Brandon Bell Introduction I would make the case that I'm not a great client for most brokers, as I have a very low transaction count. I barely trade stocks, and I almost never sell a long-term (dividend) investment. However, last year, I sold my Valero Energy Corporation (NYSE:VLO) investment, which I bought very cheaply during the pandemic. On September 26, 2023, I wrote an article titled "Valero: Despite Massive Strength, I'm Considering Selling (Rating Downgrade)." Since then, shares are down 7.4%, inclu ...

Valero Energy Corporation (NYSE:VLO) Q3 2023 Earnings Conference Call October 26, 2023 10:00 AM ET Company Participants Homer Bhullar - Vice President, Investor Relations & Finance Lane Riggs - Chief Executive Officer & President, Director Gary Simmons - Executive President & Chief Operating Officer Greg Bram - Vice President- Refining Services Jason Fraser - Executive Vice President & Chief Financial Officer Eric Fisher - Senior Vice President-Product Supply & Trading and Wholesale Richard Walsh - Senior V ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File Number 001-13175 VALERO ENERGY CORPORATION (Exact name of registrant as specified in its charter) Delaw ...

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Valero Energy Corporation (NYSE:VLO) Q2 2023 Earnings Conference Call July 27, 2023 10:00 AM ET Company Participants Homer Bhullar - Vice President, Investor Relations & Finance Lane Riggs - Chief Executive Officer & President, Director Gary Simmons - Executive President & Chief Operating Officer Eric Fisher - Senior Vice President-Product Supply & Trading and Wholesale Greg Bram - Vice President- Refining Services Richard Walsh - Senior Vice President, General Counsel & Secretary Conference Call Participan ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Valero Energy Corporation's unaudited consolidated financial statements as of and for the periods ended June 30, 2023, along with condensed notes on accounting policies and specific financial items [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets were $60.67 billion as of June 30, 2023, a slight decrease from $60.98 billion at year-end 2022, while total equity increased to $27.99 billion from $25.47 billion, and total liabilities decreased from $35.51 billion to $32.67 billion Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | June 30, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $23,695 | $24,133 | | **Total Assets** | **$60,667** | **$60,982** | | **Total Current Liabilities** | $14,948 | $17,461 | | **Total Liabilities** | $32,673 | $35,514 | | **Total Equity** | **$27,994** | **$25,468** | | **Total Liabilities and Equity** | **$60,667** | **$60,982** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) For the second quarter of 2023, Valero reported net income attributable to stockholders of $1.94 billion, or $5.40 per diluted share, a decrease from $4.69 billion, or $11.57 per diluted share, in the same period of 2022, primarily driven by lower revenues Statement of Income Highlights (in millions, except per share amounts) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $34,509 | $51,641 | $70,948 | $90,183 | | **Operating Income** | $2,759 | $6,219 | $6,802 | $7,603 | | **Net Income Attributable to Valero** | $1,944 | $4,693 | $5,011 | $5,598 | | **Diluted EPS** | $5.40 | $11.57 | $13.74 | $13.74 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2023, net cash provided by operating activities was $4.68 billion, down from $6.43 billion in the prior-year period, with significant cash used in investing and financing activities, including share repurchases and dividend payments Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $4,682 | $6,433 | | **Net Cash Used in Investing Activities** | $(1,078) | $(1,460) | | **Net Cash Used in Financing Activities** | $(3,520) | $(3,642) | | **Net Increase in Cash and Cash Equivalents** | $213 | $1,270 | | **Cash and Cash Equivalents at End of Period** | $5,075 | $5,392 | [Condensed Notes to Consolidated Financial Statements](index=10&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on accounting policies, regulatory uncertainties, financial instruments, and segment performance, including the potential impact of California's SBx 1-2 legislation and details on debt and equity activities - California's Senate Bill No. 2 (SBx 1-2) creates uncertainty for California operations by authorizing a potential maximum gross gasoline refining margin, financial penalties, and expanded reporting, with the ultimate impact unknown but potentially leading to **material impairment losses or asset retirement obligations**[26](index=26&type=chunk)[27](index=27&type=chunk) - In February 2023, the company used cash on hand to purchase and retire **$199 million** in principal amount of various senior notes[31](index=31&type=chunk)[32](index=32&type=chunk) - During the six months ended June 30, 2023, Valero purchased **19.4 million shares** for treasury, with **$2.5 billion** remaining available for purchase under the 2023 share purchase program as of June 30, 2023[44](index=44&type=chunk) - The company's three reportable segments are **Refining**, **Renewable Diesel**, and **Ethanol**, with the **Refining** segment being