Valero Energy (VLO) 25 Jul 192019 Q2 Earnings call transcript

Company Profile

Participants

Homer Bhullar	VP, IR
Joseph Gorder	Chairman, CEO & President
Martin Parrish	SVP, Alternative Fuels
Gary Simmons	SVP, Supply, International Operations & Systems Optimization
Lane Riggs	EVP & COO
Jason Fraser	EVP & General Counsel
Manav Gupta	Crédit Suisse
Douglas Leggate	Bank of America Merrill Lynch
Prashant Rao	Citigroup
Benny Wong	Morgan Stanley
Sam Margolin	Wolfe Research
Neil Mehta	Goldman Sachs Group
Philip Gresh	JPMorgan Chase & Co.
Roger Read	Wells Fargo Securities
Paul Cheng	Scotia Howard Weil
Patrick Flam	Simmons Energy
Jason Gabelman	Cowen and Company
Matthew Blair	Tudor, Pickering, Holt & Co.

Call transcript

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Operator

Good day, ladies and gentlemen, and welcome to Valero Energy Corporation's Second Quarter 2019 Earnings Conference Call. [Operator Instructions].

As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference, Mr. Homer Bhullar, Vice President of Investor Relations.

begin. may You

Homer Bhullar

Titzman, and COO; XXXX everyone, senior other Joe team. Valero Corporation's President Executive Counsel; Officer; Energy our CFO; General President Good Riggs, and Fraser, Lane Conference welcome of our Call. members management Quarter our Donna Executive Chief Earnings President President are several Executive With Second Valero's Vice Chairman, and and morning, Vice and to our Jason me and Gorder, Vice today Executive

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

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

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

for Joe Now to the opening remarks. I'll over call turn

Joseph Gorder

quarter performance the good limited Benicia cracks during in our good regions to reliably Thanks, the at downtime. refineries. with operating had and morning, quarter the Homer, significantly in quarter boosting in very ran we quarter despite to everyone. the We pleased and margins. second improved major Gasoline that relative second We're Memphis all first Houston, refining turnarounds unplanned having report

crude Venezuelan of supplies sour to for oils to medium resulting Brent crude and grades due production curtailments limited continued Iranian the sanctions oil. OPEC and in discounts crude and those narrower However, remained relative heavy

sweet, optimized Canadian domestic our crude system heavy and with result, American light oils. additional Latin a we As

over In per crude for another with Canadian barrels XXX,XXX fact, quarter this set day. heavy we record oil runs

ethanol income, the positive continues diesel. growing operating our to demand strong a to due for renewable renewable margin segments, the And Turning renewable weak business our results diesel high business to environment. generated generate despite

Texas continue upgrade our Valero's investments. as quarter and organic Houston We commitment on make and budget. gas premium to on now second the We produce of in capability refinery the low-cost Central terminals third alkylation abundant quarter be project, on which on deliver fully through product. grow completed project earnings remains is and to us progress to natural pipelines a This the continue successfully operational to this alkylate in year. growth we allowing project unit olefins to and the to liquids And track scheduled

in a Diesel Port enhance late completed growth St. are unit Charles to steady have Diamond unit Arthur XXXX the in year, organic margin Green to And The of XXXX, expected be be at portfolio. our we respectively. the alkylation of expected are and completed cogeneration XXXX. this to and expansion projects beyond profitability Looking pipeline Coker Pasadena and terminal, Pembroke

annual with projects remains cost capital growth focused market on high Our returns an billion are $X.X unchanged operating strategy capital and CapEx approximately with XXXX expansion allocation at both XXXX targeting improvement. margin with that and for control,

payout net of stockholders provided annual ratio quarter, to million adjusted stockholders, paid out the XX%. returns to to to we respect we the to year-to-date In ratio to of cash operating second activities. cash XX% by XX% continue total With target an bringing payout $XXX

product Looking ahead, demand. for fundamentals we're with supporting year healthy optimistic the of the balance continued,

well-positioned complexity impacts year-over-year, cracks. and to and high advantage crude fuel that refineries, XXXX lower-sulfur fuel With of positive product heavy terminals expect traveled differentials expected for from we're oils we IMO market oil. wider miles transition bunker our the take Vehicle the implementation higher to we increase to believe continues as

to to to value growth Lastly, committed disciplined remain operations. and our delivering and stockholders we long-term environmentally through responsible exceptional

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

Homer Bhullar

Joe. Thanks,

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

Second of or quarter million second net Valero's per XXXX. per to or $X.XX XXXX the $XXX share to income stockholders $X.XX quarter for adjusted attributable was $XXX compared share million

tables release. financial reconciliations adjusted please For to to of this refer actual amounts, that the accompany

from Brent X of quarter significantly line for which crude in of per decrease XXXX $X differentials narrower volumes income the per in mainly XXXX throughput per to to utilization $X.XX oil second barrels oil. and segment quarter of the higher sour quarter for relative were the Refining the XXXX. second day XXXX. refining billion of Throughput the second was day, second than of barrel, second of averaged was heavy was second with quarter Refining barrels quarter medium XXXX of Operating quarter billion the to the was in for quarter The compared cash $X.X operating million crude XX,XXX expenses second capacity the XX% XXXX. attributed XXXX.

