VLO - Earnings call transcript Q4 2020 | Valero Energy Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, greetings and welcome to the Valero Energy Fourth Quarter 2020 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 remainder, this conference is being recorded. It is now my pleasure to introduce your host, Homer Bhullar, Vice President of Investor Relations. sir. you, Thank

begin. You may

Homer Bhullar

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

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

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

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

Joe Gorder

morning, record been oil and the decisive rates the our communities, good We some in crude product quarter U.S. COVID-XX and demand an those The pandemic its increased product which and unprecedented five-year The safety eased COVID-XX and maintaining to inventories. steadily among response, everyone. we utilization with pandemic across and and an increased, the crude business lowered reducing businesses substantially, in contraction, globally, families, high Homer, band. restrictions more first accelerated operational with oil the In as impact thorough resulting as by Thanks, confronted has on was and XXXX of on and the demand. energy levels. inventories product had product year within while in normal inventory product inventories extraordinary began mobility has globe. to in refinery the And increase focus closely ended response, in related reliability. and Throughout regions match crude team our supply pandemic, demand cases were financial

year and we in two safety set employee fact, milestone refining XXXX, environmental our operational segment, the performance, and ever for records optimize In several in a And in year years and records performance. applying sales set to safety we recording margin for achieving process renewable best ever our row, volumes XXXX. best the on diesel our expertise

significant higher with made Valero the one product start shipments Mexico. waterborne also markets importers progress our product to into strategy expand of on growth chain of to largest our our We into Veracruz supply international new the terminal, making fuel

Cogen Port XXXX. as The the projects and moving and quarters shareholders this in the the refinery at DGD by expected and capacity be including fourth to the is projects, and $X renewable we project high-return of challenges The Arthur and $X.X to in in maintaining financial continued Charles, the of talent Coker Charles project refer XXX is of imposed we is at is Diamond hurricanes, by a million, project and of fourth and side, forward. by pandemic third liquidity of and budget. continued debt St. under our year efforts past the Pembroke several And capital the line liquidity. the attractive commitment growth rates, with expected further expansion over in by completed we Digital strategic ending to the our while keeping all competitiveness $XXX budget increase fourth billion as the total X gallons Alkylation be St. to we designed are and on which which to Charles And testament to Green completed was on track billion be and year refining brought raising St. increases year, reduced to schedule progress in diesel and per challenges XXXX.The XXXX. dividend completed to $X.X the quarter, on available project the make the On the Pipeline of Diamond cash of on honor production Despite several completed million to organization. a our expansion quarter our unit, billion we improved our spite

and the As XXX diesel optimization, XXX Charles improvement of year. of renewable a gallons from continuous St. existing per is the plant, increased to capacity million per DGD process million X, gallons year result

DGD year. In of completion XXX roadmap expected comprehensive our laid X, the XXXX. St. greenhouse emissions gallons million per gas the to we With XXXX, by at by Charles be to reduce total XX% out capacity is

of the pleased gallons expect Texas return, part the the X renewable growth, operational announce into at is projects. capital DGD to in we Once the low-carbon As fuels reinvest that year renewable and refinery. immediately, second diesel To plant has of expected diesel new DGD’s of million our approved million Port XX Board and annual with X.X renewable now forward this per naphtha. new to be X, XXXX. moving plant gallons to higher that We're higher a gallons is DGD continue renewable goal, capacity billion Arthur, XXX to half of end, completed, be project we combined we're

vaccines to product widely normal to with expect coming back to encouraging as allowing are now in in already refining the U.S. We're months, and get in strong COVID-XX with improvement total range. seeing and people demand margins, businesses continued light see distributed inventories normalcy. diesel the we ahead, signs Looking

in capacity our strategy, rationalizations we to stockholder the with growth the and honoring further earnings returns. announced steadfast In be uncompetitive in expect in addition, closing, In to many of excellence world year. refineries conversions investing XXXX, announced for execution our or this volatility pursuing commitment around we remain operations, lower shutdowns and

to continue expect diesel to liquid demand invested fuels. and advantage being view, low-carbon for low-carbon largest global And North in platform comes return our projects expand renewable higher capital. fuel renewable with We the globally and and that to on with for drive competitive fuels our expertise we're expand leveraging producer policies that America, steadily economic a

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

Homer Bhullar

Thanks Joe.

loss quarter share quarter of of net quarter $X.X stockholders we was fourth of net million or of or XXXX fourth net a income billion $XXX to Valero compared the for loss XXXX. million incurred to the to For the per fourth quarter attributable share $X.XX of per share to income $X.XX adjusted $XXX per attributable compared $X.XX stockholders XXXX, net $X.XX Valero or million or fourth for $XXX The adjusted of a XXXX. share per

was $X.XX $X.XX full XXXX the the release. share Fourth earnings Valero to adjusted reflected billion the per $X.XX per Valero adjusted exclude or XXXX billion stockholders XXXX. per compared attributable XXXX loss financial share net of net in $X.XX and For attributable share adjusted $X.X stockholders income in year or net XXXX, $X.X loss billion income items results compared and The quarter in that billion XXXX. net to tables per to accompany $X.X share to or $X.X or of was

to loss reported adjusted of For those financial reconciliations quarter income to amounts, operating fourth an refining of $XXX the compared million XXXX. refer tables. please of of the The to segment $X.X quarter billion of XXXX in operating actual in fourth