the **largest contributor** to revenue and operating income[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial performance for Q2 and H1 2023, highlighting strong demand and constrained supply, segment results, liquidity, capital resources, and a positive outlook driven by low product inventories and improving demand [Overview and Outlook](index=38&type=section&id=Overview%20and%20Outlook) Valero's Q2 and H1 2023 results were driven by strong global demand and constrained supply for petroleum products, leading to strong refining margins, with a positive outlook for Q3 2023 supported by improving demand and low product inventories - Q2 2023 net income attributable to Valero stockholders was **$1.9 billion**, down from **$4.7 billion** in Q2 2022, primarily due to lower operating income[137](index=137&type=chunk)[139](index=139&type=chunk) - For the first six months of 2023, operations generated **$4.7 billion** in cash, which was used for **$982 million** in capital investments, **$3.1 billion** in shareholder returns (buybacks and dividends), and **$199 million** in debt reduction[138](index=138&type=chunk) - The outlook for Q3 2023 anticipates that gasoline and diesel demand will follow typical seasonal patterns **near pre-pandemic levels**, jet fuel demand will continue to improve, and **low product inventories** in the U.S. and Europe will support **high refinery utilization**[147](index=147&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) This section provides a detailed breakdown of financial performance by segment for Q2 and H1 2023 compared to 2022, showing a decrease in Refining segment income but increases in Renewable Diesel and Ethanol segments due to favorable cost and volume factors Operating Income by Segment (in millions) | Segment | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | **Refining** | $2,432 | $6,212 | $6,489 | $7,663 | | **Renewable Diesel** | $440 | $152 | $645 | $301 | | **Ethanol** | $127 | $101 | $166 | $102 | | **Total Company** | **$2,759** | **$6,219** | **$6,802** | **$7,603** | - The Refining segment's Q2 adjusted operating income fell by **$3.7 billion** YoY, mainly due to lower gasoline and distillate margins[141](index=141&type=chunk) - The Renewable Diesel segment's Q2 operating income grew by **$288 million** YoY, driven by lower feedstock costs and higher sales volumes from the new DGD Port Arthur Plant[141](index=141&type=chunk)[174](index=174&type=chunk) - The Ethanol segment's Q2 adjusted operating income increased by **$49 million** YoY, primarily due to lower corn prices and higher production volumes[142](index=142&type=chunk)[176](index=176&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2023, Valero maintained strong liquidity of $10.1 billion, generated $4.7 billion in cash from operations in H1 2023, and returned significant cash to shareholders while allocating over 40% of growth capital to low-carbon projects - Total liquidity as of June 30, 2023, was **$10.1 billion**, consisting of **$5.4 billion** in available credit facilities and **$4.7 billion** in cash and cash equivalents (excluding VIEs)[225](index=225&type=chunk) - For 2023, the company expects capital investments attributable to Valero to be approximately **$2.0 billion**, with **over 40%** of growth capital allocated to expanding low-carbon businesses[239](index=239&type=chunk) - In the first six months of 2023, Valero returned **$3.1 billion** to stockholders through **$2.4 billion** in share repurchases and **$746 million** in dividend payments[229](index=229&type=chunk)[242](index=242&type=chunk) - As of June 30, 2023, **$3.9 billion** of the company's cash and cash equivalents was held by foreign subsidiaries, which can be repatriated but may be subject to withholding and state taxes[244](index=244&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Valero is exposed to market risks from interest rates, commodity prices, renewable fuel credit prices, and foreign currency exchange rates, with no material changes to these risks reported since the 2022 annual report Debt by Rate Type as of June 30, 2023 (in millions) | Debt Type | Total Principal | Fair Value | | :--- | :--- | :--- | | **Fixed Rate** | $8,265 | $7,864 | | **Floating Rate** | $800 | $800 | - A **10 percent** increase or decrease in floating interest rates would **not have a material effect** on the company's results of operations[249](index=249&type=chunk) - There have been **no material changes** to market risks related to commodity prices, Renewable and Low-Carbon Fuel Programs credits, and foreign currency exchange rates since the year-ended December 31, 2022 Form 10-K filing[252](index=252&type=chunk) [Item 4. Controls and Procedures](index=65&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the second quarter of 2023 - Management concluded that disclosure controls and procedures were **effective** as of June 30, 2023[253](index=253&type=chunk) - **No changes** in internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[254](index=254&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=65&type=section&id=Item%201.