Valero Energy Q4 2024 Earnings Report

Valero Energy EPS Results

• Actual EPS: $0.64
• Consensus EPS: $0.14
• Beat/Miss: Beat by +$0.50
• One Year Ago EPS: N/A

Valero Energy Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $30.02 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Valero Energy Announcement Details

• Quarter: Q4 2024
• Date: 1/30/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 30, 2025
• Conference Call Time: 10:00AM ET

Valero Energy (NYSE:VLO) is a leading international downstream energy company focused on the refining, marketing and transportation of petroleum products. Headquartered in San Antonio, Texas, Valero owns and operates 15 refineries across the United States, Canada and the United Kingdom, with a combined crude oil capacity exceeding three million barrels per day. The company’s integrated operations extend from feedstock sourcing and logistics to product distribution, supported by a network of pipelines, terminals and retail outlets that include the Valero, Diamond Shamrock and Shamrock brands.

Founded in 1980 as part of Coastal States Gas Corporation, Valero became an independent entity in 1986 and adopted its current name. Over the ensuing decades, the company has grown through strategic acquisitions, including the purchase of Ultramar Diamond Shamrock in 2001 and the Premcor refining business in 2005, broadening its geographic footprint and product portfolio. Valero’s history of disciplined capital allocation and focus on operational efficiency has positioned it as a prominent supplier of gasoline, diesel, jet fuel, asphalt and petrochemical feedstocks.

In addition to traditional petroleum products, Valero has developed a strong presence in renewable fuels through its Valero Renewables division, which operates ethanol plants in the United States and invests in next-generation biofuel technologies. The company also produces renewable diesel and is exploring carbon reduction initiatives, reflecting a commitment to environmental stewardship alongside its core refining business. Valero’s marketing segment serves wholesale and retail customers, supplying fuel to convenience stores, wholesale distributors and major airlines.

Leadership at Valero is headed by Chairman and Chief Executive Officer Joseph W. Gorder, who has led the company since 2014, supported by a seasoned executive team with deep expertise in refining, logistics and energy markets. Under this management, Valero continues to prioritize safety, reliability and cost management, aiming to deliver consistent performance and long-term value for stakeholders in a dynamic global energy landscape.

Valero Energy Q4 2024 Earnings Call Transcript

Key Takeaways

• Record operational performance: Valero delivered its best year for personnel and process safety, processed a record volume of heavy sour crude, and achieved record ethanol production despite weak refining margins.
• 2024 earnings declined sharply: net income attributable to stockholders was $280 million ($8.58/share) versus $880 million ($24.92/share) in 2023, with adjusted net income down to $270 million ($8.48/share) from $890 million ($24.96/share).
• Strong capital returns: the company returned $4.3 billion to shareholders in 2024 through $140 million in dividends and $290 million in buybacks, raised its quarterly dividend by 6%, and reduced share count by 6%.
• Growth investments advancing: the Diamond Green Diesel sustainable aviation fuel project is fully operational ahead of schedule, and a $2.3 billion FCC optimization at St. Charles is expected to add 6,000–7,000 bpd of high-octane alkylate upon startup in 2026.
• 2025 outlook and guidance: plans ~$2 billion of CapEx (with $160 million sustaining), refining throughput targeted at 1.72–1.77 mmbpd on the Gulf Coast, operating costs of ~$4.95/bbl, and renewable diesel and ethanol volumes of 1.2 billion gallons and 4.6 million gpd, respectively.

Presentation

[Operator]

Greetings and welcome to Valero Energy Corp. Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

[Operator]

It is now my pleasure to introduce your host, Homer Bollard, Vice President of Investor Relations and Finance. Thank you. You may begin.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Good morning, everyone, and welcome to Valera Energy Corporation's fourth quarter twenty twenty four earnings conference call. With me today are Lane Riggs, our Chairman, CEO and President Jason Frasier, our Executive Vice President and CFO Gary Simmons, our Executive Vice President and COO and several other members of Valero's senior management team. If you have not received our earnings release and would like a copy, you can find 1 on our website at investorvalero.com. Also attached to the earnings release are tables that provide additional financial information on our business segments and reconciliations and disclosures for adjusted financial metrics mentioned on this call. If you have any questions after reviewing these tables, please feel free to contact our Investor Relations team after the call.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

I would now like to direct your attention to the forward looking statement disclaimer contained in the press release. In summary, it says that statements in the press release and on this conference call 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 under federal securities laws. There are many factors that could cause actual results to differ from our expectations, including those we've described in our earnings release and filings with the SEC. Now, I'll turn the call over to Lane for opening remarks.

[Lane Riggs, CEO, President & Director at Valero Energy]

Thank you, Homer, and good morning, everyone. I would like to start by highlighting some of our team's accomplishments last year. 2024 was our best year for personnel and process safety and 1 of our best years for environmental performance. Safe and reliable operations drive overall performance and disciplined operations. In refining, we processed a record volume of heavy sour crude in the This demonstrates our refining systems flexibility and highlights the capability of our commercial and operations teams to be able to secure and process the most economic crude oils.

[Lane Riggs, CEO, President & Director at Valero Energy]

Finally, we set a record for ethanol production with the expansion of the Charles City plant and process optimization at other sites. Our team's relentless focus on operational excellence and low cost operations enabled us to deliver positive results in the in an otherwise weak margin environment. On the strategic front, we continue to deliver on our commitment to grow Valero's earnings capacity through organic investments. The DGD sustainable aviation fuel project was successfully started up in the and is now fully operational. Looking ahead, we are progressing with an SEC unit optimization project at St.

[Lane Riggs, CEO, President & Director at Valero Energy]

Charles that will enable the refinery to increase the yield of high value products, including high octane alkylate. The project is estimated to cost $2.30,000,000 dollars and is expected to start up in 2026. And we continue to pursue other short cycle high return optimization projects around our existing refining assets. On the financial side, we continue to honor our commitment to shareholder returns with a strong payout ratio of 78% for the year. And earlier this month, our board approved a 6% increase in the quarterly cash dividend further demonstrating our strong financial position.