for XXXX, volumes of Refining of quarter gallon. the as for fourth quarter was gallons day blender's for were XXXX. quarter COVID-XX per segment lower the income segment fourth the with the fourth to higher gallons The the line planned quarter $XXX fourth day expenses, the the in XXXX prices day with LIFO X.X XXX,XXX per the fourth corn quarter in was lower of volumes to oil million segment million prices in decrease volumes the liquidation utilization operating $XXX segment day, due XXXX. of of XX% million annual retroactive XXXX compared quarter lower quarter XXXX, income day from than and from results XXXX of set versus refining XXXX of of capacity $XXX $X.XX was records to by product Renewable XXX,XXX Refining to the a The to sales lower averaged differentials, was compared per the tax quarter higher was XXXX, $X.X rates. income fourth the adjusting for sales renewable XXXX fourth demand. income fourth million. quarter primarily in impacted and per quarter which due prices. and other volumes diesel per credit operating Fourth adjustment of operating XXXX the the $X.XX narrow barrels to gallons due product the quarter maintenance. effect of operating and of the was $XXX averaged demand in of $X.XX million effect a fourth the $XX result day were cash quarter Excluding in gallons loss barrel which in ethanol of of operating XXXX. quarter $XX quarter of for margins, XXXX per decrease averaged million Ethanol due adjusted crude throughput Operating guidance per was pandemic. of per gallons Throughput the fourth XXX,XXX barrel of diesel primarily per lower production the throughput XXXX, for in than XXXX. lower fourth million million in of Operating fourth ethanol quarter the the adjusted renewable margin fourth lower of of than After the resulting diesel fourth in expenses lower XXX,XXX was XXXX.

year. the of operating receive Depreciation was primarily $XXX was to the was tax this of were and G&A rate to we in annual a the income the carryback interest million was quarter million lower And tax XXXX. of $XXX quarter million net expect For expenses $XXX which by activities cash cash the XXXX. million. in The federal XX% was the loss was of refund in operating expense the U.S. approximately tax fourth result XX%. net million expense fourth were Net quarter for was fourth second of when XXXX quarter in provided XXXX, million tax of $XXX expenses tax of effective and billion million of statutory our $XXX $XX amortization benefit $X of and than rate $XXX XXXX G&A XXXX, XXXX.

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

share Valero our billion Diamond XX% investments and were year. to Diesel and of $X variable to capital $XXX Excluding attributable for XXXX partner’s quarter capital in investments million other attributable related the those fourth full interest to entities, Green the of

available were to billion. commitment of cash excluding and and at fourth $X.X net end Moving our payout provided dividend capitalization and debt strong of of and $XX.X XXXX demonstrating financial stockholders of dividends $X.XX debt And quarterly total $X.X and billion dividend in to ratio Directors and our were was The cash returned cash. approved position finance regard by $X.X at liquidity, operating equivalents and December, in per adjusted activities. Board With of our to lease to XXX% of the the through our we activities, share, quarter-end, And resulting financing $XXX regular cash XX%. had our cash investors. cash through equivalents balance billion a sheet our cash quarter of the obligations return a million total year, in buybacks of net XXXX to ratio to billion we just

About to our to Turning which Valero be business in and to Almost our and of venture to $X capital approximately to investments. allocated catalysts expanding renewable CapEx expenditures XX% turnarounds, of joint capital allocated for billion, XXXX is the investments guidance, attributable our investments to XXXX growth. half XX% sustaining we for includes is diesel business. expect growth

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

expenses impacted volumes We expect approximately $X.XX gallon be segment, maintenance to operating sales due first gallons amortization. be cash day for by activity. diesel barrel, depreciation be planned the to noncash throughput as refining XXX,XXX respect lower quarter With XXXX. per Operating to in expect volumes to the which such is $X.XX per includes expenses in per and which $X.XX should XXXX we in per gallon, costs renewable

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

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

corporate and approximately depreciation opening annual concludes effective be expenses, rate should rate. For to the U.S. That excluding XXXX, remarks. statutory our tax expect approximate million, we $XXX G&A the

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

you rejoin other ensure to the ask callers as to have more two this their permits. please questions, And respect If questions. please time request queue have time than

Operator

from [Operator coming Evercore with line first Doug Terreson Our is the of question ISI. Instructions]

Doug Terreson

morning, Good everybody.

and levels, a look mentioned absolute in inventories you starting Joe, like the to good same range U.S. are little to a bit markets, are feedstock close fundamentals, which to refining I for adjusted levels is they're up year-ago distillate, Margins gasoline basis, both, starting demand ago differentials too. five-year Regarding they minute an we're but in most on for widen going see think a near to thing. that and shape

recovery sustainable? in view XXXX? way, recovery Do you overall for we've your market What's there my at you refined the this So, the surprised outlook either that question been it's have And the that of is, think seen? reason to by is pace your for what's products believe point?

