VLO - Earnings call transcript Q2 2021 | Valero Energy Corporation

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Operator

Greetings, and welcome to the Valero's Second Quarter 2021 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 Investor Relations and Finance. sir. you, Thank ahead. Please go

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. Second 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, good and everyone. Homer, Thanks,

but otherwise the environment flexibility system's in team's margin on optimization the improving and Our week, us a relentless positive to in enabled quarter. second earnings deliver focus

higher the There of for increase from demand the US. our for by proceeds refund, a XXXX portion investing driving used refined the provided the and in our the even interest more cash without a significant the second particularly products, income the in benefits Pasadena from quarter, sale in More terminal. covered financing operating than activities in in cash tax importantly, activities our mobility quarter, was of and cash

of and as for We higher Mid-Continent demand pre-pandemic in demand system. of demand up Gulf level. XX% gasoline refinery levels in around and Jet seeing US excess to well, Coast and is diesel our with our in utilization ramp match product regions. we're fact, responded XXXX's In to continues

picking In highest of easing up XXX,XXX day in volume of barrels XXXX. the to have America with been We Latin the exports addition, particularly since lockdowns which products June, system our exported the is product region. per in from

range and Diesel Green highlighting diesel segment renewable Renewable volumes, well Valero's once to sales margin to set Our continues Diesel's and exceptionally records Diamond perform operational technical feedstocks and of and discounted a wide expertise. ability again process for

segment ethanol expected Valero returns. the the economic while system. in this to the be to lower production. provided to intensity connected products, eight with solid and to anchor help open season. This Our garnered providing serves also BlackRock demand and for sequestration ethanol along project gasoline performed additional interest from the strong well moving parties operating our as quarter Carbon binding goal shipper plants has with achieve increased, our and Navigator solid is with is of in income ahead second higher carbon ethanol project

half is Port XX per and of the operational year diesel three Diamond St. our of gallons year in is the million million Our now also of quarter And remains to total to the of and project renewable is renewable this middle year. at XXX at million is expansion of Arthur renewable Green project Diamond be gallons expected per well, Diesel expected on production gallons progressing XXX in at be to Charles the year to project capacity Charles diesel and Diesel per two scheduled first fourth by St. XXXX. capacity naphtha. Green This operational budget increase bringing

to year gallons be plant, completion XX XXX the of this diesel, million is gallons renewable gallons per renewable expected X.X of of total naphtha. billion capacity million With DGD's and annual

completed to to optimization expected be Our XXXX. third track Cogen completed in in Pembroke this the expected remain projects the project with on refinery quarter the Arthur project and of Port be Coker year,

we product with demand as favorable have a to vaccinations for outlook refining mobility. global ahead, increasing Looking margins, improve and continues

strong In addition, the in that refineries, significant rationalization closures been there last refinery should the with refinery US product refining in rationalization We couple significant further of coupled and we uncompetitive supportive believe recovery, capacity of years be demand has particularly in expect of margins. Europe.

margins. fuel to OPEC+ expand crude carbon we expect also crude heavy should to wider support globally, medium supply and increases remain And refining see as oil policies We low continue differentials as positioned. provide to which further well

in projects the our we years. to next couple current diesel the expect in of renewable quadruple With progress, production

continue sequestration, we fuel, to strengthen in carbon renewable our projects other and advantage. addition, develop and hydrogen opportunities aviation competitive sustainable explore innovative to In long-term

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

Homer Bhullar

Thanks Joe.

second stewardship and our provide recently sustainability you our includes which quarter financial pleased or disclosures. an published updated SASB I accounting report Before responsibility I'm to we that standards results now summary, inform

competitive per or our projects. Net stockholders summary. $X.X global Valero In previously strategy These the our expand for of million with attributable gas global addition emissions income in quarter leverage greenhouse the turning of the per for share emissions second advantage gas or our second of by are Board-approved liquid includes economic a reduce report with being new now fuels consistent XXXX. track and compared And to to our global long-term refining quarterly to greenhouse $XXX our was refining as target $X.XX offset XXXX continue reduce of platform share to by our to in to to achieve billion quarter XX% our offset investments to XXXX. $X.XX projects, XXX% and target and targets we on investments to low-carbon announced XXXX through innovate

