Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (October 2003)
14 slides from Valero Energy's investor presentation, Oct 27, 2003
Slide 1: October 2003 Management Presentation
October 2003 Management Presentation
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: Offering Summary
Securities Offered Issue Date Maturity Date Face Value Coupon Conversion Ratio Optional Conversion Rights Latest VLO Stock Price Selling Shareholder Use of Proceeds Joint Bookrunners Offering Summary 8,460,000 Mandatory Convertible Preferred Shares July 1, 2003 July 1, 2006 $25.00 $0.50 per share, 2
Slide 4: Extensive Refining & Marketing System
Market Capitalization $4.5 billion Annual Revenue $30 billion Total Assets $14.4 billion Number of Employees 20,000 Total Refining Capacity 2 million BPD Extensive Refining & Marketing System
Slide 5: Valero Best Among Refiners
VLO SUN ASH PCO TSO Market Cap 4.462 2.94 2.182 1.68 0.475 Biggest Market Cap Source: Purvin & Gertz Billion $ VLO SUN ASH PCO TSO Gulf Coast 0.82 0.304 0.25 Northeast 0.33 0.505 West Coast 0.25 0.441 Mid-Continent 0.25 0.225 0.631 0.36 0.115 Most Geographic Diversity Million Bbls/Day (Crude) Highes
Slide 6: St. Charles Refinery Update
Acquired July 1, 2003 from Orion Purchase price of $400 million + $150 million working capital Financed with $300 million cash and $250 million 3-year mandatory convertible preferred New management team in place; motivated workforce Profit improvement initiatives underway Expense Reduction Renegotia
Slide 7: Refining Initiatives
Improving gross margin Invest to increase sour crude capacity by 220,000 BPD Texas City Coker in 4Q03 Install/expand sulfur plants Maintaining high yield of light products on lower quality feed Lowering operating costs and optimize system Improving plant reliability and maintaining superior safety r
Slide 8: Retail & Wholesale Initiatives
10% of production sold through company operated retail system of 4,100 sites Sold/closed 250 retail sites over last 18 months Investing only in high potential sites Record earnings in 2Q03 on fewer sites 2002 2003 2004 2005 2006 Sites 388 456 560 652 726 30% of production sold through wholesale chan
Slide 9: Environmental Regulations to Tighten Supply
Tier II sulfur specifications and other major environmental requirements to impact supply Limits capital available for capacity expansion Gasoline losses from closures and octane loss API (100,000 BPD); PIRA (150-200,000 BPD); ESAI (90- 100,000 BPD) Non-traditional importers of gasoline not expected
Slide 10: Strong Fundamentals
Global petroleum stocks low Strengthening U.S. economy Blue Chip Indicators - 3.7% U.S. GDP growth 2H03; 3.5% for 2004 Each 1% change in GDP = .5% change in product demand Asian economic recovery underway (EIA) Asian gasoline market projected to be in balance by 2005 (ESAI) 2002 2003 2004 World 0.03
Slide 11: Gasoline Fundamentals
Gasoline demand up 1.2% YTD; up 2.9% over last 4 weeks Imports beginning to moderate Gasoline inventories at low end of historical range U.S. supply restricted due to new specifications starting in 2004 Gasoline Fundamentals
Slide 12: Distillate Fundamentals
Inventories builds in anticipation of the winter heating season have stopped Winter demand pull to begin soon With recovery of economy, demand growing Distillate demand up 5.3% over last 4 weeks Spikes in natural gas prices would further boost demand Distillate Fundamentals
Slide 13: Strong Financial Position
Favorable earnings and cash flow outlook Provided guidance of $1.45 per share for 3Q 2003 Ample cash flow to fund capital investments Solid financial ratios Low debt-to-cap (approx. 42% at September 30) EBITDA/Interest (approx. 5.25x at September 30) Strong liquidity position No debt maturities in 2
Slide 14: New Era for Refining
U.S. refining system tighter than ever High utilization rates; low inventories Margins keep improving Higher highs, higher lows 2004 margins look good Outstanding fundamentals Strong demand Supply constraints Moderating imports Sour discounts should widen Valero has all the advantages needed for the