VLO - Earnings call transcript Q3 2024 | Valero Energy Corporation

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Operator

Greetings, and welcome to Valero Energy Corp.

Third Quarter 2024 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. you. Thank

begin. may You

Homer Bhullar

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

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

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

to that the forward-looking like statements summary, release. intended federal from press the your SEC. under press expectations, release this direct in of predictions the and statements the attention management's In contained disclaimer the forward-looking in state differ now provisions are on would company's results call we've I 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

a period relatively results heavy reflect a weak refining third Our during in environment. quarter of maintenance our margin segment

million volumes per demand across second with remained our capacity day in consecutive with Product for for at barrels our exceeding guidance the the strong operated throughput quarter. system Our X utilization XX% U.S. wholesale quarter. refineries the line

The and continue Diamond Fuel committed report our to the front, expand that to of strategic long-term Green business to our we that Aviation Diesel the On advantage. competitive proud earnings the up. of capability I'm enhance of projects executing projects remain Sustainable on and is our complete a project under in and schedule the is or budget strength starting is and teams. mechanically now the project and was operations SAF process completed to testament

On shareholder returns payout a the XX%. for the commitment XX% the ratio financial honor payout our year-to-date strong and quarter we to side, to of continue with of

improving to backdrop product should differentials additions capacity next oil further support beyond the refinery XXXX, of shutdowns OPEC supporting diesel margins. widen fundamentals. we crude demand in ahead, sour exceed margins. increase the refining crude with Looking Increases against light limited supply supply announced term, product inventories And low demand refining long-term and plus expect longer our should year and

focus our our In continue and discipline closing, served on going well will us forward. anchor to operational excellence, returns have honoring strategy and capital commitment our shareholder to

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

Homer Bhullar

Thanks, Lane.

X.X million stockholders $XXX or Refining of the quarter billion third XXXX. million operating to net volumes Refining of per quarter or $X.X XXXX. capacity quarter utilization. the $X.XX barrels income compared share for The attributable XXXX, the Valero reported was segment to For $X.XX quarter third income million the of the billion of third $XXX operating refining per share $X.XX of for in compared quarter to for third averaged the of XXXX day in $X.X barrel throughput third XXXX. XXXX are quarter of XX% per per or third expenses throughput cash

gallons day quarter gallons the of quarter gallons segment of day compared averaged million X.X sales compared the third XXXX XXXX XXX,XXX million Ethanol quarter the of for higher million in million Diesel The XXXX. diesel per gallons the than ethanol XXXX, per of for segment of $XXX XXX,XXX third $XXX reported the the day third was quarter in the third averaged volumes production day quarter of quarter $XXX $XX than to Renewable income operating was per income of Renewable of operating third third which XXXX. third the X.X quarter XXXX. for XXXX. higher of million was per volumes XXXX, to quarter for which third million

activities $XXX expenses in change $XXX was of $XXX favorable net of For $XX million. million, DGD. adjusted Net cash XXXX. $XXX the million interest XXXX, amortization the operating income this was expense by expense The quarter by of was tax associated and and member were rate billion G&A depreciation million expense provided of million, tax $X.X in effective was joint cash third other was venture third working provided million capital the Included in XX%. amount quarter operating net share with $XX and activities was

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

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

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

Moving to and of quarter. to payout the the $XXX common was financing XXXX, buybacks, the resulting our resulting $XXX long-term purchase have ratio of above a minimum the shares for well million XX%. $XXX quarter which X.X stockholders of in we million our of of XX%, stock, third of paid Year-to-date, returned million to was and stockholders approximately in returned We activities. form of billion of in commitment XX% million payout as our ratio XX% dividends dividends to a in for $X.X

since start and period, share and cash of buybacks. $XX debt stockholders of billion returned exceeded billion reduction investments cash capital through dividends In have our $X uses over operations over this of to XXXX, fact, total including the flows total from over our

we available cash. ended and the ended XXXX, with net was with to equivalents. capitalized and billion excluding obligations The cash quarter debt-to-capitalization $X.X of our and of billion of finance sheet, cash the XX% billion ratio, September we respect debt, $X.X balance and liquidity, With total cash $X.X of of lease well quarter billion of cash as $X.X XX, equivalents

guidance. catalysts joint and investments capital We to to venture billion, expenditures to investments. XXXX attributable be compliance still $X for approximately regulatory Valero expect for which includes Turning turnarounds,

of business and billion of low projects. to our with towards About approximately balance the that $X.X carbon capital half to growth businesses fuels the towards is sustaining refining growth half allocated and the