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

refer operating income quarter of amounts of the million second reported financial the the Refining XXXX. please adjusted to to accompany segment release. that of $X.X XXXX reconciliations $XXX for billion tables The second for compared to the For quarter earnings

lower per barrel to day quarter higher per of was Throughput capacity second Renewable the compared second the Refining per operating XXXX. million second set compared The per XXX,XXX loss of of than utilization the in was of was XXXX The for XXXX $X.XX to the for of sales second income The $XXX XXX,XXX million of million XXXX. compared XXXX. income of second quarter quarter operating operating reported to gallons million, operating record diesel day segment operating XXXX. adjusted quarter and day of XX% day quarter of for renewable segment second XXXX, the quarter than averaged the second segment $XX volumes income $XXX per operating the for primarily million expenses Refining second second in income per quarter higher X.X throughput gallons which the in volumes. sales averaged which second higher of another quarter of was second XXXX. to adjusted $XXX XXXX quarter cash barrels second the quarter quarter volumes was quarter $X.XX million the in the Refining throughput XXXX quarter diesel for $XX XXXX the the of for of $XXX ethanol million barrels segment barrel of an for XXXX. of due Second XXX,XXX than were XXXX.

Ethanol $XX second gallons loss quarter than per X.X the which quarter averaged of XXXX per the The in million day gallons was second operating of quarter was day volumes adjusted second million. XXXX. production XXXX X.X higher million

was to tax quarter quarter of liabilities due of deferred operating tax was were XX% primarily of expenses higher G&A XXXX. XXXX, of the tax quarter million effective XXXX. our million. as that Net quarter million rate of provided of million $XXX effective UK $XXX be in the our increase was expense was expense billion the second XXXX. $XXX result second than amortization the second will tax the expense net which XXXX cash statutory activities and was The was $XXX primarily by an for in For $X income interest rate in a and and second Depreciation remeasurement

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

the entities, to second Excluding to XX% Green capital Diamond other Valero attributable $XXX capital of million were in Diesel interest investments partner's our of XXXX. attributable investments share and related quarter those to variable

cash $XX.X and and we ratio cash stockholders billion debt-to-capitalization quarter in Moving our resulting proceeds provided total sale in financing Board this of tax ratio of cash. had operating provided And refund as net and XX% to cash in of investments activities $X.X portion the $X.XX operating end of XXXX which quarter lease At of the investing dividend cover $XXX cash by to billion. our by our regular cash Earlier a third cash capital liquidity to quarterly and activities our payable With returned equivalents of at second able net interest month the million end available even a also We the and June, quarter. our the our payout billion to were of obligations the the were of Pasadena the Directors the terminal. activities respect through dividend balance noted, of adjusted with was the share quarter and approved per XX%. quarter. debt activities. excluding our for The of dividend without of second Joe benefit cash the from a includes we were and in financing from in sheet finance equivalents $X all

to guidance. Turning

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

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

expenses approximately as day $X.XX barrel. Renewable the segment the $X.XX the in operating depreciation the and with to be XXXX cash of which in the fourth expenses anticipated middle one volumes Operating two XXXX. refining be to per to expect third sales DGD With expect such We start-up of respect we includes non-cash Diesel quarter in $X.XX quarter, gallon should for average gallon, in gallons amortization. million costs per per per

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

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

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

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

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

Operator

is Gresh Thank of you. from go [Operator gentlemen, for now the ahead. Our floor Instructions] Please is open Ladies JPMorgan. Phil coming question and first questions,

Phil Gresh

Good Hi. morning.

Joe Gorder

Phil. morning, Good

Phil Gresh

the Nice July macro environment. remarks in getting on June organic you opening touched know of better job refining What despite around here. Joe pretty was here. obviously choppy margins tough. some dividend this the coverage in the normalized needs I just happen referencing you it improvement think in and do we or were demand your remarks. to more back levels. to need some differentials, of see forward you in going do sustainable closures margins these Is to is

any additional thoughts? Just

Gary Simmons

This is Gary. Hi. Good morning, Phil.

levels. markets. increasing transportation demand just the about And second centers with issue in second on-road to the basically really pre-pandemic recovery the The mobility other we fuel talked faster in throughout in the pace quarter. in quarter We saw was major recovery was than of the about saw saw we of mobility -- domestic we mobility Joe what recovered the recovery in the you most US world. As in talked much demand had the in good

track imports. dislocate up eventually to to And so from where margins our started global demand our improved as the and markets we began market incentivized

destruction. as caused build. And inventory built And saw high in so levels imports to we we eventually saw of margin later the very quarter inventory

the we think we're into in markets those in good for visibility is the in as that mobility quarter. we seeing second like news did good least have I markets third us increase into quarter at US we the the the go

we're demand market America. certainly mobility, recovery what markets global need up. And the in increase demand Canadian in Latin off sustained take UK the the -- seeing really in to markets in that to the With and have I to global is pick you We quite our that's think nicely. we margin see go

you thus July, on So that are the saw and far about certainly little that's a the encouraging. margins in bit differentials. talked seen second we better crude we've quarter, Then side than in the so

