AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 3/6 · 19/10/2026
Moat25
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 1/4 · Discounted-feedstock processing and distribution access are useful capabilities, but highly competitive markets and nonpreferential crude purchase pricing limit evidence of a defensible relative advantage.
durability · 1/4 · Historical losses from narrower feedstock discounts, the California impairment and completed Benicia idling demonstrate fragility despite enduring physical infrastructure.
customer dependency · 1/4 · Most customer contracts are spot arrangements without remaining performance obligations. Commercial volumes demonstrate demand, but provide little evidence of customer lock-in or costly switching.
erosion resilience · 1/4 · The 2026 recovery shows continuing earning capacity, but realized differential sensitivity and refinery impairment and idling show limited protection from adverse economics and regulation.
Pricing power38
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 2/4 · Second-quarter 2026 revenue growth primarily reflected higher petroleum-product prices, and refining product margins improved despite higher feedstock costs. These are favorable realized pricing outcomes, but commodity exposure prevents attributing them to discretionary pricing power.
retention · 1/4 · Record commercial volumes in disclosed markets provide indirect evidence of continuing demand. Predominantly spot sales provide weak evidence of durable repeat customer attachment; no retention rate is inferred.
margin resilience · 1/4 · Improved 2026 refining economics are meaningful, but prior differential compression hurt results and management explicitly describes substantial uncontrollable margin swings. Ethanol improvement also benefited from production credits.
contractual freedom · 2/4 · Predominantly spot contracts allow frequent repricing rather than long-term fixed customer commitments. This flexibility is constrained by highly competitive commodity markets and does not demonstrate freedom to impose premium prices.
Predictability—
Missing exact annual revenue, free cash flow or FCF margin; operating cash flow and capex must both be reported for all five years.
Financial strength—
Missing required inputs: debtFcfGrade. Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- netDebtEbitGrade
- 62.71
- interestCoverageGrade
- 42.92
- currentRatioGrade
- 71.60
- Net debt / operating income (x)
- 1.86
- Interest coverage (x)
- 5.72
- Current ratio (x)
- 1.65
Capital allocation—
Missing required inputs: cashConversionGrade. Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 18.73
- 3-year average dilution (%)
- -7.82
- 3-year average SBC / revenue (%)
- 0.08
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · First-half 2026 operating cash of $6.97 billion covered investment spending and shareholder distributions while cash increased and weighted-average shares declined. Borrowings also exceeded repayments, and the $1.1 billion refinery impairment limits the investment record. Buyback value creation is not established by spending alone.
incentive alignment · 2/4 · Actual performance-share grants, performance-dependent payout terms, ownership requirements and a disclosed January 2026 vesting support alignment. Relative TSR thresholds strengthen accountability, but ratable vesting and relative measures do not establish exceptional alignment with absolute long-term economic outcomes.
execution · 3/4 · Reported 97.5% mechanical availability, successful turnaround completions and a financial systems upgrade completed on time and budget support strong execution. These are disclosed achievements, not merely goals. The Port Arthur fire and reduced-capacity restart temper the assessment; earnings recovery is not attributed wholly to management.
governance · 2/4 · Documented audit committee activity and an unqualified auditor opinion on internal controls support functioning oversight. Combined CEO and chairman roles introduce concentration of authority, and financial-reporting controls alone do not demonstrate exceptional overall governance.
Evidence
A significant portion of our profitability is derived from the ability to purchase and process crude oil feedstocks that historically have been cheaper than benchmark crude oils.
Risk factors: profitability from discounted crude feedstocks · Filed 25/02/2026
Most of our refineries have access to marine facilities, and they interconnect with common-carrier pipeline systems, allowing us to sell products in the U.S., Canada, the U.K., Ireland, Latin America, and other parts of the world.
Business: marine facilities and common-carrier pipeline access · Filed 25/02/2026
Our strategic actions have enabled us to be a low-cost, efficient, and reliable supplier of these liquid transportation fuels to much of the world.
Strategy: management's low-cost supplier assertion · Filed 25/02/2026
Previous declines in such differentials have had, and any future declines will likely again have, a negative impact on our results of operations.
Risk factors: realized effects of narrower feedstock differentials · Filed 25/02/2026
The refining and marketing industry is highly competitive with respect to both feedstock supply and refined petroleum product markets.
