VLO - Earnings call transcript Q3 2021 | Valero Energy Corporation

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Operator

Greetings, ladies and gentlemen, and welcome to the Valero Third 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]. If anyone should require operator assistance during the conference [Operator Instructions].

conference recorded. this reminder, a is being As It Mr. my pleasure your host, to introduce is now Vice of Bhullar, Homer President Finance. Investor Relations & Thank sir. you, go Please ahead.

Homer Bhullar

other Quarter Officer, Jason our Simmons, President Chairman of and Energy Management CEO, CFO, Lane members With Good Gary to President and and Executive today XXXX and & Team. Vice our Third and COO, me Gorder, everyone Vice Call. our Senior Earnings Chief our Joe morning, are several Executive Riggs, Commercial Conference Fraser, welcome Valero Corporation's Valero President

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

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

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

Joe Gorder

levels margins in coupled third supported the Finding as quarter. in globally everyone. by continued key were low morning, We markets. during the falling with economic good strong to significant quarter mobility saw in And recovery to inventories demand, Homer. refining recover improvement product product Thanks, activity margins in in

diesel Diesel affected storm production XXX unit. year, ability The significant quarter, process of facilities and of impacts renewable were power oil than sales light are oil our and fact, not gallons St. year. is to the X-year Green quarter as gasoline light did from million we Ida increases our DGD's successfully of utilities the XXXX per efforts their immediately the to and level. team's on-budget the effort. system, product at the the recovery the diesel Miro X. our during XXXX crude shutdown diesel project, new I'm Across safely OPEC+ refineries Charles are in at resulted help sour X operations. and restored, increased sales XXXX. the and U.S. damage Green Hurricane our to total side, in product the Despite in the now of renewable In lows, some DGD and restart deployed the XX% XXX employees, proud the in And schedule, current level, total differentials Diesel and and in Diamond expansion hurricane, also ahead plants bringing Plant. and capacity XX% in and starting downtime up on our supplies sustain and heavy the higher supply. demand capacity medium inventories DGD at In XX% teams very restoration over of are were completed per Diamond emergency after the crude total families, gallons by are restarted. surrounding communities third the of and the once million We storm the widened

and of efficient the and and completed reliable electricity and the In new provide steam we further the in unit Pembroke successfully is started expected to up Cogeneration third refineries Which source enhance addition, quarter. competitiveness. an

first still project the X expected of half progress is continues XXXX. refinery in and Port the Arthur ahead, to operational our at DGD to Looking be

which XXXX. be connected to successful XX the BlackRock a gallons the of project on margin, of these and of should naphtha. improved ethanol be completed million the diesel, is anchor is also in the system, system, season. turnaround as ethanol refineries X.X increase billion product with completion and a capacity to total Coker and utilization board expected gallons result gallons to is Navigator received Navigator a expected progressing proceed pipeline shipper renewable of which uplift. Valero Port binding is Arthur schedule. sequestration to X large-scale provide expected has necessary open approvals be higher year the is With with carbon carbon this DGGS project, plan, expected to capture rate efficiency, million still plants per The to annual XXX renewable The with

On $XXX the capital, entire prioritizes in credit our of side, an rating. sheet a with the which X.X our allocation senior ended balance the strong of excluding financial cash. cash remain billion available X.X rate million redeemed disciplined outstanding floating amount quarter we And the well-capitalized and notes investment-grade of of billion XXXX principal in third We we due and in liquidity quarter.

favorable margins continue demand product Looking as and the last balances global significant recovery, have result refinery of refining continued to a outlook inventories, by supported capacity ahead, over year-and-a-half. on seen global a rationalization we the low

incentives feed industrial winter fuels and producers expected consumers, for the prices the demand energy facilities, addition, gas products switch petrochemical natural refinery as natural stock Europe Asia power generation further and high should and oil needs. gas to to see through from liquid In support in

shareholder with earnings improvement renewable’s refining returns. advantage coupled of should competitive ongoing businesses, expansion core in Continued drive strengthen our our business, of our the and long-term

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

Homer Bhullar

Thanks, Joe.

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

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

quarter reported operating income quarter the to amounts, operating tables third of earnings The the refer adjusted third please XXX to refining the of the XXXX. acCompany of a XXXX that For million XXX million financial loss for compared to reconciliations segment for release.

quarter higher income for Third XXXX the third million for of an of per a lower in barrels to the for per XXXX third compared third was XXX the quarter operating of barrel quarter higher to Refining the quarter the of quarter of million XXXX the XXXX, the XXXX. were quarter XXXX. was expenses XX% the operating adjusted day million X.X of of of and barrel the in XXXX volumes for renewable $X.XX cash, than which for of third the XX compared operating The than sales of quarter to adjusted million income lower to volumes operating Xrd XXX in operating gas which diesel quarter reported averaged of third prices. The primarily XXXX. XXXX, third of in gallons Hurricane quarter XXXX quarter quarter due third to segment third the was $X.XX XXX,XXX sales ethanol income of Throughput XXXX third segment XXXX. loss volumes higher Xrd XXXX. compared attributed per of in per capacity The third diesel the segment million was XX% operating are compared XXX plant XXX,XXX quarter Ida. for loss the quarter was Refining Renewable gallons than utilization XXX quarter refining third of XX to million averaged natural operating the million to throughput per barrels XXX,XXX income day, XXXX. day primarily day, downtime of due per

of adjusted XXXX per which X.X million Excluding Ethanol third day third the the in gallons income million for of in XXXX. X third XXX to the volumes averaged quarter adjustments the acCompanying shown quarter quarter compared release third of operating than lower XXXX. earnings per thousand was day the gallons million XXXX, was tables, XX production quarter

of billion expenses the were of net quarter effective that which were Net the DGD's the third XXXX G&A rate million million. by Depreciation not the was was quarter to $XX was for taxable in XX%, net million benefit XXXX. expense reflects quarter cash the and The income tax $XXX activities For income and is portion was $XXX tax X.X operating expense third from of provided us. $XXX and expense million amortization third interest XXXX. of

