Valero(VLO) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section provides Valero Energy Corporation's unaudited consolidated financial information, including financial statements, management's discussion, and market risk disclosures ITEM 1. FINANCIAL STATEMENTS This section presents Valero Energy Corporation's unaudited consolidated financial statements and condensed notes, highlighting a decline in net income and EPS for the period ended June 30, 2025, primarily due to an asset impairment loss Consolidated Balance Sheets The consolidated balance sheets show a slight decrease in total assets and total equity for Valero Energy Corporation as of June 30, 2025, compared to December 31, 2024, while total liabilities also decreased Consolidated Balance Sheet Highlights (Millions of Dollars) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total current assets | $23,804 | $23,737 | | Property, plant, and equipment, net | $28,236 | $29,314 | | Total assets | $59,433 | $60,143 | | Total current liabilities | $14,677 | $15,495 | | Total equity | $26,947 | $27,521 | | Total liabilities and equity | $59,433 | $60,143 | Consolidated Statements of Income Valero experienced a significant decline in net income and earnings per common share for both the three and six months ended June 30, 2025, compared to the same periods in 2024, largely impacted by an asset impairment loss in the six-month period Consolidated Statements of Income Highlights (Millions of Dollars, except per share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $29,889 | $34,490 | $60,147 | $66,249 | | Total cost of sales | $28,640 | $33,051 | $58,391 | $62,827 | | Asset impairment loss | — | — | $1,131 | — | | Operating income | $997 | $1,221 | $97 | $2,900 | | Net income attributable to Valero Energy Corporation stockholders | $714 | $880 | $119 | $2,125 | | Earnings per common share | $2.28 | $2.71 | $0.37 | $6.47 | Consolidated Statements of Comprehensive Income Comprehensive income for Valero Energy Corporation stockholders increased for the three months ended June 30, 2025, but decreased significantly for the six months ended June 30, 2025, compared to the prior year, primarily influenced by foreign currency translation adjustments Consolidated Statements of Comprehensive Income Highlights (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $663 | $926 | $11 | $2,256 | | Other comprehensive income (loss) | $556 | $(121) | $721 | $(349) | | Comprehensive income attributable to Valero Energy Corporation stockholders | $1,270 | $763 | $838 | $1,823 | Consolidated Statements of Equity The consolidated statements of equity show a decrease in total equity from December 31, 2024, to June 30, 2025, primarily due to common stock dividends and purchases of common stock for treasury, partially offset by other comprehensive income Consolidated Statements of Equity Highlights (Millions of Dollars) | Metric | Balance as of December 31, 2024 | Balance as of June 30, 2025 | | :------------------------------------ | :------------------------------ | :-------------------------- | | Total Valero Energy Corporation stockholders' equity | $24,512 | $24,078 | | Noncontrolling interests | $3,009 | $2,869 | | Total equity | $27,521 | $26,947 | - For the six months ended June 30, 2025, Valero reported net income of $119 million, paid $710 million in common stock dividends ($2.26 per share), and purchased $613 million of common stock for treasury[19] Consolidated Statements of Cash Flows Cash flows from operating activities significantly decreased for the six months ended June 30, 2025, compared to the same period in 2024, while cash used in financing activities also decreased due to lower share repurchases and debt repayments Consolidated Statements of Cash Flows Highlights (Millions of Dollars) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,888 | $4,318 | | Net cash used in investing activities | $(1,047) | $(1,029) | | Net cash used in financing activities | $(1,231) | $(3,191) | | Net decrease in cash, cash equivalents, and restricted cash | $(117) | $(10) | | Cash, cash equivalents, and restricted cash at end of period | $4,712 | $5,414 | Condensed Notes to Consolidated Financial Statements The condensed notes detail accounting policies, asset impairment, inventory, debt, equity, VIEs, employee benefits, income taxes, EPS, segment data, cash flow, fair value, and price risk management 1. Basis of Presentation and Significant Accounting Policies This section outlines the basis of presentation for interim financial statements and the adoption of new accounting standards, which primarily impact disclosures without affecting financial position or results - Valero adopted ASU 2023-07 (Segment Reporting) effective January 1, 2024, and ASU 2023-09 (Income Taxes) effective January 1, 2025, neither of which affected the company's financial position or results of