UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________

Commission File Number 001-13175

VALERO ENERGY CORPORATION

(Exact name of registrant as specified in its charter)


Delaware			74-1828067
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)

One Valero Way

San Antonio, Texas

(Address of principal executive offices)

78249

(Zip Code)

(210) 345-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock

VLO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The number of shares of the registrant’s only class of common stock, $0.01 par value, outstanding as of ~~April 23,~~October 22, 2021 was ~~408,760,165.~~408,835,615.

VALERO ENERGY CORPORATION

TABLE OF CONTENTS



			Page
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of ~~March 31,~~September 30, 2021 and December 31, 2020			1
Consolidated Statements of Income for the Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020			2
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020			3
Consolidated Statements of Equity for the Three and Nine Months Ended ~~March 31,~~September 30, 2021 and 2020			4
Consolidated Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2021 and 2020			56
Condensed Notes to Consolidated Financial Statements			67
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			2734
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			4966
ITEM 4. CONTROLS AND PROCEDURES			5168
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			5269
ITEM 1A. RISK FACTORS			5269
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			5369
ITEM 6. EXHIBITS			5471
SIGNATURE			5572

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VALERO ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(millions of dollars, except par value)


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	2,254	$	3,313	Cash and cash equivalents	$	3,498	$	3,313
Receivables, net	Receivables, net	9,014		6,109		Receivables, net	8,627		6,109
Inventories	Inventories	5,881		6,038		Inventories	6,227		6,038
Prepaid expenses and other	Prepaid expenses and other	442		384		Prepaid expenses and other	438		384
Total current assets	Total current assets	17,591		15,844		Total current assets	18,790		15,844
Property, plant, and equipment, at cost	Property, plant, and equipment, at cost	47,370		46,967		Property, plant, and equipment, at cost	48,235		46,967
Accumulated depreciation	Accumulated depreciation	(16,991)		(16,578)		Accumulated depreciation	(17,795)		(16,578)
Property, plant, and equipment, net	Property, plant, and equipment, net	30,379		30,389		Property, plant, and equipment, net	30,440		30,389
Deferred charges and other assets, net	Deferred charges and other assets, net	5,644		5,541		Deferred charges and other assets, net	5,461		5,541
Total assets	Total assets	$	53,614	$	51,774	Total assets	$	54,691	$	51,774
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of debt and finance lease obligations	Current portion of debt and finance lease obligations	$	734	$	723	Current portion of debt and finance lease obligations	$	1,162	$	723
Accounts payable	Accounts payable	9,113		6,082		Accounts payable	9,820		6,082
Accrued expenses	Accrued expenses	1,087		994		Accrued expenses	1,539		994
Taxes other than income taxes payable	Taxes other than income taxes payable	1,233		1,372		Taxes other than income taxes payable	1,548		1,372
Income taxes payable	Income taxes payable	140		112		Income taxes payable	244		112
Total current liabilities	Total current liabilities	12,307		9,283		Total current liabilities	14,313		9,283
Debt and finance lease obligations, less current portion	Debt and finance lease obligations, less current portion	13,930		13,954		Debt and finance lease obligations, less current portion	13,071		13,954
Deferred income tax liabilities	Deferred income tax liabilities	5,034		5,275		Deferred income tax liabilities	5,110		5,275
Other long-term liabilities	Other long-term liabilities	3,616		3,620		Other long-term liabilities	3,608		3,620
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Equity:	Equity:					Equity:
Valero Energy Corporation stockholders’ equity:	Valero Energy Corporation stockholders’ equity:					Valero Energy Corporation stockholders’ equity:
Common stock, $0.01 par value; 1,200,000,000 shares authorized; 673,501,593 and 673,501,593 shares issued	Common stock, $0.01 par value; 1,200,000,000 shares authorized; 673,501,593 and 673,501,593 shares issued	7		7		Common stock, $0.01 par value; 1,200,000,000 shares authorized; 673,501,593 and 673,501,593 shares issued	7		7
Additional paid-in capital	Additional paid-in capital	6,810		6,814		Additional paid-in capital	6,830		6,814
Treasury stock, at cost; 264,741,072 and 265,096,171 common shares		(15,700)		(15,719)
Treasury stock, at cost; 264,680,113 and 265,096,171 common shares						Treasury stock, at cost; 264,680,113 and 265,096,171 common shares	(15,696)		(15,719)
Retained earnings	Retained earnings	27,849		28,953		Retained earnings	27,673		28,953
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,165)		(1,254)		Accumulated other comprehensive loss	(1,338)		(1,254)
Total Valero Energy Corporation stockholders’ equity	Total Valero Energy Corporation stockholders’ equity	17,801		18,801		Total Valero Energy Corporation stockholders’ equity	17,476		18,801
Noncontrolling interests	Noncontrolling interests	926		841		Noncontrolling interests	1,113		841
Total equity	Total equity	18,727		19,642		Total equity	18,589		19,642
Total liabilities and equity	Total liabilities and equity	$	53,614	$	51,774	Total liabilities and equity	$	54,691	$	51,774

See Condensed Notes to Consolidated Financial Statements.

Table of Contents

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(millions of dollars, except per share amounts)

(unaudited)


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020				2021		2020		2021		2020
Revenues (a)	Revenues (a)	$	20,806	$	22,102		Revenues (a)	$	29,520	$	15,809	$	78,074	$	48,308
Cost of sales:	Cost of sales:						Cost of sales:
Cost of materials and other	Cost of materials and other	18,992		19,952			Cost of materials and other	26,624		14,801		70,865		43,832
Lower of cost or market (LCM) inventory valuation adjustment	Lower of cost or market (LCM) inventory valuation adjustment	0		2,542			Lower of cost or market (LCM) inventory valuation adjustment	—		(313)		—		(19)
Operating expenses (excluding depreciation and amortization expense reflected below)	Operating expenses (excluding depreciation and amortization expense reflected below)	1,656		1,124			Operating expenses (excluding depreciation and amortization expense reflected below)	1,348		1,117		4,218		3,268
Depreciation and amortization expense	Depreciation and amortization expense	566		569			Depreciation and amortization expense	630		602		1,772		1,737
Total cost of sales	Total cost of sales	21,214		24,187			Total cost of sales	28,602		16,207		76,855		48,818
Other operating expenses	Other operating expenses	38		2			Other operating expenses	19		25		69		30
General and administrative expenses (excluding depreciation and amortization expense reflected below)	General and administrative expenses (excluding depreciation and amortization expense reflected below)	208		177			General and administrative expenses (excluding depreciation and amortization expense reflected below)	195		186		579		532
Depreciation and amortization expense	Depreciation and amortization expense	12		13			Depreciation and amortization expense	11		12		35		37

Operating loss		(666)		(2,277)
Operating income (loss)							Operating income (loss)	693		(621)		536		(1,109)
Other income, net	Other income, net	45		32			Other income, net	32		48		179		107
Interest and debt expense, net of capitalized interest	Interest and debt expense, net of capitalized interest	(149)		(125)			Interest and debt expense, net of capitalized interest	(152)		(143)		(451)		(410)
Loss before income tax benefit		(770)		(2,370)
Income tax benefit		(148)		(616)
Income (loss) before income tax expense (benefit)							Income (loss) before income tax expense (benefit)	573		(716)		264		(1,412)
Income tax expense (benefit)							Income tax expense (benefit)	65		(337)		86		(614)

Net loss		(622)		(1,754)
Net income (loss)							Net income (loss)	508		(379)		178		(798)
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	82		97			Less: Net income attributable to noncontrolling interests	45		85		257		264
Net loss attributable to Valero Energy Corporation stockholders		$	(704)	$	(1,851)
Net income (loss) attributable to Valero Energy Corporation stockholders							Net income (loss) attributable to Valero Energy Corporation stockholders	$	463	$	(464)	$	(79)	$	(1,062)

Loss per common share		$	(1.73)	$	(4.54)
Earnings (loss) per common share							Earnings (loss) per common share	$	1.13	$	(1.14)	$	(0.20)	$	(2.62)
Weighted-average common shares outstanding (in millions)	Weighted-average common shares outstanding (in millions)	407		408			Weighted-average common shares outstanding (in millions)	407		407		407		407

Loss per common share – assuming dilution		$	(1.73)	$	(4.54)
Earnings (loss) per common share – assuming dilution							Earnings (loss) per common share – assuming dilution	$	1.13	$	(1.14)	$	(0.20)	$	(2.62)
Weighted-average common shares outstanding – assuming dilution (in millions)	Weighted-average common shares outstanding – assuming dilution (in millions)	407		408			Weighted-average common shares outstanding – assuming dilution (in millions)	408		407		407		407

__________________________	__________________________						__________________________
Supplemental information:	Supplemental information:						Supplemental information:
(a) Includes excise taxes on sales by certain of our international operations	(a) Includes excise taxes on sales by certain of our international operations	$	1,120	$	1,368		(a) Includes excise taxes on sales by certain of our international operations	$	1,610	$	1,339	$	4,152	$	3,491

See Condensed Notes to Consolidated Financial Statements.

Table of Contents

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(millions of dollars)

(unaudited)

Three Months Ended
March 31,
2021 2020
Net loss $ (622) $ (1,754)
Other comprehensive income (loss):
Foreign currency translation adjustment 76 (607)
Net gain on pension and other postretirement
benefits
15 12
Net gain on cash flow hedges
10 29
Other comprehensive income (loss) before
income tax expense
101 (566)
Income tax expense related to items of
other comprehensive income (loss)
7 6
Other comprehensive income (loss) 94 (572)
Comprehensive loss (528) (2,326)
Less: Comprehensive income attributable
to noncontrolling interests
87 111
Comprehensive loss attributable to
Valero Energy Corporation stockholders
$ (615) $ (2,437)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income (loss)	$	508	$	(379)	$	178	$	(798)
Other comprehensive income (loss):
Foreign currency translation adjustment	(259)		217		(114)		(252)
Net gain on pension and other postretirement benefits	16		12		44		36
Net gain (loss) on cash flow hedges	(17)		5		(14)		9
Other comprehensive income (loss) before income tax expense (benefit)	(260)		234		(84)		(207)
Income tax expense (benefit) related to items of other comprehensive income (loss)	(1)		4		8		9
Other comprehensive income (loss)	(259)		230		(92)		(216)
Comprehensive income (loss)	249		(149)		86		(1,014)
Less: Comprehensive income attributable to noncontrolling interests	35		87		249		268
Comprehensive income (loss) attributable to Valero Energy Corporation stockholders	$	214	$	(236)	$	(163)	$	(1,282)

See Condensed Notes to Consolidated Financial Statements.

Table of Contents

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(millions of dollars)

(unaudited)


		Valero Energy Corporation Stockholders’ Equity																	Valero Energy Corporation Stockholders’ Equity
		Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total		Non- controlling Interests		Total Equity			Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total		Non- controlling Interests		Total Equity
Balance as of December 31, 2020		$	7	$	6,814	$	(15,719)	$	28,953	$	(1,254)	$	18,801	$	841	$	19,642
Balance as of June 30, 2021																		Balance as of June 30, 2021	$	7	$	6,819	$	(15,696)	$	27,610	$	(1,089)	$	17,651	$	1,053	$	18,704
Net income																		Net income	—		—		—		463		—		463		45		508
Dividends on common stock ($0.98 per share)																		Dividends on common stock ($0.98 per share)	—		—		—		(400)		—		(400)		—		(400)
Stock-based compensation expense																		Stock-based compensation expense	—		11		—		—		—		11		—		11

Contributions from noncontrolling interests																		Contributions from noncontrolling interests	—		—		—		—		—		—		25		25

Other comprehensive loss																		Other comprehensive loss	—		—		—		—		(249)		(249)		(10)		(259)
Balance as of September 30, 2021																		Balance as of September 30, 2021	$	7	$	6,830	$	(15,696)	$	27,673	$	(1,338)	$	17,476	$	1,113	$	18,589

Balance as of June 30, 2020																		Balance as of June 30, 2020	$	7	$	6,824	$	(15,760)	$	30,575	$	(1,799)	$	19,847	$	787	$	20,634
Net income (loss)	Net income (loss)	—		—		—		(704)		—		(704)		82		(622)		Net income (loss)	—		—		—		(464)		—		(464)		85		(379)
Dividends on common stock ($0.98 per share)	Dividends on common stock ($0.98 per share)	—		—		—		(400)		—		(400)		—		(400)		Dividends on common stock ($0.98 per share)	—		—		—		(399)		—		(399)		—		(399)
Stock-based compensation expense	Stock-based compensation expense	—		28		—		—		—		28		—		28		Stock-based compensation expense	—		12		—		—		—		12		—		12
Transactions in connection with stock-based compensation plans	Transactions in connection with stock-based compensation plans	—		(32)		19		—		—		(13)		—		(13)		Transactions in connection with stock-based compensation plans	—		(2)		1		—		—		(1)		—		(1)

Distributions to noncontrolling interests	Distributions to noncontrolling interests	—		—		—		—		—		—		(2)		(2)		Distributions to noncontrolling interests	—		—		—		—		—		—		(81)		(81)

Other comprehensive income	Other comprehensive income	—		—		—		—		89		89		5		94		Other comprehensive income	—		—		—		—		228		228		2		230
Balance as of March 31, 2021		$	7	$	6,810	$	(15,700)	$	27,849	$	(1,165)	$	17,801	$	926	$	18,727

Balance as of December 31, 2019		$	7	$	6,821	$	(15,648)	$	31,974	$	(1,351)	$	21,803	$	733	$	22,536
Net income (loss)		—		—		—		(1,851)		—		(1,851)		97		(1,754)
Dividends on common stock ($0.98 per share)		—		—		—		(401)		—		(401)		—		(401)
Stock-based compensation expense		—		24		—		—		—		24		—		24
Transactions in connection with stock-based compensation plans		—		(31)		14		—		—		(17)		—		(17)
Open market stock purchases		—		—		(130)		—		—		(130)		—		(130)

Distributions to noncontrolling interests		—		—		—		—		—		—		(1)		(1)

Other comprehensive income (loss)		—		—		—		—		(586)		(586)		14		(572)
Balance as of March 31, 2020		$	7	$	6,814	$	(15,764)	$	29,722	$	(1,937)	$	18,842	$	843	$	19,685
Balance as of September 30, 2020																		Balance as of September 30, 2020	$	7	$	6,834	$	(15,759)	$	29,712	$	(1,571)	$	19,223	$	793	$	20,016

See Condensed Notes to Consolidated Financial Statements.

Table of Contents

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(millions of dollars)

(unaudited)


	Valero Energy Corporation Stockholders’ Equity
	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total		Non- controlling Interests		Total Equity
Balance as of December 31, 2020	$	7	$	6,814	$	(15,719)	$	28,953	$	(1,254)	$	18,801	$	841	$	19,642
Net income (loss)	—		—		—		(79)		—		(79)		257		178
Dividends on common stock ($2.94 per share)	—		—		—		(1,201)		—		(1,201)		—		(1,201)
Stock-based compensation expense	—		52		—		—		—		52		—		52
Transactions in connection with stock-based compensation plans	—		(36)		23		—		—		(13)		—		(13)

Contributions from noncontrolling interests	—		—		—		—		—		—		25		25
Distributions to noncontrolling interests	—		—		—		—		—		—		(2)		(2)

Other comprehensive loss	—		—		—		—		(84)		(84)		(8)		(92)
Balance as of September 30, 2021	$	7	$	6,830	$	(15,696)	$	27,673	$	(1,338)	$	17,476	$	1,113	$	18,589

Balance as of December 31, 2019	$	7	$	6,821	$	(15,648)	$	31,974	$	(1,351)	$	21,803	$	733	$	22,536
Net income (loss)	—		—		—		(1,062)		—		(1,062)		264		(798)
Dividends on common stock ($2.94 per share)	—		—		—		(1,200)		—		(1,200)		—		(1,200)
Stock-based compensation expense	—		48		—		—		—		48		—		48
Transactions in connection with stock-based compensation plans	—		(35)		19		—		—		(16)		—		(16)
Open market stock purchases	—		—		(130)		—		—		(130)		—		(130)

Distributions to noncontrolling interests	—		—		—		—		—		—		(208)		(208)

Other comprehensive income (loss)	—		—		—		—		(220)		(220)		4		(216)
Balance as of September 30, 2020	$	7	$	6,834	$	(15,759)	$	29,712	$	(1,571)	$	19,223	$	793	$	20,016

See Condensed Notes to Consolidated Financial Statements.

Table of Contents

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions of dollars)

(unaudited)


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss		$	(622)	$	(1,754)
Adjustments to reconcile net loss to net cash used in operating activities:
Net income (loss)						Net income (loss)	$	178	$	(798)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense	Depreciation and amortization expense	578		582		Depreciation and amortization expense	1,807		1,774
LCM inventory valuation adjustment	LCM inventory valuation adjustment	0		2,542		LCM inventory valuation adjustment	—		(19)

Deferred income tax benefit		(239)		(162)
Gain on sale of partial interest in MVP Terminalling, LLC (MVP)						Gain on sale of partial interest in MVP Terminalling, LLC (MVP)	(62)		—
Deferred income tax expense (benefit)						Deferred income tax expense (benefit)	(150)		177
Changes in current assets and current liabilities	Changes in current assets and current liabilities	184		(1,107)		Changes in current assets and current liabilities	1,630		(232)
Changes in deferred charges and credits and other operating activities, net	Changes in deferred charges and credits and other operating activities, net	47		(150)		Changes in deferred charges and credits and other operating activities, net	2		(50)
Net cash used in operating activities		(52)		(49)
Net cash provided by operating activities						Net cash provided by operating activities	3,405		852
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures (excluding variable interest entities (VIEs))	Capital expenditures (excluding variable interest entities (VIEs))	(160)		(299)		Capital expenditures (excluding variable interest entities (VIEs))	(368)		(775)
Capital expenditures of VIEs:	Capital expenditures of VIEs:					Capital expenditures of VIEs:
Diamond Green Diesel Holdings LLC (DGD)	Diamond Green Diesel Holdings LLC (DGD)	(153)		(74)		Diamond Green Diesel Holdings LLC (DGD)	(730)		(311)
Other VIEs	Other VIEs	(26)		(62)		Other VIEs	(59)		(196)
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	Deferred turnaround and catalyst cost expenditures (excluding VIEs)	(230)		(309)		Deferred turnaround and catalyst cost expenditures (excluding VIEs)	(544)		(529)
Deferred turnaround and catalyst cost expenditures of DGD	Deferred turnaround and catalyst cost expenditures of DGD	(1)		(4)		Deferred turnaround and catalyst cost expenditures of DGD	(6)		(18)
Proceeds from sale of partial interest in MVP						Proceeds from sale of partial interest in MVP	270		—
Investments in unconsolidated joint ventures	Investments in unconsolidated joint ventures	(12)		(19)		Investments in unconsolidated joint ventures	(8)		(39)

Other investing activities, net	Other investing activities, net	2		10		Other investing activities, net	33		16
Net cash used in investing activities	Net cash used in investing activities	(580)		(757)		Net cash used in investing activities	(1,412)		(1,852)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from debt issuances and borrowings (excluding VIEs)	Proceeds from debt issuances and borrowings (excluding VIEs)	0		300		Proceeds from debt issuances and borrowings (excluding VIEs)	—		4,320
Proceeds from borrowings of VIEs		8		70
Proceeds from borrowings of VIEs:						Proceeds from borrowings of VIEs:
DGD						DGD	100		—
Other VIEs						Other VIEs	29		202
Repayments of debt and finance lease obligations (excluding VIEs)	Repayments of debt and finance lease obligations (excluding VIEs)	(31)		(15)		Repayments of debt and finance lease obligations (excluding VIEs)	(672)		(461)
Repayments of debt of VIEs	Repayments of debt of VIEs	(1)		(1)		Repayments of debt of VIEs	(4)		(4)
Purchases of common stock for treasury	Purchases of common stock for treasury	(14)		(147)		Purchases of common stock for treasury	(15)		(147)
Common stock dividend payments	Common stock dividend payments	(400)		(401)		Common stock dividend payments	(1,201)		(1,200)

Contributions from noncontrolling interests						Contributions from noncontrolling interests	25		—
Distributions to noncontrolling interests						Distributions to noncontrolling interests	(2)		(208)
Other financing activities, net	Other financing activities, net	(1)		(1)		Other financing activities, net	1		(32)
Net cash used in financing activities		(439)		(195)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(1,739)		2,470
Effect of foreign exchange rate changes on cash	Effect of foreign exchange rate changes on cash	12		(67)		Effect of foreign exchange rate changes on cash	(69)		(6)
Net decrease in cash and cash equivalents		(1,059)		(1,068)
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	185		1,464
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	3,313		2,583		Cash and cash equivalents at beginning of period	3,313		2,583
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	2,254	$	1,515	Cash and cash equivalents at end of period	$	3,498	$	4,047

See Condensed Notes to Consolidated Financial Statements.

