Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (November 2020)
50 slides from Valero Energy's investor presentation, Nov 13, 2020
Slide 1: Advancing the Future of Energy
Advancing the Future of Energy W I T H C A P I TA L D I S C I P L I N E , I N N O V AT I O N A N D U N M AT C H E D E X E C U T I O N . R E L I A B L E A F F O R D A B L E S U S T A I N A B L E E N E R G Y
Slide 2: Cautionary Statement
Cautionary Statement This presentation contains forward-looking statements made by Valero Energy Corporation (“VLO” or “Valero”) within the meaning of federal securities laws. These statements discuss future expectations, contain projections of results of operations or of financial condition or stat
Slide 3: Refining, Renewable Diesel and Ethanol Overview
REFINING RENEWABLE DIESEL ETHANOL W O R L D ’ S L A R G E S T I N D E P E N D E N T W O R L D ’ S 2 ND L A R G E S T R E N E W A B L E D I E S E L W O R L D ’ S 2 ND L A R G E S T C O R N E T H A N O L R E F I N E R P R O D U C E R P R O D U C E R GROWTH PROJECTS FOCUSED ON COST CONTROL, OPTIMIZATIO
Slide 4: Advancing the Future of Energy with Capital Discipline, Innovation and Unmatched Execution
Advancing the Future of Energy with Capital Discipline, Innovation and Unmatched Execution Operations Earnings Growth Capital Discipline Excellence Steadfast in the execution of our Unmatched Execution with a Proven Growth Through Innovation Demonstrated Commitment t o strategy, pursuing History of
Slide 5: Comprehensive Roadmap to Further Reduce Emissions
Comprehensive Roadmap to Further Reduce Emissions with Projects in Execution GHG Emissions Intensity Absolute Reductions and Offsets through Existing Board Approved Projects Target (Scope 1 & 2)) Targeting to reduce 1.4 31.8 and offset Refining GHG emissions by 35.8 20% 4.7 BOE e2 63% CO 5.9 63% 28.
Slide 6: Expanding Competitive Advantage with Low-carbon Transportation Fuels
INVESTOR PRESENTATION | NOVEMBER 2020 - $10,500 Expanding Our Long-term Competitive Advantage with Investments in Economic Low-carbon Transportation Fuels Reinvesting capital with diversification into higher growth, higher return and lower carbon renewable fuels Visibility to Earnings Growth $1.2 to
Slide 7: Global Low-carbon Fuel Policies Driving Renewable Diesel Demand
Global Low-carbon Fuel Policies Driving Demand Growth for Renewable Diesel California Renewable Diesel Consumption (million gallons) 618 Active Low-carbon Mandates Carbon Mandates 113 in Development or GHG Emissions Goal 2030 GHG Emissions Net-Zero GHG Primary Transportation Fuel 2014 2015 2016 2017
Slide 8: Renewable Diesel Driving Low Carbon Results in California
Renewable Diesel Driving Low Carbon Results in California California LCFS Performance LCFS Credit by Fuel Type (% reduction in carbon intensity) (2020 YTD) Cost-effective 0% Other fuel that can be 1% used with Biomethane existing vehicles -6% 9% -5% Electricity (other) 7% Renewable Diesel Does not 3
Slide 9: Expansion into Low-carbon Renewable Fuels Underpinned by Higher Returns
Expansion into Low-carbon Renewable Fuels Underpinned by Higher Economic Returns Renewable Diesel Capacity Renewable Diesel Realized Cash Flow Profile (million gallons per year) ($ in millions) 1,075 $879 million cumulative EBITDA $1,000 $440 million cumulative Capex $750 400 DGD 1 Cumulative Capex
