Valero Energy (VLO) 31 Jan 192018 Q4 Earnings call transcript

Company Profile

Participants

Homer Bhullar	VP, IR
Joe Gorder	Chairman, President and CEO
Donna Titzman	EVP and CFO
Lane Riggs	EVP and COO
Jason Fraser	EVP and General Counsel
Gary Simmons	SVP, Supply, International Operations and Systems Optimization
Martin Parrish	SVP, Alternative Fuels
Blake Fernandez	Simmons Energy
Doug Terreson	Evercore
Paul Cheng	Barclays
Manav Gupta	Credit Suisse
Doug Leggate	Bank of America Merrill Lynch
Prashant Rao	Citigroup
Roger Read	Wells Fargo
Phil Gresh	JP Morgan
Neil Mehta	Goldman Sachs
Paul Sankey	Mizuho
Brad Heffern	RBC Capital Markets
Craig Shere	Tuohy Brothers
Matthew Blair	Tudor, Pickering, Holt
Craig Weiland	US Capital Advisors
Jason Gabelman	Cowen

Call transcript

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Operator

Good day, ladies and gentlemen. Welcome to the Valero Energy Corporation’s Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to Investor conference Relations. like Bhullar, to now President, Vice would turn over the Homer I Sir, may you begin.

Homer Bhullar

members today and our Good Jason and morning. Officer; CFO; earnings President me Lane XXXX Vice Corporation's Donna Fraser, fourth Joe several And welcome management Vice General team. of Executive and to our conference Valero Titzman, our Riggs, Valero's call. Executive President Chief our President senior COO; and Chairman, Energy other Executive quarter are Counsel, Executive Gorder, and With President Vice

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

of that after predictions management's that to expectations, federal that the it’s feel questions results contained differ statement after and on laws. Harbor under SEC. Company's tables, future, you are to those or in direct covered including expectations described this from like Safe provisions or statements team Relations forward-looking press have could contact summary, the Investor by filings call. attention release. reviewing free call says many I the we've the would are disclaimer with cause state factors statements conference There release securities be our forward-looking actual the the our your in intended to any to please press these the the our to in If In

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

Joe Gorder

in completed operations enabled where our environmentally quarter, ran responsible results. another everyone. unrelenting delivered Throughout maintained reliably morning, We're the an manner. quarter safely us our good focus solid to we and pleased that and on and operate which Homer, we financial report to excellence, Thanks, business we well good

on matched XXXX delivered we stockholders. last and process maintaining record while that we also Logistics to In continue and Valero's our several solid industry we our returns personal to projects made invest growth significantly are to to safety acquisitions injury performance, our in the years earnings XXXX, on contributing commitment rates. the over We increased capability for outperform earnings. investments

in investments of Pipeline increased the the opportunities flexibility, fourth available allowing expansion take system’s our Pipeline Diamond to Sunrise XB, and us Our the XXXX. quarter the Line advantage in of

set million X.X In and over barrels X.X for a light fact, crude for American at we day. per North a light per barrels runs day record processed record crude total at million

maximize into netback We products also America. continued exports higher to in Latin markets

allocation. capital to Turning

to according disciplined continue to framework. execute We our

execution on In is unit approved Central Ingredients, on quarter. exceeding and Construction the out Diesel of to Texas be completed to of plant cash November, to Green facility. construction second Darling and we of remain Board the range XX% the to target annual in XXXX, of of and Valero projects by XX%. mid-XXXX. diesel paid a in scheduled returns million cash stockholders and activities, our to Directors finishing finish annual gallons are expansion track. the XXX per provided Our naphtha alkylation terminals our respect in the production to year Diamond pipelines an expected With XX% net renewable operating adjusted renewable And Houston the of of payout

a as $X.XX the regular to dividend Our Board demonstrate our our solid a to approved to financial commitment position our outlook share or XX.X% further last for week, in us increase enabled investors, $X.XX and business favorable per our annually. quarterly

of This acquisition Energy Valero January, we Partners. it's was accretive closed the immediately transaction simplified our in and greatly earlier Lastly, structure.

logistics continue VLP’s investments product our no assets at Valero and Valero a will longer flexibility. traded feedstock publicly business, While have enhance will to ongoing midstream and

strategy, discipline our been has we look ratings, ahead, sustaining capital our our we no remain allocation There to capital our framework. investment paying investments and prioritizes dividends. as which change grade committed Now, in

compete in investments with $X.X incremental our and approximately growth discretionary discretionary with We to fuel other in where both to cash line In economy, for including uses, flow XXXX over several expect CapEx annual encouraged cash year-over-year miles growing to traveled, and be a vehicle continue XXXX we’re returns, closing, for expect it's prices, with And and should a last low been years. increase billion, M&A. XXXX. you the

optimistic. give us gasoline for wide well fuel flexibility also domestic supply the five-year We sour distillate reliably of to and inventories year. for evidenced as demand global remained XXXX range Expected weakness the reduction seasonal exports with of associated the fourth for in results, system’s average. sulfur feedstocks fuels incremental demand Valero markets quality our the and us. We a feedstocks oil a our remain impending that and reason positions good to supply expect believe this opportunity by quarter discounts market, Despite market to presents in whatever process below days diesel