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

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

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

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

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

the open in Q&A two turn questions, the call we each Before questions. please limit to to

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

Operator

Today's UBS. Instructions]. coming from question [Operator Manav is first Gupta of

Manav Gupta

we key you is the demand a close coming as a XXXX? products and about is, little can My first talk that how trending here for to are in question bit

Gary Simmons

interesting is market Manav. to during turn of improved driving the This crack we've the -- past fundamentals us us fourth couple refinery we more the as than weaker last very and environment spreads to market in move we've actually thing that, Obviously, third despite markets Sure, in Gary. we look The the years. years. a sentiment to third improve continued much seems presence, even margin we lower. than couple it a negative, quarter of seen similar the like is in into quarter, quarter what have the looks to the where in market improving things seen have the fundamentals, underlying To

million wholesale year-over-year. far We sales increase sales the averaged flat sales in seen X.X third actually we've XX,XXX barrel actually in a fairly a third Lane fourth were alluded the sales through to a million day. our year-over-year. quarter day quarter, quarter, X wholesale is Gasoline year-over-year. actually in about increased over to channel. up Thus the which in barrels Diesel our

up. it's going actually So

compare an to about X%. of indication with indicators. Vehicle get kind that other some were traveled, demand of You up models

to So week. data, a that week Even kind the numbers. our of of matches lot noise although DOE with there's

from at look up. slightly demand gasoline the kind show of you numbers the DOE demand year-to-date to flat If would

to the of in some demand down bit year-to-date for especially you bit a that's so to we diesel that And said demand year-over-year. of system Again, is diesel are. where if diesel our that's of we sales I DOE at we pretty the indicate freight the look the in DOE other little would think up a compare the day, show numbers, numbers indicators a close. little which softer think I barrels Again, indices kind think demand, XXX,XXX close

has gap by of up fuel in made of that. that Some demand in been jet increase demand, diesel half an about

flat like So the products Mexico, a net-net, kind very significant we U.S. trends. the Canada, U.S., down total year-over-year. we in market light to U.K., feel where the outside presence of markets all in I similar think have slightly

and in year-over-year three in decline a growth of diesel gasoline the growth jet all I think witnessed those in demand have markets year-over-year demand, demand.

those demand looks outside strong pretty markets. So

third We day, XXX,XXX Latin and in Canada. Gasoline the day kind continue to third in XXX,XXX see again, barrels quarter Diesel of typical quarter, a the barrels about America South export were America and a demand. Europe. exports markets, exports good

we've So markets presence. looks what where we the very have last that years see strong we the to a to couple in in continue of similar demand seen

Manav Gupta

did hit able Perfect, red in Gary, flags transient environment but stronger mid-cycle? that do And softer you suddenly no here are are the this higher? and real and quick is, in mid-cycle back to -- follow-up kind as cracks or trending outside. get maybe is even lightly the if my we it's be track if of Why below demand demand, so the where U.S., should holds then to this see there

Gary Simmons

I Manav, reasons you some negative say And for of of third slowing hurricane to sentiment. this, RVP would quarter there's tends Day some that. as go had Labor your earnings have season. marks the our that year RVP call, through the you've the on transition market Yes, on Labor the market some around to gasoline typically Each little hype transition, driving you you out people a typically season, Day, more start away kind view of of hurricane in pool. end gone tend gasoline,

around driven more be quarter to in understand the quarter fourth negative distillate tend can you first And by gasoline. typically, cracks. sentiment So certainly market strength some and the

fairly been which has we into pockets down We've pessimism around came throughout resilient. and although cause think the economy diesel the I bit. year and have weakness little cracks. a diesel globe, economic seen this driven some U.S. the of demand

We're last where into though, below time, with inventories, we XX at year fundamentals the look gasoline going the things you If look this very million are, the low X-year barrels where below strong. inventory, at year were average.

