Valero Energy Corporation
Energy · Oil & Gas Refining & Marketing
STRUCTURAL: Pure-play refiner levered to gasoline + distillate crack spreads, with Gulf Coast complexity advantage (heavy/sour processing at Port Arthur, St. Charles, Corpus Christi). 2B gal/yr nameplate post-Port Arthur expansion) layers a policy-driven leg on top of the refining base.
Capital return discipline - buybacks + dividend at ~75%+ of adjusted operating cash flow target.
- Refining capacity attrition (US closures, EU consolidation) tightens medium-term crack spreads
- DGD scaling into SAF (sustainable aviation fuel) opens a higher-margin renewable leg
- Gulf Coast heavy/sour optionality benefits when WCS/Maya discounts widen
- Disciplined balance sheet - net debt/cap target ~20-30%, no major capex overhang
- Shareholder returns: consistent buybacks shrink share count alongside dividend growth
- Crack spreads mean-reverting from 2022-2023 peaks; gasoline demand structurally peaking in OECD
- Renewable diesel margins compressed by LCFS credit oversupply + 45Z transition uncertainty
- EV adoption + CAFE standards erode long-dated gasoline demand curve
- Capex creep on DGD expansion + decarbonization spend with uncertain IRR
- Cyclical earnings - operating leverage cuts both ways when spreads normalize
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