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Valero Energy Reports 2021 Fourth Quarter and Full Year Results

  • Reported net income attributable to Valero stockholders of $1,009 million, or $2.46 per share, for the fourth quarter and $930 million, or $2.27 per share, for the year.

  • Reported adjusted net income attributable to Valero stockholders of $1,012 million, or $2.47 per share, for the fourth quarter and $1,152 million, or $2.81 per share, for the year.

  • Returned $401 million in cash to stockholders in the fourth quarter and $1.6 billion in the year through dividends.

  • Reduced Valero’s long-term debt by $693 million in the fourth quarter and by $1.3 billion in 2021.

  • Startup of the Diamond Green Diesel project at Port Arthur (DGD 3) is now expected to be in the first quarter of 2023.

SAN ANTONIO, January 27, 2022--(BUSINESS WIRE)--Valero Energy Corporation (NYSE: VLO, "Valero") today reported net income attributable to Valero stockholders of $1,009 million, or $2.46 per share, for the fourth quarter of 2021, compared to a net loss of $359 million, or $0.88 per share, for the fourth quarter of 2020. Excluding the adjustments shown in the accompanying earnings release tables, fourth quarter 2021 adjusted net income attributable to Valero stockholders was $1,012 million, or $2.47 per share, compared to an adjusted net loss of $429 million, or $1.06 per share, for the fourth quarter of 2020.

For 2021, net income attributable to Valero stockholders was $930 million, or $2.27 per share, compared to a net loss of $1,421 million, or $3.50 per share, in 2020. Excluding the adjustments shown in the accompanying earnings release tables, adjusted net income attributable to Valero stockholders was $1,152 million, or $2.81 per share, in 2021, compared to an adjusted net loss of $1,265 million, or $3.12 per share, in 2020.

"We saw continued improvement in our business during the fourth quarter with margins supported by strong product demand," said Joe Gorder, Valero Chairman and Chief Executive Officer. "Looking ahead, we remain optimistic on refining margins with low global light product inventories, strong demand, global supply tightness due to significant refining capacity rationalization, and wider sour crude oil differentials."

Refining

The refining segment reported $1.3 billion of operating income for the fourth quarter of 2021, compared to a $377 million operating loss for the fourth quarter of 2020. Fourth quarter 2021 adjusted operating income was $1.1 billion, compared to an adjusted operating loss of $476 million for the fourth quarter of 2020. Refinery throughput volumes averaged 3.0 million barrels per day in the fourth quarter of 2021, which was 483 thousand barrels per day higher than the fourth quarter of 2020. 2021 was Valero’s best year ever for Employee and Process Safety.

"The Employee and Process safety milestones set in 2021 are a testament to our long-standing commitment to safe, reliable and environmentally responsible operations," said Gorder. "In fact, we have set records for Process Safety for three consecutive years."

Renewable Diesel

The renewable diesel segment, which consists of the Diamond Green Diesel (DGD) joint venture, reported $150 million of operating income for the fourth quarter of 2021, compared to $127 million for the fourth quarter of 2020. Adjusted renewable diesel operating income was $152 million for the fourth quarter of 2021. Renewable diesel sales volumes averaged 1.6 million gallons per day in the fourth quarter of 2021, which was 974 thousand gallons per day higher than the fourth quarter of 2020. The higher operating income and sales volumes in the fourth quarter of 2021 were primarily attributable to the startup of the DGD expansion project (DGD 2) in the fourth quarter.

Ethanol

The ethanol segment reported $474 million of operating income for the fourth quarter of 2021, compared to $15 million for the fourth quarter of 2020. Fourth quarter 2021 adjusted operating income was $475 million, compared to $17 million for the fourth quarter of 2020. Ethanol production volumes averaged 4.4 million gallons per day in the fourth quarter of 2021, which was 278 thousand gallons per day higher than the fourth quarter of 2020. Higher operating income in the fourth quarter of 2021 was primarily attributed to higher ethanol product prices.

