Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (May 2024)
62 slides from Valero Energy's investor presentation, May 1, 2024
Slide 1: Investor Presentation May 2024
Exhibit 99.1 Leading Producer of Liquid Advancing the Future of Energy • With Capital Discipline, Innovation and Unmatched Execution Transportation Fuels C A P I TA L D I S C I P L I N E I N N O VAT I O N U N M ATC H E D E X E C U T I O N I N V E S T O R P R E S E N T A T I O N | M A Y 2 0 2 4
Slide 2: Cautionary Statement
Cautionary Statement 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 stat
Slide 3: Leading profitable producer of low-carbon transportation fuels
LEADING PROFITABLE PRODUCER OF LOW-CARBON TRANSPORTATION FUELS REFINING RENEWABLE DIESEL ETHANOL W O R L D ’ S P R E M I E R I N D E P E N D E N T D I V E R S I F Y I N G I N T O H I G H E R G R O W T H , D E V E L O P I N G P R O J E C T S T O C R E A T E A R E F I N E R H I G H E R M A R G I N S A
Slide 4: Demonstrated commitment to capital discipline, innovation and unmatched execution
Demonstrated commitment to capital discipline, innovation and unmatched execution Operations Earnings Growth Capital Discipline Steadfast in the Excellence execution of our Unmatched Execution with a Proven Growth Through Innovation Demonstrated Commitment to strategy, pursuing History of Operations
Slide 5: Comprehensive roadmap to further reduce emissions
Comprehensive roadmap to further reduce emissions with innovative low-carbon projects consistent with our strategy GHG Emissions 2035 GHG Emissions Target Reduction and Displacement (Global Refinery Scope 1 & 2) In 2023, our performance Independently Verified exceeded our 2025 target to (Global Refi
Slide 6: Size, scale, lowest cost producer, disciplined investments
SIZE, SCALE AND GLOBAL REACH LOWEST COST PRODUCER DISCIPLINED INVESTMENTS EXTENSIVE CONNECTIVITY AND GLOBAL OPTIMIZATION RELIABLE TOP QUARTILE OPERATIONS GROWTH WITH LOWER VOLATILITY PREMIER REFINING PORTFOLIO (1) INDEPENDENTLY FOUND TO BE RESILIENT EVEN IN A CARBON-CONSTRAINED SCENARIO Long-term, S
Slide 7: High operational and supply flexibility with low cost operations
High operational and supply flexibility coupled with low cost operations are driving profitability through-cycle Refining Segment Cash Operating Expenses Refining Segment Adjusted EBITDA Per Barrel of Throughput Per Barrel of Throughput (excludes turnaround and D&A expenses) (excludes turnaround and
Slide 8: Improving margin capability through refining optimization and growth projects
Improving the margin capability of our portfolio through disciplined refining optimization and strategic growth projects Refining Margin Improvement Select Refining Optimization and Strategic Growth Projects ($ in billions, reflects Gross Margin) ($ in millions) $4.4 $19.1 Annual EBITDA Estimate Opt
Slide 9: Leadership in low-carbon renewable fuels with high economic returns
Leadership in low-carbon renewable fuels underpinned by high economic returns DGD Renewable Fuels Capacity Renewable Diesel Realized Cash Flow Profile (million gallons per year) ($ in millions) (1) $2,579 million cumulative EBITDA 1,220 1,220 20 $2,600 (1) 50 $1,825 million cumulative Capex 235 235
Slide 10: Expanding competitive advantage with sustainable aviation fuel
Expanding our competitive advantage with sustainable aviation fuel (SAF) DGD Port Arthur SAF Project • Large-scale SAF project at the recently constructed DGD Port Arthur plant is expected to be completed in the fourth quarter of 2024 − The plant will have the capability to upgrade up to 50% of its
Slide 11: Developing paths to reduce carbon intensity of ethanol business
Developing economic paths to further reduce the carbon intensity of our ethanol business • Connecting to Summit Carbon Solutions’ large-scale carbon capture and storage project o Valero is expected to be a shipper with eight ethanol plants connected to the carbon capture system, representing approxi
Slide 12: Refining business generates significant cash: sources and uses
Refining business generates significant cash to support growth and stockholder returns Sources and Uses of Cash – Cumulative: December 31, 2014 to December 31, 2023 ($ in billions) Sources of Cash Uses of Cash ($21.0) $0.7 $54.4 Sustaining capital ($12.8) Growth capital ($6.9) Acquisitions ($1.2) ($
Slide 13: Disciplined capital allocation is a constant in our strategy
Disciplined capital allocation is a constant in our strategy 1 Maintain a Strong Balance Sheet Maintain an investment grade credit rating Target 20% to 30% net debt-to-cap ratio 2 Non-discretionary Sustaining Capex Dividend • Target approximately $1.5 billion annually• Commitment to stockholders • K
Slide 14: Expanding our long-term competitive advantage
Expanding our long-term competitive advantage Steady investments to maintain our asset base and with investments in economic low-carbon enhance the margin capability of our portfolio fuels Increased Annual Capital Investments Attributable to Valero Growth Capital Investments Attributable to Valero R
Slide 15: Delivering on commitment of cash returns to stockholders
Delivering on our commitment of cash returns to stockholders (1) Stockholder Returns ($ in billions) Payout Ratio $6.6 184% Buybacks Buybacks $6.1 Dividends Dividends $5.2 $3.7 $4.6 $3.1 $2.6 $2.4 $2.3 65% 63% 60% $2.8 56% $1.7 54% $1.9 47% $1.8 50% $1.4 $0.8 45% $1.6 $1.3 $1.4 $0.2 31% 30% $1.3 $0.