Slide 10: Renewable Diesel Emits Fewer Emissions than an Electric Vehicle
A Vehicle Running on Renewable Diesel Emits RENEWABLE DIESEL A DR IN FUEL Over 40% Fewer Emissions than an Electric Vehicle U.S. Light-Duty Vehicle Life Cycle Emissions U.S. Heavy-Duty Long-Haul Vehicle Life Cycle Emissions A single light-duty vehicle Argonne National Laboratory Study Southwest Rese
Slide 11: Our Competitive Advantage with Diamond Green Diesel
Our Competitive Advantage with Diamond Green Diesel (DGD) DGD is Designed to Process Low Carbon Feedstocks for Higher Product Value $1.89 Carbon Intensity (g CO 2e / MJ) $1.70 $1.58 LCFS credit value ($ per gallon) $1.01 100 82 54 27 32 20 Used Cooking Oil Distillers Corn Oil Animal Fats Soybean Oil
Slide 12: Premier Refining Portfolio Resilient in Carbon-Constrained Scenario
SIZE, SCALE AND GLOBAL REACH LOWEST COST PRODUCER DISCIPLINED INVESTMENTS EXTENSIVE CONNECTIVITY AND GLOBAL OPTIMIZATION TOP QUARTILE OPERATIONS GROWTH WITH LOWER VOLATILITY PREMIER REFINING PORTFOLIO THAT IS RESILIENT EVEN IN A CARBON-CONSTRAINED SCENARIO SIZE, SCALE AND GLOBAL REACH high complexit
Slide 13: Safety and Reliability are Imperative for Profitability
Safety and Reliability are Imperative for Profitability In 2019, we delivered our best year ever on employee safety performance and had the lowest number of environmental events in company history Personnel Safety Tier 1 Process Safety (three-year rolling averages) 0.19 0.90 Valero Industry Event In
Slide 14: Increased Refinery Availability Drives Lowest Cost Producer
Increased Refinery Availability Has Driven Valero to be the Lowest Cost Producer Improvement in Mechanical Availability Refining Cash Operating Expenses Versus Industry Benchmarks Per Barrel of Throughput (excludes turnaround and D&A expenses) Peer Range $7.00 1st Quartile 2018 2nd Quartile 2008 3rd
Slide 15: Refining Generates Significant Cash for Growth and Stockholder Returns
Refining Business Generates Significant Cash to Support Growth and Stockholder Returns Sources and Uses of Cash – Cumulative Last Five Years ($ in billions) December 31, 2014 to December 31, 2019 Sources of Cash Uses of Cash $1.1 $13.3 $25.8 Sustaining capital ($7.8) Growth capital ($4.2) Acquisitio
Slide 16: Disciplined Capital Management is a Constant in Our Strategy
Disciplined Capital Management is a Constant in Our Strategy 1 Maintain Strong Balance Sheet Maintain investment grade credit rating Target 20% to 30% debt-to-cap ratio 2 Non-Discretionary Sustaining Capex Dividend Target approximately $1.5 billion annually Commitment to stockholders Key to safe and
Slide 17: Demonstrated Discipline in Capital Allocation
Demonstrated Discipline in Capital Allocation Estimated Total Annual Capex Annual Capex $2.0 Billion for 2020 and 2021 $3.4 Sustaining Growth $2.8 $2.8 Sustaining Renewables 40% 60% 40% $2.6 $2.6 Growth Other Growth $2.4 $1.8 $2.3 $0.7 $1.3 $2.0 $0.9 $2.0 $2.0 $1.6 $1.0 $1.0 $0.6 Total Capex Growth
Slide 18: Delivering on Our Commitment of Cash Returns to Stockholders
Delivering on Our Commitment of Cash Returns to Stockholders Stockholder Annual Dividend Per Share and Weighted Average Annual Dividend Shares Outstanding Returns as a Percentage Relative to 2012 Yield(2) 556 million Payout Ratio: S&P 500 1.6% shares 11% 30% 31% 54% 65% 63% 56% 47% 100% 7.8% 99% $3.
