Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (June 2020)
39 slides from Valero Energy's investor presentation, Jun 3, 2020
Slide 1: Investor Presentation June 2020
Investor Presentation June 2020 Exhibit 99.01
Slide 2: Disclaimers
Disclaimers 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 state other f
Slide 3: Who We Are
Who We Are (NYSE: VLO) Refining Premier assets and lowest cost producer 15 refineries, 3.2 million barrels per day (BPD) of high-complexity capacity Logistics assets, including approximately 3,100 miles of active pipelines, 130 million barrels of storage and over 50 docks Fuels marketing and distrib
Slide 4: Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent
Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent UNITED STATES WHOLESALE MARKETING PRESENCE VALERO ETHANOL PLANTS VALERO REFINERIES BRANDED WHOLESALE PRESENCE VALERO TERMINALS DIAMOND GREEN DIESEL PIPELINES PERU LIMA LONDON PEMBROKE UNITED KINGDOM IRELAND CANADA BENICIA WILMINGTON MCK
Slide 5: Demonstrated Strategy for Value Creation
Demonstrated Strategy for Value Creation Proven history of operations excellence: Safe, reliable, environmentally responsible operations have driven higher profitability and lower volatility through multiple commodity cycles The lowest cash operating costs among peer group Visibility to earnings gro
Slide 6: 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 balance sheet cash. (2)Peer group includes PSX, MPC, HFC, and PBF. (3)Payout ratio is the sum of dividends and stock buybacks divided by adjusted ne
Slide 7: Demonstrated Discipline in Capital Allocation
Demonstrated Discipline in Capital Allocation Steady investments to maintain asset base and enhance margin capability of portfolio. Non-discretionary Sustaining capex includes costs for turnarounds and catalysts and regulatory compliance. Growth capex includes joint-venture investments but excludes
Slide 8: Delivering on our Commitment of Cash Returns to Stockholders
Delivering on our Commitment of Cash Returns to Stockholders Delivering cash returns through sustainable annual dividend growth and discretionary buybacks. Energy Real Estate Utilities Cons. Staples Financials Materials Industrials Tech Health Care Comm. Services Cons. Disc. S&P 500 Source: Bloomber
Slide 9: Safety and Reliability are Imperative for Profitability
Safety and Reliability are Imperative for Profitability See slide 21 for notes regarding this slide. Investments in reliability have contributed to operations excellence. In 2019, we delivered our best year ever on employee safety performance and had the lowest number of environmental events in comp
Slide 10: Increased Refinery Availability Has Driven Valero to be the Lowest Cost Producer
(1) 2020 refining cash operating expenses per barrel of throughput through March 31. Peer group includes PSX, MPC, HFC, and PBF. Increased Refinery Availability Has Driven Valero to be the Lowest Cost Producer See slide 21 for notes regarding this slide. 1st Quartile 2nd Quartile 3rd Quartile 4th Qu
Slide 11: Advantaged Crude Supply in the U.S. Gulf Coast
Advantaged Crude Supply in the U.S. Gulf Coast (1) CDU capacity from EIA data and company presentations. See slide 31 for Valero’s capacity and Nelson complexity by refinery. (2) 2020 feedstock ranges through March 31. Ranges represent average quarterly minimums and maximums of each feedstock catego
Slide 12: Our Portfolio Facilitates Global Optimization of Product Exports
Our Portfolio Facilitates Global Optimization of Product Exports See slide 21 for notes regarding this slide. Distillate volumes include diesel, jet fuel and ULSK. Distillate Gasoline Product shortages in Latin America, Eastern Canada, Europe, and Africa expected to drive import demand growth. VLO’s
Slide 13: Visibility to Growth with a Steady Pipeline of High Return Projects
Visibility to Growth with a Steady Pipeline of High Return Projects Target approximately $1 billion annually on growth investments Approximately $350 MM of incremental EBITDA in 2019 from completed projects Diamond Green Diesel expansion, Houston alkylation unit, Sunrise Pipeline and other optimizat
Slide 14: Investing to Improve Margins and Light Product Yields
Investing to Improve Margins and Light Product Yields $975 MM anticipated cost for 55 MBPD delayed coker and sulfur recovery unit, with expected startup in 2023 Creates two independent CDU-VDU-coker trains, which should improve turnaround efficiency and reduce maintenance-related lost margin opportu