Slide 16: Cash returns through dividend growth and buybacks
Delivering cash returns through sustainable dividend growth and discretionary buybacks Shares Outstanding (in millions; as a percentage of 2012) Annual Dividend Per Share $4.28 $4.08 $3.92 $3.92 $3.92 552; $3.60 100% 536; 97% Dividend Per Share $3.20 514; 41% reduction in CAGR since 2012 vs. shares
Slide 17: Lower volatility in earnings and free cash flow
Demonstrated lower volatility in earnings and free cash flow Volatility S&P 500 Free Cash Return Profile Average Free Cash Flow 2012 – 2023 2012 – 2023 2012 – 2023 Valero has Peer Range demonstrated VLO 10% higher Materials 8% 10% $3,529 average free Refining Peers 7% cash flow and Energy 5% lower F
Slide 18: Disciplined capital allocation delivering higher return on investment
Disciplined allocation of capital and execution of our strategy is delivering higher return on investment ROIC Including Amounts Attributable to the Other Joint Adjusted Return on Equity (ROE) Attributable to Valero Venture Members Premier Refining portfolio independently 18% 25% Peer Range Peer Ran
Slide 19: Appendix contents
Appendix contents Topic Slide VLO guidance 20 Global scale with concentration in advantaged U.S. Gulf coast 21 Crude supply advantage in the U.S. Gulf coast and Mid-Continent 22 Global optimization of operations, ratable global wholesale supply and product exports 23-26 Completed projects 27-30 U.S.
Slide 20: VLO guidance
VLO guidance (1) 2Q24 • Throughput (MBPD) – U.S. Gulf Coast 1,790 to 1,840 – U.S. Mid-Continent 410 to 430 – North Atlantic 430 to 450 – U.S. West Coast 245 to 265 • Refining cash operating expense per barrel of throughput $4.55 • Ethanol – Production (millions of gallons per day) 4.5 – Operating ex
Slide 21: Global scale with concentration in advantaged U.S. Gulf Coast
Global scale with concentration in advantaged U.S. Gulf Coast 2.7 mmbpd Refining Capacity (mbpd, % of overall crude capacity) U.S. West Coast CANADA 230 UNITED 9% North Atlantic KINGDOM 440 IRELAND 16% 1,534 U.S. Gulf Coast 461 58% 17% U.S. Mid-Continent UNITED STATES (1) Gulf Coast Refining Capacit
Slide 22: Crude supply advantage in U.S. Gulf Coast and Mid-Continent
Crude supply advantage in the U.S. Gulf Coast and Mid-Continent Valero U.S. Gulf Coast Feedstock Ranges Local Crude Gathering (quarterly averages) Cushing McKee 54% Diamond Pipeline Memphis Cushing-McKee Connection Collierville Childress Crude System Station Ardmore Hewitt Wasson To Nederland To St.