OPEC differentials think noticed the I you barrels on and we moves need back market. meaningful the -- see

some sometime the to the good to And hear plans it barrels to are that. think markets OPEC reflecting already market course, on day Of put degree I XXX,XXX a out back post-August. was

look fourth quarter Again in on the in in about wider wider that the we the Brent at $X.XX backwardation than differentials heavy Gulf the $X.XX face market. what you If of in Brent Canadian discounts has discounts today the see market. the

look in the as meaningful fairly a if that see we you of later Brent move at it's would year. that a as get So percent we discount

Phil Gresh

it. Got

over the Okay. because were this structural the margins oil quarter transitory to I another again, quarter the you sustainability Thanks benefit. that sequentially advantaged switch indicator things in thinking presuming there see trend? just down for indicator. or color. do record up the obviously question. second moving Were that any diesel the But there up from of factors to about Regardless you're sequentially, for want The put you of based renewable soybean feedstock forward? how

Martin Parrish

Hey, Phil, this is Martin.

about just diesel segment, think renewable I if think right. back and step you our

expertise that renewable has of and of diesel refining success Our to and critical a development ultimately been the operations component business. the

almost the mover accumulated You a more that in early lot in we of peers. also all have and space mind keep our worth to than were is have decades of an which knowledge,

operating and that's has been very Green. Our reliability differentiate good Diamond helped

RIN sales that to to as same use results in it price, stronger then going immediately have prices other would we diesel have producers, our the also are the when see going a feedstock. because lag on the the We reliability price going cost Diamond and pricing be expect ULSD structurally the renewable finally you Green And value well is up of on that them up, to you at process refining as system. applied

So with increasing price us this helped somewhat. environment

Phil Gresh

Got it.

Okay. Thank you.

Operator

you. Thank

Our of next of question is coming from Doug Leggate Bank America. Please go ahead.

Doug Leggate

morning. Good folks. Thanks

also me open observations my around flow Let cash numbers. the

to in have Joe, confirm Expect that. you go okay. we All Jason or to So for the one. -- hear maybe can me queue. much this the second Hopefully, right.

coverage improve obviously, investors, be the On that half balance your cash the elevated. of year, as the flow, things is commitment cash while have shown cash to you the to sheet the there, in us you've going still but is somewhat return second

cash returns question. dividends? prioritize through so? balance the walk my incremental have beyond And please. sheet the Will follow-up can take actually a That's next will year or So over first priority us you you I how the

Jason Fraser

Okay. sure. to I'll glad to Yes you it. be talk about

a quarter step our this said, for in We've first cover for change enough to Joe time, of big us and money was a of we all couple ways. cash had As needs. the made big,

our normalize get then put did to of range, have balance leverage to again. we two place first and focus work great back things glad billion-plus second things: starting to up So we our in as to $X be that's in down. initially will year. on We And building on back cash that there be last debt billion $X or a to the said

$X.X billion. June So balance cash XX was about our

would there. at said to fall. on a line this in we're in few redeeming as are floaters working is which starting as second pretty early that spot, debt We we're and good three-year we this the So of at times problem, a We're looking our repayment. look tranche callable before

debt and still we'll true. forward we step, opportunities. things cash and And have have. to that, year first our for But is optionality framework. allocation And move remain at were looking as move, cash still maintaining three our liability a where And look long-term in net definitely be we continue to the we which this we're likely our to more credit to a of and still said, generation further around question, as a consistent into have XX% you normalized our we also something then to cap we're priority which ratings would that increased we with continue that's us. to also we'll So target And normalize more is hope at. That's management to capital net to committed targeting XX%. continue cap beyond we earnings have way, as other debt the the times to to in But environment, is your past. get

ratio forward and target payout XX% able deleveraging strategy. this quarter recovery on to XX% even on an through to that the move we we be shareholder meet Our to as do work We ratio was beyond expect and basis. XX% our we annual this continue as to

So going be to to both we we're able of think do them.

I target the to don't have the certainly We're to the would in your sacrifice and answer. not XX% either. think XX% to think it -- we'll to not I target sacrifice have dividend be going

Doug Leggate

the dividend, answer. clear Yes. thinking guess, but a very about and discretionary more I was I just the beyond full a that's

prepared are events I typically could you but refinery the this talked that particular more ex remarks things in just wonder know insights have I visibility but thank you refineries. might of accelerated do remarks, at I'm you your I vulnerable if leave or an it capital you US, to were your that thoughts this these happen closures around bring for specifically, else time want prepared or the someone So, triggered wondering you don't giving about as put nature or you comfort prepared there. turnarounds of you to that fact to I some back And take it Joe, Thanks. I'll guess prospect if that's it that. perennial that you. what for by the know in -- pace? any

