VLO - Earnings call transcript Q3 2020 | Valero Energy Corporation

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Operator

Greetings and welcome to Valero Energy Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Homer Bhullar, Vice President of Investor Relations. may you sir, you begin. Thank

Homer Bhullar

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

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

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

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

Joseph Gorder

Homer Thanks everyone. and good morning

to has schools. to this the the product compared improved margins which in-line of activities restrictions has of quarter, across and on quarter and created finished increased DOE in-person limited jet some to demand businesses, the third there movement global have demand, which refinery as and The on restrictions second crude refining narrower pressured for gasoline, a the the crude year. system. continue were our These This is less reopening quarter, individual oil by to across that easing in another demand Despite positive incremental in last turn, experienced produce challenging period discounts lower imposed in economies. the Relative challenging be pandemic with in number restrictions resulting demand was from globe, X% and oil incentive to previous led developments and diesel with XX%, of respectively, by increase statistics environment, show XX% we products.

over Our XX% light moving of production. total wholesale products remain volumes our steady,

the significantly XXX,XXX Our in distillate gasoline to in third We and barrels were the Latin quarter. XXX,XXX per and the exported higher day in than also per we America is which exports quarter, Europe barrels second day exported robust quarter. third the

have in logistics also several years. We volumes proactively Mexico, network saw steady our a where into for we the been wholesale increase last our expanding

fact, Mexico. the fuel is In importers into largest, Valero one private now of

product from and third production we quarter easing plant of capacity. to With refinery in of well XX% from second quarter to utilization XX% higher and as restrictions XX% increased ethanol XX% increased the incremental the our demand, in the our

record with renewable performance, margin for $X.XX and sales quarter of gallon solid low-carbon remains a a realizing business per resilient, setting diesel Our volumes. another of

In capitalized. cash $X quarter ended we almost addition, and over the billion liquidity. total remain We with well available of billion $XX of

environment current our levels, that as inventories continue very and keep we're to on $X.X to margins down low-margin if attractive projects of come raised economies at improve expect honor to commitment for high we to rates reopen able debt shareholders. normal the track currently another anticipated. ensure and return to While to than persist product longer Even opportunistically our billion we to

fourth in expansion track Cogen also to is Unit, drive to expected alkylate a The feedstocks long-term remains the Port gated be the designed are Turning that Diamond Pipeline be product, Arthur into St. quarter. to on premium in capital the of projects investments, Alkylation growth. in evaluating Charles completed low-value in and to we The to expected continue a announced that execute projects are is on phase expected which to convert be carbon XXXX to Coker earnings completed project the We're and of low our development XXXX. other process. growth Pembroke project completed number are

review million Now, increase on to per project year plant we is our designed in strengthen Arthur, XXX million a completed gallons advantage Diesel our St. year to advanced renewable per million production at potential XXXX. business. competitive renewable engineering at for gallons continue new diesel year is expected XXX Diesel diesel Port Green The Texas Green the progress our with diesel be to by to which to still long-term capacity gallons investments continues in make refinery. Diamond Diamond Charles, also XXX per renewable expansion

range. than trending season. look turnarounds conversions higher and improve, anticipated range. refinery five been year of oil closures ahead, gasoline range, improvement it's of And inventory we distillate advantage further less see coupled to inventories expect normal in As U.S. refineries, Diesel balance demand harvest as is Oil winter margins, product the demand five-year recent recently approach we in already is in although should with downwards to heating middle the or supply. by the five-year continue should weeks. the and also inventory supported announced

excellence growth, in of the remain stockholder steadfast lot returns. strategy, of in volatility investing commitment uncertainty to operations, lower a our with honoring is pursuing market, and our in there we in Although execution the earnings

economy as position the cost pandemic being lowest the our while us maintain low-margin execution, induce to unmatched liquidity, producer well global of environment and this manage ample recovers. and Our position strength,

There principles prioritizes unchanged. investments dividend. which grade investment guiding and honoring the absolutely strategy underpinning our our strategy in ratings, remain no allocation change sustaining the is our Lastly, capital

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

Homer Bhullar

Joe. Thanks

we Report standards. Standards quarter website I'm to posted SASB the Before for I or financial a framework Sustainability refining and industry marketing aligns that with our third provide Accounting recently our summary, pleased inform Board on you that results SASB

and the in Board targets are investments our through attributable competitive The our platform of quarter for by in projects. per blending of liquid reductions our investments economic of absolute through million be And, and This see we advantage $XXX to with stockholders the income to incurred emissions by XXXX through compared to Valero credits efficiencies, global net achieved and low performance, long-term expand report, approved we share strategy our renewable turning offset or our loss quarter reduce XX% million you'll our quarterly gas as will in As XXXX, targeting production fuels carbon emissions to a with and we to global projects. for diesel by $X.XX consistent fuels. refining leverage continue for offsets ethanol net third $X.XX now is renewable greenhouse to $XXX or per third share of XXXX.

to for was quarter Valero XXXX. compared $XXX The XXXX million the per to per net of of income $X.XX share quarter loss $X.XX adjusted or third third or attributable share $XXX adjusted stockholders net million

results, an adjustment adjusted liquidation. or $XXX from of Third an million loss after-tax million the approximately of lower $XXX quarter XXXX for exclude cost LCM, inventory and after-tax an primarily LIFO benefit of valuation market, or expected

the quarter third to of of tables income For accompany operating adjusted a full $XXX of reported The the of of in operating that segment release. reconciliation the million the loss amounts, financial third please $X.X billion refer in compared an quarter refining XXXX XXXX. actual to to

