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Valero Energy Corporation supplies transportation fuels, with petroleum refining accounting for the vast majority of revenue. It sells to fuel distributors and retailers, as well as petroleum traders and large users such as airlines. It has no company-owned retail network, so its business is supplying fuel rather than operating filling stations.
Valero buys nearly all the raw materials it processes. Its earnings depend on the gap between fuel selling prices and crude-oil purchase costs, after operating costs. Processing crude oils that cost less than benchmark grades contributes significantly to profitability, making those price discounts important to the business.
Its smaller low-carbon businesses turn corn into ethanol and renewable feedstocks into diesel and aviation fuel. Valero operates the Diamond Green Diesel (DGD) joint venture, which sells renewable fuels for blending with petroleum fuels or for direct use. Its ethanol plants also sell grain co-products to animal-feed customers. Low-carbon fuel economics depend on feedstock costs and government policies that determine tax credits, incentives and product eligibility. The U.S. clean fuel production credit is restricted to fuels made exclusively from feedstocks produced or grown in the United States, Mexico or Canada.
The risk section is the longest, dullest part of the filing. This keeps only what can really hurt you: where it hits, how hard, when it plays out.
Every company claims an edge. Each one is checked against hard numbers like margins and returns: which hold, and which line gives way first.
Marathon Petroleum and Valero compete to sell gasoline and diesel from large refinery networks to overlapping wholesale and export customers, so fuel prices relative to crude costs matter to both. Watch Marathon’s gasoline and distillate sales for a read on those shared markets.
Phillips 66 competes with Valero for branded, unbranded and bulk fuel customers in the United States and United Kingdom; both refine crude into transportation fuels. Its gasoline, diesel and aviation-fuel sales offer a window into demand in those shared markets.
PBF Energy competes with Valero in overlapping North American markets by refining crude into unbranded gasoline and distillates sold to commercial customers and major oil companies. Its gasoline and diesel sales help show the conditions facing Valero’s unbranded fuel business.
HF Sinclair Corporation competes with Valero in Mid-Continent refinery markets, and both sell gasoline, diesel, jet fuel and renewable diesel, including through branded fuel sales and wholesale supply. Watch its refining and renewable-diesel results separately to compare the two fuel businesses with Valero’s.
Delek US Holdings, Inc. and Valero both refine petroleum transportation fuels for domestic wholesale customers, leaving both exposed to fuel prices relative to crude costs. Delek’s sales to inland U.S. transportation and industrial markets are the relevant comparison, rather than its pipeline and storage business.
CVR Energy’s refineries compete directly with Valero’s Ardmore refinery to supply regional transportation-fuel customers. Watch CVR’s fuel pricing and supply reliability in the Mid-Continent, where it sells through truck, rail and pipeline deliveries.
Darling Ingredients shares Valero’s renewable-fuel exposure through its 50% stake in Diamond Green Diesel and turns animal by-products and used cooking oil into ingredients, offering the venture feedstocks at market prices that it need not buy. Watch Darling’s share of DGD earnings for the venture’s profitability, but do not equate it with Valero’s consolidated renewable-diesel results.
ExxonMobil makes and sells petroleum fuels that compete with Valero’s supply to fuel buyers, but its oil and gas production makes total earnings a less useful comparison. Focus on its petroleum-fuel business when assessing the refining conditions Valero faces.
Chevron refines crude and sells petroleum and renewable fuels that compete with Valero’s products for fuel buyers. Its fuel-business results are the closer comparison; oil and gas production makes Chevron’s group earnings less comparable with Valero’s.
BP’s refining and customer-facing fuel businesses compete with Valero’s transportation-fuel supply, including sales through a branded retail network. Watch BP’s customers & products segment rather than group earnings, which also reflect substantial oil and gas production.
Imperial Oil refines and sells petroleum products in Canada, competing with Valero’s Canadian fuel operations for buyers. Its downstream fuel sales offer a closer view of that market than overall earnings, which also include oil and gas production and chemicals.
