The companies on the Global 500 employ 70.2 million people, and their revenue represents more than one-third of the world’s GDP.

Fortune Global 500

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Energy sector dominated this year for the first time since 2008, with 28 companies featured on the list.

100 Fastest-Growing Companies

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are mining, oil and gas exploration and services, pipelines, refining, and utilities.

Fortune Sector Leaders: Energy

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-Valero

Petroleum refining company Valero Energy leaped 42 spots in our ranking this year, bringing in $175.7 billion in revenue, a 53% increase over the previous year. 
<ul> 
 	<li>In May 2023, Valero announced that Joseph W. Gorder would retire as chief executive officer effective June 30, staying on as executive chairman. R. Lane Riggs, Valero’s president and chief operating officer, succeded Gorder.</li> 
 	<li>The company’s refining, renewable diesel, and ethanol segments each reported substantial increases in revenue as of the first quarter of 2023 compared to the year-earlier quarter.</li> 
 	<li>Valero’s Port Arthur Coker project, which the company expects will improve its efficiency by converting residual crude oil into useable fuels, was completed in March 2023 and began operations the month after.</li> 
 	<li>In April 2023, Valero agreed to pay a $1.2 million settlement to the U.S. Environmental Protection Agency after its refinery in Benicia, Calif., violated the federal Clean Air Act.</li> 
</ul>

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500 2023-Valero Energy

Petroleum refining company Valero Energy leaped 12 spots in our ranking this year, bringing in $171.2 billion in revenue, a 58% increase over the previous year. 
<ul> 
 	<li>In May 2023, Valero announced that Joseph W. Gorder would retire as chief executive officer effective June 30, staying on as executive chairman. R. Lane Riggs, Valero’s president and chief operating officer, will take Gorder’s place as CEO.</li> 
 	<li>The company’s refining, renewable diesel, and ethanol segments each reported substantial increases in revenue as of the first quarter of 2023 compared to the year-earlier quarter.</li> 
 	<li>Valero’s Port Arthur Coker project, which the company expects will improve its efficiency by converting residual crude oil into useable fuels, was completed in March 2023 and began operations the month after.</li> 
 	<li>In April 2023, Valero agreed to pay a $1.2 million settlement to the U.S. Environmental Protection Agency after its refinery in Benicia, Calif., violated the federal Clean Air Act.</li> 
</ul>

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

This year’s Fortune 500 marks the 68th running of the list.

F500 2022 Valero Energy Corp

Like other oil and gas companies, refining giant Valero Energy enjoyed a snapback in revenue and earnings in 2021 as pandemic lockdowns eased. Valero has launched a number of low-carbon and renewable fuel projects in recent years, and has pledged to reduce emissions from its refining operations 63% from 2020 levels by 2025. The company’s Diamond Alternative Energy has taken some heat from environmentalists, however, for lobbying for renewable fuels over zero-emissions alternatives; Diamond is a plaintiff in a recent federal lawsuit against Environmental Protection Agency regulations designed to encourage the sale of electric vehicles.

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500-2021-164-VALERO ENERGY

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;The U.S. refining sector was battered in 2020 by lockdowns and travel restrictions, pushing the San Antonio–based refiner to a $1.4 billion loss. That compares with 2019’s $2.4 billion profit. One saving grace came from Valero’s renewable fuels business, which capitalized on the push for low-carbon alternatives to fossil fuels. The company now expects to invest half of its growth capital in renewable diesel. As part of its expansion, last year Valero approved a new diesel plant that is expected to begin operations in 2023.&quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri&quot;,&quot;16&quot;:11}">The U.S. refining sector was battered in 2020 by lockdowns and travel restrictions, pushing the San Antonio–based refiner to a $1.4 billion loss. That compares with 2019’s $2.4 billion profit. One saving grace came from Valero’s renewable fuels business, which capitalized on the push for low-carbon alternatives to fossil fuels. The company now expects to invest half of its growth capital in renewable diesel. As part of its expansion, last year Valero approved a new diesel plant that is expected to begin operations in 2023.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-53-Valero Energy

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-071-Valero-Energy

As CEO Joe Gorder put it when the company released its annual financial report, Valero faced another “challenging environment for the refining business” in 2019. Net income sank 17% year-on-year, to $2.8 billion, even as refinery utilization was at 96% and the company refined record amounts of oil. The business completed a network of central Texas pipelines and terminals, extending the reach of its vast U.S. shale business deeper inland. Its 2020 growth ambitions suffered a blow in late November when its renewable fuels business stumbled: Two ethanol plants were forced to close temporarily, and additional plants went offline in March 2020, as the coronavirus pandemic destroyed demand for any and all types of energy.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-032-Valero-Energy

This year's Fortune Global 500 generated $27.7 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

Here are the World's Most Admired Companies for 2016 as ranked in their industries. See who made the list.

