Valero Energy Corporation (NYSE: VLO, “Valero”) today reported net income attributable to Valero stockholders of $1.3 billion, or $3.07 per share, for the second quarter of 2020 compared to net income of $612 million, or $1.47 per share, for the second quarter of 2019. Excluding the adjustments shown in the accompanying earnings release tables, adjusted net loss attributable to Valero stockholders was $504 million, or $1.25 per share, for the second quarter of 2020, compared to second quarter 2019 adjusted net income attributable to Valero stockholders of $665 million, or $1.60 per share. Second quarter 2020 adjusted results exclude the benefit from an after-tax lower of cost or market, or LCM, inventory valuation adjustment of $1.8 billion.

Refining

The refining segment reported $1.8 billion of operating income for the second quarter of 2020 compared to $1.0 billion for the second quarter of 2019. Excluding the LCM inventory valuation adjustment, the second quarter 2020 adjusted operating loss was $383 million. Refinery throughput volumes averaged 2.3 million barrels per day in the second quarter of 2020, which was 647 thousand barrels per day lower than the second quarter of 2019.

“While the impact of the pandemic and the ensuing global economic downturn so far this year has been significant, we saw a rapid recovery in demand for refined products as we moved through the quarter,” said Joe Gorder, Valero Chairman and Chief Executive Officer.

Renewable Diesel

The renewable diesel segment reported $129 million of operating income for the second quarter of 2020 compared to $77 million for the second quarter of 2019. After adjusting for the retroactive blender’s tax credit, renewable diesel operating income was $145 million for the second quarter of 2019. Renewable diesel sales volumes averaged 795 thousand gallons per day in the second quarter of 2020, an increase of 26 thousand gallons per day versus the second quarter of 2019.

Ethanol

The ethanol segment reported $91 million of operating income for the second quarter of 2020, compared to $7 million for the second quarter of 2019. Excluding the LCM inventory valuation adjustment, the second quarter 2020 adjusted operating loss was $20 million. Ethanol production volumes averaged 2.3 million gallons per day in the second quarter of 2020, which was 2.2 million gallons per day lower than the second quarter of 2019. The decrease in adjusted operating income was attributed primarily to lower margins resulting from lower ethanol prices and lower throughput.

Corporate and Other

General and administrative expenses were $169 million in the second quarter of 2020 compared to $199 million in the second quarter of 2019. The effective tax rate for the second quarter of 2020 was 20 percent, which was affected by the results of certain of our international operations that are taxed at rates that are lower than the U.S. statutory tax rate.

Investing and Financing Activities

Capital investments totaled $503 million in the second quarter of 2020, of which $240 million was for sustaining the business, including costs for turnarounds, catalysts and regulatory compliance. Excluding our partner’s 50 percent share of Diamond Green Diesel’s (DGD) capital investments, Valero’s capital investments were approximately $448 million.

Valero returned $400 million to stockholders through dividends in the second quarter of 2020, resulting in a year-to-date payout of 96 percent of adjusted net cash provided by operating activities.

Net cash provided by operating activities was $736 million in the second quarter of 2020. Included in this amount was a $629 million favorable impact from working capital, as well as our joint venture partner’s share of DGD’s net cash provided by operating activities, excluding changes in its working capital. Excluding these items, adjusted net cash provided by operating activities was $38 million.

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 second quarter of 2020 with $12.7 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 33 percent as of June 30, 2020.

Strategic Update

Valero expects to invest approximately $2.1 billion of capital in 2020, of which approximately 60 percent is for sustaining the business and approximately 40 percent is for growth projects. Approximately 30 percent of Valero’s 2020 growth capital is allocated to expanding the renewables business.

The new St. Charles Alkylation Unit, which is designed to convert low-value feedstocks into a premium alkylate product, is on track to be completed in the fourth quarter of this year. The Diamond Pipeline expansion and the Pembroke Cogen project are expected to be completed in 2021 and the Port Arthur Coker project is expected to be completed in 2023.

Valero and its joint venture partner in DGD continue to pursue growth in the low-carbon renewable fuel business. The DGD plant expansion is expected to be completed in 2021, subject to COVID-19 related delays, and as previously announced, DGD continues to make progress on the advanced engineering and development cost review for a potential new 400 million gallons per day renewable diesel plant at Valero’s Port Arthur, Texas facility. If the project is approved, operations are expected to commence in 2024, increasing DGD production capacity to over 1.1 billion gallons annually.

“As we focus on the path to recovery with improving product demand, we remain steadfast in the execution of our strategy, pursuing excellence in our operations, investing for earnings growth with lower volatility and honoring our commitment to stockholder returns,” said Gorder. “This uncompromising focus on capital discipline and execution has served us well in the current pandemic-imposed downturn, and it should continue to position Valero well through the recovery and beyond.”

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 14 ethanol plants with a combined production capacity of approximately 1.73 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 also is a joint venture partner in Diamond Green Diesel, which 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.valero.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, 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,” 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 reports 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 at a time when seasonal driving patterns typically result in an increase of consumer demand for gasoline. 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, 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 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 renewable diesel operating income, adjusted ethanol operating income (loss), and adjusted net cash provided by operating activities. 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 (f) 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,

 

2020

 

2019

 

2020

 

2019

Statement of income data

 

 

 

 

 

 

 

Revenues

$

10,397

 

 

$

28,933

 

 

$

32,499

 

 

$

53,196

 

Cost of sales:

 

 

 

 

 

 

 

Cost of materials and other (a)

9,079

 

 

26,083

 

 

29,031

 

 

48,061

 

Lower of cost or market (LCM) inventory valuation adjustment (b)

(2,248

)

 

—

 

 

294

 

 

—

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

1,027

 

 

1,175

 

 

2,151

 

 

2,390

 

Depreciation and amortization expense

566

 

 

552

 

 

1,135

 

 

1,089

 

Total cost of sales

8,424

 

 

27,810

 

 

32,611

 

 

51,540

 

Other operating expenses

3

 

 

2

 

 

5

 

 

4

 

General and administrative expenses (excluding

depreciation and amortization expense reflected below)

169

 

