VLO - Earnings call 4 2023 | Valero Energy Corporation

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Operator

Greetings, and welcome to Valero Energy Corp. Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Homer Bhullar, Vice President, Investor Relations and Finance. Thank you.

begin. may You

Homer Bhullar

Vice and other XXXX everyone, Lane Valero Corporation's team. and our Energy our our Gary Good Vice of Executive Conference welcome Valero's Call. Quarter President Executive Fraser, Jason Earnings and and are and With Fourth CFO, CEO Simmons, several morning, COO; President; to President members me Riggs, management today senior

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

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

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

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

Lane Riggs

everyone. morning, good and Homer, you, Thank

strong financial to for report year. and are We full fourth pleased results the quarter the

XXXX, earnings of the adjusted in and year of exception earnings the highest we our capability in fourth history the XXXX quarter portfolio. delivered With results, our company's full demonstrating

XXXX, achieved ever. our XX.X% best is system which refining mechanical availability in Our

reliable our for environmental environmentally the We and performance safety, for safe, responsible long-standing our and record illustrating also commitment operations. previous to set record matched benefits from process a

our for per growth branded our in demonstrating the system, approximately record sales barrels of million Now strength we day, marketing network. set annual through organic X wholesale volume and at wholesale an of XXXX

We our XXXX capability on enhance projects pursue SAF of first sustainable the a and business expected schedule expand competitive for continue million. remains long-term The Port $XXX or completion strategic of to DGD earnings the to in Arthur at fuel, quarter that total advantage. project of our aviation

Half attributable to that of Valero.

of DGD SAF expected of With the completion is of become the one project, the this to manufacturers world. in largest

cycle addition, cash projects capitalize that margins and opportunities our In to on are pursuing existing refining we optimize around improve assets. shorter

dividends side, fourth shareholders. approved ratio activities in financial a dividend. continue we our the operating XX% commitment net the and returned of X% a to On shareholders our and We through adjusted by repurchases XXXX, honor XX% share last quarterly cash Board in week, to cash for provided payout the resulting increase to quarter,

applied and near we product despite products remain expected be expect Looking to refining supply ahead, to tight new demand term, by summer quarter, refining constrained we ahead balances. industry-wide startups. inventories exceed margins. supported expect heavy In the support to first activity season providing in of are to refinery turnaround global the with the Long product term, growth margins demand driving

in success our of has returns for the and In positions our to well commitment operations, pursuing future. team's simple demonstrated on shareholder excellence strategy a projects driven discipline closing, us growth return-driven

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

Homer Bhullar

Lane. Thanks,

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

$XX.XX per share primarily Valero per the was compared day. billion attributable environmental million billion fourth due segment operating of share utilization quarter XXXX $XX XXXX, or $XXX to $X.X to billion capacity averaged fourth $XXX XX% For XXXX XXXX. expenses the fourth the to stockholders of was stockholders regulatory per $XX.X of higher net of $XX.XX to income Refining income reserve for adjusted Valero for $X.X income in XXXX. Renewable in or $XX.XX XXXX in fourth per guidance attributable net to XXXX. The XXXX. $X.X to refining adjustment throughput cash quarter million Coast. in in quarter the quarter share than XXXX Throughput of of billion fourth for was per quarter fourth X was billion fourth barrels operating operating $X.X compared income of compared the were of to compared Diesel $XX.X an XXXX. segment West Refining barrel the of the for million billion per XXXX in $X.XX quarter the reported volumes share $XX.XX quarter or or

volumes the quarter Port sales fourth quarter in of the XXXX. averaged day day income Arthur in XXXX started lower higher which of due DGD in lower margin XXXX, to higher the the gallons quarter X.X from diesel million fourth up were to diesel volumes sales gallons was which per renewable quarter fourth of XXXX. quarter quarter additional the fourth of of XXXX fourth was of plant, The volumes X.X impact of million per fourth than Renewable XXXX. due the the Operating the in than

higher $XXX XXXX. compared of fourth of in income of fourth the result income The for of million gallons income reported primarily quarter fourth higher fourth XXXX. as lower volumes gallons quarter million X.X volumes ethanol the production quarter quarter Adjusted for fourth XXXX, than the million for a Adjusted segment XXXX, the prices XXXX. Ethanol million corn for XXXX quarter was production $X operating million to quarter than of XXX,XXX of fourth day fourth averaged quarter XXXX day $XXX of which the was per to and higher per quarter the operating fourth operating the the XXXX. in compared of of was $XX of

of expense were million, was $XXX expenses fourth $XXX net the quarter For XXXX, and million. G&A interest

impact $XXX amount of a cash $XX The with fourth tax effective $XXX associated activities XXXX. was by and G&A million was XX% million was $X.X expense by other operating adjusted Net rate million in provided cash and tax of million billion was for the $XXX $XXX amortization capital was income provided expenses XXXX. quarter operating net in were activities of XXXX. expense Depreciation fourth Included for joint in unfavorable from million the the share venture DGD. quarter working this and member of XXXX.

