Valero Energy Corporation · NYSE:VLO
Valero Energy — Credit Suisse Energy Summit 2011
48 slides from Valero Energy's conference presentation, Feb 9, 2011
Slide 1: Credit Suisse Energy Summit February 9-11, 2011
Credit Suisse Energy Summit February 9-11, 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: Valero Energy Overview
Valero Energy Overview World's largest independent refiner14 refineries 2.6 million barrels per day (BPD) of throughput capacityAverage refinery throughput capacity of 185,000 BPDOne of the nation's largest fuel retailers with approximately 5,800 branded marketing sitesOne of the largest ethanol com
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: Continued Global Demand Growth Important to Refining Margins
(CHART) Continued Global Demand Growth Important to Refining Margins Refining is a global business - global demand growth matters to refiners everywhereStrong growth in emerging markets is leading the surge in global petroleum demand estimated at 2.5 million BPD in 2010 5 Source: Consultant and Vale
Slide 6: Simple Refining Margins Bottomed in 2009, Recovery Started in 2010
Simple Refining Margins Bottomed in 2009, Recovery Started in 2010 6 Gulf Coast LLS Margins Margins improving from strong global demand, particularly in emerging markets, and capacity rationalizationRecent cold weather and restocking from 4Q10 French strike in OECD countries helping distillate deman
Slide 7: Strong Demand for Waterborne Light-Sweet Crude Oils Creating Large Feedstock Discounts
Strong Demand for Waterborne Light-Sweet Crude Oils Creating Large Feedstock Discounts 7 (CHART) $/barrel
Slide 8: Strong Demand for Waterborne Light-Sweet Crude Oils Creating Large Feedstock Discounts
Strong Demand for Waterborne Light-Sweet Crude Oils Creating Large Feedstock Discounts 8 Light-sweet waterborne crude oils are the marginal feedstock in strong demandExamples: LLS, Brent, among othersLower-quality and logistically constrained crude oils seeing wide discounts Maya, WTI, Mars, ANSExpe
Slide 9: Valero Has Significant Leverage to Lower-cost Feedstocks and Wider Throughput Margins
Valero Has Significant Leverage to Lower-cost Feedstocks and Wider Throughput Margins 9 9 Gulf Coast62% (1,600 mbpd) Mid-Con17% (455 mbpd) West Coast12% (305 mbpd) Northeast (Canada)9% (235 mbpd) Throughput Capacity (CHART) Maya/Mars Heavy Sour Coking WTI Cracking ANS Medium Sour Coking Brent Cracki
Slide 10: Gulf Coast Heavy Sour Coking Margins Leading the Recovery
Gulf Coast Heavy Sour Coking Margins Leading the Recovery Leading the Recovery Leading the Recovery 10 Source: Argus; 2011 year-to-date through January 31; see Appendix for details on refinery configuration assumptions
Slide 11: Valero's Gulf Coast System Well-Positioned for Global Export Opportunities
Valero's Gulf Coast System Well-Positioned for Global Export Opportunities 11 Our large, complex refineries on Gulf Coast are competitive with low-cost operations and feedstocksStructural supply-demand imbalance in Latin America and diesel-shortage in Europe provide higher-margin export opportunitie
Slide 12: Rationalization of Industry Capacity Continues
(CHART) (CHART) Rationalization of Industry Capacity Continues Source: Valero EnergyNote: 2011 and 2012 estimates include announced future capacity closures MBPD 12 Source: Valero Energy MBPD As we said previously, refining capacity continues to shut down in the industry, particularly marginal plant
Slide 13: Valero's Strategic Priorities
Valero's Strategic Priorities 13 Manage overhead and maintain investment grade credit ratingImprove margin capture, operating costs, and reliability at refineriesComplete major, value-added capital projects at key refineriesOptimize portfolio - continue "high-grading" strategy of the last several ye
Slide 14: Achieving Significant Cost Reductions
Achieving Significant Cost Reductions 14 (CHART) (CHART) Since beginning of 2007, we have achieved $620 million in pre-tax cost savingsIn 2011, targeting another $100 million in pre-tax cost savings
Slide 15: Continuing to Make Our Refineries More Competitive
Continuing to Make Our Refineries More Competitive 15 1st QuartileIndustry Rank 2nd Quartile 1st QuartileIndustry Rank 2nd Quartile Industry benchmarking survey shows Valero is continuing to improve on its competitive, low-cost operations2010 was Valero's best companywide performance in five yearsCo
Slide 16: Continuing to Make Our Refineries More Competitive
Continuing to Make Our Refineries More Competitive 16 1st QuartileIndustry Rank 2nd Quartile 1st Quartile 2nd Quartile Our goal is to be a 1st-quartile refiner in industry benchmark surveysExpect big reliability improvement after major 1Q11 turnarounds, particularly for Port Arthur coke drums and St