 

199

 

 

346

 

 

408

 

Depreciation and amortization expense

12

 

 

14

 

 

25

 

 

28

 

Operating income (loss)

1,789

 

 

908

 

 

(488

)

 

1,216

 

Other income, net (c)

27

 

 

12

 

 

59

 

 

34

 

Interest and debt expense, net of capitalized interest

(142

)

 

(112

)

 

(267

)

 

(224

)

Income (loss) before income tax expense (benefit)

1,674

 

 

808

 

 

(696

)

 

1,026

 

Income tax expense (benefit)

339

 

 

160

 

 

(277

)

 

211

 

Net income (loss)

1,335

 

 

648

 

 

(419

)

 

815

 

Less: Net income attributable to noncontrolling interests (a)

82

 

 

36

 

 

179

 

 

62

 

Net income (loss) attributable to Valero Energy Corporation

stockholders

$

1,253

 

 

$

612

 

 

$

(598

)

 

$

753

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share

$

3.07

 

 

$

1.47

 

 

$

(1.48

)

 

$

1.80

 

Weighted-average common shares outstanding (in millions)

406

 

 

415

 

 

407

 

 

416

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share – assuming dilution

$

3.07

 

 

$

1.47

 

 

$

(1.48

)

 

$

1.80

 

Weighted-average common shares outstanding –

assuming dilution (in millions) (d)

407

 

 

417

 

 

407

 

 

417

 

 

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, 2020

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenues from external customers

$

9,615

 

 

$

239

 

 

$

543

 

 

$

—

 

 

$

10,397

 

Intersegment revenues

2

 

 

57

 

 

38

 

 

(97

)

 

—

 

Total revenues

9,617

 

 

296

 

 

581

 

 

(97

)

 

10,397

 

Cost of sales:

 

 

 

 

 

 

 

 

 

Cost of materials and other (a)

8,539

 

 

135

 

 

501

 

 

(96

)

 

9,079

 

LCM inventory valuation adjustment (b)

(2,137

)

 

—

 

 

(111

)

 

—

 

 

(2,248

)

Operating expenses (excluding depreciation and

amortization expense reflected below)

928

 

 

20

 

 

79

 

 

—

 

 

1,027

 

Depreciation and amortization expense

533

 

 

12

 

 

21

 

 

—

 

 

566

 

Total cost of sales

7,863

 

 

167

 

 

490

 

 

(96

)

 

8,424

 

Other operating expenses

3

 

 

—

 

 

—

 

 

—

 

 

3

 

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

—

 

 

—

 

 

—

 

 

169

 

 

169

 

Depreciation and amortization expense

—

 

 

—

 

 

—

 

 

12

 

 

12

 

Operating income by segment

$

1,751

 

 

$

129

 

 

$

91

 

 

$

(182

)

 

$

1,789

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2019

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenues from external customers

$

27,746

 

 

$

222

 

 

$

964

 

 

$

1

 

 

$

28,933

 

Intersegment revenues

8

 

 

73

 

 

53

 

 

(134

)

 

—

 

Total revenues

27,754

 

 

295

 

 

1,017

 

 

(133

)

 

28,933

 

Cost of sales:

 

 

 

 

 

 

 

 

 

Cost of materials and other

25,172

 

 

189

 

 

855

 

 

(133

)

 

26,083

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

1,026

 

 

17

 

 

132

 

 

—

 

 

1,175

 

Depreciation and amortization expense

518

 

 

12

 

 

22

 

 

—

 

 

552

 

Total cost of sales

26,716

 

 

218

 

 

1,009

 

 

(133

)

 

27,810

 

Other operating expenses

1

 

 

—

 

 

1

 

 

—

 

 

2

 

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

—

 

 

—

 

 

—

 

 

199

 

 

199

 

Depreciation and amortization expense

—

 

 

—

 

 

—

 

 

14

 

 

14

 

Operating income by segment

$

1,037

 

 

$

77

 

 

$

7

 

 

$

(213

)

 

$

908

 

 

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, 2020

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenues from external customers

$

30,600

 

 

$

545

 

 

$

1,354

 

 

$

—

 

 

$

32,499

 

Intersegment revenues

4

 

 

110

 

 

102

 

 

(216

)

 

—

 

Total revenues

30,604

 

 

655

 

 

1,456

 

 

(216

)

 

32,499

 

Cost of sales:

 

 

 

 

 

 

 

 

 

Cost of materials and other (a)

27,666

 

 

265

 

 

1,314

 

 

(214

)

 

29,031

 

LCM inventory valuation adjustment (b)

277

 

 

—

 

 

17

 

 

—

 

 

294

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

1,923

 

 

40

 

 

188

 

 

—

 

 

2,151

 

Depreciation and amortization expense

1,069

 

 

23

 

 

43

 

 

—

 

 

1,135

 

Total cost of sales

30,935

 

 

328

 

 

1,562

 

 

(214

)

 

32,611

 

Other operating expenses

5

 

 

—

 

 

—

 

 

—

 

 

5

 

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

—

 

 

—

 

 

—

 

 

346

 

 

346

 

Depreciation and amortization expense

—

 

 

—

 

 

—

 

 

25

 

 

25

 

Operating income (loss) by segment

$

(336

)

 

$

327

 

 

$

(106

)

 

$

(373

)

 

$

(488

)

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2019

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

Revenues from external customers

$

50,964

 

 

$

474

 

 

$

1,757

 

 

$

1

 

 

$

53,196

 

Intersegment revenues

10

 

 

124

 

 

105

 

 

(239

)

 

—

 

Total revenues

50,974

 

 

598

 

 

1,862

 

 

(238

)

 

53,196

 

Cost of sales:

 

 

 

 

 

 

 

 

 

Cost of materials and other

46,337

 

 

413

 

 

1,549

 

 

(238

)

 

48,061

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

2,097

 

 

36

 

 

257

 

 

—

 

 

2,390

 

Depreciation and amortization expense

1,021

 

 

23

 

 

45

 

 

—

 

 

1,089

 

Total cost of sales

49,455

 

 

472

 

 

1,851

 

 

