Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (May 2019)
41 slides from Valero Energy's investor presentation, May 14, 2019
Slide 1: Investor Presentation May 2019
Investor Presentation May 2019 Exhibit 99.01
Slide 2: Disclaimers
Disclaimers 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 state other f
Slide 3: Who We Are
Who We Are (NYSE: VLO) Refining Premier assets and low cost operations 15 refineries, 3.1 million barrels per day (BPD) of high-complexity capacity Logistics assets, including approximately 2,800 miles of active pipelines, over 121 million barrels of storage and over 50 docks Fuels marketing and dis
Slide 4: Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent
Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent UNITED STATES WHOLESALE MARKETING PRESENCE VALERO ETHANOL PLANTS VALERO REFINERIES BRANDED WHOLESALE PRESENCE VALERO TERMINALS DIAMOND GREEN DIESEL PIPELINES PERU LIMA LONDON PEMBROKE UNITED KINGDOM IRELAND CANADA BENICIA WILMINGTON MCK
Slide 5: Demonstrated Strategy for Value Creation
Demonstrated Strategy for Value Creation Proven history of operations excellence: Safe, reliable, environmentally responsible operations have driven higher profitability through multiple commodity cycles One of the lowest cash operating costs among peer group Visibility to earnings growth: Steady pi
Slide 6: Disciplined Capital Management is a Constant in Our Strategy
Disciplined Capital Management is a Constant in Our Strategy Maintain Strong Balance Sheet (1)Targeted debt-to-cap ratio based on total debt reduced by $2 billion of cash. (2)Peer group includes PSX, MPC, HFC, and PBF. (3)Payout ratio is the sum of dividends and stock buybacks divided by adjusted ne
Slide 7: Demonstrated Discipline in Capital Allocation
Demonstrated Discipline in Capital Allocation Steady investments in maintaining asset base and enhancing margin capability of portfolio. Non-discretionary Sustaining capex includes costs for turnarounds and catalysts and regulatory compliance. Growth capex includes joint-venture investments but excl
Slide 8: Delivering on our Commitment of Cash Returns to Stockholders
Delivering on our Commitment of Cash Returns to Stockholders Targeting continued buybacks and sustainable annual dividend growth. (1) 2019 weighted average shares outstanding through March 31, 2019. Dividends per share annualized based on most recent quarterly dividend. Energy Real Estate Utilities
Slide 9: Safety and Reliability are Imperative for Profitability
Safety and Reliability are Imperative for Profitability See slide 20 for notes regarding this slide. Investments in reliability have contributed to operations excellence. 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
Slide 10: Increased Refinery Availability Has Driven Valero to be One of the Lowest Cost Producers
Increased Refinery Availability Has Driven Valero to be One of the Lowest Cost Producers See slide 20 for notes regarding this slide. 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile (1) 2019 refining cash operating expenses per barrel of throughput through March 31. Peer group includes PSX, MPC,
Slide 11: Advantaged Crude Supply in U.S. Gulf Coast and Mid-Continent
U.S. Mid-Continent U.S. Gulf Coast Advantaged Crude Supply in U.S. Gulf Coast and Mid-Continent (1) CDU capacity as of January 1, 2019. See slide 20 for notes and slide 31 for capacity and Nelson complexity by refinery. (2) 2019 feedstock ranges through March 31. Feedstock ranges represent average q
Slide 12: Our Portfolio Facilitates Global Optimization of Product Exports
Our Portfolio Facilitates Global Optimization of Product Exports (1) 2019 product exports through March 31. See slide 20 for notes regarding this slide. Distillate volumes include diesel, jet fuel, and ULSK. Distillate Gasoline Product shortages in Latin America, Eastern Canada, Europe, and Africa e
Slide 13: Visibility to Growth with a Steady Pipeline of High Return Projects
Visibility to Growth with a Steady Pipeline of High Return Projects Expect to spend approximately $1 billion annually on growth investments Approximately $340 MM in incremental EBITDA for 2018 from completed projects Diamond and Sunrise Pipelines, Wilmington cogeneration unit, and Diamond Green Dies
Slide 14: Investing to Improve Margins and Light Product Yields
Investing to Improve Margins and Light Product Yields $975 MM cost for 55 MBPD delayed coker and sulfur recovery unit, with expected startup in 2022 Creates two independent CDU-VDU-coker trains, improving turnaround efficiency and reducing maintenance-related lost margin opportunity Enables full uti