$X.X items, XXXX. by these adjusted Excluding fourth quarter net cash operating was activities of provided in billion the

venture amount operating XXXX was Net with million working $X.X capital share of DGD. operating activities activities cash in provided net by $X.X joint adjusted provided unfavorable $XXX billion. a impact associated in cash billion the Included by this and from was of members other

net items, by activities provided operating XXXX in $XX billion. these cash adjusted Excluding was

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

share of XXXX. attributable joint venture member XXXX attributable DGD, billion Valero fourth and the to $X.X million capital investments Excluding other to for investments $XXX of were the capital quarter in

the activities. a million shares of million Moving in of fourth stockholders XXXX to common resulting We $XXX in was payout of the approximately which our for dividends billion returned to and for purchase X.X quarter. $XXX as $X.X was million financing of the paid XX% stock, ratio of quarter

of quarter results XXXX. we and XX% count by $X.X equivalents mentioned, to of our share year. cash in in ratio, since by year-end Lane billion With of the XX% for XXXX cash. ratio repurchases, our the liquidity, was $X.X billion quarter reduced a net and December XXXX. payout XX% Through this balance capitalized $X.X well with approximately cash billion debt, ended of excluding and equivalents. of As The respect XX% total we share sheet, $X.X obligations of finance And XX, of cash ended debt-to-capitalization with lease the billion and we cash available as

Turning to guidance.

capital About the towards businesses XXXX to projects. which for approximately investments the includes catalysts, to joint attributable $X.X billion sustaining growth is half our business expenditures refining venture that allocated fuel compliance expect with We capital of turnarounds, towards half low of $X to be the balance investments. and to carbon billion, and regulatory and growth approximately for Valero

capital growth SAF for primarily is the carbon low project. Our fuels

refining capacity, and or to some our of projects improve our markets crude out Coast in to value some refineries. out Gulf flexibility of increase growth improve into aim more our of product key access unit extract conversion logistics Our our the our

projects or exceed these our threshold of IRR. minimum All meet after-tax return of XX%

per we turnaround Mid-Continent throughput XXX,XXX day. to barrels refining and first at the expect Gulf fall XXX,XXX Coast at volumes XXX,XXX to barrels the West XXX,XXX modeling day X.XX For ranges: quarter which million Arthur to X.XX per day; legacy XXX,XXX million barrels Coast operations, our to work on following per within to XXX,XXX barrels our at North at at day Atlantic refinery. per coker includes Port

across be gallons volumes to depreciation should to expect we approximately such the first billion quarter XXXX amortization. the per Operating expenses lower cash expect respect $X.XX noncash system. as our be per operating barrel, to With due and gallon $X.XX which gallon, be We sales for includes in $X.XX in activity in X.X reflecting segment, diesel throughput per expenses costs XXXX. refining to approximately turnaround renewable

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

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

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

That concludes remarks. our opening

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

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

Operator

question first JPMorgan. [Operator coming Instructions] Royall Our from of John today is

John Royall

side, about is see OPEC in how quarter, widening here? still to you about macro we question talk on beginning just all of yet drivers the the in around first of LLS-Maya my So and of from heavy the you from diffs $XX the on heavies. restrictive risen coastal being the terms way progressing them have light Can X production. has

Gary Simmons

This is Gary. Sure.

contributed number of I think to that. factors a

see the little make did U.S. Gulf Western up tick a bit production barrels their in into Coast. Venezuelan way We're more the seeing You quarter. in few fourth a Canada

biggest especially more and as But barrels. the of of early this you heavy fourth impact quarter, the So decreasing a those, demand the quarter sour late probably little to got supply the see market. the you're is on in for starting factor some turnarounds

for on oil, sulfur well. as to power demand typical had In seasonality lower in heavy but generation fuel of addition high fuel discounts kind the sour factors, high weighing you those sulfur the

refinery continue to view OPEC start need quality really market. those impact we bit wider diffs you'll the come first impact any production our you'll the more through discounts, to then but is meaningful sour and the season, little heavy a for for quarter, So that in through see maintenance to sustainable see on

it could the forecast, look year. this If quarter consultant like at third looks that you probably happen

John Royall

And then my second of is on return question capital.

of was very you've 'XX tend the year fall quarter a below, the we CFO. talked where even in to ends how kind this of for about type XX% you mid-cycle that XX% strong, of and I or If strong. year think being number know cracks range more year? range might are how come you above about your the So finished XX% at you when up to should in

Jason Fraser

And call And a into This talk and is if bit going I go I'm Jason. cold. too I've a ask respond. of so a and Homer to fit, got to much, I'll

