Valero Energy Corporation

Greetings and welcome to the Valero's second quarter 2021 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, you may do so by pressing star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Homer Bowler, Vice President, Investor Relations and Finance. Thank you, sir. Please go ahead.

Good morning, everyone, and welcome to Valero Energy Corporation's second quarter 2021 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 with the SEC. Now I'll turn the call over to Joe for opening remarks.

Thanks, Homer, and good morning, everyone. Our system's flexibility and the team's relentless focus on optimization in a weak but otherwise improving margin environment enable us to deliver positive earnings in the second quarter. More importantly, cash provided by operating activities more than covered our cash used in investing and financing activities for the quarter. even without the cash benefits from our 2020 income tax refund and the proceeds from the sale of a portion of our interest in the Pasadena Terminal. There was a significant increase in mobility in the second quarter, driving higher demand for refined products, particularly in the U.S. In fact, we're seeing demand for gasoline and diesel in excess of pre-pandemic levels in our U.S. Gulf Coast and Mid-Continent regions. Jet demand continues to ramp up as well, and is around 80% of 2019's level. We responded with higher refinery utilization to match product demand in our system. In addition, product exports have been picking up, particularly to Latin America, with the easing of lockdowns in the region. We exported 410,000 barrels per day of products from our system in June, which is the highest volume since 2018. Our renewable diesel segment continues to perform exceptionally well and once again set records for renewable diesel margin and sales volumes, highlighting Diamond Green Diesel's ability to process a wide range of discounted feedstocks and Valero's operational and technical expertise. Our ethanol segment also performed well and provided solid operating income in the second quarter as demand for ethanol increased along with higher gasoline production. Carbon sequestration project with BlackRock and Navigator is moving ahead and has garnered strong interest from additional parties in the binding open season. Valero is expected to be the anchor shipper with eight ethanol plants connected to this system. This project serves to help achieve our goal to lower the carbon intensity of our products while providing solid economic returns. Our Diamond Green Diesel 2 project at St. Charles remains on budget and is scheduled to be operational in the middle of the fourth quarter of this year. This expansion project is expected to increase renewable diesel production capacity by 400 million gallons per year, bringing the total capacity at St. Charles to 690 million gallons per year of renewable diesel and 30 million gallons per year of renewable naphtha. And our Diamond Green Diesel 3 project at Port Arthur is also progressing well and is now expected to be operational in the first half of 2023. With the completion of this 470 million gallons per year plant, DGD's total annual capacity is expected to be 1.2 billion gallons of renewable diesel and 50 million gallons of renewable naphtha. Our refinery optimization projects remain on track, with the Pembroke Cogen project expected to be completed in the third quarter of this year and the Port Arthur Coker project expected to be completed in 2023. Looking ahead, we have a favorable outlook for refining margins as product demand continues to improve with increasing global vaccinations and mobility. In addition, there's been significant refinery capacity rationalization in the U.S. in the last couple of years, and we expect further closures of uncompetitive refineries, particularly in Europe. We believe that product demand recovery, coupled with significant refinery rationalization, should be supportive of strong refining margins. We also expect to see wider medium and heavy crude oil differentials as OPEC Plus increases crude supply, which should further provide support to refining margins. And as low carbon fuel policies continue to expand globally, we remain well positioned. With the current projects in progress, we expect to quadruple our renewable diesel production in the next couple of years. In addition, we continue to explore and develop opportunities in carbon sequestration, sustainable aviation fuel, renewable hydrogen, and other innovative projects to strengthen our long-term competitive advantage. So with that, Homer, I'll hand the call back to you.