Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (June 2021)
54 slides from Valero Energy's investor presentation, Jun 1, 2021
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 Projects in Execution
63% 20% Comprehensive Roadmap to Further Reduce Emissions with Projects in Execution GHG Emissions Intensity Absolute Reductions and Offsets through Existing Board Approved Projects Target (Scope 1 & 2) Targeting to reduce 1.4 and offset Refining 31.8 GHG emissions by 35.8 4.7 63% 5.9 28.7 through i
Slide 6: Expanding Long-term Competitive Advantage with Investments in Low-carbon Fuels
Expanding Our Long-term Competitive Advantage with Investments in Economic Low-carbon Transportation Fuels $1.2 to $1.6 billion in Annual EBITDA from Growth Projects Visibility to Earnings Growth (expected completion / project cost) $10,500 Reinvesting capital Refining Optimization and Renewables Ex
Slide 7: Global Low-carbon Fuel Policies Driving Demand Growth for Renewable Diesel
Global Low-carbon Fuel Policies Driving Demand Growth for Renewable Diesel California Renewable Diesel Consumption (million gallons) 589 Active Low-carbon Mandates Carbon Mandates 113 in Development or GHG Emissions Goal 2030 GHG Emissions Net-zero GHG Primary Transportation Fuel 2030 Liquid Fuels G
Slide 8: Renewable Diesel Driving Low Carbon Results in California
Renewable Diesel Driving Low Carbon Results in California California LCFS Performance LCFS Credit by Fuel Type (% reduction in carbon intensity) (2020) Cost-effective 0% fuel that can be used with Electricity existing vehicles (other) Other 8% 1% -5% Electricity -7.4% Renewable (on-road charging) Do
Slide 9: Expansion into Low-carbon Renewable Fuels Underpinned by Higher Economic Returns
Expansion into Low-carbon Renewable Fuels Underpinned by Higher Economic Returns Renewable Diesel Capacity Renewable Diesel Realized Cash Flow Profile (million gallons per year) ($ in millions) 1,160 $1,326 million cumulative EBITDA $1,350 $791 million cumulative Capex $1,135 Cumulative EBITDA 470 $
Slide 10: Renewable Diesel: A Drop-in Fuel
RENEWABLE DIESEL A Vehicle Running on Renewable Diesel Emits A DROP-IN FUEL Over 40% 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 Argonne National Laboratory (DOE) Study Southw
Slide 11: 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) $1.86 2 $1.68 $1.55 LCFS credit value ($ per gallon) renewable $0.87 10
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 • Partnering with BlackRock and Navigator for a large-scale carbon capture and storage project − 1,200 mile pipeline is expected to span across five Midwest states − Valero is expected to be the anchor shipper with eigh
Slide 13: Premier Refining Portfolio Resilient in a Carbon-Constrained Scenario
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 2020, we delivered our best year ever on safety performance and had the lowest number of environmental events in company history Personnel Safety Tier 1 Process Safety (thr
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 Versus Industry Benchmarks Per Barrel of Throughput (excludes turnaround and D&A expenses) Peer Range $7.00 st 1 Quartile 2018 2018 nd 2 Quartile 2
Slide 16: Refining Business Generates Significant Cash to Support Growth and Stockholder Returns
Refining Business Generates Significant Cash to Support Growth and Stockholder Returns Sources and Uses of Cash – Cumulative Five Years: December 31, 2014 to December 31, 2019 ($ in billions) Sources of Cash Uses of Cash $1.1 $13.1 $25.8 Sustaining capital ($7.8) Growth capital ($4.1) Acquisitions (
Slide 17: Disciplined Capital Management is a Constant in Our Strategy
Disciplined Capital Management is a Constant in Our Strategy 1 Maintain Strong Balance Sheet Maintain investment grade credit rating Target 20% to 30% net debt-to-cap ratio 2 Non-discretionary Sustaining Capex Dividend • Target approximately $1.5 billion annually• Commitment to stockholders • Key to
Slide 18: Demonstrated Discipline in Capital Allocation
Demonstrated Discipline in Capital Allocation Estimated Capital Investments Attributable to Valero Annual Capital Investments Attributable to Valero ($ billion) $2.0 Billion for 2021 $3.4 Sustaining Growth Steady investments $2.8 Sustaining Renewables $2.7 to maintain a safe 60% 40% >50% $2.6 $2.6 G
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 Annual Dividend Shares Outstanding (2) Returns Yield as a Percentage Relative to 2012 556 million Delivering cash S&P 500 1.4% Payout Ratio: shares returns through 11% 30% 31% 54%
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 – 2020 2012 – 2020 2012 – 2020 Valero has Refining Peer Range 10% BEST demonstrated Valero Financials lower $2,213 8% Communication volatility in 8
Slide 21: Valero's Positioning Relative to the S&P Index
Valero’s Positioning Relative to the S&P 500 Index Dividend Yield VLO 4.8% Growth Value Balance Sheet Compelling Dividend Yield Company B (≥3% Annualized dividend yield) 3.9% Company 2 Premier Refining 278% 4.8% portfolio that is Company C 3.7% Company 3 Competitive EBITDA Growth resilient even in a
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 Crude Supply Advantage in the U.S. Gulf Coast and Mid-Continent 29 Global Optimization of Operations and Product Exports 30-32
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 Slide 14 Industry Total Recordable Incident Rate (TRIR) from U.S. Bureau of Labor Statistics. Valero TRIR includes refining employee and contractor data. Tier 1 three-year rolling averages of refining process safety events per 200,000 work hours. Tier 1 defined within API Recommended Practice
Slide 25: VLO Guidance
VLO Guidance (1) 2Q21 • Throughput (MBPD) – U.S. Gulf Coast 1,650 to 1,700 – U.S. Mid-Continent 430 to 450 – North Atlantic 340 to 360 – U.S. West Coast 250 to 270 • Refining cash operating expense per barrel of throughput $4.20 • Ethanol – Production (millions of gallons per day) 4.1 – Operating ex
Slide 26: We are Committed to Protecting the Environment
We are Committed to Protecting the Environment ENVIRONMENTAL E Environmental Recycling, Reusing, Management Systems Carbon Capture Reduction of GHG Emissions Reclaiming, and Reducing A proprietary systematic Targeting to reduce and approach, Commitment To In 2019, we recycled more than Our Port Arth
Slide 27: Sharing Our Success with Communities; Strong Governance
Sharing Our Success with the Communities where we Operate with Strong Governance and Ethical Standards SOCIAL GOVERNANCE S G 5 of 11 directors represent 10 members are independent of our U.S. workforce are minorities 35% diversity of race or gender Diversity and Board of 3 fully independent committe
Slide 28: Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent
Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent (1) 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
Slide 29: 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 1Q21) Cushing McKee 54% Diamond Pipeline Memphis Cushing-McKee Connection Collierville Childress Crude System Station Ardmore Hewitt Wasson To Nederland To St.