Homer Bhullar

the dividend the shareholder to cash we've our Yes, And the quarter, as we leading XX% COVID And flywheel and includes XXXX, year. adjusted for payout fourth operations. regularly highlighted, which was consider XX%. from as our hit XX% mean the in a in nondiscretionary had the on, our we strength net years buybacks, for to X that average approach above of considered XX% into which target. annual payout returns in the we John, I obviously, XX% given sheet supplementing by is since you around a And fact, our target And target. dividend, which balance our in driven touched paid the to are our resulted of payout

dividend is in covered. and short CapEx So sheet and when periods is CapEx, sustaining it as strong the I now and strategic is think the balance

cash floor and XX% You think any our target excess of a to expect go can XX% towards buybacks. to as reasonably

Operator

coming Barclays. of Chen The Theresa from is question next

Theresa Chen

moves Would and seeing update in utilization outlook demand demand is across ramping footprint, from please? inventory you the of an also some well you're mind recent fully and up products not giving running on your as here? even your additional terms us what Taking refining clean internationally, into supply the as account capacity

Gary Simmons

of Mexico markets our see then that the are percent were you, to wholesale to of impact Gulf the difficult weather. market the tell kind arb are weather that That's in year Sure, storage. trade kind making gasoline you, Theresa. And kept with this putting for remained time I and limit America not This year, weather can markets few see of in gasoline Latin relatively for strong. gasoline holidays really We're we're last is always you then It's can down, and summer typical gasoline we where will demand domestically, really early, and Gary. normal have and tend because about to Gasoline in But recover patterns. tends assess year-over-year. as nicely. European It on-road following appears fuel by channel have to the demand through a seasonal were the line structure transatlantic exports. regions the I really doesn't volumes a to transportation it great this closed, exports into and incentivize be starting volumes and steady. looks impacted concerned of fog big into tell it's

of move with So pretty season. on optimistic we gasoline and into has once really gasoline this driving demand spring us cracks all improves

colder side, On seeing about oil little with more diesel in heating year. bit a weather. demand our the last system compared demand Probably to is X% up

bottom at of range. average remains the inventory X-year Diesel the

with South flow diesel the the continues But quarter, way our the we're barrels weather to So America with a Diesel some barrels with hitting exports cracks. can thus into demand their support caused good down keep you much to quarter. warm first Europe. demand have were in Russian our colder low trade making combined changes more fourth down little inventory a weather far tell in to little in demand there. stronger bit. The system of seeing European tended their Europe, in In the going I

continue diesel cracks demand. We get jet support believe from the to increased

pre-COVID gap freight demand this down pool colder As diesel picking we Jet still kerosene about a year. and Most continue closing year And about COVID. expectations was up then us gets of from forecasts for slightly to the better well. little pulled recover that levels. back show out from with as as diesel for last XX.X% demand weather half

back looks new looks on day barrels about million demand online, day. overall, new question X like growth us over coming your it So be a to million somewhere capacity X.X capacity, of to year-over-year barrels to a slightly in

last timing on. So when year. supply/demand are question balances really we capacity becomes really that The what fairly new to saw comes of close

for to tight don't that the as really that different is starting view you difference start holds, then impact on we're you've those an balances up only refineries Our supply it relatively have inventory mentioned. and will later a longer see new was really take until from in the supply-demand if year. already position, you being And

that, expect to some we on do the operations, In total expect into get to refinery had our draws weeks. begin weather product season, cold would to over mind see you'll The which light we and inventory on several impact draw. start then next inventory turnaround to

Theresa Chen

are What just looking you with then Mid-Con And answer. detailed Coast? do in the divergence in the in regions? within cracks that the the Gulf benchmark your is margins maybe in the on weakness causing the just product for particular across suppose you views strength Thank think U.S., what

Gary Simmons

Yes.

we on Seeing thing on Coast. demand and off the you West once tended in that the we've long So the the recover. the demand the to weathers to region. think Mid-Con that But the think that weathers summer just and get start region driving in and West to I short the impact so into kind market historically, that The the weather product see back year. long winter. and is is this And same of you especially I tended product season, more we're Coast, seen seeing in Mid-Continental hit see clear

seen a And of this that little maybe so for than would we've bit market year. softer you time see typically

Operator

of question next Neil The Mehta is coming Sachs. from Goldman

Neil Mehta

some and operational And Congrats but of one Yes. I they're that, the what but about things sensitivities to And great lot us good. know of some the be performance, spend guaranteed, recognize continue commercial on of lot stood is was rates of talking very doing results. to Lane a there's out capture that I side. on some your that commercial the of around time that's competitors a

share curious, dynamic a can anything if how you you're just So be very environment. continues optimizing to about be what

Lane Riggs

Lane. it's Neil,

the So past. I'll our I understands Everyone by spoke company I'm for that say in not will thank I this position start the what wouldn't And they going our to saying That's -- industry. the commercial team other in team play. about you. I in trade any

between to clear, in signals, I sometimes on -- position clear they and That's a of that between interference signals that's a supposed on supply expenses, get groups make all they pretty Everybody play focused think lot Refining, how coordinate to and you Valero. chain. the how really some and can our operating do it envelopes an refining where reliability understand front groups has not P&E the well. commercial been I've true organization and work. the not of our and that's the it's execute and

incentives. I you own And course, key groups And would in corporation tell the so have to their having of different everybody that's the We goals. don't our really of same that, execution. sort is incentivized finally, the with

So we the through. that's way get alignment how all

So have glad to them.