operations, but both resulted in additional disclosures[28][30] - ASU 2024-03 (Expense Disaggregation) is expected to be adopted effective January 1, 2027, and will not affect financial position or results of operations, but will result in additional disclosures[31] 2. Impairment Valero recognized a combined asset impairment loss of $1.1 billion in its Refining segment in March 2025, related to its Benicia and Wilmington refineries in California. This decision followed a plan to cease refining operations at the Benicia Refinery by April 2026 due to increased operational restrictions and potential adverse effects from California legislation - Valero approved a plan to cease refining operations at its Benicia Refinery by the end of April 2026 due to California legislation imposing increased operational restrictions[32][33][35] - A combined asset impairment loss of $1.1 billion was recognized in the Refining segment in March 2025 for the Benicia and Wilmington refineries, reducing their carrying values to estimated fair values of $722 million and $847 million, respectively[33] - Expected asset retirement obligations of $337 million were recognized, primarily reflecting estimated decommissioning costs for the impaired assets[34] 3. Inventories Total inventories decreased slightly from $7,761 million as of December 31, 2024, to $7,538 million as of June 30, 2025. The replacement cost of LIFO inventories exceeded their carrying amounts by $3.7 billion as of June 30, 2025 Inventories (Millions of Dollars) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Refinery feedstocks | $1,875 | $2,167 | | Refined petroleum products and blendstocks | $4,084 | $4,016 | | Renewable diesel feedstocks and products | $874 | $872 | | Ethanol feedstocks and products | $314 | $342 | | Materials and supplies | $391 | $364 | | Total Inventories | $7,538 | $7,761 | - As of June 30, 2025, the replacement cost (market value) of LIFO inventories exceeded their LIFO carrying amounts by $3.7 billion, a decrease from $4.0 billion at December 31, 2024[37] 4. Debt Valero issued $650 million of 5.150 percent Senior Notes due February 15, 2030, in February 2025, using a portion of the proceeds to repay maturing senior notes. The company maintains various committed and uncommitted credit facilities, with significant availability under its Valero Revolver and accounts receivable sales facility - On February 7, 2025, Valero issued $650 million of 5.150 percent Senior Notes due February 15, 2030, using net proceeds to repay $189 million and $251 million of maturing senior notes[38] Credit Facilities as of June 30, 2025 (Millions of Dollars) | Facility | Facility Amount | Outstanding Borrowings | Letters of Credit Issued | Availability | | :-------------------------------- | :-------------- | :--------------------- | :----------------------- | :----------- | | Valero Revolver | $4,000 | $— | $2 | $3,998 | | Accounts receivable sales facility | $1,300 | $— | n/a | $1,300 | | DGD Revolver | $400 | $100 | $23 | $277 | | IEnova Revolver | $830 | $37 | n/a | $793 | - The accounts receivable sales facility's maturity date was extended to July 2026 in July 2025[41] 5. Equity Valero purchased 4,642,535 shares for treasury totaling $613 million during the six months ended June 30, 2025. The Board declared a quarterly cash dividend of $1.13 per common share payable on September 2, 2025. Accumulated other comprehensive loss significantly improved, moving from $(1,272) million at December 31, 2024, to $(553) million at June 30, 2025, primarily due to foreign currency translation adjustments - Valero purchased 2,567,930 shares for treasury during the three months ended June 30, 2025, and 4,642,535 shares during the six months ended June 30, 2025[47] - The Board authorized share purchase programs with $1.2 billion remaining under the February 2024 Program and $2.5 billion under the September 2024 Program as of June 30, 2025[48] - Accumulated other comprehensive loss improved from $(1,272) million at December 31, 2024, to $(553) million at June 30, 2025, driven by a $726 million foreign currency translation adjustment gain for the six months ended June 30, 2025[19][50] 6. Variable Interest Entities Valero consolidates key Variable Interest Entities like Diamond Green Diesel Holdings and Central Mexico Terminals, whose assets are restricted to their own obligations - Valero consolidates DGD, a joint venture producing renewable diesel, naphtha, and neat sustainable aviation fuel (SAF) from waste and renewable feedstocks[53] - Central Mexico Terminals, a group of IEnova subsidiaries, is also a consolidated VIE with which Valero has terminaling agreements but no ownership interest[53] - The assets of consolidated VIEs can only be used to settle their own obligations, and their creditors have no recourse to Valero's other assets[51] 7. Employee Benefit Plans Net periodic