Earnings call transcript Q4 2022

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Operator

Greetings and welcome to the Valero's Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Homer Bhullar, Vice President, Investor Relations. Mr. you, Thank Bhullar.

begin. You may

Homer Bhullar

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

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

reviewing have tables, contact the any free to team after Investor call. you feel questions our please Relations after these If

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

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

Joe Gorder

finished everyone. margin good XX% and Homer environment. strong refining We utilization morning year favorable capacity refineries with a Thanks at the our in operating

refinery since utilization In for fact, our XXXX. highest this system is the refining

a ever safe, safety, for XXXX long-standing that share contractor the environmentally testament combined is operations. reliable, responsible and to and employee to our to year best commitment which proud also I'm was

in resulted of As recovery XXXX, were which and demand. by during permanent we most low the the significant global product continued shutdowns product inventories, refining from refinery supported saw margins

by were oils. increased supply, high and regulation lower from impact fuels. refining freight discounted Our for sour oils the discounts XXXX rates, system sour oil heavily These marine IMO crude and driven sulfur fuel also benefited the crude from

Also, lieu And European and oils, are of incentivize Europe on refining high on oils. reducing focused track. crude projects to remain oils crude in crude on adding that improving margin natural gas process further sour prices our sweet pressure in sour refiners capture cost

to The Port is throughput increase Arthur feedstocks refinery's turnaround and process in crude second residual and and improving to Coker sour XXXX ability project quarter completed expected of while the be volumes also capacity of oils efficiency. incremental will

schedule to quarter another continue operations, in Port sales successful In new diesel the DGD renewable set of plant and renewable in capacity start-up of commissioning completed of record November. our we diesel brings Diesel and DGD's we the and Renewable Arthur naphtha. X.X volume expand fourth production ahead renewable and was approximately under gallons budget segment, That with billion project gallons the of million XX and to annual

schedule segment, the Ethanol Navigators late carbon on and start-up begin In in activities project still is and progressing expected is XXXX. sequestration to BlackRock

fuel, margin And advance such projects. business. and positioning renewable to the other and significantly improve renewable continue sequestration sustainable low-carbon is and which shipper the connected intensity system, production a carbon be in of with anchor that lower ethanol eight product our to to expected to plants expect of this should carbon the profile we as of opportunities result We additional the aviation competitive naphtha ethanol hydrogen

return meet threshold. gated helps these ensure our Our minimum process projects

a year strengthen ratio off balance the financial continue our and ending of sheet, XX%. during net all side, the debt to with incurred the the to-capitalization debt we pandemic of incremental On paying

oils large crude coastal margins, oil relative we refineries. that system. sour Looking discounts ahead, to gas have oils refiners particularly our natural to for that low product in crude we and global see continue we in can demand increase fuel process support expect supply continued advantages and And for and product US heavy inventories to

in Port to a diesel have the is of contribution wide margins. significant earnings half expected Arthur and oil startup of also back sour XXXX, the strong crude The differentials Coker supported by

In which, and contribution shareholder the outlook, to coupled encouraged with competitive projects in advantage our should strategic our growth fuels, by the renewable we're closing, long-term strengthen refining refining returns. continue and from

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

Homer Bhullar

Joe. Thanks,

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

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

the tables. earnings the and to refer please accompanying amounts, adjusted to release reconciliations For financial

income was billion XXXX, barrel higher per $X of income the XXXX to quarter for fourth were of of the of the $X.X million XXXX. compared operating to quarter cash natural compared of operating per $X.X utilization Refining quarter the reported segment operating quarter in fourth X the per XXXX. of gas $X.X billion for XXXX Refining volumes of the The averaged in of billion for for primarily Throughput than XXXX Refining quarter attributed $X.X fourth Adjusted XXXX prices. billion in fourth quarter of higher fourth barrels to fourth XX% throughput the day. fourth XXXX. $X.XX of expenses quarter the fourth capacity quarter barrel was

the the Renewable quarter Arthur quarter X.X plant volumes quarter million day XXX,XXX to the due Port St. than XXXX. and fourth the for sales sales Diesel per the start-up fourth the of $XXX from higher was Renewable expansion XXXX. of of the for of million million quarter volumes volumes was Diesel The quarter to income DGD gallons fourth day per plant. additional which higher averaged the impact compared XXXX of of in $XXX fourth XXXX, XXXX, gallons were Charles segment DGD operating fourth