tend backwards. the Some key the on year, of of time markets market this the we to gasoline in be is market at structure, focused things structure

to store incentive produce no there's So gasoline. summer-grade and

paper fourth America. throughout the Export to least We're is gasoline Harbor, you Latin quarter, closed for demand have seeing good arb on a quarter. quarter, fourth in the strong. demand Europe positive that to the from New ship Typically, will into York export remains transatlantic first at arb

don't moves we But as season think So respond. into inventory gas to I transition, things big would you anytime in remains cracks gas soon. crack to check, as look driving RVP for good back the long going see expect you're in get gasoline. any

gasoline, side, a trending last of although years. key like are toward the distillate lows than we've for. that seen we'd less inventories the bit thing the little On hoped again, we've Distillate the seen demand couple is,

we've think saw took world supply cuts of parts run you turnaround as throughout the economic some market. I here supply well. off that had the recently, decreased activity,

with demand you'll And good if I a winter. as demand you colder heating see have in in pretty think some us put heading well. position into some it from respond uptick distillate cracks weather, oil So

Operator

coming question is next Royall of The from John JPMorgan.

John Royall

my question on So first is allocation. capital

cracks. aggressive your in very downtick program were in You buyback what's XQ on despite been a

pretty to environment, type at CFO not been or in may the of use approach you lower in been your range balance of on a terms your mid-cycle in XXs how change of margin stay percent that cycle? about and in? your framework But may or environment. capital we You've would of sort you assuming can returning this you've lower a clear parts that XXs talk above little sheet And bit

Jason Fraser

I'm Jason. is going to this question. your to ask John, Homer respond to

Homer Bhullar

to of John. should and with to in posture. absolutely strength I environment our in sheet, Thanks, think in us our we're should the Yes, continue Jason. mean, balance I you this expect be

you start operations. capital. billion I through of paid billion from our to of debt mentioned go been remarks, and period, all over $X flow back fund We've can $XX As the to in We've opening of cash, cash able down uses XXXX. that including returned shareholders to all over over

turning the reiterating to a let that start So me by is to we where not now, target. XX% minimum are commitment, a XX%

we're always going to honor So that.

As consistently the despite you that in been noted, we've well above margins. pullback

of you that to disciplined then profile and ability because our do think attribute of attribute And our -- can I use that low-cost capital.

and to floor XX% our all think cash free the continue position, should towards So cash buybacks. comfortable I be will XX% that flow excess to rest given strength sheet a the will go our you balance of and

John Royall

mentioned just Great. new on good those next out you be. if about there, will you're some equal, gotten all an might a thing California just news closure wondering continuing could think, a for us strategic operate But And my strategic California. then those alternatives how remain. in update there, question XX-Q. as alternatives, thinking other of to legislative and pressures be on also in there refinery which We've are you've new who what I things and is was your I a give

Lane Riggs

after John, question. I'll start talk strategic policy with let of about the I'll the answer the side, this is Rich Lane. side the then

Richard Walsh

Okay. Yes.

time which one state and that whether the proposing these these of this So out when of coming unclear policies at really various legislations. it's keeps

CEC are So of plays have political lot of you out the by of to these implementation, back we'll And legislature think arena when have these ideas. driven how I over see of we for we'll see the lot with out. the just political pass see a kind I the rhetoric of to them that struggle from you think state. coming kind lot that that A see of and to a

you into costly they There has start when putting the that ideas to are sound even things potential make but the more it for politically, good market consumers. realities, them

reality of recent state refineries has most cost number the including California policy that the a and is announcement. So this

And have can't so prices that customers. expected for then you to and supply policy lower impairs

So -- and consumers.

lower CEC consumers. to the that to caveat it So in them recall, the be require for all cost they have regulations only for that going And them. challenge of if a these implement find the that's actions will

Lane Riggs

make in On and said, call driven Coast, probably California turn We've manage through pressure a CapEx, strategy, we've option CapEx, cracks. our us sure West terms in we operation been consistent on its we which increasing reliable core largely for is positions that and over minimized we strategic of policy. really how maintain decade, the West With even maintenance longer our steward as California it's than a industry. the Coast a on regulatory that -- by

the on all everything, are So considering options it's table. really

Operator

Chen question Barclays. is of next The coming from Theresa

Theresa Chen

of some product the Can result? guess, continued closures trend? well you more, taking on term, medium do XXXX. over earlier comments evolution abroad And as the to as supply facilities flows up as unpack trade of think into do in the in global How the account changes a long expect planned you ramp this I you

Gary Simmons

Yes, can try. Theresa, I

capacity refining X,XXX,XXX of at look we when overall, we about new coming a day barrels XXXX, see So online.

