- Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to Valero’s Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Investor Finance. President, Vice Bhullar, Relations and Homer Thank you. go ahead. Please

Homer Bhullar

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

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

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

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

Joe Gorder

safe product global million results strength credited We're global and reasons, diesel to continued strong four capacity off-line Despite performance everyone. morning, conversions quarter, demand report refinery supply utilization roughly inventories system advantages fundamentals. US jet and and product cost demand pre-pandemic product global with higher of and approaching steadily our competitors. remains margins constrained barrels low in as Refining permanently due supported per unfavorable refining carbon reliable for third the produce to continued rates, remain by XXXX part operational Product demand, financial Thanks, levels, energy planned Homer, compared and to being refineries for to fuels. strong high good including or refining levels. to gasoline strong, taken remains variety of demand across our since than economics a and XXXX low day for of fuel pleased

maximize to XX% as throughput. Our third in to continue we increased refining utilization refining quarter the

ethanol differentials renewable sour the that our system In crude X segment, Our throughput diesel sales on increase be to and activities optimize attributed late Navigators diesel X.X cost in renewable which other in refining approximately and Arthur schedule And project to on oil to carbon gallons wider is expecting efficiency, oil also to our should opportunities is XXXX. supply, sweet low-carbon We're anchor in located start-up XXXX expected of lower fuel sour and operations, November. margins. refinery, product another the annual quarter. which additional for XXXX. to capacity, track to billion carbon of oils our plant, Port total oil for plant growth and Brent continue currently diesel operational is this crude connected third progressing provide sweet oil sour start-up setting The to to improve renewable while in generate half gallons crude of our DGD million first renewable record new million continue the XXX benchmark. improving is And higher sustainable shipper begin capture. opportunities, IMO the expected expected light carbon The DGD's margin and our our expected ethanol marine lower is a per to also in the the refining with that with project, naphtha. as be fuel, other Arthur evaluate process the completed and BlackRock lieu system, Port projects impact plants sour of year wider next this natural And The Coker such we The incentivize is high be XX to to and of turnaround naphtha completion we remain refinery's to volume refiners to fuels oils. the Europe are hydrogen sequestration projects. the regulation we increase gas sequestration benefited crude in and of from increased sulfur product process crude to intensity differentials expected gallons prices renewable eight European of crude in pipeline capacity and renewable is aviation reduce low-carbon

our our sheet bringing debt billion, $X our of the reduction to an a balance billion height debt evaluate And will cornerstone to incremental quarter, pandemic capital XXXX. debt On continue third the billion $X.XX during the deleveraging approximately In strong incurring total side, reduced of additional remains financial allocation our we by further we going framework. opportunities $X.X in since the forward. of

reductions floor refining ahead, prices in setting remain are on which as supply higher remains margins. and a global constrained high strong natural Looking due product Europe, capacity fundamentals to gas

from benefit feedstocks and we oil the crude system. fuel our realize addition, in continue discounted oil to sour In

drive environmentally in a can on While refinery essential we geopolitical in products. maximizing the we utilization focused manner what to and volatility and reliable control, macroeconomic provide remain safe, responsible market, factors may

profitability strengthen fuels businesses also We increase advantage. the growth advancing committed remain low to further our competitive our of and carbon to

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

Homer Bhullar

Joe. Thanks,

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

please prices. of of for for higher the the quarter XXXX X.X per of to operating to million income and adjusted segment refining in downtime operating the gallons operating compared barrel earnings million. from X reported refer $XXX XXXX, income a XXXX, in the financial XXX,XXX The quarter X compared to XXXX. the operating Ida, quarter the the started $X.X per $XXX The for XXXX, of the XXXX, day, quarter natural loss million fourth and income impact of barrels the to of volumes income X.X of of million of third reported operating for segment XX% quarter additional third which to per third the quarter of the quarter third was third diesel for third the quarter of in for quarter compared Refining The of XX% DGD cash XXXX was $XXX third to Adjusted third barrel $XX to the $X.XX compared million higher XXXX. third per day of the release the third primarily billion third tables. expenses the Hurricane third Renewable DGD was third quarter of of amounts, per was the Renewable capacity in day reconciliations third in which X, up the quarter of of per volumes resulting from For $X the higher in XXXX segment quarter than XXXX, quarter day volumes $XXX accompanying $X X.X XXXX. than sales Throughput of Adjusted million in ethanol third higher quarter XXXX. the million. barrels third million due operating quarter XXXX. XXXX quarter volumes quarter income averaged which gallons for the throughput Refining production million volumes third of utilization of to quarter of higher was XXXX operating million per gas XXXX. of day were $X.XX for in averaged of sales third diesel was quarter were than the averaged gallons Ethanol attributed million XXXX. XXXX, XXXX.

