Valero energy reports second quarter 2020 results
San antonio--(business wire)--valero energy corporation (nyse: vlo, “valero”) today reported net income attributable to valero stockholders of $1.3 billion, or $3.07 per share, for the second quarter of 2020 compared to net income of $612 million, or $1.47 per share, for the second quarter of 2019. excluding the adjustments shown in the accompanying earnings release tables, adjusted net loss attributable to valero stockholders was $504 million, or $1.25 per share, for the second quarter of 2020, compared to second quarter 2019 adjusted net income attributable to valero stockholders of $665 million, or $1.60 per share. second quarter 2020 adjusted results exclude the benefit from an after-tax lower of cost or market, or lcm, inventory valuation adjustment of $1.8 billion. refining the refining segment reported $1.8 billion of operating income for the second quarter of 2020 compared to $1.0 billion for the second quarter of 2019. excluding the lcm inventory valuation adjustment, the second quarter 2020 adjusted operating loss was $383 million. refinery throughput volumes averaged 2.3 million barrels per day in the second quarter of 2020, which was 647 thousand barrels per day lower than the second quarter of 2019. “while the impact of the pandemic and the ensuing global economic downturn so far this year has been significant, we saw a rapid recovery in demand for refined products as we moved through the quarter,” said joe gorder, valero chairman and chief executive officer. renewable diesel the renewable diesel segment reported $129 million of operating income for the second quarter of 2020 compared to $77 million for the second quarter of 2019. after adjusting for the retroactive blender’s tax credit, renewable diesel operating income was $145 million for the second quarter of 2019. renewable diesel sales volumes averaged 795 thousand gallons per day in the second quarter of 2020, an increase of 26 thousand gallons per day versus the second quarter of 2019. ethanol the ethanol segment reported $91 million of operating income for the second quarter of 2020, compared to $7 million for the second quarter of 2019. excluding the lcm inventory valuation adjustment, the second quarter 2020 adjusted operating loss was $20 million. ethanol production volumes averaged 2.3 million gallons per day in the second quarter of 2020, which was 2.2 million gallons per day lower than the second quarter of 2019. the decrease in adjusted operating income was attributed primarily to lower margins resulting from lower ethanol prices and lower throughput. corporate and other general and administrative expenses were $169 million in the second quarter of 2020 compared to $199 million in the second quarter of 2019. the effective tax rate for the second quarter of 2020 was 20 percent, which was affected by the results of certain of our international operations that are taxed at rates that are lower than the u.s. statutory tax rate. investing and financing activities capital investments totaled $503 million in the second quarter of 2020, of which $240 million was for sustaining the business, including costs for turnarounds, catalysts and regulatory compliance. excluding our partner’s 50 percent share of diamond green diesel’s (dgd) capital investments, valero’s capital investments were approximately $448 million. valero returned $400 million to stockholders through dividends in the second quarter of 2020, resulting in a year-to-date payout of 96 percent of adjusted net cash provided by operating activities. net cash provided by operating activities was $736 million in the second quarter of 2020. included in this amount was a $629 million favorable impact from working capital, as well as our joint venture partner’s share of dgd’s net cash provided by operating activities, excluding changes in its working capital. excluding these items, adjusted net cash provided by operating activities was $38 million. valero continues to target a long-term total payout ratio between 40 and 50 percent of adjusted net cash provided by operating activities. valero defines total payout ratio as the sum of dividends and stock buybacks divided by net cash provided by operating activities adjusted for changes in working capital and dgd’s net cash provided by operating activities, excluding changes in its working capital, attributable to our joint venture partner’s ownership interest in dgd. liquidity and financial position valero ended the second quarter of 2020 with $12.7 billion of total debt and finance lease obligations and $2.3 billion of cash and cash equivalents. the debt to capitalization ratio, net of cash and cash equivalents, was 33 percent as of june 30, 2020. strategic update valero expects to invest approximately $2.1 billion of capital in 2020, of which approximately 60 percent is for sustaining the business and approximately 40 percent is for growth projects. approximately 30 percent of valero’s 2020 growth capital is allocated to expanding the renewables business. the new st. charles alkylation unit, which is designed to convert low-value feedstocks into a premium alkylate product, is on track to be completed in the fourth quarter of this year. the diamond pipeline expansion and the pembroke cogen project are expected to be completed in 2021 and the port arthur coker project is expected to be completed in 2023. valero and its joint venture partner in dgd continue to pursue growth in the low-carbon renewable fuel business. the dgd plant expansion is expected to be completed in 2021, subject to covid-19 related delays, and as