VLO - Earnings call transcript Q1 2020 | Valero Energy Corporation

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Valero Energy Corporation's First Quarter 2020 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to your speaker, Mr. Homer Bhullar, Vice President of Investor Relations. Please go ahead, sir.

Homer Bhullar

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

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

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

good Thanks, and morning, Homer, everyone.

particularly year jet brought and to driven activity with economic and The Well, we've restrictions on stay-at-home collapse pandemic. impact all COVID-XX businesses our demand very to for orders had the ensuing significant a due the families, to products, down has by gasoline communities, start our fuel. challenging and travel worldwide, of

most challenges, we able helping and Across hand produced ethanol need supporting employees country, blessed their this pandemic. the in to emergency that for we're kindness. and community sanitizer people in see responders in frontlines the to innovation hospitals, Despite mind, organizations, strangers to and neighbors partners and continue that to response our COVID-XX operations be demonstrating With help extraordinary efforts the these human organizations genuine on of another our other to make for and one our distribution proud possible. and I'm

of downturn thorough, chain has to team economic decisive, to our in rates and in this our does the Operationally, the that a match financial operational with response position at not demand, entered we've refineries strength infeasible. throughput swift and supply product our Valero our been current environment. physically supply more closely adjusted to ensure become and

processed plants of idled reduced number temporarily and plants, for demand amount also of corn a the the remaining ethanol to our We ethanol. feedstock at address decreased the

thought started uncertainty the capitalized. solid Financially, additional $XXX financial be we strengthen debt we liquidity. rates of raised in facility, cash our the billion available well it'd attractive to remain balance. with million us, the entered to revolving We prudent undrawn, we a for and further. $X.X position Due new We and a which markets remains year to into credit

suspended mid-March. temporarily also in buybacks We

due in by were projects, Cogen In and first projects approximately pushes million capital that Coker approximately $XXX the their Port which including tax the year, mechanical out in decided to Pembroke addition, the defer along million to in quarter, slowing $XXX we X-months. completion Arthur payments with for X

products capacity our Pasadena of said, progress our We our logistics we increases portfolio, for flexibility for strategic enhances several on the to expands terminal project, export. make blending, and biofuels which being That projects. continue completed

should both And completed be completed the our potential Unit in And COVID-XX to Green to the Diamond advanced be progress make the Port St. to remains project, plant of review Green on-track continues progress XXXX. facility. on continuing on of Arthur, make joint related to and a at Alkylation Diamond Texas Pipeline The we're Diesel Charles engineering which expansion in the renewable also Diamond XXXX, subject delays. venture diesel new Diesel

allocation in the we've with are framework we've consistent had taken place actions for the So, capital several years.

capital, We dividend. credit should prioritize including to capital And sustaining of continue primarily discretionary and our cash uses, buybacks. growth rating expect capital to you expenditures organic to with non-discretionary and our uses continue investment flow incremental grade discretionary other and compete

Our framework it well to and adhere the as has to served future. in continue we'll

of our the health, and operate top the among our priorities. closing, In safety, remain where and we employees communities well-being

a without financial of in a flexibility this remains Our lay-offs. allowed while today's our prudent operational navigate global near us to challenging shutdown management and of environment. allow uncertainty And macro through weather us has operations tremendous the to amount like future,

a footprint with on return with advantaged demonstrated a our positions country operational Our excellence as to and coupled stockholders, world to feedstocks, normal a wide the and focus well process of flexibility the life. commitment range more assets our way to of a relentless

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

Homer Bhullar

Thanks Joe.

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

Valero $XXX per adjusted $XXX the first for share $X.XX or attributable per million of quarter million or stockholders XXXX share, $X.XX to quarter income First XXXX. net was compared to

valuation adjusted of billion. First quarter after-tax XXXX or cost lower market, an approximately exclude or inventory of adjustment results LCM, $X

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

XXXX of operating XXXX. loss in The first to $X.X the compared quarter the million for operating income quarter of of an $XXX Refining generated the first segment of billion

segment, excludes adjusted the adjustment XXXX quarter income operating valuation for $XXX million. LCM which was refining inventory the First

XXXX. rapid crude barrels barrel with capacity line million results quarter low barrel Refining was throughput prices. X.X quarter in XX% which and Refining in the natural impacted averaged Throughput to first volumes expenses to day, $X.XX was First first quarter related lower of per cash the in primarily the gas of quarter per first utilization than lower XXXX. of $X.XX per XXXX, were operating due XXXX of were product the by prices. the margins pandemic COVID-XX decline

XXXX, for the the $XXX was XXXX. quarter blender's retroactive million renewable adjusted $XX XXXX. the of compared quarter quarter adjusting renewable of million was first for first income for million segment $XXX Operating the After in diesel the income credit, to operating diesel in tax first of

increase operating primarily XXX,XXX XXXX. volumes. of of was higher per in gallons increase averaged day gallons first versus diesel sales XXXX, The day an per to in first quarter of XX,XXX due volumes sales the income quarter the Renewable

XXXX. Ethanol operating loss The quarter quarter to of first $X the operating XXXX, first an income million million generated segment compared in the of $XXX of of in