Ethanol $XXX quarter fourth of income X.X fourth quarter XXXX volumes demand XXXX, low production of the quarter the operating the quarter compared primarily Ethanol to $XX ethanol per Adjusted million The the for quarter fourth operating of operating million to for high income XXXX. fourth inventories. due $X of the multi-year gallons XXXX. income XXXX. million reported strong to million of higher was segment and prices averaged of $XXX compared attributed for The day million for the quarter XXXX was fourth in to in fourth of

billion were interest million net and G&A and million. fourth expenses was was the The quarter expense expense For million was and XXXX. XX% effective XXXX. $XXX the $XXX $XXX G&A were quarter of $XXX tax of annual XXXX. fourth expenses Depreciation in million tax for expense for $X rate income XXXX, amortization was

XXXX operating was for quarter the in $XX.X of and by activities full provided billion the year. fourth $X.X cash Net billion

Excluding full was quarter the activities, working quarter working million member $X by DGD's in fourth and the the billion joint share in billion year. and provided excluding change unfavorable capital, net other provided of capital the venture in changes DGD's $X.X billion activities of fourth XXXX by for operating $X operating cash $XX.X and in adjusted for cash the net

costs $XXX made and and investments the of was for million million business, business. of including compliance fourth the turnarounds, for we regulatory $XXX investing for sustaining of Regarding activities, capital was in growing the $XXX catalysts which million quarter XXXX,

DGD $XXX annual Excluding our attributable billion Arthur project to in for higher to the spend Coker capital primarily $X.X other the the attributable and the DGD completion of which the other venture investments to plant. than joint accelerated on Port million guidance project investments capital those of the share is were Valero timing variable to entities, year, quarter and Arthur related members Port XXXX fourth of and due interest

the stockholders XXXX through fourth activities. $X.X financing billion cash in and and billion a XX% buybacks. dividends activities provided our ratio adjusted payout the of resulting of to operating returned to in $X.X Moving stock net XXXX in We by of year, quarter

Valero's in through by quarter our completed debt debt opportunistic With balance transactions million $XXX open repurchases. respect we to reduction fourth that sheet, the reduced additional market

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

guidance. to Turning

for which catalysts Valero $X expect of sustaining to We includes to capital venture that $XXX $X.X About and joint XXXX million and billion investments. the be attributable to to approximately is expenditures allocated growth. business turnarounds, investments for billion,

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

expenses expect in be quarter cash approximately to per the barrel. operating We first refining $X.XX

expenses be and non-cash billion as which the should gallon, amortization. XXXX for gallon sales gallons depreciation such Renewable costs be per per includes approximately in to XXXX. to With respect expect Diesel in Operating we segment, volumes X.X $X.XX $X.XX

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

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

For approximately G&A $XXX we million. to depreciation, expect XXXX, excluding be corporate expenses,

our opening concludes remarks. That

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

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

Operator

you. of go from is Instructions] The Please Barclays. question coming Thank [Operator Chen Theresa ahead. first

Theresa Chen

Thank questions. taking you for everyone. my morning, Good

Joe Gorder

Good morning, Theresa.

Theresa Chen

your the is how over question as price specifically on do situation? you the as to cap see diesel morning. products first to imports respect Russia, the well And Related – embargo near-term. good My or related to the outlook to geo with playing EU macro out, Russian

Gary Simmons

is Theresa, Gary. this

a the we the rebalancing would utilization, result place. much coming and the trade see I you exports you'll think, trade lower reduction refinery with of a today in flows initially, take in ramp-up Most when resids. in sanctions like diesel of people sanctions, sanctions with saw crude and see Russia of felt VGO think the Russian just actually and that we in will even like out

Theresa Chen

How think a year, How this will first half unplanned the been in of there's clearly, on maintenance economics? work this near-term big on And your you it. through is? refining downtime. you your impact to well? focus of as of are taking refining And an real account the maintenance some that implications on you elevated into what own amount this be Got own think do an plus do earnings have program

Gary Simmons

Yes.

million tight. XX the five-year So is light total market barrels at inventories very below We're the very, product looking average.

period just restock haven't been restocking typically, this so you outage perspective. terms And the margin nicely very winter the place. maintenance sets refinery with storm a able of take of to see which time we and And inventories high year where up in is activity,

Lane Riggs

this And Lane. Theresa, is

we been around first quarter when of nonetheless, are quarters consistent, mean, and lot third commentary turnaround we've the do turnaround activity. we I have heavy pretty as a periods don't But turnarounds. So our

of sort our how seasonally, And that's we so that's maintenance. execute

Theresa Chen

you. Thank

Operator

The go from coming ahead. Thank of of you. Please Bank America. question Leggate Doug next is