previously announced, dgd continues to make progress on the advanced engineering and development cost review for a potential new 400 million gallons per day renewable diesel plant at valero’s port arthur, texas facility. if the project is approved, operations are expected to commence in 2024, increasing dgd production capacity to over 1.1 billion gallons annually. “as we focus on the path to recovery with improving product demand, we remain steadfast in the execution of our strategy, pursuing excellence in our operations, investing for earnings growth with lower volatility and honoring our commitment to stockholder returns,” said gorder. “this uncompromising focus on capital discipline and execution has served us well in the current pandemic-imposed downturn, and it should continue to position valero well through the recovery and beyond.” conference call valero’s senior management will hold a conference call at 10 a.m. et today to discuss this earnings release and to provide an update on operations and strategy. about valero valero energy corporation, through its subsidiaries (collectively, “valero”), is an international manufacturer and marketer of transportation fuels and petrochemical products. valero is a fortune 50 company based in san antonio, texas, and it operates 15 petroleum refineries with a combined throughput capacity of approximately 3.2 million barrels per day and 14 ethanol plants with a combined production capacity of approximately 1.73 billion gallons per year. the petroleum refineries are located in the united states (u.s.), canada and the united kingdom (u.k.), and the ethanol plants are located in the mid-continent region of the u.s. valero also is a joint venture partner in diamond green diesel, which operates a renewable diesel plant in norco, louisiana. diamond green diesel is north america’s largest biomass-based diesel plant. valero sells its products in the wholesale rack or bulk markets in the u.s., canada, the u.k., ireland and latin america. approximately 7,000 outlets carry valero’s brand names. please visit www.valero.com for more information. valero contacts investors: homer bhullar, vice president – investor relations, 210-345-1982 eric herbort, senior manager – investor relations, 210-345-3331 gautam srivastava, manager – investor relations, 210-345-3992 media: lillian riojas, executive director – media relations and communications, 210-345-5002 safe-harbor statement statements contained in this release that state the company’s or management’s expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions of the securities act of 1933 and the securities exchange act of 1934. the words “believe,” “expect,” “should,” “estimates,” “intend,” “target,” “will,” “plans,” and other similar expressions identify forward-looking statements. it is important to note that actual results could differ materially from those projected in such forward-looking statements based on numerous factors, including those outside of the company’s control, such as delays in construction timing and other factors, including but not limited to the impacts of covid-19. for more information concerning factors that could cause actual results to differ from those expressed or forecasted, see valero’s annual reports on form 10-k, quarterly reports on form 10-q, and other reports filed with the securities and exchange commission and available on valero’s website at www.valero.com. covid-19 disclosure the global pandemic has significantly reduced global economic activity and resulted in airlines dramatically cutting back on flights and a decrease in motor vehicle use at a time when seasonal driving patterns typically result in an increase of consumer demand for gasoline. as a result, there has also been a decline in the demand for, and thus also the market prices of, crude oil and certain of our products, particularly our refined petroleum products. many uncertainties remain with respect to covid-19, including its resulting economic effects and any future recovery, and we are unable to predict the ultimate economic impacts from covid-19, how quickly national economies can recover once the pandemic subsides, or whether any recovery will ultimately experience a reversal or other setbacks. however, the adverse impact of the economic effects on us has been and will likely continue to be significant. we believe we have proactively addressed many of the known impacts of covid-19 to the extent possible and will strive to continue to do so, but there can be no guarantee that these measures will be fully effective. for more information, see our quarterly reports on form 10-q and other reports filed with the securities and exchange commission. use of non-gaap financial information this earnings release and the accompanying earnings release tables include references to financial measures that are not defined under u.s. generally accepted accounting principles (gaap). these non-gaap measures include adjusted net income (loss) attributable to valero stockholders, adjusted earnings (loss) per common share – assuming dilution, refining margin, renewable diesel margin, ethanol margin, adjusted refining operating income (loss), adjusted renewable diesel operating income, adjusted ethanol operating income (loss), and adjusted net cash provided by operating activities. these non-gaap financial measures have been included to help facilitate the comparison of operating results between periods. see the accompanying earnings release tables for a reconciliation of non-gaap measures to their most directly comparable u.s. gaap measures. note (f) to the earnings release tables