The paragraph introduces the Valero Energy Corp. Third Quarter 2023 Earnings Call and its participants. It also mentions the availability of the earnings release and provides a disclaimer about forward-looking statements. The CEO, Lane Riggs, then gives an overview of the company's strong financial results for the third quarter, setting a record for earnings per share.

The company experienced strong product demand and low inventories, leading to high margins. Their U.S. wholesale system reached record sales volume and their refineries operated at 95% capacity utilization. The company is focused on strategic projects, such as the DGD Sustainable Aviation Fuel project, which is expected to be completed in 2025. They have also maintained a commitment to shareholder returns and ended the quarter with a low net debt to capitalization ratio. The company remains focused on controlling what they can, such as operating efficiently and maintaining capital discipline.

In the third quarter of 2023, Valero's net income attributable to stockholders was $2.6 billion or $7.49 per share, slightly lower than the previous year. The refining segment reported $3.4 billion in operating income, with throughput volumes of 3 million barrels per day. Renewable diesel sales volumes were higher due to the addition of a new plant, but operating income was lower due to lower margins. The ethanol segment reported a significant increase in operating income, driven by higher production volumes and lower corn prices.

In the third quarter of 2023, the company had $250 million in G&A expenses and $149 million in net interest expense. Depreciation and amortization expense was $682 million and income tax expense was $813 million with an effective tax rate of 23%. Net cash provided by operating activities was $3.3 billion, with $33 million from favorable change in working capital and $82 million from the other joint venture member. Adjusted net cash provided by operating activities was $3.2 billion. The company made $394 million in capital investments, with $303 million for sustaining the business and $91 million for growth. $2.2 billion was returned to stockholders, with $360 million in dividends and $1.8 billion for share repurchases. The company ended the quarter with $9.2 billion in debt, $2.3 billion in finance lease obligations, and $5.8 billion in cash. The debt to capitalization ratio was 17% and the company had $5.4 billion in available liquidity.

Valero has cancelled their CO2 pipeline project but still sees carbon capture and storage as a strategic opportunity for reducing carbon intensity in conventional ethanol. They are evaluating other projects to sequester CO2. They expect capital investments of $2 billion in 2023, with $1.5 billion allocated to sustaining the business and the rest to growth. Refining throughput volumes and cash operating expenses for the fourth quarter are expected to fall within certain ranges. Sales volumes for renewable diesel in 2023 are expected to be 1.2 billion gallons, while ethanol production for the fourth quarter is expected to be 4.4 million gallons per day. Net interest expense, depreciation and amortization expenses, and G&A expenses for 2023 are also outlined.

The speaker is addressing a question about the outlook for near-term refining margins and specifically gasoline margins. They explain that there were several factors that contributed to the recent decline in gasoline margins, including the end of hurricane season and pessimistic demand numbers from the DOE. They expect gasoline margins to follow typical seasonal patterns, but note that the market structure does not support storing summer-grade gasoline for next year's driving season. They believe that once demand picks back up, gasoline margins will also improve.

Gary Simmons, Valero's Executive Vice President and Chief Commercial Officer, discusses the impact of geopolitical risks on light heavy differentials in the crude oil market. He also mentions the influence of OPEC+ production levels, seasonal patterns, and freight markets on these differentials. In response to a question about gasoline market trends, Simmons suggests that the market may be more seasonal due to changes in consumer behavior, but also notes that Valero's system has become more diesel-oriented with recent investments. He also highlights Valero's strong track record in capturing opportunities and executing well during the typically volatile fourth quarter.

The speaker is asked about the potential for increased seasonality in gasoline sales and whether recent projects have improved their position. They respond that gasoline sales have actually recovered and increased year-over-year, and that their focus has been on increasing diesel production. The next question is about the Port Arthur Coker and the Gulf Coast's heavy or advantaged seller crude spreads, specifically the behavior of Maya compared to WCS. The speaker acknowledges that Maya has behaved differently but notes that their benchmark is WCS.

During a Q&A session, Lane Riggs, Gary Simmons, and Greg Bram discuss the capture rate of the coker and the impact of heavy sour discounts on the market. Gary and Greg state that the coker is operating as expected and generating strong economic value. There is no current impact on Gulf Coast spreads from gas broadcast. Doug Leggate asks about the company's strategy for buybacks, to which Jason Fraser responds that it is driven by their thoughts on cash, dividends, and debt.

The speaker discusses the company's cash, debt, dividend, and buyback policies. They are comfortable with their current cash position and have no plans to pay down debt. Their dividend is competitive and sustainable, but they cannot provide specific details on potential increases. They aim to have a 40-50% payout for buybacks, but due to the pandemic, they have already exceeded 50% for the year and will likely continue this practice.