[Lane Riggs, CEO, President & Director at Valero Energy]

Looking ahead, refining margins should be supported by low light product inventories ahead of the driving season. And longer term, we still expect product demand to exceed supply with the announced refinery shutdowns this year and the limited capacity additions beyond 2025, supporting long term refining fundamentals. So with that, Homer, I'll hand it back to you.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Thanks, Lane. For the net income attributable to Valero stockholders was $2.81,000,000 dollars or $0,.88 per share compared to $120,000,000,0.0 or $3,.55 per share for the Excluding the adjustments in the earnings release tables, adjusted net income attributable to Valero stockholders was $2.00 $7,000,000 or $0,.64 per share for the compared to $120,000,000,0.0 or $3,.57 per share for the For 2024, net income attributable to Valero stockholders was $280,000,000,0.0 or $8,.58 per share compared to $880,000,000,0.0 or $24,.92 per share in 2023. '20 '20 04/00 adjusted net income attributable to Valero stockholders was $270,000,000,0.0 or $8,.48 per share compared to $890,000,000,0.0 or $24,.96 per share in 2023. The Refining segment reported $4.37,000,000 dollars of operating income for the compared to $160,000,000,0.0 for the Refining throughput volumes in the averaged 3000000 barrels per day or 94% throughput capacity utilization. Refining cash operating expenses were $4,.67 per barrel in the operating income was $170,000,000 for the compared to $84,000,000 for the sales volumes averaged 3400000.0 gallons per day in the The ethanol segment reported $20,000,000 of operating income for the compared to $190,000,000 for the Ethanol production volumes averaged 4600000.0 gallons per day in the G and A expenses were $2.66,000,000 dollars for the and $9.61,000,000 dollars for the full year.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Depreciation and amortization expense was $6.98,000,000 dollars net interest expense was $135,000,000 and income tax benefit was $34,000,000 for the The effective tax rate was 19% for 2024. Net cash provided by operating activities was $110,000,000,0.0 in the Included in this amount was $119,000,000 of adjusted net cash provided by operating activities associated with the other joint venture member share of DGD. Excluding this item, adjusted net cash provided by operating activities was $9.51,000,000 dollars in the Net cash provided by operating activities in 2024 was $670,000,000,0.0 Included in this amount was a $7.95,000,000 dollars favorable change in working capital and $3.71,000,000 dollars of adjusted net cash provided by operating activities associated with the other joint venture member share of DGD. Excluding these items, adjusted net cash provided by operating activities was $550,000,000,0.0 in 2024. Regarding investing activities, we made $5.47,000,000 dollars of capital investments in the of which $4.52,000,000 dollars was for sustaining the business, including costs for turnarounds, catalysts and regulatory compliance and the balance was for growing the business.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Excluding capital investments attributable to the other joint venture member share of DGD and other variable interest entities, capital investments attributable to Valero were $5.15,000,000 dollars in the and $190,000,000,0.0 for the year. Moving to financing activities, we returned $6.00 $1,000,000 to our stockholders in the of which $3.39,000,000 dollars was paid as dividends and $2.62,000,000 dollars was for the purchase of approximately 2,000,000 shares of common stock resulting in a payout ratio of 63% for the quarter. In 2024, we returned 4300000000.0 to stockholders consisting of $290,000,000,0.0 in stock stock buybacks and $140,000,000,0.0 in dividends, resulting in a payout ratio of 78% for the year. In fact, since the start of 2021, our total cash flow from operations have exceeded our total uses of cash over this period, including capital investments. During this time, we delivered over $4,000,000,000 of debt reduction and returned approximately $1,870,000,000,0.0 to stockholders through dividends and share buybacks.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Through share repurchases, we reduced our share count by approximately 6% in 2024 and by 23% since year end 2021. With respect to our balance sheet, we ended the quarter with $810,000,000,0.0 of total debt, $240,000,000,0.0 of finance lease obligations and $470,000,000,0.0 of cash and cash equivalents. Debt to capitalization ratio net of cash and cash equivalents was 17% as of Dec. 31, 2024. And we ended the quarter well capitalized with $530,000,000,0.0 of available liquidity excluding cash.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Turning to guidance, we expect capital investments attributable to Valero for 2025 to be approximately $2,000,000,000 which includes expenditures for turnarounds, catalysts, regulatory compliance and joint venture investments. About $160,000,000,0.0 of that is allocated to sustaining the business and the balance to growth. For modeling our operations, we expect refining throughput volumes to fall within the following ranges: Gulf Coast at 1720000.00 to 1770000.00 barrels per day Mid Continent at 415000 to 435000 barrels per day, West Coast at 190000 to 210000 barrels per day and North Atlantic at 455000 to 475000 barrels per day. We expect refining cash operating expenses in the to be approximately $4,.95 per barrel. With respect to the Renewable Diesel segment, we expect sales volumes to be approximately 1200000000.0 gallons in 2025.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Operating expenses in 2025 should be $0,.51 per gallon, which includes $0,.22 per gallon for non cash costs such as depreciation and amortization. Our ethanol segment is expected to produce 4600000.0 gallons per day in the Operating expenses should average $0,.41 per gallon, which includes $0,.05 per gallon for non cash costs such as depreciation and amortization. For the net interest expense should be about $130,000,000 and total depreciation and amortization expense should be approximately $7.10,000,000 dollars For 2025, we expect G and A expenses to be approximately $9.85,000,000 dollars That concludes our opening remarks. Before we open the call to questions, please limit each turn in the Q and A to 2 questions. If you have more than 2 questions, please rejoin the queue as time permits to ensure other callers have time to ask their questions.

[Operator]

Thank you. The floor is now open for questions. Today's first question is coming from John Royal of JPMorgan. Please go ahead.

[John Royall, Analyst at JPMorgan Chase]

Hi, good morning. Thanks for taking my question. So my first question is maybe to Gary, just broadly on market color. You've always given us a good view of the fundamental picture in the sector. How do you view the supply demand balances today for products and the outlook for cracks for this year?

[John Royall, Analyst at JPMorgan Chase]

And what do you think are the key things we should look out for in terms of just any early indicators of when this market might turn back up?

[Gary Simmons, Executive VP & COO at Valero Energy]

Yes, John. It's always difficult to get much of a read on the market this early. I'll tell you that we typically see our sales through our wholesale channel dip fairly significantly through the holiday season, kind of goes through the first couple of weeks of the year then starts to recover. We saw that same dynamic this year. Sales kind of dipped to about 85% of average.

