Valero Energy (VLO) 26 Oct 172017 Q3 Earnings call transcript

Company Profile

Participants

John Locke	Valero Energy Corp.
Joseph W. Gorder	Valero Energy Corp.
Jason Fraser	Valero Energy Corp.
Gary Simmons	Valero Energy Corp.
Michael S. Ciskowski	Valero Energy Corp.
R. Lane Riggs	Valero Energy Corp.
Donna M. Titzman	Valero Energy Corp.
Richard F. Lashway	Valero Energy Corp.
Roger D. Read	Wells Fargo Securities LLC
Spiro M. Dounis	UBS Securities LLC
Doug Leggate	Bank of America Merrill Lynch
Brad Heffern	RBC Capital Markets LLC
Paul Cheng	Barclays Capital, Inc.
Phil M. Gresh	JPMorgan Securities LLC
Blake Fernandez	Scotia Capital (NYSE:USA), Inc.
Neil Mehta	Goldman Sachs & Co. LLC
Chi Chow	Tudor, Pickering, Holt & Co. Securities, Inc.
Justin S. Jenkins	Raymond James & Associates, Inc.
Ryan Todd	Deutsche Bank Securities, Inc.
Faisel H. Khan	Citigroup Global Markets, Inc.
Craig K. Shere	Tuohy Brothers Investment Research, Inc.

Call transcript

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Operator

Welcome to the Valero Energy Corporation reports 2017 Third Quarter Earnings Results Conference Call. My name is Vanessa, and I will be the operator for today's call. Please note that this conference is being recorded, and I will now turn the call over to Mr. John Locke, Vice President, Investor Relations.

John Locke

Well, good morning, and welcome to Valero Energy Corporation's third quarter 2017 earnings conference call. President Joe Ciskowski, Chairman, and Executive our Riggs, team. Executive are Executive and CFO, Vice today and of our Mike Operations Valero's Counsel, Officer, Executive Vice other President me and Gorder, Browning, and President our Chief Lane Engineering, General With Jay Refining several our members of Vice management President senior

Valero.com. a Also the on copy, not to additional you received earnings our release website would provide on have release at can you our earnings like attached find the that are one If and business tables segments. information financial

If to after contact questions, team reviewing free our or please Investor Relations feel you have me call. after these any the tables,

are to the statements this contained or the forward-looking Now, company's to would future, and factors statements press intended securities state I actual statement the press filings could There we've with are in says management's our including that In or described by under Provisions the attention those in summary, in it results be federal the cause expectations, call forward-looking the that that on differ many Harbor release expectations like to conference your our from laws. of the release. Safe disclaimer to SEC. predictions covered direct

will Now, call opening over turn the remarks. I to Joe for

Joseph W. Gorder

in made touched would to before Coast of almost these of do before Coast natural Corpus to whole, Gulf Gulf into moved XX at Antonio, Houston of and Texas and Hurricane to am reversed along ultimately region, We quarterly Louisiana, to where it landfall is team, prior days, Victoria. rate then the Arthur energy What shutting all plants we It like east storm of proud moving results inland and the proceeding our course, just Three talk in down about inland as just Valero's of stalled Christi, eastward in of before Thanks, reduced to the the to dissipating. four due Three headquarters Rivers northeast The Port refineries reaching we path three I of the Harvey's John, hurricanes, everyone. San span Corpus down arrival, a refineries. way Valero our dumped responded good and rain and our Harvey's financial Arthur Houston/Beaumont/Port and short and and inches for near the disasters. our area, morning, industry to the Christi shut Rivers I Arthur and Port discuss flooding. eventually and our how continuing

Our only team get Three impact as and and restore our the up Hurricane soon plants Irma we Rivers worked Port experienced running, team our operations, tirelessly but chain prepare business and extended refining supply possible. less commercial these hard and worked partners and on Arthur. back safely had as a delays at to direct to for

and Houston affected assistance, our employees along and the are operations that Arthur shelter, recovery. during affected Gulf we particularly Valero to those people storm fuel, communities In and meals, communities the have the their provided the to by areas. support response, southern and Port Coast recognize and still storm water, and financial the While normal, other returned recovering, in

efficiency direct was lived moment. sector our of partners federal supply refining help fighting not this the rain as those who fully were cleanup, of local, efforts short Coast Gulf Coast of of all employees a to and dedicated One shows To us supply these American impressive. disruptions the employees, like spirit refining An was chain their and take the and our frankly, residents that lines waters, the of by, our of and to energy the think closely and I as our communities. officials, all a times banded of X the keep and things worked during rising day-to-day appreciated most neighbors the Gulf the and state from affected onslaught is industry together could need. it basis. rescue who and I help defining fuels with to our flood they recovery a in the front each event on on epicenter on the encouraged hit applaud other the display From the to of that business of supply with a was the was Category back return determination government which, to torrential the hurricane

with St. and Valero Now, that by we're the a will happy Program the noteworthy good company hurricane Last our we STAR company, that Memphis in share with refineries for to OSHA, are demonstrate OSHA's our the mentioned to Protection focus results I shortly. our Charles These sites. VPP OSHA and achievements and to of quarter most as impacts, safety you report STAR extending John refining another were despite pleased Voluntary our quarter, distinguishing report of Valero for reliability. were that participation facilities. to I'm more awarded status which commitment

the primarily Moving sour to discounts. improving on domestic and the notwithstanding supplies ample demand, on product OPEC pleased impact as to and the margins to improvement as markets, of cuts we're compared continued to year. overall, is export last due the crude, medium This of see well strong heavy

diet Our capture sweet maximize wider our system's versus feedstock discounts allowed shift crudes flexibility Brent. domestic and to to us

to adhere also made allocation to continue and We progress strategy, investments. growth disciplined capital our on our

next incremental two we're and the in XXXX. contribution projects projects these beginning Pasadena terminal We Green Diamond expect expansion projects. and Diesel unit, from announced the alkylation we Texas earnings see Construction on marine pipeline to the and complete also continues and cogen the the Diamond months, to Central Houston and recently eager the Pipeline Wilmington within

