VLO
$82.59
Valero Energy
$2.10
2.61%
Earnings Details
3rd Quarter September 2018
Thursday, October 25, 2018 6:33:00 AM
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Summary

Valero Energy (VLO) Recent Earnings

Valero Energy (VLO) reported 3rd Quarter September 2018 earnings of $2.01 per share on revenue of $30.8 billion. The consensus earnings estimate was $1.95 per share on revenue of $29.8 billion. Revenue grew 30.9% on a year-over-year basis.

Valero Energy Corp is a refining and marketing company. The Company produces conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined products as well as a slate of premium products.

Results
Reported Earnings
$2.01
Earnings Whisper
-
Consensus Estimate
$1.95
Reported Revenue
$30.85 Bil
Revenue Estimate
$29.81 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Valero Energy Reports Third Quarter 2018 Results

  • Reported net income attributable to Valero stockholders of $856 million, or $2.01 per share.  
  • Invested $604 million of capital in the third quarter. 
  • Approved the construction of a new coker at the Port Arthur refinery.
  • Announced merger with Valero Energy Partners LP (NYSE: VLP, the “Partnership”).
  • Returned $775 million in cash to stockholders through dividends and stock buybacks.

SAN ANTONIO, Oct. 25, 2018 (GLOBE NEWSWIRE) -- Valero Energy Corporation (NYSE: VLO, “Valero”) today reported net income attributable to Valero stockholders of $856 million, or $2.01 per share, for the third quarter of 2018 compared to $841 million, or $1.91 per share, for the third quarter of 2017. 

“We operated well in the third quarter and delivered solid financial performance,” said Joe Gorder, Valero Chairman, President and Chief Executive Officer.  “We continued to capture benefits from our investments in crude oil logistics and light crude processing.  We also continued to deliver on our commitments to grow the earnings capability of the company through acquisitions and growth investments while delivering returns to our stockholders.” 

Refining
The refining segment reported $1.3 billion of operating income for the third quarter of 2018 compared to $1.4 billion for the third quarter of 2017.  The $90 million decrease is mainly due to lower gasoline and secondary products margins. 

Refinery throughput capacity utilization was 99 percent, with throughput volumes averaging 3.1 million barrels per day in the third quarter of 2018.  This compares to 2.9 million barrels per day in the third quarter of 2017, during which five of our refineries were impacted by Hurricane Harvey.  The company exported a total of 421,000 barrels per day of gasoline and distillate during the third quarter of 2018. 

Biofuel blending costs were $94 million in the third quarter of 2018, which is $136 million less than in the third quarter of 2017, mainly due to lower Renewable Identification Number (RIN) prices.

Ethanol
The ethanol segment reported $21 million of operating income for the third quarter of 2018 compared to $82 million for the third quarter of 2017.  The decrease in operating income is attributed primarily to lower ethanol prices.  Ethanol production volumes of 4 million gallons per day were in line with the third quarter of 2017. 

VLP
The VLP segment, which is composed of Valero Energy Partners LP, the company’s majority-owned midstream master limited partnership, reported $90 million of operating income for the third quarter of 2018 compared to $69 million for the third quarter of 2017.  The $21 million increase is mostly driven by contributions from the Port Arthur terminal assets and Parkway Pipeline, which the Partnership acquired from Valero in November 2017.  These assets were formerly a part of the refining segment.

Corporate and Other
General and administrative expenses were $209 million in the third quarter of 2018 compared to $225 million in the third quarter of 2017.  The effective tax rate was 24 percent for the third quarter of 2018. 

Investing and Financing Activities
Capital investments in the third quarter of 2018 totaled $604 million.  Included in this amount is $435 million associated with sustaining the business, such as turnaround, catalyst, and regulatory compliance expenditures, with the balance for growth.

Valero returned $775 million to stockholders in the third quarter, of which $341 million was paid as dividends and the balance was used to purchase 3.8 million shares of its common stock. 

Net cash provided by operating activities in the third quarter was $496 million.  Included in this amount is a $729 million use of cash to fund working capital.  Excluding working capital, adjusted net cash provided by operating activities was $1.2 billion

The company continues to target a total payout ratio between 40 and 50 percent of adjusted net cash provided by operating activities for 2018.  Valero defines total payout ratio as the sum of dividends and stock buybacks divided by adjusted net cash provided by operating activities. 

Liquidity and Financial Position
Valero ended the third quarter of 2018 with $9.1 billion of total debt and $3.6 billion of cash and cash equivalents.  The debt to capital ratio, net of $2.0 billion in cash, was 24 percent. 