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

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

quarter. notes at X.X adjusted Moving activities in our With X.X resulting available were due redeemed ratio to and total amount sheet and rate XXXX a XXXX million and XX%, XX% the obligations excluding payout returned third floating and we entire mentioned to to the billion dividend, the provided respect $XXX of September, earlier, of liquidity, of debt cash XXX balance financing net was third outstanding as were cash. we cash quarter at and our operating our XX.X cash in our The end debt-to-capitalization quarter. equivalents stockholders we end, by net of through activities, cash the ratio, of Joe lease billion. of cash senior for principal in in quarter And million equivalents had finance of billion the

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

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

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

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

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

XXXX, $XXX we excluding expect depreciation our still expenses be corporate opening remarks. to G&A For approximately concludes That million.

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

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

Operator

you. open [Operator floor questions. for Thank is Instructions]. The now

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

Doug Leggate

thanks team. and may. Good macro want getting if balance Homer, Thanks. Morning question a Joe, then morning, sheet I [Indiscernible]. the start I and on to call everyone. Hi, with Joe a question for

think still, growth this might to probably this had but thinking debt to to obviously that this capital renewable capital prioritizing like point, about you'd your is think the your in like should have Capex XXXX? right completed Jason, you've when mid-cycle, still be the balance you how at diesel we about forward where year, of and at expansion there or we sheet see you balance level as obviously sheet So, for above and be XXXX, you'd

Joe Gorder

Go ahead, Jason.

Jason Fraser

that pretty On flow our budget as to end have as to in said, with our XX% that really going -- past the we be shareholders we're we excess to so changed. I forward, Yeah, forecasting no Capex, the change we've extra hasn't mean, -- cash done up return really Okay. with to XX% And Capex commitment there. you consistent as

as cash We think good buybacks then a to relative place the we pretty going our dividend of to a And sorry, And notes floating beyond in look have looking we're we delivering we will forward. made. that's bought make and year, week. We peers. it commitment rate are which more back that, next I to last do to just up then our is to XXX to have we bit, at month. moves mean, next target and a

Doug Leggate

net you like I would you to We point. be? my want do that Jason, Where debt-to-cap guess be to is

Jason Fraser

our in have hadn't to But what changed we frameworks XX, we XX%.

-- So, from that we've down our we know we're the don't but hadn't this are changed definitely time. endpoint changed at I we that, working where now.

Doug Leggate

ton question is parts, it. reversing Joe Thank oil moving it you. obviously this. I rest phrase back for like guys and my want of with to Okay. top-line in macro OPEC+ really, adding a particular of the and and There's try all you

this So, the you side then this is you do simplest you for of go got ask Maybe see spread know, Thanks. the And point being question with side leave jet-fuel of year cycle it. it link. there. the to I'll above year as XXXX Valero missing a EBITDA, perhaps way in product below what mid it at from on an you terms of mid-cycle

Joe Gorder

Thanks, Doug.

Gary Simmons

recurring fairly demand consistent. the -- the demand to is see Hey side our of pre of and been levels. XXXX -pandemic view returning gasoline Doug, this Gary. you, diesel has We equation, tell would I on

Our before activity, Inventories difficult but domestically change demand recovers inventories -pandemic clean levels. probably that part to are pre that view it is year. for -- from you product see the so XXXX the globally us is before jet they quarter the just we're turnaround well. jet it's fact real The next the replenish latter is And inventories low. low look going to when year are as are at fourth coming of on to low,

going year see view we're so low, to And some that we into with spreads. fairly crack inventories move strong starting a to next can

the look are which comes I $XX run, kind to world that spreads paying of pushes places pressures natural for higher. natural to also million you a needed think When in BTU that incremental refining also high-cost play. around that, gas, it at the margins addition capacity the for gas and them into crack raises

now So, at you it's levels. I we mid-cycle would type mid-cycle came more XXXX in slightly trending above tell that below looking and probably

Doug Leggate

Thank you a of to the couple talk Appreciate answers, guys. in We'll weeks. you.

Joe Gorder

Thanks, Doug.

Operator

you. Thank

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

Theresa Chen

Good morning, there. everyone. Hi,

Joe Gorder

Morning, Theresa.