announced. barrels there's And of so about far, a refinery XXX,XXX day closures

a XXX,XXX then XXX,XXX about total day. we're product additions. in is capacity at a net-net, an So increase barrel looking day about demand net for light forecast And a barrels

when about it refineries So did becomes all When close, come -- timing. new online. and the did really, capacity those for comes next year, it

Even into is next side uncertain. year. little gives the demand a it lot a uncertainty So of

does China, product at balances a you net additions, next the next to period take fairly pretty there's when tightening have lot stimulus year. come of through effect? growth, we capacity into long gap economic A good of there. in total you look how But get when it you extended kind year, and see then a where demand past And

So refining an around the and margins. see tighter period tighter we extended with balances

Theresa Chen

front. turning operating to and on the this able views offering other provide recent Would Helpful. to your broaden the unit well prices. as as its update you an on any be in-service to discussions how is subsidy And following renewables SaaS the then commercial

Eric Fisher

this startup Theresa. say is great. Yes, I'd -- looks Eric, SaaS The

the project in our said the budget. call, and had of we As finished next schedule ahead finished under we from of timing that for original XQ year it

And ability beat Valero performance expect for exceptional So its that expectations. again you once as full to go project execution we into then operations. demonstrates

I a think meet that. well and wanted as startup of SBK far, And know, standpoint, don't comment don't to contracting seeing both if commercially, so product, standpoint. its doubt So, capability. of continued going I very design And have it's from blended we interest on the SaaS any of good. you looks Gary, as lot a a we're to any

Gary Simmons

I'm of that JetBlue No, of into a going releases not airlines, details, signed. but to the there's press contracts been we've some with about lot Southwest, some go

freight There's DHL. to dealing addition In that, carriers. an announcement we're with with been

I'm sold going have a expected the return said we contracts threshold confident commercial decision to of after there. details that project, when and that. exceed we lot into still with made But in we'll it XX%, our we to tax, go place of So minimum not fund do we the to the volumes the the

Operator

Leggate The Doug question Wolfe Research. next from of is coming

Douglas Leggate

availability XX%, lot who's we're you has got make use 'XX, have balances questions an I look know example. whatever. my your your point an year. the wonder the the imprecise Xrd anyone obviously question. a back, XXXX mechanical I Appreciate investment to obviously, that potential But go you it's if same is been Gary, Singapore take wanted the or probably an could And I as runs to upside this all assessment to of My here. I is quarter, guys -- hallmarks Valero XX% cutting imperfect I of at XX%. last guys. back one to of 'XX, true your XX%, case. utilization. Pre-COVID of point, then trying that,

that additions, guess the that you And you when market getting it around need of above a what challenged I'm we assuming get are oversupplied response mid-cycle to So to think before utilization those about not some at reasonable you supply is I the raising refineries. we more in about. closures talking were of back for assume refinery what potentially

Gary Simmons

Yes. and kind look and line refinery it's assume in We balances of we to utilization at historic historic at utilization the with rates look going be rates.

However, a I can is do the lot in refining in of lot think of see that capacity a that's need you underwater, of some capital investment. world of

And will think closures you as refinery so I additional see well.

Douglas Leggate

Okay.

-- to to? something you have are guessing. So that you I guess be Or is any insight

Gary Simmons

we the but you announced additional some No, refineries some And kind see of that would refiners that in pressure, Far Europe, are close, coming. see name closures can you'll is expectation our in some East. can't under that

Douglas Leggate

Got it.

in as going it the it we've about to down any the I opposite mean, potential Okay. and inventory to you that question. follow-up, guess, that there an back Well, tightness impact and offset seem obviously, shut And of on imports the comments too, topic it the California. equal title ABX your is West Phillips XX that's don't Coast. was from my when seems Rodeo, if mind, had I

only and your give competitiveness? cost Any the portfolio the portfolio asset thinking as area do particularly that quarter. can this in money adjustments how you in So about see overall, I look year you how portfolio lost your color this on Coast, forward? going past you're It's you West the at the guess only

Lane Riggs

alluded cost before. I challenged sort highest to they our Historically, cost to clearly crude. been structure it's operation. of with respect Lane. it Doug, of had It's

