Valero: Q2 ethanol production down, renewable diesel sales up

By Erin Voegele | July 30, 2020

Valero Energy Corp. released second quarter financial results on July 30, reporting that ethanol production volumes were down approximately 50 percent when compared to the same period of 2019. Renewable diesel sales volumes, however, were up.

During an earnings call held to discuss the company’s second quarter performance, Homer Bhullar, vice president of investor relations at Valero, said ethanol production volumes for the second quarter averaged approximately 2.3 million gallons per day, down 2.2 million gallons per day when compared to the second quarter of 2019.

The ethanol segment reported $91 million of operating income for the second quarter compared to $7 million during the same period of last year. The second quarter 2020 adjusted operating loss was $20 million. Bhullar said the decrease in adjusted operating income is primarily attributed to lower margins resulting from lower ethanol prices and lower throughput.

Moving into the third quarter, Bhullar said the ethanol segment is expected to produce 3.8 million gallons per day. Operating expenses are expected to average 38 cents per gallon.

Renewable diesel sales volumes averaged 795,000 per day during the second quarter, up 26,000 gallons per day when compared the same period of last year, according to Bhullar. Operating income for the renewable diesel segment reached $129 million, up from $77 million during the second quarter of 2019. After adjusting for the retroactive blenders tax credit (BTC), adjusted renewable diesel operating income for the second quarter of last year is $145 million.

For the full year, renewable diesel sales are expected to average 750,000 gallons per day, with operating expenses of 50 cents per gallon.

Joe Gorder, chairman and CEO of Valero, said the company remains committed to the expansion of its renewable diesel business. The Diamond Green Diesel expansion project is expected to be complete in 2021, he said. The expansion project will increase annual renewable diesel production capacity by 400 million gallons per year, bringing the total capacity to 675 million gallons per year. Gorder also said Diamond Green Diesel continues to make progress on the advanced engineering review for a potential new 400-million-gallon-per-year facility in Port Arthur, Texas.

In its second quarter financial report, Valero indicated that the company expects to invest approximately $2.1 billion of capital in 2020, with approximately 30 percent of that growth capital allocated to expanding the company’s renewables business.

Overall, Valero reported net income attributable to Valero stockholders of $1.3 billion, or $3.07 per share, for the second quarter, compared to net income of $612 million or $1.47 per share, for the second quarter of 2019. Adjusted net loss attributable to Valero stockholders was $504 million, or $1.25 per share, compared to an adjusted net income attributable to Valero stockholders of $665 million, or $1.60 per share.