Valero Energy Reports First Quarter 2021 Results

Reported a net loss attributable to Valero stockholders of $704 million, or $1.73 per share, including estimated excess energy cost of $579 million, or $1.15 per share, related to impacts from Winter Storm Uri
Returned $400 million in cash to stockholders through dividends and declared a regular quarterly cash dividend of $0.98 per share
Announced the development of a large-scale carbon capture and storage project with BlackRock and Navigator
Announced the sale of a partial interest in the Pasadena marine terminal joint venture (MVP Terminalling) for $270 million

SAN ANTONIO–(BUSINESS WIRE)–Valero Energy Corporation (NYSE: VLO, “Valero”) today reported a net loss attributable to Valero stockholders of $704 million, or $1.73 per share, for the first quarter of 2021, compared to a net loss of $1.9 billion, or $4.54 per share, for the first quarter of 2020. The operating loss in the first quarter of 2021 includes estimated excess energy costs of $579 million, or $1.15 per share, related to impacts from Winter Storm Uri. Excluding the adjustments shown in the accompanying earnings release tables, adjusted net income attributable to Valero stockholders for the first quarter of 2020 was $140 million, or $0.34 per share. First quarter 2020 adjusted results exclude an after-tax lower of cost or market, or LCM, inventory valuation adjustment of approximately $2.0 billion.

“Winter Storm Uri impacted operations and operating costs of many facilities in the U.S. Gulf Coast and U.S. Mid-Continent regions, including our facilities,” said Joe Gorder, Valero Chairman and Chief Executive Officer. “I am very proud of our team for safely managing the utilities curtailments and the freeze by idling or shutting down the affected facilities and resuming operations without incident.”

Refining

The refining segment reported a $592 million operating loss for the first quarter of 2021, compared to an operating loss of $2.1 billion for the first quarter of 2020. The first quarter 2021 adjusted operating loss was $554 million, compared to adjusted operating income of $329 million in the first quarter of 2020, which excludes the LCM inventory valuation adjustment. The operating loss for the first quarter of 2021 includes estimated excess energy costs of $525 million related to impacts from Winter Storm Uri. Refinery throughput volumes averaged 2.4 million barrels per day in the first quarter of 2021, which was 414 thousand barrels per day lower than the first quarter of 2020.

“We are encouraged by the substantial increase in products demand and refining margins in the last three months,” said Gorder. “In fact, we achieved positive operating income and operating cash flow in March.”

Renewable Diesel

The renewable diesel segment, which consists of the Diamond Green Diesel (DGD) joint venture, reported $203 million of operating income for the first quarter of 2021, compared to $198 million for the first quarter of 2020. Renewable diesel sales volumes averaged 867 thousand gallons per day in the first quarter of 2021.

“We are leveraging our global liquid fuels platform to continue expanding our long-term competitive advantage in renewables,” said Gorder. “Valero’s operational expertise and commercial strength are demonstrated by the record operating income and renewable diesel margin by this segment in the first quarter of 2021.”

Ethanol

The ethanol segment reported a $56 million operating loss for the first quarter of 2021, compared to an operating loss of $197 million for the first quarter of 2020. The operating loss for the first quarter of 2021 includes estimated excess energy costs of $54 million related to impacts from Winter Storm Uri. First quarter 2020 adjusted operating loss was $69 million, which excludes the LCM inventory valuation adjustment. Ethanol production volumes averaged 3.6 million gallons per day in the first quarter of 2021, which was 541 thousand gallons per day lower than the first quarter of 2020.

Corporate and Other

General and administrative expenses were $208 million in the first quarter of 2021, compared to $177 million in the first quarter of 2020. The effective tax rate for the first quarter of 2021 was 19 percent.

Investing and Financing Activities

Capital investments totaled $582 million in the first quarter of 2021, of which $333 million was for sustaining the business, including costs for turnarounds, catalysts and regulatory compliance. Excluding capital investments attributable to our partner’s 50 percent share of DGD and those related to other variable interest entities, capital investments attributable to Valero were $479 million.

Net cash used in operating activities was $52 million in the first quarter of 2021. Included in this amount was a $184 million favorable impact from working capital and $108 million associated with our joint venture partner’s share of DGD’s net cash provided by operating activities, excluding changes in DGD’s working capital. Excluding these items, adjusted net cash used in operating activities was $344 million.

