Valero Energy Corporation · NYSE:VLO
Valero Energy — Merger or Acquisition (June 2005)
25 slides from Valero Energy's merger presentation, Jun 20, 2005
Slide 1: Europe Investor Meetings June 20-25, 2005
‘ENERGY CORPORATION Europe Investor Meetings June 20-25, 2005
Slide 2: Forward Looking Statements
Forward Looking Statements Statements contained in this presentation that state either company’s or their management’s expectations or predictions of future events are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exc
Slide 3: Proxy Statement/Prospectus
Proxy Statement/Prospectus Investors and security holders are urged to read the proxy statement/prospectus regarding the proposed merger, which is included with the Form S-4 Registration Statement filed with the Securities and Exchange Commission on May 20, 2005 (as the same may be supplemented or a
Slide 4: Valero at a Glance: Largest independent refiner in North America
Valero at a Glance 2 Largest independent refiner in North America + 14 refineries in the U.S., Canada and Caribbean + Throughput capacity = 2.4 million BPD (12% of total U.S. refining capacity) © 3.2 million BPD once Premcor closes sammion ep © One of the largest U.S. retail operators - 4,700 market
Slide 5: Right Business, Right Time
Right Business, Right Time 22004 — A record year + $6.53 EPS and 98% Total Shareholder Return + Two-for-one stock split » Added to the S&P 500 22005 — Expect another record year + 1Q05 EPS of $1.92 + 2Q05 EPS guidance of about $3.00 » First Call full year EPS of $7.51 is too low @ Balance sheet in g
Slide 6: Valero Acquiring Premcor
"4 Valero Acquiring Premcor @ Announced $8 billion acquisition of Premcor April 25th + Approximately 50/50 cash and stock consideration © Assuming $1.8 billion of Premcor long-term debt @ Cash consideration will be financed with a combination of cash on hand, bank debt, and/or proceeds from a public
Slide 7: Strategic Rationale
Strategic Rationale ®@ Premcor assets a great fit with Valero + Combined company would be largest refiner in North America +Enhanced geographic diversity, which further increases earnings stability + Aligned strategies that further increase exposure to light-heavy spread © Combined entity would proc
Slide 8: Financial Benefits
"4 Financial Benefits ®@ Expected to be significantly accretive to earnings and cash flow per share » 14% accretive to estimated 2006 Case earnings per share +» 13% accretive to estimated 2006 Case cash flow per share © Expect at least $350 million of annually recurring synergies ®@ Expect to retain
Slide 9: Projected Financial Impact
Projected Financial Impact nee ate sue $00 ss00 200 2006 Earnings Per Share 2006 Free Cash Flow ($MM) 146 Accretion soto sia $1221 ste 10% Accretion va sce $15 o20 8679 sient i=: 2006 Case vate Co anGegae wvaae vPreFeam 2006 Free Cash Flow / Debt 2006 Year-End Net Debt / Capitalization Coy 61% | ll
Slide 10: 2005 — Expect Another Record Year
2005 — Expect Another Record Year @ Outstanding distillate fundamentals + U.S, low sulfur distillate demand up 2.2% YID + Distillate imports down 26% YTD + U.S. distillate days-of-supply at 5-year lows + 2005 U.S. Gulf Coast forward curve indicating around $10.00 per barrel vs. 2004 average of below
Slide 11: Tight Global Supply/Demand Fundamentals
Tight Global Supply/Demand Fundamentals Global Crude Oil Demand Growth Compared To Distillation ae Capacity Expansion 000 Demand — 3.00 Exceeds Capacity 20% | 4,000 o Ea Capacity “0° Lj Exceeds Demand 3,000 ovceP uh 8 Gane, Pa, ESA Cenpary nfomato, "91 to ‘94 95 to '99 "00to'04 = ‘050 07 Est. 2@ 200
Slide 12: Global Utilization Rates Increasing
"4 Global Utilization Rates Increasing Global Crude Distillation Capacity Utilization Rates (12-Month Moving Average) Source: US. - DOBEA | 95% ‘sia, Europe, Worl. ESAL U.S. SP PB PC ES BS PS OP SS ®@ Global utilization rates continue to rise to meet growing demand @ Conversion capacity running at e
Slide 13: Higher Utilization Producing More Resid