Slide 23: Operational flexibility and refinery optimization
Operational flexibility and refinery optimization provide competitive advantage Refinery Product Yield Ranges • VLO has demonstrated a wider (monthly averages) range of yields for gasoline, VLO Industry kerosene, jet fuel, and diesel 59% versus the industry 40% 38% • Our operational flexibility and
Slide 24: Growing a ratable global wholesale supply business
Growing a ratable global wholesale supply business Stable branded and unbranded demand through an extensive marketing network Rack blending Valero’s Global Wholesale Volumes million barrels per (% of total light products production, mbpd) partially offsets our day of ratable >1.5 RVO compliance whol
Slide 25: Competitive global light products supply
Product shortages Competitive global light products supply in Latin America, Eastern Canada, Europe, and VLO U.S. Product Exports (thousand barrels per day) Africa expected to Gasoline Distillate drive U.S. export 354 demand growth 256 98 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 L
Slide 26: Expansion of supply chain to high demand growth markets
Expansion of supply chain to high demand Investing to grow product exports growth markets provides a ratable into higher netback markets product outlet and improves margin Advantaged Refineries and Logistics U.S. Product Exports capture MCKEE (12-month moving average, mbpd) PORT UNITED EL PASO ARTHU
Slide 27: Investing to improve access to North American crude
Investing to improve access to North American crude and lower refinery operating cost structure GROWTH PROJECTS FOCUSED ON OPTIMIZATION AND MARGIN CAPTURE Completed Diamond Pipeline project with 200 MBPD capacity connecting Improves crude oil supply Provides additional Mid-Continent Memphis to Cushi
Slide 28: Port Arthur Delayed Coker Unit
Port Arthur Delayed Coker Unit Investing to improve margins and light product yields Port Arthur Coker Project provides additional crude flexibility • 55 MBPD delayed coker and sulfur recovery unit was started up in the second quarter of 2023 Incremental Feedstock & Product Ranges (MBPD) Feedstocks
Slide 29: Houston Alkylation Unit
Houston Alkylation Unit Investing to upgrade product value Houston and St. Charles Alkylation Units • 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 units up
Slide 30: Investing to supply higher demand markets and expand exports
Investing to supply higher demand markets and expand product export and biofuels blending capabilities Central Texas pipelines and terminals to supply high-growth refined products market Extending • Started up in 2019 product (1) • Approximately 205 miles of pipe , 960,000 barrels of total storage c
Slide 31: U.S. natural gas provides cost advantages for U.S. refiners
U.S. natural gas provides operating expense and feedstock cost advantages for U.S. Refiners Historical: 2019 Natural Gas Impact Current: 2023 Natural Gas Impact ($ per barrel of throughput) ($ per barrel of throughput) $3.87 ~$1 per barrel ~$3.20 per barrel U.S advantage versus U.S. advantage Europe
Slide 32: Investments in reliability and safety
Investments in reliability have contributed to Reliability and safety are imperative for profitability operations excellence In 2023, our Tier 1 Process Safety Event rate matched our best-ever performance Personnel Safety Tier 1 Process Safety (Annual) Valero Employee & Contractor Industry 0.90 0.16
Slide 33: Global low-carbon fuel policies driving renewable diesel demand
Global low-carbon fuel policies driving demand growth for renewable diesel Diesel Demand RD and BD (1) (1) In Select Markets Consumption ~7,300 ~500 Up to 80% Active Low-carbon EU & UK 990 145 Mandates reduction in life 330 5,750 Canada Low-Carbon Mandates 565 cycle GHG Under Development 20 Select U
Slide 34: Competitive advantage with refining and Diamond Green Diesel
Applying our Our competitive advantage with refining and Diamond Green Diesel (DGD) liquid fuels DGD is Designed to Process Low-carbon manufacturing Feedstocks for Higher Product Value expertise to LCFS Carbon Intensity (g CO e / MJ) 2 $0.79 LCFS credit value ($ per gallon) $0.71 $0.65 $0.35 88 opti
Slide 35: Ethanol operations outlook
Operations Outlook Ethanol • 12 plants with 1.6 billion gallons annual • Ethanol will remain a significant part of the production capacity domestic fuel mix o Dry mill production process, where corn is • Global renewable fuel mandates should drive U.S. Fuel Ethanol Exports ground into flour and mixe
Slide 36: Refining capacity and Nelson Complexity Index