Theresa Chen

my taking some and about of seeing question, comments wanted Thanks domestically to internationally, well. pressures the your for morning. up we're on I natural gas follow it Gary, clearly, as

just and -- So example, competitive competitive think see this the and do on export of dynamics do potentially or for you Europe, refiners first you going how assets, between that maybe how elsewhere, the affects where domestic does to? positioning your

Gary Simmons

gas for is about some that's lane might here. Well, our guess a XX% good help question. of I ask what OpEx? Natural

Joe Gorder

[Indiscernible] I'll

Gary Simmons

Yeah.

a natural a paying for operating $XX figure dollar that's that you're markets. gas. expenses, you which of seeing X, And $X significant kind export you So, see us if give a barrel that can versus and advantage into and what today. very those cash does overall does We're refinery

much we're into Europe You're markets. a pull American from markets, and into not those those big flow seeing seeing Latin

Theresa Chen

diesel your a Got I an bit, it. And renewable to little maybe, would on update gears love get outlook on economics. switching

largely going LCFS recovery are or Is petroleum As DGD this up, and now X expectations. consistent in of ball prices because into there to could is us with now of specifically, Martin give here? generation? like else from beginning Martin's and higher again his it it Would trough where hit something starting on sense can seeing look signs crystal looks of go life California and if here. a love some products previous prices Is have demand deficit a

Martin Parrish

This Okay, shot. Martin, a is I'll that Theresa. give

ton LCFS prices think, I the seen rebound metric $X.XX now. we've a yeah,

to data expectation the game due out. the some think of that's I to second half

that the And of go obvious of quarter X.X% look, be carbon moving 'XX X.XX%. X.XX% goal after deficits just Second from time, the to XXXX, at at but really if will end reduction increasing. data and published stopped to it's back you the month, was the

nothing bank you'd with the XXXX. are happen credits So since each in deficits, and year deficits step flat. change we've up credit and is keeping see seen a historically

changes see is going that's pretty in what in the of explains And that not beginning rear-view And went the generation why some now, in So think the It's kind an with of variant of expect to the would mobility over lack Delta I credits, mirror pricing improving, big away. deficit It's clear. I picture expect. the it's to think hopefully, the we forward. and market deficits. California,

margins. renewable Part stock the moderate in impacting flows the getting temporary to time the any As record the at far and as we the very the years. X into through you versus prices half we the see to of talk to of price. change the moderate, and new a is this the past change Once marketplace. going point margins DGD, about, consistent signaled, market back increase you're expected to market, the XXXX. X this waste DGD margins changing the flows what annual go the expect as we diesel of first the and economics, we're inertia We've We're the flows because we market, work always feed in been the those

from Our that and XXX we what of good future. a annual expect in to a margins indication believe in move gallon history XXX only a gallon the that X-year to is margin period,

Theresa Chen

Thank you.

Operator

you. Thank

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

Roger Read

good Yeah, morning, everybody.

Joe Gorder

Hey, Roger.

Roger Read

and go got -- I in horse uh know that cogen plant Just, bit ahead let's Europe. hear over death. the a of things little to mitigate completely natural helps you've you beat gas sort

liquid and others think probably and costs? for you way are was, were hedge? come said products. for the you about intro. higher mitigation both somebody natural Joe, it the at of you think it, do look think options other back in else, As your step what operations is -- I you hedge at you Another demand to mean, I do gas mentioned some

trigger the points gas? you -- think the do pull we is are, and natural should could over that how ratios of the for product are that additional some about maybe, would to what there what So, demand why

Lane Riggs

Roger. Hey, is This Lane.

about completed a it at marginal Pembroke our an efficient on " is, a somewhere day of between gas. $XXX supplier has our have with was take benefit, in $XXX,XXX these. a yeah, who And on to market the economics do even we ask does. so to unit work? $XXX,XXX cogen. you'd the of I that yourself, and the of project $XX shot just this over and FID day of that [Indiscernible] some versus today "Hey, we're a and I'll -- electricity sort do Does still One So, mean it

where that's running and it help. have margin that we So have we it does that

as guys those economics well, relative Is these Now lot a as the efficient have they don't lot your in people lie. that's of are, efficient know versus of where because cogen cogens a U.K. the Because rather how how marginal you're is I the that need capacity margin to in what call on because to Basin guy market. is and satisfy in Gary their seeing essentially run oil alluded of market. earlier, the the you Atlantic

this Europe means and UK very that to people margin what larger So, on but of going -- in substantially gives be the to that their bit gives economics, side a is a Atlantic. that marginal are

terms is minimize of In hedging or ways, a through to one ways gas. is few mitigate it just in

You most we where gas, our get can propane, into of always things, start we're essentially place their for other long our refineries are you a we can oil. so requirements natural gas do complexity, burning from can deriving

is. signal strategy. see we use and so, where arbitrage that to the around thing other played And is out And try and option

exposure It's know, for can buy don't know and question. an go all go can obviously you out of contract. you in -- do look shock buy interesting to at because how You coal and know, trying bit using trying before perspective, options my we out to storm gas trying and time And we And mitigate And many it's lower to that. ways then, have little words, we people you compare you In his I exposure. the or take something it your and and various not options view we a winter to that. during to insurance look this a free, so, a my from other prevent at incident. use to like -- Yuri cost saw my like a my of something right?

for do Because essentially additional our somebody sort here? something to doesn't size, paid have that are that operating cost, you it isn't if his into what trying So, frame And costs we free. just to that of being it translate -- insurance. you

to so, have ways And it. other you do

lower can of as going in try end of you're bag the of a You our float lot almost the but at fix mitigate decide always There's to to closer prices contango. or forward, day, tools to the to month. the getting it's this structural lock end towards tool in

in the kind crazy look you the it's of in because staring the curve futures now, so everybody's If looking, activity this first quarter. at see right and can you

so, And we do have to difficult, tools it's do but that.