Neil Mehta

benchmark. was follow-up this that. well realized up. Then I and on gross shows The was quarter It $XX, benchmark, Atlantic. the just above North was it to particularly No, Yes. think, margin strong the the relative

if or U.K. curious you'd drove call there's just there? Montreal strength in anything that So the out

Greg Bram

is Greg. this Neil,

for were quarter They prior than seen costs periods. to capture that crude of that commercial up -- then that our And things region those up the you region. very the rate strong Pembroke. programs the then than where more combined North you saw is as were that And saw primarily did costs you we've over in well the in Atlantic. in the some all in there, we for brought compliance in margins. improve for So costs And drive Canada in lower

Gary Simmons

trading distillate to And a Yes. a high Syncrude to $X is just with real add, at a below is benefit our that discount Brent Brent. crude I'll yield systems. And to

Operator

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

Douglas Leggate

bidding I'm means the want but how but perhaps and macro Sea product wants do imports to obvious so implications to to specifically, been and more with a Valero of on at this perhaps at it about does disruptions sector? on. the this has movement more rates tanker a shipping which who the what not dependent up ask one, for time, clean on question What do the I take that and Lane, for just situation system perhaps not an than sense, is any sure least I've since covered Red it

Gary Simmons

Yes.

running crude region. really not we're So from that

it the just of of crude. hasn't us rates. really especially to big terms But an of had could Brent-WTI. crude Gulf has side been that in the barrel crude to that So spiked the where range to see in from $X export And in you time Coast a the supply a period could had you a Europe We the impact, business low freight of on U.S. barrel. $X impact Northwest

competitors. advantage So system, it our for you, gives I crude a global cost an it is advantage tell versus because us probably our would net

Douglas Leggate

able seems sustain to payout, that payout that, it it's restated maybe but we'll CapEx higher I you you Okay. level, are the but your least quantify, for it's to at so of continue thanks XX% for to billion plan. that. on especially to or is cold, numbers, Lane, at now given watch, a easily you've for follow-up my realize Jason, XX% $X kind hard our

reference your of curious, in what's that the capable range is payout? to that supporting system So clearly terms of I'm kind just the of reset

Lane Riggs

answer let that. I'm going Homer to

Homer Bhullar

long-term mean, right? is Doug, a XX% And think our our long-term range, you target. to build I But sheet it obviously, I as a think think set -- target so is above as like the it as mentioned a we're point, strong your balance to have to consistently XX% I And I again, going come right and not on in cash. that. now, when earlier, we've of

above that think target. So shareholder returns reasonably expect should I come you to in

Operator

Gupta next question UBS. from is of The coming Manav

Manav Gupta

to business. to of a has renewable on And about the done now very XX%. I lag job ask good the So of capture wanted side diesel the explaining about dropped Homer works. market the the The how DGD to

quarter an XX% So look renewable assume than would have the of something lag, if the and diesel hit And actual capture up XQ, effect materially. in stronger would when the margin first like that XX%, if $X.XX, ignoring we the we XX% would fourth we margin lag add in earnings that for that back so past the is came terms that that much quarter? be imply capture

Eric Fisher

feedstocks it's And see curve would change and just you really, is renewable lot Yes, yes, with first longer. chain supply -- run diesel DGDX we is the the year percentage I This full a for very in say lot that Eric, operation, good same of of for higher Valero we yes. a described. a and that -- naturally foreign the of just is

I So seen most imports. foreign And that's DGD this lag historically. longer coming think CI we've from than feedstocks lowest attractive, in are creating the

I analysis, your correct. So is think,

Manav Gupta

Perfect.

quick we follow-up last an winter. had is, a here warm Just abnormally year,

then much as guys colder we taking are when quarter, at this a last have Now weather there. look year, is and you have turnaround out could all a heavier mentioned, you industry as we versus seeing first

first comp demand. last year. So even dynamics the relates oil I'm just understand to better again, than it versus versus be for the year heating quarter, last trying to the year-on-year could as this

Gary Simmons

way capacity which the of between year last year, big it. kind took the early winter inventory That's Yes. see The is storm refining and had off-line of the big in difference year created we kind this the last reset. we quarter

colder you'll our a and in turnaround get little March the weather. have with a into didn't of see year, draw mind, that we then and this February as more You but activity

Lane Riggs

so. There's I still possibility call. the Coast, weather of to the Gulf January. still hitting It's have

Operator

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

Sam Margolin

the on gasoline I had market. question a

economics. may capture I XQ think benefited have rate from butane in

blend as possible. just low as much making high of there's a summer correspondingly, make to grade. may to of categories. into And incentive have NGL across so kind There winter a -- was if stockpiles a of number And different that incentive way in-store a supply across lot there been is great a its

And overstated as if just quantity so the of enter think to it about in driving makes inventories know season, total maybe butane maybe that given we if to I sense gasoline want are number. into