$XXX Excluding and loss was operating third quarter adjustment expected XXXX for other operating the adjusted expenses, LCM inventory liquidation refining valuation adjustment, LIFO segment million. the the

quarter $XX quarter million million was third million effect than the Throughput planned of day XXXX million lower third narrow the differentials, quarter cash XXXX, day, quarter demand the per the a renewable of diesel XXXX. in quarter per was the quarter for that third of prices, quarter million XXXX. rates. occurred Third of Refining the volumes an quarter ethanol maintenance of in income the averaged the product the the of the operating due barrels of XXXX, third diesel primarily the to barrel lower utilization due segment impacted and product to gallons third capacity increase third third million were the during XX% of in the segment results Blender's as of $X.XX a XXXX demand. of expenses operating was for which adjusted quarter for pandemic. of in was quarter XXXX, effect to by oil X.X of in lower retroactive due sales XXXX of throughput XXXX, third $XX result were throughput of to operating was of After lower day $XX XXXX. per per gallons adjusting lower diesel COVID-XX the per compared $XXX income crude XXXX. $XXX averaged Tax $X.XX Credit, the XXXX. of the quarter XXX,XXX than XXX,XXX Operating versus to higher in third quarter volumes for the Refining renewable Renewable Operating barrel income third compared third loss

adjusted third was quarter million gallons quarter million. XXX,XXX Ethanol of The the per XXXX, operating third in XXXX volumes $XX segment for was ethanol which income production averaged the day X.X from gallons lower increase of per XXXX prices. resulting of third margins than corn income higher day the the to quarter operating primarily lower XXXX. in quarter third was The due from

net and carried the Depreciation tax federal was in U.S. back in quarter operating provided was $XXX $XXX XXXX. $XXX loss, XXXX, impacted operating quarter rate third million when $XXX and federal primarily tax was the XXXX, activities will million interest the by million For the was was The were tax by statutory expense to income quarter benefit of expense XX%. G&A million. XXXX. and the which third of rate expenses of that amortization be expected U.S. third net Net cash was was $XXX tax effective XX%, an million

million in capital we activities Diesel's impact $XXX regard provided for as million in our of of changes to capital $XXX was cash XX% the XXXX, million working including adjusted costs quarter activities, joint was With of million, turnarounds, as favorable operating was and and share growing million. the excluding third Diamond business, operating partner's $XXX of total in sustaining regulatory from its venture the which capital, working investing Green net for $XXX used change by compliance investments made the activities, Excluding cash by well net business. catalysts for the of $XXX

to of capital investments other Excluding attributable Diesel Valero entities, $XXX those to variable million. attributable capital share our investments interest partners, related Diamond and XX% were to Green

lease the excluding XX%. of billion $X.X debt end net cash liquidity total of billion. was billion equivalents and of of available sheet quarter cash in third $XXX million in activities. ratio provided our XXXX operating balance to Moving a respect total resulting activities, through we dividend, by adjusted to financing debt year-to-date net finance to cash and end, stockholders of obligations $X were quarter and had of At our The we and cash XXX% our equivalents With at to $XX.X cash the capitalization September, payout for returned ratio, cash.

to we capital XXXX, Turning Valero billion attributable to for capital growth. sustaining to to business XX% approximately about $X guidance, investments allocated of expect XX% in and the is our investments

investments XXXX XXXX and We of growth well, allocated expect our annual $X diesel CapEx billion is XXXX as to business. capital be our approximately our renewable for expanding approximately overall to for XX% and

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

sales non-cash renewable cash diesel be includes be as per approximately in planned in barrel. per XXX,XXX costs, per quarter expenses gallons to day XXXX, depreciation to per We maintenance segment, expect volumes reflects which $X.XX expenses in $X.XX in gallon, the which October. Operating expect respect operating for such With the $X.XX amortization. we should refining and to gallon fourth XXXX be

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

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

we And expense expect be $XXX approximately G&A $XX expenses be million $XXX which the between XXXX, excluding for to million, than is depreciation our lower prior we million expect $XXX to guidance. RINs million. year the corporate and For

as Act, any not Lastly, and rate to on call, our on remarks. impact as due our COVID-XX discussed providing well tax pandemic of for business, earnings CARES beneficial concludes impact the the on our opening in its the guidance our That tax as we're effective XXXX. last provisions

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

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

Operator

Our Instructions] Phil comes Please Gresh the proceed question first your [Operator with from JPMorgan. with line question. of

Phil Gresh

for start-off is the 'XXs how question low-end management? by in quarters, bigger recognizing a had cost you've and roughly. Valero here of Just curve. around the asking Obviously thinks Valero the picture few capacity past of utilization The XQ to about wanted at guidance results low

whether I'm from So curious managing about think a a permanent it's just perspective. or how from capacity, temporary philosophically perspective you

the is with managing, what to secondary is Thank Just are, are thoughts diesel gasoline situation think say more you. point Or decision the it given just more be challenging you'd have would about? helpful. units, just any than

Lane Riggs

All right.