Joe Gorder

switching? Did to you fuel speak

Roger Read

Great, thanks.

Lane Riggs

we I mean saying I switch. why -- I fuel can was that's we did,

Joe Gorder

Yeah, Propane. okay.

Lane Riggs

gas Mainly made propane, but also from our we operations.

Joe Gorder

Okay.

Roger Read

Thanks.

coming side, supply On it we next at the the a I it the off -- obviously happier standpoint, let's curious. trucking. international product with jet month. should fuel some was appears have get in issues a travel look demand chain from just lift And of then restrictions

jet diesel general up versus we You mentioned into you picture? then earlier just on as how the was that Hopefully, XX like focused it there's another logistics, see demand and year-end. looked get improving think you demand up, trucking lift demand? levels. Do fuel do And

Jason Fraser

Roger, in so of side, there what think is still A moved of the get -- trucking it lot We've the drive some and on lot good demand. companies but products trucks a to harvest to weather, find drivers on seen struggling depends quarter, upside the specifically good happens around. a fourth chance Yes, I diesel. to

demand I diesel. that So, highway Which work, that as and a see get to drivers through for you'd we think, is more back worked chance there encouraging. is

into On trending the the that step jumped XXs. third of XX%, change quarter. saw a were XX% levels side, the XXXX we jet nice in We and

below day barrels to XXX,XXX is XXXX. it nice At refining XXX,XXX got Product barrels But that So overall level, that's you've a day kind you're demand in total. less was where about of a see. capacity.

is, demand signs were we at least, encouraging -pandemic. we domestically, are tighter And really seeing supply, you're pre already, So than the side. balance on then jet

an to the supply, travel of are a heavy seemed anticipating lot the airlines that so season pretty transparency that we're that there, we would don't You holiday and show seeing with a look, expect from we but uptake they have demand. there jet we nominations

Roger Read

Great. Thank you.

Operator

Thank you.

coming next go question JPMorgan. of is Gresh Please Our Phil from ahead.

Phil Gresh

Yeah. Good morning.

domestic on points. commentary demand Brazilian Just supply really up following picture, to is from It export markets the seems right the about the demand the you around pick starting are how data now? up like thinking recent last

general, think how you those in the European dynamics do and just seeing with are you export about the then what So situation competitive right in given refineries now? markets

Gary Simmons

so Europe levels. and good very demand to Yeah, I diesel of you has pull tell open Very same export -pandemic to Latin that, to the export thing, you our pre know, and very mobility side, swinging would in good demand returned the the seeing America, type export and strong Europe closing as we're kind demand well. on is arb

again, -pandemic. flows to pre normalized they seem where trade completely have to So were

Phil Gresh

it. Got

is happened or like the to a second you underlying demand prices stronger we were we to lot come was so all impact there's of Europe, were because then, think about And if than do had spread, gas my just it down just, the diesel of back that? crack this should discussion be a gas on on of curious where before see in it's question European scenario feel higher or, been underlying the improvements still natural just Okay. natural how would crack and of refineries, effect

Martin Parrish

Yeah.

spreads. looks and the to to and It is demand in very in falloff even you at expect utilization, us, would see difficult draw been it where the crack keep especially the that's to they be long situation you the stocks support suspect cracks. to going inventory I versus trending, we crack Europe as ramp case, up natural their some for to that's spread as would inventory support will if replenish gas however, really weakened, look and it's as So, Europe, continue the

Phil Gresh

Okay. it. you. Thank Got

Operator

you. Thank

question Prashant go next of Our ahead. is Rao coming from Please Citigroup.

Prashant Rao

wanted Thanks morning. on Good policy. allocation my -- taking little bit on morning. first Good I question, guys. just capital the to ask for Hi.

comfortable it looking above year expecting, the looking commentary earnings distributions could about the come you us allocation a be your for the around from fit it dividend been think curious next said have the Given partners what and and up being giving capital can, DGDs just mid-cycle framework. place little EBITDA on I I'm that? to -- how like, into [Indiscernible] the distributions maintain many of later. specifically bit maybe

think that Given dividend? on you is shareholders more project but about potentially that XXXX to got sources and the Capex that set factor you is have? flow for you've Or money and X that the on cash really distribution back the specifically that DGD is other material versus a putting to coming start, how of not

Jason Fraser

Okay, Jason to and a definitely DGDs shot. take more it's you're And a right, I bigger come is development online. this can going positive bigger get units and as the

in to So, that look it help definitely it's to get in it's but excited growing of normal XX% it, doesn't significant, a our at EBITDA it acquire and half how and the -- [Indiscernible] forward. on is we analysis math will that's change aspect, XX% very us distributions our going we cash into target us about us and we still

Prashant Rao

be for yet, to of soon need Ethanol could something in ethanol XX a a demand RFS and news We've one, -- to in from guess means also there. able Couple project do got FID see CCS to up to that the of around industries. progress the we've support overall volatility roll increases to standpoint, of for certain what about Thanks, what footprint got about standpoint certain good remainder and some the ask here for ethanol from revenue and how Thanks. for those the all or some and from how you you on increase Jason. we or your just project. could a I then the CCUs if if -- more wanted those Project, macro about I I thoughts in questions haven't you wondering touched the address blending. factors government the was might second part of question, queue affect