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1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

General

The terms “Valero,” “we,” “our,” and “us,” as used in this report, may refer to Valero Energy Corporation, one or more of its consolidated subsidiaries, or all of them taken as a whole. The term “DGD,” as used in this report, may refer to Diamond Green Diesel Holdings LLC, its wholly owned consolidated subsidiary — Diamond Green Diesel LLC, or both of them taken as a whole.

These unaudited financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of our results for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The financial statements presented herein should be read in conjunction with the financial statements included in our annual report on Form 10-K for the year ended December 31, 2020.

As discussed in Note 2, the outbreak of COVID-19 and its development into a pandemic in March 2020 resulted in significant economic disruption globally. Developments with respect to COVID-19 have been occurring at a rapid pace and the risk remains that circumstances could change. Demand for and market prices of most of our products began to improve during the latter half of 2020 and continued to improve throughout the first quarter of 2021. These improvements resulted primarily from the lifting or easing of restrictions by many governmental authorities, especially those in our U.S. Gulf Coast and U.S. Mid-Continent regions, in response to decreasing COVID-19 infection rates and increasing numbers of people receiving COVID-19 vaccines, which were approved by a number of regulators throughout the world in late 2020 and early 2021. While many governmental authorities in areas located in our U.S. West Coast and North Atlantic regions, such as California, Canada, and the United Kingdom (U.K.), continue to impose restrictions, some of these restrictions have been or are soon expected to be moderately lifted. The ongoing distribution of vaccines may result in the continued lifting of restrictions and may be seen as a key factor in helping to restore public confidence, and thus stimulate and increase economic activity, potentially to pre-pandemic levels; however, the risk remains that the vaccines may not be distributed widely on a timely basis, they may not be effective against new variants of the COVID-19 virus, the distribution of some or all of the vaccines may be paused or withdrawn due to concerns with potential side effects, and/or the level of individuals’ willingness to receive a vaccine may not be as strong or as timely as needed. Based on these and other circumstances that cannot be predicted, the broader implications of the pandemic on our results of operations and financial position remain uncertain.

The balance sheet as of December 31, 2020 has been derived from our audited financial statements as of that date. For further information, refer to our financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2020.

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~~Reclassifications~~

Certain prior year amounts presented in Note 11 have been reclassified to conform to the 2021 presentation. The change was due to the reclassification of amounts for income taxes receivable from prepaid expenses and other to “receivables, net.”

Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

Adoption of Accounting Pronouncement

The following Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) was issued and adopted by us on January 7, 2021. Our adoption of this ASU did not have a material impact on our financial statements or related disclosures.


ASU		Basis of Adoption
2021-01	Reference Rate Reform (Topic 848): Scope	Prospectively

2. UNCERTAINTIES

~~The outbreak~~At the onset of the COVID-19 ~~and its development into a~~ pandemic in March 2020, ~~resulted in significant economic disruption globally as~~ governmental authorities around the world imposed restrictions, such as stay-at-home orders and other social distancing measures, to slow the spread of COVID-19. These ~~actions significantly~~measures resulted in significant economic disruption globally as reduced ~~global~~ economic activity and negatively impacted many businesses, including our business. We took a number of actions since March 2020 to respond to the impacts from the pandemic on our business, such as reducing transportation fuel production at our refineries and ethanol plants to align with demand. During the three months ended March 31, 2021, our business showed signs of recovery and improvement in demand for and market prices of gasoline and diesel, with both factors reaching near pre-pandemic levels in March 2021. Also, jet fuel has seen improved market indicators, although at a slower pace than other products we produce relative to pre-pandemic levels.

While our business has improved as a result of the increasing demand for and market prices of most of the products that we produce, many uncertainties remain with respect to the pandemic, including its resulting economic effects. Therefore, we are unable to predict the ultimate economic impacts from the pandemic on our business and how quickly national economies can recover once the pandemic subsides, the timing or effectiveness of vaccine distributions or vaccination levels, whether improvements experienced by us so far may reverse, or whether other setbacks may occur. As a result, the adverse impacts of the economic effects of the pandemic on our company may likely continue to be significant. We believe we have proactively responded to many of the known impacts of the COVID-19 pandemic on our business to the extent practicable and we strive to continue to do so, but there can be no assurance that any measures we have taken or may take will be fully effective.

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activity negatively impacted many businesses, including our business. We experienced a decline in the demand for most of the transportation fuels that we produce and sell, and thus also a decline in the market prices of those products, due to a decrease in the level of individual movement and travel resulting from the restrictions and general public health concerns. Some governmental authorities began lifting restrictions in the latter part of 2020 and this has continued throughout the first nine months of 2021. These actions have contributed to increasing levels of individual movement and travel and a resulting increase in the demand for and market prices of our products. However, some governmental authorities continue to impose some level of restrictions due in part to new outbreaks, including those related to new variants of the COVID-19 virus.

The distribution of vaccines beginning in late 2020 has helped decrease rates of infection and contributed to the lifting of many restrictions. The ongoing distribution of vaccines may result in the continued lifting of restrictions globally and may be seen as a key factor contributing to the ongoing restoration of public confidence, and thus also to stimulating and increasing global economic activity. However, the risk remains that vaccines may not be distributed widely on a timely basis, they may not be as effective against new variants of the virus, the distribution of some or all of the vaccines may be paused or withdrawn due to concerns with potential side effects, and/or the level of individuals’ willingness to receive a vaccine may not be as strong or as timely as needed. Additionally, many governmental authorities have recently announced requirements and mandates, including steep fines for non-compliance, on employers concerning workforce vaccination and testing. Many large companies across the globe, independent of such government regulations, have also begun implementing vaccine requirements and mandates for their workforce, or as a prerequisite to providing customers certain goods and services in person. These requirements and mandates have evoked mixed reactions and have created additional challenges and costs, both administratively and operationally, for employers and employees. Developments with respect to such requirements and mandates are evolving at a rapid pace and the ultimate impact thereof remains uncertain.

Based on these and other circumstances that cannot be predicted, the broader implications of the pandemic on our results of operations and financial position remain uncertain and may continue to be significant. We believe we have proactively responded to many of the known impacts of the pandemic on our business to the extent practicable and we strive to continue to do so, but there can be no assurance that these or other measures will be fully effective.

3. INVENTORIES

Inventories consisted of the following (in millions):


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Refinery feedstocks	Refinery feedstocks	$	1,947	$	1,979	Refinery feedstocks	$	1,646	$	1,979
Refined petroleum products and blendstocks	Refined petroleum products and blendstocks	3,284		3,425		Refined petroleum products and blendstocks	3,944		3,425
Renewable diesel feedstocks and products	Renewable diesel feedstocks and products	64		50		Renewable diesel feedstocks and products	113		50
Ethanol feedstocks and products	Ethanol feedstocks and products	297		297		Ethanol feedstocks and products	233		297
Materials and supplies	Materials and supplies	289		287		Materials and supplies	291		287

Inventories	Inventories	$	5,881	$	6,038	Inventories	$	6,227	$	6,038

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We compare the market value of inventories to their cost on an aggregate basis, excluding materials and supplies. In determining the market value of our inventories, we assume that feedstocks are converted into refined products, which requires us to make estimates regarding the refined products expected to be produced from those feedstocks and the conversion costs required to convert those feedstocks into refined products. We also estimate the usual and customary transportation costs required to move the inventory from our plants to the appropriate points of sale. We then apply an estimated selling price to our inventories. If the aggregate market value is less than the aggregate cost, we recognize a loss for the difference in our statements of income. To the extent the aggregate market value of our last-in, first-out (LIFO) inventories subsequently increases, we recognize an increase to the value of our inventories (not to exceed cost) and a gain in our statements of income.

The market value of our LIFO inventories fell below their LIFO inventory carrying amounts as of March 31, 2020, and as a result, we recorded an LCM inventory valuation reserve of $2.5 billion in order to state our inventories at market. As of ~~March 31,~~September 30, 2020, we reevaluated our inventories and determined that our cost was lower than market. As a result, our LCM inventory valuation reserve was fully reversed as of September 30, 2020. The change in our LCM inventory valuation reserve resulted in a net benefit of $313 million during the three months ended September 30, 2020. The net benefit of $19 million for the nine months ended September 30, 2020 was due to the foreign currency translation effect of the portion of the LCM inventory valuation adjustment attributable to our international operations. As of September 30, 2021 and December 31, 2020, the replacement cost (market value) of LIFO inventories exceeded their LIFO carrying amounts by ~~$2.7~~$5.2 billion and $1.3 billion, respectively.

During the three and nine months ended September 30, 2020, we recognized the impact of an expected liquidation of LIFO inventory layers that increased cost of materials and other by $326 million. Our LIFO inventory levels decreased throughout the first nine months of 2020 due to lower production resulting from lower demand for our products caused by the negative economic impacts of the COVID-19 pandemic on our business. Consequently, we expected our LIFO inventory levels as of December 31, 2020 would remain below their December 31, 2019 levels.

Our non-LIFO inventories accounted for $1.2 billion and $918 million of our total inventories as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

4. PROPERTY, PLANT, AND EQUIPMENT

In September 2021 and 2020, we reduced the estimated useful lives of our ethanol plants in Jefferson, Wisconsin and Riga, Michigan, respectively, which reduced their net book values to estimated salvage value. The additional depreciation expense for the three and nine months ended September 30, 2021 and 2020 of $48 million and $30 million, respectively, resulting from these changes did not have a material impact on our results of operations nor was there a material impact to our financial position.

The Jefferson plant was temporarily idled in 2020 at the onset of the COVID-19 pandemic in response to the decreased demand for ethanol resulting from the effects of the pandemic on our business, and we had previously evaluated this plant for potential impairment assuming that operations would resume. However, we completed an evaluation of the plant during the third quarter of 2021 and concluded that it

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4.was no longer a strategic asset for our ethanol business. As a result, the plant’s operations have permanently ceased.

The Riga plant was temporarily idled in 2019 due to corn quality issues with the local third-party corn feedstock supply. Although we expected operations to resume after an improved corn harvest, we completed an evaluation of this plant during the third quarter of 2020 and concluded that it was no longer a strategic asset for our ethanol business. The plant’s operations permanently ceased at that time.

5. DEBT

Public Debt

~~During the three months ended March 31,~~In September 2021, we redeemed our Floating Rate Senior Notes due September 15, 2023 (the Floating Rate Notes) for $575 million, or 100.00 percent of stated value, plus accrued and ~~2020, there was no issuance or redemption activity related to our public debt.~~unpaid interest.

During the nine months ended September 30, 2020, the following activity occurred:

•In September 2020, we issued the following senior notes:

◦the Floating Rate Notes, which bore interest at a rate of three-month London Interbank Offered Rate (LIBOR) plus 1.150 percent per annum, subject to certain adjustments set forth in the terms of the Floating Rate Notes;

◦$925 million of 1.200 percent Senior Notes due March 15, 2024;

◦$400 million of 2.850 percent Senior Notes due April 15, 2025 that constitute an additional issuance of our 2.850 percent Senior Notes due April 15, 2025 that were issued in April 2020 (see below); and

◦$600 million of 2.150 percent Senior Notes due September 15, 2027.

•In April 2020, we issued $850 million of 2.700 percent Senior Notes due April 15, 2023 and $650 million of 2.850 percent Senior Notes due April 15, 2025.

Proceeds from the April and September 2020 debt issuances totaled $4.020 billion before deducting the underwriting discount and other debt issuance costs.

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Credit Facilities

Summary of Credit Facilities

We had outstanding borrowings, letters of credit issued, and availability under our credit facilities as follows (amounts in millions and currency in U.S. dollars, except as noted):


					March 31, 2021										September 30, 2021
		Facility Amount		Maturity Date	Outstanding Borrowings		Letters of Credit Issued (a)		Availability			Facility Amount		Maturity Date	Outstanding Borrowings		Letters of Credit Issued (a)		Availability
Committed facilities:	Committed facilities:										Committed facilities:
Valero Revolver	Valero Revolver	$	4,000	March 2024	$	0	$	118	$	3,882	Valero Revolver	$	4,000	March 2024	$	—	$	288	$	3,712
364-day Revolving Credit Facility (b)		$	875	April 2021	$	0	n/a		$	875
Canadian Revolver	Canadian Revolver	C$	150	November 2021	C$	0	C$	5	C$	145	Canadian Revolver	C$	150	November 2021	C$	—	C$	5	C$	145
Accounts receivable sales facility		$	1,000	July 2021	$	0	n/a		$	1,000
Accounts receivable sales facility (b)											Accounts receivable sales facility (b)	$	1,300	July 2022	$	—	n/a		$	1,300
Letter of credit facility	Letter of credit facility	$	50	November 2021	n/a		$	0	$	50	Letter of credit facility	$	50	November 2021	n/a		$	—	$	50
Committed facilities of VIEs (c):	Committed facilities of VIEs (c):										Committed facilities of VIEs (c):
DGD Revolver	DGD Revolver	$	400	March 2024	$	0	$	0	$	400	DGD Revolver	$	400	March 2024	$	100	$	7	$	293
IEnova Revolver (d)		$	660	February 2028	$	606	n/a		$	54
IEnova Revolver											IEnova Revolver	$	743	February 2028	$	627	n/a		$	116
Uncommitted facilities:	Uncommitted facilities:										Uncommitted facilities:
Letter of credit facilities	Letter of credit facilities	n/a		n/a	n/a		$	330	n/a		Letter of credit facilities	n/a		n/a	n/a		$	127	n/a

________________________

(a)Letters of credit issued as of ~~March 31,~~September 30, 2021 expire at various times in 2021 through 2023.

(b)~~This~~In July 2021, we extended the maturity date of this facility ~~matured on April 12, 2021~~to July 2022 and ~~was not renewed.~~increased the facility amount from $1.0 billion to $1.3 billion.

(c)Creditors of our VIEs do not have recourse against us.

~~(d)As of March 31, 2021 and December 31, 2020, the variable interest rate on the IEnova Revolver was 3.888 percent and 3.870 percent, respectively.~~

~~Activities~~Activity under our credit facilities ~~were~~was as follows (in millions):

Three Months Ended
March 31,
2021 2020
Borrowings:
Accounts receivable sales facility $ 0 $ 300
IEnova Revolver 8 70

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~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~


	Nine Months Ended September 30,
	2021		2020
Borrowings:
Accounts receivable sales facility	$	—	$	300
DGD Revolver	100		—
IEnova Revolver	29		202
Repayments:
Accounts receivable sales facility	—		(400)

DGD Revolver

In March 2021, DGD (as described in Note 6)7) entered into a $400 million unsecured revolving credit facility (the DGD Revolver) that matures in March 2024. DGD has the option to increase the aggregate commitments under the DGD Revolver to $550 million, subject to certain restrictions. ~~The~~Initially, the DGD Revolver also ~~provides~~provided for the issuance of letters of credit of up to $10 million. In September 2021, the DGD Revolver was amended to increase the letter of credit facility from $10 million to $50 million and to limit DGD’s indebtedness arising under other letters of credit that DGD may obtain up to $25 million at

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any one time outstanding. This restriction does not impact Valero’s other letter of credit facilities. The DGD Revolver is only available ~~only~~ to the operations of ~~DGD, and the creditors of DGD do~~DGD. DGD’s lender does not have recourse against us.

Outstanding borrowings under the DGD Revolver generally bear interest, at DGD’s option, at either (i) an alternate base rate plus the applicable margin or (ii) an adjusted LIBOR rate for the applicable interest period in effect from time to time plus the applicable margin. The DGD Revolver also requires payments for customary fees, including unused commitment fees, letter of credit fees, and administrative agent fees. As of September 30, 2021, the variable interest rate on the DGD Revolver was 1.840 percent.

~~During~~IEnova Revolver

In May 2021, the ~~three months ended March 31, 2021, there were 0borrowings or repayments~~borrowing capacity under the ~~DGD Revolver.~~IEnova Revolver was increased from $660 million to $743 million. As of September 30, 2021 and December 31, 2020, the variable weighted-average interest rate on the IEnova Revolver was 3.497 percent and 3.870 percent, respectively. The IEnova Revolver is available only to the operations of Central Mexico Terminals (as described in Note 7). IEnova does not have recourse against us.

Other Disclosures

“Interest and debt expense, net of capitalized interest” is comprised as follows (in millions):


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020				2021		2020		2021		2020
Interest and debt expense	Interest and debt expense	$	164	$	145		Interest and debt expense	$	162	$	162	$	488	$	468
Less: Capitalized interest	Less: Capitalized interest	15		20			Less: Capitalized interest	10		19		37		58
Interest and debt expense, net of capitalized interest	Interest and debt expense, net of capitalized interest	$	149	$	125		Interest and debt expense, net of capitalized interest	$	152	$	143	$	451	$	410

5.6. EQUITY

Share Activity

There was no significant share activity during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020.

Common Stock Dividends

On ~~April 16,~~October 27, 2021, our board of directors declared a quarterly cash dividend of $0.98 per common share payable on ~~June 8,~~December 9, 2021 to holders of record at the close of business on ~~May 17,~~November 18, 2021.