Doug Leggate

good you I to spoken everyone. Thanks those for yet. my taking questions. guys Hi, Year, for New haven’t morning, Happy

Joe Gorder

Doug. Thanks,

Doug Leggate

coker online, I about are too, you diesel resid know but Joe, the to I'm plan who we than curious were a this laid direct very we economics. bring market don't this original in out you to want different today. When

the as -- see got what characterize like that to it project? stands, however you of relative you it, us set you idea expectations I've first looked could or earnings strip your want the please. facility maybe And power can as you So give when follow-up, out what a are to an it at you

Joe Gorder

let at crack a Doug, take Lane one. we'll No, Yes. this

Lane Riggs

million, I it around sort $XXX that's so just Doug. you’re XXXX, look I It's was everybody, mid-cycle. EBITDA of back Hi, think to our sort all FID, based of remind at hope on million. the I of was $XXX in right. sort We -- think,

little sort $XXX it's bit of you quarter, dollars. fourth in the order maybe of a probably If million, more

So use kind you those if of margins.

don't -- it's but obviously, be I if be have we to exactly right. we know lucky And incredible good, it's that's So foresight, great to lucky.

outlook, our will this timing all holds, have is the least least is at that resid at assuming it prices think, distillate pretty sort say a and and whole, I'd be a yes, I cracks the for So for -- year, this of perfect.

Doug Leggate

but clear, to anticipate this and about how quarter, you be second of thinking the to I specific you you or want don't timing, Just be by would on the start-up? know end up are

Lane Riggs

going I'm early Feb, going here. right April to in somewhere to expect and oil May. March, be be we mechanically We're somewhere fairly late specific early complete or late

Doug Leggate

to return the question. this, do to ask cash Joe, I hate I but got

you've sheet, to back balance it COVID Your managed Jason, maybe, or levels. below

dividend still Your count share moved and is guess, I X%. down, your hasn't now about

lot what considered, to capacity can on you're thinking restart us things How all returns? you've you dividend So, it dividend of for got through a seems Thanks. cash walk growth.

Joe Gorder

fair question we'll let that's his around Jason this. strategy share and No, Yes. very Doug, a

Jason Fraser

change we things. of in quarter, a context Yes, which kind did we beat I'll a will at how goal, look give little

to we at return of XX% were prior frequently range even high above pandemic, target So, to XX%. the back our or payout the end

committed the billion on another and pandemic, the $X to to know, target in our debt we during Now, range. as loan of take were us you above dividend during COVID, to our XXXX. XX% had put we way very And dividend paying XX%

what which which this the So, And working to situations this competing on. the messaged deleveraging, payback main on post-COVID we're of debt, improve the XX% while range, lower at working that goal was payout financial doing. our objectives one been of been of we as we've stay aggressively end would XX% is incremental we've our we've

of to of which million debt, the repurchase goal final by us step fourth were $XXX we in is the our able $X in deleveraging quarter, billion. meeting Now,

end a the XX% year $X.X that stock with insight, ratio. to purchases the our billion payout during So, quarter, increased we we're to at and able

So, of work full we're way for able to our the target year. to our range midpoint the back

mid-level a our level, margin given higher construction we off cash should paid move debt you as environment we've good expect be at that or build now to us payout and to targets balance reasonably our And pandemic up looking forward. the

dividend Now, go about -- ahead other on the too, side, dividend puzzle. which asked the of is please you'd yes, pieces

So, way we through. And hadn't had competitive we all, show the like We also we know, XXXX to for a pandemic, to the sustainable dividends our since you as work aim versus any to had first peers. as would dividend growth. which we had and because, the quarter continue of growth of -- first our

debt And then we're down. rebuilding cash and working our

So, so of we we've as kind goals to return I've a like those now, of said, as to would met growth pattern forward. we move

Doug Leggate

full the appreciate answer, Jason. I

the know, see Joe, on you sheet. As we'd to cash like balance

that. thanks So, much best. the so for All

Joe Gorder

Net zero Doug. debt,

Doug Leggate

Thank you everybody.

