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What changed in Valero Energy's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Valero Energy's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+307 added−319 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in Valero Energy's 2023 10-K

307 paragraphs added · 319 removed · 243 edited across 5 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

127 edited+42 added−41 removed25 unchanged
Biggest changeMoreover, the EPA has indicated that it intends in the near future to pursue more stringent GHG emissions standards for model year 2027 and later passenger vehicles and to seek GHG emissions reductions for medium and heavy-duty vehicles pursuant to its “Clean Truck Plan.” Additionally, in July 2022, the Federal Highway Administration proposed rules that would require certain U.S. state departments of transportation and metropolitan planning organizations to establish declining carbon dioxide emissions targets for motor vehicle tailpipe carbon dioxide emissions that align with the current administration’s net-zero targets.
Biggest changeAdditionally, in November 2023, the Federal Highway Administration finalized rules that require certain U.S. state departments of transportation and metropolitan planning organizations to establish declining tailpipe carbon dioxide emissions targets for motor vehicles. Most recently, in December 2023, the EPA announced final rules intended to sharply reduce emissions of methane and other air pollution from oil and gas operations.
Governments and private parties are also increasingly filing lawsuits or initiating regulatory action based on allegations that certain public statements and disclosures by companies regarding climate change and other ESG matters are false and misleading “greenwashing” that violate deceptive trade practices, consumer protection statutes, or other similar laws and regulations, or are fraudulent or misleading under applicable corporate, securities, stock exchange, or other similar laws and regulations.
Governments and private parties are also increasingly filing lawsuits or initiating regulatory action based on allegations that certain public statements and disclosures by companies regarding climate change and other ESG matters are false or misleading “greenwashing” that violate deceptive trade practices, consumer protection statutes, or other similar laws and regulations, or are fraudulent or misleading under applicable corporate, securities, stock exchange, or other similar laws and regulations.
Failure by us, an entity in which we have a joint venture interest, or the VIEs to adequately manage the risks associated with such entities, and any differences in views among us and other joint venture members or the third-party equity holders in the VIEs, could prevent or delay actions that are in the best interest of us, the joint venture, or the VIE, and could have a material adverse effect on our financial condition, results of operations, and liquidity.
Failure by us, an entity in which we have a joint venture interest, or the VIEs to adequately manage the risks associated with such entities, and any differences in views among us and other joint venture members or the third-party equity holders in the VIEs, could prevent or delay actions that are in the best interest of us, the joint venture, or the VIE, and could have a material adverse effect on our business, financial condition, results of operations, and liquidity.
Our information technology systems and network infrastructure may be subject to unauthorized access or attack (and we are frequently subject to such attempts), including ransom-related incidents that could result in increased costs to prevent, and be prepared to respond to or mitigate such events, such as deploying additional personnel and protection technologies, training employees, and engaging third-party experts and consultants.
Our information systems and network infrastructure may be subject to unauthorized access or attack (and we are frequently subject to such attempts), including ransom-related incidents that could result in increased costs to prevent, and be prepared to respond to or mitigate such events, such as deploying additional personnel and protection technologies, training employees, and engaging third-party experts and consultants.
The other joint venture members and the third-party equity holders of the VIEs may have economic, business, or legal interests, opportunities, or goals that are inconsistent with or different from our opportunities, goals, and interests, or may have different liquidity needs or financial condition characteristics than our own, be subject to different legal or contractual obligations than we are, or be unable to meet their obligations.
The other joint venture members and the third-party equity holders of the VIEs have certain economic, business, or legal interests, opportunities, or goals that are inconsistent with or different from our interests, opportunities, and goals, have different liquidity needs or financial condition characteristics than our own, are subject to different legal or contractual obligations than we are, and may be unable to meet their obligations.
There can be no assurance that our current or future infrastructure protection technologies and disaster recovery plans can prevent such breaches, cyber, and ransom-related incidents, or systems failures, any of which could have a material adverse effect on our business, financial condition, results of operations, and liquidity.
There can be no assurance that our current or future infrastructure protection technologies and disaster recovery plans can prevent or mitigate such breaches, cyber, and ransom-related incidents, or systems failures, any of which could have a material adverse effect on our business, financial condition, results of operations, and liquidity.
The EPA states that its final rule is projected to reduce gasoline consumption by more than 360 billion gallons by 2050, reaching a 15 percent reduction in annual U.S. gasoline consumption in 2050.
The EPA states that its rule is projected to reduce gasoline consumption by more than 360 billion gallons by 2050, reaching a 15 percent reduction in annual U.S. gasoline consumption in 2050.
Many government authorities across the world have imposed, and may impose in the future, policies or regulations designed to facilitate less petroleum-dependent modes of transportation (e.g., increases in fuel economy standards, low-carbon fuel standards, restrictions and bans on vehicles using liquid fuels, tariffs, tax incentives, and subsidies), which could reduce demand for our petroleum-based products and/or all liquid transportation fuels.
Many government authorities across the world have imposed, and may impose in the future, policies or regulations designed to facilitate less petroleum-dependent modes of transportation (e.g., increases in fuel economy or efficiency standards, low-carbon fuel standards, restrictions and bans on vehicles using liquid fuels, tariffs, tax incentives, and EV subsidies), which could reduce demand for our petroleum-based products and/or all liquid transportation fuels.
This data is subject to regulation at various levels of government in many areas of our business and in jurisdictions across the world, including data privacy and security laws such as the California Consumer Privacy Act (CCPA), the California Privacy Rights Act (CPRA), the EU General Data Protection Regulation (GDPR), the U.K. and General Data Protection Regulation (U.K.
This data is subject to regulation at various levels of government in many areas of our business and in jurisdictions across the world, including data privacy and security laws such as the California Consumer Privacy Act, the California Privacy Rights Act, the EU General Data Protection Regulation (GDPR), the U.K. and General Data Protection Regulation (U.K.
If we experience prolonged interruptions of supply or increases in costs to deliver our products to market, or if the ability of the logistics assets used to transport our feedstocks or products is disrupted because of weather events, water levels of key waterways for trade, rail disruptions, cybersecurity incidents, accidents, derailments, collisions, fires, explosions, spills, public health crises, hostilities, or other government or third-party actions (including protests), it could have a material adverse effect on our business, financial condition, results of operations, and liquidity.
If we experience prolonged interruptions of supply or increases in costs to deliver our products to market, or if the ability of the logistics assets used to transport our feedstocks or products is disrupted because of labor issues, weather events, dock availability, water levels of key waterways for trade, rail disruptions, cybersecurity incidents, accidents, derailments, collisions, fires, explosions, spills, public health crises, hostilities, or other government or third-party actions (including protests), it could have a material adverse effect on our business, financial condition, results of operations, and liquidity.
Significant interruptions in our operations could also lead to increased volatility in the price of our feedstocks and many of our products. We have experienced certain of these events in the past, and although we focus on maintaining safe, stable, and reliable operations, we may experience additional events in the future.
Significant interruptions in our operations could also lead to increased volatility in the price of our feedstocks and many of our products. We have experienced some of these events in the past, and although we focus on maintaining safe, stable, and reliable operations, we may experience additional events in the future.
In November 2022, California approved its “Advanced Clean Cars II” rulemaking, which similarly requires an increasing percentage of zero-emission light-duty vehicle sales through 2035, at which time 100 percent of light-duty vehicle sales in California must be zero-emission vehicles.
In November 2022, California approved its “Advanced Clean Cars II” rulemaking, which similarly requires an increasing percentage of “zero-emission” light-duty vehicle sales through 2035, at which time 100 percent of light-duty vehicle sales in California must be zero-emission vehicles.
For example, in September 2022, California adopted the Oil Refinery Cost Disclosure Act (SB 1322), which will require refineries in California to report monthly on the volume and cost of the crude oil they buy, the quantity and price of the wholesale gasoline they sell, and the gross gasoline margin per barrel, among other information, some or all of which data could become publicly available.
For example, in September 2022, California adopted the Oil Refinery Cost Disclosure Act (SB 1322), which requires refineries in California to report monthly on the volume and cost of the crude oil they buy, the quantity and price of the wholesale gasoline they sell, and the gross gasoline margin per barrel, among other information, some or all of which data could become publicly available.
We also conduct some of our operations through entities in which we have a minority or no equity ownership interest, such as the variable interest entities (VIEs) described in Note 11 of Notes to Consolidated Financial Statements.
We also conduct some of our operations through entities in which we have a minority or no equity ownership interest, such as the variable interest entities (VIEs) described in Note 12 of Notes to Consolidated Financial Statements.
Certain employees at five of our U.S. refineries, as well as at each of our Canada and U.K. refineries, and one of our terminals, are covered by collective bargaining or similar agreements, which generally have unique and independent expiration dates.
Certain employees at five of our U.S. refineries, as well as at each of our Canada and U.K. refineries, are covered by collective bargaining or similar agreements, which generally have unique and independent expiration dates.
We are exposed to the volatility in the market price of RINs, LCFS credits, and other credits, as described in Note 19 of Notes to Consolidated Financial Statements. We cannot predict the future prices of RINs, LCFS credits, or other credits.
We are exposed to the volatility in the market price of RINs, LCFS credits, and other credits, as described in Note 20 of Notes to Consolidated Financial Statements. We cannot predict the future prices of RINs, LCFS credits, or other credits.
ITEM 1A. RISK FACTORS You should carefully consider the following risk factors in addition to the other information included in this report. Each of these risk factors could adversely affect our business, financial condition, results of operations, and/or liquidity, as well as adversely affect the value of an investment in our securities.
ITEM 1A. RISK FACTORS You should carefully consider the following risk factors in addition to the other information included in this report. Each of these risks could adversely affect our business, financial condition, results of operations, and/or liquidity, as well as, in certain cases, the value of an investment in our securities.
U.S. and other government sanctions and actions by governments and private market participants to refrain from purchasing or transporting crude oil and petroleum-based products from particular countries 21 Table of Contents (such as in response to the Russia-Ukraine conflict) have impacted and may continue to impact trade flows, and have limited and may continue to limit our access to business opportunities in various countries.
U.S. and other government sanctions and actions by governments and private market participants to refrain from purchasing or transporting crude oil and petroleum-based products from particular countries (such as in response to the Russia-Ukraine conflict) have impacted, and may continue to impact, trade flows, and have limited, and may continue to limit, our access to business opportunities in various countries.
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. These crude oil feedstock differentials vary significantly depending on overall economic conditions and trends and conditions within the markets for crude oil and refined petroleum products .
Additionally, 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. These crude oil feedstock differentials vary significantly depending on many factors, including overall economic conditions and trends and conditions within the markets for crude oil and refined petroleum products .
Although we actively manage these costs through contracting and hedging our exposure to price volatility as appropriate, and by pursuing projects that reduce our reliance on third parties and fortify the resilience of our assets, increases in prices for natural gas and electricity, or disruptions to our supply thereof, could materially and adversely affect our business, financial condition, results of operations, and liquidity.
Although we actively manage these risks through contracting and hedging our exposure to price volatility as appropriate, and by pursuing projects that reduce our reliance on third parties and fortify the resilience of our assets, increases in prices for natural gas and electricity, or disruptions to our supply thereof, have in the past, and could again, materially and adversely affect our business, financial condition, results of operations, and liquidity.
In addition to our own logistic assets, we use the services of third parties to transport feedstocks to our refineries and plants and to transport our products to market.
In addition to our own logistics assets, we use the services of third parties to transport feedstocks to our refineries and plants and to transport our products to market.
For example, in December 2021, the EPA finalized its “Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emission Standards,” revising the GHG emissions standards for light-duty vehicles for 2023 and later model years at a level that cannot be achieved by internal combustion engine vehicles through improvements in combustion efficiency.
For example, the EPA issued its “Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emission Standards,” revising the GHG emissions standards for light-duty vehicles for 2023 and later model years at a level that cannot be achieved by internal combustion engine vehicles through improvements in combustion efficiency.
A breach could also originate from or compromise our customers’, vendors’, suppliers’, or other third-party networks outside of our control that could impact our business and operations, as occurred with the Colonial Pipeline cybersecurity incident in May 2021.
A breach could also originate from or compromise our customers’, vendors’, suppliers’, or other third-party networks outside of our 30 Table of Content s control that could impact our business and operations, as occurred with the Colonial Pipeline cybersecurity incident in May 2021.
If any refinery or plant, or related pipeline or terminal, were to experience an interruption in operations, our earnings could be materially and adversely affected (to the extent not recoverable through insurance) because of lost productivity and repair and other costs.
If any refinery or plant, or related logistics assets, were to experience an interruption in operations, our earnings could be materially and adversely affected (to the extent not recoverable through insurance) because of lost productivity and repair and other costs.
The principal environmental risks associated with our operations are emissions into the air, handling of waste, and releases into the soil, surface water, or groundwater. Environmental laws also may impose liability on us for the conduct of third parties or for actions that complied with applicable requirements when taken, regardless of negligence or fault.
The principal environmental risks associated with our operations are emissions into the air, handling of waste, and releases into the soil, surface water, or groundwater. Such laws have imposed, and may again impose, liability on us for the conduct of third parties or for actions that complied with applicable requirements when taken, regardless of negligence or fault.
As electrification continues to grow, or if there are increased restrictions or costs imposed on the ability of utilities or power suppliers to utilize certain energy sources (such as through restrictions on fossil fuel or nuclear-generated electricity or ESG pressure not to use such sources of electricity generation), there will likely be increased strains on, and risks to the integrity, reliability, and resilience of electrical grids, and increased volatility and tightness in natural gas and electricity supplies across the world, and such events could negatively affect the cost, reliability, and availability of our natural gas and electricity supplies.
As electrification continues to grow, or if there are increased restrictions or costs imposed on the ability of utilities or power suppliers to utilize certain energy sources (such as through restrictions on fossil fuel or nuclear-generated electricity or ESG pressure not to use such sources of electricity generation), there will likely be increased strains on and risks to the integrity, reliability, and resilience of electrical grids, and increased volatility and tightness in natural gas and electricity supplies across the world.
These in turn depend on, among other things, the availability and quantity of feedstocks and liquid transportation fuels imported into the countries in which we operate, the production levels of suppliers, levels of product inventories, productivity and growth (or the lack thereof) of the U.S. and global economies, the U.S. government’s relationships with foreign governments, political affairs, and the extent of government regulation.
These in turn depend on, among other things, the availability and quantity of feedstocks and liquid transportation fuels imported into the countries in which we operate, the production levels of suppliers, levels of product inventories, productivity and growth (or the lack thereof) of the U.S. and global economies, the U.S. government’s relationships with foreign governments, political affairs, the extent of government regulation, and the events described in many of the other risk factors below.
While we believe that our ESG disclosures and methodologies reflect our business strategy and are reasonable at the time made or used, as our business or applicable methodologies, standards, or regulations develop and evolve, we may revise or cease reporting or using certain disclosures and methodologies if we determine that they are no longer advisable or appropriate.
