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Valero Energy Reports Second Quarter 2022 Results

  • Reported net income attributable to Valero stockholders of $4.7 billion, or $11.57 per share

  • Reported adjusted net income attributable to Valero stockholders of $4.6 billion, or $11.36 per share

  • Reduced debt by $300 million through the acquisition of the 4.00 percent Gulf Opportunity Zone Revenue Bonds (GO Zone Bonds), reducing Valero’s debt by $2.3 billion since the second half of 2021

SAN ANTONIO, July 28, 2022--(BUSINESS WIRE)--Valero Energy Corporation (NYSE: VLO, "Valero") today reported net income attributable to Valero stockholders of $4.7 billion, or $11.57 per share, for the second quarter of 2022, compared to $162 million, or $0.39 per share, for the second quarter of 2021. Excluding the adjustments shown in the accompanying earnings release tables, adjusted net income attributable to Valero stockholders was $4.6 billion, or $11.36 per share, for the second quarter of 2022, compared to $260 million, or $0.63 per share, for the second quarter of 2021.

"We continue to maximize refinery run rates, while executing our long-standing commitment to safe, reliable and environmentally responsible operations," said Joe Gorder, Valero Chairman and Chief Executive Officer. "Our refinery utilization rate increased from the pandemic low of 74 percent in the second quarter of 2020 to 94 percent in the second quarter of 2022."

Refining

The Refining segment reported operating income of $6.2 billion for the second quarter of 2022, compared to $349 million for the second quarter of 2021. Adjusted operating income was $6.1 billion for the second quarter of 2022, compared to $442 million for the second quarter of 2021. Refining throughput volumes averaged 3.0 million barrels per day in the second quarter of 2022, which was 127 thousand barrels per day higher than the second quarter of 2021.

Renewable Diesel

The Renewable Diesel segment, which consists of the Diamond Green Diesel (DGD) joint venture, reported $152 million of operating income for the second quarter of 2022, compared to $248 million for the second quarter of 2021. Renewable diesel sales volumes averaged 2.2 million gallons per day in the second quarter of 2022, which was 1.3 million gallons per day higher than the second quarter of 2021. The higher sales volumes in the second quarter of 2022 were attributable to the fourth quarter 2021 startup of the DGD expansion project at St. Charles (DGD 2).

Ethanol

The Ethanol segment reported $101 million of operating income for the second quarter of 2022, compared to $99 million for the second quarter of 2021. Adjusted operating income, which primarily excludes the gain from the sale of our Jefferson ethanol plant whose operations were idled in 2020, was $79 million for the second quarter of 2022. Ethanol production volumes averaged 3.9 million gallons per day in the second quarter of 2022.

Corporate and Other

General and administrative expenses were $233 million in the second quarter of 2022, compared to $176 million in the second quarter of 2021. The effective tax rate for the second quarter of 2022 was 22 percent.

Investing and Financing Activities

Net cash provided by operating activities was $5.8 billion in the second quarter of 2022. Included in this amount was a $594 million favorable impact from working capital and $90 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 $5.2 billion in the second quarter of 2022.

Capital investments totaled $653 million in the second quarter of 2022, of which $298 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 $524 million.

In the second quarter, Valero further reduced its debt through the acquisition of the $300 million of 4.00 percent GO Zone Bonds. This transaction, combined with debt reduction and refinancing transactions completed in the second half of 2021 and the first quarter of 2022, have collectively reduced Valero’s debt by $2.3 billion.

"We raised $4.0 billion of incremental debt in 2020 due to the negative impacts of the pandemic on our business," said Gorder. "Since then, we have reduced our debt by $2.3 billion and will evaluate further deleveraging opportunities."

Liquidity and Financial Position

Valero ended the second quarter of 2022 with $10.9 billion of total debt, $2.0 billion of finance lease obligations and $5.4 billion of cash and cash equivalents, compared to $13.0 billion of total debt, $1.6 billion of finance lease obligations and $2.3 billion of cash and cash equivalents at the end of the first quarter of 2021. As a result, the debt to capitalization ratio, net of cash and cash equivalents, was 25 percent as of June 30, 2022, down from the pandemic high of 40 percent at the end of the first quarter of 2021.

Strategic Update

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

The DGD project located next to Valero’s Port Arthur refinery (DGD 3), which is expected to have renewable diesel production capacity of 470 million gallons per year, should commence operations in the fourth quarter of 2022. The total annual DGD production capacity is expected to nearly double to approximately 1.2 billion gallons of renewable diesel and 50 million gallons of renewable naphtha upon commencement of DGD 3’s operations.

