VLO - Earnings call transcript Q4 2021 | Valero Energy Corporation

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Operator

Greetings, and welcome to the Valero's Fourth 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. pleasure Relations your and my Vice Homer now Investor President, Finance. is to host, introduce Bhullar, It Thank you. Please go ahead.

Homer Bhullar

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

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

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

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

Joe Gorder

and quarter product refining business for We year diesel higher our saw we demand. pre-pandemic margins gasoline ended pre-pandemic during morning, than actually supported good the improvement continued and levels strong at everyone. in demand Homer, with levels. system, demand the In by our with fourth Thanks,

the beginning fuel Product of X XX% rationalization recovery to of inventories and pre-pandemic Winter the levels significant that's taken a year. were international end at the years approximately of the from in Storm as impacts at of opened approximately Uri up, last XX% We Ida. increasing as also place and domestic weather-related from the saw a jet refining travel capacity result Hurricane year and low the

oil crude oil throughout supplying crude sour the improving the Brent side, sour OPEC+ On year discounts wider crude with to crude production primarily the resulting increased market in oil. demand oils, with

that throughout ethanol record As by for a segments, best margins In margins, say these performance dynamics, across record was Strong solid saw highs recovery near to result our and of our Valero. ethanol refining income operational we record I regards employee low and process of prices for year am the the were coupled for generated a in proud quarter, overall particularly ever for fourth operating all our segment, earnings inventories. quarter ethanol all with our steady quarterly our complex demand and system. supported segment year, in XXXX safety. to strong

reliable safety In These a in reliable and weather-related to pandemic commitment and environmentally refinery's XXXX, competitiveness. quarter steam, our third provides of the 'XX, We on unit cogeneration and started efficient in an enhances the growth up and the projects Pembroke remained and which of track. source electricity X testament long-standing years. we've for safe, are operations. milestones records the our process to set fact, despite responsible And for consecutive challenges

XXX per million commenced project, in budget operations gallons In capacity on total expansion million fourth renewable process a the per annual capacity year renewable diesel expansion result as of demonstrated diesel has to gallons above Diamond initial This quarter brings XXX schedule. nameplate the ahead of optimization, Green DGD design of Diesel gallons. million of XXX capacity DGD's year. since production X, the addition, expansion and The

progressing is the ahead, expected project XXXX. Looking DGD Port be schedule in refinery X and of first our to the is now quarter ahead Arthur operational of at

With refinery's of Valero of expected project, expected per schedule renewable product to should be Arthur to to turnaround plants shipper completed and also sequestration expected and capacity efficiency, Navigator’s is which to year is naphtha. higher million-gallon system, half is utilization activities is the BlackRock of Port be XXXX. is begin and the total anchor ethanol ethanol gallons XXXX. is plant, X.X and annual expected be large-scale with improved increase of DGD's Coker The which this, renewable a XXX to diesel the carbon margin. million connected to X start-up the in the progressing first XX expected in project late completion billion on rate provide still gallons

capital side, remain we took On underpinning our We credit and which our financial billion liquidity, prioritizes remains Valero's available strong of net investment-grade disciplined allocation reduce and to capitalized balance And XXXX, allocation XX%. of measures $X.X $X.X rating. We the guiding of billion long-term sheet ended unchanged. approximately excluding capitalization framework well a $X.X debt strategy In with an billion. capital, in the debt our to cash year the was by cash.

stockholders, first has to dividend as dividend continue of payout XXXX. announced, of Board quarter XXXX. and defending for a a in We of the per of ratio honor margin approved recently cycles delivering the And $X.XX Directors share our the across XX% commitment to quarterly

strong refining to crude sour on low light margins, differentials. oil demand, product capacity remain and tightness refining global optimistic significant inventories, wider product we supply ahead, global rationalization Looking due with

and these pursuing the success with low-carbon expand with driven our an in optimistic technical on In of focus for maintain honoring We've growth uncompromising and to we on global growing team's to simple closing, our which We demand our operations, lower also strategy remain operational of stockholders, competitive returns excellence deploying leaders products. continue the and carbon advantage and well. has commitment intensity businesses us expertise. with capital positions businesses, a our been in our

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

Homer Bhullar

Thanks, Joe.

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

to net of XXXX, XXXX share For $X.X Valero XXXX. net or $X.X $XXX in compared million or stockholders income billion net attributable to of a share loss $X.XX share or income billion $X.XX XXXX. stockholders per $X.XX per billion $X.XX loss compared adjusted an share was net or was in per to to attributable per Valero adjusted $X.X