Competition: feedstock and refined-product markets · Filed 25/02/2026
Such competitors are at times able to offset or avoid losses or decreased profitability from downstream operations, or in challenging regions, with such other operations, and may be better positioned to withstand periods of reduced product margins or feedstock disruptions.
Competition: potential resilience of diversified competitors · Filed 25/02/2026
The majority of the crude oil purchased under our term contracts is purchased at the producer’s official stated price (i.e., the “market” price established by the seller for all purchasers) and not at a negotiated price specific to us.
Business: crude purchases at producers' market prices · Filed 25/02/2026
Therefore, we reduced the carrying values of these assets to their estimated fair values of $722 million and $847 million, respectively, and recognized a combined asset impairment loss of $1.1 billion in our Refining segment in March 2025.
Financial statement notes: California refinery impairment · Filed 25/02/2026
In accordance with our plan, full idling of all processing units was completed in April 2026.
Financial statement notes: completed Benicia idling in April 2026 · Filed 30/07/2026
Contract Balances Contract balances were as follows (in millions): June 30, 2026 December 31, 2025 Receivables from contracts with customers, included in receivables, net $ 8,112 $ 6,233 Contract liabilities, included in accrued expenses 102 60 Remaining Performance Obligations We have spot and term contracts with customers, the majority of which are spot contracts with no remaining performance obligations.
Revenue note: predominantly spot customer contracts · Filed 30/07/2026
Three Months Ended June 30, 2026 2025 Change Revenues $ 44,476 $ 29,889 $ 14,587 Cost of sales (see note (a)) 39,007 28,640 10,367 Operating income 5,196 997 4,199 Adjusted operating income (see note (c)) 5,178 1,001 4,177 Income tax expense 1,094 279 815 Net income (loss) attributable to noncontrolling interests 353 (51) 404 Revenues increased by $14.6 billion in the second quarter of 2026 compared to the second quarter of 2025 primarily due to increases in product prices for the petroleum-based transportation fuels associated with sales made by our Refining segment.
Second-quarter results: realized product-price and revenue increases · Filed 30/07/2026
This increase in revenues was partially offset by an increase in cost of sales of $10.4 billion primarily due to increases in crude oil and other feedstock costs.
Second-quarter results: higher crude and feedstock costs · Filed 30/07/2026
Refining segment adjusted operating income increased by $3.2 billion primarily due to higher gasoline and distillate (primarily diesel) margins, partially offset by a decline in sweet crude oil differentials.
Refining results: higher product margins and narrower sweet crude differentials · Filed 30/07/2026
The volatile nature of commodity pricing that characterizes our primary feedstocks, as well as the resulting products that are sold to customers, can result in significant swings in short-term product margins and our earnings that are beyond our control.
Compensation discussion: commodity-driven swings in prices, margins and earnings · Filed 19/03/2026
5 Table of Contents VALERO ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (millions of dollars) (unaudited) Six Months Ended June 30, 2026 2025 Cash flows from operating activities: Net income $ 5,395 $ 11 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 1,577 1,505 Asset impairment loss — 1,131 Deferred income tax benefit (268) (259) Changes in operating assets and liabilities: Current assets and current liabilities (see Note 11) 403 (168) Deferred charges and other assets (57) (50) Long-term liabilities (180) (56) Other operating activities, net 100 (226) Net cash provided by operating activities 6,970 1,888 Cash flows from investing activities: Capital expenditures (excluding variable interest entities (VIEs)) (382) (333) Capital expenditures of VIEs: Diamond Green Diesel Holdings LLC (DGD) (7) (63) Other VIEs (2) (3) Deferred turnaround and catalyst cost expenditures (excluding VIEs) (374) (621) Deferred turnaround and catalyst cost expenditures of DGD (33) (46) Investments in nonconsolidated joint ventures — (1) Other investing activities, net 37 20 Net cash used in investing activities (761) (1,047) Cash flows from financing activities: Proceeds from debt issuances and borrowings (excluding VIEs) 2,700 4,749 Proceeds from debt borrowings of DGD 450 300 Repayments of debt and finance lease obligations (excluding VIEs) (1,959) (4,656) Repayments of debt and finance lease obligations of VIEs: DGD (464) (213) Other VIEs (21) (21) Purchases of common stock for treasury (2,836) (612) Payment of excise tax on purchases of common stock for treasury (25) (28) Common stock dividend payments (714) (710) Contributions from noncontrolling interests 191 97 Distributions to noncontrolling interests (222) (131) Other financing activities, net (9) (6) Net cash used in financing activities (2,909) (1,231) Effect of foreign exchange rate changes on cash (111) 273 Net increase (decrease) in cash, cash equivalents, and restricted cash 3,189 (117) Cash, cash equivalents, and restricted cash at beginning of period (a) 4,865 4,829 Cash, cash equivalents, and restricted cash at end of period (a) $ 8,054 $ 4,712 ________________________ (a)Restricted cash is included in prepaid expenses and other in our consolidated balance sheets.