West think it's supply the the a and -- if about Coast, you environment regulatory situation So the it's always challenge. OpEx in

some And be other to when the done for maybe so we've because things so to and of call that it's supply And -- try assets a position long. what very of is is again, we chain option areas balance different than get out the the operate. historically

actually they on regulatory operators regulations, But environment respect forward with to is try how So what pressure operations. about think the California going they just and have to to putting out see finally do. with these might we'll clearly, their there

Operator

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

Roger Read

XX-Q, come an of consumers to highlighted -- concern how want the the first. California have I do. your fuels refining their most or to as of hypersensitive you and question. forward, down someone value price asset make announcing XX-K their hammer think, of unit kind of about that and going I impact unit, back you you've well. California issues Yes. decision In closing or you the ongoing may put it would to political of recent closure if a from -- on invite else With sort ability, an obviously hard policy question with out California Philips their Does what mean that the it regardless went interference? a more work? And unit does California

Richard Walsh

market the to programs I interfere, you I I mean, think I of and announced. mean is still that, realize ago, they I interfere the the A is until thinking the worse California factors the information more that regulatory are at gets. the that initial California was with what the the the were starting margin it. incredibly these one that don't announced years think mean of one, studying I think be forward. the and there's as cap efficient programs been think, market. X into lot is really our realities And puts I I situation they've mean is, I collecting necessarily. we almost know what looking would

And the I think so challenge there. that's,

have to see do it's do, So decision. think their going then what what we And to wait and to I react that. and that's they're choice, I to decide. have what others they and their just mean, we

them. great have operating have there, assets and we out We people great

our position. think So I like we

Roger Read

worth is seeing of Gary, in demand? improve the starting there look that let's all is don't the Rich, you're they months here it, than call to quite question, on at me outcomes. in an full more versus it's just more of impacts you're like probably optimist terms terms like diesel seeing kind to that look information, last the short-term demand U.S., I you basis like believe to anything year X does a there of grasp DOE I'd that. The Appreciate as in of, in -- because of anything ask, really your the commentary you're policies follow-up

Gary Simmons

I think little weeks, picked gasoline saw and X both gone I seen the we've a it's and has we mentioned as of diesel, bit a demand actually surge. the year up softness, over last on.

So demand year-over-year last the in X increase with comments. weeks, we in have X% your about a consistent of diesel kind

seeing well. think you're I of Europe that some as in

You the tight has gone of to weeks, that XXX heading needed can $X of things indicating that in some capacity up into getting from is some see the capacity, Europe the in market that of topping supply few the $X as hydroskimming or last diesel winter. topping are kind

Operator

question next from Paul is Scotiabank. coming The Cheng of

Paul Cheng

I apologize.

First I California on question want is -- also. to add one

wait there's decision. shut they're refinery because money. making to refiner maybe substantial and that Lane. just until turn the down think a hard they're just doesn't typically, Gary major on make a requirement, not a we that pushed before Historically, being But I outlay CapEx

ongoing Just put or any say, business make to can at curious than Is or next a there what that the to not. a have can that you viable will you share whether trying have we'll that a what say? data make more likely the is time you Benicia that need may decision decision will that you be in major to that your that point you be capital line, refinery,

Lane Riggs

Yes. Paul, this is Lane.

that. for Sorry

I out normally turnarounds out But activity. provide So outlooks higher good with clearly, try. is not the correct. there to We there is higher. cost our only respect significantly the mean is your premise don't cost structure turnaround

matter, the weighs going other any asset it so in world in about in really for terms do guidance you the by the the -- -- driven is that. just -- policy, West on it's our But don't assets Coast of on capital think will big way any we that as turnarounds general a next outlay. going and it And next and outlay turnaround, we're big do we largely forward, to in

Paul Cheng

difficult. is condition [indiscernible] Europe phenomenal. [very] interesting Europe, Understand. quite And the market Okay. And mean capture the I it's because margin

refinery? So if by that the [indiscernible] also is Europe mean, is strong margin well. your really Or driven -- capture doing I is

or mean, past then the upside. to us us understand I time often Just surprised trying over years, X take X [indiscernible] help -- the and quite on

So trying understand there. what's on to going

Greg Bram

Paul, it's Greg.