it's by we crudes at where we've morning do and a This looks utilization run making nature very our challenging been running lower we a time near-term, we we and be answering and molecule want to Valero the Phil. sure is good the out on on start have it Certainly the the that So, with a Lane. where is to I'll trying them. that. optimize system - way have - selective

very we've gasoline got seen to ability move bit, lower of when quite we've a You that yield. do utilization just your that seen our to be refinery lot a can flex careful, our you yields

down distillate than different is roughly little XX%, a up when you're XX% yields So full. and which

to - So means about from through I've in Longer-term, gross see it calls, cash think, by there operations, to of, it's and of by here like Valero of of a flow something competitiveness the we mean looks not that here. at sort sort you or or near-term, big changed - you a margin has obviously a driven spoken trying change that is in advantage what I lots is is changes company are regulatory just refinery us it's whether in asset, in sort an - and and this drives trade optimize company I deciding constantly really your which flow with or terms when company products closure. a obviously earlier combined largely would things fundamentally crude the spend of consider what or it's its say, CapEx. Those companies another run I

the see when Coast so where criteria, it's that East that certainly, do you - like And and companies think on West the you've - U.S. those and see that in you about we've Coast, decisions. you And seen felt the always situation, in - - to OpEx. they're you all of bringing crude that's and of tough their a they're structural on lot And if because Europe, have kind Europe their have oil export. you like know, a advantage don't products a

sort of on answer And so my that's that.

Phil Gresh

thought led third Coast prepared The the the a that second I'm one-time of? was factors have a to as hurricanes Mid-Con. the there ordinarily quarter versus I be other question what sequential might in are challenging capture crude just say tighter just maybe particularly you themselves. and quarter. multiple curious, the you results the more in thinking rate on factor Gulf any would one Coast perhaps, would performance that declines, as Joe, Obviously, remarks, about in differentials Gulf around the But drove talked

Joseph Gorder

a Phil. crack question, Gary, can on. then, this take Good will and at Lane follow

Lane Riggs

Yes.

correct. you're So

really, come provider up Our Arthur [technical refinery, was had to Port really difficulty] are we by hit got hard close utility really us. the back impeded and

refinery recovering, So sort difficult a it’s ability providing to back they had job bring the regional, provider the slowed of utility did that time ultimately our power, and they but great a up.

where volume had So variance refinery. would how levels some the we we volume, those - for characterize

Gary Simmons

and third those ability there disadvantaged quarter ourselves the impacted define a has opportunities, Yes, discounted space feed-stocks. our you just lot really weren't Gulf operations. to we system our of U.S. well add, certainly Gulf these the in know in - And Coast only I'll thing as Coast provide the really optimize on a

Phil Gresh

Great, Okay. you. thank

Operator

comes line Our question. from of Credit next your with Please question Manav the Gupta Suisse. with proceed

Manav Gupta

diesel Joe, last indicated margin quarter this in you renewable And the had was remarks, in was prepared the about your that $X.XX. for number quarter the $X.XX.

at And indicating provide very I indicator helpful. That the week, a when is increase there almost So a which quarter-over-quarter. look diesel margin improvement. $X.XX $X.XX renewable every was was you

to if $X.XX little diesel indicator segment? the translated sort us that $X.XX us to for in you over actual of business renewable margin as So in could - capture how a out help actually

Joseph Gorder

can Good morning one. that crack a Manav. Listen I'll let on Mark

Mark Schmeltekopf

the it will a you margin says the as in soybean oil the margin, feedstock, proxy So indicator as use obviously oil gross he but our know, feedstocks for and we're soybean we is paying price feedstocks. price for not waste for

fluctuates that a quite Manav. bit So

a oil. is reason, versus biggest feedstock the that's soybean So the actual

Manav Gupta

quick But follow-up are sure a I'm out there. have you feedstocks expansion. number for Charles then already Okay. there St. And of the secured again, is, announcements the

the you process help if in feedstock us out in little? securing Port for are - could Arthur, there, of a you already So more

Joseph Gorder

I and the announcements of lot backup, time there will think Well, there out a tell. is

tied announcements different. it If feedstock partnership never you the always time. historically, feedstock our access and low projects low there's growth benefits with be know, the just ability confident integrated cost, you announcements the vertically to somewhat It came global this But waste of our us lot look of source going been a back forward. will Waste be supply we're may gives to to and came, intensity GDP different carbon is and in feedstocks. Darling,

get experience markets. global also Darling procure the the helps from also benefit us feedstocks We in other feedstock Darling's people. of

here just margins superior feel we like allow versus So us that's maintain position going a competition. and the we have unique to these to

Operator

your comes Theresa Barclays. the question with Chen of next question. line Our proceed with from Please

Theresa Chen

that view follow-up along investing, happy is SASB And position, renewable your the guess see clearly Can with disclosures diesel consistent the once theme in ESG as on as you Are a talk question that additional the far framework. to also prices front. energy about I LCS the renewable with transition your fruition. any to a the how you diesel of big as been have And many you you return. could as - recently defensibility How see Do - risk projected come announced? projects there? of well. these the on factoring

Martin Parrish

a we I'll Sure, projects. the take keep announced stab This Martin. at Obviously is track of that. all

new expect nothing you gets. come. also cloud to that of mean And track farther coming, you we the are cloudy, all out, go the the cloudy. policies We is and what in but keep it's I there

And policies You're we're That's you at and again you've projects if these just look got aren't get making a But more where of projections to bill. going step at, lot fact. a back here. coming. just