While we believe that our ESG disclosures and methodologies reflect our business strategy and are reasonable at the time made or used, as our business or applicable methodologies, standards, or regulations develop and evolve, we may revise or cease reporting or using certain disclosures and methodologies if we determine that they are no longer advisable or appropriate, or are otherwise required to do so.
In addition to these U.S. federal measures, in March 2022, the EPA reinstated a waiver of preemption (which is currently subject to legal challenge) under federal law authorizing California to implement its “Advanced Clean Cars I” rule requiring sales of increasing percentages of alternative fuel vehicles, thereby also reviving other U.S. states’ ability to adopt standards identical to California’s.
In addition to these U.S. federal measures, in March 2022, the EPA reinstated a waiver of preemption under federal law authorizing California to implement its “Advanced Clean Cars I” rule requiring sales of increasing percentages of alternative fuel vehicles, thereby also reviving other U.S. states’ ability to adopt standards identical to California’s.
If we are unable to obtain adequate or optimal volumes or are able to obtain such volumes only at unfavorable prices, our business, financial condition, results of operations, and liquidity could be materially adversely affected, including from reduced sales volumes of products or reduced margins as a result of higher costs.
If we are unable to obtain adequate or optimal volumes or are able to obtain such volumes only at unfavorable prices, our business, financial condition, results of operations, and liquidity could be materially and adversely affected, including from reduced sales volumes of products or higher operating costs.
Renewable Transport Fuel Obligation, the South Coast Air Quality Management District’s Rule 1109.1 – Emissions of Oxides of Nitrogen from Petroleum Refineries and Related Operations, CARB’s Control Measure for Ocean-Going Vessels At Berth Rule, reductions in the National Ambient Air Quality Standards, bans or restrictions on certain chemicals or processes, and other laws related to climate, GHG emissions, environmental, health, or safety matters could result in increased costs and capital expenditures, among other impacts, to (i) operate and maintain our facilities, (ii) install new emission controls at our facilities, and (iii) administer and manage any emissions or blending programs, including obtaining emission credits, allowances, or allotments.
Renewable Transport Fuel Obligation, the South Coast Air Quality Management District’s Rule 1109.1 – Emissions of Oxides of Nitrogen from Petroleum Refineries and Related Operations, CARB’s Control Measure for Ocean-Going Vessels At Berth Rule, reductions in the National Ambient Air Quality Standards, bans or restrictions on certain chemicals, feedstocks, products, or processes, and other laws related to climate, GHG emissions, or environmental, health, or safety matters, have resulted in, and are expected to continue to result in, increased costs and capital expenditures, among other impacts, to (i) operate and maintain our facilities (including restrictions on certain refinery operations and requirements to modify our operations), (ii) install new emission controls or other equipment at our facilities, and (iii) administer and manage any emissions or blending programs, including obtaining emission credits, allowances, or allotments.
For example, ESG-focused stockholder activism has been increasing in the fossil fuel industry and has resulted in more frequent attempts to effect business or governance changes through mechanisms such as stockholder proposals, vote-no campaigns, and exempt proxy solicitations, among others.
For example, ESG-focused activism has increased in the fossil fuel industry and has resulted in more frequent attempts to effect business or governance changes through mechanisms such as stockholder proposals, vote-no campaigns, and exempt proxy solicitations.
Additionally, increased government regulations and public opposition to pipeline construction and electricity generation and transmission projects may result in the underinvestment in, or unavailability of, the infrastructure and logistics assets needed to obtain natural gas feedstocks and electricity in a reliable and cost-efficient manner.
Additionally, increased government regulations and public opposition to pipeline construction and electricity generation and transmission projects have resulted in, and could continue to result in, the underinvestment in, or unavailability of, the infrastructure and logistics assets needed to obtain natural gas feedstocks and electricity in a reliable and cost-efficient manner.
Should Darling’s supply be disrupted or should supply from other sources become limited or only available on unfavorable terms, DGD could be required to develop alternate sources of supply, and it could be required to increase its utilization of waste and renewable feedstocks that produce lower margin products.
If Darling’s supply is disrupted or if supply from other sources becomes limited or only available on unfavorable terms, DGD could be required to develop alternate sources of supply, and it could be required to increase its utilization of waste and renewable feedstocks that produce lower-margin products.
The U.S. federal government under the current presidential administration has also been aggressive in the scope, magnitude, and number of actions it has taken to address GHG emissions, including efforts to limit petroleum-dependent modes of transportation.
The U.S. federal government under the current presidential administration has also been aggressive in the scope, magnitude, and number of actions it has taken to address GHG emissions and other environmental matters, including efforts to limit or eliminate petroleum-dependent modes of transportation.
BUSINESS AND PROPERTIES—OUR COMPREHENSIVE LIQUID FUELS STRATEGY— Regulations, Policies, and Standards Driving Low-Carbon Fuel Demand ,” government authorities across the world have issued, or are considering issuing, low-carbon fuel regulations, policies, and standards to help reduce GHG emissions and increase the percentage of low-carbon fuels in the transportation fuel mix.
As described under “ITEMS 1. and 2. BUSINESS AND PROPERTIES—OUR COMPREHENSIVE LIQUID FUELS STRATEGY— Regulations, Policies, and Standards Driving Low-Carbon Fuel Demand ,” government authorities across the world have issued, or are considering issuing, low-carbon fuel regulations, policies, and standards to help reduce GHG emissions and increase the percentage of low-carbon fuels in the transportation fuel mix.
The U.S. government can also prevent or restrict us from doing business in or with other countries. For example, U.S. sanctions concerning Russia, Iran, and Venezuela limit, but not necessarily ban, the ability of most U.S. companies to engage in oil transactions involving these countries.
The U.S. government can also prevent or restrict us from doing business in or with other countries. For example, U.S. sanctions targeting Russia, Iran, and Venezuela limit, but do not necessarily ban, the ability of most U.S. companies to engage in petroleum-related transactions involving these countries.
Such events could also result in (i) a loss of intellectual property, proprietary information, or employee, customer, supplier, or vendor data, (ii) public disclosure of sensitive information, (iii) systems interruption, (iv) disruption of our business operations, (v) remediation costs and repairs of system damage, (vi) reputational damage that adversely affects customer, supplier, or investor confidence, and (vii) damage to our competitiveness, the price of our securities, and long-term stockholder value.
Such unauthorized events could also result in (i) a loss of intellectual property, proprietary information, or employee, customer, supplier, or vendor data, (ii) public disclosure of sensitive information, (iii) systems interruption, (iv) disruption of our business operations, (v) remediation costs and repairs of system damage, (vi) reputational damage that adversely affects customer, supplier, or investor confidence, and (vii) damage to our business and competitiveness.
For example, the IRA contains significant changes to U.S. tax law including, but not limited to, a corporate minimum tax and a one percent excise tax on the purchase by companies of their own stock, which are generally effective in 2023 or later. Many of these tax liabilities are subject to periodic audits by the respective taxing authorities.
For example, the IRA contains significant changes to U.S. tax law including, but not limited to, a corporate minimum tax and a one percent excise tax on the purchase by companies of their own stock. Many of these tax liabilities are subject to periodic audits by the respective taxing authorities.
Large capital projects can take many years to complete, and the political and regulatory environments or other market conditions may change or deteriorate over time, negatively impacting project returns. We may engage in capital projects based on the forecasted project economics, political and regulatory environments, and the expected return on the capital to be employed.
Large capital and other strategic projects can take many years to complete, and the political and regulatory environments or other market conditions may change or deteriorate over time. We engage in capital and other strategic projects based on many factors, including the forecasted project economics, political and regulatory environments, and the expected return on the capital to be employed.
Certain of these laws and regulations could impose obligations to conduct assessment or remediation efforts at our refineries and plants, as well as at formerly owned properties or third-party sites where we have taken wastes for disposal or where our wastes may have migrated.
Certain of these laws and regulations have in the past imposed, and could again impose, obligations on us to conduct assessment or remediation efforts at our refineries and plants, as well as at formerly owned properties or third-party sites where we have taken wastes for disposal or where our wastes may have migrated.
Our refineries, renewable diesel plants, and ethanol plants are our principal operating assets and are subject to planned and unplanned downtime and interruptions.
Our refineries, DGD plants, and ethanol plants are our principal operating assets and are subject to planned and unplanned downtime and interruptions.
The IRA, which was 25 Table of Contents passed in August 2022, also includes substantial subsidies to promote EVs and other alternative fuel vehicles.
The IRA, which was passed in August 2022, also includes substantial subsidies to promote EVs and other alternative fuel vehicles.
The occurrence of any such event could result in the halting, curtailing, or cessation of operations at impacted facilities, commercial restrictions, delay or cancellation of projects, increased costs, fines, penalties, or otherwise reduce our profitability and result in a material adverse effect on our business, financial condition, results of operations, and liquidity.
The occurrence of any such event could result in the halting, curtailing, or cessation of operations at impacted facilities; commercial restrictions; delay, denial, or cancellation of projects, permits, and authorizations; and increased costs, fines, penalties, and burdens; any of which could result in a material adverse effect on our business, financial condition, results of operations, and liquidity.
These activities have also aimed to increase the attention on and demand for action related to various ESG matters, which has contributed to increasing societal, investor, and legislative focus and pressure on ESG practices and disclosures, including those related to climate change, GHG emissions targets, business 19 Table of Contents resilience under the assumptions of demand-constrained scenarios, net-zero ambitions, transition plans, actions related to diversity and inclusion, political activities, racial equity audits, and governance standards.
These activities have also aimed to increase the attention on and demand for action related to various ESG matters, which has contributed to increasing societal, investor, and legislative focus and pressure on ESG practices and disclosures, including those related to climate change, GHG emissions targets, business resilience under the assumptions of demand-constrained scenarios, net-zero ambitions, GHG reduction 19 Table of Content s plans, actions related to human capital management, political activities, environmental justice, racial equity audits, and governance standards.
Any failure by us (or any company we acquire) to comply with these laws and regulations, including as a result of a security or privacy breach, or otherwise, could result in significant penalties and liabilities and expose us to litigation.
Any failure by us to comply with these laws and regulations, including as a result of a security or privacy breach, or otherwise, could expose us to litigation and enforcement, and result in significant penalties, fines, and other liabilities.
Additionally, although we consolidate certain VIEs, we do not have full control of every aspect of these VIEs, or the actions taken by their third-party equity holders, some of which may affect our business, legal position, financial condition, results of operations, and liquidity.
While we consolidate certain VIEs, we do not have full control of every aspect of these VIEs, or the actions taken by their third-party equity holders, some of which have affected, and could continue to affect, our business, legal position, financial condition, results of operations, and liquidity.
Our low-carbon fuels businesses could be materially and adversely affected if (i) these regulations, policies, and standards are adversely changed, not enforced, or discontinued, (ii) the benefits therefrom (such as Section 45Q and Section 45Z tax credits, the blender’s tax credit, and other incentives) are reduced, (iii) any of the products we produce are deemed not to qualify for compliance therewith, or (iv) we are unable to satisfy or maintain any approved pathways.
Our low-carbon fuels businesses could be materially and adversely affected if (i) these regulations, policies, and standards are adversely changed, not enforced, or discontinued, (ii) the benefits therefrom (such as Section 45Q, Section 45Z, and the blender’s tax credits) are reduced or discontinued, (iii) any of the products we produce are deemed not to qualify for compliance therewith or are not in sufficient demand, or (iv) we are unable to satisfy or maintain the conditions of any approved 27 Table of Content s pathways or certifications.
While it is not currently possible to predict the ultimate form, timing, or extent of any such developments, any such event could materially and adversely affect our business, financial condition, results of operations, and liquidity. Sentiment towards climate change, fossil fuels, GHG emissions, environmental justice, and other ESG matters could adversely affect our business and cost of capital.
While it is not currently possible to predict the ultimate form, timing, or extent of any such developments, any such event could materially and adversely affect our business, financial condition, results of operations, and liquidity. We are subject to risks arising from sentiment towards climate change, fossil fuels, GHG emissions, environmental justice, and other environmental, social, and governance (ESG) matters.
Any reduction or delay in crop production from these or similar events could reduce and disrupt the supply of, or otherwise increase our costs to obtain, corn for our Ethanol segment. We are subject to risks arising from our operations outside the U.S. and generally to worldwide political and economic developments.
Reductions or delays in crop production from these or similar events could reduce and disrupt the supply of, or otherwise increase our costs to obtain, corn for our Ethanol segment, and such events have occurred periodically. We are subject to risks arising from our operations outside the U.S. and generally to worldwide political and economic developments.
In addition, the cost and availability of debt and equity financing may be adversely impacted by rising interest rates, inflation, unstable or illiquid market conditions, or adverse changes in our credit profile or to our credit ratings.
In addition, the cost and availability of debt and equity financing may be adversely impacted by persistently high interest rates, inflation, unstable or illiquid 31 Table of Content s market conditions, or adverse changes in our credit profile or to our credit ratings.
If an insufficient number of RINs, LCFS credits, or other credits is available for purchase (or available only at increased prices), or if we are otherwise unable to meet the EPA’s RFS mandates or our other obligations under the Renewable and Low-Carbon Fuel Programs (for example, if there were to be demand destruction for gasoline, diesel, and renewable fuels resulting from displacement of internal combustion engine vehicles with EVs that results in production falling short of established RVOs, an acceleration of the blendwall, or other significant deviations from projected volumes), our business, financial condition, results of operations, and liquidity could be adversely affected. 27 Table of Contents In addition to the RFS and LCFS, we operate in multiple jurisdictions that have issued, or are considering issuing, similar low-carbon fuel regulations, policies, and standards, such as the CFR.
If an insufficient number of RINs, LCFS credits, or other credits are available for purchase (or available only at increased prices), or if we are otherwise unable to meet the EPA’s RFS mandates or our other obligations under the Renewable and Low-Carbon Fuel Programs (for example, if there were to be demand destruction for gasoline, diesel, and renewable fuels resulting from displacement of internal combustion engine vehicles with EVs that results in production falling short of established RVOs, an acceleration of the blendwall, or other significant deviations from projected volumes), our business, financial condition, results of operations, and liquidity could be adversely affected.
Any adverse change in these regulations, policies, and standards (including, for example, changes in the price of carbon or other inputs that affect the value of our low-carbon fuels), or in our ability to obtain any approved fuel pathways, could have a material adverse effect on the margins we receive for our low-carbon products in certain markets.
Any adverse change in these regulations, policies, and standards (including, for example, changes in the price of carbon or other inputs that affect the value of our low-carbon fuels, such as approved fuel pathways, credits, or incentives) could have a material adverse effect on the margins we receive for our low-carbon fuels.