Valero returned $400 million to stockholders through dividends in the first quarter of 2021.

Valero continues to target a long-term total payout ratio between 40 and 50 percent of adjusted net cash provided by operating activities. Valero defines total payout ratio as the sum of dividends and stock buybacks divided by net cash provided by operating activities adjusted for changes in working capital and DGD’s net cash provided by operating activities, excluding changes in its working capital, attributable to our joint venture partner’s ownership interest in DGD.

Liquidity and Financial Position

Valero ended the first quarter of 2021 with $14.7 billion of total debt and finance lease obligations and $2.3 billion of cash and cash equivalents. The debt to capitalization ratio, net of cash and cash equivalents, was 40 percent as of March 31, 2021.

Strategic Update

Valero continues to evaluate and pursue economic projects that lower the carbon intensity of its products. Valero announced that it is partnering with BlackRock and Navigator for a large-scale carbon capture and storage system in the U.S. Midwest that would capture and store carbon dioxide (CO₂) from eight of Valero’s ethanol plants, making a lower carbon intensity ethanol product to be marketed in low carbon fuel markets. The system is expected to be capable of storing 5 million metric tonnes of CO₂ per year.

In addition, Valero and its joint venture partner continue to steadily expand DGD’s capacity to produce low carbon intensity renewable diesel. The DGD plant expansion at St. Charles (DGD 2), which is expected to increase renewable diesel production by 400 million gallons per year, is on track to be completed and operational in the middle of the fourth quarter of 2021. The St. Charles expansion will also provide the capability to market 30 million gallons per year of renewable naphtha into low carbon fuel markets. The new DGD plant at Port Arthur (DGD 3), which is expected to produce 470 million gallons per year of renewable diesel, is expected to commence operations in the second half of 2023, increasing DGD’s total annual production capacity to approximately 1.2 billion gallons of renewable diesel and 50 million gallons of renewable naphtha.

Refinery optimization projects that are expected to reduce cost and improve margin capture, are progressing on schedule. The Pembroke Cogen project is on track to be completed in the third quarter of 2021 and the Port Arthur Coker project is expected to be completed in 2023.

On April 19, Valero sold a 24.99 percent membership interest in its Pasadena marine terminal joint venture for $270 million. Valero will retain a 25.01 percent interest in the joint venture.

Capital investments attributable to Valero are forecasted to be $2.0 billion in 2021, of which approximately 60 percent is for sustaining the business and approximately 40 percent is for growth projects. Over half of Valero’s 2021 growth capital is allocated to expanding the renewable diesel business.

“Continued improvement in product demand and refining margins supports a positive outlook for our refining business,” said Gorder. “Those improvements coupled with our growth strategy and operational expertise in low carbon renewable fuels, further strengthens Valero’s long-term competitive advantage.”

Conference Call

Valero’s senior management will hold a conference call at 10 a.m. ET today to discuss this earnings release and to provide an update on operations and strategy.

About Valero

Valero Energy Corporation, through its subsidiaries (collectively, “Valero”), is an international manufacturer and marketer of transportation fuels and petrochemical products. Valero is a Fortune 50 company based in San Antonio, Texas, and it operates 15 petroleum refineries with a combined throughput capacity of approximately 3.2 million barrels per day and 13 ethanol plants with a combined production capacity of approximately 1.69 billion gallons per year. The petroleum refineries are located in the United States (“U.S.”), Canada and the United Kingdom (“U.K.”), and the ethanol plants are located in the Mid-Continent region of the U.S. Valero is also a joint venture partner in Diamond Green Diesel, which owns and operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant. Valero sells its products in the wholesale rack or bulk markets in the U.S., Canada, the U.K., Ireland and Latin America. Approximately 7,000 outlets carry Valero’s brand names. Please visit www.investorvalero.com for more information.

Valero Contacts

Investors:

Homer Bhullar, Vice President – Investor Relations, 210-345-1982

Eric Herbort, Senior Manager – Investor Relations, 210-345-3331

Gautam Srivastava, Senior Manager – Investor Relations, 210-345-3992

Media:

Lillian Riojas, Executive Director – Media Relations and Communications, 210-345-5002

Safe-Harbor Statement

Statements contained in this release that state the company’s or management’s expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “believe,” “expect,” “should,” “estimates,” “intend,” “target,” “will,” “plans,” “forecast,” and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements based on numerous factors, including those outside of the company’s control, such as delays in construction timing and other factors, including but not limited to the impacts of COVID-19. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero’s annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed with the Securities and Exchange Commission and available on Valero’s website at www.valero.com.