The first $XX million. quarter loss, valuation the excludes inventory operating was which adjusted LCM XXXX of adjustment

resulting to Ethanol prices first day The decrease from averaged the million margins first from lower and gallons volumes per the ethanol XXXX of was XXXX. X.X primarily corn due prices. quarter in lower quarter production of higher

million. general tax Depreciation the administrative $XXX $XXX For amortization first net was quarter million the were the quarter and and of first million income expense was in benefit expense interest and expenses was tax million XXXX, and $XXX $XXX enactment of federal to by in years that XX%, was which tax of carried the expected XXXX. impacted back net rate effective U.S. tax December to loss operating The an was prior reform XXXX U.S. can be

used in in activities cash first of quarter XXXX. the Net million $XX operating was

net partner's $XXX net million. its well of change in of impact as Green cash operating provided the adjusted in Diesel's share by provided joint working changes $X.X as billion, capital excluding XX% the by activities, from activities capital, unfavorable was cash our Diamond venture working Excluding operating

of investments the in was investing approximately million was of regulatory including first growing $XXX XXXX, the of business, $XXX to capital the turnarounds, for for we total activities, regard business. which Approximately $XXX of cost catalysts With quarter million made for and million sustaining compliance. the

Diamond of Diesel's share Green capital XX% partner's $XXX our approximately Excluding investments, capital investments were million. Valero's

X.X shares million XX% stock. $XXX first to balance total the Moving purchase The Valero quarter common million we adjusted as was our to to pay-out with financing the paid stockholders ratio XXXX. returned of activities. operating was $XXX provided net by of activities, cash in of dividends used million

of approximately share position Board March week, commitment of of our And a authorization financial $X.XX return further Directors repurchase sound share, last investors. XX, of demonstrating to we cash our our As dividend and remaining. to had quarterly billion approved per $X.X

cash $XXX we billion remains were $XX.X available facility, quarter-end, a cash which billion. XX%. was billion of and ratio finance were In With equivalents respect balance debt and total The at and facility, to XXX-day, cash of lease credit sheet our revolving equivalents and Including net had obligations we $X credit capacity. debt-to-capitalization cash over April, this borrowing million undrawn. closed $X.X on

and expect now we $XXX joint million expenditures turnarounds, guidance, XXXX includes to investments. $X.X venture billion, guidance. capital for to investments billion approximately be catalysts, reduction a annual prior The $X.X Turning for from of reflecting our

to XXX,XXX barrels barrels following barrels Atlantic U.S. XXX,XXX second quarter operations, Coast within per fall X.XXX refining at and per For at day, day. to million mid-continent the at XXX,XXX ranges. per U.S. at modeling XXX,XXX we to West Coast day. XXX,XXX U.S. per throughput XXX,XXX volumes day. X.XXX our Gulf million North to barrels expect to

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

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

to XXXX depreciation gallon, non-cash expect sales $X.XX Diesel per With to Renewable as should volumes amortization. day the respect segment, be for expenses be we costs which Operating gallon $X.XX per per in includes XXXX. in and XXX,XXX gallons such

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

and expenses year we excluding $XXX the to expect depreciation G&A expect we be million, still XXXX, million. the RIN's $XXX corporate to for $XXX be between approximately million and expense For

impact tax assumptions the rate. outcomes, as confidence and estimate to and a its low the any of provisions degree small in in as in on COVID-XX the a wide of tax Act, CARES effective of beneficial our business, range pandemic due of well changes Lastly, resulting yield impact the

on we're it. any So, not providing at this guidance point,

That concludes our remarks. opening

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

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

Operator

ahead. first Instructions] with go [Operator Our Doug ISI. will Terreson Evercore Please come question from

Doug Terreson

get storage fundamental your Basin following might color these whether to and global more some you - areas insights less just so, On this global than capacity? we're I have market that think in to when levels, So, output you on in the on there? Atlantic competitive others. probably demand plants get wanted declines response were nearing So, point, product if reducing And we refined that seeing with it. supplies if we're

because the scenario? shut whether face questions I and they you'd and if also are potential affect cons restart, outcomes. And new the fuel of challenges refiners when completely the pros frame of in capacity restart. see the current are kind restarts fundamentals to those down, So, market often us might if and they specs then decisions on want second, for

Gary Simmons

this is Okay. Doug, Gary.

make weeks to few industry were Your Basin, we issue cut and Atlantic staring industry on looks have and like question thought good region small inventory. and done really supply [Technical of been gasoline to North with on is a showed we API less draw at job market not that the stage, to encouraging. an and reaction Pad this But rates encouraged it to with But diesel. that a and with as X at filling hard which on ago gasoline, had difficulty] fundamentals concerned we're the balance up were products. about pretty that by up yesterday going a demand the has filling

Doug Terreson

Okay, good.

Lane Riggs

the second question. Lane. is this I'll answer Doug

to everybody of the up to a to you're it's XX% risk start go down XX% whenever down when somewhere one into back refiners full-blown risk going much try push try of of - a risk you not the unit. near you given puts there's So, up start to at utilization and most But sure, very have to you refinery for minimum, exactly normally which turnaround. shutting their because right, is I'm of

a did that Now had take Charles we a a system And producing shut we saw said, But it FCC. to with and way our FCC. that some finished was we that off turnaround. capacity not actually big take down risk. because as gasoline It's being St. our just for

for about for a just it's have - just other or be problem a that us, investment ULSD lot out lower depends that, I of fuel reason for haven't if terms seen as a - unit It In think problem GDU I than a some on in on, terms quality, there big of a there's startup. I that us. to sulfur. But of

Operator

question ahead. will from go Please Barclays. Theresa with next Chen Our come

Theresa Chen

you responding contraction just to real First side? question, of talk economic just seems Gasoline the side Can lowering activity. just utilizations improved, depth recently. but there some and duration if the margin on shock. has the happening on an be industry demand diesel seen margins reflecting have Not the to about diesel on sure the volatility it's and what's

Gary Simmons

is Yes, Theresa, Gary. this

did the side. that a supply talked about, demand we on industry think the and job good I balancing as of So, gasoline

most pretty expectation cutting in the were supply bring with the part, would we close with that, For that to being crude demand. along refinery with runs balance diesel balances

demand However, the refinery disruption demand, diesel, blending yield it just build. record diesel started seen lower production really so to even utilization, refineries into from inventory be outpacing was And jet caused severe, we've jet the causing and the everyone at despite the diesel levels.