[Gary Simmons, Executive VP & COO at Valero Energy]

The last couple of weeks, we've seen a nice recovery back to kind of a 1000000 barrels a day level that we typically see. I think yesterday, we did 1040000 barrels a day. Gasoline sales in our system year to date are slightly down year over year. I think when you look at the concentration of our marketing, this makes sense. The snow in the South and Southeast kept people off the road.

[Gary Simmons, Executive VP & COO at Valero Energy]

And then the Colonial Pipeline outage limited our volumes we had available to sell in some markets. For that window, the pipeline was down. Our current seven day average data shows gasoline sales up 2% year over year. Overall, what we can see is gasoline demand looks good and we expect gasoline demand in The United States to be fairly flat to last year. Diesel sales year to date in our system are also off a few percent.

[Gary Simmons, Executive VP & COO at Valero Energy]

This was a little more surprising to me mainly because of the cold weather that we've seen. But I think if you look into the data a little bit more, it makes sense. We had about 10000 barrels a day of renewable diesel from Port Arthur that was going to our wholesale channel that we were selling. That material is now going to produce sustainable aviation fuel. So that's a chunk in the year over year decline in diesel sales.

[Gary Simmons, Executive VP & COO at Valero Energy]

In addition to that, we saw the same dynamic on diesel with some of the snow impacting on road diesel demand. And then I think if you look at Valero, we don't have a big marketing presence in the markets where you see high heating oil demand. So we don't really see that big uplift from the cold weather that you may see. We definitely get that on the bulk side, but not through wholesale. Seven day average shows diesel sales are up about 1% and that's kind of what we expect for the year about a 1% increase in diesel demand in The United States.

[Gary Simmons, Executive VP & COO at Valero Energy]

Most consultants I've read are showing about a 250000 barrel a day increase in diesel demand just due to cold weather in the North Atlantic Basin. Not only do we expect diesel demand to be better, but we expect a greater percentage of that to be supplied by refinery derived diesel. Last year, we had the big wave of bio and renewable diesel projects hitting the market. We don't see that same dynamic this year. So I think overall, things are shaping up pretty nicely.

[Gary Simmons, Executive VP & COO at Valero Energy]

We're at total life product inventory 9000000, 10 million barrels below where we were last year at this time. So inventory is in good place. I think at the beginning of the year, the supplydemand balances look similar to last year, but as you progress through the year, you'll see gradual tightening of supply demand balances.

[John Royall, Analyst at JPMorgan Chase]

Great. It's very helpful. Thank you, Gary. And then my second question is on capital allocation. You finished the year with another quarter well above your 40% to 50% floor and high 70s for the full year.

[John Royall, Analyst at JPMorgan Chase]

But assuming we don't have a significant recovery in cracks from here, how should we think about that payout ratio in a lower crack environment in 'twenty five? Should we expect you to move closer to that 40% to 50% floor?

[Jason Fraser, Executive VP & CFO at Valero Energy]

Good morning, John. This is Jason. I'm going to ask Homer to give you a little more detail on that.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Sure. Yes, John, I mean, you're right. We had a 78% payout for the year, but that was partly funded by our excess cash balance going into the year. But if you want to put this into context with some numbers, if we had held our shareholder payout ratio at 50% for the year, we would have built almost $170,000,000,0.0 of cash for the year. Even if you excluded the $7.95,000,000 dollars of positive impact for working capital for the year and include the $167,000,000 debt repayment we did in the we would have still built over $700,000,000 of cash.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Now taking that a bit further, even if you look at the low margin environment in the we still would have been able to honor our minimum payout commitment of 40% to 50% without leaning into the balance sheet or drawing down cash. So hopefully this gives you some context of the earnings capacity of the portfolio even in a low margin environment and our ability to invest capital, obviously honor our shareholder commitment and flexibility with debt and our balance sheet.

[John Royall, Analyst at JPMorgan Chase]

Thank you.

[Operator]

Thank you. The next question is coming from Doug Leggate of Wolfe Research. Please go ahead.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

Thank you. Thanks guys. I think Gary might be the most popular man in the call today, Lane. I apologize, but there's obviously a lot going on.

[Lane Riggs, CEO, President & Director at Valero Energy]

It's okay with me, Doug.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

So, I got to try just a couple someone's got to do it. I'm going to try a couple of high level ones, if I may. The headlines I saw just a couple of hours ago was that Trump is still going to go ahead with tariffs on Canada. And we I seem to recall that the last time there were problems with heavy oil supply at Canada, a there was a second order effect that everyone seems to have forgotten about. And I wanted to run this past you and just get your perspective on it.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

And that is that if you need to find a substitute for that much heavy oil, you're going to have run cuts. You're going to have utilization yield issues, funding your system and so on. And I wanted to see if you guys thought there was any sense to that in the context of actually became a thing as it relates to the substitution of lighter crudes on the heavy rigs. What would you guys do?

[Gary Simmons, Executive VP & COO at Valero Energy]

Yes. So Doug, this is Gary. And I can tell you, we've been aware of this for a couple of months. And so our commercial teams and optimization teams have been working hard to develop every possible scenario we can think of and how we would respond to that. Of course, it's why we like our position on The U.

[Gary Simmons, Executive VP & COO at Valero Energy]

S. Gulf Coast because you can source feedstocks from anywhere around the world and where we also like our feedstock flexibility. But yes, there is a point where if heavy feedstocks become limited, it affects rate and production of clean products certainly from our assets and we'd expect industry wide.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

So assuming this is transitory, it's not a big deal, but if it did drag on for an extended period of time, particularly as we switch into summer grade, I mean, could it be meaningful or is that a rounding error?