Joe Gorder

I particular good anybody got doesn't think insight into assets. we've specific Doug, that a have any question. that's And else don't

we can are. and Lane know at about times. look the them think I vulnerabilities many all say has spoken I this where

thoughts? Just want to share your

Lane Riggs

closures that an or in have regulatory a those to there. we or how operations them cash over on chunky whatever plant with disadvantages, think will think we and and sit when areas, refinery start of those areas a going issue that you sort about And and in operators think job and -- would and alluded Yes. these flow they're the generate whether you issues think or focus over big think West -- the before this or we to we I tests don't East it's time about Obviously about this ultimately our we've really they big or America. start before, an said, stress it here it's talked Latin and the we say for turnaround, do disadvantages. that slightly through areas Coast, operations will their we to in and areas reliability that and have understand is of have those we it. is we US it's we reasons And happen. assets have about it that's you layer how -- have try capital, -- refinery regions we I over economic you those change -- are Doug cycle. Europe, to might mean that where we've Joe just things or it's how we those And think what We structural we And drive -- these about regionally said when assets flow whether Coast assets respond trade as reason capital as try there the entire we and do. -- to where different fall US all the

Doug Leggate

don't answers where with the is. it the fellows. Valero And I think I happy that assume quite portfolio you're Appreciate is, it

Joe Gorder

operate. very to always our ongoing We markets that sure hard work all we that the make maintain advantage competitive we in

Doug Leggate

Fair answer. both. Thanks,

Joe Gorder

Thanks, Doug.

Operator

coming is question of next go Chen Theresa from ahead. Our Please Barclays.

Theresa Chen

you on Good for morning. Maybe taking touching DGD questions. first again. my Thank

that? a seen profitability Just in light been you strong how volatility we've do prices And that trend seeing see many given and have LCFS row, that going faltering driving of the very in credit some forward? for recently, quarters what's

Martin Parrish

Hey, Theresa, this Martin. is

is is, of since it's now we I if have you thing the thing data you bank haven't But XXXX the quarters. credit five California, stable at look think other for think one been California, them in end right. pretty to seen any from the

actually there's lag. Tomorrow, we'll first a So data. see quarter the

per for a shift pretty you happened California, I'm by last to the probably a thing The lack So we you it's type the the bit much? signaled Not $XXX ton in quarters. targets times. then prolonged be goalpost think the that the was price worry that knowledge. of raise had of response for with being too would sure CARB to content might that see. have actually -- price. reduction But several carbon And I because to little a the really credit the several something stable move of carbon had think pretty other do price about they went because bank if They're where down you there -- about

which long-term would would carbon price then we reduction just expect up. So quicker raise was price in back there shift that a the if

Theresa Chen

do there? under to That broader are then, renewables have on kind And front, makes you endeavors on hydrogen, renewable it. to of specifically wanted ask Got you Many your what development. sense. about And planning projects the there. projects I

Lane Riggs

Hi.

is this So Lane. --

backs So of those as to we SMR of an come renewable carbon the and there that out projects units of from the then off Arthur to refineries, lowers product those those Port ways and St. our both for Green and intensity LPGs them Diesel make units. the and look lands that then get up go in the essentially -- again hydrogen Charles hydrogen to into projects, Diamond turn what we're doing our

Theresa Chen

Thank you.

Operator

you. Thank

coming Our Please next Wells of is Read Fargo. question Roger from go ahead.

Roger Read

you. Yes. Good Thank morning.

Joe Gorder

Roger. Hi

Roger Read

back guess hard at way was kind over in of first areas, And at you of are the -- seen the know We've for market. don't like things frame? what inventories you were wondering And I to as come to the the that, for some those of potentially next, for as to stronger imports end could maybe expectation question what the mean look be discussion the being there you with is you the months were than would definitely the improving. Europe I time three down looking to at I a what let's mobility reasonable margins improving I'd just first say, Gary, at as two it look come in least QX? in they that keep QX measurably or

Gary Simmons

Roger. Yes,

July. So think closed I'd gasoline from all point a they thing I has to of really most been are Europe, is, to import

see. been that's so encouraging to And

reflected Not not the of only DOE we're the saw American I set think much time also more the Latin exports in Europe our more up not only, the it in they some we've States, ramp just things the is last markets. imports barrels Latin to really as America imports pushing America. data to us but because sending were and falling really competitive send an in the in the we're was again to exports of impact than But of that the export has United but Europe, But market. data the first we seen that typically they're off. lose Latin seeing have US, causing up picked we in into

So support of draw what to which normalization I continue crack help trade will spreads. better would inventories, say and is flows, more

Roger Read

the what be aviation looking beaten anything look path talk expansions about economics typical you're areas, front? And then diesels at as more would aviation But sustainable extent some we've you other aviation in as fuel Great. Thanks. as seen. in of them? at the, Are off sustainable little renewable a and I just aggressively there guess renewable sustainable then And I moving of Lot is as one interchangeability was the attractive the diesel the here. curious between of that diesel obviously, fuel? you're, to question renewable

Martin Parrish

Yeah.