XX% pay returns in year-to-date. stock out a returned in million buybacks of $XXX flow we activities regard in dividends adjusted This with to quarter. cash Lastly, third to results through the stockholders, operating and

XX% to exceed of the range well-positioned to So year. XX% for target our we're

that, So back hand you. with I John, the will to call

John Locke

Joe. you, Thank

per For in the stockholders or XXXX. third compared net or quarter the $XXX to third million, share, share $X.XX to $XXX attributable per million quarter, of income Valero $X.XX was

Third stockholders $X.XX quarter was net attributable or Valero $XXX million share. per adjusted XXXX to income

For the accompany cash to refer due revised compared operating financial third is amounts, were of million to and tables to reconciliations was margins, higher from third segment. segment has lower of from quarter of please million income $XXX billion, resulting of the third of million VLP VLP barrels crudes quarter partly retrospectively $XX were for premiums Operating increase actual third of crude, and primarily contributions and of residual and which grain release. to decrease for the in of quarter XX,XXX of $XX the the margins, quarter million distillate for from due versus Refining higher increase lower the XXXX, offset income by XXXX third quarter the despite XXXX to of $XXX of to respectively. for The million, the mainly third attributed the third in XX% to and XXXX third quarter that in sweet was compared quarter higher XXXX, per Hurricane energy distillers due operating the heavy to medium per acquired in third in throughput the per Operating prices. higher compared and X.X day higher our was mostly gasoline adjusted The ethanol in domestic day, segment to and $X.X for third from barrel The terminals of corn the refining segment income XXXX in XXXX. Rivers been The primarily generated the than the crudes was narrower pipeline XXXX was for $XX XXXX, the barrels Harvey quarter which related $X.XX impacts. Refining quarter to quarter from XXXX. utilization barrel which volumes million Brent January XXXX. discounts higher averaged XXXX, reflect XXXX. for per costs Brent. than feedstocks, to wider the discounts River relative sour September Throughput of was Three and Meraux XXXX, expenses Red $X.XX XXXX capacity

of of third billion by At interest which $X.X the respect cash With ratio to $XXX million, available and Valero's VLP. Depreciation end XXXX, quarter rate $XXX was the $XXX cash was the million, was general investments administrative sheet XXXX. and capitalization were excluding $XXX operating we in VLP. net expense $X net generated billion depreciation, of We XX%. quarter for XX% was our temporary cash, amortization available was to tax and effective billion. million. corporate at of debt liquidity, For the Of only cash $XXX $X.X and and from was expense quarter billion had cash third debt $X.X in excluding balance was expenses, total billion, of million third the were and activities in $X September, held of million which, quarter. of net end,

and working $XX activities, turnarounds negative $XXX investing the we regard of from made billion. was catalysts. Excluding of investments, and increase capital capital impact cash which With to for $XXX million, of sustaining a approximately $X.X million million generated growth was

the of dividends, and returned used we to balance $XXX Valero stockholders our the X.X stock. million to Moving paid financing common third $XXX to shares million in million purchase activities, as was was quarter.

of share XX, September remaining. $X.X of As approximately billion we had repurchase authorization

billion allocated XXXX for expect turnarounds, investments. for to for and the $X.X business, be venture to joint $X.X $X.X billion billion, catalysts continue sustaining the We Included approximately investments growth. with capital total are in and

Gulf per we per at at day. U.S. And day. fall For modeling at XXX,XXX following barrels our Coast day. ranges: per U.S. to million West X.XX Atlantic at to U.S. to fourth barrels X.X North barrels XXX,XXX per quarter throughput XXX,XXX XXX,XXX to to within million volumes Mid-Continent barrels XXX,XXX expect day. XXX,XXX operations, the Coast

We be operating fourth expenses quarter cash the per expect to approximately barrel. in refining $X.XX

per should amortization. Our $X.XX day total ethanol X and fourth which gallon, such $X.XX to Operating of costs per non-cash gallons million segment the quarter. as a expenses in produce gallon expected for depreciation includes average is per

excluding expense the and Total amortization expense corporate depreciation be around $XXX $XXX to million. We million, and should around be approximately million. interest third for quarter depreciation should $XXX be expect G&A expenses, net

year Lastly, expense opening be for the between we concludes $XXX $XXX our to expect RIN and million. remarks. That million

the to adhere of callers request our that call limiting to questions, the two respectfully open again we we in to Before each questions. turn Q&A protocol

questions, This time two permits. than have more their questions. the us queue time have as to helps callers ask rejoin please ensure you other If

Operator

thank And you.

begin Roger And Read with Fargo. our from have We first we our Wells will question session. now question-and-answer

Roger D. Read

Good thanks. Hi, morning.