Ryan Todd of Piper Sandler asks about the performance of renewable diesel markets in the second quarter and the impact of hedging losses. Eric Fisher, speaking on behalf of the company, explains that the drop in RIN prices was due to news of delayed start-ups and increased U.S. exports. This resulted in a loss in margins, but with the adjustment of fat prices, profitability is expected to return in the fourth quarter.

The speaker discusses the refining side of PADD 5 and the current supply and demand dynamics. They mention that the market is tight for gasoline due to refinery conversions and that the introduction of renewable diesel has increased distillate supply. They also mention the company's capital discipline and potential projects for 2024.

The company is looking for shorter cash cycle projects in refining, focusing on lowering costs, improving reliability, and reducing carbon intensity. They are cautious about discussing projects until closer to FID. The lifting of sanctions in Venezuela could potentially increase exports to the U.S. Gulf Coast. The company has flexibility in their system to adjust the amount of lights, heavies, and mediums they run based on market conditions.

The speaker discusses the factors that drive the company's performance in different grades, such as maintenance work and reliability programs. They also mention the high utilization of their assets in the third quarter due to the lack of turnaround activity. The next question is about the diesel market, and the speaker notes that demand remains strong and sales are up 8% year-over-year. They also mention the potential impact of a warmer winter on diesel margins.

The article discusses the current state of the diesel market, noting that it is down about 1% compared to last year due to a warmer winter. This has led to lower demand for diesel and inventories remaining below the 5-year average. However, the company expects strong diesel cracks in the winter and potential for even stronger demand if there is a colder winter. The article also touches on the regional dynamics of selling diesel into other states and Canada to offset lower LCFS prices in California. The company sees more growth opportunities in Oregon, Washington, and Canada and expects California to announce changes to increase the LCFS price next year. The company also notes the advantages of being on the Gulf Coast, with access to global feedstocks and markets, and the continued preference for waste oils over vegetable oils due to their lower carbon intensity.

The CEO of the company, Lane Riggs, has been in his position for a few months and has observed that the company's strategy has been consistent and successful. There are no plans to deviate from this strategy, unless the market changes. The CEO also discusses the company's ethanol business, which has had a good year due to low corn and natural gas prices.

Paul Cheng asks about the impact of the company's branding initiatives on gasoline supply and the percentage increase in comparison to the fourth quarter of last year.

The speaker is asked about the turnaround cycle for the next year and whether it will be similar to this year or not. The speaker mentions that the amount of butane blended into gasoline increases with higher RVP gasoline, and this allows for more flexibility in branding. However, they do not provide any outlook on turnaround behavior for the next year. The speaker also notes that gasoline is not doing well currently.

The speaker is discussing the impact of winter blending on gasoline production and the use of butane. They also mention their strategy for using excess cash, with a focus on sustaining assets, maintaining the dividend, and using the rest for buybacks.

The speaker is asked about the company's potential for strategic growth and whether they are considering using equity to acquire other companies. The speaker responds by saying that they constantly look at opportunities and have a group dedicated to finding ways to expand their existing footprint. They are open to all possibilities, but are careful in how they discuss and finance potential acquisitions. The speaker also mentions their history of consolidation in the industry in the past.

The speaker discusses the company's last major acquisition in 2013 and their understanding of the costs associated with buying or merging assets. They have not made any major acquisitions since then but are always open to considering opportunities. The speaker also mentions the recent downward trend in D4 and D6 RINs and the potential impact of future production increases on the market.

The speaker discusses the recent drop in RIN prices and how it has affected the company's biodiesel and veg oil RD. They mention a rush to sell RINs in the third quarter, which was fueled by a Russian announcement that they would ban exports (which was quickly reversed). The speaker also notes that the company's lower CI waste oil play has been advantageous, even at lower credit values. They mention plans for continued growth in R&D and diversification into different markets. The impact of the DGD to fire on the reported EBITDA margin is not quantified.

During the Q&A portion of the earnings call, the speaker was asked about product exports and the potential impact of a recent announcement from Mexico regarding restrictions on refined product imports. The speaker stated that exports were up in the third quarter and are expected to remain at similar levels in the fourth quarter, with most of the exports going to Latin America and Europe. They also addressed the Mexican decree, stating that it is aimed at import smuggling and should not affect Valero's legitimate operations. The call was then concluded by the moderator.

The speaker concludes the event by thanking the participants and inviting them to contact the IR team with any further questions. The operator then thanks the participants for their participation and announces the end of the event. Participants are free to disconnect or log off and continue with their day.

This summary was generated with AI and may contain some inaccuracies.