Martin. is this So

If reactor Roger you're mean some you ways add and to have have a at that either you're you're I there's fractionator. certainly look probably to add do equipment. a the jet few SAF, going going going additional or make to to -- to it to but you add renewable

capital. that once yield So make a light little where that's your pattern additional And ends. then some bit changes you more

some pricing at the day renewable SAF to to end and you're the side on So help to equal back some the green there. get have diesel, to of going to get with additional mechanism additional premium

regulatory right we We're processes. and the SAF. legislative make processes now incentive everything. We're of That it. to we're the obviously, don't at the economic So studying or landscape looking see parts going how looking said, all being changes once through world in

watching to at some making we fully expect point. be we'll And it. So keep it

of don't but question think a it's I So more if it's about when.

Roger Read

you. Thank

Operator

Margolin is go Our ahead. next Sam Research. coming from of question Please Wolfe

Sam Margolin

you Hi doing? everybody. are How

Joe Gorder

Sam. Hi

Sam Margolin

made ask yield a all yield different a the outcome at question in of you value about DGD little is for to powerful. very My first Martin. I you the flowing gallon could comment given bit that per more just detail go If is credits into

plans you're able production how can far are efficiency? and So you to just if your you and of that terms more of sort it in is and outcomes a yield off detail sustainable how give around whether

Martin Parrish

much yield, the it's a Well, a what and RIN increase so the helped more really discount. the the but you year-to-date Sam, by had had in up -- with price. in the fat about huge timing. I market huge expect. been in We've ULSD price also right is the and been a also been we've than price, And not RIN escalation in the you've has in track fat say we increase bigger it's just in The yield wouldn't on a our with

Our running at feedstocks, soybean XXX% than waste feedstocks buying by lower oil. we're significantly certainly a price

revenue you're And timing and that going like So in immediately going see saying rising price. see ULSD your to on cost hitting goods to is feedstock, just lag the I'm of in market just a RIN immediately the the you're price there's and what sold. a the price

better rising prices. So environment little going see to you're in a margin a

Lane Riggs

to is Hi, little add I'll Sam. it bit. This a Lane.

We have been units working and versus of some versus diesel trying of the gases. LPG with naphtha catalyst and of off maximize suppliers essentially current in yield versus improving terms the renewable to the

life we till… seen have our yields XXXX experience operating from the over So over all our improving of

Sam Margolin

volumes Thank back. and And you light-heavy in bottoming about your understood. starting Okay, Joe comment a you. prepared potentially remarks differentials come as to here OPEC then had expand

at still still supply I'm means for going very normal, it what sulfur relationship penalty. discounts wide. of sour thinking or around think expansion of the that supply that Is looking faster Is versus expands? are signal oil when as you normal advantage the actual high-sulfur than still there be to about the between fuel and differentials? a I It's

Joe Gorder

No.

I high to expect stocks think in margin economic fuel the continue. markets seen running our blend high-sulfur weaker. our in stocks, more to more in then highest had system really we primary prospect have caused drivers on to just Today of of high-sulfur high-sulfur And China the And move the two the one high you've fuel One fuel fuel high-sulfur fuel one sulfur feedstocks and policies that sulfur high-sulfur today. changes some it's barrels out system, some. in blend we we're caused kick the is feeds which weaken in some of some onto them the to fuel, getting discounts. fuel oil movement tax of OPEC caused

Sam Margolin

Take Thanks Okay. everybody. care.

Operator

you. Thank

Goldman Sachs. is go question from Neil coming ahead. next Please Mehta Our of

Neil Mehta

Yeah. everyone. Good morning,

side. The it's for first ethanol here probably is -- on Martin question just the

ethanol segment. You And this just Can had sustainability to business recovery from that you is? think prices? what moving the strong pieces the product you of feedstock about results talk at

