Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (June 2022)
55 slides from Valero Energy's investor presentation, Jun 1, 2022
Slide 1: Advancing the Future of Energy
Exhibit 99.01 Advancing the Future of Energy Advancing the Future of Energy • With Capital Discipline, Innovation and Unmatched Execution W I T H C A P I TA L D I S C I P L I N E , I N N O V AT I O N A N D U N M AT C H E D E X E C U T I O N . R E L I A B L E A F F O R D A B L E S U S T A I N A B L E
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: Refining, Renewable Diesel and Ethanol Overview
REFINING RENEWABLE DIESEL ETHANOL ND ND W O R L D ’ S L A R G E S T I N D E P E N D E N T W O R L D ’ S 2 L A R G E S T R E N E W A B L E D I E S E L W O R L D ’ S 2 L A R G E S T C O R N E T H A N O L R E F I N E R P R O D U C E R P R O D U C E R GROWTH PROJECTS FOCUSED ON COST CONTROL, OPTIMIZATIO
Slide 4: Advancing the Future of Energy with Capital Discipline, Innovation and Unmatched Execution
Advancing the Future of Energy with 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 O
Slide 5: Comprehensive Roadmap to Further Reduce Emissions with Innovative Low-carbon Projects
Comprehensive Roadmap to Further Reduce Emissions with Innovative Low-carbon Projects Consistent with Our Strategy GHG Emissions 2035 Target Reduction (Scope 1 & 2) On track to reduce and displace Refinery GHG 2.4 emissions by 32.3 32.3 4.2 Scope 1 & 2 63% through investments in 11.1 board-approved
Slide 6: Expanding Long-term Competitive Advantage with Economic Low-carbon Transportation Fuels
Expanding Our Long-term Competitive Advantage with Investments in Economic Low-carbon Transportation Fuels Visibility to Earnings Growth $1.2 to $1.7 billion in Annual EBITDA from Growth Projects in Execution $10,500 (expected completion / project cost) Refining Optimization and Increasing Renewable
Slide 7: Global Low-carbon Fuel Policies Driving Demand Growth for Renewable Diesel
Global Low-carbon Fuel Policies Driving Demand Growth for Renewable Diesel Diesel Demand in Current RD and BD California Renewable (1) (1) Select Markets Consumption Diesel Consumption ~7,300 <500 937 (million gallons) Active Low-carbon 589 EU & UK 720 Mandates 105 335 6,000 Canada 570 15 Low-Carbon
Slide 8: Renewable Diesel Driving Low-carbon Results in California
Renewable Diesel Driving Low-carbon Results in California California LCFS Performance LCFS Credit by Fuel Type (% reduction in carbon intensity) (2021) Cost-effective 0% fuel that can be used with Electricity existing vehicles (other) 9% -5% Other Electricity Renewable 2% Drop-in fuel (on-road charg
Slide 9: Expansion into Low-carbon Renewable Fuels Underpinned by Higher Economic Returns
Expansion into Low-carbon Renewable Fuels Underpinned by Higher Economic Returns Renewable Diesel Capacity Renewable Diesel Realized Cash Flow Profile (million gallons per year) ($ in millions) 1,170 $1,602 million cumulative EBITDA $1,700 $1,238 million cumulative Capex $1,400 Cumulative EBITDA 470
Slide 10: Renewable Diesel: A Drop-in Fuel with Fewer Emissions than an EV
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 2021 Southwest Research Institute Study 2021 Southwest
Slide 11: Applying Our Competitive Advantage with Diamond Green Diesel
Applying our Our Competitive Advantage with liquid fuels Diamond Green Diesel (DGD) manufacturing DGD is Designed to Process Low-carbon expertise to Feedstocks for Higher Product Value optimize our Carbon Intensity (g CO e / MJ) $1.37 $1.23 2 $1.14 LCFS credit value ($ per gallon) 100 $0.63 renewabl
Slide 12: Developing Economic Paths to Further Reduce Carbon Intensity of Our Products
Developing Economic Paths to Further Reduce the Carbon Intensity of Our Products • Connecting to BlackRock and Navigator’s large-scale carbon capture and storage project MINNESOTA − 1,300 mile pipeline is expected to span across five Midwest states SOUTH DAKOTA − Valero is expected to be the anchor
Slide 13: Premier Refining Portfolio: Size, Scale, Lowest Cost Producer
