VALERO ENERGY CORP/TX Q4 FY2025 earnings call

• Last year was best for personnel safety and environmental performance, with record refining throughput and ethanol production. - Strong financial results in Q4, capturing favorable refining margins. - Progress on SCC unit optimization project at St. Charles refinery, expected to start in 2026. - Committed to disciplined capital allocation framework prioritizing balance sheet strength, capital investments, and shareholder returns.

Refining segment: 2025 operating income was $1.7 billion (vs $437 million in 2024), refining throughput volumes averaged 3.1 million barrels per day with 98% capacity utilization, cash operating expenses were $5.3 per barrel. Renewable diesel segment: 2025 operating income was $92 million (vs $170 million in 2024), sales volumes averaged 3.1 million gallons per day. Ethanol segment: 2025 operating income was $117 million (vs $20 million in 2024), production volumes averaged 4.8 million gallons per day in Q4 2025, setting quarterly and full-year records.

• Expect capital investments attributable to Valero for 2026 to be ~$1.7 billion, including sustaining and growth projects. - First quarter refining throughput ranges: Gulf Coast 1.695-1.745 million bpd, Midcontinent 430-450 thousand bpd, West Coast 160-180 thousand bpd, North Atlantic 485-505 thousand bpd. - Refining cash operating expenses in Q1 expected to be ~$5.17 per barrel. - Renewable diesel segment expects sales volumes ~260 million gallons in Q1, operating expenses 72¢ per gallon. - Ethanol segment expects production 4.6 million gallons per day in Q1, operating expenses average $0.49 per gallon. - Net interest expense expected ~$140 million in Q1, total depreciation and amortization ~$835 million including incremental for Benicia refinery. - G&A expenses expected ~$960 million in 2026. - Capital allocation framework: through-cycle minimum annual payout ratio 40%-50% of adjusted net cash provided by operating activities, long-term net debt to cap ratio 20%-30% with minimum cash balance $4 billion-$5 billion.

• Geopolitical factors affecting oil prices and supply. - Weather impacts on demand and production. - Policy uncertainties related to RVO, PTC, and tariffs. - Refinery union contract negotiations and potential strikes. - Operational challenges with refinery turnarounds and regulatory compliance.

Q: Looking at the macro outlook, how do you view the evolution of and demand dynamics for light products and crack spreads going forward?

A: Gary Simmons discussed inventory builds, demand trends, refinery utilization expectations, and execution risks on consultant assumptions.

Q: How much of Venezuelan crude can be absorbed within your footprint over time and impact differentials?

A: Randy spoke about Venezuela crude fitting Valero's configuration, processing capability, and factors affecting differentials like US Gulf sour crude production, Canadian crude, and freight rates.

Q: On return of capital, how aggressive will you be around buying back stock?

A: Homer Bhullar talked about share repurchases as part of capital allocation, disciplined approach to growth projects and acquisitions, and willingness to be aggressive on buybacks when favorable.

Q: On heavy oil barrels being marketed, how do they compete with your alternatives?

A: Eddie commented on evaluating Venezuelan crude against alternatives and anticipating Venezuelan crude making up a large part of heavy diet in Q1.

Q: On cash flow profile difference over years with same refining margin, explain dynamics.

A: Homer Bhullar discussed operations, disciplined growth investments, balance sheet strength, and share repurchases contributing to higher cash flow.

Q: On RVO and RIN prices, mid-cycle earnings capacity of DGD?

A: Eric Fisher talked about new PTC regime, RIN price implications, and 2026 outlook for renewable diesel segment.

Q: On coker utilization and heavy runs, where can throughput get to?

A: Lane Riggs and Gary Simmons discussed coker optimization, crude diet, and mechanical availability impact on refinery utilization.

Q: On labor contracts and refinery utilization, impact of strikes and future utilization?

A: Lane Riggs and Gary Simmons addressed union status, Valero's less unionized nature, and mechanical availability impact on utilization.

Q: On West Coast refining profitability and Venetia shutdown timeline?

A: Gary Simmons and Rich Walsh discussed West Coast capture rates, retroactive tariffs, Venetia idling timeline, and supply commitments.

Q: On oil price, demand impact from storm, and California exposure?

A: Lane Riggs and Gary Simmons talked about geopolitical factors, oil price drivers, and California refinery CapEx and operations.

Q: On CapEx, inflation impact, and heavy crude valuation?

A: Lane Riggs and Randy discussed CapEx challenges with inflation, heavy crude market dynamics, and valuation considerations.

Q: On ethanol segment drivers and E15 potential?

A: Eric Fisher and Rich Walsh talked about ethanol segment drivers, export demand, and E15 potential tied to RVO policy.

Q: On EU refinery loophole sanctions, diesel markets, and Venezuela Cisco auction?

A: Gary Simmons and Lane Riggs discussed EU diesel market impacts, Venezuela crude processing, and Cisco auction stance.

Q: On North Atlantic capture, product pipelines, and California supply?

A: Gary Simmons talked about North Atlantic capture drivers, pipeline considerations, and California supply optimization.

Q: On 45Z credits in ethanol segment and Venezuela crude usage?

A: Eric Fisher and Randy discussed 45Z credit capture in ethanol and Venezuelan crude mix in refining operations.

Q: On crude quality differentials sustainability?

A: Randy discussed factors affecting crude differentials and their sustainability.