$X.X XXXX the DGD refer operating to Diesel to natural attributed to release. operating in expansion $XXX earnings an project, than quarter tables the that the accompany quarter reported income of of was fourth prices. in operating diesel ethanol for Adjusted of ethanol the day by diesel renewable financial fourth quarter refining was quarter mentioned Fourth for were Diamond the adjusted quarter the day of fourth than low $XXX the operating the day, day earlier, loss the income quarter fourth Renewable were $X.X quarter of per million of segment fourth the was $XXX XXXX. higher the operating XXX,XXX fourth The of the of for was operating higher Throughput compared operating the fourth X.X in amounts, in of sales million of Ethanol adjusted to million sales strong higher than utilization as fourth Green higher And in barrels to income for XXXX. quarter quarter quarter expenses million $XXX XXXX. production primarily to of to compared attributed inventories. XXX,XXX was million of were fourth fourth start-up fourth gallons XX% quarter capacity averaged reconciliations primarily quarter fourth of please and quarter barrel which XXXX, for per million $X.XX of the quarter cash Joe prices, to per averaged was XX% XXXX. income fourth Refining XXXX, per and quarter of $XX day million barrels XXXX. fourth XXXX, fourth the was of higher volumes quarter to gas X higher compared of reported a fourth XXXX. quarter million the The quarter XXXX $XXX record the million of quarter segment XXXX to operating the $XXX operating loss $XXX The volumes per X.X income XXX,XXX than million Refining primarily income the in income the XXXX XXXX. which fourth adjusted for refining XXXX gallons Adjusted quarter of renewable The compared segment billion gallons per of fourth the volumes was of for the the of XXXX diesel per quarter $XX For billion which million barrel to the higher operating for operating volumes for compared which XXXX supported throughput the XXXX. fourth due XXXX. of demand was segment $X.XX in per quarter. million for X, gallons XXXX. income of higher XXXX of day averaged compared fourth the fourth for

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

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

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

to of through quarter, refinancing $X.X quarterly sheet of activities were share, returned Valero's we XXXX approved and Moving by transactions cash notes liquidity, series recently activities. equivalents position and in the of lease and a our finance to to the million. balance reduced The million due adjusted we a fourth the sound for long-term Board investors. rate excluding of billion together $X.X Valero's our $XX.X by $XXX debt year. of year, XXXX cash floating financing cash third debt had in obligations collectively cash billion cash by debt-to-capitalization were combined was of operating respect $X.X fourth net and the Directors billion. We billion. And cash available regular $XXX with and total financial in our million debt $X.XX of dividends ratio, demonstrating redemption and equivalents payout $XXX transactions, dividend refinancing of that to of billion our reduced XXXX At end net long-term reduction the In reduction senior XX%. per ratio cash. These at debt return completed stockholders debt year-end, and our a $X.X the the quarter, resulting and dividend quarter With to of XX% the through provided in our commitment year,

to Turning guidance.

capital is to billion, expanding XXXX our $X approximately of sustaining expenditures expect allocated growth. XX% businesses. Valero attributable We XX% catalysts growth to turnarounds, Approximately for includes and joint venture capital investments. investments our to XXXX to for business XX% low-carbon and About be capital is allocated the of investments to in which our

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

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

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

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

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

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

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

Operator

Instructions]. [Operator

today of first coming Theresa Our from question Barclays. is Chen

Theresa Chen

comments to resilient. while pretty like began global refining to significant happened setup seem outlook XXXX. pandemic continues your and before amount earlier I'd and refining demand slightly lean recover mean margin I with to about even clearly, positive remain since rationalization the the have revisit that's Joe, inventories of we through a and

through sense risk detract could the the the just on this of that this either you to rest puts or thesis, takes a looking and us year, can upside So give downside here? from variables from of

Joe Gorder

Thanks Gary look we -- lot. a a take take Sure, don't Theresa. Why crack let at a this? at

Gary Simmons

Theresa. Sure,

off seeing just even in system. of saw I'll and We XXXX. through diesel we -- from year, both we're rebound through little expect in that recovery good things we good some a the fuel last our look what started you go If gasoline the recovery jet and of is mean, I bit expect. And would kind gasoline demand. to continue We demand year,

spike would XXXX, were tell But X% average if well. about only with this as XXXX cases to X% XXXX. Some in of in demand you where was we of is impacting just that even weather about at the seasonality. I time off is gasoline already, COVID the and of some also we're off X-day you it go back our year, But in

of in latest it. looks like it already COVID surge So we’re this cases out coming

And so where inventories forward. bullish gasoline with very gasoline moving are,

As demand, was out, less that we'll expect demand be you close XXXX see demand levels, trying which to already capacity. to peak gasoline gasoline feed significantly pointed refining we back and to to with

in be we globally. has tight. low it about was very of you of they're the United When expect inventories to States, are So actually markets diesel, to where X% XXXX. Diesel diesel move gasoline in system in course, the not only demand our but low been

factors, are a So positive having impacting weather on that some impact of negatively demand. those gasoline are -- particular, are in diesel actually

see be occurred. investors turnaround demand. rationalization in So occurring we along the And don't a those the in future see that's in diesel we activity the to clear industry, near strong actually to restock that's very with path able

us, constructive be throughout So year. very the will both the for look unknown. moving gasoline Jet demand and diesel

that of through but will much air get fairly wave COVID, will we picks international time period back of up. be rapidly saw travel is like longer domestic we last a as it expectation before year, this pick travel Our back up