Joseph W. Gorder

Roger. Morning,

Roger D. Read

us recovery some And we about there's think expense Joe, give been there's I'm kind mitigate the of how refining, forward? just flowed next you time Can through, everybody's let's in last in Obviously, able then and do back achieve. I to some topic flows any guidance what a policy RIN non-refining guess through, to to you've there negative, can in RINs here. what has and news we do talked. both if expense, let's positive on then and able maybe you're magnitude XX the months. dive the of on curious, of assume be isn't kind of going that number, obviously favorite to And change you meaningful the

Joseph W. Gorder

Well, to $XXX million the right. All number fair we cost share actual that on would the The $XXX RIN million. enough. is

it won't continuing speculate assets what can more release. us think the on We're allow that volumes and to But see and in affects invest I to blend more. tell so from you how will is, I So marketing I export to on. it you the

wholesale focus on market strong So and logistics very the expansion. we've on a got

Now, relative this from situation, fight over. to RFS far policy is this Roger,

expect, this and perspective Jason windfall our just give have on Why enjoying are those go. aggressively view. defending insights that you occurred, we then I don't positions their some into are counter maybe we where and let what's you'd As a

Jason Fraser

this is Okay. Yeah, Jason.

idea EPA sent Midwestern RFS You at. said week and they the of grant all they obligations. which letter going move the going they RINs, In Pruitt the in looking going were to looking weren't Administrator this decided to they the to were the the about They potential at, probably was weren't senators, is here looking changes they biodiesel the saw to notice at. under letter, last export weren't point to he another volumes these that lower

in are disappointed the down this we in process. review looks course, Of resulted since how went circuiting pressure political it policy short like

analysis full proposal decide not and thing of the It's for have review is not Now, to the right a midstream, it's that's it's to another be one and just country, good a government. is and is which the this bullied abandoning thing Still supposed the to to the high it not for what White House, have the prices way program the all and refiners. are looks This us EPA what time. the acknowledged Congress work. a happened problem RIN that balanced

situation to continue to going options, We're they're keep we fight. our legislative So, up until going are to we're as regulatory, to the and going and pressure pursue others, legal, to the continue addressed. get get

Roger D. Read

give bit. crude pricing, Midland able along Gulf to Thanks. maybe or or you through Can that if is out guess just Coast, issue, pricing your changing a the tact to some in are Okay. there you an difference look the us you light some a pipeline of of advantage big access? of Other Coast of pretty I maybe particularly how to idea you a are relative able Gulf little achieve Cushing, thinking sort WTI, of net marketing prices. big and crude take

Gary Simmons

raised capacity we've to Yeah, sweet I crude. light run Roger, is this our Gary. guess,

In of of in and with Houston. a Then up capacity that as Cushing Mid-Continent access itself, Diamond of which to barrels capacity. crude the addition day equivalent light the about well, day we refining about capability, we're the in Memphis McKee, market have Mid-Continent of So, refining us Midland a puts barrels Ardmore and now start will Pipeline, XXX,XXX between which barrels competitive with gives and December. sweet toppers processing the Corpus X.X XXX,XXX million

In us gives access X, competitive we've Cushing to worked also we've addition our secure Midland give also Line which that TIR. to at hard very Brent And and added to to Corpus, exposure and access Midland to that, logistics us refineries. Houston and competitive

us we position over we've be in sweet to like sweet, So, advantage of done logistics to years, able of several a take great differential. this past puts lot that light feel work that on the

Roger D. Read

Okay, great. Thank you.

Operator

you. thank And

Our with Spiro Dounis are next question comes from UBS Securities.

Spiro M. Dounis

morning, years, market good starting just here. the question. like steward for start Thanks Joe, really want it Valero been off a few everyone. and capital share last belt return. just tight on Hey, It maybe can't the currency taking I strong just spending here. you over levels, has of to is seems I like screams investing your notice but But price capital debt the strong strong cash recognize and low to large and help balance, be should now. the

like pivot value maybe So, expansion where be a or refining just or more whether are spending makes think the it the you reaching to wondering, sense, do midstream, chain? point you up down

Joseph W. Gorder

Spiro, good I mean, Yeah, that's a question.

have strong everything. in. very opportunistic, well understand think To I effective the one have we balance that capital. we We position. look a Acquisitions use strong the And Valero, you do cash way sheet. acquisition have synergy at you a know. of at And an involved are it's do we be look as for got to there's

And so, one considerations. that's primary the of

a We have assets today. portfolio great of

we're could we're So, with a price we're or the always that And, at find not ourselves. that where the do we of at back of frankly, buying just compelled we we then something shares. project evaluate And we achieve acquisition returns growth that because feel our with an still to today. undervalued

flow, the remains. deem cash discretionary So competition of the be what that would we for use to

think at as So, present look they you'll I to opportunities see themselves. us continue

number if going our more interesting a mean, capital it's capital some we're I same expect do percolate on returns reason, forward, Anyway, that going that to I increase what going should of you projects we'll would $X.X up, guys execute we continue can case for told billion a $X budget if, to to the we those you is very feel you find our make this, think projects and be for And think good that some effectively. bit expect we idea. why will we've with forward. nominally, what there to in are projects, the just that billion you That's is But range. them. that that I going can

Spiro M. Dounis

Fair the then enough. comments enough. maybe market general just here. around Fair And

supply you've early ramp I seen gasoline up low while, lower of think in that spring. we've guess, winter here, I been I than as the refined in got a time it's head too into to a products distillate led and years. And kind you production in think historically, what's in this don't

into than from expected better Are being an it as looking you? year? right just setup you we look things what the standpoint, you surprise earlier maybe this XXXX, maybe is now at So inventory the

