Valero Energy Corporation · NYSE:VLO
Valero Energy — Merger or Acquisition (March 2011)
24 slides from Valero Energy's merger presentation, Mar 11, 2011
Slide 1: Acquisition of Chevron's Pembroke Refinery, Marketing and Logistics Assets in the UK and Ireland
Acquisition of Chevron's Pembroke Refinery, Marketing and Logistics Assets in the United Kingdom and Ireland March 2011
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: Transaction Overview
Transaction Overview Valero has agreed to acquire Chevron's Pembroke refinery, marketing and logistics assets in the United Kingdom and Ireland for $730 million 270,000 barrels-per-day refinery with estimated value of $480 million Nelson complexity of 11.8 Estimated replacement cost of $3.4 billion
Slide 4: Strategic Rationale: Competitive, high-quality assets
Strategic Rationale Competitive, high-quality assets One of the largest, most complex refineries in Western Europe Refinery was profitable and cash flow positive in 2009, a tough refining environment when many refineries were unprofitable Well-maintained refinery with cash-operating-costs-per barrel
Slide 5: Strategic Rationale: Expected EPS accretion creates shareholder value
Strategic Rationale Expected EPS accretion creates shareholder value Valero estimates earnings accretion of $0.26/share with 2010 market prices and $0.30/share with 2011 forward curve prices Valero estimates $10 to $20 million of annual operating synergies, primarily in trading and optimization Cons
Slide 6: Pembroke Refinery Overview
Pembroke Refinery Overview Large, complex refinery with total throughput of 270,000 bpd 220,000 bpd crude plus 50,000 bpd other feedstocks Large FCC unit provides significant volumetric gains Built in 1964 as a hydroskimmer, cat cracking capacity was added in 1982 6 Occupies approximately 450 acres
Slide 7: Competitive Feedstock and Product Slate
Competitive Feedstock and Product Slate Flexible plant mainly processes North Sea crudes and a variety of other feedstocks Has processed over 60 different types of crudes in the past decade Feedstock slate priced an average of $1/barrel below Brent over the past 5 years Up to 20% high-mercaptan crud
Slide 8: Excellent Location, Deep-Water Port, and Tankage
Excellent Location, Deep-Water Port, and Tankage Deep-water port and docks can handle VLCCs, providing significant flexibility Crude is delivered by ship directly without reliance on third-party terminal or pipelines Advantaged location to obtain growing light crude volumes from Africa and the Caspi
Slide 9: Integrated Marketing Businesses Provide Stable Home for Refinery Production
Integrated Marketing Businesses Provide Stable Home for Refinery Production Diversified distribution channels consist of retail, wholesale, and aviation in the U.K. and Ireland Distributed volume is over 150,000 bpd, or >50% of refinery production Aviation business supplies 14,000 bpd of jet fuel to
Slide 10: Branded Sites Focused in Areas of Supply and Cost Advantage
Branded Sites Focused in Areas of Supply and Cost Advantage Approximately 1,000 branded wholesale sites plus 35 company-owned sites Largest branded dealer site network in the U.K. and the second largest network in Ireland Brand is Texaco, in use in the U.K. since 1916 20-year agreement to use the br
Slide 11: Estimated Annual Financial Performance
Estimated Annual Financial Performance 11 Valero's estimates are based on market prices applied to Valero's base operating assumptions. These are not Chevron's assumptions or estimates. In 2011, Valero expects to incur approximately $20 million in pre-tax, non-recurring costs related to this transac
Slide 12: Pembroke One of Largest, Most Complex Refineries in Western Europe
12 12 Pembroke One of Largest, Most Complex Refineries in Western Europe Source: PIRA, All data based on firm capacities based on period ending 4Q 2010
Slide 13: Pembroke One of Highest Conversion Capacity among U.S. East Coast Competitors
Pembroke One of Highest Conversion Capacity among U.S. East Coast Competitors 13 Source: O&G Journal, Conversion capacity consists of FCC, HCU, Coking and ROSE unit capacity
Slide 14: Pembroke's Low Operating Costs Enhance Valero's Competitiveness
Pembroke's Low Operating Costs Enhance Valero's Competitiveness Valero's Competitiveness Valero's Competitiveness 14 25% below VLO Average 1Based on 2010 results 2Valero estimate 1 2
Slide 15: Acquisition Price Far Below Recent Refining Transactions and VLO's Implied Refining Value
Acquisition Price Far Below Recent Refining Transactions and VLO's Implied Refining Value 15 (CHART) 60% discount to VLO
Slide 16: Pembroke Enhances Valero's Margin Optimization Strategy in the Atlantic Basin
Pembroke Enhances Valero's Margin Optimization Strategy in the Atlantic Basin 16 Valero estimates $10 to $20 million of annual operating synergies, primarily in trading and optimization Quebec U.S. Gulf Coast Aruba Pembroke
Slide 17: In Summary, Acquisition Improves Portfolio and Creates Shareholder Value for Valero
In Summary, Acquisition Improves Portfolio and Creates Shareholder Value for Valero Competitive, high-quality assets One of largest, most complex refineries in Western Europe Competitive cost structure Integrated marketing and logistics assets Attractively priced below VLO and other recent transacti
Slide 18: Appendix
Ww - VALERO Appendix
Slide 19: Geographically Diverse Operations
Geographically Diverse Operations 19 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. 325 205 20.6 Houston 160 90 15.1 McKee 170 168 9.5 Memphis 195 180 7.5 Port A
Slide 20: Market-Implied Estimated Value of Valero's Refining Assets
Market-Implied Estimated Value of Valero's Refining Assets Billions, except per unit amounts Billions, except per unit amounts Market Value of Equity at $29/share $16.6 Add: Book Value of Debt1 8.3 Less: Cash1 -3.3 = Estimated Enterprise Value 21.5 Less: Book Value of Net Working Capital1 -2.2 Less:
Slide 21: U.K. and Ireland Logistics Assets
Manchester Airport (50% Into - Plane) Newcastle UK Ireland Manchester Terminal (33%) Dublin Terminal (50%) Dublin Airport (50%) Galway Terminal (50%) Shannon Airport (Fuel) New Ross (50%) Buncefield Tank Farm Seisdon Nottingham London East Midlands Airport (100%) Kingsbury Terminal (100%) HOSL Termi
Slide 22: Refinery Estimated Annual Financial Performance
Refinery Estimated Annual Financial Performance 22 Valero's estimates are based on market prices applied to Valero's operating assumptions. These are not Chevron's assumptions or estimates. Estimated depreciation and amortization expense assumes life of 25 years and straight-line method; subject to
Slide 23: Marketing Estimated Annual Financial Performance
Marketing Estimated Annual Financial Performance 23 Valero's estimates are based on market prices applied to Valero's operating assumptions. These are not Chevron's assumptions or estimates. Estimated depreciation and amortization expense assumes life of 20 years and straight-line method; subject to
Slide 24: Pembroke Refinery Configuration
Pembroke Refinery Configuration (unit capacities in 000 bpd) 24 Crude Merox (34) Naphtha Hydrotreating (49) Diesel hydrotreating (29,39) Vacuum Distillation Unit (97) Visbreaker (26) Isom (17) CCR Reformer (35) Resid Cat Cracker (92) C4 Isom (19) ULSG (35,33) LSAR Butanes HF Alkylation (35) VGO Crud