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JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation

Valero Energy Corporation · Jul 10, 2014 · 60 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 1
    Investor Presentation July 2014
  2. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 2
    Valero Overview Worlds largest independent refiner 16 refineries Approximately 2.9 million barrels per day (BPD) of throughput capacity, excluding suspended operations of the Aruba refinery In 2013 created publicly traded Valero…
  3. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 3
    Valeros Geographically Diverse Operations Capacities (000 bpd) Total Through Crude Nelson Refinery -put Oil Index Corpus Christi 325 205 19.9 Houston 165 90 15.1 Meraux 135 135 10.3 Port Arthur 350 330 12.6 St. Charles 280…
  4. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 4
    Key Market Trends Growth in U.S. and Canadian shale development provides North American resources advantage Expect strong supply growth in crude oil, natural gas, and natural gas liquids (NGLs) Industry is making significant…
  5. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 5
    Valeros Strategy to Enhance Returns and Increase Long-term Shareholder Value Invest to Process more domestic light crude oil Expand hydrocrackers with high distillates yield and exploit North leverage to natural gas American…
  6. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 6
    U.S. and Canadian Production Growth Provides Resource Advantage to North American Refiners MMBPD U.S. and Canadian Crude Production vs. U.S. Crude Imports 18 Largest growth coming from 16 U.S. shale crude and heavy Canadian crude…
  7. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 7
    Valeros Strategy to Supply Incremental Volumes of Cost-Advantaged Crude Oil Gulf Coast Region Expect refineries to benefit as flows increase on cost-efficient pipelines St. Charles: added approximately 20 MBPD of rail unloading…
  8. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 8
    Expect Quebec City Refinery to Reach 100% North American Crude Diet by End of 2014 Replacing foreign crudes priced at a premium to Brent with discounted North American crudes via rail (60 MBPD capacity) and foreign-flagged ships from…
  9. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 9
    Investments to Process More Light Crude Oil Strategy Valeros North American Increase processing of North American cost- Light Crude Capacity MBPD advantaged light crude oil 1,400 Estimate current capability to run light crude at…
  10. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 10
    Lower-Cost Natural Gas Provides Structural Advantage to U.S. and Canadian Refiners Expect significant production from shale basins to keep U.S. natural gas prices low and disconnected from global oil and LNG prices for foreseeable…
  11. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 11
    Global Distillates Demand Growth Yields Higher Margins Distillates (diesel, kero, jet fuel) margins are significantly higher than gasoline due to less spare distillates production capacity versus demand Distillates demand growth rate…
  12. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 12
    U.S. Refining Capacity Is Globally Competitive and Continues to Take Market Share U.S. flipped from importer to exporter on lower local product demand and higher refinery utilization, particularly in PADDS 2, 3, and 4, driven by…
  13. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 13
    Hydrocracking and Hydroprocessing Investments Increase Distillates Production Strategy New St. Charles Hydrocracker Emphasize distillates production and natural gas consumption Designed to benefit from our outlook of: Relatively…
  14. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 14
    Logistics Growth Investments Strategy Increase access to cost-advantaged crudes Increase capability to export products and crudes Growth Investments 5,320 rail cars purchased, delivery from 4Q12 to 2Q15 Approximately 55% general…
  15. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 15
    Valero Energy Partners LP (NYSE: VLP) Traditional, logistics MLP with Valero Energy Partners Assets 100% fee-based revenues Valeros primary vehicle to grow logistics assets Valero retained significant ownership and control of VLP…
  16. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 16
    Improving Our Refining Operations Industry surveys reflect significant Improvement in Key Benchmarks improvement over last six years 100% Improved reliability also yielding 1st benefits in staffing, operating cost, and Quartile…
  17. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 17
    Ethanol Segment Generated Strong Returns 11 plants with total production millions Ethanol Segment EBITDA 550 capacity of 1.3 billion gallons/year Acquired plants for 794 million, or average of less than 35% of estimated 450…
  18. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 18
    Returning More Cash to Stockholders and Maintaining Financial Strength Returning more cash to stockholders Cash Returned to VLO Stockholders Returned 825 million in cash to shareholders in millions dividend and stock buybacks in…
  19. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 19
    Growth Investments Compose Approximately Half of Our Capital Spending Estimated 2014 Capital Strategic Growth Investments Spending Totals 3 Billion 1.525 Billion 90 MM 3% 665 MM Logistics 22% 45% 720 MM 24% Light Crude…
  20. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 20
    Key Market Trends and Valeros Strategy Expect continued growth in North American oil, gas, and NGLs Key Market Trends production provides resources advantage Global distillates demand growth yielding higher margins U.S.…