I'll Homer, the call that, with to So, back you. hand

Homer Bhullar

Joe. Thank you,

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

income the per attributable $X.XX income from was net the to stockholders or billion Act. to or the compared to that attributable several adjusted items of income $X.X in share, compared share, $X.XX or billion in results release, XXXX XXXX Jobs exclude Valero billion share XXXX. stockholders per net billion $X.XX $X.X adjusted billion The tax in Cuts Tax $X.X per $X.XX was while results Valero $X.X an $X.X to benefit share XXXX. per XXXX, or tables and accompany this adjusted XXXX financial exclude reflected For

of XXXX. $XX income million lower of margins, XXXX million fourth billion, The averaged natural from in the XXXX of decrease fourth gas due quarter ethanol compared was of segment higher XXXX The costs weaker quarter attributed of the day, lower the mostly to with cash actual operating XXXX, to $XX refer the quarter $X.XX fourth to by income which was quarter quarter primarily quarter American capacity amounts, due operating fourth to $X.X Brent, of XXXX. discounts compared fourth increase segment XXXX, of in for margins. and the of quarter The Throughput generated X increase which to utilization terminal quarter in prices. million was $XX fourth XXXX. those fourth to expenses Refining to per to was in of XXXX. tables. relative loss higher for XX% due assets of ethanol the from resulting was quarter Operating The for line the volumes refining mainly for reconciliations the please acquired November per Operating in XXXX. mainly throughput segment $XX the gasoline VLP the XXXX. financial Refining barrel XXXX. and crude contributions fourth offset million in For the per adjust wider of XXXX in were were Port fourth the quarter in was than from North from operating of barrels income crudes compared partly $XXX in of to Parkway million, sweet Pipeline, to barrel was XXXX fourth Arthur the certain from million $X.XX sour

expenses interest general General our million due and $XXX million XXXX administrative than administrative to higher expense was XXXX, mainly adjustments $XXX XXXX, expenses of quarter fourth and to liabilities. million. $XXX and the net of for were For environmental were

certain $XXX which million. tables, For includes income was was expense of income tax the XXXX, in release reflected million. $XXX depreciation the tax And accompanying fourth quarter expense, and benefits, as amortization earnings

in these was available debt generated effective Excluding tax we $X.X capitalization $X rate $X.X billion billion. $X was Valero’s from and benefits, of was to balance At $X.X ratio billion to debt quarter-end, net end equivalents fourth was XX%. cash XX% net our at We of With operating the quarter. total cash liquidity, cash sheet activities of and the of excluding billion, cash the billion in had respect December, cash.

With net $XXX was we fourth to the of $XXX was for a sustaining approximately decrease regard Excluding and impact of turnarounds which activities, million, investing of capital from growth $XXX catalyst. generated the made in investments unfavorable $X.X XXXX, working cash capital million billion. quarter of and million

we billion for was sustaining $XXX of XXXX, billion was $X.X invested million growth. which $X.X for approximately and For

quarter, Moving activities. financing to million was million and our fourth $XXX the as stockholders $XXX returned for shares purchase We of X.X the million paid in dividends. $XXX common million to stock was Valero of

remaining. As of repurchase approximately $X.X of share authorization we December XXst, had billion

approximately capital investments approximately catalyst and to to our investments. turnarounds, for approximately total, allocated the Included XX% XX% expect to be and $X.X billion, growth. venture in sustaining XXXX joint business the We with

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

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

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

depreciation at annual For The expenses approximately XX%. tax XXXX, estimated we to expect rate corporate be is excluding G&A million. effective $XXX

million, and be amortization expense million. approximately about and quarter, For $XXX interest $XXX should first the net should be total expense depreciation

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

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

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

Operator

Blake Instructions] Energy. comes from Simmons [Operator first Our you. with question Thank Fernandez

Your line open. is

Blake Fernandez

on Congrats CapEx. results. for Good appreciate the the outlook stellar I morning, two guys. on years

I sustaining component that defilation turnarounds? bit and think, be talk year-over-year, you there it's actually sustained decrease some last that would sanction perception $XXX into or year the pressure, XXXX. with there seeing about has maybe growth a maybe we're coming where little and Can some whether the upward of or that a from, was million project

Lane Riggs

I Tier lot had in of call and the X that Corpus would project it respect -- I deflation, Christi sustaining This a wouldn't is had reliability our call XXXX. plus at to Lane. with refinery we capital we a

our obviously normally timing sustain our assets. year. bit And We rate we've what involved billion and past is to $X.X this there's in a said had run that than all more Our about like a little is having turnarounds Whether that. bit something have end or on we environmental, up again special anything currently to don't on lumpy of that. some a little do bit get view our forward we little

Blake Fernandez

great. Okay,

The where very you those replace to one, to importantly, to you're crudes barrels, more is confirm market going currently crude on how could domestic resort the I’m to maxed guess to second of barrels? there? Thanks. in you to out I topical. heavy or are But guess, much on order have importing actually sweet kind global I replacement more then, you're Venezuela, light curious, for medium to question obviously largely just sweet and just sour light looking resort

Gary Simmons

Yes. Blake, Gary. this is

Of crisis, Venezuela. currently course, not we of from people but production the benefit XX% sanctions. markets run Venezuela was Venezuela. we're proper of the it in of the see the crude the of threat was with for that for also a years, known historically. our not taking decline heavy about We've sour and only there resolution hopeful we've Venezuelan seen for we’ll welfare that of certainly barrels the was anything We're sanctions, But, to

to put we’ve for this. in be prepared So, alternatives place

to hours the XX announcement just Monday; Of we've was course, respond. had made only

get at begin a the to in to lot supply have two coker in top we're unit. of plan. we Arthur. today plan and next our holes Charles been St. Our a on we fill Venezuelan really turnaround than their And Port priority Gulf, covered. were position still some refineries tell XX-day but crude We refinery did The on has better in you can to barrels I really Tuesday, our Charles St. supply and run

To system. light So, that the our definitely had your certainly maximize sweet minimizes pushing current sanctions to the the point, are that on impacts in us system. economics

Operator

question Doug Terreson from next Evercore. Our with comes

line Your is open.

