Capital Allocation in Low Margins
Q: Will you maintain buybacks if margins stay low?
A: Valero intends to continue returning capital to shareholders even in a lower margin environment, thanks to its strong balance sheet and low-cost operations. They have committed to a minimum of 40–50% of cash flow from operations going to shareholders, and all excess free cash flow will support buybacks.

California Refinery Strategy
Q: Any update on California refinery plans?
A: Facing increased regulatory pressures in California, Valero is considering all strategic options for its operations there. Historically, they have minimized capital expenditures in the state due to policy challenges, and now all alternatives are being evaluated as they assess their future in California.

Refining Margins Outlook
Q: How do you see refining margins evolving?
A: Valero expects tightening balances in refining markets due to modest net capacity additions of about 300,000 barrels per day and demand growth of 700,000 barrels per day in 2025. Timing of refinery closures and new capacity will impact margins, and they anticipate an extended period of tighter balances leading to improved margins beyond next year.

Renewables and Sustainable Aviation Fuel
Q: What's the outlook for your renewable fuels business?
A: The startup of the sustainable aviation fuel unit is ahead of schedule and under budget, with strong commercial interest from airlines and freight carriers. Valero expects positive policy tailwinds in 2025, including the Inflation Reduction Act, European SAF mandates, and potential RIN price increases, which should enhance returns exceeding their minimum after-tax threshold of 25%.

Operating Expenses
Q: How are you keeping OpEx low?
A: Valero continues to manage operating expenses through disciplined cost control, maintaining a focus on low-cost operations. While lower natural gas prices have helped, they are actively working to offset inflation impacts on maintenance, catalyst, and chemical costs to sustain their cost advantage.

Capture Rates Improvement
Q: What needs to improve capture rates?
A: Improvement in capture rates depends on factors like reduced crude market backwardation and better pricing for secondary products such as propylene and naphtha. As petrochemical demand improves, these factors should enhance margins and capture rates.

Diesel Demand Trends
Q: Is diesel demand improving?
A: Valero has seen a recent increase in diesel demand, with a 5% year-over-year rise in the last two weeks. This suggests strengthening markets, and with tighter inventories, it could support higher diesel margins heading into winter.

Port Arthur Coker Economics
Q: How is the Port Arthur coker performing?
A: The Port Arthur coker project is meeting return expectations set during funding, benefiting from processing heavy sour crude into light products. As sour crude differentials fluctuate, Valero anticipates capturing additional value from this asset.

Naphtha Exports Outlook
Q: What's driving naphtha export strength?
A: Increased naphtha exports are due to reduced supply from hydroskimmer run cuts and improving petrochemical demand. Valero expects this trend to continue, supporting margins for naphtha and related products.

Ethanol Volumes and Margins
Q: Why are ethanol volumes at record levels?
A: Valero has expanded ethanol production capacity and is leveraging export opportunities amid strong global demand. Despite margin pressures, the company is taking advantage of the abundant U.S. corn supply and increased international interest in ethanol-blended fuels.