Valero Energy Corporation

Ladies and gentlemen, greetings and welcome to the Valero Energy fourth quarter 2020 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. It is now my pleasure to introduce your host, Homer Buhler, Vice President of Investor Relations. Thank you, sir. You may begin.

Good morning, everyone, and welcome to Valero Energy Corporation's fourth 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 InvestorValero.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 of the SEC. Now I'll turn the call over to Joe for opening remarks.

Thanks, Homer, and good morning, everyone. The COVID-19 pandemic has had an extraordinary impact on families, communities, and businesses across the globe. The energy business was among those confronted by unprecedented demand contraction, which began in the first quarter of 2020 as COVID-19 cases accelerated globally, resulting in an increase in crude oil and product inventories to record high levels. In response, we lowered our refinery utilization rates to more closely match product supply with demand. And as the pandemic-related restrictions were eased in some regions and mobility increased, product demand increased substantially, steadily reducing crude oil and product inventories. We ended the year with U.S. crude oil and product inventories within the normal five-year inventory bands. Throughout the pandemic, our team has been thorough and decisive in its operational and financial response, while maintaining focus on safety and reliability. In fact, we set several operational records in 2020, recording our best-ever year on employee safety performance, achieving the milestone two years in a row, and the best-ever year for process safety and environmental performance. In applying our refining expertise to optimize our renewable diesel segment, we set records for sales volumes and margin in 2020. We also made significant progress on our international strategy to expand our product supply chain into higher growth markets with the start of waterborne product shipments to our new Veracruz terminal, making Galera one of the largest fuel importers in New Mexico. On the financial side, we improved our liquidity by raising $4 billion of debt at attractive rates and we reduced our capital budget by over $500 million, while keeping our high return projects moving forward. And in spite of all the challenges this past year, we continue to honor our commitment to our shareholders by maintaining the dividend and ending the year with $3.3 billion of cash and $9.2 billion of total available liquidity. Despite the pandemic-imposed challenges and several hurricanes, We completed and continue to make progress on several strategic growth projects, including the St. Charles Alkalation Unit, which was brought online in the fourth quarter, on schedule and under budget. The project further increases the competitiveness of the St. Charles Refinery and is a testament to the talent and efforts of the refining organization. The Pembroke Cogen project and the Diamond Pipeline expansion are on track to be completed in the third and fourth quarters of 2021, and the Port Arthur Coker project is expected to be completed in 2023. The Diamond Green Diesel Expansion Project at St. Charles, which we refer to as DGD2, is designed to increase renewable diesel production capacity by 400 million gallons per year, and is expected to be completed in the fourth quarter of 2021. As a result of continuous process improvement and optimization, the capacity of the existing St. Charles Renewable Diesel Plant, DGD-1, has increased from 275 million gallons per year to 290 million gallons per year. With the completion of DGD-2, the total capacity at St. Charles is expected to be 690 million gallons per year. In 2020, we laid out our comprehensive roadmap to reduce greenhouse gas emissions by 63% by 2025. As part of this goal, we continue to reinvest capital into higher growth, higher return, low-carbon renewable fuels projects. To that end, we are pleased to announce that the Board has approved DGD3, a new 470 million gallons per year renewable diesel plant at our Port Arthur, Texas refinery. We're moving forward with the project immediately, and we now expect the new plant to be operational in the second half of 2023. Once DGD-3 is completed, DGD's combined annual capacity is expected to be 1.2 billion gallons of renewable diesel and 50 million gallons of renewable naphtha. Looking ahead, we expect to see continued improvement in refining margins as COVID-19 vaccines are widely distributed in the coming months, allowing people and businesses to get back to normalcy. We're already seeing encouraging signs with strong diesel demand and with U.S. total light product inventories now in the normal range. In addition, many uncompetitive refineries around the world announced shutdowns or conversions in 2020. and we expect further capacity rationalizations to be announced this year. In closing, we remain steadfast in the execution of our strategy, pursuing excellence in operations, investing for earnings growth with lower volatility, and honoring our commitment to stockholder returns. We expect low-carbon fuel policies to continue to expand globally and drive demand for renewable fuels, and with that view, We're leveraging our global liquid fuels platform and expertise that comes with being the largest renewable diesel producer in North America to steadily expand our competitive advantage in economic low-carbon projects for a higher return on invested capital. So with that, Homer, I'll hand the call back to you.