Doug Terreson

Basin, points Joe's while we distillate few to highlighted inventories about And positive to a get just on seems both for about although typically appear see demand this how seasonality U.S. the and uncertainty minutes if wanted a and you minute that Atlantic market the could in true fundamental. exports Venezuela also, just converse should and some might the And supportive. likely covering then, are you gasoline, year, markets made and I oil spend to that and be net you feedstocks the out given could elaboration and fuel how heavy sort be ago adjust? Canada Blake

Gary Simmons

again. Gary is Yes. This

it demand. gasoline course, course good this result high forward. gasoline We early feel are refinery call, moving the kind gasoline gasoline and about card good employment like low wild seems panic markets. The Of the we in demand very always of should utilization. year, on in becomes prices of during

it XX-year of that has could grade PADD X. an year, tankage build primarily to make structure the little utilization more I York there's we in is PADD look we tankage X they're starting individually, overhanging. gasoline X, a bit with saw with are I a we bit in refinery at and New overhanging such an the inventory in and incentive The So, high PADD that available. see put market gasoline been last year regions summer If Harbor, economic PADD X. still those The and

So, that come. would

X. PADD in again inventory some could You

X in think, of the was margins strong. PADD were some significant crude The very you'll just the moving PADD discount. lot think result I a forward. gasoline of and both build PADD I X X, a see improvements

So, in year But than market planned balance now, market. you drop winter typically I But was PADD looks look ran last at the this more the if see they refinery year. be at there PADD discounts the utilization where, hard. maintenance X, to the off X crude to with

with move that issues then we the quite be snap in As region. seems currently forward to PADD few a hitting X, refinery there and cold

In the indicating region. Explorer X between and there's in for big a pull group products is now fact, pro-rated, that Pipeline Chicago

in in our year. typically as X this some again I export and hinder think I issues gasoline draws well. So, Gulf, gasoline PADD good you'll we fog And in which think we to inventories Then, have see year, PADD see you'll early the saw X. draw the that also product, ability

trying the inventory people refiner a they as in bottleneck is of lot well their build saw export Gulf preparation We interest some get supply then, their which we could gasoline destination. also largest into outages. for cover obviously saw And to Mexico, a buying so during in as turnaround, our

So, all maintenance planned things, I PADD Gulf pick I'm of in you beginning well. you confident as and inventories see as those X you'll the in result grow think, lower as see exports a see up, utilization

And We good gasoline. feel we think going about the again, is going pretty I what So, wildcard good feel about is to demand. be very utilization forward. gasoline

Doug Terreson

Any Okay. too? insight on fuel oil

Gary Simmons

oil. fuel Yes,

now been of to OPEC a issue the the significant talk the about. I sanctions, supply cuts think, in Canada. on and Venezuelan it you production There definitely is with has cuts sanctions hits lot fuel Western and side Iranian

Alberta then, fuel at that of demand coming that barrels oil, XX,XXX at tied lot about raise and some the oil. for sulfur look And month, a you in backward If it's change. the moving forward a curve high XXXX on that least is result fuel lower do see ahead as can to The announce to IMO weaker fuel $X on. spec of February, day. We some of and they're the there's a be fuel production did go going government production signs

of will well. help some things as those So,

Operator

Barclays. Cheng Our question with comes from next Paul

open. Your line is

Paul Cheng

morning, guys. Good Hi.

told excess my I ask Gulf be and to is team Coast since big your lobby I question, XXX, his publicly bonus. a supply I Locke, filed John Before of margin give crude you will probably Joe if to going realized Gary in that

lobbying you. I'm So,

Gary Simmons

really Paul, to helpful me you're here.

Paul Cheng

Anyway.

two So, that, other questions. than

to trying yield. mean, is level in First, the current the fourth think maximize already I everyone I distillate the looking quarter, at on

into that can light? there's how that to any and that, per So, shift gasoline there you in Is oil. any you said barrels from can that a actually there distillate. any light medium And also, X.X you that can million you can is to more much from heavy record running move -- your you're more the more if in system, actually you day do quantify

Gary Simmons

Yes.

gasoline else sweet was out So, of about tell little numbers On I that maxed today. do. we to light you distillate would capacity. tell XX% can We're we swing, light crude, that you on the gave distillate there's the would much our very you Joe on pretty

is our crude system. push to some there there additional room so, light And sweet into some

Paul Cheng

day? that So, barrel Gary, most means can if you another XXX,XXX per mean that push XX%, you XXX,XXX, at that

Gary Simmons

Exactly.

about crude So, we X.X day light barrels a saying we've been sweet capacity. million of have

Paul Cheng

expect Secondly the that shortage in we shipping look to your you there that you Mexico expect coming the there? in export months, Mexico? the If export any increase have you're to fuel weeks, given seen do you last the that back noticeable in decline two gasoline

Gary Simmons

and continue get only Mexico, into barrels even then we waterborne of fuels barrels business bottlenecks the No, crackdown we country very barrels we ramp trying the see on we all Historically, seeing of the as to really see haven't. that December from the from interest demand for the not Mexico importing to worse. made And country. in lot the and well. into good our We're the but we're these way country barrels, a seeing buying actually delivered good in up demand obviously,

Operator

next Manav Credit Our from with Suisse. question comes Gupta

Your line is open.

