VALERO ENERGY CORP/TX Q3 FY2024 earnings call

• Refineries operated at 90% throughput capacity utilization during a weak margin environment, with U.S. wholesale volumes exceeding 1 million bbl/day for the second consecutive quarter.
• Diamond Green Diesel Sustainable Aviation Fuel project is mechanically complete and in startup process, completed on schedule and under budget.
• Committed to shareholder returns with a 84% payout ratio for Q3 and 81% year-to-date.
• Focus on operational excellence, capital discipline, and executing projects to enhance earnings and competitive advantage.

Refining segment: Operating income was $565 million in Q3 2024 compared to $3.4 billion in Q3 2023. Throughput volumes averaged 2.9 million barrels per day with 90% capacity utilization. Renewable Diesel segment: Operating income was $35 million in Q3 2024 compared to $123 million in Q3 2023. Sales volumes averaged 3.5 million gallons per day, a 552,000 gallons per day increase Y/Y. Ethanol segment: Operating income was $153 million in Q3 2024 compared to $197 million in Q3 2023. Production volumes averaged 4.6 million gallons per day, a 255,000 gallons per day increase Y/Y.

• Refining throughput volumes for Q4: Gulf Coast 1.83-1.88 million bbl/day, Mid-Continent 425,000-445,000 bbl/day, West Coast 230,000-250,000 bbl/day, North Atlantic 380,000-400,000 bbl/day.
• Renewable diesel sales volumes expected to be ~1.2 billion gallons in 2024, operating expenses $0.45 per gallon.
• Ethanol production expected to be 4.7 million gallons per day in Q4.
• Net interest expense expected ~$140 million in Q4, total D&A expense ~$690 million in Q4. G&A expenses expected ~$975 million for 2024.

• Weak refinery margin environment despite improving market fundamentals.
• OPEC+ crude supply increases affecting sour crude differentials.
• California regulatory challenges impacting refinery operations and costs.
• Uncertainty in economic conditions affecting product demand.

Q: Can you unpack some of the earlier comments on the evolution of global product supply over the more, I guess, medium to long term?

A: This is Gary. In 2025, ~1,040,000 bbl/day new refining capacity coming online, ~740,000 bbl/day refinery closures announced, net-net ~300,000 bbl/day net capacity additions. Total light product demand expected to increase ~700,000 bbl/day. Tightening balances next year, extended period of tighter margins after next year.

Q: Would you be able to provide an update on how the SaaS unit is operating following its recent in-service and any other commercial discussions to broaden this offering as well as your views on the subsidy prices?

A: This is Eric. The SaaS unit startup looks great, finished ahead of schedule and under budget. Commercially, seeing interest and contracting for the product. Confident it will meet design capability and exceed minimum return threshold of after tax 25% with current contracts.