Valero Energy Reports 2022 Fourth Quarter and Full Year Results

  • Reported net income attributable to Valero stockholders of $3.1 billion, or $8.15 per share, for the fourth quarter and $11.5 billion, or $29.04 per share, for the year
  • Reported adjusted net income attributable to Valero stockholders of $3.2 billion, or $8.45 per share, for the fourth quarter and $11.6 billion, or $29.16 per share, for the year
  • Reduced debt by $2.7 billion in 2022, bringing Valero’s aggregate debt reduction since the second half of 2021 to $4.0 billion
  • Successfully commenced operations of the new DGD Port Arthur plant in the fourth quarter

SAN ANTONIO–(BUSINESS WIRE)–Valero Energy Corporation (NYSE: VLO, “Valero”) today reported net income attributable to Valero stockholders of $3.1 billion, or $8.15 per share, for the fourth quarter of 2022, compared to $1.0 billion, or $2.46 per share, for the fourth quarter of 2021. Excluding the adjustments shown in the accompanying earnings release tables, adjusted net income attributable to Valero stockholders was $3.2 billion, or $8.45 per share, for the fourth quarter of 2022, compared to $988 million, or $2.41 per share, for the fourth quarter of 2021.

For 2022, net income attributable to Valero stockholders was $11.5 billion, or $29.04 per share, compared to $930 million, or $2.27 per share, in 2021. Excluding the adjustments shown in the accompanying earnings release tables, adjusted net income attributable to Valero stockholders was $11.6 billion, or $29.16 per share, in 2022, compared to $1.2 billion, or $2.81 per share, in 2021.

Refining

The Refining segment reported operating income of $4.3 billion for the fourth quarter of 2022, compared to $1.3 billion for the fourth quarter of 2021. Adjusted operating income for the fourth quarter of 2022 was $4.4 billion, compared to $1.1 billion for the fourth quarter of 2021. Refining throughput volumes averaged 3.0 million barrels per day in the fourth quarter of 2022.

“Our refineries operated at a 97 percent capacity utilization rate in the fourth quarter, which is the highest utilization rate for our system since 2018,” said Joe Gorder, Valero’s Chairman and Chief Executive Officer, “I am also proud to report that 2022 was Valero’s best year ever for combined employee and contractor safety, which is a testament to our long-standing commitment to safe, reliable and environmentally responsible operations.”

Renewable Diesel

The Renewable Diesel segment, which consists of the Diamond Green Diesel (DGD) joint venture, reported $261 million of operating income for the fourth quarter of 2022, compared to $150 million for the fourth quarter of 2021. Segment sales volumes averaged 2.4 million gallons per day in the fourth quarter of 2022, which was 851 thousand gallons per day higher than the fourth quarter of 2021. The higher sales volumes were due to the impact of additional volumes from the DGD St. Charles plant expansion and the fourth quarter 2022 startup of the DGD Port Arthur plant.

Ethanol

The Ethanol segment reported $7 million of operating income for the fourth quarter of 2022, compared to $474 million for the fourth quarter of 2021. Adjusted operating income for the fourth quarter of 2022 was $69 million, compared to $475 million for the fourth quarter of 2021. Ethanol production volumes averaged 4.1 million gallons per day in the fourth quarter of 2022, which was 340 thousand gallons per day lower than the fourth quarter of 2021. The higher operating income in the fourth quarter of 2021 was primarily attributed to high ethanol prices due to strong demand and low inventories.

Corporate and Other

General and administrative expenses were $282 million in the fourth quarter of 2022, compared to $286 million in the fourth quarter of 2021. General and administrative expenses were $934 million for the year. The effective tax rate for 2022 was 22 percent.

Investing and Financing Activities

Net cash provided by operating activities was $4.1 billion in the fourth quarter of 2022. Included in this amount was a $9 million unfavorable change in working capital and $142 million of net cash provided by operating activities associated with the other joint venture member’s share of DGD, excluding changes in DGD’s working capital. Excluding these items, adjusted net cash provided by operating activities was $4.0 billion in the fourth quarter of 2022.

Net cash provided by operating activities in 2022 was $12.6 billion. Included in this amount was a $1.6 billion unfavorable impact from working capital and $436 million of net cash provided by operating activities associated with the other joint venture member’s share of DGD, excluding changes in DGD’s working capital. Excluding these items, adjusted net cash provided by operating activities in 2022 was $13.8 billion.

Capital investments totaled $640 million in the fourth quarter of 2022, of which $349 million was for sustaining the business, including costs for turnarounds, catalysts and regulatory compliance. Excluding capital investments attributable to the other joint venture member’s share of DGD and those related to other variable interest entities, capital investments attributable to Valero were $538 million in the fourth quarter of 2022 and $2.3 billion in 2022, which was higher than the annual guidance primarily due to spend timing on the Port Arthur Coker project and the accelerated completion of the DGD Port Arthur plant.