Manav Gupta

on congrats a good great team. a congrats joining quarter. on Homer, And Joe,

to We would new Locke the wish him all will miss role. John like in all and his best

of follow-up also trying So, I you partner they return a Are competitive give like margins, on it advantage Green just the fair Darling project financial Diamond peers, the Like, just question that have for does edge at if brings to or is, second your on you similar the a Diesel for table? who on current Ingredients you? a is expansion. they And some what look is projects? kind are XX-plus-percent to quick this assume it

Martin Parrish

return that $X.XX forward, ballpark historically going at Green, On in right Martin. on EBITDA so the -- about gallon, going Diamond doing to you’re at math, probably is be looking we're the This with margins. we we're a think

been meat been on oil. XX% used a also just Now, Darling X cooking a the we've They've around the fat in partner. a years. significant market been Green, these sourcing markets years, in do processes fat this collecting Darling byproduct. for years of They lot not a the world’s to in for about financial long now, Diamond time. X.X the is unit. for table work for fat bring They the they've pre-treating

joint here. really into We've synergy expertise got good the a it's got So, expertise, they've and a pre-treatment product, refining a the marketing bringing fat got we've in expertise venture.

really So, partnership. a good it's

Operator

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

line Your open. is

Doug Leggate

is obviously. Joe, in great curious rate effect capture lag quarter; oil the great of to quarter, job every really some that it’s obviously side we you our to question numbers deliver. your making prices, a XXX% XX%, look I'm the shift capture guys $XX more a do lighter effect, pay such about structural we on there's my that Was rate. or correction sell saw But dumb attention on in the as a move and running off the normally of lag above that is what forward? just something you to is there should just XX% going grades as going would

Gary Simmons

good a question. that's Doug,

Joe Gorder

Why Gary the here. opening we One don’t remarks, it -- I and couple pipeline the we've of is -- a to for is had at alluded reasons. retune take recal few projects. But whatever a as in shot saying there I'm really

a allowed the in us the our the to capture really really, is We us of net-backs higher in I'm But Sunrise. Quebec other to things, have the refinery capture up sure, the Line the in all pet side Mid-Continent drove then, things lower markets on quarter. of those position to that X the contribution our contribute really take price, distressed prices. essentially and two the on the the and And rate advantage like rate. coke, rent the the there's we in all our put and fourth other first on quarter. that side, our fourth Pipeline of essentially Diamond stuff the had And position capture product product

Doug Leggate

structurally that So, should capture moving higher? is we consider rate the

Joe Gorder

I yes. you the -- side lower with would product the say, should on rent prices,

have it's looks side, just of view you a what crude [indiscernible] you Cushing. and -- those how a what view like distressed matter the of like On a a are. markets line of Midland and looks have And

Doug Leggate

pivot a guess. and answer to extent, summer, trying we as into is IMO Normally, -- that. tough know got would the for follow-up this really you I between even the distillate was kind move My Doug going Thank Terreson’s this follow-up to of I is obviously to question, XXXX. see the through obviously some one. it you -- industry gasoline but we've Okay.

bias part wondering, there Valero I'm see So, And gasoline the is overhang? as whole it we I'll that specifically solution one the of through leave there. to possibility a a maintain XXXX of Thanks. distillate the max

Lane Riggs

it’ll is going now. the Obviously, right mean, we market through Lane at max now be This for of that early but least I while see in be and that's we've continue been way again. that We will in the case. the distillate it’s in year way to way is XXXX. a believe absolutely pointing forward the rest the the the

Operator

Our Citigroup. comes Prashant question next from with Rao

Your open. line is

Prashant Rao

a for look crude Good morning, obviously And really back question. to makes us said, quarter. and and this thanks Paul as the guys, bit, all circle it sourcing wanted I to little there. down we taking underestimated drill performance you strong

I or is we expect we was just priced XQ? that as we lot should you the of how now heavy American that sours, mean, running But out On we have your -- you forward market the should other look purchasing to what were for were like grades go much some Maya those -- XQ. XQ get of to in confirmation? normalization a saw I want in themselves -- as and it and not in price Central

Gary Simmons

probably the best side, for So, definitely seen on heavy we're we've for heavy is paying not I crude. what think sour a Maya that marker the

Brent. And you that more actual Canadian much or in was quote a heavy look discount of representative the priced system. trading Canadian if Western in So, WCS into Select the we sour to our was Maya Brent. Gulf $XX.XX the U.S. the believe at fourth Coast discount at to was delivered X.XX quarter,

XX,XXX were heavy and in day on in rail, very of Canadian then by In were rail western barrels. significant Arthur, uplift there that, disconnect with barrels a Port things some crude connect discounted -- those addition the the did a Canadian pricing. we certainly had to by We

Prashant Rao

purchasing leads to to Okay, guess that seems data market I on barrels. year-to-date what to those is you of get and be sort heard is the And second It question. access My follow-up -- data, barrels. the Canadian import we've the good thanks. my to continue able Canadian nicely like

wondering had that if up any sourcing, given production by in just also we've especially the the those on color there? Just there cuts Canada you available should the think color some more in of give how dynamics on with sourcing or of coming rail, we are in market, could barrels about the variety

Gary Simmons

Yes.

the delivered day So, ran a Canadian. a of is ran We on in system. fourth heavy and quarter, about barrels also via record volume of a Canadian crude And barrels that XXX,XXX by do rail. sourced in Gulf, we then we the set XX,XXX pipe, we our into it day the over heavy

will is pipeline by be western the Canada. until necessary view Our that approved one rail out crude major of projects gets of

Operator

Thank you.

comes question Wells Read Roger with next Fargo. Our from

open. is line Your

Roger Read

summer in dig the little thinking with time gasoline. maybe a deeper, here guess, to about I

if the not So, most doing you're max running distillate, is industry all presumably same. the

So, by speaking, up get in staring relatively cracks ended cracks if of should balance we run additional especially with gasoline effectively, in you to has or the toggles if to us this IMO the does latter about imply with do, face the relative a stronger can part the summer? situation summertime you gasoline, that distillate the weaker with we to think things that cuts summer, see, employ industry

Joe Gorder

yield, to the utilization the expect saw to that combination last in high and sustainable. And is that and Roger, answer, certainly max situation the certainly whether is refer XX-year I’d of be to thinking of is we it’s what the then, refining which a thing distillate year difficult is, rate capacity we other the just gasoline mode.