Gary Simmons

pre-hurricane, Well, pretty some effect. falling period, you hurricane that distillate I think inventories even time and you in had even before saw distillate during typically even you builds were flat see good the or

strong So, us made at several max years, operate we're think is this supply build of which all, and when it's to strong then gasoline a point created think year. put into year, be season, the help very the driving definitely in heading the will mode, diesel the season. next accurate, strength distillate, really crack the you disruption, weather and in been hasn't you then into supportive kind the for max in a with of had heading refineries in enough force I mode, it very a distillate avoid last good cold into position like with looks it's a the gasoline in gasoline of much oil the inventory refineries build season. distillate should And But winter, distillate I will terms the heating

Spiro M. Dounis

the color. guys. Thanks, Appreciate

Operator

you. Thank

Our Leggate next question America. comes Bank from Doug with of

Doug Leggate

is looks cost up your drag can like RIN Thanks, your the if – everybody. earlier, to full got may. bit add to you I previously. do, a take options of quota had it ticked a I've of I'm if has RIN more, going bit I'll just guidance I the RIN exports, to you wonder two, on question that. guidance, Good exposure? could bit guys. things Joe, the I mitigate What what from from are if my thinking follow-up little morning, retail, this because other a

that potential wondering appears I'm resolution for just line have to stalled be now? of what will So your now that response

Joseph W. Gorder

look that's projects okay. if question. the that Doug, And we've I you a great no, announced, think at Yeah,

pipeline the take to to going then terminal us we're the a We're the allow we've stretch that us expanding terminal, projects regulators, not Jason Again, being Houston of issue. wholesale our the at deal continue have business. over. far marketing from that to We that allow us own at Congress, sand it's in the There's and realization, to look House our think the any products which it this today that don't will the market RFS imagination, announced develop structured is And I White though, You blend. only broken. of by on as clear it'll in into the the will to area, a heads achieving objectives with said, legislation not implemented. allow as going is to and but export is more Magellan And product. we also was with with this this, fight aggressively at is Doug stated, it when the

and there with from it to solution a the will what some with a type try are expense. this can, up to and we we'll to we of and with can continue But things come front, to try be this. so to Doug, doing deal to we changes, to regulatory continue deal strategically, mitigate it control, legislatively with we'll reasonable And

Doug Leggate

to wait say really snuck that's really, imagine flow, full commend is, resets will third-party date. get hear that very you've your is share I on at that follow-up when corporate terms assuming price to would at already on to really But flow And that one what you're now got imagine leave growth you've would benefit are a basically, where thinking that, you what's this the greater to you another my to going buyback one yield, cognizant step of corporate your extent, payout cash out for I is but there. through do of forward? reduction, dividend is, to guys of in about the obviously kind that the versus Okay. it tax we some emphasis now? doing the see take back going reset happened. transparency, to I'll it cash is forward dividend my on current ratio the and that get cycle, conference, higher with one been and your target, in your to to of trading, resetting My a guess, a I future on question question buybacks, split dividend what is the we you as the this Thanks. likely go

Joseph W. Gorder

Thanks, Doug.

Michael S. Ciskowski

Okay.

it do absolute On of provide target, to with really the from a think that going our – dollar metric. metric, not a we're the reset payout, guidance forward, different different the the just affects I but going versus we'll provide

increases You know, annually, in of a our plan pay to is high to end the range. our current regard review to group for peer dividend, at dividend the the dividend and

Regarding they flow. from cash will be our share funded repurchases, excess

more we with excess repurchase and use flow, best cash repurchase compare of generate So the repurchases cash, our alternative as we'll some then is the the we'll if uses shares.

Doug Leggate

I gets put in yield suspect maybe, take now the is here don't one is context what my in the that ExxonMobil, share I line in want your guess, trading an rewarded to up which dividend just with I'm to it of quota just growth would price, saying. yield observation, relative

lot. Just the Thanks an appreciate a yeah, observation, moves. answer but I I and, your like

Joseph W. Gorder

Doug. Thanks,

Operator

you. Thank

Our with next Brad question Markets. RBS comes from Capital Heffern

Brad Heffern

morning, everyone. Good

Joseph W. Gorder

Brad. morning, Good

Brad Heffern

Joe, morning.

this announced you selling through having can have sort terminal Mexico into talk before, gives relates terminal as didn't that obviously partnership, Mexico? of You've it to you of sort you that what new

Gary Simmons

Brad, Gary. Hey, this is

in we and long-term can us supply Mexico marine a inland secured deal there, access Veracruz, terminal gives to deepwater From City. have in Mexico. Puebla We that terminals

the be sometime expect we So operation XXXX. first quarter to of in that in

to addition our this some not supply to to up to major communicate opportunities. of volume ready continue that, we're In population market. to centers. time, cross-border opportunities exploring ramp we At any other of also to supply other And those the the we're

to volume in all unbranded number both to going distributors them. we regarding volumes logistics, engaged on In with to retailers the work are and also branded supply of and a wholesale addition

Joseph W. Gorder

then, those provides and that's also. America. mean with additional to really Number other we two course, today. on the why footprint us I a to parts benefit. to sell This look benefits, you provides opportunity market a is Same Mexico the into is it Brad, where Latin It's one, grow. of right? And margin the we there's And other So, barrels And barrels. capture true those to of with consumption get opportunity continue growing. then

You related exporting markets benefit have and them. associated those into a securing with RIN more

Brad Heffern

That's buyers and recently guys. declines you Gary, thinking front. anecdotes crude. it as guys general of color lot of payments. Obviously, Venezuela how are And guess great. would a Venezuelan great difficulty going on there about sticking Okay. just I've guys a I maybe color, Thanks. with the big heard you forward as just can comes to there, quality give Any about Venezuela are you source about be

Gary Simmons

Sure, our volumes consistent. certainly from the have. fairly Venezuela have see been they We that struggles

shows that go in the load that degradation but Some we've of the along windows, with getting windows. we get commercial Venezuela contracts have to but seen It's volume, deducts in that qualities. the been with have our load up terms have those the on and we price quality, difficult some

problems So as yet. we of seen really any haven't

Brad Heffern

Okay. Thanks all.

