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VALERO ENERGY CORP/TX - Quarter Report: 2022 June (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 001-13175
vlo-20220630_g1.jpg
VALERO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware74-1828067
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)
One Valero Way
San Antonio, Texas
(Address of principal executive offices)
78249
(Zip Code)
(210) 345-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stockVLONew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filer
Smaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
The number of shares of the registrant’s only class of common stock, $0.01 par value, outstanding as of July 22, 2022 was 393,970,342.



VALERO ENERGY CORPORATION
TABLE OF CONTENTS
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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VALERO ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(millions of dollars, except par value)
June 30,
2022
December 31,
2021
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$5,392 $4,122 
Receivables, net14,439 10,378 
Inventories7,147 6,265 
Prepaid expenses and other431 400 
Total current assets27,409 21,165 
Property, plant, and equipment, at cost49,602 49,072 
Accumulated depreciation(18,848)(18,225)
Property, plant, and equipment, net30,754 30,847 
Deferred charges and other assets, net6,182 5,876 
Total assets$64,345 $57,888 
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and finance lease obligations$1,022 $1,264 
Accounts payable16,643 12,495 
Accrued expenses1,112 1,253 
Taxes other than income taxes payable1,599 1,461 
Income taxes payable1,593 378 
Total current liabilities21,969 16,851 
Debt and finance lease obligations, less current portion11,858 12,606 
Deferred income tax liabilities4,792 5,210 
Other long-term liabilities2,993 3,404 
Commitments and contingencies
Equity:
Valero Energy Corporation stockholders’ equity:
Common stock, $0.01 par value; 1,200,000,000 shares authorized;
673,501,593 and 673,501,593 shares issued
Additional paid-in capital6,845 6,827 
Treasury stock, at cost;
279,531,760 and 264,305,955 common shares
(17,537)(15,677)
Retained earnings33,079 28,281 
Accumulated other comprehensive loss(1,425)(1,008)
Total Valero Energy Corporation stockholders’ equity20,969 18,430 
Noncontrolling interests1,764 1,387 
Total equity22,733 19,817 
Total liabilities and equity$64,345 $57,888 
See Condensed Notes to Consolidated Financial Statements.

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VALERO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(millions of dollars, except per share amounts)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Revenues (a)$51,641 $27,748 $90,183 $48,554 
Cost of sales:
Cost of materials and other42,946 25,249 77,895 44,241 
Operating expenses (excluding depreciation and amortization
expense reflected below)
1,626 1,214 3,005 2,870 
Depreciation and amortization expense590 576 1,185 1,142 
Total cost of sales45,162 27,039 82,085 48,253 
Other operating expenses15 12 34 50 
General and administrative expenses (excluding depreciation and
amortization expense reflected below)
233 176 438 384 
Depreciation and amortization expense12 12 23 24 
Operating income (loss)6,219 509 7,603 (157)
Other income, net33 102 13 147 
Interest and debt expense, net of capitalized interest(142)(150)(287)(299)
Income (loss) before income tax expense6,110 461 7,329 (309)
Income tax expense1,342 169 1,594 21 
Net income (loss)4,768 292 5,735 (330)
Less: Net income attributable to noncontrolling interests75 130 137 212 
Net income (loss) attributable to Valero Energy Corporation
stockholders
$4,693 $162 $5,598 $(542)
Earnings (loss) per common share$11.58 $0.39 $13.75 $(1.34)
Weighted-average common shares outstanding (in millions)404 407 406 407 
Earnings (loss) per common share – assuming dilution$11.57 $0.39 $13.74 $(1.34)
Weighted-average common shares outstanding –
assuming dilution (in millions)
404 407 406 407 
__________________________
Supplemental information:
(a) Includes excise taxes on sales by certain of our foreign
operations
$1,254 $1,422 $2,677 $2,542 

See Condensed Notes to Consolidated Financial Statements.

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VALERO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(millions of dollars)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net income (loss)$4,768 $292 $5,735 $(330)
Other comprehensive income (loss):
Foreign currency translation adjustment(442)69 (429)145 
Net gain on pension and other postretirement
benefits
13 17 28 
Net gain (loss) on cash flow hedges50 (7)
Other comprehensive income (loss) before
income tax expense
(383)75 (407)176 
Income tax expense related to items of
other comprehensive income (loss)
Other comprehensive income (loss)(390)73 (414)167 
Comprehensive income (loss)4,378 365 5,321 (163)
Less: Comprehensive income attributable
to noncontrolling interests
101 127 140 214 
Comprehensive income (loss) attributable to
Valero Energy Corporation stockholders
$4,277 $238 $5,181 $(377)

See Condensed Notes to Consolidated Financial Statements.

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VALERO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(millions of dollars)
(unaudited)
Valero Energy Corporation Stockholders’ Equity
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
TotalNon-
controlling
Interests
Total
Equity
Balance as of March 31, 2022$$6,832 $(15,794)$28,785 $(1,009)$18,821 $1,589 $20,410 
Net income— — — 4,693 — 4,693 75 4,768 
Dividends on common stock
($0.98 per share)
— — — (399)— (399)— (399)
Stock-based compensation
expense
— 15 — — — 15 — 15 
Transactions in connection
with stock-based
compensation plans
— (2)— — — 
Purchases of common stock for
treasury
— — (1,748)— — (1,748)— (1,748)
Contributions from noncontrolling
interests
— — — — — — 75 75 
Distributions to noncontrolling
interests
— — — — — — (1)(1)
Other comprehensive
income (loss)
— — — — (416)(416)26 (390)
Balance as of June 30, 2022$$6,845 $(17,537)$33,079 $(1,425)$20,969 $1,764 $22,733 
Balance as of March 31, 2021$$6,810 $(15,700)$27,849 $(1,165)$17,801 $926 $18,727 
Net income— — — 162 — 162 130 292 
Dividends on common stock
($0.98 per share)
— — — (401)— (401)— (401)
Stock-based compensation
expense
— 13 — — — 13 — 13 
Transactions in connection
with stock-based
compensation plans
— (4)— — — 
Purchases of common stock for
treasury
— — (1)— — (1)— (1)
Other comprehensive
income (loss)
— — — — 76 76 (3)73 
Balance as of June 30, 2021$$6,819 $(15,696)$27,610 $(1,089)$17,651 $1,053 $18,704 

See Condensed Notes to Consolidated Financial Statements.

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VALERO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(millions of dollars)
(unaudited)
Valero Energy Corporation Stockholders’ Equity
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
TotalNon-
controlling
Interests
Total
Equity
Balance as of December 31, 2021$$6,827 $(15,677)$28,281 $(1,008)$18,430 $1,387 $19,817 
Net income— — — 5,598 — 5,598 137 5,735 
Dividends on common stock
($1.96 per share)
— — — (800)— (800)— (800)
Stock-based compensation
expense
— 47 — — — 47 — 47 
Transactions in connection
with stock-based
compensation plans
— (29)32 — — — 
Purchases of common stock for
treasury
— — (1,892)— — (1,892)— (1,892)
Contributions from noncontrolling
interests
— — — — — — 240 240 
Distributions to noncontrolling
interests
— — — — — — (3)(3)
Other comprehensive
income (loss)
— — — — (417)(417)(414)
Balance as of June 30, 2022$$6,845 $(17,537)$33,079 $(1,425)$20,969 $1,764 $22,733 
Balance as of December 31, 2020$$6,814 $(15,719)$28,953 $(1,254)$18,801 $841 $19,642 
Net income (loss)— — — (542)— (542)212 (330)
Dividends on common stock
($1.96 per share)
— — — (801)— (801)— (801)
Stock-based compensation
expense
— 41 — — — 41 — 41 
Transactions in connection
with stock-based
compensation plans
— (36)38 — — — 
Purchases of common stock for
treasury
— — (15)— — (15)— (15)
Distributions to noncontrolling
interests
— — — — — — (2)(2)
Other comprehensive income— — — — 165 165 167 
Balance as of June 30, 2021$$6,819 $(15,696)$27,610 $(1,089)$17,651 $1,053 $18,704 

See Condensed Notes to Consolidated Financial Statements.