Roger Read

with think off. with heard other reason -- about others companies, think that occurs in terms was can Yes. light have a decision. how no of anything can if that to at look different throughout barrels more other this your We decisions versus I would I there's refiners there's I mean, It’s hard for strictly curious, available, just FCC IMO margin talk though things refines U.S. like system? as make. you your come you do run overall units you your

Lane Riggs

Lane. that. stab I'll a at take This is

our So, we there's inflection fill economic point, pivotal do it of sense alky. And makes -- part FCC and point. operation, almost a always obviously certain our is inflection

to up full. to the run are we’ll So, point sure units make alkylation

point, put And also looking sense into marginal the make we that halfway we're go reg. the for enough, in run-pass meet IMO the market your And to stream percent capacity interestingly fuel these that out so, can the to point. to always to is the

So, lot pass, we is do alky, work the whole think the probably that going that XXXX run IMO is out. certainly of FCC of here to won’t things structurally a will it’s their happen at one least in context how drilling

Roger Read

you on sheet do increase opposed of a pursue or I non-recourse a allocation, acquisition sheet? of to over you flexibility, the And to about anything the terms The then, as that goal the was capital cash to to Is great allocation. issue if future wondering, is Joe, you front? to here years were future side. VLP want into like in kind you’ve the done balance here true think capital more and job decision there on the to roll up as on the kind brings balance debt anything there reduce maybe of

Joe Gorder

up just Roger, that's XX% that. We framework interesting the set allocation to are with all a about, we balance day has that issue like about we time. billion, that would debt-to-cap good say isn't going going raised there minimum a XXXX kind we're capital really operate the things expecting day I cash that's provide. a we sustainability target is somebody Those question. get that assumption the question asked we XX% October, of the $X target in Donna forward. within dividend. Because out fundamental range. We anything in got was with all were of things point do being this And, IMO what asked the as of generally, change. at periodically to go to to the to were in and come cash

at our view look and long-term I understand the I our that market think hype. decisions realize based the for So, making when on being Valero, and of business we're strategic said, that we I not

position able the might to And financially be to with market always so, we whatever deal to try ourselves be us. giving

calculus any do we So, if makes XX% have if strong at satisfy a And the say we sense kind proceeded. an did VLP kind going if if then, I we we dividend forward? extent we cash. yes, that well, we of was VLP project? the at there. terms projects traded you dividend, going for Valero's logistics up are kind to going publicly that. context we them question, without defend And, the to Valero. would you to And them of started of And VLP and to CapEx the to to it it the entity, reservation the in growth think need in the review to terms the to Okay. continue certainly a takes that even of we're of the the be to a acquisition around and yes, From And be, went with return, and in recall, thought dividend wouldn't was perspective, Valero sustaining That we'll at we with answer benefits it We in you really of is you we sustainably rate consider just always raised can if that to would example, got roll that's invest still was projects. need take totally business. as project through. non-discretionary, a VLP, when it same that for sheet, issue the balance continue and think of really, of allocate And

as projects look just at an Now, aggregate these project. we

the the of result sourcing a the XX% So, Pipeline for we return. the VLP crude Diamond of in a huge and as example, Memphis benefit have Diamond on was the Pipeline, rate getting

of Now, rolled and look XX% in that's we all to rates context one economics on it at set in return of projects. refining of the

changed flexible adjust framework, So, bit it's structured the we're but to hasn't little what we to fundamentally on. to time, enough time way we're a focused the it from what doing and us allow

Roger. question, to long a answer a was that So pretty simple really

that. about sorry So

Roger Read

appreciate believe accused can't No, fickle... that. be I Street I Wall you in just to

Joe Gorder

Isn’t hard Yes. imagine. it's I it? know to

Roger Read

All Thank right. Absolutely. you.

Joe Gorder

you. Thank

Operator

from comes JP Phil Our next with Gresh question Morgan.

open. is line Your

Phil Gresh

Joe, question, you I think about that be, million illustrative the these way. your have of couple $XXX years from XXXX talked from First completed generate projects talked for about you in incremental that under can a for EBITDA slides, would you And, now you projects.

So, about how from think you thinking I'm that projects ramp underway? wondering be and about we XXXX should in that XXXX the

Joe Gorder

haven't EBITDA going we giving don't right? and been in forecast I that there. ‘XX think Well, go ‘XX, to for And explicit we're

threshold And we're $X chart on what And to in so the we slide and numbers and produce? you think, of of benefit look our that you to do comfortable say in with you this numbers. our year-in the billion to to And at got project, the if capital what are very, on, is, really, pipeline DGD, alky our I $X.X year-out, coker ownership to expected projects strategic on. the still those all And, going interest for billion. got going of the invest of includes very the is you've terminal our much deck. Phil, EBITDA return rely you're and projects, kind

capital to And billion targeting so, the EBITDA terms billion going in accordingly, in moving $X of that allocation projects to clear to $X.X incremental in invest from recognition an and capital perspective needle resource, are we're finite our EBITDA. going framework produce and the the of is of a it we're light

