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| 8-K - FORM 8-K SECOND QUARTER 2017 EARNINGS RELEASE - VALERO ENERGY CORP/TX | vlo6302017q2form8-k.htm |
Exhibit 99.01
Valero Energy Reports Second Quarter 2017 Results
• | Reported net income attributable to Valero stockholders of $548 million, or $1.23 per share. |
• | Invested $461 million of growth and sustaining capital in the second quarter. |
• | Returned $658 million in cash to stockholders through dividends and stock buybacks. |
• | Expect Diamond Pipeline and Wilmington cogeneration projects to be complete and online by the end of 2017. |
SAN ANTONIO, July 27, 2017 – Valero Energy Corporation (NYSE: VLO, “Valero”) today reported net income attributable to Valero stockholders of $548 million, or $1.23 per share, for the second quarter of 2017 compared to $814 million, or $1.73 per share, for the second quarter of 2016. Second quarter 2016 adjusted net income attributable to Valero stockholders was $503 million, or $1.07 per share.
“With continued focus on safe and reliable operations, we delivered another quarter of solid operating and financial performance,” said Joe Gorder, Valero Chairman, President and Chief Executive Officer. “We’re encouraged by resilient product demand and the bullish trend in product inventory draws.”
Refining
The refining segment reported $959 million of operating income for the second quarter of 2017 compared to $1.3 billion for the second quarter of 2016. Second quarter 2017 operating income was in line with second quarter 2016 adjusted operating income of $902 million. The 2016 refining segment results have been retrospectively revised to reflect the operating results of Valero Energy Partners LP (NYSE: VLP) as a separate segment consistent with Valero’s current segment presentation, and those revised results have been adjusted to exclude the lower of cost or market inventory valuation adjustment and asset impairment loss, as shown in the accompanying earnings release tables.
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Refinery throughput capacity utilization was 96 percent, despite an external power failure at the Benicia refinery that caused an abrupt shutdown and unplanned maintenance. Throughput volumes averaged 3.0 million barrels per day in the second quarter of 2017, which was 192,000 barrels per day higher than the second quarter of 2016.
The company exported a total of 369,000 barrels per day of gasoline and diesel during the second quarter.
Biofuel blending costs were $255 million in the second quarter of 2017, which was $82 million higher than the second quarter of 2016, mainly due to higher Renewable Identification Number (RIN) expenses.
Ethanol
The ethanol segment reported $31 million of operating income for the second quarter of 2017 compared to $69 million for the second quarter of 2016. Adjusted operating income for the second quarter of 2016 was $49 million. The decrease in operating income in the second quarter of 2017 compared to the second quarter 2016 adjusted amount is attributed primarily to higher energy costs and strong industry ethanol production that pressured margins. Ethanol production volumes averaged 3.8 million gallons per day in the second quarter of 2017, which was in line with the second quarter of 2016.
VLP
The VLP segment reported $71 million of operating income for the second quarter of 2017 compared to $52 million for the second quarter of 2016. The increase in operating income was driven primarily by contributions from the Meraux and Three Rivers terminals, which were acquired subsequent to the second quarter of last year, and the Red River pipeline segment, which was acquired in January 2017.
Corporate and Other
General and administrative expenses were $178 million in the second quarter of 2017. The effective tax rate of 26 percent in the second quarter of 2017 was lower than expected due primarily to the favorable resolution of an income tax audit.
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Investing and Financing Activities
Capital investments totaled $461 million in the second quarter of 2017, of which $63 million was for turnarounds and catalyst.
Valero paid $312 million in dividends and purchased 5.4 million shares of its common stock for $346 million, resulting in total cash returned to stockholders of $658 million in the second quarter of 2017. The company continues to target a total payout ratio of at least 75 percent in 2017. Valero defines total payout ratio as the sum of dividends and stock buybacks divided by adjusted net income from continuing operations attributable to Valero stockholders.
The company generated $1.8 billion of cash from operating activities in the second quarter of 2017, of which approximately $700 million was due to changes in working capital.
Liquidity and Financial Position
Valero ended the second quarter of 2017 with $8.5 billion of total debt and $5.2 billion of cash and temporary cash investments. The debt to capital ratio, net of $2.0 billion in cash, was 24 percent.
Strategic Update
Valero continues to target $2.7 billion of total capital investments this year, consisting of $1.1 billion for growth projects and $1.6 billion for sustaining the business.
“We’re pleased with the progress we’ve made on our growth investments this year,” Gorder commented. “Before year-end, we expect to see the Wilmington cogeneration plant running and to have oil flowing through the Diamond Pipeline.”
Valero expects the Diamond Green Diesel capacity expansion and the Houston alkylation unit construction to be completed in the first half of 2018 and 2019, respectively.
Conference Call
Valero’s senior management will hold a conference call at 10 a.m. ET today to discuss this earnings release and to provide an update on operations and strategy.