(238

)

 

51,540

 

Other operating expenses

3

 

 

—

 

 

1

 

 

—

 

 

4

 

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

—

 

 

—

 

 

—

 

 

408

 

 

408

 

Depreciation and amortization expense

—

 

 

—

 

 

—

 

 

28

 

 

28

 

Operating income by segment

$

1,516

 

 

$

126

 

 

$

10

 

 

$

(436

)

 

$

1,216

 

 

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 (f)

(millions of dollars, except per share amounts)

(unaudited)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

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

$

1,253

 

 

$

612

 

 

$

(598

)

 

$

753

 

Adjustments:

 

 

 

 

 

 

 

LCM inventory valuation adjustment (b)

(2,248

)

 

—

 

 

294

 

 

—

 

Income tax expense (benefit) related to the LCM inventory valuation adjustment

491

 

 

—

 

 

(60

)

 

—

 

LCM inventory valuation adjustment, net of taxes

(1,757

)

 

—

 

 

234

 

 

—

 

2019 blender’s tax credit attributable to Valero Energy

Corporation stockholders (a)

—

 

 

38

 

 

—

 

 

79

 

Income tax expense related to 2019 blender’s tax credit

—

 

 

(2

)

 

—

 

 

(3

)

2019 blender’s tax credit attributable to Valero Energy

Corporation stockholders, net of taxes

—

 

 

36

 

 

—

 

 

76

 

Loss on early redemption of debt (c)

—

 

 

22

 

 

—

 

 

22

 

Income tax benefit related to loss on early

redemption of debt

—

 

 

(5

)

 

—

 

 

(5

)

Loss on early redemption of debt, net of taxes

—

 

 

17

 

 

—

 

 

17

 

Total adjustments

(1,757

)

 

53

 

 

234

 

 

93

 

Adjusted net income (loss) attributable to

Valero Energy Corporation stockholders

$

(504

)

 

$

665

 

 

$

(364

)

 

$

846

 

 

 

 

 

 

 

 

 

Reconciliation of earnings (loss) per common share –

assuming dilution to adjusted earnings (loss) per common

share – assuming dilution

 

 

 

 

 

 

 

Earnings (loss) per common share – assuming dilution (d)

$

3.07

 

 

$

1.47

 

 

$

(1.48

)

 

$

1.80

 

Adjustments:

 

 

 

 

 

 

 

LCM inventory valuation adjustment (b)

(4.32

)

 

—

 

 

0.58

 

 

—

 

2019 blender’s tax credit attributable to Valero Energy

Corporation stockholders (a)

—

 

 

0.09

 

 

—

 

 

0.19

 

Loss on early redemption of debt (c)

—

 

 

0.04

 

 

—

 

 

0.04

 

Total adjustments

(4.32

)

 

0.13

 

 

0.58

 

 

0.23

 

Adjusted earnings (loss) per common share –

assuming dilution (e)

$

(1.25

)

 

$

1.60

 

 

$

(0.90

)

 

$

2.03

 

 

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 (f)

(millions of dollars)

(unaudited)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

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 income (loss)

$

1,751

 

 

$

1,037

 

 

$

(336

)

 

$

1,516

 

Adjustments:

 

 

 

 

 

 

 

2019 blender’s tax credit (a)

—

 

 

4

 

 

—

 

 

9

 

LCM inventory valuation adjustment (b)

(2,137

)

 

—

 

 

277

 

 

—

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

928

 

 

1,026

 

 

1,923

 

 

2,097

 

Depreciation and amortization expense

533

 

 

518

 

 

1,069

 

 

1,021

 

Other operating expenses

3

 

 

1

 

 

5

 

 

3

 

Refining margin

$

1,078

 

 

$

2,586

 

 

$

2,938

 

 

$

4,646

 

 

 

 

 

 

 

 

 

Refining operating income (loss)

$

1,751

 

 

$

1,037

 

 

$

(336

)

 

$

1,516

 

Adjustments:

 

 

 

 

 

 

 

2019 blender’s tax credit (a)

—

 

 

4

 

 

—

 

 

9

 

LCM inventory valuation adjustment (b)

(2,137

)

 

—

 

 

277

 

 

—

 

Other operating expenses

3

 

 

1

 

 

5

 

 

3

 

Adjusted refining operating income (loss)

$

(383

)

 

$

1,042

 

 

$

(54

)

 

$

1,528

 

 

 

 

 

 

 

 

 

Renewable diesel segment

 

 

 

 

 

 

 

Renewable diesel operating income

$

129

 

 

$

77

 

 

$

327

 

 

$

126

 

Adjustments:

 

 

 

 

 

 

 

2019 blender’s tax credit (a)

—

 

 

68

 

 

—

 

 

140

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

20

 

 

17

 

 

40

 

 

36

 

Depreciation and amortization expense

12

 

 

12

 

 

23

 

 

23

 

Renewable diesel margin

$

161

 

 

$

174

 

 

$

390

 

 

$

325

 

 

 

 

 

 

 

 

 

Renewable diesel operating income

$

129

 

 

$

77

 

 

$

327

 

 

$

126

 

Adjustment: 2019 blender’s tax credit (a)

—

 

 

68

 

 

—

 

 

140

 

Adjusted renewable diesel operating income

$

129

 

 

$

145

 

 

$

327

 

 

$

266

 

 

 

 

 

 

 

 

 

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 (f)

(millions of dollars)

(unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

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 (continued)

 

 

 

 

 

 

 

Ethanol segment

 

 

 

 

 

 

 

Ethanol operating income (loss)

$

91

 

 

$

7

 

 

$

(106

)

 

$

10

 

Adjustments:

 

 

 

 

 

 

 

LCM inventory valuation adjustment (b)

(111

)

 

—

 

 

17

 

 

—

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

79

 

 

132

 

 

188

 

 

257

 

Depreciation and amortization expense

21

 

 

22

 

 

43

 

 

45

 

Other operating expenses

—

 

 

1

 

 

—

 

 

1

 

Ethanol margin

$

80

 

 

$

162

 

 

$

142

 

 

$

313

 

 

 

 

 

 

