Valero Energy Corporation · NYSE:VLO
Valero Energy — Credit Suisse First Boston 2003 Energy Summit
22 slides from Valero Energy's conference presentation, Feb 6, 2003
Slide 1: Credit Suisse First Boston 2003 Energy Summit
Credit Suisse First Boston 2003 Energy Summit February 7, 2003
Slide 2: 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. It is important to n
Slide 3: System Overview
Valero Refineries Branded Marketing Presence San Antonio Headquarters Valero Terminals Valero Pipelines Valero LP Refined Products Terminals Valero LP Crude Oil Storage Facilities Valero LP Pipelines VALERO LP ASSETS VALERO ASSETS System Overview
Slide 4: Key System Attributes
Key System Attributes Large size and scope of operations Complex refining system Geographic diversity Mid-Continent and Canadian refining systems contributed $250 million to 2002 operating income Integrated business lines Retail exposure contributing to earnings $130 million to operating income in 2
Slide 5: Feedstocks Overview
Term Crude Spot Purchases 0.65 0.35 Sweet Crude Sour Feedstocks Blendstocks Other Feedstocks 0.3 0.6 0.05 0.05 Sour Feedstocks 60% Sweet Crude 30% Spot Purchases 35% Term Purchases 65% Other Feedstocks 5% (Based on 1.9 million BPD throughput capacity) Blendstocks 5% Feedstocks Overview High percenta
Slide 6: Refined Products & Distribution Channels
Gasoline/Blendstocks Distillate Asphalt, Petro. Other 52 30 18 Distillate 30% Asphalt, Petrochemicals, Other 18% Gasoline & Blendstocks 52% Bulk Retail Wholesale 60 10 30 Bulk 60% Wholesale 30% Retail 10% REFINED PRODUCT SLATE GASOLINE & DISTILLATE DISTRIBUTION CHANNELS Refined Products & Distributi
Slide 7: Retail and Wholesale Marketing
Retail and Wholesale Marketing Retail (10% of Valero production) 1,250 U.S. retail sites Consolidating brands and optimizing network size 1,100 Canadian retail sites Canadian and Northeast home heating oil business Wholesale (30% of Valero production) One-quarter of wholesale volumes sold through 1,
Slide 8: Impact of Venezuelan Strike
Impact of Venezuelan Strike Venezuela normally exports 550,000 BPD of light products and 2.0 million BPD of crude and feedstocks Valero only purchases about 50,000 BPD of Venezuela crude Cessation of exports increased feedstock costs As strike is easing, crude oil is returning to market Venezuelan r
Slide 9: 2003 Fundamentals Looking Strong
2003 Fundamentals Looking Strong Cold winter drawing down distillate stocks Heavy industry turnaround schedule in February 7% of U.S. capacity down 10% of California conversion unit capacity down Petrochemicals being pulled from gasoline pool Global refined product inventories at 5-year lows Imports
Slide 10: Financial Summary
($ in millions, except per share amounts) 2002 2003 est. (1) EBITDA $879 $1,500 Net Income $91 $475 Earnings Per Share (diluted) $0.83 $4.20 Cash Flow from Operating Sources $575 $1,125 PEPS Conversion (August 2003) ------ $175 Asset sales $1,225 ----- Capital Investments $975 $1,100 Total Debt $4,9
Slide 11: Ample Liquidity
(in millions) Cash (December 31) $ 380 Bank facility, matures Dec. '06 750 Bank facility, matures Nov. '03 750 Other lines 190 Uncommitted bank and L/C facilities 100 Total Capacity 2,170 Borrowings as of January 31 Bank facilities (600) Letters of Credit (100) Available Capacity $1,470 Ample Liquid
Slide 12: Long-Term Trends Favor Valero
Reduced U.S. product supply due to environmental regulations More difficult to export to U.S. market Potential lost 100 MBPD gasoline, 320 MBPD distillate State MTBE bans expanding Tightening domestic supply / demand balance U.S. demand growth projected to exceed capacity growth Latin America demand
Slide 13: Appendix
Appendix
Slide 14: Gasoline Fundamentals - Demand & Production
Gasoline Fundamentals - Demand & Production Gasoline demand strong in 2002, up about 2.6% vs. 2001 Stable prices Continued penetration of SUV's and light trucks Driving rather than flying for shorter trips Continued strong demand in January Production declining in 1Q with lower refinery utilization
Slide 15: Gasoline Fundamentals - Inventories & Gas Cracks
January inventories typically build in advance of turnarounds and RVP change, then decline Run cuts occurring due to poor sweet crude oil and intermediate feedstock economics Heavy turnaround schedule for February/March Margins have improved with lower production and continued strong demand Gasoline
Slide 16: Gasoline Fundamentals - California
MTBE phase-out underway, expected to result in reduced CARB production of 60,000 barrels per day Lower RVP standard begins March 1 Heavy conversion unit turnarounds in February 10% of California capacity down Gasoline Fundamentals - California Total PADDV Gasoline Stocks, '000bbls 25000 27000 29000
Slide 17: Distillate Fundamentals - Demand & Production
Strong distillate demand - up 12% vs. last year Cold winter Fuel switching has increased distillate demand approximately 200 MBPD Jet fuel fundamentals improving Distillate production declining sharply Decline has accelerated with turnarounds Distillate Fundamentals - Demand & Production
Slide 18: Distillate Fundamentals - Inventories & Heat Cracks
Distillate inventories currently well below last year Should continue to decline with good demand, upcoming turnarounds and exports to Latin America As a result, margins have recovered Averaged $3.75 per barrel in January vs. $2.50 per barrel 5-year average Distillate Fundamentals - Inventories & He
Slide 19: Sour Crude Discounts
Although sour crude discounts recovered in 4Q from first half lows, they narrowed in December due to Venezuela Mars discount $4.40 per barrel for November; as low as $1.00 per barrel in December Sour crude discounts have since widened with additional OPEC production available in February and March M
Slide 20: 2002 Synergy Overview
2002 Synergy Overview Non Recurring Recurring Total Expense Synergies $100 $20 $120 Maintenance and Operating Expense Savings through Best Practices Energy Expense Savings Procurement Initiatives Other Expense Synergies (Product Supply, Crude Supply, Logistics) Gross Margin Synergies $80 $60 $140 Cr
Slide 21: Tier II Fuel Specs to Reduce Supply
Tier II specifications will dramatically reduce allowable sulfur Industry investment estimated at $15 billion for Tier II Valero expects to invest approximately $1 billion over 5 years Expect volumetric reduction Octane loss Limited capacity creep/capital constraints Refinery closures Gasoline 2003
Slide 22: 2003 Capital Investments
2003 Environmental Tier II low sulfur (30 ppm) gasoline $225 Tier II low sulfur (15 ppm) diesel 0 Other environmental 325 Reliability and safety improvement 200 Turnarounds 100 Strategic initiatives 250 Cost reduction Gross margin improvement Heavy/sour crude processing $1,100 Capital Investments
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