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About Valero
Valero Energy Corporation, through its subsidiaries, is an international manufacturer and marketer of transportation fuels and other petrochemical products. Valero, a Fortune 50 company based in San Antonio, Texas, with approximately 10,000 employees, is an independent petroleum refiner and ethanol producer, and its assets include 15 petroleum refineries with a combined throughput capacity of approximately 3.1 million barrels per day and 11 ethanol plants with a combined production capacity of 1.4 billion gallons per year. The petroleum refineries are located in the United States (U.S.), Canada and the United Kingdom (U.K.), and the ethanol plants are located in the Mid-Continent region of the U.S. In addition, Valero owns the 2 percent general partner interest and a majority limited partner interest in Valero Energy Partners LP, a midstream master limited partnership. Valero sells its products in both the wholesale rack and bulk markets, and approximately 7,400 outlets carry Valero’s brand names in the U.S., Canada, the U.K. and Ireland. Please visit www.valero.com for more information.
Valero Contacts
Investors:
John Locke, Vice President – Investor Relations, 210-345-3077
Karen Ngo, Senior Manager – Investor Relations, 210-345-4574
Tom Mahrer, Manager – Investor Relations, 210-345-1953
Media:
Lillian Riojas, Director – Media Relations and Communications, 210-345-5002
Safe-Harbor Statement
Statements contained in this release that state the company’s or management’s expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “believe,” “expect,” “should,” “estimates,” “intend,” “targeting,” and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements based on numerous factors, including those outside of the company’s control, such as delays in construction timing and other factors. For more information concerning factors that could cause actual results to differ from those expressed
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or forecasted, see Valero’s annual reports on Form 10-K, quarterly reports on Form 10-Q and our other reports filed with the SEC and on Valero’s website at www.valero.com, and VLP’s annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the SEC and on VLP’s website at www.valeroenergypartners.com.
Use of Non-GAAP Financial Information
This earnings release and the accompanying earnings release tables include references to financial measures that are not defined under U.S. generally accepted accounting principles (“GAAP”). These non-GAAP measures include adjusted net income attributable to Valero stockholders, adjusted earnings per common share – assuming dilution, adjusted operating income, and gross margin. We have included these non-GAAP financial measures to help facilitate the comparison of operating results between periods. See the accompanying earnings release tables for a reconciliation of these non-GAAP measures to their most directly comparable U.S. GAAP measures. In note (d) to the earnings release tables, we disclose the reasons why we believe our use of these non-GAAP financial measures provides useful information.
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VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
FINANCIAL HIGHLIGHTS
(millions of dollars, except per share amounts)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Statement of income data | |||||||||||||||
Operating revenues | $ | 22,254 | $ | 19,584 | $ | 44,026 | $ | 35,298 | |||||||
Costs and expenses: | |||||||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 19,609 | 17,120 | 39,037 | 30,627 | |||||||||||
Lower of cost or market inventory valuation adjustment (a) | — | (454 | ) | — | (747 | ) | |||||||||
Operating expenses | 1,097 | 1,001 | 2,214 | 2,031 | |||||||||||
General and administrative expenses | 178 | 159 | 368 | 315 | |||||||||||
Depreciation and amortization expense | 499 | 471 | 999 | 956 | |||||||||||
Asset impairment loss (b) | — | 56 | — | 56 | |||||||||||
Total costs and expenses | 21,383 | 18,353 | 42,618 | 33,238 | |||||||||||
Operating income | 871 | 1,231 | 1,408 | 2,060 | |||||||||||
Other income, net | 16 | 14 | 33 | 23 | |||||||||||
Interest and debt expense, net of capitalized interest | (119 | ) | (111 | ) | (240 | ) | (219 | ) | |||||||
Income before income tax expense | 768 | 1,134 | 1,201 | 1,864 | |||||||||||
Income tax expense | 196 | 291 | 308 | 508 | |||||||||||
Net income | 572 | 843 | 893 | 1,356 | |||||||||||
Less: Net income attributable to noncontrolling interests | 24 | 29 | 40 | 47 | |||||||||||
Net income attributable to Valero Energy Corporation stockholders | $ | 548 | $ | 814 | $ | 853 | $ | 1,309 | |||||||
Earnings per common share | $ | 1.23 | $ | 1.74 | $ | 1.90 | $ | 2.79 | |||||||
Weighted-average common shares outstanding (in millions) | 444 | 467 | 446 | 468 | |||||||||||
Earnings per common share – assuming dilution | $ | 1.23 | $ | 1.73 | $ | 1.90 | $ | 2.78 | |||||||
Weighted-average common shares outstanding – assuming dilution (in millions) | 446 | 470 | 448 | 471 | |||||||||||
Dividends per common share | $ | 0.70 | $ | 0.60 | $ | 1.40 | $ | 1.20 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 1