SIZE, SCALE AND GLOBAL REACH LOWEST COST PRODUCER DISCIPLINED INVESTMENTS EXTENSIVE CONNECTIVITY AND GLOBAL OPTIMIZATION TOP QUARTILE OPERATIONS GROWTH WITH LOWER VOLATILITY PREMIER REFINING PORTFOLIO THAT IS RESILIENT EVEN IN A CARBON-CONSTRAINED SCENARIO Long-term, SIZE, SCALE AND GLOBAL REACH sus
Slide 14: Investments in Safety and Reliability are Imperative for Profitability
Investments in Safety and Reliability reliability have contributed to are Imperative for Profitability operations excellence In 2021, we delivered our best year ever on employee and process safety performance Personnel Safety Tier 1 Process Safety (three-year rolling averages) Valero Industry 0.19 0
Slide 15: Increased Refinery Availability Has Driven Valero to be the Lowest Cost Producer
Increased Refinery Availability Has Driven Valero to be the Lowest Cost Producer Improvement in Mechanical Availability Refining Cash Operating Expenses (1) Versus Industry Benchmarks Per Barrel of Throughput (excludes turnaround and D&A expenses) Peer Range $8.00 st 1 Quartile 2018 nd 2 Quartile 20
Slide 16: Refining Business Generates Significant Cash to Support Growth and Stockholder Returns
Refining Business Generates Significant Cash to Support Growth and Stockholder Returns Sources and Uses of Cash – Cumulative: December 31, 2014 to March 31, 2022 ($ in billions) Sources of Cash Uses of Cash Reducing Leverage $4.0 $3.0 ($17.7) (0.6) $33.2 Sustaining capital ($10.6) (0.7) Growth capit
Slide 17: Disciplined Capital Management is a Constant in Our Strategy
Disciplined Capital Management 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 $1.2 to $1.5 billion annually• Commitment to stockhol
Slide 18: Demonstrated Discipline in Capital Allocation
Demonstrated Discipline in Capital Allocation Estimated Capital Investments Attributable to Valero Annual Capital Investments Attributable to Valero ($ billion) $2.0 billion for 2022 $3.4 Sustaining Growth Steady investments $2.8 Sustaining Renewables $2.7 ~50% ~60% ~40% to maintain a safe $2.6 $2.6
Slide 19: Delivering on Our Commitment of Cash Returns to Stockholders
Delivering on Our Commitment of Cash Returns to Stockholders Annual Dividend Per Share and Weighted Average Stockholder Dividend Shares Outstanding (2) Returns Yield as a Percentage Relative to 2012 556 million S&P 500 1.6% Payout Ratio: Delivering cash shares 11% 30% 31% 54% 65% 63% 56% 47% 184% 50
Slide 20: Demonstrated Lower Volatility in Earnings and Free Cash Flow
Demonstrated Lower Volatility in Earnings and Free Cash Flow Volatility S&P 500 Free Cash Flow Volatility and Return Profile Average Free Cash Flow 2012 – 2022 2012 – 2022 2012 – 2021 Valero has Peer Range 9% BEST demonstrated Financials lower 8% Valero $2,119 volatility in 8% 7% earnings and Commun
Slide 21: Valero's Positioning Relative to the S&P Index
Valero’s Positioning Relative to the S&P 500 Index Dividend Yield Compelling Dividend Yield Growth Value Balance Sheet VLO 3.2% (≥3% Dividend Yield) ($ billion) Premier Refining Company 2 Company 2 3.1% portfolio that is Competitive EBITDA Growth 34% resilient even in a (≥10% Consensus CAGR for carb
Slide 22: Appendix Contents
Appendix Contents Topic Slide Notes 23-24 VLO Guidance 25 Environmental, Social and Governance (ESG) 26-27 Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent 28 U.S. Natural Gas Cost Advantage 29 Crude Supply Advantage in the U.S. Gulf Coast and Mid-Continent 30 Global Optimization of O
Slide 23: Notes
Notes Payout Ratio Payout Ratio is the sum of dividends and stock buybacks 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 operating cash flow (excluding the change in its working c
Slide 24: Notes
Notes Slides 13 and 20 Free cash flow is defined as net cash provided by operating activities less capital expenditures of VLO and DGD, deferred turnaround and catalyst cost expenditures, investments in joint ventures, and changes in current assets and liabilities. Average free cash flow reflects 20
Slide 25: VLO Guidance