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Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component, net of tax, were as follows (in millions):


	Three Months Ended September 30,
	2021								2020
	Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total		Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total
Balance as of beginning of period	$	(373)	$	(715)	$	(1)	$	(1,089)	$	(1,144)	$	(653)	$	(2)	$	(1,799)
Other comprehensive income (loss) before reclassifications	(255)		—		(8)		(263)		217		—		—		217
Amounts reclassified from accumulated other comprehensive loss	—		10		2		12		—		9		2		11
Effect of exchange rates	—		2		—		2		—		—		—		—
Other comprehensive income (loss)	(255)		12		(6)		(249)		217		9		2		228
Balance as of end of period	$	(628)	$	(703)	$	(7)	$	(1,338)	$	(927)	$	(644)	$	—	$	(1,571)


		Three Months Ended March 31,																	Nine Months Ended September 30,
		2021								2020									2021								2020
		Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total		Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total			Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total		Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total
Balance as of beginning of period	Balance as of beginning of period	$	(515)	$	(737)	$	(2)	$	(1,254)	$	(676)	$	(672)	$	(3)	$	(1,351)	Balance as of beginning of period	$	(515)	$	(737)	$	(2)	$	(1,254)	$	(676)	$	(672)	$	(3)	$	(1,351)
Other comprehensive income (loss) before reclassifications	Other comprehensive income (loss) before reclassifications	76		1		(5)		72		(606)		0		21		(585)		Other comprehensive income (loss) before reclassifications	(113)		1		(20)		(132)		(251)		—		19		(232)
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	0		8		9		17		0		9		(10)		(1)		Amounts reclassified from accumulated other comprehensive loss	—		32		15		47		—		28		(16)		12
Effect of exchange rates																		Effect of exchange rates	—		1		—		1		—		—		—		—
Other comprehensive income (loss)	Other comprehensive income (loss)	76		9		4		89		(606)		9		11		(586)		Other comprehensive income (loss)	(113)		34		(5)		(84)		(251)		28		3		(220)
Balance as of end of period	Balance as of end of period	$	(439)	$	(728)	$	2	$	(1,165)	$	(1,282)	$	(663)	$	8	$	(1,937)	Balance as of end of period	$	(628)	$	(703)	$	(7)	$	(1,338)	$	(927)	$	(644)	$	—	$	(1,571)

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7. VARIABLE INTEREST ENTITIES

Consolidated VIEs

We consolidate a VIE when we have a variable interest in an entity for which we are the primary beneficiary. As of ~~March 31,~~September 30, 2021, our significant consolidated VIEs included:

•DGD, a joint venture with a subsidiary of Darling Ingredients Inc., which owns and operates a plant that processes rendered and recycled materials, including animal fats, used cooking oils, and other vegetable oils, into renewable diesel; and

•Central Mexico Terminals, which is a collective group of three subsidiaries of Infraestructura Energetica Nova, S.A.B. de C.V. (IEnova), a Mexican company and subsidiary of Sempra Energy, a U.S. public company. We have terminaling agreements with Central Mexico Terminals that represent variable interests. We do not have an ownership interest in Central Mexico Terminals.

The assets of our VIEs can only be used to settle their own obligations and the creditors of our VIEs have no recourse to our other assets. We do not provide financial guarantees to our VIEs. Although we have provided credit facilities to some of our VIEs in support of their construction or acquisition activities, these transactions are eliminated in consolidation. Our financial position, results of operations, and cash flows are impacted by the performance of our consolidated VIEs, net of intercompany eliminations, to the extent of our ownership interest in each VIE.

The following tables present summarized balance sheet information for the significant assets and liabilities of our consolidated VIEs, which are included in our balance sheets (in millions):


	September 30, 2021
	DGD		Central Mexico Terminals		Other		Total
Assets
Cash and cash equivalents	$	159	$	—	$	17	$	176
Other current assets	191		10		22		223
Property, plant, and equipment, net	2,110		676		93		2,879
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	320	$	700	$	13	$	1,033
Debt and finance lease obligations, less current portion	28		—		22		50

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~~The following tables present summarized balance sheet information for the significant assets and liabilities of our consolidated VIEs, which are included in our balance sheets (in millions):~~

March 31, 2021
DGD Central
Mexico
Terminals Other Total
Assets
Cash and cash equivalents $ 191 $ 0 $ 19 $ 210
Other current assets 272 10 10 292
Property, plant, and equipment, net 1,431 614 94 2,139
Liabilities
Current liabilities, including current portion
of debt and finance lease obligations
$ 166 $ 632 $ 8 $ 806
Debt and finance lease obligations,
less current portion
1 0 24 25


		December 31, 2020									December 31, 2020
		DGD		Central Mexico Terminals		Other		Total			DGD		Central Mexico Terminals		Other		Total
Assets	Assets									Assets
Cash and cash equivalents	Cash and cash equivalents	$	144	$	1	$	16	$	161	Cash and cash equivalents	$	144	$	1	$	16	$	161
Other current assets	Other current assets	219		24		8		251		Other current assets	219		24		8		251
Property, plant, and equipment, net	Property, plant, and equipment, net	1,232		590		96		1,918		Property, plant, and equipment, net	1,232		590		96		1,918
Liabilities	Liabilities									Liabilities
Current liabilities, including current portion of debt and finance lease obligations	Current liabilities, including current portion of debt and finance lease obligations	$	90	$	620	$	8	$	718	Current liabilities, including current portion of debt and finance lease obligations	$	90	$	620	$	8	$	718
Debt and finance lease obligations, less current portion	Debt and finance lease obligations, less current portion	1		0		25		26		Debt and finance lease obligations, less current portion	1		—		25		26

Non-Consolidated VIEs

We hold variable interests in VIEs that have not been consolidated because we are not considered the primary beneficiary. These non-consolidated VIEs are not material to our financial position or results of operations and are accounted for as equity investments.

On April 19, 2021, we sold a 24.99 percent membership interest in MVP, ~~Terminalling, LLC (MVP),~~ an unconsolidated joint venture with a subsidiary of Magellan Midstream Partners, LPL.P. (Magellan), for $270 ~~million.~~million that resulted in a gain of $62 million, which is included in “other income, net.” MVP owns and operates a marine terminal located adjacent to the Houston Ship Channel in Pasadena, Texas. We retained a 25.01 percent membership interest in MVP.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.8. EMPLOYEE BENEFIT PLANS

The components of net periodic benefit cost related to our defined benefit plans were as follows (in millions):


		Pension Plans				Other Postretirement Benefit Plans					Pension Plans				Other Postretirement Benefit Plans
		2021		2020		2021		2020			2021		2020		2021		2020

Three months ended March 31
Three months ended September 30										Three months ended September 30
Service cost	Service cost	$	40	$	35	$	2	$	1	Service cost	$	40	$	35	$	1	$	1
Interest cost	Interest cost	18		21		2		2		Interest cost	19		21		2		3
Expected return on plan assets	Expected return on plan assets	(48)		(44)		0		0		Expected return on plan assets	(48)		(44)		—		—
Amortization of:	Amortization of:									Amortization of:
Net actuarial loss	Net actuarial loss	20		18		0		0		Net actuarial loss	21		18		—		—
Prior service credit	Prior service credit	(4)		(5)		(2)		(1)		Prior service credit	(5)		(4)		(2)		(2)
Special charges										Special charges	3		2		—		—
Net periodic benefit cost										Net periodic benefit cost	$	30	$	28	$	1	$	2

Nine months ended September 30										Nine months ended September 30
Service cost										Service cost	$	121	$	105	$	4	$	4
Interest cost										Interest cost	55		64		5		7
Expected return on plan assets										Expected return on plan assets	(144)		(134)		—		—
Amortization of:										Amortization of:
Net actuarial loss										Net actuarial loss	61		55		—		—
Prior service credit										Prior service credit	(14)		(14)		(5)		(5)
Special charges										Special charges	7		3		—		—
Net periodic benefit cost	Net periodic benefit cost	$	26	$	25	$	2	$	2	Net periodic benefit cost	$	86	$	79	$	4	$	6

The components of net periodic benefit cost other than the service cost component (i.e., the non-service cost components) are included in “other income, ~~net” in the statements of income.~~net.”

As previously disclosed in our annual report on Form 10-K for the year ended December 31, 2020, we plan to contribute approximately $128 million to our pension plans and $22 million to our other postretirement benefit plans during 2021. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~and 2020,~~ we contributed ~~$21~~$121 million and $12 million ~~respectively,~~ to our pension ~~plans~~ and ~~$3 million and $4 million, respectively, to our~~ other postretirement benefit ~~plans.~~plans, respectively. During the nine months ended September 30, 2020, we contributed $28 million and $12 million to our pension and other postretirement benefit plans, respectively.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. INCOME TAXES

Our income tax expense for the three and nine months ended September 30, 2021 included a permanent income tax benefit to our estimated annual effective tax rate from DGD’s share of pre-tax income that is not taxable to us and a benefit for the settlement of the audits of certain state tax returns for 2004 through 2006. In addition, income tax expense for the nine months ended September 30, 2021 included a $64 million charge, which resulted from certain statutory income tax rate changes (primarily an increase in the United Kingdom (U.K.) rate from 19 percent to 25 percent effective in 2023) that were enacted during the three months ended June 30, 2021. The variation in the customary relationship of our effective tax rate to the U.S. federal statutory rate for the three and nine months ended September 30, 2021 was primarily due to these components of our tax expense.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted, which resulted in significant changes to the U.S. Internal Revenue Code of 1986, as amended. ~~We recognized an overall~~Our income tax benefit ~~of $616 million~~ for the three and nine months ended ~~March 31,~~September 30, 2020, therefore, included a tax benefit of ~~which $110~~$121 million ~~was~~and $238 million, respectively, attributable to the carryback of our 2020 tax net operating loss (NOL) ~~carryback provided for under the CARES Act of our 2020 tax NOL~~ to our 2015 income tax year ~~in which~~when we paid U.S. federal income ~~tax~~taxes at a 35 percent tax rate. ~~In addition, we were not limited~~The variation in the ~~amount~~customary relationship of ~~interest expense we could deduct. The remaining income~~our effective tax ~~benefit~~rate to the U.S. federal statutory rate for the three and nine months ended September 30, 2020 was primarily due to ~~the LCM inventory valuation adjustment that resulted in a~~this income tax ~~benefit of $551 million.~~

benefit.

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~~VALERO ENERGY CORPORATION~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~9. EARNINGS (LOSS) PER COMMON SHARE~~

~~Earnings (loss) per common share was computed as follows (dollars and shares in millions, except per share amounts):~~

Three Months Ended
March 31,
2021 2020
Loss per common share
Net loss attributable to Valero stockholders $ (704) $ (1,851)
Less: Income allocated to participating securities 1 1
Net loss available to common stockholders $ (705) $ (1,852)
Weighted-average common shares outstanding 407 408
Loss per common share $ (1.73) $ (4.54)
Loss per common share – assuming dilution
Net loss attributable to Valero stockholders $ (704) $ (1,851)
Less: Income allocated to participating securities 1 0
Net loss available to common stockholders $ (705) $ (1,851)
Weighted-average common shares outstanding –
assuming dilution
407 408
Loss per common share – assuming dilution $ (1.73) $ (4.54)

~~Participating securities include restricted stock and performance awards granted under our 2020 Omnibus Stock Incentive Plan (OSIP) or our 2011 OSIP.~~

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. EARNINGS (LOSS) PER COMMON SHARE

Earnings (loss) per common share was computed as follows (dollars and shares in millions, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Earnings (loss) per common share:
Net income (loss) attributable to Valero stockholders	$	463	$	(464)	$	(79)	$	(1,062)
Less: Income allocated to participating securities	1		1		4		4
Net income (loss) available to common stockholders	$	462	$	(465)	$	(83)	$	(1,066)

Weighted-average common shares outstanding	407		407		407		407

Earnings (loss) per common share	$	1.13	$	(1.14)	$	(0.20)	$	(2.62)

Earnings (loss) per common share – assuming dilution:
Net income (loss) attributable to Valero stockholders	$	463	$	(464)	$	(79)	$	(1,062)
Less: Income allocated to participating securities	1		1		4		4
Net income (loss) available to common stockholders	$	462	$	(465)	$	(83)	$	(1,066)

Weighted-average common shares outstanding	407		407		407		407
Effect of dilutive securities	1		—		—		—
Weighted-average common shares outstanding – assuming dilution	408		407		407		407

Earnings (loss) per common share – assuming dilution	$	1.13	$	(1.14)	$	(0.20)	$	(2.62)

Participating securities include restricted stock and performance awards granted under our 2020 Omnibus Stock Incentive Plan (OSIP) or our 2011 OSIP. Dilutive securities include participating securities as well as outstanding stock options granted under our 2011 OSIP.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. REVENUES AND SEGMENT INFORMATION

Revenue from Contracts with Customers

Disaggregation of Revenue

Revenue is presented in the table below under “Segment Information” disaggregated by product because this is the level of disaggregation that management has determined to be beneficial to users of our financial statements.

Contract Balances

Contract balances were as follows (in millions):


		March 31, 2021		December 31, 2020		Increase			September 30, 2021		December 31, 2020
Receivables from contracts with customers, included in receivables, net	Receivables from contracts with customers, included in receivables, net	$	4,701	$	3,642	$	1,059	Receivables from contracts with customers, included in receivables, net	$	5,597	$	3,642
Contract liabilities, included in accrued expenses	Contract liabilities, included in accrued expenses	104		55		49		Contract liabilities, included in accrued expenses	67		55

~~Receivables from contracts with customers is a component of “receivables, net” as presented on~~During the ~~balance sheet. Theincrease in “receivables, net” is described in Note 11.~~

~~For the three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, we recognized as revenue ~~$37~~$44 million and ~~$52~~$53 million ~~respectively,~~ that was included in contract liabilities as of December 31, 2020 and 2019, respectively. Revenue recognized during the three months ended September 30, 2021 and 2020 related to contract liabilities was not material.

Remaining Performance Obligations

We have spot and term contracts with customers, the majority of which are spot contracts with no remaining performance obligations. We do not disclose remaining performance obligations for contracts that have terms of one year or less. The transaction price for our remaining term contracts includes a fixed component and variable consideration (i.e., a commodity price), both of which are allocated entirely to a wholly unsatisfied promise to transfer a distinct good that forms part of a single performance obligation. The fixed component is not material and the variable consideration is highly uncertain. Therefore, as of ~~March 31,~~September 30, 2021, we have not disclosed the aggregate amount of the transaction price allocated to our remaining performance obligations.

Segment Information

We have 3 reportable segments — refining, renewable diesel, and ethanol. Each segment is a strategic business unit that offers different products and services by employing unique technologies and marketing strategies and whose operations and operating performance are managed and evaluated separately. Operating performance is measured based on the operating income generated by the segment, which includes revenues and expenses that are directly attributable to the management of the respective segment. Intersegment sales are generally derived from transactions made at prevailing market rates. The following is a description of each segment’s business operations.

•The refining segment includes the operations of our petroleum refineries, the associated marketing activities, and logistics assets that support our refining operations. The principal products manufactured by our refineries and sold by this segment include gasolines and blendstocks, distillates, and other products.

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~~products manufactured by our refineries and sold by this segment include gasolines and blendstocks, distillates, and other products.~~

•The renewable diesel segment represents the operations of DGD, our consolidated joint venture as discussed in Note 6.7. The principal product manufactured by DGD and sold by this segment is renewable diesel. This segment sells some renewable diesel to the refining segment, which is then sold to that segment’s customers.

•The ethanol segment includes the operations of our ethanol plants, the associated marketing activities, and logistics assets that support our ethanol operations. The principal products manufactured by our ethanol plants are ethanol and distillers grains. This segment sells some ethanol to the refining segment for blending into gasoline, which is sold to that segment’s customers as a finished gasoline product.

Operations that are not included in any of the reportable segments are included in the corporate category.

~~The following tables reflect information about our operating income (loss)by reportable segment (in millions):~~

Refining Renewable
Diesel Ethanol Corporate
and
Eliminations Total
Three months ended March 31, 2021
Revenues:
Revenues from external customers $ 19,469 $ 352 $ 985 $ 0 $ 20,806
Intersegment revenues 3 79 60 (142) —
Total revenues 19,472 431 1,045 (142) 20,806
Cost of sales:
Cost of materials and other 18,022 187 924 (141) 18,992
Operating expenses (excluding depreciation
and amortization expense reflected below)
1,471 29 156 0 1,656
Depreciation and amortization expense 533 12 21 0 566
Total cost of sales 20,026 228 1,101 (141) 21,214
Other operating expenses 38 0 0 0 38
General and administrative expenses (excluding
depreciation and amortization expense
reflected below)
0 0 0 208 208
Depreciation and amortization expense 0 0 0 12 12
Operating income (loss) by segment $ (592) $ 203 $ (56) $ (221) $ (666)

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Refining Renewable
Diesel Ethanol Corporate
and
Eliminations Total
Three months ended March 31, 2020
Revenues:
Revenues from external customers $ 20,985 $ 306 $ 811 $ 0 $ 22,102
Intersegment revenues 2 53 64 (119) —
Total revenues 20,987 359 875 (119) 22,102
Cost of sales:
Cost of materials and other 19,127 130 813 (118) 19,952
LCM inventory valuation adjustment 2,414 0 128 0 2,542
Operating expenses (excluding depreciation
and amortization expense reflected below)
995 20 109 0 1,124
Depreciation and amortization expense 536 11 22 0 569
Total cost of sales 23,072 161 1,072 (118) 24,187
Other operating expenses 2 0 0 0 2
General and administrative expenses (excluding
depreciation and amortization expense
reflected below)
0 0 0 177 177
Depreciation and amortization expense 0 0 0 13 13
Operating income (loss) by segment $ (2,087) $ 198 $ (197) $ (191) $ (2,277)

The following ~~table provides a disaggregation of revenues from external customers for~~tables reflect information about our ~~principal products~~ operating income (loss)by reportable segment (in millions):

Three Months Ended
March 31,
2021 2020
Refining:
Gasolines and blendstocks $ 8,729 $ 8,244
Distillates 8,581 10,663
Other product revenues 2,159 2,078
Total refining revenues 19,469 20,985
Renewable diesel:
Renewable diesel 352 306
Ethanol:
Ethanol 752 629
Distillers grains 233 182
Total ethanol revenues 985 811
Revenues $ 20,806 $ 22,102



	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Three months ended September 30, 2021
Revenues:
Revenues from external customers	$	27,989	$	342	$	1,189	$	—	$	29,520
Intersegment revenues	3		60		115		(178)		—
Total revenues	27,992		402		1,304		(178)		29,520
Cost of sales:
Cost of materials and other	25,395		256		1,150		(177)		26,624

Operating expenses (excluding depreciation and amortization expense reflected below)	1,195		26		128		(1)		1,348
Depreciation and amortization expense	549		11		70		—		630
Total cost of sales	27,139		293		1,348		(178)		28,602
Other operating expenses	18		1		—		—		19
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		195		195
Depreciation and amortization expense	—		—		—		11		11

Operating income (loss) by segment	$	835	$	108	$	(44)	$	(206)	$	693

Three months ended September 30, 2020
Revenues:
Revenues from external customers	$	14,727	$	305	$	777	$	—	$	15,809
Intersegment revenues	2		40		58		(100)		—
Total revenues	14,729		345		835		(100)		15,809
Cost of sales:
Cost of materials and other	14,103		128		670		(100)		14,801
LCM inventory valuation adjustment	(296)		—		(17)		—		(313)
Operating expenses (excluding depreciation and amortization expense reflected below)	989		23		105		—		1,117
Depreciation and amortization expense	538		10		54		—		602
Total cost of sales	15,334		161		812		(100)		16,207
Other operating expenses	24		—		1		—		25
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		186		186
Depreciation and amortization expense	—		—		—		12		12