World's Most Admired Companies

This year's Fortune Global 500 generated $27.6 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

The world's 500 largest companies generated $31.2 trillion in revenues and $1.7 trillion in profits in 2014. Together, this year's Fortune Global 500 employ 65 million people worldwide and are represented by 36 countries.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Valero Energy is an oil refiner with operations in the U.S., Canada, Latin America, and Europe. Founded in 1980, the company sells gasoline, diesel, and ethanol through outlets under the Valero, Beacon, Diamond Shamrock, Shamrock, Texaco, and Ultramar brands.

Q2 2026

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Valero Energy (VLO): Company Profile, Stock Price, News, Rankings

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Valero Energy

valero energy

and welcome to the Valero Energy Corp. First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Homer Buller, VP of Investor Relations and Finance. Thank you. You may begin.

Good morning, everyone, and welcome to Valero Energy Corporation's first quarter twenty twenty five earnings conference call. With me today are Lane Riggs, our Chairman, CEO and President Jason Fraser, our Executive Vice President and CFO Gary Simmons, our Executive Vice President and COO Rich Walsh, our Executive Vice President and General Counsel and several other members of Valero's senior management team. If you have not received the earnings release and would like a copy, you can find one on our website at investorvalero.com. Also attached to the earnings release are tables that provide additional financial information on our business segments and reconciliations and disclosures for adjusted financial metrics mentioned on this call. If you have any questions after reviewing these tables, please feel free to contact our Investor Relations team after the call.

I would now like to direct your attention to the forward looking statement disclaimer contained in the press release. In summary, it says that statements in the press release and on this conference call 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 under federal securities laws. There are many factors that could cause actual results to differ from our expectations, including those we've described in our earnings release and filings with the SEC. Now, I'll turn the call over to Lane for opening remarks.

Thank you, Homer, and good morning, everyone. I am pleased to report that we delivered positive results for the first quarter despite heavy maintenance activity across our refining system and a tough margin environment in the renewable diesel segment. This is a credit to the strength and discipline of our operations, optimization and commercial teams. Refining margins improved through the quarter with U. S.

Light product demand slightly higher than last year and product inventories below the same period last year. On the financial side, we continue to honor our commitment to shareholder returns with a strong payout ratio of 73% in the first quarter. And in January, our Board approved a 6% increase to the quarterly cash dividend further demonstrating our strong financial position. We continue to progress the FCC unit optimization project at St. Charles that will enable the refinery to increase the yield of high value products including high octane alkylates.

The project is estimated to cost $230,000,000 and is expected to start up in 2026 and we are pursuing other short cycle high return optimization projects around our existing refining assets. Looking ahead, we expect tight product supply and demand balances and low product inventories support refining fundamentals ahead of the driving season. Longer term, product demand is expected to exceed supply as there are limited announced capacity additions beyond 2025. In closing, we remain focused on the things that we can control, pursuing excellence in operations, deploying capital with an uncompromising focus on return and honoring our commitment to stockholder returns. Our commitment remains underpinned by a strong balance sheet that provides us plenty of operational and financial flexibility.

So with that Homer, I'll hand the call back to you.

Thanks, Lane. For the first quarter of twenty twenty five, we incurred a net loss attributable to Valero stockholders of $595,000,000 or $1.9 per share compared to net income of $1,200,000,000 or $3.75 per share for the first quarter of twenty twenty four. Excluding the $1,100,000,000 pretax or $877,000,000 after tax asset impairment loss related to the West Coast assets, adjusted net income attributable to Valero stockholders was $282,000,000 or $0.89 per share for the first quarter of twenty twenty five compared to $1,300,000,000 or $3.84 per share for the first quarter of twenty twenty four. The refining segment reported an operating loss of $530,000,000 for the first quarter of twenty twenty five compared to operating income of $1,700,000,000 for the first quarter of twenty twenty four. Adjusted operating income was $6.00 $5,000,000 for the first quarter of twenty twenty five compared to $1,800,000,000 for the first quarter of twenty twenty four.