Martin Parrish

three we're Martin. moving are with side, ethanol of four -- operating this the the but so ones the of U.S. at eastern the them And sequestration potentially XX side a Well, side for Prashant, plants bit the on Eastern eastern X is this is now. forward the I should geology Yeah, down into on say, the plans going on CCUS. eastern four. of road, and system. we're little And side the the of of the good all is Indiana -- the them [Indiscernible] the is navigator Ohio,

planning on-site. the at -- we're do So, sequestration actually to

the that's process, now hurdles our So through But plan. get to through going that's and still there. gated

So on a a $X.XX we're Low $X.XX getting headed stated, uplift Carbon just on CCUS. versus a almost gross XXQ as that's gallon XXs a about XXci worth basis. an to excited And on that. about and The is the we're gallon gross where of a you basis.

as we're at look spec I for pretty the ethanol, U.S. XX RON, feeling, far get the higher As good think, oil. something good demand with engine. about fuel Good ethanol, autos, maybe for a happening to the efficiency for to for good a we in

is more we're of in been we're mix into we're kind post that COVID. that -- getting would back blending. So, optimistic that's again, the seeing pretty the And situation probably have impacts about increase U.S. now than the the up big good in too Ethanol definitely demand picking past, the with The we ethanol stay fuel in export to of

at really the there. is several for ethanol So, sites we're pretty outlook the carbon Producing deep into the it's sequestration. driving optimism our about Carbon. optimistic fiber at the point. But Low -- corn future and We're what's this that

Prashant Rao

Thank much, that. you it leave Appreciate there. Martin. very Thanks, I'll guys. it. Got

Joe Gorder

Thanks, Prashant.

Operator

you. Thank

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

Manav Gupta

we and at Coast on back XX and scrap, look you're averaging little specifically question. Gulf about Hey When XX guys. and XXXX. our about go was it bit A follow-up that

this go course is is XX to your we still the are is fair strongest quarter, way X. are right WCS in in but up know to You indicating X shaping X probably are indicators some now it's I things it times to approaching? to closer Brand say almost have now. quarter Gulf years

Gary Simmons

it Well, again, would to But month-to-date on you going shape-up. we you the indicator, at don't with agree quarter significantly if certainly, know how is is mid-cycle. We above that. the look

Manav Gupta

is HAFFA quick are commercial fuel, nothing Valero a than aviation sustainable there follow-up and produce nobody works of but Okay. out And does. technologies like better there works to here HAFFA number

that lesser sitting who commercial companies, the with big out come can technologies, players the best smaller guy off-take and there get is with out it do seeing we're agreements so, sidelines. on airlines, And still big

wondering gets fuel? aviation So, sustainable in I what was involved Valero

Martin Parrish

is with stated, a DGD can any a and or talking SAF a want customers for X plenty Sure, really progressing and currently to as is X that Manav, we're minimum Martin. maybe also our through our are we gated you X, that additional this that. interested required investment, in we're fractionator not SAF, production beyond issue. And thereof. as The demand process does at of Well, X SAF customers, retrofit a it or equipment state about -- developing, it's have thing is additional and there's combination engineering DGD SAF require not so

needs So, incremental of price SAP such investment. the to be justify that to

blender's final the engineering-wise not a on a the gallon So, we're to waiting tax tax blender's that -- credit. the we tax compared you outcome on dollar do think the for SAP But credit. credit get favorable

proceed it's question beyond But do we're of a to when. not out that, and of it's again, question looking for to and EBITDA we likely SAP, it's sell not to going a it. of one just engineering. favorable say, as needed to are positive you produce And incremental if So this,

holdup now. is what's the that's So right

Manav Gupta

Thank you.

Operator

Thank you.

Research. next Paul ahead. Sankey is coming Our from Please go of question Sankey

Paul Sankey

morning, Good everyone.

Joe Gorder

Hello. Paul.

Paul Sankey

me we've how in of rule since it's good sensitivity? or long guys sort natural It's you gas really that's sensitivity terms worried it much Can so battle of years changed a Thanks. asset-based what has since, of remind a problem, about thumb how for the XX it's changed time uses you is, since and been been your prices.

Jason Fraser

$X.XX, per about change $X.XX gross. million Dollar barrel or a BTUs,

Paul Sankey

changed with while low I crude Canada, period from plenty from over Saudi, you, that managing Thanks. -- talk very lot well. discounts, as Dubai some Lane a Nothing Venezuela, slate issues about Mexico. has have Great. a to just the how you bit about brand, brand. West to you Can and also crude talk market? notably Africa the for significant example, you're Can

Lane Riggs

good answer my question. friend let I'll Gary that

Gary Simmons

widest we're stocks in the of look, seeing some you the far if margin run. heavy we feed So today,

blend running margin. have stocks heavy today margins, mentioned, that of canadian the good You has some good fuel we're

In light it other goes. terms comes and to of the sweet sour, medium

we're it and light move sours. to as Gulf our west, tend If you economics medium on you sweet is, what Gulf, it the favor as in east would you running Coast you sweet. light have over in market, favors seeing But sours, look general, today's move more assets, at better in medium the

Paul Sankey

crude Is the of amount the itself of had major U.S. lower a the -- has coming out impact?

Gary Simmons

No.

