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VALERO ENERGY CORP/TX (VLO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 EPS was $2.28, beating S&P Global consensus ($1.77) on strong Refining capture and record Gulf Coast throughput; revenue was $29.89B vs consensus $27.16B, with renewable diesel weakness partially offset by distillate strength . EPS and revenue beats vs consensus are based on S&P Global data; values retrieved from S&P Global.*
  • Management highlighted record refining throughput in the U.S. Gulf Coast, supportive product demand, and very low diesel inventories, underpinning stronger distillate cracks into hurricane season .
  • Q3 guidance: refining throughput ranges by region, cash OpEx ~$4.80/bbl, net interest ~$135M, D&A ~$810M (incl. ~$100M Benicia incremental D&A; ~$0.25/share quarterly impact), 2025 G&A ~$985M, and maintained 2025 capital investments attributable to Valero at ~$2B .
  • Capital returns remained robust: Q2 payout ratio 52% with $695M returned (dividends $354M, buybacks $341M); dividend maintained at $1.13 per share declared July 17 .

What Went Well and What Went Wrong

What Went Well

  • Record U.S. Gulf Coast refining throughput and strong operating/commercial execution: “we set a record for refining throughput rate in our U.S. Gulf Coast region” .
  • Distillate strength: diesel inventories near historic lows and strong export pull from USGC kept cracks firm; diesel sales trending ~3% above last year, supporting margin capture .
  • Refining margin per barrel improved to $12.35 vs $11.14 in Q2 2024; adjusted refining operating income per barrel rose to $4.78 vs $4.49 YoY .

What Went Wrong

  • Renewable Diesel segment swung to a loss (-$79M vs +$112M YoY) on weaker credit/fat price economics; margin per gallon fell to $0.22 (vs $0.80 YOY) and sales volumes declined to 2.7M gpd .
  • Incremental depreciation (~$100M quarterly) from Benicia plan reduced earnings; management guided ~$0.25/share impact for the next three quarters .
  • General & administrative expense increased YoY ($220M vs $203M), and Renewable Volume Obligation costs rose YoY ($6.14/bbl vs $3.39/bbl), pressuring cost structure .

Financial Results

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$34,490 $30,756 $30,258 $29,889
Operating Income ($USD Millions)$1,221 $348 $(900) $997
Net Income attributable to VLO ($USD Millions)$880 $281 $(595) $714
EPS (GAAP, $)$2.71 $0.88 $(1.90) $2.28
Adjusted EPS ($)$2.73 $0.64 $0.89 $2.28

Segment operating income (loss):

Segment ($USD Millions)Q2 2024Q2 2025
Refining$1,224 $1,266
Renewable Diesel$112 $(79)
Ethanol$105 $54
Corporate & Eliminations$(220) $(244)

KPIs and margins:

KPIQ2 2024Q4 2024Q1 2025Q2 2025
Refining Throughput (kbpd)3,010 2,995 2,828 2,922
Refining Margin per bbl ($)11.14 8.44 9.78 12.35
Adjusted Refining Op Inc per bbl ($)4.49 1.60 2.38 4.78
Renewable Diesel Sales (k gpd)3,492 3,356 2,435 2,732
RD Margin per gallon ($)0.80 1.06 0.02 0.22
Ethanol Production (k gpd)4,474 4,627 4,466 4,583
Ethanol Margin per gallon ($)0.61 0.42 0.48 0.52

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital investments attributable to ValeroFY 2025~$1.95B “Approximately $2B” Maintained/rounded higher
Refining throughput (Gulf Coast)Q3 2025Not disclosed prior1.76–1.81 M bpd New detail
Refining throughput (Mid-Continent)Q3 2025Not disclosed prior430–450 kbpd New detail
Refining throughput (West Coast)Q3 2025Not disclosed prior240–260 kbpd New detail
Refining throughput (North Atlantic)Q3 2025Not disclosed prior465–485 kbpd New detail
Refining cash OpEx per bblQ3 2025Not disclosed prior~$4.80/bbl New detail
Net interest expenseQ3 2025Not disclosed prior~$135M New detail
Total D&AQ3 2025Not disclosed prior~$810M (incl. ~$100M Benicia incremental) New detail
Benicia incremental D&A EPS impactNext 3 quartersNot disclosed prior~$0.25 per share per quarter New detail
G&A expenseFY 2025Not disclosed prior~$985M New detail
Renewable Diesel sales volumesFY 2025Not disclosed prior~1.1B gallons New detail
Renewable Diesel OpEx per gallonFY 2025Not disclosed prior~$0.53 ($0.24 non-cash) New detail
Ethanol productionQ3 2025Not disclosed prior~4.6M gpd; OpEx ~$0.40/gal (incl. $0.05 D&A) New detail
DividendQ3 2025$1.13/share (Jan 16 increase) $1.13/share declared July 17 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Distillate market/inventoriesQ4: USGC distillate margins firm; Q1: lighter crude slates, diesel yields pressured Diesel inventories near historic lows; export pull keeps cracks strong; sales ~3% above LY Improving cracks; inventory tightness persists
Crude quality differentialsQ1: Canadian/WCS widened vs Brent; heavier slate partially constrained Expect widening in Q4 as OPEC unwinds cuts; Canadian output recovery; potential sanctions impact Likely widening into H2
Renewable Diesel policy/creditsQ4: LCFS higher; RD margin per gallon $1.06 Await EPA RVO/SRE clarity; see LCFS/D4 RINs moving up; fat prices need to disconnect; RD margin improved QoQ Policy-driven recovery potential
SAF operationsQ4: SAF project completed, optionality established Operations blending well; logistics effective; customer premiums above RD even post PTC changes Positive operational trajectory
California/BeniciaQ1: Announced plan to cease Benicia refining by Apr-2026; impairment No change to plan; ongoing discussions with state; incremental D&A continues Unchanged closure plan
Capital returnsQ4: $601M returned; payout 63% Q2: $695M returned; payout 52%; all excess FCF to buybacks; minimum annual payout 40-50% Ongoing robust buybacks