I which think people fundamentals moving diesel yields ourselves we in least be see adjustments operations seeing, the to in forward. to market down some to at are the some diesel week, starting making to this that the including their the supportive bring are industry should indications

Theresa Chen

force the Continental reasoning majeure be producer an majeure And could in acceleration likely do declaring it evolving you in these or your as terms you up which declared on a entity as you or the on gasoline an as just see about think recent hold in Flint can be refining of counterparty would Do Hills, a And of court? declare neighbor Pemex how force can developments against? the majeure Corpus majeure imports, this? that or you declarations, whether force see both talk force

Joseph Gorder

Yes.

we're market do okay trying asking on are to expect of Or force Theresa, asking perspective continue the majeure? of kind - a So, you legal you're this? do kind - we to

Theresa Chen

The more. latter

Joseph Gorder

Okay.

Gary, So, want to? you

Gary Simmons

Yes.

a of to cancellation. side And can tell contracts to on have been most to crude most I business, them of our that. certainly the expect So, XX-day hold trying we our our we've tell you - the suppliers of

we so the haven't far in a of so, much supply in force you're reading And really press. of result crude seen about as disruption majeure the a

Operator

with Our Suisse. next Please question from go Manav will ahead. come Credit Gupta

Manav Gupta

you Texas on What start Joe, at is, cases. trying mentioned to Florida is demand. I'm of the the lifting call of has number gasoline weaker understand order Friday. the minimum

there and looks orders come their are will plan. them lifted, this So, then be end two states about states by at XX are big of partial behind have those reopen least a prospective demand like that And their with reopen week.

understand as states a right start yes, one these as opening, gasoline So, online? these but states is gasoline another I'm what to do demand trying start start demand rebound seeing now, after do like coming bad do the we is, when of in

Joseph Gorder

question. It's a good

and are seeing I'm you and anecdotal of on we're he the answer we've But in committees traffic San weeks. over me the then Let on couple have But give Proper, mean give you Lane. in serving system, an I in XX% Gary can issues some that increase we last working here. what Antonio because seen - some

get So, more. people out starting to are

to mobile get demand up you their and as is opening be going again to there restaurants and go to And and I said, pent-up a we're think probably for folks out to of again. to get shop houses and

much also but not in So, change Gary, here system, the only the we've within broadly, we're seen more going demands? think some see to I more through and South. activity, do particularly

Gary Simmons

Yes, have. we

very point weeks a Kind got what about in normal. sharp really the in were to our we we call system of March. two in saw XX% would follow demand where we seeing demand, So, a of up last

the But weeks pick back we're stabilize to For level. to it now starting in up of already. first around April, seemed see demand couple that

average seven-day the in our it's normal. you about if at look systems, So, of XX% rack

Coast fairly X% are where the of some of significant And regions, We're seeing early demand. increase of these Mid-Continent, pickup really you mentioned, stay-at-home So, in where in orders already the as lifted. about a increase April. sharp is as the a seeing were kind you're we Gulf

Manav Gupta

up. guys. quick Thanks A follow

deliver side margin to the renewable was diesel so the did realized the on your on to actually but I'm up indicated $X.XX, managed was down almost side? and quarter-over-quarter. understand benchmark diesel beat own beat how trying Your you successfully a renewable benchmark

Martin Parrish

Martin. this is Manav,

the to On a using have benchmark, you oil price. we're realize soybean

other we're impacts differ what to versus that. year. are doing from contractually last this Our costs actual going There's year feedstock too,

it's and of a strength going the answer fast not just and of on you're Green of diesel give seeing there. renewable I'm - to Diamond kind you - that, So, strength hard the we but

Operator

Our go Roger Please with will ahead. Read Wells be from next question Fargo.

Roger Read

here, market? Well, in seeing are I'd first of some we has of, but maybe terms where what I day, been be that availability capture guidance and really, terms tons can side of for like uncertain such different had you negative a a crude in stuff through? How to flowing through in the prices what lights crude to guess Maybe question market ask and of condition? that's go how heavies the flowing on

Gary Simmons

markets our of of week-to-week, changing lot kind the volatility quarter. crude a in we've been moving and throughout from the signals Roger, purchase certainly

think sweet ramped the economics we sours quite March of really signaling been some along haven't medium sour light sours. with medium We we for became the I into up as time maximum and we've much. medium sour and seen economic heavy now, got and

However, where that, we've we maximizing our to sweets the in kind we're kind of sours would light were back before, back where heavy place returned I say of system. and

in sour with with wide you're light market region, especially sweet X through certainly, in providing big seeing some feedstock. regions, we're of Quebec's Line buying, on a real balancing benefit, a sweets of dislocations purchases the the we're lot those some then and that And us light heavy different Mid-Continent

some fuel that So, South of crudes kind of some we're the sour blend and back stocks sourcing into step America. high with Canada along heavy sulfur from

Roger Read

and you're this trouble to a going having go not any I'm limb Yes, at say point? on out crudes finding

Gary Simmons

in all. at area that no No, trouble

Roger Read

not get That's to laugh. going right. Joe All to

- on question Second

Joseph Gorder

You did.