So the levels probably by although to of fully we year, not XXXX be expect the closed to recovered. back end

for OPEC production. wildcard the is a for crude happens Obviously, so kind the to ramp we you card, having tightness differentials do impact I the of of talk certainly what when it's crude market. in markets on this begin up wild think the us, really today, see an when me, in about to year and lot

of to throughout up, demand increase sour to year barrels, that we OPEC be heavy well. A will moving production. be lot and differentials global As would which oil wider medium constructive would expect picks as the

Theresa Chen

great color. That's

to So I ask capital the got allocation question.

couple a for in on we the consistent execution cash You that made so cash reducing And have soon generally the free debt, been the as may as with point on inflection step-up flow progress where near-term around an outlook. generating past see messaging and return at positive we well refining you've shareholders? momentum your quarters on Are to of this.

Joe Gorder

Jason?

Jason Fraser

Yes, you're this take we've goals. good And made on progress that. I'll is right, our Jason.

we $X.X have around out more cash We at on situation, of said end the this billion. We that. and when coming $X rebuild billion keeping the year. We've done started hand we target our had of

net, target delevering the said XX% also quarters We and on billion delevering. to about shareholders. of transactions third the our But margins pace of our the $X.X buybacks start net brought in on we're to getting to to and to return down really working had. our get going the ultimately depend to going XX% long-term we year, to at XX% cash generation. goal off back and the did we've And to debt fourth And to is end cap cash last of and paid year, is on

As better you looking said, things are now.

we've was payout they're return think by target. this increase sorry. We this having with our for meet of commitment the driven also the projects just we can targets years. it's and XX% fourth aggressive continue buybacks buybacks place in paydown doing via our some anticipate both and and so via plans. our minimal pattern, this framework the year exclusive and mutually had pattern feel continuing our recovery -- employee meet in the XXXX, quarter margin we'll definitely does debt goal buybacks, do we far, And they're to and year during first our continue, if we don't shareholder I'm all several strong to the be For related the But to be dividend with to of quarter

Operator

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

Manav Gupta

seeing Everybody getting number of is projects getting question lagging. was What I DGD. I lead delayed, kind equipment we just out had through. is of long not are on there -- first

exception, And keeps an which have allowing project know are going best moving is always you what besides are tell doing else you you me, people. time the line best backwards? you You else versus But right, your everybody I forward move the forward. people, to

Joe Gorder

should even anything? don't Wow! say I we --

Lane Riggs

the Hey, I'm still Manav, people. best Lane. going have to we say is this

Diamond we looks of a understanding what We execution also have the really like. So completed Green X, right? project good

these, are been same and the And a just really Diamond to partners improve schedule, the able we're built business X it's it's have around, in we’ve our well. these better. really partners we just we the third, X. and that people, Green permit been just have business are even as we've good we've good of -- And way -- We our executing largely we all not really team also permitting,

So just....

Joe Gorder

Yes. there's been went we learned as And Lane, through lessons there's lot X. a -- of

And mean… so I

Lane Riggs

I what just we’ve That’s learned built things. built finished we've mean. and We've all we X, through X those -- all

We an early the are we of advantage -- being mover this definitely in have space.

Manav Gupta

fats moving My animal for the looking DGD a is second get used terms animal more guys is now? like acquisition, DGD X? feedstock of you X. running it what need is when to think with you guys. ahead give point to X quickly and Perfect, is oil, your situation to feedstock there cooking very DGD international fats. How would in I here was stage, kind this of very up more follow-up At partner from feed in Are close an you which looks would more

Martin Parrish

around, oil X that's -- continue has feedstock carbon DGD the market. We We've feedstock. that feed on tightened good that. X. Martin. relative feedstock and that when and to soybean up knew with X, And and The trade to coming market is with our this We impact contemplated expect plan pricing frankly, start-up oil. we X X Manav, relative of appreciate. to and was an soybean X, flows. we feel the Yes, expected DGD waste Obviously, market is to DGD And to we had appreciate to moved everything changed we about

to So global yes, we it's growth. a yes, we're it. all up, to but be the to able we And just feedstock be it target, GDP situation, expect kind to expected sum tied And where moving of to it's feed here.