 

 

 

Ethanol operating income (loss)

$

91

 

 

$

7

 

 

$

(106

)

 

$

10

 

Adjustments:

 

 

 

 

 

 

 

LCM inventory valuation adjustment (b)

(111

)

 

—

 

 

17

 

 

—

 

Other operating expenses

—

 

 

1

 

 

—

 

 

1

 

Adjusted ethanol operating income (loss)

$

(20

)

 

$

8

 

 

$

(89

)

 

$

11

 

 

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 (f)

(millions of dollars)

(unaudited)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

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) (g)

 

 

 

 

 

 

 

U.S. Gulf Coast region

 

 

 

 

 

 

 

Refining operating income (loss)

$

892

 

 

$

273

 

 

$

(50

)

 

$

391

 

Adjustments:

 

 

 

 

 

 

 

2019 blender’s tax credit (a)

—

 

 

3

 

 

—

 

 

6

 

LCM inventory valuation adjustment (b)

(1,109

)

 

—

 

 

4

 

 

—

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

535

 

 

586

 

 

1,093

 

 

1,185

 

Depreciation and amortization expense

327

 

 

318

 

 

661

 

 

628

 

Other operating expenses

2

 

 

1

 

 

2

 

 

2

 

Refining margin

$

647

 

 

$

1,181

 

 

$

1,710

 

 

$

2,212

 

 

 

 

 

 

 

 

 

Refining operating income (loss)

$

892

 

 

$

273

 

 

$

(50

)

 

$

391

 

Adjustments:

 

 

 

 

 

 

 

2019 blender’s tax credit (a)

—

 

 

3

 

 

—

 

 

6

 

LCM inventory valuation adjustment (b)

(1,109

)

 

—

 

 

4

 

 

—

 

Other operating expenses

2

 

 

1

 

 

2

 

 

2

 

Adjusted refining operating income (loss)

$

(215

)

 

$

277

 

 

$

(44

)

 

$

399

 

 

 

 

 

 

 

 

 

U.S. Mid-Continent region

 

 

 

 

 

 

 

Refining operating income

$

293

 

 

$

422

 

 

$

73

 

 

$

658

 

Adjustments:

 

 

 

 

 

 

 

2019 blender’s tax credit (a)

—

 

 

1

 

 

—

 

 

2

 

LCM inventory valuation adjustment (b)

(283

)

 

—

 

 

—

 

 

—

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

148

 

 

146

 

 

312

 

 

312

 

Depreciation and amortization expense

83

 

 

74

 

 

166

 

 

149

 

Refining margin

$

241

 

 

$

643

 

 

$

551

 

 

$

1,121

 

 

 

 

 

 

 

 

 

Refining operating income

$

293

 

 

$

422

 

 

$

73

 

 

$

658

 

Adjustments:

 

 

 

 

 

 

 

2019 blender’s tax credit (a)

—

 

 

1

 

 

—

 

 

2

 

LCM inventory valuation adjustment (b)

(283

)

 

—

 

 

—

 

 

—

 

Adjusted refining operating income

$

10

 

 

$

423

 

 

$

73

 

 

$

660

 

 

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 (f)

(millions of dollars)

(unaudited)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

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) (g)

(continued)

 

 

 

 

 

 

 

North Atlantic region

 

 

 

 

 

 

 

Refining operating income (loss)

$

597

 

 

$

278

 

 

$

(117

)

 

$

454

 

Adjustments:

 

 

 

 

 

 

 

LCM inventory valuation adjustment (b)

(657

)

 

—

 

 

217

 

 

—

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

112

 

 

146

 

 

253

 

 

293

 

Depreciation and amortization expense

52

 

 

55

 

 

105

 

 

108

 

Other operating expenses

1

 

 

—

 

 

3

 

 

—

 

Refining margin

$

105

 

 

$

479

 

 

$

461

 

 

$

855

 

 

 

 

 

 

 

 

 

Refining operating income (loss)

$

597

 

 

$

278

 

 

$

(117

)

 

$

454

 

Adjustments:

 

 

 

 

 

 

 

LCM inventory valuation adjustment (b)

(657

)

 

—

 

 

217

 

 

—

 

Other operating expenses

1

 

 

—

 

 

3

 

 

—

 

Adjusted refining operating income (loss)

$

(59

)

 

$

278

 

 

$

103

 

 

$

454

 

 

 

 

 

 

 

 

 

U.S. West Coast region

 

 

 

 

 

 

 

Refining operating income (loss)

$

(31

)

 

$

64

 

 

$

(242

)

 

$

13

 

Adjustments:

 

 

 

 

 

 

 

2019 blender’s tax credit (a)

—

 

 

—

 

 

—

 

 

1

 

LCM inventory valuation adjustment (b)

(88

)

 

—

 

 

56

 

 

—

 

Operating expenses (excluding depreciation and

amortization expense reflected below)

133

 

 

148

 

 

265

 

 

307

 

Depreciation and amortization expense

71

 

 

71

 

 

137

 

 

136

 

Other operating expenses

—

 

 

—

 

 

—

 

 

1

 

Refining margin

$

85

 

 

$

283

 

 

$

216

 

 

$

458

 

 

 

 

 

 

 

 

 

Refining operating income (loss)

$

(31

)

 

$

64

 

 

$

(242

)

 

$

13

 

Adjustments:

 

 

 

 

 

 

 

2019 blender’s tax credit (a)

—

 

 

—

 

 

—

 

 

1

 

LCM inventory valuation adjustment (b)

(88

)

 

—

 

 

56

 

 

—

 

Other operating expenses

—

 

 

—

 

 

—

 

 

1

 

Adjusted refining operating income (loss)

$

(119

)

 

$

64

 

 

$

(186

)

 

$

15

 

 

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
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

Throughput volumes (thousand barrels per day)

 

 

 

 

 

 

 

Feedstocks:

 

 

 

 

 

 

 

Heavy sour crude oil

378

 

 

419

 

 

369

 

 

415

 

Medium/light sour crude oil

385

 

 

257

 

 

363

 

 

297

 

Sweet crude oil

1,018

 

 