Refining throughput volumes in the first quarter of twenty twenty five averaged 2,800,000 barrels per day or 89% throughput capacity utilization. Refining cash operating expenses were $5.7 per barrel in the first quarter of twenty twenty five. The renewable diesel segment reported an operating loss of $141,000,000 for the first quarter of twenty twenty five compared to operating income of $190,000,000 for the first quarter of twenty twenty four. Renewable diesel sales volumes averaged 2,400,000 gallons per day in the first quarter of twenty twenty five. The ethanol segment reported $20,000,000 of operating income for the first quarter of twenty twenty five compared to $10,000,000 for the first quarter of twenty twenty four.

Adjusted operating income was $39,000,000 for the first quarter of twenty twenty four. Ethanol production volumes averaged 4,500,000 gallons per day in the first quarter of twenty twenty five. For the first quarter of twenty twenty five, G and A expenses were $261,000,000 net interest expense was $137,000,000 depreciation and amortization expense was $691,000,000 and income tax benefit was $265,000,000 Net cash provided by operating activities was $952,000,000 in the first quarter of twenty twenty five. Included in this amount was $157,000,000 favorable change in working capital and $67,000,000 of adjusted net cash used in operating activities associated with the other joint venture member share of DGD. Excluding these items, adjusted net cash provided by operating activities was $862,000,000 in the first quarter of twenty twenty five.

Regarding investing activities, we made $660,000,000 of capital investments in the first quarter of twenty twenty five, of which $582,000,000 was for sustaining the business including costs for turnarounds, catalysts and regulatory compliance and the balance was for growing the business. Excluding capital investments attributable to the other joint venture member share of DGD and other variable interest entities, capital investments attributable to Valero were $611,000,000 in the first quarter of twenty twenty five. Moving to financing activities, we returned $633,000,000 to our stockholders in the first quarter of twenty twenty five, of which $356,000,000 was paid as dividends and $277,000,000 was for the purchase of approximately 2,100,000.0 shares of common stock, resulting in a payout ratio of 73% for the quarter. On January 16, we announced a 6% increase to the quarterly cash dividend on common stock from 1.07 to $1.13 per share delivering on our commitment of a growing dividend. With respect to our balance sheet, we issued $650,000,000 aggregate principal amount of 5.15% senior notes due 02/1930 in February and repaid the outstanding principal balances of $189,000,000 of 3.65% senior notes that matured in March and $251,000,000 of 2.85% senior notes that matured in April.

We ended the quarter with $8,500,000,000 of total debt, 2,300,000,000.0 of total finance lease obligations and $4,600,000,000 of cash and cash equivalents. The debt to capitalization ratio net of cash and cash equivalents was 19% as of 03/31/2025. And we ended the quarter well capitalized with $5,300,000,000 of available liquidity excluding cash. Turning to guidance, we still expect capital investments attributable to Valero for 2025 to be approximately $2,000,000,000 which includes expenditures for turnarounds, catalysts, regulatory compliance and joint venture investments. About $1,600,000,000 of that is allocated to sustaining the business and the balance to growth.

For modeling our second quarter operations, we expect refining throughput volumes to fall within the following ranges. Gulf Coast at 1,750,000 to 1,800,000 barrels per day, Mid Continent at 385,000 to 405,000 barrels per day, West Coast at two and forty thousand to 260,000 barrels per day and North Atlantic at 320,000 to 340,000 barrels per day. We expect refining cash operating expenses in the second quarter to be approximately $5.15 per barrel. With respect to the renewable diesel segment, we now expect sales volumes to be approximately 1,100,000,000 gallons in 2025 reflecting lower production volumes due to economics. Operating expenses in 2025 should be $0.53 per gallon, which includes $0.24 per gallon for non cash costs such as depreciation and amortization.

Our ethanol segment is expected to produce 4,600,000 gallons per day in the second quarter. Operating expenses should average $0.41 per gallon, which includes $05 per gallon for non cash costs such as depreciation and amortization. For the second quarter, net interest expense should be about 135,000,000 Total depreciation and amortization expense in the second quarter should be approximately $780,000,000 which includes $100,000,000 of incremental depreciation expense related to our plan to cease refining operations at our Benicia refinery by the April 2026. We expect this incremental amount related to the Benicia refinery to be included in D and A for the next four quarters, resulting in a quarterly earnings impact of approximately zero two five dollars per share based on current shares outstanding. For 2025, we still expect G and A expenses to be approximately $985,000,000 That concludes our opening remarks.