Martin Parrish

at inventories And pretty I quarter correlation debt is most good. inventories was Neil. Sure, get you're industry. in obviously second if ethanol quarter just through drawing. quarter second And better really weekly kept good in draw was mean, the inventory margin. it's when to a U.S. Yes, typically the going the you there look happening the the of what And

way. turn we've data that the but -- we now other into through when June, June May So starting weekly and seen in the

they sure. runs than some second quarter. signaled to is for now. cuts I'm guidance see on the second starting We're run the some lower in are third long lower How in in now we We've were quarter. this margins what versus going industry to not quarter last? did So

turns. really at where gallon ethanol a that's the between term into like worth gallon that's LCFS what is going getting sequestration. feel tax industry And carbon to see So looking it XXQ in mean, we more from a about we'll the us we're markets is $X.XX though like $X.XX credit differentiate I gross. long that

and we're plants then Navigator there we're carbon So we're that projects at looking Eastern and BlackRock some with ethanol are also doing well positioned for stand-alone with what sequestration.

there really differentiate So that's intensity endgame is our ourselves. product lower carbon the competitive of stay and and a to

Neil Mehta

And know for didn't Global perform And both of question. Margins still demand No, a independent, that's inventories. Jet. gasoline big hard the but one over years of big great. the come levels until nicely. United U.S. enabling it's here demand benefits side favorable a strikes the see picture last recently been couple that broken-down? ahead back the I us refiners will Joe around discipline the States of run and system low a of Yeah. diesel question if discipline too as in still Obviously, that refining just that structural Lane, in it refiners was product. waiting the as picture of has the the at of has running to It's do you has certainly I utilization on the runs? relative don't for Do space we're for that follow-up, system believe Or this relatively structural you tailwind about generally a refining but if equation is just or the think really

Lane Riggs

Yeah.

more this and -- say manage is is we end of Lane. Neil, at our be independent have will much refiners, than cash I'd What decade industry was disciplined ago. day we because flow And money. the it's assets to just So to to the a the make

just Gary May and utilization. to essentially it mobility was way It what from that I the imports still in right? clear raise in and were talked signaling was I were up areas it -- there a recovered it and markets big you've was is we seen happened think a we're April earlier bug, with that. -- had What out our really -- the attracted about the lockdown. a signal mean, gone U.S.

of of places mentioned signals. surplus States the some imports. was have there's and and look earlier It gotten there other have capacity U.S. to we the operating United refining attracted caller in -- was that European that wouldn't better. So some these essentially lack had industries capacity that our pointed really you I the Europe fundamentals the could say out had -- main we issue -- get was It that discipline. further

though close States you're the up, what today we're yards -- So margins really is coming Europe. not out are of seeing even to United

Neil Mehta

Excellent.

Operator

Thank you.

go is Scotia question coming Howard Please from Cheng Your of next Paul ahead. Weil.

Paul Cheng

morning. Hey Good guys.

Lane Riggs

Paul. morning, Good

Paul Cheng

continue couple were with standpoint? is that the will you elimination any investment number that's by usual And large Mexico and down you lines Gary. hits of So change pushed be as question. export take have And you? to you and business maybe Gary, does the for whether forward? of seen questions, see think your AMLO the you concern you import the market slow it quick guys cancels how recent -- it's just, the there? A action near-term to or cause when in dynamic away this and from first the maybe Or

Lane. is second for question The

design system the for system, even refiner changing But the jet then time this into fuel gasoline. Just that Coast curious, refining the the guys will industry oil of the substantially the crude standard one heavy flexibility pandemic, more type different done or to ship trying have over that I even Gulf a use mean and remarkable to get model. several last of reduced And substantially you deviated -- the job and lot light. of a to from the during in years, to

along soft? doable, So while create bit such have a margin that, you. inefficiency maybe you perhaps any or that the become capture Thank course more as way it's any seen

Gary Simmons

it, reform. And had doing. those legislation. investing they're energy add making we're Paul in that Mexico. let that assets investments others in really intended not But lot one overall the Mexico on investment in. I IEnova I kind anything think that advantage I'll to we're a to the when They of taking is partnered really and of They've to not I'll infrastructure they using see Mexico. And unchanged. wants of if the started we The and utilize to investing agreements in wanted would We what say they strategy is with start. long-term him signed Rich are their in then country. thing Walsh Okay. Really are is really our others strategy

in investing doing I exactly Mexico are We the intended in regulation. with the think in change And is are country. what the we what was

very still is much fully operational strategy our Veracruz now. is intact. So

City second We it the terminal have in was Mexico during quarter. our commissioned

terminal and We jet started bring in commission to third We've we'll start our well. jet as fuel quarter. the will also into third in quarter sales in Puebla fuel Veracruz the

things add Rich us for going I know So want are in if anything? you well Mexico. very And don't to

Rich Walsh

I think that sums it up.