One, that cost good things had couple the quarter: North that from you Quebec, So the third really helped that very the impacted commercial the thing, contribute; we talked some a crude Atlantic in about region. then results for of team second And but

Quebec, sometimes costs but fairly were crude favorable. it's it's Sometimes Pembrook

Quebec. was coming of that the of grades some Some Canadian into

Some of that was value just the grades versus relative dated Brent. of the we're running

so And crack. remember challenged, have of reference that kind been relative is might market that to while market-based capture a the

well And reference. that putting market take account where so relative we into the is we performed pretty at and that together, to and

Operator

of Bank is Jean of question America. next Salisbury coming The from

Jean Ann Salisbury

different over growing and high you supply in in sour crude, as and manifest OPEC markets exposure also year. your I there? consume that Can the Valero primarily believe You referenced some feedstocks. intermediate This supply but increasing sulfur margins. could that the next OPEC ways you heavy different go the benefits of just

Gary Simmons

Yes.

So XXX,XXX Then winter. of OPEC, barrels oil in well. see East sour you year, period day bright time you a terms market you're ramp Middle production the the continued fundamentals We this supply several we spots crude. Canadian to up Seasonally, around starting Obviously, on Canadian heavy think we production in expect the as December. past over of get burning Venezuelan highs power record generation. they're production fuel the time in have for where hit of and could to where growth,

all the on that more barrels So market. puts

shuts and quarter down, way first the some it as well. into demand get you Lyondell takes If as

in positive should terms So things be quality those of discounts.

Operator

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

Joseph Laetsch

margins to and wanted environment for a recently. tougher the it to back I go margin RD continues industry to the So overall be to side,

thinking XXXX, to look prices you're feedstock to we costs profitability? around credits, towards talk RINs, as about including it the how moving pieces could relates As just as you LCFS as well

Eric Fisher

tailwinds lot This like looks -- it XXXX. Sure. in The of Eric. a good start is

with LCFS X, XXXX the So Jan X, intent California credit modifications bank and through intends the to increase approve of should their that tighten prices. November that starting LCFS

that. got You've

into got B.C. starting nationally, X% still very We're naturally in year. ratchet XX the mandate SAF Canadian play And be as fit and XXXX. election the Europe the of but for You've that U.K. CFR, closely with watching you in their that what which these will do in obligations go they all see region. starts to next

for then to the the from with qualify from importers for us And allow $X the and a production credit. for the most we're CI does lot the tailwind base that switch a where not credit everyone to blenders the IRA to tax tax of create does advantaged lastly, switch credit it because will

So if all the those a lot are DGD. IRA, of waiting clarification that's you benefits that two is paper policy for good between at a things for on look tailwind Those of now action end of intent year. look most we the programs. change. one at the of all and to But policy those And of legislative thing that those the the is take is

we that, at forward means probably least so And go designed policies that initially. difficult think, will will those be as and

on all in seeing develops that months. couple how the next we're waiting So of

constructive. with renewables plans. that given be can whole is for asking forward we segment that But the all move all of so looks think pretty I to this guidance

seen evened several There out. seen the the side, that equilibrate. we've market a talked lot On the the We've has prices about of out last was really months a advantage lot previously We've feedstock for equilibrate. feedstocks. in lag of foreign we've price level largely mostly seen

I think is the still oils that you're what waste advantaged. most the are is So world recognizing seeing

to see of oil domestic we advantaged. set gives some Darling be BD Europe, space. whole us partnership to foreign are that And most as and that and produce South Our floor looks and of will they going vegetable forward, all the going out of and feedstock their that now feedstock marginal this America with advantaged still in access a

So tax the the blenders BD as RINs. an credit away, be underwater significantly will goes adjustment without to

BD takes last have that is PTC. positive vegetable to the the So expectation the RD that that offset up the to piece go and think we as I will to RINs loss is migrate oil

and DGD significant it expectation a overnight, RINs increase. That that of to if So there's RD. that a -- won't that does, will but lot is happen tailwind

Joseph Laetsch

couple strong you to specifically, are think out Gulf of for which there. of supportive the are just how the And on in I the has you exports thinking then Coast margins. been the outlook naphtha And Great. been here? your I has months, ask on about seeing naphtha wanted side, What of side? past

Gary Simmons

Yes.

So think there's in the a driving of things couple strength relative I naphtha.

Some of economic the naphtha run of in less hydroskimmers, see the the with that some is cuts you of market.