quarter tax quarter provided third of was million G&A was the XXXX. of rate XX%. For $XXX tax for operating interest was The and XXXX. quarter was billion XXXX, activities was third third the amortization were expense by net expenses and expense cash Net $XXX million. effective $XXX $XXX Depreciation income and in the of million expense million $X

net the Excluding adjusted net third provided our cash the activities, $X.X change DGD's in unfavorable by quarter provided estimated million quarter billion, which by business, working investments of we in the and to activities cash billion. $XXX other regulatory $XXX to of was activities, operating and was for costs for DGD's million and business. capital primarily operating was working sustaining the With growing changes $XXX member capital, excluding made which of share due turnarounds, regard payment joint venture tax was in for $X.X of the compliance XXXX, third catalysts million including of capital investing

Excluding investments attributable of capital quarter interest third attributable investments to members million to joint those in and DGD were the of venture Valero entities, to capital the share other other variable related XXXX. $XXX

stock that debt our we our cash through ratio, activities. and net financing buybacks, balance have be XX% to deleveraging in which consistent Moving focusing to at operating guidance annual respect payout target low third to returned completed we by activities quarter dividends to transaction on billion. the by reduced is Valero's of our reduction $X.XX debt another Year-to-date, our the stockholders with provided to end adjusted while With our XX% XX% sheet. sheet, balance of

of finance of end collectively of with cash by and the March cash XX% largely with reduced refinancing The debt of was we the billion. equivalents, was We of liquidity, of and available the of As combined at earlier, half $X.X the high total result and XX%, billion Joe lease incurred this of quarter capitalized from during Valero's $X.X the and second the height billion noted which billion ratio, reduction quarter have COVID-XX the the ended a of with XXXX, obligations debt-to-capitalization ended transaction, excluding billion XXXX, debt cash pandemic debt net $X down $X.X approximately debt, And equivalents. cash well pandemic. $X.X cash. transactions the of approximately since of series

Turning to guidance.

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

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

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

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

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

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

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

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

Operator

coming Bank for of gentlemen, is Doug open Ladies now go and [Operator question is of Leggate questions. from ahead. The floor Instructions] America. the Please first

Doug Leggate

that the thoughts the seems the the an ask House in buyback. product possibility everybody. returns the rumbling I on ban, is speaks Thanks. couple of Joe, question, recently quarter, of and operational I'm issues. my Good big cash could views take to if morning, picture to opportunity But your the on table. export performance your be your I see back just on your for I White still itself. macro to wonder a to delighted export obviously the with I ban visit guess, mean,

my view our Thank the higher wondering one just a And that it on about on Lane be I know a results But what margins. if So elaborate comment could there. I'm then you're to any my second wondering, floor on trying you imply if I'm this, from would of I'll you. make think in it's may, you maybe question, comment. color there for And you leave commentary? are comfortable you guys. or sharing did your I first

Joe Gorder

No, great. Doug, Both questions. that's good

went were She the House, the it I fuels. down I We and constructive that visit companies, there. things looking bring was on White course, up Secretary ended was think, So to with a that of represented that would to suggest Granholm. and the meeting And I seven there industry in would might say the for of Lane try cost conversation.

And so those table I of we effect consideration fuel we Thus it would which embraced, give don't her to. several believe some been have the with an any marketplace. on supply on at it least increasing far, did, provided put to suggestions, of into the but the was for her have

her to And we process so the that team work continues with have the in involved team.

folks with supply them. DC back quite office also dialogue then, has bit those So have conversations. time spent course, involved work continuing been here of of the has that the to And in I a know continued. our

they're So might and to additional fuel opportunities have they the continues, for dialogue reduce I price. that looking the just think

So you anything to Lane? Rich, you is would or add there that,

Rich Walsh

No, I think And trying I I to than more so. helpful. I flows. of don't they be harmful think would think they the that probably market realized mean, understand disrupt consequences

And is so understanding think that there. I

they're the but options, a I think understanding the they at that's know of least. lot looking have from I So at industry

Joe Gorder

Yeah.

second that's to So that. they do understand I is, that relates then general And have the ban the on they're take wouldn't the mean, achieve. exports, to of it want you effect Doug. question? it consequences think And the to the potential think trying I consensus I as

Lane Riggs

margin think Doug, Lane. it's we work mid-cycle From a the sure. tweaks process, define that entire go cycle. through anomalies average the business as we a of market being few Yeah, are that the

cycle through do the we've business but believe we're yet, had the you've we pandemic. through where So closures not refinery had structurally, next interperiod

exactly refining probably forward But going the work. is not the the to call will refining investment at view our higher fuel going when capacity. trying understand industry, how going fossil particular, everybody balances have is are much time You're in as in to a be to on

prepared do the higher don't will be So the last -- we we to we're not next than that, quantify mid-cycle believe but mid-cycle.

Doug Leggate

the guess, market, of of new for the a I there's exports me but quick forgive Lane. lot obviously concern, Chinese capacity follow-up, and Guys, expansion, hitting

So you of I there. throw you Thank I a guys in And into consideration. that will definition concern just for that if your it wonder could mid-cycle? Is that leave you.

