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Valero Energy Reports Third Quarter 2021 Results

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·14-min read
In this article:
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  • Reported net income attributable to Valero stockholders of $463 million, or $1.13 per share.

  • Reported adjusted net income attributable to Valero stockholders of $500 million, or $1.22 per share.

  • Returned $400 million in cash to stockholders through dividends.

  • Redeemed the total outstanding balance of $575 million Floating Rate Senior Notes due in 2023.

  • Completed the Diamond Green Diesel expansion project (DGD 2).

  • Completed and started up the new Pembroke Cogeneration Unit.

SAN ANTONIO, October 21, 2021--(BUSINESS WIRE)--Valero Energy Corporation (NYSE: VLO, "Valero") today reported net income attributable to Valero stockholders of $463 million, or $1.13 per share, for the third quarter of 2021, compared to a net loss of $464 million, or $1.14 per share, for the third quarter of 2020. Excluding the adjustments shown in the accompanying earnings release tables, third quarter 2021 adjusted net income attributable to Valero stockholders was $500 million, or $1.22 per share, compared to an adjusted net loss attributable to Valero stockholders of $472 million, or $1.16 per share, for the third quarter of 2020.

Refining

The refining segment reported $835 million of operating income for the third quarter of 2021, compared to a $629 million operating loss for the third quarter of 2020. Third quarter 2021 adjusted operating income was $853 million, compared to an adjusted operating loss of $575 million for the third quarter of 2020. Refinery throughput volumes averaged 2.9 million barrels per day in the third quarter of 2021, which was 338 thousand barrels per day higher than the third quarter of 2020.

"We saw significant improvement in refining margins in the third quarter as economic activity and mobility continued to recover in key markets," said Joe Gorder, Valero Chairman and Chief Executive Officer. "The continued improvement in earnings of our refining business, coupled with the ongoing expansion of our renewables businesses, should strengthen our competitive advantage and drive long-term shareholder returns."

Renewable Diesel

The renewable diesel segment, which consists of the Diamond Green Diesel (DGD) joint venture, reported $108 million of operating income for the third quarter of 2021, compared to $184 million for the third quarter of 2020. Renewable diesel sales volumes averaged 671 thousand gallons per day in the third quarter of 2021, which was 199 thousand gallons per day lower than the third quarter of 2020. The lower operating income and sales volumes in the third quarter of 2021 are primarily attributed to plant downtime due to Hurricane Ida.

Ethanol

The ethanol segment reported a $44 million operating loss for the third quarter of 2021, compared to $22 million of operating income for the third quarter of 2020. Excluding the adjustments shown in the accompanying earnings release tables, third quarter 2021 adjusted operating income was $4 million, compared to $36 million for the third quarter of 2020. Ethanol production volumes averaged 3.6 million gallons per day in the third quarter of 2021, which was 175 thousand gallons per day lower than the third quarter of 2020.

Corporate and Other

General and administrative expenses were $195 million in the third quarter of 2021, compared to $186 million in the third quarter of 2020. The effective tax rate for the third quarter of 2021 was 11 percent, which reflects the benefit from the portion of DGD’s net income that is not taxable to Valero.

Investing and Financing Activities

Net cash provided by operating activities was $1.4 billion in the third quarter of 2021. Included in this amount was a $379 million favorable impact from working capital and $59 million associated with our joint venture partner’s share of DGD’s net cash provided by operating activities, excluding changes in DGD’s working capital. Excluding these items, adjusted net cash provided by operating activities was $1.0 billion.

Capital investments totaled $585 million in the third quarter of 2021, of which $191 million was for sustaining the business, including costs for turnarounds, catalysts and regulatory compliance. Excluding capital investments attributable to our partner’s 50 percent share of DGD and those related to other variable interest entities, capital investments attributable to Valero were $392 million.

Valero returned $400 million to stockholders through dividends for a payout ratio of 40 percent of adjusted net cash provided by operating activities in the third quarter of 2021.