Operating income (loss) by segment	$	(629)	$	184	$	22	$	(198)	$	(621)

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Total assets by reportable segment were as follows (in millions):~~

March 31,
2021 December 31,
2020
Refining $ 45,649 $ 42,939
Renewable diesel 1,948 1,659
Ethanol 1,736 1,728
Corporate and eliminations 4,281 5,448
Total assets $ 53,614 $ 51,774

~~11. SUPPLEMENTAL CASH FLOW INFORMATION~~

~~In order to determine net cash used in operating activities, net lossis adjusted by, among other things, changes in current assets and current liabilities as follows (in millions):~~

Three Months Ended
March 31,
2021 2020
Decrease (increase) in current assets:
Receivables, net $ (2,946) $ 2,968
Inventories 175 627
Prepaid expenses and other (24) (8)
Increase (decrease) in current liabilities:
Accounts payable 2,992 (4,222)
Accrued expenses 105 (79)
Taxes other than income taxes payable (144) (241)
Income taxes payable 26 (152)
Changes in current assets and current liabilities $ 184 $ (1,107)

~~Changes in current assets and current liabilities for the three months ended March 31, 2021 were primarily due to the following:~~

•~~the increase in receivables was primarily due to an increase in commodity prices in March 2021 compared to December 2020 combined with an increase in sales volumes;~~

•~~the decrease in inventories was primarily due to lower inventory levels in March 2021 compared to December 2020; and~~

•~~the increase in accounts payable was due to an increase in commodity prices in March 2021 compared to December 2020 combined with an increase in crude oil and other feedstock volumes purchased.~~


	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Nine months ended September 30, 2021
Revenues:
Revenues from external customers	$	73,426	$	1,190	$	3,458	$	—	$	78,074
Intersegment revenues	7		215		259		(481)		—
Total revenues	73,433		1,405		3,717		(481)		78,074
Cost of sales:
Cost of materials and other	67,417		724		3,204		(480)		70,865

Operating expenses (excluding depreciation and amortization expense reflected below)	3,730		86		403		(1)		4,218
Depreciation and amortization expense	1,626		35		111		—		1,772
Total cost of sales	72,773		845		3,718		(481)		76,855
Other operating expenses	68		1		—		—		69
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		579		579
Depreciation and amortization expense	—		—		—		35		35


Operating income (loss) by segment	$	592	$	559	$	(1)	$	(614)	$	536




Nine months ended September 30, 2020
Revenues:
Revenues from external customers	$	45,327	$	850	$	2,131	$	—	$	48,308
Intersegment revenues	6		150		160		(316)		—
Total revenues	45,333		1,000		2,291		(316)		48,308
Cost of sales:
Cost of materials and other	41,769		393		1,984		(314)		43,832
LCM inventory valuation adjustment	(19)		—		—		—		(19)
Operating expenses (excluding depreciation and amortization expense reflected below)	2,912		63		293		—		3,268
Depreciation and amortization expense	1,607		33		97		—		1,737
Total cost of sales	46,269		489		2,374		(314)		48,818
Other operating expenses	29		—		1		—		30
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		532		532
Depreciation and amortization expense	—		—		—		37		37

Operating income (loss) by segment	$	(965)	$	511	$	(84)	$	(571)	$	(1,109)

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides a disaggregation of revenues from external customers for our principal products by reportable segment (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Refining:
Gasolines and blendstocks	$	13,132	$	7,021	$	34,293	$	19,258
Distillates	11,588		6,327		31,044		21,369
Other product revenues	3,269		1,379		8,089		4,700
Total refining revenues	27,989		14,727		73,426		45,327
Renewable diesel:
Renewable diesel	342		305		1,190		850
Ethanol:
Ethanol	948		624		2,683		1,685
Distillers grains	241		153		775		446
Total ethanol revenues	1,189		777		3,458		2,131

Revenues	$	29,520	$	15,809	$	78,074	$	48,308

Total assets by reportable segment were as follows (in millions):


	September 30, 2021		December 31, 2020
Refining	$	45,975	$	42,939
Renewable diesel	2,588		1,659
Ethanol	1,621		1,728
Corporate and eliminations	4,507		5,448
Total assets	$	54,691	$	51,774

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. SUPPLEMENTAL CASH FLOW INFORMATION

In order to determine net cash provided by operating activities, net income (loss) is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions):


	Nine Months Ended September 30,
	2021		2020
Decrease (increase) in current assets:
Receivables, net	$	(2,643)	$	3,229
Inventories	(232)		1,577

Prepaid expenses and other	28		70
Increase (decrease) in current liabilities:
Accounts payable	3,624		(4,893)
Accrued expenses	538		17
Taxes other than income taxes payable	200		(24)
Income taxes payable	115		(208)
Changes in current assets and current liabilities	$	1,630	$	(232)

Changes in current assets and current liabilities for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 were primarily due to the following:

•the increase in receivables was primarily due to an increase in refined petroleum product prices in September 2021 compared to December 2020 combined with an increase in refined petroleum product sales volumes, partially offset by a decrease in income taxes receivable associated with the receipt of a $962 million refund related to our U.S federal income tax return for 2020;

•the increase in accounts payable was primarily due to an increase in crude oil and other feedstock prices in September 2021 compared to December 2020 combined with an increase in crude oil and other feedstock volumes purchased; and

•the increase in accrued expenses was primarily due to an increase in our environmental credit obligations under fixed-price contracts that resulted from higher prices for Renewable Identification Numbers (RINs) in September 2021 compared to December 2020.

Changes in current assets and current liabilities for the nine months ended September 30, 2020 were primarily due to the following:

•the decrease in receivables was due to (i) a decrease of ~~$3.4~~$3.6 billion as a result of a decrease in ~~commodity~~sales volumes combined with a decrease in refined petroleum product prices in ~~March~~September 2020 compared to December 2019 ~~combined with~~and (ii) the collection of $449 million for a ~~decrease in sales~~blender’s tax credit receivable attributable to volumes blended during 2019 and ~~(ii)~~2018, partially offset by an increase in income taxes receivable of ~~$430~~$770 million primarily due to the recognition of ~~the~~a current ~~portion of the~~ income tax ~~benefit described in Note 8;~~

•~~the decrease in inventories was due to a decrease in commodity prices in March 2020 compared to December 2019 combined with lower inventory levels;~~

•~~the decrease in accounts payable was due to a decrease in commodity prices in March 2020 compared to December 2019 combined with a decrease in crude oil and other feedstock volumes purchased; and~~

•~~the decrease in taxes other than income taxes payable was mainly due to the payment of ad valorem, value-added, and motor fuel taxes.~~

~~Cash flows related to interest and income taxes were as follows (in millions):~~

Three Months Ended
March 31,
2021 2020
Interest paid in excess of amount capitalized,
including interest on finance leases
$ 103 $ 88
Income taxes paid, net 36 121

~~Supplemental cash flow information related to our operating and finance leases was as follows (in millions):~~

Three Months Ended March 31,
2021 2020
Operating
Leases Finance
Leases Operating
Leases Finance
Leases
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows $ 100 $ 18 $ 106 $ 22
Financing cash flows — 31 — 15
Changes in lease balances resulting from new
and modified leases (a)
72 7 92 1,441

~~________________________~~

~~(a)~~Noncash activity for the three months ended March 31, 2020 primarily included $1.4 billion for a finance lease right-of-use asset and related liability recognized in connection with the terminaling agreement with MVP.benefit;

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

•the decrease in inventories was primarily due to lower inventory levels in September 2020 compared to December 2019; and

•the decrease in accounts payable was due to a decrease in crude oil and other feedstock volumes purchased combined with a decrease in crude oil and other feedstock prices in September 2020 compared to December 2019.

Cash flows related to interest and income taxes were as follows (in millions):


	Nine Months Ended September 30,
	2021		2020
Interest paid in excess of amount capitalized, including interest on finance leases	$	397	$	338
Income taxes paid (refunded), net	(876)		206

Supplemental cash flow information related to our operating and finance leases was as follows (in millions):


	Nine Months Ended September 30,
	2021				2020
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	296	$	53	$	329	$	74
Investing cash flows	1		—		1		—
Financing cash flows	—		97		—		51
Changes in lease balances resulting from new and modified leases (a)	366		93		211		1,506

________________________

(a)Noncash activity for the nine months ended September 30, 2020 primarily included $1.4 billion for a finance lease right-of-use asset and related liability recognized in connection with the terminaling agreement with MVP.

There were no significant noncash investing and financing activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, except as noted in the table above.

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13. FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

The following tables present information (in millions) about our assets and liabilities recognized at their fair values in our balance sheets categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of ~~March 31,~~September 30, 2021 and December 31, 2020.

We have elected to offset the fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty, including any related cash collateral assets or obligations as shown below; however, fair value amounts by hierarchy level are presented in the following tables on a gross basis. We have no derivative contracts that are subject to master netting arrangements that are reflected gross on the balance sheet.


		March 31, 2021																	September 30, 2021
								Total Gross Fair Value		Effect of Counter- party Netting		Effect of Cash Collateral Netting		Net Carrying Value on Balance Sheet		Cash Collateral Paid or Received Not Offset									Total Gross Fair Value		Effect of Counter- party Netting		Effect of Cash Collateral Netting		Net Carrying Value on Balance Sheet		Cash Collateral Paid or Received Not Offset
		Fair Value Hierarchy																	Fair Value Hierarchy
		Level 1		Level 2		Level 3													Level 1		Level 2		Level 3
Assets	Assets																	Assets
Commodity derivative contracts	Commodity derivative contracts	$	386	$	0	$	0	$	386	$	(386)	$	0	$	0	$	0	Commodity derivative contracts	$	785	$	—	$	—	$	785	$	(677)	$	(48)	$	60	$	—
Physical purchase contracts	Physical purchase contracts	0		10		0		10		n/a		n/a		10		n/a		Physical purchase contracts	—		6		—		6		n/a		n/a		6		n/a

Foreign currency contracts	Foreign currency contracts	10		0		0		10		n/a		n/a		10		n/a		Foreign currency contracts	4		—		—		4		n/a		n/a		4		n/a
Investments of certain benefit plans	Investments of certain benefit plans	75		0		8		83		n/a		n/a		83		n/a		Investments of certain benefit plans	84		—		6		90		n/a		n/a		90		n/a

Total	Total	$	471	$	10	$	8	$	489	$	(386)	$	0	$	103			Total	$	873	$	6	$	6	$	885	$	(677)	$	(48)	$	160

Liabilities	Liabilities																	Liabilities
Commodity derivative contracts	Commodity derivative contracts	$	444	$	0	$	0	$	444	$	(386)	$	(58)	$	0	$	(120)	Commodity derivative contracts	$	736	$	—	$	—	$	736	$	(677)	$	(59)	$	—	$	(55)
Environmental credit obligations	Environmental credit obligations	0		62		0		62		n/a		n/a		62		n/a		Environmental credit obligations	—		94		—		94		n/a		n/a		94		n/a
Physical purchase contracts																		Physical purchase contracts	—		5		—		5		n/a		n/a		5		n/a

Foreign currency contracts																		Foreign currency contracts	5		—		—		5		n/a		n/a		5		n/a
Total	Total	$	444	$	62	$	0	$	506	$	(386)	$	(58)	$	62			Total	$	741	$	99	$	—	$	840	$	(677)	$	(59)	$	104

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		December 31, 2020																							December 31, 2020
								Total Gross Fair Value				Effect of Counter- party Netting		Effect of Cash Collateral Netting			Net Carrying Value on Balance Sheet				Cash Collateral Paid or Received Not Offset																	Total Gross Fair Value				Effect of Counter- party Netting				Effect of Cash Collateral Netting				Net Carrying Value on Balance Sheet				Cash Collateral Paid or Received Not Offset
		Fair Value Hierarchy														Fair Value Hierarchy
		Level 1		Level 2		Level 3										Level 1								Level 2				Level 3
Assets	Assets																																Assets
Commodity derivative contracts	Commodity derivative contracts	$	403	$	0	$	0			$	403			$	(373)				$	(18)			$	12			$	0	Commodity derivative contracts		$	403				$	—			$	—			$	403			$	(373)			$	(18)			$	12	$	—
Physical purchase contracts	Physical purchase contracts	0		13		0		13				n/a		n/a			13				n/a			Physical purchase contracts	—				13					—				13				n/a				n/a				13				n/a

Investments of certain benefit plans	Investments of certain benefit plans	74		0		8		82				n/a		n/a			82				n/a			Investments of certain benefit plans	74				—					8				82				n/a				n/a				82				n/a

Total	Total	$	477	$	13	$	8	$	498			$	(373)	$	(18)		$	107						Total	$	477			$	13				$	8			$	498			$	(373)			$	(18)			$	107

Liabilities	Liabilities																							Liabilities
Commodity derivative contracts	Commodity derivative contracts	$	405	$	0	$	0	$	405			$	(373)	$	(32)		$	0			$	(44)		Commodity derivative contracts	$	405			$	—				$	—			$	405			$	(373)			$	(32)			$	—			$	(44)
Environmental credit obligations	Environmental credit obligations	0		96		0		96				n/a		n/a			96				n/a			Environmental credit obligations	—				96					—				96				n/a				n/a				96				n/a

Foreign currency contracts	Foreign currency contracts	4		0		0		4				n/a		n/a			4				n/a			Foreign currency contracts	4				—					—				4				n/a				n/a				4				n/a
Total	Total	$	409	$	96	$	0	$	505			$	(373)	$	(32)		$	100						Total	$	409			$	96				$	—			$	505			$	(373)			$	(32)			$	100

A description of our assets and liabilities recognized at fair value along with the valuation methods and inputs we used to develop their fair value measurements are as follows:

•Commodity derivative contracts consist primarily of exchange-traded futures, which are used to reduce the impact of price volatility on our results of operations and cash flows as discussed in Note ~~13.~~14. These contracts are measured at fair value using a market approach based on quoted prices from the commodity exchange and are categorized in Level 1 of the fair value hierarchy.

•Physical purchase contracts represent the fair value of fixed-price corn purchase contracts. The fair values of these purchase contracts are measured using a market approach based on quoted prices from the commodity exchange or an independent pricing service and are categorized in Level 2 of the fair value hierarchy.

•Foreign currency contracts consist of foreign currency exchange and purchase contracts and foreign currency swap agreements related to our international operations to manage our exposure to exchange rate fluctuations on transactions denominated in currencies other than the local (functional) currencies of our operations. These contracts are valued based on quoted foreign currency exchange rates and are categorized in Level 1 of the fair value hierarchy.

•Investments of certain benefit plans consist of investment securities held by trusts for the purpose of satisfying a portion of our obligations under certain U.S. nonqualified benefit plans. The plan assets categorized in Level 1 of the fair value hierarchy are measured at fair value using a market approach based on quoted prices from national securities exchanges. The plan assets categorized ~~in Level 3 of the fair value hierarchy represent insurance contracts, the fair value of which is provided by the insurer.~~

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~~(functional) currencies of our operations. These contracts are valued based on quoted foreign currency exchange rates and are categorized~~ in Level 13 of the fair value ~~hierarchy.~~hierarchy represent insurance contracts, the fair value of which is provided by the insurer.

•Environmental credit obligations represent our liability for the purchase of (i) biofuel credits (primarily ~~Renewable Identification Numbers (RINs)~~RINs in the U.S.) needed to satisfy our blending obligation ~~to blend~~under the U.S. federal Renewable Fuel Standard (RFS) and similar biofuel blending programs, such as the U.K. Renewable Transport Fuel Obligation, (collectively, the biofuels ~~into the products we produce~~programs); and (ii) emission credits needed under ~~the~~ ~~California Global Warming Solutions Act~~ ~~(the California cap-and-trade system, also known as AB 32) and similar~~various other environmental emissions programs (collectively, the ~~cap-and-trade systems)~~other environmental emissions programs). To the degree we are unable to blend biofuels (such as ethanol and ~~biodiesel)~~biodiesel, including renewable diesel) at percentages required under the biofuel programs, we must purchase biofuel credits to comply with these programs. Under the ~~cap-and-trade systems,~~other environmental emissions programs, we also must purchase emission credits to comply with these ~~systems.~~programs. These programs are described in Note 1314 under “Risk Management Activities by Type of Risk—Environmental Compliance Program Price Risk.” The liability for environmental credits is based on our deficit for such credits as of the balance sheet date, if any, after considering any credits acquired or under contract, and is equal to the product of the credits deficit and the market price of these credits as of the balance sheet date. The environmental credit obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a market approach based on quoted prices from an independent pricing service.

Nonrecurring Fair Value Measurements

There were 0no assets or liabilities that were measured at fair value on a nonrecurring basis as of ~~March 31,~~September 30, 2021 and December 31, 2020.

Other Financial Instruments

Financial instruments that we recognize in our balance sheets at their carrying amounts are shown in the following table along with their associated fair values (in millions):


			March 31, 2021				December 31, 2020						September 30, 2021				December 31, 2020
		Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value			Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	Level 1	$	2,254	$	2,254	$	3,313	$	3,313	Cash and cash equivalents	Level 1	$	3,498	$	3,498	$	3,313	$	3,313
Financial liabilities
Financial liabilities:											Financial liabilities:
Debt (excluding finance leases)	Debt (excluding finance leases)	Level 2	13,024		14,776		13,013		15,103		Debt (excluding finance leases)	Level 2	12,573		14,574		13,013		15,103

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~13.~~14. PRICE RISK MANAGEMENT ACTIVITIES

General

We are exposed to market risks primarily related to the volatility in the price of commodities, foreign currency exchange rates, and the price of credits needed to comply with various government and regulatory programs. We enter into derivative instruments to manage some of these risks, including derivative instruments related to the various commodities we purchase or produce, and foreign currency exchange and purchase contracts, as described below under “Risk Management Activities by Type of Risk.” These derivative instruments are recorded as either assets or liabilities measured at their fair values (see Note ~~12)~~13), as summarized below under “Fair Values of Derivative Instruments.” The effect of these derivative instruments on our income and other comprehensive income (loss) is summarized below under ““Effect of Derivative Instruments on Income and Other Comprehensive Income (Loss).”

Risk Management Activities by Type of Risk

Commodity Price Risk

We are exposed to market risks related to the volatility in the price of feedstocks (primarily crude oil and corn), the products we produce (primarily refined petroleum products), and natural gas used in our operations. To reduce the impact of price volatility on our results of operations and cash flows, we use commodity derivative instruments, such as futures and options. 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 of directors.

We primarily use commodity derivative instruments as cash flow hedges and economic hedges. Our objectives for entering into each type of hedge is described below.

•Cash flow hedges – The objective of our cash flow hedges is to lock in the price of forecasted purchases and/or product sales at existing market prices that we deem favorable.

•Economic hedges – Our objectives for holding economic hedges are to (i) manage price volatility in certain feedstock and product inventories and (ii) lock in the price of forecasted purchases and/or product sales at existing market prices that we deem favorable.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of ~~March 31,~~September 30, 2021, we had the following outstanding commodity derivative instruments that were used as cash flow hedges and economic hedges, as well as commodity derivative instruments related to the physical purchase of corn at a fixed price. The information presents the notional volume of outstanding contracts by type of instrument and year of maturity (volumes in thousands of barrels, except corn contracts that are presented in thousands of bushels).


