Jason Daniel Gabelman

Jason Daniel Gabelman followed up on 2026 throughput, noting that sustaining CapEx is down $200 million, and asked if this indicates higher mechanical availability and if throughput (excluding Benicia) is expected to continue improving.

Answer

R. Lane Riggs, Chairman, CEO, and President, confirmed that the reduction in sustaining CapEx is primarily due to the Benicia refinery shutdown, meaning one less refinery to sustain capital on, rather than a direct indication of higher mechanical availability across the remaining system.

Jason Gabelman asked about the widening crude quality discounts, their sustainability, and reasons why differentials are wider now compared to pre-COVID levels. He also inquired about the 2026 throughput, the $200 million reduction in sustaining CapEx, and whether it indicates higher mechanical availability or expected throughput improvement, excluding the Benicia shutdown.

Answer

R. Lane Riggs (Chairman, CEO and President, Valero Energy Corporation) attributed wider differentials to factors like increased sour crude production, higher freight rates (due to shadow fleet enforcement), and geopolitical wrangling, which he expects to persist. He clarified that the sustaining CapEx reduction is largely due to having one less refinery (Benicia) to sustain, rather than a direct indication of higher mechanical availability across the remaining fleet.

Jason Daniel Gabelman asked about the impact of Russian refining disruptions, particularly from Ukraine drone strikes, on product exports and how much of the current product strength is due to actual disruptions versus geopolitical risk premium. He also inquired about Valero's plans to resupply the market after the Benicia shutdown, specifically if imports from Asia would be necessary to meet contractual obligations.

Answer

Gary Simmons, Executive Vice President and COO, indicated that drone strikes have been effective, targeting higher complexity Russian refining capacity, leading to a ramp-up of lower complexity capacity. He clarified that the current market spike is more due to future geopolitical risk premium than immediate disruptions, though Russian product exports are falling. Lane Riggs, Chairman, CEO and President, stated that Valero intends to continue supplying its wholesale business contractual obligations after the Benicia shutdown, leveraging waterborne optionality to source products from anywhere in the world.

Jason Daniel Gabelman inquired about Valero's plans to resupply the market after the Benicia refinery shutdown, asking if the company would need to import products from Asia to meet contractual obligations.

Answer

Lane Riggs, Chairman, CEO and President, stated that Valero intends to continue supplying its contractual obligations for its wholesale business after the shutdown. He clarified that products could be sourced from anywhere in the world, leveraging waterborne optionality rather than committing to a single market or pipeline.

Jason Daniel Gabelman asked about the timeline for companies complying with RIN obligations and its potential impact on RIN prices, specifically the December 1 deadline for 2024 RINs. He also inquired about the conditions needed to gain confidence to restart DGD1, given improved DGD margins.

Answer

Robert Day (CFO) expects the December 1 deadline for 2024 RINs to hold but does not anticipate a significant lift in RIN prices, as ample 2025 RINs are available for 2024 obligations. He expects a lift if 2025 enforcement dates are clarified. Regarding DGD1, Robert Day (CFO) stated that a restart depends on soybean oil being profitable for a long enough outlook to justify burning a catalyst, acknowledging they are closer to that point than before.

Jason Daniel Gabelman asked about the timeline for companies complying with RIN obligations and whether the December 1 deadline for 2024 RINs would catalyze stronger RIN prices. He also inquired about the specific conditions needed to restart DGD1.

Answer

CFO Bob Day expects the December 1 deadline for 2024 RINs to hold but not significantly impact RIN prices, as 2025 RINs can satisfy 2024 obligations. He noted that clarity on 2025 enforcement dates (March 31, 2026) would be a more likely catalyst. Regarding DGD1, Day stated it would restart when soybean oil becomes profitable with a sufficient margin and long-term outlook to justify burning up a catalyst.