Before we open the call to questions, please limit each turn in the Q and A to two questions. If you have more than two questions, please rejoin the queue as time permits to ensure other callers have time to ask their questions.

Thank you. We will now be conducting a question and answer session. Our first questions come from the line of Manav Gupta with UBS. Please proceed with your questions.

Good morning, guys. Very resilient earnings in a tough macro. I have two questions for Gary. I'll ask them upfront in the interest of time. So Gary, there's a lot of chatter around here on tariffs and recessions and whatever.

But what are you seeing in terms of the market dynamics, supply demand out there for refined products? And the second one is, can you talk a little bit about the crude differentials and the quality discounts given everything which is going around OPEC probably raising volumes, land is shutting down and probably tariffs. So if you could address those two questions. Thank you.

Good morning, Manav. This is Gary. Happy to address that and show you kind of talk about what we're seeing on the commercial side of the business. Sales through our wholesale system were down in the first quarter a few percent from typical historic levels. Our product exports were up year over year, but down versus fourth quarter levels.

None of this is really a reflection of demand, just more due to the heavy refinery maintenance we had during the quarter. If you look at the seven day average trends to our wholesale system, we're back to just below that 1,000,000 barrel a day level. We're showing a 1% year over year increase in gasoline sales and a 6% year over year increase in diesel volumes. Diesel sales have really been supported by higher agricultural demand as we started planting season in the Mid Continent. If you look at the DOE demand data for total light products, it indicates a year over year increase in total light product demand in the neighborhood of 300,000 barrels a day, which we believe is pretty accurate.

It looks to us like the DOE is under reporting gasoline demand a little. If you look at the ethanol blending data, it would indicate gasoline demand flat to slightly up from last year, jet demand year to date slightly up and then a really nice bump in diesel demand driven largely by the cold temperatures we experienced early in the year. Globally, I think we've seen stronger light product demand as well and more than was expected. The consultants data varies greatly here, but if you take an average of the data, it would show a year over year increase in total light product demand globally of around 1,000,000 barrels a day, which we think is pretty close. Our data shows we had about 640,000 barrels a day in new refining capacity come online during the quarter, but then we had two refineries shut down with a combined capacity of 410,000 barrels a day.

So total light product demand globally up 1,000,000 barrels a day, 230,000 barrels a day of net refinery capacity additions and then a little lower refinery utilizations due to turnaround. So you combine all that and you would expect to see some inventory draws, which is what we've seen. Total light product inventories drawn back to the point where once again below the five year average range, currently 36,000,000 barrels below the five year average, 8,000,000 barrels below where we were last year at this time. Gasoline inventory is drawn down to the bottom part of the five year average range. Jet inventories are now below the five year average levels.

Diesel inventory is well below five year average range, below last year and now approaching the historically low levels we saw in 2022 and 2023. As we head into driving season, gasoline fundamentals look constructive. Gasoline inventory toward the bottom of the five year average range, demand at or slightly above last year. West Coast gasoline is a twelve year low for this time of year. Unemployment remains low, which historically translates into good gasoline demand.

And then the strength in European gasoline is really keeping their barrels in Europe versus the normal Transatlantic export flow into New York Harbor. Additionally, that strength in European gasoline is opening up more exports for U. S. Gulf Coast refineries into Latin America. Diesel looks very strong.

We had good demand early in the year due to cold weather. We've seen imports as well as domestic production of renewable and biodiesel fall off, which has created incremental demand for refinery produced diesel. Despite the fact that we're at or near record lows on total diesel inventory in The U. S. That we've seen in 2022 and 2023, the arb to ship on Explorer from The U.

S. Gulf Coast to the Mid Continent is open due to the strong agricultural demand. The arb to ship on Colonial to New York Harbor is open. The arb to ship from The U. S.

Gulf Coast to Europe is open and the arb to ship to Latin America is open. So when you look at record low inventories and still have open arbs to ship product domestically and globally from The U. S. Gulf Coast, I think that speaks well for diesel not just domestically but also globally. VGO remains fairly expensive indicating tightness in that market which likely says FCCs and hydrocrackers have to compete for incremental VGO barrels.