COVID-19 Disclosure

The global pandemic has significantly reduced global economic activity and resulted in airlines dramatically cutting back on flights and a decrease in motor vehicle use. As a result, there has also been a decline in the demand for, and thus also the market prices of, crude oil and certain of our products, particularly our refined petroleum products. Many uncertainties remain with respect to COVID-19, including its resulting economic effects and any future recovery, and we are unable to predict the ultimate economic impacts from COVID-19, how quickly national economies can recover once the pandemic subsides, the timing or effectiveness of the vaccine distribution, or whether any recovery will ultimately experience a reversal or other setbacks. However, the adverse impact of the economic effects on us has been and will likely continue to be significant. We believe we have proactively addressed many of the known impacts of COVID-19 to the extent possible and will strive to continue to do so, but there can be no guarantee that these measures will be fully effective. For more information, see our annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed with the Securities and Exchange Commission.

Use of Non-GAAP Financial Information

This earnings release and the accompanying earnings release tables include references to financial measures that are not defined under U.S. generally accepted accounting principles (GAAP). These non-GAAP measures include adjusted net income (loss) attributable to Valero stockholders, adjusted earnings (loss) per common share – assuming dilution, refining margin, renewable diesel margin, ethanol margin, adjusted refining operating income (loss), adjusted ethanol operating income (loss), adjusted net cash provided by operating activities, and capital investments attributable to Valero. These non-GAAP financial measures have been included to help facilitate the comparison of operating results between periods. See the accompanying earnings release tables for a reconciliation of non-GAAP measures to their most directly comparable U.S. GAAP measures. Note (d) to the earnings release tables provides reasons for the use of these non-GAAP financial measures.


VALERO ENERGY CORPORATION EARNINGS RELEASE TABLES FINANCIAL HIGHLIGHTS (millions of dollars, except per share amounts) (unaudited)

	Three Months Ended March 31,
	2021			2020
Statement of income data
Revenues	$	20,806		$	22,102
Cost of sales:
Cost of materials and other (a)	18,992			19,952
Lower of cost or market (LCM) inventory valuation adjustment (b)	—			2,542
Operating expenses (excluding depreciation and amortization expense reflected below) (a)	1,656			1,124
Depreciation and amortization expense	566			569
Total cost of sales	21,214			24,187
Other operating expenses	38			2
General and administrative expenses (excluding depreciation and amortization expense reflected below)	208			177
Depreciation and amortization expense	12			13
Operating loss	(666		)	(2,277		)
Other income, net	45			32
Interest and debt expense, net of capitalized interest	(149		)	(125		)
Loss before income tax benefit	(770		)	(2,370		)
Income tax benefit	(148		)	(616		)
Net loss	(622		)	(1,754		)
Less: Net income attributable to noncontrolling interests	82			97
Net loss attributable to Valero Energy Corporation stockholders	$	(704	)	$	(1,851	)

Loss per common share	$	(1.73	)	$	(4.54	)
Weighted-average common shares outstanding (in millions)	407			408

Loss per common share – assuming dilution	$	(1.73	)	$	(4.54	)
Weighted-average common shares outstanding – assuming dilution (in millions) (c)	407			408

See Notes to Earnings Release Tables.


VALERO ENERGY CORPORATION EARNINGS RELEASE TABLES FINANCIAL HIGHLIGHTS BY SEGMENT (millions of dollars) (unaudited)

	Refining			Renewable Diesel		Ethanol			Corporate and Eliminations			Total
Three months ended March 31, 2021
Revenues:
Revenues from external customers	$	19,469		$	352	$	985		$	—		$	20,806
Intersegment revenues	3			79		60			(142		)	—
Total revenues	19,472			431		1,045			(142		)	20,806
Cost of sales:
Cost of materials and other (a)	18,022			187		924			(141		)	18,992
Operating expenses (excluding depreciation and amortization expense reflected below) (a)	1,471			29		156			—			1,656
Depreciation and amortization expense	533			12		21			—			566
Total cost of sales	20,026			228		1,101			(141		)	21,214
Other operating expenses	38			—		—			—			38
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—			—		—			208			208
Depreciation and amortization expense	—			—		—			12			12
Operating income (loss) by segment	$	(592	)	$	203	$	(56	)	$	(221	)	$	(666	)