Roger Read

sort a have real this question But and ethanol issue going of a is side the regulatory couple here. volumes to any hitting blending on of we're Second year. parks

normally getting maybe then, think stand you there's front relief there? do where And grade, stuff this were that about, other about sort you any grade was point, into don't side? curious summer other regulatory the but given the winter I exclusions or we in So, you the of market on, it's on regulatory headaches where the think if we some to or should of on any headwinds think at do stands whether May

Joseph Gorder

those? want you to speak Jason, Okay. to

Jason Fraser

Yes. Yes, definitely talk about a bit RFS. little I can

diesel in are the the And out our helping more the rents with of harm not pretty really cost our the with RFS stick didn't high. does definitely compliance drop demand a drop little of it's and course, price products. gasoline industry, to and still large Of things. and They

governors a EPA, authority, to EPA economic to those sent waivers severe with definitely volumes. recently the exercise believe five and the So, for the to harm basis to grant letter lower and the has those waiver XXXX.We and requesting RVOs the agree reduce authority governors the the

can't as As think of now. regulatory headwinds, right far other I any

Joseph Gorder

Nor can I.

guys other The can't.

Roger. good just So, to say morning Tom,

Operator

Our Phil from next JPMorgan. Please with question ahead. come Gresh will go

Phil Gresh

Hi.

guide is utilization of first So is the kind we'll to and you about of operating expectation that would XX% quarter have a looks normal see start and mentioned that say draws? intend Or utilization had to question, your the low midpoint guidance that utilization it's like that for over you with quarter? the demand XXs. you Would and that kind you if would in of the better, ramp more gets you're inventory say demand below today stable

Lane Riggs

Lane. Phil, this is

where that diesel. you if careful XXs to of sure we demand about make is. We're not to into our with So, the which feedstock gasoline we are plans throughput and think goes it, match basis, think low trying all

that to to us the assets into maybe going outrun that now or and demand will crude that demand. towards but have structure let buying recovery to drive it, anything our we're run necessarily right habits And a of meet the is to like pint - available our assumption flight that. end beyond be be Now, not some

Phil Gresh

it? do the the progression Okay. modeling the the broadly, about, you two about about over next, based the think And diesel if on to been side do on for how and how inventory the the it, you've way macro industry you one you just think think quarters, gasoline call

Joseph Gorder

can took a can and it at take I guess that at I Well, Gary, then have I Gary to tune earlier. shot say whatever here. shot another

done a where has that rate with first industry our job with the appropriate mentioned, respect reductions to And was you including And gasoline. were-- is, and diesel. primary us. good the when industry we And Gary started, really responded think have, just are I think we I like today dropping that concern. in

unit. now that'll right if I oil, how So, signals replace there diesel VGO essentially the to play and out which gas some conversion into purchases are there drop think will out these

So, you they crude going And disruption. stare demand. then to have think to should some need to meet much they how diesel really everybody's see

to Obviously, supply. comes demand versus of And does is so, it this there how ultimately a back lot crude crude.

far on then or reach plays have out accordingly, how or Very chain. committed, you that up to So, in your very can don't supply accordingly ramp out. long depending you cut

Phil Gresh

move my Okay, just your growth up just the sounds related It color see was cutting great. Thanks. back as on much out? this CapEx. spending year, on to CapEx And flex projects, you XXXX? do but any How look more capital then sort you in into you're of follow of you is that as most like it

Joseph Gorder

we guidance with needed, about be something $XXX Yes, the for gave year. it'd expect, that we if would this we million the talked and commensurate

Operator

will ahead. question America. Doug of next with Leggate Please come from go Bank Our

Doug Leggate

had virtual like our since we It long dinner. a time seems

well. So, doing all I you are guys hope

Joseph Gorder

Boy, sure has, it Doug. hasn't it? Thanks,

Doug Leggate

So, two quick questions.

know all, the unwind ask a trajectory don't wanted of any I piece. the through - know about working mechanics working but year? bit it's Donna I expect potential how a there, of capital and to if to capital, the of I First the is would moving you

to you of in what And would a - balance And liquidity more but it you would highest balance balance did financial, no question, run which after and probably robust sheet move forward is medium-term how see things the my is change you're I'll it Thank just I'm there. question, you the sheet this buybacks, there's the really And look know to trying is over would on had I'm I things of it your when balance Obviously, tend sheet. that guess at that with just you headed how understand issues, curious while. move net level XX% normalize. I where treatment or if I the and to debt-to-cap. back? second a leave you've a related That's dividends, as relates nature? sheet, guess behavior quite going how you. also to

Donna Titzman

All start right. working I'll with the Well, capital.

you're that seen, how economy draw happen. leveled see reverse as correct, And Now, would as really backup, That we've how recover. working prices bit. see now, dependent start they quickly recover these hopefully, the tell on then, capital expect you will off to quickly with is to waking all a we itself. we I can't prices that

And late. obviously, the of has bit debt up to yes, gone question; answer a here cap balance the sheet

Our than as when bit longer-term the $X.X quicker XXs that that idea in become back short-term normal, a intentions normalize in with gets we would that issuance. We much billion. that maturities to a raised would balance be, and not to repayable also everything XXs, sheet did and the

be pre would get key today. of And kind absolutely of as the as where mentioned, we you again, liquidity, quickly intent were our this, So, to is all we can. to back as

the So, and are we definitely strong where today. a liquidity we in comfortable with now, we're right very are but preservation level cash very mode at have

Doug Leggate

big net there? you. Donna, in drop but anticipate interested so terms I behind you that in is use capital? on clarification on moves you're that of us the obviously QX, big for had a or of the in you've But kind the do prices a in I hurts after What do a anticipate more I was assume, move crude really of can some think mechanics. any ask in oil obviously you shock I understand capital worst prices, had working - position. a, just - you've payables the you do working additional

Donna Titzman

and of Well, through of looking into some think so a at mid-March you started point off But we're should in lot improvement can forward. April continued the this now from to are leveling that and you mentioned, April. carried expect probably I things timeframe, I as have - this hopefully that expect

So, consumed. we same of kind shouldn't of see level being cash that

Operator

Neil Our next Sachs. question Mehta from will Goldman go come ahead. Please with

Neil Mehta

morning, on structural conditions. two Hi and call, you XXXX perspective your I in demand team, lot a jet. on talked want this follow-up for questions question sort of are and Joe all well. of doing this about of products: of want I team, good demand, to the hope demand gasoline that just to on particularly get we've

thoughts change us the figure around a in of impact gasoline, demand? behavior you and willingness seen from And are a cyclical? view just is this the that home, consumer more changes does travel, think of work long-term has more on create jet, do out over from the on So, to the that social I impact gas you all an whether there to trying or we've some month, that last here the as of

Gary Simmons

Yes, Neil, this is Gary.