Operator

Thank you.

question with Paul next Wolfe from Our Sankey comes Research.

Joseph W. Gorder

Hey, Paul. Are you there?

Operator

he that the next seems question. on has to move It dropped. will I

with comes Cheng question Paul Barclays. next Our from

Paul Cheng

morning. good Hey, guys,

Joseph W. Gorder

Paul. Morning,

Paul Cheng

for that on questions, two we're linefill talking start the for that is up, to What Pipeline, about the are be one to Gary, maybe first actually, the going the be? tariffs will Joe, when going when there? Diamond and

Gary Simmons

Yeah.

Cushing be be really When Gulf, from So To in we TI is idea an or operation economics will kind get the the plus the in today, tariff. pipeline it's of Diamond and November Pipeline, plus we'll expect Diamond Memphis Diamond in Midland supply tariff. the we be an pipeline of LLS December. to service, and it in linefill doing

Today to spread spread would that at. you is really look that LLS is WTI around it that So $X.XX.

Paul Cheng

from what about be you should say Gary, is Gulf So Coast that the interpret tariff up that to the as the same I Memphis today? will

Gary Simmons

it's difference tariffs, too but little a the in There's significant. No, not

Paul Cheng

the going to oil that see consideration to you're things WTI are we any Cushing when (XX:XX) we or LLS, yield on in addition WTI from take the to that any difference the spread? Coast, And the getting Gulf into need

Gary Simmons

have like grades grades one a Yeah, crude access what time, associated the are depending Diamond that – economic it with crude number yield different the reasons on and can certainly, grades of of the is we'll number to we there a crudes. gives of be a at shift us the

Paul Cheng

not in economic? that's But Okay. base your

Gary Simmons

it's No, not.

Paul Cheng

Valero CapEx or A IMO refining projects on associated any the that one, Okay. second have with yield? to XXXX, plan Joe, to your launch shift does expect

Joseph W. Gorder

let Why in don't I this. Gary on and weigh Lane

R. Lane Riggs

Paul, this Lane. is

are have obviously looking we a and we view. that So at

existing Our assets will regulatory in them understand we and are but our that'll change have market we talk clearly about fuel replacement believe several position that definitely not publicly, that We're to change, that but will a in be fuel diesel. gating projects not benefit for we from the big oil, process. only the

a see spread. sort from diesel resid you'll of that to fairly positive So, economics

to we are yes, So, of advantage projects looking at take that.

Paul Cheng

timeline Is any there any guys timeline FID of share? you decision, or a link kind that you may to come can

R. Lane Riggs

process just next FID get Maybe and will in gating done. of go the engineering the we We get our got year. Yes, half early first through even decisions first to some year. to as as the quarter next of

And to so, more going in. clarity sometime provide invest be deciding on and a everyone we would we're to when little as year it'll what what next we're to

Paul Cheng

billion smaller? in be the, much be it those will would project? $X.X And kind billion, say, Or $X of

R. Lane Riggs

said as about much but I've probably All I can. as I very excellent think questions,

Paul Cheng

enough. you. fair Thank Okay,

Joseph W. Gorder

was that three, number Paul, okay?

Paul Cheng

you. Thank

Joseph W. Gorder

you. Lane get And answered soon to properly. love it there out We enough talking it though. We'll with

Paul Cheng

Thank you.

R. Lane Riggs

Thanks, Paul.

Operator

And thank you.

Phil with Our next question comes from Gresh JPMorgan.

Phil M. Gresh

the these hi. Yes, be generally range the range back big that this there suppose this I'll would you of Good ask any over to next question years? generally billion Would more do that guess type influence I it few that, or enough think range. still of different is, way morning. it's within I slightly which that CapEx of of $X.X billion going Paul's about, $X.X that question talked you're a kind of X.X, projects one on to operate you've

Joseph W. Gorder

think discipline around it going that but best selecting this material, And at don't to the with us ready grow that the tell we're goes you time are in of to the above I we're the in jump to into point position ones projects the range. No, future. that best rates return

focus. years that's our to take several Projects construct. so, And

million $XXX it's billion if even year. $XXX so, $X.X million, a project, a And talking you're

us CapEx. So, expect you're I of to $X to $X.X going find don't think that billion billion to should you jumping

Phil M. Gresh

Right.

residual Arthur, anywhere were are then, about Okay. That's Valero maybe thought the by all or I just quarter, I'm I system? your can ask of fourth And entered where efforts the start the the thinking your running you effects certainly, helpful. on Port there is up back we of I'd Gulf would appreciate terms Coast. fully the you in about as say any quarter? of, in and I comments at guess,

R. Lane Riggs

this is Phil, Yeah, Lane.