Three months ended March 31, 2020
Revenues:
Revenues from external customers	$	20,985		$	306	$	811		$	—		$	22,102
Intersegment revenues	2			53		64			(119		)	—
Total revenues	20,987			359		875			(119		)	22,102
Cost of sales:
Cost of materials and other	19,127			130		813			(118		)	19,952
LCM inventory valuation adjustment (b)	2,414			—		128			—			2,542
Operating expenses (excluding depreciation and amortization expense reflected below)	995			20		109			—			1,124
Depreciation and amortization expense	536			11		22			—			569
Total cost of sales	23,072			161		1,072			(118		)	24,187
Other operating expenses	2			—		—			—			2
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—			—		—			177			177
Depreciation and amortization expense	—			—		—			13			13
Operating income (loss) by segment	$	(2,087	)	$	198	$	(197	)	$	(191	)	$	(2,277	)

See Operating Highlights by Segment. See Notes to Earnings Release Tables


VALERO ENERGY CORPORATION EARNINGS RELEASE TABLES RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (d) (millions of dollars, except per share amounts) (unaudited)

	Three Months Ended March 31,
	2021			2020
Reconciliation of net loss attributable to Valero Energy Corporation stockholders to adjusted net income (loss) attributable to Valero Energy Corporation stockholders
Net loss attributable to Valero Energy Corporation stockholders	$	(704	)	$	(1,851	)
Adjustments:
LCM inventory valuation adjustment (b)	—			2,542
Income tax benefit related to the LCM inventory valuation adjustment	—			(551		)
LCM inventory valuation adjustment, net of taxes	—			1,991
Adjusted net income (loss) attributable to Valero Energy Corporation stockholders	$	(704	)	$	140

Reconciliation of loss per common share – assuming dilution to adjusted earnings (loss) per common share – assuming dilution
Loss per common share – assuming dilution (c)	$	(1.73	)	$	(4.54	)
Adjustments:
LCM inventory valuation adjustment (b)	—			4.88
Adjusted earnings (loss) per common share – assuming dilution (c)	$	(1.73	)	$	0.34

See Notes to Earnings Release Tables.


VALERO ENERGY CORPORATION EARNINGS RELEASE TABLES RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (d) (millions of dollars) (unaudited)

	Three Months Ended March 31,
	2021			2020
Reconciliation of operating income (loss) by segment to segment margin, and reconciliation of operating income (loss) by segment to adjusted operating income (loss) by segment
Refining segment
Refining operating loss	$	(592	)	$	(2,087	)
Adjustments:
LCM inventory valuation adjustment (b)	—			2,414
Operating expenses (excluding depreciation and amortization expense reflected below) (a)	1,471			995
Depreciation and amortization expense	533			536
Other operating expenses	38			2
Refining margin	$	1,450		$	1,860

Refining operating loss	$	(592	)	$	(2,087	)
Adjustments:
LCM inventory valuation adjustment (b)	—			2,414
Other operating expenses	38			2
Adjusted refining operating income (loss)	$	(554	)	$	329

Renewable diesel segment
Renewable diesel operating income	$	203		$	198
Adjustments:
Operating expenses (excluding depreciation and amortization expense reflected below)	29			20
Depreciation and amortization expense	12			11
Renewable diesel margin	$	244		$	229

Ethanol segment
Ethanol operating loss	$	(56	)	$	(197	)
Adjustments:
LCM inventory valuation adjustment (b)	—			128
Operating expenses (excluding depreciation and amortization expense reflected below) (a)	156			109
Depreciation and amortization expense	21			22
Ethanol margin	$	121		$	62

Ethanol operating loss	$	(56	)	$	(197	)
Adjustment: LCM inventory valuation adjustment (b)	—			128
Adjusted ethanol operating loss	$	(56	)	$	(69	)

See Notes to Earnings Release Tables.