Valero returned 45 percent of adjusted net cash provided by operating activities to stockholders in 2022.

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 the other joint venture member’s share of DGD.

Valero further reduced its debt by $442 million in the fourth quarter. This reduction, combined with a series of debt reduction and refinancing transactions completed since the second half of 2021, have collectively reduced Valero’s debt by over $4.0 billion.

Liquidity and Financial Position

Valero ended 2022 with $9.2 billion of total debt, $2.4 billion of finance lease obligations and $4.9 billion of cash and cash equivalents, compared to $13.0 billion of total debt, $1.6 billion of finance lease obligations and $2.3 billion of cash and cash equivalents at the end of the first quarter of 2021. The debt to capitalization ratio, net of cash and cash equivalents, was approximately 21 percent as of December 31, 2022, down from the pandemic high of 40 percent as of March 31, 2021.

Strategic Update

The DGD project adjacent to the Port Arthur refinery (DGD Port Arthur plant), which has a production capacity of 470 million gallons per year of renewable diesel and 20 million gallons per year of renewable naphtha, was commissioned and started up in the fourth quarter. The project was completed under budget and ahead of the original schedule. Total annual DGD production capacity is now approximately 1.2 billion gallons of renewable diesel and 50 million gallons of renewable naphtha.

Refinery optimization projects that are expected to reduce costs and improve margin capture are progressing on schedule. The Port Arthur Coker project is expected to be completed in the second quarter of 2023 and to increase the refinery’s throughput capacity, while also improving turnaround efficiency.

BlackRock and Navigator’s carbon sequestration project is still expected to begin startup activities in late 2024. Valero expects to be the anchor shipper with eight of its ethanol plants connected to this system, which is expected to result in the production of a lower carbon intensity ethanol product that should significantly improve the margin profile and competitive positioning of the ethanol business.

“We continue to advance other low-carbon opportunities, such as sustainable aviation fuel, renewable hydrogen, and additional renewable naphtha and carbon sequestration projects,” said Gorder. “Our gated process helps ensure these projects meet our minimum return threshold.”

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 a multinational manufacturer and marketer of petroleum-based and low-carbon liquid transportation fuels and petrochemical products, and it sells its products primarily in the United States (“U.S.”), Canada, the United Kingdom (“U.K.”), Ireland and Latin America. Valero owns 15 petroleum refineries located in the U.S., Canada and the U.K. with a combined throughput capacity of approximately 3.2 million barrels per day. Valero is a joint venture member in Diamond Green Diesel Holdings LLC, which owns two renewable diesel plants located in the U.S. Gulf Coast region with a production capacity of approximately 1.2 billion gallons per year, and Valero owns 12 ethanol plants located in the U.S. Mid-Continent region with a combined production capacity of approximately 1.6 billion gallons per year. Valero manages its operations through its Refining, Renewable Diesel, and Ethanol segments. Please visit investorvalero.com for more information.

Valero Contacts

Investors:

Homer Bhullar, Vice President – Investor Relations and Finance, 210-345-1982

Eric Herbort, Director – 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 Valero’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 Valero’s 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 Valero’s control, such as legislative or political changes or developments, market dynamics, cyberattacks, weather events, and other matters affecting Valero’s operations or the demand for Valero’s products. These factors also include, but are not limited to, the uncertainties that remain with respect to the Russia-Ukraine conflict, the impact of inflation on margins and costs, economic activity levels, the COVID-19 pandemic, variants of the COVID-19 virus, governmental and societal responses thereto, and the adverse effects the foregoing may have on Valero’s 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 attributable to Valero stockholders, adjusted earnings per common share – assuming dilution, Refining margin, Renewable Diesel margin, Ethanol margin, adjusted Refining operating income, adjusted Renewable Diesel operating income, adjusted Ethanol operating income, adjusted net cash provided by 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 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

December 31,

Year Ended

December 31,

2022

2021

2022

2021

Statement of income data

Revenues

$

41,746

$

35,903

$

176,383

$

113,977

Cost of sales:

Cost of materials and other (a) (b)

34,811

31,849

150,770

102,714

Operating expenses (excluding depreciation and

amortization expense reflected below) (b)

1,638

1,558

6,389

5,776

Depreciation and amortization expense (c)

622

586

2,428

2,358

Total cost of sales

37,071

33,993

159,587

110,848

Asset impairment loss (d)

61

61

Other operating expenses

26

18

66

87

General and administrative expenses (excluding

depreciation and amortization expense reflected below) (e)