So right then Renewable got British you've and and markets. in in rid Directive the now, you've those got major California, Columbia got too the Energy Europe, you've Ontario, are

future, the steps York, the moving And state of have in being lot While standard a huge fuel Colorado, of Midwest one nationwide preliminary states announcing in biggest more Norway, aggressive, few these you've that demand you the Finland, got steps New keeps which Oregon's is diesel. forward, back. up. huge a diesel percentage the going has to And not renewable ramping plant. there. But too. a they We're out, renewable And are of put Washington, information though Canada, got clean the the then Sweden, and policies in

demand. really in right. then There diesel, feel you if the carbon about good And fuel, we It's wall. low So drop a blend the molecule, look is it's no just at available. intensity. It's renewable

few it brakes would is take program, if the too, So to wasn't carbon you available California, you right. - expect low have available. They these regulators to I times down they've the hit slowed hit when a think if accelerator. the

day, in to we good that about advantage position is would we've good what Yes, States mover think said, the our the you and all really at so, feel being and first about laid feel end demand United the there first really know and out we do. the mover. of we're So I of

Theresa Chen

you low you to? Are of and growth your Understood. And projects other hydrogen what it talking the additional biofuels there. about Can flavor could development. a related carbon to give this projects can us kind share of and any related, Joe about under statements you color investment that in if pertain

Lane Riggs

is Lane. This Yes.

was projects what make think fuels about. talking these carbon markets really - for we're This investments sequestration - really two, that we our Mark - of now and in CIS largely right what them make of those markets. tie to can looking we So is we're and where at trying more is lower the competitive

Operator

of comes question with with RBC line your from Your Markets. the Brad Heffern proceed next question. Please Capital

Brad Heffern

add from framework goes your and there clear you So said change think, you how have the we remarks being quarters the you for press little still Can $X do release expected. point than weakness see prepared, a about. longer Thanks. in on that and unchanged dividend to capital the made part, your even you minus than more less remarks the is you a around EPS, this no is of pretty to everything more see If you the that. re-evaluate, if or I on call think four color or what do just COVID

Joseph Gorder

a good Brad. That's Yes. question.

me and - give give let some I'll Jason on. you then maybe here Let follow insights

Jason Fraser

is - this a September, feel under We picked a saw liquidity about we're We committed basically all in the demand up. third Jason. $X.X facilities. the export in dividend. Yes, and long billion cash signs positive of over we available quarter, rethinking of end improved, $X the billion little volumes saw we At from our way had

would fast, we really things So It's right course alone. just accelerate vaccine of how the question are of things in direction. in a think headed

be an that right us to something this allocation to well for our need cash revise going pandemic is headed take. step so adjusting years. event. framework a the position think we're now, the just isolated this way to picture things don't very With bigger we Looking long-term time appear And dividend reluctant liquidity to and many we our and served capital

Joseph Gorder

allocation And dividend. years the with rewarding just at six approach question job time. capital been add Yes, our came there, over lot to regarding shareholders a this, let been I to little now. that framework And there mean, of and this a we in I've out has the me out

we've we've owners continue do And to done to our demonstrated have at that. and We but every we're our clear our going nothing, of been step to in top. and commitment very communications the walk way,

shareholders to listen team decide they're be needs to going trying who one who and commitment when to There they're opportunities our demonstrated their going knowledge to little six affects in for it who think certainly on. shareholders. a a to is taking years of movement with their long-term going and from to trying the really very understands And for and basis is to determine what's or is somebody, position I create a equity. management

were we've So would, answer I I messaging. right. to listen encourage to been to think us clear think exactly And about I I anyway everybody would pretty I Jason's if you, our listen and at this and time was

Brad Heffern

for or Gary. And then maybe Lane

the Valero. on like COVID being Just it's obviously, this seen how thought other see option market about there. potentially West out? value of you that for diesel of less couple of all stuff stronger the playing think side is the on historically or option sort - a that that's Coast, we've Do you do of that part you've closures a market market as renewable of know value discussion, an I sort out

Lane Riggs

would very I going gasoline and what certainly, we're and and always send balances you've believe the it will But changed COVID we demand ultimately out Lane. the being is out we've there. diesel This manage pass careful by we say, recover will to there.

for. near an the improved it's in term, market So

term, in and I at So, we we strategically what like at least a opportunity. advantages looks pretty difficulty] don't good take think or while the near of [technical look - think

Operator

comes question next Prashant Rao question. proceed from with with Our Please Citigroup. your

Prashant Rao

sheet. to couple a I balance the wanted here. Jason, one follow-ups ask is first on of My

I it I slightly want needs LIFO going a the sheet, the that is little the hand kind about of billion for forward, you done. caller, $X under you've wanted or room of on cap to cash the keep balance environment. used the that adjustments, recovery? sub we the of but balance lower that the in working think does quarters managing sheet you inventory give to into couple as through think don't and bouquet lower, liquidity now current next and management, about, cash for we sort slightly the liquidation know, on Is the cash equivalents, to focus need Given

Gary Simmons

We range. still target to be that in

I that's - So a good assumption. think still

Joe Gorder

market as I the spoke opportunity Yes, And things changed. we the advantage clearly in of Lane it. we mean forward, I as took supply think is chain go did that to reassess the of has the earlier, about one today

different essentially need past. the so the volumes capital, working that they are than in And inventory we the were

not to of And that's took our year, much, need anything - this try all that and that. or is operating adjusted more target guides proper our so inventories what our run operating impact P&L the it's a we us, we take levels jeez we so inventories. and for And to what to this for we business like level - impact we to LIFO but proper

And seen so we've the some benefit side. cash from

Prashant Rao

thank I'm Okay, you, sorry.