Should DGD’s feedstock supply be disrupted, such an event could adversely impact its and our business, financial condition, results of operations, and liquidity. Our Ethanol segment relies on corn sourced from local farmers and commercial elevators in the Mid-Continent region of the U.S.
A disruption to DGD’s feedstock supply could adversely impact its and our business, financial condition, results of operations, and liquidity. Our Ethanol segment relies on corn sourced from local farmers and commercial elevators in the Mid-Continent region of the U.S.
Any adverse outcome of any of such tax audits or related proceedings could result in unforeseen tax-related liabilities that may, individually or in the aggregate, materially affect our cash tax liabilities, and, as a result, our business, financial condition, results of operations, and liquidity.
Any adverse outcome of any of such tax audits or related proceedings could result in unforeseen tax-related liabilities that may, individually or in the aggregate, materially affect our cash tax liabilities, or create issues with respect to certain of our business permits, authorizations, and registrations, and, as a result, our business, financial condition, results of operations, and liquidity.
We are subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, indirect taxes (excise/duty, sales/use, gross receipts, and value-added taxes), payroll taxes, franchise taxes, withholding taxes, and ad valorem taxes.
We are subject to risks arising from compliance with and changes in tax laws. We are subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes; indirect taxes (excise/duty, sales/use, gross receipts, and value-added taxes); and payroll, franchise, withholding, and ad valorem taxes.
Additionally, the availability of natural gas and electricity can be affected by numerous events such as weather (e.g., hurricanes and periods of considerable heat or cold, like Winter Storm Uri in 2021), pipeline and other logistics interruptions, electric grid outages, cybersecurity incidents, intermittent electricity generation (particularly from wind and solar), hostilities, sanctions, and supply and demand imbalances for electricity and natural gas.
Additionally, the availability and cost of natural gas and electricity have been, and could continue to be, affected by numerous events, such as government regulations, weather (e.g., hurricanes and periods of considerable heat or cold, such as Winter Storm Uri in 2021), logistics interruptions, electric grid outages, cybersecurity incidents, intermittent electricity generation (particularly from wind and solar), hostilities, sanctions, human error, and supply and demand imbalances for natural gas and electricity.
Risks Related to Our Business, Industry, and Operations Our financial results are affected by volatile margins, which are dependent upon factors beyond our control, including the price of feedstocks and the market price at which we can sell our products.
Although the risks are organized by headings and each risk is discussed separately, many are interrelated. Risks Related to Our Business, Industry, and Operations Our financial results are affected by volatile margins, which are dependent upon factors beyond our control, including the price of feedstocks and the market price at which we can sell our products.
Government authorities across the world are also considering, or have announced, profits or windfall taxes or penalties on fossil fuel companies, or have announced or imposed GHG emissions fees or changes that are adverse to refinery operations.
Government authorities across the world have also announced, or are considering, profits or windfall taxes or penalties on fossil fuel companies, or have announced or imposed GHG emissions fees and other regulations that are adverse to refinery operations, could increase costs, and limit profitability.
New developments may make alternative fuel vehicles more affordable or desirable, including improvements in battery and storage technology, increases in driving ranges, increased availability of charging stations and other infrastructure, expanded and more reliable supply chains, increased inventory, and improvements in hydrogen fuel cell technology.
New developments may make alternative fuel vehicles more affordable or desirable, including improvements in battery and storage technology, increases in driving ranges, increased availability of charging stations and other infrastructure, expanded and more reliable supply chains, and improvements in hydrogen fuel cell technology. Any such developments could increase consumer acceptance and result in greater market penetration of alternative fuel vehicles.
The RFS, LCFS, and similar U.S. state and international low-carbon fuel regulations, policies, and standards are extremely complex, often have different or conflicting requirements or methodologies, and are frequently evolving, requiring us to periodically update our systems and controls to maintain compliance and monitoring, which could require significant expenditures, and presents an increased risk of administrative error.
The RFS, LCFS, and similar U.S. state and international low-carbon fuel regulations, policies, and standards are extremely complex, often have different or conflicting requirements or methodologies, and are frequently evolving, requiring us to periodically update our systems and controls to maintain compliance and monitoring, which impose substantial administrative burdens.
We conduct some of our operations through joint ventures in which we may share control over certain economic, legal, and business interests with other joint venture members.
Our investments in joint ventures and other entities decrease our ability to manage risk. We conduct some of our operations through joint ventures in which we share control over certain economic, legal, and business interests with other joint venture members.
For example, in September 2022, the EU passed legislation imposing a profits tax and penalty on certain fossil fuel companies, and similar taxes and penalties have been proposed in California.
For example, in September 2022, the EU passed legislation imposing a profits tax and penalty on certain fossil fuel companies.
In recent years, a number of advocacy groups, both in the U.S. and internationally, have campaigned for government and private action to promote climate and other ESG-related change, particularly at public companies, through investment and voting practices of investment advisors, sovereign wealth funds, pension funds, endowments, and other stockholders.
In recent years, a number of advocacy groups, both in the U.S. and internationally, have campaigned for government and private action to promote climate and other ESG-related changes, particularly at public companies, through activities including investment, engagement, and voting practices.
The continuing and evolving threat of cybersecurity incidents has also resulted in increased regulatory focus on prevention and disclosure, such as the directive issued by the U.S. Transportation Security Administration following the Colonial Pipeline cybersecurity incident, the obligations imposed by the U.S. Cyber Incident Reporting for Critical Infrastructure Act adopted in March 2022, and the SEC’s proposed cybersecurity disclosure rule.
The continuing and evolving threat of cybersecurity incidents has also resulted in increased regulatory focus on prevention and disclosure, such as the directive issued by the U.S. Transportation Security Administration following the Colonial Pipeline cybersecurity incident, the obligations imposed by the U.S.
In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. For example, coverage for hurricane damage is very limited, and coverage for terrorism and cyber risks have broad exclusions.
Premiums and deductibles for certain insurance policies could increase substantially based on market conditions. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. For example, coverage for hurricane damage is limited, and coverage for terrorism and cyber risks have broad exclusions.
Such risks are particularly acute in California due to the pace and scope of anti-fossil fuel developments there. 26 Table of Contents Many of these legal, political, regulatory, and international accord matters and developments are subject to considerable uncertainty due to a number of factors, including technological and economic feasibility, legal challenges, and potential changes in law, regulation, or policy, and it is not currently possible to predict the ultimate effects of these matters and developments on us.
Many of these legal, political, regulatory, and international accord matters and developments are subject to considerable uncertainty due to a number of factors, including technological and economic feasibility, pending or anticipated legal challenges, and potential changes in law, regulation, or policy, and it is not currently possible to predict the ultimate effects of many of these matters and developments on us.
These actions have contributed to a number of U.S. federal rulemakings aimed at regulating transportation GHG emissions, many of which ignore or downplay the full life cycle carbon footprint of EVs, and thereby seek to inappropriately advantage them over internal combustion engine vehicles.
These actions have contributed to, and may continue to spur, a number of U.S. federal rulemakings and other actions that disfavor petroleum-dependent modes of transportation, many of which ignore or downplay the full life cycle carbon footprint of EVs, and thereby seek to inappropriately advantage them over internal combustion engine vehicles.
We strategically market our low-carbon fuels based on regional policies, feedstock preferences, CI scores, and our ability to obtain fuel pathways. A significant portion of our low-carbon fuels are sold in California, Canada, and Europe. Regarding the RFS, in December 2022, the EPA proposed a rule that would increase RVOs for 2023, 2024, and 2025.
We strategically market our low-carbon fuels based on regional policies, regulations, feedstock preferences, CI scores, and our ability to obtain fuel pathways, credits, certifications, and incentives. A significant portion of our low-carbon fuels are sold in California, Canada, and the U.K. Regarding the RFS, in June 2023, the EPA announced final rules that increase RVOs for 2023, 2024, and 2025.
If the RVOs for cellulosic biofuel are high relative to D3 RIN generation, RIN prices may rise, and the EPA may or may not issue cellulosic waiver credits in time to moderate prices spikes or at all.
Future RVOs, RFS changes, and small refinery exemption petition denials may also affect RIN prices. For example, if the RVOs for cellulosic biofuel are high relative to D3 RIN generation, RIN prices may rise, and the EPA may or may not issue cellulosic waiver credits in time to moderate price spikes, if at all.
This could adversely impact and limit our ability to obtain favorable credit and debt financing, raise our cost of capital, or require us to provide collateral, or other forms of security, which would increase our costs and restrict operational and financial flexibility.
These factors could adversely impact and limit our ability to obtain favorable credit and debt financing, raise our cost of capital, or require us to provide collateral or other forms of security, which would increase our costs and restrict operational and financial flexibility. Unstable or illiquid market conditions could also negatively impact our pension plans’ assets and funding requirements.
For example, in January 2021, the current administration issued an executive order calling for a “whole of government” approach to climate change and environmental justice that seeks to organize and deploy the full capacity of the U.S. federal government in novel and coordinated ways that attempt to reduce GHG emissions and the use of most petroleum-based products.
For example, the current administration utilizes a “whole of government” approach to climate change and environmental justice that seeks to organize and deploy the full capacity of the U.S. federal government in novel and coordinated ways to limit or eliminate the use of most petroleum-based products.
The ability of the members of the Organization of Petroleum Exporting Countries (OPEC) to agree on and to maintain crude oil price and production controls and changes in trade flows from events such as the Russia-Ukraine conflict have also had, and are likely to continue to have, a significant impact on the market prices of crude oil and certain of our products.
The ability of the members of the Organization of Petroleum Exporting Countries (OPEC) to agree on and to maintain crude oil price and production controls has also had, and is likely to continue to have, a significant impact on the market prices of crude oil and certain of our products.
Such changes could also negatively impact the economic assumptions and projections with respect to many of our low-carbon projects and could have a material adverse impact on the timing of completion, project returns, and other outcomes with respect to such projects. Applicable environmental, health, and safety laws could adversely affect our performance.
Such changes could also negatively impact the plans, expectations, assumptions, and projections with respect to our low-carbon projects and our GHG emissions targets and ambition, and could have a material adverse impact on the timing of completion, project returns, and other outcomes with respect to such projects. Applicable environmental, health, and safety laws expose us to various risks.
The current administration has also issued a number of other related executive orders, including orders requiring agencies to review environmental actions taken by the previous administration and directing the U.S. federal government to use its scale and procurement power to achieve a number of aspirational net-zero emissions goals, including, among others, 100 percent zero-emission vehicle acquisitions by 2035 and 100 percent zero-emission light-duty vehicle acquisitions by 2027.
The current administration has also issued a number of related executive orders, including orders requiring agencies to review environmental actions taken by the previous administration and directing the U.S. federal government to use its scale and procurement power to achieve a number of aspirational net-zero 24 Table of Content s emissions goals, including seeking to limit or eliminate petroleum-based fuels by imposing mandates of so-called 100 percent zero-emission vehicle acquisitions, such as EVs and other alternative fuel vehicles, by 2035 and 100 percent zero-emission light-duty vehicle acquisitions by 2027.
Such liability or expenditures could materially and adversely affect our business, financial condition, results of operations, and liquidity. Litigation, regulatory proceedings, and mandatory disclosure requirements related to climate change and other ESG matters, or aimed at the fossil fuel industry, could adversely affect our performance. We could face increased climate‐related litigation with respect to our operations, disclosures, or products.
Such liabilities and costs could materially and adversely affect our business, financial condition, results of operations, and liquidity. We are subject to risks arising from litigation, regulatory proceedings, and mandatory disclosure requirements related to climate change and other ESG matters, or aimed at the fossil fuel industry.
Responding to such ESG-focused activism has been and will likely continue to be costly and time-consuming. Such response efforts could also result in the implementation of certain ESG practices or disclosures that may present a heightened level of legal and regulatory risk, or that threaten our credibility with other investors and stakeholders.
Such response efforts have resulted in, and could continue to result in, the implementation of certain practices and disclosures that may present a heightened level of legal and regulatory risk, or that threaten our credibility with other investors and stakeholders.
Some of our competitors also have materially greater financial and other resources than we have and may have a greater ability to bear the economic risks inherent in all phases of our industry. An interruption in one or more of our refineries or plants could adversely affect our business.
Some of our competitors also have materially greater financial and other resources 22 Table of Content s than we have and may have a greater ability to bear the economic risks inherent in all phases of our industry. We are subject to risks arising from an interruption in any of our refineries or plants.
For example, while we operate the DGD Plants and perform certain day-to-day operating and management functions for DGD as an independent contractor, we do not have full control of every aspect of DGD’s business and certain significant decisions concerning DGD, including, among others, the acquisition or disposition of assets above a certain value threshold, making certain changes to DGD’s business plan, raising debt or equity capital, DGD’s distribution policy, and entering into particular transactions, which also require certain approvals from Darling.
For example, while we operate the DGD Plants and perform certain day-to-day 23 Table of Content s operating and management functions for DGD, we do not have full control of every aspect of DGD’s business and certain significant decisions concerning DGD, including acquiring or disposing of assets above a certain value threshold, making certain changes to its business plan, raising debt or equity capital, altering its distribution policy, and making certain other transactions, require approval from Darling.
Because environmental, health, and safety laws and regulations are becoming more stringent and new environmental, health, and safety laws and regulations are continuously being enacted or proposed, the level of expenditures required for environmental matters could increase in the future.
Because environmental, health, and safety laws and regulations are becoming more stringent and new environmental, health, and safety laws and regulations are continuously being enacted or proposed, and are being interpreted and applied in new and controversial ways, the level of costs required for environmental matters has increased and is expected to continue to increase in the future.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are reporting these proceedings to comply with SEC regulations, which require us to disclose certain information about proceedings arising under U.S. federal, state, or local provisions regulating the discharge of materials into the environment or protecting the environment if we reasonably believe that such proceedings have the potential to result in monetary sanctions of $300,000 or more.
Biggest changeLEGAL PROCEEDINGS LITIGATION We incorporate by reference into this item our disclosures made in Note 1 of Notes to Consolidated Financial Statements under “Legal Contingencies.” ENVIRONMENTAL ENFORCEMENT MATTERS We are reporting the following proceedings to comply with SEC regulations, which require us to disclose certain information about proceedings arising under federal, state, or local provisions regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment if a governmental authority is a party to such proceeding and we reasonably believe that such proceeding will result in monetary sanctions that exceed a specified threshold.
We are working with the EPA to resolve this matter. Texas Attorney General (Texas AG) (Port Arthur Refinery). In our annual report on Form 10-K for the year ended December 31, 2021, we reported that the Texas AG had filed suit against our Port Arthur Refinery in the 419th Judicial District Court of Travis County, Texas, Cause No.
We are continuing to work with the BAAQMD to resolve these matters. Texas Attorney General (Texas AG) (Port Arthur Refinery). In our annual report on Form 10-K for the year ended December 31, 2022, we reported that the Texas AG had filed suit against our Port Arthur Refinery in the 419th Judicial District Court of Travis County, Texas, Cause No.