282

286

934

865

Depreciation and amortization expense

11

12

45

47

Operating income

4,295

1,594

15,690

2,130

Other income (expense), net (f)

92

(163

)

179

16

Interest and debt expense, net of capitalized interest

(137

)

(152

)

(562

)

(603

)

Income before income tax expense

4,250

1,279

15,307

1,543

Income tax expense (g)

1,018

169

3,428

255

Net income

3,232

1,110

11,879

1,288

Less: Net income attributable to noncontrolling interests

119

101

351

358

Net income attributable to Valero Energy Corporation

stockholders

$

3,113

$

1,009

$

11,528

$

930

Earnings per common share

$

8.15

$

2.47

$

29.05

$

2.27

Weighted-average common shares outstanding (in millions)

380

408

395

407

Earnings per common share – assuming dilution

$

8.15

$

2.46

$

29.04

$

2.27

Weighted-average common shares outstanding –

assuming dilution (in millions)

381

408

396

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 December 31, 2022

Revenues:

Revenues from external customers

$

39,566

$

1,066

$

1,114

$

$

41,746

Intersegment revenues

32

528

233

(793

)

Total revenues

39,598

1,594

1,347

(793

)

41,746

Cost of sales:

Cost of materials and other

33,280

1,221

1,095

(785

)

34,811

Operating expenses (excluding depreciation and

amortization expense reflected below)

1,398

77

161

2

1,638

Depreciation and amortization expense

565

35

22

622

Total cost of sales

35,243

1,333

1,278

(783

)

37,071

Asset impairment loss (d)

61

61

Other operating expenses

25

1

26

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

282

282

Depreciation and amortization expense

11

11

Operating income by segment

$

4,330

$

261

$

7

$

(303

)

$

4,295

Three months ended December 31, 2021

Revenues:

Revenues from external customers

$

33,521

$

684

$

1,698

$

$

35,903

Intersegment revenues

7

253

174

(434

)

Total revenues

33,528

937

1,872

(434

)

35,903

Cost of sales:

Cost of materials and other (a)

30,342

714

1,224

(431

)

31,849

Operating expenses (excluding depreciation and

amortization expense reflected below)

1,358

48

153

(1

)

1,558

Depreciation and amortization expense

543

23

20

586

Total cost of sales

32,243

785

1,397

(432

)

33,993

Other operating expenses

15

2

1

18

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

286

286

Depreciation and amortization expense

12

12

Operating income by segment

$

1,270

$

150

$

474

$

(300

)

$

1,594

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

Eliminations

Total

Year ended December 31, 2022

Revenues:

Revenues from external customers

$

168,154

$

3,483

$

4,746

$

$

176,383

Intersegment revenues

56

2,018

740

(2,814

)

Total revenues

168,210

5,501

5,486

(2,814

)

176,383

Cost of sales:

Cost of materials and other (a)

144,588

4,350

4,628

(2,796

)

150,770

Operating expenses (excluding depreciation and

amortization expense reflected below)

5,509

255

625

6,389

Depreciation and amortization expense (c)

2,247

122

59

2,428

Total cost of sales

152,344

4,727

5,312

(2,796

)

159,587

Asset impairment loss (d)

61

61

Other operating expenses

63

3

66

General and administrative expenses (excluding

depreciation and amortization expense reflected

below) (e)

934

934

Depreciation and amortization expense

45

45

Operating income by segment

$

15,803

$

774

$

110

$

(997

)

$

15,690

Year ended December 31, 2021

Revenues:

Revenues from external customers

$

106,947

$

1,874

$

5,156

$

$

113,977

Intersegment revenues

14

468

433

(915

)

Total revenues

106,961

2,342

5,589

(915

)

113,977

Cost of sales:

Cost of materials and other (a) (b)

97,759

1,438

4,428

(911

)

102,714

Operating expenses (excluding depreciation and

amortization expense reflected below) (b)

5,088

134

556

(2

)

5,776

Depreciation and amortization expense (c)

2,169

58

131

2,358

Total cost of sales

105,016

1,630

5,115

(913

)

110,848

Other operating expenses

83

3

1

87

General and administrative expenses (excluding

depreciation and amortization expense reflected

below)

865

865

Depreciation and amortization expense

47

47

Operating income by segment

$

1,862

$

709

$

473

$

(914

)

$

2,130

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)

(unaudited)

Three Months Ended

December 31,

Year Ended

December 31,

2022

2021

2022

2021

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

$

3,113

$

1,009

$

11,528

$

930

Adjustments:

Modification of renewable volume obligation (RVO) (a)

(220

)

(104

)

(1

)

Income tax expense related to modification of RVO

49

23

Modification of RVO, net of taxes

(171

)

(81

)

(1

)

Gain on sale of ethanol plant (c)