Operator

of JPMorgan. is question Phil from coming next Gresh Our

Philip Gresh

things since XXXX, even And right. than Coast advantages they're if about The feedstock XQ I fourth we quarter 'XX that that. in the talking and margins Gulf were and have the refining were like when best IMO better XXXX

Gulf if think in the So I curious that just sustainability elaborate the strength about Coast margins the about on quarter more of the saw that? there's you was of we and anything to how

Gary Simmons

Yes.

a the see lot typically we think Coast, in to I -- Gulf stronger it's tied So when optimization. capture feedstock of rates,

around And oil so running our some certainly, of capture fuel in supported system, blend has stocks we've lot been which higher those more and helped rates. those a doing of

Philip Gresh

it. Got

Phase sounds some about question, quarter down any that, the maybe whether think, other commentary there, it's in then expected. the your how you follow-up The is expected capture rate I you in And forward? some of run sequentially. there, on Or factors? there than there you Were was, just and the think a opinion, second this as a there factors transitory Okay. some the X margins like or moving up renewable kind of had of started feedstock It diesel. bit rate, lower on gross a indicator with but

Martin Parrish

This Sure, is Phil. Martin.

capture. of which margin soybean gave capture the feedstock to all lower XXXX XX%. price. feedstock really low So some capture In prices soybean at half were in In quarter, about oil, oil high a margin resulted the that 'XX, to margin us and relative first fourth relative was were high prices the in

DGD while. of we're to start-up the for With going a prices X, have tighter

capture. that's going We to see soybean experienced And the for be forward then plays we XXXX. immediate right oil, would we And the around be what few But feedstock that after this oil incur that. it in soybean which months closer future. to out throughout XXX% type we'll around expect next to margin expect how

go look we right at back around those capture. margin you averaged numbers, and If XXX%

expect to the we few in kind shake months. of that's things next out So how

Operator

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

Roger Read

some you'd OPEC oil what highly just I are of expect? want on tightness unit. more other ask dependent the to the tended And there here back, a side we work? is putting factor in of we suite come Or in some if I you're on at refining terms comments, And of light what one then saw is reasons seeing the differentials, possible, closures market? that the crude the to be to

down side, also that some So if that for differentials? is on is physical the of of demand tightness accounting the

Gary Simmons

Gary. it's Roger, Yes,

a simply the factors There's weather I We production the the Ecuador. tightness, contributed there's that supply Canadian off been and of We not have barrels disruptions market. took OPEC. issue on between to Turkey had number between think the heavy -- saw Iraq Western winter impact pipeline from from in Canada. an -- the pipeline that

So again, going only We a number OPEC think get of up. factors. forward, not ramping production

of We logistics expect it we see production to back not only on. actually back, grow some Western Canadian coming think will with projects the come the

And of back. was that production so is market the most coming that off

will to and In production the off market, the pressure the the coming differentials. the that take some crude off production growing certainly addition on of OPEC crude markets pressure

Roger Read

'XX? of cash in model Jason. assume at you 'XX, capital when possibility insight maybe risk something the back about way? of seeing neutral some going other working getting coming though, the 'XX. event unrelated is the follow-up on we returns significant you a reverse the Like outlook, think then capital should you, to more assume are we my that do the in improvement and Or given curious, of in normal working in question to And was I

Jason Fraser

Yes. our follow movements price. Well, capital in working generally flat

neutral capital basis. our on assume just working cash we're as forecasting, when we So

Roger Read

prices working going So up, capital? just eat down, If prices to go positive it's a go reminder. quick

Jason Fraser

Right. That's right.

Operator

Citigroup. next coming Our question Prashant of is from Rao

Prashant Rao

I the back wanted allocation piece bit. a to on capital circle little

to It sounds You've year, high be very be bit balance on looks above given ask dividend. I what about this might done wanted out to point, here like we're in that you'll And positive at of the just be mid-cycle a reducing earnings. an great like know sheet it got a looking buybacks. if take cash. job debt. another at could it able chunk sort this I premature but you're

I in. potentially annualized a that? debt year? something bit and dividend, little starting too Currently, of come increase soon X% the look to a at price that gotten hard is think work, that than is talking continues it might taking under You've to this that something the start share just if you about yield and the is Or tighter to controlled

Jason Fraser

a Yes. little given It's But always we This is came probably Jason. through. soon look we it. what just at

high where are have end to group, that's a a of it and our place. is with where a the and is commitment peers is, think now, market good dividend peer sustainable it's the at the Our in yield we

Prashant Rao

Okay. just... then And Perfect.

Joe Gorder

Prashant, question dividend, was at this short a time can last lot a year, the sustainability change A period. right? of in big on there

Now you never questioned it.

like stuff anyways, around. faith, had But always how You that. interesting it’s things come

Prashant Rao

It's true. It's right, altogether, like a Joe? different world

Joe Gorder

Yes. There it is.