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VALERO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars)
(unaudited)
Six Months Ended
June 30,
20222021
Cash flows from operating activities:
Net income (loss)$5,735 $(330)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization expense1,208 1,166 
Loss on early retirement of debt50 — 
Gain on sale of assets— (62)
Deferred income tax benefit(333)(136)
Changes in current assets and current liabilities(128)1,251 
Changes in deferred charges and credits and other operating activities, net(99)67 
Net cash provided by operating activities6,433 1,956 
Cash flows from investing activities:
Capital expenditures (excluding variable interest entities (VIEs))(324)(261)
Capital expenditures of VIEs:
Diamond Green Diesel Holdings LLC (DGD)(458)(398)
Other VIEs(19)(35)
Deferred turnaround and catalyst cost expenditures (excluding VIEs)(681)(426)
Deferred turnaround and catalyst cost expenditures of DGD(13)(1)
Proceeds from sale of assets32 270 
Investments in nonconsolidated joint ventures(1)(9)
Other investing activities, net24 
Net cash used in investing activities(1,460)(836)
Cash flows from financing activities:
Proceeds from debt issuances and borrowings (excluding VIEs)1,439 — 
Proceeds from borrowings of VIEs:
DGD359 — 
Other VIEs46 16 
Repayments of debt and finance lease obligations (excluding VIEs)(2,580)(63)
Repayments of debt and finance lease obligations of VIEs:
DGD(365)— 
Other VIEs(33)(3)
Premiums paid on early retirement of debt(48)— 
Purchases of common stock for treasury(1,892)(15)
Common stock dividend payments(800)(801)
Contributions from noncontrolling interests240 — 
Distributions to noncontrolling interests(3)(2)
Other financing activities, net(5)
Net cash used in financing activities(3,642)(866)
Effect of foreign exchange rate changes on cash(61)
Net increase in cash and cash equivalents1,270 259 
Cash and cash equivalents at beginning of period4,122 3,313 
Cash and cash equivalents at end of period$5,392 $3,572 
See Condensed Notes to Consolidated Financial Statements.

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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
General
The terms “Valero,” “we,” “our,” and “us,” as used in this report, may refer to Valero Energy Corporation, one or more of its consolidated subsidiaries, or all of them taken as a whole. The term “DGD,” as used in this report, may refer to Diamond Green Diesel Holdings LLC, its wholly owned consolidated subsidiary, or both of them taken as a whole.

These unaudited financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these interim financial statements reflect all adjustments considered necessary for a fair statement of our results for the interim periods presented. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The financial statements presented herein should be read in conjunction with the financial statements included in our annual report on Form 10-K for the year ended December 31, 2021.

The balance sheet as of December 31, 2021 has been derived from our audited financial statements as of that date. For further information, refer to our financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2021.

Significant Accounting Policy
Use of Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2.    UNCERTAINTIES

During the three and six months ended June 30, 2022, our results were favorably impacted by the effect from the ongoing recovery in the worldwide demand for petroleum-based transportation fuels while the worldwide supply of those products was constrained. This supply and demand imbalance has contributed to increases in the market prices of the petroleum-based transportation fuels that we produce (as well as crude oil and other feedstocks that are processed to make these products) and in refining margins. Factors contributing to the supply and demand imbalance and the associated volatility in market prices, among others, are the loss of refining capacity resulting from refinery closures and the transition of refineries to renewable fuel production, and the Russia-Ukraine conflict. The Russia-Ukraine conflict, which began in February 2022, has exacerbated the fuel supply imbalance as a result of changes in trade flows of crude oil and petroleum-based products as countries and private market participants responded to the conflict by taking actions to refrain from purchasing and transporting Russian crude oil and petroleum-based products.

Many uncertainties remain with respect to the supply and demand imbalance and the resulting volatility in market prices for petroleum-based transportation fuels (including the potential negative impacts on the demand for those products due to the continued volatility in market prices), the current inflationary environment, and the possible responses from governmental authorities to new variants of the COVID-19 virus that could negatively affect the demand and market prices for our products and the worldwide economy. Developments with respect to the uncertainties described above are occurring at a rapid pace and cannot be predicted. Their overall economic impact and resulting impact on us also cannot be predicted with certainty at this time.

3.    INVENTORIES

Inventories consisted of the following (in millions):
June 30,
2022
December 31,
2021
Refinery feedstocks$1,888 $1,995 
Refined petroleum products and blendstocks
4,328 3,567 
Renewable diesel feedstocks and products
319 135 
Ethanol feedstocks and products315 273 
Materials and supplies297 295 
Inventories$7,147 $6,265 

As of June 30, 2022 and December 31, 2021, the replacement cost (market value) of last-in, first-out (LIFO) inventories exceeded their LIFO carrying amounts by $9.7 billion and $5.2 billion, respectively. Our non-LIFO inventories accounted for $1.5 billion and $1.4 billion of our total inventories as of June 30, 2022 and December 31, 2021, respectively.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4.    PROPERTY, PLANT, AND EQUIPMENT

In June 2022, we sold our ethanol plant in Jefferson, Wisconsin for $32 million, which resulted in a gain of $23 million that is included in depreciation and amortization expense for the three and six months ended June 30, 2022.

The Jefferson plant was temporarily idled in 2020 at the onset of the COVID-19 pandemic in response to the decreased demand for ethanol resulting from the effects of the pandemic on our business, and we had previously evaluated this plant for potential impairment assuming that operations would resume. However, we completed an evaluation of the plant during the third quarter of 2021 and concluded that it was no longer a strategic asset for our ethanol business. The plant’s operations permanently ceased at that time.

5.    DEBT

Public Debt
In June 2022, we reduced our debt through the acquisition of the $300 million of 4.00 percent Gulf Opportunity Zone Revenue Bonds Series 2010 (GO Zone Bonds) that are due December 1, 2040, but were subject to mandatory tender on June 1, 2022. We have the option to effectuate a remarketing of these bonds.

In February 2022, we issued $650 million of 4.000 percent Senior Notes due June 1, 2052. Proceeds from this debt issuance totaled $639 million before deducting the underwriting discount and other debt issuance costs. The proceeds and cash on hand were used to repurchase and retire the following notes in connection with cash tender offers that we publicly announced and completed in February 2022 (in millions):
Debt Repurchased and RetiredPrincipal
Amount
3.65% Senior Notes due 2025
$72 
2.850% Senior Notes due 2025
507 
4.375% VLP Senior Notes due 2026
168 
3.400% Senior Notes due 2026
653 
Total$1,400 

In connection with the early debt retirement activity described above, we recognized a charge of $50 million in “other income, net” primarily comprised of $48 million of premiums paid.

During the six months ended June 30, 2021, there was no issuance or redemption activity related to our public debt.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Credit Facilities
We had outstanding borrowings, letters of credit issued, and availability under our credit facilities as follows (amounts in millions and currency in U.S. dollars, except as noted):
June 30, 2022
Facility
Amount
Maturity DateOutstanding
Borrowings
Letters of Credit
Issued (a)
Availability
Committed facilities:
Valero Revolver$4,000 March 2024$— $912 $3,088 
Canadian RevolverC$150 November 2022C$— C$C$145 
Accounts receivable
sales facility (b)
$1,300 July 2022$— n/a$1,300 
Letter of credit facility$50 November 2022n/a$— $50 
Committed facilities of
VIEs (c):
DGD Revolver (d)$400 March 2024$100 $18 $282 
DGD Loan Agreement (e)$25 April 2023$25 n/a$— 
IEnova Revolver (f)$830 February 2028$695 n/a$135 
Uncommitted facilities:
Letter of credit facilitiesn/an/an/a$1,448 n/a
________________________
(a)Letters of credit issued as of June 30, 2022 expire at various times in 2022 through 2023.
(b)In July 2022, we extended the maturity date of this facility to July 2023.
(c)Creditors of the VIEs do not have recourse against us.
(d)The variable interest rate on the DGD Revolver was 3.030 percent and 1.860 percent as of June 30, 2022 and December 31, 2021, respectively.
(e)The amounts shown for this facility represent the facility amount available from, and borrowings outstanding to, the noncontrolling member as any transactions between DGD and us under this facility are eliminated in consolidation. The variable interest rate on the DGD Loan Agreement was 3.620 percent and 2.603 percent as of June 30, 2022 and December 31, 2021, respectively.
(f)The variable interest rate on the IEnova Revolver was 4.617 percent and 3.781 percent as of June 30, 2022 and December 31, 2021, respectively.

Activity under our credit facilities was as follows (in millions):
Six Months Ended
June 30,
20222021
Borrowings:
Accounts receivable sales facility$800 $— 
DGD Revolver359 — 
IEnova Revolver46 16 
Repayments:
Accounts receivable sales facility(800)— 
DGD Revolver(359)— 
IEnova Revolver(30)— 

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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Disclosures
“Interest and debt expense, net of capitalized interest” is comprised as follows (in millions):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Interest and debt expense$156 $162 $313 $326 
Less: Capitalized interest14 12 26 27 
Interest and debt expense, net of
capitalized interest
$142 $150 $287 $299 

6.    EQUITY

Treasury Stock
We purchase shares of our outstanding common stock as authorized by our board of directors (Board), including under share purchase programs and with respect to our employee stock-based compensation plans. During the three and six months ended June 30, 2022, we purchased for treasury 14,211,408 shares for $1.7 billion and 15,757,281 shares for $1.9 billion, respectively. During the three and six months ended June 30, 2021, we purchased for treasury 7,072 shares for $1 million and 228,060 shares for $15 million, respectively. On January 23, 2018, the Board authorized our purchase of up to $2.5 billion of our outstanding common stock with no expiration date (the 2018 Program), and we completed all authorized share purchases under that program during the three months ended June 30, 2022. On July 7, 2022, we announced that our Board authorized our purchase of up to an additional $2.5 billion of our outstanding common stock with no expiration date (the 2022 Program).