D-1-GN-19-004121, for alleged violations of the Clean Air Act seeking injunctive relief and penalties. We are working with the Texas AG to resolve this matter. Bay Area Air Quality Management District (BAAQMD) (Benicia Refinery).
D-1-GN-19-004121, for alleged violations of the Clean Air Act seeking injunctive relief and penalties. We are working with the Texas AG to resolve this matter.
Removed
LEGAL PROCEEDINGS LITIGATION We incorporate by reference into this Item our disclosures made in Note 1 of Notes to Consolidated Financial Statements under “Legal Contingencies.” ENVIRONMENTAL ENFORCEMENT MATTERS While it is not possible to predict the outcome of the following environmental proceedings, if any one or more of them were decided against us, we believe that there would be no material effect on our financial condition, results of operations, and liquidity.
Added
Pursuant to SEC regulations, we use a threshold of $1 million for purposes of determining whether disclosure of any such proceeding is required. We believe proceedings less than this threshold are not material to our business and financial condition. Bay Area Air Quality Management District (BAAQMD) (Benicia Refinery).
Removed
EPA (Benicia Refinery). In our annual report on Form 10-K for the year ended December 31, 2021, we reported that the EPA had issued a Notice of Potential Violations and Opportunity to Confer related to a series of inspections conducted by the EPA arising out of a 2019 emissions event at our Benicia Refinery.
Added
In our quarterly report on Form 10-Q for the quarter ended September 30, 2023, we reported that (i) we had received a Notice of Violation (NOV) from the BAAQMD on March 21, 2019 related to atmospheric emissions of hydrogen commingled with non-methane organic compounds at our Benicia Refinery (the 2019 Atmospheric Emissions NOV), (ii) on December 1, 2020, we had received an NOV from the BAAQMD related to pressure relief devices in the Benicia Refinery’s Hydrogen Unit (the 2020 Pressure Relief Device NOV), and (iii) on June 17, 2021, October 11, 2021, and January 26, 2022, we had received certain other compliance-related NOVs related to the 2019 Atmospheric Emissions NOV and the 2020 Pressure Relief Device NOV.
Removed
In our annual report on Form 10-K for the year ended December 31, 2021, we reported that we had received a Violation Notice from the BAAQMD related to atmospheric emissions at our Benicia Refinery. We are working with the BAAQMD to resolve this matter. Texas Commission on Environmental Quality (TCEQ) (Corpus Christi East Refinery).
Added
We are continuing to work with the BAAQMD to resolve these matters. BAAQMD (Benicia Refinery). In our quarterly report on Form 10-Q for the quarter ended June 30, 2023, we reported that on May 1, 2023, the BAAQMD issued a compliance-related NOV to our Benicia Refinery related to a pressure relief device.
Removed
In our annual report on Form 10-K for the year ended December 31, 2021, we reported that we had received a Notice of Enforcement from the TCEQ relating to Title V permit deviations at our Corpus Christi East Refinery. We are working with the TCEQ to resolve this matter. ITEM 4.
Added
We are continuing to work with the BAAQMD to resolve this matter. BAAQMD (Benicia Refinery).
Removed
MINE SAFETY DISCLOSURES None. 33 Table of Contents PART II
Added
In our quarterly report on Form 10-Q for the quarter ended September 30, 2023, we reported that we were in the process of working with the BAAQMD to resolve several other NOVs issued by the BAAQMD to our Benicia Refinery in 2020 and 2019, which primarily relate to various emissions and related compliance issues.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+3 added−1 removed4 unchanged
Biggest changeCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN 3 Among Valero, the S&P 500 Index, and Peer Group As of December 31, 2017 2018 2019 2020 2021 2022 Valero common stock $ 100.00 $ 84.28 $ 109.87 $ 70.75 $ 99.28 $ 173.77 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.89 Peer Group 100.00 93.30 96.50 59.30 96.35 168.49 3 Assumes that an investment in Valero common stock, the S&P 500 index, and our peer group was $100 on December 31, 2017.
Biggest changeCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN 4 Among Valero, the S&P 500 Index, Old Peer Group, and New Peer Group As of December 31, 2018 2019 2020 2021 2022 2023 Valero common stock $ 100.00 $ 130.36 $ 83.95 $ 117.80 $ 206.18 $ 218.29 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 Old Peer Group 100.00 103.43 63.56 103.27 180.60 194.27 New Peer Group 100.00 105.09 69.11 106.04 177.48 192.24 4 Assumes that an investment in Valero common stock, the S&P 500 index, our old peer group, and our new peer group was $100 on December 31, 2018.
There can be no assurance that we will pay a dividend in the future at the rates we have paid historically, or at all. The following table discloses purchases of shares of our common stock made by us or on our behalf during the fourth quarter of 2022.
There can be no assurance that we will pay a dividend in the future at the rates we have paid historically, or at all. The following table discloses purchases of shares of our common stock made by us or on our behalf during the fourth quarter of 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the NYSE under the trading symbol “VLO.” As of January 31, 2023, there were 4,562 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock trades on the NYSE under the trading symbol “VLO.” As of January 31, 2024, there were 4,414 holders of record of our common stock.
The following line graph compares the cumulative total return 3 on an investment in our common stock against the cumulative total return of the S&P 500 Composite Index and an index of peers (that we selected) for the five-year period commencing December 31, 2017 and ending December 31, 2022.
The following line graph compares the cumulative total return 4 on an investment in our common stock against the cumulative total return of the S&P 500 Composite Index and an index of peers (that we selected) for the five-year period commencing December 31, 2018 and ending December 31, 2023.
Our selected peer group comprises the following ten members: ConocoPhillips; CVR Energy, Inc.; Delek US Holdings, Inc.; the Energy Select Sector SPDR Fund; EOG Resources, Inc.; HF Sinclair Corporation; Marathon Petroleum Corporation; Occidental Petroleum Corporation; PBF Energy Inc.; and Phillips 66.
Our selected peer group comprises the following eleven members: ConocoPhillips; CVR Energy, Inc.; Delek US Holdings, Inc.; the Energy Select Sector SPDR Fund; EOG Resources, Inc.; HF Sinclair Corporation; LyondellBasell Industries N.V.; Marathon Petroleum Corporation; Occidental Petroleum Corporation; PBF Energy Inc.; and Phillips 66.
Cumulative total return is based on share price appreciation plus reinvestment of dividends from December 31, 2017 through December 31, 2022. 35 Table of Contents ITEM 6. [RESERVED]
Cumulative total return is based on share price appreciation plus reinvestment of dividends from December 31, 2018 through December 31, 2023. 38 Table of Contents ITEM 6. [RESERVED]
On February 23, 2023, our Board authorized our purchase of up to an additional $2.5 billion of our outstanding common stock with no expiration date, which is in addition to the amount remaining under the October 2022 Program. 34 Table of Contents The performance graph below is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, respectively .
On February 22, 2024, our Board authorized us to purchase shares of our outstanding common stock for a total cost of up to $2.5 billion with no expiration date, which is in addition to the amount remaining under the September 2023 Program. 37 Table of Contents The performance graph below is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, respectively .
(b) On January 23, 2018, we announced that our Board authorized our purchase of up to $2.5 billion of our outstanding common stock with no expiration date, and we completed all authorized share purchases under that program during the second quarter of 2022.
(c) On February 23, 2023, we announced that our Board authorized us to purchase shares of our outstanding common stock for a total cost of up to $2.5 billion with no expiration date, and we completed all authorized share purchases under that program during the fourth quarter of 2023.
On October 26, 2022, our Board authorized our purchase of up to an additional $2.5 billion of our outstanding common stock with no expiration date (the October 2022 Program). As of December 31, 2022, we had $2.3 billion of our outstanding common stock remaining available for purchase under this program.
On September 15, 2023, we announced that our Board authorized us to purchase shares of our outstanding common stock for a total cost of up to $2.5 billion with no expiration date (the September 2023 Program). As of December 31, 2023, we had $2.2 billion remaining available for purchase under the September 2023 Program.
Period Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (b) October 2022 94,879 $ 127.85 — $4.1 billion November 2022 5,718,669 $ 134.80 5,670,935 $3.3 billion December 2022 7,983,898 $ 122.03 7,980,785 $2.3 billion Total 13,797,446 $ 127.36 13,651,720 $2.3 billion ________________________ (a) The shares reported in this column include 145,726 shares related to our purchases of shares from our employees and non-employee directors in connection with the exercise of stock options, the vesting of restricted stock, and other stock compensation transactions in accordance with the terms of our stock-based compensation plans.
Period Total Number of Shares Purchased (a) Average Price Paid per Share (b) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (c) October 2023 611,778 $ 124.20 559,399 $3.1 billion November 2023 1,561,401 $ 124.24 1,487,134 $2.9 billion December 2023 5,324,131 $ 128.92 5,323,068 $2.2 billion Total 7,497,310 $ 127.56 7,369,601 $2.2 billion ________________________ (a) The shares reported in this column include 127,709 shares related to our purchases of shares from our employees (including former employees) and non-employee directors in connection with the exercise of stock options, the vesting of restricted stock, and other stock compensation transactions in accordance with the terms of our stock-based compensation plans.
Removed
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, and we completed all authorized share purchases under that program during the fourth quarter of 2022.
Added
(b) The average price paid per share reported in this column excludes brokerage commissions and a one percent excise tax on share purchases.
Added
LyondellBasell Industries N.V. was added to the prior year’s peer group because of its similarities to us in size, complexity, and exposure to commodity pricing volatility for both its products and feedstocks.
Added
LyondellBasell Industries N.V. also helps to balance the full portfolio of peers by helping ensure accountability of performance both within the core downstream segment of the oil and gas industry, and also in adjacent segments that face similar challenges and opportunities.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

95 edited+14 added−29 removed42 unchanged
Biggest changeThese 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; 36 Table of Contents • 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 purchase 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; • the effect of general economic and other conditions, including inflation and economic activity levels, 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 GHG emissions reduction/displacement targets and our current and any future low-carbon projects.
Biggest changeThese forward-looking statements include, among other things, statements regarding: • the effect, impact, potential duration or timing, or other implications of global geopolitical and other conflicts and tensions; • 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, transportation costs, and operating expenses; • anticipated levels of crude oil and liquid transportation fuel inventories and storage capacity; • expectations regarding the levels of, costs and timing with respect to, the production and operations at our existing refineries and plants, projects under evaluation, construction, or development, and former projects; • 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 costs and 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 pension plans and other postretirement benefit plans; 39 Table of Contents • our ability to meet future cash and credit requirements, whether from funds generated from our operations or our ability to access financial markets effectively, and expectations regarding our liquidity; • our evaluation of, and expectations regarding, any future activity under our share purchase 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 SBx 1-2 and the matters discussed under “ITEM 3.
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.
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,” “ambition,” “could,” “would,” “should,” “may,” “strive,” “seek,” “potential,” “opportunity,” “aimed,” “considering,” “continue,” and similar expressions.
Noncash charges primarily included $2.5 billion of depreciation and amortization expense, $50 million of deferred income tax expense, and a $61 million asset impairment loss associated with our Lakota ethanol plant, as described in Note 5 of Notes to Consolidated Financial Statements.
Noncash charges primarily included $2.5 billion of depreciation and amortization expense, $50 million of deferred income tax expense, and a $61 million asset impairment loss associated with our Lakota ethanol plant, as described in Note 6 of Notes to Consolidated Financial Statements.
Non-GAAP financial measures are as follows: • Refining margin is defined as Refining segment operating income excluding the modification of RVO adjustment, operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses, as reflected in the table below.
Non-GAAP financial measures are as follows (in millions): • Refining margin is defined as Refining segment operating income excluding the modification of RVO adjustment, operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses, as reflected in the table below.
As of December 31, 2022, all of our ratings on our senior unsecured debt, including debt guaranteed by us, were at or above investment grade level as follows: Rating Agency Rating Moody’s Investors Service Baa2 (stable outlook) Standard & Poor’s Ratings Services BBB (stable outlook) Fitch Ratings BBB (stable outlook) We cannot provide assurance that these ratings will remain in effect for any given period of time or that one or more of these ratings will not be lowered or withdrawn entirely by a rating agency.
As of December 31, 2023, all of our ratings on our senior unsecured debt, including debt guaranteed by us, were at or above investment grade level as follows: Rating Agency Rating Moody’s Investors Service Baa2 (stable outlook) Standard & Poor’s Ratings Services BBB (stable outlook) Fitch Ratings BBB (stable outlook) We cannot provide assurance that these ratings will remain in effect for any given period of time or that one or more of these ratings will not be lowered or withdrawn entirely by a rating agency.
We have developed an extensive multi-year capital investment program, which we update and revise based on changing internal and external factors. The following table reflects our expected capital investments for the year ending December 31, 2023 by nature of the project and reportable segment, along with historical amounts for the years ended December 31, 2022 and 2021 (in millions).
We have developed an extensive multi-year capital investment program, which we update and revise based on changing internal and external factors. The following table reflects our expected capital investments for the year ending December 31, 2024 by nature of the project and reportable segment, along with historical amounts for the years ended December 31, 2023 and 2022 (in millions).
We also exclude all of the capital expenditures of other VIEs that we consolidate because we do not operate those VIEs. See Note 11 of Notes to Consolidated Financial Statements for more information about the VIEs that we consolidate. We believe capital investments attributable to Valero is an important measure because it more accurately reflects our capital investments.
We also exclude all of the capital expenditures of other VIEs that we consolidate because we do not operate those VIEs. See Note 12 of Notes to Consolidated Financial Statements for more information about the VIEs that we consolidate. We believe capital investments attributable to Valero is an important measure because it more accurately reflects our capital investments.
Also in note (h), we disclose the reasons why we believe our use of such non-GAAP financial measures provides useful information. See the table on page 60 for a reconciliation of capital investments attributable to Valero to its most directly comparable GAAP financial measure.
Also in note (h), 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.
Regulatory compliance capital investments are generally associated with projects that are incurred to comply with government regulatory requirements, such as requirements to reduce emissions and prohibited elements from our products. • Growth capital investments , including low-carbon growth capital investments that support the development and growth of our low-carbon renewable diesel and ethanol businesses, are generally associated with projects for the construction of new property assets that are expected to 57 Table of Contents enhance our profitability and cash-generating capabilities, including investments in nonconsolidated joint ventures.
Regulatory compliance capital investments are generally associated with projects that are incurred to comply with government regulatory requirements, such as requirements to reduce emissions and prohibited elements from our products. • Growth capital investments , including low-carbon growth capital investments that support the development and growth of our low-carbon renewable diesel and ethanol businesses, are generally associated with projects for the construction of new property assets that are expected to enhance our profitability and cash-generating capabilities, including investments in nonconsolidated joint ventures.