Valero continues to target a long-term total payout ratio between 40 and 50 percent of adjusted net cash provided by operating activities. Valero defines total payout ratio as the sum of dividends and stock buybacks divided by net cash provided by operating activities adjusted for changes in working capital and DGD’s net cash provided by operating activities, excluding changes in its working capital, attributable to our joint venture partner’s ownership interest in DGD.

Valero redeemed the entire outstanding principal amount of its $575 million Floating Rate Senior Notes due in 2023 at par value, plus accrued and unpaid interest on September 27, 2021.

Liquidity and Financial Position

Valero ended the third quarter of 2021 with $14.2 billion of total debt and finance lease obligations and $3.5 billion of cash and cash equivalents. The debt to capitalization ratio, net of cash and cash equivalents, was 37 percent as of September 30, 2021.

Strategic Update

The Diamond Green Diesel expansion project at Valero’s St. Charles refinery (DGD 2), which increases renewable diesel production capacity by 400 million gallons per year, was completed in the third quarter and is in the process of starting up.

"We are excited to report that the Diamond Green Diesel expansion project at Valero’s St. Charles refinery was successfully completed on-budget and ahead of schedule," said Gorder. "This is a testament to the strength of our engineering and operations teams, who got this accomplished despite Hurricane Ida related challenges."

The new DGD plant at Valero’s Port Arthur refinery (DGD 3), which is expected to have a renewable diesel production capacity of 470 million gallons per year, is progressing well and is still expected to commence operations in the first half of 2023, increasing DGD’s total annual production capacity to approximately 1.2 billion gallons of renewable diesel and 50 million gallons of renewable naphtha.

The large-scale carbon sequestration project with BlackRock and Navigator is also progressing on schedule. Navigator has received the necessary board approvals to proceed with the carbon capture pipeline system as a result of a successful binding open season. Valero is expected to be the anchor shipper with eight of Valero’s ethanol plants connected to this system, producing a lower carbon intensity ethanol product to be marketed in low-carbon fuel markets that is expected to result in a higher product margin.

Refinery optimization projects that are expected to reduce cost and improve margin capture are progressing on schedule. The Pembroke Cogeneration Unit, which is expected to provide an efficient and reliable source of electricity and steam, was completed and commissioned in the third quarter of 2021. The Port Arthur Coker project, which is expected to increase the refinery’s utilization rate and improve turnaround efficiency, is still expected to be completed in 2023.

Capital investments attributable to Valero are forecasted to be $2.0 billion in 2021, of which approximately 60 percent is for sustaining the business and approximately 40 percent is for growth projects. Over 60 percent of Valero’s 2021 growth capital is allocated to expanding the renewable diesel business.

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.

About Valero

Valero Energy Corporation, through its subsidiaries (collectively, "Valero"), is an international manufacturer and marketer of transportation fuels and petrochemical products. Valero is a Fortune 500 company based in San Antonio, Texas, and owns 15 petroleum refineries with a combined throughput capacity of approximately 3.2 million barrels per day and 12 ethanol plants with a combined production capacity of approximately 1.6 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. Valero is also a joint venture partner in Diamond Green Diesel, which owns and operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel owns North America’s largest biomass-based diesel plant. Valero sells its products in the wholesale rack or bulk markets in the U.S., Canada, the U.K., Ireland and Latin America. Approximately 7,000 outlets carry Valero’s brand names. Please visit www.investorvalero.com for more information.