1,550

 

 

1,234

 

 

1,513

 

Residuals

169

 

 

241

 

 

202

 

 

193

 

Other feedstocks

69

 

 

171

 

 

85

 

 

162

 

Total feedstocks

2,019

 

 

2,638

 

 

2,253

 

 

2,580

 

Blendstocks and other

302

 

 

330

 

 

320

 

 

337

 

Total throughput volumes

2,321

 

 

2,968

 

 

2,573

 

 

2,917

 

 

 

 

 

 

 

 

 

Yields (thousand barrels per day)

 

 

 

 

 

 

 

Gasolines and blendstocks

1,061

 

 

1,378

 

 

1,189

 

 

1,387

 

Distillates

835

 

 

1,141

 

 

940

 

 

1,115

 

Other products (h)

434

 

 

483

 

 

456

 

 

445

 

Total yields

2,330

 

 

3,002

 

 

2,585

 

 

2,947

 

 

 

 

 

 

 

 

 

Operating statistics (f) (i)

 

 

 

 

 

 

 

Refining margin

$

1,078

 

 

$

2,586

 

 

$

2,938

 

 

$

4,646

 

Adjusted refining operating income (loss)

$

(383

)

 

$

1,042

 

 

$

(54

)

 

$

1,528

 

Throughput volumes (thousand barrels per day)

2,321

 

 

2,968

 

 

2,573

 

 

2,917

 

 

 

 

 

 

 

 

 

Refining margin per barrel of throughput

$

5.10

 

 

$

9.58

 

 

$

6.27

 

 

$

8.79

 

Less:

 

 

 

 

 

 

 

Operating expenses (excluding depreciation and

amortization expense reflected below) per barrel of

throughput

4.39

 

 

3.80

 

 

4.10

 

 

3.97

 

Depreciation and amortization expense per barrel of

throughput

2.53

 

 

1.92

 

 

2.28

 

 

1.93

 

Adjusted refining operating income (loss) per barrel of throughput

$

(1.82

)

 

$

3.86

 

 

$

(0.11

)

 

$

2.89

 

 

See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION

EARNINGS RELEASE TABLES

RENEWABLE DIESEL SEGMENT OPERATING HIGHLIGHTS

(millions of dollars, except per gallon amounts)

(unaudited)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

Operating statistics (f) (i)

 

 

 

 

 

 

 

Renewable diesel margin

$

161

 

 

$

174

 

 

$

390

 

 

$

325

 

Adjusted renewable diesel operating income

$

129

 

 

$

145

 

 

$

327

 

 

$

266

 

Sales volumes (thousand gallons per day)

795

 

 

769

 

 

831

 

 

780

 

 

 

 

 

 

 

 

 

Renewable diesel margin per gallon of sales

$

2.22

 

 

$

2.49

 

 

$

2.58

 

 

$

2.30

 

Less:

 

 

 

 

 

 

 

Operating expenses (excluding depreciation and

amortization expense reflected below) per gallon of sales

0.29

 

 

0.25

 

 

0.27

 

 

0.26

 

Depreciation and amortization expense per gallon of sales

0.15

 

 

0.17

 

 

0.15

 

 

0.16

 

Adjusted renewable diesel operating income per gallon

of sales

$

1.78

 

 

$

2.07

 

 

$

2.16

 

 

$

1.88

 

 

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
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

Operating statistics (f) (i)

 

 

 

 

 

 

 

Ethanol margin

$

80

 

 

$

162

 

 

$

142

 

 

$

313

 

Adjusted ethanol operating income (loss)

$

(20

)

 

$

8

 

 

$

(89

)

 

$

11

 

Production volumes (thousand gallons per day)

2,316

 

 

4,533

 

 

3,210

 

 

4,376

 

 

 

 

 

 

 

 

 

Ethanol margin per gallon of production

$

0.38

 

 

$

0.39

 

 

$

0.24

 

 

$

0.40

 

Less:

 

 

 

 

 

 

 

Operating expenses (excluding depreciation and

amortization expense reflected below) per gallon of production

0.38

 

 

0.32

 

 

0.32

 

 

0.32

 

Depreciation and amortization expense per gallon of production

0.10

 

 

0.05

 

 

0.07

 

 

0.07

 

Adjusted ethanol operating income (loss) per gallon of production

$

(0.10

)

 

$

0.02

 

 

$

(0.15

)

 

$

0.01

 

 

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
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

Operating statistics by region (g)

 

 

 

 

 

 

 

U.S. Gulf Coast region (f) (i)

 

 

 

 

 

 

 

Refining margin

$

647

 

 

$

1,181

 

 

$

1,710

 

 

$

2,212

 

Adjusted refining operating income (loss)

$

(215

)

 

$

277

 

 

$

(44

)

 

$

399

 

Throughput volumes (thousand barrels per day)

1,385

 

 

1,779

 

 

1,527

 

 

1,725

 

 

 

 

 

 

 

 

 

Refining margin per barrel of throughput

$

5.13

 

 

$

7.30

 

 

$

6.15

 

 

$

7.09

 

Less:

 

 

 

 

 

 

 

Operating expenses (excluding depreciation and

amortization expense reflected below) per barrel of

throughput

4.23

 

 

3.63

 

 

3.93

 

 

3.80

 

Depreciation and amortization expense per barrel of

throughput

2.60

 

 

1.96

 

 

2.37

 

 

2.01

 

Adjusted refining operating income (loss) per barrel of throughput

$

(1.70

)

 

$

1.71

 

 

$

(0.15

)

 

$

1.28

 

 

 

 

 

 

 

 

 

U.S. Mid-Continent region (f) (i)

 

 

 

 

 

 

 

Refining margin

$

241

 

 

$

643

 

 

$

551

 

 

$

1,121

 

Adjusted refining operating income

$

10

 

 

$

423

 

 

$

73

 

 

$

660

 

Throughput volumes (thousand barrels per day)

364

 

 

462

 

 

398

 

 

452

 

 

 

 

 

 

 

 

 

Refining margin per barrel of throughput

$

7.28

 

 

$

15.25

 

 

$

7.61

 

