Valero Energy Corporation · NYSE:VLO
Valero Energy — Non-Deal Roadshow (March 2008)
24 slides from Valero Energy's roadshow presentation, Mar 24, 2008
Slide 1: Management Presentation March 24-27, 2008
Management Presentation March 24 - 27, 2008
Slide 2: 2007 Was a Great Year for Valero
3 2007 Was a Great Year for Valero Financial Earned $7.72 per share from continuing operations, one of our best years ever Purchased 14% of our shares that were outstanding at the end of 2006 For 2006 and 2007, purchased nearly 20% of our shares that were outstanding at the end of 2005 Raised annual
Slide 3: Gasoline Season Is Not Over
Gasoline Season Is Not Over 5 5-Yr Avg 2008 2007 High Low 1/6/2006 9.0914 9.331 9.292 9.221 8.665 1/13/2006 8.9667 9.288 9.18425 9.104 8.562 1/20/2006 8.85795 9.168 9.129 8.998 8.389 1/27/2006 8.7848 9.081 9.08975 8.879 8.22 2/3/2006 8.75885 8.984 9.0735 8.883 8.204 2/10/2006 8.7758 8.96 9.07375 8.9
Slide 4: Issue Is Gasoline Inventory Level Relative to Demand
7 Issue Is Gasoline Inventory Level Relative to Demand Gasoline Days of Supply at 25.6 9.9% above same week in 2007 7.3% above 5-year average 5-Yr Avg 2008 2007 Forward Curve Low 1/1/2007 5.1 5.1 4.39 2.87 1/8/2007 6.32 3.46 4.32 1.98 1/15/2007 5.04 2.29 4.13 5.64 1/22/2007 5.25 5.33 4.12 5.77 1/29/
Slide 5: Supply Response Anticipated
9 Supply Response Anticipated Transition from winter-grade to summer-grade gasoline backs out blending components Anticipate combination of seasonal demand growth and supply-side reductions to reduce gasoline inventories and improve margins Industry-wide downtime expected to peak in March 2008 Last
Slide 6: 5-Yr Avg 2008 2007 2008 Forward Curve 1/1/2007 7.97 13.67 11.96716669 1/8/2007 7.6 12.07
11 5-Yr Avg 2008 2007 2008 Forward Curve 1/1/2007 7.97 13.67 11.96716669 1/8/2007 7.6 12.07 14.0877 1/15/2007 7.9 14.21 15.11475 1/22/2007 8.59 14.81 14.6863 1/29/2007 8.78 15.83 14.2115 2/5/2007 8.76 17.46 13.647 2/12/2007 9.29 20.24 14.795 2/19/2007 11.17 22.39 18.16475 2/26/2007 11.36 22.06 19.21
Slide 7: Worldwide Capacity Expected to Remain Tight Through This Decade
Worldwide Capacity Expected to Remain Tight Through This Decade Conversion capacity remains tight - especially with down time Expect incremental conversion capacity growth in 2009, but economic recovery should drive higher demand growth 2001 2002 2003 2004 2005 2006 2007E 2008E 2009E Total Global Pe
Slide 8: Wide Feedstock Differentials, But Weak Margins for Residual Products
15 Wide Feedstock Differentials, But Weak Margins for Residual Products However, very weak margins for bottom of barrel products hurting margin capture Residual fuel oil, asphalt, bunker fuel trading at steep discounts to crude oil Asphalt season mainly in summer, but high prices and tax budgets cou
Slide 9: Valero's Conversion Capacity Is a Key Advantage
17 Valero's Conversion Capacity Is a Key Advantage Source: Company reports Coking Hydrocracking Cat Cracking VLO 361 269 897 XOM 403 159 826 COP 341 154 726 BP 244 267 442 RDS 238 229 468 CVX 164 258 257 MRO 66 27 402 TSO 94 94 196 SUN 9 28 322 U.S. Conversion Capacity (mbpd) Source: Company reports
Slide 10: Valero First Quarter 2008 Performance
19 Valero First Quarter 2008 Performance Our performance adversely affected by operating and equipment issues Coking plants very profitable, but... Port Arthur running at low rates due to cracks in coker drum walls Aruba run rates limited by vacuum tower fire Delaware City operated below capacity fo
Slide 11: Taking Steps Toward Building a Better Valero
21 Taking Steps Toward Building a Better Valero Strategies Optimizing Refining Portfolio Investing in Growth Projects at Core Refineries Focusing on Reliability and Cost Efficiency Using Balanced Approach to Allocate Cash Continuing to Seek Acquisitions That Meet Our Criteria Achieve best returns on
Slide 12: Optimizing Refining Portfolio