  21. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 21
    Appendix 22
  22. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 22
    Private Letter Ruling on Processed Condensate Product Exports In response to two specific applications, the U.S. Department of Commerce - Bureau of Industry and Security (BIS) issued private rulings to allow exports of processed What…
  23. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 23
    Continued Global Demand Growth Important to Refining Margins Emerging markets lead in terms of global petroleum demand growth Particularly strong growth in Latin America, Middle East, Africa, Asia Refining is a global business world…
  24. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 24
    World Refinery Capacity Growth Expect significant new global refining additions in the next several years Mainly new plants in Asia and the Middle East, where demand growth is strong New capacity announcements from Brazil, Mexico, and…
  25. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 25
    VLPs First Acquisition from VLO VLP footprint and geographic diversity expanded with assets VLP First Acquisition July 1, 2014 in the Mid-Continent, U.S. Gulf Coast and South Texas McKee Crude System (Sunray, TX): over 200 miles of…
  26. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 26
    Improving Our Safety and Environmental Performance Safety is our highest priority: our goal is zero injuries Frequency of Tier 1 process safety events has steadily decreased Environmental event frequency has declined by over 65%…
  27. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 27
    Increasing Our Products Exports Capability Valeros U.S. Products Exports Exports enable Valero to maintain MBPD utilization rates or capture 600 incremental margin Valero exports products based on 500 economic optimization of:…
  28. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 28
    Upgrading Natural Gas to Methanol Strategy Methanol Demand Gas-to-liquids upgrading very attractive (million tonnes per year) 110 12 syngas pricing Estimate 7% average 100 11 U.S. is a growing methanol market and annual growth rates…
  29. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 29
    NGLs Upgrading Presents an Opportunity to Create Value MMBPD U.S. NGLs Supply Strategy 4.5 Consistent strategy feedstock advantage and 4.0 3.5 bolt-on/synergistic project 3.0 Expect continued growth in supply of NGLs and 2.5 2.0…
  30. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 30
    Unlocked Value via Retail Spinoff CST Brands, Inc. trading on the NYSE under the ticker symbol CST CST has traded at approximately double the earnings valuation of VLO Unlocked stockholder value equivalent to approximately 3.60 per…
  31. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 31
    Our Crude and Feedstock Supply MBPD 2013 Crude Oil Sources 1,200 1,000 800 600 400 200 0 North America Middle East Africa South America Other Asia/ Europe Australia Valeros crude and intermediate feedstock runs were…
  32. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 32
    Valeros Processing of Cost-Advantaged U.S. and Canadian Crude Continues to Grow MBPD MBPD 900 1,600 800 1,400 700 1,200 600 1,000 500 800 400 600 300 400 200 100 200 0 0 2010 2011 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14…
  33. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 33
    Crude Oil Differentials Versus Brent 5% Premium 0% -5% -10% Discount -15% Maya Mars -20% ANS WTI LLS -25% Source: Argus; 2014 year-to-date through June 27. LLS prices are roll adjusted. 34
  34. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 34
    Valeros Regional Refinery Indicator Margins /bbl 25 20 15 10 5 Mid-Con WTI Cracking West Coast ANS Medium-Sour Coking Northeast Brent Light-Sweet Cracking Gulf Coast Heavy-Sour Coking 0 2002 2003 2004 2005 2006…
  35. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 35
    Definitions of Valeros Regional Indicator Margins Gulf Coast Indicator: (GC Colonial 85 CBOB A grade- LLS) x 60% + (GC ULSD 10ppm Colonial Pipeline prompt - LLS) x 40% + (LLS - Maya Formula Pricing) x 40% + (LLS - Mars Month 1) x…
  36. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 36
    Logistics Constraints Create Regional Crude Discounts in U.S. and Canada Brent Less Crude Prices J Crude Pricing by Location (Trailing 12-Months, /bbl) C (A) Light Houston Sweet Trailing 4-weeks F (B) LLS Lighter (C)…
  37. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 37
    Valeros View on U.S. Gulf Coast Medium and Heavy Oil Prices Versus Brent U.S. and Canadian Light Crude Oil on Gulf Coast LLS, WTI, Bakken, Eagle Ford, Permian, etc. Plentiful supply and price advantage should push out foreign imports…
  38. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 38
    Increasing U.S. Oil and Natural Gas Production Provides Cost Advantage for Refiners Bcf/day Natural Gas Production MBPD Crude Oil Imports & Production MBPD 70 10,500 8,500 Imports 10,000 Production 8,000 65 9,500 7,500 60 9,000…
  39. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 39
    U.S. Gulf Coast is Benefitting from Cost-Efficient Crude Oil Pipeline Additions Rapid increase in pipeline capacities to move inland North American crude oils to the Gulf Coast Light crudes have been pricing below LLS in western parts…
  40. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 40
    Canadian Heavy Crudes Have Several Options to the Gulf Coast Pipeline industry has several options in various stages to move crude oil from Canada to the U.S. Gulf Coast Seaway Currently shipping light and heavy sour from Cushing to…
  41. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 41