 

$

13.70

 

Less:

 

 

 

 

 

 

 

Operating expenses (excluding depreciation and

amortization expense reflected below) per barrel of

throughput

4.47

 

 

3.45

 

 

4.32

 

 

3.81

 

Depreciation and amortization expense per barrel of

throughput

2.51

 

 

1.76

 

 

2.29

 

 

1.82

 

Adjusted refining operating income per barrel of throughput

$

0.30

 

 

$

10.04

 

 

$

1.00

 

 

$

8.07

 

 

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
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

Operating statistics by region (g) (continued)

 

 

 

 

 

 

 

North Atlantic region (f) (i)

 

 

 

 

 

 

 

Refining margin

$

105

 

 

$

479

 

 

$

461

 

 

$

855

 

Adjusted refining operating income (loss)

$

(59

)

 

$

278

 

 

$

103

 

 

$

454

 

Throughput volumes (thousand barrels per day)

340

 

 

493

 

 

414

 

 

491

 

 

 

 

 

 

 

 

 

Refining margin per barrel of throughput

$

3.40

 

 

$

10.69

 

 

$

6.12

 

 

$

9.61

 

Less:

 

 

 

 

 

 

 

Operating expenses (excluding depreciation and

amortization expense reflected below) per barrel of

throughput

3.64

 

 

3.26

 

 

3.36

 

 

3.30

 

Depreciation and amortization expense per barrel of

throughput

1.67

 

 

1.23

 

 

1.39

 

 

1.20

 

Adjusted refining operating income (loss) per barrel of throughput

$

(1.91

)

 

$

6.20

 

 

$

1.37

 

 

$

5.11

 

 

 

 

 

 

 

 

 

U.S. West Coast region (f) (i)

 

 

 

 

 

 

 

Refining margin

$

85

 

 

$

283

 

 

$

216

 

 

$

458

 

Adjusted refining operating income (loss)

$

(119

)

 

$

64

 

 

$

(186

)

 

$

15

 

Throughput volumes (thousand barrels per day)

232

 

 

234

 

 

234

 

 

249

 

 

 

 

 

 

 

 

 

Refining margin per barrel of throughput

$

3.98

 

 

$

13.32

 

 

$

5.06

 

 

$

10.17

 

Less:

 

 

 

 

 

 

 

Operating expenses (excluding depreciation and

amortization expense reflected below) per barrel of

throughput

6.26

 

 

6.97

 

 

6.21

 

 

6.83

 

Depreciation and amortization expense per barrel of

throughput

3.37

 

 

3.32

 

 

3.22

 

 

3.02

 

Adjusted refining operating income (loss) per barrel of throughput

$

(5.65

)

 

$

3.03

 

 

$

(4.37

)

 

$

0.32

 

 

See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION

EARNINGS RELEASE TABLES

AVERAGE MARKET REFERENCE PRICES AND DIFFERENTIALS

(unaudited)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

Refining

 

 

 

 

 

 

 

Feedstocks (dollars per barrel)

 

 

 

 

 

 

 

Brent crude oil

$

33.22

 

 

$

68.33

 

 

$

42.06

 

 

$

66.08

 

Brent less West Texas Intermediate (WTI) crude oil

5.42

 

 

8.53

 

 

5.17

 

 

8.73

 

Brent less Alaska North Slope (ANS) crude oil

2.85

 

 

0.15

 

 

1.18

 

 

(0.27

)

Brent less Louisiana Light Sweet (LLS) crude oil

2.95

 

 

1.30

 

 

2.85

 

 

1.38

 

Brent less Argus Sour Crude Index (ASCI) crude oil

4.14

 

 

3.44

 

 

4.58

 

 

3.17

 

Brent less Maya crude oil

9.05

 

 

6.23

 

 

9.40

 

 

5.64

 

LLS crude oil

30.27

 

 

67.03

 

 

39.21

 

 

64.70

 

LLS less ASCI crude oil

1.19

 

 

2.14

 

 

1.73

 

 

1.79

 

LLS less Maya crude oil

6.10

 

 

4.93

 

 

6.55

 

 

4.26

 

WTI crude oil

27.80

 

 

59.80

 

 

36.89

 

 

57.35

 

 

 

 

 

 

 

 

 

Natural gas (dollars per million British Thermal Units)

1.65

 

 

2.46

 

 

1.74

 

 

2.66

 

 

 

 

 

 

 

 

 

Products (dollars per barrel)

 

 

 

 

 

 

 

U.S. Gulf Coast:

 

 

 

 

 

 

 

Conventional Blendstock of Oxygenate Blending (CBOB)

gasoline less Brent

0.51

 

 

6.72

 

 

1.44

 

 

3.44

 

Ultra-low-sulfur (ULS) diesel less Brent

4.89

 

 

12.88

 

 

8.08

 

 

13.94

 

Propylene less Brent

(12.71

)

 

(24.70

)

 

(16.88

)

 

(22.67

)

CBOB gasoline less LLS

3.46

 

 

8.02

 

 

4.29

 

 

4.82

 

ULS diesel less LLS

7.84

 

 

14.18

 

 

10.93

 

 

15.32

 

Propylene less LLS

(9.76

)

 

(23.40

)

 

(14.03

)

 

(21.29

)

U.S. Mid-Continent:

 

 

 

 

 

 

 

CBOB gasoline less WTI

6.19

 

 

18.76

 

 

6.94

 

 

14.23

 

ULS diesel less WTI

11.38

 

 

22.51

 

 

14.35

 

 

23.70

 

North Atlantic:

 

 

 

 

 

 

 

CBOB gasoline less Brent

3.03

 

 

10.11

 

 

3.66

 

 

5.68

 

ULS diesel less Brent

6.94

 

 

14.76

 

 

10.62

 

 

16.10

 

U.S. West Coast:

 

 

 

 

 

 

 

California Reformulated Gasoline Blendstock of

Oxygenate Blending (CARBOB) 87 gasoline less ANS

9.43

 

 

23.24

 

 

8.63

 

 

15.49

 

California Air Resources Board (CARB) diesel less ANS

10.36

 

 