Gary Simmons

Yes. and when at into look storage. a Certainly, to in making our to system, putting you cost gasoline of grade summer there's oduce economics pr it some at gasoline, no great all the be

I think the only way people that storage could they're see is be storing today and octane barrels stronger. components we at going in to all, that it it winter really the get would grade. be largely But are high octane are that speculating barrels certainly that that just

Sam Margolin

question commercially one my closer for that as SAF unit you SAF. I'm market Great. developing about And we the follow-up coming wondering just how on. And second is get is to

to you I production. regime, through the pass policy think have of kind of SAF on it levers view cost-plus sort the love SAF a are take outside because that there's closer market as would characteristics developing commercially how to is thoughts but get that on contracted could airlines I of your longer-term some

Eric Fisher

said Yes, Sam, it I well. think you've

through of in basis to of -- their are models A carbon that to offset to the budgets. cargo We travel to all sort through into be to on voluntary footprint their Jets based a a more their carriers. approach their customers travel continue going pass-through we and a that airlines goes talk are lot of want

to And of have so those lot conversations. a we continue

production several on with into contracts from airlines done very having we're think I our our close project. going early

very, continues be that well. very So to progressing

have So project. we that this don't of of we're going moving a problem the to see volume all out

Operator

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

Paul Sankey

with ask about the you've was I international shipping, Sea. to dealt going Red but

a just port other out about of product Russia wondering there. we seeing you Russia year. start you're as how a coming explosion much I big could the bit talk was and distillate about that headlines So was

new starting Secondly, Venezuelan, the with are Mexico Nigeria crude? and lot starting from incremental Venezuelan then maybe refinery I finally, big And there? the think from you What's you benefited outlook with your a refinery seeing what

Gary Simmons

I'll with Yes, Okay. start Russia.

we're I lot drone biggest last the a the a naphtha night, attack is the East. supplied that of seeing market to think impact far probably naphtha that occurred seen you've so in reaction refinery the Far market

And gone. that a that, be so there's flow may concern

And up. naphtha has the tightened so market

to see think starting I you fall. do distillates

And getting they West would parts some things. what the experienced some like issues, spare support for of of the typically and we're they're things trouble those as even refineries is seeing from types that having that

do maybe see to of the issues. due to middle was The that part a we starts So off distillate trend those bit little question

Paul Sankey

Venezuela benefit.

Gary Simmons

ramp So up volume Venezuelan of we crude. continue to our

have the a lifting impact, a Venezuelan had probably quarter bit additional reducing more more system that as into they on volume than our of we in think of the we're I sanctions price running the more fourth that see result of Venezuela. so of value did barrels a little further on some the sanctions

Paul Sankey

starting? Mexico refinery

Gary Simmons

Yes.

business we talk yet from us see may that the we some the either. of product yet When hasn't crude delta seeing impacted don't side our of the as in the So Mexico not there's we that on really of supply about refineries. always supply, any any we're discussion And see Maya, but impact falloff yet.

Paul Sankey

I apply well, then Nigeria as that to would right? guess And

Gary Simmons

while mind, just We think bring that be to to Yes, in same ramp for thing. our a take up. to it's that's refinery to online. going It's not big a easy refinery going

Paul Sankey

quarter, the you said then saw that Can changing year Great. you in here, just anticipate follow-up with you a last leadership. asset And you that that that. taking we with the the it Homer. anything expressed of for on you number are add want weak to market? look leave you've dismay and if the given policies on the us update there assets results perhaps the California just greatly change second CEO Lane, don't question I'll base And where

Lane Riggs

as consistent. Yes. on team, I We [indiscernible] been mean a to market. everything the leadership look has at Joe that comes we've been pretty

being is it's of United the to in and short. structurally difficulty States move really we I is to difficulty in fuels of desire of terms structurally, make policies whether fossil -- and the fuels, Canada and investments, see the our to think view sort from Europe transportation the try away

that So lens we we on. look assets do look when at that through come

in we also during industry. the were consolidator We XXXXs, the biggest start the

and know to what it we So this, at it. do good takes we're very

these our to And they and -- at so all full look buying compare are and that when with and and organic we we we assets that we wide cost compare eyes back shares. growth we open understand come the on

And Clearly, and same is probably place to that We in our framework. base. so getting do like operate it's tough asset a tougher. all California

to everything really that's what that look again, as we want But continue well. want say refineries all and part. at at to we So say we -- also look I at I is look about not -- to we're

Operator

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

Roger Read

I'd -- like what's grade the conditions conversion know already so incentives in Like to maintenance to the going look I this in the at with point? what is the that in way? to March set follow of close you and we market isn't heavy up, market? much. gasoline inventories seasonality are the Yes. Or the I'm between like that current the needle what But up gasoline? how just that said understand the on Gary, summer trying are thread you is the to

Gary Simmons

Yes.