Strategic Update
The expansion of the Diamond Green Diesel plant to 16,500 barrels per day of renewable diesel production capacity was completed in August 2018 and is running well.  Development continues on a project to further expand the facility’s production capacity to a total of 44,000 barrels per day, with a final investment decision expected before year-end. 

In September, Valero’s Board of Directors approved a project to construct a 55,000 barrel per day coker and a sulfur recovery unit at the Port Arthur refinery for a total cost of $975 million.  When completed in 2022, the refinery is expected to benefit from improved turnaround efficiency, reduced feedstock costs, and increased crude oil throughput capacity. 

“We’re excited that the coker project is moving forward,” commented Gorder.  “The additional coker capacity will create two independent process trains and improve the Port Arthur refinery’s turnaround efficiency.”

In October, the company entered into an agreement to acquire three ethanol plants from Green Plains Renewable Energy with a total nameplate capacity of 280 million gallons per year at a cost of $300 million plus working capital estimated at $28 million.  The plants are strategically located in the U.S. corn belt and utilize the same process technologies as Valero’s existing facilities, enabling the capture of commercial and operational synergies and the transfer of best practices.  This transaction is expected to close in the fourth quarter of 2018. 

Also in October, Valero and the Partnership announced the execution of a merger agreement under which Valero plans to acquire all of the Partnership’s outstanding publicly held common units at a price of $42.25 per common unit in cash.  This transaction is expected to be immediately accretive and to close as soon as possible following the satisfaction of certain customary closing conditions.  

Construction continues on schedule for the Houston and St. Charles alkylation units, the Central Texas pipelines and terminals, the Pasadena products terminal, and the Pembroke cogeneration plant, with startups expected in 2019 and 2020. 

Capital investment plans of $2.7 billion for 2018, of which $1.0 billion is for growth projects and $1.7 billion is for sustaining the business, remain unchanged. 

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, is an international manufacturer and marketer of transportation fuels and other petrochemical products.  Valero, a Fortune 50 company based in San Antonio, Texas, with approximately 10,000 employees, is an independent petroleum refiner and ethanol producer, and its assets include 15 petroleum refineries with a combined throughput capacity of approximately 3.1 million barrels per day and 11 ethanol plants with a combined production capacity of 1.45 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.  In addition, Valero owns the 2 percent general partner interest and a majority limited partner interest in the Partnership, a midstream master limited partnership.  Valero sells its products in both the wholesale rack and bulk markets, and approximately 7,400 outlets carry Valero’s brand names in the U.S., Canada, the U.K., and Ireland.  Please visit www.valero.com for more information.

Valero Contacts
Investors:
John Locke, Vice President – Investor Relations, 210-345-3077
Karen Ngo, Senior Manager – Investor Relations, 210-345-4574
Tom Mahrer, Manager – Investor Relations, 210-345-1953

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,” and other similar expressions identify forward-looking statements.  The forward-looking statements contained herein include statements related to the proposed merger with the Partnership as described above. 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, other factors and, with respect to the proposed merger, include, but are not limited to, failure of closing conditions, delays in the consummation of the proposed merger and changes to business plans, as circumstances warrant.  These factors may influence Valero’s and/or the Partnership’s ability to consummate the proposed merger on the expected time frame or at all.  For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero’s annual reports on Form 10-K, quarterly reports on Form 10-Q and our other reports filed with the SEC and on Valero’s website at www.valero.com, and VLP’s annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and on VLP’s website at www.valeroenergypartners.com.

Important Information About the Proposed Merger
Valero has filed with the SEC a Current Report on Form 8-K, which contains, among other things, a copy of the merger agreement and the support agreement for the proposed merger with the Partnership.  VLO’s stockholders may obtain, without charge, a copy of VLO’s Form 8-K announcing the execution of the merger agreement and the support agreement, and other relevant documents filed with the SEC from the SEC’s website at www.sec.gov.  VLO’s stockholders will also be able to obtain, without charge, a copy of VLO’s Form 8-K announcing the execution of the merger agreement and the support agreement, and other documents relating to the proposed merger (when available) 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 attributable to Valero stockholders, adjusted earnings per common share – assuming dilution, adjusted refining operating income, refining margin, ethanol margin, adjusted VLP operating income, and adjusted net cash provided by operating activities.  We have included these non-GAAP financial measures 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.  In note (g) to the earnings release tables, we disclose the reasons why we believe our use of these non-GAAP financial measures provides useful information.

