Valero Energy Corporation

Greetings, and welcome to Valero's second quarter earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Homer Bouar, Vice President, Investor Relations.

Good morning, everyone, and welcome to Valero Energy Corporation's second quarter 2020 earnings conference call. With me today are Joe Gorder, our chairman and CEO, Lane Riggs, our president and COO, Jason Frazier, our executive vice president and CFO, 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 Joe for opening remarks.

Thanks, Homer, and good morning, everyone. This year has been challenging in many aspects. The COVID-19 pandemic and the ensuing global economic downturn has affected the health and livelihoods of so many people and has had a severe impact on all businesses, including ours. As troubling as our circumstances may be from time to time, it's gratifying to see individuals stepping up, selflessly helping those in need, whether it be by providing health care to those that are sick or food to those that are hungry. In this regard, our team is doing its part. As you probably know, Valero is part of the country's critical infrastructure. As such, our team continues to operate our plants, providing the fuel that our country needs to keep critical supplies and first responders moving. I'm proud that we have not laid off, furloughed, or reduced the compensation of any of our 10,000 dedicated employees who continue to give generously volunteering their time and working courageously and tirelessly through this difficult period. Our employees are our greatest asset in the heart of our company. Their health, safety, and well-being remain among our top priorities, and we'll continue to take the steps necessary to keep them safe, whether they work in the field or at our headquarters. In response to the COVID-19 pandemic-imposed shutdown, we had to make important operational and financial decisions. When the stay-at-home orders were first issued, we reduced our refinery and ethanol plant throughput rates to match product supply with demand. We saw demand in April bottom out at 50% of normal demand for gasoline, 70% for diesel, and 30% for jet fuel relative to the same period last year. As the stay-at-home orders and travel restrictions eased through most regions of the US during the second quarter, we saw gasoline and diesel demand recover to 85% to 90% of normal and jet fuel recover to 50% of normal. We also saw a recovery in product exports to Latin America and Europe in June. As a result, we prudently increased refining and ethanol throughput rates in step with the increase in product demand. We also took prudent actions to maintain our financial strength. We lowered our 2020 capital budget by $400 million, raised $1.5 billion of debt at attractive rates, secured an additional credit facility, which remains undrawn, and temporarily suspended the stock buyback program beginning in mid-March this year. And through all of this, we've honored our commitment to capital discipline and maintained our dividend as demonstrated by our Board of Directors approving a quarterly dividend of $0.98 per share earlier this month. Notwithstanding project deferrals this year, we continue to invest for earnings growth and are making progress on strategic projects under development. The St. Charles Alkalation Unit, which is designed to convert low-value feedstocks into a premium alkylate product, is on track to be completed in the fourth quarter of this year. The Diamond Pipeline expansion and the Pembroke Cogen project are expected to be completed in 2021, and the Port Arthur Coker project is expected to be completed in 2023. And we remain committed to the expansion of our low-carbon renewable diesel business. The Diamond Green diesel expansion project is expected to be completed in 2021. This project is expected to increase annual renewable diesel production capacity by 400 million gallons per year, bringing the total capacity to 675 million gallons per year. In addition, the Diamond Green Diesel continues to make progress on the advanced engineering review for a potential new 400 million gallons per year renewable diesel plant at our Port Arthur, Texas facility. As we focus on the path to recovery with improving product demand, we remain steadfast in the execution of our strategy, pursuing excellence in our operations, investing for earnings growth with lower volatility, and honoring our commitment to stockholder returns. We continue to prioritize our investment-grade credit rating and non-discretionary uses of capital, including sustaining capital expenditures and our dividend. This uncompromising focus on capital discipline and execution has served us well in the current pandemic-imposed downturn, and it should continue to position Valero well through the recovery and beyond. So with that, Homer, I'll hand the call back to you.