%20Legal%20Proceedings) There were no material developments in previously reported legal proceedings, but the company disclosed a new environmental enforcement matter involving a Notice of Violation issued to the Benicia Refinery on May 1, 2023 - **No material developments** occurred in previously reported legal proceedings[255](index=255&type=chunk) - On May 1, 2023, the Bay Area Air Quality Management District (BAAQMD) issued a **Notice of Violation (NOV)** to the Benicia Refinery, which the company is working to resolve[256](index=256&type=chunk) [Item 1A. Risk Factors](index=65&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the company's 2022 annual report, though the potential impacts of California's SBx 1-2 legislation could heighten many of the previously described risks - **No material changes** to risk factors from the 2022 Form 10-K were reported[257](index=257&type=chunk) - The potential adverse effects of California's SBx 1-2 legislation may **heighten many of the other risks** previously described[257](index=257&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the second quarter of 2023, Valero purchased 8.42 million shares of its common stock as part of publicly announced programs, with $2.5 billion remaining available for repurchase under its current authorization as of June 30, 2023 Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2023 | 21,404 | $120.66 | | May 2023 | 3,091,392 | $111.30 | | June 2023 | 5,308,656 | $112.00 | | **Total** | **8,421,452** | **$111.76** | - As of June 30, 2023, **$2.5 billion** remained available for purchase under the company's share repurchase program authorized in February 2023[260](index=260&type=chunk) [Item 5. Other Information](index=66&type=section&id=Item%205.%20Other%20Information) On July 21, 2023, the company amended its Supplemental Executive Retirement Plan to modify the interest rate calculation for lump-sum benefits, and no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during Q2 2023 - The company **amended** its Supplemental Executive Retirement Plan, effective July 1, 2023, to modify the interest rate used for calculating lump-sum benefits to **reduce volatility**[261](index=261&type=chunk) - **No director or officer adopted or terminated** a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the second quarter of 2023[262](index=262&type=chunk) [Item 6. Exhibits](index=67&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the amended Supplemental Executive Retirement Plan, officer certifications, and Inline XBRL data files

Valero Energy Corp (NYSE:VLO) Q1 2023 Earnings Conference Call April 27, 2023 10:00 AM ET Company Participants Homer Bhullar - VP, IR & Finance Joseph Gorder - Chairman & CEO Richard Walsh - SVP, General Counsel & Secretary Gary Simmons - EVP & Chief Commercial Officer Lane Riggs - President & COO Jason Fraser - EVP & CFO Conference Call Participants Manav Gupta - UBS Theresa Chen - Barclays Bank Kalei Akamine - Bank of America Merrill Lynch Matthew Blair - Tudor, Pickering, Holt & Co. Jason Gabelman - TD C ...

Financial Performance - Net income attributable to Valero stockholders for Q1 2023 was $3.1 billion, a $2.2 billion increase from $905 million in Q1 2022, driven by a $2.7 billion increase in operating income[121] - Total company operating income grew by $2.659 billion to $4.043 billion in Q1 2023 compared to $1.384 billion in Q1 2022[122] - Operating income increased by $2.7 billion in Q1 2023 compared to Q1 2022, with refining segment contributing $2.6 billion due to higher gasoline and diesel margins, crude oil discounts, and throughput volumes[123] - Net income attributable to Valero Energy Corporation stockholders was $3.067 billion in Q1 2023, compared to $905 million in Q1 2022[130][133] - Operating income increased by $2.7 billion (195%) to $4.0 billion in Q1 2023, driven by a $4.8 billion decrease in cost of sales[141] - Total company operating income reached $4,043 million in Q1 2023, compared to $1,384 million in Q1 2022[167] Segment Performance - Refining segment operating income increased by $2.6 billion to $4.057 billion in Q1 2023 compared to $1.451 billion in Q1 2022[122] - Renewable Diesel segment operating income rose by $56 million to $205 million in Q1 2023 from $149 million in Q1 2022[122] - Ethanol segment operating income increased by $38 million to $39 million in Q1 2023 from $1 million in Q1 2022[122] - Renewable Diesel segment operating income increased by $56 million in Q1 2023, driven by higher sales volumes despite lower renewable diesel prices and higher operating expenses[123] - Ethanol segment adjusted operating income increased by $37 million in Q1 2023, primarily due to higher corn-related co-product prices and production volumes, partially offset by lower ethanol prices[124] - Refining segment operating income increased by $2.6 billion (180%) to $4.1 billion in Q1 2023, with refining margin up $2.7 billion (84%)[146][147] - Renewable Diesel segment operating income increased by $56 million (38%) to $205 million in Q1 2023, with sales volumes up 1.3 million gallons per day (72%)[150][151] - Ethanol segment operating income increased by $38 million to $39 million in Q1 2023, driven by a $32 million (20%) increase in ethanol margin[154][155] - Refining operating income increased to $4,057 million in Q1 2023, up from $1,451 million