So, I think account. we are taking into those things

would side, more as we a the recovery demand this level, be gradual expect demand the continue work to to from in fairly people to XX% saw sharp So, where decline we home. on

using hard have when driving social because is transit. working offsetting you're just mass It's distancing forward. We going you're mass going people see probably more people but on things. Certainly, the from some then to home, less, transit and

see it demand where was recovery fairly back we overall, pre-COVID. gasoline in and So, a close gradual demand to getting

to the jet again happen, that start or going on to On are is I jet comfortable believe late to it people here flying start requires year longer the side, people again. vaccine where is flying probably side think something we with or where medical us back get recovery, type the lower feel a demand and a and probably

Neil Mehta

That's dividend. just great. Thank is follow-up The the on you.

your and guys and a that are the interim get thinking I think core about want to the here dividend? priority you perspective message how to. that you're something hear you're dividend trying to just But is deliver committed on that the is

Joseph Gorder

situation improvements obviously, term. this. have take the Donna at I'll are demand, with the with in okay, already with for the term to consider then and you now, also right as we're a in normal Neil. shot think continue be dealing short guys activities. first the seeing And Yes, a pandemic, business our the I'll team But, have a fairly mentioned, return people crack as more to is let nature. we to long know, going we running And which we're it

share how got place So, forward, we we it And years years. consider we okay? the categories. for manage acquisitions, how repurchases. the be growth for cash business, for discretionary framework, And at within what let's dividends that for the three have managing are and framework now there's that we've the use and adhered this and allocation CapEx to look then sustaining in we projects dollars and then we're within competition those those said several non-discretionary. We've turnarounds, that capital of uses the to going And

So, what actions think capital certainly buybacks market. we've our improvements the considering and spending not that any and further and there's reduced We've taken discretionary mind, until share acquisitions today, we're in with done in about okay? we've our that the

out are framework. things they three those context capital that So, way the within should allocation playing of the

Friday. in you But have look very and have. the have Board that last at our additional dividend of has they and capable declared been they the I business if same And actions team proactive Directors confidence a that taken, we this

are we six have years margins are margins and So, they and implemented last weeks. like over about that are use talked when for the really when things here that strong the things we've weak, that eight we've the been or both

there. to to take a need my long Donna, in the relative you'd action so, view, dividend, any we way anything before we add? to go And to got like

Donna Titzman

times No, the have a this. conservative maintained being able I like along, sheet of purpose balance all we for mean, to survive just

Operator

Our from ahead. Please question with go next Citigroup. Prashant Rao comes

Prashant Rao

I sheet on My that. wanted to and first debt. specifically touch balance is question on the of sort on back

low recently environment and the in took your with of the good strength financial rate position that issued guys billion $X.X debt. advantage interest of You

how debt, depending take longer goes that upon to wondering, structure, would Thanks. expense? any the as appreciated. for just the here there color perhaps versus of a interest So, you be are retire further rates, tenor potentially debt about well? sort overall Donna, of into tenor made this appetite comment your so refi plays I'm there or other the interest opportunities recovery parts current maybe low of economically, lower ahead these advantage shorter

Donna Titzman

Sure.

the in a there issue is that we with this agreements. provisions on basis. in the out of this with environment is problem all - not current look we all make-whole refinancing something regular typically time, of just retiring, have but The So, our debt at

investor low paying the impact anyway. current of prices we're the effectively, doing what So is the

So, that works to perspective, from deal. good an rarely a be out economic

say continue we But that to always as looking for said, being happen a market continue are That larger big way. and for I wouldn't - in would not smaller not moments but trade others, things where efficiently times those look we're may ideas, many opportunities. again, as in that odd those opportunities we'll but the

Prashant Rao

about we we of may who some a screen those. follow-up capture is what the able We the of pre-differential So, did to Thank legalization That's advantages modeling lot on sense us be right as market. and in of those dislocations and as but pre aid preserved get ability some forward disparities model be that might here? those - wanted sort ahead seen thinking you. differential of physical Okay. in low how some about some to get sense - refiners or quarters physical now? how we operating of how and rates for that to we on be experts the I are see And questions means into My working the financial of parts the months and of that to that and what look disconnects aren't between a think should get a clear. further given there, There's some a lot from perspective? question. those We've the a guess of cautious that disparity ability to and market, of

Gary Simmons

some Gary. ways average Sure, on our In of couple price. the kind some a a our contracts - supply of crude side side, of the on are this on monthly based is contracts crude

as So obviously, happened our we can't did, it the negative the have ultimately does certainly going figure to of that the for the I dislocation say its and crude way month, saw delivered also, that the end into And average contract expiry. at the when we anticipated crude you you the we will like potential but it weakness monthly got costs. then make

those barrels, side little to discounted the done that. into us of So period did opportunity on of some and the and to a time we buy out short give go go we've that probably

those system, not, into in to we'll see we're And then run benefit our had and absorb where to we that your barrels in you'll those If point, places barrels. if putting there's come. room to storage months