Slide 19: Demonstrated Lower Volatility in Earnings and Free Cash Flow
Demonstrated Lower Volatility in Earnings and Free Cash Flow Average Free Cash Flow Volatility S&P 500 Free Cash Flow Volatility and Return Profile 2012 – 2019 2012 – 2020 2012 – 2020 Refining Peer Range 12% BEST Cap Financials $2,607 10% 9% Market Valero of % 8% Refining Peers a Communication Infor
Slide 20: Valero's Positioning Relative to the S&P Index
Valero’s Positioning Relative to the S&P 500 Index Growth Value Balance Sheet Compelling Dividend Yield ( ³ 3% Annualized dividend yield) 125% 7.8% Compa Competitive EBITDA Growth ( ³ 10% Consensus CAGR for Quartile Compa 2020E - 2022E) st 1 ($ billion) Compa High Stockholder Return Cash Revolver (
Slide 21: Appendix Contents
Appendix Contents Topic Slide Notes 22-23 VLO Guidance 24 Environmental, Social and Governance (ESG) 25-26 Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent 27 Crude Supply Advantage in the U.S. Gulf Coast and Mid-Continent 28 Global Optimization of Product Exports 29-31 Ratable Global
Slide 22: Notes
Notes Payout Ratio Payout Ratio is the sum of dividends and stock buybacks divided by adjusted net cash provided by operating activities. Adjusted net cash provided by operating activities excludes changes in working capital and 50% of DGD’s operating cash flow (excluding the change in its working c
Slide 23: Notes
Notes Slide 13 Industry total recordable incident rate from U.S. Bureau of Labor Statistics. Valero TRIR includes employee and contractor data. Tier 1 three-year rolling averages of process safety events per 200,000 work hours. Tier 1 defined within API Recommended Practice 754. Industry benchmarkin
Slide 24: VLO Guidance
VLO Guidance 4Q20(1) Throughput (MBPD) – U.S. Gulf Coast 1,410 to 1,460 – U.S. Mid-Continent 385 to 405 – North Atlantic 400 to 420 – U.S. West Coast 230 to 250 Refining cash operating expense per barrel of throughput $4.35 Ethanol – Production (millions of gallons per day) 4.2 – Operating expense p
Slide 25: We are Committed to Protecting the Environment
We are Committed to Protecting the Environment E ENVIRONMENTAL Environmental Recycling, Reusing, Management Systems Reduction of GHG Emissions Carbon Capture Reclaiming, and Reducing A proprietary systematic In 2019, we recycled more than approach, Commitment To Reduced GHG emission Our Port Arthur
Slide 26: Social and Governance
I N V E S T O R P R E S E N T A T I O N | N O V E M B E R 2 0 2 0 Board of Directors Stakeholder Engagement All-Employee Bonus Record Donations Sharing Our Success with the Communities where we Operate with Strong Governance and Ethical Standards SOCIAL GOVERNANCE S 10 members are independent 5 of 1
Slide 27: Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent
I N V E S T O R P R E S E N T A T I O N | N O V E M B E R 2 0 2 0 UNITED STATES CANADA SAN ANTONIO MONTREAL MEXICO CITY 1,484 57% 461 17% 440 17% 230 9% Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent WHOLESALE MARKETING PRESENCE VALERO ETHANOL PLANTS VALERO REFINERIES BRANDED WHOLES
Slide 28: Crude Supply Advantage in the Gulf Coast and Mid-Continent
INVESTOR PRESENTATION | NOVEMBER 2020 17% 6% 17% 8% 34% 34% 54% 23% Heavy Sour Medium / LightSour Sweet Residuals 22% 17% 11% 40% Crude Supply Advantage in the Gulf Coast and Mid-Continent Valero Gulf Coast Feedstock Ranges 2012 -2018 2012 -2020 To St. James DiamondPipeline Colorado City Childress S
Slide 29: Operational Flexibility and Refinery Optimization
INVESTOR PRESENTATION | NOVEMBER 2020 12% 11% 2% 4% VLO Industry Operational Flexibility and Refinery Optimization Provide Competitive Advantage Our operational flexibility and optimization to quickly shift light product yields as market conditions signal move from “max gasoline” to “max distillate”