So again, the fundamentals look very strong and have exceeded our expectations so far for the year. I think when you go through all this data, it's actually surprising we don't see stronger refinery margins. Based on the strong fundamentals, I'd say refinery margins are undervalued. I think right now, it's the uncertainty around the economy. People have made assumptions about what happens with the economy and its impact on demand for our products.

And those assumptions are really driving the market right now. Thus far, the economy looks like it's been fairly resistant, but we'll have to see. All of you guys probably have better insight to that than what I do. Turning to the crude differentials. It's been hard to really have clarity on what's going to happen with the crude differentials in the quarter.

A lot of the discussions on tariffs and sanctions have certainly made that hard to see where the direction that's going. I think when you look at bullish factors, certainly the Lyondell refinery shutting down in The U. S. Gulf Coast to put 200,000 to 250,000 barrels a day of additional heavy sour barrels on the market. We saw a record Canadian production in the first quarter and it looks like Canadian production continues to ramp up.

And then we've had the announcement of 500,000 barrels of a day additional OPEC plus production. News yesterday was that maybe even higher than the 500,000 barrels a day. Offsetting that somewhat, we continue to see Mexican production decline a little and then the potential for sanctions impacting Iranian and Venezuelan production. But you combine all that and I think the likelihood is that you see more medium and heavy sour barrels on the market, which speaks well to the differentials moving forward. I don't think there's much room for them to come in any because medium and heavy sours are already trading at economic parity to light sweet.

And in fact, we're seeing economic signals approach the point where you would back off of heavy feedstocks and even spare coking capacity.

Thank you. Our next questions come from the line of Roger Read with Wells Fargo. Please proceed with your questions.

morning, everybody. Just to come back on the guidance just to for the second quarter, a little light relative to what I was anticipating a little I guess you could even say a little light relative to a year ago. Is this a function of maintenance? Because it seems to run a little counter to the explanation you were just offering there Gary.

Hey Roger, this is Greg. Yes, it is maintenance and you can see it in a couple of the particular regions North Atlantic and Mid Con you can see those quite a bit lower and that's all maintenance driven. In the Gulf Coast and the West Coast where most of the maintenance is complete, we're getting those kind of back to what you would typically see for throughput.

Okay. And then Homer, I think this is just to clarify with you. When we talked about maintenance before, you've pointed out there can be a difference between crude unit maintenance and downstream maintenance. So presuming the guidance is crude unit maintenance, are we looking at the ability to run some of the downstream units? Or should we take this at face value on volumes?

Roger, it's Greg again. It is when you see those big throughput impacts, that tends to tell you that's the front end of the plant that's shutting down. We may try to run some downstream stuff, but it really depends on being able to get feedstocks into some of those particular markets. You think about the Mid Continent particular, it's hard to bring other feedstocks in when you've got the front end of the plants down. So you probably don't see as much of that in those regions, North Atlantic as well as you would see in like the Gulf Coast.

Great. That would have been my interpretation as well. Okay. Thank you. I'll turn it back.

You. Next questions come from the line of Ryan Todd with Piper Sandler. Please proceed with your questions.

Great. Thanks. Can you walk through the decision to close the Peninsula refinery? Why now? What's changed?

And how should we think about the future risk to or the environment for the Wilmington Refinery?

Hey, Ryan, it's Lane. So when you think about the West Coast, California has been pursuing policies to move away from fossil fuels for really for the past twenty years and the consequence of that is the regulatory and enforcement environment is the most stringent and difficult of anywhere else in North America. And so if you sort of think about what's happened on the West Coast since COVID, you've had several refineries closed. Have another one closed this year. So then you start thinking about our asset base and we're looking at the difficulty and all that.

So Venetia operates in the more difficult part of California with respect to the regulatory and enforcement side of this. And then on top of that Venetia costs considerably more to maintain versus Wilmington.

Okay. Thank you. And then maybe shifting to renewable diesel markets. Can you maybe walk through where we are on the I mean, the markets are trying to reach a new equilibrium under the new PTC regime. Can you maybe walk through where you think we are on the path to normalization and the timing to get there?

And then maybe within that, I know you booked some 45z credits in the first quarter. How much should we expect to see you book? Should we expect to see that improve going forward from here? So I guess maybe just some thoughts on how that market normalizes and maybe improves over the course of the year?