The $X increase operating The day the quarter added ethanol of in primarily to million per decrease was three from due corn second prices. income X.X generated in million of production $XX the to higher second in the from quarter XXX,XXX in ethanol compared second XXXX of of November primarily quarter day quarter of XXXX the Ethanol gallons of second XXXX, an due plants acquired production quarter segment per of to the XXXX. million volumes gallons XXXX. XXXX, averaged versus second the

the sales third expansion XXXX. an quarter in increase and due $XX generated were in segment Green per XXX,XXX Renewable second XXXX, averaged income gallons million quarter Diamond second diesel diesel sales per volumes quarter the Diesel $XX in quarter plant the renewable in versus XXX,XXX the to second second compared of quarter of primarily million of the XXXX XXXX. of to XXXX. in of of day increase operating gallons day of income of operating volumes The The the the

quarter expense and amortization was million. was rate For cash With million the billion, the XX%. expense and XX%. tax debt tax in $XXX million was cash balance $X $X.X expense administrative equivalents was were net second expenses interest was respect quarter and XXXX. billion XXXX, Depreciation $XXX and total second at general of $XXX was net billion. our debt-to-capitalization end, to effective and were of of and in million sheet quarter cash $XXX The income ratio $X Valero's

June, million $X.X which was approximately investments Net was for the and sustaining of compliance. made regulatory million billion XXXX, in cash. the excluding available With At billion second investing quarter turnarounds, had activities business, of $XXX to quarter. costs the of for in the provided end by of operating we $XXX capital of we $X.X activities, including liquidity, cash regard catalysts second

Excluding by cash the from operating working during impact change was the provided $X.X billion. quarter, adjusted in capital activities net the

We cash ratio returned stockholders million used total Moving provided shares activities. stockholders in activities. as stock. the million financing the and of adjusted with $XXX net to X.X to Valero XX% the year-to-date $XXX to by payout our common million balance second to of $X quarter. paid purchase This operating to to return billion our dividends was brings

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

$X.X $X.X for approximately and and growth. be business investments. expect billion to approximately We and both catalysts continue XXXX capital the joint investments for to approximately annual XXXX includes The XX% turnarounds, with to XX% billion to expenditures venture sustaining allocating

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

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

respect includes costs is noncash produce per a $X.XX day as depreciation and such in $X.XX such $X.XX expenses $X.XX the to million XXXX. X.X to volumes per With expected we average third segment should gallon, ethanol amortization. quarter. Operating to includes per Our as for diesel in gallon, sales XXXX gallon and depreciation of should renewable which XXX,XXX total costs in amortization. Operating day expenses per the gallons gallon per per segment, be for noncash gallons be expect which

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

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

RINs for year expect expense between and to $XXX the the we million still be $XXX Lastly, million.

That concludes [Operator remarks. our opening Instructions].

Operator

first our question comes And from Instructions]. [Operator Gupta Suisse. Crédit from Manav

Manav Gupta

now. at six right on quarter. a Congrats tight Brent curves look the and months. assumed of we Maya or credit the spread $X on Brent widening But little the $X.XX understand a in about Bloomberg, when good We we X% that next is forward

widening $X mathematically, of the XX% Now translates since $X HSFO Maya Brent makes to it about to formula, pricing Maya. up of

exists $XX, Pemex, could in it Maya the oil get and formula you or rid today and formula following from step fuel change et think and pricing do sulfur Brent the pricing the So, and the just cetera, try high be of easily try formula? as

Joseph Gorder

give Why into Manav, that? let some we Gary a you good that's really question. insight don't

Gary Simmons

question the formula first. Yes. Manav, so on I'll guess I answer the

Our that the coming will indicate discussions weeks. the they with PMI would change in formula

formula. the do change a we expect So, in

heavy However, on view your going. discounts we where to sour hold are do

Western seeing MEH. if the sour on and discounted being Canadian Select you The a if light fuel If look quarter sulfur compare side, you discounts $X Select is at you're to such domestic is MEH. then Canadian quote Select discount discount in in in fourth around market, already. Western is Maya as the the tell you forward Select good in XX% Western look which Western and And the discount, today. trade even at there's even a it today Gulf, at backwardation Canadian least sweet heavy would trading XX% Canadian it at where is market already, where Brent, high $X.XX discount to fourth today, at quarter done to oil the are you the around the alternatives from Canadian

number So that pretty $X to you that's the were looking close at.

Manav Gupta

quick is barrels the with minutes ramping major by by A Canadian to rail that sticking XX year-end. on struck, could government they deal call Canadian to said if A Select. see their Western ago XXX,XXX XXX,XXX about follow-up the

that's switch heavy Maya Gulf or, XXXX, the So volume running? land let's I'm just say, year-end seamlessly grades Coast. Gulf massive early by any the WCS understand were you landing does or a Coast on you in crude to WCS, between that can of if this trying

Gary Simmons

Yes, pretty ramping will into concur it is Port had for discussions of up a would Arthur a rail the And we And had pretty producers. with lot much. and with Maya. and much and that that that replacement we've view take direct refinery, volume be discussions our

Operator

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

Douglas Leggate

of on potential bit Joe, exploit we obviously we renewed light second got complex of take that? well. to let's you marks little let's I'm lot an the the question expected say, flexibility that to NGLs. Permian, what by you period into is think just of XXXX, talked I've this units advantaged could look if system as underappreciated, please. with last you about time in your going then But obviously, WCS. you folks is be you about I'm -- year for and half up, that dislocations follow-up, of could Valero's into My pricing. the sat like down, as helping alky through would the like of, it curious opportunity over things that on from I the your crude. was normally question gravity curious as as ramp opportunity the and a Or up a whether Could look the is a advantage crude what and say, ramp in situation. talk coming

