Valero Energy (NYSE:VLO) executives highlighted record operating performance and stronger fourth-quarter earnings during the company’s fourth quarter 2025 earnings call, pointing to favorable refining margins, widening sour crude discounts, and continued progress on key optimization projects.
Record operations and stronger fourth-quarter results
Chairman, CEO and President Lane Riggs said 2025 was the company’s best year for personnel safety and environmental performance, building on records set in 2024. Management also reported record refining throughput and record ethanol production for both the fourth quarter and the full year, along with record mechanical availability.
For the full year 2025, net income attributable to stockholders was $2.3 billion ($7.57 per share) versus $2.8 billion ($8.58 per share) in 2024. Adjusted net income for 2025 was $3.3 billion ($10.61 per share) versus $2.7 billion ($8.48 per share) in 2024.
Segment performance: refining led gains, renewables softened
Valero’s refining segment posted $1.7 billion of operating income in the fourth quarter, up from $437 million in the prior-year quarter. Throughput averaged 3.1 million barrels per day, representing 98% utilization. Refining cash operating expenses were $5.03 per barrel.
The renewable diesel segment reported $92 million of operating income, down from $170 million a year earlier. Sales volumes averaged 3.1 million gallons per day in the quarter. In Q&A, management said it was still waiting on final policy guidance related to the RVO and PTC, but described policy expectations as a potential tailwind in 2026. Executives also noted capacity remaining offline early in 2026 as some market participants wait for guidance, which the company said has helped feedstock prices level off and decline.
The ethanol segment reported $117 million of operating income, up from $20 million in the fourth quarter of 2024. Production averaged 4.8 million gallons per day, a quarterly and full-year record. Management attributed strength to a good corn crop supporting feedstock economics and rising export demand for ethanol as “a very cheap source of octane,” as well as continued growth in ethanol’s role in low-carbon programs. On nationwide E15, the company said all its plants are registered to sell E15, but customer acceptance has been slow, though gradually improving.
Cash flow, capital allocation, and balance sheet
Valero generated $2.1 billion of net cash provided by operating activities in the fourth quarter and $5.8 billion for the full year. Capital investments were $412 million in the fourth quarter, with $368 million directed to sustaining the business. Capital investments attributable to Valero were $405 million in the quarter and $1.8 billion for the year.
Shareholder returns totaled $1.4 billion in the fourth quarter, representing a 66% payout ratio. For the year, shareholder returns totaled $4.0 billion, a 67% payout ratio. Valero ended 2025 with 299 million shares outstanding, reflecting a 5% reduction for the year and a 42% reduction since 2014. Management also said the board approved a 6% increase in the quarterly cash dividend.
On the balance sheet, Valero ended the quarter with $8.3 billion of total debt, $2.4 billion of finance lease obligations, and $4.7 billion of cash and cash equivalents. The debt-to-capitalization ratio net of cash was 18% at year-end, and the company reported $5.3 billion of available liquidity excluding cash.
During Q&A, Bhullar said Valero’s capital allocation priorities remained anchored by balance sheet strength and disciplined spending, with share repurchases continuing to play a central role absent compelling growth projects or acquisitions that meet return thresholds and strategic criteria.
Outlook: throughput guidance, Benicia impacts, and crude differentials
For 2026, Valero expects capital investments attributable to the company of approximately $1.7 billion, with about $1.4 billion allocated to sustaining and the remainder to growth. Management said growth spending is focused on shorter-cycle optimization investments across the refining system and efficiency and rate expansion projects in ethanol.
For first-quarter modeling, Valero guided refining throughput ranges by region:
- Gulf Coast: 1.695–1.745 million bpd
- Midcontinent: 430,000–450,000 bpd
- West Coast: 160,000–180,000 bpd
- North Atlantic: 485,000–505,000 bpd
First-quarter refining cash operating expenses are expected to be about $5.17 per barrel. Renewable diesel sales volumes are expected to total about 260 million gallons in the first quarter, with operating expenses of $0.72 per gallon (including $0.35 non-cash). Ethanol production is expected to average 4.6 million gallons per day with operating expenses of $0.49 per gallon (including $0.05 non-cash).
Management also discussed incremental depreciation tied to plans to cease refining operations at the Benicia refinery. Fourth-quarter depreciation and amortization expense included approximately $100 million of incremental depreciation related to Benicia, and first-quarter 2026 D&A is expected to include a similar $100 million incremental amount, with an estimated first-quarter earnings impact of approximately $0.25 per share based on current shares outstanding. Executives said the process to safely idle Benicia’s operating units is phased, with units being idled in February due to mandatory inspection requirements, while the company continues producing fuel as inventories are worked down and imports supplemental supply to meet contractual obligations in the Bay Area. Wilmington is expected to continue normal operations.
On feedstocks, management struck a constructive tone on sour crude differentials, citing increased Canadian production, additional Venezuelan supply into the U.S., higher freight rates, and other market factors. Executives said Valero historically ran as much as 240,000 barrels per day of Venezuelan heavy crude and expects processing capability “substantially north” of that level following the 2023 coker project at Port Arthur. The company also said it had already purchased Venezuelan barrels from each of the three authorized sellers and anticipated Venezuelan crude becoming a large part of its heavy diet into February and March, while continuing to evaluate it against other alternatives.
About Valero Energy (NYSE:VLO)
Valero Energy Corporation is a San Antonio, Texas–based integrated downstream energy company that manufactures and markets transportation fuels, petrochemical feedstocks and other industrial products. The company’s operations focus on refining crude oil into finished fuels such as gasoline, diesel and jet fuel, as well as producing asphalt and other refined product streams for commercial and industrial customers.
In addition to refining, Valero has significant operations in renewable fuels, including the production of ethanol and other biofuels, and it manages an extensive logistics network of pipelines, terminals, rail and marine assets to move feedstocks and finished products.