VALERO ENERGY CORPORATION EARNINGS RELEASE TABLES RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (d) (millions of dollars) (unaudited)

	Three Months Ended March 31,
	2021			2020
Reconciliation of refining segment operating income (loss) to refining margin (by region), and reconciliation of refining segment operating income (loss) to adjusted refining segment operating income (loss) (by region) (e)
U.S. Gulf Coast region
Refining operating loss	$	(508	)	$	(942	)
Adjustments:
LCM inventory valuation adjustment (b)	—			1,113
Operating expenses (excluding depreciation and amortization expense reflected below) (a)	994			558
Depreciation and amortization expense	332			334
Other operating expenses	31			—
Refining margin	$	849		$	1,063

Refining operating loss	$	(508	)	$	(942	)
Adjustments:
LCM inventory valuation adjustment (b)	—			1,113
Other operating expenses	31			—
Adjusted refining operating income (loss)	$	(477	)	$	171

U.S. Mid-Continent region
Refining operating loss	$	(10	)	$	(220	)
Adjustments:
LCM inventory valuation adjustment (b)	—			283
Operating expenses (excluding depreciation and amortization expense reflected below) (a)	190			164
Depreciation and amortization expense	84			83
Other operating expenses	7			—
Refining margin	$	271		$	310

Refining operating loss	$	(10	)	$	(220	)
Adjustments:
LCM inventory valuation adjustment (b)	—			283
Other operating expenses	7			—
Adjusted refining operating income (loss)	$	(3	)	$	63

See Notes to Earnings Release Tables.


VALERO ENERGY CORPORATION EARNINGS RELEASE TABLES RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS REPORTED UNDER U.S. GAAP (d) (millions of dollars) (unaudited)

	Three Months Ended March 31,
	2021			2020
Reconciliation of refining segment operating income (loss) to refining margin (by region), and reconciliation of refining segment operating income (loss) to adjusted refining segment operating income (loss) (by region) (e) (continued)
North Atlantic region
Refining operating income (loss)	$	55		$	(714	)
Adjustments:
LCM inventory valuation adjustment (b)	—			874
Operating expenses (excluding depreciation and amortization expense reflected below)	140			141
Depreciation and amortization expense	52			53
Other operating expenses	—			2
Refining margin	$	247		$	356

Refining operating income (loss)	$	55		$	(714	)
Adjustments:
LCM inventory valuation adjustment (b)	—			874
Other operating expenses	—			2
Adjusted refining operating income	$	55		$	162

U.S. West Coast region
Refining operating loss	$	(129	)	$	(211	)
Adjustments:
LCM inventory valuation adjustment (b)	—			144
Operating expenses (excluding depreciation and amortization expense reflected below)	147			132
Depreciation and amortization expense	65			66
Refining margin	$	83		$	131

Refining operating loss	$	(129	)	$	(211	)
Adjustment: LCM inventory valuation adjustment (b)	—			144
Adjusted refining operating loss	$	(129	)	$	(67	)

See Notes to Earnings Release Tables.


VALERO ENERGY CORPORATION EARNINGS RELEASE TABLES REFINING SEGMENT OPERATING HIGHLIGHTS (millions of dollars, except per barrel amounts) (unaudited)

	Three Months Ended March 31,
	2021			2020
Throughput volumes (thousand barrels per day)
Feedstocks:
Heavy sour crude oil	354			360
Medium/light sour crude oil	275			252
Sweet crude oil	1,143			1,538
Residuals	192			235
Other feedstocks	102			100
Total feedstocks	2,066			2,485
Blendstocks and other	344			339
Total throughput volumes	2,410			2,824

Yields (thousand barrels per day)
Gasolines and blendstocks	1,191			1,317
Distillates	894			1,046
Other products (f)	352			478
Total yields	2,437			2,841

Operating statistics (a) (d) (g)
Refining margin	$	1,450		$	1,860
Adjusted refining operating income (loss)	$	(554	)	$	329
Throughput volumes (thousand barrels per day)	2,410			2,824

Refining margin per barrel of throughput	$	6.68		$	7.24
Less:
Operating expenses (excluding depreciation and amortization expense reflected below) per barrel of throughput	6.78			3.87
Depreciation and amortization expense per barrel of throughput	2.46			2.09
Adjusted refining operating income (loss) per barrel of throughput	$	(2.56	)	$	1.28

See Notes to Earnings Release Tables.

Contacts

Investors:

Homer Bhullar, Vice President – Investor Relations, 210-345-1982

Eric Herbort, Senior Manager – Investor Relations, 210-345-3331

Gautam Srivastava, Senior Manager – Investor Relations, 210-345-3992

Media:

Lillian Riojas, Executive Director – Media Relations and Communications, 210-345-5002

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