Six-month cash flow statement: operating cash, investment, financing and distributions · Filed 30/07/2026
1 Table of Contents 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, 2026 2025 2026 2025 Revenues (a) $ 44,476 $ 29,889 $ 76,857 $ 60,147 Cost of sales: Cost of materials and other 35,130 24,678 61,315 50,726 Taxes other than income taxes 1,648 1,654 3,369 3,154 Operating expenses (excluding depreciation and amortization expense reflected below) 1,506 1,522 3,101 3,045 Depreciation and amortization expense 723 786 1,551 1,466 Total cost of sales 39,007 28,640 69,336 58,391 Asset impairment loss — — — 1,131 Other operating expenses 26 4 50 8 General and administrative expenses (excluding depreciation and amortization expense reflected below) 233 220 518 481 Depreciation and amortization expense 14 28 26 39 Operating income 5,196 997 6,927 97 Other income, net 116 86 248 206 Interest and debt expense, net of capitalized interest (145) (141) (285) (278) Income before income tax expense 5,167 942 6,890 25 Income tax expense 1,094 279 1,495 14 Net income 4,073 663 5,395 11 Less: Net income (loss) attributable to noncontrolling interests 353 (51) 412 (108) Net income attributable to Valero Energy Corporation stockholders $ 3,720 $ 714 $ 4,983 $ 119 Earnings per common share $ 12.62 $ 2.28 $ 16.79 $ 0.37 Weighted-average common shares outstanding (in millions) 294 312 296 313 Earnings per common share – assuming dilution $ 12.62 $ 2.28 $ 16.78 $ 0.37 Weighted-average common shares outstanding – assuming dilution (in millions) 294 312 296 313 __________________________ Supplemental information: (a) Includes excise taxes on sales by certain of our foreign operations $ 1,660 $ 1,662 $ 3,385 $ 3,166 See Condensed Notes to Consolidated Financial Statements.
Income statement: earnings recovery and weighted-average share counts · Filed 30/07/2026
Annual Incentive Bonus Performance Goals and Achievements Component Weighting Minimum Target Maximum Achieved in 2025 Bonus Percent Earned Financial Performance Goal I.Adjusted EPS ($/share) 40.00% $1.71 $6.83 $10.24 $10.61 80.00% Operational Performance Goals II.Health, Safety, and Environment 13.33% 0.00% 100.00% 200.00% 199.00% 26.53% III.Mechanical Availability 13.33% 95.6% 96.2% 97.6% 97.5% 26.02% IV.Refining Cash Operating Expense Management ($/EDC) 13.34% $192.00 $164.00 $145.00 $136.00 26.68% Subtotal 40.00% Subtotal 79.23% Strategic Execution Goals V.Strategic Execution 20.00% 0.00% 100.00% 200.00% 200.00% 40.00% Total 100.00% Final Bonus Achieved and Total Payout: 199.23% Our above-target annual incentive bonus achievement reflects high-level operational execution, significant earnings and stockholder returns, and excellent execution in key areas of our strategy.
Compensation discussion: actual 2025 operating achievements and bonus calculation · Filed 19/03/2026
budget •Continued disciplined deployment of capital under our capital allocation framework, with all growth projects being held to the same minimum after-tax internal rate of return requirement Operational Excellence •Execution of capital projects and turnarounds •Executed a heavy turnaround workload with successful completion and start-up of FCC units at five refineries •Margin improvement and market expansion •Achieved record commercial volumes in the U.K.
Strategic accomplishments: turnaround completion and commercial volumes · Filed 19/03/2026
(4)Represents the number of performance shares awarded under our 2020 OSIP to our NEOs on February 26, 2025 as part of our LTI compensation program described in “Compensation Discussion and Analysis—Elements of Executive Compensation—Long-Term Incentive Awards—Performance Shares.”