Majority of refineries designated as VPP Star Sites by OSHA, recognizing Our refining capacity and Nelson exemplary occupational safety, Complexity Index process safety and health programs (1) Capacities (mbpd) Nelson Complexity (1) Refinery Throughput Crude Index (2) Corpus Christi 370 290 14.4 Hou
Slide 37: Valero's logistics assets
(1) (1) (1) Pipelines Racks, Terminals and Storage Rail Marine Valero’s logistics assets • Over 3,000 miles of active • Over 130 million barrels of • Approximately 5,200 railcars• Over 50 docks pipelines active shell capacity for crude oil and products • Expected to serve long-term • Two Panamax cla
Slide 38: Renewable diesel: a drop-in fuel
RENEWABLE DIESEL A vehicle running on renewable diesel emits A DROP-IN FUEL fewer emissions than an electric vehicle U.S. Light-Duty Vehicle Life Cycle Emissions U.S. Heavy-Duty Long-Haul Vehicle Life Cycle Emissions A single light-duty vehicle 2022 Southwest Research Institute Study 2022 Southwest
Slide 39: Electric vehicle myth: zero emissions
Electric Vehicle (EV) myth: zero emissions Myth: Zero Emissions Fact: significant emissions from EV life cycle Cobalt & Rare Before it Mining/Extraction Earth Processing Manufacturing EVs Power Generation leaves the showroom, an EV emits twice the CO 2 Embedded CO Emissions 2 • Life cycle emissions
Slide 40: A commitment to environmental stewardship
A commitment to environmental stewardship, beyond regulations ENVIRONMENTAL E ESG Disclosures Reducing, Reusing, Recycling, and Repurposing Carbon Capture Our Port Arthur refinery • Annual ESG Report, Flare-gas recovery systems Recycled more than 16 times the including SASB report, became the first
Slide 41: Social and governance
Sharing our success with the communities where we operate with strong governance and ethical standards SOCIAL GOVERNANCE S G Matched best year ever for Tier 1 Process Safety in 2023 7 of 11 directors represent 9 members are independent diversity of race or gender Ensuring a best-in-class work enviro
Slide 42: Notes
Notes Payout Ratio Payout Ratio is the sum of dividends and stock buybacks, including a 1% excise tax that commenced in 2023, divided by adjusted net cash provided by operating activities. Adjusted net cash provided by operating activities excludes changes in working capital and 50% of DGD’s operati
Slide 43: Notes
Notes Slide 8 Texas City Crude Flexibility: Upgraded crude receipt and tankage logistics to increase the number of crude segregations and allow import and processing of discounted crude oils. Port Arthur Butane Rail Rack: Added railcar LPG loading and unloading rack, associated rail track, and LPG t
Slide 44: Notes
Notes Slide 31 VLO Refining system used as a proxy for U.S. refining and compared to a European refinery with similar processing unit configuration. Platts Houston Ship Channel natural gas price quotes used for the U.S. and the ICE UK National Balancing Point quotes used for Europe. Historical natur
Slide 45: Non-GAAP Disclosures
Non-GAAP Disclosures Return on Invested Capital (ROIC) VLO defines return on invested capital (ROIC) as adjusted net income (loss) attributable to VLO stockholders before adjusted net interest expense after-tax, divided by average adjusted invested capital. VLO defines adjusted net income attributab
Slide 46: Non-GAAP Disclosures
Non-GAAP Disclosures Renewable Diesel Net Cumulative Cash Flow VLO defines renewable diesel net cumulative cash flow as DGD’s cumulative adjusted EBITDA attributable to VLO, less DGD’s cumulative capital expenditures attributable to VLO. VLO defines DGD’s adjusted EBITDA attributable to VLO as 50 pe
Slide 47: Non-GAAP Disclosures
Non-GAAP Disclosures Adjusted Net Cash Provided by Operating Activities VLO defines adjusted net cash provided by operating activities as net cash provided by operating activities excluding the items noted below. VLO believes adjusted net cash provided by operating activities is an important measure
Slide 48: Non-GAAP Disclosures
Non-GAAP Disclosures DGD Adjusted EBITDA per Gallon DGD adjusted EBITDA is defined as DGD’s operating income (loss) excluding depreciation and amortization expense, adjusted for the effect of special items that VLO believes are not indicative of DGD's core operating performance and that may obscure
Slide 49: Non-GAAP Disclosures: Return on Invested Capital (ROIC)
Non-GAAP Disclosures: Return on Invested Capital (ROIC) RETURN ON INVESTED CAPITAL (ROIC) (in millions) Year Ended December 31, 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Numerator: Net income (loss) attributable to VLO stockholders $3,990 $2,289 $4,065 $3,122 $2,422 ($1,421) $930 $11,528 $8,