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

    
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Statement of income data       
Revenues$30,849  $23,562  $88,303  $67,588 
Cost of sales:       
Cost of materials and other (a)27,701  20,329  79,317  59,366 
Operating expenses (excluding depreciation and
amortization expense reflected below) (b)
1,193  1,135  3,439  3,370 
Depreciation and amortization expense504  484  1,499  1,457 
Total cost of sales29,398  21,948  84,255  64,193 
Other operating expenses (c)10  44  41  44 
General and administrative expenses (excluding
depreciation and amortization expense reflected below) (b) (d)
209  225  695  592 
Depreciation and amortization expense13  13  39  39 
Operating income1,219  1,332  3,273  2,720 
Other income, net (b) (e)42  23  88  76 
Interest and debt expense, net of capitalized interest(111) (114) (356) (354)
Income before income tax expense1,150  1,241  3,005  2,442 
Income tax expense (f)276  378  674  686 
Net income874  863  2,331  1,756 
Less: Net income attributable to noncontrolling interests (a)18  22  161  62 
Net income attributable to Valero Energy Corporation
stockholders
$856  $841  $2,170  $1,694 
        
Earnings per common share$2.01  $1.91  $5.05  $3.80 
Weighted-average common shares outstanding (in millions)425  439  428  444 
        
Earnings per common share – assuming dilution$2.01  $1.91  $5.05  $3.80 
Weighted-average common shares outstanding –
assuming dilution (in millions)
427  441  430  446 

See Notes to Earnings Release Tables.

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

 Refining Ethanol VLP Corporate
and
Eliminations
 Total
Three months ended September 30, 2018         
Revenues:         
Revenues from external customers$29,984  $864  $  $1  $30,849 
Intersegment revenues5  68  140  (213)  
Total revenues29,989  932  140  (212) 30,849 
Cost of sales:         
Cost of materials and other27,137  776    (212) 27,701 
Operating expenses (excluding depreciation and
amortization expense reflected below)
1,047  116  31  (1) 1,193 
Depreciation and amortization expense466  19  19    504 
Total cost of sales28,650  911  50  (213) 29,398 
Other operating expenses (c)10        10 
General and administrative expenses (excluding
depreciation and amortization expense reflected
below)
      209  209 
Depreciation and amortization expense      13  13 
Operating income by segment$1,329  $21  $90  $(221) $1,219 
          
Three months ended September 30, 2017         
Revenues:         
Revenues from external customers$22,728  $834  $  $  $23,562 
Intersegment revenues1  48  110  (159)  
Total revenues22,729  882  110  (159) 23,562 
Cost of sales:         
Cost of materials and other19,818  669    (158) 20,329 
Operating expenses (excluding depreciation and
amortization expense reflected below) (b)
996  114  26  (1) 1,135 
Depreciation and amortization expense455  17  12    484 
Total cost of sales21,269  800  38  (159) 21,948 
Other operating expenses (c)41    3    44 
General and administrative expenses (excluding
depreciation and amortization expense reflected
below) (b)
      225  225 
Depreciation and amortization expense      13  13 
Operating income by segment$1,419  $82  $69  $(238) $1,332 

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 Ethanol VLP Corporate
and
Eliminations
 Total
Nine months ended September 30, 2018         
Revenues:         
Revenues from external customers$85,675  $2,625  $  $3  $88,303 
Intersegment revenues10  156  407  (573)  
Total revenues85,685  2,781  407  (570) 88,303 
Cost of sales:         
Cost of materials and other (a)77,608  2,279    (570) 79,317 
Operating expenses (excluding depreciation and
amortization expense reflected below)
3,013  336  93  (3) 3,439 
Depreciation and amortization expense1,385  57  57    1,499 
Total cost of sales82,006  2,672  150  (573) 84,255 
Other operating expenses (c)41        41 
General and administrative expenses (excluding
depreciation and amortization expense reflected
below) (d)
      695  695 
Depreciation and amortization expense      39  39 
Operating income by segment$3,638  $109  $257  $(731) $3,273 
          
Nine months ended September 30, 2017         
Revenues:         
Revenues from external customers$65,030  $2,558  $  $  $67,588 
Intersegment revenues1  136  326  (463)  
Total revenues65,031  2,694  326  (463) 67,588 
Cost of sales:         
Cost of materials and other57,662  2,166    (462) 59,366 
Operating expenses (excluding depreciation and
amortization expense reflected below) (b)
2,966  330  75  (1) 3,370 
Depreciation and amortization expense1,358  63  36    1,457 
Total cost of sales61,986  2,559  111  (463) 64,193 
Other operating expenses (c)41    3    44 
General and administrative expenses (excluding
depreciation and amortization expense reflected
below) (b)
      592  592 
Depreciation and amortization expense      39  39 
Operating income by segment$3,004  $135  $212  $(631) $2,720 