Executive compensation: performance shares actually awarded in February 2025 · Filed 19/03/2026
Per the awards’ terms, on a normal vesting date executives can earn, in shares of Common Stock, from 0% to 200% of the number of performance shares that are vesting based on Valero’s achievement of objective performance measures during the performance periods set by the Human Resources and Compensation Committee.
Executive compensation: performance award payout terms · Filed 19/03/2026
(8)One-half of these performance shares vested on January 21, 2026 at 200% of target, and the other half is scheduled to vest in January 2027.
Executive compensation: actual January 2026 vesting and scheduled future tranche · Filed 19/03/2026
•Our officers and directors are subject to rigorous Stock Ownership and Retention Guidelines, as discussed under “Compensation-Related Policies” below, which require (i) more ownership for our CEO and President (as a percent of salary) than the median practices among our peers, and more broadly, among S&P 500 companies; and (ii) pre-approval from the Committee (for our CEO) and our CEO (for other officers) for sales exceeding 20 percent of the officer’s holdings of Valero Common Stock, which promotes our NEOs’ ongoing retention of Valero Common Stock following vesting beyond that of the minimum ownership requirements.
Compensation policies: ownership and stock-sale approval requirements · Filed 19/03/2026
In 2025, some of the key accomplishments and highlights of the committee’s activities throughout the year or that its oversight helped enable included the following: •oversaw Valero’s SAP financial systems upgrade, which was successfully completed on time and on budget; •continued its oversight of Valero’s cybersecurity and IT practices and risks, including again receiving and discussing an annual cybersecurity/IT update report, and periodically reviewing and discussing the use of data, technology, and artificial intelligence (“AI”) by Valero and its independent auditor; •reviewed and discussed critical accounting and financial reporting matters related to Valero’s Benicia refinery; •continued an enhanced annual process to formally evaluate the performance of Valero’s independent auditor and held an executive session with Valero’s independent auditor at every committee meeting; •reviewed and discussed the impacts of various regulatory and other developments on Valero’s financial statements and public disclosures; •continued an enhanced process for reviewing Valero’s earnings release information prior to issuance; •promoted Valero’s efforts with respect to accurate and timely financial statement reporting, including through periodic reports and discussions regarding Valero’s controls and procedures framework, Sarbanes-Oxley compliance, financial reporting, internal audit, and financial statement integrity initiatives; •oversaw the execution of Valero’s 2025 internal audit plan, with services covering matters related to Valero’s low-carbon fuels, data privacy, cybersecurity efforts, and trading and commercial risk, among others; •continued focus placed on enterprise risk management, including by reviewing and discussing Valero’s (i) insurance and risk management framework; (ii) implementation and completion of an internal threat assessment of hundreds of individuals with access to critical infrastructure; (iii) increased drone surveillance and mitigation efforts over refinery airspace; and (iv) continued enhancement and progression of its third-party due diligence program; and •received quarterly updates on Valero’s ethics helpline activity, referable compliance issues, company policy updates, and other compliance initiatives and efforts.
Governance: audit committee activities and completed financial systems upgrade · Filed 19/03/2026
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Auditor opinion: effective internal control over financial reporting · Filed 25/02/2026
While the Board has determined that combining the CEO and Chairman roles is appropriate under current circumstances, our governance documents do not establish this approach as a policy, and such roles were split during Mr.
Governance: combined CEO and chairman roles · Filed 19/03/2026
•On March 23, 2026, our Port Arthur Refinery experienced a fire in one of the refinery’s distillate hydrotreater units, which is more fully discussed in Note 5 of Condensed Notes to Consolidated Financial Statements.
Operating update: March 2026 Port Arthur refinery fire · Filed 30/04/2026
As of the date of this quarterly report on Form 10-Q, the Port Arthur Refinery has resumed operations at reduced capacity.
Operating update: Port Arthur resumed at reduced capacity · Filed 30/04/2026
•Ethanol segment. Ethanol segment operating income increased by $264 million primarily due to the recognition of clean fuel production credits in 2026, higher ethanol and corn-related co-product prices, and lower corn prices.
Ethanol results: production credits and commodity-price effects · Filed 30/07/2026
Our 2025 performance share design requires relative TSR performance above the peer median in order to achieve target performance and caps overall payouts at 200 percent of target.
Compensation discussion: relative TSR threshold and payout ceiling · Filed 19/03/2026