23 Optimizing Refining Portfolio Valero Marketing Presence Quebec, Canada 215,000 bpd capacity 7.8 Nelson complexity Three Rivers, Texas 100,000 bpd capacity 12.4 Nelson complexity Corpus Christi, Texas 315,000 bpd capacity 18.4 Nelson complexity Wilmington, California 135,000 bpd capacity 15.9 Nels
Slide 13: Our Core Refineries Have Advantages
25 Our Core Refineries Have Advantages Nelson Non-Core Refineries 8.1 Core Refineries 12.4 Nelson Complexity Index 1 "Non-Core Refineries" consist of Lima, Aruba, Krotz Springs, Memphis, and Ardmore Diluted Shares Outstanding Non-Core Refineries 0.36 Core Refineries 0.69 2006 % Discounted Feedstocks
Slide 14: Investing in Growth Projects at Core Refineries for the Long Term
27 Investing in Growth Projects at Core Refineries for the Long Term Refinery Project Total Cost1 $mm Start-Up Contribution to Operating Income before Depr. and Amort. Expense2 $mm IRR2 Description St. Charles Crude/ Coker/ Hydrocracker $1,400 2010 $350 20% Crude unit expansion - 45 mbpd Coker expan
Slide 15: Expect Strategic Moves to Strengthen Valero's Long-Term Position
29 Expect Strategic Moves to Strengthen Valero's Long-Term Position % Discounted Feeds 2006 0.61 2007 0.64 2008 0.66 2009 0.73 2010 0.73 2011 0.76 2012 0.77 Increasing % of Discounted Feedstocks1 % Discounted Feeds 2006 0.32 2007 0.34 2008 0.34 2009 0.33 2010 0.35 2011 0.36 2012 0.36 Increasing Dist
Slide 16: Focusing on Reliability and Cost Efficiency
31 Focusing on Reliability and Cost Efficiency Mechanical availability (reliability) Issues have been identified, plans are in-place Major coker repair in progress at Port Arthur May postpone turnaround currently planned for 1Q09 to 4Q09 Projects: Cat cracker revamp at St. Charles, coker drums repla
Slide 17: Continuing Balanced Approach to Allocate Cash
33 Continuing Balanced Approach to Allocate Cash 2000 2001 2002 2003 2004 2005 2006 2007 2008E Base shares 176.7 176.7 176.7 176.7 176.7 176.7 176.7 176.7 176.7 Acquisitions 37.6 221.2 221.4 263.3 292.2 378.1 378.1 379.2 379.2 Benefits 29.5 36.6 57.7 75.2 97 120.8 125 135.8 145.4 General financings
Slide 18: Valero Has Many Advantages
35 Valero Has Many Advantages Source: Oil & Gas Journal and Valero estimates EC GC MC WC RM DK 0 1 0 0 0 ALJ 0 0.6 0 0.4 0 WNR 0.3 0 0 0 0.7 HOC 0 1 TSO 0.82 0.18 FTO 0.7 0.3 SUN 0.74 0.26 VLO 0.25 0.56 0.07 0.12 Most Geographically Diverse Refining Capacity Source: Oil & Gas Journal and Valero esti
Slide 19: Implied Value of Valero's Refining Assets
Implied Value of Valero's Refining Assets Billions, except per unit amounts Billions, except per unit amounts Market Value of Equity at $50/share $26.7 Book Value of Debt1 6.9 Less: Cash1 -2.5 = Estimated Enterprise Value 31.1 Less: Book Value of Net Working Capital1 -1.0 Less: Incremental Market Va
Slide 20: Valero's Refineries Appear Under Valued
Valero's Refineries Appear Under Valued USGC New Build (Estimated) 25000 VLO Replacement Cost (Estimated) 15817 VLO Lima Transaction Value 11875 VLO Implied Refining Assets 7400 Value per Barrel of Daily Capacity USGC New Build (Estimated) 1800 VLO Replacement Cost (Estimated) 1609 VLO Lima Transact
Slide 21: Committed to Creating Long-Term Shareholder Value
41 Committed to Creating Long-Term Shareholder Value Expect gasoline situation to improve Outstanding distillate margins Most geographically diverse independent refiner in North America Most conversion capacity among U.S. refiners Committed to safe and environmentally compliant operations Optimizing
Slide 22: Appendix
VALERO Appendix
Slide 23: Capital Spending Emphasizes Safety, Reliability, and Long-Term Growth
45 Capital Spending Emphasizes Safety, Reliability, and Long-Term Growth 2007A 2008E Regulatory 290 535 Turnarounds 520 420 Sustaining/Other 895 1570 Tier II 325 40 Strategic 750 1935 Budgeted 330 $2,780 $4,500 Millions Strategic Tier II Sustaining/ Other Turnarounds Regulatory 2007 came in below $3
Slide 24: Safe Harbor Statement
47 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