VLO Guidance (1) 2Q22 • Throughput (MBPD) – U.S. Gulf Coast 1,640 to 1,690 – U.S. Mid-Continent 395 to 415 – North Atlantic 445 to 465 – U.S. West Coast 225 to 245 • Refining cash operating expense per barrel of throughput $5.15 • Ethanol – Production (millions of gallons per day) 4.0 – Operating ex
Slide 26: A Commitment to Environmental Stewardship, Beyond Regulations
A Commitment to Environmental Stewardship, Beyond Regulations ENVIRONMENTAL E Upcoming ESG Reducing, Reusing, Recycling, and Repurposing Carbon Capture Disclosures Our Port Arthur refinery - ESG Report to include Flare-gas recovery systems Recycle approximately 18.5 SASB report, EEO-1, became the fi
Slide 27: Sharing Our Success with the Communities where we Operate
Sharing Our Success with the Communities where we Operate with Strong Governance and Ethical Standards SOCIAL GOVERNANCE S G 6 of 11 directors represent 10 members are independent of our U.S. workforce are minorities 36% diversity of race or gender of our professional employees 4 fully independent c
Slide 28: Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent
Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent 2.6 mmbpd Refining Capacity (mbpd, % of overall crude capacity) U.S. West Coast CANADA 230 UNITED 9% North Atlantic KINGDOM 440 IRELAND 17% 1,484 U.S. Gulf Coast 57% MONTREAL 461 17% U.S. Mid-Continent LONDON UNITED STATES (1) Gulf Coas
Slide 29: U.S. Natural Gas Provides Operating Expense and Feedstock Cost Advantages
U.S. Natural Gas Provides Operating Expense and Feedstock Cost Advantages 2Q22 Natural Gas Opex for 2Q21 Natural Gas Opex 1Q22 Natural Gas Opex ($ per barrel) ($ per barrel) U.S. versus European Refineries ($ per barrel) $10.02 $7.14 ~$9.00 per barrel Opex advantage ~$2.00 per barrel Opex advantage
Slide 30: Crude Supply Advantage in the 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 (2012 through 1Q22) Cushing McKee 54% Diamond Pipeline Memphis Cushing-McKee Connection Collierville Childress Crude System Station Ardmore Hewitt Wasson To Nederland To St.
Slide 31: Operational Flexibility and Refinery Optimization Provide Competitive Advantage
Operational Flexibility and Refinery Optimization Provide Competitive Advantage 2012 – 2022 Refinery Product Yield Ranges (monthly averages) • Our operational flexibility and optimization to VLO Industry quickly shift light product yields as market 59% conditions signal move from “max gasoline” to 4
Slide 32: 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 310 demand growth 209 102 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Latin Amer
Slide 33: Investing to Grow Product Exports into Higher Netback 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 (12-month moving average, mbpd) Other Europe Canada Other Latin
Slide 34: Ratable Global Wholesale Supply Through an Extensive Marketing Network
Ratable Global Wholesale Supply Stable branded and unbranded demand Through an Extensive Marketing Network Wholesale Volumes million barrels per day of Rack blending 1.2 (% of total light products production, mbpd) ratable wholesale supply partially offsets our (1) (2) (3) U.S. Europe and Canada Lat
Slide 35: 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 36: Ethanol Operations Outlook
Operations Outlook • 12 plants with 1.6 billion gallons annual • Ethanol will remain a significant part of the Ethanol production capacity domestic fuel mix – Dry mill production process, where corn is • Efficiency standards will drive demand for ground into flour and mixed with water U.S. Fuel Etha
Slide 37: Port Arthur Delayed Coker Unit
Port Arthur Delayed Coker Unit Investing to Improve Margins and Light Product Yields Port Arthur Coker • $975 MM anticipated cost for 55 MBPD delayed Incremental Volumes (MBPD) coker and sulfur recovery unit, with expected Feeds startup in the first half of 2023 Crude 102 • Creates two independent C
Slide 38: 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 39: 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 40: Investing to Supply Higher Demand Markets and Expand Product Export