As the long as in really export markets. of a to we not that TI are still long we're from getting a point kind we're exporting crude, sets the where and way Brent

Paul Sankey

my the a or Because if part, jet product if being thumb fact we would you issues has sensitivity come operations. it's back, your sense. fuel framing I lost what see make the rule of at what to jet my I -- opportunity cost to want in for of way have Thanks. fuel final highest have produce. obviously The what's the that around that know thought there's Yeah, been how just maybe margin the guys that?

Lane Riggs

would I wouldn't I all a I It's This I if would consider. don't optimization. know tell is that Lane. -- of you Gary, matter

it's at If historically it. ran in you the had look it has

compare can [Indiscernible] almost penny. in to So, the you industry -- always see and you jet to it can the out what ULSD

So, time, ULSD I there's different essentially of market the would most in the is jet. say something unless between unusual,

go down cost X been said, that go so opportunity -- operations, we to actually way making jet. with and I there's we our the especially a wouldn't configured, can say jet, Now big we're almost not

that diesel. been what industry the that means has is going obviously, Now, jet into to

[Indiscernible] the above is extent you've it the it demand throughout created jet as -- and the to so, potentially actually call, crack, diesel hurt but heard And where was.

So, some that. there's to been offsets all

jet's big been us. able a not being Specifically, [Indiscernible] make don't us to I to think

Paul Sankey

there tight, shortage -- demand about and really with right? is interesting diesel Yeah, and really, it's latent looks the The sense everything much just that make you makes market truckers of else. how diesel point an

Jason Fraser

Yes.

Paul Sankey

Great. Thanks, guys.

Operator

Thank you.

Our next question Please Cheng coming of is from Scotiabank. ahead. Paul go

Paul Cheng

Hey, guys. Good morning.

Joe Gorder

Morning.

Paul Cheng

ask about put, [Indiscernible] the margin? hydro to margin so gross After on gross we gas for How PCF gas another about you volumes gas. have I question at should given of I per look natural the capture, treatment Lane, ask also think barrel. X.X about that use price Sankey higher the you [Indiscernible] the on on [Indiscernible], impact heavy earlier to the cost, the want $X.XX talked ed a natural when I that and up question. the hydrocracker how

Jason Fraser

a barrel $X.XX cost of about it's in goods. Yeah,

Paul Cheng

every per $X? barrel $X.XX for Is

Jason Fraser

Yes.

Paul Cheng

Okay.

But The come indicator quarter Martin. benchmark It is the like question renewable are think it's the gross number both actually will gross we is is When actually spread. job, accurate down. second this than the that, actually margin is for you margin third did not. the indicator we in ethanol, look is what in in for now then placed seems worse your gross on saw be. I at that in indicator, Benchmark pretty And the margin, DGD, they diesel, for ethanol substantially. up guys but

that in fiscal for it's the ethanol think I a fiscal diesel bit and of a renewable issue I quarter issue third on also. think the the

curve you. what maybe the you a whether can to help current also and on way? if And DGD also, can that trends happened us X So, -- understand elaborate continue you tell fourth the is bit, what quarter? those into us Thank one

Gary Simmons

those I Paul, some straight. Hi, keeping help might need in

I'm start Cheng. Here to with we Paul going it, ethanol. go. Bust

the a stated, you was margin as quarter, indicator gallon, $X.XX third The

Lane Riggs

-- to margin But indicator and corn to the our In to $X.XX basis. corn up a to use stocks years, of that to the ratio is, second low the due not year which most but the does extremely that's it's a gallon this on Cbot -- what high. basis you corn have to versus was price ratio was about fine the corn include remember stocks quarter. the costs, use based approximation

basis bushel. at was some If you look the U.S.D.A $X.XX $X, of reports,

$X.XX takes out indicator. the of that to So $X.XX

not that So, and indicator kind at end of achievable. high the just the the artificially day, was was of EBITDA

Gary Simmons

with the broken. price good new crop, corn basis while now, the is still high, the has Cbot news is So, the

margins indicator are over of indicative those a gallon, So industry a seeing where would which the pretty are be. now, you're dollar

ongoing crop, $X.XX But again going corn price -- you the to But go broken. next to so on So really few high. And now, third to end like get right period there's quarter, we're corn DGD, kind this basis this basis, that's it's high. was down -- stay to On gets the a is the DGD, as issue. the where indicator not pretty but of in the through moving. we're quarter, of year, second quite the an probably going things flat, is

in tell the you, would margins signaled lower we I thing first third that quarter. The have we would

increasing going up, immediately, up we've fat is RIN prices, goes of that The up. Some product lag this consuming and so of all expected cost that's our or and your feed when the goods over fat, break we a then was prices quits price prices, price are -- still stock. higher-priced a the immediately in you got as going decreasing, with falls but starts you're that RIN

in that third quarter. of some had we So, the

other while prices [Indiscernible] a these oil, we Anytime we're the X in were got a we're in little flows, now. and soybean price change down go buying and market that's for happened a earlier. and to market way that these into and entering going expect The and DGD big news take seeing to third good in we thing and you market to I the there we for went is the through quarter out it's inertia it so relative get back the a

correct to I here. that else itself And I'm expect think we to So, what trying too. missed

Paul Cheng

What's the current X DGD rate? run

Gary Simmons

we're up, run Hey, were just it along but well. have we the in process moving of looks Paul, good, yet. Everything a rate don't starting

Paul Cheng

Okay.

yet? So, haven't you stopped running actually

Lane Riggs

actually three This Yeah. is We Lane. it days up about started ago.