Operator

next will ahead. from come question Our Paul Scotiabank. Chen with go Please

Paul Chen

they want talk want think export reasonably know well bit Gary, they infected safe wish they've and concerned, be that everyone to wish I'm cases seems first can the the I some about think holding to America just I probably and you crack. but in family actually of market? and have didn't been a that Joe yet. probably healthy. quite first a having the lot Because Latin I up because like and start the to - your team quarter,

So, three what trend? maybe you weeks, two are any you last help Particularly, in you have understanding seen us or can seeing? the

Gary Simmons

Paul, this is Gary.

accounting don't export from have XX% done But are type our quarter first typical down So, number. about more the what volumes we course. really the we our final April volumes, or April yet, did volumes of in

typically really you're lower the seen than it seeing countries far in what not a what we've But seeing May, support. April. Latin forward, selling we're kind American in in you're So, of demand with

in On exports. the side, see distillate did a falloff you diesel

because of that low. Some U.S. the just inventories were been very has

into well ship surprised of exports the how XX% been we've abroad. the saw U.S. been to selling wholesale barrels keep Mexico, And so, normal, side, XX%. better we markets the has we were on gasoline than like have market them those in off we're following distillate stronger at volumes and Where to the held domestic was up. But around barrels more

of moved quarter. what in So, yesterday, in we the XX% were moving first we Mexico,

So, holding. the the export in-country seeing that we we're our wholesale are selling But off. volumes, are barrels fall markets

Paul Chen

about Thank market? you. or Can talked And to the the [indiscernible] inland the the storage is in not about going three Atlantic you in reach the you Gary, talk Basin. the gas,

Gary Simmons

Yes.

lot that was area again, fill refiners couple And concern and we there had may draws. now one of And we've inventory of is the the the seen that recovery in Mid-Continent, the look like we a kind actually weeks, in the the on. adjusted adjusted demand, balance the best a of So, seeing Mid-Continent of other gasoline and you in up of could we're all that demand and with out regions. areas they've see

Paul Chen

you any of we've talk a there sudden the improvement seen California? reason Because say, Can couple particular But about driving weeks. that? in the over last, margin is

Gary Simmons

Yes.

So, the I would that really say more side. is production from driven

production demand. industry units bringing and refining of with to so We've job the done actually strength and the some a inventories that's getting offline good think the Pad seen has in market. balance on I draw X, gasoline led

Operator

Please Wong come Our next go from Benny question Morgan Stanley. with will ahead.

Benny Wong

the challenges first hope everybody defer lot on is maintenance. on My of of facilities is just seen We've healthy. the maintenance safe question and line I a COVID. given work, planned really the

work right guys a kind bit bit to of expect reduced there's that looking out. of of activity you during Or period do and little When now? a to runs for little to enough the then? Just by back more you maintenance think do of further normal environment, be a shutdowns flexibility would pent-up we're needs this had

Lane Riggs

fortunately we year, planned half basis. a at behavior, position. you for obviously We Benny, had the turnaround our sort proxy the were And this the I'll give that. is second good - of So of in just low Lane.

planned So, lot turn we didn't have a arounds. of

maintenance, at look we sort very do when we just did and making discretionary maintain lot next to at carefully. push of plants And I'm like sure a that. and we're do some so, at we when are framework our maintenance looked turnaround, in look of we going all our so sure our our But into we year, that we people of our -

At people to turnaround. some do have point, obviously

that And just of deferring some we'll you turnaround, up turnaround. point are at have some at who that, people take point to see. to have lot catch So, does been doing and a a

was that too. there a I'll question And earlier answer

Somebody of shut may up, long there's them run - a be its starting which the some risk end somewhere force turnaround - early. unit to a down the and cycle, it will near take to there force

Benny Wong

Lane. diesel. it. on question helpful. That's the renewable Thanks, super My Got second is

a had just with and some So, are economic out, taking this the any plans shutdown, of the maybe on curious, those side, and we've even just that further on delayed? these LCFS being feedstock risk cause little the at adopting might impact to events jurisdictions looking that demand

Martin Parrish

Martin. Okay, this is

we're think perspective, to long-term running book. got the committed if business. DGD a and right, full capacity our as growing hasn't strategy put We're the we've great the you and at I outlook in first back step of in quarter changed,

slightly, the tax prices entirely gallons escalated carbon play. offset that, per and rent blenders COVID-XX, dollar but With has gallon the in dropped credit and

to understand XXX a have you running million availability, feedstock gallons the On now. we're year

up to for and We we believe go we Xx feedstock amount that have can plans the secure to that. still

unit. not of - about So, significant. this but is there's kind keeping in not feed a We're disruptions, it's front the concerned of

I far all the it to this don't rearview I I but it's significant. and down I'd think temporary as that bump be certainly, As don't to it the slow materially. the think anything in for mirror, road, in LCFS, as And what does going is think characterize rather going it's

Joseph Gorder

think what don't-- don't to back regulations. I Jason, know I going LCFS you Yes. type anybody's off but don't I of think,

Jason Fraser

I think Yes, don't so.

a lot see laws social a distancing. enacting may the little and because of bills they've just bit recesses actually them with in taken You of slow

So, the down they've the legislature months. slowed of really couple lot in states, a last

session. get So, starting into we're talk see back to about them and coming back

coming I were think or that But but little are talking We you changes that, their bit long-term views. I delay and don't it see think can Arizona just in of yesterday. the California a it back. about trend

Operator

Markets. from next come ahead. Our with RBC will go Capital Please question Brad Heffern

Brad Heffern

capture. question Another on

for and have either things it how to in something of decrements capture. constraints, with so as thinking about or you we those sort the like far I being these relates they're capture can and think running maybe much refineries and sound crude the unusual wondering, these along discussed shut production I'm positive maybe that load are have or discounts been some be just to around been utilization lines? of intermediates there need down, well, of system is FCC as to optimize the

