Valero 2025-26: Refining $1.7B EBIT, St. Charles SCC Online 2026
FY25 revenue $122.69B (-5%); Op income $4.31B (+15%); NI $2.35B (-15%); EPS $7.57. Refining 2025 op income $1.7B (vs $437M FY24); 98% capacity utilization; throughput 3.1M bpd. Renewable diesel $92M. Ethanol $117M (+485% YoY). St. Charles SCC unit project starting up in 2026. FY26: capex ~$1.7B.
Key takeaways
- Refining margin recovery year. FY25 refining op income $1.7B vs only $437M FY24. The crack spread cycle inflected from FY24 trough; cash operating expense $5.30/bbl (industry-leading low). 98% capacity utilization at 3.1M bpd throughput.
- Renewables compressed but diversification holding. Renewable diesel op income $92M (vs $170M FY24) — soft on RIN/credit pricing + supply oversupply. Ethanol $117M (+485% YoY) on margin recovery.
- St. Charles SCC unit FY26 startup. Major capital project — supercritical CO2 (or selective conversion?) optimization at the St. Charles refinery. Expected to enhance margins on heavy crude processing.
- FY26 capex ~$1.7B balanced sustaining + growth. Mgmt explicitly committed to disciplined capital allocation framework — return-of-capital + selective growth.
- Capital return $4.0B FY25 (~$1.4B div + $2.6B buyback). Continues decade-long pattern of returning >100% of FCF to shareholders during favorable cycles + steady through troughs.
Business
Valero Energy is the largest US merchant refiner with 15 refineries across US Gulf Coast + Mid-Continent + West Coast + North Atlantic. Three reporting segments:
- Refining (~85% of revenue): 15 refineries with ~3.2M bpd combined capacity. Gulf Coast (8 refineries — largest concentration), Midcontinent (3), West Coast (1 California, 1 idle), North Atlantic (1 Quebec + 1 UK). Top quartile cost position; light/medium crude diet.
- Renewable Diesel (Diamond Green Diesel) (~10% of revenue): 50/50 JV with Darling Ingredients. ~1.2B gallon annual capacity. RIN + LCFS credit revenue + biodiesel margin.
- Ethanol (~5% of revenue): 12 ethanol plants (~1.6B gallon annual capacity). Corn → ethanol → DDGS animal feed.
Strategic position: highest-quality merchant refiner globally — cost leadership + asset positioning (Gulf Coast crude flexibility) + scale + balance sheet strength. ~30% of US refining capacity is owned by integrated majors; Valero has the largest pure-play position.
FY25 financial performance
| Metric (FY) | 2023 | 2024 | 2025 |
|---|---|---|---|
| Revenue ($B) | 144.77 | 129.88 | 122.69 |
| Gross profit ($B) | 12.89 | 4.76 | 5.37 |
| Op income ($B) | 11.86 | 3.76 | 4.31 |
| Op margin | 8.2% | 2.9% | 3.5% |
| EBITDA ($B) | 14.66 | 7.03 | 6.72 |
| Net income ($B) | 8.84 | 2.77 | 2.35 |
| Diluted EPS ($) | 24.95 | 8.58 | 7.57 |
| FCF ($B) | 8.32 | 5.78 | 5.03 |
| Capex ($B) | -0.91 | -0.91 | -0.80 |
| Total debt ($B) | 12.64 | 11.54 | 10.62 |
| Dividends ($B) | -1.45 | -1.38 | -1.41 |
| Buyback ($B) | -5.14 | -2.88 | -2.60 |
The cycle pattern:
- FY23: Crack spread peak — EPS $24.95.
- FY24: Trough — EPS $8.58.
- FY25: Modest recovery — EPS $7.57 (slight decline despite refining recovery, dampened by renewable diesel softness + corp items).
Segment FY25 operating income:
- Refining: $1.7B (vs $437M FY24) — recovery.
- Renewable Diesel: $92M (vs $170M FY24) — compressed.
- Ethanol: $117M (vs $20M FY24) — recovery.
Capital allocation
- Capex: $-0.80B FY25 (0.6% of revenue). Light, capital-disciplined model. FY26 guide ~$1.7B (up — reflects St. Charles project + sustaining + Renewable Diesel).
- Dividends: $-1.41B FY25 (+2% YoY). Steady raise.
- Buybacks: $-2.60B FY25, moderated from $5.14B FY23 cycle peak. Continues high payout.
- M&A: No major; selective growth investments.
- Debt: $10.62B (-$0.92B YoY). Continued paydown.
FY26 outlook (per Q4 2025 call, 2026-01-29)
| FY26 guide | Range / point |
|---|---|
| Capex | ~$1.7B (sustaining + growth) |
| Q1 Refining throughput Gulf Coast | 1.695-1.745M bpd |
| Q1 Midcontinent | 430-450K bpd |
| Q1 West Coast | 160-180K bpd |
| Q1 North Atlantic | 485-505K bpd |
| Q1 cash operating expenses | $5.40-$5.60/bbl Refining |
| St. Charles SCC unit | Online in 2026 |
The St. Charles SCC startup is the year's big strategic event — meaningful margin uplift on heavy crude processing capability. Refining FY26 EBIT depends heavily on crack spread cycle; current futures suggest modest recovery from FY25 levels.
Key risks
- Crack spread cycle: Refining margin is the dominant variable; outside Valero's control. Recession or refining capacity additions compress margin.
- Renewable diesel cycle: RIN + LCFS credit pricing + capacity additions in industry. FY25 saw compression; further pressure possible.
- Carbon regulation: California Cap-and-Trade + LCFS framework + EU Emissions Trading. Cost exposure for refining + RD operations.
- Capex execution: St. Charles SCC startup is critical for FY26 margin uplift; project schedule risk.
- Crude differential cycle: WCS (Canadian heavy) + Mexican heavy differentials cycle; Valero's Gulf Coast positioning leverages this.
- Energy demand: Long-term, EV adoption + LCFS reduce gasoline + diesel demand. Currently mild; structural over decade.
Bottom line
Valero FY25 is the modest refining recovery year — refining op income $1.7B (vs $437M trough), capacity utilization 98%, EPS $7.57 (slight decline on RD softness). FY26 setup is St. Charles SCC startup + Refining cycle continued recovery + RD stabilization + Ethanol staying favorable. Capital return at $4.0B continues; dividend raise + buyback. The structural read: highest-quality merchant refiner with cost discipline + diversified Renewable Diesel + Ethanol + balance sheet flexibility. Risks are crack spread cycle (out of control) + RD pricing + carbon regulation.
Citations
- Valero Energy Corp. FY25 Form 10-K (filed February 2026, SEC EDGAR).
- Valero Q4 2025 earnings call, 2026-01-29 — refining 2025 op income $1.7B (vs $437M FY24); 98% capacity utilization; throughput 3.1M bpd; cash opex $5.30/bbl; renewable diesel $92M; ethanol $117M; FY26 capex ~$1.7B; Q1 throughput ranges; St. Charles SCC unit online in 2026.
- Internal financial_statements view (consolidated annual + cash flow + capital structure).