(23

)

Income tax expense related to gain on sale of ethanol plant

5

Gain on sale of ethanol plant, net of taxes

(18

)

Asset impairment loss (d)

61

61

Income tax benefit related to asset impairment loss

(14

)

(14

)

Asset impairment loss, net of taxes

47

47

Environmental reserve adjustment (e)

20

Income tax benefit related to environmental reserve adjustment

(5

)

Environmental reserve adjustment, net of taxes

15

Pension settlement charge (f)

58

58

Income tax benefit related to pension settlement charge

(13

)

(13

)

Pension settlement charge, net of taxes

45

45

Loss (gain) on early redemption and retirement of debt (f)

(38

)

193

(14

)

193

Income tax (benefit) expense related to loss (gain) on early

redemption and retirement of debt

9

(43

)

3

(43

)

Loss (gain) on early redemption and retirement of debt,

net of taxes

(29

)

150

(11

)

150

Foreign withholding tax (g)

51

51

Change in estimated useful life of ethanol plant (c)

48

Income tax benefit related to the change in estimated useful

life of ethanol plant

(11

)

Change in estimated useful life of ethanol plant,

net of taxes

37

Gain on sale of MVP interest (f)

(62

)

Income tax expense related to gain on sale of MVP interest

14

Gain on sale of MVP interest, net of taxes

(48

)

Diamond Pipeline asset impairment loss (f)

24

Income tax benefit related to Diamond Pipeline asset

impairment loss

(5

)

Diamond Pipeline asset impairment loss, net of taxes

19

Income tax expense related to changes in statutory tax rates (g)

64

Total adjustments

114

(21

)

48

221

Adjusted net income attributable to

Valero Energy Corporation stockholders

$

3,227

$

988

$

11,576

$

1,151

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)

(unaudited)

Three Months Ended

December 31,

Year Ended

December 31,

2022

2021

2022

2021

Reconciliation of earnings per common share –

assuming dilution to adjusted earnings per common

share – assuming dilution

Earnings per common share – assuming dilution

$

8.15

$

2.46

$

29.04

$

2.27

Adjustments:

Modification of RVO (a)

(0.42

)

(0.20

)

Gain on sale of ethanol plant (c)

(0.05

)

Asset impairment loss (d)

0.13

0.12

Environmental reserve adjustment (e)

0.04

Pension settlement charge (f)

0.12

0.11

Loss (gain) on early redemption and retirement of debt (f)

(0.08

)

0.37

(0.03

)

0.37

Foreign withholding tax (g)

0.13

0.13

Change in estimated useful life of ethanol plant (c)

0.09

Gain on sale of MVP interest (f)

(0.12

)

Diamond Pipeline asset impairment loss (f)

0.04

Income tax expense related to changes in statutory tax rates (g)

0.16

Total adjustments

0.30

(0.05

)

0.12

0.54

Adjusted earnings per common share – assuming dilution

$

8.45

$

2.41

$

29.16

$

2.81

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)

(unaudited)

Three Months Ended

December 31,

Year Ended

December 31,

2022

2021

2022

2021

Reconciliation of operating income by segment to segment

margin, and reconciliation of operating income by segment

to adjusted operating income by segment

Refining segment

Refining operating income

$

4,330

$

1,270

$

15,803

$

1,862

Adjustments:

Modification of RVO (a)

(220

)

(104

)

(1

)

Operating expenses (excluding depreciation and

amortization expense reflected below) (b)

1,398

1,358

5,509

5,088

Depreciation and amortization expense

565

543

2,247

2,169

Other operating expenses

25

15

63

83

Refining margin

$

6,318

$

2,966

$

23,518

$

9,201

Refining operating income

$

4,330

$

1,270

$

15,803

$

1,862

Adjustments:

Modification of RVO (a)

(220

)

(104

)

(1

)

Other operating expenses

25

15

63

83

Adjusted Refining operating income

$

4,355

$

1,065

$

15,762

$

1,944

Renewable Diesel segment

Renewable Diesel operating income

$

261

$

150

$

774

$

709

Adjustments:

Operating expenses (excluding depreciation and

amortization expense reflected below)

77

48

255

134

Depreciation and amortization expense

35

23

122

58

Other operating expenses

2

3

Renewable Diesel margin

$

373

$

223

$

1,151

$

904

Renewable Diesel operating income

$

261

$

150

$

774

$

709

Adjustment: Other operating expenses

2

3

Adjusted Renewable Diesel operating income

$

261

$

152

$

774

$

712

See Notes to Earnings Release Tables.

Contacts

Valero Contacts

Investors:

Homer Bhullar, Vice President – Investor Relations and Finance, 210-345-1982

Eric Herbort, Director – 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

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