Yes. This is Eric. As you look at the first quarter, '1 thing that we should be clear about is that we had catalyst changes on DGD-one and DGD-two. So you had a pretty significant volume impact in the first quarter that reduced a lot of the margin opportunity for the segment. But as you said, we got PTC guidance in January and in February, we pivoted both operations and our contracts with customers in order to begin capturing the PTC.

So we didn't get a complete capture in the first quarter. We did get capture on NAFTA and SNF, but only about half of the RD was able to be captured because it took us a little while to get those contracts and operations shifted over. Going forward, we see, we should get 100% of eligible credits on PTC for all three of those product lines. Now there are a lot of feedstock eligibility issues. So it's not 100% of our full volume.

It will be 100% of the eligible feedstocks. And so as that market is figuring out where the net balance is going to be between tariffs, PTC eligibility and just call it flat price, we still see the market moving around there. But going forward, we think we've got that solved. So as I said before, if you look at the shift from the $1 blenders tax credit to this CI based PTC, everyone knew there was going to be a drop in profitability going from the previous program to the current program. For PTC on waste oils, which are still the most favorite feedstocks, that's $0.50 to $0.60 a gallon on domestic primarily domestic feedstocks.

Foreign feedstocks into SAF still count, but foreign feedstocks into RD do not. And so we have kind of a unique position there that as you look at your product allocations and your feedstocks, you have to take all of that into account. The backdrop the other backdrop you have here is, we've seen a big drop in domestic production as Gary mentioned in his comments on the macro. You've also seen a big drop in foreign imports. So the overall D4 RIN production has dropped pretty significantly.

Combine that with this conversation that a lot of trade groups have gone to the EPA and asked for an increase of the RIN obligation and beginning in 2026 and 2027 into 5,250,000,000 gallons for D4 RINs. So you have a drop in production plus this anticipated increase in obligation. There is some potential tailwind out there in the future at some point if that gets proposed to the EPA and the EPA approves that probably sometime in the third or fourth quarter of this year. So you've got a little bit of upside potential there. The other one that's that may be more or sooner to be revealed is the California LCFS program.

Those obligations that were pushed off initially have been resubmitted to the OAL for approval. So in the next thirty days or so, we should hear from California on whether or not they're going to increase their LCFS obligation by 9% going back to Jan one. That should put another potential increase of LCFS prices on the horizon. So hard to predict what California will do on that, but that is the timeframe for when we should get an answer yes or no on LCFS modifications. So if you look at all of this and think about, okay, how does this all net out?

We have seen the D4 RIN move, the LCFS price has not. On the D4 RIN, the increase is not enough to offset in the veg oil space. It only gets $0.10 to $0.20 a gallon on the PTC. You need RINs, you still need RINs to go up another $0.04 0 or $0.50 in order to offset that $0.80 loss that veg oil is seeing which is why you're seeing a big drop in domestic BD production. So as the market tries to figure this out, the D4 RIN has to move up substantially, whether that driver is a continued drop in production or imports and or this anticipated increase beginning in the 2026 obligation, that's going to set what the overall volume looks like in terms of performance versus overall obligation.

So it looks like in 2Q, we're starting to see some of this potentially improve. I think it's still more of a the upside looks more like a back half of the year for the RD segment. And then I think for our platform specifically, which is still the most advantaged platform when it comes to CI market access and just overall ability to demonstrate compliance into all these different programs. We still see we'll capture the PTC and we'll be the ones that can optimize between the feedstocks that are most desired into these compliance programs and then whether or not they're covered by the PTC.

Thank you. Our next questions come from the line of Theresa Chen with Barclays. Please proceed with your questions.

Hi. Eric, just to follow-up on that last question. So it sounds like the drop in production and imports is structural absent recovery in deforeigns and maybe more to come on that front. From a supply and competitive landscape perspective, do you see some of that supply creeping back over time? Or how does this settle out as the market tries to find equilibrium?

I think if you look at or maybe I'll put it in context of this RIN obligation. At the current 3,300,000,000 gallons versus what we've seen in the last couple of years, the RD and BD segment production capacity could far exceed that RIN obligation. And so what was really keeping a lot of that volume flowing was the BTC. And so when you take the BTC out, then suddenly as we've always said, the BTC is what kept the marginal producer operating. So we see a lot of those and this is public.

