Valero Energy Corporation

Greetings and welcome to the Valero first quarter 2023 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 Bowler, Vice President of Investor Relations. Thank you. You may begin.

Good morning, everyone, and welcome to Valero Energy Corporation's first quarter 2023 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 and reconciliations and disclosures for adjusted metrics mentioned on this call. 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 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 earnings release and filings with the SEC. Now I'll turn the call over to Joe for opening remarks.

Thanks, Homer, and good morning, everyone. We had another strong quarter with all of our segments performing well. Our refineries operated at 93% capacity utilization rate despite planned maintenance at several facilities. Our ability to optimize and maximize system throughput while undertaking maintenance activities illustrates the benefits from our longstanding commitment to operational excellence. Refining margins were supported by lower industry refining capacity and a backdrop of strong product demand. I'm also proud to report that the Port Arthur Coker project was completed in March and successfully started up in early April. which is a testament to the strength of our engineering and operations teams. The project is expected to increase the refinery's throughput capacity and ability to process incremental volumes of sour crude oils in residual feedstocks while also improving turnaround efficiency. Our renewable diesel segment set another sales volume record in the first quarter with the continued ramp up of DGD Port Arthur, which was started up in November 2022. In January, we announced that DGD approved a sustainable aviation project at Port Arthur, Texas. The DGD Port Arthur plant will have the capability to upgrade approximately 50% of its current 470 million gallon annual renewable diesel production capacity to sustainable aviation fuel, or SAF. The project is expected to be completed in 2025 and is estimated to cost approximately $315 million, with half of that attributable to Valero. With the completion of this project, DGD is expected to be one of the largest manufacturers of SAF in the world. In the ethanol segment, BlackRock and Navigator's carbon sequestration project is progressing and they expect to begin startup activities in late 2024. We expect to be the anchor shipper with eight of our ethanol plants connected to this system, which will allow us to produce a lower carbon intensity ethanol product and significantly improve the margin profile and competitive positioning of our ethanol business. And we continue to advance other low carbon opportunities, such as renewable hydrogen, alcohol to jet, and additional renewable naphtha and carbon sequestration projects. All of our projects must meet a minimum return threshold to continue to progress through our gated review process. On the financial side, we continue to strengthen our balance sheet, reducing debt by $199 million in the first quarter and ending the quarter with a net debt to capitalization ratio of 18%. In January, we announced an increase in our quarterly dividend on our common stock from $0.98 per share to $1.02 per share, demonstrating our longstanding commitment to stockholder returns. Looking ahead, we expect refining fundamentals to remain supported by low global light product inventories, tight product supply and demand balances, and continued increase in product demand as we approach peak air travel and summer driving season. In closing, our team continues to successfully execute a strategy that enables us to meet the challenge of supplying the world's need for reliable and affordable energy in an environmentally responsible manner. The tenets of our strategy underpinned by operational excellence, deploying capital with an uncompromising focus on returns and honoring our commitment to stockholders have been in place for nearly a decade and continue to position us well for the future. So with that, Homer, I'll hand the call back to you.