Operator

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

Roger Read

Yes, of don't right? it, they've jump have on We releases quite structure ceased, good bit. say big call morning. to had seem just, a Those like market, year. crude lot definitely if I'd guess a I'd here in in last the I least, eased SPR I at to know

product thing. more coming barrels enter to Russian a Mexico. the of start mentioned Gulf And had really the Venezuelan You then of sanctions That's the up. we've

as looking how the crude get question, XXXX you at broad days here? crude into guess availability we and dips a I as are early So, of

Gary Simmons

Yes.

Gary. is this So,

high crude running I sour the utilization sulfur think our which refineries have fairly the outlook key rates, really differentials on crude to quality produce oil. we more the The market is on at more market, stay quality drivers consistent. been differentials high on expect fuel

demand the for then high it's sulfur IMO And XXXX decreased oil. with regulation, the fuel

those play, quality drives factors fuel high the the into balances sulfur all and so sulfur then fuel high And affecting around supply/demand come really discount.

in least differentials at where changing quality much of the see don't near-term are. terms in we those So

Roger Read

into Joe, in market. that, the If those of comments. we general, Gary, the might your with And see is you for Russian VGO I on summer were Basin VGO mentioned production? the expectation distillate a Maybe, follow-on there's feedstock kind units and secondary Atlantic your on the less the ban, as in less think, follow-up what in impacts of the substitute

Lane Riggs

a take shot is this it. Lane. Roger, Hey, I'll at

some And see, I some what is availability, that going we tight. the this the started the will in I it year I stockpiled past it is people of into what was some remain it sort you'll VGO the concerned gasoline production. East with were Middle mean, refineries to of way and answer affects about think of the through we think ultimately, VGO, up. And but

cracks it's distillate it as hang in FCC's going clear believe where into in it to through a you are tight. are, gets there If have hydrocracker, you'll summer, by but VGO the challenge economics they fact, margins will

Roger Read

– so two, I'll it my you. I'll Great. there. leave that's Thank

Lane Riggs

Roger. Thanks,

Operator

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

John Royall

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

how on appear your about that market, So the think to new on could coming I you of quota. and hoping the view export when through big refining and China releasing still be reopening capacity for batches particularly was trickle they

be China would helpful? So Thanks. reality anything on

Gary Simmons

Yeah.

So this is Gary.

certainly I their making purchasing significant in product utilization are markets ramp-up view our It you'll China exports the in see by China in be the in market. both to to lot demand. domestic quarter. although the our needed active from product Chinese some recovery see China is occasionally lot in seen more in think a But staying as exports of we've supply way that that, And refinery the looks the the a market, the region, demand of like us well. feedstocks will we second into and

will the additions. still new capacity balances show refinery outpace at On supply-demand year-over-year capacity, least demand our

we're that capacity of And about doesn't it. concerned fuels. not lot transportation of a lot so really too make A

gasoline, XX% lot and refineries diesel a Some oil production. in China, of big yield, fuel and the petrochemicals than less more jet it's total

John Royall

how DGD than assuming been about why and pushed is talk way That's it's advantaged case, you. feedstock the of Diesel can feedstock easier it having DGD absorbing then this Renewable did up on is Thank with helpful. X X? the kind the And you side, Great. the market

Eric Fisher

Yeah, Eric. this is

We really feedstock X a DGD on. in coming seen big haven't with change costs

the least change next As oil we've CBOT really We But equilibrated “soybean saw oil”, oil” oil pretty flat. But hold prices to with on we November. flat with soybean you seen their at for actually, waste where October really soybean DGD the big pretty feeds obligations announcement oil and a the the to said, then with years. that we drop “soybean came did waste in start-up three of in XXXX. saw RFS X, oils DGD see EPA X

overall, but been feedstock big It's stable. – your so prices. change And pretty a to seen we question, haven't in answer

John Royall

Thank you.

Operator

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

Sam Margolin

you. Good morning. Thank

Joe Gorder

Sam. Good morning,

Sam Margolin

So in are the out prepared But remarks, US a Europe the opportunities via that's energy of your costs gas little have optimization side kind equation? different you on from there. and mentioned maybe in going cracks optimization are these driving is energy in Europe you cost crashed and diesel European rising those of what's of opportunities sustaining talk factors. still even a in Can still maybe though perspective advantages the about the bit cost lot

