cash Operating (2012 – 3Q16) Expenses Per Barrel of Throughput (Excludes Turnaround and D&A) $6 Peer Range VLO Median 34% 34% 34% $5.30 23% 22% 17% $4.50 16% 10% 12% 4% $3.60 $3 Refining Peers See s
Slide 10: Our Portfolio Facilitates Optimization of Product Exports
Our Portfolio Facilitates Optimization of Product Exports VLO’s U.S. Product Exports (MBPD) Gasoline Diesel 541 447 253 164 324 246 69 118 Distillate (1) 2011 2012 2013 2014 2015 2016 Current Potential Capacity Future Gasoline Capacity See slide 20 for notes regarding this slide. (1) (1)Actual expor
Slide 11: Capital Allocation
Capital Allocation 1 Maintain Strong Balance Sheet • Maintain investment grade credit rating • Target 20% to 30% debt-to-cap ratio (1) Sustaining Capex Dividend 2 • Approximately $1.5 billion annually • Commitment to shareholders • Key to safe and reliable operations • Targeting a dividend payout at
Slide 12: Demonstrated Discipline in Capital Allocation
Demonstrated Discipline in Capital Allocation Capital Allocation 2017 Capex Budget(1) ($ billion) ($ billion) Buybacks $2.8 Growth Buybacks $1.3 $1.1 Dividend Dividend $0.8 $1.1 Sustaining Growth Growth $1.6 $1.0 $0.7 Sustaining Sustaining $1.5 $1.5 (1) Approximately $200 MM growth capex carried for
Slide 13: Growth Investments
Growth Investments • Diamond Pipeline completion expected in 4Q17 • 13 MPBD Houston alkylation unit expected to startup in 1H19 Incremental octane would relieve tightness created by Tier 3 gasoline regulations • 6 MBPD production capacity expansion of Diamond Green Diesel plant Project approved in 4
Slide 14: Delivered Peer Leading Total Stockholder Return Since December 31, 2014
Delivered Peer Leading Total Stockholder Return Since December 31, 2014 Total Stockholder Return VLO +48% 65% Peer average +21% Peer minimum -6% Peer Range VLO -40% • Since end of 2014, current leadership team has delivered consistent outperformance. • VLO had second highest TSR in peer group for 20
Slide 15: Our Sponsored MLP Valero Energy Partners LP
Our Sponsored MLP Valero Energy Partners LP (NYSE:VLP) Strategy Accomplishments since IPO • Grow VLP primarily through drop downs from VLO • 81% increase in quarterly cash distribution over MQD • Target organic growth opportunities and midstream • Grew annualized EBITDA attributable to Partnership d
Slide 16: Approximately $1 Billion of Estimated MLP Eligible EBITDA Inventory
Approximately $1 Billion of Estimated MLP Eligible EBITDA (2) Inventory Racks, Terminals, Wholesale Fuels Pipelines (1) Rail Marine(1) and Storage(1) Marketing • Over 1,200 miles • Over 70 million • Approximately • 51 docks • Approximately of active pipelines barrels of active 5,250 purchased 800 MB
Slide 17: Ethanol Business
Ethanol Business Ethanol plant in Aurora, South Dakota Operations Outlook • 11 ethanol plants with 1.4 billion gallons annual • Ethanol demand expected to be strong globally production capacity • Driven by increasing usage mandates, low absolute – Dry mill production process, where corn is ground in
Slide 18: We Believe Valero is an Excellent Investment
We Believe Valero is an Excellent Investment Peer Range VLO Median Return on Invested EBITDA Per Barrel of Net Debt-to-EBITDA Dividend Yield (12-mos ended Sep 30, 2016) (Dec 30, 2016) Capital Throughput (12-mos ended Sep 30, 2016) (Nine-mos ended Sep 30, 2016) 4 5% 11% 3.6 4.3% 9% 9% $5.10 $5.10 5 6
Slide 19: Appendix Contents
Appendix Contents Topic Pages Notes 20 Guidance 21 Cumulative Cash Returns 22 Refining Operating Statistics 23 – 24 Natural Gas Cost Sensitivity 25 Crude Oil Transportation 26 – 27 Fundamentals 28 – 31 Valero Energy Partners LP 32 – 33 Non-GAAP Disclosures 34 – 40 Investor Relations Contacts 41 19
Slide 20: 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 process safety event defined within API Recommended Practice 754. Industry benchmarking and Valero’s performance statistics from
Slide 21: Guidance
Guidance Port Arthur Refinery 4Q16 (anticipated) • Throughput (MBPD) – Gulf Coast 1,580 to 1,630 – Mid-Continent 420 to 440 – North Atlantic 450 to 470 – West Coast 270 to 290 • Refining operating expenses per barrel throughput $3.75 • Ethanol – Production (millions of gallons per day) 3.95 – Operat
Slide 22: Delivering Cash Returns to Stockholders is One of Our Priorities
Delivering Cash Returns to Stockholders is One of Our Priorities Cumulative Capital Returned and Weighted Average WASO(2) Shares Outstanding as Percentage Relative to 2011 at 9/30/2016 Relative to 12/31/2011 Dividends Buybacks WASO Peer Range VLO Average 570 million $10.5 billion 111% shares 98% 105
Slide 23: Our Refining Capacity and Nelson Complexity
Our Refining Capacity and Nelson Complexity Capacities (MBPD)(1) Nelson Complexity Refinery Throughput Crude Index Corpus Christi(2) 370 275 15.1 Houston 175 90 15.4 Meraux 135 125 9.7 Port Arthur 375 335 12.7 St. Charles 305 215 16.1 Texas City 260 225 11.1 Three Rivers 100 89 13.2 U.S. Gulf Coast
Slide 24: Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization
Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization Valero Refinery Availability and Utilization Rates 96% 96% Solomon 95% 95% 95% 94% availability 92% 88% 87% 86% 82% 24