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

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 a multinational 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, Director – 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 Russia-Ukraine conflict, the impact of inflation on margins and costs, the COVID-19 pandemic, variants of the COVID-19 virus, governmental and societal responses thereto, including requirements and mandates with respect to COVID-19 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 Ethanol operating income, 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 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

FINANCIAL HIGHLIGHTS

(millions of dollars, except per share amounts)

(unaudited)

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Statement of income data

Revenues

$

51,641

$

27,748

$

90,183

$

48,554

Cost of sales:

Cost of materials and other (a) (b)

42,946

25,249

77,895

44,241

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

1,626

1,214

3,005

2,870

Depreciation and amortization expense (c)

590

576

1,185

1,142

Total cost of sales

45,162

27,039

82,085

48,253

Other operating expenses

15

12

34

50

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

233

176

438

384

Depreciation and amortization expense

12

12

23

24

Operating income (loss)

6,219

509

7,603

(157

)

Other income, net (e)

33

102

13

147

Interest and debt expense, net of capitalized interest

(142

)

(150

)

(287

)

(299

)

Income (loss) before income tax expense

6,110

461

7,329

(309

)

Income tax expense (f)

1,342

169

1,594

21

Net income (loss)

4,768

292

5,735

(330

)

Less: Net income attributable to noncontrolling interests

75

130

137

212

Net income (loss) attributable to Valero Energy Corporation stockholders

$

4,693

$

162

$

5,598

$

(542

)

Earnings (loss) per common share

$

11.58

$

0.39

$

13.75

$

(1.34

)

Weighted-average common shares outstanding (in millions)

404

407

406

407

Earnings (loss) per common share – assuming dilution

$

11.57

$

0.39

$

13.74

$

(1.34

)

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

404

407

406

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 June 30, 2022

Revenues:

Revenues from external customers

$

49,495

$

855

$

1,291

$

$

51,641

Intersegment revenues

11

596

201

(808

)

Total revenues

49,506

1,451

1,492

(808

)

51,641

Cost of sales:

Cost of materials and other (a)

41,313

1,213

1,226

(806

)

42,946

Operating expenses (excluding depreciation and amortization expense reflected below)

1,402

58

167

(1

)

1,626

Depreciation and amortization expense (c)

565

28

(3

)

590

Total cost of sales

43,280

1,299

1,390

(807

)

45,162

Other operating expenses

14

1

15

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

233

233

Depreciation and amortization expense

12

12

Operating income by segment

$

6,212

$

152

$

101

$

(246

)

$

6,219

Three months ended June 30, 2021

Revenues:

Revenues from external customers

$

25,968

$

496

$

1,284

$

$

27,748

Intersegment revenues

1

76

84

(161

)

Total revenues

25,969

572

1,368

(161

)

27,748

Cost of sales:

Cost of materials and other

24,000

281

1,130

(162

)

25,249

Operating expenses (excluding depreciation and amortization expense reflected below)

1,064

31

119

1,214

Depreciation and amortization expense

544

12

20

576

Total cost of sales

25,608

324

1,269

(162

)

27,039

Other operating expenses

12

12

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

176

176

Depreciation and amortization expense

12

12

Operating income by segment

$

349

$

248

$

99

$

(187

)

$

509

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

Six months ended June 30, 2022

Revenues:

Revenues from external customers

$

86,308

$

1,450

$

2,425

$

$

90,183

Intersegment revenues

15

982

328

(1,325

)

Total revenues

86,323

2,432

2,753

(1,325

)

90,183

Cost of sales:

Cost of materials and other (a)

74,919

1,968

2,330

(1,322

)

77,895

Operating expenses (excluding depreciation and amortization expense reflected below)

2,595

109

302

(1

)

3,005

Depreciation and amortization expense (c)

1,114

54

17

1,185

Total cost of sales

78,628

2,131

2,649

(1,323

)

82,085

Other operating expenses

32

2

34

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

438

438

Depreciation and amortization expense

23

23

Operating income by segment

$

7,663

$

301

$

102

$

(463

)

$

7,603

Six months ended June 30, 2021

Revenues:

Revenues from external customers

$

45,437

$

848

$

2,269

$

$

48,554

Intersegment revenues

4

155

144

(303

)

Total revenues

45,441

1,003

2,413

(303

)

48,554

Cost of sales:

Cost of materials and other (b)

42,022

468

2,054

(303

)

44,241

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

2,535

60

275

2,870

Depreciation and amortization expense

1,077

24

41

1,142

Total cost of sales

45,634

552

2,370

(303

)

48,253

Other operating expenses

50

50

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

384

384

Depreciation and amortization expense

24

24

Operating income (loss) by segment

$

(243

)

$

451

$

43

$

(408

)

$

(157

)

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
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

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

$

4,693

$

162

$

5,598

$

(542

)

Adjustments:

Modification of renewable volume obligation (RVO) (a)

(104

)

81

(104

)

161

Income tax expense related to modification of RVO

23

...