Common Stock Dividends
On July 21, 2022, our Board declared a quarterly cash dividend of $0.98 per common share payable on September 1, 2022 to holders of record at the close of business on August 4, 2022.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Accumulated Other Comprehensive Loss
Changes in accumulated other comprehensive loss by component, net of tax, were as follows (in millions):
Three Months Ended June 30,
20222021
Foreign
Currency
Translation
Adjustment
Defined
Benefit
Plans
Items
Gains
(Losses)
on
Cash Flow
Hedges
TotalForeign
Currency
Translation
Adjustment
Defined
Benefit
Plans
Items
Gains
(Losses)
on
Cash Flow
Hedges
Total
Balance as of beginning
of period
$(549)$(437)$(23)$(1,009)$(439)$(728)$$(1,165)
Other comprehensive
income (loss) before
reclassifications
(442)(50)(491)66 — (7)59 
Amounts reclassified
from accumulated
other comprehensive
loss
— 69 73 — 14 18 
Effect of exchange rates— — — (1)— (1)
Other comprehensive
income (loss)
(442)19 (416)66 13 (3)76 
Balance as of end of
period
$(991)$(430)$(4)$(1,425)$(373)$(715)$(1)$(1,089)

Six Months Ended June 30,
20222021
Foreign
Currency
Translation
Adjustment
Defined
Benefit
Plans
Items
Gains
(Losses)
on
Cash Flow
Hedges
TotalForeign
Currency
Translation
Adjustment
Defined
Benefit
Plans
Items
Gains
(Losses)
on
Cash Flow
Hedges
Total
Balance as of beginning
of period
$(562)$(441)$(5)$(1,008)$(515)$(737)$(2)$(1,254)
Other comprehensive
income (loss) before
reclassifications
(429)(2)(114)(545)142 (12)131 
Amounts reclassified
from accumulated
other comprehensive
loss
— 11 115 126 — 22 13 35 
Effect of exchange rates— — — (1)— (1)
Other comprehensive
income (loss)
(429)11 (417)142 22 165 
Balance as of end of
period
$(991)$(430)$(4)$(1,425)$(373)$(715)$(1)$(1,089)

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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7.    VARIABLE INTEREST ENTITIES

Consolidated VIEs
We consolidate a VIE when we have a variable interest in an entity for which we are the primary beneficiary. As of June 30, 2022, the significant consolidated VIEs included:

DGD, a joint venture with a subsidiary of Darling Ingredients Inc. that owns and operates a plant that processes waste and renewable feedstocks (predominately animal fats, used cooking oils, and inedible distillers corn oils) into renewable diesel; and

Central Mexico Terminals, a collective group of three subsidiaries of Infraestructura Energetica Nova, S.A.P.I. de C.V. (IEnova), which is a Mexican company and indirect subsidiary of Sempra Energy, a U.S. public company. We have terminaling agreements with Central Mexico Terminals that represent variable interests. We do not have an ownership interest in Central Mexico Terminals.

The assets of the consolidated VIEs can only be used to settle their own obligations and the creditors of the consolidated VIEs have no recourse to our other assets. We generally do not provide financial guarantees to the VIEs. Although we have provided credit facilities to some of the VIEs in support of their construction or acquisition activities, these transactions are eliminated in consolidation. Our financial position, results of operations, and cash flows are impacted by the performance of the consolidated VIEs, net of intercompany eliminations, to the extent of our ownership interest in each VIE.

The following tables present summarized balance sheet information for the significant assets and liabilities of the consolidated VIEs, which are included in our balance sheets (in millions):
DGDCentral
Mexico
Terminals
OtherTotal
June 30, 2022
Assets
Cash and cash equivalents$171 $— $14 $185 
Other current assets835 25 868 
Property, plant, and equipment, net3,052 661 87 3,800 
Liabilities
Current liabilities, including current portion
of debt and finance lease obligations
$419 $718 $24 $1,161 
Debt and finance lease obligations,
less current portion
258 — — 258 

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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DGDCentral
Mexico
Terminals
OtherTotal
December 31, 2021
Assets
Cash and cash equivalents$21 $— $15 $36 
Other current assets558 10 13 581 
Property, plant, and equipment, net2,629 676 91 3,396 
Liabilities
Current liabilities, including current portion
of debt and finance lease obligations
$398 $729 $$1,136 
Debt and finance lease obligations,
less current portion
264 — 20 284 

Nonconsolidated VIEs
We hold variable interests in VIEs that have not been consolidated because we are not considered the primary beneficiary. These nonconsolidated VIEs are not material to our financial position or results of operations and are accounted for as equity investments.

On April 19, 2021, we sold a 24.99 percent membership interest in MVP Terminalling, LLC (MVP), a nonconsolidated joint venture with a subsidiary of Magellan Midstream Partners, L. P., for $270 million that resulted in a gain of $62 million, which is included in “other income, net” for the three and six months ended June 30, 2021. MVP owns and operates a marine terminal located on the Houston Ship Channel in Pasadena, Texas. We retained a 25.01 percent membership interest in MVP.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8.    EMPLOYEE BENEFIT PLANS

The components of net periodic benefit cost related to our defined benefit plans were as follows (in millions):
Pension PlansOther Postretirement
Benefit Plans
2022202120222021
Three months ended June 30
Service cost$39 $41 $$
Interest cost21 18 
Expected return on plan assets(48)(48)— — 
Amortization of:
Net actuarial loss13 20 — — 
Prior service credit(5)(5)(1)(1)
Special charges— — — 
Net periodic benefit cost$20 $30 $$
Six months ended June 30
Service cost$77 $81 $$
Interest cost42 36 
Expected return on plan assets(96)(96)— — 
Amortization of:
Net actuarial loss26 40 — — 
Prior service credit(9)(9)(2)(3)
Special charges— — — 
Net periodic benefit cost
$40 $56 $$

The components of net periodic benefit cost other than the service cost component (i.e., the non-service cost components) are included in “other income, net.”

9.    INCOME TAXES

Income Tax Expense
There was no significant variation in the customary relationship between income tax expense and income before income tax expense for the three and six months ended June 30, 2022.

During the three months ended June 30, 2021, certain statutory income tax rate changes (primarily an increase in the United Kingdom (U.K.) rate from 19 percent to 25 percent effective in 2023) were enacted that resulted in the remeasurement of our deferred tax liabilities. We recognized deferred income tax expense of $64 million during the three and six months ended June 30, 2021, which represented the net increase in our deferred tax liabilities resulting from the changes in the income tax rates.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Tax Returns Under Audit
We expect to complete the appeals process for certain U.S. federal income tax audits within the next 12 months. We do not expect to have a significant change to our liability for unrecognized tax benefits upon the settlement of our ongoing audits, and we believe that the ultimate settlement of our audits will not be material to our financial condition, results of operations, and liquidity.

10.    EARNINGS (LOSS) PER COMMON SHARE

Earnings (loss) per common share was computed as follows (dollars and shares in millions, except per share amounts):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Earnings (loss) per common share:
Net income (loss) attributable to Valero stockholders$4,693 $162 $5,598 $(542)
Less: Income allocated to participating securities17 20 
Net income (loss) available to common stockholders$4,676 $160 $5,578 $(545)
Weighted-average common shares outstanding404 407 406 407 
Earnings (loss) per common share$11.58 $0.39 $13.75 $(1.34)
Earnings (loss) per common share – assuming dilution:
Net income (loss) attributable to Valero stockholders$4,693 $162 $5,598 $(542)
Less: Income allocated to participating securities17 20 
Net income (loss) available to common stockholders$4,676 $160 $5,578 $(545)
Weighted-average common shares outstanding404 407 406 407 
Effect of dilutive securities— — — — 
Weighted-average common shares outstanding –
assuming dilution
404 407 406 407 
Earnings (loss) per common share – assuming dilution$11.57 $0.39 $13.74 $(1.34)

Participating securities include restricted stock and performance awards granted under our 2020 Omnibus Stock Incentive Plan (OSIP) or our 2011 OSIP. Dilutive securities include participating securities as well as outstanding stock options.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11.    REVENUES AND SEGMENT INFORMATION

Revenue from Contracts with Customers
Disaggregation of Revenue
Revenue is presented in the table below under “Segment Information” disaggregated by product because this is the level of disaggregation that management has determined to be beneficial to users of our financial statements.

Contract Balances
Contract balances were as follows (in millions):
June 30,
2022
December 31,
2021
Receivables from contracts with customers,
included in receivables, net
$9,399 $6,228 
Contract liabilities, included in accrued expenses109 78 

During the six months ended June 30, 2022 and 2021, we recognized as revenue $72 million and $40 million that was included in contract liabilities as of December 31, 2021 and 2020, respectively. Revenue recognized related to contract liabilities during the three months ended June 30, 2022 and 2021 was not material.

