Valero Energy Corporation · NYSE:VLO
Valero Energy — Investor Presentation (September 2015)
45 slides from Valero Energy's investor presentation, Sep 8, 2015
Slide 1: Investor Presentation September 2015
Exhibit 99.01 Investor Presentation September 2015
Slide 2: Safe Harbor Statement
2 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 19
Slide 3: Who We Are
3 Who We Are World’s Largest Independent Refiner Operator of Liquids-Focused Logistics Assets Wholesale Fuels Marketer One of North America’s Largest Renewable Fuels Producers • 15 refineries, 2.9 million barrels per day (BPD) of high- complexity throughput capacity • Greater than 70% of refining ca
Slide 4: Strong Gulf Coast and Mid-Continent Presence
4 Strong Gulf Coast and Mid-Continent Presence Refineries and ethanol plants are in advantaged locations
Slide 5: Current Macro Environment
5 Current Macro Environment Abundant supply of crude oil and natural gas 1 Expected petroleum demand increase, with highest growth in China, India and Middle East countries 5 Forecasted world GDP growth 3 Structural product shortage in Latin America, Europe, Africa and Eastern Canada 6 Demand respon
Slide 6: Production Growth Provides Resource Advantage to North American Refiners
6 Production Growth Provides Resource Advantage to North American Refiners 5,475 U.S. Natural Gas Production (Bcf/day) Source: DOE, 2015 data through May 9,212 7,257 9,527 U.S. Crude Oil Production and Imports (MBPD) Imports Production
Slide 7: Safety and Reliability are Imperative for Profitability
7 Safety and Reliability are Imperative for Profitability Mechanical Availability Personnel Index Maintenance Index Non-Energy Cash Opex Energy Intensity Index VLO’s Performance Versus Industry Benchmarks 2008 2010 2012 2014 th Quartile st Quartile rd Quartile nd Quartile See appendix for footnotes
Slide 8: Leader in Refinery Complexity and Clean Product Yields
8 Leader in Refinery Complexity and Clean Product Yields 12.4 12.3 11.5 11.1 10.9 VLO HFC TSO MPC PSX Nelson Complexity Index 91% 86% 84% 83% 78% HFC VLO PSX TSO MPC 1H15 Clean Product Yields (As Percentage of Total Products) See appendix for footnotes Expand Commercial and Operational Flexibility
Slide 9: Leader in Location-Advantaged CDU Capacity
9 Leader in Location-Advantaged CDU Capacity and Our Gulf Coast Assets Have Flexible Feed Slates 1,731 1,230 443 129 26% 17% 12% 12% 4% 37% 34% 30% 23% 10% Feedstock Ranges in Gulf Coast (2010 – 2015) See appendix for footnotes 1,948 VLO MPC PSX HFC TSO Location-Advantaged CDU Capacity (MBPD) Easter
Slide 10: Our System Enables Optimization of Product Exports and Netbacks
10 Our System Enables Optimization of Product Exports and Netbacks 164 221 412 472 2011 2012 2013 2014 1H15 Current Capacity Potential Future Capacity VLO’s U.S. Product Exports (MBPD) Diesel Gasoline Expand Commercial and Operational Flexibility Actual export volumes for 2011 – 1H15. See appendix f
Slide 11: Location Advantage, Feedstock Flexibility and Low Opex Deliver Strong Operating Income
11 Location Advantage, Feedstock Flexibility and Low Opex Deliver Strong Operating Income $5.50 $6.20 $7.20 $7.90 $8.90 VLO MPC HFC PSX TSO 1H15 Refining Operating Expenses Per Barrel Throughput (Includes Cash Costs and D&A) $10.40 $7.50 $7.20 $6.60 $5.00 HFC VLO MPC TSO PSX 1H15 Refining Operating
Slide 12: Current Capital Allocation Framework
12 Current Capital Allocation Framework Sustaining Capex Dividend Growth Debt and Cash Growth Capex Stock Buybacks Acquisitions • Estimate $1.5 billion or lower annual spend • Key to safe and reliable operations • Should be sustainable • Compete for cash flow versus reinvestments • Maintain investme
Slide 13: Investing in Logistics and Higher Margin Businesses