Slide 17: Strong Contribution from Retail
Strong Contribution from Retail (CHART) Retail Performance (Trailing 4Q Avg.)(U.S. and Canada) 17 In 2010, retail had best 1st and 2nd quarters and 2nd best year in Valero history Improvement in retail earnings with smaller asset base = better returnsSince 2005, more than doubled total operating inc
Slide 18: Strong Contribution from Ethanol
Strong Contribution from Ethanol 18 Large, efficient plants in great location have competitive advantage on costsAcquired world-class ethanol plants at an average of 35% of replacement costIn less than 2 years, cumulative operating income less depr. & amort. expense (EBITDA) was $427 million, or 56%
Slide 19: Adding to Financial Strength
(CHART) (CHART) Adding to Financial Strength Investment grade credit ratingEnded 4Q10 with $3.3 billion of cash and nearly $4 billion of additional liquidityNet debt-to-cap ratio at 12/31/10 was 25%, far below credit facility covenant of 60%No other coverage-type ratios or borrowings on bank revolve
Slide 20: Shifting Capital Spending to Economic Growth Projects
Shifting Capital Spending to Economic Growth Projects 20 "Stay-in- business" spending 2011 estimated Regulatory spending estimated to decline as Benicia scrubber and MSAT2 projects were completed in 2010There are potential benefits of a recently passed tax law allowing 100% deduction on capital proj
Slide 21: Economic Growth Projects Mainly Geared Toward High Oil/Low Natural Gas Prices
Economic Growth Projects Mainly Geared Toward High Oil/Low Natural Gas Prices Potential for significant earnings power and project returnsProjects developed based on our "bullish crude, bearish natural gas" price outlookThese projects represent over 75% of strategic capital spending in 2010 and 90%
Slide 22: Why Invest in Valero Today?
Why Invest in Valero Today? 22
Slide 23: Appendix
Ww VALERO Appendix
Slide 24: Impact of Cost Savings Programs
Impact of Cost Savings Programs Impact of Cost Savings Programs 24 Ongoing cost savings programs have contributed to Valero's competitiveness and improved financial performance millions (CHART)
Slide 25: Valero Has Competitive, Low-Cost Refining Operations
Valero Has Competitive, Low-Cost Refining Operations 25 Refining Cash Operating Expenses less Natural Gas Usage ($/bbl) Source: Macquarie Capital (CHART)
Slide 26: Valero Has High Conversion Refining System
Valero Has High Conversion Refining System Valero Has High Conversion Refining System 26 Note: CDU = crude distillation unit; conversion capacity is the sum of each company's FCC, hydrocracking, and coking capacity Source: PIRA Energy Group 12/16/10 (CHART) We believe size and conversion ratio matte
Slide 27: Memphis FCC Revamp Project
Memphis FCC Revamp Project Investment HighlightsFavorable economics driven by better reliability and gains on margin and volumeImproves flexibility to run lower- quality feedstocksImproves FCC reliability and increases run length between turnarounds to four years from 1.5 yearsIncrease in run length
Slide 28: St. Charles MSCC to FCC Conversion Project
St. Charles MSCC to FCC Conversion Project Investment HighlightsFavorable 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 yearsAdds 5%+ volume expansion through FCCImproves energy effic
Slide 29: Hydrogen Plant Projects
Hydrogen Plant Projects 29 Summary of Project Status and Economics1 Summary of Project Status and Economics1 Summary of Project Status and Economics1 Estimated completion date 1Q12 1Q12 Estimated total investment (mil.) $180 $180 Cumulative spend thru 4Q10 (mil.) $25 $25 Incremental Operating Income
Slide 30: Port Arthur Hydrocracker Project
Port Arthur Hydrocracker Project Investment HighlightsFavorable economics driven by margin and volume gainsMain unit is 50,000 barrels/day hydrocracker plus facilities to process over 150,000 barrels/day of high-acid, heavy sour Canadian crudeCreates high-value products from low- value feedstocks pl
Slide 31: Montreal Pipeline Project
Montreal Pipeline Project Investment HighlightsFavorable economics driven by reducing transportation costs and growing volumesNew pipeline with 100,000 barrels/day of throughput capacityPlanned closure of Shell Montreal refinery allows Valero to place additional products into Montreal and Ontario ma
Slide 32: St. Charles Hydrocracker Project