provides reasons for the use of these non-gaap financial measures. valero energy corporation earnings release tables financial highlights (millions of dollars, except per share amounts) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 statement of income data revenues $ 10,397 $ 28,933 $ 32,499 $ 53,196 cost of sales: cost of materials and other (a) 9,079 26,083 29,031 48,061 lower of cost or market (lcm) inventory valuation adjustment (b) (2,248 ) — 294 — operating expenses (excluding depreciation and amortization expense reflected below) 1,027 1,175 2,151 2,390 depreciation and amortization expense 566 552 1,135 1,089 total cost of sales 8,424 27,810 32,611 51,540 other operating expenses 3 2 5 4 general and administrative expenses (excluding depreciation and amortization expense reflected below) 169 199 346 408 depreciation and amortization expense 12 14 25 28 operating income (loss) 1,789 908 (488 ) 1,216 other income, net (c) 27 12 59 34 interest and debt expense, net of capitalized interest (142 ) (112 ) (267 ) (224 ) income (loss) before income tax expense (benefit) 1,674 808 (696 ) 1,026 income tax expense (benefit) 339 160 (277 ) 211 net income (loss) 1,335 648 (419 ) 815 less: net income attributable to noncontrolling interests (a) 82 36 179 62 net income (loss) attributable to valero energy corporation stockholders $ 1,253 $ 612 $ (598 ) $ 753 earnings (loss) per common share $ 3.07 $ 1.47 $ (1.48 ) $ 1.80 weighted-average common shares outstanding (in millions) 406 415 407 416 earnings (loss) per common share – assuming dilution $ 3.07 $ 1.47 $ (1.48 ) $ 1.80 weighted-average common shares outstanding – assuming dilution (in millions) (d) 407 417 407 417 see notes to earnings release tables. valero energy corporation earnings release tables financial highlights by segment (millions of dollars) (unaudited) refining renewable diesel ethanol corporate and eliminations total three months ended june 30, 2020 revenues: revenues from external customers $ 9,615 $ 239 $ 543 $ — $ 10,397 intersegment revenues 2 57 38 (97 ) — total revenues 9,617 296 581 (97 ) 10,397 cost of sales: cost of materials and other (a) 8,539 135 501 (96 ) 9,079 lcm inventory valuation adjustment (b) (2,137 ) — (111 ) — (2,248 ) operating expenses (excluding depreciation and amortization expense reflected below) 928 20 79 — 1,027 depreciation and amortization expense 533 12 21 — 566 total cost of sales 7,863 167 490 (96 ) 8,424 other operating expenses 3 — — — 3 general and administrative expenses (excluding depreciation and amortization expense reflected below) — — — 169 169 depreciation and amortization expense — — — 12 12 operating income by segment $ 1,751 $ 129 $ 91 $ (182 ) $ 1,789 three months ended june 30, 2019 revenues: revenues from external customers $ 27,746 $ 222 $ 964 $ 1 $ 28,933 intersegment revenues 8 73 53 (134 ) — total revenues 27,754 295 1,017 (133 ) 28,933 cost of sales: cost of materials and other 25,172 189 855 (133 ) 26,083 operating expenses (excluding depreciation and amortization expense reflected below) 1,026 17 132 — 1,175 depreciation and amortization expense 518 12 22 — 552 total cost of sales 26,716 218 1,009 (133 ) 27,810 other operating expenses 1 — 1 — 2 general and administrative expenses (excluding depreciation and amortization expense reflected below) — — — 199 199 depreciation and amortization expense — — — 14 14 operating income by segment $ 1,037 $ 77 $ 7 $ (213 ) $ 908 see operating highlights by segment. see notes to earnings release tables. valero energy corporation earnings release tables financial highlights by segment (millions of dollars) (unaudited) refining renewable diesel ethanol corporate and eliminations total six months ended june 30, 2020 revenues: revenues from external customers $ 30,600 $ 545 $ 1,354 $ — $ 32,499 intersegment revenues 4 110 102 (216 ) — total revenues 30,604 655 1,456 (216 ) 32,499 cost of sales: cost of materials and other (a) 27,666 265 1,314 (214 ) 29,031 lcm inventory valuation adjustment (b) 277 — 17 — 294 operating expenses (excluding depreciation and amortization expense reflected below) 1,923 40 188 — 2,151 depreciation and amortization expense 1,069 23 43 — 1,135 total cost of sales 30,935 328 1,562 (214 ) 32,611 other operating expenses 5 — — — 5 general and administrative expenses (excluding depreciation and amortization expense reflected below) — — — 346 346 depreciation and amortization expense — — — 25 25 operating income (loss) by segment $ (336 ) $ 327 $ (106 ) $ (373 ) $ (488 ) six months ended june 30, 2019 revenues: revenues from external customers $ 50,964 $ 474 $ 1,757 $ 1 $ 53,196 intersegment revenues 10 124 105 (239 ) — total revenues 50,974 598 1,862 (238 ) 53,196 cost of sales: cost of materials and other 46,337 413 1,549 (238 ) 48,061 operating expenses (excluding depreciation and amortization expense reflected below) 2,097 36 257 — 2,390 depreciation and amortization expense 1,021 23 45 — 1,089 total cost of sales 49,455 472 1,851 (238 ) 51,540 other operating expenses 3 — 1 — 4 general and administrative expenses (excluding depreciation and amortization expense reflected below) — — — 408 408 depreciation and amortization expense — — — 28 28 operating income by segment $ 1,516 $ 126 $ 10 $ (436 ) $ 1,216 see operating highlights by segment. see notes to earnings release tables. valero energy corporation earnings release tables reconciliation of non-gaap measures to most comparable amounts reported under u.s. gaap (f) (millions of dollars, except per share amounts) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 reconciliation of net income (loss) attributable to valero energy corporation stockholders to adjusted net income (loss) attributable to valero energy corporation stockholders net income (loss) attributable to valero energy corporation stockholders $ 1,253 $ 612 $ (598 ) $ 753 adjustments: lcm inventory valuation adjustment (b) (2,248 ) — 294 — income tax expense (benefit) related to the lcm inventory valuation adjustment 491 — (60 ) — lcm inventory valuation adjustment, net of taxes (1,757 ) — 234 — 2019 blender’s tax credit attributable to valero energy corporation stockholders (a) — 38 — 79 income tax expense related to 2019 blender’s tax credit — (2 ) — (3 ) 2019 blender’s tax credit attributable to valero energy corporation stockholders, net of taxes — 36 — 76 loss on early redemption of debt (c) — 22 — 22 income tax benefit related to loss on early redemption of debt — (5 ) — (5 ) loss on early redemption of debt, net of taxes — 17 — 17 total adjustments (1,757 ) 53 234 93 adjusted net income (loss) attributable to valero energy corporation stockholders $ (504 ) $ 665 $ (364 ) $ 846 reconciliation of earnings (loss) per common share – assuming dilution to adjusted earnings (loss) per common share – assuming dilution earnings (loss) per common share – assuming dilution (d) $ 3.07 $ 1.47 $ (1.48 ) $ 1.80 adjustments: lcm inventory valuation adjustment (b) (4.32 ) — 0.58 — 2019 blender’s tax credit attributable to valero energy corporation stockholders (a) — 0.09 — 0.19 loss on early redemption of debt (c) — 0.04 — 0.04 total adjustments (4.32 ) 0.13 0.58 0.23 adjusted earnings (loss) per common share – assuming dilution (e) $ (1.25 ) $ 1.60 $ (0.90 ) $ 2.03 see notes to earnings release tables. valero energy corporation earnings release tables reconciliation of non-gaap measures to most comparable amounts reported under u.s. gaap (f) (millions of dollars) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 reconciliation of operating income (loss) by segment to segment margin, and reconciliation of operating income (loss) by segment to adjusted operating income (loss) by segment refining segment refining operating income (loss) $ 1,751 $ 1,037 $ (336 ) $ 1,516 adjustments: 2019 blender’s tax credit (a) — 4 — 9 lcm inventory valuation adjustment (b) (2,137 ) — 277 — operating expenses (excluding depreciation and amortization expense reflected below) 928 1,026 1,923 2,097 depreciation and amortization expense 533 518 1,069 1,021 other operating expenses 3 1 5 3 refining margin $ 1,078 $ 2,586 $ 2,938 $ 4,646 refining operating income (loss) $ 1,751 $ 1,037 $ (336 ) $ 1,516 adjustments: 2019 blender’s tax credit (a) — 4 — 9 lcm inventory valuation adjustment (b) (2,137 ) — 277 — other operating expenses 3 1 5 3 adjusted refining operating income (loss) $ (383 ) $ 1,042 $ (54 ) $ 1,528 renewable diesel segment renewable diesel operating income $ 129 $ 77 $ 327 $ 126 adjustments: 2019 blender’s tax credit (a) — 68 — 140 operating expenses (excluding depreciation and amortization expense reflected below) 20 17 40 36 depreciation and amortization expense 12 12 23 23 renewable diesel margin $ 161 $ 174 $ 390 $ 325 renewable diesel operating income $ 129 $ 77 $ 327 $ 126 adjustment: 2019 blender’s tax credit (a) — 68 — 140 adjusted renewable diesel operating income $ 129 $ 145 $ 327 $ 266 see notes to earnings release tables. valero energy corporation earnings release tables reconciliation of non-gaap measures to most comparable amounts reported under u.s. gaap (f) (millions of dollars) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 reconciliation of operating income (loss) by segment to segment margin, and reconciliation of operating income (loss) by segment to adjusted operating income (loss) by segment (continued) ethanol segment ethanol operating income (loss) $ 91 $ 7 $ (106 ) $ 10 adjustments: lcm inventory valuation adjustment (b) (111 ) — 17 — operating expenses (excluding depreciation and amortization expense reflected below) 79 132 188 257 depreciation and amortization expense 21 22 43 45 other operating expenses — 1 — 1 ethanol margin $ 80 $ 162 $ 142 $ 313 ethanol operating income (loss) $ 91 $ 7 $ (106 ) $ 10 adjustments: lcm inventory valuation adjustment (b) (111 ) — 17 — other operating expenses — 1 — 1 adjusted ethanol operating income (loss) $ (20 ) $ 8 $ (89 ) $ 11 see notes to earnings release tables. valero energy corporation earnings release tables reconciliation of non-gaap measures to most comparable amounts reported under u.s. gaap (f) (millions of dollars) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 reconciliation of refining segment operating income (loss) to refining margin (by region), and reconciliation of refining segment operating income (loss) to adjusted refining segment operating income (loss) (by region) (g) u.s. gulf coast region refining operating income (loss) $ 892 $ 273 $ (50 ) $ 391 adjustments: 2019 blender’s tax credit (a) — 3 — 6 lcm inventory valuation adjustment (b) (1,109 ) — 4 — operating expenses (excluding depreciation and amortization expense reflected below) 535 586 1,093 1,185 depreciation and amortization expense 327 318 661 628 other operating expenses 2 1 2 2 refining margin $ 647 $ 1,181 $ 1,710 $ 2,212 refining operating income (loss) $ 892 $ 273 $ (50 ) $ 391 adjustments: 2019 blender’s tax credit (a) — 3 — 6 lcm inventory valuation adjustment (b) (1,109 ) — 4 — other operating expenses 2 1 2 2 adjusted refining operating income (loss) $ (215 ) $ 277 $ (44 ) $ 399 u.s. mid-continent region refining operating income $ 293 $ 422 $ 73 $ 658 adjustments: 2019 blender’s tax credit (a) — 1 — 2 lcm inventory