Remaining Performance Obligations
We have spot and term contracts with customers, the majority of which are spot contracts with no remaining performance obligations. We do not disclose remaining performance obligations for contracts that have terms of one year or less. The transaction price for our remaining term contracts includes a fixed component and variable consideration (i.e., a commodity price), both of which are allocated entirely to a wholly unsatisfied promise to transfer a distinct good that forms part of a single performance obligation. The fixed component is not material and the variable consideration is highly uncertain. Therefore, as of June 30, 2022, we have not disclosed the aggregate amount of the transaction price allocated to our remaining performance obligations.

Segment Information
We have three reportable segments — Refining, Renewable Diesel, and Ethanol. Each segment is a strategic business unit that offers different products and services by employing unique technologies and marketing strategies and whose operations and operating performance are managed and evaluated separately. Operating performance is measured based on the operating income generated by the segment, which includes revenues and expenses that are directly attributable to the management of the respective segment. Intersegment sales are generally derived from transactions made at prevailing market rates. The following is a description of each segment’s business operations.

The Refining segment includes the operations of our petroleum refineries, the associated activities to market our refined petroleum products, and the logistics assets that support our refining operations. The principal products manufactured by our refineries and sold by this segment include gasolines and blendstocks, distillates, and other products.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Renewable Diesel segment represents the operations of DGD, a consolidated joint venture as discussed in Note 7, and the associated activities to market renewable diesel. The principal product manufactured by DGD and sold by this segment is renewable diesel. This segment sells some renewable diesel to the Refining segment, which is then sold to that segment’s customers.

The Ethanol segment includes the operations of our ethanol plants and the associated activities to market our ethanol and co-products. The principal products manufactured by our ethanol plants are ethanol and distillers grains. This segment sells some ethanol to the Refining segment for blending into gasoline, which is sold to that segment’s customers as a finished gasoline product.

Operations that are not included in any of the reportable segments are included in the corporate category.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables reflect information about our operating income (loss) by reportable segment (in millions):
RefiningRenewable
Diesel
EthanolCorporate
and
Eliminations
Total
Three months ended June 30, 2022
Revenues:
Revenues from external customers
$49,495 $855 $1,291 $— $51,641 
Intersegment revenues
11 596 201 (808)— 
Total revenues
49,506 1,451 1,492 (808)51,641 
Cost of sales:
Cost of materials and other (a)41,313 1,213 1,226 (806)42,946 
Operating expenses (excluding depreciation
and amortization expense reflected below)
1,402 58 167 (1)1,626 
Depreciation and amortization expense
565 28 (3)— 590 
Total cost of sales
43,280 1,299 1,390 (807)45,162 
Other operating expenses14 — — 15 
General and administrative expenses (excluding
depreciation and amortization expense
reflected below)
— — — 233 233 
Depreciation and amortization expense
— — — 12 12 
Operating income by segment$6,212 $152 $101 $(246)$6,219 
Three months ended June 30, 2021
Revenues:
Revenues from external customers
$25,968 $496 $1,284 $— $27,748 
Intersegment revenues
76 84 (161)— 
Total revenues
25,969 572 1,368 (161)27,748 
Cost of sales:
Cost of materials and other (a)24,000 281 1,130 (162)25,249 
Operating expenses (excluding depreciation
and amortization expense reflected below)
1,064 31 119 — 1,214 
Depreciation and amortization expense
544 12 20 — 576 
Total cost of sales
25,608 324 1,269 (162)27,039 
Other operating expenses12 — — — 12 
General and administrative expenses (excluding
depreciation and amortization expense
reflected below)
— — — 176 176 
Depreciation and amortization expense
— — — 12 12 
Operating income by segment$349 $248 $99 $(187)$509 
________________________
See note (a) on page 20.

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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
RefiningRenewable
Diesel
EthanolCorporate
and
Eliminations
Total
Six months ended June 30, 2022
Revenues:
Revenues from external customers
$86,308 $1,450 $2,425 $— $90,183 
Intersegment revenues
15 982 328 (1,325)— 
Total revenues
86,323 2,432 2,753 (1,325)90,183 
Cost of sales:
Cost of materials and other (a)74,919 1,968 2,330 (1,322)77,895 
Operating expenses (excluding depreciation
and amortization expense reflected below)
2,595 109 302 (1)3,005 
Depreciation and amortization expense
1,114 54 17 — 1,185 
Total cost of sales
78,628 2,131 2,649 (1,323)82,085 
Other operating expenses32 — — 34 
General and administrative expenses (excluding
depreciation and amortization expense
reflected below)
— — — 438 438 
Depreciation and amortization expense
— — — 23 23 
Operating income by segment$7,663 $301 $102 $(463)$7,603 
Six months ended June 30, 2021
Revenues:
Revenues from external customers
$45,437 $848 $2,269 $— $48,554 
Intersegment revenues
155 144 (303)— 
Total revenues
45,441 1,003 2,413 (303)48,554 
Cost of sales:
Cost of materials and other (a)42,022 468 2,054 (303)44,241 
Operating expenses (excluding depreciation
and amortization expense reflected below)
2,535 60 275 — 2,870 
Depreciation and amortization expense
1,077 24 41 — 1,142 
Total cost of sales
45,634 552 2,370 (303)48,253 
Other operating expenses50 — — — 50 
General and administrative expenses (excluding
depreciation and amortization expense
reflected below)
— — — 384 384 
Depreciation and amortization expense
— — — 24 24 
Operating income (loss) by segment$(243)$451 $43 $(408)$(157)
________________________
(a)Cost of materials and other for our Renewable Diesel segment is net of the blender’s tax credit on qualified fuel mixtures of $198 million and $84 million for the three months ended June 30, 2022 and 2021, respectively, and $354 million and $163 million for the six months ended June 30, 2022 and 2021, respectively.

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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides a disaggregation of revenues from external customers for our principal products by reportable segment (in millions):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Refining:
Gasolines and blendstocks
$20,604 $12,432 $36,164 $21,161 
Distillates
24,427 10,875 41,871 19,456 
Other product revenues
4,464 2,661 8,273 4,820 
Total refining revenues
49,495 25,968 86,308 45,437 
Renewable Diesel:
Renewable diesel
855 496 1,450 848 
Ethanol:
Ethanol
979 983 1,854 1,735 
Distillers grains
312 301 571 534 
Total ethanol revenues
1,291 1,284 2,425 2,269 
Revenues
$51,641 $27,748 $90,183 $48,554 

Total assets by reportable segment were as follows (in millions):
June 30,
2022
December 31,
2021
Refining$52,088 $47,365 
Renewable Diesel4,237 3,437 
Ethanol1,716 1,812 
Corporate and eliminations6,304 5,274 
Total assets$64,345 $57,888 


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12.    SUPPLEMENTAL CASH FLOW INFORMATION

In order to determine net cash provided by operating activities, net income (loss) is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions):
Six Months Ended
June 30,
20222021
Increase in current assets:
Receivables, net$(4,163)$(3,069)
Inventories(1,056)(47)
Prepaid expenses and other(108)(103)
Increase (decrease) in current liabilities:
Accounts payable4,240 3,979 
Accrued expenses(126)284 
Taxes other than income taxes payable133 162 
Income taxes payable952 45 
Changes in current assets and current liabilities$(128)$1,251 

Changes in current assets and current liabilities for the six months ended June 30, 2022 were primarily due to the following:

The increase in receivables was due to an increase in refined petroleum product prices in June 2022 compared to December 2021, partially offset by a decrease in sales volumes;

The increase in inventories was due to an increase in inventory volumes with higher inventory unit prices in June 2022 compared to December 2021;

The increase in accounts payable was due to an increase in crude oil and other feedstock prices in June 2022 compared to December 2021, partially offset by a decrease in crude oil and other feedstock volumes purchased; and

The increase in income taxes payable was primarily due to higher income before income tax expense in the second quarter of 2022.

Changes in current assets and current liabilities for the six months ended June 30, 2021 were primarily due to the following:

The increase in receivables was primarily due to an increase in refined petroleum product prices in June 2021 compared to December 2020 combined with an increase in sales volumes, partially offset by a decrease in income taxes receivable associated with the receipt of a $962 million refund related to our U.S. federal income tax return for 2020; and


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The increase in accounts payable was due to an increase in crude oil and other feedstock prices in June 2021 compared to December 2020 combined with an increase in crude oil and other feedstock volumes purchased.