Coast U.S. petrochemical a a a which But of So has seeing bit that. be Gulf naphtha, for improving. pickup we're for also demand to looks supply step in had for

of some opportunities. creating And so that's the export also

it expect we continue. to So

Operator

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

Ryan Todd

sector, know Maybe love entire kind how know but much the last you rate, -- been -- of has about months. what XX steadily I I the over concept it's Lane, to for the capture of declining talk been

crude see that things some level improvements And on headwinds? down. of Any maybe of differentials, margin that of been needs crude that? then in signs wider the of improvements terms capture. encouragement of have to margins, maybe is look absolute in obviously you it just XXXX fourth some the margins of as is backwardation, it But improvement. product is to into pricing that quarter talk happen secondary you can coming about what And And

Lane Riggs

to fortunately off it's hand Ryan, I this Lane. get to I Yes. Greg.

Greg Bram

factors, them so late a Crude and most been talked strong has of persistent certainly a that's particularly bit think you about some Ryan, noted and we've the XXXX factor. I backwardation certainly already. key here, in of market

you actually fact, in look early In in XXXX, I if think we're back contango.

you an not basis on that ongoing So continuing something would there's expect. no is doubt necessarily

talked improvement of recently. quarters help seeing number will Thinking about capture. in So maintenance a we've here heavy particular, us, there about

definitely that's others. regions more than some factor So in a

some system well. as in I be our maintenance mean, industry to always going there's

some then there been have think that have though mentioned heavier periods And products. had impact. some you I So secondary

I the so think propylene come about there to it. ones naphtha. and like just really pet chem, And Gary are related talked that those to things mind

on As capture. values to going to improve we're pet that's start seeing expect have positive chem impact those well, and to improve some as

Ryan Todd

maybe sustainable on some one follow-up earlier of And Great. your fuel. comments aviation on then

you And moving and last you're was you markets that How to XX then sell the late be still to you view kind as think which Europe. was this, able about undersupplied? in XX an couple pricing into qualify was pieces guys. months Do of the going think next into of market market market producers lot as to domestic be the good versus been Europe about of being into the for that over mean one think the here? undersupplied SAF few going we of probably message think about domestic over I sell to to As -- the you can do the optionality I the potential of There's -- there a expectation years clearly that.

Eric Fisher

Eric. is this Yes,

is I the that occurring ramp undersupplied, consistent is physically given the view market the in next X year mandates think years. to our that is over

supplying have Europe mentioned we're clarification think that are most market, start a correct. and That as be do attractive be of up. will absolutely will our the primary into outlets You're for I the waiting lot of But as one of there. capability we I market. always, before, policies we

get Europe think lot very be is guidance on these waiting are make of that contract year of in especially of can compliance. all clarity that over on of and but we're X duties that a in kind we're favors customers we as our all so for moving it, forward, is for guidance. RD confident going the clearly what And well is the on solvable between clarity difficult, language I import to once -- clarity mandate credit end waiting solved a The the details blenders we contract for clarity get clear lot and we implemented affecting on that this policy IRA now that codes get standpoint. But as that's the January the will waiting as for finishing how staff are contractually see all and U.S., perfected. from and of Again, that the and a

Operator

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

Neil Mehta

of OpEx first around barrel. low always just Valero It's ability a expenses. your is The hallmark is that keep per been operating to question

of as moving years geographically and pieces even how those perspective move you're of well. how we as about thinking on your some Just into it the next couple

Greg Bram

Neil, it's Greg.

under keep natural gas one think, that. are So we It's been driving A the every control. day. been I we things of have of a that low help. Energy That's focus probably notable. parts, on couple expenses costs those

towards looks of kind of it range kinds costs, has middle made are least like things. helpful. so on harder. We've And cycle catalyst that chemicals, what prices move those of of here, the thinking, a folks kind seen those that's of at both Inflation effects back it the will maintenance but been bit that's

our make try costs competitive. those we partners to sure We work with hard to keep

the focus And some so probably well. as about as really day. inflation every that see parts on moderates, we'd are improve expect the think to and biggest things we of two Those to

Neil Mehta

Yes. just Yes. the And on other the side. Arthur Port then the Understood is on energy coker. on one

about when path you mid-cycle? about rating then about million -- evolve think How $XXX you FID-ed, it one, economics actually those closer $XXX the think economics to think back as the do And you talked run of project think about, EBITDA. you to that million. I talked then could current you about specifically you how as and