		Notional Contract Volumes by Year of Maturity		Notional Contract Volumes by Year of Maturity
		2021	2022			2021	2022
Derivatives designated as cash flow hedges
Derivatives designated as cash flow hedges:					Derivatives designated as cash flow hedges:
Refined petroleum products:	Refined petroleum products:				Refined petroleum products:
Futures – long	Futures – long	427	0		Futures – long	1,162	501
Futures – short	Futures – short	1,605	0		Futures – short	3,400	501

Derivatives designated as economic hedges
Derivatives designated as economic hedges:					Derivatives designated as economic hedges:
Crude oil and refined petroleum products:	Crude oil and refined petroleum products:				Crude oil and refined petroleum products:

Futures – long	Futures – long	66,513	64		Futures – long	63,320	1,354
Futures – short	Futures – short	56,880	22		Futures – short	61,498	1,173

Corn:	Corn:				Corn:
Futures – long	Futures – long	63,630	10		Futures – long	85,540	1,615
Futures – short	Futures – short	90,395	365		Futures – short	103,295	6,395
Physical contracts – long	Physical contracts – long	26,563	351		Physical contracts – long	16,441	4,792

Foreign Currency Risk

We are exposed to exchange rate fluctuations on transactions related to our international operations that are denominated in currencies other than the local (functional) currencies of our operations. To manage our exposure to these exchange rate fluctuations, we use foreign currency contracts. These contracts are not designated as hedging instruments for accounting purposes and therefore are classified as economic hedges. As of ~~March 31,~~September 30, 2021, we had foreign currency contracts to purchase ~~$245~~$463 million of U.S. dollars and ~~$2.8~~$1.1 billion of U.S. dollar equivalent Canadian dollars. Of these commitments, ~~$1.0 billion~~$425 million matured on or before ~~April 27,~~October 25, 2021 and the remaining ~~$2.0~~$1.138 billion will mature by ~~July 15,~~December 6, 2021.

Environmental Compliance Program Price Risk

We are exposed to market risk related to the volatility in the price of credits needed to comply with various governmental and regulatory environmental compliance programs. To manage this risk, we enter into contracts to purchase these credits ~~when prices are deemed favorable.~~as appropriate. Some of these contracts are derivative instruments; however, we elect the normal purchase exception and do not record these contracts at their fair values. Certain of these programs, such as the biofuels programs described in Note 13, require us to blend biofuels into the products we produce, and we are subject to such programs in most of the countries in which we operate. These countries, or local governments thereof, set annual quotas for the percentage of biofuels that must be blended into the motor fuels consumed in ~~these countries.~~their jurisdictions. As a producer of motor fuels from petroleum, we are obligated to blend biofuels into the products we produce at a rate that is at least equal to the applicable quota. To the degree we are unable to blend at the applicable rate, we must purchase biofuel credits (primarily RINs in the U.S.). We are exposed to ~~the volatility in the market price of these credits, and we manage that risk by purchasing biofuel credits when prices are deemed favorable. The cost of meeting our~~

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the volatility in the market price of these credits, and we manage that risk by purchasing biofuel credits as appropriate. The cost of meeting our credit obligations under ~~these compliance~~the biofuels programs was ~~$360~~$618 million and ~~$112~~$143 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and $1.6 billion and $391 million for the nine months ended September 30, 2021 and 2020, respectively. These amounts are reflected in cost of materials and other.

We are subject to additional requirements under ~~greenhouse gas (GHG) emission~~the other environmental emissions programs ~~including the cap-and-trade systems,~~ as discussed in Note ~~12.~~13. Under these ~~cap-and-trade systems,~~other environmental emissions programs, we purchase various ~~GHG~~ emission credits ~~available on the open market.~~to comply with these programs. Therefore, we are exposed to the volatility in the market price of these credits. The cost ~~to implement certain provisions~~ of the ~~cap-and-trade systems~~various credits under the other environmental emissions programs are significant; however, we recovered substantially allof these costs from our customers for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 and expect to continue to recover the majority of these costs in the future. For the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, the net cost of meeting our credit obligations under these ~~compliance~~other environmental emissions programs was immaterial.

Fair Values of Derivative Instruments

The following tables provide information about the fair values of our derivative instruments as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in millions) and the line items in the balance sheets in which the fair values are reflected. See Note 1213 for additional information related to the fair values of our derivative instruments.

As indicated in Note ~~12,~~13, we net fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty under master netting arrangements, including cash collateral assets and obligations. The following table, however, is presented on a gross asset and gross liability basis, which results in the reflection of certain assets in liability accounts and certain liabilities in asset accounts:


		Balance Sheet Location		March 31, 2021						December 31, 2020						Balance Sheet Location		September 30, 2021						December 31, 2020
			Asset Derivatives			Liability Derivatives			Asset Derivatives			Liability Derivatives					Asset Derivatives			Liability Derivatives			Asset Derivatives			Liability Derivatives
Derivatives designated as hedging instruments
Derivatives designated as hedging instruments:															Derivatives designated as hedging instruments:
Commodity contracts	Commodity contracts	Receivables, net		$	5		$	10		$	4		$	17	Commodity contracts	Receivables, net		$	18		$	41		$	4		$	17

Derivatives not designated as hedging instruments
Derivatives not designated as hedging instruments:															Derivatives not designated as hedging instruments:
Commodity contracts	Commodity contracts	Receivables, net		$	381		$	434		$	399		$	388	Commodity contracts	Receivables, net		$	767		$	695		$	399		$	388
Physical purchase contracts	Physical purchase contracts	Inventories		10			0			13			0		Physical purchase contracts	Inventories		6			5			13			—
Foreign currency contracts	Foreign currency contracts	Receivables, net		10			0			0			0		Foreign currency contracts	Receivables, net		4			—			—			—
Foreign currency contracts	Foreign currency contracts	Accrued expenses		0			0			0			4		Foreign currency contracts	Accrued expenses		—			5			—			4
Total	Total			$	401		$	434		$	412		$	392	Total			$	777		$	705		$	412		$	392

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Market Risk

Our price risk management activities involve the receipt or payment of fixed price commitments into the future. These transactions give rise to market risk, which is the risk that future changes in market conditions may make an instrument less valuable. We closely monitor and manage our exposure to

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~~VALERO ENERGY CORPORATION~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

market risk on a daily basis in accordance with policies approved by our board of directors. Market risks are monitored by our risk control group to ensure compliance with our stated risk management policy. We do not require any collateral or other security to support derivative instruments into which we enter. We also do not have any derivative instruments that require us to maintain a minimum investment-grade credit rating.

Effect of Derivative Instruments on Income and Other Comprehensive Income (Loss)

The following table provides information about the gain (loss) recognized in income and other comprehensive income (loss) due to fair value adjustments of our cash flow hedges (in millions):

Derivatives in
Cash Flow Hedging
Relationships Location of Gain (Loss)
Recognized in Income
on Derivatives Three Months Ended
March 31,
2021 2020
Commodity contracts
Gain (loss) recognized in other
comprehensive income (loss)
on derivatives
N/A $ (13) $ 55
Gain (loss) reclassified from
accumulated other comprehensive
loss into income
Revenues (23) 26


Derivatives in Cash Flow Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivatives	Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020
Commodity contracts:
Gain (loss) recognized in other comprehensive income (loss) on derivatives	n/a	$	(21)	$	2	$	(52)	$	52
Gain (loss) reclassified from accumulated other comprehensive loss into income	Revenues	(3)		(3)		(37)		42

For cash flow hedges, no component of any derivative instrument’s gains or losses was excluded from the assessment of hedge effectiveness for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020. For the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, cash flow hedges primarily related to forward sales of renewable diesel. The estimated deferred after-tax ~~gain~~loss that is expected to be reclassified into revenues over the next 12 months as a result of the hedged transactions that are forecasted to occur as of ~~March 31,~~September 30, 2021 was immaterial. For the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, there wereno amounts reclassified from accumulated other comprehensive loss into income as a result of the discontinuance of cash flow hedge accounting. The changes in accumulated other comprehensive loss by component, net of tax, for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 are described in Note 5.6.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table provides information about the gain (loss) recognized in income on our derivative instruments with respect to our economic hedges and our foreign currency hedges and the line items in the statements of income in which such gains (losses) are reflected (in millions):


Derivatives Not Designated as Hedging Instruments	Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Three Months Ended March 31,				Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives		Three Months Ended September 30,					Nine Months Ended September 30,
			2021		2020						2021					2021			2020
Commodity contracts	Commodity contracts	Revenues	$	7	$	(8)			Commodity contracts		$	(7)				$	13		$	(3)
Commodity contracts	Commodity contracts	Cost of materials and other	(78)		(152)				Commodity contracts		Cost of materials and other			6		118			(51)			106
Commodity contracts	Commodity contracts	Operating expenses (excluding depreciation and amortization expense)	1		(2)				Commodity contracts	Operating expenses (excluding depreciation and amortization expense)			(1)		—			2			2
Foreign currency contracts	Foreign currency contracts	Cost of materials and other	(8)		49				Foreign currency contracts	Cost of materials and other			19		(6)			17			43
Foreign currency contracts	Foreign currency contracts	Other income, net	30		(165)				Foreign currency contracts	Other income, net			(28)		56			55			(49)

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Form 10-Q, including without limitation our disclosures below under the heading “OVERVIEW AND OUTLOOK,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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,” “will,” “may,” “strive,” “seek,” “potential,” “opportunity,” “aimed,” “considering,” “continue,” and similar expressions.

These forward-looking statements include, among other things, statements regarding:

•the effect, impact, potential duration or timing, or other implications of the COVID-19 pandemic, government restrictions, requirements, or mandates in response thereto, variants of the COVID-19 virus, vaccine distribution and administration levels, economic activity, and global crude oil production levels, and any expectations we may have with respect thereto, including with respect to our responses thereto, our operations and the production levels of our assets;

•~~our expectations with respect to the frequency of large excess costs and expenses arising out of storms and other weather events, such as Winter Storm Uri;~~

•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 refined petroleum product inventories and storage capacity;

•expectations regarding the levels of, and timing with respect to, the production and operations at our existing refineries and ~~plants;~~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 maintenance 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 results of ~~operations;~~operations and financial position;

•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;

•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 repurchase ~~program;~~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 ~~initiatives;~~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 results of operations and financial position;

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•the effect of general economic and other conditions on refining, renewable diesel, and ethanol industry fundamentals;

•expectations regarding our risk management activities, including the anticipated effects of our hedge transactions;

•

~~Table of Contents~~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 ~~several~~our publicly announced greenhouse gas (GHG) emissions reduction/offset targets and our current and any future carbon transition ~~projects, which are in early development.~~projects.

We based our forward-looking statements on our current expectations, estimates, and projections about ourselves, our industry, and the global economy and financial markets generally. We caution that these statements are not guarantees of future performance or results and involve known and unknown risks and uncertainties, the ultimate outcomes of which we cannot predict with certainty. In addition, we based many of these forward-looking statements on assumptions about future events, the ultimate outcomes of which we cannot predict with certainty and which may prove to be inaccurate. Accordingly, actual performance or results may differ materially from the future performance or results that we have expressed, suggested, or forecast in the forward-looking statements. 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:

•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, including requirements and mandates with respect to vaccines, vaccine distribution and administration levels, and the adverse impacts of the foregoing on our business, financial condition, results of operations, and liquidity, including, but not limited to, our growth, operating costs, administrative costs, supply chain, labor availability, logistical capabilities, customer demand for our products, and industry demand generally, margins, production and throughput capacity, utilization, inventory value, cash position, taxes, the price of our securities and trading markets with respect thereto, our ability to access capital markets, 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, or to receive ~~feedstocks;~~feedstocks, or otherwise operate efficiently;

•political and economic conditions in nations 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 the Organization of Petroleum Exporting Countries (OPEC) to agree on and to maintain crude oil price and production controls;

•the level of consumer demand, consumption and overall economic activity, including seasonal fluctuations;

•refinery, renewable diesel plant, or ethanol plant overcapacity or undercapacity;

•our ability to successfully integrate any acquired businesses into our operations;

•the risk that any divestitures may not provide the anticipated benefits or may result in unforeseen detriments;

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•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;

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•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;~~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 biofuel credits (primarily RINs needed to comply with the ~~U.S. federal Renewable Fuel Standard (RFS))~~RFS) and ~~GHG~~ emission credits needed ~~to comply with~~under the ~~requirements of various GHG emission~~other environmental emissions programs;

•delay of, cancellation of, or failure to implement planned capital projects and realize the various assumptions and benefits projected for such projects or cost overruns in constructing such planned capital projects;

•earthquakes, hurricanes, tornadoes, and ~~irregular~~other weather events, which can unforeseeably affect the price or availability of electricity, natural gas, crude oil, rendered and recycled materials, 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 governmental authorities, ~~including~~such as tariffs, ~~and tax and~~ environmental regulations, ~~such as~~ changes to income tax rates, introduction of a global minimum tax, tax changes or restrictions impacting the ~~corporate tax rate,~~foreign repatriation of cash, actions implemented under the ~~California cap-and-trade system~~biofuel programs and ~~similar~~the other environmental emissions programs, including changes to volume requirements or other obligations or exemptions under the RFS, and actions arising from the U.S. Environmental Protection Agency’s ~~(EPA’s)~~ or other governmental ~~regulation~~agencies’ regulations, policies, or initiatives concerning GHGs, including mandates for or bans of ~~GHGs,~~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 expropriation or impoundment of assets, failure of foreign governments and state-owned entities to honor their contracts, property disputes, 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 joint venture partners that we do not control;

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•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;~~borrow or access financial markets;

•the costs, disruption, and diversion of ~~management’s attention~~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

•other factors generally described in the “Risk Factors” section included in our annual report on Form 10-K for the year ended December 31, 2020.

Any one of these factors, or a combination of these factors, could materially affect our future results of operations and whether any forward-looking statements ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and actual results and future performance may differ materially from those expressed, suggested, or forecast in any forward-looking statements. WeSuch forward-looking statements speak only as of the date of this quarterly report on Form 10-Q and we do not intend to update these statements unless we are required by the securities laws to do so.

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the ~~foregoing.~~foregoing, as it may be updated or modified by our future filings with the U.S. Securities and Exchange Commission (SEC). 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.~~events unless we are required by the securities laws to do so.

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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. GAAP. These non-GAAP financial measures include adjusted operating income (loss) (including adjusted operating income (loss) for each of our reportable segments, as applicable); refining, renewable diesel, and ethanol segment margin; and capital investments attributable to Valero. We have included these non-GAAP financial measures to help facilitate the comparison of operating results between periods, ~~and~~ to help assess our cash ~~flows.~~flows, and because we believe they provide useful information as discussed further below. See the tables in note ~~(c)~~(g) beginning on page 4157 for reconciliations of adjusted operating income (loss) (including adjusted operating income (loss) for each of our reportable segments, as applicable) and refining, renewable diesel, and ethanol segment margin to their most directly comparable U.S. GAAP financial measures. Also in note ~~(c)~~(g), we disclose the reasons why we believe our use of such non-GAAP financial measures provides useful information. See the table on page 4764 for a reconciliation of capital investments attributable to Valero to its most directly comparable U.S. GAAP financial measure. Beginning on page ~~46,~~63, we disclose the reasons why we believe our use of this non-GAAP financial measure provides useful information.

IMPACT OF THE COVID-19 PANDEMIC TO OUR BUSINESS

The COVID-19 pandemic has negatively impacted our business. Although we have experienced improvements in 2021, the broader implications of the pandemic on our results of operations and financial position remain uncertain. Information about the uncertainties of the COVID-19 pandemic on our business is discussed in Note 2 of Condensed Notes to Consolidated Financial Statements.

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OVERVIEW AND OUTLOOK

Overview

Business Operations Update

~~The outbreak~~Our business continued to recover throughout the third quarter of ~~COVID-19 and its development into~~2021 as a pandemic in March 2020 resulted in significant economic disruption globally as governmental authorities imposed restrictions, such as stay-at-home orders and other social distancing measures, to slow the spreadresult of ~~COVID-19. These actions significantly reduced global economic activity and negatively impacted many businesses, including our business. We experienced a decline~~ongoing improvements in the demand for and market prices of refined petroleum products, primarily gasoline and diesel, with demand for these products near pre-pandemic levels for most of the ~~transportation fuels that~~first nine months of 2021, and we have recently experienced demand for diesel well in excess of pre-pandemic levels. Jet fuel demand has also continued to improve throughout the third quarter and first nine months of 2021, although at a slower pace than other products we produce relative to pre-pandemic levels. These ongoing improvements in demand and ~~sell, and thus also a decline~~an associated increase in refining margins contributed to us reporting net income attributable to Valero stockholders of $463 million for the third quarter of 2021.

Refining margins have improved more slowly than demand over the first nine months of 2021, although the improvement has been more significant during the third quarter of 2021 as refined product inventories continued to fall, especially in the ~~market prices of those products,~~U.S. In fact, U.S. refined product inventories are at five-year lows due to ~~a decrease in~~ the ~~level~~effect of ~~individual movement and travel~~increased demand, the impact from lower production resulting from a portion of U.S. Gulf Coast refining capacity being offline in late August and most of September 2021 because of Hurricane Ida, and the ~~restrictions. There was also a decline~~impact of lower imports from Europe as rising natural gas prices in Europe have made their supply less economic. Renewable diesel margins have remained strong over the ~~global~~first nine months of 2021 due to continued demand for ~~crude oil,~~this low-carbon transportation fuel. However, our renewable diesel operations were negatively impacted during the ~~primary feedstock for the products~~third quarter of ~~our refining segment, resulting in a decline in crude oil prices and production levels. As~~2021 as a result of ~~these factors,~~Hurricane Ida. We shut down two refineries and our renewable diesel plant in Louisiana in preparation for the storm, and although the refineries and the plant sustained minimal damage, we were delayed from restarting operations until electrical supply and other utilities were restored and from shipping product to our customers until the Mississippi River was reopened to ship and barge traffic.

While we reported positive earnings for the third quarter of 2021, we generated a net loss attributable to Valero stockholders ~~in 2020 and our operations generated significantly less cash in 2020 than in prior years. We took a number~~ of actions since March 2020 to respond to the impacts from the pandemic on our business, such as reducing transportation fuel production at our refineries and ethanol plants to align with demand, deferring certain capital investments, deferring the payment of certain income and indirect taxes as permitted by legislation, and suspending purchases of our common stock under our stock purchase program. We also raised a total of $4.0 billion (before deducting the underwriting discounts and debt issuance costs) through two public debt offerings at attractive rates. The net proceeds from these offerings, along with the cash generated by our operations, allowed us to make most of our planned capital investments, pay dividends in each of the 2020 quarterly periods, and increase our cash and cash equivalents on hand as of December 31, 2020 compared to the prior year end.

~~For~~$79 million for the first ~~quarter~~nine months of ~~2021, we reported a net loss attributable to Valero stockholders of $704 million.~~2021. The factor primarily impacting ~~these~~the nine-month results was a significant increase in the cost of electricity and natural gas at certain of our refineries and ethanol plants arising out of Winter Storm Uri. We incurred excess energy costs estimated at $579 million, or $467 million after taxes, ~~during~~in February 2021.