Joseph Gorder

good. Go ahead. you're No,

Prashant Rao

right. All

demand where can look think headwind, slower a just bit help you to with like system back, and what the in cope a stopping, about static how about really jet products how that that pressuring of another in say, does for little you're what fuel on few What more for demand. recovery. years bear the with At is does but means scenario that, lower color some typical would distillate margins and line with staying that operations on Can a it Sorry, this comfortable on let's to typical and us on not inventories arms refining the if that how on of globally? that we fuel. not much bit little to run takes of macro-specific or of overall, think sort you maybe you case XX% on - sort I level, had a of on We're is jet the normal get of demand sort jet around sort fuel for what it of color trying jet longer, system, here. question sort of happen a your maybe XX% your to where it with recovering of demand. get our

Joseph Gorder

Yes.

utilization. really So overall, where see, much full and it it in could and all gets of jet I overall have we pretty molecules think you flexibility refinery impact does, to those ULSD yield our lend any not

jet improving to of can those along and is raise demand out molecules with advantage the utilization it. that So start we pull

that been was overall, markets, third to the jet think, of we've I quarter rate the quarter XX% increase. surprised up recovery very second

And data to quarter, airline - XX% passenger the fourth headcount, XX% far, encouraging. the so which increase is in

nominations know I the with it's would reserving along say, - are go You also - our airlines also to for up. that,

rate other see jet, is The trading a maybe can now jet to petrodiesel is you thing start ULSD. at adjust

to I you result market the is fuel that's pull you'd diesel to see start that thing, around allows like to molecules of see will and ULSD, petrodiesel in refinery in adjusted the which think that generating us the - higher utilization. those out

Operator

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

Doug Leggate

me of one just appreciate and think, about Joe, responsible all. analysis lot the as question much need direct I to guys. I people And as a and right, you're of dividend you've you because people think been Let say, articulate too being out to listen you of first I investment for there.

appreciate making got questions. statement. that I you I've So With that, two quick

can talk obviously First quarter. one debt on added you've as you last just about, some debt, is tolerance,

Your seems. liquidity. of you plenty do what just tolerance? the But see bonds are trading as with positioned You're debt it fine

you to sheet needed you the do here. think what balance about If

Joseph Gorder

cash We which other we if needed bonds pretty do The we needed right. have There the liquidity $X.X given like more a are I'm we've liquidity, sure we lot is, could. feel could good we to rely expect untapped we you're billion are the need our We've taken, - spot. to. we're we things in a got could if and don't mean, of still I steps of trading Yes, on we well.

Lane Riggs

attractive the Yes, the I of do any operation. to there lot I mentioned - think, and you earlier, think finance degree adding no sense business, it's the business, that risk that of for is Jason Joe to when of

And demand the answers needed to question, that Doug? needed something we to certainly we more, anticipate we're There with going got, we offerings we it. very room that I don't to, there impressed rates believe great. else. But very do investment so if do No was for and to we grade we just could, do we the more, the remain think, Yes, So, it's need is to debt. we do is - was about to question we if room high committed the rating. but

Doug Leggate

Thank billion. our - maybe prior I more does. about know. still some at But housekeeping your my spending in $X.X subtlety non-discretionary presentation, in last is And you really don't you. of have a it missed run the issue, I Yes, follow-up calls,

guidance that's Your capital couple says XX% Is billion. that capital. And that point? billion it or Thanks. sustaining a level I'll just sustainable XXXX at it a sustaining of and is your low the leave and today there. something has Is reset changed, is $X.X obviously that

Lane Riggs

Doug. Thanks,

is This Doug, Sorry, Lane.

talk spin. we or on we So sustaining - need cycle. We're side about, to talking we the it's feel that over spend our roughly that lower three is and Capital. when or the four-year really like about that's That's average

years. turnaround lighter heavy turnaround We years have and

So activity. turnaround you have - $X.X is to remember our in that billion

it that. leave - So that's I'll with

Operator

Paul Our Sankey next question comes from question. Please proceed your with Research. with Sankey

Paul Sankey

Doug, on. kind wanted hits I of hit to on what

from just about, Separately, for you potential and and So question the really update do could that extent you overblown difficult talk very I think the example the concerns when, a and is think about because faced democrats suit. to question being know potential hopefully abide what CapEx election the a you what are the outcomes biggest well. it's concerns latest top and give think on I the us Thank you. you answered do the which you flexible, risks

Rich Lashway

a of a I'll the at to want to, out going mean, this. to is think, and trying So, step this they're regardless of at probably to going talk look more I you're win answer probably who Rich. here. look higher Democratic you But coming win, this, we pandemic taxes if directionally, I they're regulation. have

rate, and got that be a is of the kinds those is to on to to recover. priority, stimulate to of need effort the economy, you've with other you focus going on high things it's an bunch unemployment a first So policies whole which some hard really layer

So I think.

to you of a run to going now. reality that they have wall the see through I see think to then a of is And rhetoric lot once right into get what election. lot the you're campaign of going

just a union history. these of is you individuals. He and is, his of and saw The look real and those know, of of it supportive supportive He long being manufacturing one ideologically you jobs other history at part facilities. if not Biden driven of

industry. so And the also renewable about positively he spoken

be in as you'll because - well. we So area supportive that

So in it's and we - is to it's never I going it's say good as never, be. it's to never be I say, as as going as bad

and think I changes so these And of as be reasons there's institutional good coming why lot think. structural a will some not in and people

good. that through to doing administration we economy. going materially feel to the go are don't we that. be And pretty think is so anything And alter really we there the here, that's going we demand think We as recovery