Lane Riggs

flexibility into a more would answer to how differently the Valero demonstrated to learned you would the say, did out at expect to to may your as pandemic us how our Paul actually particularly of be And and going operate. figure least I I operate lot refineries terms think industry in question, – we second

what and see coming the gone crude we in going is as contango to you flat there of backwardation. it think So markets we've is into you'll you capture contango, slight out – we're of I as it right? it structural in margin of terms had coming out was

you ability margin when as see So and affect you the obviously of ahead will to in think much maybe affect high capture. our capture. – kind doesn't flat slight It a backwardation market some combination price I you'll margin will what as to byproducts of have cause of EBITDA much terms capture of some moving so have think really of generate

anything post In about manage to happened lot more terms before. that's even learned than pandemic, our more just if business how carefully anything we of had a we

Paul Cheng

you. Thank

Operator

you. Thank

Our Manav question Please of from coming is ahead. go Suisse. Gupta Crédit

Manav Gupta

Hey, guys.

two also on congratulate shareholder returns wish We the they're are strong them the first all their and taking Locke wanted congratulate the within you luck discipline capital new know Valero. to for to Just new for responsibilities pillars Mr. have all this you I Valero. Homer Joe. want John and built And and which promotions

So it very achieve personally you was for dividend to coverage. important full

despite And so getting congrats there a macro. tough on

Joe Gorder

Yes. to No. Homer Manav. both a need John of luck. And lot Thanks, are going and

Manav Gupta

little weaker. your you Joe that North of a and located us here we is could turnaround seen why Europe My and on was one and have Atlantic Mid-Con outperform Lane strong. this that came in some with I'm refineries if just a weaker the it actually do sometimes is hoping just slightly it's And do North to give nothing quick was quarter question is or very Atlantic Canada color here in quarter-over-quarter?

Lane Riggs

Yes.

actually actually affected you in you – were hit the main quarter. So refineries in second The the Both turnaround issue. by were that. results

Manav Gupta

taking Okay. my question. Thank you for

Operator

you. Thank

is question Sandler. next Piper Our coming from of Todd Ryan

Ryan Todd

allowed there. Diamond timing up Diesel Phase from out half Maybe second you the you – start-up announced What's can of maybe about X Green And talk moved Thanks. XXXX. general half one the that first you the on environment of the to to you the that? accelerate

the I seeing start within you probably of projects? environment allowing what people taken dates are than have better most to your you kind think most for guess I would over expansion expected there that on capacity overall that execute out of that's

Martin Parrish

Martin. Sure. This is

much X I think pretty one to carbon thing is copy you DGD remember X. a have DGD of now is

So little that bit tweaks. we just a helped equipment the major us. I mean but all changed

sooner lot So have. we engineering would done had a typically of than the you

to Now market. funded were up we getting while of knew that obviously, we the everything steel that all kind prices it the we out when beat just but market and

labor is good. Gulf where the had mean placed space The shop is the the and is we I on orders we're So building. that happened. good before Coast, really situation there delivery

these that contractors So units. X all DGD from those things built experience over had experienced and we having of moved then just an one just

the work, work, the the going steel all concrete up. structural structural work So already is

we quick just out that. start gates a the really and be got able maintain we of expect to to So

really us. set that an front construction in of shop getting So space team a nutshell price for and these experienced good out in has increases and been

Lane Riggs

we group. to able what Diamond in has we're what it's in, just I do and learn is I we're accelerated this really – of to And This actually but X really Green Martin mean space the it's good project just scheduled. here said. and we brought is they of building Lane. a in have part not it's execution want process emphasize and

Green diesel not just that to into took execute the not also our in we well refinery So X. renewable to this but this space space. And Diamond sort all and but projects very our capability we and operate can well speaks just in in of transferred just only

Ryan Todd

market or side, both way of material going you're thoughts side how issue, over biofuel out to how the we in into of things RINs with the a Thanks Congratulations Maybe looking the lot on a couple though. Court's next lot with the try been volatility a on mean there's the ruling I in SREs yourselves of RVO. lot. is at -- of on now to it's Any head markets you following and the years? on -- in on Supreme balance and upcoming those a any and pretty sides lately a question as the the pretty noise impressive EPA RVOs obviously on type RVO. the with involved gasoline think playing

Rich Walsh

of to Rich This at that. is is you lot a going on really when is They're of noise this, of to have up I'll issue deal. lot a are it all infrastructure these have to but to forward middle down crack EPA in the the comes out, rear the There this and a try not sort Walsh. issue to take it to out discussion clearly kicking them get past their RVOs. infrastructure to push efforts