Cash flows related to interest and income taxes were as follows (in millions):
Six Months Ended
June 30,
20222021
Interest paid in excess of amount capitalized,
including interest on finance leases
$291 $290 
Income taxes paid (refunded), net916 (882)

Supplemental cash flow information related to our operating and finance leases was as follows (in millions):
Six Months Ended June 30,
20222021
Operating
Leases
Finance
Leases
Operating
Leases
Finance
Leases
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows$196 $39 $199 $35 
Financing cash flows— 86 — 63 
Changes in lease balances resulting from new
and modified leases
92 164 315 46 

There were no significant noncash investing and financing activities during the six months ended June 30, 2022 and 2021, except as noted in the table above.

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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13.    FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements
The following tables present information (in millions) about our assets and liabilities recognized at their fair values in our balance sheets categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of June 30, 2022 and December 31, 2021.

We have elected to offset the fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty, including any related cash collateral assets or obligations as shown below; however, fair value amounts by hierarchy level are presented in the following tables on a gross basis. We have no derivative contracts that are subject to master netting arrangements that are reflected gross on the balance sheet.
June 30, 2022
Total
Gross
Fair
Value
Effect of
Counter-
party
Netting
Effect of
Cash
Collateral
Netting
Net
Carrying
Value on
Balance
Sheet
Cash
Collateral
Paid or
Received
Not Offset
Fair Value Hierarchy
Level 1Level 2Level 3
Assets
Commodity derivative
contracts
$1,143 $— $— $1,143 $(1,131)$(4)$$— 
Physical purchase
contracts
— — n/an/an/a
Foreign currency
contracts
— — n/an/an/a
Investments of certain
benefit plans
73 — 79 n/an/a79 n/a
Total$1,218 $$$1,229 $(1,131)$(4)$94 
Liabilities
Commodity derivative
contracts
$1,338 $— $— $1,338 $(1,131)$(207)$— $(210)
Blending program
obligations
— 30 — 30 n/an/a30 n/a
Physical purchase
contracts
— 26 — 26 n/an/a26 n/a
Foreign currency
contracts
24 — — 24 n/an/a24 n/a
Total$1,362 $56 $— $1,418 $(1,131)$(207)$80 

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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021
Total
Gross
Fair
Value
Effect of
Counter-
party
Netting
Effect of
Cash
Collateral
Netting
Net
Carrying
Value on
Balance
Sheet
Cash
Collateral
Paid or
Received
Not Offset
Fair Value Hierarchy
Level 1Level 2Level 3
Assets
Commodity derivative
contracts
$522 $— $— $522 $(444)$(15)$63 $— 
Physical purchase
contracts
— — n/an/an/a
Foreign currency
contracts
— — n/an/an/a
Investments of certain
benefit plans
83 — 89 n/an/a89 n/a
Total$606 $$$616 $(444)$(15)$157 
Liabilities
Commodity derivative
contracts
$472 $— $— $472 $(444)$(28)$— $(41)
Blending program
obligations
— 57 — 57 n/an/a57 n/a
Physical purchase
contracts
— — n/an/an/a
Foreign currency
contracts
10 — — 10 n/an/a10 n/a
Total
$482 $62 $— $544 $(444)$(28)$72 

A description of our assets and liabilities recognized at fair value along with the valuation methods and inputs we used to develop their fair value measurements are as follows:

Commodity derivative contracts consist primarily of exchange-traded futures, which are used to reduce the impact of price volatility on our results of operations and cash flows as discussed in Note 14. These contracts are measured at fair value using a market approach based on quoted prices from the commodity exchange and are categorized in Level 1 of the fair value hierarchy.

Physical purchase contracts represent the fair value of fixed-price corn purchase contracts. The fair values of these purchase contracts are measured using a market approach based on quoted prices from the commodity exchange or an independent pricing service and are categorized in Level 2 of the fair value hierarchy.

Foreign currency contracts consist of foreign currency exchange and purchase contracts and foreign currency swap agreements related to our foreign operations to manage our exposure to exchange rate fluctuations on transactions denominated in currencies other than the local (functional) currencies of our operations. These contracts are valued based on quoted foreign currency exchange rates and are categorized in Level 1 of the fair value hierarchy.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Investments of certain benefit plans consist of investment securities held by trusts for the purpose of satisfying a portion of our obligations under certain U.S. nonqualified benefit plans. The plan assets categorized in Level 1 of the fair value hierarchy are measured at fair value using a market approach based on quoted prices from national securities exchanges. The plan assets categorized in Level 3 of the fair value hierarchy represent insurance contracts, the fair value of which is provided by the insurer.

Blending program obligations represent our liability for the purchase of compliance credits needed to satisfy our blending obligations under various governmental and regulatory blending programs, such as the U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard (RFS), the California Low Carbon Fuel Standard, and similar programs in other jurisdictions in which we operate (collectively, the Renewable and Low-Carbon Fuel Blending Programs). The blending program obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a market approach based on quoted prices from an independent pricing service.

Nonrecurring Fair Value Measurements
There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of June 30, 2022 and December 31, 2021.

Other Financial Instruments
Financial instruments that we recognize in our balance sheets at their carrying amounts are shown in the following table along with their associated fair values (in millions):
June 30, 2022December 31, 2021
Fair Value
Hierarchy
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Financial assets:
Cash and cash equivalentsLevel 1$5,392 $5,392 $4,122 $4,122 
Financial liabilities:
Debt (excluding finance lease
obligations)
Level 210,898 10,694 11,950 13,668 


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14.    PRICE RISK MANAGEMENT ACTIVITIES

General
We are exposed to market risks primarily related to the volatility in the price of commodities, foreign currency exchange rates, and the price of credits needed to comply with the Renewable and Low-Carbon Fuel Blending Programs. We enter into derivative instruments to manage some of these risks, including derivative instruments related to the various commodities we purchase or produce, and foreign currency exchange and purchase contracts, as described below under “Risk Management Activities by Type of Risk.” These derivative instruments are recorded as either assets or liabilities measured at their fair values (see Note 13), as summarized below under “Fair Values of Derivative Instruments.” The effect of these derivative instruments on our income and other comprehensive income (loss) is summarized below under “Effect of Derivative Instruments on Income and Other Comprehensive Income (Loss).

Risk Management Activities by Type of Risk
Commodity Price Risk
We are exposed to market risks related to the volatility in the price of feedstocks (primarily crude oil, waste and renewable feedstocks, and corn), the products we produce, and natural gas used in our operations. To reduce the impact of price volatility on our results of operations and cash flows, we use commodity derivative instruments, such as futures and options. Our positions in commodity derivative instruments are monitored and managed on a daily basis by our risk control group to ensure compliance with our stated risk management policy that has been approved by our Board.

We primarily use commodity derivative instruments as cash flow hedges and economic hedges. Our objectives for entering into each type of hedge is described below.

Cash flow hedges – The objective of our cash flow hedges is to lock in the price of forecasted purchases and/or product sales at existing market prices that we deem favorable.

Economic hedges – Our objectives for holding economic hedges are to (i) manage price volatility in certain feedstock and product inventories and (ii) lock in the price of forecasted purchases and/or product sales at existing market prices that we deem favorable.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of June 30, 2022, we had the following outstanding commodity derivative instruments that were used as cash flow hedges and economic hedges, as well as commodity derivative instruments related to the physical purchase of corn at a fixed price. The information presents the notional volume of outstanding contracts by type of instrument and year of maturity (volumes in thousands of barrels, except corn contracts that are presented in thousands of bushels).
Notional Contract Volumes by
Year of Maturity
20222023
Derivatives designated as cash flow hedges:
Refined petroleum products:
Futures – long640 — 
Futures – short3,920 — 
Derivatives designated as economic hedges:
Crude oil and refined petroleum products:
Futures – long72,277 47 
Futures – short68,735 — 
Corn:
Futures – long155,075 255 
Futures – short206,335 4,345 
Physical contracts – long49,624 4,093 

Foreign Currency Risk
We are exposed to exchange rate fluctuations on transactions related to our foreign operations that are denominated in currencies other than the local (functional) currencies of our operations. To manage our exposure to these exchange rate fluctuations, we often use foreign currency contracts. These contracts are not designated as hedging instruments for accounting purposes and therefore are classified as economic hedges. As of June 30, 2022, we had foreign currency contracts to purchase $974 million of U.S. dollars and $1.2 billion of U.S. dollar equivalent Canadian dollars. Of these commitments, $1.8 billion matured on or before July 27, 2022 and the remaining $370 million will mature by August 4, 2022.

Renewable and Low-Carbon Fuel Blending Programs Price Risk
We are exposed to market risk related to the volatility in the price of credits needed to comply with the Renewable and Low-Carbon Fuel Blending Programs. To manage this risk, we enter into contracts to purchase these credits. Some of these contracts are derivative instruments; however, we elect the normal purchase exception and do not record these contracts at their fair values. The Renewable and Low-Carbon Fuel Blending Programs require us to blend a certain volume of renewable and low-carbon fuels into the petroleum-based transportation fuels we produce in, or import into, the respective jurisdiction to be consumed therein based on annual quotas. To the degree we are unable to blend at the required quotas, we must purchase compliance credits (primarily renewable identification numbers (RINs)). The cost of meeting our credit obligations under the Renewable and Low-Carbon Fuel Blending Programs was $221 million and $680 million for the three months ended June 30, 2022 and 2021, respectively, and

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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
$523 million and $1.1 billion for the six months ended June 30, 2022 and 2021, respectively. These amounts are reflected in cost of materials and other.