Joseph Gorder

is is referred doesn't Yes, there which see rolling. of that package the the It Rich economy to you get election. - Paul thing to going I They're to. the stimulus get one kind think following a have is part selected we matter

And would there say it rolling so is is. off, I but

is is stimulus stimulus going there some of of kind type view be Our And to any package. package.

produce. greater trigger products to that going Just for we demand

we're so and to the are many as of pessimistic change - we'll think, a we're company positioned watching as about And organized are over deal all it and administration. for carefully comes, - potential we I well whatever outcome with not

Paul Sankey

And I'd of The follow-up. the thanks. Thank reality comfort. Great, wall you. like

Joseph Gorder

That's what we try live Paul. to

Paul Sankey

helped just you. Joe, to programs further remind about airlines Thank stuff. talk government the sort you've of you to extent is, to there's for Can about by what if us a lot bailout been out follow-up federal any. how stimulus

Jason Fraser

What I'm trying to think, I mean,

Jason Fraser

demand protections more through, airlines see of think coming airline and them Yes, helps reinforce for to efforts support that and the provide here think the are there jet. we for them the are with likely mean, supporting you're bills any substantial obviously the I I and to pop-up industry

we that's from would think, I think benefit we that. where would So

think I that…

Paul Sankey

Valero not So response that obviously your implies much? received has

Joseph Gorder

No, no.

Paul Sankey

that. clarify a wanted Thanks to Yes, lot. I just

Operator

comes Roger your line Our proceed Fargo. Read from with next question question. of the Wells with Please

Roger Read

even future. would money hit. I kind I least name that guess any over environment. the see, fist Lot unit little that's of industry unit, things what concern, do the a previous What of at bit made you've a you that term talked least risk. should I with mean, costs everybody to demand be times. the in at of the current is been from is then regions. And decision longer. could the little has is stuff I the about pay company changes, it continue the bit know, to the likely the at if issue or way attention a are is the address cited outside maybe near that that we if supply to But you for hand we kind it, particular high maintenance to don't and someone permanently particular shut want is back the go absolutely losing not crude it cash. the if at But would losing a very you a think, indicate foreseeable

suppose for to but you in that Just Lane I anything there. wants jump else questions whoever

Lane Riggs

a of advantage. hand those change the earlier really And about maybe after And losing practice of is in demand I Now, crude have that by can they see you the money some place - mean is, that spoke over really in what trade falling. don't I kind flow. product or of

a obviously So part it. that's of

then and - about have think. I regulatory I talk spend.

you or FCC that of And issues is some well, consider that of shut an a have don't their FCC [technical might base to on turnaround, sort [technical say, thinking - have location into large. those or of end might that have refinery can difficulty] based maybe difficulty]. turnaround up like they I spend layer something either other and are struggling the you about on of like a and it whether companies of they be balance large stretched probably very sheet where want and down companies, had just maybe other the part it's that of these sort The factor

Roger Read

on be fuel there But areas front, of in the it believing operate would to some Yes, A in you interesting. of longer-term been - certainly of interesting questions are get along, opportunities last the you on about going to or success system. in viability long-term in questions, so has could, negative of will already stress be and if there. lot really demand. come synergies continue you refining, built sort were you to particularly of any interesting of where in expect that the much the one an I lot guess

the so of question, to kind list M&A So speak. wish

Joseph Gorder

to would totally live certainly Yes, let produced years, over just, we see losing to in I able in know that certainly, it's Because add anything I start this. to it we're In my impractical viability would we I fuels, to of fossil lifetime. mean, believe me that of and hand we is fuels. the long-term be think money a it liquid guess just of world the to is refining. But Rich to from then part necessary makes lifetime fuels going we'll wants do I are couple is this mean is world the we’re live it. fit. that function fuels, my motor where than displace more over, what

And continue will long-term going viability do care in take to so fuels But of refining be obviously business of the we making We're that. forward. a believers it. going anyway, Cleaner to our be to believe investments and is we are that part of successful refining. strong

M&A the front. on anything Rich, So,

Rich Lashway

justify cash, of push preserving we've can of say projects good kind got No organic to of that kind we're acquisition a there's any nothing other we've an it's and hard to really, than given that back. queue

back not So - shares. buying we're in

to this activity. in M&A really So environment, kind it's any of see difficult

Operator

Our next with Paul Scotiabank. Cheng question comes Please your proceed from with question.

Paul Cheng

for and think maybe Two strict longer question forward. we're that Jason, I One one. is It term.

you as percentage cash expectation XX loss, refund. For in loss, tax your months percentage months would have if what XX any you be and reported your what loss the tax to - cash you - refund, Jason, if received to of next what that is receive given able - the tax and are tax

second also you I that until or should question second, The Jason should answer guys, my wait first? I tell

Joseph Gorder

mind repeating the real quick. you. tough question you do is Paul hear to It

Paul Cheng

the cash first is tax refund. question on The

maybe loss carry-forward, given the are any XXXX, you back And when receiving tax you receiving government. tax cash and from are if into refund the guys have tax you You money. law making

what percentage next the cash tax if that still see a let's of months, as you're Over actually reporting XX tax we benefit assume it would we refund. loss,

Joseph Gorder

Okay.