Joe Gorder

it this such Coast realized. And would the we've shape, a the a Board got view. out, demand, to perhaps who I we immunity all let it like his And of he get herd really going detail. That's pleased certainly out other frankly, rolled think bit far. of the point question. We'll that. we take thinks But, the been government quicker better much place, roaring get sometimes Doug, East to Gary of think, and our mean, country, be we rolls more than I when do of for statement. Directors, agree to But, that's Lane member in think, we the is of of speak vaccine pent-up it as and can that in And on that obvious distribution, 'XXs, If we've do see pace so the where the we're I a parts look tend a with to you're good that's vaccine I kind and there in functioning aggressively. get the to I see some in with going you're is accelerate granted. an appropriately we recovery the going little

that, Lane and specifically regarding with and color the a inventories little let So, demand. I'll provide Gary more

Gary Simmons

Yes, light is Doug. built surplus, especially inventory, pandemic. total in on Certainly, This a the product Gary. getting we early significant

So, average encouraging. seeing getting very gone into range back essentially is and five-year that the surplus

much recover pick As to quicker. to margins allow up, you will as know, starts it demand

had year time. I cases, despite a a the was gasoline think, it the bit encouraging that fact, for still -- surge another DOE where above the demand at encouraging COVID year-over-year is sign this XX% fact is last little we've in

close wholesale pretty showing that. to are volumes Our to be

and be little reasonable a the product gasoline the [ph] relatively has gasoline to low inventories so, stronger. of market caused And demand combination

flattened one the think, there key the curve on has stronger things product is really market of the I gasoline.

up away taking driving it's so, of margins. of gasoline, and gasoline sets And for terms that store a to a grade summer lot that season stronger incentive in certainly

I As Joe said, that recovery. gradual view we'll think, we see

buying we could fairly the expect pick be things there disposable a getting family in that do third gasoline which they're And with pent-up of on largely start lot normal spending spend surge disposable demand. up. be we and to people are quarter, a see ordering exception by going vacations, that quarter, see things to you'll experiences, then the income to Second cause things income and that that out that demand, are could

as side, mentioned, kind pretty diesel is diesel of the you hung demand On there in really strong.

in So, year-over-year so system. year-over-year, DOEs diesel in showing the are we growth at were diesel our over XX% demand. demand at system, XXX% showing Actually, seven-day average our actually

I think heating helps well. bit And people spending with demand which then, rail some that course up, ordering course, disposable strong diesel pick as freight year, of and this to on-road starting winter drilling has been things, of been of has colder some trucking little a activity see -- freight, income demand. oil strong,

to ag, will move to year, throughout as which we will the yields into throughout plant bring diesel demand then, As lower also demand begins diesel as year, some we demand we jet to start set incremental diesel see see that the and from help up and expect longer it balance, coming crops. recover, term. moving nicely, you supply And

Doug Terreson

Okay. Good points.

that fairly for me. kind sounds covers It of So, it encouraging.

Joe Gorder

each importantly business time. me understand I to more you more you I going you're through we're mean, But, normal if without are other I wisdom very I And that, lifestyles than just getting in and think forward a remiss man, one you years. more look, the And insight to and and to question, to to am But, your long unsurpassed. for say climate. we're the one, here get opportunity worst spring. sector this. good know that you're going be miss I'd over you with Doug, normal I, to repositioning a this is say known be work let better back thing And didn't encouraged. to the Yes. looking all for that very we're just And, greatly. we off. before had this I and of get certainly mean, a for we've Doug, people having

going we're know Valero want visit we everything the I the I done of sometime you've in over tell the So, best you just on -- industry behalf you here I to wish think, team, but and to for have chance whole a to the thanks March, years. to want look, for just

Doug Terreson

capital I mean, been too. Joe, management especially you Well, in industry. you guys have thank this leaders,

it good all stock time, are guys Your over and too. you reflects

been easy want really for leadership I your decades. just enjoyed so, me a and support you've team management And really thank to the over for And together. time you to our

And on the Joe. has that yourselves again, performance the so, deserve stock been you guys the for because demonstrated in market back Thanks pat you sure.

Operator

from is the line JPMorgan. Gresh next Our Phil with question coming of

Phil Gresh

Hey. follow-up. Good morning. Tough

Joe Gorder

Well, young still Phil, a you're guy.

yours it day, one me. get probably won't You'll but from be

Phil Gresh

differential I of there, Doug's guess, side. I'll on the just follow-up part one on question

talked the especially element, here, a differential lot light-heavy. tight You like about margin pretty still is on product obviously

how year? that So, do out of see for playing the the you guys rest

Gary Simmons

is Phil, this Gary. Yes.

seen barrels In OPEC I crude widened have the on to need narrow more very out, we differentials. think, those order we get quality market.

end If demand need you million at point look barrels day where online forecast, X the at the production to oil you'll OPEC most showing a of additional year. global the they're by consulting of least growing

to our And back quality the widen so, year see probably is of where the view think, differentials you'll begin I out. half is

those second and differentials high been we'll more have you half supported of quality where by, of to around Brent, kind look forward at the which oil again the it of year. more fuel year, trading look out if of fuel of the to sulfur XX% I indicative widen see half Brent, XX% is you back that high the gets sulfur further the think, that's curve,

Phil Gresh

Got it.

spending spending XXXX next talked you of able a the question, for trying to second just years X think X. $X these Phase level Diesel. with through the then, And billion for Green Phase Diamond to Okay. despite hold, few cadence over capital still Obviously, about some spending being

I'm the to see flow trying EBITDA just can capital you as out do the to and the or project as recover potential well? DGD think X refining look and Phase you $X on. budget billion 'XX the we 'XX, cash as gauge So, come free do within you margins so

Lane Riggs

Hey this Phil, is Lane.