    Growth of Crude Oil Pipelines to U.S. Gulf Coast Year-End Throughput Capacities, 000 bpd 2011 2012 2013 2014E 2015E Announced Start-up Cushing Seaway and Loop 150 400 850 850 2Q12, 1Q13, 2Q14 Keystone MarketLink - - - 700 830 1Q14,…
  42. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 42
    Atlantic Basin Closures Reduce Excess Capacity Capacity closures have been concentrated in the Atlantic Basin: U.S. East Coast, Caribbean, Western Europe; expect more will occur Combined with poor reliability and low utilization in…
  43. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 43
    Global Refining Capacity Rationalization CDU Capacity Year CDU Capacity Year Location Owner Closed (MBPD) Closed Location Owner Closed (MBPD) Closed Perth Amboy, NJ Chevron 80 2008 St. Croix, U.S.V.I Hovensa 350 2012 Bakersfield,CA Big…
  44. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 44
    Global Refining Capacity For Sale or Under Strategic Review CDU Capacity Location Owner (MBPD) Lytton, Australia Caltex 109 Nishihara, Japan Petrobras/Sumitomo 95 Inchon, Korea SK Energy 270 Whitegate, Ireland Phillips 66 71…
  45. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 45
    Low-Cost U.S. Natural Gas Provides Competitive Advantage U.S. natural gas has traded at a significant discount to Brent crude oil price (on energy equivalent basis) Prices are expected to remain low and disconnected from global oil…
  46. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 46
    Crude Fundamentals 410,000 U.S. Crude Inventory (MB) 400,000 390,000 380,000 370,000 360,000 350,000 340,000 330,000 5 Yr High 5 Yr Low 2012 2013 2014 5 Yr Avg 320,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 55,000 Cushing…
  47. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 47
    Gasoline Fundamentals 25 USGC Brent Gasoline Crack (per bbl) 10 U.S. Gasoline Demand (mmbpd) 20 9.5 15 10 9 5 0 8.5 -5 8 -10 -15 7.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov…
  48. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 48
    Distillate Fundamentals USGC Brent ULSD Crack (per bbl) 4.8 U.S. Distillate Demand (mmbpd) 25 4.6 20 4.4 4.2 15 4 3.8 10 3.6 5 3.4 3.2 0 3 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep…
  49. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 49
    U.S. Transport Indicators U.S. VMT Growth vs. Gasoline Demand Growth Airline Traffic Indicators U.S. Gasoline Demand Growth U.S. VMT Growth 3.5 90% U.S. Gasoline Demand Growth 12MMA U.S. VMT Growth 12MMA International Source: U.S.…
  50. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 50
    U.S. Transport Indicators: Trucking ATA Seasonally Adj Truck Tonnage Index ATA Non-Seasonally Adj Truck Tonnage Index 135 145 Current Year Current Year 130 12-Mth Moving Avg 12-Mth Moving Avg 135 125 125 Index, 2000 = 100…
  51. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 51
    Mexico Statistics Crude Unit Throughput (MBPD) Crude Unit Utilization 1,400 90% 1,350 85% 1,300 80% 1,250 1,200 75% 1,150 70% 1,100 65% 1,050 1,000 60% 2007 2008 2009 2010 2011 2012 2013 2014 2007 2008 2009 2010 2011 2012 2013…
  52. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 52
    100 150 200 250 300 350 400 0 50 MBPD Feb-05 Jun-05 Source: EIA, April 2014 Oct-05 Feb-06 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11…
  53. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 53
    U.S. Gasoline Exports by Destination Strong demand from Latin America, including Mexico, have kept gasoline exports elevated 700 12 Month Moving Average, MBPD Other 600 Europe 500 Other Latin America Mexico 400 Canada 300…
  54. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 54
    U.S. Gasoline Imports by Source Gasoline imports have declined steadily since 2007 Shutdown of the Atlantic Basin refineries will keep pressure on this trend 12 Month Moving Average, MBPD Other 1400 Europe Other Latin America…
  55. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 55
    U.S. Diesel Exports by Destination Diesel exports to Latin America have exceeded exports to Europe in recent years 1400 12 Month Moving Average, MBPD 1200 Other 1000 Europe Other Latin America 800 Mexico Canada 600 Latest 4…
  56. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 56
    U.S. Shifted to Net Exporter The transition of the U.S. refining system to being a net exporter to the world market has mitigated the impact of declining domestic demand Large quantities of U.S. diesel and gasoline exports to Latin…
  57. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 57
    U.S. Shifted to Net Exporter As a result of the continued shift towards exports, U.S. net exports of petroleum products have increased from 335 MBPD in 2010 to 2,221 MBPD in 2014 Diesel net exports remain strong, with U.S. refiners…
  58. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 58
    U.S. Competitively Exporting into Growing Markets U.S. has become a net exporter of refined products due to growth in developing countries, Atlantic Basin capacity closures, Western European diesel demand, and Latin American refining…
  59. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 59
    Reconciliation of Operating Income to EBITDA Ethanol (millions) 2Q09 4Q09 2010 2011 2012 2013 1Q14 Cumulative Operating income 165 209 396 (47) 491 243 1,457 + Depreciation and amortization expense 18 36 39 42 45 12 192 = EBITDA 183…
  60. JULY 2014 INVESTOR PRESENTATION – Valero Energy Corporation – slide 60
    Investor Relations Contacts For more information, please contact: John Locke Executive Director, Investor Relations 210-345-3077 john.lockevalero.com Karen Ngo Manager, Investor Relations 210-345-4574 karen.ngovalero.com 61

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