in Q1 2022[161] - Renewable Diesel operating income rose to $205 million in Q1 2023, compared to $149 million in Q1 2022[162] - Ethanol operating income surged to $39 million in Q1 2023, up from $1 million in Q1 2022[163] Cash Flow and Liquidity - Operations generated $3.2 billion of cash in Q1 2023, with $524 million used for capital investments and $1.8 billion returned to stockholders through stock buybacks and dividends[120] - Cash and cash equivalents increased by $659 million to $5.5 billion as of March 31, 2023, from $4.9 billion as of December 31, 2022[120] - Liquidity stood at $10.8 billion as of March 31, 2023[120] - Cash and cash equivalents totaled $5,403 million as of March 31, 2023[170] - Operating activities generated $3,170 million in cash flow for Q1 2023, up from $588 million in Q1 2022[174] - Net increase in cash and cash equivalents was $659 million for Q1 2023[174] Capital Investments and Debt Management - The company purchased approximately $199 million of its public debt during Q1 2023, contributing to debt reduction efforts[120] - Capital investments for Q1 2023 amounted to $549 million, including $114 million related to DGD[175] - Debt repayments and finance lease obligations totaled $1,156 million in Q1 2023[174] - Return to stockholders through stock repurchases and dividends was $1,830 million in Q1 2023[174] - Capital investments attributable to Valero for the three months ended March 31, 2023, totaled $467 million, compared to $718 million in the same period in 2022[186] - Valero expects to incur approximately $2.0 billion in capital investments for 2023, with $1.5 billion allocated to sustaining the business and the remainder towards growth strategies, including over 40% for low-carbon business expansion[186] - During the three months ended March 31, 2023, Valero purchased and retired approximately $199 million of its public debt[188] - Valero repurchased 10,993,341 shares for $1.5 billion during the three months ended March 31, 2023, with $899 million remaining under the October 2022 Program and $2.5 billion available under the 2023 Program[189] - Valero's fixed-rate debt as of March 31, 2023, totaled $8.265 billion, with an average interest rate of 4.8%, while floating-rate debt stood at $852 million with an average interest rate of 8.1%[197] Market Conditions and Demand - Strong worldwide demand for petroleum-based transportation fuels and constrained supply contributed to strong refining margins in Q1 2023[119] - Gasoline and diesel demand have returned to near pre-pandemic levels, while jet fuel demand remains below pre-pandemic levels but continues to improve[125] - Light product inventories in the U.S. and Europe are below historical levels, supporting continued high utilization of refining capacity[125] - Crude oil discounts have narrowed due to reduced sour crude oil production from OPEC+ suppliers but are expected to remain near current levels[126] - Renewable diesel margins are expected to remain consistent with current levels[126] - Brent crude oil price averaged $82.20 per barrel in Q1 2023, down from $97.34 per barrel in Q1 2022[136] - Total company revenues decreased by $2.1 billion (5.5%) in Q1 2023 compared to Q1 2022, primarily due to lower petroleum-based transportation fuel prices[141] Production and Throughput - Throughput volumes in the Refining segment increased by 130,000 barrels per day (4.6%) in Q1 2023 compared to Q1 2022[146] - Renewable Diesel segment margin increased by $123 million (54%) in Q1 2023, primarily due to higher sales volumes from new production capacity[151] - Ethanol production volumes increased by 138,000 gallons per day (3.4%) in Q1 2023 compared to Q1 2022[154] Other Financial Items - Other income increased by $149 million in Q1 2023, including a $61 million gain from early retirement of debt[143][144] - Income tax expense increased by $628 million (249%) in Q1 2023 due to higher pre-tax income[144] - As of March 31, 2023, Valero held $4.3 billion in cash and cash equivalents in foreign subsidiaries, which can be repatriated with potential tax implications[191] - Valero plans to contribute $108 million to its pension plans and $21 million to other postretirement benefit plans during 2023[190] Environmental and Regulatory Matters - Valero resolved an environmental enforcement matter with the EPA related to a 2019 emissions event at its Benicia Refinery through a Consent Agreement and Final Order on March 30, 2023[203]