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
FINANCIAL HIGHLIGHTS BY SEGMENT
(millions of dollars)
(unaudited)
Refining (c) | Ethanol | VLP (c) | Corporate and Eliminations | Total | |||||||||||||||
Three Months Ended June 30, 2017 | |||||||||||||||||||
Operating revenues: | |||||||||||||||||||
Operating revenues from external customers | $ | 21,415 | $ | 839 | $ | — | $ | — | $ | 22,254 | |||||||||
Intersegment revenues | — | 28 | 110 | (138 | ) | — | |||||||||||||
Total operating revenues | 21,415 | 867 | 110 | (138 | ) | 22,254 | |||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales: | |||||||||||||||||||
Cost of sales from external customers | 18,899 | 710 | — | — | 19,609 | ||||||||||||||
Intersegment cost of sales | 138 | — | — | (138 | ) | — | |||||||||||||
Total cost of sales | 19,037 | 710 | — | (138 | ) | 19,609 | |||||||||||||
Operating expenses | 965 | 107 | 27 | (2 | ) | 1,097 | |||||||||||||
General and administrative expenses | — | — | — | 178 | 178 | ||||||||||||||
Depreciation and amortization expense | 454 | 19 | 12 | 14 | 499 | ||||||||||||||
Total costs and expenses | 20,456 | 836 | 39 | 52 | 21,383 | ||||||||||||||
Operating income | $ | 959 | $ | 31 | $ | 71 | $ | (190 | ) | $ | 871 | ||||||||
Three Months Ended June 30, 2016 | |||||||||||||||||||
Operating revenues: | |||||||||||||||||||
Operating revenues from external customers | $ | 18,664 | $ | 920 | $ | — | $ | — | $ | 19,584 | |||||||||
Intersegment revenues | — | 45 | 87 | (132 | ) | — | |||||||||||||
Total operating revenues | 18,664 | 965 | 87 | (132 | ) | 19,584 | |||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment): | |||||||||||||||||||
Cost of sales from external customers | 16,322 | 798 | — | — | 17,120 | ||||||||||||||
Intersegment cost of sales | 132 | — | — | (132 | ) | — | |||||||||||||
Total cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 16,454 | 798 | — | (132 | ) | 17,120 | |||||||||||||
Lower of cost or market inventory valuation adjustment (a) | (434 | ) | (20 | ) | — | — | (454 | ) | |||||||||||
Operating expenses | 878 | 99 | 24 | — | 1,001 | ||||||||||||||
General and administrative expenses | — | — | — | 159 | 159 | ||||||||||||||
Depreciation and amortization expense | 430 | 19 | 11 | 11 | 471 | ||||||||||||||
Asset impairment loss (b) | 56 | — | — | — | 56 | ||||||||||||||
Total costs and expenses | 17,384 | 896 | 35 | 38 | 18,353 | ||||||||||||||
Operating income | $ | 1,280 | $ | 69 | $ | 52 | $ | (170 | ) | $ | 1,231 | ||||||||
See Operating Highlights by Segment beginning on Table Page 8.
See Notes to Earnings Release Tables on Table Page 15.
Table Page 2
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
FINANCIAL HIGHLIGHTS BY SEGMENT
(millions of dollars)
(unaudited)
Refining (c) | Ethanol | VLP (c) | Corporate and Eliminations | Total | |||||||||||||||
Six Months Ended June 30, 2017 | |||||||||||||||||||
Operating revenues: | |||||||||||||||||||
Operating revenues from external customers | $ | 42,302 | $ | 1,724 | $ | — | $ | — | $ | 44,026 | |||||||||
Intersegment revenues | — | 88 | 216 | (304 | ) | — | |||||||||||||
Total operating revenues | 42,302 | 1,812 | 216 | (304 | ) | 44,026 | |||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales: | |||||||||||||||||||
Cost of sales from external customers | 37,540 | 1,497 | — | — | 39,037 | ||||||||||||||
Intersegment cost of sales | 304 | — | — | (304 | ) | — | |||||||||||||
Total cost of sales | 37,844 | 1,497 | — | (304 | ) | 39,037 | |||||||||||||
Operating expenses | 1,949 | 216 | 51 | (2 | ) | 2,214 | |||||||||||||
General and administrative expenses | — | — | — | 368 | 368 | ||||||||||||||
Depreciation and amortization expense | 903 | 46 | 24 | 26 | 999 | ||||||||||||||
Total costs and expenses | 40,696 | 1,759 | 75 | 88 | 42,618 | ||||||||||||||
Operating income | $ | 1,606 | $ | 53 | $ | 141 | $ | (392 | ) | $ | 1,408 | ||||||||
Six Months Ended June 30, 2016 | |||||||||||||||||||
Operating revenues: | |||||||||||||||||||
Operating revenues from external customers | $ | 33,584 | $ | 1,714 | $ | — | $ | — | $ | 35,298 | |||||||||
Intersegment revenues | — | 79 | 166 | (245 | ) | — | |||||||||||||
Total operating revenues | 33,584 | 1,793 | 166 | (245 | ) | 35,298 | |||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment): | |||||||||||||||||||
Cost of sales from external customers | 29,121 | 1,506 | — | — | 30,627 | ||||||||||||||
Intersegment cost of sales | 245 | — | — | (245 | ) | — | |||||||||||||
Total cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 29,366 | 1,506 | — | (245 | ) | 30,627 | |||||||||||||
Lower of cost or market inventory valuation adjustment (a) | (697 | ) | (50 | ) | — | — | (747 | ) | |||||||||||
Operating expenses | 1,785 | 198 | 48 | — | 2,031 | ||||||||||||||
General and administrative expenses | — | — | — | 315 | 315 | ||||||||||||||
Depreciation and amortization expense | 879 | 31 | 23 | 23 | 956 | ||||||||||||||
Asset impairment loss (b) | 56 | — | — | — | 56 | ||||||||||||||
Total costs and expenses | 31,389 | 1,685 | 71 | 93 | 33,238 | ||||||||||||||
Operating income | $ | 2,195 | $ | 108 | $ | 95 | $ | (338 | ) | $ | 2,060 | ||||||||
See Operating Highlights by Segment beginning on Table Page 8.