Greg Bram

got at than returns and when still expected the current we we see old started. we different think turnaround benefits I coker good strong this us with Neil, Yes, some earlier on little The value there. consistent see what did FID. where we year is showed we giving a We real market the to project that the

a project then of to in light being don't sour our heavy I So think again, obviously, on is able anything that and And products. view. has crude hinged lot to changed upgraded run

those sour chance move capture as some to so give us around, going to differentials more that's a value. And

Operator

The next Blair Matthew question is of TPH. coming from

Matthew Blair

ethanol paper. QX an I are all-time might record. margins volume And correctly, heard a I If the just be $X.X ethanol for time when on at guidance think million coming really crumbling

Is net should be the the help there's indicator? opportunities maybe or lag a on export function that? us of that we about reconcile So could you thinking increasing ethanol

Eric Fisher

Yes, it's Eric.

pretty increased this that our been has ethanol Most capability. this of expanded production have We year. year capability for positive

also have U.S. qualified there's about We our policy, expanded ethanol of especially lot ISCC export in interest talking Again, a in ethanol, Europe. our markets.

of the also giving the a of opportunity lot of ethanol that largest carryout, harvest attractive We U.S. largest because with being U.S. is feedstock one ever most exports. in corn see we've for it the seen, the

So mandate EXX for we're as that's in seeing new well the what the beginning ethanol as increased seeing markets see its 'XX. and mandate we as We're is in increasing Brazil world, demand. SaaS

grown a lot in this we've of anticipation in ethanol. of expanded our capacity So interest globally

Matthew Blair

big and part there's been chatter U.S. increasing then good. global Sounds of outlet more about the lately And just refiners. tariffs are for a exports

just increases concern you So is when [indiscernible] what that you think, in tariffs, forward? hear potential going for about the do a

Richard Walsh

effort goods. an at increase don't take those add you to focused of that. I'll mean, look Most I lot a their in. take manufactured Walsh. really Rich is This to tariffs, that they're of want they're energy countries when around cost trying to times,

wrap you about for really tariffs, think when targets energy. they So normally don't around

we And on concerns see so know I don't the that that.

Operator

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

Jason Gabelman

think about financial helpful you of how I using comments wondering I'm metrics circle you and the capital about framework, being a a provided return back the And target. wanted downturn. sheet some the firm on in to balance

billion you you so the sheet this a more on market that balance bit for a sheet. downturn headed cash the target kind Is of what lean want could weaken? for $X You have the into should balance

Jason Fraser

thoughts cash around to we're balance hoard And a to between cash as billion as some not cash we normalized in Jason. our environment, a going to is cash. environment to to Yes. our like share the depend you to balance of I'll $X billion on This $X working be a targeted due in, things And will guideline. know, we're lot but like keep glad any cash. about capital, in quarter a move but

from to here. So I think our a you balance down little expect directionally, trend cash should

wasn't I'd to have this the quarter, if drawn cash for we from working also capital would $XXX it like positive by note, impact million. over

answer without of on to flexibility question the strong your gives you're million the $X We the our to right, yes, a in $XXX lot us continue directly, and leaning also downturn room more buybacks approach for quarter more to buybacks. billion sheet. But balance had that

think I in number. So big billion correct. with that's factor a out coming It's a $X

Jason Gabelman

it's U.S., market. for out the coming pretty bit have And then the here a just product exports gasoline fallen and as past and Great. of diesel, fracs the other We've the months. a strong noticed on

U.S. what's in there's on market fair market pull those exports at product sources of so seems interpretation the on to And kind the healthy needing international levels. push that a rather prices and on a kind to from U.S. it fall keep where of going the U.S. Is than from are inventories a like of clear products?

Gary Simmons

we Well, last gasoline appear that, it's We're were $XX pretty inventories question. is you're would million the a saying below year. of are It that where in correct. what really face good But low.

You are below the X-year average.

that's would So it's of flowing. are a getting export like we're and the inventories barrels the an a wouldn't seem premium, need almost pull, more why It and push. indicate to

Jason Gabelman

to an Okay. [premium], markets the you international able at price you're Gulf getting say, export U.S. than you're say Coast? to sell higher at you're And when on, a what selling

Gary Simmons

we Yes, are.

Operator

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

Homer Bhullar

Thank everyone you, us appreciate We Donna. joining today.

a the As day, you you. always, to great everyone. please team IR feel Have any if free contact questions. additional have Thank

Operator

today's concludes this event. Ladies and gentlemen,

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

Valero Energy (VLO) 24 Oct 242024 Q3 Earnings call transcript