Lane Riggs

I'll and is add. the by way, to Lane, This if start Sam. of Gary sort wants

at per still $XX mean is So and nominally BTU. million nominally change. of the -- I sort the probably around and still in that natural Netherlands Houston UK three gas the really When today, comparing

natural significant now. So there's cost still difference a gas between

driven signals proxy. we'll in Natural use as over our With that said, a refinery our really a year. gas Pembroke hasn't

how which it our economics refinery. big don't on we for at And macro is not our of is prices. a us, -- don't I insight have guess Europe, to saying gas Pembroke least what a at now SMR units. natural flows that it's through those marginal have we're what max hydrocracker, I'm an don't have In so we so signals, and But high into changed hasn't run their saying we lot I'm

Sam Margolin

with cost bit a at back integration guess really other a renewable no high just got as diesel mean I That's is it's for run little a this you've its then the helpful. up reason follow-on, Port Okay. advantage rate, to if related, it's just than there I facility the refinery. coker Arthur. but that's And starting very and new

I the So the at say. question with you, world to fuels just this And is, I to is get even to would honest contribution most in don't that's this I'm know valuable be but what probably the point, trying facility complex system. the

Lane Riggs

like Sam. going, you're We where

Sam Margolin

a dragging -- level just has system Yes. it of sort comes if I mean optimization entire would it it's that if helpful. with, Gulf plant with of be mean, the I up because contribution I opportunities it Coast guess,

Lane Riggs

question? last that was What

Homer Bhullar

Contribution at the plant level?

Lane Riggs

at really sort say what our down around least, I the do comments -- reduces VGO you comments can't purchases and our significantly. heavy refinery up intermediate it. We of this about think about that. We if mean your does, be think if Yes. will you -- appreciate well, it coker

very So to less of, way integrates that significantly the better way as integrates makes It it on makes sort say, sort the said, it's of a less fill and us vertically dependent you out refinery. asset. less, refinery important I'd intermediates

Joe Gorder

And then there the is plant, to renewable diesel very helpful. going be obviously,

very to us. So you're right, complex a Sam, valuable it's

Sam Margolin

All Well, right. a thanks great day so much. Have

Joe Gorder

You too.

Operator

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

Paul Cheng

Hey, guys. Good morning.

Joe Gorder

Good morning.

Paul Cheng

lay we terms yield? understand behind Arthur Can will impact product go cruise on facility. coker Port in how that the and the decisions you that can stream, throughput the you I the you period, coming of of with Arthur, one of mean, the won still during long-term doing mainly I Port But into is around that, turnaround, the allow back

Lane Riggs

are turnaround you Are you it? So talking just--? of about portion the

Paul Cheng

understand I No, Now, outside of turnaround we mean, you coker. two it. have the

Lane Riggs

bit-- That’s a what to I've alluded little

Paul Cheng

impact the throughput? more in But your yield [indiscernible], terms it if turnaround, is product, overall not I'm of interested will coker your doing new addition how your the and

Lane Riggs

-- medium I it's run considerably. we'll crudes. So, and as said up heavy light to some Today, we Sam,

not it's significantly more would us much maybe at see You'll back think. FID plus looking I'd some, heavy, the probably you as as over rate, run but time.

really of a XX% sort in is, plus purchases die of of it's is XX% net terms reduction us. depending this, really make product And the that's terms we for of on plus distillate, to a out in the feedstock What in distillate. and crude it

turnaround we like to addition said, efficiency. it's a In

Paul Cheng

Right.

mediums barrel see XX,XXX will heavy per day, barrels of tune per and a day? so incremental is the to one that you XXX,XXX of assume we So,

Lane Riggs

you Paul, sorry, I'm can that? repeat

Paul Cheng

we heavier up Now, about sour day the the of heavy coker, per we're the Should and by barrels is day. per barrels capacity crude? XX,XXX assume XXX,XXX medium

Lane Riggs

No, we're per We're XX,XXX up. not day. heavying increasing barrel

You'll anywhere if normally from XXX see to today, public don't I go know on I from [indiscernible] don't got be run depending XXX, the XXX it's die. to I our -- careful. rates. We crude here,

I could light go depending up think plus on we XX crude how on potentially we are. or to XX heavy are we plus

So, that's sort happens. of what

And do just so out. this the all units time purchases of then changes. sort When we we whenever to finish we it have our change in our die, intermediate crude spot to conversion

happen of So, how on and the reduce we depending of how refinery how amount what will is we'll the purchases and heavy sort run are we'll base between crude tuning the intermediate rates. the change significantly

it's XXX,XXX. a So, -- plus not but

Paul Cheng

that, I'm sour this the I'm throughput XXX,XXX increased barrels coker? run with by heavy saying day the not will you per of no, saying crude No, overall increase XXX,XXX, and medium by