Slide 15: Diamond Green Diesel Train II Expansion
Independent parallel renewable diesel plant and renewable naphtha finishing facility adjacent to existing St. Charles plant is expected to be completed in 2021 Expected to increase annual renewable diesel production capacity by 400 million gallons per year and enables recovery of renewable naphtha C
Slide 16: Ethanol Operations
Ethanol Operations 14 plants with 1.73 billion gallons annual production capacity Dry mill production process, where corn is ground into flour and mixed with water before fermentation Efficient plants with scale, located in corn belt Operational best practices transferred from refining Cost advantag
Slide 17: Delivered Solid Earnings and Free Cash Flow Even in a Low Margin Environment
Adjusted Earnings Per Share 2016 & 1Q 2020 Delivered Solid Earnings and Free Cash Flow Even in a Low Margin Environment Free Cash Flow (FCF) Refining EBITDA Per Barrel of Throughput 2012 to 2019 Prior results are not a representation of management’s expectations for 2020. See slide 21 for notes rega
Slide 18: Demonstrated Lower Volatility in Earnings and Free Cash Flow
Demonstrated Lower Volatility in Earnings and Free Cash Flow See slide 21 for notes regarding this slide. Peer group includes PSX, MPC, HFC, and PBF. Source: Bloomberg and company reports. See slides 34 – 38 for non-GAAP disclosures. Volatility 2012 – 2020 Adjusted Earnings Per Share Free Cash Flow
Slide 19: We Believe Valero is a Compelling Investment
We Believe Valero is a Compelling Investment Consensus EBITDA CAGR 2019-2022 Dividend Yield TSR Since 2014(1) EV / 2021 EBITDA(3) Net Debt to TTM Adjusted EBITDA(2) VLO Versus S&P 500 Constituents Premier asset portfolio and operations Managed risks Proven operations excellence with the lowest cash
Slide 20: Appendix Contents
Appendix Contents Topic Slide Notes 21 Guidance 22 Environmental, Social and Governance (ESG) 23 Logistics Investments to Improve Feedstock Flexibility, Cost & Crude Quality 24 Valero Logistics Assets 25 Investing to Grow Product Placement into Higher Netback Markets 26 Project Price Set Assumptions
Slide 21: Notes Slide
Notes Slide 9 Contractor total recordable incident rate from U.S. Bureau of Labor Statistics. Tier 1 three-year rolling averages of process safety events per 200,000 work hours. Tier 1 defined within API Recommended Practice 754. Industry benchmarking and Valero’s performance statistics from Solomon
Slide 22: VLO Guidance
VLO Guidance 2Q20(1) Throughput (MBPD) U.S. Gulf Coast1,325 to 1,375 U.S. Mid-Continent315 to 335 North Atlantic315 to 335 U.S. West Coast215 to 235 Refining cash operating expense per barrel of throughput$4.50 Ethanol Production (millions of gallons per day)2.0 Operating expense per gallon of produ
Slide 23: Environmental, Social and Governance (ESG)
Largest renewable fuels producer in North America Significant investment in renewable fuels of $2.7 billion(1) 2019 was Valero’s best year ever for: Refinery employee safety Lowest environmental events Lowest energy consumption Lowest greenhouse gas emissions per barrel of throughput Lowest air emis
Slide 24: Logistics Investments to Improve Feedstock Flexibility, Cost and Crude Quality
Logistics Investments to Improve Feedstock Flexibility, Cost and Crude Quality Valero Terminals Valero Refineries Pipelines Terminal Projects Pipelines Projects Export Dock Projects Competitive Supply in the Mid-Continent Taking Advantage of Permian Production with Investments in Corpus Christi Crud
Slide 25: Valero Logistics Assets
Valero Logistics Assets (1)Includes assets that have other joint venture or minority interests. Does not include ethanol assets. Racks, Terminals and Storage(1) Approximately 130 million barrels of active shell capacity for crude oil and products Over 200 truck rack bays Pasadena terminal completed
Slide 26: Investing to Grow Product Placement into Higher Netback Markets
Investing to Grow Product Placement into Higher Netback Markets (1) Includes terminals owned or leased by Valero. U.S. Product Exports 12 Month Moving Average (MBPD) 81% Advantaged Refineries and Logistics Expansion of supply chain to high demand growth markets provides a ratable product outlet and
Slide 27: Project Price Set Assumptions