Slide 25: U.S. Natural Gas Provides Opex and Feedstock Cost Advantages
U.S. Natural Gas Provides Opex and Feedstock Cost Advantages • Our refining operations consume approximately 904,000 mmBtu/day of natural gas, of which 57% is operating expense and balance is cost of goods sold • Significant annual pre-tax cost savings compared to refiners in Europe • Prices expecte
Slide 26: 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 Alberta Bakken Niobrara • Pipeline capacity additions Cushing increased market liquidity and crude competition in U.S. Gulf KEY Permian Coast • Discounts for inland crudes Completed versus WTI and Brent have
Slide 27: 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 • Received permits required to begin construction; project is on track for completion in 4Q17 • Provides supply flexibility and ability to improve crude
Slide 28: Ample Supply Provides Resource Advantage to North American Refiners
Ample Supply Provides Resource Advantage to North American Refiners U.S. Crude Oil Production and U.S. Natural Gas Production Imports (Bcf/day) (MBPD) Imports Production 72.9 9,213 8,897 7,889 58.4 5,476 Source: DOE, 2016 data through September. 28
Slide 29: Global Petroleum Demand Growth Expected to Outpace Refinery Capacity Expansion
Global Petroleum Demand Growth Expected to Outpace Refinery Capacity Expansion MMBPD 2.0 1.6 1.2 0.8 0.4 0.0 -0.4 -0.8 2013 2014 2015 2016E-2020E Avg Europe China Middle East Other Net CDU Capacity Additions World Petroleum Demand Growth Source: Consultant and Valero estimates. Net Global Refinery C
Slide 30: U.S. Gasoline Exports
U.S. Gasoline Exports 900 12 Month Moving Average (MBPD) 800 Other 700 Europe 600 Other Latin America 500 Mexico 400 Canada 300 200 100 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Gasoline represents all finished gasoline plus all blendstocks (including ethanol, MTBE, and other oxy
Slide 31: U.S. Diesel Exports
U.S. Diesel Exports 1400 12 Month Moving Average (MBPD) 1200 Other 1000 Europe 800 Other Latin America Mexico 600 Canada 400 200 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: DOE Petroleum Supply Monthly data through September 2016. 31
Slide 32: Diversified VLP Portfolio Integrated with VLO's Refining Assets
Diversified VLP Portfolio(2) Integrated with VLO’s Refining Assets IPO assets Drop downs 4 McKee Terminal April 1, 2016 - $240 mm (1) 1 Texas Crude Systems McKee, Three Rivers, Wynnewood July 1, 2014 - $154 mm (1) 2 Houston and St. Charles Terminals March 1, 2015 - $671 mm (1) 5 Meraux and Three Riv
Slide 33: VLP's Competitive Strengths
VLP’s Competitive Strengths Stable and Predictable Strong Sponsor Quality Assets Revenues • Strategic relationship with • High quality, well • Fee-based agreements with investment grade sponsor maintained assets no direct exposure to VLO integrated with VLO’s commodity price risks refineries and loc
Slide 34: VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, Distribution Coverage, and Debt-to-EBITDA
VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, Distribution Coverage, 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 a
Slide 35: VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, Distribution Coverage, and Debt-to-EBITDA
VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, Distribution Coverage, and Debt-to-EBITDA 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’
Slide 36: VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, and Distribution Coverage
VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, and Distribution Coverage VALERO ENERGY PARTNERS LP RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited, in Thousands, Except Ratio Amount) Nine Months Ended Reconciliation of net income to EBIT
Slide 37: 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) September 30, 2016 Numerator: Total debt and capital lease obligations $ 894,057 Nine Months Ended
Slide 38: VLP Non-GAAP Disclosures: Quarterly EBITDA and Distributable Cash Flow
VLP Non-GAAP Disclosures: Quarterly EBITDA and Distributable Cash Flow VALERO ENERGY PARTNERS LP RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited, in Thousands) 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 Net income $
Slide 39: VLO Non-GAAP Disclosures: Return on Invested Capital
VLO Non-GAAP Disclosures: Return on Invested Capital VLO defines return on invested capital (ROIC) as operating income after tax divided by the total invested capital. VLO defines total invested capital as the sum of total debt and total equity. VLO defines operating income after tax for the trailin
Slide 40: VLO Non-GAAP Disclosures: EBITDA and Net Debt-to-EBITDA
VLO Non-GAAP Disclosures: EBITDA and Net Debt-to-EBITDA VLO defines net debt-to-EBITDA ratio as total debt net of cash divided by EBITDA adjusted for turnaround and catalyst costs. VLO defines EBITDA for the trailing 12 month period (TTM) as the sum of EBITDA for 2015 and the nine months ended Sep 3
Slide 41: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: John Locke Karen Ngo Vice President, Investor Relations Sr. Manager, Investor Relations 210.345.3077 210.345.4574 john.locke@valero.com karen.ngo@valero.com 41