the into operations So but Port that biggest normal so. are the of Arthur back going would effect lingering have fourth to our the now, had refinery quarter, as been

Phil M. Gresh

you've Okay. Joe, question to of last execution $X.X over $XXX million EBITDA billion next coming $XXX this And $X.X billion that's of project going that's phase. for to talked few to million about the in then years. Joe. be

coming, Green XXXX can expect in basis? we talk run So, – is Diamond is coming, should uplift, rate you how Wilmington Diamond Diesel, much

Joseph W. Gorder

Yeah. Why don't insight there. give you John some

John Locke

Diamond got and we've cogen so Pipeline Wilmington up. Phil, coming Yeah, that's

We can make do and a the two there's on think, would we toppers, projects have the don't the time can really the on the see they slides break depending EBITDA. we what expect given down you ballpark, view a on a operate, those slide continue triangulate specific those have for good they But would larger guidance cost was can year. I deck, to done our longer in assumption. we you that in have we But of slide We And what contributing. so on deck, term are have year, it of don't by that. expected price projects, XX we've kind you use in some IRR base two the see for to thresholds that do next get and can after given in that past, your kind can of so you and where

Phil M. Gresh

the the to So, $X.X would run billion more linear next rate fairly $X.X five generally of billion be this years, broadly? over

John Locke

can That's Well, bit. it's the lumpy online, or we don't projects and it guidance at all little we'll talk smooth, have a really on them look about we come say. but as if

Phil M. Gresh

Thanks. Okay.

Operator

And thank you.

cash? the clarify this going land VLP to financed drop you be going I sheet hoping Capital comes with Inc. of Scotia is how $XXX the - is Howard question for how on in to out Weil. Hey, next was figure Fernandez guys, Scotia Our Blake form actually much of Can good XQ? Question of million. versus Fernandez balance cash Blake (USA), trying you. in much on that Basically morning. to from units to clarify

Joseph W. Gorder

to Yeah, is Donna going This an answer hey, Joe. to give is Blake. this.

Donna M. Titzman

Yeah, so, million. Scotia for There (USA), be to the be - will than million. and north less relatively net $XXX little VLO cash should inflow but be it'll Capital of take-backs, $XX Blake unit that some Inc. small Fernandez a

previous you. I question Okay, distillate And looks I great. you believe Gary, this, shifting toward levels, the back looking but on stated yield. it and on your maximum was don't Thank then, like I'm just XQ the kind you the or, do end is have running how XX% do that you can curious, system think distillate were I guess, of yield. about flex you what of upper there? much at

Gary Simmons

distillate have in of mode weren't the swing our generally X% I a say, the a ability for for max yield we portion about we third say quarter, of quarter. We to good slate. would

that's the think that's And another indicative Capital kind kind Inc. toward or forward? so in amount I there (USA), will Blake may of to ability the words, So, or Scotia see of So, be Fernandez X% you of more X% flex kind in flexibility yields. industry? of distillate - you think going of other

Gary Simmons

similar would it. Got Inc. Fernandez I us. (USA), - to Scotia assume Blake Yeah, Thank most Capital people you. are

Joseph W. Gorder

Blake. Thanks,

Operator

you. Thank

next question from with Goldman Our Sachs. Neil comes Mehta

Neil Mehta

team. morning, Good

Joseph W. Gorder

morning, Good Neil.

Neil Mehta

ultimately and export where as the perspective product barrels XXXX The market. the first I here? for want around are in exports your question just was into of roll going, the guys' product terms we outlook

Gary Simmons

is This Gary.

The exports. XX,XXX a barrels exports, and of diesel did day quarter, did barrels XXX,XXX of we a gasoline we day third

impacts. the the with open to hurricane and of dropped. Latin November, we to wide a to December November South definitely it day over trade, certainly to both were again on to America. you go a Europe. diesel, arbs trade, volumes we pull like XXX,XXX barrels diesel saw America some with Prior looks especially you saw know then, those hurricane, big the think, hurricane, And I exports. certainly,

closed, the open it traders first expect arb Europe days has few been to trade, but of For December the up. our

really there don't export material much demand. in we So be see difference that of a will

to it in America. see expect growth we grow, we fact, South In as

Neil Mehta

follow Gary, the Brent up, TI. then on And just appreciate. I

around as are then terms any system there's XXXX spread Houston is firm this in and folks LLS kind to it how that about or are switching here. congestion as like who you as seems how but color, have differential of of what's about talked into views Cushing, thinking terms just you relatively any So it is of seems going pricing but maximize you very is wide bottleneck what's like firm. in in lights, It market driving well. the driving the actually do as is, It the wide? a

Gary Simmons

in It's and think in is I you're really factors. of so, Brent combination Yeah, weakness a in TI TI. what seeing strength Brent

seen you've good in and Asia pushed was had you've so the and Brent hurricanes. seen barrels, margins from And TI, the Europe, contract refining it's of you've So, North of on into pull the backwardation. and that from strength driven some in a weakness, Sea Brent, then

capacity the ability decreased had hurricanes then down. export You for demand the refining TI to our with And also crude. hindered

where now XXX,XXX period the period, to little of capacity you looked have barrels begun It it Mid-Continent the that you've had like, that's some stress peak, XXX,XXX so turnarounds. bit. refineries at to a down, logistics and a Following refining and

both it's line the Seaway in under caused line and then the are TI. So really so weakness proration, and this MarketLink

and meaningful Mid-Continent production bit certainly, little that next again, it'll But through So, see year. are think, Brent pipeline capacity wider I refining we growth, seek as some tariffs see comes back would a as online. continue to to TI expect improve we you'll

Neil Mehta

guys. I time. Thanks the appreciate

Operator

Thank you.

next Our Holt. question from with Chi comes Pickering, Tudor, Chow

Chi Chow

Thanks, good morning.

