Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (February 2018)
59 slides from Valero Energy's investor presentation, Feb 14, 2018
Slide 1: Investor Presentation February 2018
Investor Presentation February 2018 Exhibit 99.01
Slide 2: Disclaimers
Disclaimers This presentation contains forward-looking statements made by Valero Energy Corporation (“VLO” or “Valero”) and Valero Energy Partners LP (“VLP” or the “Partnership”) within the meaning of federal securities laws. These statements discuss future expectations, contain projections of resul
Slide 3: Who We Are
Who We Are (NYSE: VLO) Premier Independent Refiner 15 refineries, 3.1 million barrels per day (BPD) of high-complexity capacity Fuels marketed and distributed through bulk and wholesale channels General partner and majority owner of Valero Energy Partners LP Operator and 50% owner of Diamond Green D
Slide 4: Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent
Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent Majority of refineries designated as VPP Star Sites by OSHA, recognizing exemplary occupational safety and health programs See slide 29 for capacities.
Slide 5: Favorable Macro Environment Expected
Favorable Macro Environment Expected SUPPLY DEMAND See slide 20 for notes regarding this slide and slides 32 and 33 for supply and demand details. REGULATORY AND GEOPOLITICAL Evolving U.S. legislative and regulatory landscape Recent tax reform Emerging global developments Bullish fundamentals expect
Slide 6: Our Strategy for Value Creation
Our Strategy for Value Creation Maintain manufacturing excellence: safe, reliable, environmentally responsible operations Focus on earnings growth: Market expansion, margin improvement, operating cost control Disciplined capital allocation: deliver distinctive financial results and peer-leading retu
Slide 7: Safety and Reliability are Imperative for Profitability
Safety and Reliability are Imperative for Profitability See slide 20 for notes regarding this slide. VLO’s injury and process safety event rates in 2017 were the lowest in its history.
Slide 8: Reliability Initiatives Have Improved Refinery Availability
Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization and Lower Opex See slide 20 for notes regarding this slide. (1) Utilization and operating expenses for VLO through Dec 31. Utilization was lower due primarily to hurricane impacts. Source: Company reports. (1)
Slide 9: Advantaged Portfolio in U.S. Gulf Coast and Mid-Continent
Advantaged Portfolio in U.S. Gulf Coast and Mid-Continent See slide 20 for notes and slide 29 for capacity and Nelson complexity by refinery. (1) Feedstock ranges represent average quarterly minimums and maximums. Valero’s refineries have flexibility to process 1.6 million BPD light sweet crude and
Slide 10: Our Portfolio Facilitates Global Optimization of Product Exports
Our Portfolio Facilitates Global Optimization of Product Exports See slide 20 for notes regarding this slide. Distillate volumes include diesel, jet fuel, and ULSK. (1) 2017 exports include hurricane impacts. Distillate Gasoline (1)
Slide 11: Investing to Grow Export and Wholesale Fuels Volumes
Investing to Grow Export and Wholesale Fuels Volumes Mexico’s refined product demand is expected to grow, with imports filling a large percentage of the supply shortage Approximately 808 MBPD of gasoline and diesel imported in 2017(1) Proximity, scale, and flexibility of VLO’s Gulf Coast refineries
Slide 12: 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, ANDV, HFC, and PBF. (3)Payout ratio is the sum of dividends and stock buybacks divided by net c
Slide 13: Delivering Cash Returns to Stockholders Is One of Our Priorities
Delivering Cash Returns to Stockholders Is One of Our Priorities Targeting continued buybacks and sustainable annual dividend growth. (1) Annualized based on most recent quarterly dividend. (2) Peer group includes PSX, MPC, ANDV, HFC, and PBF. Dividend yield as of Feb 6, 2018. (1)
Slide 14: Demonstrated Discipline in Capital Allocation
Demonstrated Discipline in Capital Allocation Steady investments in maintaining asset base and enhancing margin capability of portfolio. Non-discretionary (1) 2018 values are estimates. (2) Sustaining reflects costs expected for Turnarounds and Catalysts and Regulatory Compliance.
