Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (March 2017)
40 slides from Valero Energy's investor presentation, Mar 27, 2017
Slide 1: Investor Presentation March 2017
Investor Presentation March 2017 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 covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “be
Slide 3: Who We Are
Who We Are World’s Largest Independent Refiner 15 refineries, 3.1 million barrels per day (BPD) of high-complexity capacity Greater than 70% of capacity located in U.S. advantaged Gulf Coast and Mid-Continent Fuels marketed and distributed through bulk and wholesale channels General partner and majo
Slide 4: Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent
Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent Refineries and ethanol plants are in advantaged locations See slide 23 for capacities.
Slide 5: Current Macro Environment
Current Macro Environment Abundant global supply of crude oil and natural gas Forecasted world GDP growth Product shortages in Latin America, Europe, Africa, and Eastern Canada Demand response to lower product prices SUPPLY DEMAND North American logistics build out added efficiency and removed Mid-C
Slide 6: Our Strategy for Value Creation
Maintain manufacturing excellence and grow commercial and operational flexibility Our Strategy for Value Creation Operate safely and reliably and demonstrate environmental responsibility Demonstrate disciplined capital management and deliver peer leading returns
Slide 7: Safety and Reliability are Imperative for Profitability
Safety and Reliability are Imperative for Profitability See slide 20 for notes regarding this slide. In 2016 Valero posted the lowest injury and process safety event rates in its history.
Slide 8: Advantaged Location in U.S. Gulf Coast
Advantaged Location in U.S. Gulf Coast See slide 20 for notes regarding this slide. See slide 23 for detailed capacity and complexity by refinery. Over 55% of our throughput capacity is located in U.S. Gulf Coast Access to low cost natural gas and abundant North American and foreign crudes Access to
Slide 9: High Complexity Refineries and Lowest Cost Operator
High Complexity Refineries and Lowest Cost Operator See slide 20 for notes regarding this slide. Refining cash operating expenses for the year ended December 31, 2016.
Slide 10: Our Portfolio Facilitates Optimization of Product Exports
Our Portfolio Facilitates Optimization of Product Exports Distillate Gasoline See slide 20 for notes regarding this slide. (1)Actual export volumes through 2016. (1)
Slide 11: Capital Allocation
Capital Allocation Maintain Strong Balance Sheet (1)Debt-to-cap ratio based on total debt reduced by $2 billion of cash. (2)Peer group includes PSX, MPC, TSO, HFC, and PBF. (3)Payout ratio is the sum of dividends and stock buybacks divided by net income from continuing operations excluding special i
Slide 12: Demonstrated Discipline in Capital Allocation
Demonstrated Discipline in Capital Allocation Steady investments in maintaining asset base and enhancing margin capability of portfolio. Targeting at least 75% payout ratio of adjusted net income for 2017. (1)Approximately $265 MM growth capex carried forward for Diamond Pipeline from 2016 to 2017.
Slide 13: Growth Investments
Growth Investments Diamond Pipeline completion expected in 4Q17 13 MPBD Houston alkylation unit expected to startup in 1H19 Incremental octane expected to relieve tightness created by Tier 3 gasoline regulations 6 MBPD production capacity expansion of Diamond Green Diesel plant Project approved in 4
Slide 14: Outperformed Peers in Total Stockholder Return for Two Years Ended 2016
Outperformed Peers in Total Stockholder Return for Two Years Ended 2016 Peer group includes PSX, MPC, TSO, HFC, and PBF. See slide 20 for notes regarding this slide. Total stockholder return (TSR) from Dec 31, 2014, through Dec 30, 2016. TSR year to date 2017 as of Mar 21, 2017. Since end of 2014, c
Slide 15: Our Sponsored MLP Valero Energy Partners LP
Grow VLP primarily through drop downs from VLO Target organic growth opportunities and midstream deals strategic to VLO’s core business or that provide third party revenue Grow annual distributions at target rates of 25% through 2017 and at least 20% for 2018 Maintain investment grade credit rating
Slide 16: Approximately $1 Billion of Estimated MLP Eligible EBITDA
Approximately $1 Billion of Estimated MLP Eligible EBITDA(1) Inventory Racks, Terminals, and Storage(2) Over 70 million barrels of active shell capacity for crude oil and products 139 truck rack bays Rail Approximately 5,250 purchased railcars, expected to serve long-term needs of ethanol, asphalt,
Slide 17: Ethanol Business Operations
Ethanol Business Operations 11 ethanol plants with 1.4 billion gallons annual production capacity Dry mill production process, where corn is ground into flour and mixed with water before fermentation Low capital investment with scale, located in corn belt Operational best practices transferred from
Slide 18: We Believe Valero is an Excellent Investment
We Believe Valero is an Excellent Investment Chart data sources: Company reports and Bloomberg as of Dec 30, 2016. See slides 20 and 38 – 39 for notes and VLO non-GAAP disclosures, respectively. TSR year to date 2017 as of Mar 21, 2017. We Believe VLO is Undervalued Disciplined management team Stron
Slide 19: Appendix Contents