[Gary Simmons, Executive VP & COO at Valero Energy]

Greg, you want to

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

Hey, Doug, this is Greg. Yes, when we think about it and look at some of those different scenarios, you might see a 10% change in throughput. A lot depends on how far it goes and how deep you have to back off on some of those heavy barrels. But it wouldn't be driving things to a much greater degree than that, I don't think.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

Okay. I'm also meaningfully enough when you were talking about the situation you are right now. So we're searching for green shoots guys. That's what we've got to tell what these questions are about. So I apologize, I'm going to try another high level 1 and it really relates to your throughput guidance.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

So obviously, everyone is focused on whether it's DAS BOCUS or Lyondell closing or Grangemouth or whatever it happens to be. But it seems to me that coming out of COVID, utilization rates, the concentration or the absence of goods maintenance got solved and the concentration of great maintenance meant everybody ran well. And it seems to us with no storms and all the things you run through, Gary, there's probably about 3% or 4% of utilization that was kind of a best in class world for The U. S. Last year, which is basically 4 refineries, if you think about it.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

And so when I look at your guidance for the quarter, you obviously don't give forward cadence for commercial reasons through the rest of the year. But at a high level, how do you see the likelihood that the industry, The U. S. Industry specifically can continue to run at those kind of levels, given the backdrop we've had and the fact that we're down 10% in the last three weeks in utilization?

[Gary Simmons, Executive VP & COO at Valero Energy]

Yes. So I think certainly what you've seen utilization in the last few weeks is somewhat weather related along with the maintenance activity. I think given the advantages that U. S. Refiners enjoy on feedstock cost and energy cost, you should expect to see that U.

[Gary Simmons, Executive VP & COO at Valero Energy]

S. Refinery continue refining continues to run at higher utilization rates. And when you have run cuts, they occur elsewhere in the world where they don't have the natural resources advantages that we have.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

I think I was thinking more about the reliability aspect as opposed to the cost advantage aspect.

[Gary Simmons, Executive VP & COO at Valero Energy]

Yes. And I'm sure we've certainly seen an improvement in our system on mechanical availability, and I suspect our peers have as well and it's something we always strive to get better and better at.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

Great stuff. All right guys, sorry for the high level questions, but I've had my 2, so I'll leave it there. Thanks so much.

[Jason Fraser, Executive VP & CFO at Valero Energy]

Thanks Doug.

[Operator]

Thank you. The next question is coming from Neil Mehta of Goldman Sachs. Please go ahead.

[Neil Mehta, Analyst at Goldman Sachs]

Yes. Good morning team. Just a couple of questions on the quarter itself. Renewable diesel performance came in I think better than what most market participants were expecting and better than implied by the indicators. So just curious on any thoughts there and the outlook for that business as we work our way through 2025?

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

Yes, this is Eric. I think a lot there was a 1 time benefit with some inventory optimization at the end of the year that was the bulk of that higher than expected performance. There is a little bit of SAF in that, but I would make it clear that that was mostly some inventory optimization we did at the end of the year. In terms of forward looking in renewable diesel and SAB for us, we're all kind of waiting to see how this market is going to develop and how the policy is going to develop. But overall, things are very much staying in line with kind of what we thought was going to happen.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

The 45Z has now replaced the blenders tax credit. We can see that that's now going to limit product imports into The U. S. It is going to make it a carbon intensity scale rather than a flat dollar to every renewable product. All of that is advantageous to Diamond Green Diesel and our platform because like the refining platform, our feedstock flexibility, our ability to export to any of the other markets.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

And I think consistent with our outlook from last year, the most attractive markets are going to be in Europe and Canada compared to U. S. And California. So, overall, we're waiting to see how RINs are going to respond, how LCFS is going to respond. And I think you will see those changes emerging in the market in the next couple of months as some of those production and credit reports emerge on how the year ended.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

Gary already mentioned that we don't see any increase in renewable production this year. It's still long compared to say D3 RIN credit bank or D4 RIN credit banks and LCFS credit banks. But we do also expect you're going to see some correction in production that will eventually start to pull those credit banks down throughout the year.

[Neil Mehta, Analyst at Goldman Sachs]

That's helpful. And then independent of tariffs, it was notable the amount of heavy that you were able to run through the system. And I think there were some concerns about coking economics in in the quarter given how tight fuel oil was, but clearly you were able to optimize the system to run over 600000 barrels a day of heavy sour oil. So can you just talk about how you were able to do that and the commercial approach to maximizing heavy in a time when fuel oil is pretty tight?

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

Hey, Neil, this is Greg. I'll start and Gary can talk some more about the market. But you hit on I think the key factor, which is as the fuel oil prices, those differentials narrowed that with fuel oil typically being a feedstock in our Gulf Coast system, we pivoted away from that towards the heavy crudes as an alternative, which continued to show some good value. So that's why you see that shift towards more heavy sour crude. You also notice a reduction on the heavy resid feedstocks that we've processed as well.

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

And that's kind of how we got to the high level of heavy crude processing. Also keep in mind, we've got the Port Arthur Coker online. That shifts us to a bit of a heavier feed slate as well. So that's part of what you see in that number as well.

[Operator]

Would you like to move on to the next question?

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Yes, please.

[Operator]

Thank you. The next question is coming from Theresa Chen of Barclays. Please go ahead.

[Theresa Chen, MD - Equity Research at Barclays]

Good morning. Thank you for taking my questions. On the tariff topic specifically, understanding that you're not captive to any specific source of crude based on your footprint and the optionality you have on the Gulf Coast. But as we think about the tariffs on Canada, Mexico incremental sanctions potentially on Venezuela, how are you thinking about life heavy differentials as we move through the year?

[Gary Simmons, Executive VP & COO at Valero Energy]

Yes, Theresa, this is Gary. I think I'll start with kind of fundamentals, but then cut to really what's driving the market. And certainly on the fundamentals side, typically this time of year, you see less buying of medium and heavy sours just due to turnaround activity. In addition to that, Lyondell coming down puts another 200000 barrels a day heavy on the market. Calls for OPEC crude 01/00 '80 barrels a day of medium sour crude.

[Gary Simmons, Executive VP & COO at Valero Energy]

So all those things would be supportive of water quality differentials. But in reality, the discussions on sanctions and tariffs are really what's driving the market. And until we see some resolution to that, I don't expect any meaningful moves in the quality differentials.

[Theresa Chen, MD - Equity Research at Barclays]

Understood. And related to the St. Charles FCC project, would you be able to provide a little bit more color on this, what the optimization means in terms of the incremental improvement in the yield of high value products?