we is less the year, actually our our billion back So, with that lower. X. bit get we And whatever the We world's want on some little bit budget Obviously, cash -- reason, little diesel and maintain pace things Diamond level. that. for our at to Diamond we did renewable to at if we we billion than about but maintained believe $X X that on do can to on a developing spending some a last point, certainly continue capital a other can spend $X

Joe Gorder

this that go mean, our don't Yes. expect a And year. X broader strategic Phil, from okay? going $X a billion should spend number perspective, to is out going just in billion I we're -- forward, and $X think I target you to

that So, year timing we've of spend calendar spending. capital said necessarily isn't

some to target And $X year it range as and to little billion going the might But, that years, in will through it range, it's XXXX. us $X think, years, so, for this be some more I $X less it than $X.X stay billion in this billion. billion $X than remains billion bit range be and was a

Operator

Citi. next Prashant with from line Our comes of the question Rao

Prashant Rao

particularly little But, bit of a more do California sources outside just or gas, people that coming talked out longer RINs, playing I that say competing and curious California more Port it the see towards we've next of and fair your X outside to and are California. the to on do years? reduce opportunity you other the specifically the the could other a diesel I bit some given DGD its greater lot of pandemic the that on for California. since of I So, there reduction outside part of market that just wondering, market time ask that there's sort energy. and the do thoughts about. a be X get of how term in to they there The there capital pre-COVID. in -- might meaningful emerging with that being, could It RD which increase more which Is substitutes in the of your supply BTC, about. the emissions a credit, the sources California? up goalpost that competing but of was progressed a they're line, in to possibility moving is the regional renewable And, other about market's opportunities wanted quite while few line And expect electrification, is seems going small for evolution, capital. has over a is now, of for the This like expect California target, this about just how provincial LCFS? changed other I'm plans, also wanted pace opportunity? LCFS follow-up create I by see on you would lot you move pieces there, and we were talking a Arthur the

you out? moving playing update wanted an to parts those see I how on just get So,

Martin Parrish

pretty the Sure. as Prashant, stable generator. few is Martin. the And the diesel On far years. then, as is the this last been renewable largest carbon California, obviously, market’s the price carbon

demand expect first. fuel standard That and California, over expect in we to is incremental York in an bring happen New in to by also but going sell XXXX. in LCFS happen. years. I'll XXXX. or that We've impossible that's years Timing hard predict, implement legislation the You Europe. the to to also of State We and next those Today, LCFS will we got end California, next Washington few we sell step place Canada the outside to that answer part will we but in Canada State few is states for of programs. think the be to clean What

blend electricity renewable carbon to for natural obviously Renewable projections you diesel that. change there's So, but future. a are the the rate some it And think in diesel trucking, foreseeable internal their huge still heading their like gas, don't I is largest renewable as that's California, at for mean, than diesel. is continue. We We renewable be you're that. as XX% projections, might they're that to XXXX, expect right. generator. the going if far even look in higher honestly penetration, There's credit

there's There's blend to wall. stop nothing there's -- no So, really this.

we're and parts globe. demand So, in optimistic other optimistic about we're demand in the about of California,

Prashant Rao

Recently, in talk where as California it too And early the on for the we've ton is right you to emissions see And do sustainable bit there has do order hearing then, in the some think going of -- in where to and say to legs a maybe the developed a the rest about, just higher higher discussion that the need now? a middle? in there's that. come given obviously, advocating narrative little is saying price meeting evolving, California, who incentivize price per for to that up, the gives been than the other carbon or who you of per is the the $XXX some see -- a of How sort the be more But, move follow-up that have is carbon a financial world to reduction. had been price in world. headlines, community been you that parts ton do

Martin Parrish

I you standard first on careful lot depends carbon whether Yes. say, okay XX% lot think, a going that things But, go price reduction would in goalpost be by okay it California the they're started now. expect that if tax, have But goalposts, the California, to at move they're the they're carbon I it's down, going a those XXXX credits, little looking price to think price objective, the or to regimes. the with and because a I'd by carbon to you you of it a year. I each happen and they've CPI with signaled, thing, get because harder. different different absolute with escalated right? a $XXX, obviously low-carbon prices the move make fuel carbon that's where If We're having start at at down, looking a

Operator

you. Thank

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

Manav Gupta

unique, something X getting is In X is months see you expectations. DGD generally XX before the or what delayed energy projects doing by you're months up industry, starting months,

from understand perspective a how securement, in achieve to feedstock to this trying able before you of start-up engineering, Just time, are the case?

Lane Riggs

Lane. this Manav, is

to focused -- and we you at to we to did more So, project accelerating project this schedule find actually not our very either. because look step to we are -- we obviously if of can try accelerate by every as the keep the do executing optimize project, cost than budgeted that very, to accelerate on and try we and the so are we spend, spent

hard mentioned, a really, it you've us. we because good big a for is we such as it is So, flow are project, -- really worked have and cash it generator

execution, so put to And we it's sure project our there, that a just of we've it's project revisions essentially and largely really because focus, Diamond we well. Diamond X with expertise duplicate but few fast can. X and is as And here we accelerate in So, -- making of our we along understand. a people terms as project it have -- been moves that able best as on of

Manav Gupta

both is then, us is, obligation, then some prices understand moved how idea of start-up line? I'm your once DGD following DGD phases up DGD up. would lower go which X and cut A And on quick much give it to here trying does the the have follow-up RVO how obligation RVO right obviously, now? wind are what X actually the

Joe Gorder

Sorry. Martin Gary... or We're if see Manav, looking, to

Martin Parrish

factors you've a uncertainty now right And much [Multiple Court by but influenced you've EPA and the there, is point. I Speakers] more I going now. about And Manav, at it's the you so what don't SRE and the obligation of know is fundamentals do. to the as really the that this are RIN lot got to right have probably prices think, think what got about Supreme

Joe Gorder

That's right. Yes.