13 Investing in Logistics and Higher Margin Businesses $790 $300 $400 $715 $765 $730 $695 $655 $2,650 $2,400 2015E 2016E Capital Expenditures (millions) Logistics Light Crude Processing, Natural Gas and NGLs Upgrading Turnarounds & Catalyst Sustaining (1) Excludes estimated placeholder for potential
Slide 14: Investing in Feedstock Flexibility
14 Investing in Feedstock Flexibility Light Crude • 160 MBPD total new topping capacity at Corpus Christi and Houston refineries to process up to 50 API sweet crude • Replaces approximately 55 MBPD of purchased low sulfur resid for FCCs with indigenous production • Net throughput capacity increase o
Slide 15: Investing to Increase High Value Product Yields
15 Investing to Increase High Value Product Yields Distillate Methanol • Meraux’s hydrocracker expansion (1) in 4Q14 increased distillate yields by approximately 19 MBPD • 30 MBPD total hydrocracker capacity addition at Port Arthur (4Q15) and St. Charles (1Q16) expected to increase distillate yields
Slide 16: Delivering High Cash Returns to Stockholders is One of Our Priorities
16 Delivering High Cash Returns to Stockholders is One of Our Priorities 169 360 462 554 409 409 349 281 928 1,296 992 1,807 75% total payout target for 2015 2015 YTD through September 2. Payout ratio as percent of 2015 net income. 25% 31% 51% 51% 61% YTD 75% Target 2011 2012 2013 2014 1H15 2015 YTD
Slide 17: Our Sponsored MLP Valero Energy Partners
17 Our Sponsored MLP Valero Energy Partners (NYSE:VLP) Disciplined Capital Management to Unlock Value Logistics MLP • VLO owns entire 2% general partner interest, all incentive distribution rights and 69.6% LP interest • High-quality assets integrated with Valero’s refining system • Fee-based, liqui
Slide 18: Expect $1 Billion of Drop-Down Transactions to VLP in 2015
18 $95 $200 Expect $1 Billion of Drop-Down Transactions to VLP in 2015 4Q14 Annualized 4Q15E Annualized Adjusted EBITDA Attributable to VLP (millions) See appendix for reconciliation of estimated 2015 EBITDA to net income Sold Houston and St. Charles Terminals to VLP for $671 MM in March 2015 Discip
Slide 19: More Than $1 Billion of Estimated MLP Eligible EBITDA Inventory
19 More Than $1 Billion of Estimated MLP Eligible EBITDA Inventory Racks, Terminals, and Storage (1) Pipelines (1) Marine (1) Fuels Distribution • Over 100 million barrels of active shell capacity for crude and products • 139 truck rack bays Rail • Three crude unloading facilities with estimated tot
Slide 20: Renewables Business Has Performed Well
20 Renewables Business Has Performed Well Ethanol Diamond Green Diesel • 11 plants with 1.3 billion gallons total annual production • Low capital investment with scale and location in corn belt • Operational best practices transferred from refining Disciplined Capital Management to Unlock Value • 50
Slide 21: We Believe Valero is an Excellent Investment
21 Median 10.4% Median 8.1x We Believe Valero is an Excellent Investment VLO 14.2% 2016E Return on Average Market Capital Employed VLO 5.9x 2016E Price to Earnings Ratio • Majority of capacity located in U.S. Gulf Coast and Mid-Continent with access to cost-advantaged crude, natural gas, NGLs and co
Slide 22: Appendix Contents
22 Appendix Contents Footnotes 23 2015 Goals 24 Refining Operating Statistics 25 – 28 Capital Investment Details 29 – 34 Valero Energy Partners LP 35 Natural Gas Cost Sensitivity 36 Crude Oil Transportation 37 – 38 Global Fundamentals 39 – 43 Non-GAAP Reconciliations 44 IR Contacts 45 Topic Pages
Slide 23: Footnotes
23 Footnotes Slide 5 Macro environment themes represent industry consult views, of which points 1, 2, 5, and 6 are supported by additional slides in the presentation. Slide 7 Contractor recordable incident rate from U.S. Bureau of Labor Statistics. Tier 1 process safety event defined within API Reco