PART I [BUSINESS AND PROPERTIES](index=5&type=section&id=ITEMS%201.%20and%202.%20BUSINESS%20AND%20PROPERTIES) Valero manufactures and markets petroleum-based and low-carbon liquid transportation fuels through Refining, Renewable Diesel, and Ethanol segments, prioritizing environmental management and carbon intensity reduction - Valero is a multinational manufacturer and marketer of **petroleum-based and low-carbon liquid transportation fuels** and petrochemical products, primarily selling in the U.S., Canada, the U.K., Ireland, and Latin America[10](index=10&type=chunk) Operational Capacities (as of December 31, 2022) | Segment | Asset Type | Location | Capacity | | :---------------- | :------------------ | :------------------------------------- | :------------------------------------- | | Refining | Petroleum Refineries| U.S., Canada, U.K. | ~3.2 million barrels per day (BPD) | | Renewable Diesel | Renewable Diesel Plants| U.S. Gulf Coast | ~1.2 billion gallons per year | | Ethanol | Ethanol Plants | U.S. Mid-Continent | ~1.6 billion gallons per year | - The company has invested **$5.1 billion** in low-carbon fuels businesses, including **$3.4 billion** in renewable diesel and **$1.7 billion** in ethanol, with plans for additional growth[25](index=25&type=chunk) - Valero's environmental management is supported by three programs: Commitment to Excellence Management System (CTEMS), Environmental Excellence and Risk Assessment (EERA), and an expanding Fuels Regulatory Assurance Program to include a Low-Carbon Assurance Program[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [Our Business](index=5&type=section&id=Our%20Business) [Our Comprehensive Liquid Fuels Strategy](index=5&type=section&id=Our%20Comprehensive%20Liquid%20Fuels%20Strategy) [Environmental Management Systems](index=9&type=section&id=Environmental%20Management%20Systems) [Our Operations](index=10&type=section&id=Our%20Operations) [Government Regulations](index=17&type=section&id=Government%20Regulations) [Human Capital](index=18&type=section&id=Human%20Capital) [Properties](index=21&type=section&id=Properties) [Available Information](index=21&type=section&id=Available%20Information) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) Valero faces various risks including volatile margins influenced by feedstock and product prices, economic uncertainty, and geopolitical events, alongside evolving sentiment towards fossil fuels and increasing low-carbon fuel competition. Operational risks include dependency on natural gas and electricity, supply chain disruptions, and potential interruptions at refineries, while legal and regulatory risks stem from climate change policies, complex low-carbon fuel programs, and increasing scrutiny on ESG matters. Cybersecurity and data privacy risks also pose significant threats to business operations and financial stability. - Financial results are affected by **volatile margins**, dependent on feedstock prices (crude oil, corn, waste/renewable feedstocks) and product market prices, influenced by global and regional supply/demand, economic conditions, and geopolitical events like the Russia-Ukraine conflict[88](index=88&type=chunk)[89](index=89&type=chunk) - Evolving sentiment and regulations regarding fossil fuels and GHG emissions, including the rise of alternative fuel vehicles (EVs) and increased competition in low-carbon fuels, may decrease demand for Valero's products and adversely affect performance[93](index=93&type=chunk)[94](index=94&type=chunk) - Operations are vulnerable to disruptions in natural gas and electricity supply, logistical interruptions, and reliance on third-party transportation for feedstocks and products, potentially disadvantaging Valero against integrated competitors[103](index=103&type=chunk)[104](index=104&type=chunk)[113](index=113&type=chunk)[115](index=115&type=chunk) - Legal, political, and regulatory developments related to climate change, GHG emissions, and low-carbon fuel programs (RFS, LCFS, CFR) could increase compliance costs, reduce demand for liquid fuels, and lead to litigation or regulatory actions[123](index=123&type=chunk)[124](index=124&type=chunk)[134](index=134&type=chunk)[138](index=138&type=chunk) - Significant breaches of information technology systems and increasing legal/regulatory focus on data privacy and security issues pose risks of data loss, system interruption, reputational damage, increased costs, and potential litigation[148](index=148&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) [Risks Related to Our Business, Industry, and Operations](index=22&type=section&id=Risks%20Related%20to%20Our%20Business%2C%20Industry%2C%20and%20Operations) [Legal, Government, and Regulatory Risks](index=29&type=section&id=Legal%2C%20Government%2C%20and%20Regulatory%20Risks) [Cyber Security and Privacy Related Risks](index=34&type=section&id=Cyber%20Security%20and%20Privacy%20Related%20Risks) [General Risk Factors](index=35&type=section&id=General%20Risk%20Factors) [Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - No unresolved staff comments[160](index=160&type=chunk) [Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) Valero is involved in various legal proceedings and environmental enforcement matters, including those with the EPA, Texas Attorney General, Bay Area Air Quality Management District, and Texas Commission on Environmental Quality, which are not expected to materially affect its financial condition, results of operations, or liquidity. - Valero is subject to legal proceedings, claims, and liabilities arising in the ordinary course of business, with losses accrued when probable and reasonably estimable[161](index=161&type=chunk)[365](index=365&type=chunk) - The company is involved in environmental enforcement matters with the EPA (Benicia Refinery), Texas AG (Port Arthur Refinery), BAAQMD (Benicia Refinery), and TCEQ (Corpus Christi East Refinery)[163](index=163&type=chunk)[164](index=164&type=chunk) - Despite ongoing environmental