So, just what uncertainty with change really what's volume And and the RINs all. Biden Martin, happen the renewable at it prices the around doesn't obligation I our SREs agree administration will surge. on causing to is

Operator

Thank you.

next Theresa Chen from with Our question comes Barclays.

Theresa Chen

morning. up side. renewable Good follow wanted the to I diesel on

supply feedstocks, of quarter? And development, the and and such, the absolute about have going think onetime for were capacity if Manav's all about of have will talk but renewable that And sharply a factors time still originally how see meet costs, in costs them So, currently of forward, even now, increase with might under in versus are over to able competition long-term you that? onslaught the planned using? was were a where as terms that you very in the seem as what you and quarter achieve just the to given there If the any you're projects diesel of Can likely planned, as feedstocks. at sustainable? not high. your feedstock type that facility, increasing risen thus benefited Is to frame point of maintenance the feedstock feedstocks you will do capture shift

Martin Parrish

Okay. Sure.

quarter-on-quarter. Soybean quarter oil margins noted, flat gallon per was up you EBITDA were our XX% in third But as versus fourth quarter.

If three feedstock swings RINs enterprises, a there. you and ULSD the experienced in swing huge renewable costs, we've past back DX wide RINs, look on years diesel, obviously prices

gallon However, XXXX. in of $X.XX our consistent, from as low a very annual a high margins ranging in XXXX $X.XX gallon a have been a to

earnings regardless. power And compensate, anyway. market the because that of So, to up RIN that's you is the works PAT go see prices kind there the up, and goes can consistent

works concert of in kind all there. it So,

what about next move on Then, production indicator. happened expect margin slowed palm. indicator to We be COVID-XX, look foreseeable believe over harvest if labor the up demand history drought veg sourcing to because the and time, Palm lack oil the future, price, is well, this with to supply of let's of growth with to global say, and driven of we soybean Malaysia, price is long-term, a one in prices over first and due good what to good Indonesia plus time. soybean oils. by were quarter Any we're So, concerned you feel minus, not a or can but our margin feedstocks.

Now, tight production soybean this is you've year. got pretty

lower a down about worry I So, crop in Brazil.

Soybean is to oil going production be impacted.

got compared so in that's moving of the pricing whole then was finally, oil low ULSD as You've veg up, ag XXXX kind commodity up soybean XXXX. oil too. index And the moving to and

in more this, be vegetable pricing relative produced expected diesel. low ULSD. oil response vegetable don't So, movement response shift And to some sulfur in to upward sustainable we to we to relative see higher a long-term prices. oil In

Theresa Chen

particularly about broader office a policy can Thank climate-related talk next industry transition, of think of cetera? for in And perspective the be? how emissions, renewable you And -- took you plays this penetration, announcements, general out series Biden out you. fuels, the very on how of this and you the energy EV et topic step think what the from standards, aggressive plays since Administration will made the CAFE

Joe Gorder

some and sure. -- seen we'll we've facts less it on at are made perspective. around sales, cover X% they're seen globally. of consideration slightly into year and X% team if domestic time And, than just everyone now, outlook EV demand up I continue for sales I But it have tag to think car focused forward. in policy right? look And of side keep we last the Yes, a affordable it you at the lot and look is And kind this. EVs climate feeding them. going people forward of EVS, this. Rich need and I mean, housing can safe for mean, focus to change for Walsh when headlines less takes all is in to their And just the developing long-term whole than oil looking and we on countries, that the their providing

a of there's future. far will cleaner it's of on extinct. fuels reality is be be but the the politically, going that So, are EVs part from But, combustion the from that part is far future, lot internal -- engine being going to

a to as we've thing go fine done amount that also efficient. has still ethanol with is selling know, intensity carbon one producing. I looking that more at projects that's sequestration that adjusting business. so, we're carbon a our the we of on. And We're our in so with all are doing And diesel think internal it keep Valero, And doing tremendous and undertaken. have the a forward. engines lot projects products you the We're of that around to combustion mind frankly, that of of renewable and reduce industry We're we job operations working as hydrogen

on fuels, very intensity traditional perspective carbon see tell increase. of So to overall think, the think, I from already can continue And see from EV. a we're anyway, I that you And deck IR diesel our we'll renewable honestly, competitive there's an with that you'll lot continue And to here. a going liquid fuels down. go

the there. side? policy stop on Rich, I'll So,

Rich Walsh

to announcement Joe's headlines yesterday, an to to of a they mean that the I that very in came the of under it's fleet lot mean, see to And order lot didn't I the mean, that's course, federal right. And difficult -- of on a you similar EVs. order see out order. I out, than federal with Yes. that movement in that. become the But, EVs think moving Obama executive XXXX, half we a issued fleet on the you it. EVs. of we lot fleet more point do mandating