Gary Simmons

again. Gary is this Doug,

In the about used we the activity. maximizing second certainly and available quarter, our what table are the was due capacity, XX% we to light left on really, primarily system. sweet So, was of turnaround into

of move that. to we forward, we As all utilize expect

seeing As which this WTL lighter are We out," the that gravity Rivers. in is Three a WTI. gets grade "coming lighter, some of of started running we

think the purchased at day future X,XXX some to also that, runs I in second of for and a we've ran Memphis. quarter, XX,XXX barrels we

in day a of scheduled September. think in about Memphis to we're WTL run barrels I XX,XXX

spreads, is discount the So, and that we're certainly watching moving and the in direction there.

lot a into it have We flexibility being our system. able of take to

Douglas Leggate

the within Okay. Are system? just of Gary? you Or you the flexing retooling, are pretty much constraints

Gary Simmons

of is much the within pretty system. It constraints the

However, flexibility lot and new Corpus this us we in built a give the at Houston area. more toppers

Douglas Leggate

Joe. go stuff. -- follow-up ahead, Great My

Joseph Gorder

at I Port on position that, our a to part project. when plant saturation going we're think that's -- as our the coker gas Doug, expand Arthur of

sweet. in we'll have increased So, capability also run XXXX, an to light

Douglas Leggate

question. Joe, terms IMO you follow-up Okay. perhaps time Have is This demand? or egregious refiners of coming you pretty turning really is, a any? tanks there. optimism taking news I supply. anything will I'll was impact a compliant seen have to that impacts. out My more IMO of no of eased as yet be on seems you they in lot much Has indicated And a little doubt macro guys of advantage a the last the be There still margins constructive of on where now impact can. that lot able we on on next your pretty you year? expectation are of the fuels leave to into international it disruptive are Or go the for year, distillate

Joseph Gorder

forward impact. really And distillate third of late our been view all markets year. to see been probably guess to reflected the start that quarter this we Doug. I Doug, fourth something mean, the has Thanks, haven't I It's would that along interesting, -- third

starting places, your guys do see think in other but to want I share you to we're it views?

Gary Simmons

you to bidding strength, sulfur is a all approach that's of it's turn trouble not you demand see show up today. just start which market the see agree when not see fairly bunker one fuel buying it's forward in market I are and steep line. that Joe, sulfur time IMO step curve backwardation oil still think tanks, reflected significant having that fuel so the the as And change diesel January the and high estimates I actually spec we a people I today, in seeing changes, with and oil, you the a reasons today are very is No, ships liquid high

Operator

Our comes Prashant next with question Rao Citigroup. from

Prashant Rao

what you that availability. XXX,XXX? How with touch hitting your more. And you this of need Gulf, give widen we as up flex discounts? duration the quarter I into Western to wanted us we're as as bit you barrels -- ability you there. per -- to some sense the strong that XXX,XXX lean is take of that incremental back a to in Select sort looking sort maybe as going you're sort on Or beyond do of go day wanted much hand to you're ramp to thinking? those I Canadian the we idea the rail at in contracting rail discount the in running contract, forward advantage what still could have of and see And expect numbers a get contract just of

Gary Simmons

Yes.

advantaged and assets. run the able a Port heavy lot We have the to to get it because we run that those of at flexibility some just capacity refineries, process can run two Arthur those City our primarily best XX,XXX Corpus Canadian. refinery two We Texas well, We're more to but day could Between the be probably a Charles, of challenged. run at have logistics into it. and XXX,XXX day as St. a to about again, barrels a at logistics are we Christi about getting in today to

whereas shipping were continue as in buying that barrels and those done. rail delivered basis, Western deals to and doing a the them past producers, On get will volume the ourselves, Canada up we're we in side, to deals ramp and work continue on we with we

Prashant Rao

a switching very sort It's question. on helpful. picture back Okay. And bigger just then of

With the in stands project a you X views the of wanted I are Tier back in Houston whole completed, compliance. to finding get and country step system on getting alky terms where take the guys your

Seymour refining that so There macro. in teams. the much getting I we're the looking at we're and think has of been terms

tight questions XQ get is be about to So, going the 'XX. concerns to that get by time a few may how octane we

position making. tight would that is views at progress you you be to you'd market. where in relative of there the like updated terms we're color relatively think a you I speaking, It -- then, of And today how your guess, advantaged feels kind any that? can the in helpful. be Just what stands your But system octane provide

Lane Riggs

Yes. is Lane. This

ahead came So, exactly combined here that to NGLs. going we they're we've of at coming finally cheap get these was always did right online had projects with us matured end and Tier the and strategic as octane that and outlook of X the was the the reason year sort a at time. That valuable to more

we You expensive. were seeing get we're octane and more definitely seeing -- believe more

we're of we if where that -- for compliance, have a ourselves. Tier a terms X end look as In come we're the by still on you have the that, the trying online at at us is But industry proxy looking three that units to to year. of

the ahead So, industry there's more in octane some us. still disruption of

Joseph Gorder

say, though or I implementation been, delayed as... somewhat has would muted people's mean, I

Lane Riggs

credits. using Been

Joseph Gorder

where you point Yes, they you lot of the now it's to continue could a rubber but or to makeup were we're are the spread going meets credits, to the capital, to using we the be expand. to road, the credits. this And and extent going see activity use getting defer