There's a lot of announcements of BD and RD operations that are either slowing down or taking a pause in operations. And so everyone is looking to see when that marginal producer will come back into the market, because right now there's not an incentive for them to run, particularly any kind of veg oil based BD or RD. So if you see the obligation increase or you see the RIN bank tightened to the point where we are physically short, I think this year we are still long in the D4 market, but it is starting to tighten and you can kind of see this in the D4, D6 RIN spread, which is sometimes reaching $0.10 a gallon on the differential there. So there's some anticipation and recognition of this. I think as that continues through the year, if you see RIN prices react, like I said, it's got to be $0.04 0 or $0.50 additional move from what it's already moved.

So we've seen D4 RINs go from the 60s up until the 90s sometimes over $1 That is still not enough to incentivize the BD producer that used to get a dollar. And so how that will rationalize is I think everyone will and there's no question from an ag standpoint, the farmers want to run their BD units and their soybean oil. Otherwise, you're going see soybean oil continue to get stranded from a fuel market. So I think it's really waiting to see if that RIN is going to move to offset the loss of the transition from the BTC to the PTC. I think that's the only way you're going to see incremental production come on in the back half of the year.

That's helpful. Thank you. And on Mexico within the refining segment, would you be able to provide an update on your suspension from the registry of importers? What led to this? And what is the path forward from here?

Yes. Theresa, this is Gary. If you haven't heard, I'm happy to announce that we have had our import permit reinstated. Go through a little of the history on April 9, we were notified by Mexico's Tax Administration Service that our import permit was being temporarily suspended. We were told at the time that customs in Mexico had some questions as a result of an investigation that they had done that we weren't privy to.

Since we began our operations in Mexico, we maintained a policy of full cooperation with all the authorities there, implemented rigorous traceability and security controls throughout the supply chain. So it was disappointing to us that our permit was suspended, while at any prior notification or opportunity to clarify and the timing of all this right before the Easter holiday was especially bad. Nevertheless, once we had the opportunity to reach out to the stakeholders and countries, sit down and go through all the records and data with customs in Mexico, the custom authority recognized that Valero was in full compliance of our import reporting and tax obligations, and we were quickly exonerated of any wrongdoing. So although this is all unfortunate and created significant supply disruption for our customers, it is part of an effort in Mexico to limit the importation of illegal fuel, which is an effort we very much applaud and will positively impact our business down there going forward.

Thank you. Our next questions come from the line of Neil Mehta with Goldman Sachs. Please proceed with your questions.

Good morning, Lee and team. You guys have done a great job of continuing to return cash to shareholders and you've talked about cash balances of 4,000,000,000 to $5,000,000,000 and I think you're at 4,600,000,000.0 right now. So just talk about in this period of macro uncertainty, how

you thinking about taking advantage of the balance sheet to shrink the share count?

Hey, Neil, it's Homer. Yes, you're right. I mean, given the strength of our balance sheet and our current cash position, we have plenty of flexibility. And we continue to lean into buybacks with excess free cash flow going to shareholder returns. In fact, as you can as I'm sure you're aware, we've drawn down excess cash the last three quarters as we've guided to.

And hopefully, this quarter demonstrates the resilience of the portfolio even in the low margin environment. So I think looking forward, assuming the balance sheet is strong as it is now and like we've said in the past, where our CapEx and dividend are covered, that commitment to shareholder returns should remain a floor and any sort of excess free cash flow will continue to go towards share buybacks.

Okay. Thank you. And then the follow-up Gary to your comments about just inventories for diesel in particular distillate, it looks really tight relative to the margins. So can you speak specifically to that product as you think about the distillate pool, how you're thinking about the outlook for jet as it feeds into that? A lot of moving pieces in diesel, but it feels like it's ground zero for the refining debate.

Yes, I agree. Again, kind of some of the things I pointed out, I mean, it's kind of amazing when you're close to historic lows on diesel inventory in The United States and yet we have open arms to export to Latin America and Europe. It tells you both those regions are very short diesel as well. On jet, we saw very strong nominations the first part of the year. You're starting to see some of the airlines talk about weaker jet demand moving forward.

We haven't seen signs of that yet. Historically though, when people start to switch and not take flights for their summer vacation plans, it translates into higher gasoline demand.

Thank you. Our next questions come from the line of John Royall with JPMorgan. Please proceed with your questions.

Hi, good morning. Thanks for taking my question. So my first question is a follow-up on your 2Q guide. Wayne mentioned operational flexibility in his opener. Should we think about throughputs as relatively locked in sitting at the April?