Prashant Rao

reporting the quick obviously, question. Ethanol, seen we've at high is historically, results performance another Just been here. quarter you've This since quarterly best ethanol.

little a wondering Just bit about strength carryover.

what strength we whole how is a in -- and puts the about how were ethanol takes. we across of and Some when picture just there's all think there given XXXX bunch carrying volatile big where on demand, some market are was I back, going how cautious over, what to to we -- in entering factors discussed there. read this if happens there? -- be wondering about think a that months as gasoline of couple I terms lot of cautious also set where a the might but cadence XXXX level of policy, think the

some and about get we into wonder a So to if little clarity look be thinking how we color as we 'XX? that bit should as maybe just could of

Martin Parrish

crop weak. you what off that really ethanol. of fourth we year quarter also was we a for margin great obviously, look Martin. quarter, is up end this And Well, it, at Prashant, really were is, the the started at -- set quarter When corn. in third the

available the very So low -- that in pretty stocks. this industry wasn't corn is

just back rates rates, And early exceeded. higher the built. inventory even cuts, October. X-year But what So the across until there plants really and Valero, and a rebound. I'm of I'm early taken just lot the get maintenance lot was rates then didn't in industry, talking interesting up early I never mean talking was with a of not And rates run averages. exceeded October

leads So what you low high and we inventory margins, that have that's situation saw. a when to

the last So weeks of few and few now the we've inventory had year the first significant build. XXXX, weeks of

that's we're So dramatically. But off at, fiber. for great longer And gallons carbon are the also going we capture. that and That's us, more now, we and ethanol producing a quarter for -- from corn looking of always produce margins to come ethanol what the the where the still provide margins. said, at term more cellulosic we're both think start LCFS. are and probably XXQ in though, is I to from the being have the And typically first ethanol opportunity

optimistic just of both fuel that is also confident we're So ethanol a those. of to domestic remain part the We're going about mix.

octane RON, in future, are means expect XX blends We more export drive ethanol higher blending. fuel going renewable which to mandates globally, the growth. namely And the

going good longer quarter. But next So about really we feel ethanol term, really we quarter, maybe ethanol. forward, feel good not about this

Operator

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

Douglas Leggate

Joe, going slightly I'm maybe I'm capital a angle. more sorry, to question time, allocation X the different hit

healthy your mean, business. your what and an focused and percent between ordinary business balance dividends is buybacks the on of here I for kind remind you easily That's could a of buy stock. pretty growth I dividend X-plus I'm really So because, back

going is there's the to broad you if So of cash us, curious between to the -- curious dividend forward criticism how balance I how buyback. about in returns years a I question, been you XX% level. a dividend as I'm kind what's a cash the right that high is balance of perhaps burden Joe, guess the the between wondering know buyback right debt allocation just price level I'm of and at behind more forward? going tool buybacks manage the it's the XX% think just but gone by, I'm kind to of reconsider and

Joe Gorder

Yes. ton had No, when good right? the Doug, and flushed but think at particularly with of year, a the be it certainly time. is sword, We weren't. end typically a about where a you're double-edged same high has we all shares, right, price year, you mean, we've cash last been stock flows with And up it and bought would last cash back I yield been we

create to to at approach hard it's look we formulaic why a how doing that's this. So

had We'll laid I to we place. coming has strong what we is, covered he those. of wanted I'll out I here. specific CFO. see priorities of got a he think set so in What out, very look, think we And it that thinks good And a put do COVID, Jason

got anything you'd share? like You've to

Jason Fraser

was said downturn. have as to you everything we we're Yes, in defend -- accurate. it going dividend have And because through a have we've last downturn, you balanced the the proven to we to --

you of it flywheel. And the So too you to have be wary buybacks high. making give the

Joe Gorder

Yes.

I look -- the and always say it. So Doug, I at like to dividend, mean, we increase we'd wouldn't

easy when as Jason that. I the it's in a down it think right we a And it, don't environment, said, it. Certainly, load. margin want and there's But have we’ve it's we've a committed to today. overextended. just to defended bit of But it was time get will good be we're burden that carry. a to in able a environment to we And been do like margin

Jason Fraser

And the peers. it's well positioned versus

to committed box is the checked. look is step as the first peers, the versus our as be highest, long to we're that of top and end near up we Our

Douglas Leggate

I want done, Obviously, companies some don't that question topic, is in have if because mind, else, assets. for same example, about long-life at, your business similar the to what have respectful on to take terms second I'm that the be you I'm to looking to sustainable of annuity of the think very some and respects Canadians going in everyone actual nature. my

your did year, taken use you of can kind out be to balance some last with case. of but your that your that’s folks level, take hat, investment wonder then, sheet on sheet, So my I the concern I wouldn't then a stronger much balance dividend question so why know

XX% So words, I'll lower past go is the the level? XX% leave in to year? right why there. the And other drop Why not that we it in saw all given

Joe Gorder

accessible I Jason do of business The last were can know. Doug, to never Homer this. downturn. were very But rates even in the you, so consistently. fair that's really job that able looking a good at again, the Jason? we you that tell X question. And through attractive a of that's year, were capital and And things financing markets really are the

Jason Fraser

capital give debt have X and balance. higher we would structure pretty X of but now. a cheap do cost of address efficient thing hold to But One right. flexibility an to resilience, a debt you we is you to have The cost. the want and this That's also Yes. higher is maximum then cash kind right a

Joe Gorder

Doug, shares lines? back you proposing to are those But that something we like buy would along lever or up