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

Sure, Theresa. It's Greg. Lane mentioned it costs about $2.30,000,000 dollars It definitely meets our investment hurdle at mid cycle pricing. And 1 of the key outcomes for the project is increasing the production of light olefin product out of the FCC. And what that really means is that's additional feedstock we can use to fill the alkylation capacity we have downstream of the FCC there.

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

And you might remember, we started up a C5 alkylation unit at St. Charles back in And with some tweaks and optimizations we've done to that unit since, we've got some spare capacity in the Alky. And with this project, you will increase high octane outlet production by something on the order of 6000 to 7000 barrels today. That's 1 of the key outcomes and things that drive the value. It's really a good example of identifying some key equipment constraints within the operation that when we modify those constraints of that equipment, it allows us to take full advantage of the capability, not only of the SEC unit in this case, but other equipment and other units in the refinery and again in this case the Alky.

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

And that's how we generate a good return from the project.

[Theresa Chen, MD - Equity Research at Barclays]

Thank you very much.

[Operator]

Thank you. The next question is coming from Manav Gupta of UBS. Please go ahead.

[Manav Gupta, Executive Director at UBS Group]

Good morning. I wanted some additional color on the North Atlantic capture. Looks like it jumped from 102% last quarter to about 118%. And similarly, the Gulf Coast capture jumped from about 76% to 86%. So Gary, if you could help us out a little, what were some of the factors helping you drive that kind of capture improvement?

[Gary Simmons, Executive VP & COO at Valero Energy]

Sure. I'll let Greg in.

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

Hey, Manav. A couple of things I'd point out on the North Atlantic. It really is a bit of a system question. So it's North Atlantic and Gulf Coast as well. But we go into the wintertime, we start blending more butane into the higher RVP gasoline.

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

That gives us a bit of a bump in capture as that adds value into the gasoline pool. In both those regions as well, you had good contributions from the wholesale side of the business, the commercial parts. So we saw some benefit from that. On the Gulf Coast, the other notable item would really be if you look at Maya relative to the Canadian grades that we use for the benchmark. Maya was a bit more discounted. Crude costs that we saw for the heavy crudes into the Gulf Coast.

[Manav Gupta, Executive Director at UBS Group]

Quick follow-up here is, we are seeing a very strong diesel margin and slightly weaker gasoline and I know Valero can move the yield around a lot. So are you already operating in max diesel mode Or how much more can you swing the yield more towards diesel? Or do you think this is very temporary, like once you come Feb. 0 and March 0, the gasoline demand will improve and the cracks will start to balance out each other?

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

No, Manav, this is Greg. Yes, we are definitely in max diesel mode. As you mentioned, the cracks would drive us in that direction. And we'll see as we get into gasoline season whether the gas crack shifts enough to push us the other way.

[Manav Gupta, Executive Director at UBS Group]

Thank you for taking my questions.

[Operator]

Thank you. The next question is coming from Paul Sankey of Sankey Research. Please go ahead.

[Paul Sankey, Independent Analyst at Sankey Research]

Hi, everyone. Just continuing on the themes the themes that we've had this morning. Can you talk a bit about the Atlantic Basin and all the trade arbitrages? I think it's obviously tough to make a firm's outlook here with all that's moving around. But I wondered, what have you been seeing, let's say, over the past two to six months in terms of the major Nigerian refinery?

[Paul Sankey, Independent Analyst at Sankey Research]

There's been a lot of action in the dollar versus the euro. There's obviously been all the cold weather effects. So I just wondered if you could describe a little bit what we've been seeing in the market in the Atlantic Basin and what your outlook is for the coming year? Thanks a lot. Tough question.

[Gary Simmons, Executive VP & COO at Valero Energy]

Yes. So I'll start with the Dangote Refinery. I think from what we can see and what we read, they do have their resid up and running. We see that commercially. They're not offering out the fuel oil or the Resid that we were buying from them.

[Gary Simmons, Executive VP & COO at Valero Energy]

We also see less imports of gasoline into West Africa, which is all consistent with Dangote continuing to ramp up. With that though, however, what we've seen is that generally tends to impact Europe more than it does The U. S. Gasoline that was going to West Africa gets backed into Europe. We haven't really seen much of an impact from that.

[Gary Simmons, Executive VP & COO at Valero Energy]

Our gasoline exports primarily go to Latin America. You can see in the we are 98000 barrels a day of gasoline exports into that market, which is consistent of where we've been. I can tell you in the that's we're right about that same level again. Diesel has been somewhat interesting. The cold weather in The U.

[Gary Simmons, Executive VP & COO at Valero Energy]

S. Kind of has The U. S. Market strong. So you actually see a few cargos from Europe actually booked in the New York Harbor, which is an abnormal trade flow.

[Gary Simmons, Executive VP & COO at Valero Energy]

We do see that correcting when you get to the February,. We're already seeing an open arb to export back from The U. S. To Europe. So nothing too abnormal on trade flows.

[Gary Simmons, Executive VP & COO at Valero Energy]

I think by and large what you've seen is that the Dangote startup in the North Atlantic Basin has been largely offset with Lyondell coming down and Grangemouth coming down. And they're kind of counterbalancing each other and keeping trade flows about what we've seen historically.

[Paul Sankey, Independent Analyst at Sankey Research]

That's brilliant. Thanks very much. And just if I could follow-up, thinking about the reality of tariffs, could you describe maybe a situation of how they would work? I mean, what happens? Do you just suddenly have to start paying it overnight?

[Paul Sankey, Independent Analyst at Sankey Research]

Or how does it work? If you've got any ideas, I'd be grateful. Thanks.

[Gary Simmons, Executive VP & COO at Valero Energy]

Without having really any clarity on what's going to happen, there's no reason for us. There is no way we can really speculate on how we deal with it. We're just going to have to deal with it when it comes up.

[Lane Riggs, CEO, President & Director at Valero Energy]

Paul, it's Lynn. All I add is, it depends on the market, right? If you're a captive market, they're going to it'll somehow get shared between the refinery and the say the Canadian crude producer because there's some captive markets in the Mid Continent. In the Gulf Coast, somehow that will all ultimately get sort of priced in depending on what how the refiner is configured and what their alternatives are. And then we'll just have to see how long it lasts.