See Notes to Earnings Release Tables on Table Page 15.
Table Page 3
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS
REPORTED UNDER U.S. GAAP (d)
(millions of dollars, except per share amounts)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Reconciliation of net income attributable to Valero Energy Corporation stockholders to adjusted net income attributable to Valero Energy Corporation stockholders | |||||||||||||||
Net income attributable to Valero Energy Corporation stockholders | $ | 548 | $ | 814 | $ | 853 | $ | 1,309 | |||||||
Exclude adjustments: | |||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | — | 454 | — | 747 | |||||||||||
Income tax expense related to the lower of cost or market inventory valuation adjustment | — | (87 | ) | — | (168 | ) | |||||||||
Lower of cost or market inventory valuation adjustment, net of taxes | — | 367 | — | 579 | |||||||||||
Asset impairment loss (b) | — | (56 | ) | — | (56 | ) | |||||||||
Total adjustments | — | 311 | — | 523 | |||||||||||
Adjusted net income attributable to Valero Energy Corporation stockholders | $ | 548 | $ | 503 | $ | 853 | $ | 786 | |||||||
Reconciliation of earnings per common share – assuming dilution to adjusted earnings per common share – assuming dilution | |||||||||||||||
Earnings per common share – assuming dilution | $ | 1.23 | $ | 1.73 | $ | 1.90 | $ | 2.78 | |||||||
Exclude adjustments: | |||||||||||||||
Lower of cost or market inventory valuation adjustment, net of taxes | — | 0.78 | — | 1.23 | |||||||||||
Asset impairment loss (b) | — | (0.12 | ) | — | (0.12 | ) | |||||||||
Total adjustments | — | 0.66 | — | 1.11 | |||||||||||
Adjusted earnings per common share – assuming dilution | $ | 1.23 | $ | 1.07 | $ | 1.90 | $ | 1.67 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 4
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS
REPORTED UNDER U.S. GAAP (d)
(millions of dollars)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Reconciliation of operating income to gross margin and reconciliation of operating income to adjusted operating income | |||||||||||||||
Refining segment (c) | |||||||||||||||
Operating income | $ | 959 | $ | 1,280 | $ | 1,606 | $ | 2,195 | |||||||
Add back: | |||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | — | (434 | ) | — | (697 | ) | |||||||||
Operating expenses | 965 | 878 | 1,949 | 1,785 | |||||||||||
Depreciation and amortization expense | 454 | 430 | 903 | 879 | |||||||||||
Asset impairment loss (b) | — | 56 | — | 56 | |||||||||||
Gross margin | $ | 2,378 | $ | 2,210 | $ | 4,458 | $ | 4,218 | |||||||
Operating income | $ | 959 | $ | 1,280 | $ | 1,606 | $ | 2,195 | |||||||
Exclude adjustments: | |||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | — | 434 | — | 697 | |||||||||||
Asset impairment loss (b) | — | (56 | ) | — | (56 | ) | |||||||||
Adjusted operating income | $ | 959 | $ | 902 | $ | 1,606 | $ | 1,554 | |||||||
Ethanol segment | |||||||||||||||
Operating income | $ | 31 | $ | 69 | $ | 53 | $ | 108 | |||||||
Add back: | |||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | — | (20 | ) | — | (50 | ) | |||||||||
Operating expenses | 107 | 99 | 216 | 198 | |||||||||||
Depreciation and amortization expense | 19 | 19 | 46 | 31 | |||||||||||
Gross margin | $ | 157 | $ | 167 | $ | 315 | $ | 287 | |||||||
Operating income | $ | 31 | $ | 69 | $ | 53 | $ | 108 | |||||||
Exclude adjustment: Lower of cost or market inventory valuation adjustment (a) | — | 20 | — | 50 | |||||||||||
Adjusted operating income | $ | 31 | $ | 49 | $ | 53 | $ | 58 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 5
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS
REPORTED UNDER U.S. GAAP (d)
(millions of dollars)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Reconciliation of operating income to gross margin and reconciliation of operating income to adjusted operating income by refining segment region (e) | |||||||||||||||
U.S. Gulf Coast region (c) | |||||||||||||||
Operating income | $ | 483 | $ | 449 | $ | 856 | $ | 868 | |||||||
Add back: | |||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | — | (18 | ) | — | (37 | ) | |||||||||
Operating expenses | 566 | 506 | 1,138 | 1,025 | |||||||||||
Depreciation and amortization expense | 279 | 257 | 558 | 513 | |||||||||||
Asset impairment loss (b) | — | 56 | — | 56 | |||||||||||
Gross margin | $ | 1,328 | $ | 1,250 | $ | 2,552 | $ | 2,425 | |||||||
Operating income | $ | 483 | $ | 449 | $ | 856 | $ | 868 | |||||||