Operator

Wong next Stanley. question Benny with Morgan comes Our from

Benny Wong

there's rate It's Just other Coast. been the ask is And just probably Understand strong. if in capture sense any in on that. really to wanted those North there to about to the is weighing the It for conversely, quarter. get the of the But second strong capture risk factors factors If particularly contribute weak persisting. a any light/heavy Atlantic, that. wanted U.S. couple a has in quarters. differentials Gulf

get wanted and driving Europe should sense higher is we expect level U.S. Just capture a it or going that, to forward? a

Lane Riggs

while is Lane. this And Benny. Benny, I a called I'm ago, for Prashant, sorry, you

that products are year-over-year quality. non-gasoline X% propylene and X% sort the is, terms XX% is of good is naphtha we're -- to Coast propane. about talks to rate, remaining of the also So down About some cheap But what and differentials, XX% XX% how capture some the crude maybe -- products. proxy of and about in other that are of Gulf it's Everybody but for ours, just is of year-over-year. a it it's discounted

our direction the and conclusion what that, will can propane, your and of in optimistic on or discounts capture some help are what propylene pretty sour continued to improve optimistic is it's is at rest seeing And the or they you're is crudes. you medium then of North propylene advantaged terms Line of heavy obviously going that I weak position where the here. as shale. and follow mean, own X are naphtha probably period -- that really XXXX and structurally just NGLs sort least IMO for oil We're to, going Atlantic, the getting cheaper Atlantic going. still to, come on is and the Gary of about alluded Line X our cheaper rate on we're -- time So,

Benny Wong

the within Appreciate XXXX system there other something color portfolio there. really, My there it. Got Is fuel areas that? and that portfolio? just be guys you been you something opportunity of at of Seems has more is capacity one like optimization guys within your into excess where IMO that slack exercise, was that to looked about, take one their preparing follow-up redirecting excess the talking really looking for your from oils is part might coking of Or of curious maybe advantage a of just peers looked this capacity. at? is an logistical ahead

Gary Simmons

Yes.

So, I saying coking oil the that Is fuel it to have question? we where guess, is what potentially open taking you're capacity. length

Benny Wong

coking you're have saying. have exactly what do Essentially, areas are guys where some the you if there Yes. have question capacity oil areas length, where fuel and slack is you you

Gary Simmons

Yes.

system, oil in full. keep our coking much our So, make pretty and much don't we we capacity

to it's coking Port Meraux run the when it Arthur We Arthur some the and produce in take Coker flexibility some oil are we providing expanded. fuel project Port with potentially at

Lane Riggs

from system. resid make -- it what some does is believe don't be so in coker both with more oil you'll year for we of at about of that good get To going and crude that crude. X.X% do ran That's will we he here fuel have the heavy and compete Gary's do of probably more we ultimately blending competes, these feedstock see actually fuel long of plan XXXX. full and pretty what like But competes the point, other to some today to much sour cost oils capacity, going just you're and it into of that the feel units next as that, run see obviously components why result as like we through said, to to and medium a IMO crude X%

Operator

from comes Wolfe Sam next Margolin Our question from Research.

Sam Margolin

naphtha, follow-up around for market. can the besides a the out having of ask Was producing Lane, Coast? at you you of were rate XQ impact of in the throughput naphtha commodity anything Gulf with coming quoted that's because I dispersion light on Houston sort -- about the something reason and excess LPGs that exacerbated naphtha capture an there XQ capture crude sort touched impact turnaround just the swirling to Was you do or increase any rate the with or turnaround something the LPGs? of and something in there that you

Lane Riggs

really. have to reformers would units mean, have run most more had of have we anything, I we turnarounds our back. now, is economic did if were in And reformer. the the addition full. to go naphtha. so Right Not and And alky and crude our more one

had so, have full. signaled would we reformer And our

So, look it see naphtha, we the the -- get light just and was we I'd on naphtha, have go more to sweet have if is -- more directionally, longer, but goes what on we a make we and weren't run position we crude. balance it's and

Gary Simmons

of I the Coast more and U.S. really and crude naphtha factors. diluent. other of think Venezuela function Gulf was diet the a It's then A lot the exactly. of to going

it's weaker. to naphtha off, And shut as so caused that certainly, has get

Sam Margolin

mean Okay. that of isn't in certain and off-spec like question. just Is is And doesn't that weird crude scarce, heavy There's crude and the an everywhere Brent and about signal? this printing idiosyncratic is reports pretty sweet there premiums available, locations. an an is heavy here anything? It's then but case this it's sort IMO sweet wide some pretty up this some pricing. Or IMO at this to bring trades

Lane Riggs

this. Gary and will I tag-team

directly. universe. interesting and IMO I coking to there some in burn have mean, to sour you're value refineries. they sure seeing can those of you fit -- they the there's of crudes I'm I but from think or going either And mean, I see some these belief necessarily, these is are be substitute not XXXX them -- that -- are as effect highest crudes the Brazil. for for that's it's crudes they come lot off, substitution heavy some Angola how a

And certainly so, of things not that's word at the have lot you the gotten don't have But best they've the necessarily if in grade. they them. naphtha is they look a

I of the So, resorting that out quality. it's world just sort mean,

Gary Simmons

Yes.