[Paul Sankey, Independent Analyst at Sankey Research]

Got it. Have there been examples of it happening in the past that you can think of where you suddenly have to pay 25% more for a given crew?

[Lane Riggs, CEO, President & Director at Valero Energy]

No, and it's been around a long time.

[Paul Sankey, Independent Analyst at Sankey Research]

Yes. Got you. I'll take that later.

[Operator]

The next question is coming from Roger Read of Wells Fargo.

[Roger Read, Analyst at Wells Fargo]

Lane, I'm still chuckling from you've been around a long time answer there. Maybe coming back a little bit on the whole changing in capacity. So obviously, you mentioned the shutdown of Grange Smith. We had the shutdown here locally of Lyondell and we have some more stuff likely coming in Europe beyond what's been announced. I'm just curious how you all are seeing some of those dynamics play out in terms of just crude availability, let's leave the tariff thing aside and maybe how that's playing out along The Gulf Coast?

[Gary Simmons, Executive VP & COO at Valero Energy]

Yes. So I think the only thing we can see is you've definitely seen the dynamic in the market of Lyondell stopping to buy and they were buying a lot of especially a lot of Canadian. And so we've seen more of those barrels become available to us as they backed off the market.

[Roger Read, Analyst at Wells Fargo]

Is that materially changed price or is it just an availability question?

[Gary Simmons, Executive VP & COO at Valero Energy]

It's so difficult to tell because it's been going along at the same time with all these tariffs and sanctions discussions. So it's kind of those discussions have muted any market impact there would be of Lyondell pushing the barrels back so far.

[Roger Read, Analyst at Wells Fargo]

Okay. And then as a follow-up question from earlier about, I think Doug was asking it about the industry's ability to maintain utilization as you look forward through the year thinking about some of these closures that have happened. And if you look at on a year over year change of U. S. Inventories, whether you look at crude alone or crude plus products or just products, all are down year over year, little more severe on the crude side than on the product side, but it would imply a lot of tightness.

[Roger Read, Analyst at Wells Fargo]

And if you can't I'd say if you can, if the industry cannot maintain these levels of utilization, it would imply either much lower inventories or lower exports. But is there anything I'm missing in that general thought process?

[Gary Simmons, Executive VP & COO at Valero Energy]

No, I think you've got it nil on the head. When we look at the balances, the inherent assumption that you're going to see similar supply demand balances to last year and gradually tightening is the fact that the industry at a high actually utilization is going to go up to meet demand. And so that certainly we haven't had a major weather event the last year. Any kind of a major weather event to knock capacity offline or unreliability event can tighten things up a lot. If you look, we're especially on the diesel side, we're within 10% on inventory of where we were in 2023.

[Gary Simmons, Executive VP & COO at Valero Energy]

In 2023, we had a $45 diesel crack versus where it is today. I mean, the inventory position is not significantly different, yet the margin environment is fairly significantly different. It could change in a hurry.

[Roger Read, Analyst at Wells Fargo]

Appreciate that. Thank you.

[Operator]

Thank you. The next question is coming from Ryan Todd of Piper Sandler. Please go ahead.

[Ryan Todd, Senior Research Analyst at Piper Sandler Companies]

Thanks. Maybe a couple of follow ups on the biofuels side. I mean, you talked some about your like the broader 2025 outlook with all the moving pieces there. As we think about the early part of this year, like in particular, BTC goes away December '31. It feels like it's going to take some time, at least a few months for the market to kind of meet you in equilibrium with the 45Z and some of the impacts on imports and domestic production. What's the is there a risk to like first how does this play out in the Is there a risk that economics kind of fall off the table in the as this stuff gets sorted before it reaches kind of a better equilibrium later on in the year?

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

Yes, I think if you look at the conversion of the BTC where everyone got a dollar to now this carbon intensity based credit, we've run The U. S. CREIT model that was just released. For veg oil, that's 0 for canola oil, it's 0.16 for soybean oil and waste oils are in the $0.5 to $0.6 per gallon range. And so at the end of the day, that is all less than a dollar.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

So if you needed that dollar to breakeven and now you're getting $0,.16 it's a fairly negative margin environment for non waste oils. I think everyone can see that. I think there's growing recognition that this is going to be very difficult to see a lot of the biodiesel side and veg oil side operate at these lower incentives. How that plays out in terms of production reconciliation through the Everyone is looking to see well, but hand in hand we also see the imports that were coming to The U. S.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

To get that dollar are now stopped. So how all that balances out? We haven't seen a lot of change in feedstock prices to reflect a lot of this, but I think there's growing recognition that there's going to be some movement in overall production and overall feedstock prices kind of as you go through the and see some of these early reports coming in on what are we seeing in terms of generation of credits. And so again, I think being a waste oil unit on the Gulf Coast, we're the most advantage in terms of how we can react to these things and it still mostly favors waste oils, which is what our platform is based on. So I think we're still in a good position versus our competitors.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

It's just but there's no doubt overall there's lower incentive for all of this in this PTC world.

[Ryan Todd, Senior Research Analyst at Piper Sandler Companies]

Thanks. And then maybe a follow-up on SaaS. I mean, can you maybe just provide a little bit of an update in terms of your SaaS operations at this point, maybe some idea of level of production and how you think about the contribution of Sac Economics here in 2025?

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

Yes. So, Lane mentioned this in his opening comments. The project started up in the Again, credit to our project team on finishing ahead of schedule and under budget. We had a flawless startup. It started up on spec.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

We spent most of the time in the doing test runs and initial fills on tanks. But throughout all our test run trials, we showed a very wide range of operability, all of which more than met our project goals operationally. So unit hardware looks great. Production has been very smooth and we made our first sales in Nov. 0 and we saw the QAQC and all of the traceability and accreditation flow all the way from production to neat staff to blended staff to delivery to final customer.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

And so we spent a lot of time in the just sort of proving the system out. In terms of going forward, we're not going to really get into a lot of detail because what I'd say is what we have now is very good flexibility to meet all the project economic goals and that we set out with the original project. But if you look at say the ARGUS market in The EU and The UK, right now you see HBO at or better than SAS. So we have flexibility to make either barrel into the European market. And so really what we're doing now is just tuning that optimization as we see SaaS customers really starting up in the because of the 2% mandate that you see in The EU and UK.