Exclude adjustments: | |||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | — | 18 | — | 37 | |||||||||||
Asset impairment loss (b) | — | (56 | ) | — | (56 | ) | |||||||||
Adjusted operating income | $ | 483 | $ | 487 | $ | 856 | $ | 887 | |||||||
U.S. Mid-Continent region (c) | |||||||||||||||
Operating income | $ | 179 | $ | 124 | $ | 286 | $ | 196 | |||||||
Add back: | |||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | — | (4 | ) | — | (9 | ) | |||||||||
Operating expenses | 146 | 136 | 292 | 271 | |||||||||||
Depreciation and amortization expense | 66 | 63 | 132 | 132 | |||||||||||
Gross margin | $ | 391 | $ | 319 | $ | 710 | $ | 590 | |||||||
Operating income | $ | 179 | $ | 124 | $ | 286 | $ | 196 | |||||||
Exclude adjustment: Lower of cost or market inventory valuation adjustment (a) | — | 4 | — | 9 | |||||||||||
Adjusted operating income | $ | 179 | $ | 120 | $ | 286 | $ | 187 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 6
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS
REPORTED UNDER U.S. GAAP (d)
(millions of dollars)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Reconciliation of operating income to gross margin and reconciliation of operating income to adjusted operating income by refining segment region (e) (continued) | |||||||||||||||
North Atlantic region | |||||||||||||||
Operating income | $ | 261 | $ | 566 | $ | 458 | $ | 969 | |||||||
Add back: | |||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | — | (410 | ) | — | (646 | ) | |||||||||
Operating expenses | 109 | 119 | 241 | 244 | |||||||||||
Depreciation and amortization expense | 49 | 52 | 97 | 102 | |||||||||||
Gross margin | $ | 419 | $ | 327 | $ | 796 | $ | 669 | |||||||
Operating income | $ | 261 | $ | 566 | $ | 458 | $ | 969 | |||||||
Exclude adjustment: Lower of cost or market inventory valuation adjustment (a) | — | 410 | — | 646 | |||||||||||
Adjusted operating income | $ | 261 | $ | 156 | $ | 458 | $ | 323 | |||||||
U.S. West Coast region | |||||||||||||||
Operating income | $ | 36 | $ | 141 | $ | 6 | $ | 162 | |||||||
Add back: | |||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | — | (2 | ) | — | (5 | ) | |||||||||
Operating expenses | 144 | 117 | 278 | 245 | |||||||||||
Depreciation and amortization expense | 60 | 58 | 116 | 132 | |||||||||||
Gross margin | $ | 240 | $ | 314 | $ | 400 | $ | 534 | |||||||
Operating income | $ | 36 | $ | 141 | $ | 6 | $ | 162 | |||||||
Exclude adjustment: Lower of cost or market inventory valuation adjustment (a) | — | 2 | — | 5 | |||||||||||
Adjusted operating income | $ | 36 | $ | 139 | $ | 6 | $ | 157 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 7
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
REFINING SEGMENT OPERATING HIGHLIGHTS
(millions of dollars, except per barrel amounts)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Throughput volumes (thousand barrels per day) | |||||||||||||||
Feedstocks: | |||||||||||||||
Heavy sour crude oil | 517 | 380 | 483 | 404 | |||||||||||
Medium/light sour crude oil | 508 | 505 | 482 | 519 | |||||||||||
Sweet crude oil | 1,308 | 1,196 | 1,277 | 1,184 | |||||||||||
Residuals | 228 | 272 | 231 | 281 | |||||||||||
Other feedstocks | 142 | 170 | 145 | 152 | |||||||||||
Total feedstocks | 2,703 | 2,523 | 2,618 | 2,540 | |||||||||||
Blendstocks and other | 316 | 304 | 311 | 313 | |||||||||||
Total throughput volumes | 3,019 | 2,827 | 2,929 | 2,853 | |||||||||||
Yields (thousand barrels per day) | |||||||||||||||
Gasolines and blendstocks | 1,458 | 1,408 | 1,409 | 1,393 | |||||||||||
Distillates | 1,167 | 1,071 | 1,129 | 1,069 | |||||||||||
Other products (f) | 434 | 379 | 429 | 425 | |||||||||||
Total yields | 3,059 | 2,858 | 2,967 | 2,887 | |||||||||||
Operating statistics (c) | |||||||||||||||
Gross margin (d) | $ | 2,378 | $ | 2,210 | $ | 4,458 | $ | 4,218 | |||||||
Adjusted operating income (d) | $ | 959 | $ | 902 | $ | 1,606 | $ | 1,554 | |||||||
Throughput volumes (thousand barrels per day) | 3,019 | 2,827 | 2,929 | 2,853 | |||||||||||
Throughput margin per barrel (g) | $ | 8.66 | $ | 8.59 | $ | 8.41 | $ | 8.12 | |||||||
Operating costs per barrel: | |||||||||||||||
Operating expenses | 3.51 | 3.41 | 3.68 | 3.44 | |||||||||||
Depreciation and amortization expense | 1.66 | 1.67 | 1.70 | 1.69 | |||||||||||
Total operating costs per barrel | 5.17 | 5.08 | 5.38 | 5.13 | |||||||||||
Adjusted operating income per barrel (h) | $ | 3.49 | $ | 3.51 | $ | 3.03 | $ | 2.99 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 8