valuation adjustment (b) (283 ) — — — operating expenses (excluding depreciation and amortization expense reflected below) 148 146 312 312 depreciation and amortization expense 83 74 166 149 refining margin $ 241 $ 643 $ 551 $ 1,121 refining operating income $ 293 $ 422 $ 73 $ 658 adjustments: 2019 blender’s tax credit (a) — 1 — 2 lcm inventory valuation adjustment (b) (283 ) — — — adjusted refining operating income $ 10 $ 423 $ 73 $ 660 see notes to earnings release tables. valero energy corporation earnings release tables reconciliation of non-gaap measures to most comparable amounts reported under u.s. gaap (f) (millions of dollars) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 reconciliation of refining segment operating income (loss) to refining margin (by region), and reconciliation of refining segment operating income (loss) to adjusted refining segment operating income (loss) (by region) (g) (continued) north atlantic region refining operating income (loss) $ 597 $ 278 $ (117 ) $ 454 adjustments: lcm inventory valuation adjustment (b) (657 ) — 217 — operating expenses (excluding depreciation and amortization expense reflected below) 112 146 253 293 depreciation and amortization expense 52 55 105 108 other operating expenses 1 — 3 — refining margin $ 105 $ 479 $ 461 $ 855 refining operating income (loss) $ 597 $ 278 $ (117 ) $ 454 adjustments: lcm inventory valuation adjustment (b) (657 ) — 217 — other operating expenses 1 — 3 — adjusted refining operating income (loss) $ (59 ) $ 278 $ 103 $ 454 u.s. west coast region refining operating income (loss) $ (31 ) $ 64 $ (242 ) $ 13 adjustments: 2019 blender’s tax credit (a) — — — 1 lcm inventory valuation adjustment (b) (88 ) — 56 — operating expenses (excluding depreciation and amortization expense reflected below) 133 148 265 307 depreciation and amortization expense 71 71 137 136 other operating expenses — — — 1 refining margin $ 85 $ 283 $ 216 $ 458 refining operating income (loss) $ (31 ) $ 64 $ (242 ) $ 13 adjustments: 2019 blender’s tax credit (a) — — — 1 lcm inventory valuation adjustment (b) (88 ) — 56 — other operating expenses — — — 1 adjusted refining operating income (loss) $ (119 ) $ 64 $ (186 ) $ 15 see notes to earnings release tables. valero energy corporation earnings release tables refining segment operating highlights (millions of dollars, except per barrel amounts) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 throughput volumes (thousand barrels per day) feedstocks: heavy sour crude oil 378 419 369 415 medium/light sour crude oil 385 257 363 297 sweet crude oil 1,018 1,550 1,234 1,513 residuals 169 241 202 193 other feedstocks 69 171 85 162 total feedstocks 2,019 2,638 2,253 2,580 blendstocks and other 302 330 320 337 total throughput volumes 2,321 2,968 2,573 2,917 yields (thousand barrels per day) gasolines and blendstocks 1,061 1,378 1,189 1,387 distillates 835 1,141 940 1,115 other products (h) 434 483 456 445 total yields 2,330 3,002 2,585 2,947 operating statistics (f) (i) refining margin $ 1,078 $ 2,586 $ 2,938 $ 4,646 adjusted refining operating income (loss) $ (383 ) $ 1,042 $ (54 ) $ 1,528 throughput volumes (thousand barrels per day) 2,321 2,968 2,573 2,917 refining margin per barrel of throughput $ 5.10 $ 9.58 $ 6.27 $ 8.79 less: operating expenses (excluding depreciation and amortization expense reflected below) per barrel of throughput 4.39 3.80 4.10 3.97 depreciation and amortization expense per barrel of throughput 2.53 1.92 2.28 1.93 adjusted refining operating income (loss) per barrel of throughput $ (1.82 ) $ 3.86 $ (0.11 ) $ 2.89 see notes to earnings release tables. valero energy corporation earnings release tables renewable diesel segment operating highlights (millions of dollars, except per gallon amounts) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 operating statistics (f) (i) renewable diesel margin $ 161 $ 174 $ 390 $ 325 adjusted renewable diesel operating income $ 129 $ 145 $ 327 $ 266 sales volumes (thousand gallons per day) 795 769 831 780 renewable diesel margin per gallon of sales $ 2.22 $ 2.49 $ 2.58 $ 2.30 less: operating expenses (excluding depreciation and amortization expense reflected below) per gallon of sales 0.29 0.25 0.27 0.26 depreciation and amortization expense per gallon of sales 0.15 0.17 0.15 0.16 adjusted renewable diesel operating income per gallon of sales $ 1.78 $ 2.07 $ 2.16 $ 1.88 see notes to earnings release tables. valero energy corporation earnings release tables ethanol segment operating highlights (millions of dollars, except per gallon amounts) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 operating statistics (f) (i) ethanol margin $ 80 $ 162 $ 142 $ 313 adjusted ethanol operating income (loss) $ (20 ) $ 8 $ (89 ) $ 11 production volumes (thousand gallons per day) 2,316 4,533 3,210 4,376 ethanol margin per gallon of production $ 0.38 $ 0.39 $ 0.24 $ 0.40 less: operating expenses (excluding depreciation and amortization expense reflected below) per gallon of production 0.38 0.32 0.32 0.32 depreciation and amortization expense per gallon of production 0.10 0.05 0.07 0.07 adjusted ethanol operating income (loss) per gallon of production $ (0.10 ) $ 0.02 $ (0.15 ) $ 0.01 see notes to earnings release tables. valero energy corporation earnings release tables refining segment operating highlights by region (millions of dollars, except per barrel amounts) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 operating statistics by region (g) u.s. gulf coast region (f) (i) refining margin $ 647 $ 1,181 $ 1,710 $ 2,212 adjusted refining operating income (loss) $ (215 ) $ 277 $ (44 ) $ 