Valero Energy Corporation · NYSE:VLO
Valero Energy — Barclays CEO Energy and Power Conference 2010
34 slides from Valero Energy's conference presentation, Sep 15, 2010
Slide 1: Barclays CEO Energy and Power Conference
Bill Klesse, Chairman & CEO Barclays CEO Energy and Power Conference September 15 - 16, 2010
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 intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 193
Slide 3: Valero Energy Overview
Valero Energy Overview Largest independent refiner in North America 15 refineries 2.8 million barrels per day (BPD) of throughput capacity Average refinery capacity of 185,000 barrels per day One of the nation's largest fuel retailers with nearly 5,800 branded marketing sites One of the largest etha
Slide 4: Geographically Diverse Operations
Geographically Diverse Operations 4 Refinery Capacities (000 bpd) Capacities (000 bpd) Nelson Index Refinery Total Through-put Crude Oil Nelson Index Aruba 235 235 8.0 Ardmore 90 86 12.0 Benicia 170 145 15.0 Corpus Chris. 315 205 20.6 Houston 145 90 15.1 McKee 170 168 9.5 Memphis 195 180 7.5 Port Ar
Slide 5: High Conversion Refining System
High Conversion Refining System High Conversion Refining System 5 Note: CDU = crude distillation unit; conversion capacity is the sum of each company's FCC, hydrocracking, and coking capacity Source: PIRA (CHART) We believe size and conversion ratio matter to competitiveness Provides flexibility to
Slide 6: Strong Contribution from Retail and Ethanol
Strong Contribution from Retail and Ethanol (CHART) U.S. Retail Performance (Trailing 4Q Avg.) 6 Acquired world-class ethanol plants at an average of 35% of replacement cost Large, efficient plants have competitive advantage on cost Valero initiatives achieving 6% higher ethanol production than prio
Slide 7: Solid Financial Health
(CHART) (CHART) Solid Financial Health Ended 2Q10 with $2 billion of cash and $4.4 billion of additional liquidity Net debt-to-cap ratio far below credit facility covenant of 60% At 6/30/10, was 28.6% No other coverage-type ratios No borrowings on bank revolver Investment grade credit rating Cash fl
Slide 8: Refining Industry Margins Bottomed in 2009, Improvement Started in 2010
Refining Industry Margins Bottomed in 2009, Improvement Started in 2010 9 Gulf Coast Gasoline and On-road Diesel Margins vs. WTI Plentiful spare capacity and product inventories squeezed margins in 2009 2010 margins improving from strong global demand and capacity rationalization Expect 2011 will co
Slide 9: Feedstock Discounts Also Rebounded in 2010
Sour crude discounts recovering in 2010 due to: OPEC increasing production, some of which is lower-quality and heavier crude Light product demand outpacing heavy product demand growth Supply of low-quality crudes from Latin American has been better than expected Longer term, expect to benefit from C
Slide 10: Rationalization of Industry Capacity Occurring
(CHART) (CHART) Rationalization of Industry Capacity Occurring Source: Valero Energy MBPD 11 Source: Valero Energy MBPD We expect additional refining capacity to shut down in the industry
Slide 11: Valero's Strategic Priorities
Valero's Strategic Priorities 12 Continue to lower costs Maintain investment grade credit rating Optimize portfolio - continue strategy of the last several years All assets must perform and contribute Paulsboro refinery: continuing to progress on negotiations for potential sale Aruba refinery: condu
Slide 12: Achieving Significant Cost Reductions
Achieving Significant Cost Reductions In 2010, on pace to cut more than $100 million in pre-tax costs in addition to last year's savings of $215 million in pre-tax costs, excluding the benefit from lower energy prices 13 (CHART) (CHART)
Slide 13: Continuing to Make Our Refineries More Competitive
Continuing to Make Our Refineries More Competitive 14 1st Quartile 2nd Quartile 1st Quartile 2nd Quartile Industry benchmarking survey shows Valero is continuing to improve on its competitive, low-cost operations Corpus Christi refinery ranked as one of the best facilities on the Gulf Coast for cash
Slide 14: Opportunity for More Improvement
Opportunity for More Improvement 15 1st Quartile 2nd Quartile 1st Quartile 2nd Quartile We aim to be a 1st-quartile refiner in industry benchmark surveys 3rd Quartile 3rd Quartile 4th Quartile Source: Solomon Associates and Valero Energy Source: Solomon Associates and Valero Energy
Slide 15: Shifting Capital Spending to Economic Growth and Reliability Projects
Shifting Capital Spending to Economic Growth and Reliability Projects 16 "Stay-in- business" spending 2011 estimated Regulatory spending expected to decline as Benicia air scrubber and MSAT2 projects are completed by year-end 2010 Strategic/economic growth spending is generally flexible and discreti
Slide 16: Economic Projects Provide Potential for Earnings Growth
Economic Projects Provide Potential for Earnings Growth Large projects have long lead times and were started several years ago Projects have higher implied returns on remaining investment excluding previous spending ("sunk costs") We expect natural gas prices to stay low for years 17 1D&A = deprecia
Slide 17: Economic Projects Provide Potential for Earnings Growth
(CHART) Economic Projects Provide Potential for Earnings Growth 18 1D&A = depreciation and amortization expense; 2See Appendix for price assumptions and project descriptions, 3Most of project commissioned in 2010 millions These projects represent over 75% of strategic capital spending in 2010 and 90
Slide 18: Gulf Coast System Well-Positioned for Global Export Opportunities
Valero's Gulf Coast System Well-Positioned for Global Export Opportunities 19 Our large, complex, low-cost refineries on Gulf Coast are competitive Exports typically provide a margin benefit Structural supply-demand imbalance in Latin America provides long-term export opportunity (CHART) 1Based on 8
Slide 19: Why Invest in Valero Today?