Slide 15: Steady Pipeline of High Return Projects
Steady Pipeline of High Return Projects Texas City Refinery photo Expect to spend $1 billion annually on growth investments from 2017 through 2021 Approximately 50 / 50 allocation between refining and logistics projects Diamond Pipeline and Wilmington cogeneration unit completed in Nov 2017 Projects
Slide 16: Valero Energy Partners: Executing from a Position of Fundamental Strength
Maintain growth profile, targeting drop downs from VLO, organic projects, and midstream acquisitions Grow annual distributions at target rate of at least 20% for 2018 and deliver top tier distribution growth beyond 2018 Maintain investment grade credit ratings Valero Energy Partners (NYSE: VLP) Exec
Slide 17: Ethanol Business
Ethanol Business Operations 11 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 Plants purchased for 35% of replacement cost Efficient plants with scale, located in corn belt Operational b
Slide 18: We Believe Valero is a Compelling Energy Investment
We Believe Valero is a Compelling Energy Investment XLE Range Median Premier asset portfolio and best in class operations Managed risks Proven operations excellence Low cash cost operations and more stable earnings compared to history Strong financial position Advantaged geographic locations Seeing
Slide 19: Appendix Contents
Appendix Contents Topic Pages Notes 20 Guidance 21 Projects in Execution Phase or Recently Completed 22 – 25 Shift in Refining Evaluation 26 Equity Performance, Stockholder Returns, Financial Results 27 – 28 Refining Capacity and Nelson Complexity 29 Natural Gas Cost Sensitivity 30 Crude Oil Pipelin
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: VLO Guidance
VLO Guidance 1Q18(1) Throughput (MBPD) U.S. Gulf Coast1,650 to 1,700 U.S. Mid-Continent 440 to 460 North Atlantic415 to 435 U.S. West Coast250 to 270 Refining operating expenses per barrel throughput$4.00 Ethanol Production (millions of gallons per day)4.0 Operating expenses per gallon of production
Slide 22: Investing to Improve Access to North American Crude
Investing to Improve Access to North American Crude and Refinery Operating Cost Structure Diamond Pipeline 440 miles of 20-inch pipe (200 MBPD capacity) connecting Memphis to Cushing, started up in Nov 2017 Improves crude supply flexibility and blend quality Approximately $460 MM of project cost for
Slide 23: Investing to Improve Margins
Investing to Improve Margins Octane demand expected to grow due to Tier 3 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 octane, low
Slide 24: Investing to Increase Premium Renewable Fuels Production
Investing to Increase Premium Renewable Fuels Production Expect renewable diesel margins to be supported by increased usage mandates and carbon pricing 6 MBPD of additional production capacity expected to be completed in 3Q18 $200 MM project cost, 50% of which is Valero’s portion Evaluating an addit
Slide 25: Investing to Improve Margins, Expand Export Capability, Increase Biofuels Blending
Investing to Improve Margins, Expand Product Export Capability, and Increase Biofuels Blending (1) Valero to own ~70 mile pipeline from Hearne to Williamson County and 40% undivided interest in 135 mile pipeline from Houston to Hearne. Central Texas pipelines and terminals to supply high-growth refi
Slide 26: 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 Methodical and continuing growth in all major economies Tight global product market expected to continue Product
Slide 27: Outperformed All Companies in the XLE Index on TSR Since 2014
Outperformed All Companies in the XLE(1) Index on TSR Since 2014 (1) XLE includes refining peers PSX, MPC, ANDV, and 28 other energy companies such as XOM, CVX, SLB, COP, EOG, OXY, and KMI. (2) TSR from Dec 31, 2014, through Feb 6, 2018. TSR includes stock price appreciation and dividends paid. VLO
Slide 28: Solid Operational Performance Across the Cycle
Solid Operational Performance Across the Cycle Has Contributed to Distinctive Financial Results Peer group includes PSX, MPC, ANDV, HFC, and PBF. See slides 51 - 54 for non-GAAP disclosures. (1) TSR from Dec 31, 2014, through Dec 31, 2016. TSR includes stock price appreciation and dividends paid. (2
Slide 29: 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 235 180 8.9 Meraux 135 125 9.8 Port Arthur 395 335 12.9 St. Charles 340 215 17.1 Texas City 260 225 11.6 Three Rivers 100 89 13.2 U.S. Gulf Coast
