Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (January 2016)
35 slides from Valero Energy's investor presentation, Jan 6, 2016
Slide 1: Investor Presentation January 2016
Investor Presentation January 2016 Exhibit 99.01
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 World’s Largest Independent Refiner 15 refineries, 3 million barrels per day (BPD) of high-complexity throughput capacity Greater than 70% of refining capacity located in U.S. Gulf Coast and Mid-Continent Approximately 10,000 employees Operator of Liquids-Focused Logistics Assets General
Slide 4: Strong U.S. Gulf Coast and Mid-Continent Presence
Strong U.S. Gulf Coast and Mid-Continent Presence Refineries and ethanol plants are in advantaged locations See slide 21 for capacities
Slide 5: Current Macro Environment
Current Macro Environment Abundant global supply of crude oil and natural gas Forecasted world GDP growth Structural product shortage in Latin America, Europe, Africa and Eastern Canada Demand response to lower product prices SUPPLY DEMAND North American logistics build out adds efficiency and remov
Slide 6: Safety and Reliability are Imperative for Profitability
Safety and Reliability are Imperative for Profitability See slide 20 in Appendix for notes regarding this slide. Operate Safely and Reliably
Slide 7: Peer Leading Refinery Complexity and Lowest Cost Operator Drives Profitability
Peer Leading Refinery Complexity and Lowest Cost Operator Drives Profitability See slide 20 in Appendix for notes regarding this slide. 2015 YTD through Sep 30. Expand Commercial and Operational Flexibility
Slide 8: Leader in Location-Advantaged CDU Capacity and Flexible Feed Slates
Leader in Location-Advantaged CDU Capacity and Our U.S. Gulf Coast Assets Have Flexible Feed Slates Expand Commercial and Operational Flexibility See slide 20 in Appendix for notes regarding this slide. Capacities as of Jan 1, 2016.
Slide 9: Our Portfolio Facilitates Optimization of Product Exports
Our Portfolio Facilitates Optimization of Product Exports Distillate Gasoline Expand Commercial and Operational Flexibility Actual export volumes for 2011 – Nov 2015. See slide 20 in Appendix for notes regarding this slide.
Slide 10: Capital Allocation: Maintain Strong Balance Sheet
Capital Allocation Maintain Strong Balance Sheet (1)Debt-to-cap ratio based on total debt reduced by $2 billion of cash. Disciplined Capital Management to Unlock Value Sustaining Capex Approximately $1.5 billion of annual spend Key to safe and reliable operations Dividend Strategy is to maintain a s
Slide 11: Capital Investments Focused on Maintaining Asset Base, Enhancing Margins, Growing Logistics
31% INCREASE from 2015 Capital Investments Focused on Maintaining Asset Base, Enhancing Margins, and Growing Logistics $2.65 billion 2015 capital program expected to be under budget, mostly in discretionary spending Targeting $2.6 billion in 2016 Includes some 2015 carry forward 2016 growth investme
Slide 12: Investing in Asset Optimization
Investing in Asset Optimization 160 MBPD total new topping capacity at Corpus Christi and Houston refineries to process up to 50 API sweet crude Replaces approximately 55 MBPD of purchased low sulfur resid for FCCs with indigenous production Expect net throughput capacity increase of about 105 MBPD
Slide 13: 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, OK Provides supply flexibility and ability to improve crude blend quality Approximately $900 MM total project cost Exercised option in Dec 2015 to acquire
Slide 14: Delivering High Cash Returns to Stockholders is One of Our Priorities
Delivering High Cash Returns to Stockholders is One of Our Priorities 75% total payout target for 2015 and 2016; exceeded target for 2015 2015 YTD includes actual dividends and estimated buybacks, pending year-end close and settlement. Payout ratio as percent of 2015 net income. Disciplined Capital
Slide 15: Our Sponsored MLP Valero Energy Partners Summary
VLO owns entire 2% GP interest, all incentive distribution rights, and 67.1% LP interests High-quality assets integrated with VLO’s system Fee-based, liquids-focused revenue generation with no direct commodity price exposure Our Sponsored MLP Valero Energy Partners (NYSE:VLP) Summary 22% CAGR over M
Slide 16: More Than $1 Billion of Estimated MLP Eligible EBITDA Inventory
More Than $1 Billion of Estimated MLP Eligible EBITDA Inventory Racks, Terminals, and Storage(1) Over 80 million barrels of active shell capacity for crude and products 139 truck rack bays Rail Three crude unloading facilities with estimated total capacity of 150 MBPD 5,320 purchased railcars, expec
Slide 17: Renewables Business
Renewables Business Renewables Operations 11 ethanol plants with 1.3 billion gallons total annual production capacity Low capital investment with scale and location in corn belt Operational best practices transferred from refining Diamond Green Diesel plant 50-50 JV with approximately 11 MBPD of ren
Slide 18: We Believe Valero is an Excellent Investment
We Believe Valero is an Excellent Investment Chart data sources: Bloomberg and Goldman Sachs as of Dec 31, 2015. See slide 20 in Appendix for notes regarding this slide. We Believe VLO is Undervalued Disciplined management team Strong financial position Favorable macro environment Proven operations
Slide 19: Appendix Contents
Appendix Contents Topic Pages Notes 20 Refining Operating Statistics 21 – 23 Natural Gas Cost Sensitivity 24 Crude Oil Transportation 25 – 26 Fundamentals 27 – 30 Valero Energy Partners LP 31 – 34 Investor Relations Contacts 35
Slide 20: Notes Slide
Notes Slide 5 Macro environment themes represent industry consultant views. Slide 6 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 VLO performance statistics from Solom
Slide 21: Our Refining Capacity and Nelson Complexity
Our Refining Capacity and Nelson Complexity Refinery Capacities (MBPD)(1) Nelson Complexity Index Throughput Crude Corpus Christi(2) 370 275 19.9 Houston 175 90 15.4 Meraux 135 125 9.7 Port Arthur 375 335 12.4 St. Charles 305 215 16.0 Texas City 260 225 11.1 Three Rivers 100 89 13.2 U.S. Gulf Coast
Slide 22: Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization
Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization 2015 YTD through Sep 30.