Slide 24: Key Goals Expected in 2015
24 Key Goals Expected in 2015 Operations Excellence Start up Montreal crude terminal with the Enbridge Line 9B reversal and lower Quebec City refinery’s crude costs versus Brent compared to 2014 Grow product export market share and increase branded wholesale fuels volume Capital Returns to Stockhold
Slide 25: Our Refining Capacity and Nelson Complexity
25 Our Refining Capacity and Nelson Complexity Refinery Capacities (MBPD) Nelson Complexity Index Throughput Crude Corpus Christi (1) 19.9 Houston 15.4 Meraux 9.7 Port Arthur 12.4 St. Charles 16.0 Texas City 11.1 Three Rivers 13.2 Gulf Coast 1,660 1,284 14.0 Ardmore 12.1 McKee 9.5 Memphis 7.9 Mid-Co
Slide 26: Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization
26 Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization
Slide 27: Valero Is Currently Utilizing Percent of Its Available Light Crude Capacity
27 Valero Is Currently Utilizing 84 Percent of Its Available Light Crude Capacity in North America 1,410 McKee Refinery Crude Unit Expansion • 25 MBPD additional capacity expected in 2H15 • Distillate recovery improvements Houston Refinery Crude Topping Unit • 90 MBPD capacity expected 1H16 • Displa
Slide 28: Expect Quebec City Refinery to Have Access to 100% North American Crude
28 Expect Quebec City Refinery to Have Access to 100% North American Crude in 2015 0% 50% 100% 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 Quebec City Refinery Crude Slate Foreign Imports North American Processing advantaged crudes delivered by rail and foreign flagged ships from U.S. Gulf Coa
Slide 29: Meraux Hydrocracker Conversion Completed December 2014
29 Meraux Hydrocracker Conversion Completed December 2014 Incremental Volume (MBPD) Project Estimates Investment Highlights • Converted hydrotreater into high-pressure hydrocracker and repurposed old FCC gas plant for additional LPG recovery • Expect to upgrade 23 MBPD gasoil and low-cost hydrogen (
Slide 30: McKee Refinery Diesel Recovery Improvement and CDU Expansion
30 McKee Refinery Diesel Recovery Improvement and CDU Expansion Startup Expected in 2H15 Incremental Volume (MBPD) Project Estimates Investment Highlights • Adding 25 MBPD crude unit capacity and parallel light ends processing train • Expect to improve yields and volume gain by recovering diesel fro
Slide 31: Light Crude Processing Investments
31 Light Crude Processing Investments Incremental Volume (MBPD) Combined Project Estimates • 160 MBPD new topping capacity designed to process up to 50 API domestic sweet crude – Estimated 55 MBPD low sulfur resid yield should lower feedstock costs – Net throughput capacity increase of approximately
Slide 32: Houston and Corpus Christi Crude Topping Project Economics
32 Houston and Corpus Christi Crude Topping Project Economics Project Estimates Project Estimates Estimates Incremental Volume (MBPD) Estimates Incremental Volume (MBPD) Corpus Christi Refinery Houston Refinery (1) Estimates based on 2014 full year average prices; EBITDA = operating income before de
Slide 33: Project Price Set Assumptions
33 Project Price Set Assumptions Driver ($/bbl) 2014 Average ICE Brent 99.49 ICE Brent – WTI 6.35 ICE Brent – LLS 2.75 USGC CBOB – ICE Brent 3.52 G3 CBOB – WTI 12.27 USGC ULSD – ICE Brent 14.25 G3 ULSD – WTI 23.88 Natural gas (Houston Ship Channel, $/mmBtu) 4.34 Naphtha – ICE Brent -0.67 LSVGO – ICE
Slide 34: Estimated Key Price Sensitivities on Project Economics