proceedings, Valero believes that if any were decided against them, there would be no material effect on its financial condition, results of operations, and liquidity[162](index=162&type=chunk) [Litigation](index=37&type=section&id=Litigation) [Environmental Enforcement Matters](index=37&type=section&id=Environmental%20Enforcement%20Matters) [Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There are no mine safety disclosures to report - No mine safety disclosures[164](index=164&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Valero's common stock trades on the NYSE under 'VLO', with 4,562 holders of record as of January 31, 2023, and the Board considers quarterly dividends subject to financial performance. The company actively repurchased shares in Q4 2022, completing a **$2.5 billion** program and authorizing another **$2.5 billion** in October 2022, with **$2.3 billion** remaining, and an additional **$2.5 billion** program authorized in February 2023. - Valero's common stock trades on the NYSE under the symbol **'VLO'**, with **4,562 holders of record** as of January 31, 2023[166](index=166&type=chunk) - Dividends are considered quarterly by the Board and depend on financial condition, results of operations, cash flows, and other factors[166](index=166&type=chunk) Common Stock Purchases (Q4 2022) | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :------------ | :--------------------- | :------------------------------- | | October 2022 | 94,879 | 127.85 | | November 2022 | 5,718,669 | 134.80 | | December 2022 | 7,983,898 | 122.03 | | **Total** | **13,797,446** | **127.36** | - Valero completed a **$2.5 billion** share purchase program in Q4 2022 and authorized an additional **$2.5 billion** program in October 2022, with **$2.3 billion** remaining as of December 31, 2022, and another **$2.5 billion** program authorized on February 23, 2023[167](index=167&type=chunk) [Reserved](index=36&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Valero's financial performance in 2022 was significantly boosted by strong worldwide demand for petroleum-based transportation fuels and constrained supply, leading to a substantial increase in refining margins and net income. The company generated **$12.6 billion** in cash from operations, used for capital investments, debt reduction, and stockholder returns, with key operational highlights including increased adjusted operating income in Refining and Renewable Diesel, while Ethanol saw a decrease due to higher corn prices. The outlook anticipates continued strong demand and high refining capacity utilization, with renewable diesel margins remaining consistent. - Valero reported **$11.5 billion** in net income attributable to stockholders for the year ended December 31, 2022, a significant increase from **$930 million** in 2021, primarily due to a **$13.6 billion** increase in operating income[190](index=190&type=chunk) Adjusted Operating Income by Segment (Millions of Dollars) | Segment | 2022 ($M) | 2021 ($M) | Change ($M) | | :--------------- | :-------- | :-------- | :---------- | | Refining | 15,762 | 1,944 | 13,818 |\n| Renewable Diesel | 774 | 712 | 62 |\n| Ethanol | 151 | 522 | (371) |\n| Total Company | 15,710 | 2,264 | 13,446 | - Refining segment adjusted operating income increased by **$13.8 billion**, driven by higher gasoline and distillate margins and increased throughput volumes, partially offset by lower margins on other products and higher operating expenses[191](index=191&type=chunk)[215](index=215&type=chunk) - Renewable Diesel segment adjusted operating income increased by **$62 million**, primarily due to higher sales volumes (up **1.2 million gallons per day**) and higher renewable diesel prices, partially offset by increased feedstock costs and unfavorable commodity derivative impacts[192](index=192&type=chunk)[217](index=217&type=chunk)[220](index=220&type=chunk) - Ethanol segment adjusted operating income decreased by **$371 million**, mainly due to higher corn prices and operating expenses, despite higher ethanol and co-product prices[192](index=192&type=chunk)[225](index=225&type=chunk) - The company generated **$12.6 billion** in cash from operations in 2022, which was used for **$2.7 billion** in capital investments, **$2.7 billion** in debt reduction, and **$6.1 billion** returned to stockholders through share repurchases and dividends[188](index=188&type=chunk) [CAUTIONARY STATEMENT FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995](index=40&type=section&id=CAUTIONARY%20STATEMENT%20FOR%20THE%20PURPOSE%20OF%20SAFE%20HARBOR%20PROVISIONS%20OF%20THE%20PRIVATE%20SECURITIES%20LITIGATION%20REFORM%20ACT%20OF%201995) [NON-GAAP FINANCIAL MEASURES](index=43&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) [OVERVIEW AND OUTLOOK](index=44&type=section&id=OVERVIEW%20AND%20OUTLOOK) [RESULTS OF OPERATIONS](index=47&type=section&id=RESULTS%20OF%20OPERATIONS) [LIQUIDITY AND CAPITAL RESOURCES](index=59&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) [CRITICAL ACCOUNTING ESTIMATES](index=66&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) [Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Valero is exposed to market risks from commodity price volatility (feedstocks, products, natural gas), compliance program credit prices (RINs, LCFS), and foreign currency exchange rates, which are managed using derivative instruments and contracts. A **10%** change in underlying prices for commodity derivatives or compliance credits was not material as of December 31, 2022, and interest rate risk on debt instruments is also managed, with a **10%** change in floating rates not having a material effect. - Valero is exposed to market risks from volatility in feedstock prices (crude oil, waste/renewable feedstocks, corn), product prices, and natural gas prices, managed using commodity derivative instruments (futures and options)[294](index=294&type=chunk) - The company faces market risk from the volatility in prices of compliance credits for Renewable and Low-Carbon Fuel Programs (e.g., RINs, LCFS credits), managed through purchasing contracts[296](index=296&type=chunk) Debt Instruments by Expected Maturity (Millions of Dollars, December 31, 2022) | Type | 2023 ($M) | 2024 ($M) | 2025 ($M) | 2026 ($M) | 2027 ($M) | Thereafter ($M) | Total ($M) | Average Interest Rate (%) | | :------------ | :-------- | :-------- | :-------- | :-------- | :-------- | :-------------- | :--------- | :------------------------ | | Fixed rate | — | 167 | 441 | 672 | 578 | 6,606 | 8,464 | 4.8 |\n| Floating rate | 861 | — | — | — | — | — | 861 | 7.1 | - Foreign currency risk from operations denominated in non-local currencies is managed using foreign currency contracts, with fair values not material as of December 31, 2022 and 2021[301](index=301&type=chunk) [Commodity Price Risk](index=68&type=section&id=Commodity%20Price%20Risk) [Compliance Program Price Risk](index=68&type=section&id=Compliance%20Program%20Price%20Risk) [Interest Rate Risk](index=69&type=section&id=Interest%20Rate%20Risk) [Foreign Currency Risk](index=69&type=section&id=Foreign%20Currency%20Risk) [Financial Statements and Supplementary Data](index=66&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Valero's audited consolidated financial statements for the years ended December 31, 2022, 2021, and 2020, including balance sheets, statements of income, comprehensive income, equity, and cash flows, with management affirming the effectiveness of internal control over financial reporting, attested by KPMG LLP. Detailed notes provide further insights into business operations, significant accounting policies, segment information, debt, equity, and fair value measurements. - Management evaluated and concluded that Valero's internal control over financial reporting was effective as of December 31, 2022, based on COSO criteria[303](index=303&type=chunk) - KPMG LLP issued an unqualified opinion on the effectiveness of Valero's internal control over financial reporting and on the consolidated financial statements for the three-year period ended December 31, 2022[307](index=307&type=chunk)[317](index=317&type=chunk) Consolidated Balance Sheet Highlights (Millions of Dollars) | Item | December 31, 2022 ($M) | December 31, 2021 ($M) | | :------------------------ | :--------------------- | :--------------------- | | Total Assets | 60,982 | 57,888 |\n| Total Current Assets | 24,133 | 21,165 |\n| Property, Plant, & Equip. (net)| 30,978 | 30,847 |\n| Total Liabilities | 35,514 | 38,071 |\n| Total Equity | 25,468 | 19,817 | Consolidated Statements of Income Highlights (Millions of Dollars) | Item | 2022 ($M) | 2021 ($M) | 2020 ($M) | | :--------------------------------------- | :-------- | :-------- | :-------- | | Revenues | 176,383 | 113,977 | 64,912 |\n| Total Cost of Sales | 159,587 | 110,848 | 65,652 |\n| Operating Income (Loss) | 15,690 | 2,130 | (1,579) |\n| Net Income (Loss) attributable to Valero | 11,528 | 930 | (1,421) |\n| Earnings (Loss) per Common Share | 29.05 | 2.27 | (3.50) | Consolidated Statements of Cash Flows Highlights (Millions of Dollars) | Item | 2022 ($M) | 2021 ($M) | 2020 ($M) | | :------------------------------------ | :-------- | :-------- | :-------- | | Net cash provided by operating activities | 12,574 | 5,859 | 948 |\n| Net cash used in investing activities | (2,805) | (2,159) | (2,425) |\n| Net cash provided by (used in) financing activities | (8,849) | (2,846) | 2,077 |\n| Net increase in cash and cash equivalents | 740 | 809 | 730 | [MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING](index=70&type=section&id=MANAGEMENT'S%20REPORT%20ON%20INTERNAL%20CONTROL%20OVER%20FINANCIAL%20REPORTING) [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM](index=71&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM) [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM](index=73&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM_73) [CONSOLIDATED BALANCE SHEETS](index=75&type=section&id=VALERO%20ENERGY%20CORPORATION%20CONSOLIDATED%20BALANCE%20SHEETS) [CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=77&type=section&id=VALERO%20ENERGY%20CORPORATION%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) [CONSOLIDATED STATEMENTS OF EQUITY](index=78&type=section&id=VALERO%20ENERGY%20CORPORATION%20CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) [CONSOLIDATED STATEMENTS OF CASH FLOWS](index=79&type=section&id=VALERO%20ENERGY%20CORPORATION%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) [NOTES