21.10

 

 

13.79

 

 

18.65

 

CARBOB 87 gasoline less WTI

12.00

 

 

31.62

 

 

12.62

 

 

24.49

 

CARB diesel less WTI

12.93

 

 

29.48

 

 

17.78

 

 

27.65

 

 

See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION

EARNINGS RELEASE TABLES

AVERAGE MARKET REFERENCE PRICES AND DIFFERENTIALS

(unaudited)

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

Renewable diesel

 

 

 

 

 

 

 

New York Mercantile Exchange ULS diesel

(dollars per gallon)

$

0.97

 

 

$

1.98

 

 

$

1.26

 

 

$

1.96

 

Biodiesel Renewable Identification Number (RIN)

(dollars per RIN)

0.54

 

 

0.38

 

 

0.50

 

 

0.44

 

California Low-Carbon Fuel Standard (dollars per metric ton)

201.01

 

 

188.77

 

 

203.52

 

 

191.49

 

Chicago Board of Trade (CBOT) soybean oil (dollars per

pound)

0.27

 

 

0.28

 

 

0.29

 

 

0.29

 

 

 

 

 

 

 

 

 

Ethanol

 

 

 

 

 

 

 

CBOT corn (dollars per bushel)

3.23

 

 

3.91

 

 

3.49

 

 

3.82

 

New York Harbor ethanol (dollars per gallon)

1.17

 

 

1.54

 

 

1.25

 

 

1.49

 

 

See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION

EARNINGS RELEASE TABLES

OTHER FINANCIAL DATA

(millions of dollars, except per share amounts)

(unaudited)

 

 

June 30,

 

December 31,

 

2020

 

2019

Balance sheet data

 

 

 

Current assets

$

12,762

 

 

$

18,969

 

Cash and cash equivalents included in current assets

2,319

 

 

2,583

 

Inventories included in current assets

5,420

 

 

7,013

 

Current liabilities

7,300

 

 

13,160

 

Current portion of debt and finance lease obligations

included in current liabilities

587

 

 

494

 

Debt and finance lease obligations, less current portion

12,090

 

 

9,178

 

Total debt and finance lease obligations

12,677

 

 

9,672

 

Valero Energy Corporation stockholders’ equity

19,847

 

 

21,803

 

 

 

 

 

 

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2020

 

2019

 

2020

 

2019

Reconciliation of net cash provided by operating activities to adjusted net cash provided by

operating activities (f)

 

 

 

 

 

 

 

Net cash provided by operating activities

$

736

 

 

$

1,517

 

 

$

687

 

 

$

2,394

 

Exclude:

 

 

 

 

 

 

 

Changes in current assets and current liabilities

629

 

 

283

 

 

(478

)

 

413

 

Diamond Green Diesel LLC’s (DGD) adjusted net cash

provided by operating activities attributable to our joint

venture partner’s ownership interest in DGD

69

 

 

44

 

 

173

 

 

74

 

Adjusted net cash provided by operating activities

$

38

 

 

$

1,190

 

 

$

992

 

 

$

1,907

 

 

 

 

 

 

 

 

 

Dividends per common share

$

0.98

 

 

$

0.90

 

 

$

1.96

 

 

$

1.80

 

 

See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION

NOTES TO EARNINGS RELEASE TABLES

 

(a)

Cost of materials and other for the three and six months ended June 30, 2020 includes a benefit of $76 million and $155 million, respectively, related to the blender’s tax credit attributable to volumes blended during those periods. The legislation authorizing the credit through December 31, 2022 was passed and signed into law in December 2019, and that legislation also applied retroactively to volumes blended during 2019 (2019 blender’s tax credit). The entire 2019 blender’s tax credit was recognized by us in December 2019 because the law was enacted in that month, but the benefit attributable to volumes blended during the three and six months ended June 30, 2019 was $72 million and $149 million, respectively.

 

 

 

The above-mentioned pre-tax benefits are attributable to our reportable segments and stockholders as follows:

   

 

Periods to which Blender’s Tax Credit is Attributable

   

 

Three Months Ended
June 30,

  

Six Months Ended
June 30,

   

 

2020

  

2019

  

2020

  

2019

   

Reportable segments to which blender’s tax credit is attributable

 

 

 

 

 

 

 

   

Refining

$

4

 

$

4

 

$

4

 

$

9

   

Renewable diesel

72

 

68

 

151

 

140

   

Total

$

76

 

$

72

 

$

155

 

$

149

   

 

 

 

 

 

 

 

 

   

Interests to which blender’s tax credit is

attributable

 

 

 

 

 

 

 

   

Valero Energy Corporation stockholders

$

40

 

$

38

 

$

79

 

$

79

   

Noncontrolling interest

36

 

34

 

76

 

70

   

Total

$

76

 

$

72

 

$

155

 

$

149

(b)

The market value of our inventories accounted for under the last-in, first-out (LIFO) method fell below their historical cost on an aggregate basis as of March 31, 2020. As a result, we recorded an LCM inventory valuation adjustment of $2.5 billion in March 2020. The market value of our LIFO inventories improved as of June 30, 2020 due to an increase in market prices, which resulted in a reversal of $2.2 billion of the $2.5 billion LCM adjustment recorded in the three months ended March 31, 2020. Consequently, our results of operations for the six months ended June 30, 2020 reflect a net LCM inventory valuation adjustment of $294 million.

 

 

 

Of the $2.2 billion benefit recognized in the three months ended June 30, 2020, $2.1 billion and $111 million is attributable to our refining and ethanol segments, respectively. Of the $294 million adjustment recognized in the six months ended June 30, 2020, $277 million and $17 million is attributable to our refining and ethanol segments, respectively.

 

 

(c)

“Other income, net” for the three and six months ended June 30, 2019 includes a $22 million charge from the early redemption of $850 million of our 6.125 percent senior notes due February 1, 2020.

 

 

(d)

Common equivalent shares have been excluded from the computation of diluted loss per common share for the six months ended June 30, 2020, as the effect of including such shares would be antidilutive.