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
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Reconciliation of net income attributable to Valero Energy
Corporation stockholders to adjusted net income
attributable to Valero Energy Corporation stockholders
       
Net income attributable to Valero Energy Corporation
stockholders
$856  $841  $2,170  $1,694 
Exclude adjustments:       
Blender’s tax credit attributable to Valero Energy
Corporation
stockholders (a)
    90   
Income tax expense related to the blender’s tax credit    (11)  
Blender’s tax credit attributable to Valero Energy
Corporation
stockholders, net of taxes
    79   
Texas City Refinery fire expenses    (14)  
Income tax benefit related to Texas City Refinery
fire expenses
    3   
Texas City Refinery fire expenses, net of taxes    (11)  
Environmental reserve adjustments (d)    (108)  
Income tax benefit related to the environmental reserve
adjustments
    24   
Environmental reserve adjustments, net of taxes    (84)  
Loss on early redemption of debt (e)    (38)  
Income tax benefit related to the loss on early
redemption of debt
    9   
Loss on early redemption of debt, net of taxes    (29)  
Total adjustments    (45)  
Adjusted net income attributable to
Valero Energy Corporation stockholders
$856  $841  $2,215  $1,694 
        
Reconciliation of earnings per common share – assuming
dilution to adjusted earnings per common share –
assuming dilution
       
Earnings per common share – assuming dilution$2.01  $1.91  $5.05  $3.80 
Exclude adjustments:       
Blender’s tax credit attributable to Valero Energy
Corporation
stockholders (a)
    0.18   
Texas City Refinery fire expenses    (0.03)  
Environmental reserve adjustments (d)    (0.19)  
Loss on early redemption of debt (e)    (0.07)  
Total adjustments    (0.11)  
Adjusted earnings per common share – assuming dilution$2.01  $1.91  $5.16  $3.80 

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)
(unaudited)

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Reconciliation of operating income by segment to segment
margin, and reconciliation of operating income by
segment to adjusted operating income by segment
       
Refining segment       
Refining operating income$1,329  $1,419  $3,638  $3,004 
Exclude:       
Blender’s tax credit (a)    170   
Operating expenses (excluding depreciation and
amortization expense reflected below) (b)
(1,047) (996) (3,013) (2,966)
Depreciation and amortization expense(466) (455) (1,385) (1,358)
Other operating expenses (c)(10) (41) (41) (41)
Refining margin$2,852  $2,911  $7,907  $7,369 
        
Refining operating income$1,329  $1,419  $3,638  $3,004 
Exclude:       
Blender’s tax credit (a)    170   
Other operating expenses (c)(10) (41) (41) (41)
Adjusted refining operating income$1,339  $1,460  $3,509  $3,045 
        
Ethanol segment       
Ethanol operating income$21  $82  $109  $135 
Exclude:       
Operating expenses (excluding depreciation and
amortization expense reflected below)
(116) (114) (336) (330)
Depreciation and amortization expense(19) (17) (57) (63)
Ethanol margin$156  $213  $502  $528 
        
VLP segment       
VLP operating income$90  $69  $257  $212 
Exclude: Other operating expenses (c)  (3)   (3)
Adjusted VLP operating income$90  $72  $257  $215 
        

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)
(unaudited)

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Reconciliation of refining segment operating income to
refining margin (by region), and reconciliation of
refining segment operating income to adjusted refining
segment operating income (by region) (h)
       
U.S. Gulf Coast region       
Refining operating income$591  $602  $1,856  $1,445 
Exclude:       
Blender’s tax credit (a)    167   
Operating expenses (excluding depreciation and
amortization expense reflected below) (b)
(579) (564) (1,687) (1,715)
Depreciation and amortization expense(287) (281) (839) (839)
Other operating expenses (c)(9) (41) (39) (41)
Refining margin$1,466  $1,488  $4,254  $4,040 
        
Refining operating income$591  $602  $1,856  $1,445 
Exclude:       
Blender’s tax credit (a)    167   
Other operating expenses (c)(9) (41) (39) (41)
Adjusted refining operating income$600  $643  $1,728  $1,486 
        