Appendix Contents Topic Pages Notes 20 Guidance 21 Cumulative Cash Returns 22 Refining Operating Statistics 23 – 24 Natural Gas Cost Sensitivity 25 Crude Oil Transportation 26 – 27 Fundamentals 28 – 31 Valero Energy Partners LP 32 – 33 Non-GAAP Disclosures 34 – 39 Investor Relations Contacts 40
Slide 20: Notes
Notes Slide 5 Macro environment themes represent industry consultant views. Slide 7 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. I
Slide 21: Guidance
Guidance 1Q17 (guidance provided on 4Q16 earnings call) Throughput (MBPD) Gulf Coast1,630 to 1,680 Mid-Continent415 to 435 North Atlantic440 to 460 West Coast195 to 215 Refining operating expenses per barrel throughput$4.15 Ethanol Production (millions of gallons per day)3.8 Operating expenses per g
Slide 22: Delivering Cash Returns to Stockholders is One of Our Priorities
Delivering Cash Returns to Stockholders is One of Our Priorities 2016 dividends and buybacks through December 30. (1) Year ended December 31, 2016. WASO from company 10-K and 10-Q filings. (2) WASO for MPC adjusted for stock split. Share count as of year ended Dec 31, 2011, and year ended December 3
Slide 23: 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 15.1 Houston(4) 235 180 8.9 Meraux 135 125 9.8 Port Arthur(5) 395 335 12.9 St. Charles(6) 340 215 17.1 Texas City 260 225 11.6 Three Rivers 100 89 13.2 U.S. Gu
Slide 24: Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization
Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization
Slide 25: U.S. Natural Gas Provides Opex and Feedstock Cost Advantages
U.S. Natural Gas Provides Opex and Feedstock Cost Advantages Average year to date natural gas prices for 2017 through Mar 22 for U.S. and Europe. Estimated per barrel cost of 912,000 mmBtu/day of natural gas consumption at 86% refinery throughput capacity utilization, or 2.7 MMBPD. $1,051 MM pre-tax
Slide 26: Pipeline Takeaway Capacity Additions Have Increased Crude Competition in the U.S. Gulf Coast
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 Grand Mesa / Saddlehorn 350 Niobrara Seaway 450 KEY Completed 2017 or Later Startup Capacities in MBPD. Pipeline completion and startu
Slide 27: 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 Project is on track for completion in 4Q17 Provides supply flexibility and ability to improve crude blend quality Approximately $925 MM total project cost
Slide 28: Ample Supply Provides Resource Advantage to North American Refiners
Ample Supply Provides Resource Advantage to North American Refiners Source: DOE, 2016 data through Dec.
Slide 29: 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. (Does not include Condensate Splitters.) Global Petroleum Demand Growth Expected to Outpace Refinery Capacity Expansion
Slide 30: 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 Dec 2016. U.S. Gasoline Exports
Slide 31: U.S. Diesel Exports
Source: DOE Petroleum Supply Monthly data through Dec 2016. U.S. Diesel Exports 12 Month Moving Average (MBPD)
Slide 32: Diversified VLP Portfolio Integrated with VLO's Refining Assets
Diversified VLP Portfolio(1) Integrated with VLO’s Refining Assets IPO assets Acquisitions (1)Portfolio assets as of Jan 18, 2017.
Slide 33: 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 and Predictable Revenues Fee-based agreements with no direct exposure to c
Slide 34: VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, and Debt-to-EBITDA
VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, and Debt-to-EBITDA VLP defines EBITDA as net income before income tax expense, interest expense, and depreciation expense. VLP defines distributable cash flow as EBITDA less (i) EBITDA attributable to its Predecessor and cash payments during
Slide 35: VLP Non-GAAP Disclosures (continued)
VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, and Debt-to-EBITDA (continued) VLP uses distributable cash flow to measure whether it has generated from its operations, or “earned,” an amount of cash sufficient to support the payment of the minimum quarterly distributions. VLP’s partnersh
Slide 36: VLP Non-GAAP Disclosures: Debt-to-EBITDA
VLP Non-GAAP Disclosures: Debt-to-EBITDA VALERO ENERGY PARTNERS LP RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited, in Thousands, Except Ratio Amount) December 31, 2016 Numerator: Total debt and capital lease obligations $ 895,355 Year Ended Decembe
Slide 37: VLP Quarterly EBITDA and Distributable Cash Flow Reconciliation
1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 Net income ($8,280) ($6,929) ($7,934) ($10,218) ($269) $19,161 $15,625 $36,795 $35,780 $44,545 $48,707 $59,799 Plus: Depreciation expense 8,319 8,632 10,398 10,560 10,364 10,578 13,760 10,976 11,512 11,821 11,319 11,
Slide 38: VLO Non-GAAP Disclosures: Return on Invested Capital
VLO Non-GAAP Disclosures: Return on Invested Capital VALERO ENERGY CORPORATION RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited, in Millions, Except Percentage and Ratio Amounts) Year Ended December 31, 2016 Numerator: Operating income $ 3,572 Effect
Slide 39: VLO Non-GAAP Disclosures: EBITDA and Net Debt-to-EBITDA
VLO Non-GAAP Disclosures: EBITDA and Net Debt-to-EBITDA VALERO ENERGY CORPORATION RECONCILIATION OF NET INCOME TO EBITDA (Unaudited, in Millions, Except Ratio Amount) Year Ended December 31, 2016 Net income $ 2,417 Less: Deferred turnaround and catalyst costs 718 Plus: Depreciation and amortization
Slide 40: 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 Senior Manager, Investor Relations 210.345.4574 karen.ngo@valero.com Tom Mahrer Manager, Investor Relations 210.345.1953 tom.mahrer@valero.com