Higher Utilization Producing More Resid Residual Fuel Oil and Sour Crude Discounts to WTI Resid $20.00 $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 Maya Arab Lightstgdium 1998 1999 ~=2000~—«2001 2002-2003 ~=«2004~~-2005yTD. @ Increased global crude runs have led to more resid being pro
Slide 14: Wide Sour Crude Discounts to Continue
Wide Sour Crude Discounts to Continue Estimated World Crude Demand by Quality Type (2005) Estimated Quality of Reserves (2005) High Acid igh acia (Sweet) 3% Lightaedium ‘Sour B% Lightedium Sour 53% Sovees008 Gar Jounal Company oma, ® Fundamental issue ... disconnect between global crude reserves and
Slide 15: Higher Highs, Higher Lows Globally
Higher Highs, Higher Lows Globally Rolling 5 - Year Average $ per barrel Global Re! $12.00 ing Margins $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 "98-02 *99-'03. *00-'04 *01-"05* Bus. i Northwest Europe DBAsia - singapore “Frou My 2000 tough May 2005, NOTE: US, Gul Cowt 2-1-1 rning margin weg Anvb Medan;
Slide 16: 2006 — Expect Great Earnings to Continue
"4 2006 — Expect Great Earnings to Continue ®@ Major changes in U.S. sulfur specs + 30 ppm sulfur gasoline January 1, 2006 o Further restricts pool of potential imports © Turnarounds expected to amplify supply issues © Yield losses +15 ppm sulfur diesel June 1, 2006 © Potential supply problems @ Log
Slide 17: Appendix
a Appendix
Slide 18: Combined Valero/Premcor Asset Base
Combined Valero/Premcor Asset Base ‘ie, conan SSStnopespanty 1 soompi Sesion psemasty ens, Non ay 1 iigompeme 2 Semopepanty a Sorc pee rg, ctoe ___| Panag NDR bpd, % HiBoompeahy Dpto Valero . = TODO bpdoapactty tne, teas e 1 aseaptin Soa pscspacty 3 = oe Aegis onesies Stam epaespsny “nce Res, Tews 1
Slide 19: Premcor Enhances Geographic Diversity
Premcor Enhances Geographic Diversity ILS. Refining Crude Capacity Rank by PADD (bbls/d) + of he we “PADD I “PADD *PADD IL span *PADD IIT itd = “asp aL ey | “MAP “@31900 "+18.1% “Bombs "1586900 “19.7% + ConocoPhillips -s23900 269% “BP +6250 “15.6% Valero -Premcor 1,239,000 15.4% Valero -Premeor 341,
Slide 20: Premcor Acquisition - Key Assumptions
Premcor Acquisition - Key Assumptions @ Key Price Drivers (As of April 12, 2005) Mid-Cyde (S per barrel) 2004 2005 2006 01-05 Avg. WII 4145 53.15 52.00 35.55 USGC Gas Crack 7.69 691 7.50 5.87 USGC High Sulfur Heat Crack 3.95 7.46 8.00 3.73 Arab Medium crude vs. WII (6.36) (9.06) (8.25) (5.60) Maya c
Slide 21: 2006 Case - Capital Forecast
2006 Case - Capital Forecast Pro-forma Projected Capital Expenditures (Datlars in Mition=) 52.255 la Strategic $1,950 Ba Tieril Bl Sustaining/Other Bl Regulatory 2004 2005 2006 2007 @ Expect to fund all capex with available cash flow + Would reduce strategic capital in lower margin environment ©@ Si
Slide 22: Premcor Acquisition Estimated Synergies
Premcor Acquisition Estimated Synergies es and Other Savings irprovernents SMe Comments > Corporate S684 Savings 3 70 Headquarters and other acininistrative expenses » Incentive Compensation 5 80_Premear vs. Valero horus, stock ption expense > Crutde Financing Cost 3 15 Letter of creut savings, Morg
Slide 23: 2005 Distillate Fundamentals
2005 Distillate Fundamentals USGC Heat Crack ($/bbl) % $14.00 36 $12.00 a $10.00 2 $8.00 a $6.00 28 $4.00 26 a $2.00 2 $0.00 20+ -s2.00 + Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan FebMar AprMay Jun Jul AugSep Oct Now ec == 2004—— 2005 Forward Curve. Sy avy ‘MOTE: Beovnk Cana a Fe 162005 FE
Slide 24: 2005 Gasoline Fundamentals
2005 Gasoline Fundamentals Gasoline Days of Supply USGC Gas Crack ($/bbl) at $20.00 $18.00 26 $16.00 Fa $1400 $12.00 ae $10.00 23 $e.n0 $6.0 ee $4.00 a $200 $000 ans $2.00 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan FebMar Apr May Jun Jul Aug Sep Oct NovD ec == 2004—— 2005 Forward Curve. Sy
Slide 25: Searchable text section of graphics shown above
Searchable text section of graphics shown above [ GRAPHIC] [LOGO] Europe Investor Meetings June 20–25, 2005 [G RAPHIC] Forward Looking Statements Statements contained in this presentation that state either company’s or their management’s expectations or predictions of future events are forward-looki