Investor Presentation September 2017 Disclaimers Statements - PowerPoint PPT Presentation

Investor Presentation September 2017

Disclaimers Statements contained in this presentation that state the company’s or management’s expectations or predictions of the future are forward-looking statements covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words “believe,” “expect,” “should,” “estimates,” “intend,” “targeting,” “anticipate,” and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero’s annual reports on Form 10-K and quarterly reports on Form 10-Q, and our other reports filed with the Securities and Exchange Commission, and available on Valero’s website at www.valero.com. This presentation includes non-GAAP financial measures. Our Reconciliations of non-GAAP financial measures to GAAP financial measures are located at the end of this presentation. These non-GAAP financial measures should not be considered an alternative to GAAP financial measures. 2

Who We Are • Growth Oriented Master One of North America’s Premier Limited Partnership Largest Ethanol Independent Refiner (NYSE: VLP) Producers • 15 refineries, 3.1 million barrels per day • Fee based MLP • 11 plants with 1.4 billion (BPD) of high-complexity capacity gallons per year  Approximately 1 million (2) BPD (91,000 BPD) ethanol of pipeline throughput • Fuels marketed and distributed through production capacity 2.8 million (2) BPD of terminaling  bulk and wholesale channels throughput • General partner and majority owner of • All convert corn into • Liquids-focused logistics Valero Energy Partners LP ethanol and distillers grains assets • Operator and 50% owner of Diamond • Plants were acquired at a • Revenues are 100% fee- Green Diesel renewable diesel JV fraction of replacement cost based  11,000 BPD production capacity • $3 billion market • Premier plants and low cost • Approximately 10,000 employees capitalization (1) operations • $30 billion market capitalization (1) (1) As of Aug 24, 2017, VLO at $67.60 per share and VLP at $43.47 per unit. (2) For the six months ended Jun 30, 2017. 3

Strong Presence in Advantaged U.S. Gulf Coast and Mid-Continent Refineries and ethanol plants are in advantaged locations See slide 30 for capacities. 4

Favorable Macro Environment Expected SUPPLY PRODUCTION DEMAND • World economies aligning for • Abundant global supply of • sustainable economic growth crude oil and natural gas • Healthy product demand in lower • Near to mid-term crude quality price environment • discounts compressed due • Product shortages in Latin America, primarily to OPEC cut Eastern Canada, Europe, and compliance Africa • International Maritime Organization • North American logistics added • (IMO) bunker fuel specification shift efficiency and removed Mid- should support diesel demand Continent bottlenecks REGULATORY AND GEOPOLITICAL • U.S. legislative reform remains uncertain • U.S. regulatory landscape continues to evolve • Emerging global developments Expect bullish fundamentals to continue driving increased global petroleum demand. See slide 19 for notes regarding this slide and slides 34 and 35 for supply and demand details. 5

Our Strategy for Value Creation Maintain manufacturing excellence: safe, reliable, environmentally responsible operations Disciplined capital allocation: deliver distinctive financial results and peer-leading returns to stockholders Focus on earnings growth: Market expansion, margin improvement, operating cost reduction 6

Safety and Reliability are Imperative for Profitability Personnel Safety Tier 1 Process Safety (Three-year rolling averages) Process Safety Event Total Recordable Incident 1.60 Employees Contractors Industry 0.19 0.97 Rate (TRIR) Rate 0.75 0.60 0.30 0.35 0.07 VLO’s Drive to 1 st Quartile Performance Versus Industry Benchmarks 1 st Quartile 2008 2 nd 2010 Quartile 2012 3 rd 2014 Quartile 2016 4 th Quartile Mechanical Availability Personnel Index Maintenance Index Non-Energy Cash Energy Intensity Index Opex See slide 19 for notes regarding this slide. VLO’s injury and process safety event rates in 2016 were the lowest in its history. 7

Reliability Initiatives Have Improved Refinery Availability and Enabled Higher Utilization and Lower Opex VLO Refinery Availability and VLO Refining Cash Operating Utilization Rates Expenses Per Barrel of Throughput (Excludes Turnaround and D&A) Refinery availability Peer Range $6 $6.16 $6.12 96% $5.95 $5.83 95% 95% 95% $6 94% $5.55 $5.36 $5.30 $5.24 $5.22 $5 92% $5 88% $4 87% $4 $3.71 $3.79 $3.83 $3.79 $3.79 $3.87 $3.71 $3.63 $3.68 $3 $3.32 82% $3.16 $3.15 $3 2009 2011 2013 2015 1H17 2009 2011 2013 2015 1H17 See slide 19 for notes regarding this slide. Source: company reports. 8