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
ETHANOL SEGMENT OPERATING HIGHLIGHTS
(millions of dollars, except per gallon amounts)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating statistics | |||||||||||||||
Gross margin (d) | $ | 157 | $ | 167 | $ | 315 | $ | 287 | |||||||
Adjusted operating income (d) | $ | 31 | $ | 49 | $ | 53 | $ | 58 | |||||||
Production volumes (thousand gallons per day) | 3,775 | 3,826 | 3,908 | 3,783 | |||||||||||
Gross margin per gallon of production (g) | $ | 0.46 | $ | 0.48 | $ | 0.45 | $ | 0.42 | |||||||
Operating costs per gallon of production: | |||||||||||||||
Operating expenses | 0.31 | 0.28 | 0.31 | 0.29 | |||||||||||
Depreciation and amortization expense | 0.06 | 0.06 | 0.06 | 0.05 | |||||||||||
Total operating costs per gallon of production | 0.37 | 0.34 | 0.37 | 0.34 | |||||||||||
Adjusted operating income per gallon of production (h) | $ | 0.09 | $ | 0.14 | $ | 0.08 | $ | 0.08 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 9
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
VLP SEGMENT OPERATING HIGHLIGHTS (c)
(millions of dollars, except per barrel amounts)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Volumes (thousand barrels per day) | |||||||||||||||
Pipeline transportation throughput | 1,003 | 851 | 983 | 885 | |||||||||||
Terminaling throughput | 2,853 | 2,146 | 2,794 | 1,998 | |||||||||||
Operating statistics | |||||||||||||||
Pipeline transportation revenue | $ | 25 | $ | 19 | $ | 48 | $ | 39 | |||||||
Pipeline transportation revenue per barrel (g) | $ | 0.27 | $ | 0.25 | $ | 0.27 | $ | 0.25 | |||||||
Terminaling revenue | $ | 84 | $ | 68 | $ | 167 | $ | 127 | |||||||
Terminaling revenue per barrel (g) | $ | 0.33 | $ | 0.35 | $ | 0.33 | $ | 0.35 | |||||||
Storage and other revenue | $ | 1 | $ | — | $ | 1 | $ | — | |||||||
Total operating revenues | $ | 110 | $ | 87 | $ | 216 | $ | 166 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 10
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
REFINING SEGMENT OPERATING HIGHLIGHTS BY REGION
(millions of dollars, except per barrel amounts)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating statistics by region (e) | |||||||||||||||
U.S. Gulf Coast region (c) | |||||||||||||||
Gross margin (d) | $ | 1,328 | $ | 1,250 | $ | 2,552 | $ | 2,425 | |||||||
Adjusted operating income (d) | $ | 483 | $ | 487 | $ | 856 | $ | 887 | |||||||
Throughput volumes (thousand barrels per day) | 1,781 | 1,605 | 1,742 | 1,649 | |||||||||||
Throughput margin per barrel (g) | $ | 8.20 | $ | 8.55 | $ | 8.09 | $ | 8.08 | |||||||
Operating costs per barrel: | |||||||||||||||
Operating expenses | 3.49 | 3.46 | 3.61 | 3.41 | |||||||||||
Depreciation and amortization expense | 1.73 | 1.76 | 1.76 | 1.71 | |||||||||||
Total operating costs per barrel | 5.22 | 5.22 | 5.37 | 5.12 | |||||||||||
Adjusted operating income per barrel (h) | $ | 2.98 | $ | 3.33 | $ | 2.72 | $ | 2.96 | |||||||
U.S. Mid-Continent region (c) | |||||||||||||||
Gross margin (d) | $ | 391 | $ | 319 | $ | 710 | $ | 590 | |||||||
Adjusted operating income (d) | $ | 179 | $ | 120 | $ | 286 | $ | 187 | |||||||
Throughput volumes (thousand barrels per day) | 481 | 462 | 463 | 458 | |||||||||||
Throughput margin per barrel (g) | $ | 8.91 | $ | 7.59 | $ | 8.47 | $ | 7.06 | |||||||
Operating costs per barrel: | |||||||||||||||
Operating expenses | 3.33 | 3.24 | 3.48 | 3.25 | |||||||||||
Depreciation and amortization expense | 1.50 | 1.48 | 1.58 | 1.57 | |||||||||||
Total operating costs per barrel | 4.83 | 4.72 | 5.06 | 4.82 | |||||||||||
Adjusted operating income per barrel (h) | $ | 4.08 | $ | 2.87 | $ | 3.41 | $ | 2.24 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 11
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
REFINING SEGMENT OPERATING HIGHLIGHTS BY REGION
(millions of dollars, except per barrel amounts)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating statistics by region (e) (continued) | |||||||||||||||
North Atlantic region | |||||||||||||||
Gross margin (d) | $ | 419 | $ | 327 | $ | 796 | $ | 669 | |||||||
Adjusted operating income (d) | $ | 261 | $ | 156 | $ | 458 | $ | 323 | |||||||
Throughput volumes (thousand barrels per day) | 491 | 487 | 490 | 480 | |||||||||||
Throughput margin per barrel (g) | $ | 9.39 | $ | 7.39 | $ | 8.97 | $ | 7.66 | |||||||
Operating costs per barrel: | |||||||||||||||
Operating expenses | 2.44 | 2.69 | 2.71 | 2.79 | |||||||||||
Depreciation and amortization expense | 1.09 | 1.17 | 1.10 | 1.17 | |||||||||||