Could we see some economic adjustments if this downside demand case were to materialize and reflect more in spot cracks?

John, it's Greg. I would tell you that's how we see the quarter shaping up as we look at it now. Obviously, as we always do, we evaluate market conditions and adjust our plans accordingly. But I think if you think about what Gary just shared kind of the macro view, it'd be hard to imagine in this short term period, this next few months that we would see ourselves moving to some kind of a lower throughput on an economic basis. So I think you can probably say this is where we expect to be.

And if things improve market wise, we're obviously going to continue to maximize throughput, maximize margin to capture as much value as we can.

So really our lower guidance is a function of maintenance, not some outlook that we think there's lower demand in the future.

Yes, absolutely. And maybe just on that, we always talk about doing a lot of maintenance in the first quarter. If you think about the regions we're talking about, the Mid Continent and the North Atlantic, those aren't regions that really lend themselves from a weather perspective to doing a lot of work early in the year. You kind of wait till you've got a little better weather, take less risk from that standpoint. So that's why you see a bit more work in the second quarter than you might typically see out of us.

And you don't see a lot in the Gulf Coast where we tend to do that in the first quarter.

That's very helpful. Thank you. And then my follow-up is just another one on Venetia and forgive me if I'm overanalyzing this, but just reading the wording on the press release, it struck us as maybe not 100% definitive in terms of the plan. So maybe my question is, is the door open for the state or the city to make any changes or concessions that could cause you to think differently about your plans for Benicia? Do you expect that there will be some sort of discussion there?

Yes. This is Rich Walsh. Let try to answer that. I mean just to be clear our current intent is to close the refinery and obviously there's been some initial concern from the state leadership and we've already had meetings with the CEC. We're working with them to minimize the impacts that would result from the loss of the refinery.

I do think there's a genuine interest in California to avoid the closure, but it's also a really very complex regulatory and policy driven environment that we're dealing with. And if you understand that challenge and how significant it is, I think you need to factor that in. But yes, we are having discussions with the state. But our intent right now is to close the refinery.

Thank you. Our next questions come from the line of Doug Leggate with Wolfe Research. Please proceed with your questions.

Thanks. Good morning everyone. Lane, I'm sorry to pound on the West Coast, but I also have a question on that, if you don't mind. The press release, you well, sorry, I feel like it's been hammered pretty heavily this morning already. But in the press release, you did mention that you also had impaired Wilmington.

I think that was the implication of the language. Can you talk about what the prognosis is for Wilmington as part of this overall debate over the viability, the future viability of the West Coast assets? And I've got a follow-up on the same topic please.

Well, I'll start I'll let Homer start to explain the impairment process, but and then I'll add to it. So go ahead.

Yes. Doug, the impairment so obviously we performed an impairment asset on both of these assets based on the continued evaluation of strategic alternatives, right, which remains. But and based on the analysis, we obviously concluded that the current book value of the refinery was not recoverable. And so therefore, we revised it down to reflect the fair value of the assets, which resulted in an impairment loss, as you cited, both for Venetia and for Wilmington. In terms of the overall impairment, it was 1,130,000,000.00 of which about $900,000,000 was for Benicia Nine Zero One Million Dollars and Wilmington was $230,000,000

Okay. That's helpful. So my follow-up guys is really to think about implications going forward. And I don't know the extent to which you can share, but obviously presumably these are free cash flow negative otherwise you wouldn't be taking the impairment. So can you give some idea what the implications are for your capital spending going forward when Venetia does go offline and whether Wilmington is still free cash flow positive?

Doug, this is Greg. I'll take a shot at answering that the best I can. Others might jump in. But yes, so we don't tend to talk about refinery by refinery performance. But I think it's probably fair to say on the West Coast, if you look back over the last ten years, Venetia was generally higher operating expense, lower EBITDA, higher capital and then as a result, obviously lower cash flow compared to Wilmington.

So I'm not sure we'll break it down any more detail than that, but that would give you some sense for how those perform relative to each other. And then I think it's been mentioned, when you have a large turnaround in front of you, which is a large cash outlay and you think about how the facility has performed looking back, well, that's no guarantee of the future. It does give you some sense or cause you to pause as to whether or not this is the time to take different action, which is what you see us

Valero Energy (VLO) Q1 2025 Earnings Call Transcript

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