Paul Cheng

see. I

We you. Thank do. Okay.

Jason Fraser

Thanks, Paul.

Operator

Thank you.

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

Sam Margolin

morning, good Hey, everyone.

Joe Gorder

Sam. Hey,

Sam Margolin

much allocation grow dividend together, was It XX% capital because the worked to the as In sort as you here. right? growths past, your shares. buyback gets on of firmer you and did partially out as dividend of Follow-up the took cycle your enabled

or do one think period, of potentially about entering we other? kind do the the you returns of together to cycle can As they here without stronger capital into phase a next be the of component have increasing

Joe Gorder

one. going Jason this me take is love to to

of high use You said of kind end this don't Maybe know together, to range. the yield right? towards decisions. we range the our target. now. We the link And make we've Sam the year peer necessarily the based them at how Is end do XX% I we as on earlier, right got of dividend Jason mean; high XX%

he past, going debt-to-cap. number any at know, the priorities. now, way top right? you it's around closer we've given we revert buybacks wants right to I back to when up did funny us of as as cash a that what But for to, use somewhere we to by he for that do little stock and look playing the why capital this forward. out fine So, allocation then we'll And act if just you for because is bit. de balancing you executed do the price the in stretch you high and comes It's of a a the allocation then down our we the guys we buybacks, and anyway, part and priorities guess we ways. framework us to framework like it going forward. XX% really plan up multitude it one love see that's -lever the them in our of and laid sometimes, We Anyway, We'd push say, total execution back on in think I had it think you that's and continue capital XX% do imagination. forward forward. it And I a going do our go of it like we're and haven't and

Sam Margolin

just and This helpful. and same coincidence, in diesel the follow-up bean down a -- time have oils too. plant may for renewable competitor that the a dynamics but down, the Thanks. oil whole on were Very the the space. just a DGD of came And been Okay. complex then Martin waste area in at

actually A is that that's in thing $X.XX of -- a down tight can some feedstock your by that capacity people just complex spare of underappreciated. And that And as interpreted same market or couple bring some your Was is. Thanks. the there's a a feeling plants how just the pound. signal coincidence? was

Martin Parrish

soybean bean oil, bean this led oil. oil oil, veg palm a you bean any canola is oil, I all look coincidence Hey price, side, it's at at of palm price. -- when doubled that's definitely And they the got The oil, that Sam, on was have shortage just by Malaysia. stocks lower whether oil the since at globally, it's or Martin, XXXX the prices, if in palm you fall of look and three big oil veg look a oil oil that mean,

to it in So, Indonesia, U.S. in if oil, times palm that put oil production the you look perspective, soybean Malaysia is X as and in as large

veg So, pricing. palm oil drives oil

So oil, move, oil see likely than anytime soybean you [Indiscernible] more oil palm soybean lot about anything a else. it's

on an waste of had the into said, getting weight we where now on It on pig stuff all of think said animals and oil, But earlier, corn So that's above tallow expect of an DGD gets prices and the content. or that. content waste had that relative energy kinds slaughter impact I price value energy to feed complicated I and a situation soybean do all as this because the way you're come the rates, are stuff Certainly, information. now got to an back out. you've

So, wastes feeding not to are the oils. waste feed oils to people out waste figure trying

future really stuff we to So, we're the still optimistic about waste and -treatment handle have glad it. feed capacity pre always in

Sam Margolin

good Thanks so a day. much. Have

Operator

you. Thank

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

Ryan Todd

of targeting would additions characterize just and on lot a the over Maybe additions those we've follow-up diesel your there. in renewable comment last Thanks. towards avoiding about diesel. months, capacity a we've vegetable natural shift light to a cost a capital potential as seen But lot think XX of -treatment also of seen pre the amongst facility. a headlines what I last oils renewable entry But I

years trends flexibility your you the So position feedstock increasingly these impacting given next and markets on see differentiated over few already do how sourcing?

Martin Parrish

little don't are say on issue The oil have plantations, of this coming not veg oil oil for the higher a bit shortage Yeah, soybean And there we pricing Sure. and between and structural what's Diamond the Which would RIN. oil, also prices crude moderating. veg so less, trees a higher given oil for years, well remember of I yields the high margin does DGD. getting that spread RVD is business, veg that's been diesel doesn't prices the there's DX a getting met oil kind so soybean a a now. us, veg veg degummed see for palm oil that in absolute going older, dictate our Diesel Green renewable to impact for with you oil prices the

this running But and us -- stock that with So veg be not guys position going tough. so I our to is pre and good lot in about think in we are that acCompanying puts than feel position. a little waste position being robust position oils pretty better in feed the -treatment just

Ryan Todd

a What quite assume asset out -- to with not, playing guess over to how the refineries Good. er your consider shift a another do for to take next know specifically? asset your for this few being this you would see of out follow-up answer see months? portfolio these do And XX closures marketed is position you How if you -- there assets? lot we refining. on and see Thanks. I now of to shaking maybe adding to you long Do are currently you more then right or lot but it XX I use a there. seriously a out specifically,

Joe Gorder

say today. then he right. with way whatever very can wants. comfortable We're All it that and I'll portfolio answer Rich have the Well, this we

the and for would a that acquisition getting going And grown that a place time up any comfortable the just that assets end we and in through having we got were it As acquisition that to was strong spent there that in. strategy plus, executed record years to track in you operating a standard well. we then we through process. like them the up And be executed, we've realize we would really XX of last the know, past, we same

to And an to for give be case so, incredibly compelling that have any consideration. would it us

now rather to in additional invest refining and that capacity. we I'd know, the assets front. although business anticipate renewables doing expect to continue the that that I right the on the in don't that opportunities, should continue build we sure at investing wouldn't market look have, so, we us assets than optimize be you what's we anything in And just miss be to to

Ryan Todd

Thanks, Dan. Thanks, Joe.

