- Net Income: $880 million or $2.71 per share for Q2 2024, compared to $1.9 billion or $5.40 per share for Q2 2023.
- Refining Segment Operating Income: $1.2 billion for Q2 2024, compared to $2.4 billion for Q2 2023.
- Refining Throughput Volumes: 3 million barrels per day with 94% capacity utilization in Q2 2024.
- Refining Cash Operating Expenses: $4.45 per barrel in Q2 2024.
- Renewable Diesel Segment Operating Income: $112 million for Q2 2024, compared to $440 million for Q2 2023.
- Renewable Diesel Sales Volumes: 3.5 million gallons per day in Q2 2024, 908,000 gallons per day lower than Q2 2023.
- Ethanol Segment Operating Income: $105 million for Q2 2024, compared to $127 million for Q2 2023.
- Ethanol Production Volumes: 4.5 million gallons per day in Q2 2024, 31,000 gallons per day higher than Q2 2023.
- G&A Expenses: $203 million for Q2 2024.
- Net Interest Expense: $140 million for Q2 2024.
- Depreciation and Amortization Expense: $696 million for Q2 2024.
- Income Tax Expense: $277 million for Q2 2024 with an effective tax rate of 23%.
- Net Cash Provided by Operating Activities: $2.5 billion for Q2 2024.
- Capital Investments: $420 million for Q2 2024, with $329 million for sustaining the business and $91 million for growth.
- Shareholder Returns: $1.4 billion returned in Q2 2024, including $347 million in dividends and $1 billion in share buybacks.
- Total Debt: $8.4 billion as of June 30, 2024.
- Cash and Cash Equivalents: $5.2 billion as of June 30, 2024.
- Debt-to-Capitalization Ratio: 16% net of cash and cash equivalents as of June 30, 2024.
- Available Liquidity: $5.3 billion excluding cash as of June 30, 2024.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Valero Energy Corp (VLO, Financial) reported strong financial results for the second quarter, with refineries achieving 94% throughput capacity utilization.
- The company saw continued strength in its US wholesale system, with sales exceeding 1 million barrels per day.
- Valero's renewable diesel and ethanol segments made good contributions to overall performance.
- Growth projects, including the Diamond Green Diesel sustainable aviation fuel project, are progressing on schedule.
- Valero remains committed to shareholder returns, with a year-to-date payout of 80% and a quarterly cash dividend of $1.07 per share.
Negative Points
- Net income attributable to Valero stockholders decreased to $880 million or $2.71 per share, compared to $1.9 billion or $5.40 per share for the same period last year.
- The refining segment's operating income dropped to $1.2 billion from $2.4 billion year-over-year.
- Renewable diesel segment operating income fell to $112 million from $440 million due to lower sales volumes and margins.
- Ethanol segment operating income decreased to $105 million from $127 million year-over-year.
- Refining cash operating expenses increased to $4.45 per barrel, and the company expects these expenses to rise to approximately $4.70 per barrel in the third quarter.
Q & A Highlights
Q: What are your views on the supply and demand balance in the refining macro environment, particularly in the US and globally?
A: Gary Simmons, COO, noted that the US economy has been resilient with gasoline demand flat year-over-year and diesel demand down slightly. He highlighted that the North Atlantic Basin saw sluggish economic activity and increased refining runs in the Middle East, leading to restocking of inventories. He expects tighter supply-demand balances in the near term and bullish long-term refining margins due to limited new capacity additions.
Q: How do you think about the cadence on the buyback going forward from here?
A: Homer Bhullar, VP of Investor Relations and Finance, stated that Valero has funded all uses of cash, including significant shareholder returns, through cash flow from operations. Given the strong balance sheet, they continue to lean into buybacks with a payout ratio of 87% for the quarter and 80% year-to-date. He emphasized that 40% to 50% is a floor for payout ratios, with excess free cash flow going towards share buybacks.
Q: What is your outlook on the Gulf Coast heavy sour differential, considering OPEC's potential production increases and refinery closures?
A: Gary Simmons, COO, mentioned that short-term differentials have widened due to decreased demand for Canadian heavy crude. He expects more OPEC barrels on the market by late this year or early next year, which will create wider heavy sour differentials. He also noted that even with current differentials, running heavy sour crudes provided significant economic uplift in the second quarter.
Q: Can you provide an update on the impact of the TMX pipeline on the West Coast market?
A: Gary Simmons, COO, explained that the impact of TMX on West Coast crude costs is becoming evident, with A&S trading lower relative to Brent. He expects this to show up more in the third quarter. Lane Riggs, CEO, added that the West Coast is the highest cost region to operate in, and any changes in refining outlook do not significantly impact their operational strategy focused on reliability and execution.
Q: How sustainable do you think the recent uptick in ethanol margins is, and what is the update on the Summit carbon capture project?
A: Eric Fisher, SVP of Product Supply, Trading, and Wholesale, attributed the uptick in ethanol margins to cheap natural gas and corn prices. He expects corn prices to remain low due to large carryout inventories. Regarding the Summit carbon capture project, he noted that while Valero is a shipper on the project, they do not have detailed insights into its timeline but view carbon sequestration as a supportive strategy for ethanol.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