[Ryan Todd, Senior Research Analyst at Piper Sandler Companies]

Great. Thank you.

[Operator]

Thank you. The next question is coming from Paul Cheng of Scotiabank. Please go ahead.

[Paul Cheng, Analyst at Scotiabank]

Hey, guys. Good morning.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

Good morning.

[Paul Cheng, Analyst at Scotiabank]

Maybe this is 1 go back to Eric. The PTC, I don't think that the detail is out. So when you guys report the should we just assume that in your gross margin, the PTC is out so that you will drop by $1 per gallon, but you're not going to recall any benefit or that you will put some kind of provision or anything that you will just come through? And also whether that you can share how much is the inventory benefit or optimization benefit that you are referring to earlier? That's the first question.

[Paul Cheng, Analyst at Scotiabank]

The second question maybe for Ming, U. S. Natural gas price look like it's going to be higher. So if we look at your system, do you see a lot of opportunity of reducing your energy costs further or that you have already done so much is really difficult and will be too expensive if you're trying to have any meaningful reduction in the energy costs from the current level.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

Okay. So I'll start on the margin indicator. We had the same discussion that our margin indicator still includes the dollar PTC in the calculation. 1 of the challenges in this PTC environment is because it's carbon intensity based that will vary with our feedstock slate. And so we haven't had enough run time or as you said enough clarity to really know how this is all going to line out because we can think of scenarios where certain feedstocks get very cheap that might have a higher CI or we'll see continue to see the incentive to run the lowest CI feedstocks and those will obviously have higher benefits in the PTC.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

So it's a little hard to nail down the how we want to adjust the margin indicator. So our decision, we're going to keep it the same for now until we see a little more development on how we're going to be running in this new policy environment.

[Paul Cheng, Analyst at Scotiabank]

So Eric, I'm sorry, I'm not asking about the margin indicator. I'm asking that when you report the result in your result, so we just assume that you will take out the $1 per gallon for the BTC in your margin and not including any benefit from the BTC because that's not being finalized or that when you report the result in the you actually will do some provisional estimate on what your DGD results should be under the PTC as you understand?

[Lane Riggs, CEO, President & Director at Valero Energy]

Hey, Paul, this is Lane. The way we do our financials is particularly on that side. It's really on the act. We don't have there won't be a provisional like, hey, we think the PTC benefit is going to ultimately be this. If it's not if we don't have clear policy in the it will be whatever it is.

[Paul Cheng, Analyst at Scotiabank]

Okay. So we will just take out the PTC benefit, but not including any estimate for the PTC for you guys?

[Lane Riggs, CEO, President & Director at Valero Energy]

Correct.

[Paul Cheng, Analyst at Scotiabank]

Okay. And how about in terms of Eric, can you share what is the inventory benefit in the

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

Yes. I don't think we're going to give that level of detail out. But it was just an end of year optimization that we did at both units in the

[Paul Cheng, Analyst at Scotiabank]

All right. So how about the energy cost?

[Lane Riggs, CEO, President & Director at Valero Energy]

I'm going to at least initially pitch this over to Greg. So go ahead, Greg.

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

Hey, Paul. So with low energy costs and a lot of that meaning low natural gas and low cost for power for our plants in North America, you don't see a lot of incentive to try to do a project to further reduce your energy consumption. There's just not a lot of opportunity there from a value standpoint. We do see opportunities in Pembroke. We've done some things at the refinery there to improve energy efficiency because their costs are quite a bit higher.

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

So I would say in general that's unless you see a marked change in the cost of natural gas or power, it's going to be hard to justify some kind of an improvement project. Always trying to be as efficient as we can be in the base operation, so there's no change there. But in terms of some kind of investment to make a step change, that's hard to do in the current environment.

[Paul Cheng, Analyst at Scotiabank]

Okay. Thank you.

[Operator]

Thank you. The next question is coming from Joe Lach with Morgan Stanley. Please go ahead.

[Joe Laetsch, Analyst at Morgan Stanley]

Great. Thanks. Good morning, everyone. Thanks for taking my questions. So I wanted to ask a couple on the quarter.

[Joe Laetsch, Analyst at Morgan Stanley]

From our standpoint, it looked like the mid con came in stronger on throughput and capture, while the West Coast was or let's say remained a bit weaker, which I think was driven in part by maintenance. Could you just talk to any specific drivers during the quarter for the mid con and West Coast in particular from a capture and throughput standpoint?

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

Yes. Joe, this is Greg. So West Coast is fairly simple and you hit on it. It was maintenance work primarily at Benicia that impacted not so much throughput there, but it impacted the the amount of transportation fuel we could make and so that had to impact on the capture rate. In the mid con, throughput was higher.

[Greg Bram, SVP Supply Chain Optimization at Valero Energy]

We actually saw pretty good incentive to continue to maximize throughput there, good demand for products. And so we were able to push throughput a little bit higher than we had planned going into the quarter. And then on the capture side, 1 of the factors there, you saw crude market structure on WTI less backward than you saw in the prior quarter that had a benefit to capture rates in addition to some of the things I talked about earlier on butane blending.

[Joe Laetsch, Analyst at Morgan Stanley]

Great. Thanks. That's helpful. And then I wanted to shift gears and ask about the ethanol segment. So the indicator continues to grind to lower to start the year.

[Joe Laetsch, Analyst at Morgan Stanley]

Can you just talk to some of the puts and takes going on in the industry as well as your forward outlook? And then also the potential for year round E15 which was included in the executive orders released last week? Thank you.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

Yes. The ethanol margin has been challenged with high inventories and high production rates. I'll say surprisingly high production rates that have been sustained really for the and into the beginning of this year. We have seen some weather related impacts to production rates, but I think overall you're looking at high inventories and high production rates. And so it's keeping ethanol margins currently, I would say, below mid cycle.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

So in terms of E15, there's always a lot of positive outlook for that. As you know, we've continued to see E15 approved by emergency order every twenty days. We don't see a lot of E15 movements. We don't see a lot of growth in that market. We do see Canada still talking about moving to E15 this year through their CFR program.