399 throughput volumes (thousand barrels per day) 1,385 1,779 1,527 1,725 refining margin per barrel of throughput $ 5.13 $ 7.30 $ 6.15 $ 7.09 less: operating expenses (excluding depreciation and amortization expense reflected below) per barrel of throughput 4.23 3.63 3.93 3.80 depreciation and amortization expense per barrel of throughput 2.60 1.96 2.37 2.01 adjusted refining operating income (loss) per barrel of throughput $ (1.70 ) $ 1.71 $ (0.15 ) $ 1.28 u.s. mid-continent region (f) (i) refining margin $ 241 $ 643 $ 551 $ 1,121 adjusted refining operating income $ 10 $ 423 $ 73 $ 660 throughput volumes (thousand barrels per day) 364 462 398 452 refining margin per barrel of throughput $ 7.28 $ 15.25 $ 7.61 $ 13.70 less: operating expenses (excluding depreciation and amortization expense reflected below) per barrel of throughput 4.47 3.45 4.32 3.81 depreciation and amortization expense per barrel of throughput 2.51 1.76 2.29 1.82 adjusted refining operating income per barrel of throughput $ 0.30 $ 10.04 $ 1.00 $ 8.07 see notes to earnings release tables. valero energy corporation earnings release tables refining segment operating highlights by region (millions of dollars, except per barrel amounts) (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 operating statistics by region (g) (continued) north atlantic region (f) (i) refining margin $ 105 $ 479 $ 461 $ 855 adjusted refining operating income (loss) $ (59 ) $ 278 $ 103 $ 454 throughput volumes (thousand barrels per day) 340 493 414 491 refining margin per barrel of throughput $ 3.40 $ 10.69 $ 6.12 $ 9.61 less: operating expenses (excluding depreciation and amortization expense reflected below) per barrel of throughput 3.64 3.26 3.36 3.30 depreciation and amortization expense per barrel of throughput 1.67 1.23 1.39 1.20 adjusted refining operating income (loss) per barrel of throughput $ (1.91 ) $ 6.20 $ 1.37 $ 5.11 u.s. west coast region (f) (i) refining margin $ 85 $ 283 $ 216 $ 458 adjusted refining operating income (loss) $ (119 ) $ 64 $ (186 ) $ 15 throughput volumes (thousand barrels per day) 232 234 234 249 refining margin per barrel of throughput $ 3.98 $ 13.32 $ 5.06 $ 10.17 less: operating expenses (excluding depreciation and amortization expense reflected below) per barrel of throughput 6.26 6.97 6.21 6.83 depreciation and amortization expense per barrel of throughput 3.37 3.32 3.22 3.02 adjusted refining operating income (loss) per barrel of throughput $ (5.65 ) $ 3.03 $ (4.37 ) $ 0.32 see notes to earnings release tables. valero energy corporation earnings release tables average market reference prices and differentials (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 refining feedstocks (dollars per barrel) brent crude oil $ 33.22 $ 68.33 $ 42.06 $ 66.08 brent less west texas intermediate (wti) crude oil 5.42 8.53 5.17 8.73 brent less alaska north slope (ans) crude oil 2.85 0.15 1.18 (0.27 ) brent less louisiana light sweet (lls) crude oil 2.95 1.30 2.85 1.38 brent less argus sour crude index (asci) crude oil 4.14 3.44 4.58 3.17 brent less maya crude oil 9.05 6.23 9.40 5.64 lls crude oil 30.27 67.03 39.21 64.70 lls less asci crude oil 1.19 2.14 1.73 1.79 lls less maya crude oil 6.10 4.93 6.55 4.26 wti crude oil 27.80 59.80 36.89 57.35 natural gas (dollars per million british thermal units) 1.65 2.46 1.74 2.66 products (dollars per barrel) u.s. gulf coast: conventional blendstock of oxygenate blending (cbob) gasoline less brent 0.51 6.72 1.44 3.44 ultra-low-sulfur (uls) diesel less brent 4.89 12.88 8.08 13.94 propylene less brent (12.71 ) (24.70 ) (16.88 ) (22.67 ) cbob gasoline less lls 3.46 8.02 4.29 4.82 uls diesel less lls 7.84 14.18 10.93 15.32 propylene less lls (9.76 ) (23.40 ) (14.03 ) (21.29 ) u.s. mid-continent: cbob gasoline less wti 6.19 18.76 6.94 14.23 uls diesel less wti 11.38 22.51 14.35 23.70 north atlantic: cbob gasoline less brent 3.03 10.11 3.66 5.68 uls diesel less brent 6.94 14.76 10.62 16.10 u.s. west coast: california reformulated gasoline blendstock of oxygenate blending (carbob) 87 gasoline less ans 9.43 23.24 8.63 15.49 california air resources board (carb) diesel less ans 10.36 21.10 13.79 18.65 carbob 87 gasoline less wti 12.00 31.62 12.62 24.49 carb diesel less wti 12.93 29.48 17.78 27.65 see notes to earnings release tables. valero energy corporation earnings release tables average market reference prices and differentials (unaudited) three months ended june 30, six months ended june 30, 2020 2019 2020 2019 renewable diesel new york mercantile exchange uls diesel (dollars per gallon) $ 0.97 $ 1.98 $ 1.26 $ 1.96 biodiesel renewable identification number (rin) (dollars per rin) 0.54 0.38 0.50 0.44 california low-carbon fuel standard (dollars per metric ton) 201.01 188.77 203.52 191.49 chicago board of trade (cbot) soybean oil (dollars per pound) 0.27 0.28 0.29 0.29 ethanol cbot corn (dollars per bushel) 3.23 3.91 3.49 3.82 new york harbor ethanol (dollars per gallon) 1.17 1.54 1.25 1.49 see notes to earnings release tables. valero energy corporation earnings release tables other financial data (millions of dollars, except per share amounts) (unaudited) june 30, december 31, 2020 2019 balance sheet data current assets $ 12,762 $ 18,969 cash and cash equivalents included in current assets 2,319 2,583 inventories included in current assets 5,420 7,013 current liabilities 7,300 13,160 current portion of debt and finance lease obligations included in current liabilities 587 494 debt and finance lease obligations, less current portion 12,090 9,178 total debt and finance lease obligations 12,677 9,672 valero energy corporation stockholders’ equity 19,847 21,803 three months ended june 30, six months ended june 30, 2020 2019 2020 2019 reconciliation of net cash provided by operating activities to adjusted net cash provided by operating activities (f) net cash provided by operating activities $ 736 $ 1,517 $ 687 $ 2,394 exclude: changes in current assets and current liabilities 629 283 (478 ) 413 diamond green diesel llc’s (dgd) adjusted net cash provided by operating activities attributable to our joint venture partner’s ownership interest in dgd 69 44 173 74 adjusted net cash provided by operating activities $ 38 $ 1,190 $ 992 $ 1,907 dividends per common share $ 0.98 $ 0.90 $ 1.96 $ 1.80 see notes to earnings release tables. valero energy corporation notes to earnings release tables (a) cost of materials and other for the three and six months ended june 30, 2020 includes a benefit of $76 million and $155 million, respectively, related to the blender’s tax credit attributable to volumes blended during those periods. the legislation authorizing the credit through december 31, 2022 was passed and signed into law in december 2019, and that legislation also applied retroactively to volumes blended during 2019 (2019 blender’s tax credit). the entire 2019 blender’s tax credit was recognized by us in december 2019 because the law was enacted in that month, but the benefit attributable to volumes blended during the three and six months ended june 30, 2019 was $72 million and $149 million, respectively. the above-mentioned pre-tax benefits are attributable to our reportable segments and stockholders as follows: periods to which blender’s tax credit is attributable three months ended june 30, six months ended june 30, 2020 2019 2020 2019 reportable segments to which blender’s tax credit is attributable refining $ 4 $ 4 $ 4 $ 9 renewable diesel 72 68 151 140 total $ 76 $ 72 $ 155 $ 149 interests to which blender’s tax credit is attributable valero energy corporation stockholders $ 40 $ 38 $ 79 $ 79 noncontrolling interest 36 34 76 70 total $ 76 $ 72 $ 155 $ 149 (b) (c) (d) (e) (f) ◦ adjusted net income (loss) attributable to valero energy corporation stockholders is defined as net income (loss) attributable to valero energy corporation stockholders adjusted to reflect the items noted below, along with their related income tax effect. we have adjusted for these items because we believe that they are not indicative of our core operating performance and that their adjustment results in an important measure of our ongoing financial performance to better assess our underlying business results and trends. the basis for our belief with respect to each adjustment is provided below. – lcm inventory valuation adjustment – the lcm inventory valuation adjustment, which is described in note (b), is the result of the market value of our inventories as of june 30, 2020 falling below their historical cost, with the decline in market value resulting from the decline in crude oil and product market prices associated with the negative economic impacts from covid-19. the adjustment obscures our financial performance because it does not result from decisions made by us; therefore, we have excluded the adjustment from adjusted net income (loss) attributable to valero energy corporation stockholders. – 2019 blender’s tax credit attributable to valero energy corporation stockholders – the 2019 blender’s tax credit was recognized by us in december 2019, but it is attributable to volumes blended throughout 2019. therefore, the adjustment reflects the portion of the 2019 blender’s tax credit that is associated with volumes blended during the three and six months ended june 30, 2019. see note (a) for additional details. – loss on early redemption of debt – the penalty and other expenses incurred in connection with the early redemption of our 6.125 percent senior notes due february 1, 2020 (see note (c)) are not associated with the ongoing costs of our borrowing and financing activities. ◦ adjusted earnings (loss) per common share – assuming dilution is defined as adjusted net income (loss) attributable to valero energy corporation stockholders divided by the number of weighted-average shares outstanding in the applicable period, assuming dilution (see note (e)). ◦ refining margin is defined as refining operating income (loss) adjusted to reflect the 2019 blender’s tax credit (see note (a)), and excluding the lcm inventory valuation adjustment (see note (b)), operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses. we believe refining margin is an important measure of our refining segment’s operating and financial performance as it is the most comparable measure to the industry’s market reference product margins, which are used by industry analysts, investors, and others to evaluate our performance. ◦ renewable diesel margin is defined as renewable diesel operating income adjusted to reflect the 2019 blender’s tax credit (see note (a)), and excluding operating expenses (excluding depreciation and amortization expense) and depreciation and amortization expense. we believe renewable diesel margin is an important measure of our renewable diesel segment’s operating and financial performance as it is the most comparable measure to the industry’s market reference product margins, which are used by industry analysts, investors, and others to evaluate our performance. ◦ ethanol margin is defined as ethanol operating income (loss) excluding the lcm inventory valuation adjustment (see note (b)), operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses. we believe ethanol margin is an important measure of our