to would about cost there's cheap butane view, $X.XX. screen. March-April to look our is tell carry being a you produce the and We with to So the closer $X.XX Roger, you

especially arb happened had incentive that was economic economics of Explorer ship terms of the in gasoline. to of the on Mid-Continent Colonial no lot to being that you in weak. Mid-Continent, the things build the certainly, we due allocated was what So the store inventory December, into at in closed happened Gulf all the think a Coast. is lot A

in movements Jones dry that Act freight some some had You dock limited market the there. off

late. markets lot a impacted then freight really volatility the of in And

go during Gulf would because and saw rather and and covering store just that Coast out consume so do and periods that. was they barrels than to weak they ahead choose And going is in own gasoline although that our carry refiners I to screen got choosing Coast basis weak Gulf a there you saw mind, what so keep Coast their basis draw. inventory the value better think hold inventories And enough U.S. the we of wasn't to then maintenance the to lot on saw Gulf inventory,

should over next months. So couple of then if case, inventory the the that's see this work you off

Roger Read

with obviously, lot Great. but And of also new coming other a then feedstock capacity in. quarter, thing, some That's diesel, helpful. in issues renewable this the there's dealing

curious in assuming think more business, at or a about potential that Just feedstocks in terms us forward basis. at to sort and where holds, just the you either coming we pieces think the or look you of moving how about a us, market matching in how curve point on structure, to of should if market margin this ask this of today it's because in how would opaque the daily relative we -- it the little to timing it's just here are

Eric Fisher

both fixed I down, it online you oil. to prices capacity, would into to continue see that and coming renewable would margins. how would outlook both play those down Yes. veg because capacity RD difficult say will diesel, additional have out predict that and also feedstock exactly say naturally credit for value with being for credit it banks come oil the LCFS is that we should do additional narrow waste come which That and said, RINs

waste oils CI always lower have a oil. into will get the you structurally advantage over then So veg

oils So into compliance competitive oils where they won't waste to be long, be veg markets. will still

of the to oils, to core a the back is markets DGD besides goes low-cost it business, waste producer access which California. So

feedstock an up still would standpoint. question a we'll feedstock overall, credit prices But we both OpEx with to is keep say, it's prices will continue how and the narrow. be that that advantaged, so outlook, expect from And we And we'll see of that. I competitively

is and be SAF, diversifying last And we'll of this which RD the thing, obviously besides away so California of market. our out project, takes some -- into our with product from sales then diversifying

things in both make those advantaged So and still us tightening competitive think most platform even R&D, in the a of we market.

Roger Read

is lot the So we it to call fair year In for look R&D your probably feedstock it, other there's and this is let's the the where more on on, side should supply probably R&D? opportunity as relative clarity sales of on summarize rather clarity less of say, a that price side? lot than, feedstock a words,

Eric Fisher

fair most a of CI vegetable be to that think oils that still I waste say oils. Yes, is advantage would that over being in

Operator

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

Ryan Todd

turnaround on activity. question a Maybe

XXXX, quarter. seeing in what in we expect Is be should the indicative a to Is expect we maintenance this that heavy you're just should of relatively looks what Your year? of this maintenance for loaded? to of in And you year. for heavy level relatively overall overall any activity higher terms maybe -- another thoughts first industry this front-end then be

Greg Bram

Ryan, plans. turnaround this is our overall Greg. Normally, we don't talk about

first You guidance, for quarter. fair of in can activity tell amount a the from the us

we'll first industry of from get I of the in across a as those rest out up think are the periods come fair about talk activity to we the year, we the perspective, when we amount the through industry turnaround think an seeing quarter. I

be in . of general, lot the a for Gary's kind going it the season looks in it's So Gulf lot of to point, in to a there. to a Coast it like heavy industry focus of

Gary Simmons

although expect The can rates. impact it other don't capture throughput we only right. see guidance, is may to thing our you really the we add That's

Ryan Todd

really are bit on our competing spend. just I Great. capital you either types a on that project, on follow-up side could gave of projects things most -- a refining be the keeping capital within is you your the Or which few appreciate And or of all as growth that there you've spend small of it, that of of But little some things forward across draw things isn't in more the question over of wedge that meaningful just little for the or of what I kind recently years any capital regulatory-driven the some other look eyes got SAF make maybe capital then finished of these and years? mean terms next we detail couple Homer, are project-driven should netback-driven budget. work the large. the there next of larger that or we way? more your growth environmental expect over should horizon, capital

Lane Riggs

your about to when -- I spend, historically, The actually maintain capital That it how sort be Lane. regulatory mean capital. you sort used if would include think say, we supposed we frame go albeit sustain capital. and of it's earnings we're I assets regulatory of way it. I this would lumpy. work back your Ryan, sustainable is would we to the that, in to would It to of we our try said generate billion $X.X that's

around that to number. And going so you're average

of that's we a really large the have spend. So now could foresee change. regulatory side that how about don't we it. I think that regulatory at always Clearly, least right