Lane Riggs

hey, - is this Brad, So Lane.

or hydrocracker whether might they're units conversion create gains, FCC. volume something respect The So, I it would with to to just anything, think. say, be

have to And isn't say negative margin hydrocrackers the outside help FCC your have, that. a don't your you demand, the extent operating - we're that, if think that you'll of I gain how meet to volume to so with else cutting there directly and there's would I there anything we're are could capture. impact in we - to know

Brad Heffern

Martin. Got Thanks. one Okay. then And for it. maybe

than than on Just the this of it here, the Just before you're not reason on XX%. Is given guys even lower seeing guidance for ethanol more quarter, down gave Thanks. million screen the OpEx? bit business, we're there that? $X.X a margins little running a you that negative that

Martin Parrish

down know, six you our of plants running. and as eight Well, sure. got are we've Okay,

disruption at made right, year. So, lower today. would significant demand home ethanol than the information, running demand implied - tell is actually This really of - demand across less April that the in you XX% if is look last EIA We cuts hit industry. we're have than it been cut XX%

export again year-round right fuel we'll we'll and global think is renewable So, demand the a we're EXX standards in pool. And incremental as growth. sales. going result of the efficiency and be to will see and in get drive we Ultimately, this ethanol fuel spot. recover will gasoline Domestically, mandates going right

Operator

Our go ahead. from Sam Wolfe will Please with come Margolin Research. next question

Sam Margolin

allocation production I've mean, it's got might That where of do that around an environment you there because that re-enter years, paying we're that you're that capital is you something that doesn't else to think quarter. be to to? do oriented? the helpful. going Anything sort at today your crude would decisions? business was for complexity and continue. declines U.S. obvious in in three I to it's production attention Do you your that the still light think sweet look really very your Or that's like going U.S. to be in environment - how probably theme less four affects the mentioned the Gary throughput doesn't outlook was quarter, question. a levels first up return in up and that's crude

Lane Riggs

Hey, this for sour. we that about is is over, there's think to. That's that work but I the on There's that the more element to Sam, other Lane. to in on in allocation, our extent we're the feedstock caps investing small something always continue things positioning yourself feed capital terms run side has about heavy flexibility, would to refining say really a right? feedstock,

two the run to units built domestic. crude We

think production we destock, going you losses though I there's some this. even have in think obviously to

to a have to domestic a is while there for going recovery. destock crude You're as

not we've big making additional to that. think crude we're run done So, investments domestic because we

have pointed But in our We don't do that we this at on we think of of lot big different projects something - are to So, trying to take don't it. sort more that. or have of projects we we've really collection. the take done advantage to future even have try projects, feedstock don't a advantage

Sam Margolin

Thanks. feedstock. And just follow-up then on a

demand. there's don't might at draw across least and But involved? where there's kind line mentioned imagine way of balance components Certainly, maybe You would throughput or trading cross of regular I do - of sort pretty sulfur business with decisions? some wide. that the high still be discount oil utilization want your run of the fuel into you incentive look what you How ahead Brent sort that basis, board a attractive. do is that you between to to on to percentage some something the

Lane Riggs

That's good a really question.

planning - and would to an to trying values open. our we bit open is it's refineries this - all place It's feedstocks it's relative a you're So, I what it. your little say of are If of interesting capacity, when into right? essentially do be doing

it's - pretty are we So basic.

feedstock to ahead demand try demand doing might matching do our will our a so. to that you into there structure run even not to be of to are be best trying careful optimize and incentivize though very try to collection to We

as are heavy, it to sort seen, very So, to that. And a we gasoline like line. Gary particular looks start of pick that we that's loaded get was weak, to of up a heavy. as sort were started of and being But domestic - mentioned saw we unfolded attention this we've then we we lot and medium and doing sour on crude really went crudes, gasoline out, paying thing disadvantage. in up which Domestic and

running our of of of us back, think, sort traditional sort we're it. seeing just to be going You're work to it's I less posture,

Operator

will come go from Please ahead. question next with Simmons Our Todd Energy. Ryan

Ryan Todd

capital? into think any me. you are the your terms think overall little a talked this one there may any level from about capital, ball, Valero things I you you think it's potential calls point, are thinking high to I of business portfolio, way practices, down impact if changes coming run to structural line? impact that crystal look you know demand. you out longer-term the speculate operational I - just you strategic the But there maybe the the are your you to about the one long-term see Joe. within preferences impact and bit business of structural regional that at likely about this if hard line on But down in that know you're - as allocate you

Joseph Gorder

right? you No, Yes. - we're I said always But can't about thinking it, run I earlier, this think.

a run set the You can't on of short-term business based circumstances.

we've industry demand a think has in now to and that growth so, me it we're don't to - match long-term basically sitting Board It's all at be story, supply really okay? on forward. strategy kind consider time to set our reassessing to business room our meet review year. every the refining the a anybody what the done, with the I it's itself and it would our and going know of okay, approach we business, I But And here you look long-term with if where

as way look maximize we that within And so, run margin business, it, the business. we the can the we to the capture at

logistics more just focused value for adhere how of and process? lower and to going capital forward. And we're so, structure going and we've years, view is several that plants. that the That's then projects now our cost get we it it's allow which out coming things think that our we do plants optimization the And little stream a going of adhered view I projects out to to on to the is us every into of the

But a other on which diesel implemented the So, greater we've renewable's, capital, now. now it's fuels than with I for right say and the business. going just early direction focus don't that envision there's to than other business, the anything, we've of little ethanol around renewable's, major already the that done those greener any renewable fundamental that, forward, any a changes, right me with change

Operator

Cowen. will Jason question Gabelman next Please from go Our with come ahead.