Total operating costs per barrel | 3.53 | 3.86 | 3.81 | 3.96 | |||||||||||
Adjusted operating income per barrel (h) | $ | 5.86 | $ | 3.53 | $ | 5.16 | $ | 3.70 | |||||||
U.S. West Coast region | |||||||||||||||
Gross margin (d) | $ | 240 | $ | 314 | $ | 400 | $ | 534 | |||||||
Adjusted operating income (d) | $ | 36 | $ | 139 | $ | 6 | $ | 157 | |||||||
Throughput volumes (thousand barrels per day) | 266 | 273 | 234 | 266 | |||||||||||
Throughput margin per barrel (g) | $ | 9.93 | $ | 12.67 | $ | 9.47 | $ | 11.05 | |||||||
Operating costs per barrel: | |||||||||||||||
Operating expenses | 5.99 | 4.74 | 6.60 | 5.08 | |||||||||||
Depreciation and amortization expense | 2.47 | 2.33 | 2.73 | 2.73 | |||||||||||
Total operating costs per barrel | 8.46 | 7.07 | 9.33 | 7.81 | |||||||||||
Adjusted operating income per barrel (h) | $ | 1.47 | $ | 5.60 | $ | 0.14 | $ | 3.24 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 12
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
AVERAGE MARKET REFERENCE PRICES AND DIFFERENTIALS
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Feedstocks (dollars per barrel) | |||||||||||||||
Brent crude oil | $ | 50.91 | $ | 46.94 | $ | 52.78 | $ | 41.04 | |||||||
Brent less West Texas Intermediate (WTI) crude oil | 2.67 | 1.47 | 2.74 | 1.68 | |||||||||||
Brent less Alaska North Slope (ANS) crude oil | 0.22 | 1.22 | 0.52 | 0.96 | |||||||||||
Brent less Louisiana Light Sweet (LLS) crude oil | 0.60 | (0.39 | ) | 0.86 | (0.17 | ) | |||||||||
Brent less Argus Sour Crude Index (ASCI) crude oil (i) | 3.94 | 5.01 | 4.50 | 5.19 | |||||||||||
Brent less Maya crude oil | 7.03 | 9.21 | 8.48 | 9.15 | |||||||||||
LLS crude oil | 50.31 | 47.33 | 51.92 | 41.21 | |||||||||||
LLS less ASCI crude oil (i) | 3.34 | 5.40 | 3.64 | 5.36 | |||||||||||
LLS less Maya crude oil | 6.43 | 9.60 | 7.62 | 9.32 | |||||||||||
WTI crude oil | 48.24 | 45.47 | 50.04 | 39.36 | |||||||||||
Natural gas (dollars per million British Thermal Units) | 3.14 | 2.08 | 3.05 | 2.01 | |||||||||||
Products (dollars per barrel, unless otherwise noted) | |||||||||||||||
U.S. Gulf Coast: | |||||||||||||||
CBOB gasoline less Brent | 10.38 | 11.13 | 9.58 | 9.47 | |||||||||||
Ultra-low-sulfur diesel less Brent | 10.99 | 9.47 | 11.06 | 8.70 | |||||||||||
Propylene less Brent | 0.04 | (11.79 | ) | 0.63 | (7.09 | ) | |||||||||
CBOB gasoline less LLS | 10.98 | 10.74 | 10.44 | 9.30 | |||||||||||
Ultra-low-sulfur diesel less LLS | 11.59 | 9.08 | 11.92 | 8.53 | |||||||||||
Propylene less LLS | 0.64 | (12.18 | ) | 1.49 | (7.26 | ) | |||||||||
U.S. Mid-Continent: | |||||||||||||||
CBOB gasoline less WTI | 14.16 | 13.77 | 13.44 | 11.89 | |||||||||||
Ultra-low-sulfur diesel less WTI | 14.60 | 11.72 | 14.30 | 11.38 | |||||||||||
North Atlantic: | |||||||||||||||
CBOB gasoline less Brent | 12.57 | 14.63 | 10.63 | 12.47 | |||||||||||
Ultra-low-sulfur diesel less Brent | 12.21 | 11.17 | 12.14 | 10.35 | |||||||||||
U.S. West Coast: | |||||||||||||||
CARBOB 87 gasoline less ANS | 23.01 | 21.56 | 19.89 | 19.45 | |||||||||||
CARB diesel less ANS | 14.32 | 14.71 | 14.58 | 12.95 | |||||||||||
CARBOB 87 gasoline less WTI | 25.46 | 21.81 | 22.11 | 20.17 | |||||||||||
CARB diesel less WTI | 16.77 | 14.96 | 16.80 | 13.67 | |||||||||||
New York Harbor corn crush (dollars per gallon) | 0.26 | 0.23 | 0.26 | 0.18 | |||||||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 13
VALERO ENERGY CORPORATION AND SUBSIDIARIES
EARNINGS RELEASE TABLES
OTHER FINANCIAL DATA
(millions of dollars)
(unaudited)
June 30, | December 31, | ||||||||||||||
2017 | 2016 | ||||||||||||||
Balance sheet data | |||||||||||||||
Current assets | $ | 15,731 | $ | 16,800 | |||||||||||
Cash and temporary cash investments included in current assets | 5,207 | 4,816 | |||||||||||||
Inventories included in current assets | 5,674 | 5,709 | |||||||||||||
Current liabilities | 7,683 | 8,328 | |||||||||||||
Current portion of debt and capital lease obligations included in current liabilities | 121 | 115 | |||||||||||||
Debt and capital lease obligations, less current portion | 8,366 | 7,886 | |||||||||||||
Total debt and capital lease obligations | 8,487 | 8,001 | |||||||||||||
Valero Energy Corporation stockholders’ equity | 19,923 | 20,024 | |||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cash flow data | |||||||||||||||
Net cash provided by operating activities | $ | 1,797 | $ | 2,319 | $ | 2,785 | $ | 2,959 | |||||||
See Notes to Earnings Release Tables on Table Page 15.