Our results of operations for the third quarter and the first ~~quarter~~nine months of ~~2021. Our results for the first quarter~~2021 are more fully discussed in “Third Quarter Results” and “First ~~Quarter~~Nine Months Results” below and in “RESULTS OF OPERATIONS” beginning on page ~~33.~~

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While the significant increase in energy costs was an event isolated to the first quarter of 2021, our business showed signs of recovery and improvement in the demand for and market prices of gasoline and diesel, with both factors reaching near pre-pandemic levels in March 2021. Jet fuel demand has seen improved market indicators, such as higher traveler throughput as reported by the Transportation Security Administration, although at a slower pace than other products we produce relative to pre-pandemic levels. These improvements resulted primarily from the lifting or easing of restrictions by many governmental authorities, especially those in our U.S. Gulf Coast and U.S. Mid-Continent regions, in response to decreasing COVID-19 infection rates and increasing numbers of people receiving COVID-19 vaccines, which were approved by a number of regulators throughout the world in late 2020 and early 2021. While many governmental authorities in areas located in our U.S. West Coast and North Atlantic regions, such as California, Canada, and the U.K., continue to impose restrictions, some of these restrictions have been or are soon expected to be moderately lifted. The ongoing distribution of vaccines may result in the continued lifting of restrictions and may be seen as a key factor in helping to restore public confidence, and thus stimulate and increase economic activity, potentially to pre-pandemic levels; however, the risk remains that the vaccines may not be distributed widely on a timely basis, they may not be effective against new variants of the COVID-19 virus, the distribution of some or all of the vaccines may be paused or withdrawn due to concerns with potential side effects, and/or the level of individuals’ willingness to receive a vaccine may not be as strong or as timely as needed. Based on these and other circumstances that cannot be predicted, the broader implications of the pandemic on our results of operations and financial position remain uncertain.41.

~~The~~Despite the lingering, but improving, ~~but lingering,~~ impacts of the pandemic on our operations, ~~and~~ the negative effects arising out of Winter Storm Uri on ~~the~~ energy costs at certain of our refineries and ethanol plants, ~~also impacted~~and the negative effects of Hurricane Ida on our ~~liquidity~~renewable diesel operations, our operations generated $3.4 billion of cash during the first nine months of 2021. Approximately a quarter of ~~2021. Our operations for the quarter used $52 million of cash largely~~that amount, however, was due to the ~~effect~~receipt of our 2020 U.S. federal income tax refund of $962 million. In addition, we received proceeds of $270 million from ~~estimated excess energy costs previously noted,~~ the ~~majority~~sale of ~~which were paid by the end of the first quarter. We also~~a partial interest in MVP in April 2021, made ~~$582 million~~$1.7 billion in capital investments, redeemed the total outstanding balance of our $575 million Floating Rate Notes due in 2023, and paid ~~$400 million~~$1.2 billion in dividends during the ~~quarter.~~nine-month period. As a result of this and other activity, our cash and cash equivalents ~~decreased~~increased by ~~$1.0 billion,~~$185 million, from $3.3 billion as of December 31, 2020 to ~~$2.3~~$3.5 billion as of ~~March 31,~~September 30, 2021. We did not issue any debt or make any borrowings under our credit facilities (excluding activity with respect to the committed facilities of our VIEs) during the first ~~quarter~~nine months of 2021, and we had ~~$8.0~~$8.5 billion in liquidity1 as of ~~March 31,~~September 30, 2021. A summary of our cash flows is presented on page 45, and a description of our cash flows and other matters impacting our liquidity and capital resources, including measures we have taken to address the impacts of the COVID-19 pandemic on our liquidity, can be found under “LIQUIDITY AND CAPITAL RESOURCES” on pages 44 through 49.

While our business has improved as a result of the increasing demand for and market prices of most of the products that we produce, many uncertainties remain with respect to the pandemic, including its resulting economic effects. Therefore, we are unable to predict the ultimate economic impacts from the pandemic on our business and how quickly national economies can recover once the pandemic subsides, the timing or effectiveness of vaccine distributions or vaccination levels, whether improvements experienced by us so far may reverse, or whether other setbacks may occur. As a result, the adverse impacts of the economic effects of the pandemic on our company may likely continue to be significant. We believe we have proactively responded to many of the known impacts of the pandemic on our business to the extent practicable and we strive to continue to do so, but there can be no assurance that these or other measures will be fully effective.

1 ~~See the components of our liquidity as of March 31, 2021 in the table on page 45 under “LIQUIDITY AND CAPITAL RESOURCES—Our Liquidity~~.”

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~~First~~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 under “LIQUIDITY AND CAPITAL RESOURCES” beginning on page 61.

Third Quarter Results

For the ~~first~~third quarter of 2021, we reported a net ~~loss~~income attributable to Valero stockholders of ~~$704~~$463 million compared to a net loss ~~attributable to Valero stockholders~~ of ~~$1.9 billion~~$464 million for the ~~first~~third quarter of 2020. The ~~improvement~~increase of ~~$1.1 billion~~$927 million was primarily due to ~~a lower~~higher operating ~~loss~~income of ~~$1.6~~$1.3 billion, partially offset by ~~a lower~~higher income tax ~~benefit~~expense of ~~$468~~$402 million. The decrease in operating loss between the periods included the effect of a $2.5 billion LCM inventory valuation adjustment in the first quarter of 2020, which is described in Note 3 of Condensed Notes to Consolidated Financial Statements and in note (b) on page 41.

While our operating ~~loss decreased~~income increased by ~~$1.6~~$1.3 billion in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020, adjusted operating income ~~decreased~~also increased by ~~$895 million.~~$1.3 billion. Adjusted operating income excludes the adjustments reflected in the table in note ~~(c)~~(g) on page ~~44.~~60.

The ~~$895 million decrease~~$1.3 billion increase in adjusted operating income was primarily due to the following:

•Refining segment. Refining segment adjusted operating income ~~decreased~~increased by ~~$883 million~~$1.4 billion primarily due to ~~estimated excess energy costs arising out of Winter Storm Uri, lower~~higher gasoline and distillate (primarily diesel) margins ~~lower~~and higher throughput volumes, ~~and~~partially offset by the higher ~~cost~~costs of biofuel credits ~~partially offset by~~and higher ~~gasoline margins.~~operating expenses (excluding depreciation and amortization expense). This is more fully described on pages 3745 and ~~38.~~46.

•Renewable diesel segment. Renewable diesel segment adjusted operating income decreased by $75 million primarily due to higher feedstock costs and lower sales volumes, partially offset by higher renewable diesel prices. This is more fully described on pages 46 and 47.

•Ethanol segment. Ethanol segment adjusted operating income decreased by $32 million primarily due to higher corn prices and higher operating expenses (excluding depreciation and amortization expense), partially offset by higher ethanol and corn related co-product prices. This is more fully described on pages 47 and 48.

First Nine Months Results

For the first nine months of 2021, we reported a net loss attributable to Valero stockholders of $79 million compared to $1.1 billion for the first nine months of 2020. The improvement of $983 million was primarily due to higher operating income of $1.6 billion, partially offset by higher income tax expense of $700 million. The increase in operating income included the favorable effect from a $326 million charge recognized in the first nine months of 2020 for the expected liquidation of LIFO inventory layers, which is described in Note 3 of Condensed Notes to Consolidated Financial Statements.

While our operating income increased by $5$1.6 billion in the first nine months of 2021 compared to the first nine months of 2020, adjusted operating income increased by $1.4 billion. Adjusted operating income excludes the adjustments reflected in the table in note (g) on page 60.

The $1.4 billion increase in adjusted operating income was primarily due to the following:

•Refining segment. Refining segment adjusted operating income increased by $1.3 billion primarily due to higher margins on gasoline, distillates (primarily diesel), and other products and higher throughput volumes, partially offset by the higher costs of biofuel credits, lower discounts

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on crude oils, and estimated excess energy costs arising out of Winter Storm Uri. This is more fully described on pages 52 and 53.

•Renewable diesel segment. Renewable diesel segment adjusted operating income increased by $49 million primarily due to higher renewable diesel prices, partially offset by higher feedstock costs, ~~and~~ an unfavorable impact from commodity derivative instruments associated with our price risk management ~~activities.~~activities, lower sales volumes, and higher operating expenses (excluding depreciation and amortization expense). This is more fully described on ~~page 39.~~

pages 54 and 55.

•Ethanol segment. Ethanol segment adjusted operating ~~loss decreased~~income increased by ~~$13~~$100 million primarily due to higher ethanol and corn related co-product prices and higher production volumes, partially offset by higher corn prices and estimated excess energy costs arising out of Winter Storm ~~Uri, and lower production volumes.~~Uri. This is more fully described on pages 4055 and ~~41.~~56.

Outlook

As previously discussed, many uncertainties remain with respect to the COVID-19 pandemic, and while it is difficult to predict the ultimate economic impacts that the pandemic may have on us and how quickly we ~~can~~will continue to recover ~~once~~as the pandemic subsides, we have noted several factors below that have impacted or may impact our results of operations during the ~~second~~fourth quarter of 2021.

•Gasoline ~~jet fuel,~~ and diesel ~~prices are~~product demand has returned to near pre-pandemic levels and is expected to ~~continue~~follow typical seasonal patterns. Jet fuel demand continues to slowly improve ~~with industry-wide inventory levels returning to historical levels and continued recovery in product demand.~~but remains below pre-pandemic levels.

•Sour crude oil discounts are expected to continue to improve as OPEC production increases in response to ~~any further~~anticipated continued growth in global crude oil demand.

•Renewable diesel margins are expected to ~~remain consistent with current levels.~~moderate somewhat from the levels achieved in the third quarter; however, these effects may be offset by an expected increase in sales volumes following the start up in October 2021 of the expansion of DGD’s renewable diesel plant in Louisiana. The plant’s renewable diesel production capacity was recently expanded by 400 million gallons per year, from 290 million gallons to 690 million gallons per year.

•Ethanol margins are expected to improve ~~as domestic consumption increases.~~due to lower corn prices.

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RESULTS OF OPERATIONS

The following tables, including the reconciliations of non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures in note ~~(c)~~(g) beginning on page ~~41,~~57, highlight our results of operations, our operating performance, and market reference prices and margins that directly impact our operations.

~~First~~Third Quarter Results -

Financial Highlights By Segment and Total Company

(millions of dollars)


		Three Months Ended March 31, 2021											Three Months Ended September 30, 2021
		Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total			Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Revenues:	Revenues:											Revenues:
Revenues from external customers	Revenues from external customers	$	19,469	$	352	$	985	$	—	$	20,806	Revenues from external customers	$	27,989	$	342	$	1,189	$	—	$	29,520
Intersegment revenues	Intersegment revenues	3		79		60		(142)		—		Intersegment revenues	3		60		115		(178)		—
Total revenues	Total revenues	19,472		431		1,045		(142)		20,806		Total revenues	27,992		402		1,304		(178)		29,520
Cost of sales:	Cost of sales:											Cost of sales:
Cost of materials and other ~~(a)~~	Cost of materials and other ~~(a)~~	18,022		187		924		(141)		18,992		Cost of materials and other ~~(a)~~	25,395		256		1,150		(177)		26,624

Operating expenses (excluding depreciation and amortization expense reflected below) ~~(a)~~	Operating expenses (excluding depreciation and amortization expense reflected below) ~~(a)~~	1,471		29		156		—		1,656		Operating expenses (excluding depreciation and amortization expense reflected below) ~~(a)~~	1,195		26		128		(1)		1,348
Depreciation and amortization expense(d)	Depreciation and amortization expense(d)	533		12		21		—		566		Depreciation and amortization expense(d)	549		11		70		—		630
Total cost of sales	Total cost of sales	20,026		228		1,101		(141)		21,214		Total cost of sales	27,139		293		1,348		(178)		28,602
Other operating expenses	Other operating expenses	38		—		—		—		38		Other operating expenses	18		1		—		—		19
General and administrative expenses (excluding depreciation and amortization expense reflected below)	General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		208		208		General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		195		195
Depreciation and amortization expense	Depreciation and amortization expense	—		—		—		12		12		Depreciation and amortization expense	—		—		—		11		11
Operating income (loss) by segment	Operating income (loss) by segment	$	(592)	$	203	$	(56)	$	(221)	(666)		Operating income (loss) by segment	$	835	$	108	$	(44)	$	(206)	693
Other income, net	Other income, net									45		Other income, net									32
Interest and debt expense, net of capitalized interest	Interest and debt expense, net of capitalized interest									(149)		Interest and debt expense, net of capitalized interest									(152)
Loss before income tax benefit										(770)
Income tax benefit										(148)
Net loss										(622)
Income before income tax expense												Income before income tax expense									573
Income tax expense												Income tax expense									65
Net income												Net income									508
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests									82		Less: Net income attributable to noncontrolling interests									45
Net loss attributable to Valero Energy Corporation stockholders										$	(704)
Net income attributable to Valero Energy Corporation stockholders												Net income attributable to Valero Energy Corporation stockholders									$	463

~~________________________~~___________________

See note references on pages 4156 through ~~44.~~60.

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~~First~~Third Quarter Results -

Financial Highlights By Segment and Total Company (continued)

(millions of dollars)


		Three Months Ended March 31, 2020											Three Months Ended September 30, 2020
		Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total			Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Revenues:	Revenues:											Revenues:
Revenues from external customers	Revenues from external customers	$	20,985	$	306	$	811	$	—	$	22,102	Revenues from external customers	$	14,727	$	305	$	777	$	—	$	15,809
Intersegment revenues	Intersegment revenues	2		53		64		(119)		—		Intersegment revenues	2		40		58		(100)		—
Total revenues	Total revenues	20,987		359		875		(119)		22,102		Total revenues	14,729		345		835		(100)		15,809
Cost of sales:	Cost of sales:											Cost of sales:
Cost of materials and other(b)	Cost of materials and other(b)	19,127		130		813		(118)		19,952		Cost of materials and other(b)	14,103		128		670		(100)		14,801
LCM inventory valuation adjustment ~~(b)~~(c)	LCM inventory valuation adjustment ~~(b)~~(c)	2,414		—		128		—		2,542		LCM inventory valuation adjustment ~~(b)~~(c)	(296)		—		(17)		—		(313)
Operating expenses (excluding depreciation and amortization expense reflected below)	Operating expenses (excluding depreciation and amortization expense reflected below)	995		20		109		—		1,124		Operating expenses (excluding depreciation and amortization expense reflected below)	989		23		105		—		1,117
Depreciation and amortization expense(d)	Depreciation and amortization expense(d)	536		11		22		—		569		Depreciation and amortization expense(d)	538		10		54		—		602
Total cost of sales	Total cost of sales	23,072		161		1,072		(118)		24,187		Total cost of sales	15,334		161		812		(100)		16,207
Other operating expenses	Other operating expenses	2		—		—		—		2		Other operating expenses	24		—		1		—		25
General and administrative expenses (excluding depreciation and amortization expense reflected below)	General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		177		177		General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		186		186
Depreciation and amortization expense	Depreciation and amortization expense	—		—		—		13		13		Depreciation and amortization expense	—		—		—		12		12
Operating income (loss) by segment	Operating income (loss) by segment	$	(2,087)	$	198	$	(197)	$	(191)	(2,277)		Operating income (loss) by segment	$	(629)	$	184	$	22	$	(198)	(621)
Other income, net	Other income, net									32		Other income, net									48
Interest and debt expense, net of capitalized interest	Interest and debt expense, net of capitalized interest									(125)		Interest and debt expense, net of capitalized interest									(143)
Loss before income tax benefit	Loss before income tax benefit									(2,370)		Loss before income tax benefit									(716)
Income tax benefit	Income tax benefit									(616)		Income tax benefit									(337)
Net loss	Net loss									(1,754)		Net loss									(379)
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests									97		Less: Net income attributable to noncontrolling interests									85
Net loss attributable to Valero Energy Corporation stockholders	Net loss attributable to Valero Energy Corporation stockholders									$	(1,851)	Net loss attributable to Valero Energy Corporation stockholders									$	(464)

~~________________________~~___________________

See note references on pages 4156 through ~~44.~~

60.

3442

Table of Contents

~~First~~Third Quarter Results -

Average Market Reference Prices and Differentials

Three Months Ended March 31,
2021 2020 Change
Refining
Feedstocks (dollars per barrel)
Brent crude oil $ 61.09 $ 50.90 $ 10.19
Brent less West Texas Intermediate (WTI) crude oil 3.26 4.92 (1.66)
Brent less Alaska North Slope (ANS) crude oil 0.33 (0.50) 0.83
Brent less Louisiana Light Sweet (LLS) crude oil 1.11 2.76 (1.65)
Brent less Argus Sour Crude Index (ASCI) crude oil 2.99 5.01 (2.02)
Brent less Maya crude oil 4.70 9.74 (5.04)
LLS crude oil 59.98 48.14 11.84
LLS less ASCI crude oil 1.88 2.25 (0.37)
LLS less Maya crude oil 3.59 6.98 (3.39)
WTI crude oil 57.84 45.98 11.86
Natural gas (dollars per million British Thermal Units) 19.66 1.82 17.84
Product margins (dollars per barrel)
U.S. Gulf Coast:
Conventional Blendstock of Oxygenate Blending
(CBOB) gasoline less Brent 10.12 2.37 7.75
Ultra-low-sulfur (ULS) diesel less Brent 10.19 11.26 (1.07)
Propylene less Brent 18.50 (21.04) 39.54
CBOB gasoline less LLS 11.23 5.13 6.10
ULS diesel less LLS 11.30 14.02 (2.72)
Propylene less LLS 19.61 (18.28) 37.89
U.S. Mid-Continent:
CBOB gasoline less WTI 14.82 7.69 7.13
ULS diesel less WTI 17.21 17.31 (0.10)
North Atlantic:
CBOB gasoline less Brent 11.56 4.28 7.28
ULS diesel less Brent 11.89 14.29 (2.40)
U.S. West Coast:
California Reformulated Gasoline Blendstock of
Oxygenate Blending (CARBOB) 87 gasoline less ANS 14.56 7.82 6.74
California Air Resources Board (CARB) diesel less ANS 14.14 17.22 (3.08)
CARBOB 87 gasoline less WTI 17.49 13.24 4.25
CARB diesel less WTI 17.07 22.64 (5.57)


	Three Months Ended September 30,
	2021		2020		Change
Refining
Feedstocks (dollars per barrel)
Brent crude oil	$	73.22	$	43.38	$	29.84
Brent less West Texas Intermediate (WTI) crude oil	2.64		2.47		0.17
Brent less Alaska North Slope (ANS) crude oil	0.49		0.64		(0.15)
Brent less Louisiana Light Sweet (LLS) crude oil	1.72		0.88		0.84
Brent less Argus Sour Crude Index (ASCI) crude oil	4.52		1.71		2.81
Brent less Maya crude oil	7.01		4.19		2.82
LLS crude oil	71.51		42.50		29.01
LLS less ASCI crude oil	2.81		0.83		1.98
LLS less Maya crude oil	5.30		3.31		1.99
WTI crude oil	70.58		40.91		29.67