The discussion for the year ended December 31, 2020 and comparison between the years ended December 31, 2021 and 2020 have been omitted from this annual report on Form 10-K for the year ended December 31, 2022, as such information can be found in “ITEM 7.
The discussion for the year ended December 31, 2021 and comparison between the years ended December 31, 2022 and 2021 have been omitted from this annual report on Form 10-K for the year ended December 31, 2023, as such information can be found in “ITEM 7.
Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 17 of Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net income.
Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 18 of Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net income.
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, 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; 37 Table of Contents • 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 OPEC 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; • 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) under the Renewable and Low-Carbon Fuel Programs and emission credits needed under other environmental emissions programs; • delay of, cancellation of, or failure to implement planned capital or other projects and realize the various assumptions and benefits projected for such projects or cost overruns in constructing such planned capital projects; • earthquakes, hurricanes, tornadoes, winter storms, 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 government authorities, environmental regulations, changes to income tax rates, introduction of a global minimum tax, windfall taxes or penalties, tax changes or restrictions impacting the foreign repatriation of cash, actions implemented under the Renewable and Low-Carbon Fuel Programs and other environmental emissions programs, including changes to volume requirements or other obligations or exemptions under the RFS, and actions arising from 38 Table of Contents the EPA’s or other government 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 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 “ITEM 1A.
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 global geopolitical and other conflicts and tensions, 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, and the global economy and financial markets generally; 40 Table of Contents • 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 OPEC, and other petroleum-producing nations that collectively make up OPEC+ , 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; • 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, societal, 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; • 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 low-carbon projects and 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) under the Renewable and Low-Carbon Fuel Programs and emission credits needed under other environmental emissions programs; • delay of, cancellation of, or failure to implement planned capital or other strategic projects and realize the various assumptions and benefits projected for such projects or cost overruns in constructing such planned projects; • earthquakes, hurricanes, tornadoes, winter storms, droughts, floods, wildfires, 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, such as unexpected environmental remediation or enforcement costs, including those in excess of any reserves or insurance coverage; • legislative or regulatory action, including the introduction or enactment of legislation or rulemakings by government authorities, environmental regulations, changes to income tax rates, 41 Table of Contents introduction of a global minimum tax, windfall taxes or penalties, tax changes or restrictions impacting the foreign repatriation of cash, actions implemented under SBx 1-2, actions implemented under the Renewable and Low-Carbon Fuel Programs and 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 government 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 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 lawsuits, demands, or investigations, or campaigns and negative publicity commenced by government authorities, 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 “ITEM 1A.
(e) General and administrative expenses (excluding depreciation and amortization expense) for the year ended December 31, 2022 includes a charge of $20 million for an environmental reserve adjustment associated with a non-operating site.
(d) General and administrative expenses (excluding depreciation and amortization expense) for the year ended December 31, 2022 includes a charge of $20 million for an environmental reserve adjustment associated with a non-operating site.
Renewable Diesel Segment Results The following table includes selected financial and operating data of our Renewable Diesel segment for 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Renewable Diesel Segment Results The following table includes selected financial and operating data of our Renewable Diesel segment for 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Refining Segment Results The following table includes selected financial and operating data of our Refining segment for 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Refining Segment Results The following table includes selected financial and operating data of our Refining segment for 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Our operations have historically generated positive cash flows to fulfill our working capital requirements and other uses of cash as discussed below. Capital Investments Capital investments are comprised of our capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in nonconsolidated joint ventures, as reflected in our consolidated statements of cash flows as shown on page 75 .
Our operations have historically generated positive cash flows to fulfill our working capital requirements and other uses of cash as discussed below. Capital Investments Capital investments are comprised of our capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in nonconsolidated joint ventures, as reflected in our statements of cash flows as shown on page 76 .
Because environmental laws and regulations are becoming more complex and stringent and new environmental laws and regulations are continuously being enacted or proposed, the level of future expenditures required for environmental matters could increase. See Note 7 of Notes to Consolidated Financial Statements for disclosure of our environmental liabilities.
Because environmental laws and regulations are becoming more complex and stringent and new environmental laws and regulations are continuously being enacted or proposed, the level of future costs and expenditures required for environmental matters could increase. See Note 8 of Notes to Consolidated Financial Statements for disclosure of our environmental liabilities.
The debt issuance, borrowings, and repayments are described in Note 8 of Notes to Consolidated Financial Statements. As previously noted, our operations generated $12.6 billion of cash in 2022, driven primarily by net income of $11.9 billion and noncash charges to income of $2.3 billion, partially offset by an unfavorable change in working capital of $1.6 billion.
The debt issuance, borrowings, and repayments are described in Note 9 of Notes to Consolidated Financial Statements. 58 Table of Contents As previously noted, our operations generated $12.6 billion of cash in 2022, driven primarily by net income of $11.9 billion and noncash charges to income of $2.3 billion, partially offset by an unfavorable change in working capital of $1.6 billion.
The amount outstanding associated with the IEnova Revolver, as defined and described in Note 8 of Notes to Consolidated Financial Statements, is reflected in current portion of debt and finance lease obligations in our balance sheet as of December 31, 2022, and also included in the table above in debt obligations – short-term.
The amount outstanding associated with the IEnova Revolver, as defined and described in Note 9 of Notes to Consolidated Financial Statements, is reflected in current portion of debt and finance lease obligations in our balance sheet as of December 31, 2023, and also included in the table above in debt obligations – short-term.
These concentrations of customers may impact our overall exposure to credit risk, either positively or negatively, in that these customers may be similarly affected by changes in economic or other conditions, including the uncertainties concerning the COVID-19 pandemic and other worldwide events causing volatility in the global crude oil markets.
These concentrations of customers may impact our overall exposure to credit risk, either positively or negatively, in that these customers may be similarly affected by changes in economic or other conditions, including the uncertainties concerning worldwide events causing volatility in the global crude oil markets.
If the circumstances that trigger an impairment also result in a reduction in the estimated useful life of the asset, then we may also be required to recognize an asset retirement obligation for that asset. 63 Table of Contents
If the circumstances that trigger an impairment also result in a reduction in the estimated useful life of the asset, then we may also be required to recognize an asset retirement obligation for that asset.
See the tables in note (h) 39 Table of Contents beginning on page 52 for reconciliations of adjusted operating income (including adjusted operating income for each of our reportable segments, as applicable) and Refining, Renewable Diesel, and Ethanol segment margin to their most directly comparable GAAP financial measures.
See the tables in note (h) beginning on page 54 for reconciliations of adjusted operating income (including adjusted operating income for each of our reportable segments, as applicable) and Refining, Renewable Diesel, and Ethanol segment margin to their most directly comparable GAAP financial measures.
This discussion and analysis includes the years ended December 31, 2022 and 2021 and comparison between such years.
This discussion and analysis includes the years ended December 31, 2023 and 2022 and comparison between such years.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in our annual report on Form 10-K for the year ended December 31, 2021, which was filed on February 22, 2022.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in our annual report on Form 10-K for the year ended December 31, 2022, which was filed on February 23, 2023.
We are a 50 percent joint venture member in DGD and consolidate its financial statements. As a result, all of DGD’s net cash provided by operating activities (or operating cash flow) is included in our consolidated net cash provided by operating activities.
We are a 50 percent joint venture member in DGD and consolidate its financial statements, and DGD’s operations compose our Renewable Diesel segment. As a result, all of DGD’s net cash provided by operating activities (or operating cash flow) is included in our consolidated net cash provided by operating activities.
These judgments and estimates are subject to change due to many factors, including the progress of ongoing tax audits, case law, and changes in legislation. 62 Table of Contents Details of our liability for unrecognized tax benefits, along with other information about our unrecognized tax benefits, are included in Note 14 of Notes to Consolidated Financial Statements.
These judgments and estimates are subject to change due to many factors, including the progress of ongoing tax audits, case law, and changes in legislation. Details of our changes in unrecognized tax benefits, along with other information about our unrecognized tax benefits, are included in Note 15 of Notes to Consolidated Financial Statements.
Year Ended December 31, 2022 2021 Reconciliation of Ethanol operating income to Ethanol margin Ethanol operating income $ 110 $ 473 Adjustments: Operating expenses (excluding depreciation and amortization expense) (see note (b)) 625 556 Depreciation and amortization expense (see note (c)) 59 131 Asset impairment loss (see note (d)) 61 — Other operating expenses 3 1 Ethanol margin $ 858 $ 1,161 • Adjusted Refining operating income is defined as Refining segment operating income excluding the modification of RVO adjustment and other operating expenses, as reflected in the table below.
Year Ended December 31, 2023 2022 Reconciliation of Ethanol operating income to Ethanol margin Ethanol operating income $ 553 $ 110 Adjustments: Operating expenses (excluding depreciation and amortization expense) 515 625 Depreciation and amortization expense (see note (b)) 80 59 Asset impairment loss (see note (c)) — 61 Other operating expenses 16 3 Ethanol margin $ 1,164 $ 858 • Adjusted Refining operating income is defined as Refining segment operating income excluding the modification of RVO adjustment and other operating expenses, as reflected in the table below.
We believe that our expected allocation of growth capital into low-carbon projects is consistent with such targets. Certain of these low-carbon projects have been completed or are already in execution and the associated capital investments are included in our expected capital investments for 2023.
We believe that our allocation of growth capital into low-carbon projects to date has been consistent with such targets and ambition. Certain low-carbon projects have been completed or are already in execution and the associated capital investments are included in our expected capital investments for 2024.
(c) Excludes $149 million of cash and cash equivalents related to the consolidated VIEs that is available for use only by the VIEs. Information about our outstanding borrowings, letters of credit issued, and availability under our credit facilities is reflected in Note 8 of Notes to Consolidated Financial Statements.
(b) Excludes $260 million of cash and cash equivalents related to the consolidated VIEs that is for their use only. Information about our outstanding borrowings, letters of credit issued, and availability under our credit facilities is reflected in Note 9 of Notes to Consolidated Financial Statements.
Year Ended December 31, 2022 2021 Reconciliation of Renewable Diesel operating income to Renewable Diesel margin Renewable Diesel operating income $ 774 $ 709 Adjustments: Operating expenses (excluding depreciation and amortization expense) 255 134 Depreciation and amortization expense 122 58 Other operating expenses — 3 Renewable Diesel margin $ 1,151 $ 904 • Ethanol margin is defined as Ethanol segment operating income excluding operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, the asset impairment loss, and other operating expenses, as reflected in the table below.
Year Ended December 31, 2023 2022 Reconciliation of Renewable Diesel operating income to Renewable Diesel margin Renewable Diesel operating income $ 852 $ 774 Adjustments: Operating expenses (excluding depreciation and amortization expense) 358 255 Depreciation and amortization expense 231 122 Renewable Diesel margin $ 1,441 $ 1,151 • Ethanol margin is defined as Ethanol segment operating income excluding operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, the asset impairment loss, and other operating expenses, as reflected in the table below.
In 2020, we recognized the cost of the RVO using the 2020 quotas set by the EPA at that time, and in 2021 we recognized the cost of the RVO using our estimates of the quotas.
In 2020, we recognized the cost of the RVO using the 2020 quotas set by the EPA at that time, and in 2021 and the three months ended March 31, 2022, we recognized the cost of the RVO using our estimates of the quotas.
Ethanol segment margin is primarily affected by prices for the ethanol and corn related co-products that we sell and the cost of corn that we process. The table on page 46 reflects market reference prices that we believe had a material impact on the change in our Ethanol segment margin in 2022 compared to 2021.
Ethanol segment margin is primarily affected by prices for the ethanol and corn related co-products that we sell and the cost of corn that we process. The table on page 49 reflects market reference prices that we believe impacted our Ethanol segment margin in 2023 compared to 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 below under “LIQUIDITY AND CAPITAL RESOURCES.” 40 Table of Contents Results for the Year Ended December 31, 2022 For 2022, we reported net income attributable to Valero stockholders of $11.5 billion compared to $930 million for 2021.
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 below under “LIQUIDITY AND CAPITAL RESOURCES” beginning on page 57 . 43 Table of Contents Results for the Year Ended December 31, 2023 For 2023, we reported net income attributable to Valero stockholders of $8.8 billion compared to $11.5 billion for 2022.
Year Ended December 31, 2022 2021 Reconciliation of Ethanol operating income to adjusted Ethanol operating income Ethanol operating income $ 110 $ 473 Adjustments: Gain on sale of ethanol plant (see note (c)) (23) — Asset impairment loss (see note (d)) 61 — Change in estimated useful life of ethanol plant (see note (c)) — 48 Other operating expenses 3 1 Adjusted Ethanol operating income $ 151 $ 522 • Adjusted operating income is defined as total company operating income excluding the modification of RVO adjustment, the gain on sale of ethanol plant, the asset impairment loss, the change in estimated useful life of ethanol plant, the environmental reserve adjustment, and other operating expenses, as reflected in the table below.
Year Ended December 31, 2023 2022 Reconciliation of Ethanol operating income to adjusted Ethanol operating income Ethanol operating income $ 553 $ 110 Adjustments: Gain on sale of ethanol plant (see note (b)) — (23) Asset impairment loss (see note (c)) — 61 Other operating expenses 16 3 Adjusted Ethanol operating income $ 569 $ 151 • Adjusted operating income is defined as total company operating income excluding the modification of RVO adjustment, the gain on sale of ethanol plant, the asset impairment loss, the environmental reserve adjustment, and other operating expenses, as reflected in the table below.
The debt issuances, borrowings, and repayments are described in Note 8 of Notes to Consolidated Financial Statements. As previously noted, our operations generated $5.9 billion of cash in 2021, driven primarily by noncash charges to income of $2.3 billion, a positive change in working capital of $2.2 billion, and net income of $1.3 billion.
The debt borrowings and repayments are described in Note 9 of Notes to Consolidated Financial Statements. As previously noted, our operations generated $9.2 billion of cash in 2023, driven primarily by net income of $9.1 billion and noncash charges to income of $2.4 billion, partially offset by an unfavorable change in working capital of $2.3 billion.
The components of this decrease in the adjusted results, along with the reasons for the changes in these components, are outlined below. • Ethanol segment margin decreased by $303 million in 2022 compared to 2021.
The components of this increase in the adjusted results, along with the reasons for the changes in these components, are outlined below. • Ethanol segment margin increased by $306 million in 2023 compared to 2022.
Our capital investments in future years to achieve these targets are expected to include investments associated with certain low-carbon projects currently at various stages of progress, evaluation, or approval. See “ITEMS 1. and 2. BUSINESS AND PROPERTIES—OUR COMPREHENSIVE LIQUID FUELS STRATEGY— Our Low-Carbon Projects ” for a description of our low-carbon projects.
Our capital investments in future years to achieve these targets and ambition are expected to include investments associated with certain low-carbon projects currently at various stages of progress, evaluation, or approval. See “ITEMS 1. and 2.