Phil Gresh

enough. fair Okay,

take kind pretty the is big think XXXX, I out a has I $XXX on headwind Second question VLP coming first level. capital working $X the cash million balances. take XXXX. just in quarter, minimum also billion realize that been in comment of to ending for back you're around the I If your volume your

is return with think about of that, perhaps to of about kind think oil of the there some you and context things happen going how now in reversal up? could that plans crude the And nature? trying that, just generally wondering So, prices that back capital

Joe Gorder

That's a do good to…? Donna, questions. you want

Donna Titzman

Sure.

to So, in I working mean, capital, the regards yes.

that pushed really you were up, shift go in the extent with to capital to that working in that wins a the on more lot the A So, would XXXX see do due had some negative ‘XX XXXX. were XXXX. in you in direction positive would to the capital timing saw prices of

capital But XXXX there sort itself in reverse has in of working evened that themselves. that certainly, some the other out. are movements So, could

Phil Gresh

$X And then, just down billion balance. in that terms cash of VLP taking to

kind saying or that is you’re manage do there $X basically that you’re or billion flexibility levels to mean, want how I of target? the at that you that about around So, think you

Donna Titzman

Clearly, that to going to money, was a But, big amount of make cash. generate cash we're going out continue in January.

we balance at $X that recover. And billion again, that so, level. you minimum; comfortable at But, see here should we're are cash the

Joe Gorder

years quarter-to-quarter-to-quarter-to-quarter. of never mean, plan for not our to billion carry We was cash situation. were that just ourselves $X said I Phil, we now. in And we’ve this finding --

down And was little a here this there plan intentional bit. so, to tighten to an try

we're sheet. has $X the to cash the But, got no there's target going to is reason on try target. our Donna billion to for the and She with us by here abide CFO Now, set. of balance sit

Operator

Neil question next Sachs. from Our with Goldman Mehta comes

is line Your open.

Neil Mehta

little to XX it's start has and here it's It's diesel curve since XXXX, where FO; which funny, probably reflection of forward than a seen ago, the the So, is seen we’ve call perhaps months tense got while bit still a XXXX. Joe, what talk team, XXXX. favorable, compressed I a wanted just six in we're in about lot minutes you've IMO less

you through of upside team's about playing out the tailwind? IMO talk that As has sustainability you in can look potential of this itself at markets anything And the about it? the just XXXX, mind how it and see you dynamic the changed from

Gary Simmons

high high The still oil at backwardation curve the markets. starting in XX% as oil but view sulfur you'll of high assumed Sure, trading see today, The Brent we significant shape it in high of pretty be. uptick a curve. still oil Neil. with the of would will transpire what a result sulfur IMO our is XXXX all. see really We Gary. diesel has think that you'll fuel see This I weakness of demand changed and in don't as see you fuel a is much fuel steep sulfur sulfur higher little fuel is point

to I as a increases you ULSD believe really diesel as demand that any is think, staring we IMO us will of result impact showing at IMO forward date. result approach keep a that still all. one cracks of significant January be curve there strong the that at XXXX And the as we and isn't

Neil Mehta

And lower that. attention about something we will haven't as the that RINs, on follow-up seems you lately, be good your time higher, from RINs other appreciate that market -- prices have it thoughts the here. a any much send to thoughts just of that and that how I prices out there is could just and then, your market. see risk on Is been here? for it like in period paid Again, plays

Jason Fraser

Jason. is This Yes.

at see several policy any more a put seismic I rule-makings. aspects. the ethanol looking upcoming has the from for to give the waiver mean, side, EXX we come EPA market, in. don't reform ability in tied market guys more the summer for shift the Just the They’re with to

Some improved the is with market stalled rules RIN But, out gotten all shutdown. have have what's hopefully reset. of the the been functioning within happened RFS those government

catalyst but a any change more I now, any things. just don't see So, course, to delay in right see don't big we change

Lane Riggs

small rules where RIN followed the also. got were exemption is And EPA year the and of refiner that this, off of took another some then, piece the right? appropriate. exemptions a And small the market certainly And last they refiner pressure the

the We refiner small they and exemptions appropriate. where the with to rules expect them to continue comply the legislation to issue crafted follow as it's are

a I'm Jason. market going of forward. in Neil, with change whole so, this don't And I see

Operator

Thank you.

Paul Our Sankey next from comes with Mizuho. question

open. is line Your

Paul Sankey

little have is OPEC been? a about a How sort XXXX, you environment. big Can gasoline this for equally, even obviously, the like bit but the cuts, bearish. do not turn your about It's different is impact through a good to January number good Thanks. cuts, of Venezuela, things it compared some good I'm in result changed earnings tremendous markets. It's different very progress Alberta what this things example. that time really And things have you January QX? in so QX, obviously those gasoline into comments in about feels Joe, expect in QX just in environment thinking of result changes and to very of how talk a to

Joe Gorder

reality things a Right? understand in is weak conference a that past you is long for not term. have that's mean, And of parts January we're usually that hit moving If in in managing lot were distillates we the the the it interesting I A that in at good question. this have many miserable. is your point slip we've very salty. warm, long right time we in always market their everybody is, because mind January are there keep cycles Paul, Paul, always risk at to in when so wanted a this business thing now. is stinks. But, winter very the I and point. So, on to too been times, the the But mean, for our the very because we And business. been is time. so the Gasoline

cash. try Lane changed crude, make the Those and that the that ball. around what don't sourcing our plant. we market get the to the Gary weekly, way things crystal we the that that operations can managing possible. I don't mentioned environmental a have as on deal of we And really change. things net-back good, of basis capital can day-out day-out you too. a adjustments we do to profitable best has to Day-in and But, do? we'll in things attention in do some a don't is the we daily change your on he's over to as to. we're operating lot Valero appropriately. mean, in control certain that We optimization okay, conditions, The pay and based all honoring so to which reliably, to make with try You our day-in this things be commitment and safely, are stewardship,

the do business we the Lane, specifics any to for Gary, our And so just talk want best. long-term and we or that? around manage you