Douglas Leggate

sheet to investment appreciate so that. on type the without balance business need when dividend. I've and of model that of try discount really on to It's of more case. was the speculating you're it's the sheet approach, and…. really needs because taken time, support the positioned Joe, really go-forward take the your And market yes, volatility dividend lean But more close the I just about but my opportunistically think -- Well, rightsized can you to I annuity again, balance be it out so answers that achieve to really it's

Joe Gorder

Okay. We'll see soon. you

Operator

coming Paul is from question next Research. Our Sankey Sankey of

Paul Sankey

Europe? Can I gas refiner on guys a perspective, there. crude the natural as bit? What's of major you slates, your the demand, regards prices, from about whole impact ask as Just going

Gary Simmons

Yes.

the is this COVID demand So where is in in I kind are cases. we guess what spike of recovery of of seeing latest we're ahead they're in from terms Gary.

in If the you of XX% we're we where up date. at day month look our to UK, about were X

very stocks So starting diesel. very in are similar ARA and situation the to system. gasoline recovery mobility on see demand low. good Again, in

looks So as diesel constructive well. very

result switching the gas the natural Northwest natural high side, some as of see On gas diets still Europe. an in of prices MMBtu crude you $XX a

and grades running people out heavy some sweet. sour of light see medium you more crude So kicking

seen around we've where the is processing think it capacity. optimization hydro most I

as hydrocracking prices, around a X again high So is diesel we market people idling that the less are. result all natural and capacity tightness diesel experiencing of the reasons puts very in gas we're cutting which and of why the

Paul Sankey

come I renewable how Can talk California. in with see will off obviously, renewables. I follow wonder just the could that because more challenged, market about I diesel bit market perspective play quite a seen a is where you're you a exposed we situation, importantly, where up think, could bit answer. margins your We've quite to gets But sides. what Excellent by both there. just through

Martin Parrish

we've to and diesel California. stats use, because Martin. diesel what side XX% have of have Paul, Renewable California. diesel is me has pool first well really year, deficits latest the It's held up from demand kind seen carbo diesel going decreased, that's half or is through in Obviously, and this COVID there. the Yes, of less and out but use of amazing a they've the less around for we in and of renewable the decreased gasoline

to So RXX coming in of a imports it's is an -- blending state-wide, into which And renewable lot we're diesel. California pretty amazing.

the lot say, it's with of the I up remarkably with price why do can think more diesel. from really, maybe less has down. is you held credit credits well. deficits well, And do just than So to kind But to got price renewable additional credit has that's it a

in too, of -- got for just more renewable with we So in on more was that's kind CFS. hurt us. market a great What waiting probably the the Europe for Canada, demand-wise and really diesel

more those and we expect rebound So X demand with globally. that to

Paul Sankey

years out? play the I'll the we of bit? the you couple Could And might As it over supply of how throw look forward little next the demand, terms just there. Understood. balance in a leave answer

make you to laugh but... Joe, today, not Sorry,

Joe Gorder

have Paul, that a I'll what. you tell for here pretty chance We'll soon, we? won't

Martin Parrish

you renewable play diesel, nothing that right? renewable renewable in any rate today. diesel sold California There's diesel you really if blend think there's -- can it stops really forward, XX% with it I from

I RXX XXXX. think around get to CARB's are by somewhere projections

think a than higher of think could that lot people that. I it be

considering but California, that's got LCFS. So other you've states also

looking in the year. by You've decelerate size CFS end Canada of the market. the Canadian the forward we're to got this that And of California's

big will be when That's is California. they up in we building was the early to credits generate market can, bank, see which for in over same renewable expect right? and to expect going Canada, demand. early generation, that credit and us, happened for that's a good credit thing a So what people There we diesel

Operator

is Our Scotiabank. coming Cheng question from next of Paul

Paul Cheng

Two questions, please.

for First is Martin.

within some your think product the another SAF. getting peers, diesel, seems by of to renewable excitement some be I

you your in economy what Just question. interested. have interest diesel be order of investment make that's company So in at for want make for you the need you to to to leads standpoint the and first to be change with see if economy whether compatible the point, order -- in what switch? the the And will any to where to that renewable kind from

fourth really probably was it’s quarter The second capture question Atlantic, margin the is good, great. for Lane. North

in within unit or the one-off that mean, capacity, want stronger quarter? events in Just a terms to there's in facility if which the fourth any in the and also X of Europe -- I that capture also see is margin

Martin Parrish

there, It's Martin. started Paul. Okay. I'll get

and incentive versus that I credit of were renewable think SAF what a an the make was Back with and for bill all Build producing at SAF to we base Better what looking existing that was the additional case to tax in investment in attract on we diesel unit. Bill basis sufficient level proposed that saw not

being process; in the to interested customers engineering something is still we're be or else but or economic intensity SAF credit, will air the That is a our to margins SAF we're SAF SAF producing the production over when work. way and going through diesel. produce really confident to tax required hump of a production renewable SAF question get to reduce credit There where progressing think that not still gated carbon However, is of is and if. concurrently, plenty eventually else The developing only tax favorable relative travel. the to are we're said, customers. to something of We

Paul Cheng

sorry, the Lane. -- is big How

to is SAF on attractive also to big Martin in terms Just the to renewable the follow gap be How And you enough incentive fund up compared of the said. technically diesel? wanted to call for to make XX% that kind SAF? what to need that or you that XX% you that, to to it, the be make and how investment of for DGD is produce investment in big able what

Martin Parrish

Yes.