Our operating results for 2022, including operating results by segment, are described in the summary on the following page, and detailed descriptions can be found below under “RESULTS OF OPERATIONS.” Our operations generated $12.6 billion of cash in 2022.
Our operating results for 2023, including operating results by segment, are described in the summary on the following page, and detailed descriptions can be found below under “RESULTS OF OPERATIONS” beginning on page 46 . Our operations generated $9.2 billion of cash in 2023.
(d) Our ethanol plant located in Lakota, Iowa (Lakota ethanol plant) is currently configured to produce a higher-grade ethanol product, as opposed to fuel-grade ethanol, suitable for hand sanitizer blending or industrial purposes that has a higher market value than fuel-grade ethanol. During 2022, demand for higher-grade ethanol declined and had a negative impact on the profitability of the plant.
(c) Our ethanol plant located in Lakota, Iowa (Lakota ethanol plant) was previously configured to produce USP-grade ethanol, a higher grade ethanol suitable for hand sanitizer blending that has a higher market value than fuel-grade ethanol. During 2022, demand for USP-grade ethanol declined and had a negative impact on the profitability of the plant.
Note references in this section can be found on pages 50 through 55 .
Note references in this section can be found on pages 53 through 56 .
The components of this increase in the adjusted results, along with the reasons for the changes in those components, are outlined below. • Refining segment margin increased by $14.3 billion in 2022 compared to 2021.
The components of this decrease in the adjusted results, along with the reasons for the changes in those components, are outlined below. • Refining segment margin decreased by $4.4 billion in 2023 compared to 2022.
Capital Investments Attributable to Valero Capital investments attributable to Valero is a non-GAAP financial measure that reflects our net share of capital investments and is defined as all capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in nonconsolidated joint ventures, excluding the portion of DGD’s capital investments attributable to the other joint venture member and all of the capital expenditures of other consolidated VIEs.
BUSINESS AND PROPERTIES—OUR COMPREHENSIVE LIQUID FUELS STRATEGY— Our Low-Carbon Projects ” for a description of our low-carbon projects. 60 Table of Contents Capital Investments Attributable to Valero Capital investments attributable to Valero is a non-GAAP financial measure that reflects our net share of capital investments and is defined as all capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in nonconsolidated joint ventures, excluding the portion of DGD’s capital investments attributable to the other joint venture member and all of the capital expenditures of other consolidated VIEs.
The IEnova Revolver is subject to repayment on demand; however, we do not expect the lender to demand repayment during the next 12 months. Thus, the final cash flows for this instrument cannot be predicted with certainty at this time.
The IEnova Revolver is subject to repayment on demand; however, we do not expect the lender to demand repayment during the next 12 months. Thus, the final cash flows for this instrument cannot be predicted with certainty at this time. In 2023, we used cash on hand to purchase and retire $199 million of our public debt.
Year Ended December 31, 2022 2021 Reconciliation of Refining operating income to Refining margin Refining operating income $ 15,803 $ 1,862 Adjustments: Modification of RVO (see note (a)) (104) (1) Operating expenses (excluding depreciation and amortization expense) (see note (b)) 5,509 5,088 Depreciation and amortization expense 2,247 2,169 Other operating expenses 63 83 Refining margin $ 23,518 $ 9,201 52 Table of Contents • Renewable Diesel margin is defined as Renewable Diesel segment operating income excluding operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses, as reflected in the table below.
Year Ended December 31, 2023 2022 Reconciliation of Refining operating income to Refining margin Refining operating income $ 11,511 $ 15,803 Adjustments: Modification of RVO (see note (a)) — (104) Operating expenses (excluding depreciation and amortization expense) 5,208 5,509 Depreciation and amortization expense 2,351 2,247 Other operating expenses 17 63 Refining margin $ 19,087 $ 23,518 54 Table of Contents • Renewable Diesel margin is defined as Renewable Diesel segment operating income excluding operating expenses (excluding depreciation and amortization expense) and depreciation and amortization expense, as reflected in the table below.
RISK FACTORS—Legal, Government, and Regulatory Risks— Legal, political, and regulatory developments regarding climate, GHG emissions, or the environment could adversely affect our business, financial condition, results of operations, and liquidity. ” CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
RISK FACTORS—Legal, Government, and Regulatory Risks— We are subject to risks arising from legal, political, and regulatory developments regarding climate, GHG emissions, and the environment.” 63 Table of Contents CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Purchase obligations are based on (i) fixed or minimum quantities to be purchased and (ii) fixed or estimated prices to be paid based on current market conditions.
(e) Purchase obligations are described in Note 10 of Notes to Consolidated Financial Statements. Purchase obligations are based on (i) fixed or minimum quantities to be purchased and (ii) fixed or estimated prices to be paid based on current market conditions.
The strong demand for our products and the increase in refining margins were the primary contributors to to us reporting $11.5 billion of net income attributable to Valero stockholders for the year ended December 31, 2022.
This global supply and demand imbalance contributed to strong refining margins for 2023. The strong demand for our products and continued strength in refining margins were the primary contributors to us reporting $8.8 billion of net income attributable to Valero stockholders for the year ended December 31, 2023.
Refining segment adjusted operating income increased by $13.8 billion primarily due to higher gasoline and distillate (primarily diesel) margins and higher throughput volumes, partially offset by lower margins on other products and higher operating expenses (excluding depreciation and amortization expense). • Renewable Diesel segment.
Refining segment adjusted operating income decreased by $4.2 billion primarily due to lower gasoline and distillate (primarily diesel) margins, partially offset by higher discounts on crude oils and other feedstocks and lower operating expenses (excluding depreciation and amortization expense). • Renewable Diesel segment.
We have not entered into any transactions, agreements, or other contractual arrangements that would result in off-balance sheet liabilities. Other Matters Impacting Liquidity and Capital Resources Stock Purchase Program During the year ended December 31, 2022, we purchased for treasury 37,999,481 of our shares for $4.6 billion.
We have not entered into any transactions, agreements, or other contractual arrangements that would result in off-balance sheet liabilities. 62 Table of Contents Other Matters Impacting Liquidity and Capital Resources Stock Purchase Programs During the year ended December 31, 2023, we purchased for treasury 39,717,265 of our shares for a total cost of $5.2 billion.
The following table also reflects capital investments attributable to Valero, which is a non-GAAP measure that we define and reconcile to capital investments below under “Capital Investments Attributable to Valero.” Year Ending December 31, 2023 (a) Year Ended December 31, 2022 2021 Capital investments by nature of the project (b): Sustaining capital investments $ 1,595 $ 1,368 $ 1,129 Growth capital investments: Low-carbon growth capital investments 225 836 1,042 Other growth capital investments 200 534 296 Total growth capital investments 425 1,370 1,338 Total capital investments $ 2,020 $ 2,738 $ 2,467 Capital investments by segment: Refining $ 1,570 $ 1,764 $ 1,378 Renewable Diesel 280 879 1,048 Ethanol 70 22 15 Corporate 100 73 26 Total capital investments 2,020 2,738 2,467 Adjustments: Renewable Diesel capital investments attributable to the other joint venture member in DGD (140) (439) (524) Capital expenditures of other VIEs — (40) (110) Capital investments attributable to Valero $ 1,880 $ 2,259 $ 1,833 ________________________ (a) All expected amounts for the year ending December 31, 2023 exclude capital expenditures that the consolidated VIEs (other than DGD) may incur because we do not operate those VIEs.
The following table also reflects capital investments attributable to Valero, which is a non-GAAP measure 59 Table of Contents that we define and reconcile to capital investments below under “Capital Investments Attributable to Valero.” Year Ending December 31, 2024 (a) Year Ended December 31, 2023 2022 Capital investments by nature of the project (b): Sustaining capital investments $ 1,620 $ 1,486 $ 1,368 Growth capital investments: Low-carbon growth capital investments 345 237 836 Other growth capital investments 200 193 534 Total growth capital investments 545 430 1,370 Total capital investments $ 2,165 $ 1,916 $ 2,738 Capital investments by segment: Refining $ 1,605 $ 1,488 $ 1,764 Renewable Diesel 430 294 879 Ethanol 60 43 22 Corporate 70 91 73 Total capital investments 2,165 1,916 2,738 Adjustments: Renewable Diesel capital investments attributable to the other joint venture member in DGD (215) (147) (439) Capital expenditures of other VIEs — (11) (40) Capital investments attributable to Valero $ 1,950 $ 1,758 $ 2,259 ________________________ (a) All expected amounts for the year ending December 31, 2024 exclude capital expenditures that the consolidated VIEs (other than DGD) may incur because we do not operate those VIEs.
This cash was used to make $2.7 billion of capital investments in our business and return $6.1 billion to our stockholders through purchases of common stock for treasury and dividend payments.
This cash was used to make $1.9 billion of capital investments in our business and return $6.6 billion to our stockholders through purchases of common stock for treasury and dividend payments. In addition, we reduced our outstanding debt through the purchase of $199 million of our public debt in 2023.
Year Ended December 31, 2022 2021 Change Operating income $ 110 $ 473 $ (363) Adjusted operating income (see note (h)) 151 522 (371) Ethanol margin (see note (h)) $ 858 $ 1,161 $ (303) Operating expenses (excluding depreciation and amortization expense reflected below) (see note (b)) 625 556 69 Depreciation and amortization expense (see note (c)) 59 131 (72) Asset impairment loss (see note (d)) 61 — 61 Production volumes (thousand gallons per day) (see note (i)) 3,866 3,949 (83) Ethanol segment operating income decreased by $363 million in 2022 compared to 2021; however, Ethanol segment adjusted operating income, which excludes the adjustments in the table in note (h), 49 Table of Contents decreased by $371 million in 2022 compared to 2021.
Year Ended December 31, 2023 2022 Change Operating income $ 553 $ 110 $ 443 Adjusted operating income (see note (h)) 569 151 418 Ethanol margin (see note (h)) 1,164 858 306 Operating expenses (excluding depreciation and amortization expense reflected below) 515 625 (110) Depreciation and amortization expense (see note (b)) 80 59 21 Asset impairment loss (see note (c)) — 61 (61) Production volumes (thousand gallons per day) (see note (i)) 4,367 3,866 501 Ethanol segment operating income increased by $443 million in 2023 compared to 2022; however, Ethanol segment adjusted operating income, which excludes the adjustments in the table in note (h), increased by $418 million in 2023 compared to 2022.
As a result of the final rule released by the EPA as noted above, we recognized a benefit of $104 million in 2022, of which a benefit of $105 million and a net charge of $1 million were related to the modification of the 2020 and 2021 quotas, respectively.
As a result of the final rule released by the EPA as noted above, we recognized a benefit of $104 million in the year ended December 31, 2022 primarily related to the modification of the 2020 quotas.
Cash Flows Components of our cash flows are set forth below (in millions): Year Ended December 31, 2022 2021 Cash flows provided by (used in): Operating activities $ 12,574 $ 5,859 Investing activities (2,805) (2,159) Financing activities: Debt issuances and borrowings 3,153 1,828 Repayments of debt and finance lease obligations (including premiums paid on early redemption and retirement of debt) (6,019) (3,214) Return to stockholders: Purchases of common stock for treasury (4,577) (27) Common stock dividend payments (1,562) (1,602) Return to stockholders (6,139) (1,629) Other financing activities 156 169 Financing activities (8,849) (2,846) Effect of foreign exchange rate changes on cash (180) (45) Net increase in cash and cash equivalents $ 740 $ 809 Cash Flows for the Year Ended December 31, 2022 In 2022, we used the $12.6 billion of cash generated by our operations and the $3.2 billion in debt issuances and borrowings to make $2.8 billion of investments in our business, repay $6.0 billion of debt and finance lease obligations (including premiums paid on the early retirement of debt), return $6.1 billion to our stockholders through purchases of our common stock for treasury and dividend payments, and increase our available cash on hand by $740 million.
However, there can be no assurances regarding the availability of any future financings or additional credit facilities or whether such financings or additional credit facilities can be made available on terms that are acceptable to us. 57 Table of Contents Cash Flows Components of our cash flows are set forth below (in millions): Year Ended December 31, 2023 2022 Cash flows provided by (used in): Operating activities $ 9,229 $ 12,574 Investing activities (1,865) (2,805) Financing activities: Debt issuance and borrowings 2,420 3,153 Repayments of debt and finance lease obligations (including premiums paid on early retirement of debt) (2,687) (6,019) Return to stockholders: Purchases of common stock for treasury (5,136) (4,577) Common stock dividend payments (1,452) (1,562) Return to stockholders (6,588) (6,139) Other financing activities (86) 156 Financing activities (6,941) (8,849) Effect of foreign exchange rate changes on cash 139 (180) Net increase in cash and cash equivalents $ 562 $ 740 Cash Flows for the Year Ended December 31, 2023 In 2023, we used the $9.2 billion of cash generated by our operations and the $2.4 billion in debt borrowings to make $1.9 billion of investments in our business, repay $2.7 billion of debt and finance lease obligations (including premiums paid on the early retirement of debt), return $6.6 billion to our stockholders through purchases of our common stock for treasury and dividend payments, and increase our available cash on hand by $562 million.
(b) Capital investments attributable to Valero by nature of the project are as follows (in millions): Year Ending December 31, 2023 Year Ended December 31, 2022 2021 Sustaining capital investments $ 1,550 $ 1,340 $ 1,105 Growth capital investments: Low-carbon growth capital investments 130 422 538 Other growth capital investments 200 497 190 Total growth capital investments 330 919 728 Capital investments attributable to Valero $ 1,880 $ 2,259 $ 1,833 58 Table of Contents We have publicly announced GHG emissions reduction/displacement targets for 2025 and 2035.
(b) Capital investments attributable to Valero by nature of the project are as follows (in millions): Year Ending December 31, 2024 Year Ended December 31, 2023 2022 Sustaining capital investments $ 1,565 $ 1,449 $ 1,340 Growth capital investments: Low-carbon growth capital investments 185 126 422 Other growth capital investments 200 183 497 Total growth capital investments 385 309 919 Capital investments attributable to Valero $ 1,950 $ 1,758 $ 2,259 We have publicly announced GHG emissions reduction/displacement targets and a long-term ambition.
Year Ended December 31, 2022 2021 Reconciliation of Refining operating income to adjusted Refining operating income Refining operating income $ 15,803 $ 1,862 Adjustments: Modification of RVO (see note (a)) (104) (1) Other operating expenses 63 83 Adjusted Refining operating income $ 15,762 $ 1,944 53 Table of Contents • Adjusted Renewable Diesel operating income is defined as Renewable Diesel segment operating income excluding other operating expenses, as reflected in the table below.