Slide 30: Competitive Global Light Products Supply
Competitive Global Light Products Supply VLO U.S Product Exports (thousand barrels per day) Gasoline Distillate 295 180 115 2012 2013 2014 2015 2016 2017 2018 2019 2020 Oct 20 2020 reflects year-to-date through September. Latin America Refining Runs (million barrels per day) 6.6 6.5 6.3 6.1 6.1 5.9
Slide 31: Investing to Grow Product Exports into Higher Netback Markets
Investing to Grow Product Exports into Higher Netback Markets Advantaged Refineries and Logistics U.S. Product Exports (12-month moving average, mbpd) Other Europe Canada Other Latin America Mexico Exports to Latin America make up 81% of total U.S. (1) product exports 2009 2010 2011 2012 2013 2014 2
Slide 32: Ratable Global Wholesale Supply Through Extensive Marketing Network
Ratable Global Wholesale Supply Through an Extensive Marketing Network Wholesale Volumes million barrels per day of (% of total light products production, mbpd) 1.2 ratable wholesale supply U.S.(1) Europe and Canada(2) Latin America(3) of our light products 50% 51% >50% 62% 50% 49% 49% 47% productio
Slide 33: Valero's Logistics Assets
Pipelines(1) Racks, Terminals and Storage(1) Rail Marine(1) Valero’s Logistics Assets Over 3,000 miles of active pipelines Diamond Pipeline expansion to be operational in 2021 Central Texas Pipeline started up in 2019 Sunrise Pipeline expansion started up in 2018 Over 130 million barrels of active s
Slide 34: Ethanol Operations Outlook
Operations Outlook 14 plants with 1.73 billion gallons annual production capacity – Dry mill production process, where corn is ground into flour and mixed with water before fermentation – Efficient plants with scale, located in the corn belt – Operational best practices transferred from refining Cos
Slide 35: Investing to Improve Margins and Light Product Yields
Investing to Improve Margins and Light Product Yields Port Arthur Coker $975 MM anticipated cost for 55 MBPD delayed coker and sulfur recovery unit, with expected startup in 2023 Creates two independent CDU-VDU-coker trains, which should improve turnaround efficiency and reduce maintenance-related l
Slide 36: Houston Alkylation Unit
Houston Alkylation Unit Investing to Upgrade Product Value Houston and St. Charles Alkylation Units Octane demand expected to grow due to Tier 3 sulfur regulations and CAFE standards Abundant, low cost North American NGL supply provides advantage for Gulf Coast capacity additions Both units upgrade
Slide 37: Investing to Improve Access to North American Crude
Investing to Improve Access to North American Crude and Lower Refinery Operating Cost Structure GROWTH PROJECTS FOCUSED ON OPTIMIZATION AND MARGIN CAPTURE Completed Diamond 200 MBPD Provides Improves crude Pipeline project with 200 expansion and additional Mid- oil supply MBPD capacity connecting ex
Slide 38: Investing to Supply Higher Demand Markets and Expand Exports
Investing to Supply Higher Demand Markets and Expand Product Export and Biofuels Blending Capabilities Central Texas pipelines and terminals to supply high-growth refined products market Started up in September 2019 Approximately 205 miles of pipe(1), 960 thousand barrels of total storage capacity,
Slide 39: Our Refining Capacity and Nelson Complexity
Our Refining Capacity and Nelson Complexity Capacities (mbpd)(1) Nelson Complexity Refinery Throughput Crude Index Corpus Christi(2) 370 290 14.4 Houston 255 205 8.0 Meraux 135 125 9.7 Port Arthur 395 335 12.7 St. Charles 340 215 16.1 Texas City 260 225 11.1 Three Rivers 100 89 13.2 U.S. Gulf Coast
Slide 40: Now vs. Then – A Shift in Valuation