Lane Riggs

on on would thing Venezuela even stay have to market, One in put place. the going oil add some I to point if at these sanctions Venezuela,

market. buy will there's come oil time balancing build going any to through where and they'll buy a our Venezuelan be So, oil to alternatives, here whoever

of time changes clearly to a the OPEC, back available also be where will what's then allow trying to OPEC of based alluded do again, that's there. out something just optimize amount course, the to, set markets and Joe around wake And every quo. at the the it mean, I Venezuela, of what's day looking in just sort you it's here period -- what play we So, structure is going are market. to our as in oil And On of and out. up to got market assets we the in interim on status if we

great most understand these better than in the and the have We a markets. get value to anyone markets system

Paul Sankey

got Napa Energy you're [Multiple Joe, And that do our refining out guys. Saying plug. don't and and out conference. Valley join us forget the refining our only but -- got there Xnd for April, January you I are the shot major remember year, Thanks, shameless Summit appreciate, we've on in greatly to for Great. most that of our welcome the speakers]. we've you Xst this Apologies

Joe Gorder

if buying, I work. you Paul, would all And can can less. nothing are it make I we expect see,

Paul Sankey

I appreciate much that, indeed. Thanks guys. very

Joe Gorder

Thanks, Paul. care. Take

Operator

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

is line open. Your

Brad Heffern

not you sort could just anything sourcing. you comments expect. the that made on it the like normally mean, would see on Lane, about crude all the expand numbers it's I pretty the seems just for sour of I was screen math we just hoping that waterborne, you much

Are and Oriente heavies X a their the and the the or sort where see So, are there just minus routes mediums into crudes period is competitive? trade the actually pricing the interim really way cut drawn chance system or not minus in at those getting we of at is are that Mars of because runs X? sort that

Lane Riggs

of is we Mars, what on system But depends have the then, one to it's really they it's all is at it tune are me. is take at another. where the unit. with that And and the can try margin open parity we your our of medium are and Today, the Gary margin, run positive to on on sort and to most it sweets. where I'll we part heavy, sort a shot an obviously barrels refinery And crude like profitable So, you sellout. run sweet still trying crude of last

our and trying dive right assets. navigate really get just the So, it's into to

In the trade terms deploying. are of just routes way

I how I got watch always I on as around, plays Venezuela aren't the It's mean, sanction same cuts, to we what when side. out think, going thing. OPEC happens to again, cuts. like they be And just said,

So, world these permanent these pass, things happen. all rebalances we worked, the trade but they're not when the

Brad Heffern

negotiations you I going And on contracts. union then, was any union now Obviously, just the your color on contract wondering if steel could expires workers give and right the tomorrow.

you do the didn't time last impact just expect I what if know four time you that any have So, ago, years we but guys around. this curious saw this,

Joe Gorder

Sure.

the So, behalf Shell of on negotiating pattern is the for really bargaining. industry

Arthur. In And terms of refineries, and is that refinery we expire will refineries have Memphis contracts Valero, that we Port expire. two our that contracts have two these think these XX at midnight I actually tonight

sort have stoppage with of at refinery We but in of don't work know. expect on local we're Shell a Port whole sort agreement just And Arthur. now tentative the pending our our you terms issues We the a just agreement, process, never negotiations. of this still during Memphis working right

that. for prepared we're So,

to be. to completely we're have event you but not assets for the there trained that us temporary is certainly out. as prepared over a walk say in take We I'm have one, would workforce the to going we're a trying But, it, expect

Operator

Thank you.

with Shere Our next question comes Tuohy from Brothers. Craig

is open. line Your

Craig Shere

So, regulations if the wastewater XXXX speak appear be just to expanding the option picking Neil's that ship-based to you scrubbers. up wonder of could limiting question. I on IMO

Lane Riggs

Hi. This Lane. is

there saying about, there Is of discharges. -- these ports what environment that talking are that sort you're are some about? the are allowing not of you are they're I asking some think what

Craig Shere

Exactly.

Lane Riggs

Yeah.

of of bitumen to trying little other which pathway try burning think headwind It's get that Gary the of the historically difficult been into takes making strength. it these more solve you And happen ships just again ships I again, IMO, that the of only the forward rid range it aware the this to water. is puts mean, market see invest difficult where I of in a just the scrubbers. terms ports another there's local makes few problem that's to going are in and that. how really of try So, it is out a fully technology some long understand more out for to SOX And to this as these to that's and it's it. really to mentioned, exactly particular heavy air

Craig Shere

to prolonged just deeper agree and a that's the perhaps So, would you benefit data refineries? another point suggesting more that

Lane Riggs

exactly Exactly. That's right.