U.S. Mid-Continent region       
Refining operating income$418  $359  $1,008  $641 
Exclude:       
Blender’s tax credit (a)    2   
Operating expenses (excluding depreciation and
amortization expense reflected below) (b)
(149) (146) (447) (442)
Depreciation and amortization expense(68) (64) (201) (196)
Refining margin$635  $569  $1,654  $1,279 
        
Refining operating income$418  $359  $1,008  $641 
Exclude: blender’s tax credit (a)    2   
Adjusted refining operating income$418  $359  $1,006  $641 

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)
(unaudited)

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Reconciliation of refining segment operating income to
refining margin (by region), and reconciliation of
refining segment operating income to adjusted refining
segment operating income (by region) (h) (continued)
       
North Atlantic region       
Refining operating income$322  $327  $620  $785 
Exclude:       
Operating expenses (excluding depreciation and
amortization expense reflected below) (b)
(149) (138) (432) (379)
Depreciation and amortization expense(52) (53) (167) (150)
Refining margin$523  $518  $1,219  $1,314 
        
U.S. West Coast region       
Refining operating income (loss)$(2) $131  $154  $133 
Exclude:       
Blender’s tax credit (a)    1   
Operating expenses (excluding depreciation and
amortization expense reflected below) (b)
(170) (148) (447) (430)
Depreciation and amortization expense(59) (57) (178) (173)
Other operating expenses (c)(1)   (2)  
Refining margin$228  $336  $780  $736 
        
Refining operating income (loss)$(2) $131  $154  $133 
Exclude:       
Blender’s tax credit (a)    1   
Other operating expenses (c)(1)   (2)  
Adjusted refining operating income (loss)$(1) $131  $155  $133 

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
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Throughput volumes (thousand barrels per day)       
Feedstocks:       
Heavy sour crude oil466  446  476  470 
Medium/light sour crude oil424  420  422  461 
Sweet crude oil1,527  1,348  1,392  1,301 
Residuals244  215  233  226 
Other feedstocks144  147  128  146 
Total feedstocks2,805  2,576  2,651  2,604 
Blendstocks and other295  317  326  313 
Total throughput volumes3,100  2,893  2,977  2,917 
        
Yields (thousand barrels per day)       
Gasolines and blendstocks1,478  1,401  1,429  1,406 
Distillates1,201  1,108  1,135  1,122 
Other products (i)460  420  451  426 
Total yields3,139  2,929  3,015  2,954 
        
Operating statistics (g) (j)       
Refining margin (from Table Page 5)$2,852  $2,911  $7,907  $7,369 
Adjusted refining operating income (from Table Page 5)$1,339  $1,460  $3,509  $3,045 
Throughput volumes (thousand barrels per day)3,100  2,893  2,977  2,917 
        
Refining margin per barrel of throughput$10.00  $10.94  $9.73  $9.26 
Less:       
Operating expenses (excluding depreciation and
amortization expense reflected below) per barrel of
throughput (b)
3.67  3.75  3.71  3.73 
Depreciation and amortization expense per barrel of
throughput
1.64  1.71  1.70  1.71 
Adjusted refining operating income per barrel of throughput$4.69  $5.48  $4.32  $3.82 

See Notes to Earnings Release Tables.

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

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Operating statistics (g) (j)       
Ethanol margin (from Table Page 5)$156  $213  $502  $528 
Ethanol operating income (from Table Page 5)$21  $82  $109  $135 
Production volumes (thousand gallons per day)4,069  4,032  4,061  3,949 
        
Ethanol margin per gallon of production$0.42  $0.57  $0.45  $0.49 
Less:       
Operating expenses (excluding depreciation and
amortization expense reflected below) per gallon
of production
0.31  0.30  0.30  0.31 
Depreciation and amortization expense per gallon of
production
0.05  0.05  0.05  0.05 
Ethanol operating income per gallon of production$0.06  $0.22  $0.10  $0.13 

See Notes to Earnings Release Tables.

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

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Operating statistics (j)       
Pipeline transportation revenue$31  $23  $93  $71 
Terminaling revenue107  86  309  253 
Storage and other revenue2  1  5  2 
Total VLP revenues$140  $110  $407  $326 
        
Pipeline transportation throughput (thousand barrels per day)1,141  859  1,079  941 
Pipeline transportation revenue per barrel of throughput$0.30  $0.29  $0.32  $0.28 
        
Terminaling throughput (thousand barrels per day)3,767  2,694  3,576  2,760 
Terminaling revenue per barrel of throughput$0.31  $0.34  $0.32  $0.34 

See Notes to Earnings Release Tables.