Lane Riggs

a -- are at them been seen seen the don't at some much. really to talk prompt the the looking up on There that respect -- has market increases know way. we've least, by in that that I on about picking with Gary, products Chinese we've the purchases, I'm but

Gary Simmons

No.

stay offset comes the China longer I refinery term, if most to that. will in even coming you some are up. And think Russia of are of of our in Chinese volume be kind in out exports from Atlantic ramped the North the are believe any the offsetting going as it it sanctions incremental to then, further any of by And exports of into the traders term, us, like, strikes short assume really region. the looks Basin, French reductions

Lane Riggs

North basis, of And aren't Europeans whether then trying to on else longer-term really is America and under ESG sort a just pressure increase everyone refining capacity. and

there and will is if world raise India refining China. that's going be region the that So probably of capacity, to a

Doug Leggate

the you, answers. Appreciate Thank guys.

Operator

is Please of from coming question JPMorgan. next Thank The ahead. go you. John Royall

John Royall

for taking question. my Hey, good morning, Thanks guys.

to level end think sheet off XX% of So you your you to leverage where mentioned returns, of to that get in further before can you the already move prior would remarks. talked or prepared you quarter, much you're you XX% kind about lower your the get bulletproof there? low in reductions How on and do bulletproofing evaluating your you balance the like

Joe Gorder

John, at that's a here. Jason good it swack question. We'll let a take

Jason Fraser

Yes, yes.

paying we've down been about, COVID talking As we're on working still debt. our

this $XXX $X about the left after did off full offer have the paid third for We in have million quarter. to billion we accounting tender

you're base see cash bit or to down debt want probably hold billion you we're balance, $X But talked $X higher at a our more. working about price downturn, let's going we're the -- more to how, like on at on to we billion maybe $X potentially forward, cash little levels level. cash So at economic flat and hold if looking billion with we side, a the

bias the that. we So of to upper end

target. on toward now good So COVID. to to of spot the end at highest long-term to of the at have a we're point range to On debt from the debt We're both XX% XX.X% net cap, -- close we those. we that XX% XX% quarter, down a third cap at a

you'd the to the you like like we've at to to be lower, flexibility working I'd more going give So been even financial forward. direction. in range right XX% be

So of an that's kind overview.

Joe Gorder

So we're getting close.

Jason Fraser

Yes.

Joe Gorder

low point of mean, To the target be I where, the range necessarily anymore. the end the wouldn't

John Royall

And helpful. from you. XQ. then, about a have, I maybe also refining Thank price heavy least and you're dips. looking talk captures That's you environment, October, seeing so Okay. could in at they're but how tailwinds rising in some know we far

be color generally any So there helpful. just would

Lane Riggs

The Lane. margin our some is baked are This degree. indicators into heavy to dips

will move it. those So with

all you'll when really third and of is any and being a you butane benefit. fourth equal, quarter, blending things to compare this think, I the the year, see given in quarter

So on improved up obviously, to are And, third -- enough we rates constant, quarter a marginally did more down, our moves the other you fourth to capture because hold quarter. flat all the bit effect. or if be things have butane we're byproducts if of in than the in price going

diesel. really all gasoline are So biggest and still to capture margin is contribution those intact. But your

and blending So to we'll in to from always going main thing fourth But mind butane. quarter just keep is the see. quarter third

John Royall

Great. Thanks very much.

Operator

go coming from of next Chen Thank Barclays. you. ahead. question Please, Theresa The is

Theresa Chen

first. about to ask footprint Good morning, demand comments to your wanted across related your everyone. I

you your and when get volumes for last primarily demand through to strong? about service of by wholesale equally talk levels demand happening a channels? strengthening quarter, and your in areas diesel, gasoline being there. export Is what's is that domestic surpassing strong XXXX sense very currently, of driven like I'd Your

Gary Simmons

trended volumes Gary. We we're on that and it's domestic September, this again pace August. Hi, in and wholesale set beat wholesale the have it considerably Theresa, beat a our in to Really, in record October. is We markets volume higher.

continue volumes to trend wholesale higher. So

trending levels. trade, at were were look you channels above through If our we volumes wholesale Diesel of are levels. trending pump about pre-pandemic above where XX% is the where X% pre-pandemic market we gasoline about

our channels trade. of strong seeing domestic through demand wholesale So really

Theresa Chen

Got it. higher you. margins. gas in natural high And the Thank relation prices to supporting European

Given the longer gas of recent Do over lowering risk the full, term, on that decline you just see TTF imagine for near pace term, to in over our margins as storage while natural any TTF a build-out. pullback of and result the spread. depends a liquefaction I Henry XX% Hub