Joseph W. Gorder

Chi. Hi,

Chi Chow

possibly and talk of how long-term line Capline up the in Canadian St. James heavies general mix about week. on on and Coast the Gulf thinking in space into you company's Interesting are Meraux Can a locking last that of system? potential about interest reversal you line, your development into

Gary Simmons

more difficult feed though, a reversal. this what we be It's to sure at We're through connectivity comment day. said barrels us a going stage, feeds Chi, so XXX,XXX able Capline, not we're what's into Yeah, because Memphis not for anything Memphis. to us positive Capline a They is St. to this on to general, have reversal as which our it to Canadian at Gary. we stage, us a But it's think access really at with it then that. if just is is well. heavy, optionality heavy do gives us Charles would I And more refinery, gives at for sure too comment really it. In Canadian early this

Chi Chow

Capline how in? barrels are Patoka your about that? off you you at Well, Keystone. does support get all the Keystone XL I can mean, for And thinking into reversal change moving

Gary Simmons

To supportive with the to Keystone XL. still we're us, it's barrels with the most see we'll then efficient Well, way of in. that happens and But bring what what Capline. happens

Chi Chow

term plays but heavies, do you influence Latin Venezuela, the American term? that you about region. on certainly does production declining longer availability your how heavy How into American that Latin of talk And Okay. that throughout out there's differential think region Maya longer on and

Gary Simmons

see IMO be you certainly think replaced quality the period in We wide that we you'll additional think and I will we OPEC be so South see quality in move then wider are ramp that when heavies while see South so differentials, Yeah, XXXX closer lost but cuts continuing Canadian the this some from by up, that you and you to barrels place, you some heavies. the Canadian decline during that get date, of differentials think differentials the have America narrower. OPEC see will barrels, very time. to I as that be America But can of the

Chi Chow

just impacts everything thanks. there lead need Puerto private accounts, help to hurricane out you all you can By chain question Thanks. situation to any still the fuel in just general way efficiencies out? and get a Joe, about people maybe more and here. step a is shortage in remarks, but guys to sector talked seems here it your like into those there. Okay, there's Rico of supply And help we the a one and take

Joseph W. Gorder

Chi, nice as provided a Gary. earthquakes. hurricanes a we of as Rico, well have support fuel supply a financial of from result that's here. And thought. I source, as the then, And course, really the Puerto Mexico mean, into after

Gary Simmons

we've we calls any can certainly look it. it, had can't Chi. I'll Yeah, look say fuel, for at that but into I

Joseph W. Gorder

But back. we hold sure wouldn't it

Gary Simmons

No.

Chi Chow

thoughts. it. those for thanks Appreciate well, Yeah,

Joseph W. Gorder

you. Thank

Operator

you. And thank

James. Justin from comes question next with Raymond Jenkins Our

Justin S. Jenkins

stocks I see difficulties guess, me, made you Great, given thanks. much and question. Good looking midstream M&A prefer certainly that with about the and, M&A. development mentioned Joe, so last response maybe an announcements a maybe control the out of lately, how strength maybe the to we growth better I'm everybody. if But I relative seen investment curious with on VLP quarter midstream appreciate you talked maybe your the of and morning, or you've guess side in playing couple I things And you versus for in September. organic earlier from organic

Joseph W. Gorder

system, you'd to both better go seen doing anything or Well, So pretty for when just what I is Rich, like systems, buy mean, and you strengthen want look, seems then it do yourself? to opportunity gathering But, to the around, the we let's the seen participated organic projects. that something at obviously, market is like So is this? to add VLP of – our to ahead we've okay? try they're development in Valero there it say plenty by better into, to lofty we've M&A multiples, still and get for

Richard F. Lashway

that EBITDA got and what see assets, inventory multiples we transactions you XX-time good upstairs, got dropdowns. basically north a we've the the the It's organic trading the of projects. we've of said, are And

So lot more we've of at at part stuff a but acquisitions of But this the are right now growth stuff. good all look strategy, much we multiples. do attractive got

Justin S. Jenkins

it view VLO more like is we maybe Okay, sooner? you VLP, into the appreciate involved do that, there Thanks announced guys. or plan And a and there. guys. it VLP the for drop to in we could And think thinking on I'll it where September, financing at get build JVs thought Diamond leave midstream then two

Joseph W. Gorder

our it goal problem VLP its you'd Anything still its – and inventory. I for add? has Valero Today, point being the financial won't the but its speak ultimate no acquisitions to providing mean, on allow is it call able and But want own. asset what adding here to grows on support, to drop to projects absolutely I say taking be I it do may as to to this. Donna generally able to and Well, that would be

Donna M. Titzman

take No, way. that on, forward on negative as to this cash so right, that I to scale as take doing looking VLP can that impact we're and certainly it mean, size to to itself, soon get

Justin S. Jenkins

Thanks, Understood. everyone.

Joseph W. Gorder

Justin. Thanks,

Operator

Todd question Deutsche next comes our from with And Ryan Bank.