Slide 30: U.S. Natural Gas Provides Opex and Feedstock Cost Advantages
U.S. Natural Gas Provides Opex and Feedstock Cost Advantages 2018 average natural gas prices through Feb 7 for U.S. and Europe. Estimated per barrel cost of 890,000 mmBtu/day of natural gas consumption at 12-month rolling average refinery throughput of 2.9 MMBPD. $1.3 billion pre-tax annual cost adv
Slide 31: Pipeline Capacity Additions Have Increased Crude Competition
Pipeline Capacity Additions Have Increased Crude Competition in the U.S. Gulf Coast KEY Capacities in MBPD. Pipeline completion and startup dates are subject to change. Bayou Bridge Phase 1 operational, with Phase 2 completion expected in 2018. Permian to Gulf Coast reflects multiple pipeline projec
Slide 32: 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.) Updated Feb 9, 2018. Global Petroleum Demand Growth Expected to Outpace Refinery Capacity Expansion Expect methodical economic growth in
Slide 33: High Demand Continues for U.S. Products in Primary Export Markets
High Demand Continues for U.S. Products in Primary Export Markets North America +2.2% GDP annual average +11 MM population +70 MBPD product demand +240 MBPD CDU capacity High utilization needed to meet domestic and export demand Latin America +2.7% GDP annual average +21 MM population +310 MBPD prod
Slide 34: Investor Update February 2018
Investor Update February 2018
Slide 35: Who We Are (VLP)
Who We Are (NYSE: VLP) Sponsored by Premier Independent Refiner, Valero Valero (NYSE:VLO) is our general partner and majority owner $40 billion market capitalization(2) VLP’s assets are integrated with VLO’s refining system Growth Oriented Master Limited Partnership Liquids focused logistics assets
Slide 36: Our Strategic Vision
Our Strategic Vision Maintain safe and environmentally responsible operations ` Generate stable, predictable cash flows, avoiding commodity price risks and protecting revenues with minimum volume commitments (MVCs) and long-term agreements… Demonstrate financial discipline by maintaining a strong ba
Slide 37: Diversified Asset Portfolio
Diversified Asset Portfolio
Slide 38: Long Term Agreements Provide Stable and Predictable Cash Flows
Long Term Agreements Provide Stable and Predictable Cash Flows Transportation and terminal services agreements have 10 year initial terms and five year renewal terms Approximately 85% of revenues supported by MVCs No direct commodity price exposure
Slide 39: VLP's Strong Financial Position Provides Flexibility for Growth
Retained distributable cash flow Available to fund growth through acquisitions and organic projects Strong coverage allows for distribution growth without acquisitions through 2018 Sponsor provided seller-financing for acquisitions $555 MM of subordinated loans, of which $370 MM is outstanding $301
Slide 40: Delivering Organic Growth
Delivering Organic Growth Diamond Green Diesel logistics assets at the St. Charles Terminal Rail loading facility completed in 2Q17 180,000 barrel storage tank expected to be complete in 1Q18 Supported by a long-term, fee based contract through June 2033 Approximately $20 MM total project cost Port
Slide 41: Approximately $1 Billion of Estimated MLP Eligible EBITDA
Approximately $1 Billion of Estimated MLP Eligible EBITDA(1) Inventory at VLO Racks, Terminals, and Storage(2) Over 60 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, as
Slide 42: Solid Performance on TSR Versus Peers and AMZ Index Since Our IPO
Solid Performance on TSR Versus Peers(1) and AMZ Index(2) Since Our IPO VLP70% AMZ-14% (1) Peer group includes MPLX, PSXP, ANDX, and SHLX. (2) Alerian MLP Index (NYSE: AMZ) includes peers MPLX, PSXP, ANDX, SHLX, and 35 other MLPs such as EPD, ETP, MMP, PAA, WPZ, and WES. (3) Total stockholder return
Slide 43: VLP's Competitive Strengths
VLP’s Competitive Strengths Strong Sponsor Strategic relationship with investment grade sponsor VLO Quality Assets High quality, well maintained assets located in advantaged regions Stable and Predictable Revenues Fee-based agreements with no direct exposure to commodity price risks Contracts with 1
Slide 44: Organizational Structure
Organizational Structure(1) Valero Energy Corporation (NYSE: VLO) A wholly owned subsidiary of Valero Energy Corporation Common Units Valero Energy Partners GP LLC (our General Partner) General Partner Units Incentive Distribution Rights Valero Energy Partners LP (NYSE: VLP) Valero Partners Operatin