 

 

(e)

Common equivalent shares have been excluded in the computation of adjusted loss per common share – assuming dilution for the three months ended June 30, 2020, as the effect of including such shares is antidilutive. Weighted-average shares outstanding – assuming dilution used to calculate adjusted loss per common share – assuming dilution is 406 million shares.

 

 

(f)

We use certain financial measures (as noted below) in the earnings release tables and accompanying earnings release that are not defined under U.S. 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 after adjusting for 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 (loss) attributable to Valero Energy Corporation stockholders is defined as net income (loss) attributable to Valero Energy Corporation stockholders adjusted to reflect the items noted below, along with their related income tax effect. We have adjusted for these items because we believe that they are not indicative of our core operating performance and that their adjustment 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 adjustment is provided below.

 

 

–

 

LCM inventory valuation adjustment – The LCM inventory valuation adjustment, which is described in note (b), is the result of the market value of our inventories as of June 30, 2020 falling below their historical cost, with the decline in market value resulting from the decline in crude oil and product market prices associated with the negative economic impacts from COVID-19. The adjustment obscures our financial performance because it does not result from decisions made by us; therefore, we have excluded the adjustment from adjusted net income (loss) attributable to Valero Energy Corporation stockholders.

 

 

–

 

2019 blender’s tax credit attributable to Valero Energy Corporation stockholders – The 2019 blender’s tax credit was recognized by us in December 2019, but it is attributable to volumes blended throughout 2019. Therefore, the adjustment reflects the portion of the 2019 blender’s tax credit that is associated with volumes blended during the three and six months ended June 30, 2019. See note (a) for additional details.

 

 

–

 

Loss on early redemption of debt – The penalty and other expenses incurred in connection with the early redemption of our 6.125 percent senior notes due February 1, 2020 (see note (c)) are not associated with the ongoing costs of our borrowing and financing activities.

 

 

◦

Adjusted earnings (loss) per common share – assuming dilution is defined as adjusted net income (loss) attributable to Valero Energy Corporation stockholders divided by the number of weighted-average shares outstanding in the applicable period, assuming dilution (see note (e)).

 

 

◦

Refining margin is defined as refining operating income (loss) adjusted to reflect the 2019 blender’s tax credit (see note (a)), and excluding the LCM inventory valuation adjustment (see note (b)), operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses. 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.

 

 

◦

Renewable diesel margin is defined as renewable diesel operating income adjusted to reflect the 2019 blender’s tax credit (see note (a)), and excluding operating expenses (excluding depreciation and amortization expense) and depreciation and amortization expense. We believe renewable diesel margin is an important measure of our renewable diesel 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 (loss) excluding the LCM inventory valuation adjustment (see note (b)), operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses. 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 (loss) is defined as refining segment operating income (loss) adjusted to reflect the 2019 blender’s tax credit (see note (a)), and excluding the LCM inventory valuation adjustment (see note (b)) and other operating expenses. We believe adjusted refining operating income (loss) 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 renewable diesel operating income is defined as renewable diesel segment operating income adjusted to reflect the 2019 blender’s tax credit (see note (a)). We believe this is an important measure of our renewable diesel segment’s operating and financial performance because it excludes items that are not indicative of that segment’s core operating performance.

 

 

◦

Adjusted ethanol operating income (loss) is defined as ethanol segment operating income (loss) excluding the LCM inventory valuation adjustment (see note (b)) and other operating expenses. We believe this is an important measure of our ethanol 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 (used in) operating activities excluding the items noted below. 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. The basis for our belief with respect to each excluded item is provided below.

 

 

–

 

Changes in current assets and current liabilities – Current assets net of current liabilities represents our operating liquidity. We believe that the change in our operating liquidity from period to period does not represent cash generated by our operations that is available to fund our investing and financing activities.

 

–

 

DGD’s adjusted net cash provided by operating activities attributable to our joint venture partner’s ownership interest in DGD – We are a 50/50 joint venture partner in DGD and consolidate DGD’s financial statements; as a result, all of DGD’s net cash provided by operating activities (or operating cash flow) is included in our consolidated net cash provided by operating activities.

 

 

 

DGD’s partners use DGD’s operating cash flow (excluding changes in its current assets and current liabilities) to fund its capital investments rather than distribute all of that cash to themselves. Nevertheless, DGD’s operating cash flow is effectively attributable to each partner and only 50 percent of DGD’s operating cash flow should be attributed to our net cash provided by operating activities. Therefore, we have adjusted our net cash provided by operating activities for the portion of DGD’s operating cash flow attributable to our joint venture partner’s ownership interest because we believe that it more accurately reflects the operating cash flow available to us to fund our investing and financing activities. The adjustment is calculated as follows (in millions):

   

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 
   

 

2020

 

2019

 

2020

 

2019

   

DGD operating cash flow data

 

 

 

 

 

 

 

   

Net cash provided by operating activities

$

516

 

 

$

127

 

 

$

683

 

 

$

160

 

   

Exclude: changes in current assets and current liabilities

378

 

 

39

 

 

338

 

 

12

 

   

Adjusted net cash provided by operating activities

138

 

 

88

 

 

345

 

 

148

 

   

Our partner’s ownership interest

50%

 

50%

 

50%

 

50%

   

DGD’s adjusted net cash provided by operating activities attributable to our joint venture partner’s ownership interest in DGD

$

69

 

 

$

44

 

 

173

 

 

$

74

 

(g)

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.

 

 

(h)

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

 

 

(i)

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, per gallon of sales, and per gallon of production amounts are calculated by dividing the associated dollar amount by the throughput volumes, sales volumes, and production volumes for the period, as applicable.

 

 

 

Throughput volumes, sales volumes, and production volumes are calculated by multiplying throughput volumes per day, sales volumes per day, and production volumes per day (as provided in the accompanying tables), respectively, by the number of days in the applicable period. We use throughput volumes, sales volumes, and production volumes for the refining segment, renewable diesel segment, and ethanol segment, respectively, due to their general use by others who operate facilities similar to those included in our segments. We believe the use of such volumes results in per unit amounts that are most representative of the product margins generated and the operating costs incurred as a result of our operation of those facilities.