The truck. diesel other to today, emphasize renewable really outperforms a that like in drop on basis I cycle life thing diesel an would can our and is, equivalent electric

call help climate this and address order and we clean. away, zero-emission clean administration So, certainly can vehicles, issue are ours the straight is did for

the is have sure And to diesel it's fine The made American requirements, of other renewable that electric even not out, thing there and a meet print, in federal that and our I'd procurement made, those point it but it'd meet XXX% standards. that now. be go vehicles in can requires lot to ready order, you I'm read is the America

will the that our So, for now. we -- this to in think be products. actually they're overwhelming of the go lot ready are a And economics end,

drivers is demand a but So, good that's We lower we and think can for we we us, going administration. to for be there so. work thing think policy carbon think jewels, with the

Operator

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

Doug Leggate

morning, Joe, Happy Thanks. Year. And Good New everybody.

we've I think, earlier, I first may I'm I'm year. this in Well, it's congrats the you anyway. thinking you've I be, repositioning looking told when over the He anyway, grateful along a not analyst much thought and but that, our over Doug Doug. little hadn't something, is me sector, so but the I to so time sure passed spoken was nervous will oldest heard someone for [Multiple be Speakers]. But

that Homer can forward? So one-off, $X not losses billion housekeeping guys, just with bring actually you immaterial any obviously. cash retrospective to a to start are just two questions, question. wanted there I want quick Is double tax the a or I please. cash check. other tax mentioned refund,

Mark Schmeltekopf

this tax NOL is Mark a Doug, only that that. that's Schmeltekopf, item item. of XXXX, one-off being Obviously, to that's the it to and is our back significant XXXX carried relates

Doug Leggate

more high Okay. little wanted you. double is My I follow-up, it's bit level. I more Thank -- Joe, guess, to probably just a check. a

level business? steps I'm carbon Is curious, lot what fairly sit Just address on does in discussion? that a been just already where that pursue? love pursuing, expect just it business, the part should something capture the talked curious you're register some will I Is on deck I'm about significant your in of potential next carbon what's latest regard? how your EVS. slide you are to we You've your that sequestration math. from refining the the fuels? the as what carbon footprint and that moves the on your of about ethanol next to

Lane Riggs

take is this I'll at a Doug, shot that. Lane.

it plants, carbon the of coming has the reason like largely do gas ethanol dioxide. that plant off some these choose So, is that's projects we to the with

to to further find before we're treat So, it having we sequester. -- not it’s way a

regulatory technology carbon the to around and to works, understand certainly of try that be other trying all we're regime all sequestration. the the that, not the So, going how and policy to sort understand is

So, it's to for really us a good start projects. and place develop

The transportation of is the other hydrogen. gating affect way will projects blue that carbon this our with that. green We're intensity That and we can do in also fuels. our

perspective from done, carbon Some we helped in, transportation be certainly obviously we'll the them of ones can we intensity a will help overall us. some target ones, we've which our make market are on but gating our with that Depending fuels. -- smaller larger competitiveness will what

on those to perspective, hit trying at. all -- a think, I we're maybe dioxide carbon that that that that's other carbon of a sequestration hit in the it like just So, some other lower basically things are and lot has we're again, things. those something are that see gas trying combusted, streams looking we're are But -- the in and nitrogen stuff from we to been

Operator

next with Read question Wells Roger from Our comes Fargo.

Roger Read

the of to And some on diesel one asking is follow-up questions feedstock. a want second guess, about up to Theresa your introductory I was two I comments, the questions. renewable follow Joe.

you 'XX one out diesel renewable Phase then your into that the And unfolding, comfortable are specific you of plans Phase in first of 'XX see see the the geographic future feedstock, the have? on you necessary focus sight line unfolding, terms 'XX curious your 'XX, of capacity will in and or here in to -- maybe that on points? roll how kind of where that particular Gulf of to just trigger the and So, shutdowns, then, Coast your how in any X X global you expectation and feedstocks terms

Joe Gorder

Okay.

talk one, the one which So, first about the you closures? want to guys of

Lane Riggs

be will that me. Lane. guess, it's Roger, I

talked we the bit some a little of prior earnings about calls. on this So,

million we've barrels about a First, X day seen of refining closures.

I but been we've that some surprised a think -- say surprised it's occurred Interestingly, of want acceleration closures. I pleasantly these in certainly of lot the know -- don't and at of the United to States. I

United at least done of of say mean have I it surprise I bit Atlantic I maybe to about little But But in this Coast. we've day of for potentially think XXX,XXX closure on a that barrels the think now, the would share a of West that's announced closure. kind XXX,XXX States, us. you certainly, doesn't or basin a the to won't pond or further our the on -- side

you They're their -- closures, you really transportation, the could closures for Europe. forward where an -- crude. they away to particularly fuel. I think, look Southern don't to though, going respect have primarily access is advantaged on It at more transition Europe, if from trade flow the look has aggressive with fossil

you'll that's that where see more forward. closures will see you'll be and So, I more think more where going --

Joe Gorder

Martin, half? do second want take the to you

Martin Parrish

Sure.

that to right Roger, about waste very feedstocks, procuring we XXXX, these looking we're the feedstocks need. we at of On sight line what feel now,

with far and capita and comes plus States, If they're you established as that. [indiscernible] per production, oil used operations cooking the biggest and as is United now, And U.S. that it GDP look else. rendering production at everything large. around

we the So, about that into good future. feel

the small, feedstuff especially If of the of plenty pretreatment And waste is that installed are be, to still pretty and you renewable guys waste feedstock just place to look, diesel unit. the U.S. is the the running base there's procure.