Slide 15: Investing to Increase Premium Renewable Fuels Production
Investing to Increase Premium Renewable Fuels Production Valero’s $550 MM portion of project cost expected to be funded from cash generated by DGD’s operations Independent parallel renewable diesel plant and renewable naphtha finishing facility adjacent to existing plant expected to be completed in
Slide 16: Ethanol Operations
Ethanol Operations 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 Plants purchased for approximately 37% of replacement cost Efficient plants with scale, located in corn belt Operati
Slide 17: Valero is Well Positioned for IMO 2020
Valero is Well Positioned for IMO 2020 Expected Impacts to Crude and Products Global sulfur cap on marine fuels drops from 3.5 wt% to 0.5 wt% beginning January 1, 2020 Sour crude oil and resid discounts expected to widen as low complexity refineries switch to sweeter crude and feedstocks Consultants
Slide 18: We Believe Valero is a Compelling Investment
We Believe Valero is a Compelling Investment Premier asset portfolio and operations Disciplined growth strategy Invest in high return projects focused on operating cost control, market expansion, and margin improvement Grow long term earnings and reduce earnings volatility Generate solid cash flow a
Slide 19: Appendix Contents
Appendix Contents Topic Pages Notes 20 Guidance 21 Environmental, Social, and Governance (ESG) 22 Macro Environment Themes 23 Primary Export Markets 24 – 25 Valero Logistics Assets 26 Project Price Set Assumptions 27 Projects in Execution Phase or Recently Completed 28 – 30 Refining Capacity and Nel
Slide 20: Notes Slide
Notes Slide 9 Contractor total recordable incident rate from U.S. Bureau of Labor Statistics. Tier 1 three-year rolling averages of process safety events per 20,000 work hours. Tier 1 defined within API Recommended Practice 754. Industry benchmarking and Valero’s performance statistics from Solomon
Slide 21: VLO Guidance 2Q19
VLO Guidance 2Q19(1) Throughput (MBPD) U.S. Gulf Coast1,720 to 1,770 U.S. Mid-Continent 425 to 445 North Atlantic450 to 470 U.S. West Coast220 to 240 Refining cash operating expenses per barrel throughput$4.00 Ethanol Production (millions of gallons per day)4.7 Operating expenses per gallon of produ
Slide 22: Environmental, Social, and Governance (ESG)
Environmental, Social, and Governance (ESG) Valero remains committed to being the lowest-cost, safest operator in our industry with environmentally responsible operations We value ESG dialogue with our stockholders. In 2018, we incorporated stockholders’ views and input as follows: Amended the chart
Slide 23: Supportive Macro Environment Expected
FEEDSTOCK SUPPLY Abundant and growing supply of crude oil and natural gas Expanding North American logistics capacity continues to add efficiency to crude oil movements, particularly in the U.S. Gulf Coast Supportive Macro Environment Expected PRODUCT DEMAND Macro environment themes represent indust
Slide 24: High Demand Continues for U.S. Products in Primary Export Markets
High Demand Continues for U.S. Products in Primary Export Markets North America +2.1% GDP annual average +14 MM population +395 MBPD product demand +290 MBPD CDU capacity High utilization needed to meet domestic and export demand Latin America +2.5% GDP annual average +31 MM population +440 MBPD pro
Slide 25: Investing to Grow Product Placement into Higher Netback Markets
Investing to Grow Product Placement into Higher Netback Markets (1) Includes terminals owned or leased by Valero. (1) U.S. Product Exports 12 Month Moving Average (MBPD) 83% Advantaged Refineries and Logistics Expansion of supply chain to high demand growth markets provides ratable product outlet an
Slide 26: Valero Logistics Assets
Valero Logistics Assets Racks, Terminals, and Storage(1) Over 121 million barrels of active shell capacity for crude oil and products Over 190 truck rack bays Rail Approximately 5,250 purchased railcars Expected to serve long-term needs of ethanol, asphalt, aromatics, and other products Pipelines(1)
Slide 27: Project Price Set Assumptions
Project Price Set Assumptions Driver ($/bbl) 2018 Average(1) ICE Brent 71.56 ICE Brent – WCS Houston 9.41 HSVGO – ICE Brent 6.03 3.5%S Fuel Oil – ICE Brent (10.39) USGC CBOB – ICE Brent 4.85 USGC ULSD – ICE Brent 14.05 Naphtha – ICE Brent (1.38) LPG – ICE Brent (34.77) Expect LCFS credit prices to c
Slide 28: Investing to Improve Margins
Investing to Improve Margins 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 new units upgrade low value isobutane and amylenes into high value alkylate High octa