I a push a of lot as loaded think them people to distillation that's getting some light sweets are they're rate on pushed top crack these as of column what you as see sweet, up spreads long strong. today, medium have the the allow their more is lot end the of and

Operator

next Sachs. question from Mehta Goldman comes Neil with Our

Neil Mehta

just on Blender's diesel. there's big to the about related should context think of segment, how it to this One And around Valero. be? is question renewable in a out to trying some want business And be Tax swings big figure profitability. the do First Credit. we How could you

other how playing standard is California. low-carbon fuel The out in you see the

How just So on that -- should some you some out on swings segment. of the we time? drive see how here? upside over the thoughts think playing any could And profitability then some about it optionality the high-level

Martin Parrish

is Martin. this Neil,

Renewable globe. Energy you've We to expect grow now low-carbon got Europe, to XXXX. fuel the In the Directive out across mandates

about again fuel California out You got standard the off Canada There's the to standard. and adopting in again talk, low-carbon XXXX. on

for they on where bullish actively evaluating expansion make sense. and this we're So, we're opportunities

a for obviously, Tax comes a Credit. doesn't, if us. Tax in, no that the Credit, as this did in we're far second As quarter with big If $X.XX still We Blender's EBITDA good shape. it in that's last Blender's -- upside

renewable really California, meets they renewable diesel. limit to at specs where you diesel. get If are no hydrocarbon already you same with is in XX% diesel, look There blending can the as

partner good -- we processing. great We've for got procurement feedstock and So, that's prospects. about the the the front-end with Darling feel a

plan keep to business. we growing So, the

Joseph Gorder

on Credit? Jason, anything Blender's the Tax

Jason Fraser

about I'll be glad Yes. to that. talk

XXXX, three And the Senate, of get and bill Blender's extend expectation, in going by Senate House it years the the will know, our end to that at and get done the believe Credit or that will expired both extend to House process As that year. place got bill it They've are committees but That's through we all extend a end a and bill you will we're the the two -- how bills attached likely of get looking we're has probably Tax sure at not certainly for it get to, tax-writing done it. the years. exactly which it this will appropriations the it's will takes confident the fall.

Neil Mehta

That's an business. great. interesting It's

about price. enough -- we've been in They one a to terms other the of periphery. since it's up concerned, super The get of their while to for head asked RINs but the back something RINs here. kind have picked us DX Not least at from watch

from waivers uncertainty for market terms degree because should about RINs is around here, of especially refinery here exemptions think in we in small there the thoughts of any just how So XXXX. the

Jason Fraser

June limited a with it landscape. will market. in even at waiver We those well. be And the to developments There challenge to there also taken reforms the hadn't the RVP which those also many using RVP and RIN you is older about of rule, round stations. past, and whether final understand like potential to going are waiver, X-pound EPA probably their in authority requirements reasons waiver capital as we Yes, the EXX XX, to published still on sure. On made the the change has here, EXX market radically the cars, some RFS legal think give on year the Jason. I'll concerns granted are off grant that our This some don't recent update EPA either the of to is front. really

-- the holds about to done to market So waiver whether is is Congress. EPA to waiver see additional do if wait authority question as wait be it up, the an but going be the has there will on that some people to or going or which by the that's -- and definitely additional the whether has

are which really really adding for data the market a And don't much then a make EPA when difference. threshold, goes a company inadequate requirements. reporting RIN over RIN just as lot. a to to certain going We some holding the RIN and disclosure of public they're market functioning It's the the adopted, a think of reforms improve

be bottom don't market. going effect either So, the we dramatic think is on RIN a is to of the those line

lot led to that waivers, And real But EPA in has to been the Regarding and them RFS biofuel of about small any is year. there's pushing cases of which as well show to SREs court you Congress studies on this from the them the SRE have The destruction. as lobby well mentioned, been established lately. statute, gotten granted how is aggressively several press not guidance a biofuel this refiner process them. the multiple administer has despite that part haven't demand as very discussion

to EPA from be XXXX. think hopefully will have and So, is the we're We confident XX for going announcing on their law to their applications soon. continue decisions they pending applications the follow XXXX the about website

Operator

comes JPMorgan. from next Our Gresh question with Phil

Philip Gresh

terminals? things crude, the situation outflow Corpus as see and quick the One here. ones light export is timing we these playing Gulf certain of the of increased continue Texas are you of Christi, given to Permian how inflow to in versus envisioning couple out there out sweet A flows Coast

Gary Simmons

Yes.

made and of Phil, So, really -- progress our that lines here all connected get to there. make their way is we lot been focus the to a have Corpus, to

system. to of we will lines the I work really Québec you're about into coming exports control lot dock well, that of which I where to much as can't asking can to of more oil? receive And also is, on fourth will that And enough or that work more are give the case is on a comment on capacity it. chain then doing that's supply and our more Pembroke and we some guess finished much pretty all kind know have Corpus be at too in. not. what clear So, that whether us we've I there the can quarter the in I insight export don't dock

Philip Gresh

Okay.

Texas around light a the that going crude of of more everyone just be Second about. those been West pipelines, has be would talking coming grade lot to down the question that's

grade WTI how have West versus has running the out, that naphtha capacity slate NGL Lane's what coming about that consider given think comments kind might light? lightening of you about on crude through Just is want system of the run crude just you of your And as more impact crude around and of What something you that wondering Texas margins grade. and to you a of run? the that type think to you

Gary Simmons

Yes.

price. it's a of all Phil, just So, matter

material don't able process We market. to seen have the the plenty barrel. that price the lot and have a its it it, capacity of way Historically, incentive the an export of that such light makes to be to to to goes we Gulf we've economic run

to been its been MEH. that's discount type WTL to at way making $X.XX the of Some Corpus has pricing

to that's incentive some certainly will seen And but on the buy of we've how it so, And if lot run depend it, it. have a its capacity case, we to prices.