oil historically, a growth As from a bit used going you growth get of to out you the XXXX, animal see expect XXXX past of road, feedstock to at the that continue. because production And is. we waste this and point in look expect And pretty has that's to farther significant. [indiscernible]. down growth cooking the But population that lot where been to Asia come that's we quite

of So, and DGD to out don't problem. line X sight X, we see a

Joe Gorder

work take of to just thoughtful to And we well haven't a and piece very done, Roger, it, you I look the well you compliment on on Hey wanted demand your -- done. seen EV it. I would that and recent expansion encourage oil was if at everybody,

Roger Read

that. appreciate I

people And sometimes piece me of work, have a when referred as wasn't to it compliment. a

So, I like that.

Operator

Cheng Our next the question Paul is line of Scotiabank. with coming from

Paul Cheng

shut. talking get mean, maybe for maybe this Lane to facility questions, going is more Joe. about two have Europe there earlier was I is I

take But, ratio a level? you. looking Thank have below first this at plan at we And approach point, the at debt you're going you question. policy added look will we're debt and after books, that point the again. at the that's billion-dollar and pre-pandemic longer position several your when some pay pandemic, And over, the we how free the second everything So, even that to how the the down. generate conservative put will forward, financial first strategy, question down are to that should Company into that you it going through looking assume cash and trying pandemic. on to it will drive we're We term? much pandemic the government So, if more and

Joe Gorder

That's good, Paul.

take I'll Pembroke, you Relative can also Pembroke in let countries. part, directed Okay. Rich within second demands We'll Lane, domestic the you Ireland other and you it let it at too, to supplies when -- first Walsh. and and to UK, the this -- chime the on me. But, and Jason supplies and one look

them so Pembroke. export we We we fuels Canada So, need and on. to when Pembroke out do of of out bring

as say have But, politicians to and a an and on engine country human one something. And out to that who line to weigh down opportunity come have there our internal hard these and it's do lay so, forward. thing and there's country beings combustion in for decisions in that purchased going in they going are vehicles, they're these issues

get turn back don't we if things. these how So, when all Paul, play fear. just go at But, the think, you things we look way out concerned and we hear exactly that historically they I very out, always

clear a as case make as as here. a to think and options on good projects we efficient operation. think we are going focus his Okay? as that we different certainly But, are and on And bad different never think. And team that's have Pembroke. the It's never usually more that working continue Lane I and to

you guys to would that? Rich, add So, anything

Rich Walsh

if reset No. at you a their I see at you this to to But, like to aspirational said early see it mean, closer about tend say, they California, you -- I mean, drive practicalities I they And really the move tend this saw look you're and get when announcements see that we'll just were efforts an target look as and you down you then take if very going these in to and is the directionally to goals. way, electrification think of to were that have start to how well. countries. move these going what carbon. you effect, the in increased deadlines,

cost forward. And the play now, influence start and right there's it consequences this. will so, the to the policy on out, it drive going And of and will big a

I that's the way think, describe best can I it.

Lane Riggs

Southern Paul, just more to located going flow in thing. that's of thought what we've where we're flow to add always was trade is the to Europe trade and key be is. -- I'll because that crude they're Hi Europe, closures, this and just in where one When Lane. more exposed

Joe Gorder

do to financial take Jason, want And the you piece? Okay.

Jason Fraser

you're mean, correct. I sure. Yes,

our One at like technologies. energy on debt as dynamic our XX% We business. a other be right? of the of assumption down transition pandemic, during the very renewable We're and as looking We're debt. extra going. aggressively far we've paying we debt-to-cap some base goals are But XX%, our diesel will immediate more on taken time, growing in is have

dictate end needs which these businesses structure. to and participating new how a looking the a things. in at we dynamic different in And exactly a of We're is recognize exciting. may very up So, it open we time, we're capital

things and see so, And open that. to wed not as we're our minds keep evolve. We'll

Operator

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

Ryan Todd

facilities follow-up bit are the forward you this and in role positioned ramp one renewable kind talk on you Can to little It's think, be the about fuel at a to mix Maybe renewable steps play, fuel of this what Sustainable clearly I large produce side. see able point. longer how is as the a it? small the aviation quick necessary up term. sustainable your to very over going market to aviation diesel going

Martin Parrish

Martin. This Sure. is

a I globe. to to step to some really modifications Is it The ramp of at the pretty get renewable sustainable to the feel we that's of think, significant, the it's require to it they're Right but now, use plant necessary a aviation some going confident aren't across they when. required producing a Yes, out you're there. produce mandates -- fuel, is but it's have diesel happen? huge. question big it it's coming, going up to

on close pivot there. pivot obviously some there when keep mandated volume about we to We'll options. getting attention there. could that need So, doing paying we it's But, to and engineering out really

Ryan Todd

and of kind parts for low refining bounced sounds course margins you those to here have widen playing just touched maybe up capture year? industry. And to to has course entire the headline then, side you of maybe a overall thoughts mean, see soften an little on about like of refining the of you of It capture. out I maybe recently. bit. the of you It differentials and I me talk stubbornly follow-up timing just over pricing this year? you but earlier, how, on expect the recovery feels RIN talked the out how one some how trends stayed Any like Can the that mean, some -- on on the over

Gary Simmons

this is Ryan, Gary. So,

ability we to our know, on And on differentials, feedstock it's been do especially system, the of you as very the the with narrow to crude us, refining side optimize challenging our quality that. for key pride ourselves the think, I business.

easing more we So, second to you the us on sanctions. of go potential get feedstock OPEC of capture to potential more half rates those easing the our things on will of and Venezuelan Iranian side. do as market, do sanctions, And All the optimization the production year would that, allow up.