Joe Gorder

increase? it Will

Lane Riggs

back see a back get be you. going mean, much lot. the I on terms we and to have in to go volume. of It's I would how to have to We incremented

with So, with get We get -- I we'll disclose that what-- know. back can have don't don't and you. back know to I Homer

Paul Cheng

better the maybe Can even question outside comparing driver may your in strong, Yes, North And you any? that be this margin benchmark us help in the really, is what indicator. just quarter some the market that is Atlantic, really second conditions? understand to

Lane Riggs

overall-- Valero's -- margin which Paul, So

Paul Cheng

your North Atlantic? -- Atlantic North

Lane Riggs

at that is… mean, look didn't I not way it quarter. really we it's the just I the prior much versus -- stronger Well,

Paul Cheng

Atlantic we -- North think [ph] see I $XX.

Lane Riggs

saying I I'm prior versus No, said. but like

Homer Bhullar

only a was Capture up margin.

Lane Riggs

up was rate Capture Yeah. a little bit. just

Paul Cheng

Okay. Thank you.

Operator

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

Ryan Todd

things bit a maybe some on that a on touched little earlier the call. on Thanks. Maybe you – follow-up

point global – what profitability structural for the system macro improvements kind seems and they're business. to the that of and to post the that seen change a It time Have long from distillate think is sulfur us maybe of kind margins? product, or of the statement? some as view, a sticks ultra-low-sulfur with on tight structural is a fair product? and the whether tightness generate seen I IMO generating is least underlying higher of in effect. low terms like that system you And exceptionally something IMO global a of the a appear have But you that's or post in ability drives at be of margin for lingering a refining

Gary Simmons

Yes, I so. think

you that the spread really can can in So see low see fuel oil, sulfur on high the at gap you can to fuel. just and places, high occurred of certainly general that's see a you weakness couple then

starting last is I high it think tells that. really we've on low-sulfur to that into capacity changes the see upgrade that products. fuel and seen sulfur industry don't And you continuing, really we anything tight that early year, it's and

Ryan Todd

guess, your on on you the for Right. potentially expect do cost a the marginal And What year? this market think on the next Thanks. more thoughts how pushing whether XXXX And I guidance the then the whether overall, takeaways renewable the read see you early the maybe what time you structural diesel may as Obviously, do end appear market? players surface. over to Any of just oversupplied result guidance? curve. be I side. did diesel on will on one But – its were you renewable mean in advantage, of XXXX you're year frame didn't the out have this very you the or so two for low the impact supportive market?

Jason Fraser

reach cover to ethanol in blending RIN which the to a we situation Well, in ethanol the gallons, going billion thing still with to you're DX RFS obligation the they at be at won't the the that year so the kept target XX use billion gallons. saw obligation point is where means some DX that one you have because XX

is that in So mechanism still there.

of not that lot going soybean – based a obligations in To you announcement your prices drop the get pressure big lower as people on whether to all obligation crush expected. on or high come you higher, a forward. but as going out, oil did And or saw built well were were question see future as that point, on as these when not soybean facilities

little the lower it's still but short in that, a current mixed DX growth going bit this So definitely to on curve is RIN, on bag the there's be proposal. there RIN of a a DX

a So that plays how Europe to in of from terms both we'll a out. the about move trying conversations. in feedstock, have see in as talk lot away still and oil lot of of US, at soybean least There's to the a policy

figure so that play at And out of what's this part lower with trying to RFS as everyone's is proposal.

And the overall, as isn't oil regardless be you competitive that. that but a units obligation we're of – by compared as peers. said, to our So affected you waste we will said,

have So just to the this out. about know to see the RFS we're… you how -- other comments know, how I see on we'll we'll outlook had Rich, the don't I future proposal. plays have

Rich Walsh

with some don't renewable and think of a for corn trying intent the we to would and consistent intent the is And, RFS. it the for mean, thing We obligations EV this kind RFS the with really to for is use that's the I in that. liquid the into set find that we'll probably hit to the one user elements most they was be convert thing obviously, put really fuels purposes like it commenting problematic we and a rule. feel underlying is the on used is autos. Congress by with subsidy the EVs, heavy convert Yeah. out RFS promote for that on that I for ethanol. soybean to into EPA And Congress trying of be and very of

Ryan Todd

Thank you. Good.