Slide 45: IPO Assets and Texas Crude Systems Business
IPO Assets and Texas Crude Systems Business Texas Crude Systems Business (7-1-14) Pipelines, truck unloading sites, and storage supporting VLO’s McKee, Three Rivers, and Ardmore refineries McKee system includes 72 MBPD of throughput capacity and 240,000 barrels of storage for crude oil Three Rivers
Slide 46: Houston, St. Charles, and Corpus Christi Terminals
Houston, St. Charles, and Corpus Christi Terminals Corpus Christi (10-1-15) Crude oil, intermediates, and refined products terminaling services supporting VLO’s Corpus Christi East and West refineries 10.1 million barrels of storage on Corpus Christi ship channel Houston and St. Charles (3-1-15) Cru
Slide 47: McKee, Meraux and Three Rivers Terminals
McKee, Meraux and Three Rivers Terminals Meraux and Three Rivers Terminals (9-1-16) Crude oil, intermediates, and products storage capacity supporting VLO’s Meraux and Three Rivers refineries 6.2 million barrels of storage capacity McKee Terminal (4-1-16) Crude oil, intermediates, and products stora
Slide 48: Red River Pipeline
Red River Pipeline Red River Pipeline (1-18-17) 40% undivided interest in Hewitt segment of Red River Pipeline supporting VLO’s Ardmore refinery with a connection from Hewitt to Wasson 138 miles of newly constructed 16-inch crude oil pipeline with 150,000 barrels per day of capacity Two 150,000 barr
Slide 49: Parkway Pipeline and Port Arthur Terminal
Parkway Pipeline and Port Arthur Terminal Parkway Pipeline and Port Arthur Terminal (11-1-17) Products pipeline linking VLO’s St. Charles refinery with the Plantation and Colonial pipeline systems 141-mile, 16-inch refined petroleum products pipeline with 110,000 barrels per day of capacity with abi
Slide 50: Non-GAAP Disclosures
Non-GAAP Disclosures -— lUlUlUCVALERO
Slide 51: VLO Non-GAAP Disclosures: Free Cash Flow
VLO Non-GAAP Disclosures: Free Cash Flow VLO defines free cash flow as net cash provided by operating activities less capital expenditures; deferred turnaround and catalyst costs; investments in joint ventures; and changes in current assets and liabilities. VLO believes that the presentation of free
Slide 52: 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) Nine Months Ended Sep 30, 2016 Year Ended Dec 31, 2016 Nine Months Ende
Slide 53: VLO Non-GAAP Disclosures: Adjusted EBITDA and Net Debt-to-Adjusted EBITDA
VLO Non-GAAP Disclosures: Adjusted EBITDA and Net Debt-to-Adjusted EBITDA VALERO ENERGY CORPORATION RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (Unaudited, in Millions, Except Ratio Amount) Nine Months Ended Sep 30, 2016 Year Ended Dec 31, 2016 Nine Months Ended Sep 30, 2017 Net income $2,001 $2
Slide 54: VLO Non-GAAP Disclosures: Adjusted Earnings Per Common Share
VLO Non-GAAP Disclosures: Adjusted Earnings Per Common Share VALERO ENERGY CORPORATION Reconciliation of earnings per common share – assuming dilution, to adjusted earnings per common share – assuming dilution (Unaudited, in Millions, Except Ratio Amount) Year Ended Dec 31, 2016 Year Ended Dec 31, 2
Slide 55: VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, Debt-to-Adjusted Pro Forma EBITDA
VLP Non-GAAP Disclosures: EBITDA, Distributable Cash Flow, and Debt-to-Adjusted Pro Forma EBITDA VLP defines EBITDA as net income before income tax expense, interest and debt expense, net of capitalized interest, and depreciation expense. VLP defines distributable cash flow as EBITDA less (i) EBITDA
Slide 56: 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) Sep 30, 2017 Numerator: Total debt and capital lease obligations $895,177 Nine Months Ended Sep 30
Slide 57: 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) Dec 31, 2017 Numerator: Total debt and capital lease obligations $1,275,283 Year Ended Dec 31, 201
Slide 58: VLP quarterly EBITDA reconciliation
4Q2013 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 2Q2015 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 Net income ($6,900) ($8,280) ($6,929) ($7,934) ($10,218) ($269) $19,161 $15,625 $36,795 $35,780 $44,545 $48,707 $59,799 $58,137 $58,443 $57,589 $64,264 Plus: Depreciation expense 8,
Slide 59: 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
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