Suncor Energy’s refining and fuel sales compete with Valero for Canadian customers, but its substantial oil-sands production makes group earnings a less direct comparison. Watch Suncor’s Refining and Marketing business for conditions in the fuel market they share.
Par Pacific Holdings, Inc. and Valero both earn refining revenue by turning crude into fuels for buyers, but Par’s Hawaii, Northwest and Rocky Mountain footprint limits direct market overlap. Its refining results provide a comparison for fuel prices relative to crude costs, not a broad read on Valero’s customer markets.
Green Plains and Valero compete in Midwest corn ethanol, selling ethanol and distillers-grain co-products; ethanol and co-product prices relative to corn costs matter to both. Green Plains’ ethanol-production results are the useful comparison for Valero’s ethanol segment, rather than its grain and energy trading activities.
Sunoco buys Valero-branded fuel and resells it to dealers and commercial customers, making it a direct route from Valero to fuel demand; Valero is among its largest branded suppliers by volume. Watch Sunoco’s fuel-distribution sales and branded supply agreements for changes in that route to customers.
EIA Crude Oil Stocks Change (Oct/16)
Valero’s weekly US crude and gasoline stocks show how much crude is available to its refineries and how much gasoline is on hand to compete with the gasoline and blendstocks it sells, affecting feedstock costs and selling prices.
Read crude and gasoline stocks separately: rising crude stocks can ease Valero’s refinery feedstock costs, while rising gasoline stocks can weigh on the prices it gets for gasoline and blendstocks; falling stocks can push those effects the other way.
Valero Energy Corporation earningsThis company
Valero turns crude oil and other feedstocks into fuels, and this report will show whether the prices it gets for those products leave enough margin over what it pays for the inputs.
Read Valero’s refining margin alongside throughput, the amount of feedstock it processes. A wider margin with steady or higher throughput means more processing is translating into stronger refining returns. Higher throughput with a narrower margin means feedstock costs or weaker fuel prices are eating into the return on each barrel.
DARLING INGREDIENTS INC. earningsDAR
Darling Ingredients’ report will show how its Diamond Green Diesel stake is performing; Valero consolidates the venture’s renewable-diesel business, but the two companies’ reported results are not the same measure.
Read Darling Ingredients’ reported share of venture earnings alongside its comments on feedstock costs and product margins. Higher earnings would signal improving economics at Diamond Green Diesel; lower earnings would point to continued pressure on Valero’s consolidated renewable-diesel business, but Darling’s share is not Valero’s segment result.
SUNOCO L.P. earningsSUN
Sunoco’s report will show how fuel sales through its distribution business are changing; Sunoco buys and resells Valero-branded fuel to dealers and commercial customers.
Look at Sunoco’s fuel-distribution sales and branded supply arrangements. Steady sales and continuing arrangements mean this channel is still moving Valero-branded fuel to dealers and commercial customers; weaker sales or changed arrangements would suggest a less reliable outlet for those volumes.
CVR ENERGY, INC. earningsCVI
CVR Energy’s report will show how fuel pricing and supply reliability are changing in the Mid-Continent, where its refineries compete with Valero’s Ardmore refinery for regional customers.
Look at CVR Energy’s fuel pricing and supply reliability in the Mid-Continent. Steady pricing and reliable deliveries point to less pressure on sales from Valero’s Ardmore refinery; weaker pricing or disrupted supply would show how competition can constrain Valero’s sales to regional customers.
Green Plains, Inc. earningsGPRE
Green Plains’ report will show how Midwest ethanol and co-product prices compare with corn costs, the same basic economics facing Valero’s ethanol business.
Read Green Plains’ ethanol-production results alongside its comments on corn costs and ethanol and co-product prices. Product revenue outpacing corn costs would signal improving Midwest production economics for Valero’s ethanol business; costs rising faster than product revenue would point to tighter margins.