34 Estimated Key Price Sensitivities on Project Economics Change in Estimated EBITDA (1) Relative to 2014 (2) Prices ($millions/year) McKee Diesel Recovery & CDU Expansion Meraux HCU Expansion Corpus Christi Topper Houston Topper ICE Brent, +$1/bbl none $0.8 $0.4 none ICE Brent – WTI, +$1/bbl $5.5 n
Slide 35: Valero's GP Interest in VLP Nearing the High Splits Target
35 Valero’s GP Interest in VLP Nearing the “High Splits” Target Quarterly Distribution per Unit Marginal Percentage Interest in Distributions Unitholders GP Minimum quarterly $0.2125 98% 2% First target above $0.2125 up to $0.244375 98% 2% Second target above $0.244375 up to $0.265625 85% 15% Third
Slide 36: U.S. Natural Gas Provides Opex and Feedstock Cost Advantages
36 U.S. Natural Gas Provides Opex and Feedstock Cost Advantages • Our refining operations consume approximately 864,000 mmBtu/day of natural gas, split almost equally between operating expense and cost of goods sold • Significant annual pre-tax cost savings compared to refiners in Europe or Asia • P
Slide 37: Estimated Crude Oil Transportation Costs
37 Estimated Crude Oil Transportation Costs to Houston Pipe $2 to $4/bbl USGC to USEC U.S. Ship $3 to $5/bbl U.S. Ship $4 to $5/bbl Brent to USEC $2/bbl to USEC Rail $11 to $13/bbl to St. James Rail $11/bbl Cushing Midland to Houston Pipe $3/bbl CC to Houston $1 to $2/bbl Houston to St. James $1 to
Slide 38: Crude Oil Transportation Map
VALERO Tre Alba fansCanada Mainline CPB. ‘onversion 850
Slide 39: Global Petroleum Demand Projected to Grow
39 Global Petroleum Demand Projected to Grow Emerging markets in Latin America, Middle East, Africa, and Asia lead demand growth Net 0.8 Net 1.5 Net 1.4 -2.5 -1.5 -0.5 0.5 1.5 2.5 3.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E MMBPD World Petroleum Demand Growth U.S. OECD (excl. U
Slide 40: World Refinery Capacity Growth
40 World Refinery Capacity Growth • New capacity additions expected in Asia and the Middle East • Announced new capacity in Latin America likely to be smaller and start later than planned • Capacity rationalization expected to continue in Europe 0.85 0.70 0.98 0.91 0.96 -0.4 0.0 0.4 0.8 1.2 2015 201
Slide 41: U.S. Gasoline Exports
41 U.S. Gasoline Exports 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Other Europe Other Latin America Mexico Canada Latest 4 Wk avg estimate (Finished only) 12 Month Moving Average (MBPD) Gasoline represents all finished gasoline plus all blendstocks (including ethanol, MTBE, and other ox
Slide 42: U.S. Diesel Exports
42 U.S. Diesel Exports Source: DOE Petroleum Supply Monthly with data through May 2015. 4 Week Average estimate from Weekly Petroleum Statistics Report 1000 1200 1400 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Other Europe Other Latin America Mexico Canada Latest 4 Wk avg estimate 12 Mon
Slide 43: Net Exports of Products from the U.S.
43 Net Exports of Products from the U.S. • Net refined products exports increased from 335 MBPD in 2010 to 3 MMBPD in 2015 • Diesel net exports averaged 919 MBPD in 2014; 817 MBPD in 2015 (Jan-May) • Gasoline net exports averaged 66 MBPD in 2014; 67 MBPD in 2015 (Jan – May) -3,000 -2,500 -2,000 -1,5
Slide 44: Non-GAAP Reconciliations
44 Non-GAAP Reconciliations Forecasted (thousands) Full Year Beginning March 1, 2015 Valero Partners Houston and Louisiana Three Months Ended December 31, 2014 Three Months Ended December 31, 2015 (millions) As Reported Annualized (x4) Forecasted Annualized (x4) Net income $37,300 + Interest expense
Slide 45: Investor Relations Contacts
45 Investor Relations Contacts John Locke Karen Ngo For more information, please contact: Vice President, Investor Relations 210.345.3077 john.locke@valero.com Manager, Investor Relations 210.345.4574 karen.ngo@valero.com
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