Table Page 14
VALERO ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO EARNINGS RELEASE TABLES
(a) | During the three months ended June 30, 2016, we recorded a change in our lower of cost or market inventory valuation reserve that was established on December 31, 2015, resulting in a noncash benefit of $454 million ($434 million and $20 million attributable to our refining and ethanol segments, respectively). During the six months ended June 30, 2016, we recorded a change in our lower of cost or market inventory valuation reserve that resulted in a noncash benefit of $747 million ($697 million and $50 million attributable to our refining and ethanol segments, respectively). |
(b) | In June 2016, we recognized an asset impairment loss of $56 million representing all of the remaining carrying value of the long-lived assets of our crude oil and refined product terminal and transshipment facility in Aruba. |
(c) | Effective January 1, 2017, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our business. Accordingly, we created a new reportable segment — VLP. The results of the VLP segment, which include the results of our majority-owned master limited partnership referred to by the same name, were transferred from the refining segment. Comparable prior period information for our refining segment (as well as that segment’s U.S. Gulf Coast and Mid-Continent regions) and VLP segment has been retrospectively adjusted to reflect our current segment presentation. |
(d) | We use certain financial measures (as noted below) in the earnings release tables and accompanying earnings release that are not defined under United States (U.S.) generally accepted accounting principles (GAAP) and are considered to be non-GAAP measures. |
We have defined these non-GAAP measures and believe they are useful to the external users of our financial statements, including industry analysts, investors, lenders, and rating agencies. We believe these measures are useful to assess our ongoing financial performance because, when reconciled to their most comparable U.S. GAAP measures, they provide improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and trends. These non-GAAP measures should not be considered as alternatives to their most comparable U.S. GAAP measures nor should they be considered in isolation or as a substitute for an analysis of our results of operations as reported under U.S. GAAP. In addition, these non-GAAP measures may not be comparable to similarly titled measures used by other companies because we may define them differently, which diminishes their utility.
Non-GAAP measures are as follows:
◦ | Adjusted net income attributable to Valero Energy Corporation stockholders is defined as net income attributable to Valero Energy Corporation stockholders excluding the lower of cost or market inventory valuation adjustment, its related income tax effect, and the asset impairment loss. |
◦ | Adjusted earnings per common share – assuming dilution is defined as adjusted net income attributable to Valero Energy Corporation stockholders divided by the number of weighted average shares outstanding in the applicable period, assuming dilution. |
◦ | Gross margin is defined as operating income excluding the lower of cost or market inventory valuation adjustment, operating expenses, depreciation and amortization expense, and the asset impairment loss. |
◦ | Adjusted operating income is defined as operating income excluding the lower of cost or market inventory valuation adjustment and the asset impairment loss. |
(e) | The refining segment regions reflected herein contain the following refineries: U.S. Gulf Coast- Corpus Christi East, Corpus Christi West, Houston, Meraux, Port Arthur, St. Charles, Texas City, and Three Rivers Refineries; U.S. Mid-Continent- Ardmore, McKee, and Memphis Refineries; North Atlantic- Pembroke and Quebec City Refineries; and U.S. West Coast- Benicia and Wilmington Refineries. |
(f) | Primarily includes petrochemicals, gas oils, No. 6 fuel oil, petroleum coke, sulfur, and asphalt. |
(g) | Throughput margin per barrel represents gross margin (defined in (d) above) for our refining segment or refining segment regions divided by the respective throughput volumes. Gross margin per gallon of production represents gross margin (defined in (d) above) for our ethanol segment divided by production volumes. Pipeline transportation revenue per barrel and terminaling revenue per barrel represents pipeline transportation revenue and terminaling revenue for our VLP segment divided by pipeline transportation throughput and terminaling throughput volumes, respectively. Throughput and production volumes are calculated by multiplying throughput and production volumes per day (as provided in the accompanying tables) by the number of days in the applicable period. |
(h) | Adjusted operating income per barrel represents adjusted operating income (defined in (d) above) for our refining segment or refining segment regions divided by the respective throughput volumes. Adjusted operating income per gallon of |
Table Page 15
VALERO ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO EARNINGS RELEASE TABLES (Continued)
production represents adjusted operating income (defined in (d) above) for our ethanol segment divided by production volumes. Throughput and production volumes are calculated by multiplying throughput and production volumes per day (as provided in the accompanying tables) by the number of days in the applicable period.
(i) | Average market reference price differentials to Mars crude oil have been replaced by average market reference price differentials to Argus Sour Crude Index (ASCI) crude oil. Mars crude oil is one of the three grades of sour crude oil used to create ASCI crude oil, and therefore, ASCI crude oil is a more comprehensive price marker for medium sour crude oil. Accordingly, the price differentials for ASCI crude oil for the three and six months ended June 30, 2016 are included to conform to the current presentation. |
Table Page 16