Operator

Roger next with comes Read question Wells Our Fargo. from

Roger Read

Coast that's distillate to you somewhat gasoline Gulf the yield your had. to it Lane, yield back, come better But was about I -- maybe me comments light/heavy quarter impact to running guess guess, relative differentials despite, in had a slate. a actually the the year-over-year, lighter interesting and I

slate the with I'm you heavy to in it terms understand just like contrary could you're idea seems a naphtha? maybe how more the the the conventional trying wonder get wisdom, lights, the then give gasoline? And of I also issue kind to of kind with how yield, the lights run of to excess little capture of that's running better an product of just yet because end. if in on in tied kind that more a caught So, happened seems how it lighter the us a you

Lane Riggs

Yes.

we whole I is so would down FCC say what quarter, Houston was off. the did the have production complex of was the our -- from in Houston gasoline FCC chunk -- consequently, Roger, a big So, alky down

-- time. In terms with again, been reformer whole of max naphtha, the signal's we are the

is same be So, more in leads you it ultimately, run the clears as spot, as the exported, I industry to into light increment has it of the us, you sweet, the more to and Far light sweet, more in and it believe East. and

it doesn't the gasoline. so, go And in

right is to now there's trying lowering and be, a do way what's industry out the Now X everybody X part you naphtha, that. there gasoline abundance again, get octane is I'm to just get And Tier to figure of happening pool. this with saturating balance and need Tier will to an naphtha gasoline as back figure and octane as -- the into trying now, the that is acclimated. sure But out getting of that right is

Roger Read

source that. of our is What Okay. best who the Maybe U.S.? as incremental octane where or quick outside a or of on follow-up

Gary Simmons

some alkylate, India I a you seen over. where tell that's Historically, coming but exactly excesses from see barrels some India flow from. question. that's Well, we imports, of and good We've trade coming can't

The and as is its have component, either where with naphtha blend to other with you toluene you make toluene an xylene gasoline. prices, blend thing using to a that incentive is gasoline see today

So that's octane. another source of

Lane Riggs

issue It it gasoline in some read have as really of That's more amount fuels, in allows But yes. is the at gasoline on To around Gary's reformulated the well. as limit. you'll you pool, alkylate toxic you you that, aromatics raise the allows point where important. a get point, the the to -- incrementally alkylate you

Roger Read

We could on of whole kind spend intricacies. probably these the call

Lane Riggs

yes, -- was That exactly.

Roger Read

question, follow-up a weak. As really ethanol,

worried very companies plants beginning We've shutting the of period acquisition some the and closed but ethanol. you're into I making of Obviously, of it end some China? competitors everything. Is you did or an crop it's with just tough their remember -- very matters have refinancing size, don't it if corn and I it the here of been at the year, wondering the if is a year know their events, Can how You to about in those your through could? not the that last down the the 'XX we it turned -- XXXX in was maybe a what light of process. order magnitude tunnel, trade out? of thing? Is seen issues But end

Martin Parrish

Yes. this Martin. Roger, is

history corn back this record, is years. XX which If you goes the at the in latest of look -- the crop really the

CBOT latest crop was got a by May, you've to corn So, mid-June. December the price a and early $X.XX right bushel went bushel now, so in $X.XX the

Now it's $X.XX. down back about to

really it. of at There's matters XXXX what carryout And year. knows big a crop at end is there's is So, weather nobody the And the just lot crop. still this this the how point. that impact of could uncertainty

going it's U.S. margins big for here to the real in to ethanol be So, have this hard crop

obviously saw opens and going see China Absent Now on than They we forward right. -- a to the different a that, mandate, make big have exports story, up, you're is lower away. that if that guidance would helps That's a our you lot. difference right a ran. XX% little

long five then fleet. to these So, A have we're are got going great little one been for crop, going a the trim lot where yields to right? to bit. trim We've had now term, relying a things a have above it. when you're happen, due on In We've below of people years trend more. and

we're So, ethanol. we'll it's still this. fuel It's the it. stay, through get a component. Long great octane bullish Obviously, to with be we'll about of there part term, mix so

Joseph Gorder

things what to Martin would add Two I said.

problem today. it overproduced just fundamental what That's First is for of here. is the the all, industry

developed And where continue up has takes be aggressive So, a as things. and and a while what in we but we'll have been, exports in factor have forward. exporting in it industry, going have very we become been Valero the done? to that's tariffs we markets, ramped Well, aggressive an these ethanol

that. EXX of could other is it in a everybody Frankly, to the we of this will fuel genuine make that broadly the are of away types produce XX facing. progress, on problem would which was be in ethanol mix bash broadly. going But recover. with industry we CAFE, as be industry, more solution could we're but a to continue spoke some be take is on think solution Perhaps the if things synced of is ethanol we agree notion this of the this And board, to problem some and the okay long autos and solve very to up. has blended and with This problem. Jason we've going standard to a this to what this are EXX, require And fuel could a this. The the the I marketers issue. where ethanol will there earlier, The all like will we're going to market higher I thing, Ethanol with Martin. to we're would It to be was octane distrust, get helps amazingly, one this we board, part into it challenged, this, for going and fuel refiners that the seen is It said are because fuel allowing a get RON. that to is have retail nationwide on the just mix. out over whole arguments good time,

Roger Read

pull on Yes, probably a product opposed of to building a part of the as to mandate in. market it problem incentive more

Operator

from next with Our Scotia comes Cheng Paul question Howard Weil.