Operator

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

Connor Lynagh

or you about DGD since to continue line is vision the you policy online. is Yeah. Thanks. growth Just plants? appreciate have your you brought what you future where questioning X I, the for that online your capture make want where there. that some I be? your X this DGD renewables system bit But have a guys kind you'll think little when ridiculous of ethanol carbon might is of, on head just of opportunities for

Gary Simmons

and we the a previously, would said we reassess DGD pause Well, market. after take X

not smooth operations already. team And sales a lining making I'll X It's So nine problem we're just great DGD -- out months design job great. its budget. came like team, say start-up, under Its It's project met the was out design. did the It DGD this you into of and that very It moving said, a any rates went team and X. met fuel of the compliance markets. ahead still in project schedule. having we're we're

before, said feedstock in seen we increase an I prices. as So haven't

everything looks coming with DGDX competitive very up. So

said, That to do I all project. being the think on we continue the engineering SAP

For ethanol the Navigator the support to pipeline for then and the continue plants. we COX DGD sequestration our for platform,

there's opportunity its So competitive all of location that our given says and a still of that position. platform, with lot

Connor Lynagh

other around avenues What's market. exploring your alcohol approach the or to to jet SAF thinking potential

Rich Walsh

sequestration below Yeah, I GHG get what's to to qualify project to things. there's the to SAF, you for that two for key EU. is has think first. XX% the order that the have Obviously, ethanol In for targets go

you assume if look And couple in into if that done will -- SAF. you pipeline it ethanol so platform is of years, qualify the next our

make that conventional the the with other learned have we've jet so SAF final to you to blend thing that And the projects, with still product. is SAF

about SAF think like we into It would the finished conventional complete the So we we got sequestration jet the a chain on refining does we've in our ethanol, of side. a lot look have supply carbon have product. the and if advantage have a you just platform,

look So reality closer this we that will it's we like all sequestration something pipeline. as at continue looks to on to get carbon

Connor Lynagh

very Thanks much. right. All

Operator

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

Neil Mehta

Yes. great a Good and morning, congrats team quarter. on

markets. on your playing see We're a The first think some jet? blow Would those -- question diesel premiums do And you how premium love really was time? there's you perspective to over cracks. seeing in around premium relative out in that out jet structural do

Gary Simmons

Yes.

lot those us regions. be the of So in distillate premiums will are we lot that it's we overall, jet And in on resupply, this to Harbor Gulf a overhang expect Coast, in New seeing, market. a looks of overall, which winter US significantly markets you're the Florida the in But still It from and increase primarily think you'll what exceptionally the the tight. outages jet in those York of supply short-term, to February, had in to the mid-month I storm bit probably help demand get tightness in causing like jet markets. year a an some

Neil Mehta

the I the levels. mean, of around the are follow-up That’s on US is anchored was from helpful. XX% some down last five-year That with perspective number I levels to in disti just five-year inventory hard EIA mean trailing in is and the noisy. that is an historically which as demand we've XX%, the to demand the reconcile to four-week numbers fact the below below gasoline well.

of you're through your on any there? demand? what system in thoughts And terms real-time So love own hear just would color wholesale seeing to

Gary Simmons

Yes.

that going numbers be to them share low we DOE view we would So corrected us the the to and forward. expect look

are Our high. pretty wholesale trending numbers

XX% pre-pandemic gasoline volumes our representative is either. the wholesale are So don't channel about think of levels, necessarily broader they where through which above we markets were

which above is would we pre-pandemic the we in kind on the us, kind with the think X% are improvements the where around traveled focus showing it say more gasoline some number was of For likely. vehicle of demand levels mobility efficiency most fleet, what which miles slightly data, it in maybe to of is range the I believe flat is down

Neil Mehta

That makes guys. Thanks, more sense.

Operator

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

Jason Gabelman

I morning. couple questions. of Good got a

but be First, US some intermediate backed Coast understand that's Gulf taking to some Coker of to imports, Arthur about the ask I going resids, probably Port in-sell. out I the and project, you'll wanted be with the

been throughout benefit And as capture have XXXX. the rates large these differentials your resid I in pretty imagine a widened year, to it's

to to And the in the contribute off taken Russian And frame help VGO the could to stronger discount some market? despite continue Thanks. that? I expect XXXX you hoping expect was be captures wide you stay commentary I your that have follow-up. So of and a if resids you to

Lane Riggs

mean, that. I have of that look heavy XXX Russia And been -- this fuel buyers So the mean happened I out Lane. I versus of we think we one I'll of Russia. don't we'll obviously, crude is oil. always anymore. buy probably on sort at start things that's big

of has on Gary based they're world what and alternative plentiful largely the canvased sort oil out feedstocks fuel we've and So figured mentioned.