Ryan Todd

activity you of in Thanks. rate run XQ in with our year guidance, and Maybe line rates, On some relatively there's of quick just earlier couple terms throughput talk your next activity maintenance think into to I is of run been of into volume turnaround but mean, a deferrals ones. expectations, look turnaround now any or broadly you maintenance you I I means take next industry, in of expectations February period for activity, and portfolio your seeing are guess across March? do year's deferrals it what the for the advantage opportunity. as of have that across or

R. Lane Riggs

and change next start the Well, with about two going question. on even on in we're We deferrals. didn't situation on better going lot in and forward We the not LCO on of our turnaround Ryan, really where just to I'll next situation, in the at that's pretty this weeks Gulf the the McKee in the activity into our first half deferred the move our was turnaround be What out year or delay. have Coast of matter Mid-Continent the views that on fourth really help did of industry. really hydrocracker two-week We a our extent last say much Houston a don't give turnaround to I that so Mid-Continent And for going year. a get that will quarter we and in or supply is contractor in year. catalyst the for

Ryan Todd

third quarter, you. And your In you believe maybe sweet. more quick one. about ran was, thank I think one Great, feedstock then just I XX%

You closer of mix about the get flex start-up the barrels and there is sweet the X.X to additional run sweet XX% were is of any quarter. to capacity million additional to max? last or in Diamond, Prior that at

Gary Simmons

quarter day was then barrel heavy towards by had of ran XX% that way result that. economics the that some light that. online. X.X of sweet with out the back underutilized barrels fourth heavy million Houston we the TI Canadian third Well, are we at capacity the and about the in quarter, so capacity XX%, if of plants, to of us we of hurricane, look But the is the that you some certainly utilized at of capacity, pushing In the after discounted our really a

Ryan Todd

Great. you. Thank

Joseph W. Gorder

Thanks, Ryan.

Operator

And you. thank

with question Citigroup. comes Khan from Faisel Our next

Faisel H. Khan

morning, guys. Good

Joseph W. Gorder

Faisel. Hi,

Faisel H. Khan

Hi. questions. Two

don't back was to function $X small need balance First, just was guys a function MLPs of cash? decision current transaction, take of the it to in units the that in sheet you cash VLP a you of and a the market number or take the for of conditions billion back have the

Michael S. Ciskowski

of largely to decision our shares of those some on mitigate some was The the tax to take exposure back deal.

Faisel H. Khan

The much remains. Okay, balance stock I okay, current dividend, back that. on billion, over the following no still the increase you how just, then got guess, up you. you matter balance $X how cash And of much buy and

to So understand around philosophy your that. I want just

Michael S. Ciskowski

thing. good a That's

Joseph W. Gorder

what we to good I are your and Faisel, a Yeah. it are going on cash. undervalued. question as earlier, we is the to I on, do our think we're path shares said I take going continue with question. We're that's the all mean,

transaction, I well cash. think worked place the then going where we've mentioned top – at the dividend. So a in capital framework to on chew us. don't up allocation have going significant Mike we that the again, has at look we the we, we're of do put We we're And very payouts forward. for some dividend

context to our balance framework. we'll past, the on capital the of here So again, allocation of to the through do put we've going with work not sit We're ton the cash in it a you and it sheet. to just hoard cash told objective is and

Faisel H. Khan

the you say work you just you've you've acquisition chip could – timing looked cash for tried is of or can't make it away, that is right? not when an And stuff it it Okay. is the just and some

Joseph W. Gorder

disciplined sense as make multiples much, economics. would do little the if a much bit owners approach lot XX overpaid lead much stated, time cash, is at around times side, longer, looking we to Granted, acquisitions. rich projects our result we when something. And the better longer, And the be have on Well, – a to we of seem attractive something. very when even with it to it Rich at the doesn't is logistics overpay for growth for more we be logistics than is can but organic run for rate a

isn't growth, so to do a with, that we're blessed all way. to drive in and patience something reasonable continue it maybe do we're So to but trying but

Faisel H. Khan

Great. Thanks, Joe. Appreciate the comments.

Operator

And thank you.

Shere question Our Tuohy with comes next from Craig Brothers.

Craig K. Shere

by see or that driven relative what historical. The the for bit And to prior latest (XX:XX) a more to years? perhaps a issue? the component? to be multiples multiple drops in cash ensuing maintenance stair higher morning. an down Is Good step Is than you've you on higher the CapEx starting lower done of do assets, drop looks that

Richard F. Lashway

maintenance associated in combined solve assets. that not with out kind I of high attribute to we the capital multiple, drop They're the X.X is multiple these out. recent our for They're time X.X from dropdowns, quality line rolls IRR the for or wouldn't and most any pre-tax remember, prior assets. again, just so So time a drops. – any It's for higher these and of multiple

maintenance downs, we're So with that drop in XX% funny associated. pre-tax but CapEx on going or to IRR the on these there's nothing XX%

Craig K. Shere

just I'm million? Is press EBITDA sorry. have I release. the the misunderstood may combined $XX

Richard F. Lashway

million. No, it's $XX

Craig K. Shere

okay. apologize. I Oh,

Richard F. Lashway

Okay.

Joseph W. Gorder

Craig. problem, No,

Richard F. Lashway

Craig. Thanks,

Operator

to remarks. closing no Mr. see back further call questions I this will you. turn in time. thank at over Locke queue And now I the for

John Locke

questions. team the today. you. you We if Well, joining IR us additional Thank have everybody. you, me thank appreciate contact Okay. you any or Please

Operator

and conference. And now disconnect. This may ladies concludes you, thank thank participating and you We you gentlemen. today's for

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