Operator

Thank you.

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

Jason Gabelman

I DGD the you impact. first moving the rate guess rate, forward? easy this was modeling. the by On just use to I non-op Thanks. one lower an mentioned low that good is rate tax driven think a

have rate lower price the of wondering back effective And if seems renewable capacity if I in lot rate to that's volatility So tax online the and the quarter. go wanted I'm the California. just good else a coming go we're to just into a market that. in price wondering It selling for because to your position right fuel year. there's anything, Thanks. your consider Coast drove next in LCFS secondly, could good Europe And to renewable California. you order you in asking insight now the at guys if price of U.S. give diesel optionality’s, than rather wondering of in does to I'm what some a Gulf have I'm to maybe LCFS in terms any

Mark Schmeltekopf

it would XX%, it's challenging future, rate say to of I quarter and then hand tell tax in on for this Martin Yeah, The kind XX%. what look to over I'll somewhat it would be future, under the right. Schmeltekopf, All is it the Mark tax little but your question. rate question does -- the was a take in for you the the near expect to second

the earnings reminder, we said Just that tax have as the and impact you in the release, effective on DGD rate. earnings as to remember a the have

our includes So, portion that a income. income, only half blender's DGDs is our nor in income DGD on on tax tax consolidated XXX% expense partners of reflects the our any taxes included there's income tax DGDs pretax And share expense credits of of of no while there on income. tax

outweighed interest. income partner's effective our in just net also out backing to So of our that impact DGD our an share pretty remind you rate. that is by impact excluded having want s income is And I on overall non-controlling from it

it bit think on at cash look from or I you is of a than does. it share just thinking EPS the the the benefit taxed analysts a tax of is quite some lower which only blender's our is getting are not credit, if purely standpoint, LIRA being So,

what by they tells the not underlying by is you our were and as are it benefit tax much perceived margins. results So, as recovery that driven

I'll so, hand Martin. it And over to

Martin Parrish

again, but right? the question got [Indiscernible] that you the and know Sure. second are to that to up, a October, Canada it, about long-term Yeah, down the always Thanks, look dollar think to if a given question, lot 'XX back on is, XX% really our and just debt markets and we'll a out this the work your different in we're about credit XXX. to $XX credits was are a to what get those and look the The be in diesel and lag quarter and now but of big of And lack on a with would your quarter sometimes constrained the root COVID go been driving get know -- impact get the price there of deficit We markets. me, the aren't previous But LCFS, don't at we've a the variant I fuel it's say has to low is Mark. in routinely first they've We're now at the will exploding contracts hit ton, of credits more already. always renewable California highest Europe for our I working they prices California, as end of the XX%, right was looking we is we in and the blending California. highest deficits. of still to quarter Delta in out just And

Jason Gabelman

All right. Thanks.

Operator

Thank you.

Our Tudor, William is Matthew Please coming Pickering, ahead. next sorry, Blair go -- of Holt. from question I'm

Matthew Blair

thanks being Capline Louisiana earlier you refineries, not volumes tariff low, anticipate which shipper squeezing and due Louisiana trying kind at that for per or crude? to of some pipeline if good to a me connector supply that morning if would to to expected WCS due here. so refineries that's out going week, from and Capline filing the on Looking perhaps wondering just so, if in through. that's of are lack from a barrels seems be Hey, just was only day, lack other with or your the of this suss XXX,XXX a interest Thanks. I

Gary Simmons

Yeah.

with of pipelines So, the too not for this different Capline, Gary, is and us. most much really

shipper Our that's what to taking focus but commitment. we pipelines, good let ship, and I would producer buy the to Capline other connectivity as we end. a been has on the And at necessarily those getting then think not plan do well. We with

Matthew Blair

And be something WCS coming down, do think those will or you volumes else?

Gary Simmons

question. good a that's Well,

sweet will we Refinery. line initially replacement, like certainly into X would mainly see think that the a to for it heavy heavy Line get like be Canadian efficient us, looks at good [Indiscernible] St. some way I it making our could Canadian time. way with And be point its more to in Charles cap

Matthew Blair

Thanks. there. leave I'll Indeed. it

Joe Gorder

Matthew. Thanks,

Operator

At you. additional comments. any to time, or management would for over this floor Thank like closing to turn back the I

Homer Bhullar

Thanks, everyone in dialing Susana. today. Appreciate

up If IR on, please out stay you free have team. any questions, follow to and feel to Thanks, you want healthy. to reach please everyone, the safe and

Operator

participation Ladies and and gentlemen, interest for in your thank you Valero.

day. time your your the enjoy at log the rest or off and webcast disconnect may this of You lines

Valero Energy (VLO) 21 Oct 212021 Q3 Earnings call transcript