NOL - it So right is was the the first part value to… of NOL of

Lane Riggs

second get in it to expect quarter. We

refund. the related cash receive expect to to We

Paul Cheng

said, previous always second the for you that quarter year. the Jason

Jason Fraser

yes. Yes,

Paul Cheng

in XXXX, in is to if the that a we XXX% - a refund, loss have Any receive XXXX. that idea So other on dollar cash percentage. or so those words tax dollar, will you

Jason Fraser

that year. Mark. tax is And refund The of in loss the clear. - this be year next April we're incurring, to No, we received this tax

to nothing that results what might with So be XXXX. in has our do

Paul Cheng

understand, understand. I I

that expect year, this - you we I'm portion argument tax your that? is saying So report say entire you of have if your or million they to did, if only a cash If in $XXX $XXX that let's your for - the and million. book, that you receive

Mark Schmeltekopf

at understand refund idea if you we're Well, give probably would you sure tax good that what be that totally But question. of your would look next really running rate effective the a I'm I not the year.

Paul Cheng

we My at Lane, to that areas the and both in is they second regulatory sale impacts long or government on outlook environment XXXX gasoline or question game will that look diesel vehicle that for in even if saying that the those hydrocarbon in to on in or that And way. that ban Joe current hydrocarbon the and California, How facilities trying also is your the law, by the - detect of Europe areas. base the your so. plan their

talking think have of plan. bigger has been a is about customers need energy Do that you transition something for Some level your to plan.

Joseph Gorder

Okay.

want you part So first we'll to first, the go. take

Lane Riggs

Yes, I'll part. take first the

necessarily some trying still obviously live government's the think, about on - transportation difficulty] push that how don't it's and as going do tenancies would to of you early, has regulatory targets, fossil that Europe, fuels, thing I tenancy trade intensions goal for. the put. to out And their the drive do feasibility have the that goal lot are either I but to U.K. zero going plans one aspirational environment, there, in assets, regulators the we markets or to goals think that a [technical gasoline I are can out. or a California of the flows world - trying the think to you're put tendency to or to So and

do. is to said, there with that trying they're Now what

to very refineries, what how it's careful And ultimately, difficulty] current of the manage doing the cost West we very careful. run of we very, are CapEx and regime, whether so trying Coast, [technical said what our in and number or through - very I in are earlier, we're those we as cost - careful that

Joseph Gorder

the And company future. positioning of future the you and for the know, strategically the Paul, on question

work to fronts. continue We on leader ethanol obviously, on that. We I think early a to get were And several the business. been we've into

carbon to fuels. lower seeking, looking the is of carbon that the ethanol And footprint that that. at and rewarding another in we're the lower market into ways example of diesel Now we market on produce the business - renewable

the got, on this evolve XXXX kind market the the flow by cash But to we've you what projects already continue the based reductions portfolio the know, targets of our approved strong and the now is is refining that base - already for Board. basis will we documents can, We which are a I calling think for and further are now, - to transition. our out what over do we put for using with

be working on clearly to that successful don't position direction. heads sand very this will we're by So front time. Valero any our buried have for stretch. We a long very in And

Operator

Please Simmons with Our Todd next the of with your Energy. from comes proceed question. Ryan question line

Ryan Todd

Maybe follow-up the some on earlier on side. conversations diesel the a from of renewable

XXXX, see in one California being say that how the You Texas expansions plant XXXX. do on fossil you you obviously those see of side. that running California. coming how do terms feedstock do in to How bit - talked talk you for about versus competitive opposed terms positioning. you of or like a Louisiana of as the like to compare in things product cost operational of - transport transporting in relative economics, positioned little partnership those, you your some of the more as a the Can you advantages, possible on Darling about the Can think about one the cost

Martin Parrish

don't also operating Gulf build, capital Sure, this I lower then think would place to is would when to of say, It's is market cost. in know, like about wireless, future And the as to cost highest-priced to great. Martin. where logistics, the from get we is into just out. going infrastructure you've getting the the feel move. best just it's the Coast be. We lower it's you to Gulf flat getting rail going And be going the then Well, feedstocks Coast the we logistics to and source

to plants. just OpEx always California, what build the and large going that. flexibility enough whether have to low and that It - stress seven been can't the been is Gulf learned advantage cost. I needs we years to refinery operating that need the the Coast again to refinery. We've Coast. doing we're an is do But somewhere So that logistics co-locate you Europe intend else. be. is to try the the a keep advantaged, Gulf there high be and just have what And we've just we in to by to this And at and Canada, We now we huge with reduce operating

Ryan Todd

on even and third think the the XX do a sweat in quarter. outlook sour meaningfully, differentials which absolute then months about just side crude in I And a sweet you more general refining. oil without over look forward a maybe the mean, or spend I on improve or just been six follow-up prices demand from you meaningful there scenario How to in months. the a recovery if particularly, quarter tower here. is differentials for have so the on second next mean, headwind. macro differentials, tough. on where And mean, large I

Gary Simmons

Yes.

quarter. we saw So, narrow crude very in this Gary. differentials Certainly, very, is quality third

the Some August. back those that production. We market came lot from of of - that production in some in of got balancing

leads Additionally, Mexico, Gulf they affected production. of our the that storms the had

held. of some getting that So production online is

so so you've move wider the ASCI of out kind differential, far. seen bit And a little

greater you fourth quarter as be But will build know, really a it to needs continues that it. that You have believe, OPEC to sour - global improve percentage we barrels. - is from incrementally to in follow Amaya's of tended production

a in go it the all you so will of more along gradual And recovery differentials have with that.

