10-KPeriod: FY2018

VALERO ENERGY CORP/TX Annual Report, Year Ended Dec 31, 2018

Filed February 28, 2019For Securities:VLO

Summary

Valero Energy Corporation's 2018 10-K filing reveals a robust operational year with strong performance across its refining segment, driven by improved distillate margins and favorable crude oil discounts. Despite a slight decrease in net income compared to 2017, largely due to tax reform benefits in the prior year, the company's operational income saw a significant increase. Valero operates a vast network of 15 refineries and 14 ethanol plants, with significant assets also held through its consolidated subsidiary, Valero Energy Partners LP (VLP). The company's strategic focus in 2018 included completing the acquisition of three ethanol plants and continuing its share repurchase program. Valero's outlook for 2019 indicated expectations for refining and ethanol margins to remain near current levels. Key financial highlights include strong operational cash flow generation, supporting capital investments, dividend payments, and share repurchases. The company also completed the acquisition of all outstanding units of Valero Energy Partners LP (VLP) in early 2019, which is expected to simplify its structure and enhance financial flexibility.

Financial Highlights

50 data points
Beta

Revenue

$117.03B

4.8% Gross Margin

Net Income

$3.12B

2.7% Net Margin

EPS (Diluted)

$7.29

Total Assets

$50.16B

Cash & Equivalents

$2.98B

Free Cash Flow

$4.37B

Financial Statements
Beta
Revenue$117.03B
Cost of Revenue$111.44B
Gross Profit$5.59B
Operating Income$4.57B
Interest Expense$470.00M
Net Income$3.12B
EPS (Basic)$7.30
EPS (Diluted)$7.29
Shares Outstanding (Basic)426.00M
Shares Outstanding (Diluted)428.00M

Key Highlights

  • 1Valero operated 15 refineries with a total throughput capacity of approximately 3.1 million BPD and 14 ethanol plants with a capacity of 1.73 billion gallons per year.
  • 2Refining segment adjusted operating income increased by $961 million in 2018 compared to 2017, primarily driven by improved distillate margins and favorable crude oil discounts.
  • 3Net income attributable to Valero stockholders decreased to $3.1 billion in 2018 from $4.1 billion in 2017, mainly due to a $1.9 billion tax benefit in 2017 from Tax Reform.
  • 4The company's total liquidity was $7.1 billion as of December 31, 2018, consisting of $2.7 billion in cash and cash equivalents and $4.4 billion in available borrowing capacity.
  • 5Valero continued its common stock repurchase program, with $2.2 billion remaining available under its 2018 authorization as of December 31, 2018.
  • 6The company completed the acquisition of all outstanding publicly held common units of Valero Energy Partners LP (VLP) on January 10, 2019, for approximately $950 million.
  • 7Valero experienced a decrease in gasoline margins in 2018 compared to 2017, which unfavorably impacted its refining segment margin by an estimated $1.3 billion.

Frequently Asked Questions

Valero's primary source of revenue and profitability in 2018 was its refining segment, which includes the operations of its 15 petroleum refineries. The company also generates revenue from its 14 ethanol plants. Strong distillate margins and favorable crude oil discounts significantly contributed to the refining segment's improved operating income.

In 2018, Valero completed the acquisition of three ethanol plants and made significant capital investments. The company also continued its share repurchase program and entered into various agreements related to its logistics assets, including those for the MVP Terminal and Sunrise Pipeline System. A major event mentioned is the completion of the acquisition of Valero Energy Partners LP (VLP) in early January 2019.

The Tax Cuts and Jobs Act of 2017 significantly impacted Valero's results in 2017 by providing a $1.9 billion income tax benefit due to the reduction in the U.S. statutory income tax rate and other provisions. In 2018, the company finalized its accounting for the tax reform, resulting in a net income tax benefit of $12 million. While the lower corporate tax rate positively affected ongoing operations, the primary financial impact in 2017 was a one-time benefit.

Valero's primary risks include the volatility of refining margins influenced by crude oil prices and product demand, compliance with environmental laws and regulations (including those related to climate change and sulfur caps for marine fuels), severe weather events, disruptions in crude oil supply, changes in trade policies, reliance on third-party transportation, competitive pressures, and potential interruptions at its refineries. The company also faces risks related to credit and capital markets, cybersecurity, and labor relations.