St. Charles Hydrocracker Project Investment HighlightsFavorable economics driven by margin and volume gainsMain unit is 50,000 barrels/day hydrocrackerCreates high-value products from low- value feedstocks plus hydrogen sourced from relatively inexpensive natural gasUnit has volume expansion of 25%-
Slide 33: Project Price Set Assumptions
Project Price Set Assumptions 33 Commodity Base Case($/barrel) 2011 Fwd Curve as of 2/2/11 ($/barrel) Comments WTI 85.00 96.54 WTI - USGC HS Gas Oil -3.45 -8.66 USGC Gas Crack 6.00 9.47 USGC ULSD Crack 11.00 19.17 Natural Gas, $/MMBTU (HHV) 5.00 4.51 Prices shown below are for illustrating a potenti
Slide 34: Project Price Sensitivities
Project Price Sensitivities 34 Operating Income before D&A1 Sensitivities (Delta $ millions/year) 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 - USGC HS Gas Oil, + $1/BBL 14.1 14.1 N/A N
Slide 35: Global CDU Capacity and Additions
35 Source: Valero and Consultant Estimates MMBPD (CHART) Global CDU Capacity and Additions
Slide 36: Continued Global Demand Growth Important to Refining Margins
(CHART) (CHART) Continued Global Demand Growth Important to Refining Margins 36 Source: Consultant and Valero estimates Source: Consultant and Valero estimates MMBPD MMBPD Forecast Forecast
Slide 37: Global Refining Capacity For Sale or Under Strategic Review
Global Refining Capacity For Sale or Under Strategic Review 38 Location Owner CDU Capacity (MBPD) Stanlow, UK Shell 267 Gothenburg, Sweden Shell 80 Kapolei, HI Chevron 54 Pembroke, UK Chevron 210 Meraux, LA Murphy 125 Superior, WI Murphy 35 Milford Haven, UK Murphy 108 Lindsey, UK Total 221 Whitegat
Slide 38: Global Spare Capacity
Note: Availability of world CDU capacity assumed to average ~94%; Historical CDU capacity data from the DOE; USGC 5/3/2 = 3*USGC Gasoline+2*USGC ULSD-5*WTI Estimate global spare refining capacity fell from 7 million BPD of at end of 2009 to 5.7 million BPD at end of 2010(CHART) MMBPD Margin/bbl Gold
Slide 39: Made Excellent Ethanol Acquisitions
Made Excellent Ethanol Acquisitions Built position for average of only 35% of estimated replacement cost2Q09: acquired 7 plants with 780 million gallons per year of world-scale capacity in advantaged locations1Q10: Added 3 plants with 330 million gallons per year of capacity 40 Favorable margin outl
Slide 40: Ethanol Grows as Part of the Fuel Mix
U.S. Ethanol Demand BGal/yr We expect ethanol volumes to meet corn RFS requirements, but expect advanced (cellulosic) ethanol to develop more slowly than prescribedCurrent corn ethanol capacity is approximately 13.7 BGPY (13.1 BGPY operational) and the 2015 RFS for corn-based ethanol is 15 BGPY Sour
Slide 41: World Demand Favors Diesel
World Demand Favors Diesel World Demand Favors Diesel World Demand MMBPD Diesel demand is expected to recover past prior highs and grow rapidlyDiesel demand has grown to become much larger than gasoline globallyGrowing global diesel demand is an export opportunity for U.S. refineries History Forecas
Slide 42: Gasoline Fundamentals
Gasoline Fundamentals 43 43 (CHART) USGC Gasoline Crack (per bbl) U.S. Gasoline Demand (mmbpd) (CHART) Source: Argus; 2011 data through January 28 Source: DOE weekly data; 2011 data through week ending January 28 Source: DOE weekly data; 2011 data through week ending January 28 Source: DOE weekly da
Slide 43: Distillate Fundamentals
Distillate Fundamentals 44 44 (CHART) USGC On-road Diesel Crack (per bbl) U.S. Distillate Demand (mmbpd) (CHART) (CHART) Source: Argus; 2011 data through January 28 Source: DOE weekly data; 2011 data through week ending January 28 Source: DOE weekly data; 2011 data through week ending January 28 Sou
Slide 44: U.S. Transport Indicators: Trucking Indicators
U.S. Transport Indicators: Trucking Indicators Source: BTS Source: ATA Source: ATA 45
Slide 45: U.S. Transport Indicators
(CHART) U.S. Transport Indicators 46 46
Slide 46: Mexico Statistics
(CHART) (CHART) Mexico Statistics Diesel Net Imports (MBPD) Source: PEMEX Gasoline Net Imports (MBPD) Source: PEMEX (CHART) Crude Unit Throughput (MBPD) Crude Unit Utilization (CHART) 47 Source: PEMEX Source: PEMEX
Slide 47: Valero Financial Information (unaudited)
Valero Financial Information (unaudited) Valero Financial Information (unaudited) as of 12/31/10Total current assets: $13.5 billionCash balance: $3.3 billionTotal current liabilities: $8.8 billion Current maturities: $822 millionStockholder's equity: $15.0 billionMarket value of LIFO inventories: $1
Slide 48: Investor Relations Contacts
Investor Relations Contacts For more information, please contact:Ashley SmithVice President, Investor Relations210.345.2744ashley.smith@valero.comMatthew JacksonInvestor Analyst210.345.2564matthew.jackson@valero.com 49