Valero Energy Corporation

Greetings, ladies and gentlemen, and welcome to the Valero's third 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, please press 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, Mr. Homer Bowler, Vice President of Investor Relations and Finance. Thank you, sir. Please go ahead.

Good morning, everyone, and welcome to Valero Energy Corporation's third 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 Jill for opening remarks.

Thanks, Homer, and good morning, everyone. We saw significant improvement in refining margins globally in the third quarter as economic activity and mobility continued to recover in key markets. Finding margins were supported by strong recovery in product demand, coupled with product inventories falling to low levels during the quarter. In fact, total U.S. light product inventories are now at five-year lows, and total light product demand is over 95% of the 2019 level. Across our system, current gasoline sales are at 95% of the 2019 level, and diesel sales are 10% higher than in 2019. And on the crude oil side, medium and heavy sour crude oil differentials widened during the quarter as OPEC Plus increased supply. Hurricane Ida resulted in some downtime at our St. Charles and Miro refineries and the Diamond Green diesel plant. We immediately deployed emergency teams and supplies after the storm to help our employees, their families, and the surrounding communities in the restoration and recovery effort. The affected facilities did not sustain significant damage from the storm, and once power and utilities were restored, the plants were successfully restarted. I'm very proud of our team's efforts and the ability to safely shut down and restart our operations. Despite the impacts of the hurricane, we also completed the Diamond Green Diesel Expansion Project, DGD2, in the third quarter, ahead of schedule and on budget, and are in the process of starting up the new unit. DGD2 increases renewable diesel production capacity by 400 million gallons per year, bringing DGD's total renewable diesel capacity to 690 million gallons per year. In addition, we successfully completed and started up the new Pembroke cogeneration unit in the third quarter, which is expected to provide an efficient and reliable source of electricity and steam and further enhance the refinery's competitiveness. Looking ahead, the DGD3 project at our Port Arthur refinery continues to progress and is still 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. The large-scale carbon sequestration project with BlackRock and Navigator is also progressing on schedule. Navigator has received the necessary board approvals to proceed with the carbon capture pipeline system as a result of a successful binding open season. Valero is expected to be the anchor shipper with eight ethanol plants connected to this system, which should provide a higher ethanol product margin uplift. The Port Arthur Coker project, which is expected to increase the refinery's utilization rate and improve turnaround efficiency, is still expected to be completed in 2023. On the financial side, we remain disciplined in our allocation of capital, which prioritizes a strong balance sheet and an investment-grade credit rating. We redeemed the entire outstanding principal amount of our $575 million floating rate senior notes due in 2023 in the third quarter. And we ended the quarter well capitalized with $3.5 billion of cash and $5.2 billion of available liquidity excluding cash. Looking ahead, we continue to have a favorable outlook on refining margins as a result of low global product inventories, continued demand recovery, and global balances supported by the significant refinery capacity rationalization seen over the last year and a half. In addition, the expected high natural gas prices in Europe and Asia through the winter should further support liquid fuels demand as power generation facilities, industrial consumers, and petrochemical producers see incentives to switch from natural gas to refinery oil products for feedstock and energy needs. Continued improvement in earnings of our core refining business, coupled with the ongoing expansion of our renewables businesses, should strengthen our competitive advantage and drive long-term shareholder returns. So with that, Homer, I'll hand the call back to you.