In strategic were around terms we billion. of $X capital, our historically,

can billion $X -- well. an we like feel we As pretty execute felt we organization, like

over where years strategic it difficult of capital on spent experience and ago we XX, We have manage. some XX more was sort then and to

on so decided of a we, sort live strategic an that of capital. to we as $X And the organization, within billion upside we're going

feel in that meet around that right platforms billion, COVID, year steward we'll we're we be gated in been to $X.X number a guidance and pretty out our whether now. meet there'll and all that projects, or renewable enough that's transportation at going they're And Since to that's thresholds. good or return and about through we've our our work that refining like process year our

Operator

of is Scotiabank. question Cheng The coming Paul next from

Paul Cheng

people year last U.S. China or global I definitely growth just was If be going will impact kind is this you slow That's at octane how think And a don't down. rate expect is after because financial down will year, this the strong. on case, result very last the probably lot that structural looking be? I demand that go may Lane that gasoline the of know even into what is because to -- obtain what how first I year Gary. expect whether And be think the slowing your we're like? If will question. a impact will look of if that or landing

Gary Simmons

Yes. Okay.

been market created ] the a somewhat to that way incremental coming pool. of sweet say is been with find demand Certainly, barrel, the the incremental being produced being naphtha pet on Octane. light has would naphthalene to I on barrel coming has that's gasoline more its And of So a down, [ on which market. things couple crude barrel to chem into trying the that's

it naphtha a long, that premium. what octanes so and then to gets inverse naphtha causes and does at gets at And starts trade really when naphthas an octane trade is to weak

where the blend in that that to we octanes can would could Russia I don't anything? was absent that, tend being I a and the there's attack less different bit markets. if any don't I the try naphtha if see that drone prolonged Greg, the market. thing by to outage barrel I know tell a octane gasoline prolonged The a there's out year. there's into be have naphtha at mentioned, that the year. I've know significantly But hit differences on you So weaker that if already fundamental don't pool. this that you one little that tell naphtha you see in this refinery

Greg Bram

I agree.

Paul Cheng

balance And Gary, are or net you guys or obtain? loan

Gary Simmons

long would overall, up varies. fairly balanced. octane, octane fairly We're balanced But we're I say It always so on say can I'd soak of you pain. way. naphtha, that in

Paul Cheng

a Greg, like? in marketing the in operation local Mexico how and in that Mexico. demand look Any guys And you Gary, Caribbean. the insight have

Gary Simmons

Yes.

to We XXX Mexico. which brand continues branded Mexico. in there the volumes So now growing grow largest was XX% our very business have up very, sites, nicely. Year-over-year, were our in

will in to Altamira for us will big think year Northern and in we in growth competitive allow second year, to this to that start change would we'll seen. us be this we've anticipate is then able the the it region, which terminal use the expect of I Mexico quarter the that that be more continue we up

Paul Cheng

the your that bit maybe operation, do about market you in outside How but gasoline the little is as a whole, growing is see market a Mexico that pullback? or

Gary Simmons

Yes.

Mexico. in is recovered expectation gasoline market is last the good to you'll So continue basically see our in -- pre-Covid our Mexico levels. And year growth to see view

Operator

Laetsch of next The coming Stanley. Joe is Morgan question from

Joseph Laetsch

material I of the weeks. couple to So earlier back impacts quarter? the Gulf should mentioned we you that any an Coast crude in weather going to be or and for to past operations some of off the dislocations wanted there of mindful start price point, on the first Were cold product

Gary Simmons

throughput operational issues, holds. I No. going like given and heater had quarter boiler to that tell we still some trips, but you, impact materially would feel nothing the that's the guidance we've small trips, we

Joseph Laetsch

renewable shifting to then And Great. diesel.

similar seems which a year, such the of level turnarounds performance capacity for about to theme nameplate reason averaged see. anything? why shouldn't good XXXX, expect consistent above Any as we is volumes or So in there. outperformance like a It

Eric Fisher

Yes.

in cat couple could year. we be got a billion. unit And the kept run change we this convert because at guidance the think we the to staff, in changes when harder that mode. have of a to I capacity there $X.X do We've little a obviously,

we sure capacity So the it the we're not start up. look on get until like to ground that what project and will

an it's we'll year, up guidance So of this time will next think or down. have whether outlook capacity I be what our

Operator

next from TD Cowen. question coming of is Gabelman The Jason

Jason Gabelman

to at strength market may be historically, historical I is been one a some around OpEx. OpEx. given $XXX to at perhaps just normalized that years, system, Henry all margins think of in recent think focused your as I has it you first in on looking a here refining per And think, the on similar metric the of $X.XX the focus This The you but at barrel a I less refining And million barrel becomes a bit were, Hub extent. more were levels. price year, margins

kind if or expect the versus you level and come stay higher to at this been driving OpEx pre-COVID what has this that back of rate down? just higher to So it wondering year

Greg Bram

Jason, this is Greg.

prices side, A one think bit natural the operate we notable So quite over on seen seen where the have things of has in the the so particularly higher electricity been that be power much probably power had gas, lot but we of that's than most costs, when you places a not summer, period historically. that

of So a that's part it.