Jason Gabelman

for guidance Thanks you wanted to ask the questions. that I regional about taking the provided.

mentioned utilization rates Coast, and in going regional at been U.S. that lower that also, guidance kind of North Atlantic at has the the XQ. Mid-Con then end is demand getting highest the assets - West highest those to utilization You of the looks stronger, running range. be like are

can of in results by discuss of you and that the that So, dispersion rates? takes region puts run some just Thanks.

Lane Riggs

take at it. I'll stab Jason, a

was in you refinery Our and Mid-Continent getting Gary when when end a better, shutting setting the you balance, out Mid-Continent, the operation, if about view, a it down. have refinery become up when about of think it's get talking refinery might you you - can

on to very cautious that be landlocked, are with plants, reason So, up. plenty believe whatever it feedstock if get assumption our go needed we we essentially position the have sticking where taken of we oil is to, we the there's on demand to

where policies the are concerns really it's impacted we So, about, feasibility and are operations pre-COVID where all expectations world's landlocked our around versus of sort demand. demand these of is around

that's but is chain bottomed our for we - in a our committed really it get Gary It's if think we we we that something little to event a have chain. and that the to supply all run not quite that talked system recovering have quickly seems creates out, happen see way supply that's where now the has on and of manage And it's us where a it respond be plan it And - and for. we're bit better - the every that we I sure hope we that over the have does. doesn't to and to ourselves way Mid-Continent sort the - across have. we really problem make So, we narrative just can so, that that are shortening

match is very you that have get that right. being trying with the West just Mid-Continent to Coast, careful understanding with the that region, an the We're - demand not to

- get wrong, into you problems. some those you having get things fix to do if to don't uneconomic get very it If you -

big balance. of very different Gulf Coast, different of to we're can and of then into of But The a parts pipelines, a it's It ultimately servicing go system. sort country the even its cautious. satisfy lot there lot a export being

Jason Gabelman

Great.

Lane Riggs

- those America really in Our we're have work some refineries is doing the the Atlantic North quarter. mean, I second of we - both - in

Jason Gabelman

like just being utilized demand quickly to the Got historically is it. a a And Clearly, on that's follow-up to bottoms, capacity looks but of outlook. improve not have from reacted starting longer-term global now there's Thanks. out margin there and a changes pretty demand. it right in lot refiners refining

wondering fully there that gains recovers? could what even come your that if is So, more recovers, global is refining doesn't the refining if limit system they're it over fully risk slacking demand I'm demand year, the margins just until outlook in the a Thanks. next back,

Gary Simmons

you we've And as our I maybe has speculate get being see come is to demand - up to that some the fell certainly set going as to closer picks is hopeful that we say took off to point and March industry no risk. saw a for us demand recovers. you it demand, respond refineries production is that there's I in of case big how way in in and at operations encouraged maybe back a you industry But sharply modify the that what reverse there to the operations rates, the But for Gary. run balance by would draws. again, couple we're their to with really Yes, discipline weeks of been to shown. this would very demand lower

Jason Gabelman

Got it. Thanks for time. the

Operator

you. Thank

Tudor, Holt. with from ahead. question Please next will Our Pickering, Blair come go Matthew

Matthew Blair

are I well? $XX million like total $XX be other you've guidance take savings guidance, or it rates boilers OpEx $XXX energy versus million your that as there able will lower looks Is your the to throughput running your by If levels. cut down OpEx coming midpoint at projected on simply where against been about QX refining million areas costs

Lane Riggs

Yes, this is Lane again.

our our a a And you refinery, it's structure Henry It's and bigger So, between maybe heaters. variable been catalysts, much expensive, have an us and costs pricing thing cost, cost variable really somewhere to includes past fire gas for fixed chemicals, where now would component. which boiler gas variable $X.XX to natural because a our if think natural and FCC years Hub have costs, for and in about costs. environment, more think interesting the in down and in was about XX%. XX% Whereas you

So, down yes, have natural gas our maintenance reduced to to contractor we've looking - natural look FCC also very operating that. cost as we've really if some and catalyst, gas. careful at is headcount it's we we variable purchase also see at cut part all also carefully - bring not the that It's way we've our of you of - a line, the But we cut our - our be down. sort Again, with discretionary trying very costs.

Matthew Blair

this to for additional some barrels your U.S. could are There's then, that market storage, like for out maybe even ability capture as Act looking also tankers. your talk refiners both procure about Jones to renting barrels? reports And been well you good. in contango Sounds as offshore

that? walkthrough just you can So, all

Lane Riggs

Yes, the is cushing, such paid you do you the floating structure market storage barrels certainly, tankage that's market that whether tankage if put can in in to or that.

can about call our in to when the you bit and get you into see we and when if into for necessarily you benefit It's go purchased, prices pretty is market a I big of Mid-Continent and market except go would a barrels detail of setup the tend into we built you that see a a structure you contango purchases, from that everyday discussion structure the ask terms In lot to and a want detail discussion structures we're in that. can complex backwardation. we to Homer versus more market don't

Operator

in like Ladies would any you back gentlemen, question-and-answer further thank management for for you. participating today's' remarks. over to now Thank and session. turn the I call to

Homer Bhullar

us joining safe appreciate and healthy. today everyone stays Cherry. Thanks, everyone We and hope

any don't team. Thank IR up follow you. always, questions, the If out reach you to have to hesitate as

Operator

your this today's for Ladies and call. conference you participation. concludes Thank gentlemen,

may disconnect. You now

Valero Energy (VLO) 29 Apr 202020 Q1 Earnings call transcript