Fair Values of Derivative Instruments
The following tables provide information about the fair values of our derivative instruments as of June 30, 2022 and December 31, 2021 (in millions) and the line items in the balance sheets in which the fair values are reflected. See Note 13 for additional information related to the fair values of our derivative instruments.

As indicated in Note 13, we net fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty under master netting arrangements, including cash collateral assets and obligations. The following table, however, is presented on a gross asset and gross liability basis, which results in the reflection of certain assets in liability accounts and certain liabilities in asset accounts:
Balance Sheet
Location
June 30, 2022December 31, 2021
Asset
Derivatives
Liability
Derivatives
Asset
Derivatives
Liability
Derivatives
Derivatives designated
as hedging instruments:
Commodity contractsReceivables, net$29 $92 $$26 
Derivatives not designated
as hedging instruments:
Commodity contractsReceivables, net$1,114 $1,246 $519 $446 
Physical purchase contractsInventories26 
Foreign currency contractsReceivables, net— — 
Foreign currency contractsAccrued expenses— 24 — 10 
Total
$1,121 $1,296 $524 $461 

Market Risk
Our price risk management activities involve the receipt or payment of fixed price commitments into the future. These transactions give rise to market risk, which is the risk that future changes in market conditions may make an instrument less valuable. We closely monitor and manage our exposure to market risk on a daily basis in accordance with policies approved by our Board. Market risks are monitored by our risk control group to ensure compliance with our stated risk management policy. We do not require any collateral or other security to support derivative instruments into which we enter. We also do not have any derivative instruments that require us to maintain a minimum investment-grade credit rating.


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VALERO ENERGY CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Effect of Derivative Instruments on Income and Other Comprehensive Income (Loss)
The following table provides information about the loss recognized in income and other comprehensive income (loss) due to fair value adjustments of our cash flow hedges (in millions):
Derivatives in
Cash Flow Hedging
Relationships
Location of Gain (Loss)
Recognized in Income
on Derivatives
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Commodity contracts:
Loss recognized in other
comprehensive income
(loss) on derivatives
n/a$(130)$(18)$(294)$(31)
Loss reclassified from
accumulated other
comprehensive loss
into income
Revenues(180)(11)(299)(34)

For cash flow hedges, no component of any derivative instrument’s gains or losses was excluded from the assessment of hedge effectiveness for the three and six months ended June 30, 2022 and 2021. For the three and six months ended June 30, 2022 and 2021, cash flow hedges primarily related to forward sales of renewable diesel. The estimated deferred after-tax gain that is expected to be reclassified into revenues within the next 12 months as a result of the hedged transactions that are forecasted to occur as of June 30, 2022 was immaterial. For the three and six months ended June 30, 2022 and 2021, there were no amounts reclassified from accumulated other comprehensive loss into income as a result of the discontinuance of cash flow hedge accounting. The changes in accumulated other comprehensive loss by component, net of tax, for the three and six months ended June 30, 2022 and 2021 are described in Note 6.

The following table provides information about the gain (loss) recognized in income on our derivative instruments with respect to our economic hedges and our foreign currency hedges and the line items in the statements of income in which such gains (losses) are reflected (in millions):
Derivatives Not
Designated as
Hedging Instruments
Location of Gain (Loss)
Recognized in Income
on Derivatives
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Commodity contractsRevenues$(2)$13 $(6)$20 
Commodity contractsCost of materials
and other
(272)21 (867)(57)
Commodity contractsOperating expenses
(excluding depreciation
and amortization expense)
Foreign currency contractsCost of materials
and other
49 47 (2)
Foreign currency contractsOther income, net(115)53 (81)83 

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Form 10-Q, including without limitation our disclosures below under “OVERVIEW AND OUTLOOK,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify our forward-looking statements by the words “anticipate,” “believe,” “expect,” “plan,” “intend,” “scheduled,” “estimate,” “project,” “projection,” “predict,” “budget,” “forecast,” “goal,” “guidance,” “target,” “could,” “would,” “should,” “may,” “strive,” “seek,” “potential,” “opportunity,” “aimed,” “considering,” “continue,” and similar expressions.

These forward-looking statements include, among other things, statements regarding:

the effects and impact of the emergence of new variants of the COVID-19 virus and government responses thereto;
the effect, impact, potential duration or timing, or other implications of the Russia-Ukraine conflict;
future Refining segment margins, including gasoline and distillate margins, and discounts;
future Renewable Diesel segment margins;
future Ethanol segment margins;
expectations regarding feedstock costs, including crude oil differentials, product prices for each of our segments, and operating expenses;
anticipated levels of crude oil and liquid transportation fuel inventories and storage capacity;
expectations regarding the levels of, and timing with respect to, the production and operations at our existing refineries and plants and projects under construction;
our anticipated level of capital investments, including deferred turnaround and catalyst cost expenditures, our expected allocation between, and/or within, growth capital expenditures and sustaining capital expenditures, capital expenditures for environmental and other purposes, and joint venture investments, the expected timing applicable to such capital investments and any related projects, and the effect of those capital investments on our business, financial condition, results of operations, and liquidity;
our anticipated level of cash distributions or contributions, such as our dividend payment rate and contributions to our qualified pension plans and other postretirement benefit plans;
our ability to meet future cash requirements, whether from funds generated from our operations or our ability to access financial markets effectively, and our ability to maintain sufficient liquidity;
our evaluation of, and expectations regarding, any future activity under our share repurchase program or transactions involving our debt securities;
anticipated trends in the supply of, and demand for, crude oil and other feedstocks and refined petroleum products, renewable diesel, and ethanol and corn related co-products in the regions where we operate, as well as globally;
expectations regarding environmental, tax, and other regulatory matters, including the anticipated amounts and timing of payment with respect to our deferred tax liabilities, matters impacting our ability to repatriate cash held by our foreign subsidiaries, and the anticipated effect thereof on our business, financial condition, results of operations, and liquidity;

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the effect of general economic and other conditions, including inflation, on refining, renewable diesel, and ethanol industry fundamentals;
expectations regarding our risk management activities, including the anticipated effects of our hedge transactions;
expectations regarding our counterparties, including our ability to pass on increased compliance costs and timely collect receivables, and the credit risk within our accounts receivable or accounts payable;
expectations regarding adoptions of new, or changes to existing, low-carbon fuel standards or policies, blending and tax credits, or efficiency standards that impact demand for renewable fuels; and
expectations regarding our publicly announced greenhouse gas (GHG) emissions reduction/displacement targets and our current and any future carbon transition projects.

We based our forward-looking statements on our current expectations, estimates, and projections about ourselves, our industry, and the global economy and financial markets generally. We caution that these statements are not guarantees of future performance or results and involve known and unknown risks and uncertainties, the ultimate outcomes of which we cannot predict with certainty. In addition, we based many of these forward-looking statements on assumptions about future events, the ultimate outcomes of which we cannot predict with certainty and which may prove to be inaccurate. Accordingly, actual performance or results may differ materially from the future performance or results that we have expressed, suggested, or forecast in the forward-looking statements. Differences between actual performance or results and any future performance or results expressed, suggested, or forecast in these forward-looking statements could result from a variety of factors, including the following:

the effects arising out of the Russia-Ukraine conflict, including with respect to changes in trade flows and impacts to crude oil and other markets;
demand for, and supplies of, refined petroleum products (such as gasoline, diesel, jet fuel, and petrochemicals), renewable diesel, and ethanol and corn related co-products;
demand for, and supplies of, crude oil and other feedstocks;
the effects of public health threats, pandemics, and epidemics, such as the COVID-19 pandemic and variants of the virus, governmental and societal responses thereto, and the adverse impacts of the foregoing on our business, financial condition, results of operations, and liquidity, including, but not limited to, our growth, operating costs, administrative costs, supply chain, labor availability, logistical capabilities, customer demand for our products, and industry demand generally, margins, production and throughput capacity, utilization, inventory value, cash position, taxes, the price of our securities and trading markets with respect thereto, our ability to access capital markets, and the global economy and financial markets generally;
acts of terrorism aimed at either our refineries and plants or third-party facilities that could impair our ability to produce or transport refined petroleum products, renewable diesel, ethanol, or corn related co-products, to receive feedstocks, or otherwise operate efficiently;
the effects of war or hostilities, and political and economic conditions, in countries that produce crude oil or other feedstocks or consume refined petroleum products, renewable diesel, ethanol or corn related co-products;
the ability of the members of the Organization of Petroleum Exporting Countries to agree on and to maintain crude oil price and production controls;
the level of consumer demand, consumption and overall economic activity, including the effects from seasonal fluctuations and market prices;
refinery, renewable diesel plant, or ethanol plant overcapacity or undercapacity;