Lane Riggs

my But I'll you seen reinventory happening limited are Gary, need shot try, ships We and Europe comments. large, floating when stocks, I'll take down, -- in of it, what's at I've these the still again, have you still Basin in of with of LNG diesel. By of when on a they're still you sort are to the Atlantic sort that everything. Most and all at look slow. regasification we're

last at for plays have our see fallen. out. the prices So Pembroke least we'll weeks, refinery, in gas how just to certainly natural it couple of But have

Theresa Chen

you. Thank it. Got

Operator

go Margolin coming next of ahead. Thank Please, Wolfe Sam you. Research. question The from is

Sam Margolin

everybody. morning, Good

Joe Gorder

Sam. morning, Good

Sam Margolin

the question, kind of definitely cycle But things just not ended that also that, just you to higher in does, or are very we had like of necessarily commodity margins regional of really is open of being margin but the structurally is might of go-forward where this characterized sequence coming just and tight or of a happen this to just down maybe high So we've anomalies higher, more of capacity things was bunch a market it of if a And underlying be than broadly is frequency through just is sort ask everybody or trend? market basis, within that kind a one-off evidence, kind sort by an see too a environment. coincidence not function wondering of -- very single of globally, a could stream. like events I blowouts speak on a

Gary Simmons

Yes.

I structural. it So think some is of

his as refinery of to think, we Joe a fuels. produce lot carbon opening, refining had alluded in I converted capacity low to rationalization,

supply-demand tighter much balances, structurally so, market. And a stronger which means

the very that transient just be Some more talked lot especially in low of the market of nature. of you could things very, on a A markets. domestic function about in is product dislocation inventories,

very period restocking short winter the I think of could on be continue you the you'll to we hand, least which to other due some happening, those gasoline, in dislocations to feel of see prevent market at Diesel, think volatility -- remain like could and term. very markets to of from in the through the tight, us looks very, inventory. time, some see I low

Sam Margolin

that. on Okay. And follow-up up start just the Thanks timing. a and then DGD for

unit, see when don't know, just about adjusted starting prices has any feedstock the of a I DGD can And be But earnest really oil You that thoughts you the guys seems or timing little if tolerated that background up where we started than helpful? capacity into respond. bit new start past, would just hasn't complex, X if in the this it in have DGD demand year, know it the you feedstock if past, to a issue yet in better market the feedstock like time. a of, sort it's the veg or has environment ahead

Eric Fisher

Yes, this Eric. is

I your observations think, what are correct.

DGD this the projects time think, or in LCFS the year. projects been a We prices delayed. have lot like and are been that, announced, I about been feedstock conversion have cases some deferred delayed. seeing largely margins, I drop deferred it with some given X refining the had And not with think prices, of think in is Thinking increase I of did we of last the that

we seen have -- this year just we start-up feedstock we in last did the you quarter. if up. And increase prices feedstock So like for we not bought in the not have with starting DGD look, X

Sam Margolin

great a so day. Have much. Okay. Thank you

Eric Fisher

Sam.

Operator

go from Todd next ahead. coming of Please you. Sandler. Piper Ryan The Thank is question

Ryan Todd

Thanks. follow-up Diesel. Diamond on immediately Maybe one Green

mode years. DGD expansion in rapid been a You've pretty last over the couple at of

market X, priorities digest next With for there? Green over strategic direction here do to, the bit, think a Diesel unit of evaluate and how pause will of take Diamond years you about in you conditions of for start-up DGD or five kind a of, the the terms

Lane Riggs

Yes.

about we've and the last lot quarter like LCFS think, And I continue a this quarter, prices that taking away I space. fun drop. talked in of think to is this

as And world, a kind given projects the across and so lot you of And high lot is deferred the look are delayed. their getting a of rethinking industry, the energy prices everyone policies. across of

So I to you back that continue they in we have see, on Europe and we reassess we've after have and to, So market. the going pace especially, have said, X, been step they path DGD will are think the historically? pause, to

there SAF a I more interesting. after But X. is pause becoming will be DGD think think I lot a overall,

Ryan Todd

on that year? next for Yeah. think there or refining you think falls cetera, Russian how Thanks. there? barrels its of you if of or it's any do in know America supply to And into Russian thoughts then a product South and maybe just way and impacted go home product routes you Africa, make speculative, a those chains someplace away mentioned else, passing Is et you Russian little early goes effect expand it trade to kind and briefly but some dramatically on get imports I earlier, utilization logical

Lane Riggs

bit gasoline. a diesel naphtha, reduction of the much exports. They diesel. Russian a see exports in in reduction But on little that you not primarily a side, Our will view you of see is export will

will, homes a lot US But will keep potential have of, America believe do some that and in of Africa, for of Europe You those in from we, exports and kind you Russia. barrels diplomatic South you reduction pressures to and the from of, a mentioned. the happening, find from kind from as see

Ryan Todd

Thank you. Okay.