Natural gas (dollars per million British Thermal Units (MMBtu))	4.25		1.99		2.26

Product margins (dollars per barrel)
U.S. Gulf Coast:
Conventional Blendstock of Oxygenate Blending (CBOB) gasoline less Brent	16.90		4.96		11.94
Ultra-low-sulfur (ULS) diesel less Brent	14.15		5.19		8.96
Propylene less Brent	(5.21)		(12.69)		7.48
CBOB gasoline less LLS	18.61		5.84		12.77
ULS diesel less LLS	15.86		6.07		9.79
Propylene less LLS	(3.50)		(11.81)		8.31
U.S. Mid-Continent:
CBOB gasoline less WTI	20.84		8.17		12.67
ULS diesel less WTI	19.37		8.54		10.83
North Atlantic:
CBOB gasoline less Brent	20.82		8.08		12.74
ULS diesel less Brent	16.32		6.79		9.53
U.S. West Coast:
California Reformulated Gasoline Blendstock of Oxygenate Blending (CARBOB) 87 gasoline less ANS	27.49		13.19		14.30
California Air Resources Board (CARB) diesel less ANS	18.55		9.34		9.21
CARBOB 87 gasoline less WTI	29.64		15.02		14.62
CARB diesel less WTI	20.70		11.17		9.53

3543

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~~First~~Third Quarter Results -

Average Market Reference Prices and Differentials, (continued)


		Three Months Ended March 31,							Three Months Ended September 30,
		2021		2020		Change			2021		2020		Change
Renewable diesel	Renewable diesel							Renewable diesel
New York Mercantile Exchange ULS diesel (dollars per gallon)	New York Mercantile Exchange ULS diesel (dollars per gallon)	$	1.74	$	1.55	$	0.19	New York Mercantile Exchange ULS diesel (dollars per gallon)	$	2.13	$	1.20	$	0.93
Biodiesel RIN (dollars per RIN)	Biodiesel RIN (dollars per RIN)	1.18		0.46		0.72		Biodiesel RIN (dollars per RIN)	1.60		0.67		0.93
California Low-Carbon Fuel Standard (dollars per metric ton)	California Low-Carbon Fuel Standard (dollars per metric ton)	195.30		206.03		(10.73)		California Low-Carbon Fuel Standard (dollars per metric ton)	175.75		195.60		(19.85)
Chicago Board of Trade (CBOT) soybean oil (dollars per pound)	Chicago Board of Trade (CBOT) soybean oil (dollars per pound)	0.48		0.30		0.18		Chicago Board of Trade (CBOT) soybean oil (dollars per pound)	0.62		0.32		0.30

Ethanol	Ethanol							Ethanol
CBOT corn (dollars per bushel)	CBOT corn (dollars per bushel)	5.39		3.74		1.65		CBOT corn (dollars per bushel)	5.58		3.40		2.18
New York Harbor ethanol (dollars per gallon)	New York Harbor ethanol (dollars per gallon)	1.78		1.33		0.45		New York Harbor ethanol (dollars per gallon)	2.37		1.46		0.91

Total Company, Corporate, and Other

The following table includes selected financial data for the total company, corporate, and other for the ~~first~~third quarter of 2021 and 2020. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables on pages 3341 and ~~34,~~42, unless otherwise noted.

Three Months Ended March 31,
2021 2020 Change
Revenues $ 20,806 $ 22,102 $ (1,296)
Cost of sales (see notes (a) and (b) on page 41) 21,214 24,187 (2,973)
Operating expenses (excluding depreciation and amortization
expense) (see note (a) on page 41)
1,656 1,124 532
General and administrative expenses (excluding depreciation
and amortization expense)
208 177 31
LCM inventory valuation adjustment (see note (b) on page 41) — 2,542 (2,542)
Operating loss (666) (2,277) 1,611
Adjusted operating income (loss) (see note (c) on page 44) (628) 267 (895)
Interest and debt expense, net of capitalized interest (149) (125) (24)
Income tax benefit (148) (616) 468


	Three Months Ended September 30,
	2021		2020		Change
Revenues	$	29,520	$	15,809	$	13,711
Cost of sales (see note (b) on page 56)	28,602		16,207		12,395




Operating income (loss)	693		(621)		1,314
Adjusted operating income (loss) (see note (g) on page 60)	760		(553)		1,313


Income tax expense (benefit)	65		(337)		402
Net income attributable to noncontrolling interests	45		85		(40)

Revenues ~~decreased~~increased by ~~$1.3~~$13.7 billion in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020 primarily due to ~~a decrease~~increases in refined petroleum product prices, as well as an increase in the volume of refined petroleum products sold by our refining segment. This ~~decrease~~increase in revenues ~~along with~~was partially offset by an increase ~~in general and administrative expenses (excluding depreciation and amortization expense) of $31 million, was more than offset by a decrease~~ in cost of sales of ~~$3.0~~$12.4 billion ~~which resulted in a $1.6 billion decrease in operating loss, from $2.3 billion in the first quarter of 2020 to $666 million in the first quarter of 2021. The decrease in cost of sales was~~ primarily due to ~~the effect of the $2.5 billion LCM inventory valuation adjustment~~increases in ~~the first quarter of 2020 and lower production volumes resulting in lower~~ crude oil and other feedstock costs, resulting in ~~the first quarter of 2021, partially offset by~~ a ~~$532 million~~$1.3 billion increase in operating ~~expenses (excluding depreciation and amortization expense).~~

36income, from an operating loss of $621 million in the third quarter of 2020 to operating income of $693 million in the third quarter of 2021.

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Adjusted operating income ~~decreased~~also increased by ~~$895 million,~~$1.3 billion, from ~~$267 million of adjusted operating income in the first quarter of 2020 to~~ an adjusted operating loss of ~~$628~~$553 million in the ~~first~~third quarter of 2020 to adjusted operating income of $760 million in the third quarter of 2021. The ~~$895 million decrease includes a $31 million increase in general and administrative expenses (excluding depreciation and amortization expense) associated with our corporate activities, and~~components of this increase ~~is discussed below. The remaining components of the decrease~~ in adjusted operating income are discussed by segment in the segment analyses that follow.

~~General and administrative expenses (excluding depreciation and amortization expense)~~Income tax expense increased by ~~$31~~$402 million in the ~~first~~third quarter of 2021 compared to the ~~first quarter of 2020 primarily due to an increase in certain employee compensation expenses of $23 million and higher advertising expenses of $7 million.~~

“Interest and debt expense, net of capitalized interest” increased by $24 million in the first quarter of 2021 compared to the first quarter of 2020 primarily due to interest expense associated with public debt offerings in 2020.

~~Income tax benefit decreased by $468 million in the first quarter of 2021 compared to the first~~third quarter of 2020 primarily as a result of ~~a lower loss~~higher income before income tax ~~benefit.~~expense. Our effective tax rate was 1911 percent for the ~~first~~third quarter of 2021, which primarily reflects the permanent benefit to our estimated annual effective tax rate from the portion of DGD’s net income that is not taxable to us and a benefit for the settlement of the audits of certain state tax returns in the third quarter of 2021, compared to 2647 percent

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for the ~~first~~third quarter of 2020. The effective tax rate for the ~~first~~third quarter of 2020 was impacted by the U.S. federal tax NOL for 2020, which was carried back to 2015 when the U.S. ~~federal~~ statutory rate was 35 ~~percent, as described in~~percent. See Note 89 of Condensed Notes to Consolidated Financial ~~Statements.~~Statements for additional information on these tax matters.

Net income attributable to noncontrolling interests decreased by $40 million in the third quarter of 2021 compared to the third quarter of 2020 primarily due to lower earnings associated with DGD. As described in Note 7 of Condensed Notes to Consolidated Financial Statements, DGD is a joint venture that we consolidate, and DGD’s operations comprise our renewable diesel segment. See the renewable diesel segment analysis below for the reasons for the lower earnings associated with DGD.

Refining Segment Results

The following table includes selected financial and operating data of our refining segment for the ~~first~~third quarter of 2021 and 2020. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables on pages 3341 and ~~34,~~42, respectively, unless otherwise noted.

Three Months Ended March 31,
2021 2020 Change
Operating loss $ (592) $ (2,087) $ 1,495
Adjusted operating income (loss) (see note (c) on page 43) (554) 329 (883)
Refining margin (see note (c) on page 42) $ 1,450 $ 1,860 $ (410)
Operating expenses (excluding depreciation and amortization
expense reflected below) (see note (a) on page 41)
1,471 995 476
Depreciation and amortization expense 533 536 (3)
Throughput volumes (thousand barrels per day) (see note (d)
on page 44)
2,410 2,824 (414)


	Three Months Ended September 30,
	2021		2020		Change




Operating income (loss)	$	835	$	(629)	$	1,464
Adjusted operating income (loss) (see note (g) on page 59)	853		(575)		1,428

Refining margin (see note (g) on page 57)	$	2,597	$	952	$	1,645
Operating expenses (excluding depreciation and amortization expense reflected below)	1,195		989		206
Depreciation and amortization expense	549		538		11

Throughput volumes (thousand barrels per day) (see note (h) on page 60)	2,864		2,526		338

Refining segment operating ~~loss decreased~~income increased by $1.5 billion in the ~~first~~third quarter of 2021; however, refining segment adjusted operating income, which excludes the adjustments in the table in note ~~(c)~~(g) on page ~~43, decreased~~59, increased by ~~$883 million~~$1.4 billion in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020. The

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components of this ~~decrease,~~increase in the adjusted results, along with the reasons for the changes in those components, are outlined below.

•Refining segment margin ~~decreased~~increased by ~~$410 million~~$1.6 billion in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020.

Refining segment margin is primarily affected by the prices of the refined petroleum products that we sell and the cost of crude oil and other feedstocks that we process. The table on page 3543 reflects market reference prices and differentials that we believe had a material impact on the change in our refining segment margin in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020.

The ~~decrease~~increase in refining segment margin was primarily due to the following:

◦~~A decrease~~An increase in gasoline margins had a favorable impact of approximately $1.1 billion.

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◦An increase in distillate (primarily diesel) margins had ~~an unfavorable~~a favorable impact of approximately ~~$280~~$645 million.

◦~~A decrease~~An increase in throughput volumes of ~~414,000~~338,000 barrels per day had ~~an unfavorable~~a favorable impact of ~~$249~~approximately $127 million. As noted in “OVERVIEW AND OUTLOOK—~~Overview—~~Overview—Business Operations Update” on pages ~~30 through 31,~~38 and 39, the impacts of the COVID-19 pandemic ~~resulted~~have continued to subside so far in ~~global economic disruption and a significant decline in the demand for the transportation fuels we produce, and as~~2021. As a result, we ~~reduced production of transportation fuel products beginning late in the first quarter of 2020. We~~ have ~~since~~ increased ~~the~~ production of most of our products at our refineries to align with improvements in ~~demand, which reached near pre-pandemic levels in March 2021.~~demand.

◦An increase in the cost of biofuel credits (primarily RINs in the U.S.) had an unfavorable impact of ~~$248~~$475 million. See Note 1314 of Condensed Notes to Consolidated Financial Statements for additional information on our government and regulatory compliance ~~program.~~

◦~~Lower discounts on feedstocks other than crude oil had an unfavorable impact of approximately $167 million.~~

◦~~Estimated excess energy costs arising out of Winter Storm Uri had an unfavorable impact of $47 million (see note (a) on page 41).~~

◦~~An increase in gasoline margins had a favorable impact of approximately $557 million.~~programs.

•Refining segment operating expenses (excluding depreciation and amortization expense) increased by ~~$476~~$206 million primarily due to ~~estimated excess energy~~higher natural gas and electricity costs ~~arising out~~ of ~~Winter Storm Uri~~$129 million, an increase in certain employee compensation expenses of ~~$478~~$27 million, ~~(see note (a) on page 41).~~and higher chemical and catalyst costs of $14 million.

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Renewable Diesel Segment Results

The following table includes selected financial and operating data of our renewable diesel segment for the ~~first~~third quarter of 2021 and 2020. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables on pages 3341 and ~~34,~~42, respectively, unless otherwise noted.


									Three Months Ended September 30,
									2021		2020		Change
		Three Months Ended March 31,
		2021		2020		Change
Operating income	Operating income	$	203	$	198	$	5	Operating income	$	108	$	184	$	(76)
Adjusted operating income (see note (g) on page 59)								Adjusted operating income (see note (g) on page 59)	109		184		(75)

Renewable diesel margin (see note (c) on page 42)		$	244	$	229	$	15
Renewable diesel margin (see note (g) on page 58)								Renewable diesel margin (see note (g) on page 58)	$	146	$	217	$	(71)
Operating expenses (excluding depreciation and amortization expense reflected below)	Operating expenses (excluding depreciation and amortization expense reflected below)	29		20		9		Operating expenses (excluding depreciation and amortization expense reflected below)	26		23		3
Depreciation and amortization expense	Depreciation and amortization expense	12		11		1		Depreciation and amortization expense	11		10		1

Sales volumes (thousand gallons per day) (see note (d) on page 44)		867		867		—
Sales volumes (thousand gallons per day) (see note (h) on page 60)								Sales volumes (thousand gallons per day) (see note (h) on page 60)	671		870		(199)

Renewable diesel segment operating income ~~increased~~decreased by $5$76 million in the ~~first~~third quarter of ~~2021. The increase~~2021, and renewable diesel segment adjusted operating income, which excludes the adjustment in the table in note (g) on page 59, decreased by $75 million in the third quarter of 2021 compared to the third quarter of 2020. This decrease in the adjusted results was primarily due to ~~higher~~lower renewable diesel segment margin.

Renewable diesel segment margin ~~increased~~decreased by ~~$15~~$71 million in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020. Renewable diesel segment margin is primarily affected by the price of the renewable diesel that we sell and the cost of the feedstocks that we process. The table on page 3644 reflects market reference prices that we believe had a material impact on the change in our renewable diesel segment margin in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020.

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The ~~increase~~decrease in renewable diesel segment margin was primarily due to the following:

•~~Higher renewable diesel prices had a favorable impact of approximately $121 million.~~

•An increase in the cost of the feedstocks we process had an unfavorable impact of approximately ~~$59~~$139 million.

•~~Price risk management activities~~A decrease in sales volumes of 199,000 gallons per day primarily attributed to unplanned downtime at the DGD plant due to Hurricane Ida had an unfavorable impact of ~~$49~~approximately $52 million. ~~We recognized a hedge loss~~See “OVERVIEW AND OUTLOOK—Overview—Business Operations Update” on pages 38 and 39 for further discussion of ~~$23 million in~~ the ~~first quarter~~impact of ~~2021 compared to a hedge gain of $26 million in the first quarter of 2020.~~Hurricane Ida on our renewable diesel segment.

•

39Higher renewable diesel prices had a favorable impact of approximately $131 million.

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Ethanol Segment Results

The following table includes selected financial and operating data of our ethanol segment for the ~~first~~third quarter of 2021 and 2020. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables on pages 3341 and ~~34,~~42, respectively, unless otherwise noted.

Three Months Ended March 31,
2021 2020 Change
Operating loss $ (56) $ (197) $ 141
Adjusted operating loss (see note (c) on page 43) (56) (69) 13
Ethanol margin (see note (c) on page 43) $ 121 $ 62 $ 59
Operating expenses (excluding depreciation and amortization
expense reflected below) (see note (a) on page 41)
156 109 47
Depreciation and amortization expense 21 22 (1)
Production volumes (thousand gallons per day) (see note (d)
on page 44)
3,562 4,103 (541)


	Three Months Ended September 30,
	2021		2020		Change



Operating income (loss)	$	(44)	$	22	$	(66)
Adjusted operating income (see note (g) on page 59)	4		36		(32)

Ethanol margin (see note (g) on page 58)	$	154	$	165	$	(11)
Operating expenses (excluding depreciation and amortization expense reflected below)	128		105		23
Depreciation and amortization expenses (see note (d) on page 56)	70		54		16

Production volumes (thousand gallons per day) (see note (h) on page 60)	3,625		3,800		(175)

Ethanol segment operating ~~loss~~income decreased by ~~$141~~$66 million in the ~~first~~third quarter of 2021; however, ethanol segment adjusted operating ~~loss,~~income, which excludes the ~~adjustment~~adjustments in the table in note ~~(c)~~(g) on page ~~43,~~59, decreased by ~~$13~~$32 million in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020. The components of this decrease in the adjusted results, along with the reasons for the changes in those components, are outlined below.

•Ethanol segment margin ~~increased~~decreased by ~~$59~~$11 million in the ~~first~~third quarter of 2021 compared to the ~~first~~third quarter of 2020.

Ethanol segment margin is primarily affected by prices of the ethanol and corn related co-products that we sell and the cost of corn that we process. The table on page 3644 reflects market reference prices that we believe had a material impact on the change in our ethanol segment margin in the third quarter of 2021 compared to the third quarter of 2020.

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The decrease in ethanol segment margin was primarily due to the following:

◦Higher corn prices had an unfavorable impact of approximately $406 million.

◦Higher ethanol prices had a favorable impact of approximately $318 million.

◦Higher prices on the co-products that we produce, primarily distillers grains, had a favorable impact of approximately $77 million.

•Ethanol segment operating expenses (excluding depreciation and amortization expense) increased by $23 million primarily due to higher natural gas and electricity costs.

First Nine Months Results -

Financial Highlights By Segment and Total Company

(millions of dollars)


	Nine Months Ended September 30, 2021
	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Revenues:
Revenues from external customers	$	73,426	$	1,190	$	3,458	$	—	$	78,074
Intersegment revenues	7		215		259		(481)		—
Total revenues	73,433		1,405		3,717		(481)		78,074
Cost of sales:
Cost of materials and other (a)	67,417		724		3,204		(480)		70,865

Operating expenses (excluding depreciation and amortization expense reflected below) (a)	3,730		86		403		(1)		4,218
Depreciation and amortization expense (d)	1,626		35		111		—		1,772
Total cost of sales	72,773		845		3,718		(481)		76,855
Other operating expenses	68		1		—		—		69
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		579		579
Depreciation and amortization expense	—		—		—		35		35
Operating income (loss) by segment	$	592	$	559	$	(1)	$	(614)	536
Other income, net (e)									179
Interest and debt expense, net of capitalized interest									(451)
Income before income tax expense									264
Income tax expense (f)									86
Net income									178
Less: Net income attributable to noncontrolling interests									257
Net loss attributable to Valero Energy Corporation stockholders									$	(79)

________________________

See note references on pages 56 through 60.

Table of Contents

First Nine Months Results -

Financial Highlights By Segment and Total Company (continued)

(millions of dollars)


	Nine Months Ended September 30, 2020
	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Revenues:
Revenues from external customers	$	45,327	$	850	$	2,131	$	—	$	48,308
Intersegment revenues	6		150		160		(316)		—
Total revenues	45,333		1,000		2,291		(316)		48,308
Cost of sales:
Cost of materials and other (b)	41,769		393		1,984		(314)		43,832
LCM inventory valuation adjustment (c)	(19)		—		—		—		(19)
Operating expenses (excluding depreciation and amortization expense reflected below)	2,912		63		293		—		3,268
Depreciation and amortization expense (d)	1,607		33		97		—		1,737
Total cost of sales	46,269		489		2,374		(314)		48,818
Other operating expenses	29		—		1		—		30
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		532		532
Depreciation and amortization expense	—		—		—		37		37
Operating income (loss) by segment	$	(965)	$	511	$	(84)	$	(571)	(1,109)
Other income, net									107
Interest and debt expense, net of capitalized interest									(410)
Loss before income tax benefit									(1,412)
Income tax benefit									(614)
Net loss									(798)
Less: Net income attributable to noncontrolling interests									264
Net loss attributable to Valero Energy Corporation stockholders									$	(1,062)

________________________

See note references on pages 56 through 60.