Slide 29: Investing to Improve Access to North American Crude and Refinery Operating Cost Structure
Investing to Improve Access to North American Crude and Refinery Operating Cost Structure Diamond 200 MBPD capacity connecting Memphis to Cushing ($460 MM cost(1)), and Sunrise 100 MBPD undivided interest connecting Midland to Wichita Falls ($135 MM cost(1)) Provides additional Mid-Continent crude a
Slide 30: Investing to Improve Margins, Product Export Capability, and Biofuels Blending
Investing to Improve Margins, Product Export Capability, and Biofuels Blending Central Texas pipelines and terminals to supply high-growth refined products market Approximately 205 miles of pipe(1), 960 MB of total storage capacity, and a truck rack Pasadena refined products terminal joint venture w
Slide 31: Our Refining Capacity and Nelson Complexity
Our Refining Capacity and Nelson Complexity Refinery Capacities (MBPD)(1) Nelson Complexity Index Throughput Crude Corpus Christi(2) 370 290 14.4 Houston 250 205 7.3 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 32: U.S. Natural Gas Provides Opex and Feedstock Cost Advantages
U.S. Natural Gas Provides Opex and Feedstock Cost Advantages 2019 average natural gas prices through May 2, 2019 for U.S. and Europe. Estimated per barrel cost of 917,000 mmBtu/day of natural gas consumption at 12-month rolling average refinery throughput of 3.0 MMBPD. $1.0 billion pre-tax annual co
Slide 33: Outperformed the Dow Jones Index, the S&P Index and all Companies in the XLE
Outperformed the Dow Jones Index, the S&P 500 Index and all Companies in the XLE(1) Index on TSR Since 2014 (1) XLE includes refining peers PSX, MPC, HFC, and 26 other energy companies such as XOM, CVX, SLB, COP, EOG, OXY, and KMI. (2) TSR from December 31, 2014, through May 2, 2019. TSR includes st
Slide 34: Earnings and Free Cash Flow in a Low Margin Environment
2016 results are not a representation of management’s expectations for 2019. Peer group includes PSX, MPC, HFC, and PBF. (1) Refining EBITDA excludes LCM adjustment and turnaround and catalyst costs. Source: Barclays research and company reports. (2) EPS adjusted to exclude special or nonrecurring i
Slide 35: Now vs. Then – A Shift In Refining Valuation
Now vs. Then – A Shift In Refining Valuation New Paradigm INDUSTRY/MACRO EV/EBITDA multiple expansion and dispersion by company Peer group of larger scale, efficient and complex refiners Tight global product market expected to continue Economic growth and price environment remains favorable for heal
Slide 36: Non-GAAP Disclosures
Non-GAAP Disclosures Adjusted EBITDA and Net Debt-to-Adjusted EBITDA VLO defines EBITDA as net income before income tax expense, interest and debt expense, net of capitalized interest, and depreciation expense. VLO defines net debt-to-adjusted EBITDA as the ratio of total debt, net of cash, divided
Slide 37: Non-GAAP Disclosures (continued)
Non-GAAP Disclosures (continued) Adjusted Earnings Per Common Share – assuming dilution VLO defines adjusted earnings per common share – assuming dilution as earnings per common share – assuming dilution excluding the lower of cost or market inventory valuation adjustment and its related income tax
Slide 38: Non-GAAP Disclosures: Adjusted EBITDA and Net Debt-to-Adjusted EBITDA
Non-GAAP Disclosures: Adjusted EBITDA and Net Debt-to-Adjusted EBITDA RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (Unaudited, in Millions, Except Ratio Amount) Three Months Ended Mar 31, 2018 Year Ended Dec 31, 2018 Three Months Ended Mar 31, 2019 Net income $582 $3,353 $167 Less: Deferred turna
Slide 39: Non-GAAP Disclosures: Refining EBITDA Per Barrel of Throughput
Non-GAAP Disclosures: Refining EBITDA Per Barrel of Throughput RECONCILIATION OF REFINING EBITDA PER BARREL OF THROUGHPUT (Unaudited, in Millions, Except Per Barrel Amount) Year Ended Dec 31, 2016 Refining operating income $3,730 Plus: Operating expenses (excluding depreciation and amortization expe
Slide 40: Non-GAAP Disclosures: Adjusted Earnings Per Share and Free Cash Flow
Non-GAAP Disclosures: Adjusted Earnings Per Share and Free Cash Flow RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES UNDER GAAP TO FREE CASH FLOW (Unaudited, in Millions) Year Ended Dec 31, 2016 Net cash provided by operating activities $4,820 Less: Capital expenditures 1,278 Less: Defer
Slide 41: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: Homer Bhullar Vice President, Investor Relations 210.345.1982 homer.bhullar@valero.com Gautam Srivastava Manager, Investor Relations 210.345.3992 gautam.srivastava@valero.com Tom Mahrer Manager, Investor Relations 210.345.1953 tom.mah