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Valero (VLO) & Darling Eye Second Renewable Diesel Facility

Zacks Equity Research

Valero Energy Corporation VLO and food processor Darling Ingredients Inc. DAR recently commenced the evaluation process of a new plant in Port Arthur, TX. With countries adopting more low-carbon initiatives, it intends to tap into the growing global demand for renewable diesel.

The facility is expected to produce 400 million gallons of diesel per annum and 40 million gallons of renewable naphtha. Valero expects to take the final investment decision on the project by 2021, following which the construction work will start. The facility is expected to come online by 2024. It will be Texas’ first facility to produce renewable diesel.

Notably, this will be the refining giant’s second renewable diesel plant with Darling. Diamond Green Diesel Holdings LLC, a 50-50 joint venture (JV) between the two companies, will own and operate the facility. The JV’s first plant in Norco, LA — North America’s largest biomass-based diesel facility — forms huge part of Valero’s Renewable Diesel segment, which was created in first-quarter 2019.

The segment accounted for 6.8% of its total operating income in second-quarter 2019 and the figure is expected to grow further with the Norco plant’s expansion. Valero is on track to boost the facility’s production capacity to 675 million gallons by 2021 from the initial figure of 275 million gallons. If everything goes according to plans, Valero will end up with a production capacity of 1.1 billion gallons of renewable diesel per annum and almost 100 million gallons of renewable naphtha.

Price Performance

Valero has gained 10.3% year to date against the 3.1% decline of the industry it belongs to.

Zacks Rank & Stocks to Consider

Currently, Valero has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space are National Oilwell Varco, Inc. NOV and NuStar Energy L.P. NS. While National Oilwell sports a Zacks Rank #1 (Strong Buy), NuStar Energy has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

National Oilwell’s 2019 earnings per share are expected to rise 100% year over year.

NuStar Energy’s third-quarter 2019 earnings per share are expected to gain more than 107% year over year.

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NuStar Energy L.P. (NS) : Free Stock Analysis Report
 
National Oilwell Varco, Inc. (NOV) : Free Stock Analysis Report
 
Valero Energy Corporation (VLO) : Free Stock Analysis Report
 
Darling Ingredients Inc. (DAR) : Free Stock Analysis Report
 
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