Operator

next Thank Research. Paul you. Please ahead. question from of Sankey coming go The is Sankey

Paul Sankey

you guys. Hi, Can okay? hear me

Joe Gorder

Paul. Morning

Paul Sankey

me, Joe? Can you hear

Joe Gorder

we sir, can. Yes,

Paul Sankey

my how I wider, about you few the Cool. petroleum crude you made but was reserve the a talk strategic lot SPR just a SPR Can that things wondering of little discounts for much mentioned start understanding and release? affected a operationally was the drawdown crude. the bit taper the in was we Joe, you're is anticipating of and coming SPR point Thanks. has I a crude. profit and I that months. your even you, view guess, assume the that would outlook from reducing what

Lane Riggs

Yes.

So able of good at our each be to what take really, SPR to the we able logistics of barrels. is assets people Gulf receive lot to to barrels. logistics have the be don't with options, really in we Coast A saw place those have the

long they more certainly, it as So, We we as continue and saw on, of moving we early volume transition a sour barrels, would the the good that volume took SPR more and barrels take in sweeter. to to were system those they're forward still as expect value offering to our barrels.

Paul Sankey

will you you're start I know do think XXXX, anticipating have continuing to drawdowns say, or convention? through, let's they

Lane Riggs

and to happen year. restocking continue start year least through this drawdowns see see you'll then to I at next some think

Paul Sankey

lot. there. Thanks I'll it leave Great. a you. Thank

Joe Gorder

Thanks Paul.

Operator

The ahead. Thank next Please go Morgan from Connor question coming Stanley. Lynagh is you. of

Connor Lynagh

on that on color you to just which fuel the potential you little if wanted curious you pathways is I thanks. mentioned the that to industry topic Yes, return suggested. administration could a I'm to the reducing the made costs. suggestion for that briefly a things provide earlier,

Joe Gorder

Well, Lane there. and I were both

So, do first? you want about to it talk

Lane Riggs

Sure.

I is this think Lane. -- yes,

diesel some or the on and So much of looks relaxing was as like the maybe main two making ultra-low it think as fuels. increasing X or necessarily Tier sulfur invest, US refiners one there's sulfur others the I didn't spec gasoline. either was ones, -- Many which

in So, around world markets some export sulfur. diesel a to posture consequently, and the that to gasoline having can some they're of handle of those some -- the

ones. difficulty in I think, up see a of doing that meant main I -- to any that if industry two the big we ones. possibility really meeting refinery discuss was somebody the really, the part was there that and was So, could start obviously, mean, that was the discuss if and a coming

Joe Gorder

for I the wasn't specs came Connor, thing, I refining one been of about. on shut interesting it, was the waving to had too, general out what sentiment products ability was that, capacity happen. we talked that mean, was consideration think that was yes, down. And really The restart that to there going

reasons not mean, the a people very boat. good weren't had Of they in those making decisions. made, we're position for unwind But course, in to that I and decisions they that

So, the which have of demand, to-date. come to we waving going some regulation seen probably is in just or from reduction solution just haven't to

Connor Lynagh

out Makes types sense. likely just the that there incentives a market question, opportunities the be of in maybe is bill? or more money of by players you to Semi-related Reduction the that with Act given or you time seeing in to. are as bit Inflation What more policy digested talk the had that

Rich Walsh

it think is is strongly see to the Rich idea. enacted, think and give tax XXQ of opportunities are for mentioned I helpful around kind the Walsh. in which us things. sustainable of, tax that on is Blender's really that makes earlier, there's credit, an And, develop BTC, to a there they and on fuel. also I'll Tax carbon credits high-level additions energy really take think we're interesting we're at. had clean which supports number I And we aviation that. This have mean, One additionally, focusing then, that -- you're an credits more going to we are us. there There's of more extension for the to sequestration, Eric look for effort Credit, just it a you that tax

Connor Lynagh

Thank you. turn I’ll back it. it Got here. Okay.

Joe Gorder

you. Thank

Operator

ahead. The next Scotiabank. is Cheng question coming Paul you. Thank go Please, of from

Paul Cheng

morning. Hey, Good guys.

Joe Gorder

Hi, Paul.

Paul Cheng

hopefully, questions, short. Two

for one Lane. First is

you is of of in price US their conference $XX in have using, you're half. first the call, gap. gas back a then, at refiner the essentially refiner I number the gas say, time, cut quarter you advantage we European think, diesel the Europe, the crack gap. versus need Since because seen by And $X for natural consumption gave natural

DGD. that, is and curious second -- an you from number So that linear that share? exposure just is -- operating do your if guys? also is that by way? to that $X question give can for really gas we need updated what you natural it cut $X The can't there we region in Secondly, is can or And on us you that,

forward so contract diesel venture joint part operation. of a the the that the on hedge as think I

I heard quarter. curve So in quarter, had second backwardation substantially backwardation is curve in -- the than the a less third think you

indicator. -- didn't lead to So capture we should aware there or provide? margin you. you be any benchmark Is on to improve insight can were that you your anything surprised Thank going anything we that comparing your