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the risk that any transactions may not provide the anticipated benefits or may result in unforeseen detriments;
the actions taken by competitors, including both pricing and adjustments to refining capacity or renewable fuels production in response to market conditions;
the level of competitors’ imports into markets that we supply;
accidents, unscheduled shutdowns, weather events, civil unrest, expropriation of assets, and other economic, diplomatic, legislative, or political events or developments, terrorism, cyberattacks, or other catastrophes or disruptions affecting our operations, production facilities, machinery, pipelines and other logistics assets, equipment, or information systems, or any of the foregoing of our suppliers, customers, or third-party service providers;
changes in the cost or availability of transportation or storage capacity for feedstocks and our products;
political pressure and influence of environmental groups and other stakeholders upon policies and decisions related to the production, transportation, storage, refining, processing, marketing, and sales of crude oil or other feedstocks, refined petroleum products, renewable diesel, ethanol, or corn related co-products;
the price, availability, technology related to, and acceptance of alternative fuels and alternative-fuel vehicles, as well as sentiment and perceptions with respect to GHG emissions more generally;
the levels of government subsidies for, and executive orders, mandates, or other policies with respect to, alternative fuels, alternative-fuel vehicles, and other low-carbon technologies or initiatives, including those related to carbon capture, carbon sequestration, and low-carbon fuels, or affecting the price of natural gas and/or electricity;
the volatility in the market price of compliance credits (primarily RINs needed to comply with the RFS) and emission credits needed under the other environmental emissions programs;
delay of, cancellation of, or failure to implement planned capital projects and realize the various assumptions and benefits projected for such projects or cost overruns in constructing such planned capital projects;
earthquakes, hurricanes, tornadoes, and other weather events, which can unforeseeably affect the price or availability of electricity, natural gas, crude oil, waste and renewable feedstocks, corn, and other feedstocks, critical supplies, refined petroleum products, renewable diesel, and ethanol;
rulings, judgments, or settlements in litigation or other legal or regulatory matters, including unexpected environmental remediation costs, in excess of any reserves or insurance coverage;
legislative or regulatory action, including the introduction or enactment of legislation or rulemakings by governmental authorities, environmental regulations, changes to income tax rates, introduction of a global minimum tax, tax changes or restrictions impacting the foreign repatriation of cash, actions implemented under the Renewable and Low-Carbon Fuel Blending Programs and the other environmental emissions programs, including changes to volume requirements or other obligations or exemptions under the RFS, and actions arising from the EPA’s or other governmental agencies’ regulations, policies, or initiatives concerning GHGs, including mandates for or bans of specific technology, which may adversely affect our business or operations;
changing economic, regulatory, and political environments and related events in the various countries in which we operate or otherwise do business, including trade restrictions, expropriation or impoundment of assets, failure of foreign governments and state-owned entities to honor their contracts, property disputes, economic instability, restrictions on the transfer of funds, duties and tariffs, transportation delays, import and export controls, labor unrest, security issues involving key personnel, and decisions, investigations, regulations, issuances or revocations of permits and

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other authorizations, and other actions, policies and initiatives by the states, counties, cities, and other jurisdictions in the countries in which we operate or otherwise do business;
changes in the credit ratings assigned to our debt securities and trade credit;
the operating, financing, and distribution decisions of our joint ventures or other joint venture members that we do not control;
changes in currency exchange rates, including the value of the Canadian dollar, the pound sterling, the euro, the Mexican peso, and the Peruvian sol relative to the U.S. dollar;
the adequacy of capital resources and liquidity, including availability, timing, and amounts of cash flow or our ability to borrow or access financial markets;
the costs, disruption, and diversion of resources associated with campaigns and negative publicity commenced by investors, stakeholders, or other interested parties;
overall economic conditions, including the stability and liquidity of financial markets, and the effect thereof on consumer demand; and
other factors generally described in the “RISK FACTORS” section included in our annual report on Form 10-K for the year ended December 31, 2021.

Any one of these factors, or a combination of these factors, could materially affect our future results of operations and whether any forward-looking statements ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and actual results and future performance may differ materially from those expressed, suggested, or forecast in any forward-looking statements. Such forward-looking statements speak only as of the date of this quarterly report on Form 10-Q and we do not intend to update these statements unless we are required by applicable securities laws to do so.

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing, as it may be updated or modified by our future filings with the U.S. Securities and Exchange Commission (SEC). We undertake no obligation to publicly release any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events unless we are required by applicable securities laws to do so.

NON-GAAP FINANCIAL MEASURES

The discussions in “OVERVIEW AND OUTLOOK,” “RESULTS OF OPERATIONS,” and “LIQUIDITY AND CAPITAL RESOURCES” below include references to financial measures that are not defined under GAAP. These non-GAAP financial measures include adjusted operating income (loss) (including adjusted operating income (loss) for each of our reportable segments, as applicable); Refining, Renewable Diesel, and Ethanol segment margin; and capital investments attributable to Valero. We have included these non-GAAP financial measures to help facilitate the comparison of operating results between periods, to help assess our cash flows, and because we believe they provide useful information as discussed further below. See the tables in note (g) beginning on page 55 for reconciliations of adjusted operating income (loss) (including adjusted operating income (loss) for each of our reportable segments, as applicable) and Refining, Renewable Diesel, and Ethanol segment margin to their most directly comparable GAAP financial measures. Also in note (g), we disclose the reasons why we believe our use of such non-GAAP financial measures provides useful information. See the table on page 61 for a reconciliation of capital investments attributable to Valero to its most directly comparable GAAP financial measure. Beginning on page 60, we disclose the reasons why we believe our use of this non-GAAP financial measure provides useful information.


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OVERVIEW AND OUTLOOK

Overview
Business Operations Update
Our results for the second quarter and first six months of 2022 were favorably impacted by the effect from the ongoing recovery in the worldwide demand for petroleum-based transportation fuels while the worldwide supply of those products remained constrained. This supply and demand imbalance has contributed to increases in the market prices of petroleum-based transportation fuels (as well as crude oil and other feedstocks that are processed to make these products) and in refining margins. Supply has remained constrained for a variety of reasons, including, but not limited to, effects from refinery closures and disruptions in the crude oil and petroleum-based products markets resulting from the Russia-Ukraine conflict. Refineries closed over the last two years and other refineries ceased crude oil processing and are being transitioned to renewable fuel production. In addition, these negative impacts to the supply of petroleum-based products have been exacerbated by the Russia-Ukraine conflict as a result of countries and private market participants responding to the conflict by taking actions to refrain from purchasing and transporting Russian crude oil and petroleum-based products.

The strong demand for our products and the increase in refining margins were the primary contributors to us reporting $4.7 billion of net income attributable to Valero stockholders for the second quarter of 2022 and $5.6 billion of net income attributable to Valero stockholders for the first six months of 2022. Our operating results, including operating results by segment, are described in the following summary under “Second Quarter Results” and “First Six Months Results.” Detailed descriptions can be found under “RESULTS OF OPERATIONS.”

Our operations generated $6.4 billion of cash during the first six months of 2022. This cash was used to make $1.5 billion of capital investments in our business and return $2.7 billion to our stockholders through dividend payments and the purchase of common stock for treasury. In addition, we completed various debt reduction and refinancing transactions that reduced our debt by $1.05 billion during the first six months of 2022. As a result of this and other activity, our cash and cash equivalents increased by $1.3 billion, from $4.1 billion as of December 31, 2021 to $5.4 billion as of June 30, 2022. We had $9.8 billion in liquidity as of June 30, 2022. The components of our liquidity and descriptions of our cash flows, capital investments, and other matters impacting our liquidity and capital resources, can be found under “LIQUIDITY AND CAPITAL RESOURCES.”

Second Quarter Results
For the second quarter of 2022, we reported net income attributable to Valero stockholders of $4.7 billion compared to $162 million for the second quarter of 2021. The increase of $4.5 billion was primarily due to higher operating income of $5.7 billion, partially offset by higher income tax expense of $1.2 billion. The details of our operating income and adjusted operating income by segment and in total are reflected on the following page. Adjusted operating income excludes the adjustments reflected in the tables in note (g).


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Three Months Ended June 30,
20222021Change
Refining segment:
Operating income $6,212 $349 $5,863 
Adjusted operating income 6,122 442 5,680 
Renewable Diesel segment:
Operating income152 248 (96)
Ethanol segment:
Operating income 101 99 
Adjusted operating income 79 99 (20)
Total company:
Operating income 6,219 509 5,710 
Adjusted operating income 6,127 602 5,525 

While our operating income increased by $5.7 billion in the second quarter of 2022 compared to the second quarter of 2021, adjusted operating income increased by $5.5 billion primarily due to the following:

Refining segment. Refining segment adjusted operating income increased by $5.7 billion primarily due to higher gasoline and distillate (primarily diesel) margins and higher throughput volumes, partially offset by higher operating expenses (excluding depreciation and amortization expense) and lower margins on other products.

