Cash Flow Payout and Share Buybacks
Q: Is the $1B share buyback level sustainable?
A: Management indicated that given their strong balance sheet and desire not to build more cash, they had a payout of 74% this quarter, above the long-term commitment of 40-50%. In periods of strong fundamentals, excess cash flow is expected to continue towards buybacks, making the $1 billion repurchase level sustainable.

Returns of Capital Framework
Q: Will you change your capital return framework?
A: Management is comfortable being above the 40-50% payout target over a consistent period. They view it as a long-term indication through the cycle and suggest that recent quarters' actions are indicative of future behavior regarding cash.

Product Demand Outlook and Diesel Margins
Q: Outlook for diesel and jet margins after pullback?
A: Despite recent pullbacks, Valero sees strong diesel demand, with sales 2% higher than last year. They expect gasoline demand to be flat to slightly up, and believe diesel margins are too weak and need to strengthen, as negative margins in Europe and Asia indicate capacity needs to run.

Renewable Diesel and SAF Market Outlook
Q: Outlook for renewable diesel and SAF profitability?
A: While 2024 may remain challenging due to capacity additions, the longer-term outlook for renewable diesel (RD) and sustainable aviation fuel (SAF) is positive. Upcoming global mandates and programs in 2025 are expected to increase demand, benefiting Valero's diversification into SAF.

DGD SAF Project and Margins
Q: Economic expectations for the upcoming SAF project?
A: The SAF project is on track for Q4 start-up. Management expects margins supported by state and federal tax credits like 45Z, BTC, or PTC, and strong interest from buyers, meeting their project return thresholds.

Refining Capacity Additions and Market Tightness
Q: Will new refining capacity affect supply dynamics?
A: After this year's peak in capacity additions, global petroleum demand is expected to outpace new refinery capacity, leading to several years of tightness in the market.

Impact of Lighter Crude Mix
Q: How does lighter crude mix affect refining?
A: The global average crude gravity increased by about 1.5 degrees, leading to lower utilization since refineries are designed for heavier crudes. This trend causes derated units and challenges in processing the lighter slate.

Crude Differentials and Availability
Q: Expectations on crude differentials and supply?
A: Differentials widened in Q1 due to lower demand, but are expected to remain tight until OPEC production increases in late 2024. Valero is not experiencing feedstock availability issues but prefers wider differentials.

M&A Appetite for Refining Assets
Q: Has your outlook on refining M&A changed?
A: Valero continues to evaluate opportunities but remains disciplined, understanding the full costs to run refineries. They did not engage in recent large deals but may consider assets if they become available.

West Coast Market and Lighter Crude Slate
Q: Outlook for West Coast market this summer?
A: Valero anticipates heightened volatility and prices dependent on refinery operations. Importing into California is challenging, and recent demand has returned to normal patterns after weather-related dips.

Refinery Turnaround Activities
Q: Should we expect lighter fall turnarounds?
A: Valero had heavy turnarounds in Q1, with throughput reflecting this. Future turnaround activities will be lighter, driven by margin outlooks and seasonal considerations, with Q4 expected to be typical.

Gasoline vs. Diesel Production Strategy
Q: Will you shift focus to gasoline production?
A: Production mix is influenced by intermediate feedstock availability, especially VGO. Currently, VGO availability is sufficient, allowing Valero to operate conversion units fully; future shifts depend on market conditions.

Potential for Additional SAF Projects
Q: Is there demand for more SAF projects?
A: Commercial interest exceeds capacity of the first SAF project. Engineering on a second project is underway, but timing of announcements depends on market developments and internal decisions.

Project Execution and Timeliness
Q: How do you deliver projects ahead of schedule?
A: Valero attributes timely project execution to a culture of high discipline, accountability, and teamwork. They ensure competent people are in the right roles with clear visibility and alignment throughout the organization.

Mexican Market and Exports
Q: What are your views on Mexico's fuel demand?
A: Valero's sales in Mexico are over 100,000 barrels per day, consistent with historic levels. Demand remains strong, and they expect growth with the upcoming Altamira terminal enhancing competitiveness.

Asia Refining Margins
Q: Are Asian refining margins at a floor?
A: Negative margins in Singapore and Europe suggest margins have hit a floor. Capacity needs to run, so margins are expected to improve from current lows.

Naphtha Exports and Octane Economics
Q: Impact of falling naphtha exports on octane?
A: Significant changes require petrochemical demand for naphtha to pick up, tied to crude prices. High crude prices hinder naphtha's competitiveness in petrochems, leading it to blend into gasoline and affect octane economics.