VLO - Valero Energy: On The March For Summer (Ratings Downgrade)
2024-04-07 10:18:08 ET
Summary
- Valero is a $60.4 billion market cap oil refiner paying a 2.3% dividend. Aggressive stock buybacks have helped boost share price.
- Valero is well positioned on renewable diesel and ethanol in addition to basic oil refining. However, the SPR cushion of oil supply is gone, potentially increasing costs for all refiners.
- Risk premiums on oil, refining’s primary cost, have increased due to Red Sea shipping attacks, attacks on Russian refineries, and Mideast conflict. Low natural gas prices have benefited refiners.
Valero Energy Corporation ( VLO ) is one of the two largest US independent oil refiners. Investors may recall that demand is not for oil qua oil but for hydrocarbon products like gasoline, jet, and diesel vital to transport and trade. The company's asset-heavy infrastructure presents barriers to entry for competitors, and it produces needed energy-dense transport fuels against a backdrop of limited supply.
In addition to its baseline gasoline, diesel, and jet production, Valero is a key renewable diesel and ethanol provider. (Ethanol is blended into gasoline.) Valero's joint venture with Darling Ingredients ( DAR ) is the second-largest renewable diesel manufacturer in the world....
Valero Energy: On The March For Summer (Ratings Downgrade)