ethanol segment’s operating and financial performance as it is the most comparable measure to the industry’s market reference product margins, which are used by industry analysts, investors, and others to evaluate our performance. ◦ adjusted refining operating income (loss) is defined as refining segment operating income (loss) adjusted to reflect the 2019 blender’s tax credit (see note (a)), and excluding the lcm inventory valuation adjustment (see note (b)) and other operating expenses. we believe adjusted refining operating income (loss) is an important measure of our refining segment’s operating and financial performance because it excludes items that are not indicative of that segment’s core operating performance. ◦ adjusted renewable diesel operating income is defined as renewable diesel segment operating income adjusted to reflect the 2019 blender’s tax credit (see note (a)). we believe this is an important measure of our renewable diesel segment’s operating and financial performance because it excludes items that are not indicative of that segment’s core operating performance. ◦ adjusted ethanol operating income (loss) is defined as ethanol segment operating income (loss) excluding the lcm inventory valuation adjustment (see note (b)) and other operating expenses. we believe this is an important measure of our ethanol segment’s operating and financial performance because it excludes items that are not indicative of that segment’s core operating performance. ◦ adjusted net cash provided by operating activities is defined as net cash provided by (used in) operating activities excluding the items noted below. we believe adjusted net cash provided by operating activities is an important measure of our ongoing financial performance to better assess our ability to generate cash to fund our investing and financing activities. the basis for our belief with respect to each excluded item is provided below. – changes in current assets and current liabilities – current assets net of current liabilities represents our operating liquidity. we believe that the change in our operating liquidity from period to period does not represent cash generated by our operations that is available to fund our investing and financing activities. – dgd’s adjusted net cash provided by operating activities attributable to our joint venture partner’s ownership interest in dgd – we are a 50/50 joint venture partner in dgd and consolidate dgd’s financial statements; as a result, all of dgd’s net cash provided by operating activities (or operating cash flow) is included in our consolidated net cash provided by operating activities. dgd’s partners use dgd’s operating cash flow (excluding changes in its current assets and current liabilities) to fund its capital investments rather than distribute all of that cash to themselves. nevertheless, dgd’s operating cash flow is effectively attributable to each partner and only 50 percent of dgd’s operating cash flow should be attributed to our net cash provided by operating activities. therefore, we have adjusted our net cash provided by operating activities for the portion of dgd’s operating cash flow attributable to our joint venture partner’s ownership interest because we believe that it more accurately reflects the operating cash flow available to us to fund our investing and financing activities. the adjustment is calculated as follows (in millions): three months ended june 30, six months ended june 30, 2020 2019 2020 2019 dgd operating cash flow data net cash provided by operating activities $ 516 $ 127 $ 683 $ 160 exclude: changes in current assets and current liabilities 378 39 338 12 adjusted net cash provided by operating activities 138 88 345 148 our partner’s ownership interest 50% 50% 50% 50% dgd’s adjusted net cash provided by operating activities attributable to our joint venture partner’s ownership interest in dgd $ 69 $ 44 173 $ 74 (g) the refining segment regions reflected herein contain the following refineries: u.s. gulf coast- corpus christi east, corpus christi west, houston, meraux, port arthur, st. charles, texas city, and three rivers refineries; u.s. mid-continent- ardmore, mckee, and memphis refineries; north atlantic- pembroke and quebec city refineries; and u.s. west coast- benicia and wilmington refineries. (h) primarily includes petrochemicals, gas oils, no. 6 fuel oil, petroleum coke, sulfur, and asphalt. (i) valero uses certain operating statistics (as noted below) in the earnings release tables and the accompanying earnings release to evaluate performance between comparable periods. different companies may calculate them in different ways. all per barrel of throughput, per gallon of sales, and per gallon of production amounts are calculated by dividing the associated dollar amount by the throughput volumes, sales volumes, and production volumes for the period, as applicable. throughput volumes, sales volumes, and production volumes are calculated by multiplying throughput volumes per day, sales volumes per day, and production volumes per day (as provided in the accompanying tables), respectively, by the number of days in the applicable period. we use throughput volumes, sales volumes, and production volumes for the refining segment, renewable diesel segment, and ethanol segment, respectively, due to their general use by others who operate facilities similar to those included in our segments. we believe the use of such volumes results in per unit amounts that are most representative of the product margins generated and the operating costs incurred as a result of our operation of those facilities.