In the Past New Paradigm INDUSTRY/MACRO INDUSTRY/MACRO Majority of the U.S. refining capacity operated by large integrated oil Majority of the U.S. refining capacity operated by independent companies refiners Range bound industry wide EV/EBITDA multiple +/- 4.5x EV/EBITDA multiple expansion and disp
Slide 41: Electric Vehicle Myth: Zero Emissions
Electric Vehicle (EV) Myth: Zero Emissions Myth: Zero Emissions Fact: Significant Emissions from EV Life Cycle Cobalt & Rare Mining/Extraction Earth Processing Manufacturing EVs Power Generation Embedded CO2 Emissions Life cycle of emissions from EVs is significant – from mining raw materials to fab
Slide 42: Non-GAAP Disclosures
Non-GAAP Disclosures Return on Invested Capital (ROIC) VLO defines return on invested capital (ROIC) as adjusted net income attributable to VLO before adjusted net interest expense after-tax divided by average invested capital. VLO defines adjusted net income attributable to VLO as net income attrib
Slide 43: Non-GAAP Disclosures
Non-GAAP Disclosures Renewable Diesel Adjusted EBITDA Renewable diesel adjusted EBITDA is defined as DGD’s operating income adjusted to reflect the blender’s tax credit and excluding depreciation and amortization expense. Operating income is adjusted to reflect the blender’s tax credit in the proper
Slide 44: Non-GAAP Disclosures: Return on Invested Capital (ROIC)
Non-GAAP Disclosures: Return on Invested Capital (ROIC) RETURN ON INVESTED CAPITAL (ROIC) (unaudited, in millions) Year Ended December 31, 2014 2015 2016 2017 2018 2019 Numerator: Net income attributable to VLO stockholders $3,990 $2,289 $4,065 $3,122 $2,422 Total effect of special items after-tax 6
Slide 45: Non-GAAP Disclosures: Adjusted EBITDA
Non-GAAP Disclosures: Adjusted EBITDA RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (Unaudited, in Millions) Year Ended December 31, Nine Months Ended 2009 2012 2013 2014 2015 2016 2017 2018 2019 September 30, 2020 Net income (loss) ($1,982) $2,080 $2,728 $3,711 $4,101 $2,417 $4,156 $3,353 $2,784
Slide 46: Non-GAAP Disclosures: Renewable Diesel Net Cumulative Cash Flow
Non-GAAP Disclosures: Renewable Diesel Net Cumulative Cash Flow RECONCILIATION OF DIAMOND GREEN DIESEL LLC’s (DGD) OPERATING INCOME AND TOTAL CAPITAL INVESTEMENTS TO RENEWABLE DIESEL NET CUMMULATIVE CASH FLOW (unaudited, in millions) Year Ended December 31, 2011 2012 2013 2014 2015 2016 2017 2018 20
Slide 47: Non-GAAP Disclosures: Renewable Diesel Adjusted EBITDA Margin
Non-GAAP Disclosures: Renewable Diesel Adjusted EBITDA Margin RECONCILIATION OF DIAMOND GREEN DIESEL LLC’s (DGD) OPERATING INCOME TO DGD’s ADJUSTED EBITDA PER GALLON (unaudited, in millions except for per gallon amounts) Year Ended December 31, Nine Months Ended 2015 2016 2017 2018 2019 September 30
Slide 48: Non-GAAP Disclosures: Free Cash Flow
Non-GAAP Disclosures: Free Cash Flow RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES UNDER GAAP TO FREE CASH FLOW (unaudited, in millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 Net cash provided by operating activities $ 5,270 $ 5,564 $ 4,241 $ 5,611 $ 4,820 $ 5
Slide 49: Non-GAAP Disclosures: Payout Ratio
Non-GAAP Disclosures: Payout Ratio RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (unaudited, in millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 Net cash provided by operating activities $5,270 $5,
Slide 50: Investor Relations Contacts
INVESTOR PRESENTATION | NOVEMBER 2020 Investor Relations Contacts Homer Bhullar Vice President, Investor Relations 210.345.1982 Homer.Bhullar@Valero.com Eric Herbort Senior Manager, Investor Relations 210.345.3331 Eric.Herbort@Valero.com Gautam Srivastava Manager, Investor Relations 210.345.3992 Gau
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