benefit cost for pension plans and other postretirement benefit plans for the three and six months ended June 30, 2025, remained relatively stable compared to the prior year, with pension plans showing a net cost of $6 million and $13 million for the respective periods Net Periodic Benefit Cost (Millions of Dollars) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Pension Plans | $6 | $2 | $13 | $4 | | Other Postretirement Benefit Plans | $2 | $3 | $4 | $6 | 8. Income Taxes Valero's effective tax rate increased due to an asset impairment loss, while the recently enacted OBBB is not expected to materially impact 2025 financial results - The effective tax rate for the three and six months ended June 30, 2025, was higher than the U.S. federal statutory rate due to lower U.S. income before income tax expense, primarily from the $1.1 billion asset impairment loss in California[58][164] - The One Big Beautiful Bill Act (OBBB), enacted July 4, 2025, extends clean fuel production credits, requires U.S./Mexico/Canada feedstocks for credits after 2025, eliminates special SAF credit rates after 2025, permanently reinstates 100% expensing of qualified property, and modifies international tax provisions[60][61] - Valero does not expect the OBBB to have a material effect on its financial position, results of operations, or liquidity in 2025[60][217] 9. Earnings Per Common Share Earnings per common share (EPS) significantly decreased for both basic and diluted measures for the three and six months ended June 30, 2025, compared to the prior year, reflecting lower net income attributable to Valero stockholders Earnings Per Common Share (Dollars and Shares in Millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income available to common stockholders | $712 | $877 | $117 | $2,119 | | Weighted-average common shares outstanding | 312 | 324 | 313 | 327 | | Earnings per common share | $2.28 | $2.71 | $0.37 | $6.47 | | Earnings per common share – assuming dilution | $2.28 | $2.71 | $0.37 | $6.47 | 10. Revenues and Segment Information Valero's three segments, Refining, Renewable Diesel, and Ethanol, saw overall revenue decrease for the three and six months ended June 30, 2025, with varied segment performance - Valero has three reportable segments: Refining, Renewable Diesel, and Ethanol, each with distinct products, technologies, and marketing strategies[67] Revenues from External Customers by Segment (Millions of Dollars) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Refining | $28,324 | $33,044 | $57,081 | $63,187 | | Renewable Diesel | $565 | $554 | $1,058 | $1,256 | | Ethanol | $1,000 | $892 | $2,008 | $1,806 | | Total Revenues | $29,889 | $34,490 | $60,147 | $66,249 | Total Assets by Reportable Segment (Millions of Dollars) | Segment | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Refining | $46,223 | $46,729 | | Renewable Diesel | $5,402 | $5,680 | | Ethanol | $1,496 | $1,545 | | Corporate and eliminations | $6,312 | $6,189 | | Total assets | $59,433 | $60,143 | 11. Supplemental Cash Flow Information Changes in current assets and liabilities for the six months ended June 30, 2025, resulted in a net decrease of $168 million, primarily due to a decrease in accounts payable and inventories, partially offset by an increase in receivables. Interest paid was $263 million, and income taxes paid, net, were $283 million for the six months ended June 30, 2025 Changes in Current Assets and Liabilities (Millions of Dollars) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Receivables, net | $(112) | $(801) | | Inventories | $418 | $(503) | | Accounts payable | $(613) | $2,021 | | Changes in current assets and current liabilities | $(168) | $629 | - For the six months ended June 30, 2025, the decrease in accounts payable was primarily due to lower crude oil and other feedstock prices, while the decrease in inventories was due to lower inventory levels[82] Cash Flows Related to Interest and Income Taxes (Millions of Dollars) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Interest paid in excess of amount capitalized | $263 | $283 | | Income taxes paid, net | $283 | $659 | 12. Fair Value Measurements Valero measures assets and liabilities at fair value, including commodity derivatives and impaired refinery assets, with fair values determined using market approaches and Level 3 inputs Recurring Fair Value Measurements (Millions of Dollars) - Assets as of June 30, 2025 | Asset Category | Level 1 | Level 2 | Level 3 | Total Gross Fair Value | | :-------------------------- | :------ | :------ | :------ | :--------------------- | | Commodity derivative contracts | $867 | $— | $— | $867 | | Physical purchase contracts | $— | $1 | $— | $1 | | Investments of certain benefit plans | $84 | $— | $4 | $88 | | Investments in AFS debt securities | $4 | $23 | $— | $27 | | Total | $955 | $24 | $4 | $983 | Recurring Fair Value Measurements (Millions of Dollars) - Liabilities as of June 30, 2025 | Liability Category | Level 1 | Level 2 | Level 3 | Total Gross Fair Value | | :-------------------------- | :------ | :------ | :------ | :--------------------- | | Commodity derivative contracts | $881 | $— | $— | $881 | | Physical purchase contracts | $— | $8 | $— | $8 | | Blending program obligations | $— | $140 | $— | $140 | | Foreign currency contracts | $4 | $— | $— | $4 | | Total | $885 | $148 | $— | $1,033 | - The fair values of the Benicia and Wilmington refineries, impaired as of March 31, 2025, were determined using a market approach based on recent property sales and market data, categorized as Level 3 inputs, totaling $1,569 million[92][95] 13. Price Risk Management Activities Valero uses derivative instruments, including commodity futures and options, and foreign currency contracts, to manage exposure to price volatility in commodities, foreign exchange rates, and compliance credits for Renewable and Low-Carbon Fuel Programs. The cost of meeting compliance credit obligations for Renewable and Low-Carbon Fuel Programs was $740 million for the six months ended June 30, 2025, a significant increase from $377 million in the prior year - Valero uses commodity derivative instruments (futures and options) as cash flow hedges to lock in prices for forecasted purchases/sales and as economic hedges to manage price volatility in inventories and forecasted transactions[102][103] - As of June 30, 2025, Valero had foreign currency contracts to purchase $628 million of U.S. dollars, with $453 million maturing by July 21, 2025, and the remainder by July 30, 2025[106] - The cost of meeting compliance credit obligations under Renewable and Low-Carbon Fuel Programs was $408 million for the three months and $740 million for the six months ended June 30, 2025, significantly higher than $173 million and $377 million, respectively, in 2024[107] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section analyzes Valero's financial condition and results, highlighting the impact of strong demand and a significant asset impairment loss on operating and net income for Q2 and 6M 2025 Cautionary Statement Regarding Forward-Looking Statements This section highlights that the report contains forward-looking statements regarding future performance, market conditions, operational plans, and regulatory impacts. These statements are based on current expectations and involve known and unknown risks and uncertainties, including geopolitical conflicts, market volatility, regulatory changes, and operational disruptions, which could cause actual results to differ materially - Forward-looking statements cover future Refining, Renewable Diesel, and Ethanol segment margins, feedstock costs, product prices, capital investments, liquidity, and regulatory matters[114][116] - Risks include global geopolitical conflicts, demand/supply imbalances, public health threats, acts of terrorism, severe weather events, and legislative/regulatory actions (e.g., environmental regulations, tax changes, low-carbon fuel programs)[117][118] Non-GAAP Financial Measures Valero uses non-GAAP financial measures such as adjusted operating income (for total company and segments), Refining, Renewable Diesel, and Ethanol segment margin, and capital investments attributable to Valero. These measures are provided to facilitate comparison of operating results, assess cash flows, and offer useful information by excluding items not indicative of core operating performance, but should not be considered alternatives to GAAP measures - Non-GAAP financial measures include adjusted operating income (total and by segment), Refining, Renewable Diesel, and Ethanol segment margin, and capital investments attributable to Valero[122] - These measures are used to facilitate comparison of operating results, assess cash flows, and provide useful information by adjusting for items not indicative of core operating performance[122][179] Overview and Outlook Valero's Q2 and 6M 2025 results were influenced by strong fuel demand and a $1.1 billion asset impairment, with cash from operations funding investments and returns, and a stable but potentially volatile outlook Second Quarter Results For the second quarter of 2025, net income attributable to Valero stockholders decreased by $166 million to $714 million compared to $880 million in Q2 2024. This was primarily due to a $224 million decrease in operating income, partially offset by a $97 million decrease in net income (loss) attributable to noncontrolling interest. Adjusted operating income decreased by $223 million, driven by lower Renewable Diesel and Ethanol segment performance, partially offset by an increase in Refining segment adjusted operating income Second Quarter Operating Income (Millions of Dollars) | Segment | Q2 2025 Operating Income | Q2 2024 Operating Income | Change | | :-------------------- | :----------------------- | :----------------------- | :----- | | Refining | $1,266 | $1,224 | $42 | | Renewable Diesel | $(79) | $112 | $(191) | | Ethanol | $54 | $105 | $(51) | | Total Company | $997 | $1,221 | $(224) | - Refining segment adjusted operating income increased by $41 million due to higher gasoline and distillate margins, partially offset by declining crude oil differentials and increased operating expenses[129] - Renewable Diesel segment operating income decreased by $191 million due to higher feedstock costs and decreased sales volumes, partially offset by higher product prices[129] First Six Months Results For the first six months of 2025, net income attributable to Valero stockholders significantly decreased by $2.0 billion to $119 million compared to $2.1 billion in the prior year. This substantial decline was primarily due to a $2.8 billion decrease in operating income, partially offset by a $616 million decrease in income tax expense and a $239 million decrease in net income (loss) attributable to noncontrolling interest. Adjusted operating income decreased by $1.7 billion, largely driven by a decline in the Refining segment's adjusted operating income and a significant decrease in the Renewable Diesel segment's operating income First Six Months Operating Income (Millions of Dollars) | Segment | 6M 2025 Operating Income | 6M 2024 Operating Income | Change | | :-------------------- | :----------------------- | :----------------------- | :----- | | Refining | $736 | $2,969 | $(2,233) | | Renewable Diesel | $(220) | $302 | $(522) | | Ethanol | $74 | $115 | $(41) | | Total Company | $97 | $2,900 | $(2,803) | - Refining segment adjusted operating income decreased by $1.1 billion primarily due to a decline in crude oil and other feedstock differentials, lower distillate margins, and increased operating and depreciation expenses[133] - Renewable Diesel segment operating income decreased by $522 million due to higher feedstock costs and decreased sales volumes, partially offset by higher product prices[133] - Second quarter and first six months of 2025 results were supported by strong worldwide demand for petroleum-based transportation fuels but impacted by a $1.1 billion asset impairment loss in California[123] - Valero generated $1.9 billion of cash from operations in the first six months of 2025, used for $1.1 billion in capital investments, $1.3 billion returned to stockholders, and $440 million in public debt repayment[125] - Outlook for Q3 2025: Gasoline and diesel demand expected to follow seasonal patterns, jet fuel demand improving, combined light product inventories low, and crude oil differentials expected to remain relatively stable with potential for volatility from geopolitical factors[134] Results of Operations This section details Valero's segment-specific financial and operating performance for Q2 and 6M 2025, highlighting varied revenue, cost, and operating income trends influenced by market prices and differentials Second Quarter Results - Financial Highlights For the second quarter of 2025, total revenues decreased by $4.6 billion to $29.9 billion, primarily due to lower product prices in the Refining segment, partially offset by a $4.4 billion decrease in cost of sales. Net income attributable to Valero stockholders was $714 million, down from $880 million in Q2 2024. The Renewable Diesel segment reported an operating loss of $79 million, a significant decline from $112 million operating income in Q2 2024 Q2 2025 Financial Highlights by Segment (Millions of Dollars) | Metric | Refining | Renewable Diesel | Ethanol | Corporate and Eliminations | Total | | :--------------------------------------- | :------- | :--------------- | :------ | :------------------------- | :---- | | Revenues from external customers | $28,324 | $565 | $1,000 | $— | $29,889 | | Total cost of sales | $27,056 | $1,177 | $1,151 | $(744) | $28,640 | | Operating income (loss) by segment | $1,266 | $(79) | $54 | $(244) | $997 | | Net income attributable to Valero Energy Corporation stockholders | | | | | $714 | - Total revenues decreased by $4.6 billion in Q2 2025 compared to Q2 2024, primarily due to lower product prices for petroleum-based transportation fuels in the Refining segment[142] - Net income attributable to noncontrolling interests decreased by $97 million in Q2 2025, mainly due to lower earnings from DGD (Renewable Diesel segment)[144] Second Quarter Results - Average Market Reference Prices and Differentials Q2 2025 saw decreased Brent crude prices, increased refining product margins, higher renewable diesel feedstock costs, and mixed trends in ethanol prices and corn prices Q2 Average Market Reference Prices (Dollars per Barrel/Gallon/Pound/Bushel) | Metric | Q2 2025 | Q2 2024 | | :--------------------------------------- | :------ | :------ | | Brent crude oil | $66.59 | $84.96 | | U.S. Gulf Coast CBOB gasoline less Brent | $8.99 | $7.95 | | U.S. Gulf Coast ULS diesel less Brent | $14.79 | $14.12 | | USGC used cooking oil (UCO) | $0.56 | $0.42 | | New York Harbor ethanol | $1.84 | $1.90 | | CBOT corn | $4.52 | $4.43 | Refining Segment Results (Q2) Refining segment adjusted operating income increased by $41 million in Q2 2025 to $1,270 million, driven by a $232 million increase in Refining segment margin. This margin improvement was primarily due to higher gasoline and distillate margins (approx. $390 million each), partially offset by a $450 million decline in crude oil differentials and a $100 million unfavorable impact from decreased throughput volumes. Operating expenses and depreciation also increased Refining Segment Q2 Financial & Operating Data (Millions of Dollars, Thousand Barrels/Day) | Metric | Q2 2025 | Q2 2024 | Change | | :--------------------------------------- | :------ | :------ | :----- | | Operating income | $1,266 | $1,224 | $42 | | Adjusted operating income | $1,270 | $1,229 | $41 | | Refining margin | $3,284 | $3,052 | $232 | | Throughput volumes | 2,922 | 3,010 | $(88) | - Refining segment margin increased by $232 million, primarily due to a $390 million favorable impact from increased gasoline margins and a $390 million favorable impact from increased distillate margins[147] - Offsetting factors included a $450 million unfavorable impact from declining crude oil differentials and a $100 million unfavorable impact from decreased throughput volumes (88,000 barrels per day)[147] Renewable Diesel Segment Results (Q2) Renewable Diesel segment operating income decreased by $191 million in Q2 2025, resulting in a loss of $79 million, primarily due to a $200 million decrease in Renewable Diesel segment margin. This margin decline was driven by a $260 million unfavorable impact from higher feedstock costs and a $110 million unfavorable impact from decreased sales volumes (760,000 gallons per day), partially offset by a $180 million favorable impact from higher product prices Renewable Diesel Segment Q2 Financial & Operating Data (Millions of Dollars, Thousand Gallons/Day) | Metric | Q2 2025 | Q2 2024 | Change | | :--------------------------------------- | :------ | :------ | :----- | | Operating income (loss) | $(79) | $112 | $(191) | | Renewable Diesel margin | $54 | $254 | $(200) | | Sales volumes | 2,732 | 3,492 | $(760) | - Renewable Diesel segment margin decreased by $200 million, primarily due to a $260 million unfavorable impact from higher feedstock costs and a $110 million unfavorable impact from decreased sales volumes (760,000 gallons per day)[151] - The decrease in sales volumes was primarily due to reduced production driven by unfavorable economic conditions[151] Ethanol Segment Results (Q2) Ethanol segment adjusted operating income decreased by $49 million in Q2 2025 to $54 million, primarily due to a $30 million decrease in Ethanol segment margin. This margin decline was driven by a $30 million unfavorable impact from lower ethanol prices and a $10 million unfavorable impact from higher corn prices, partially offset by a $10 million favorable impact from increased production volumes (109,000 gallons per day). Operating expenses also increased by $19 million due to higher energy costs Ethanol Segment Q2 Financial & Operating Data (Millions of Dollars, Thousand Gallons/Day) | Metric | Q2 2025 | Q2 2024 | Change | | :--------------------------------------- | :------ | :------ | :----- | | Operating income | $54 | $105 | $(51) | | Adjusted operating income | $54 | $103 | $(49) | | Ethanol margin | $217 | $247 | $(30) | | Production volumes | 4,583 | 4,474 | $109 | - Ethanol segment margin decreased by $30 million, primarily due to a $30 million unfavorable impact from lower ethanol prices and a $10 million unfavorable impact from higher corn prices[154] - Operating expenses increased by $19 million, primarily due to higher energy costs[154] First Six Months Results - Financial Highlights For the first six months of 2025, total revenues decreased by $6.1 billion to $60.1 billion, primarily due to lower product prices in the Refining segment. The company recognized a $1.1 billion asset impairment loss. Net income attributable to Valero stockholders was $119 million, a significant decrease from $2.1 billion in the prior year. The Refining segment's operating income decreased by $2.2 billion, and the Renewable Diesel segment reported an operating loss of $220 million 6M 2025 Financial Highlights by Segment (Millions of Dollars) | Metric | Refining | Renewable Diesel | Ethanol | Corporate and Eliminations | Total | | :--------------------------------------- | :------- | :--------------- | :------ | :------------------------- | :---- | | Revenues from external customers | $57,081 | $1,058 | $2,008 | $— | $60,147 | | Total cost of sales | $55,210 | $2,218 | $2,356 | $(1,393) | $58,391 | | Asset impairment loss | $1,131 | $— | $— | $— | $1,131 | | Operating income (loss) by segment | $736 | $(220) | $74 | $(493) | $97 | | Net income attributable to Valero Energy Corporation stockholders | | | | | $119 | - Total revenues decreased by $6.1 billion in the first six months of 2025 compared to 2024, primarily due to lower product prices in the Refining segment[161] - Income tax expense decreased by $616 million due to lower income before income tax expense, but the effective tax rate increased to 56% (from 22%) due to the California asset impairment loss[163][164] First Six Months Results - Average Market Reference Prices and Differentials 6M 2025 saw decreased Brent crude prices, generally lower refining product margins, increased renewable diesel feedstock costs, and mixed trends in ethanol and corn prices 6M Average Market Reference Prices (Dollars per Barrel/Gallon/Pound/Bushel) | Metric | 6M 2025 | 6M 2024 | | :--------------------------------------- | :------ | :------ | | Brent crude oil | $70.74 | $83.40 | | U.S. Gulf Coast CBOB gasoline less Brent | $6.29 | $8.04 | | U.S. Gulf Coast ULS diesel less Brent | $15.74 | $19.37 | | USGC used cooking oil (UCO) | $0.53 | $0.41 | | New York Harbor ethanol | $1.83 | $1.77 | | CBOT corn | $4.62 | $4.39 | Refining Segment Results (6M) Refining segment adjusted operating income decreased by $1.1 billion in the first six months of 2025 to $1,875 million. This was primarily due to an $812 million decrease in Refining segment margin, driven by a $770 million unfavorable impact from declining crude oil differentials, a $410 million unfavorable impact from lower distillate margins, and a $270 million unfavorable impact from other feedstock differentials. These were partially offset by a $570 million favorable impact from increased margins on other products. Operating expenses and depreciation also increased Refining Segment 6M Financial & Operating Data (Millions of Dollars, Thousand Barrels/Day) | Metric | 6M 2025 | 6M 2024 | Change | | :--------------------------------------- | :------ | :------ | :----- | | Operating income | $736 | $2,969 | $(2,233) | | Adjusted operating income | $1,875 | $2,979 | $(1,104) | | Refining margin | $5,774 | $6,586 | $(812) | | Asset impairment loss | $1,131 | $— | $1,131 | | Throughput volumes | 2,875 | 2,885 | $(10) | - Refining segment margin decreased by $812 million, primarily due to a $770 million unfavorable impact from declining crude oil differentials, a $410 million unfavorable impact from lower distillate margins, and a $270 million unfavorable impact from other feedstock differentials[168][173] - Operating expenses increased by $195 million due to higher energy costs ($96 million) and maintenance expenses ($57 million), and the effect of a favorable property tax settlement in 2024[173] Renewable Diesel Segment Results (6M) Renewable Diesel segment operating income decreased by $522 million in the first six months of 2025, resulting in a loss of $220 million, primarily due to a $540 million decrease in Renewable Diesel segment margin. This margin decline was driven by a $360 million unfavorable impact from higher feedstock costs and a $290 million unfavorable impact from decreased sales volumes (1.0 million gallons per day), partially offset by a $140 million favorable impact from higher product prices Renewable Diesel Segment 6M Financial & Operating Data (Millions of Dollars, Thousand Gallons/Day) | Metric | 6M 2025 | 6M 2024 | Change | | :--------------------------------------- | :------ | :------ | :----- | | Operating income (loss) | $(220) | $302 | $(522) | | Renewable Diesel margin | $59 | $599 | $(540) | | Sales volumes | 2,584 | 3,610 | $(1,026) | - Renewable Diesel segment margin decreased by $540 million, primarily due to a $360 million unfavorable impact from higher feedstock costs and a $290 million unfavorable impact from decreased sales volumes (1.0 million gallons per day)[172][176] - The decrease in sales volumes was primarily due to reduced production driven by unfavorable economic conditions and planned maintenance activities at the DGD St. Charles Plant[176] Ethanol Segment Results (6M) Ethanol segment adjusted operating income decreased by $68 million in the first six months of 2025 to $74 million, primarily due to a $32 million decrease in Ethanol segment margin. This margin decline was driven by a $55 million unfavorable impact from higher corn prices and a $30 million unfavorable impact from lower co-product prices, partially offset by a $35 million favorable impact from higher ethanol prices. Operating expenses also increased by $36 million due to higher energy costs Ethanol Segment 6M Financial & Operating Data (Millions of Dollars, Thousand Gallons/Day) | Metric | 6M 2025 | 6M 2024 | Change | | :--------------------------------------- | :------ | :------ | :----- | | Operating income | $74 | $115 | $(41) | | Adjusted operating income | $74 | $142 | $(68) | | Ethanol margin | $410 | $442 | $(32) | | Production volumes | 4,525 | 4,470 | $55 | - Ethanol segment margin decreased by $32 million, primarily due to a $55 million unfavorable impact from higher corn prices and a $30 million unfavorable impact from lower co-product prices (DDGs)[177] - Operating expenses increased by $36 million, primarily due to higher energy costs[182] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Valero is exposed to market risks related to commodity price volatility, foreign currency exchange rates, and the price of compliance credits for Renewable and Low-Carbon Fuel Programs. The company manages these risks through derivative instruments and closely monitors its exposure. There have been no material changes to these market risks since the last annual report - Valero is exposed to market risks from commodity price volatility, foreign currency exchange rates, and the price of compliance credits for Renewable and Low-Carbon Fuel Programs[227] - A 10 percent increase or decrease in floating interest rates would not materially affect Valero's results of operations[224] Debt Instruments by Expected Maturity (Millions of Dollars) as of June 30, 2025 | Type | Remainder of 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | Fair Value | | :--------- | :---------------- | :--- | :--- | :--- | :--- | :--------- | :---- | :--------- | | Fixed rate | $— | $672 | $564 | $1,047 | $439 | $5,585 | $8,307 | $8,054 | | Floating rate | $137 | $— | $— | $— | $— | $— | $137 | $137 | ITEM 4. CONTROLS AND PROCEDURES Management, with the participation of the principal executive and financial officers, concluded that Valero's disclosure controls and procedures were effective as of June 30, 2025. There have been no material changes in internal control over financial reporting during the last fiscal quarter - Valero's disclosure controls and procedures were effective as of June 30, 2025[228] - There has been no material change in internal control over financial reporting during the last fiscal quarter[229] PART II – OTHER INFORMATION This section covers other information including legal proceedings, risk factors, equity security sales, and exhibits ITEM 1. LEGAL PROCEEDINGS This section reports material developments in legal proceedings. The previously reported environmental enforcement matter with the Texas Attorney General against Valero's Port Arthur Refinery for alleged Clean Air Act violations has been resolved. No new proceedings requiring disclosure under SEC regulations occurred during the three months ended June 30, 2025 - The environmental enforcement matter with the Texas Attorney General against the Port Arthur Refinery for alleged Clean Air Act violations, previously reported, has been resolved[233] - No new legal proceedings requiring disclosure occurred during the three months ended June 30, 2025[231] ITEM 1A. RISK FACTORS There have been no material changes to the risk factors disclosed in Valero's annual report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported since the annual report on Form 10-K for the year ended December 31, 2024[234] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the second quarter of 2025, Valero purchased 2,567,930 shares of its common stock for treasury at an average price of $131.64 per share, totaling approximately $338 million. As of June 30, 2025, $1.2 billion remained available for purchase under the February 2024 Program and $2.5 billion under the September 2024 Program Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----- | :------------------------------- | :--------------------------- | | April 2025 | 57,866 | $115.45 | | May 2025 | 796,850 | $127.56 | | June 2025 | 1,713,214 | $134.09 | | Total | 2,567,930 | $131.64 | - As of June 30, 2025, $1.2 billion remained available for purchase under the February 2024 Program and $2.5 billion under the September 2024 Program[237] ITEM 5. OTHER INFORMATION This item states that there is no other information to report under sub-sections (a) and (b). Additionally, no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[239] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including indentures, agreements, subsidiary information, certifications, and Inline XBRL documents - Exhibits include Second Supplemental Indenture, Form of Amended and Restated Performance Share Agreement, Subsidiary Issuer of Guaranteed Securities, Rule 13a-14(a) Certifications, Section 1350 Certifications, and Inline XBRL documents[240][242] SIGNATURE The report is duly signed on behalf of Valero Energy Corporation by Jason W. Fraser, Executive Vice President and Chief Financial Officer, on July 24, 2025 - The report was signed by Jason W. Fraser, Executive Vice President and Chief Financial Officer, on July 24, 2025[245]