Year Ended December 31, 2023 2022 Reconciliation of Refining operating income to adjusted Refining operating income Refining operating income $ 11,511 $ 15,803 Adjustments: Modification of RVO (see note (a)) — (104) Other operating expenses 17 63 Adjusted Refining operating income $ 11,528 $ 15,762 55 Table of Contents • Adjusted Ethanol operating income is defined as Ethanol segment operating income excluding the gain on sale of ethanol plant, the asset impairment loss, and other operating expenses, as reflected in the table below.
Refining segment margin is primarily affected by the prices for the petroleum-based transportation fuels that we sell and the cost of crude oil and other feedstocks that we process.
Refining segment margin is primarily affected by the prices for the petroleum-based transportation fuels that we sell and the cost of crude oil and other feedstocks that we process. The table on page 48 reflects market reference prices and differentials that we believe impacted our Refining segment margin in 2023 compared to 2022.
The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Ethanol Segment Results The following table includes selected financial and operating data of our Ethanol segment for 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Year Ended December 31, 2022 2021 Reconciliation of total company operating income to adjusted operating income Total company operating income $ 15,690 $ 2,130 Adjustments: Modification of RVO (see note (a)) (104) (1) Gain on sale of ethanol plant (see note (c)) (23) — Asset impairment loss (see note (d)) 61 — Change in estimated useful life of ethanol plant (see note (c)) — 48 Environmental reserve adjustment (see note (e)) 20 — Other operating expenses 66 87 Adjusted operating income $ 15,710 $ 2,264 54 Table of Contents (i) We use throughput volumes, sales volumes, and production volumes for the Refining segment, Renewable Diesel segment, and Ethanol segment, respectively, due to their general use by others who operate facilities similar to those included in our segments.
Year Ended December 31, 2023 2022 Reconciliation of total company operating income to adjusted operating income Total company operating income $ 11,858 $ 15,690 Adjustments: Modification of RVO (see note (a)) — (104) Gain on sale of ethanol plant (see note (b)) — (23) Asset impairment loss (see note (c)) — 61 Environmental reserve adjustment (see note (d)) — 20 Other operating expenses 33 66 Adjusted operating income $ 11,891 $ 15,710 (i) We use throughput volumes, sales volumes, and production volumes for the Refining segment, Renewable Diesel segment, and Ethanol segment, respectively, due to their general use by others who operate facilities similar to those included in our segments. 56 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Our Liquidity Our liquidity consisted of the following as of December 31, 2023 (in millions): Available capacity from our committed facilities (a): Valero Revolver $ 3,996 Accounts receivable sales facility 1,300 Total available capacity 5,296 Cash and cash equivalents (b) 5,164 Total liquidity $ 10,460 _______________________ (a) Excludes the committed facilities of the consolidated VIEs.
Financial Highlights by Segment and Total Company (millions of dollars) Year Ended December 31, 2022 Refining Renewable Diesel Ethanol Corporate and Eliminations Total Revenues: Revenues from external customers $ 168,154 $ 3,483 $ 4,746 $ — $ 176,383 Intersegment revenues 56 2,018 740 (2,814) — Total revenues 168,210 5,501 5,486 (2,814) 176,383 Cost of sales: Cost of materials and other (a) 144,588 4,350 4,628 (2,796) 150,770 Operating expenses (excluding depreciation and amortization expense reflected below) 5,509 255 625 — 6,389 Depreciation and amortization expense (c) 2,247 122 59 — 2,428 Total cost of sales 152,344 4,727 5,312 (2,796) 159,587 Asset impairment loss (d) — — 61 — 61 Other operating expenses 63 — 3 — 66 General and administrative expenses (excluding depreciation and amortization expense reflected below) (e) — — — 934 934 Depreciation and amortization expense — — — 45 45 Operating income by segment $ 15,803 $ 774 $ 110 $ (997) 15,690 Other income, net (f) 179 Interest and debt expense, net of capitalized interest (562) Income before income tax expense 15,307 Income tax expense (g) 3,428 Net income 11,879 Less: Net income attributable to noncontrolling interests 351 Net income attributable to Valero Energy Corporation stockholders $ 11,528 43 Table of Contents Financial Highlights by Segment and Total Company (continued) (millions of dollars) Year Ended December 31, 2021 Refining Renewable Diesel Ethanol Corporate and Eliminations Total Revenues: Revenues from external customers $ 106,947 $ 1,874 $ 5,156 $ — $ 113,977 Intersegment revenues 14 468 433 (915) — Total revenues 106,961 2,342 5,589 (915) 113,977 Cost of sales: Cost of materials and other (b) 97,759 1,438 4,428 (911) 102,714 Operating expenses (excluding depreciation and amortization expense reflected below) (b) 5,088 134 556 (2) 5,776 Depreciation and amortization expense (c) 2,169 58 131 — 2,358 Total cost of sales 105,016 1,630 5,115 (913) 110,848 Other operating expenses 83 3 1 — 87 General and administrative expenses (excluding depreciation and amortization expense reflected below) — — — 865 865 Depreciation and amortization expense — — — 47 47 Operating income by segment $ 1,862 $ 709 $ 473 $ (914) 2,130 Other income, net (f) 16 Interest and debt expense, net of capitalized interest (603) Income before income tax expense 1,543 Income tax expense (g) 255 Net income 1,288 Less: Net income attributable to noncontrolling interests 358 Net income attributable to Valero Energy Corporation stockholders $ 930 44 Table of Contents Average Market Reference Prices and Differentials Year Ended December 31, 2022 2021 Refining Feedstocks (dollars per barrel) Brent crude oil $ 98.86 $ 70.79 Brent less West Texas Intermediate (WTI) crude oil 4.43 2.83 Brent less WTI Houston crude oil 2.82 1.91 Brent less Dated Brent crude oil (2.22) 0.03 Brent less Alaska North Slope (ANS) crude oil 0.06 0.35 Brent less Argus Sour Crude Index crude oil 7.42 3.92 Brent less Maya crude oil 11.68 6.48 Brent less Western Canadian Select Houston crude oil 15.55 7.40 WTI crude oil 94.43 67.97 Natural gas (dollars per million British Thermal Units) 5.83 7.85 Product margins (dollars per barrel) U.S.
Financial Highlights by Segment and Total Company (millions of dollars) Year Ended December 31, 2023 Refining Renewable Diesel Ethanol Corporate and Eliminations Total Revenues: Revenues from external customers $ 136,470 $ 3,823 $ 4,473 $ — $ 144,766 Intersegment revenues 18 3,168 1,086 (4,272) — Total revenues 136,488 6,991 5,559 (4,272) 144,766 Cost of sales: Cost of materials and other 117,401 5,550 4,395 (4,259) 123,087 Operating expenses (excluding depreciation and amortization expense reflected below) 5,208 358 515 8 6,089 Depreciation and amortization expense 2,351 231 80 (4) 2,658 Total cost of sales 124,960 6,139 4,990 (4,255) 131,834 Other operating expenses 17 — 16 — 33 General and administrative expenses (excluding depreciation and amortization expense reflected below) — — — 998 998 Depreciation and amortization expense — — — 43 43 Operating income by segment $ 11,511 $ 852 $ 553 $ (1,058) 11,858 Other income, net (e) 502 Interest and debt expense, net of capitalized interest (592) Income before income tax expense 11,768 Income tax expense 2,619 Net income 9,149 Less: Net income attributable to noncontrolling interests 314 Net income attributable to Valero Energy Corporation stockholders $ 8,835 46 Table of Contents Financial Highlights by Segment and Total Company (continued) (millions of dollars) Year Ended December 31, 2022 Refining Renewable Diesel Ethanol Corporate and Eliminations Total Revenues: Revenues from external customers $ 168,154 $ 3,483 $ 4,746 $ — $ 176,383 Intersegment revenues 56 2,018 740 (2,814) — Total revenues 168,210 5,501 5,486 (2,814) 176,383 Cost of sales: Cost of materials and other (a) 144,588 4,350 4,628 (2,796) 150,770 Operating expenses (excluding depreciation and amortization expense reflected below) 5,509 255 625 — 6,389 Depreciation and amortization expense (b) 2,247 122 59 — 2,428 Total cost of sales 152,344 4,727 5,312 (2,796) 159,587 Asset impairment loss (c) — — 61 — 61 Other operating expenses 63 — 3 — 66 General and administrative expenses (excluding depreciation and amortization expense reflected below) (d) — — — 934 934 Depreciation and amortization expense — — — 45 45 Operating income by segment $ 15,803 $ 774 $ 110 $ (997) 15,690 Other income, net (e) 179 Interest and debt expense, net of capitalized interest (562) Income before income tax expense 15,307 Income tax expense (f) 3,428 Net income 11,879 Less: Net income attributable to noncontrolling interests 351 Net income attributable to Valero Energy Corporation stockholders $ 11,528 47 Table of Contents Average Market Reference Prices and Differentials Year Ended December 31, 2023 2022 Refining Feedstocks (dollars per barrel) Brent crude oil $ 82.27 $ 98.86 Brent less West Texas Intermediate (WTI) crude oil 4.60 4.43 Brent less WTI Houston crude oil 3.15 2.82 Brent less Dated Brent crude oil (0.44) (2.22) Brent less Argus Sour Crude Index crude oil 5.34 7.42 Brent less Maya crude oil 13.33 11.68 Brent less Western Canadian Select Houston crude oil 12.15 15.55 WTI crude oil 77.67 94.43 Natural gas (dollars per million British thermal units) 2.23 5.83 RVO (dollars per barrel) (g) 7.02 7.72 Product margins (RVO adjusted unless otherwise noted) (dollars per barrel) U.S.
The components of this increase in the adjusted results, along with the reasons for the changes in those components, are outlined below. • Renewable Diesel segment margin increased by $247 million in 2022 compared to 2021.
The components of this increase, along with the reasons for the changes in those components, are outlined below. • Renewable Diesel segment margin increased by $290 million in 2023 compared to 2022. Renewable Diesel segment margin is primarily affected by the price for the renewable diesel that we sell and the cost of the feedstocks that we process.
In addition, this non-GAAP measure may not be comparable to similarly titled measures used by other companies because we may define it differently, which may diminish its utility. 59 Table of Contents Year Ended December 31, 2022 2021 Reconciliation of capital investments to capital investments attributable to Valero Capital expenditures (excluding VIEs) $ 788 $ 513 Capital expenditures of VIEs: DGD 853 1,042 Other VIEs 40 110 Deferred turnaround and catalyst cost expenditures (excluding VIEs) 1,030 787 Deferred turnaround and catalyst cost expenditures of DGD 26 6 Investments in nonconsolidated joint ventures 1 9 Capital investments 2,738 2,467 Adjustments: DGD’s capital investments attributable to our joint venture member (439) (524) Capital expenditures of other VIEs (40) (110) Capital investments attributable to Valero $ 2,259 $ 1,833 Contractual Obligations Below is a summary of our contractual obligations (in millions) as of December 31, 2022 that are expected to be paid within the next year and thereafter.
Year Ended December 31, 2023 2022 Reconciliation of capital investments to capital investments attributable to Valero Capital expenditures (excluding VIEs) $ 665 $ 788 Capital expenditures of VIEs: DGD 235 853 Other VIEs 11 40 Deferred turnaround and catalyst cost expenditures (excluding VIEs) 946 1,030 Deferred turnaround and catalyst cost expenditures of DGD 59 26 Investments in nonconsolidated joint ventures — 1 Capital investments 1,916 2,738 Adjustments: DGD’s capital investments attributable to our joint venture member (147) (439) Capital expenditures of other VIEs (11) (40) Capital investments attributable to Valero $ 1,758 $ 2,259 61 Table of Contents Contractual Obligations Below is a summary of our contractual obligations (in millions) as of December 31, 2023 that are expected to be paid within the next year and thereafter.
On February 23, 2023, our Board authorized our purchase of up to an additional $2.5 billion of our outstanding common stock with no expiration date, which is in addition to the amount remaining under the October 2022 Program.
As of December 31, 2023, we had $2.2 billion remaining available for purchase under the September 2023 Program. On February 22, 2024, our Board authorized us to purchase shares of our outstanding common stock for a total cost of up to $2.5 billion with no expiration date, which is in addition to the amount remaining under the September 2023 Program.
Our investing activities of $2.8 billion primarily consisted of $2.7 billion in capital investments, as defined below under “Capital Investments,” of which $879 million related to capital investments made by DGD and $40 million related to capital expenditures of VIEs other than DGD. 56 Table of Contents Cash Flows for the Year Ended December 31, 2021 In 2021, we used the $5.9 billion of cash generated by our operations and the $1.8 billion in debt issuances and borrowings to make $2.2 billion of investments in our business, repay $3.2 billion of debt and finance lease obligations (including premiums paid on the early redemption and retirement of debt), return $1.6 billion to our stockholders through purchases of our common stock for treasury and dividend payments, and increase our available cash on hand by $809 million.
Cash Flows for the Year Ended December 31, 2022 In 2022, we used the $12.6 billion of cash generated by our operations and the $3.2 billion from the debt issuance and borrowings to make $2.8 billion of investments in our business, repay $6.0 billion of debt and finance lease obligations (including premiums paid on the early retirement of debt), return $6.1 billion to our stockholders through purchases of our common stock for treasury and dividend payments, and increase our available cash on hand by $740 million.
Other long-term liabilities exclude amounts related to the long-term portion of operating lease liabilities that are separately presented above. 60 Table of Contents (e) Purchase obligations are described in Note 9 of Notes to Consolidated Financial Statements, which is incorporated by reference into this item.
Operating lease liabilities and finance lease obligations reflected in this table include related interest expense. (d) Other long-term liabilities are described in Note 8 of Notes to Consolidated Financial Statements. Other long-term liabilities exclude amounts related to the long-term portion of operating lease liabilities that are separately presented above.
Renewable Diesel segment adjusted operating income increased by $62 million primarily due to higher sales volumes and higher renewable diesel prices, partially offset by higher feedstock costs, an unfavorable impact from commodity derivative instruments associated with our price risk management activities, higher operating expenses (excluding depreciation and amortization expense), and higher depreciation and amortization expense. • Ethanol segment.
Renewable Diesel segment operating income increased by $78 million primarily due to lower feedstock costs and higher sales volumes, partially offset by lower product prices (primarily renewable diesel), higher operating expenses (excluding depreciation and amortization expense), and higher depreciation and amortization expense. • Ethanol segment.
Debt obligations exclude amounts related to net unamortized debt issuance costs and other. (b) Interest payments related to debt obligations are the expected payments based on information available as of December 31, 2022.
Debt obligations exclude amounts related to net unamortized debt issuance costs and other. (b) Interest payments related to debt obligations are the expected payments based on information available as of December 31, 2023. (c) Operating lease liabilities, finance lease obligations, and maturity analyses of remaining minimum lease payments are described in Note 5 of Notes to Consolidated Financial Statements.