Valero Contacts
Investors:
Homer Bhullar, Vice President – Investor Relations and Finance, 210-345-1982
Eric Herbort, Senior Manager – Investor Relations, 210-345-3331
Gautam Srivastava, Senior Manager – Investor Relations, 210-345-3992

Media:
Lillian Riojas, Executive Director – Media Relations and Communications, 210-345-5002

Safe-Harbor Statement

Statements contained in this release and the accompanying tables 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," "target," "will," "plans," "forecast," and other similar expressions identify forward-looking statements. Forward-looking statements in this release and the accompanying tables include those relating to our greenhouse gas emissions targets, expected timing of completion and performance of projects, future market and industry conditions, future operating and financial performance and management of future risks. 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 legislative or political changes or developments, market dynamics, cyberattacks, weather events, and other matters affecting our operations or the demand for our products. These factors also include, but are not limited to, the uncertainties that remain with respect to the COVID-19 pandemic, variants of the virus, governmental and societal responses thereto, including requirements and mandates with respect to vaccines, vaccine distribution and administration levels, and the adverse effects the foregoing may have on our business or economic conditions generally. For more information concerning these and other factors that could cause actual results to differ from those expressed or forecasted, see Valero’s annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed with the Securities and Exchange Commission and available on Valero’s website at www.valero.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 (loss) attributable to Valero stockholders, adjusted earnings (loss) per common share – assuming dilution, refining margin, renewable diesel margin, ethanol margin, adjusted refining operating income (loss), adjusted renewable diesel operating income, adjusted ethanol operating income (loss), adjusted net cash provided by (used in) operating activities, and capital investments attributable to Valero. These non-GAAP financial measures have been included to help facilitate the comparison of operating results between periods. See the accompanying earnings release tables for a reconciliation of non-GAAP measures to their most directly comparable U.S. GAAP measures. Note (h) to the earnings release tables provides reasons for the use of these non-GAAP financial measures.

VALERO ENERGY CORPORATION
EARNINGS RELEASE TABLES
FINANCIAL HIGHLIGHTS
(millions of dollars, except per share amounts)
(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Statement of income data

Revenues

$

29,520

$

15,809

$

78,074

$

48,308

Cost of sales:

Cost of materials and other (a) (b)

26,624

14,801

70,865

43,832

Lower of cost or market (LCM) inventory valuation adjustment (c)

(313

)

(19

)

Operating expenses (excluding depreciation and

amortization expense reflected below) (a)

1,348

1,117

4,218

3,268

Depreciation and amortization expense (d)

630

602

1,772

1,737

Total cost of sales

28,602

16,207

76,855

48,818

Other operating expenses

19

25

69

30

General and administrative expenses (excluding

depreciation and amortization expense reflected below)

195

186

579

532

Depreciation and amortization expense

11

12

35

37

Operating income (loss)

693

(621

)

536

(1,109

)

Other income, net (e)

32

48

179

107

Interest and debt expense, net of capitalized interest

(152

)

(143

)

(451

)

(410

)

Income (loss) before income tax expense (benefit)

573

(716

)

264

(1,412

)

Income tax expense (benefit) (f)

65

(337

)

86

(614

)

Net income (loss)

508

(379

)

178

(798

)

Less: Net income attributable to noncontrolling interests

45

85

257

264

Net income (loss) attributable to Valero Energy Corporation

stockholders

$

463

$

(464

)

$

(79

)

$

(1,062

)

Earnings (loss) per common share

$

1.13

$

(1.14

)

$

(0.20

)

$

(2.62

)

Weighted-average common shares outstanding (in millions)

407

407

407

407

Earnings (loss) per common share – assuming dilution

$

1.13

$

(1.14

)

$

(0.20

)

$

(2.62

)

Weighted-average common shares outstanding –

assuming dilution (in millions) (g)

408

407

407

407

See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION

EARNINGS RELEASE TABLES

FINANCIAL HIGHLIGHTS BY SEGMENT

(millions of dollars)

(unaudited)

Refining

Renewable

Diesel

Ethanol

Corporate

and

Eliminations

Total

Three months ended September 30, 2021

Revenues:

Revenues from external customers

$

27,989

$

342

$

1,189

$

$

29,520

Intersegment revenues

3

60

115

(178

)

Total revenues

27,992

402

1,304

(178

)

29,520

Cost of sales:

Cost of materials and other

25,395

256

1,150

(177

)

26,624

Operating expenses (excluding depreciation and

amortization expense reflected below)