Advantaged Portfolio in U.S. Gulf Coast and Mid-Continent 2012 – 1H17 VLO Feedstock Ranges CDU Capacity (As of Jan 1, 2017) 100% 1,905 97% 1,817 461 729 U.S. Mid-Continent 89% U.S. Gulf Coast 1,444 1,236 493 31% 31% 1,088 29% 65% 23% 743 20% 19% 18% 457 419 359 13% 457 284 170 8% 10% 5% 189 135 3% 1% 0% 0% VLO MPC PSX HFC ANDV PBF Heavy sour Medium / Sweet Residuals Other light sour feedstocks • High weighted average Nelson Complexity Index for Valero’s refineries; ran 1.3 million BPD of sour crude in 2Q17. • Flexibility to process 1.6 million BPD light sweet crude; ran 1.4 million BPD light crude in 2Q17. • Deep pool of skilled labor available in U.S. Gulf Coast. See slide 19 for notes regarding this slide. See slide 31 for capacity and Nelson complexity by refinery. 9

Our Portfolio Facilitates Global Optimization of Product Exports VLO’s U.S. Product Exports (MBPD) 486 Gasoline Diesel Total Distillate 442 391 262 246 152 105 88 Distillate Gasoline See slide 19 for notes regarding this slide. 10

Investing to Grow Export and Wholesale Fuels Volumes Efficient Supply to Mexico Advantaged Refineries and Logistics • Mexico’s refined product demand is expected to grow with imports filling a large percentage of the supply shortage  Approximately 700 MBPD of gasoline and diesel imported in 2016 (1) • Valero, a premier brand with high product quality, has reliably supplied fuels to Mexico for over 10 years  Advantaged refining and logistics assets expected to enable competitive fuel offer • Expansion of supply chain expected to provide ratable product outlet and improve margin capture  Long term agreements for terminals and rail to deliver gasoline, diesel, and jet fuel into central Mexico (1) Source: Pemex reports. 11

Disciplined Capital Management is a Constant in Our Strategy 1 Maintain Strong Balance Sheet • Maintain investment grade credit rating • Target 20% to 30% debt-to-cap ratio (1) Non-Discretionary Sustaining Capex Dividend • Approximately $1.5 billion annually • Commitment to shareholders 2 • Key to safe and reliable operations • Targeting a dividend payout at the high end of our peer group (2) Growth Capex Acquisitions Cash Returns Discretionary • Targeting a payout ratio (3) between 40% • 25% IRR hurdle rate • Evaluate versus and 50% of adjusted net cash provided by 3 for refining projects alternative uses operating activities for 2017 of cash • Lower hurdle rate for • Stock buyback program consists of ratable steady cash flow and opportunistic purchases midstream projects (1) Debt-to-cap ratio based on total debt reduced by $2 billion of cash. (2) Peer group includes PSX, MPC, ANDV, HFC, and PBF. (3) Payout ratio is the sum of dividends and stock buybacks divided by net cash provided by operating activities adjusted for changes in working capital (e.g., current assets and current liabilities). 12

Delivering Sustainable Dividend Growth Annual Dividend Per Share Annual Dividend Yield (2) Sustainable growth (As of Aug 21, 2017 ) Peer Range Median 6.0% $2.80 Pacesetting 4.3% Playing catch up 3.9% 2.5% $0.30 (1) 2011 2012 2013 2014 2015 2016 2017 2018 - 2021 Targeting annual dividend increases at a sustainable level. (1) Annualized based on current quarterly dividend of $0.70 per share. (2) Annualized based on most recent quarterly dividend as of Aug 21, 2017. Peer group includes PSX, MPC, ANDV, HFC, and PBF. 13

Delivering Cash Returns to Stockholders Is One of Our Priorities Cumulative Capital Returned and Weighted Average Shares Total Payout (1) Outstanding as Percentage Relative to 2011 ($MM) (12-mons ended Jun 30, 2017) Dividends Buybacks WASO Peer Range Median 570 million shares $2,504 $2,504 98% $11.8B 96% 93% 88% 448 million $1,277 shares 81% 79% $125 2011 2012 2013 2014 2015 2016 1H17 2018 - 2021 Reduced share count by over 120 million shares, or 21% since 2011. 2017 dividends and buybacks through Jun 30. (1) Total payout defined as sum of dividends and stock buybacks sourced from company reports. Peer group includes PSX, MPC, ANDV, HFC, and PBF. 14