Lane Riggs

Paul. Hey,

I'll Today, So, crude the in in what up out that at that's demand accurate in But least in Atlantic a back what sulfur sort that is try crack, end seeing, you're to in to Atlantic up first the there reinventory try the industry, because -- to our the the quarter. So to of sort that had a is meet the the of running Pembroke have was marginal the yes, still refineries, price at question Basin, wide bidding is what in you lot fuel I of diesel guy you're Atlantic lot think And the Basin. having, crudes, that we're are the diesel they Basin, up right? natural but the advantage bit. prices a spec, are of stated I have to sweeter the bidding looking lower, you're little refineries seeing oil in gas the fallen. seeing come But crack. least a because meet or they low can't first

in getting redirection the seeing also you're cheaper, discount, Russian medium and you're Part cheaper. sour seeing sour that you're getting heavy a function So all trade is seeing that of of of -- flow.

heat a driving basis, see. of of this to prompt tankers in that lot problem. terms just the going crack. We're a trying that's gas offshore sitting solved Europe know There's to So regas. what's don't natural really I

how goes. just want Eric, And do to... we'll that see you so

Paul Cheng

one. consumption, US you when really calculated that I go that, on how curious advantage versus their natural I'm just that that cut doesn't advantage the impact on European mean, gas the is or or refiner be refiner price that's Lane, the gap, does it be in? before Europe should -- it not natural gas

Joe Gorder

or paying In proxy, first right? quarter until quarter was could fourth see, could Pembroke that, they of as Refinery up the three least use weeks that think there our advantage the eliminated versus marginal even at in fuel. really also purchases, we We when of see gas, through a all an today. to profitability though around we about natural out but gas -- our not your words, natural higher now were don't there was ago, other is could Atlantic saying we the I'm Basin. see setting so capacity what the was It's I ability were we cost What much you it

to it diesel low avoid meet a trying to is, making to spec. oil what low is a crude fuel think I very buy having sulfur the oil spec try are sulfur to and higher people

is are simple So by can't simple and driven ability Basin. of of with to that the these in some a the them to available the some it Atlantic being XXXX of IMO restock oils deal crude term, refiners

Paul Cheng

see. I

So natural the is you that driving gas think advantage don't at actually all? the

Joe Gorder

for I'm it most -- and a there Paul. the an saying, driven jump this the to just trying to the marginal sulfur simple thing. trying a diesel Basin of I'm meet the would low phenomena, three-week last I what Atlantic -- requirements. buy just to annualized buy I quarter, Well, economics -- a not of lot is refiner think of by crudes is sure try having make being just I'm out to

Paul Cheng

Okay. Thank you.

Joe Gorder

All Eric, ready? you're right,

Eric Fisher

Yes.

that second correct, less what said DGD, you in the on backwardation So quarter third was severe quarter. the is than

in an the ran. you is the all this $X.XX said the a increase We the margin And to margin that about through that of when $X.XX So we function seen of before, little we quarter a saw drop as third feedstock And [ph] we the issue XX% a haven't see, third prices was was indicator. more prices and in related oil waste slate did that the of to bit feedstocks. margin by we quarter, capture of on feedstock impact pound look capture. below – the the soybean see at where

oil really related we're it's at below what or pricing is veg to feedstocks. oils waste seeing So

to that of oil amount are because oils we only what are veg see just see we oils going available, increasing versus to down we the coming strong not thing as not not of are waste LCFS the And oils. complex, the where forward aware DGD point say of, be the I waste so in a prices would because we are flat advantages veg in running

we see those are So oil are attractive. we implementing veg prices DGD into because

Paul Cheng

to How have is Eric, in oil a you're percentage? much the run going you the do vegetable DGD X?

Eric Fisher

What Yes. We're is, fourth essentially the detail. not quarter, veg out zero of going level give that oil. up until I'll we say ran to

oil incrementing of we're veg attractive units because price. the this So into

Paul Cheng

you. Thank Eric, Okay.

Eric Fisher

Paul. you, Thank

Operator

Read coming Please ahead. The question Fargo. Roger of Thank Wells next is you. go from

Roger Read

Hey. everybody. morning. Good Hello,

Eric Fisher

Hi, Roger.