Renewable Diesel segment. Renewable Diesel segment operating income decreased by $96 million primarily due to higher feedstock costs, an unfavorable impact from commodity derivative instruments associated with our price risk management activities, and higher operating expenses (excluding depreciation and amortization expense), partially offset by higher sales volumes and higher renewable diesel prices.

Ethanol segment. Ethanol segment adjusted operating income decreased by $20 million primarily due to higher corn prices, lower production volumes, and higher operating expenses (excluding depreciation and amortization expense), partially offset by higher ethanol and corn related co-product prices.

First Six Months Results
For the first six months of 2022, we reported net income attributable to Valero stockholders of $5.6 billion compared to a net loss attributable to Valero stockholders of $542 million for the first six months of 2021. The increase of $6.1 billion was primarily due to higher operating income of $7.8 billion, partially offset by higher income tax expense of $1.6 billion. The details of our operating income (loss) and adjusted operating income (loss) by segment and in total are reflected on the following page. Adjusted operating income (loss) excludes the adjustments reflected in the tables in note (g).

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Six Months Ended June 30,
20222021Change
Refining segment:
Operating income (loss)$7,663 $(243)$7,906 
Adjusted operating income (loss)7,591 (32)7,623 
Renewable Diesel segment:
Operating income301 451 (150)
Ethanol segment:
Operating income 102 43 59 
Adjusted operating income 81 43 38 
Total company:
Operating income (loss)7,603 (157)7,760 
Adjusted operating income 7,530 54 7,476 
While our operating income increased by $7.8 billion in the first six months of 2022 compared to the first six months of 2021, adjusted operating income increased by $7.5 billion primarily due to the following:

Refining segment. Refining segment adjusted operating income increased by $7.6 billion primarily due to higher gasoline and distillate (primarily diesel) margins and higher throughput volumes, partially offset by lower margins on other products.

Renewable Diesel segment. Renewable Diesel segment operating income decreased by $150 million primarily due to higher feedstock costs, an unfavorable impact from commodity derivative instruments associated with our price risk management activities, and higher operating expenses (excluding depreciation and amortization expense), partially offset by higher sales volumes and higher renewable diesel prices.

Ethanol segment. Ethanol segment adjusted operating income increased by $38 million primarily due to higher ethanol and corn related co-product prices, partially offset by higher corn prices and higher operating expenses (excluding depreciation and amortization expense).


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Outlook
Many uncertainties remain with respect to the supply and demand imbalance in the petroleum-based products market worldwide, and while it is difficult to predict the ultimate economic impacts this may have on us, we have noted several factors below that have impacted or may impact our results of operations during the third quarter of 2022.

Gasoline and diesel demand has returned to near pre-pandemic levels and is expected to follow typical seasonal patterns. Jet fuel demand continues to improve slowly but remains below pre-pandemic levels.

Light product (primarily gasoline and diesel) inventories in the U.S. are below historical levels and should support continued high utilization of refining capacity.

Crude oil discounts are expected to remain near current levels absent changes in crude oil supply or availability.

Renewable diesel margins are expected to remain consistent with current levels.

Ethanol demand is expected to follow typical seasonal patterns.

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RESULTS OF OPERATIONS

The following tables, including the reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures in note (g) beginning on page 55, highlight our results of operations, our operating performance, and market reference prices that directly impact our operations. Note references in this section can be found on pages 54 through 57.

Second Quarter Results -
Financial Highlights By Segment and Total Company
(millions of dollars)
Three Months Ended June 30, 2022
RefiningRenewable
Diesel
EthanolCorporate
and
Eliminations
Total
Revenues:
Revenues from external customers
$49,495 $855 $1,291 $— $51,641 
Intersegment revenues
11 596 201 (808)— 
Total revenues
49,506 1,451 1,492 (808)51,641 
Cost of sales:
Cost of materials and other (a)41,313 1,213 1,226 (806)42,946 
Operating expenses (excluding depreciation and
amortization expense reflected below)
1,402 58 167 (1)1,626 
Depreciation and amortization expense (c)565 28 (3)— 590 
Total cost of sales
43,280 1,299 1,390 (807)45,162 
Other operating expenses 14 — — 15 
General and administrative expenses (excluding
depreciation and amortization expense reflected
below) (d)
— — — 233 233 
Depreciation and amortization expense— — — 12 12 
Operating income by segment$6,212 $152 $101 $(246)6,219 
Other income, net33 
Interest and debt expense, net of capitalized
interest
(142)
Income before income tax expense6,110 
Income tax expense1,342 
Net income4,768 
Less: Net income attributable to noncontrolling
interests
75 
Net income attributable to
Valero Energy Corporation stockholders
$4,693 


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Second Quarter Results -
Financial Highlights By Segment and Total Company (continued)
(millions of dollars)
Three Months Ended June 30, 2021
RefiningRenewable
Diesel
EthanolCorporate
and
Eliminations
Total
Revenues:
Revenues from external customers
$25,968 $496 $1,284 $— $27,748 
Intersegment revenues
76 84 (161)— 
Total revenues
25,969 572 1,368 (161)27,748 
Cost of sales:
Cost of materials and other24,000 281 1,130 (162)25,249 
Operating expenses (excluding depreciation and
amortization expense reflected below)
1,064 31 119 — 1,214 
Depreciation and amortization expense544 12 20 — 576 
Total cost of sales
25,608 324 1,269 (162)27,039 
Other operating expenses12 — — — 12 
General and administrative expenses (excluding
depreciation and amortization expense reflected
below)
— — — 176 176 
Depreciation and amortization expense— — — 12 12 
Operating income by segment$349 $248 $99 $(187)509 
Other income, net (e)102 
Interest and debt expense, net of capitalized
interest
(150)
Income before income tax expense461 
Income tax expense (f)169 
Net income292 
Less: Net income attributable to noncontrolling
interests
130 
Net income attributable to
Valero Energy Corporation stockholders
$162 


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Second Quarter Results -
Average Market Reference Prices and Differentials
Three Months Ended June 30,
20222021
Refining
Feedstocks (dollars per barrel)
Brent crude oil
$111.69 $69.00 
Brent less West Texas Intermediate (WTI) crude oil3.03 2.91 
Brent less Alaska North Slope (ANS) crude oil
(0.78)0.56 
Brent less Louisiana Light Sweet (LLS) crude oil
1.54 1.05 
Brent less Argus Sour Crude Index (ASCI) crude oil
6.59 3.34 
Brent less Maya crude oil
7.91 6.13 
LLS crude oil
110.15 67.95 
LLS less ASCI crude oil
5.05 2.29 
LLS less Maya crude oil
6.37 5.08 
WTI crude oil
108.66 66.09 
Natural gas (dollars per million British Thermal Units (MMBtu))7.23 2.93 
Product margins (dollars per barrel)
U.S. Gulf Coast:
Conventional Blendstock of Oxygenate Blending
(CBOB) gasoline less Brent
31.33 14.43 
Ultra-low-sulfur (ULS) diesel less Brent
55.95 12.99 
Propylene less Brent
(38.56)(20.41)
CBOB gasoline less LLS
32.87 15.48 
ULS diesel less LLS
57.49 14.04 
Propylene less LLS
(37.02)(19.36)
U.S. Mid-Continent:
CBOB gasoline less WTI
36.08 19.93 
ULS diesel less WTI
60.16 18.42 
North Atlantic:
CBOB gasoline less Brent
41.58 17.37 
ULS diesel less Brent
70.25 15.07 
U.S. West Coast:
California Reformulated Gasoline Blendstock of
Oxygenate Blending (CARBOB) 87 gasoline less ANS
55.06 27.18 
California Air Resources Board (CARB) diesel less ANS
58.37 15.28 
CARBOB 87 gasoline less WTI
58.87 29.53 
CARB diesel less WTI
62.18 17.63 


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Second Quarter Results -
Average Market Reference Prices and Differentials (continued)
Three Months Ended June 30,
20222021
Renewable Diesel
New York Mercantile Exchange ULS diesel
(dollars per gallon)
$4.03 $2.00 
Biodiesel RIN (dollars per RIN)1.70 1.71 
California Low-Carbon Fuel Standard (dollars per metric ton)104.30 184.82 
Chicago Board of Trade (CBOT) soybean oil
(dollars per pound)
0.80 0.63 
Ethanol
CBOT corn (dollars per bushel)7.77 6.58 
New York Harbor ethanol (dollars per gallon)2.84 2.38 

Total Company, Corporate, and Other
The following table includes selected financial data for the total company, corporate, and other for the second quarter of 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Three Months Ended June 30,
20222021Change
Revenues$