XXXX. kind almost posed certainly time RVO. almost be they is rule an you going the the to EPA to and all going way have would once could of By get year issue to we a expect So almost this it. clear the -- through that We're out, passed is

out recognize them that think I And and set time. coming maybe you're an obtainable. achievable same the the XXXX-XXXX at at So rule reality they -- that's looking other and at they that combined will to is RVO or need least

to expect them So we that. do

the ruling. Court the that one continuity on of issue SREs, up these On only was ruling appealed Supreme was and focused SRE the on really

haven't got back The other And aspects EPA that to and ruling since still are back SREs kick of EPA those has issued the an under. them Tenth XXXX. Circuit they SRE, there

prospect whole So still still a was the SREs issues the of of host -- with that to probably that they the really got EPA that out have other I Supreme Tenth doesn't that came stands. Court think and through Circuit change ruling the sort for ruling

achievable do mandate how reality a got and they've to and what's so you what this. is the just guess to going And happen on I do. set mean, attainable they'll that's have

Ryan Todd

All Thank right. I you. appreciate comments. the

Operator

Thank you.

of is Holt. coming Tudor, Our Pickering Blair Matthew from Please ahead. question next go

Matthew Blair

Martin, goalpost Hey, to think good to prices CARB you morning. response ton. I question. that keep expect LCFS want on to follow-up said I on you the move the a Martin's around credit $XXX

LCFS authority legislative that period. some do to production. you two, Does in do or response have that. currently would There's if thinking state refineries Just that, happened? they need that two the refiner RD you know work? something expect common a are like unilateral be the there mechanically, you CARB So have states that in do like costs. about or just the And One, incurring Valero, how follow-ups approval, don't then public two other refineries that have what on would is to

that more they So, is fight color could it? Any that there? something would refiners fight,

Martin Parrish

question goes works. in to refiner last first. is contrast on different Well, the which the what's the the with your racks the down price California is regulations way to LCFS for RFS in a and with that obligation so to passed the the CARB answer That

I the expect from on refiners wouldn't a -- to So that. fight see that's

But is there's several my looking we'll the what into have that. interesting. required I'm there the more statements goalpost. be To I to CARB on to they question can -- that, specific question, out have want not ability moving check a has is sure about We other answer little there. is been to your The do that. understanding

Joe Gorder

that's… I Yeah. mean

Matthew Blair

leave Great. Thank I’ll it you. there.

Operator

you. Thank

Cowen. Please coming Our next question Gabelman Jason of ahead. is go from

Jason Gabelman

on to wanted transitory. could been two Yeah. have aspects ask morning. I that XQ, Good

of sales unclear that if the and not. RINs, minimizes on way of thought incur, costs and biofuel maybe flow you it's there some actual but blending was First, blending or cost buying RINs that biofuels the instead

you're RINs? So Thanks. on as XQ. buy historically and are are can tailwinds if to products go seeing benefit and time same oil in transitory then items dissipating you ways? you you RINs, the of having or moving elaborate kind different and incurring some still also go are buy blending from as just into declining, the kind And headwinds that on at different impacts similar Are or prices avoids to out out the on on of second those coproduct and costs a question it turning have

Joe Gorder

your same on question, blending or first out you're thing. of whether the buying achieving you're kind the think RIN I doing the

is. market the of So price is the -- is price it what RIN

I'd way, you same say result. to get either So the

Lane Riggs

Yes.

to LPGs longer question the long are of the there that tendency with with state to price we in second sort moves like things make down haul in up sulfur, crude equilibrium takes move the have lockstep crude. other asphalt, coke, their do. On and refineries take that byproducts words once crude to don't the or pet get they It it longer moves

But we're it if for don't speculating not crude down is I it that works. -- those improve. down we that for know how you'd entire whatever will prices would So quarter. prices expect -- crude were be the don't that reason

Jason Gabelman

no say that benefit answer benefit in and versus was just stepping blending blending real if Sorry, kind there's up out an buying there's from follow doing on quickly. embedded under biofuels that you're biofuels, the that I your buying Because first of assumption can Is going RINs? that? I RINs side to on

Joe Gorder

would say move to buy the everybody you biofuels obviously, a I going to you're mean can't right? I have benefit just can't there's mean Well -- I RINs too.

certainly -- the people that is at people you're there's both But So are looking to meet of market properly functioning we're if and that have equation. sides certainly obligations.

So to just properly going saying, don't some get place have you're and to functioning but same blending to in market. you're you're both. I'm a going to the do

Jason Gabelman

Thanks. All leave there. right. it I’ll

Operator

comments. Thank you. turn At the over this to Mr. back like Bhullar, for time I'd closing to floor

Homer Bhullar

and stay questions. IR Thank the day, feel free everyone. We team, Have a everyone and Please additional Donna. to if contact today. have healthy you. joining great you us Thanks, any safe appreciate

Operator

Ladies and today's you participation. thank for This your gentlemen, concludes event.

You may your disconnect day. time lines wonderful at a have and this

Valero Energy (VLO) 29 Jul 212021 Q2 Earnings call transcript