I Paul, $X.XX still, it the the economic. probably somewhere gap On around we're to a mean, make gallon gap,

process. On going through the we're gated still investment, our

we on don't number yet. a So have that

We have preliminary a ready that have share we to but numbers, don't yet. we're number

Paul Cheng

Okay. Thank you. Lane?

Lane Riggs

All right.

the very a fourth Quebec the producing have Pembroke first configured largely the is refinery. seasonally really the about interesting X distillate, is more producing refineries whereas gasoline and specialized quarter, is of stronger in we it's a distillate Atlantic what's yes, configured, Basin in refinery So

how of kind out. that's work they So

margin And you Obviously, So issues natural helped prices hurt UK in with in capture. really really, it's their the have high obviously, the performance, well over Pembroke. their margin on capture of quarter that in terms of fourth sort the Quebec around gas

Paul Cheng

fully have And Lane that in able the operation and in is done a benefit there to in benefiting Or any guys -- it's that quarter? you're you one-off that phenomenal capture the job market? that be just item the the of

Lane Riggs

really answer, a ran quarter. -- but ran second both it's Quebec the -- the in yes. like well they I

So...

Operator

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

Sam Margolin

there the capacity of just A circle the other some have on questions. but over to a back call few analysts industry to would and see number some might closures that kind of past parties Wanted lot are the XX of even management months, third any of that are suggesting alluded to closures higher industry confirm. any than in aware that or us is the we of report the are

capacity what rationalization wonder cracks slow here you X-part think would would today, that factors where or be I But on thoughts are there's your Theoretically so driving down. other some then stop may closures. that a one. And only And question, but there's are? secondly, that

too? you would that, on So that if love this could trend on continue think input based noneconomic factors, your

Lane Riggs

Lane. it's Sam,

we is turnaround capacity of to deferrals probably think what issue seeing. certainly, just now similar as closures. preliminary and that is it's I industry. or data are And what what looking a not where on what think versus in And the the right see much deciding margins because sort there's max. occurring but of theory you're maintenance of deferrals the we something don't slowdowns -- that's it's because some We now we're call utilization pretty the as are maybe in know, to So where we that or trying at study are again, terms of sort we

ought and XX% see than to to turnarounds worked where of sure That's it we in you all DOE be XX% Once out everything. outages, shouldn't all So the refineries do this the and refinery the think in make be get other the data as range. utilization the to you kind well.

Operator

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

Ryan Todd

longer-term you know follow-up some Do quick X of comments on low just about on talked from you standard have a earlier. Maybe lease credits. issues LCFS to had California you the here? Or fuel view carbon your the you gone next We've where of stabilize you the think do go from XXX on XXX-ish. for see downside? here? credit from XX think Do we further months I

Martin Parrish

by is this of The last a so sense. What's this question. third It -- But rearview about right? That's of always good complained difficult that. X kind we'll month, of This always data. get Martin. is at you're with lags the your data about -- we've and mirror, driving months makes -- It's got data. the we're lot a -- end quarter the not

second reduced generation the I versus it generation think depends what's of since it, certainly and been quarter credit interesting is COVID obviously on look price at 'XX. has credit and when generation deficit the you deficit

that, by So have into in line certainly generation items interesting to really been But the say that the credit is XQ you it credit the that's COVID. you that me there's 'XX, surprised other stand then And in you credit when when generation I'd thing reduced X the think look upside. to to at me prices dig the have out.

X% off-road all credits, electricity The CNG, bio compressed 'XX XXX% first of and XX% gas credits. was XXXX. line second, all natural the that that XQ bio versus of And was up was item generated

credit continue bio off-road, run like times Now really don't how e-forklifts, the when the And if infrastructure and just just off-road, the e-forklift, point. XXX% know replace from -- this CNG, the some was on the on-road, about right? you of that out I credits versus would get those came wonder seems you gets many but is interestingly, up the not more pace of your on think forklift you to can the XX% generation way, XXXX. it an e-forklifts. that in at can and off-road, so that

X really small X items, But if XX% what, line see the very shakes in California of out. items line the that we'll that's, were So past. you from about XX%, in those credits think how there, which

data. then for that generation credit total And So a renewable That's versus an that's kind XXXX biodiesel, percent electricity were on-road helps. interesting all as a is XQ other color. diesel 'XX just flat as and little of Hopefully, just whole. credits of the a

Ryan Todd

your one I overall. side you're on what And generally product know great. markets? terms what you've seen maybe That's of export the U.S. seeing of may indicate in demand, the international that a what in talked demand, product you've then you're about in lot Any primary terms in seeing export just on comments here particularly particularly

Gary Simmons

Yes, this is Gary.

seeing you, in in tell recovery we're as America probably I fast UK. -- as or Latin seen we're we've seeing So would North the quite not America the

more quarter, still Gulf demand is but function of little a U.S. expect bit. demand our would exports there really not occurring, a maintenance demand in demand good Coast the But an our America, export Latin activity is quarter into America in in I little export Latin markets. the a the bit, in will demand. during seeing be especially in and So good typical first down indication We're the really the of down domestic region.