Why Invest in Valero Today? 20
Slide 20: Appendix
Ww VALERO Appendix
Slide 21: Competitive, Low-Cost Refining Operations
Competitive, Low-Cost Refining Operations 22 Refining Cash Operating Expenses less Natural Gas Usage ($/bbl) Source: Macquarie Capital
Slide 22: Memphis FCC Revamp Project
Memphis FCC Revamp Project Investment Highlights Favorable economics driven by better reliability and gains on margin and volume Improves flexibility to run lower- quality feedstocks Improves FCC reliability and increases run length between turnarounds to four years from 1.5 years Increase in run le
Slide 23: St. Charles MSCC to FCC Conversion Project
St. Charles MSCC to FCC Conversion Project Investment Highlights Favorable economics driven by better reliability and gains on margin and volume Improves FCC reliability and increases run length between turnarounds to four years from 1.5 years Adds 5%+ volume expansion through FCC Improves energy ef
Slide 24: Hydrogen Plant Projects
Hydrogen Plant Projects 25 Summary of Project Status and Economics1 Summary of Project Status and Economics1 Summary of Project Status and Economics1 Estimated completion date 4Q11 4Q11 Estimated total investment (mil.) $170 $170 Cumulative spend thru 2Q10 (mil.) $1 $1 Incremental Operating Income b
Slide 25: Port Arthur Hydrocracker Project
Port Arthur Hydrocracker Project Investment Highlights Favorable economics driven by margin and volume gains Main unit is 50,000 barrels/day hydrocracker plus facilities to process over 150,000 barrels/day of high-acid, heavy sour Canadian crude Creates high-value products from low- value feedstocks
Slide 26: Montreal Pipeline Project
Montreal Pipeline Project Investment Highlights Favorable economics driven by reducing transportation costs and growing volumes New pipeline with 100,000 barrels/day of throughput capacity Planned closure of Shell Montreal refinery allows Valero to place additional products into Montreal and Ontario
Slide 27: St. Charles Hydrocracker Project
St. Charles Hydrocracker Project Investment Highlights Favorable economics driven by margin and volume gains Main unit is 50,000 barrels/day hydrocracker Creates high-value products from low- value feedstocks plus hydrogen sourced from relatively inexpensive natural gas Unit has volume expansion of
Slide 28: Project Price Sensitivities
Project Price Sensitivities 30 Operating Income before D&A1 Sensitivities (^ $MM/YR) Port Arthur HCU St. Charles HCU Memphis & McKee Hydrogen Plants Memphis FCC St. Charles FCC Montreal Products Pipeline WTI, + $1/BBL 3.5 3 2.5 0.4 1.2 N/A WTI - Maya, - $1/BBL 73.2 16 N/A N/A N/A N/A WTI - USGC HS G
Slide 29: Global CDU Capacity and Additions
31 Source: Valero and Consultant estimates Note: Base capacity includes capacity creep of 0.1% per year MMBPD (CHART) Global CDU Capacity and Additions
Slide 30: Global Refining Capacity Rationalization
Global Refining Capacity Rationalization 2008 Limited refinery closures, began seeing key project delays and cancellations 2009 Did not see substantial closure announcements until second half 2010 More closure announcements Chatter coming from large integrated companies about rationalizing capacity
Slide 31: Global Refining Capacity For Sale or Under Strategic Review
Global Refining Capacity For Sale or Under Strategic Review 33 Location Owner CDU Capacity (MBPD) Riechstett, France Petroplus 85 Stanlow, UK Shell 267 Harburg, Germany Shell 93 Gothenburg, Sweden Shell 80 Kapolei, HI Chevron 54 Pembroke, UK Chevron 210 Meraux, LA Murphy 125 Superior, WI Murphy 35 M
Slide 32: World Demand Favors Diesel
World Demand Favors Diesel World Demand Favors Diesel World Demand MMBPD Diesel demand has declined more than gasoline with the economic downturn, but is expected to recover past prior highs in 2011 Diesel demand has grown to become much larger than gasoline globally Growing global diesel demand is
Slide 33: Annual Estimated EPS Sensitivity for $1/barrel change
2009 Volume (MBPD) Annual Estimated EPS Sensitivity for $1/barrel change 1 Gasolines and blendstocks 1,101 48% $0.46 Distillate (diesel, heating oil, jet fuel) 748 33% $0.31 Other 432 19% $0.18 Total Products 2,281 100% $0.96 Sweet 632 28% Medium Sour & Acidic 581 26% $0.24 Heavy & Resid 635 28% $0.
Slide 34: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: Ashley Smith Vice President of Investor Relations 210.345.2744 ashley.smith@valero.com Matthew Jackson Investor Analyst 210.345.2564 matthew.jackson@valero.com 36
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