1,195

26

128

(1

)

1,348

Depreciation and amortization expense (d)

549

11

70

630

Total cost of sales

27,139

293

1,348

(178

)

28,602

Other operating expenses

18

1

19

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

195

195

Depreciation and amortization expense

11

11

Operating income (loss) by segment

$

835

$

108

$

(44

)

$

(206

)

$

693

Three months ended September 30, 2020

Revenues:

Revenues from external customers

$

14,727

$

305

$

777

$

$

15,809

Intersegment revenues

2

40

58

(100

)

Total revenues

14,729

345

835

(100

)

15,809

Cost of sales:

Cost of materials and other (b)

14,103

128

670

(100

)

14,801

LCM inventory valuation adjustment (c)

(296

)

(17

)

(313

)

Operating expenses (excluding depreciation and

amortization expense reflected below)

989

23

105

1,117

Depreciation and amortization expense (d)

538

10

54

602

Total cost of sales

15,334

161

812

(100

)

16,207

Other operating expenses

24

1

25

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

186

186

Depreciation and amortization expense

12

12

Operating income (loss) by segment

$

(629

)

$

184

$

22

$

(198

)

$

(621

)

See Operating Highlights by Segment.
See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION

EARNINGS RELEASE TABLES

FINANCIAL HIGHLIGHTS BY SEGMENT

(millions of dollars)

(unaudited)

Refining

Renewable
Diesel

Ethanol

Corporate
and

Eiminations

Total

Nine months ended September 30, 2021

Revenues:

Revenues from external customers

$

73,426

$

1,190

$

3,458

$

$

78,074

Intersegment revenues

7

215

259

(481

)

Total revenues

73,433

1,405

3,717

(481

)

78,074

Cost of sales:

Cost of materials and other (a)

67,417

724

3,204

(480

)

70,865

Operating expenses (excluding depreciation and

amortization expense reflected below) (a)

3,730

86

403

(1

)

4,218

Depreciation and amortization expense (d)

1,626

35

111

1,772

Total cost of sales

72,773

845

3,718

(481

)

76,855

Other operating expenses

68

1

69

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

579

579

Depreciation and amortization expense

35

35

Operating income (loss) by segment

$

592

$

559

$

(1

)

$

(614

)

$

536

Nine months ended September 30, 2020

Revenues:

Revenues from external customers

$

45,327

$

850

$

2,131

$

$

48,308

Intersegment revenues

6

150

160

(316

)

Total revenues

45,333

1,000

2,291

(316

)

48,308

Cost of sales:

Cost of materials and other (b)

41,769

393

1,984

(314

)

43,832

LCM inventory valuation adjustment (c)

(19

)

(19

)

Operating expenses (excluding depreciation and

amortization expense reflected below)

2,912

63

293

3,268

Depreciation and amortization expense (d)

1,607

33

97

1,737

Total cost of sales

46,269

489

2,374

(314

)

48,818

Other operating expenses

29

1

30

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

532

532

Depreciation and amortization expense

37

37

Operating income (loss) by segment

$

(965

)

$

511

$

(84

)

$

(571

)

$

(1,109

)

See Operating Highlights by Segment.
See Notes to Earnings Release Tables.

VALERO ENERGY CORPORATION

EARNINGS RELEASE TABLES

RECONCILIATION OF NON-GAAP MEASURES TO MOST COMPARABLE AMOUNTS

REPORTED UNDER U.S. GAAP (h)

(millions of dollars, except per share amounts)

(unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Reconciliation of net income (loss) attributable to Valero

Energy Corporation stockholders to adjusted net income

(loss) attributable to Valero Energy Corporation

stockholders

Net income (loss) attributable to Valero Energy Corporation

stockholders

$

463

$

(464

)

...

(79

)

$

(1,062

)

Adjustments:

Gain on sale of MVP interest (e)

(62

)

Income tax expense related to gain on sale of MVP interest

14

...

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