Year Ended December 31, 2022 2021 Change Operating income $ 774 $ 709 $ 65 Adjusted operating income (see note (h)) 774 712 62 Renewable Diesel margin (see note (h)) $ 1,151 $ 904 $ 247 Operating expenses (excluding depreciation and amortization expense reflected below) 255 134 121 Depreciation and amortization expense 122 58 64 Sales volumes (thousand gallons per day) (see note (i)) 2,175 1,014 1,161 Renewable Diesel segment operating income increased by $65 million in 2022 compared to 2021; however, Renewable Diesel segment adjusted operating income, which excludes the adjustment in the table in note (h), increased by $62 million in 2022 compared to 2021.
Year Ended December 31, 2023 2022 Change Operating income $ 852 $ 774 $ 78 Renewable Diesel margin (see note (h)) 1,441 1,151 290 Operating expenses (excluding depreciation and amortization expense reflected below) 358 255 103 Depreciation and amortization expense 231 122 109 Sales volumes (thousand gallons per day) (see note (i)) 3,539 2,175 1,364 Renewable Diesel segment operating income increased by $78 million in 2023 compared to 2022.
Due to the significant subjectivity of the assumptions used to test for recoverability, changes in market conditions could result in significant impairment charges in the future, thus affecting our earnings.
Due to the significant subjectivity of the assumptions used to test for recoverability, changes in market conditions could result in significant impairment charges in the future, thus affecting our earnings. 64 Table of Contents New environmental and tax laws and regulations, as well as changes to existing laws and regulations, are continuously being enacted or proposed.
Year Ended December 31, 2022 2021 Change Operating income $ 15,803 $ 1,862 $ 13,941 Adjusted operating income (see note (h)) 15,762 1,944 13,818 Refining margin (see note (h)) $ 23,518 $ 9,201 $ 14,317 Operating expenses (excluding depreciation and amortization expense reflected below) (see note (b)) 5,509 5,088 421 Depreciation and amortization expense 2,247 2,169 78 Throughput volumes (thousand BPD) (see note (i)) 2,953 2,787 166 Refining segment operating income increased by $13.9 billion in 2022 compared to 2021; however, Refining segment adjusted operating income, which excludes the adjustments in the table in note (h), increased by $13.8 billion in 2022 compared to 2021.
Year Ended December 31, 2023 2022 Change Operating income $ 11,511 $ 15,803 $ (4,292) Adjusted operating income (see note (h)) 11,528 15,762 (4,234) Refining margin (see note (h)) 19,087 23,518 (4,431) Operating expenses (excluding depreciation and amortization expense reflected below) 5,208 5,509 (301) Depreciation and amortization expense 2,351 2,247 104 Throughput volumes (thousand BPD) (see note (i)) 2,979 2,953 26 Refining segment operating income decreased by $4.3 billion in 2023 compared to 2022; however, Refining segment adjusted operating income, which excludes the adjustments in the table in note (h), decreased by $4.2 billion in 2023 compared to 2022.
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.
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. 42 Table of Contents 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 U.S. generally accepted accounting principles (GAAP).
The decrease in Ethanol segment margin was primarily due to the following: ◦ Higher corn prices had an unfavorable impact of approximately $572 million. ◦ Higher prices for the co-products that we produce, primarily DDGs and inedible distillers corn oil, had a favorable impact of approximately $195 million. ◦ Higher ethanol prices had a favorable impact of approximately $82 million. • Ethanol segment operating expenses (excluding depreciation and amortization expense) increased by $69 million primarily due to increases in energy costs of $48 million and chemicals and catalyst expense of $18 million. ________________________ The following notes relate to references on pages 43 through 49 .
The increase in Ethanol segment margin was primarily due to the following: ◦ Lower corn prices had a favorable impact of approximately $618 million. 52 Table of Contents ◦ An increase in production volumes of 501,000 gallons per day had a favorable impact of approximately $150 million. ◦ Lower ethanol prices had an unfavorable impact of approximately $337 million. ◦ Lower prices for the corn related co-products that we produce, primarily DDGs and inedible distillers corn oils, had an unfavorable impact of approximately $129 million. • Ethanol segment operating expenses (excluding depreciation and amortization expense) decreased by $110 million primarily due to lower natural gas costs. ________________________ The following notes relate to references on pages 46 through 52 .
OVERVIEW AND OUTLOOK Overview Business Operations Update Our results for the year ended December 31, 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.
Also on page 61 , we disclose the reasons why we believe our use of this non-GAAP financial measure provides useful information. OVERVIEW AND OUTLOOK Overview Business Operations Update Our results for the year ended December 31, 2023 were favorably impacted by the continued strong worldwide demand for petroleum-based transportation fuels, while the worldwide supply of those products remained constrained.
(f) “Other income, net” includes the following: ◦ a pension settlement charge of $58 million in the year ended December 31, 2022 resulting from a greater number of employees retiring in 2022 who elected lump sum benefit payments from one of our qualified U.S. defined benefit pension plans than estimated.
(e) “Other income, net” includes the following: ◦ a net gain of $11 million in the year ended December 31, 2023 related to the early retirement of $199 million aggregate principal amount of various series of our senior notes; ◦ a net gain of $14 million in the year ended December 31, 2022 related to the early retirement of approximately $3.1 billion aggregate principal amount of various series of our senior notes; and ◦ a pension settlement charge of $58 million in the year ended December 31, 2022 resulting from a greater number of employees that retired in 2022 who elected lump sum benefit payments from our defined benefit pension plans than estimated.
The table on page 46 reflects market reference prices that we believe had a material impact on the change in our Renewable Diesel segment margin in 2022 compared to 2021. 48 Table of Contents The increase in Renewable Diesel segment margin was primarily due to the following: ◦ An increase in sales volumes of 1.2 million gallons per day had a favorable impact of approximately $1.3 billion.
The increase in Renewable Diesel segment margin was primarily due to the following: ◦ A decrease in the cost of the feedstocks that we process had a favorable impact of approximately $1.9 billion. ◦ An increase in sales volumes of 1.4 million gallons per day had a favorable impact of approximately $724 million.
The components of this $13.4 billion increase in adjusted operating income are discussed by segment in the segment analyses that follow. 46 Table of Contents “Other income, net” increased by $163 million in 2022 compared to 2021 due to the items noted in the following table (see note (f) for explanations of these components): Year Ended December 31, 2022 2021 Change Net benefit (charge) from early redemption and retirement of debt $ 14 $ (193) $ 207 Pension settlement charge (58) — (58) Asset impairment loss associated with the cancellation of a pipeline extension project by Diamond Pipeline LLC (a nonconsolidated joint venture) — (24) 24 Gain on sale of a 24.99 percent membership interest in MVP Terminalling, LLC (MVP) (a nonconsolidated joint venture) — 62 (62) Interest income, equity income on joint ventures, and other 223 171 52 Other income, net $ 179 $ 16 $ 163 Income tax expense increased by $3.2 billion in 2022 compared to 2021 primarily as a result of an increase in income before income tax expense.
The components of this $3.8 billion decrease in adjusted operating income are discussed by segment in the segment analyses that follow. 49 Table of Contents “Other income, net” increased by $323 million in 2023 compared to 2022 due to the items noted in the following table (in millions): Year Ended December 31, 2023 2022 Change Interest income on cash $ 293 $ 105 $ 188 Net gain from early retirement of debt (see note (e)) 11 14 (3) Pension settlement charge (see note (e)) — (58) 58 Equity income on joint ventures and other 198 118 80 Other income, net $ 502 $ 179 $ 323 Income tax expense decreased by $809 million in 2023 compared to 2022 primarily as a result of a decrease in income before income tax expense.
Year Ended December 31, 2022 2021 Change Revenues $ 176,383 $ 113,977 $ 62,406 Cost of sales (see notes (a) through (c)) 159,587 110,848 48,739 General and administrative expenses (excluding depreciation and amortization expense) (see note (e)) 934 865 69 Operating income 15,690 2,130 13,560 Adjusted operating income (see note (h)) 15,710 2,264 13,446 Other income, net (see note (f)) 179 16 163 Income tax expense (see note (g)) 3,428 255 3,173 Revenues increased by $62.4 billion in 2022 compared to 2021 primarily due to increases in product prices for the petroleum-based transportation fuels associated with sales made by our Refining segment.
Year Ended December 31, 2023 2022 Change Revenues $ 144,766 $ 176,383 $ (31,617) Cost of sales (see notes (a) and (b)) 131,834 159,587 (27,753) Operating income 11,858 15,690 (3,832) Adjusted operating income (see note (h)) 11,891 15,710 (3,819) Other income, net (see note (e)) 502 179 323 Income tax expense (see note (f)) 2,619 3,428 (809) Revenues decreased by $31.6 billion in 2023 compared to 2022 primarily due to decreases in product prices for the petroleum-based transportation fuels associated with sales made by our Refining segment.
The increase of $10.6 billion was primarily due to an increase in operating income of $13.6 billion, partially offset by an increase in income tax expense of $3.2 billion. The details of our operating income and adjusted operating income by segment and in total are reflected below.
The decrease of $2.7 billion was primarily due to a decrease in operating income of $3.8 billion, partially offset by an increase in “other income, net” of $323 million and a decrease in income tax expense of $809 million.
As of December 31, 2022, we recognized a deferred income tax liability of $51 million for foreign tax withholding on the anticipated repatriation of approximately $1 billion of cash held by one of our foreign subsidiaries. 61 Table of Contents Environmental Matters Our operations are subject to extensive environmental regulations by government authorities relating to the discharge of materials into the environment, waste management, pollution prevention measures, GHG emissions, and characteristics and composition of many of our products.
Environmental Matters Our operations are subject to extensive environmental regulations by government authorities relating to, among other matters, the discharge of materials into the environment, climate, waste management, pollution prevention measures, GHG and other emissions, our facilities and operations, and characteristics and composition of many of our products.
Adjusted operating income excludes the adjustments reflected in the tables in note (h) beginning on page 52 .
The details of our operating income and adjusted operating income by segment, where applicable, and in total are reflected in the following table (in millions). Adjusted operating income excludes the adjustments reflected in the tables in note (h) beginning on page 54 .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDecember 31, 2022 (a) Expected Maturity Dates 2023 2024 2025 2026 2027 There- after Total Fair Value Fixed rate $ — $ 167 $ 441 $ 672 $ 578 $ 6,606 $ 8,464 $ 8,041 Average interest rate — % 1.2 % 3.2 % 4.2 % 2.2 % 5.3 % 4.8 % Floating rate $ 861 $ — $ — $ — $ — $ — $ 861 $ 861 Average interest rate 7.1 % — % — % — % — % — % 7.1 % December 31, 2021 (a) Expected Maturity Dates 2022 2023 2024 2025 2026 There- after Total Fair Value Fixed rate $ 300 $ — $ 169 $ 1,374 $ 1,726 $ 7,637 $ 11,206 $ 12,838 Average interest rate 4.0 % — % 1.2 % 3.0 % 3.9 % 5.0 % 4.5 % Floating rate $ 810 $ 20 $ — $ — $ — $ — $ 830 $ 830 Average interest rate 3.5 % 3.9 % — % — % — % — % 3.5 % ________________________ (a) Excludes unamortized discounts and debt issuance costs.
Biggest changeDecember 31, 2023 (a) Expected Maturity Dates 2024 2025 2026 2027 2028 There- after Total Fair Value Fixed rate $ 167 $ 441 $ 672 $ 564 $ 1,047 $ 5,374 $ 8,265 $ 8,079 Average interest rate 1.2 % 3.2 % 4.2 % 2.2 % 4.4 % 5.5 % 4.8 % Floating rate $ 1,030 $ — $ — $ — $ — $ — $ 1,030 $ 1,030 Average interest rate 8.7 % — % — % — % — % — % 8.7 % December 31, 2022 (a) Expected Maturity Dates 2023 2024 2025 2026 2027 There- after Total Fair Value Fixed rate $ — $ 167 $ 441 $ 672 $ 578 $ 6,606 $ 8,464 $ 8,041 Average interest rate — % 1.2 % 3.2 % 4.2 % 2.2 % 5.3 % 4.8 % Floating rate $ 861 $ — $ — $ — $ — $ — $ 861 $ 861 Average interest rate 7.1 % — % — % — % — % — % 7.1 % ________________________ (a) Excludes unamortized discounts and debt issuance costs.
As of December 31, 2022 and 2021, the amount of gain or loss that would have resulted from a 10 percent increase or decrease in the underlying price for all of our commodity derivative instruments entered into for purposes other than trading with which we have market risk was not material.
As of December 31, 2023 and 2022, the amount of gain or loss that would have resulted from a 10 percent increase or decrease in the underlying price for all of our commodity derivative instruments entered into for purposes other than trading with which we have market risk was not material.
A 10 percent increase or decrease in our floating interest rates would not have a material effect to our results of operations. Principal cash flows and related weighted-average interest rates by expected maturity dates are presented. See Note 8 of Notes to Consolidated Financial Statements for additional information related to our debt.
A 10 percent increase or decrease in our floating interest rates would not have a material effect to our results of operations. Principal cash flows and related weighted-average interest rates by expected maturity dates are presented. See Note 9 of Notes to Consolidated Financial Statements for additional information related to our debt.
To manage this risk, we enter into contracts to purchase these credits. As of December 31, 2022 and 2021, the amount of gain or loss in the fair value of derivative instruments that would have resulted from a 10 percent increase or decrease in the underlying price of the contracts was not material.
To manage this risk, we enter into contracts to purchase these credits. As of December 31, 2023 and 2022, the amount of gain or loss in the fair value of derivative instruments that would have resulted from a 10 percent increase or decrease in the underlying price of the contracts was not material.
See Note 19 of Notes to Consolidated Financial Statements for notional volumes associated with these derivative contracts as of December 31, 2022. COMPLIANCE PROGRAM 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 Programs.
See Note 20 of Notes to Consolidated Financial Statements for notional volumes associated with these derivative contracts as of December 31, 2023. COMPLIANCE PROGRAM 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 Programs.
See Note 19 of Notes to Consolidated Financial Statements for a discussion about these blending programs. 64 Table of Contents INTEREST RATE RISK The following tables provide information about our debt instruments (dollars in millions), the fair values of which are sensitive to changes in interest rates.
See Note 20 of Notes to Consolidated Financial Statements for a discussion about these blending programs. 65 Table of Contents INTEREST RATE RISK The following tables provide information about our debt instruments (dollars in millions), the fair values of which are sensitive to changes in interest rates.
As of December 31, 2022 and 2021, the fair value of our foreign currency contracts was not material. See Note 19 of Notes to Consolidated Financial Statements for a discussion about our foreign currency risk management activities. 65 Table of Contents
As of December 31, 2023 and 2022, the fair value of our foreign currency contracts was not material. See Note 20 of Notes to Consolidated Financial Statements for a discussion about our foreign currency risk management activities. 66 Table of Contents
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.
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 is periodically reviewed with our Board and/or relevant Board committee.

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