Valero Energy Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Valero Energy Corporation's first quarter 2020 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, please press star, then 1 on your touchtone telephone. If you require any further assistance, please press star, 0. I would now like to hand the conference over to your speaker, Mr. Homer Buller, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone, and welcome to Valero Energy Corporation's first quarter 2020 earnings conference call. With me today are Joe Gorder, our Chairman and Chief Executive Officer, Lane Riggs, our President and COO, Donna Tietzman, our Executive Vice President and CFO, Jason Frazier, our Executive Vice President and General Counsel, Gary Simmons, our Executive Vice President and Chief Commercial Officer, 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 valero.com. Also attached to the earnings release are tables that provide additional financial information on our business segments. 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 filings with the SEC. Now I'll turn the call over to Jill for opening remarks.

Thanks, Homer, and good morning, everyone. Well, we've all had a very challenging start to the year with significant impact to our families, communities, and businesses worldwide brought on by the COVID-19 pandemic. The ensuing collapse of economic activity due to stay-at-home orders and travel restrictions has driven down demand for our products, particularly gasoline and jet fuel. Despite these extraordinary challenges, we're blessed to be able to continue supporting our community partners and organizations on the front lines that help people most in need in response to the COVID-19 pandemic. Across the country, we see neighbors and strangers helping one another and demonstrating genuine human kindness. With that in mind, our ethanol operations produced hand sanitizer for distribution to hospitals, emergency responders, and other organizations, and I'm proud of our employees for their innovation and efforts to make this possible. Valero entered this economic downturn in a position of strength, and our team has been thorough, decisive, and swift in our operational and financial response to the current environment. Operationally, we've adjusted the throughput rates at our refineries to more closely match product supply with demand to ensure that our supply chain does not become physically infeasible. We also temporarily idled a number of our ethanol plants and reduced the amount of corn feedstock processed at the remaining plants to address the decreased demand for ethanol. Financially, we remain well capitalized. We started the year with a solid cash balance. Due to the uncertainty in the markets and attractive rates available to us, we thought it would be prudent to strengthen our financial position further. We entered into a new $875 million revolving credit facility, which remains undrawn, and we raised $1.5 billion of debt for additional liquidity. We also temporarily suspended buybacks in mid-March. In addition, we decided to defer approximately $100 million in tax payments that were due in the first quarter, along with approximately $400 million in capital projects for the year 2020. including slowing the Port Arthur, Coker, and Pembroke co-gen projects, which pushes out their mechanical completion by six to nine months. That being said, we continue to make progress on several of our strategic projects. We completed the Pasadena Terminal Project, which expands our products logistics portfolio, increases our capacity for biofuels blending, and enhances flexibility for exports. And the St. Charles Alkalation Unit remains on track to be completed in 2020. And we're continuing to make progress on the Diamond Pipeline expansion and the Diamond Green Diesel project, both of which should be completed in 2021, subject to COVID-19 related delays. The Diamond Green Diesel joint venture also continues to make progress on the advanced engineering review of a potential new renewable diesel plant at our Port Arthur, Texas facility. So the actions we've taken are consistent with the capital allocation framework we've had in place for several years. We continue to prioritize our investment-grade credit rating and non-discretionary uses of capital, including sustaining capital expenditures and our dividend. And you should continue to expect incremental discretionary cash flow to compete with other discretionary uses, primarily organic growth capital and buybacks. Our framework has served us well and will continue to adhere to it in the future. In closing, the health, safety, and well-being of our employees and the communities where we operate remain among our top priorities. Our prudent management of operations has allowed us to weather a global shutdown like this without layoffs. And while a tremendous amount of uncertainty remains in the near future, our operational and financial flexibility allow us to navigate through today's challenging macro environment. Our advantage footprint, with the flexibility to process a wide range of feedstocks, coupled with a relentless focus on operational excellence and a demonstrated commitment to stockholders, positions our assets well as our country and the world return to a more normal way of life. So with that, Homer, I'll hand the call back to you.