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

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Operating statistics by region (h)       
U.S. Gulf Coast region (g) (j)       
Refining margin (from Table Page 6)$1,466  $1,488  $4,254  $4,040 
Adjusted refining operating income (from Table Page 6)$600  $643  $1,728  $1,486 
Throughput volumes (thousand barrels per day)1,834  1,657  1,764  1,713 
        
Refining margin per barrel of throughput$8.69  $9.76  $8.84  $8.64 
Less:       
Operating expenses (excluding depreciation and
amortization expense reflected below) per barrel of
throughput (b)
3.43  3.71  3.50  3.66 
Depreciation and amortization expense per barrel of
throughput
1.71  1.84  1.75  1.80 
Adjusted refining operating income per barrel of throughput$3.55  $4.21  $3.59  $3.18 
        
U.S. Mid-Continent region (g) (j)       
Refining margin (from Table Page 6)$635  $569  $1,654  $1,279 
Adjusted refining operating income (from Table Page 6)$418  $359  $1,006  $641 
Throughput volumes (thousand barrels per day)459  465  471  464 
        
Refining margin per barrel of throughput$15.04  $13.31  $12.86  $10.10 
Less:       
Operating expenses (excluding depreciation and
amortization expense reflected below) per barrel of
throughput (b)
3.53  3.42  3.47  3.49 
Depreciation and amortization expense per barrel of
throughput
1.61  1.48  1.57  1.54 
Adjusted refining operating income per barrel of throughput$9.90  $8.41  $7.82  $5.07 

See Notes to Earnings Release Tables.

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

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Operating statistics by region (h) (continued)       
North Atlantic region (g) (j)       
Refining margin (from Table Page 7)$523  $518  $1,219  $1,314 
Refining operating income (from Table Page 7)$322  $327  $620  $785 
Throughput volumes (thousand barrels per day)509  489  455  490 
        
Refining margin per barrel of throughput$11.17  $11.51  $9.81  $9.83 
Less:       
Operating expenses (excluding depreciation and
amortization expense reflected below) per barrel of
throughput (b)
3.18  3.06  3.48  2.84 
Depreciation and amortization expense per barrel of
throughput
1.12  1.17  1.34  1.12 
Refining operating income per barrel of throughput$6.87  $7.28  $4.99  $5.87 
        
U.S. West Coast region (g) (j)       
Refining margin (from Table Page 7)$228  $336  $780  $736 
Adjusted refining operating income (loss) (from Table
Page 7)
$(1) $131  $155  $133 
Throughput volumes (thousand barrels per day)298  282  287  250 
        
Refining margin per barrel of throughput$8.33  $12.97  $9.94  $10.80 
Less:       
Operating expenses (excluding depreciation and
amortization expense reflected below) per barrel of
throughput (b)
6.22  5.72  5.70  6.32 
Depreciation and amortization expense per barrel of
throughput
2.15  2.22  2.27  2.53 
Adjusted refining operating income (loss) per barrel of
throughput
$(0.04) $5.03  $1.97  $1.95 

See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION
EARNINGS RELEASE TABLES
AVERAGE MARKET REFERENCE PRICES AND DIFFERENTIALS
(unaudited)

 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Feedstocks (dollars per barrel)       
Brent crude oil$75.93  $52.21  $72.67  $52.59 
Brent less West Texas Intermediate (WTI) crude oil6.23  4.05  5.81  3.18 
Brent less Alaska North Slope (ANS) crude oil0.38  0.02  0.47  0.35 
Brent less Louisiana Light Sweet (LLS) crude oil1.63  0.57  1.64  0.77 
Brent less Argus Sour Crude Index (ASCI) crude oil5.12  3.85  5.21  4.28 
Brent less Maya crude oil9.74  5.66  10.70  7.54 
LLS crude oil74.30  51.64  71.03  51.82 
LLS less ASCI crude oil3.49  3.28  3.57  3.51 
LLS less Maya crude oil8.11  5.09  9.06  6.77 
WTI crude oil69.70  48.16  66.86  49.41 
        
