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VALERO ENERGY CORP/TX (VLO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 reported a GAAP net loss of $595M (-$1.90 EPS) due to a $1.1B pre-tax impairment on California refineries; adjusted net income was $282M ($0.89 EPS), with refining margins improving through the quarter despite heavy maintenance and weak renewable diesel economics .
  • Adjusted EPS of $0.89 beat S&P Global consensus of ~$0.48*, and EBITDA of ~$0.94B was slightly above ~$0.93B*; revenue was $30.26B on GAAP, above consensus ~$28.60B*, noting definitional differences in “revenue” for refiners .
  • Management guided Q2 2025 throughput by region, refining cash opex at ~$5.15/bbl, Q2 D&A ~$780M including ~$100M incremental from Benicia (≈$0.25 EPS per quarter impact), 2025 RD volumes ~1.1B gallons and 2025 G&A ~$985M .
  • Strategic update: current intent to cease Benicia refining operations by end-April 2026; Wilmington also impaired; California regulatory environment cited; dividend held at $1.13 (raised in January) and buybacks continued ($277M), with payout ratio at 73% of adjusted operating cash flow .

What Went Well and What Went Wrong

  • What Went Well

    • Refining margin improved intra-quarter; U.S. demand and low inventories supportive ahead of driving season. “We delivered positive results…despite heavy maintenance activity… This is a credit to the strength and discipline of our operations, optimization, and commercial teams.” — Lane Riggs .
    • Strong shareholder returns: $633M returned (dividends $356M, buybacks $277M); payout ratio 73% of adjusted operating cash flow .
    • Ethanol profitability steady: operating income $20M, margins/gallon $0.48, with advantaged feedstocks (cheap nat gas) and record exports in Q1; management expects max production under current economics .

  • What Went Wrong

    • Significant California impairment: $1.1B pre-tax ($877M after-tax) across Benicia ($901M) and Wilmington ($230M), driving GAAP loss; decision informed by stringent regulatory environment and Benicia’s higher cost base .
    • Renewable diesel weakness: segment operating loss $141M; margins fell to ~$0.02/gal amid PTC transition, feedstock eligibility limits, and reduced domestic RD/BD production; partial PTC capture only in Q1 .
    • Heavy maintenance lowered throughput and wholesale sales; Q2 guidance reflects continued maintenance in Mid-Con and North Atlantic, muting throughput versus year-ago .

Financial Results

Quarterly performance vs prior periods

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$32.876 $30.756 $30.258
GAAP Diluted EPS ($)$1.14 $0.88 $(1.90)
Adjusted Diluted EPS ($)$1.14 $0.64 $0.89
Refining Throughput (Mbpd)2.884 2.995 2.828
Refining Margin per bbl ($/bbl)$9.09 $8.44 $9.78
RD Margin per gal ($/gal)$0.60 $1.06 $0.02

Year-over-year comparison (Q1 2025 vs Q1 2024)

MetricQ1 2024Q1 2025
Revenue ($USD Billions)$31.759 $30.258
GAAP Diluted EPS ($)$3.75 $(1.90)
Adjusted Diluted EPS ($)$3.84 $0.89
Refining Throughput (Mbpd)2.760 2.828
RD Sales Volumes (M gal/day)3.729 2.435

Q1 2025 actual vs S&P Global consensus

MetricConsensusActual
EPS ($)$0.48*$0.89
Revenue ($USD Billions)$28.60*$30.26
EBITDA ($USD Billions)$0.93*~$0.94

Values marked with * were retrieved from S&P Global.

Segment operating income

SegmentQ3 2024Q4 2024Q1 2025
Refining ($MM)$565 $437 $(530)
Renewable Diesel ($MM)$35 $170 $(141)
Ethanol ($MM)$153 $20 $20

KPIs

KPIQ3 2024Q4 2024Q1 2025
Adjusted Refining Op. Income per bbl ($/bbl)$2.14 $1.60 $2.38
RD Op. Income per gal ($/gal)$0.11 $0.55 $(0.64)
Ethanol Margin per gal ($/gal)$0.72 $0.42 $0.48