Slide 50: Non-GAAP Disclosures: Free Cash Flow
Non-GAAP Disclosures: Free Cash Flow RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES UNDER GAAP TO FREE CASH FLOW (in millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Net cash provided by operating activities $5,270 $5,564 $4,241 $5,611 $4,820
Slide 51: Non-GAAP Disclosures: Refining Segment Adjusted EBITDA per Barrel
Non-GAAP Disclosures: Refining Segment Adjusted EBITDA per Barrel RECONCILIATION OF REFINING SEGMENT OPERATING INCOME (LOSS) TO REFINING SEGMENT ADJUSTED EBITDA PER BARREL (in millions except per barrel amounts) Year Ended December 31, 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Refining segme
Slide 52: Non-GAAP Disclosures: Refining Margin
Non-GAAP Disclosures: Refining Margin RECONCILIATION OF REFINING SEGMENT OPERATING INCOME TO REFINING MARGIN (in millions) Year Ended December 31, 2012 2023 Refining segment operating income $5,484 $11,511 Adjustments: Operating expenses (excluding depreciation and amortization expense reflected bel
Slide 53: Non-GAAP Disclosures: Renewable Diesel Net Cumulative Cash Flow
Non-GAAP Disclosures: Renewable Diesel Net Cumulative Cash Flow RECONCILIATION OF DGD OPERATING INCOME (LOSS) AND TOTAL CAPITAL INVESTMENTS TO RENEWABLE DIESEL NET CUMULATIVE CASH FLOW ATTRIBUTABLE TO VALERO (in millions) Year Ended December 31, 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Slide 54: Non-GAAP Disclosures: Ethanol Segment Adjusted EBITDA per Gallon
Non-GAAP Disclosures: Ethanol Segment Adjusted EBITDA per Gallon RECONCILIATION OF ETHANOL SEGMENT OPERATING INCOME (LOSS) TO ETHANOL SEGMENT ADJUSTED EBITDA PER GALLON (in millions except for per gallon amounts) Year Ended December 31, 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 202
Slide 55: Non-GAAP Disclosures: Capital Investments Attributable to Valero
Non-GAAP Disclosures: Capital Investments Attributable to Valero RECONCILIATION OF TOTAL CAPITAL INVESTMENTS TO CAPITAL INVESTMENTS ATTRIBUTABLE TO VALERO (in millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Capital expenditures (excluding VIEs) $1,014 $2
Slide 56: Non-GAAP Disclosures: Sustaining and Growth Capital Investments
Non-GAAP Disclosures: Sustaining Capex and Growth Capital Investments Attributable to Valero RECONCILIATION OF SUSTAINING AND GROWTH CAPITAL INVESTMENTS TO SUSTAINING AND GROWTH CAPITAL INVESTMENTS ATTRIBUTABLE TO VALERO (in millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2
Slide 57: Non-GAAP Disclosures: Adjusted Operating Cash Flow and Payout Ratio
Non-GAAP Disclosures: Adjusted Net Cash Provided by Operating Activities and Payout Ratio RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED NET CASH PROVIDED BY OPERATING ACTIVITIES (in millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 202
Slide 58: Non-GAAP Disclosures: ROIC Including Other Joint Venture Members
Non-GAAP Disclosures: Return on Invested Capital (ROIC) Including Amounts Attributable to the Other Joint Venture Members RETURN ON INVESTED CAPITAL (ROIC) INCLUDING AMOUNTS ATTRIBUTABLE TO THE OTHER JOINT VENTURE MEMBERS (in millions) Year Ended December 31, 2013 2014 2015 2016 2017 2018 2019 2020
Slide 59: Non-GAAP Disclosures: Adjusted Return on Equity
Non-GAAP Disclosures: Adjusted Return on Equity (ROE) Attributable to Valero ADJUSTED RETURN ON EQUITY (ROE) ATTRIBUTABLE TO VALERO (in millions) Year Ended December 31, 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Numerator: Net income (loss) attributable to VLO stockholders $3,694 $3,990
Slide 60: Non-GAAP Disclosures: DGD Adjusted EBITDA per Gallon
Non-GAAP Disclosures: DGD Adjusted EBITDA per Gallon RECONCILIATION OF DGD OPERATING INCOME TO DGD ADJUSTED EBITDA PER GALLON (in millions except for per gallon amounts) Year Ended December 31, 2015 2016 2017 2018 2019 2020 2021 2022 2023 DGD operating income $157 $147 $57 $319 $728 $630 $709 $761 $
Slide 61: Non-GAAP Disclosures: Adjusted EBITDA
Non-GAAP Disclosures: Adjusted EBITDA RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA (in millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $2,080 $2,728 $3,711 $4,101 $2,417 $4,156 $3,353 $2,784 ($1,107) $1,288 $11,879 $9,149 Net income (loss) Plus
Slide 62: Investor Relations contacts
Scan this QR code to Homer Bhullar Eric Herbort Gautam Srivastava see what Valero is Vice President, Investor Relations and Finance Director, Investor Relations and Finance Director, Investor Relations doing RIGHT NOW. 210.345.1982 • Homer.Bhullar@Valero.com 210.345.3331 • Eric.Herbort@Valero.com 21