TO CONSOLIDATED FINANCIAL STATEMENTS](index=81&type=section&id=VALERO%20ENERGY%20CORPORATION%20NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=140&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There are no changes in or disagreements with accountants on accounting and financial disclosure to report - No changes in or disagreements with accountants on accounting and financial disclosure[642](index=642&type=chunk) [Controls and Procedures](index=140&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management has assessed the effectiveness of Valero's disclosure controls and procedures as of December 31, 2022, concluding they were effective, and no material changes occurred in internal control during the last fiscal quarter. - Management concluded that Valero's disclosure controls and procedures were effective as of December 31, 2022[642](index=642&type=chunk) - No material changes occurred in internal control over financial reporting during the last fiscal quarter[643](index=643&type=chunk) [Other Information](index=140&type=section&id=Item%209B.%20Other%20Information) Valero exceeded its 2025 GHG reduction/displacement target three years ahead of schedule, leading the Human Resources and Compensation Committee to modify the energy transition performance modifier for performance shares to align with the 2035 GHG reduction/displacement target. - Valero's performance exceeded its **2025 GHG reduction/displacement target** three years ahead of schedule[644](index=644&type=chunk) - The Human Resources and Compensation Committee approved a modification to the energy transition performance modifier for performance shares, continuing it to the **2035 GHG reduction/displacement target**[644](index=644&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=140&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This section is reserved and contains no information PART III [ITEMS 10-14.](index=141&type=section&id=ITEMS%2010-14.) Information required by Items 10 through 14 of Form 10-K, covering topics such as Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Related Transactions, and Principal Accountant Fees, is incorporated by reference from the definitive Proxy Statement for the 2023 annual meeting of stockholders, expected to be filed by March 31, 2023. - Information for Items 10-14 is incorporated by reference from the definitive Proxy Statement for the 2023 annual meeting of stockholders[646](index=646&type=chunk) - The Proxy Statement is expected to be filed with the SEC on or before March 31, 2023[646](index=646&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=141&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements included in Item 8, confirms that no financial statement schedules are submitted due to inapplicability or inclusion in notes, and provides an index of exhibits filed as part of this Form 10-K, including corporate documents, indentures, and compensation plans. - Financial statements are included in Item 8 of this Form 10-K[647](index=647&type=chunk) - No financial statement schedules are submitted as required information is either inapplicable or included in the consolidated financial statements or notes[648](index=648&type=chunk) - An index of exhibits is provided, including corporate governance documents, debt indentures, and employee compensation plans[649](index=649&type=chunk)[650](index=650&type=chunk)[651](index=651&type=chunk) [Form 10-K Summary](index=145&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is reserved and contains no information - No Form 10-K Summary is provided[655](index=655&type=chunk) SIGNATURE The annual report on Form 10-K is duly signed on behalf of Valero Energy Corporation by Joseph W. Gorder, Chairman of the Board and Chief Executive Officer, on February 23, 2023. - The report is signed by Joseph W. Gorder, Chairman of the Board and Chief Executive Officer, on February 23, 2023[656](index=656&type=chunk) POWER OF ATTORNEY This section grants power of attorney to Joseph W. Gorder, Jason W. Fraser, and Richard J. Walsh, or any of them, to sign and file amendments and supplements to this annual report on Form 10-K, and lists the signatures of the company's directors and principal officers, confirming their authorization and capacities as of February 23, 2023. - Joseph W. Gorder, Jason W. Fraser, and Richard J. Walsh are appointed as attorneys-in-fact to sign and file amendments and supplements to the Form 10-K[658](index=658&type=chunk) - The report is signed by the Chairman and CEO, Principal Financial and Accounting Officer, and all Directors, with dates of February 23, 2023[659](index=659&type=chunk)[660](index=660&type=chunk)

Valero Energy Corporation (NYSE:VLO) Q4 2022 Earnings Conference Call January 26, 2023 10:00 AM ET Company Participants Homer Bhullar - Vice President, Investor Relations Joe Gorder - Chairman & Chief Executive Officer Lane Riggs - President & Chief Operating Officer Jason Fraser - Executive Vice President & Chief Financial Officer Gary Simmons - Executive Vice President & Chief Commercial Officer Rich Walsh - Senior Vice President & General Counsel Conference Call Participants Theresa Chen - Barclays Doug ...