Operator

with Jason Cowen. proceed from comes your Please Gabelman question next Our with question.

Jason Gabelman

the that to over XX%. for critical So of I and ask determining that grade investment the - about wanted are rating is kind cap the metrics

driving credit the and rating conversation Valero the really assuming what's I'm now companies. that's between So

right So are for the kind to balance the your of look at metrics credit assess outside kind cap? when sheet, that we're targets what to of of trying the

Jason Fraser

this bit a talk is I that. little can Jason. about Yes,

As the this our you are we've priority agencies. investment and discussed key with grade top rating us know, ratings for

really which if not We term, about Longer just is them. through cycle and our key strengths. X-months the XX-months. term you And have right facility, the next need whether excellent liquidity, the for factors They also operators. reports, They're top like our long recognize most right. clearly their to excellent for read talk

us with think our So we way their on It there structured being is I investment concerns don't also, any debt. the part grade.

And kind we that $XXX least our looked towards of you debt-to-EBITDA their offering, of the outlook, look at ratios don't ability negative highlight cap. circumstances we have are they retained mean, the did cash recent last tranche that at the then we those have was way did they same flexibility through they of risk and most at the and in looked we call ones to will to us We 'XX, net ratios, think rating. I investment-grade if the your quickly, 'XX we that. And big about for at flow. and floaters most are 'XX, million lot all ones shorter offering at deleverage one versions on when You get to have things right. flow. the early bit thinking the put what, this but I term. of the we're fall. debt all I looks the as agency but type more And a And have they about the we intentionally, as little maturities cash tell think at But we next biased notice did 'XX, a give were at, they rating. own at in all did could And or net each least things to

the in the to each separate a we change when their that would event outlook for in think they expectations two does at. this fourth were really us full assumptions the them at one But the by recovery has of view. back in So in last The pretty quarter. timing was, made, our looked what were April That's deal the be was and driven that versus own change recovery of with earnings mainly looking analysis April. quarter if own

longer our period an with elevated are getting They And the spikes that absolute their that baseline. was too. they a true. look things credit as normal quarter. us negative of ratios. before reflects. yes. months really than the outlook to affect you what And grade more the view the think that new But view there delayed what out higher term. And have is a the summer - along XX longer going to their that's is doesn't is and would and it credit next But to like take new was we be answer infection which - will investment then and view going debt hit really lead going ratios And clearly with that regular think will that fourth all I there to in recovery, back to -

Jason Gabelman

clear. really That's Great.

So or assessing recovery they're in they're about the when XXXX-ish? rating thinking

Jason Fraser

right. That's Yes.

Valero's stated in to I what of the all - think quickly months, was What exactly clear. I they their think And But happen second I thinking think the going I reports. they think, was half XX and XX they thinks that can't is admit I don't generally. next more remember year. to as next

Jason Gabelman

there Okay, to is then offered in else investment sequestration, I'm was you opportunities. case a mentioned that surprised the investing hydrogen topic, follow-up think is tax driving great. something produce on a And credits globally generate interest to was given returns by comment in And from in then is lot value hydrogen mentioned lot on the that. that or a I on for chain the hydrogen of already. refineries Lane's just economic and of of which that driven investing I potential I ask that the the U.S. low What's carbon one want there the carbon

that. on So thoughts just wondering, any Thanks.

Lane Riggs

Lane. is this Well,

that to want sure I'm some might add well. I'll So to - other people

first our from that's Philadelphia developing It when these our So where those where higher intensity - projects looking we're does carbon our the them. at market about improve filter we bang understand what at we think as difficulty] see as for tax our credit the and [technical get biggest looks test, then U.S. and that for we the And per trying a stress value we buck. can to like well. first with

So at these types of that's are developing looking projects. how and

those not context get the out of things. for in to look streams carbon intensity, - ability so we're hydrogen, obviously some lower our we're make technology to Again, to of some and their we're at the to of starting and looking those plants hydrogen cells. the have existing fuel dioxide On at of the their just almost hydrogen we trying

Joseph Gorder

don't you Yes. a you take or at It don't at. these have as you a end Lane market, of of and return work the the that it But the looking economics at look these There's like looks of things that lot day, some LCFS key into can borrowing just like is like - projects XX the sequestration projects going on one, a said tax of just lot that credit. a forward, the where economics. when day

about that's fair interesting it's like these there jour It's talk we things announce to disappoint. direction And but du - that is are to feasible enough that not look at. these topic one so the is why it. And that's we're of certainly if step

Operator

you. Thank

We end session. of have question-and-answer the our reached

back to additional to comments. over for like any the closing I'd Bhullar floor pass So Mr.

Homer Bhullar

and you out for Great, Appreciate thank time. of everyone's thank us. everyone we're joining Unfortunately, you questions.

IR feel the reach follow-up team. have out Thanks you if So questions to to again. free

Operator

today's time. Ladies may at for disconnect your you you and lines and and We webcast. thank your participation conclude gentlemen, teleconference this this does

Valero Energy (VLO) 22 Oct 202020 Q3 Earnings call transcript