Natural gas (dollars per million British Thermal Units)2.96  2.91  3.01  3.00 
        
Products (dollars per barrel, unless otherwise noted)       
U.S. Gulf Coast:       
CBOB gasoline less Brent7.08  14.36  7.28  11.17 
Ultra-low-sulfur diesel less Brent13.91  15.89  13.72  12.67 
Propylene less Brent5.49  (1.74) (2.62) (0.16)
CBOB gasoline less LLS8.71  14.93  8.92  11.94 
Ultra-low-sulfur diesel less LLS15.54  16.46  15.36  13.44 
Propylene less LLS7.12  (1.17) (0.98) 0.61 
U.S. Mid-Continent:       
CBOB gasoline less WTI16.68  19.28  15.40  15.38 
Ultra-low-sulfur diesel less WTI22.77  21.99  21.54  16.86 
North Atlantic:       
CBOB gasoline less Brent10.43  17.72  9.89  12.99 
Ultra-low-sulfur diesel less Brent15.54  17.06  15.58  13.78 
U.S. West Coast:       
CARBOB 87 gasoline less ANS13.52  22.11  15.05  20.63 
CARB diesel less ANS17.85  20.46  17.94  16.54 
CARBOB 87 gasoline less WTI19.37  26.14  20.39  23.46 
CARB diesel less WTI23.70  24.49  23.28  19.37 
New York Harbor corn crush (dollars per gallon)0.18  0.31  0.18  0.28 

?See Notes to Earnings Release Tables.

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

     September 30, December 31,
     2018 2017
Balance sheet data       
Current assets    $19,891  $19,312 
Cash and cash equivalents included in current assets 3,551  5,850 
Inventories included in current assets    7,501  6,384 
Current liabilities    12,482  11,071 
Current portion of debt and capital lease obligations included
in current liabilities
 199  122 
Debt and capital lease obligations, less current portion   8,877  8,750 
Total debt and capital lease obligations    9,076  8,872 
Valero Energy Corporation stockholders’ equity   21,910  21,991 
        
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2018 2017 2018 2017
Net cash provided by operating activities and adjusted
net cash provided by operating activities (g)
       
Net cash provided by operating activities$496  $1,037  $2,693  $3,822 
Exclude:       
Changes in current assets and current liabilities(729) (315) (1,174) 544 
Adjusted net cash provided by operating activities$1,225  $1,352  $3,867  $3,278 
        
Dividends per common share$0.80  $0.70  $2.40  $2.10 

See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION
NOTES TO EARNINGS RELEASE TABLES

(a) Cost of materials and other for the nine months ended September 30, 2018 includes a benefit of $170 million for the biodiesel blender’s tax credit attributable to volumes blended during 2017. The benefit was recognized in February 2018 because the legislation authorizing the credit was passed and signed into law in that month. The $170 million pre-tax benefit is included in the refining segment and includes $80 million attributable to noncontrolling interest and $90 million attributable to Valero Energy Corporation stockholders.

(b) Effective January 1, 2018, we adopted the provisions of Accounting Standards Update 2017-07, “Compensation—Retirement Benefits (Topic 715),” which resulted in the reclassification of the non-service component of net periodic pension cost and net periodic postretirement benefit cost from operating expenses (excluding depreciation and amortization expense) and general and administrative expenses (excluding depreciation and amortization expense) to other income, net. This resulted in an increase of $10 million and $31 million in operating expenses (excluding depreciation and amortization expense) and a decrease of $4 million and $5 million in general and administrative expenses (excluding depreciation and amortization expense) for the three and nine months ended September 30, 2017, respectively.

(c) Other operating expenses reflects expenses that are not associated with our cost of sales and include cost to repair, remediate, and restore our facilities to normal operations following a non-operating event such as a natural disaster or a major unplanned outage.

(d) General and administrative expenses (excluding depreciation and amortization expense) for the nine months ended September 30, 2018 includes a charge of $108 million for an environmental reserve adjustment associated with certain non-operating sites.

(e) Other income, net for the nine months ended September 30, 2018 includes a $38 million charge from the early redemption of $750 million 9.375 percent senior notes due March 15, 2019.

(f) As a result of the Tax Cut and Jobs Act of 2017 enacted on December 22, 2017, the U.S. statutory income tax rate was reduced from 35 percent to 21 percent. Therefore, earnings from our U.S. operations for the three and nine months ended September 30, 2018 are now taxed at 21 percent, resulting in a lower effective tax rate compared to the three and nine months ended September 30, 2017.

(g) We use certain financial measures (as noted below) in the earnings release tables and accompanying earnings release that are not defined under U.S. generally accepted accounting principles (GAAP) and are considered to be non-GAAP measures.