I mean, and you sulfur. they're have a lot of incremental crude going complexity into making struggling low

else. can X.X percent in the discount you virtually weight that So to see everything

so do that's to And believe continue. going we

through year. think I this

post us us oil coker, Valero, see intermediates. less want and some and buy crude, So, buy you'll heavy at you'll see fuel we more more

Gary Simmons

Yes.

just thing certainly probably positive rates a the and fourth resid year impact So, would for on saw is sanctions add But XXXX, only second was quarter, flows. significantly market for I quarter, because significant the really those it impact. and full our a the rebalancing trade in Russian capture the third the barrels after didn't we the the have came off

Jason Gabelman

on And follow-up is Thanks. it. DGD. Got my

of to suspect was distribution venture Given the joint X, start-up there DGD I partners. a larger the

So, I was what wondering distribution if disclose you're was? willing that to

And from you're that about to more the payout does now that at form DGD distributions, impact think ongoing you of going forward access cash in the have moving ratio all? Thanks. how to the likely to

Homer Bhullar

up. DGD start I'll on on just Maybe the it side, just started

this you know, there We cash with should more if conversation joint from expectation capital haven't a the spinning But be it comment-- I project to got to the Jason, don't should with distributions the with off coming spending even yet. the is close year, cash be that venture.

Jason Fraser

be cash. deploy capital payout include and but our maybe otherwise, having And looking on there With to right. calculus out. we'll at coming all we looking new projects X that's And when way at I had that's guess they're in DGD it that do find have ratios, Yes, another should cash they'll finish, I excess always we're it.

Jason Gabelman

Thanks. Got it.

Operator

TPH. sorry, coming The go -- Matthew Please William from is you. next of I'm Thank ahead. question Blair

Matthew Blair

morning capture my refining Hey, like any might on you to It we QX early question. have the thanks for rate? here. just Do XXXX Good a be want little seems conservative everyone. taking thoughts

implies I think refining XX% guidance utilization. you're XX% like to

heavier period. a probably So, turnaround

levels. blending some factors from butane other good, but still down they're like QX and then spreads And coming octane like looks

to consider anything conservative that more So, capture we there? and guess, I directionally, in else should we on sense does be QX want that make

Lane Riggs

Yes, need you the per have We'd out the maintenance. capture that Obviously, we I figure know barrel look that of capture material to have how at sort on be impacts to seasonal the more conservative don't and rates. dollars rates. balance actually

conclusion from sour fairly jump to quarters, changes, wouldn't you're you I to but QX blending wide So, QX, of both have discounts. butane both quarters, appreciably

That's occurring, occurring we I to how for we a versus is our have that So, year. turnaround out. of turn the when in the don't some have heavy -- just obviously, QX maintenance do that's for quarter around, this we'll But -- us and rest were see plays normal us.

Matthew Blair

you started guidance And partners we think production. DGD, the it. about was old how one-third oil, uco up your but X forward? Your should DGD corn one-third feedstock then and one-third for Got fat, mix acquired going [ph],

one-third up is want little on inch that? inch guidance, uco, might we more do the And bit to you that fat like down compared on anything that seems fair? the to maybe specific it maybe So, have a on

Rich Walsh

is Well, I detail that for waste say would oils. get DGD into feeds. is guess, normally level we the on I of What don't platform whole big

and so inedible tallows And other going it's always feeds over from the to standpoint. oil favor corn and CI a

running broadly that's Darling from coming the each maybe is more a we add is well world. international feedstocks in we I'd the And both So as just dynamic. of – thing very do as color, say always are what feedstocks, how those just see, some is play individual lot to more of

the it think veg it's So I spoke We we some earlier, as three But – those forward, of ran became attractive. some and most those feeds. mix oils. fourth are the oil going oils as prices be going attractive to in waste always because waste of the quarter

Matthew Blair

Thank Great. you.

Operator

no comments. Bhullar to you. showing to Thank floor in over We're questions at queue like time. turn the closing additional I'd this back for Mr.

Homer Bhullar

Thanks, Donna. team. have week. to us great a and if reach Thanks, any joining everyone, today. feel I IR to everyone out you appreciate Obviously, please free additional have questions, the

Operator

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

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

Valero Energy (VLO) 26 Jan 232022 Q4 Earnings call transcript