Corporate and Other

General and administrative expenses were $286 million in the fourth quarter of 2021, compared to $224 million in the fourth quarter of 2020. General and administrative expenses were $865 million for the year. The effective tax rate for 2021 was 17 percent, which reflects the benefit from the portion of DGD’s net income that is not taxable to Valero.

Investing and Financing Activities

Net cash provided by operating activities was $2.5 billion in the fourth quarter of 2021. Included in this amount was a $595 million favorable impact from working capital and $82 million associated with the other joint venture member’s share of DGD’s net cash provided by operating activities, excluding changes in DGD’s working capital. Excluding these items, adjusted net cash provided by operating activities was $1.8 billion in the fourth quarter of 2021.

Net cash provided by operating activities in 2021 was $5.9 billion. Included in this amount was a $2.2 billion favorable impact from working capital and $381 million associated with the other joint venture member’s share of DGD’s net cash provided by operating activities, excluding changes in DGD’s working capital. Excluding these items, adjusted net cash provided by operating activities in 2021 was $3.3 billion.

Capital investments totaled $752 million in the fourth quarter of 2021, of which $353 million was for sustaining the business, including costs for turnarounds, catalysts and regulatory compliance. Excluding capital investments attributable to the other joint venture member’s 50 percent share of DGD and those related to other variable interest entities, capital investments attributable to Valero were $545 million in the fourth quarter of 2021 and $1.8 billion in 2021.

Valero returned $401 million to stockholders through dividends in the fourth quarter of 2021. In 2021, Valero returned $1.6 billion to stockholders, or 50 percent of adjusted net cash provided by operating activities.

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 the other joint venture member’s ownership interest in DGD.

In the fourth quarter, Valero completed a series of debt reduction and refinancing transactions that together reduced Valero’s long-term debt by $693 million. These debt reduction and refinancing transactions, combined with the redemption of the $575 million Floating Rate Senior Notes due 2023 in the third quarter, collectively reduced Valero’s long-term debt by $1.3 billion in 2021.

Liquidity and Financial Position

Valero ended 2021 with $13.9 billion of total debt and finance lease obligations and $4.1 billion of cash and cash equivalents. The debt to capitalization ratio, net of cash and cash equivalents, was 33 percent as of December 31, 2021.

Strategic Update

The DGD 2 expansion project at Valero’s St. Charles refinery commenced operations in the fourth quarter, on-budget and ahead of schedule. DGD 2’s annual renewable diesel production capacity has been increased as a result of process improvement and optimization and now stands at 410 million gallons per year, compared to the 400 million gallons per year design capacity. Total DGD renewable diesel production capacity is now 700 million gallons per year.

The DGD project at Valero’s Port Arthur refinery (DGD 3), which is expected to have a renewable diesel production capacity of 470 million gallons per year, is progressing ahead of schedule and is now expected to commence operations in the first quarter 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.

BlackRock and Navigator’s large-scale carbon sequestration project is also progressing on schedule and is still expected to begin startup activities in late 2024. Valero is expected to be the anchor shipper with eight of Valero’s ethanol plants connected to this system, producing a lower carbon intensity ethanol product to be marketed in low-carbon fuel markets that is expected to result in a higher product margin.

Refinery optimization projects that are expected to reduce cost and improve margin capture are progressing on schedule. The Port Arthur Coker project, which is expected to increase the refinery’s utilization rate and improve turnaround efficiency, is expected to be completed in the first half of 2023.