Management Commentary

  • “We are pleased to report solid financial results for the second quarter driven by our strong operational and commercial execution… we set a record for refining throughput rate in our U.S. Gulf Coast region” — Lane Riggs, CEO .
  • “Total light product inventory remains below the five-year average… domestic gasoline demand flat YoY; diesel demand above last year with strong exports keeping inventories down” — Gary Simmons, COO .
  • “We still expect capital investments attributable to Valero for 2025 to be approximately $2B… refining cash operating expenses in Q3 to be ~$4.8/bbl… D&A ~$810M including ~$100M incremental Benicia depreciation” — Jason Fraser/CFO prepared remarks .
  • “Our commitment remains underpinned by a strong balance sheet that also provides us plenty of financial flexibility” — Lane Riggs .

Q&A Highlights

  • Demand/margins: Gasoline demand flat; export strength and closed transatlantic arb supported gasoline; diesel cracks expected to remain strong given low inventories and exports; hurricane disruption could tighten further .
  • Crude diffs: Expect widening of light-heavy quality differentials in Q4 as OPEC barrels and Canadian volumes increase; Russian sanctions are a swing factor .
  • Capacity/additions: Limited net additions (~400 kbpd in 2026); potential refinery rationalizations (e.g., Lindsey) could tighten balances sooner depending on macro activity and renewables .
  • Capture/operations: Strong capture driven by improved operations and commercial performance; maximizing distillate yields enhanced performance .
  • Renewables/SAF: Path back to mid-cycle depends on EPA RVO/SRE clarity; LCFS/D4 RINs moving up; SAF operations blending well with expected customer premiums over RD despite PTC changes .
  • California/Benicia: No change to closure plan; ongoing engagement with state entities; no material solutions identified to date .

Estimates Context

Results vs S&P Global consensus:

MetricQ1 2025Q2 2025Q3 2025FY 2025
EPS (Consensus vs Actual, $)0.48 vs 0.89*1.77 vs 2.28*3.05 vs 3.66*9.64 (cons.)*
Revenue (Consensus vs Actual, $B)28.60 vs 30.26*27.16 vs 29.89*29.25 vs 30.34*121.42 (cons.)*
EBITDA (Consensus vs Actual, $B)0.93 vs 0.94*1.54 vs 1.93*2.11 vs 2.31*7.01 (cons.)*
# Estimates (EPS/Revenue)17 / 8*18 / 10*18 / 9*20 / 10*

Values retrieved from S&P Global.* Actuals for revenue/EPS in this table compared to consensus reflect company-reported figures from 8-K filings . The magnitude of revenue beats can vary due to definitional differences in sell-side “revenue” vs company “revenues.”

Implications: Consensus likely needs to revise higher for H2 EPS/EBITDA given stronger distillate dynamics, throughput ranges, and maintained capex discipline; RD remains a swing factor pending EPA policy clarity .

Key Takeaways for Investors

  • Beat on EPS and revenue vs S&P consensus driven by strong Refining margin capture and record Gulf Coast throughput; RD weakness did not derail overall profitability . Values retrieved from S&P Global.*
  • Diesel remains the key narrative: inventories near historic lows, export arbs open, and hurricane season creates upside risk to cracks and spreads .
  • Expect crude quality differentials to widen into Q4 as OPEC/Canada barrels hit the market, supporting complex refiners’ capture; monitor sanctions impacts .
  • Near-term headwind from Benicia: incremental D&A (~$100M/quarter) implies ~$0.25/share drag for three quarters; watch EPS sensitivity to D&A and West Coast margins .
  • Capital returns should remain robust (40–50% minimum payout), with excess FCF targeted at buybacks given balanced sheet strength and capex discipline .
  • Renewables: Policy clarity (EPA RVO/SRE) and credit price increases (LCFS/D4 RINs) are catalysts for RD margin normalization; SAF operations performing well with customer premiums .
  • Trading setup: Favor exposure to distillate-heavy cracks and complex capture into H2; watch export flows, OPEC ramp timing, and hurricane risk as potential near-term catalysts .