Roger Read

between I says about to you cash a so think, Is kind those? you potential to step a environment, just of get returns return, getting is returns Or We're Maybe here interest just thinking on not expectation, of because $X crack just come billion acute you think typical spread how overall an pushing are on dividend? you're there the you're greater to shareholders but the one And I'm the than back when mid-cycle, question. it. about question mid-cycle the rid we look beyond cash to earning that with thinking lot to to as a that simple see? us. that the shareholders how XX% is about above curious XX% right, at I is as more think to split want of the of growing it as it's should you And COVID? raise came the

Jason Fraser

Jason. is This

bit I'll to where were to do well. to level which XX.X%. now, through a $X like is good The Joe we'd We think, cash. like still getting pretty I debt to is at little be. ran billion to up a answered We more. it getting our

to we're paid-off XXX say a just good we're in that but have shape, victory would yet. not left to be prefer of declaring lower the yes, XX% XX% the getting have and We end COVID to I at range. But,

Joe Gorder

And and Roger, use going know like to be -- climate is certainly balance it's defend. in do next sheet, the a dividend defend commitment probably see I we're going in that we answered going clearly now the to going we that make year. think We into to to anything and And the sheet don't past will It's on we the that had the could right did that. correctly. we to future. Jason with to balance that stated everyone economic were premature the

And things decision. into that positioned. a the of be position by talked I to and not then want up the didn't then up use would make so line going get we care got need that want the your we'll I You And flywheel to before we've be to And look we sight we we notice we think have sure about we do we the took We'll XX% see. where don't flywheel next buybacks, we've moving and a that it's above. way just that that, it's XX%. to okay? got us sight XX% maybe of okay? to way, line the of year But But And to XX%, returns. drive XX%. to

Roger Read

try something and try to else got All side. that's you there, Hey, let here and kind the know me well, right, operational more right. something on of the

there. kind of, impact what is below up fuel demand, think cycle well level it would about slowing a in out economic we risk call, gasoline a a is of recognizing already brought obviously you as You What typical recession environment. there normal of would a terms

about weakness, it's factor what, maybe see you how of the top real part. impact a cetera, magnitude typical recession about of, barrels does diesel a you So expect on Is think go hundred couple strong Like think trucking, since demand. whether in? of, that's weakness, wondering away? I'm thousand to cut let's transportation-related a that XX% typical about bottom? demand would right, to you think just fuel of it how sort just the kind When industrial et

Gary Simmons

Hey, two the about see GDP. guys they past, their I have, the this is times period recessionary and hit Gary. in kind at of, has demand as looked Roger, guess back product gone

be whatever impact of going twice GDP as is more less on that you And to gasoline. on you're take So the of going assumption fuel diesel, would demand. that you to have, mentioned,

fully think I unique are year. we into jet some One, as next head recovered. demand situations there hasn't

to been has oil a demand as in you demand anticipate, would have At down and will jet of Chinese out Chinese time, then would come pandemic, some XX%. recover. And in and the we see you'll they expect increase so point demand good

you both global see of may we combination with even oil year-over-year is the period, would recessionary growth. the things demand typical those expect, So that

Roger Read

All right. Thank you. Appreciate it.

Operator

Thank question ahead. is Goldman Please Sachs. Mehta you. of Neil The next go from coming

Neil Mehta

Good morning team.

in think the around market, oil driving is much just discounts is these question that the market. your sulfur versus so other fuel really Are market? you IMO later dynamics heavy into impacts high run and some high all big seeing love oil we're to changing perspective First and do refining the of cokers? it forth? more the doing fuel WCS through is on, of up sulfur the in you it? I at your How And in what you configuration of that showing are

Gary Simmons

Yeah.

this is Gary. So

few these but driving As factors really things, discounts. on number of touched that been there's a a sour the have Joe heavy of

the into backed the medium expenses the and driving and higher. the have Mars world Russia sanctions Chinese put A of of are the natural First, It's prices which the Indian operating those running discounts up caused be are which sours heavy gas on caused wider, around and some rebalancing. higher running euros. we heavy lot refiners Canadian to about talked Gulf,

seen So product heavy to which wider. some that We've the a US, combined naphtha sulfur contributed. the There's see be drives weakness I think putting crude. higher maintenance in also that on discounted, the discounts to Canadian in refinery wider. oil, Naphtha has with discounts higher more utilization, has content been causes so continue unplanned fuel we high overall, But market. the in

the what also contributing certainly Chinese starting in lack to is in IMO The expected see XXXX, So of some demand we're that, to that. of we finally market.

the forward, an So is going to in Canada end. maintenance market look us, Western when for coming seasonal at we

winter. see into You'll we volumes head higher as diluent

of all more market. Canadian that's the So on heavy putting

see expect to sanctions even We up ramped occur more as in rebalancing are Russia.

heavy those a our continue. market mentioned certainly putting cokers. system our sulfur in and to Canadian today this maximizing to you opportunity buy we're as We're so we in And to expect stocks, that high lot of seeing fuel

Neil Mehta

perspective Really done better lot forward, And a continue sense. through just other organically. organic you of you part the question markets we in really decade. whether, here a on That in on build the an markets, guys is have or of wonderful the there much downstream last to built Yeah. haven't bolt-on makes business the And in your as the low seeing carbon want to basis? business M&A look do and as A&D opportunities are some you M&A are

Joe Gorder

a a to Neil, building we've And largely through level we the the we the portfolio, now went business. operating I we're taken comfortable business. lot grew with period, which have approach mean, very stuff on where course, the bolted frankly, to to that of we're we of with. the comfortable

very comfortable We from and believe to renewable it, with as business they're out a about there, that has is us. doing have of we've renewables to look way in And sense made the with the up. portfolio today. opportunities refining. the that always very budget the comfortable we at significant so approach, continue that really employed capital that and we've comfortable place the part we strategy diesel certainly are do gone in the But with refining We businesses are very we're directing the with we're But we'll to that which is that. ground durable

continue expect transaction. So the not kind should going to And that any for market we'll into you do I of what think we're significant to jump we're doing.