Craig Shere

was see terminaling We just just do the sheet continue Do question. And year. one-off opportunities you think cash picking Peruvian the a obviously. and convergence soak XXXX the to Roger's VLP acquisition had up that a can also, up rollup plants, M&A ethanol event balance ongoing you robust was balance? that or on

Joe Gorder

market. acquisitions to continue right? we as to acquired can't that call the to strategic it business, at But We'll are last we not time. very-attractively the pressing grow that interest, acquisition foretell some in our coincidental, there to we're from don't our in Craig, But, point our business ethanol and opportunities continue nothing felt looking you, of the So, gap really from buying far I opportunities were a mean, is we a at our that with businesses, is the of coincidence. to I they decision do saw can assets I this it's to to kind facts and year, priced our the was extend one perspective. evaluate satisfied made chain sort what because fill that of fix arise, any tell really supply but we screen on the have practice assets. need radar

took I'm act model I opportunity. -- But, we repeat XXXX. a advantage to of going in so, would not And there the tell you for

Craig Shere

M&A steady we and flex, it's the opportunity saw to going it we're strong relatively dollar seeing be buybacks, ongoing in margins quarter? growth barring if IMO the the for is anything fourth CapEx, seems which and XXXX, like like to So, share billion robust going

Joe Gorder

Yes, sir.

Craig Shere

very Okay, much. good. Thank you

Joe Gorder

bet. You

Operator

Thank you.

Matthew comes Blair with question Our Tudor, next from Pickering, Holt.

open. is line Your

Matthew Blair

going ethanol Homer, or big something turnaround does or say on reflect any And did X.X else on? for cuts you a guidance QX? that so, economic maybe throughput run if

Martin Parrish

we going we Martin turn cut way think even up Yes, cut is where around. to demand just Well, better we bit mandates that a some little plants, grow economics And to we blending expect worldwide so don't that for There's it's had demand in we right or is long-term that Ethanol it view just ethanol have we and all U.S. more back not and and our this But, worldwide, a bit. just the that fund marginally, cheap. this things than now. ethanol little back year, priced. take continue, export it's run stay Parrish. where prices much in to and can is in expect a way

the that's So, plan.

Matthew Blair

of And $X barrel, ago then, spreads upcoming alky in coming could about $XX couple years barrel. Octane like in was was talk we expansion. also at When look I Gulf octane $XX that to around hoping more you a Coast a a

forward? going unit the spread and pricing, would So, on expect -- is are the today's a alky octane what widening economics you

Lane Riggs

Lane. is This

on come quarter. Houston stream second will alky the in our So,

Our that. FID around think, decision, come I XXX will the something like million EBITDA or

auto pressure all X of is crude All valuable. going and get and going sort the then, haven't octane. the still a I'd still to just of the now. is investment a X. that to potentially and there. idea So, we be more that. And octane higher tier puts out finally, reasons go lot this octane; have are that compare two, A, seen in in look you light see couple with One where back There's forward is But, for this and going tier committed

we same essentially, put we octane true good but that Where is Alkylation that decisions, is going it's like to it our project. check, the for have our St. just together, And all So, project. Charles, be versus valuable. still believe a we feel where funding to

Operator

next question US Our Capital comes from Advisors. with Weiland Craig

open. Your line is

Craig Weiland

and on Good fitting Hi. congrats morning, quarter. Yes. the you and for question, thank great my

that St. a James recent of weeks You probably of to been maybe into a is Eastern point, start delivering quarter, in to Coast of Gulf market start up barrels Louisiana. have your quarter And at crude move refining like other also next and located months, bridge about here, that it over this about capacity into introduced in looks years. the couple proposed slew projects some designed have

type Coast can and elaborate of So, the options I'm how if on on Valero's any could think on color could you back appreciate you they procurement will have crude feedstocks. impact what of curious, projects Gulf your you develop I these share.

Gary Simmons

Yes.

to big the biggest sour I advantage for St. Gulf getting Charles access and think, us would Canadian better us thing a obviously in for heavy is the be heavy refinery, a crude there. eastern is

of some sour so, the to crude projects a out heavy the Capline at be Charles more our And cost to able effective are reversal namely big to we're has St. to that certainly a in benefit system. there, looking is potential get

Operator

Thank you.

with Our next Cowen. question from comes Gabelman Jason

Your line is open.

Jason Gabelman

guys. Hey, quarter. the on Congrats

try The marine standpoint, that FCCs, pool? backing Just an marine into into marine specs, blend to meeting you on those there comments the the if from fuel follow-up pool, gas are or just to able production. with about a into technical a maximize A running oil be couple of fuel FCCs, questions. the the blended alky issue inputs to is the

Lane Riggs

This Hey, is Jason. Lane.

fuel these is fees, fit low will fee FCCs the into particularly yes, So, into VGO the percent sulfur half-a-way the marginal which oil market.

Jason Gabelman

with outside there's And great. specs issue spec? the of other meeting an any not the of Okay, sulfur

Lane Riggs

spec not work rigorous. is there's sulfur done some not blends, a lot There -- compatibility. ends being terms that making the really We've spec. there's It is that for of -- sure of up in just

blends you won't do for you confident, not with there that. worked all what the industry of through We've around those people that be creates really our work careful some to be It's of really that. on compatibility. really ultimately, on to say to is will I'm something that to So, to pretty issues. try some got work own of blend that these

So, that's this really issue only have. the could potentially

Jason Gabelman

to continue And near and term, than first the capture figure the pretty be is hard there more if where Do XQ have out prior butane benefited anticipated looks I blending. gasoline in like think support One butane in could quarter. expect prices where the its into upside that some capture on trying you support are. just relative looking first to first better quarter It quarters? from could area against some to fallen that obviously prices rates

Gary Simmons

a not for meaningful earnings overall our real But, Yes. to We see the the quarter. spread. it's contribution

Operator

the This like Homer to you. over I for concludes closing remarks. turn Thank Bhullar session. to call the question-and-answer would back

Homer Bhullar

Thanks, Shannon. contact We appreciate have everyone additional Thank team, IR joining you us. feel any if questions. you. Please to free the

Operator

participation. a conference. wonderful for today's your you Have gentlemen, and day. this concludes Thank Ladies

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