Project Price Set Assumptions Driver ($/bbl) 2018 Average(1) ICE Brent 71.56 ICE Brent – WCS Houston 9.41 HSVGO – ICE Brent 6.03 3.5%S Fuel Oil – ICE Brent (10.39) USGC CBOB – ICE Brent 4.85 USGC ULSD – ICE Brent 14.05 Naphtha – ICE Brent (1.38) LPG – ICE Brent (34.77) At $200 per ton carbon price,
Slide 28: Investing to Improve Margins
Investing to Improve Margins 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 upgrade low value isobutane and amylenes into high value alkylate High octane,
Slide 29: Investing to Improve Access to North American Crude and Refinery Operating Cost Structure
Investing to Improve Access to North American Crude and Refinery Operating Cost Structure Diamond 200 MBPD capacity connecting Memphis to Cushing ($460 MM cost(1)), and Sunrise 100 MBPD undivided interest connecting Midland to Wichita Falls ($135 MM cost(1)) 200 MBPD expansion and extension of Diamo
Slide 30: Investing to Improve Margins, Product Export Capability and Biofuels Blending
Investing to Improve Margins, Product Export Capability and Biofuels Blending Central Texas pipelines and terminals to supply high-growth refined products market Started up in September 2019 Approximately 205 miles of pipe(1), 960 thousand barrels of total storage capacity, and a truck rack Pasadena
Slide 31: Our Refining Capacity and Nelson Complexity
Our Refining Capacity and Nelson Complexity Refinery Capacities (MBPD)(1) Nelson Complexity Index Throughput Crude Corpus Christi(2) 370 290 14.4 Houston 255 205 8.0 Meraux 135 125 9.7 Port Arthur 395 335 12.7 St. Charles 340 215 16.1 Texas City 260 225 11.1 Three Rivers 100 89 13.2 U.S. Gulf Coast
Slide 32: Outperformed the Dow Jones Index, the S&P Index and all Companies in the XLE Index on TSR
Outperformed the Dow Jones Index, the S&P 500 Index and all Companies in the XLE Index(1) on TSR Since 2014 (1) XLE includes refining peers PSX, MPC, HFC, and 23 other energy companies such as XOM, CVX, SLB, COP, EOG, OXY, and KMI. (2) TSR from December 31, 2014 through May 22, 2020. TSR includes st
Slide 33: Now vs. Then – A Shift In Refining Valuation
Now vs. Then – A Shift In Refining Valuation In the Past INDUSTRY/MACRO Majority of the U.S. refining capacity operated by large integrated oil companies Range bound industry wide EV/EBITDA multiple +/- 4.5x Peer group fragmented with smaller scale, less efficient refiners U.S. importing crude and p
Slide 34: Non-GAAP Disclosures
Non-GAAP Disclosures Adjusted EBITDA and Net Debt-to-Adjusted EBITDA VLO defines EBITDA as net income before income tax expense, interest and debt expense, net of capitalized interest, and depreciation and amortization expense. VLO defines net debt-to-adjusted EBITDA as the ratio of total debt, net
Slide 35: Non-GAAP Disclosures (continued)
Non-GAAP Disclosures (continued) Adjusted Earnings Per Common Share – assuming dilution VLO defines adjusted earnings per common share – assuming dilution as earnings per common share – assuming dilution excluding the lower of cost or market inventory valuation adjustment and its related income tax
Slide 36: Non-GAAP Disclosures: Adjusted EBITDA and Net Debt-to-Adjusted EBITDA
Non-GAAP Disclosures: Adjusted EBITDA and Net Debt-to-Adjusted EBITDA RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND NET DEBT-TO-ADJUSTED EBITDA (Unaudited, in Millions, Except Ratio Amount) Three Months Ended March 31, 2019 Year Ended December 31, 2019 Three Months Ended March 31, 2020 Net inc
Slide 37: Non-GAAP Disclosures: Refining EBITDA Per Barrel of Throughput
Non-GAAP Disclosures: Refining EBITDA Per Barrel of Throughput RECONCILIATION OF REFINING EBITDA PER BARREL OF THROUGHPUT (Unaudited, in Millions, Except Per Barrel Amount) Year Ended December 31, 2016 Three Months Ended March 31, 2020 Refining operating income $3,730 $(2,087) Plus: Operating expens
Slide 38: Non-GAAP Disclosures: Adjusted Earnings Per Share and Free Cash Flow
Non-GAAP Disclosures: Adjusted Earnings Per Share and Free Cash Flow RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES UNDER GAAP TO FREE CASH FLOW (Unaudited, in Millions) Year Ended December 31, Three Months Ended March 31 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net cash provided by
Slide 39: Investor Relations Contacts
Investor Relations Contacts For more information, please contact: Homer Bhullar Vice President, Investor Relations 210.345.1982 Homer.Bhullar@Valero.com Eric Herbort Senior Manager, Investor Relations 210.345.3331 Eric.Herbort@Valero.com Gautam Srivastava Manager, Investor Relations 210.345.3992 Gau