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital investments attributable to Valero ($B)FY 2025~$1.95 ~$2.00 Maintained (range refined)
Refining throughput – Gulf Coast (Mbpd)Q2 2025N/A1.75–1.80 New
Refining throughput – Mid-Continent (Mbpd)Q2 2025N/A0.385–0.405 New
Refining throughput – West Coast (Mbpd)Q2 2025N/A0.240–0.260 New
Refining throughput – North Atlantic (Mbpd)Q2 2025N/A0.320–0.340 New
Refining cash operating expenses ($/bbl)Q2 2025N/A~$5.15 New
D&A expense ($MM)Q2 2025N/A~$780 incl. $100 Benicia incremental ($0.25 EPS/quarter) New
Net interest expense ($MM)Q2 2025N/A~$135 New
G&A expense ($MM)FY 2025N/A~$985 New
Renewable Diesel sales volumes (B gal)FY 2025N/A~1.1 New
RD opex ($/gal)FY 2025N/A~$0.53 (incl. ~$0.24 non-cash) New
Ethanol production (M gal/day)Q2 2025N/A~4.6 New
Ethanol opex ($/gal)Q2 2025N/A~$0.41 (incl. ~$0.05 non-cash) New
Dividend per share ($)Ongoing$1.07 (Q4’24) $1.13 (declared Jan 16; confirmed May 6) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Refining supply/demand, inventoriesHeavy maintenance; margins down; low inventories building by Q3 Demand slightly higher YoY; inventories below 5-year averages; constructive gasoline/diesel ahead of driving season Improving fundamentals vs Q4; supportive setup
West Coast assets (CA regulatory/legal)West Coast profitability volatile; higher opex per bbl Q3/Q4 Intent to cease Benicia by Apr’26; $1.1B impairment incl. Wilmington; state discussions ongoing Structural shift; portfolio de-risking
Renewable diesel economics & policy (PTC/RIN/LCFS)SAF project completed; RD margins moderate RD margins compressed; partial PTC capture in Q1; expects 100% eligible capture going forward; potential tailwinds from RIN obligation increase and CA LCFS changes Transitional; potential 2H recovery
Mexico import permitNot discussedPermit temporarily suspended; later reinstated; Valero exonerated; expects positive impact vs illegal imports Resolved; operational normalization
Capital returnsContinued high payout; buybacks and dividends $633M returned; commitment to buybacks with excess FCF; strong balance sheet Ongoing discipline
Natural gas costs & operationsHigher OPEX sensitivity; Europe optionality Volatility managed; no change to Pembroke operations mode; optimization between gas/NGLs Neutral

Management Commentary

  • “We delivered positive results… despite heavy maintenance activity across our refining system and a challenging margin environment in the Renewable Diesel segment.” — Lane Riggs (CEO) .
  • “We still expect capital investments attributable to Valero for 2025 to be approximately $2 billion… about $1.6 billion allocated to sustaining the business.” — Jason Fraser (CFO) .
  • “We have had our [Mexico] import permit reinstated… customs authority recognized that Valero was in full compliance.” — Gary Simmons (COO) .
  • “Our current intent is to close the [Benicia] refinery… we are having discussions with the state, but our intent right now is to close.” — Rich Walsh (EVP & General Counsel) .

Q&A Highlights

  • California impairment and closure: Benicia ($901M) and Wilmington ($230M) impaired; Benicia operates in the more difficult regulatory environment and has higher maintenance costs; intent to cease Benicia by Apr’26; state discussions ongoing but plan remains to close .
  • Renewable diesel under PTC: Q1 margins impacted by catalyst changes and partial PTC capture; moving to full eligible capture; potential tailwinds if D4 RIN obligation increases and CA LCFS modifications approved; RD volumes expected ~1.1B gal in 2025 .
  • Demand/inventories: Diesel and gasoline demand stronger YoY; inventories near/below 5-year ranges; multiple open arbs support exports from USGC; margins viewed as undervalued relative to fundamentals .
  • Q2 operations & maintenance: Throughput guidance lower in Mid-Con and North Atlantic due to maintenance; cash opex ~$5.15/bbl; D&A ~$780M including ~$100M incremental from Benicia .
  • Mexico import permit: Suspension in April; reinstated following records review; exonerated; expects crackdown on illegal fuel imports to support business .

Estimates Context

  • Q1 2025 results vs S&P Global consensus: EPS $0.89 vs ~$0.48* (beat); Revenue $30.26B vs ~$28.60B* (beat; note “revenue” definitions for refiners may differ); EBITDA ~$0.94B vs ~$0.93B* (slight beat). Values retrieved from S&P Global.
  • Implications: Given stronger demand/inventory backdrop and tightening maintenance rolls, forward estimates for refining capture and EPS may need modest upward revision, while RD estimates likely remain conservative pending policy-driven tailwinds .

Key Takeaways for Investors

  • The quarter’s adjusted EPS beat reflects resilient refining operations amid heavy maintenance; fundamentals into driving season look constructive (low inventories, open arbs), a positive near-term catalyst for margins .
  • California portfolio rationalization (Benicia closure intent, Wilmington impairment) reduces regulatory risk and future capital intensity; expect incremental D&A burden (~$100M/quarter; ≈$0.25 EPS) over the next four quarters as disclosed .
  • Renewable diesel profitability reset under PTC is ongoing; management expects better credit capture and potential policy support (RIN obligation increases, CA LCFS), pointing to 2H recovery scenarios .
  • Strong capital returns continue with a 73% payout of adjusted operating cash flow; dividend at $1.13 and buybacks remain a lever given balance sheet flexibility (net debt-to-cap ~19%) .
  • Q2 throughput guidance suggests lingering maintenance in Mid-Con/North Atlantic; monitor crack spreads and capture dynamics, noting seasonal butane pull-out may temporarily weigh on capture .
  • Watch Mexico operations normalization after permit reinstatement; enforcement against illegal imports could be a modest tailwind for regional economics .
  • Near-term trading setup: positive skew into summer driving season on tight product inventories; medium-term thesis: portfolio optimization and disciplined capital deployment support durable returns despite RD policy transition .