Neil Mehta

Joe. tone Thanks, Makes sense. of

Operator

ahead. of Gabelman Cowen. next Thank from question you. Jason The is coming Please go

Jason Gabelman

I taking for my thanks have Hey, two. questions.

The first on one of dynamics. near-term kind

Mississippi West I impacts X, a could was footprint drought cracks were the One, capture impacts to in a ability October, saw your couple that have strong a start-up into hoping follow-up. things. $XXX of And Thanks. Coast thinking barrel. with be River you capture discuss from that XQ, I then in of ongoing? over you any to the Just the And margins gasoline could DGD

Gary Simmons

X? Okay. DGD will You I On want capture, to be start think, challenged. margin with X, DGD

diesel somewhat is business when to units. that renewable brand-new unit, up we up first a pathways of start One this are have start to the temporary of on you generic details

your until numbers. get the to that first got like to gather the data run several months You you for actual intensity carbon

get have will numbers. as on X to data be then So start line lower in, cement DGD up I said, CI actual your like get we initially you because out, the to margin capture

be I as of issues that we DGD think started So one the will main X.

get all CI responses submit data gallon at jurisdictions that look XXXX But we'll half So But lower. from indicator temporary line certainly you your get if margin you the per our the have different out that first too. on it dollar be income. on in of a and to through certainly for more as will back submit or the will months, we numbers, volume, basis the get overall CIs it several we'll

Lane Riggs

executing we'll was refinery, at On third This is wrapping quarter, our be the here a turnaround California, which Benicia in we been turnaround and some Lane. quarter. have in of the fourth the up

maximize based still operating gasoline, and we we to make could, on we the the we'll extent rate. the had turnaround, for extent to posture even this the full brand So at

crack we'll the so -- the really just with the that's West how fourth So see Coast. in quarter to wraps up respect gasoline

Gary Simmons

river the I to final Memphis both supply ability guess, levels the refinery, around have us at the terminals. one Memphis, the our river clear refinery and impacting been the

wide situation the As southbound the be to we to for expect river of of improve. northbound and open, couple on expected is this the both out traffic weeks there and next morning,

Jason Gabelman

just within Great. opportunities low really colors portfolio. Thanks. your That XQ. other on to the think are about one then helpful carbon And

with you're jet or like makes have margins. there of either alternative Act, seems any something technology an the to Thanks. pursue growth you you're is SAF Is would DGD within it sense, project investment complement at an addition and you instead carbon maybe that looking given DGD? a to that ethanol also In particularly and Inflation the as to installing near-term ethanol business, SAF within ethanol that the that weaker DGD Reduction venture, pursuing capture

Jason Fraser

Yeah.

something definitely radar for that's us. on the So

ethanol be is given said, Navigator that And into eligible carbon, SAF SAF. – you ethanol to be ethanol get and in carbon post-sequestration. a As footprint will product with it project, our will captured our possibility

somebody to when comes online. So sort radar it's definitely Navigator post the sort of on at of a XXXX look

Jason Gabelman

Thanks.

Operator

is coming Tudor, of from final time Pickering question. showing Thank you. for we're a Holt. Blair today The go final Please Matthew Ladies question ahead. and gentlemen,

Matthew Blair

new lower question despite year, for just for in I guidance. the good one here. If the believe it that quarter-over-quarter or conservative mind? help at implies just Thanks the you should starting volumes squeezing Hey, or X had I heard million in a the in DGD us being Is me plant around be QX turnaround there DGD that is Could up keeping to a a understand I we $XXX it DGD which little still be November. morning. that? X that on correctly, was start-up,

Jason Fraser

It's a little conservative.

to ramp the X. is are November. in We full of rates plan start The DGD to in

So it million. $XXX higher the in to still out added will the Echo if But into volume we're yet feed and the put have that than you lining in, come unit finer.

know detail So that until so. mid-November won't or we

$XXX guidance we from So keep million. we at rate. standpoint, a decided proven guidance It's that the see to that

Matthew Blair

Thank sounds good. That you very much.

Operator

turn I'd like comments. you. over the At for Thank closing back of this time, End floor to Q&A

Homer Bhullar

free to us Obviously, team feel today. IR joining additional and any everyone, have everyone you, great a We the appreciate Thank Great. if Donna. contact have you, questions. week. you Thank

Operator

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

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

Valero Energy (VLO) 25 Oct 222022 Q3 Earnings call transcript