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

I think there's a high likelihood you're more likely to see incremental E15 in Canada before the appreciably in The U. S. But I mean, we'll see how this develops this year by policy. It's still a fairly significant logistics challenge to convert retail to E15. But overall, I mean, it's still something that certainly the ethanol and ag industry sees as a positive development for ethanol outlook.

[Joe Laetsch, Analyst at Morgan Stanley]

Great. Thank you all.

[Operator]

Thank you. The next question is coming from Matthew Blair of Tudor, Pickering, Holt. Please go ahead.

[Matthew Blair, Managing Director at TPH&Co]

Good morning. Thanks for taking my question. Regarding the Canadian tariffs, you talked about some of the impacts on the crude side. How about the product side for Valero and especially in regards to your Quebec City plant? What kind of volumes does Quebec send to the New York Harbor?

[Matthew Blair, Managing Director at TPH&Co]

And if there were tariffs imposed, do you think it'd be pretty easy to ship those volumes to Latin America or Europe? Or would we expect to see lower operating rates at Quebec City? Thanks.

[Gary Simmons, Executive VP & COO at Valero Energy]

Yes. This is Gary. For the most part, our Quebec system is short gasoline. So we import gasoline. A lot of that tends to come from Pembroke.

[Gary Simmons, Executive VP & COO at Valero Energy]

There are periods in the year where we're long diesel and typically that does go to New York Harbor. We could place those barrels anywhere in the world. So I wouldn't expect to see a throughput reduction as a result of tariffs.

[Matthew Blair, Managing Director at TPH&Co]

Sounds good. And then you mentioned some of the potential impacts from the 45Z. 1 other impact is that RD from foreign Yuko appears to no longer qualify for a credit. Is DGD a major importer of foreign Yuko? And if so, how would you expect to replace those volumes?

[Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale at Valero Energy]

Yes. So you're correct, four in Yuko no longer qualifies for domestic RT. Our four in Yuko is and has always been pointed at SAF going into Europe and The UK. So the PTC doesn't really change what we were going to do strategically with that feedstock. And so that's our view as we'll continue to run that into SAF into the Europe and UK markets.

[Matthew Blair, Managing Director at TPH&Co]

Great. Thank you.

[Operator]

Thank you. The next question is coming from Jason Gabelman of TD Cowen. Please go ahead.

[Jason Gabelman, Analyst at TD Cowen]

Yes. Hey, morning. Thanks for taking my questions. I wanted to ask first on the CapEx budget. I believe you said $160,000,000,0.0 of sustaining CapEx, which is about $300,000,000 above the five year average.

[Jason Gabelman, Analyst at TD Cowen]

It's the highest level since 2019. So I'm wondering if that is an indicator of above average turnaround activity in your system for 2025? And if not, what's driving that higher sustaining spend?

[Lane Riggs, CEO, President & Director at Valero Energy]

Hey, Jason, this is Lane. So, we normally we sort of talk about our sustaining capital in terms of sort of average. And so, we average about we sort of think about it being $150,000,000,0.0 That's inclusive of turnaround, inclusive of sort of CapEx for ongoing sort of sustaining operations. And so if you sort of and catalyst, so when you think in your mind, well, if it's lumpy, if it gets lumpy on the higher side or the lower side, the only thing it can be is additional turnaround work.

[Jason Gabelman, Analyst at TD Cowen]

Okay, thanks. And my follow-up is just sorry, I'm going to ask another 1 on the Canadian tariffs. Valero, I believe, has a lot of its refineries within foreign trade zones and those foreign trade zones typically aren't subject to tariffs. So given that 1Q, just clarify that most of your U. S.

[Jason Gabelman, Analyst at TD Cowen]

Gulf Coast system is in foreign trade zones and because of that do you think you would be able to if the tariffs are implemented in a very direct way you'd be able to sidestep those tariffs and also do you get any benefit now from operating in those foreign trade zones? Zones? Thanks.

[Rich Walsh, Senior Vice President & General Counsel at Valero Energy]

Yes. This is Rich Walsh. I would just say that you can't tell anything until you see what the program comes out with, right? So it just depends on how this is all structured.

[Rich Walsh, Senior Vice President & General Counsel at Valero Energy]

So, we also bring in a lot and export a lot. And so that's really what the foreign trade zone helps with. And so, I don't know that it's really trying to avoid domestic tariffs in any way along those lines. So, until you see what they're proposing and how it's structured, you really can't tell whether there's going to be benefit or not.

[Lane Riggs, CEO, President & Director at Valero Energy]

But we do have foreign trade zones.

[Rich Walsh, Senior Vice President & General Counsel at Valero Energy]

Yes, yes, we have foreign trade zones.

[Jason Gabelman, Analyst at TD Cowen]

Got it. Great. Thanks for the color.

[Operator]

Thank you. At this time, I would like to turn the floor back over to Mr. Buller for closing comments.

[Homer Bhullar, Vice President-Investor Relations & Finance at Valero Energy]

Thank you, Donna. Appreciate everyone joining us today. Obviously, feel free to contact the IR team if you have any additional questions. Have a great day everyone. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

Participants

Executives

• Homer Bhullar, Vice President-Investor Relations & Finance
• Lane Riggs, CEO, President & Director
• Gary Simmons, Executive VP & COO
• Jason Fraser, Executive VP & CFO
• Greg Bram, SVP Supply Chain Optimization
• Eric Fisher, Senior Vice President of Product Supply, Trading & Wholesale
• Rich Walsh, Senior Vice President & General Counsel

Analysts

• John Royall, Analyst at JPMorgan Chase
• Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research
• Neil Mehta, Analyst at Goldman Sachs
• Theresa Chen, MD - Equity Research at Barclays
• Manav Gupta, Executive Director at UBS Group
• Paul Sankey, Independent Analyst at Sankey Research
• Roger Read, Analyst at Wells Fargo
• Ryan Todd, Senior Research Analyst at Piper Sandler Companies
• Paul Cheng, Analyst at Scotiabank
• Joe Laetsch, Analyst at Morgan Stanley
• Matthew Blair, Managing Director at TPH&Co
• Jason Gabelman, Analyst at TD Cowen