Joseph Gorder

this Cheng? Paul Is

Paul Cheng

market, go Two you do oil, I resid, don't going a you're the or low you bunker what do oil or not. quick fuel fuel mean, guys guys sulfur that know but trying are be? going you're that? Lane take is are you or Maybe the to know into to brand lot that at And Believe VGO approach Gary. the going fuel is produce sulfur either that to around -- of to how looking for questions. this into mean, when get I to industry high the you the think I going very there? you or

Gary Simmons

Yes.

work So, low low shipping blend. very working sulfur develop our companies. we've currently shipping companies oil fuel burning been oil to I Paul, We hard think, with blends. We fuel several have, sulfur three

been able compliant working be to fuel. to we've hard produce So,

Paul Cheng

that's the Because to you that approach share makes we if it's like lower the have I the more trying and take? it sense case, -- of very, mean, guys very use inefficient what blend diesel yield? to path gasoline high that. like to you it sulfur that Gary, the sulfur VGO. that the is much the with the problem it into But with using fuel major Seems seems can or oil will us ultra-low a

Gary Simmons

Yes. That's Paul. exactly right,

blend to we're able oil tack what than low run barrels those to is oil sulfur compliant sulfur sulfur some these of streams with through we those being out and looking heavy of a low crackers, rather typically fuel some taking So, at taking fuel high stream. that

Lane Riggs

start that we places economics, high with something a with on it we don't two crude moderate doing Pembroke The Lane. up. we're sulfur that's We Québec, and it the really is maybe and then start are this and resid. Paul, that and a really blending sulfur start depends

Paul Cheng

and I take to for -- you for the this is whole, that much as purpose? are out how going guys do see. think Gary they a Lane, you VGO the industry

Lane Riggs

then market. parity to bunker the But VGO oil essentially your be cause straight And sort sulfur that. FCC have its at I about we fuel therefore, -- going an low oil into it's between is back gasoline, this to of that know supportive maintain point talked this of macro of gasoline point some that or economics a have FCC the low view and fuel will will along just market, it's up to we've a connected obviously, earlier. and into idea It don't all which to linkage with sulfur diesel.

all blends. people sorts they'd into how you around that are to through issues. compatibility everybody the of there lot just of this a thought we'll think in much, the can have much working on, terms not. see I disconnected, how of it and things be So, of how they're really -- get It's is But VGO. but There's much

Paul Cheng

that sulfur question. problem. final issue, going mean, net is like a even mean, to the produce guys fuel still resulting diesel resid. we buyer indeed, you can Do and I the have the seems mean, you fix -- A oil don't a I it, I if of are be high you --

use high zero, do excess to for you. idea we really with all down sulfur the Any would the what crashed -- I can that that price resid is be if So, alternative it great resid? mean,

Lane Riggs

market -- be the It's much primarily generation that other know how depth for that's of and the we don’t power absorbed. can or

how where much and they produces can oil. some substitution burning can they much high Instead I do. how and think crude, sulfur it burn these it depends OPEC fuel all on they were of of

this about in that once production, that light in still of we their feel -- about. we're you're long. that's Our recovering OPEC not why good it's Particularly our problem belief is starts assets talking

Paul Cheng

I coker easy doing the it industry as a the use feed and a opportunity able some, of do a but back industry don't lot that? for have doing to how the sulfur be high mean, already into you as we Lane, the -- feed? guys resid whole,

Lane Riggs

I doing is think long a curve been resids. on We've a everybody it run on learning time. We a that. lot of

the doesn't issue everybody a run. they will configuration way have operation will And refinery. on will there be we distressed and good marketplace, your got depends you've in good how much you the there try out lot The to there is -- I'm pretty of It can you challenges. defaulter have other a maintain gets the it And get don't of it mixing. into sure to and run be -- understanding. as accelerate figure light it So, find a heavier, that's is stuff, to get the so

Joseph Gorder

to good was it hear true -- were Paul, form. and you to see back, you

Operator

from Energy. comes Simmons next with Flam Our Patrick question

Patrick Flam

$X.X that far those to me spending I spending is really drop or I'm math or And to levels I walk target, into spending so you moving year. year. the if billion capital pieces If reflection about a off you XXXX be? my your the through of $X.X might me activity this half it to project hoping second trends going spent pieces just right, looks of there. doing turnaround implies the like far the was could billion lower this is ask about so which out of you've wanted lower whatever

Lane Riggs

turnaround period, the It's productive months don't those the of both. the X holidays. last X for we nearly much activity and turnaround then of heavy of rest those. And you're pretty just This two, had as or year. have is because both a the all year of We've not as Lane. It's

of a really that. combination it's So,

Joseph Gorder

this. ourselves will find in Yes. this within things mean, It's not that and unusual move little to a I bit situation.

again, we're we're but nominal is going of what as kind Sometimes $X.X spend. have to, mean, you billion we're do the sometimes slightly number just to so. I you And kind below, it expectation of our above,

Lane Riggs

planned of I in the into to mean, XXXX, point, was that had at that leak bring had to that we tube the Benicia, and quarter this turnaround the we Well, year. when we that first had

a had or spend number turnaround -- one $XX million of we on the So, $XX bring million from to to next. year

And happen. so, that like some things can

Patrick Flam

really on but you guys East for the directly you PES could potential is question -- Okay. Coast. from longer-term up of aren't this, by you follow-up helpful. impacted the market frame the hoping Great. My closure was That's know I expectations I essentially have any refinery impact

Gary Simmons

Yes.