Operator

Our is of Cowen. next Gabelman from coming question Jason

Jason Gabelman

was of to can on is, my margin provides for you're from with how question second discuss maybe the Russia. kind more and present risks Russia geopolitical the just these down feedstock over if that it intermediate of due a you kind maintenance issues throughput for one-time geopolitics and years. quarter-over-quarter dovetail going delayed as a of if COVID the And off And going that's just and that is if with in I activity and the your XQ, seems barrels you or discuss like have a of industry there Coast. broadly comment items can Can made, thinking enhancement a just about to that like a you then wanted think you're just It you answer the on guidance? of maintenance Russia impacting XQ other Gulf guidance are lot opportunities what what's past on one from lot both about indicative imports maintenance whole, there company? was given XXX,XXX couple Valero day. hopefully, looks XQ to

Lane Riggs

one. is this the take Lane. I'll first So

we directly don't comment going So with really sort respect that, we decide quarter. so our don't This a proxy can of for sort turnarounds. we into the And is they're doing on what our just you peers -- think us. that we what The don't of policy volumes on just comment the activity also on means. turnaround are certainly for to

Joe Gorder

Russia? Gary, to about you want talk

Gary Simmons

Yes.

we the things past know So you are obviously, we announced, don't they in what in really kind that entail. sanctions really results What like until happen change this simply flows. of can it a other don't in any in trade locations, is we've when would I tell seen

they'll So wherever end out what throughout intermediates that world. the here some us going, kick run. of it those that would is today we're expect be running will we run else available feedstocks for And to make happen those somewhere up to

system to our are and them commercial at the in if ready and today making So those future. we team, certainly, looking as in are to have a approved we're run them we what sure need

Operator

Our next Stanley. Connor coming from question Lynagh of Morgan is

Connor Lynagh

you see with wondering of crude would as the the Pemex you to potentially what Gulf major Coast it's industry I you the implications? the particularly likely implications do Do do think Maybe sticking was on exports? made And ending around guys exporters. And what be? refining what you occur? discussion think

Gary Simmons

Yes.

So Gary. this is

on He's our been of kind reliability able to lot a of meaningfully views capital. X being has cycles change Lane turnaround and refinery pretty public on think and I utilization. said

to like of starts certainly, refinery if if up, decrease it refinery for their are utilization, pretty increase But So export. amount it would aggressive. looks crude it goals able they're does focus the

will European export is view Asian first goes destinations first]. Our be and to from Mexico. the [It be cut destinations destinations that really for

Coast of in they to U.S. increase runs complement as nice system. the into had increase complexity Coast continue feedstock and for Pemex, refinery Our expect that long-standing has we great future. serves long sweet that's relationship actually lot our our been to system a good Mexico, experience that of in a We've fuel they a we the with that export the high-sulfur as Gulf oil, and Gulf a light run grades high U.S.

Connor Lynagh

Helpful point, level global you're concerned global closures, I the impact or at over see context. the in sense. do to here. the your but returning about sort The back and think in years capacity just of growth at capacity next mean flipping flows crude about do you are you net you earlier it. a Maybe Just had in how of Got you decline that? theory, a some couple you least on that to meaningfully areas obviously, that Do a question, flows? of altering margins? your to -- product -- sort

Lane Riggs

able we the starting their marketing. of Lane. and people up. the plan day, end region. sort the China that really -- what strong we instead back believe that most of refinery Obviously stayed this is happened were I our refineries has refineries. view read when then, have This to same some. and magazines, the refinery up where heads. our the from But day, the the keep and you import end hard At we of mean, Indian a really barrels journals starting have larger sort calculated experience of we do at call of always run I we closures were all the China the real up, guys and trade go up. alliance concerned and the some on Middle having is and this has the refinery refinery starting was I has East longer-term with of to it's refineries, parity teapot what refineries guess into stress to review in those we of

is our we know we'll holding you that industry, they're But there the get sure this not And we share it. what -- are through. difficult but assets. competitive there's So of We just as the everywhere U.S. make [rent] as work world. in to our out do long in these in we run things here

So...

Operator

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

Homer Bhullar

free on, Thanks, want everyone, to there's joining week. anything you Thanks, feel if today. the and us Thank a ping up for you, follow to Great. Donna. great Obviously, team. have IR

Operator

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

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

Valero Energy (VLO) 27 Jan 222021 Q4 Earnings call transcript