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 41: Our Refining Capacity and Nelson Complexity
Majority of refineries designated as VPP Star Sites by OSHA, recognizing Our Refining Capacity and Nelson exemplary occupational safety, Complexity process safety and health programs (1) Capacities (mbpd) Nelson Complexity Refinery Throughput Crude Index (2) Corpus Christi 370 290 14.4 Houston 255 2
Slide 42: Now vs. Then – A Shift in Valuation
Now vs. Then – A Shift In Valuation In the Past New Paradigm INDUSTRY/MACRO INDUSTRY/MACRO • Majority of the U.S. refining capacity operated by large integrated oil • Majority of the U.S. refining capacity operated by independent companies refiners • Range bound industry wide EV/EBITDA multiple +/-
Slide 43: Electric Vehicle (EV) 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 44: 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 before adjusted net interest expense after-tax divided by average invested capital. VLO defines adjusted net income attributable to VLO as net income
Slide 45: Non-GAAP Disclosures
Non-GAAP Disclosures Renewable Diesel Adjusted EBITDA per Gallon Renewable diesel adjusted EBITDA is defined as DGD’s operating income adjusted to reflect the blender’s tax credit and excluding depreciation and amortization expense. Operating income is adjusted to reflect the blender’s tax credit in
Slide 46: Non-GAAP Disclosures
Non-GAAP Disclosures Capital Investments Attributable to Valero VLO defines capital investments attributable to Valero as all capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in non-consolidated joint ventures presented in VLO’s consolidated statements of cas
Slide 47: 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 Numerator: Net income (loss) attributable to VLO stockholders $3,990 $2,289 $4,065 $3,122 $2,422 ($1,421) $930 Total effect of speci
Slide 48: Non-GAAP Disclosures: Adjusted EBITDA
Non-GAAP Disclosures: Adjusted EBITDA RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA (in millions) Year Ended December 31, 2009 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Net income (loss) ($1,982) $2,080 $2,728 $3,711 $4,101 $2,417 $4,156 $3,353 $2,784 ($1,107) $1,288 1,361 1,549 1,7
Slide 49: Non-GAAP Disclosures: Renewable Diesel Net Cumulative Cash Flow
Non-GAAP Disclosures: Renewable Diesel Net Cumulative Cash Flow RECONCILIATION OF DGD OPERATING INCOME AND TOTAL CAPITAL INVESTMENTS TO DGD’S NET CUMULATIVE CASH FLOW ATTRIBUTABLE TO VALERO (in millions) Year Ended December 31, 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 DGD's cumulative
Slide 50: Non-GAAP Disclosures: Renewable Diesel Adjusted EBITDA per Gallon
Non-GAAP Disclosures: Renewable Diesel 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 Operating income $157 $147 $57 $319 $728 $630 $709 20 28 2
Slide 51: 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) Three Months Year Ending Year Ended December 31, Ended March 31, December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 202
Slide 52: Non-GAAP Disclosures: Sustaining Capex and Growth Capital Investments
Non-GAAP Disclosures: Sustaining Capex and Growth Capital Investments Attributable to Valero RECONCILIATION OF TOTAL SUSTAINING CAPITAL EXPENDITURES AND GROWTH CAPITAL INVESTMENTS TO SUSTAINING CAPITAL EXPENDITURES AND GROWTH CAPITAL INVESTMENTS ATTRIBUTABLE TO VALERO (in millions) Three Months Year
Slide 53: 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 Net cash provided by operating activities $5,270 $5,564 $4,241 $5,611 $4,820 $5,482 $4
Slide 54: Non-GAAP Disclosures: Adjusted Net Cash Provided by Operating Activities 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 Net cash
Slide 55: Investor Relations Contacts
Investor Relations Contacts Our products fuel modern life and make a better future Homer Bhullar Vice President, Investor Relations and Finance possible 210.345.1982 Homer.Bhullar@Valero.com Eric Herbort Senior Manager, Investor Relations 210.345.3331 Eric.Herbort@Valero.com Gautam Srivastava Senior