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

We are an international manufacturer and marketer of petroleum-based and low-carbon liquid transportation fuels and petrochemical products, and we sell our products primarily in the United States (U.S.), Canada, the United Kingdom (U.K.), Ireland, and Latin America. We own 15 petroleum refineries located in the U.S., Canada, and the U.K. with a combined throughput capacity of approximately 3.2 million barrels per day (BPD). We are a joint venture member in Diamond Green Diesel Holdings LLC (DGD), which owns a renewable diesel plant in Norco, Louisiana with a production capacity of 700 million gallons per year, and we own 12 ethanol plants located in the Mid-Continent region of the U.S. with a combined production capacity of approximately 1.6 billion gallons per year. We manage our operations through our Refining, Renewable Diesel, and Ethanol segments. Please visit www.investorvalero.com for more information.

Valero Contacts

Investors:
Homer Bhullar, Vice President – Investor Relations and Finance, 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 and the accompanying tables 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. Forward-looking statements in this release and the accompanying tables include those relating to our greenhouse gas emissions targets, expected timing of completion and performance of projects, future market and industry conditions, future operating and financial performance, and management of future risks. 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 legislative or political changes or developments, market dynamics, cyberattacks, weather events, and other matters affecting our operations or the demand for our products. These factors also include, but are not limited to, the uncertainties that remain with respect to the COVID-19 pandemic, variants of the virus, governmental and societal responses thereto, including requirements and mandates with respect to vaccines, vaccine distribution and administration levels, and the adverse effects the foregoing may have on our business or economic conditions generally. For more information concerning these and other 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.

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 renewable diesel operating income, 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 (g) to the earnings release tables provides reasons for the use of these non-GAAP financial measures.

VALERO ENERGY CORPORATION

EARNINGS RELEASE TABLES

OTHER FINANCIAL DATA

(millions of dollars)

(unaudited)

Three Months Ended
December 31,

Year Ended
December 31,

2021

2020

2021

2020

Statement of income data

Revenues

$

35,903

$

16,604

$

113,977

$

64,912

Cost of sales:

Cost of materials and other (a) (b) (c)

31,849

15,101

102,714

58,933

Lower of cost or market (LCM) inventory valuation adjustment

(19

)

Operating expenses (excluding depreciation and
amortization expense reflected below) (a)

1,558

1,167

5,776

4,435

Depreciation and amortization expense

586

566

2,358

2,303

Total cost of sales

33,993

16,834

110,848

65,652

Other operating expenses

18

5

87

35

General and administrative expenses (excluding
depreciation and amortization expense reflected below)

286

224

865

756

Depreciation and amortization expense

12

11

47

48

Operating income (loss)

1,594

(470

)

2,130

(1,579

)

Other income (loss), net (d)

(163

)

25

16

132

Interest and debt expense, net of capitalized interest

(152

)

(153

)

(603

)

(563

)

Income (loss) before income tax expense (benefit)

1,279

(598

)

1,543

(2,010

)

Income tax expense (benefit) (e)

169

(289

)

255

(903

)

Net income (loss)

1,110

(309

)

1,288

(1,107

)

Less: Net income attributable to noncontrolling interests

101

50

358

314

Net income (loss) attributable to Valero Energy Corporation

stockholders

$

1,009

$

(359

)

$

930

$

(1,421

)

Earnings (loss) per common share

$

2.47

$

(0.88

)

$

2.27

$

(3.50

)

Weighted-average common shares outstanding (in millions)

408

407

407

407

Earnings (loss) per common share – assuming dilution

$

2.46

$

(0.88

)

$

2.27

$

(3.50

)

Weighted-average common shares outstanding –
assuming dilution (in millions) (f)

408

407

407

407

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 December 31, 2021

Revenues:

Revenues from external customers

$

33,521

$

684

$

1,698

$

$

35,903

Intersegment revenues

7

253

174

(434

)

Total revenues

33,528

937

1,872

(434

)

35,903

Cost of sales:

Cost of materials and other (c)

30,342

714

1,224

(431

)

31,849

Operating expenses (excluding depreciation and
amortization expense reflected below)

1,358

48

153

(1

)

1,558

Depreciation and amortization expense

543

23

20

586

Total cost of sales

32,243

785

1,397

(432

)