Operator

of comes Benny from Stanley. question the next Our with Morgan Wong line

Benny Wong

terminal Joe. international with Hey, you now highlighted Veracruz forward remarks, In your moving started. your strategy prepared the

Just give and curious and Mexico that demand to differences maybe of if get update you I you're the any are you're specifically? us generally there margin recovery seeing and outlook across a terms in sense is where wanted in on demand LatAm if regions able in see? an they to notable can in

Gary Simmons

Yes.

Gary. So, this is

mentioned, Veracruz the at end line we put terminal Joe As the of year. did the on

today. activity. gasoline doing We're diesel and some commissioning tankage Veracruz both, have and We in still

a of expect an we barrels weeks. have next day. our were XXX%. Mexico That's operational XX,XXX in couple year-over-year about for little quarter Overall, of rack increase truck the volumes a So, the to the in over

country. in growth So, the good

is from about we third down XX%. The mobility However, the we the was down about in XX%. quarter, data see quarter fourth to mobility Mexico were

and but still volumes. we're in continuing big indicates gain in hit it that to market a in share, So, we see saw we Mexico, our mobility reflected did

Moving the volumes probably second start really online come you'll quarter, on. inland And inland to early anticipate that terminal, our I we those ramp where Puebla one our come the up terminals at with that's Mexico one -- mean, see Veracruz as associated in Marine and terminals forward, City.

that to central is XX,XXX a system. in barrels get goal about to day Our

out of The other lot a thing it the chain. that takes Veracruz does supply cost is of our terminal

addition expect ramp-up margins that we selling on volumes, wider in to also country. the to So, would the volume we're in in see

Operator

from Wolfe coming of Sam with Research. line the Our next is question Margolin

Sam Margolin

My question operating is the on side.

throughputs least flat Gulf quarter-over-quarter, quarter first the Coast. in are Your at sort of

rates, and I'm assessment tolerate think I'm you and with utilization want balance your market you you spreads like how you just curious to on to you work kind demand. commodity of of said, is about sort crack this the commercial are bit as ramp you your as wondering, recovery what with concurrently up we little just how utilization? see side so, starting do what operating of what a through various pick can here And much scenarios? that versus How enter even phase the

Lane Riggs

quicker, be be to trying things very and take -- Hey certainly maybe up, but can rates shot chain and If Coast. our Gary there's we're a if recovery careful higher, Sam, we're I'll this could supply follow is the anything. not line Gulf trying Lane. recover obviously to if -- being in extended. get positioned We're our very

can -- don't lot sure that, assets So, certainly raise that going we're around make to of just rates as into to position about sort sure pricing see our better. we we exposure have to trying strategies a things try this, have -- we a conservative well-positioned the make that think posture getting if of but in and we

Gary Simmons

Yes. I would just tag on to that.

results do feel and comfortable [indiscernible] able looking if higher we good especially think, is utilization up in to have I exports, us we ramp utilization. the margin that, and key and to for it raising we're

Sam Margolin

if one Okay. processes of and there's with follow-up, I an theme, EVs EVs, certain that a that are on the transition products are materials And specifically and then, energy of associated petroleum other in just sort along amount with energy might, transition.

way the out make the you you're right structure you today, can business. things that and diesel on on be anything, might is, to you focused question So, focused guys necessarily renewable they until figured but not build weren't

investment today, the potential more materials of that streams So, immediately product necessarily thematic, think are if or not sort specialty investable looking about the horizon, horizon, not of out over you remix the chemicals to over your other into your over do maybe like how things hurdles? kind

Lane Riggs

Lane. into So I'll looked of bit Sam, We've a it. quite petrochemicals. take diversifying This is

We continue it. look at to

it just our met it's -- threshold. a hasn't gating have We --

we far haven't our going at but wheelhouse do. of too things, we we It's not So, these out better -- to we so when because than to of it's projects. continue do. some lot to we're found it, other be But, a would to look that do them something could obviously, far, of our

-- mean, renewable I projects, diesel money, world doesn't like our where carbon of trying where It the But transition we're put that's in to petrochemical put -- of a mean that of right? going money today, example, to sort idea. For certainly, not that's we of path. closed are -- we intensity carbon lower investments terms the our we this we're to fuels. of lower transportation in sort in this instead

Operator

you. comments. I the to for time the session. and end Thank this like Bhullar our to of Q&A gentlemen, over any Ladies would the point, back we for At reached Mr. floor allotted concluding additional turn have

Homer Bhullar

question, day. feel a and safe Great. me get chance Thank appreciate for and have joining those healthy, didn't you. please a Thank you. And everyone I and chat ask to to free stay us. that Please a great with to contact you. everyone happy

Operator

this for gentlemen, today's you participation. time. does lines this Ladies Once at teleconference. thank and And you disconnect your we again, your may conclude

Valero Energy (VLO) 28 Jan 212020 Q4 Earnings call transcript