Slide 30: Operational Flexibility and Refinery Optimization Provide Competitive Advantage
Operational Flexibility and Refinery Optimization Provide Competitive Advantage 2012 – 2021 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 31: 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 demand growth 249 167 82 2012 2013 2014 2015 2016 2017 2018 2019 2020 1Q21* *Export vo
Slide 32: 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 capture U.S. Product Exports (12-month moving average, mbpd) Other Europe Canada Other Latin
Slide 33: 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 generates RINs, (1) (2) (3) U.S. Europe and Canada Latin Ame
Slide 34: 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 • Expected to serve long-term • Two Panamax class vessels oil a
Slide 35: Ethanol Operations Outlook
Operations Outlook • 13 plants with 1.7 billion gallons • Ultimately, global renewable fuel mandates Ethanol annual production capacity should drive export growth – Dry mill production process, where – U.S. corn-based ethanol is the most corn is ground into flour and mixed U.S. Fuel Ethanol Exports
Slide 36: 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 2023 Crude 102 • Creates two independent CDU-VDU-coker train
Slide 37: 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 38: 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 200,000 BPD Provides Improves crude Pipeline project with 200 expansion of additional Mid- oil supply MBPD capacity connecting
Slide 39: Investing to Supply Higher Demand Markets and Expand Exports
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 40: 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 41: 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 42: Electric Vehicle 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 43: Non-GAAP Disclosures
Non-GAAP Disclosures Return on Invested Capital (ROIC) VLO defines return on invested capital (ROIC) as adjusted net income 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 attrib
Slide 44: Non-GAAP Disclosures: Renewable Diesel Adjusted EBITDA per Gallon
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 45: Non-GAAP Disclosures: Capital Investments Attributable to Valero
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 unconsolidated joint ventures presented in VLO’s consolidated statements of cash
Slide 46: Non-GAAP Disclosures: Return on Invested Capital (ROIC)
Non-GAAP Disclosures: Return on Invested Capital (ROIC) RETURN ON INVESTED CAPITAL (ROIC) (unaudited, in millions) Year Ended December 31, 2014 2015 2016 2017 2018 2019 Numerator: Net income attributable to VLO stockholders $3,990 $2,289 $4,065 $3,122 $2,422 Total effect of special items after-tax 6
Slide 47: Non-GAAP Disclosures: Adjusted EBITDA
Non-GAAP Disclosures: Adjusted EBITDA RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (Unaudited, in Millions) Year Ended December 31, 2009 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net income (loss) ($1,982) $2,080 $2,728 $3,711 $4,101 $2,417 $4,156 $3,353 $2,784 ($1,107) Plus: Depreciation and
Slide 48: 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 INVESTEMENTS TO DGD’S NET CUMMULATIVE CASH FLOW ATTRIBUTABLE TO VALERO (unaudited, in millions) Year Ended Quarter Ended December 31, March 31, 2011 2012 2013 2014 2015 2016 2017
Slide 49: 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 (unaudited, in millions except for per gallon amounts) Quarter Ended Year Ended December 31, March 31, 2015 2016 2017 2018 2019 2020 2021 Operating income $157 $
Slide 50: 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) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 Capital expenditures (excluding VIEs) $2,721 $2,040 $2,076 $1,
Slide 51: 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 TO SUSTAINING CAPITAL EXPENDITURES ATTRIBUTABLE TO VALERO (in millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 Sustaining
Slide 52: 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 (unaudited, in millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net cash provided by operating activities $ 5,270 $ 5,564 $ 4,241 $ 5,611 $ 4,82
Slide 53: Non-GAAP Disclosures: Payout Ratio
Non-GAAP Disclosures: Payout Ratio RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (unaudited, in millions) Year Ended December 31, 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net cash provided by operating activities $5,27
Slide 54: Investor Relations Contacts
Investor Relations Contacts Our products fuel modern life and make a better future Homer Bhullar Vice President, Investor Relations & 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 M