We have defined these non-GAAP measures and believe they are useful to the external users of our financial statements, including industry analysts, investors, lenders, and rating agencies. We believe these measures are useful to assess our ongoing financial performance because, when reconciled to their most comparable U.S. GAAP measures, they provide improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and trends. These non-GAAP measures should not be considered as alternatives to their most comparable U.S. GAAP measures nor should they be considered in isolation or as a substitute for an analysis of our results of operations as reported under U.S. GAAP. In addition, these non-GAAP measures may not be comparable to similarly titled measures used by other companies because we may define them differently, which diminishes their utility.

Non-GAAP measures are as follows:

  • Adjusted net income attributable to Valero Energy Corporation stockholders is defined as net income attributable to Valero Energy Corporation stockholders excluding the items noted below, along with their related income tax effect. We have excluded these items because we believe that they are not indicative of our core operating performance in 2018 and that their exclusion results in an important measure of our ongoing financial performance to better assess our underlying business results and trends. The basis for our belief with respect to each excluded item is provided below.
    - Blender’s tax credit - The blender’s tax credit is attributable to volumes blended during 2017 and is not related to 2018 activities, as described in note (a).
    - Texas City Refinery fire expenses - The costs incurred to respond to and assess the damage caused by the fire that occurred at the Texas City Refinery on April 19, 2018 are specific to that event and are not ongoing costs incurred in our operations.
    - Environmental reserve adjustments - The environmental reserve adjustments are attributable to sites that were shut down by prior owners and subsequently acquired by us (referred to by us as non-operating sites), as described in note (d).
    - Loss on early redemption of debt - The penalty and other expenses incurred in connection with the early redemption of our 9.375 percent senior notes due in March 15, 2019 (see note (e)) are not associated with the ongoing costs of our borrowing and financing activities.
  • Adjusted earnings per common share – assuming dilution is defined as adjusted net income attributable to Valero Energy Corporation stockholders divided by the number of weighted-average shares outstanding in the applicable period, assuming dilution.
  • Refining margin is defined as refining operating income excluding the blender’s tax credit, operating expenses (excluding depreciation and amortization expense), other operating expenses, and depreciation and amortization expense. We believe refining margin is an important measure of our refining segment’s operating and financial performance as it is the most comparable measure to the industry’s market reference product margins, which are used by industry analysts, investors, and others to evaluate our performance.
  • Ethanol margin is defined as ethanol operating income excluding operating expenses (excluding depreciation and amortization expense) and depreciation and amortization expense. We believe ethanol margin is an important measure of our ethanol segment’s operating and financial performance as it is the most comparable measure to the industry’s market reference product margins, which are used by industry analysts, investors, and others to evaluate our performance.
  • Adjusted refining operating income is defined as refining segment operating income excluding the 2017 blender’s tax credit received in 2018 (see note (a)) and other operating expenses. We believe adjusted refining operating income is an important measure of our refining segment’s operating and financial performance because it excludes items that are not indicative of that segment’s core operating performance.
  • Adjusted VLP operating income is defined as VLP segment operating income excluding other operating expenses. We believe this is an important measure of our VLP segment’s operating and financial performance because it excludes items that are not indicative of that segment’s core operating performance.
  • Adjusted net cash provided by operating activities is defined as net cash provided by operating activities excluding changes in current assets and current liabilities. We believe adjusted net cash provided by operating activities is an important measure of our ongoing financial performance to better assess our ability to generate cash to fund our investing and financing activities.

(h)The refining segment regions reflected herein contain the following refineries: U.S. Gulf Coast- Corpus Christi East, Corpus Christi West, Houston, Meraux, Port Arthur, St. Charles, Texas City, and Three Rivers Refineries; U.S. Mid-Continent- Ardmore, McKee, and Memphis Refineries; North Atlantic- Pembroke and Quebec City Refineries; and U.S. West Coast- Benicia and Wilmington Refineries.

(i)Primarily includes petrochemicals, gas oils, No. 6 fuel oil, petroleum coke, sulfur, and asphalt.

(j)Valero uses certain operating statistics (as noted below) in the earnings release tables and the accompanying earnings release to evaluate performance between comparable periods. Different companies may calculate them in different ways.

All per barrel of throughput and per gallon of production amounts are calculated by dividing the associated dollar amount by the throughput volumes, production volumes, pipeline transportation throughput volumes, or terminaling throughput volumes for the period, as applicable.

Throughput volumes, production volumes, pipeline transportation throughput volumes, and terminaling throughput volumes are calculated by multiplying throughput volumes per day, production volumes per day, pipeline transportation throughput volumes per day, and terminaling throughput volumes per day (as provided in the accompanying tables), respectively, by the number of days in the applicable period.

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Source: Valero Energy Corporation