it's Pembroke. day lot able tighten primarily the premium strategy That a a supply So that in obviously premium a our to has of barrels refinery. barrel gasoline, gasoline, of produced to market and XX,XXX day XXX,XXX the refinery from going been region market there,

a be refinery working And so, in a have to that place and octane, what we're to so take logistics to able short. capability produce has that on lot of good we And of that's today. assets Pembroke primarily is advantage

Operator

Our next Cowen. question comes from Gabelman with Jason

Jason Gabelman

up Energy follow to wanted on actually Philadelphia refinery I the closure.

a bit. going come So that's to be I'm wondering obviously, increase gasoline supply like the the And you margins if strengthened off market. think sustained fire lot the gasoline attribute and through in seems of have what back there's you and XQ. to a It

fall it's going follow-up. off of support through back those So, an And kind shortage months the a there have imports that to wonder I of could hit gasoline matter Coast, is rest if of the are margins I maybe a somewhat East margins XQ? or octane of

Gary Simmons

Yes.

Gary. is this So,

down. the stats a the is, pointed demand to revised to. last After had actually weeks, upward off. fall ship a of view exports for couple net will our that if New a you'll be And gallon gasoline closure, our open you Harbor. you looks York announced think view that you the reason Europe has back to I is ARB Northwest lot But see is $X.XX and the like demand DOE and at look from that been fire of that it

as And saw came U.S. into there. Coast, so, after seeing back. PADD the Gulf of refinery And imports well. import U.S. in even we're utilization the we strength, X octane imports the some incentivized its with then Gulf Coast components the

imports is the couple reversing, does what's of And from especially well. the Arizona kind are to and and it X. caused clear putting is couple We've last as but that already refiners being PADD you're that due seen exports, down, the California so, And the a that look net signs weeks. that export build seeing from that's you're to like it is cargos gone help to mainly market together, off the like we've imports flow seeing barrels good, seeing cooling demand into looks in market some,

So, I do think trend it's you'll a see reverse.

Jason Gabelman

right the a now? Do much octane you can kind maxed on have view is it if world how out produce of

Gary Simmons

Yes.

very think combination the things trying excessing Tier refiners the light Lane into octane diet I pool be and and a about globally. to caused naphtha then gasoline octane with globally, has fit destroying and tight naphtha running the some X to talked very back of

Jason Gabelman

of former, have the addition refineries new could for And Valero on one. Mexico U.S. if it. Is working a building its assuming they Got successful it I ask is a just follow-up. are can to for revamp product bit new thinking close implications existing product in to But Peru its it of exports. kind reach market the potential to Mexican similar to U.S. into a the to for markets, what of logistical combat to the up continuing strategy to push in did exports? kind its

Gary Simmons

Yes.

continue So, to as and That well. are day North marine about that We're -- have up. our in ramp in XX,XXX barrels sales terminal ourself we currently building will a sell exporting into direct Mexico. strategy a the we Veracruz about

just move do lot. were in. and it's refining to their crude logistics get revamping much to refineries, a Mexico it For of but out, move that able to involves system, the meant lot not on to crude It's also now a logistics

be much system. in before of time refining to So, revamping going their they it's a terms can long do coming

Joseph Gorder

Gary going the than higher with much in then at had originally be forecasted. is plant if completely. obviously, agree the I they Yes. you And new look have they capital mind, that cost to

that you way primary a and sense. returns is most certainly, probably want pride, do something driver its a Coast. the makes Gulf the the shorts from and as something for country supply to If to national economic Mexico are you But like U.S. investment, efficient matter then aren't to the of

Operator

Blair And Pickering, Holt. question Matthew have Tudor, a with we from

Matthew Blair

your I could alkylation in after talk Joe, you Valero you you about projects overall how will Houston alkylate? exposure Could investment change short think projects long? net net your are St. that the in with And the has just you in these today? become net would Charles. new say and industry, at capacity this biggest Are done,

Joseph Gorder

or Lane? you Gary,

Gary Simmons

Yes.

So, all where I don't economics trades. of know matter that it's a -- of alkylate

can And pool we allows allows where lot it sell CBOB. alkylate Latin to to in a flexibility the the some American of us RBOB The have grades we So, make make alkylate also additional that us more direct. versus markets. more are in export required

So, a it of price path to matter do choose will flexibility those have go, be all what we but of things. to any of we

Matthew Blair

your guidance about then the last for below And did top year. throughput think is good. what end I Sounds you 'XX of X% QX

are talk you think low quarter. the Could QX? what volumes this fairly I turnaround up coming schedule about the Why that for constraints lightens just are? the in

Lane Riggs

maintenance don't really. We any We just of Lane. really the really This -- we Yes. don't give sort ranges. is of guidance give give sort

are We of give are. bottom we So did as the -- that kind guidance. is don't just long they that, we line normally as what they

Joseph Gorder

you Yes, goes the know what and volume forecast. Matthew, into

is. it what is it So,

Matthew Blair

I mean, like sort run any does reflect cuts? economic of this

Lane Riggs

No.

Operator

Bhullar closing And I'd call at like time. the Thank to Homer no for Mr. questions you. this back turn any to remarks. further showing I'm

Homer Bhullar

joining Thanks, out to if Catherine. to us everyone the feel any reach Thank team. Investor Obviously, free everyone. today. questions, you, you Relations appreciate have We further

Operator

concludes Ladies and program. in gentlemen, conference. today's participating today's thank for you This

all disconnect. great day. Everyone, may a have You

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