33,993

Other operating expenses

15

2

1

18

General and administrative expenses (excluding
depreciation and amortization expense reflected
below)

286

286

Depreciation and amortization expense

12

12

Operating income by segment

$

1,270

$

150

$

474

$

(300

)

$

1,594

Three months ended December 31, 2020

Revenues:

Revenues from external customers

$

15,513

$

205

$

886

$

$

16,604

Intersegment revenues

2

62

66

(130

)

Total revenues

15,515

267

952

(130

)

16,604

Cost of sales:

Cost of materials and other (b)

14,324

107

800

(130

)

15,101

Operating expenses (excluding depreciation and
amortization expense reflected below)

1,032

22

113

1,167

Depreciation and amortization expense

531

11

24

566

Total cost of sales

15,887

140

937

(130

)

16,834

Other operating expenses

5

5

General and administrative expenses (excluding
depreciation and amortization expense reflected
below)

224

224

Depreciation and amortization expense

11

11

Operating income (loss) by segment

$

(377

)

$

127

$

15

$

(235

)

$

(470

)

See Operating Highlights by Segment.
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

Year ended December 31, 2021

Revenues:

Revenues from external customers

$

106,947

$

1,874

$

5,156

$

$

113,977

Intersegment revenues

14

468

433

(915

)

Total revenues

106,961

2,342

5,589

(915

)

113,977

Cost of sales:

Cost of materials and other (a) (c)

97,759

1,438

4,428

(911

)

102,714

Operating expenses (excluding depreciation and
amortization expense reflected below) (a)

5,088

134

556

(2

)

5,776

Depreciation and amortization expense

2,169

58

131

2,358

Total cost of sales

105,016

1,630

5,115

(913

)

110,848

Other operating expenses

83

3

1

87

General and administrative expenses (excluding
depreciation and amortization expense reflected
below)

865

865

Depreciation and amortization expense

47

47

Operating income by segment

$

1,862

$

709

$

473

$

(914

)

$

2,130

Year ended December 31, 2020

Revenues:

Revenues from external customers

$

60,840

$

1,055

$

3,017

$

$

64,912

Intersegment revenues

8

212

226

(446

)

Total revenues

60,848

1,267

3,243

(446

)

64,912

Cost of sales:

Cost of materials and other (b)

56,093

500

2,784

(444

)

58,933

LCM inventory valuation adjustment

(19

)

(19

)

Operating expenses (excluding depreciation and
amortization expense reflected below)

3,944

85

406

4,435

Depreciation and amortization expense

2,138

44

121

2,303

Total cost of sales

62,156

629

3,311

(444

)

65,652

Other operating expenses

34

1

35

General and administrative expenses (excluding
depreciation and amortization expense reflected
below)

756

756

Depreciation and amortization expense

48

48

Operating income (loss) by segment

$

(1,342

)

$

638

$

(69

)

$

(806

)

$

(1,579

)

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 (g)

(millions of dollars, except per share amounts)

(unaudited)

Three Months Ended
December 31,

Year Ended
December 31,

2021

2020

2021

2020

Reconciliation of net income (loss) attributable to Valero
Energy Corporation stockholders to adjusted net income
(loss) attributable to Valero Energy Corporation
stockholders

Net income (loss) attributable to Valero Energy Corporation
stockholders

$

1,009

$

(359

)

$

930

$

(1,421

)

Adjustments:

Modification of renewable volume obligation (RVO) (c)

(190

)

Income tax expense related to modification of RVO

43

Modification of RVO, net of taxes

(147

)

Changes in estimated useful lives of two ethanol plants

48

30

Income tax benefit related to the changes in estimated
useful lives of two ethanol plants

(11

)

(6

)

Changes in estimated useful lives of two ethanol plants,
net of taxes

37

24

Gain on sale of MVP interest (d)

...

(62

)

Income tax expense related to gain on sale of MVP interest

14

Gain on sale of MVP interest, net of taxes

(48

)

...