more a that recently, easing. and that seems frame would be before. part back over inflation times other to that be about pressure, talked we've That cost also thinking The some few time

something with. suppliers to folks rein on working and back our with we worked So in that we're that's

Lane Riggs

that organization, in we're I committed know Lane. we is to this imagine guide, and an Jason, best the like the will that you cost say this with you lowest on sure should as still there class are Is making we work expenses. cannot

Jason Gabelman

about Yes. $X or said No, kind get of should back ] that. Is any this expectation $XXX we range down think below we to is moving carefully forward? [ there

Lane Riggs

of would fixed I we as numbers. mean are look We'll have have variable at in in part drives throughput through cost, what we the a refining characterize in expenses part X. most our this our run really the though a other expenses, and through we even that large thing

that we barrels metric better run, more the work. the So

online really -- you the that to best to seeing are where run the both have to quarter, are. at as when got system. That's you're things cost Normally, so of highest, and the really year And and the look really understand sort that signal essentially. time structures to third the we of are the they

get understanding the OpEx base So best an to is where it's of time for the the system.

Jason Gabelman

you is frame Got you the seems together were capture would projects that could capture in growth environment, off what projects? you other and of of upside question and to CapEx, maybe it. these from bunch Or capture refining stable My a kind alternatively terms you on these way to margin frame [indiscernible] it stable stable? type the improvement way could of potential that whatever enabling on and of is or projects there -- evaluate potential just return is keeping kind clear like keep any of flexibility a is quick-hit your hurdles what

Lane Riggs

Yes.

gated do returns returns is hopefully, we've our that that demonstrated a and we of to that our have spend think process whatever. this going have all I make nominally don't they're this lease have about forward-looking the ] in So is we're -- today, way maybe will earlier, want its demonstrate I generate through does would to to more deck the disciplined the But will our try that gating of the What billion around lot try think to everyone we still had said we little we conversation projects to to $X.X then small or delineation a I -- whether year and in think process. IR a way pack we we projects, we're process. of big do or like we our generate we success [

Operator

Holt. coming The of Matthew next Pickering, is Tudor, question Blair from

Matthew Blair

XXX Gulf Coast there risk believe that is day commentary starting the on correct? for Houston Is Thanks TMX runs at any to up your with of light And in soon? about heavy earlier. that Valero WCS I a availability system.

Gary Simmons

Yes.

the total supply, volumes Canadian -- depends optimize to we a XXX,XXX it between a vary and day, live to have XXX,XXX for ability on day, heavies, probably Canada. right? Mexican we're Greg, our Venezuela So it's barrels XXX,XXX and barrels

Our Gulf view the that Gulf decrease it materially the barrels of U.S. coming Coast, TMX our Gulf is be by that exports and will you'll And what system impacted will is don't Western think Coast really we from from do TMX. have Canada. Coast really still

Matthew Blair

on question another capital had I returns. then And

with showed clearly QX I mind strong, ended payout in We of intriguing So excess year billion just build excess you And found were the started year-over-year maybe would cash, of balance impressive. quite $X buybacks in ratio $X keeping maybe say with actually of XXXX. cash that XX% cash. that year the a billion the your

there of you do So excess now, that billion in you have mechanical down pay look could in on that of then Were of buybacks $X And you $X targets billion or to any talk sort billion about maybe -- have market? on any that happened? why cash locked XXXX? $X limits you or of that where you out the internal

Homer Bhullar

payout, the we're discussed past, quarter, to stay strong Homer. Yes. particularly first $X a with above of are Matthew, from we mean had comfortable we We but perspective. then all, very the think, balance it's billion. year. in for the I very, right, we've for cash I like where also a But

example, for our paying through debt on we liability debt proactively lens. terms right look management look In we of down, portfolio. at at like, side, the

balance of need currently ongoing the given at. so debt-to-cap strength XX%. evaluation, really And pressing ratio pay we to that But and it's a with sheet, net our have an something any look we of debt it's don't down

Matthew Blair

now clarify, your balance minimum to said just cash $X billion you . is And

Homer Bhullar

stay billion. We $X above like to

Lane Riggs

Yes.

we a really COVID. years. I coming so of that. it's know, changed don't We're out And couple of

to taken going it Going low. into was too push all two. was into found the And experience that the strategy trying COVID to COVID, we'd way down probably our

two four. do go cash So earn was it on a now before a about zero. four being at thing return that we've to versus before actually look our Good decided to and we minimum ahead bring on closer

to due but we that's experience COVID. really -- So through our went as

Operator

to Thank you. to like closing over This us comments. brings would back for Bhullar it end turn to session. of I the Mr. the question-and-answer

Homer Bhullar

Thanks, Donna.

have you obviously, team. Thanks a questions, that's us So us, -- that wonderful the sorry, feel being I'm concludes ping if have opening week. free any follow-up our IR for joining and to remarks. guys again

Operator

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

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

Valero Energy (VLO) 25 Jan 242023 Q4 Earnings call transcript