Slide 23: Valero Utilized Percent of Its Available Light Crude Capacity
Valero Utilized 95 Percent of Its Available Light Crude Capacity in North America in 3Q15 McKee Refinery Crude Unit Expansion 27 MBPD additional capacity, completed 4Q15 Distillate recovery improvements Corpus Christi Refinery Crude Unit 70 MBPD new capacity, started up late 4Q15 Displaces 25 MBPD i
Slide 24: U.S. Natural Gas Provides Opex and Feedstock Cost Advantages
U.S. Natural Gas Provides Opex and Feedstock Cost Advantages Estimated per barrel cost of 864,000 mmBtu/day of natural gas consumption at 92% refinery throughput capacity utilization, or 2.7 MMBPD. $1.2 billion higher pre-tax annual costs $800 MM higher pre-tax annual costs Our refining operations c
Slide 25: Estimated Crude Oil Transportation Costs
Estimated Crude Oil Transportation Costs to Houston Pipe $2 to $4/bbl USGC to USEC U.S. Ship $4/bbl USGC to Canada Foreign Ship $2/bbl U.S. Ship $4 to $5/bbl Brent to USEC $2/bbl to USEC Rail $10 to $11/bbl to St. James Rail $9/bbl Cushing Midland to Houston Pipe $3/bbl Corpus Christi to Houston $1
Slide 26: Pipeline Takeaway Capacity Additions Have Increased Crude Competition
KEY Trunkline 400 Flanagan 600 Pipeline Takeaway Capacity Additions Have Increased Crude Competition in the U.S. Gulf Coast TransCanada Mainline Conversion 1,100 TMX 890 Keystone XL 700 Grand Mesa / Saddlehorn 350 Niobrara Seaway 450 Completed 2014 – 15 2016 or Later Startup Capacities in MBPD. Pipe
Slide 27: Production Growth Provides Resource Advantage to North American Refiners
Production Growth Provides Resource Advantage to North American Refiners Source: DOE, 2015 data through September
Slide 28: Global Petroleum Demand Growth Expected to Outpace Refinery Capacity Expansion
Source: Consultant and Valero estimates. Net Global Refinery CDU Additions = New Capacity + Restarts – Announced Closures. Global Petroleum Demand Growth Expected to Outpace Refinery Capacity Expansion
Slide 29: U.S. Gasoline Exports
Gasoline represents all finished gasoline plus all blendstocks (including ethanol, MTBE, and other oxygenates) Source: DOE Petroleum Supply Monthly data through September 2015. 4 Week Average estimate from Weekly Petroleum Statistics Report and Valero estimates. U.S. Gasoline Exports
Slide 30: U.S. Diesel Exports
Source: DOE Petroleum Supply Monthly data through September 2015. 4 Week Average estimate from Weekly Petroleum Statistics Report. U.S. Diesel Exports 12 Month Moving Average (MBPD)
Slide 31: VLP's Competitive Strengths
VLP’s Competitive Strengths Strong Sponsor Strategic relationship with investment grade sponsor VLO Quality Assets High quality, well maintained assets integrated with VLO’s refineries and located in advantaged regions Stable Revenues Stable and predictable cash flows from long term, fee-based contr
Slide 32: VLP Assets Located in U.S. Gulf Coast and Mid-Continent
VLP Assets Located in U.S. Gulf Coast and Mid-Continent VLP’s assets are integrated with Valero’s refining system (1)Total consideration value. Texas Crude Systems McKee, Three Rivers, Wynnewood July 1, 2014 - $154 mm(1) Houston and St. Charles Terminals March 1, 2015 - $671 mm(1) Corpus Christi Ter
Slide 33: Valero's GP Interest in VLP Nearing the High Splits
Valero’s GP Interest in VLP Nearing the “High Splits” Target Quarterly Distribution per Unit Marginal Percentage Interest in Distributions Unitholders GP Minimum $0.2125 98% 2% First target above $0.2125 up to $0.244375 98% 2% Second target above $0.244375 up to $0.265625 85% 15% Third target above
Slide 34: VLP Unit Price Has Outperformed Peers in 2015
VLP Unit Price Has Outperformed Peers in 2015 Prices through Dec 31 close.
Slide 35: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: John Locke Vice President, Investor Relations 210.345.3077 john.locke@valero.com Karen Ngo Manager, Investor Relations 210.345.4574 karen.ngo@valero.com