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First Nine Months Results -

Average Market Reference Prices and Differentials


	Nine Months Ended September 30,
	2021		2020		Change
Refining
Feedstocks (dollars per barrel)
Brent crude oil	$	67.77	$	42.50	$	25.27
Brent less WTI crude oil	2.94		4.27		(1.33)
Brent less ANS crude oil	0.46		1.00		(0.54)
Brent less LLS crude oil	1.29		2.20		(0.91)
Brent less ASCI crude oil	3.62		3.62		—
Brent less Maya crude oil	5.95		7.66		(1.71)
LLS crude oil	66.48		40.30		26.18
LLS less ASCI crude oil	2.33		1.42		0.91
LLS less Maya crude oil	4.66		5.46		(0.80)
WTI crude oil	64.84		38.23		26.61

Natural gas (dollars per MMBtu)	8.95		1.82		7.13

Product margins (dollars per barrel)
U.S. Gulf Coast:
CBOB gasoline less Brent	13.82		2.61		11.21
ULS diesel less Brent	12.44		7.11		5.33
Propylene less Brent	(2.37)		(15.48)		13.11
CBOB gasoline less LLS	15.11		4.81		10.30
ULS diesel less LLS	13.73		9.31		4.42
Propylene less LLS	(1.08)		(13.28)		12.20
U.S. Mid-Continent:
CBOB gasoline less WTI	18.53		7.35		11.18
ULS diesel less WTI	18.33		12.41		5.92
North Atlantic:
CBOB gasoline less Brent	16.58		5.13		11.45
ULS diesel less Brent	14.43		9.34		5.09
U.S. West Coast:
CARBOB 87 gasoline less ANS	23.08		10.15		12.93
CARB diesel less ANS	15.99		12.31		3.68
CARBOB 87 gasoline less WTI	25.55		13.42		12.13
CARB diesel less WTI	18.47		15.58		2.89

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First Nine Months Results -

Average Market Reference Prices and Differentials, (continued)


	Nine Months Ended September 30,
	2021		2020		Change
Renewable diesel
New York Mercantile Exchange ULS diesel (dollars per gallon)	$	1.96	$	1.24	$	0.72
Biodiesel RIN (dollars per RIN)	1.49		0.56		0.93
California Low-Carbon Fuel Standard (dollars per metric ton)	185.29		200.88		(15.59)
CBOT soybean oil (dollars per pound)	0.58		0.30		0.28

Ethanol
CBOT corn (dollars per bushel)	5.85		3.46		2.39
New York Harbor ethanol (dollars per gallon)	2.18		1.32		0.86

Total Company, Corporate, and Other

The following table includes selected financial data for the total company, corporate, and other for the first nine months of 2021 and 2020. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables on pages 48 and 49, unless otherwise noted.


	Nine Months Ended September 30,
	2021		2020		Change
Revenues	$	78,074	$	48,308	$	29,766
Cost of materials and other (see notes (a) and (b) on page 56)	70,865		43,832		27,033

Operating expenses (excluding depreciation and amortization expense) (see note (a) on page 56)	4,218		3,268		950
LIFO liquidation adjustment (see note (b) on page 56)	—		326		(326)
General and administrative expenses (excluding depreciation and amortization expense)	579		532		47


Operating income (loss)	536		(1,109)		1,645
Adjusted operating income (loss) (see note (g) on page 60)	653		(742)		1,395
Other income, net (see note (e) on page 56)	179		107		72
Interest and debt expense, net of capitalized interest	(451)		(410)		(41)
Income tax expense (benefit) (see note (f) on page 57)	86		(614)		700
Net income attributable to noncontrolling interests	257		264		(7)

Revenues increased by $29.8 billion in the first nine months of 2021 compared to the first nine months of 2020 primarily due to increases in refined petroleum product prices associated with sales made by our refining segment. This increase in revenues was partially offset by an increase in cost of materials and other of $27.0 billion primarily due to increases in crude oil and other feedstock costs, higher operating expenses (excluding depreciation and amortization expense) of $950 million primarily due to estimated excess energy costs of $532 million arising out of Winter Storm Uri, and an increase in general and administrative expenses (excluding depreciation and amortization expense) of $47 million primarily due to an increase in certain employee compensation expenses of $36 million and higher advertising expenses of $11 million. The increase in cost of materials and other was partially offset by the favorable effect from a $326 million LIFO liquidation adjustment in the first nine months of 2020. These changes resulted

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in a $1.6 billion increase in operating income, from an operating loss of $1.1 billion in the first nine months of 2020 to operating income of $536 million in the first nine months of 2021.

Adjusted operating income increased by $1.4 billion, from an adjusted operating loss of $742 million in the first nine months of 2020 to adjusted operating income of $653 million in the first nine months of 2021. The components of this $1.4 billion increase in adjusted operating income are discussed by segment in the segment analyses that follow.

“Other income, net” increased by $72 million in the first nine months of 2021 compared to the first nine months of 2020 primarily due to the gain of $62 million on the sale of a 24.99 percent membership interest in MVP, partially offset by an asset impairment loss of $24 million resulting from the cancellation of a pipeline extension project by our unconsolidated joint venture, Diamond Pipeline LLC. These matters are more fully described in note (e) on page 56.

“Interest and debt expense, net of capitalized interest” increased by $41 million in the first nine months of 2021 compared to the first nine months of 2020 primarily due to interest expense associated with $4.0 billion aggregate principal amount of debt we issued in public debt offerings in 2020. See Note 5 of Condensed Notes to Consolidated Financial Statements for additional details.

Income tax expense increased by $700 million in the first nine months of 2021 compared to the first nine months of 2020 primarily as a result of a higher income before income tax expense. In addition, the increase in income tax expense was impacted by a $64 million charge, which resulted from certain statutory tax rate changes, as discussed in note (f) on page 57, as well as the effect of a benefit in the first nine months of 2020 of $238 million associated with the U.S. federal tax NOL for 2020, which was carried back to 2015 when the U.S. federal statutory rate was 35 percent. See Note 9 of Condensed Notes to Consolidated Financial Statements for additional information on these tax matters.

Refining Segment Results

The following table includes selected financial and operating data of our refining segment for the first nine months of 2021 and 2020. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables on pages 48 and 49, respectively, unless otherwise noted.


	Nine Months Ended September 30,
	2021		2020		Change
Operating income (loss)	$	592	$	(965)	$	1,557
Adjusted operating income (loss) (see note (g) on page 59)	660		(629)		1,289

Refining margin (see note (g) on page 57)	$	6,016	$	3,890	$	2,126
Operating expenses (excluding depreciation and amortization expense reflected below) (see notes (a) on page 56)	3,730		2,912		818

Depreciation and amortization expense	1,626		1,607		19

Throughput volumes (thousand barrels per day) (see note (h) on page 60)	2,705		2,557		148

Refining segment operating income increased by $1.6 billion in the first nine months of 2021; however, refining segment adjusted operating income, which excludes the adjustments in the table in note (g) on page 59, increased by $1.3 billion in the first nine months of 2021 compared to the first nine months of

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2020. 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 $2.1 billion in the first nine months of 2021 compared to the first nine months of 2020.

Refining segment margin is primarily affected by the prices of the refined petroleum products that we sell and the cost of crude oil and other feedstocks that we process. The table on page 50 reflects market reference prices and differentials that we believe had a material impact on the change in our refining segment margin in the first nine months of 2021 compared to the first nine months of 2020.

The increase in refining segment margin was primarily due to the following:

◦An increase in gasoline margins had a favorable impact of approximately $2.8 billion.

◦An increase in distillate (primarily diesel) margins had a favorable impact of approximately $890 million.

◦Higher margins on other products had a favorable impact of approximately $349 million.

◦An increase in throughput volumes of 148,000 barrels per day had a favorable impact of approximately $224 million. As noted in “OVERVIEW AND OUTLOOK—Overview—Business Operations Update” on pages 38 and 39, the impacts of the COVID-19 pandemic have continued to subside so far in 2021. As a result, we have increased production of most of our products at our refineries to align with improvements in demand.

◦An increase in the cost of biofuel credits (primarily RINs in the U.S.) had an unfavorable impact of $1.2 billion. See Note 14 of Condensed Notes to Consolidated Financial Statements for additional information on our government and regulatory compliance programs.

◦Lower discounts on crude oils had an unfavorable impact of approximately $1.2 billion.

•Refining segment operating expenses (excluding depreciation and amortization expense) increased by $818 million primarily due to higher energy costs, which includes the effect of estimated excess energy costs arising out of Winter Storm Uri of $478 million (see note (a) on page 56).

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Renewable Diesel Segment Results

The following table includes selected financial and operating data of our renewable diesel segment for the first nine months of 2021 and 2020. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables on pages 48 and 49, respectively, unless otherwise noted.


	Nine Months Ended September 30,
	2021		2020		Change
Operating income	$	559	$	511	$	48
Adjusted operating income (see note (g) on page 59)	560		511		49

Renewable diesel margin (see note (g) on page 58)	$	681	$	607	$	74
Operating expenses (excluding depreciation and amortization expense reflected below)	86		63		23
Depreciation and amortization expense	35		33		2

Sales volumes (thousand gallons per day) (see note (h) on page 60)	819		844		(25)

Renewable diesel segment operating income increased by $48 million in the first nine months of 2021; however, renewable diesel segment adjusted operating income, which excludes the adjustment in the table in note (g) on page 59, increased by $49 million in the first nine months of 2021 compared to the first nine months of 2020. 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 $74 million in the first nine months of 2021 compared to the first nine months of 2020. Renewable diesel segment margin is primarily affected by the price of the renewable diesel that we sell and the cost of the feedstocks that we process. The table on page 51 reflects market reference prices that we believe had a material impact on the change in our renewable diesel segment margin in the first nine months of 2021 compared to the first nine months of 2020.

The increase in renewable diesel segment margin was primarily due to the following:

◦Higher renewable diesel prices had a favorable impact of approximately $504 million.

◦An increase in the cost of the feedstocks we process had an unfavorable impact of approximately $294 million.

◦Price risk management activities had an unfavorable impact of $79 million. We recognized a hedge loss of $37 million in the first nine months of 2021 compared to a hedge gain of $42 million in the first nine months of 2020.

◦A decrease in sales volumes of 25,000 gallons per day primarily attributed to unplanned downtime at the DGD plant due to Hurricane Ida had an unfavorable impact of approximately $25 million. See “OVERVIEW AND OUTLOOK—Overview—Business Operations Update” on pages 38 and 39 for further discussion of the impact of Hurricane Ida on our renewable diesel segment.

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•Renewable diesel segment operating expenses (excluding depreciation and amortization expense) increased by $23 million primarily due to higher maintenance expenses of $7 million, an increase in certain employee compensation expenses of $7 million, and higher chemical and catalyst costs of $2 million.

Ethanol Segment Results

The following table includes selected financial and operating data of our ethanol segment for the first nine months of 2021 and 2020. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables on pages 48 and 49, respectively, unless otherwise noted.


	Nine Months Ended September 30,
	2021		2020		Change
Operating loss	$	(1)	$	(84)	$	83
Adjusted operating income (loss) (see note (g) on page 59)	47		(53)		100

Ethanol margin (see note (g) on page 58)	$	513	$	307	$	206
Operating expenses (excluding depreciation and amortization expense reflected below) (see note (a) on page 56)	403		293		110
Depreciation and amortization expense (see note (d) on page 56)	111		97		14

Production volumes (thousand gallons per day) (see note (h) on page 60)	3,797		3,408		389

The ethanol segment operating loss decreased by $83 million in the first nine months of 2021; however, ethanol segment adjusted operating income, which excludes the adjustments in the table in note (g) on page 59, increased by $100 million in the first nine months of 2021 compared to the first nine months of 2020. The components of this increase in the adjusted results, along with the reasons for the changes in those components, are outlined below.

•Ethanol segment margin increased by $206 million in the first nine months of 2021 compared to the first nine months of 2020.

Ethanol segment margin is primarily affected by prices of the ethanol and corn related co-products that we sell and the cost of corn that we process. The table on page 51 reflects market reference prices that we believe had a material impact on the change in our ethanol segment margin in the first ~~quarter~~nine months of 2021 compared to the first ~~quarter~~nine months of 2020.

The increase in ethanol segment margin was primarily due to the following:

◦Higher ethanol prices had a favorable impact of approximately ~~$178~~$490 million.

◦Higher prices on the co-products that we produce, primarily distillers grains, had a favorable impact of approximately ~~$94~~$152 million.

◦An increase in production volumes of 389,000 gallons per day had a favorable impact of approximately $66 million. As noted in “OVERVIEW AND OUTLOOK—Overview—Business Operations Update” on pages 38 and 39, the impacts of the COVID-19

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pandemic have continued to subside so far in 2021. As a result, we have increased the aggregate production of ethanol across our plants to align with improvements in demand.

◦Higher corn prices had an unfavorable impact of approximately ~~$188~~$489 million.

◦~~A decrease in production volumes of 541,000 gallons per day had an unfavorable impact of approximately $24 million. As noted in “OVERVIEW AND OUTLOOK—Overview~~—Business Operations Update” on pages 30 through 31, the COVID-19 pandemic resulted in global economic disruption and a significant decline in demand for ethanol, and as a result, we reduced production beginning late in the first quarter of 2020. We have since increased the production of ethanol at most of our plants to align with improvements in demand.

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•Ethanol segment operating expenses (excluding depreciation and amortization expense) increased by ~~$47~~$110 million primarily due to higher energy costs, which includes the effect of estimated excess energy costs arising out of Winter Storm Uri of $54 million (see note (a) on page ~~41), partially offset by lower chemical and catalyst costs of $6 million.~~56).

________________________

The following notes relate to references on pages 3037 through ~~41.~~56.

(a)In mid-February 2021, many of our refineries and plants were impacted to varying extents by the severe cold, utility disruptions, and higher energy costs arising out of Winter Storm Uri. The higher energy costs resulted from an increase in the prices of natural gas and electricity that significantly exceeded rates that we consider normal, such as the average rates we incurred the month preceding the storm. As a result, our operating ~~loss~~income for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 includes estimated excess energy costs of $579 million.

The above-mentioned pre-tax estimated excess energy charge is reflected in our statement of income line items and attributable to our reportable segments as follows (in millions):


	Refining		Renewable Diesel		Ethanol		Total
Cost of materials and other	$	47	$	—	$	—	$	47
Operating expenses (excluding depreciation and amortization expense)	478		—		54		532
Total estimated excess energy costs	$	525	$	—	$	54	$	579

(b)Cost of materials and other for the three and nine months ended September 30, 2020 includes a charge of $326 million for the impact of an expected liquidation of LIFO inventory layers attributable to our refining segment. Our inventory levels decreased throughout the first nine months of 2020 due to lower demand for our products resulting from the negative economic impacts of the COVID-19 pandemic on our business. Consequently, we expected our inventory levels as of December 31, 2020 would remain below their December 31, 2019 levels.

(c)The market value of our inventories accounted for under the LIFO method fell below their historical cost on an aggregate basis as of March 31, 2020. As a result, we recorded an LCM inventory valuation adjustment of $2.5 billion in March 2020. The market value of our LIFO inventories improved due to the subsequent recovery in market prices, which resulted in a reversal of $2.2 billion in the three months ended June 30, 2020 and the remaining amount in the three months ended September 30, 2020. Of the ~~$2.5 billion adjustment, $2.4 billion~~$313 million benefit recognized in the three months ended September 30, 2020, $296 million and ~~$128~~$17 million ~~are~~is attributable to our refining and ethanol segments, respectively. The LCM inventory valuation adjustment for the nine months ended September 30, 2020 reflects a net benefit of $19 million due solely to the foreign currency translation effect of the portion of the LCM inventory valuation adjustments attributable to our international operations.

~~(c)~~(d)Depreciation and amortization expense for the three and nine months ended September 30, 2021 and 2020 includes accelerated depreciation of $48 million and $30 million, respectively, related to changes in the estimated useful lives of two of our ethanol plants.

(e)On April 19, 2021, we sold a 24.99 percent membership interest in MVP for $270 million. “Other income, net” for the nine months ended September 30, 2021 includes a gain on the sale of $62 million.

“Other income, net” for the nine months ended September 30, 2021 also includes a $24 million charge representing our portion of the asset impairment loss recognized by Diamond Pipeline LLC, an unconsolidated

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joint venture with a subsidiary of Plains All American Pipeline, L.P., resulting from the joint venture’s cancellation of its pipeline extension project.

(f)Certain statutory tax rate changes were enacted during the second quarter of 2021 (primarily an increase in the U.K. rate from 19 percent to 25 percent effective in 2023) which resulted in the remeasurement of our deferred tax liabilities. Under U.S. GAAP, we are required to recognize the effect of a change in tax law in the period of enactment. As a result, we recognized income tax expense of $64 million during the nine months ended September 30, 2021, which represents the net increase in our deferred tax liabilities resulting from the change in the tax rates.

(g)We use certain financial measures (as noted below) that are not defined under U.S. GAAP and are considered to be non-GAAP measures.

We have defined these non-GAAP measures and believe they are useful to the external users of our financial statements, including industry analysts, investors, lenders, and rating agencies. We believe our adjusted operating income measures (including for our refining and ethanol segments) are useful to assess our ongoing financial performance because, when reconciled to their most comparable U.S. GAAP measures, they provide improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and trends. We believe our refining margin, renewable diesel margin, and ethanol margin, as applicable, are important measures of the relevant segment’s operating and financial performance because, with respect to such segment, it is the most comparable measure to the industry’s market reference product margins, which are used by industry analysts, investors, and others to evaluate our performance. These non-GAAP measures should not be considered as alternatives to their most comparable U.S. GAAP measures nor should they be considered in isolation or as a substitute for an analysis of our results of operations as reported under U.S. GAAP. In addition, these non-GAAP measures may not be comparable to similarly titled measures used by other companies because we may define them differently, which diminishes their utility.

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Non-GAAP measures are as follows:

◦Refining margin is defined as refining segment operating ~~loss~~income (loss) excluding the LIFO liquidation adjustment, the LCM inventory valuation adjustment, operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses, as reflected in the table below.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Reconciliation of refining operating income (loss) to refining margin
Refining operating income (loss)	$	835	$	(629)	$	592	$	(965)
Adjustments:
LIFO liquidation adjustment (see note (b))	—		326		—		326
LCM inventory valuation adjustment (see note (c))	—		(296)		—		(19)
Operating expenses (excluding depreciation and amortization expense) (see note (a))	1,195		989		3,730		2,912
Depreciation and amortization expense	549		538		1,626		1,607
Other operating expenses	18		24		68		29
Refining margin	$	2,597	$	952	$	6,016	$	3,890

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◦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.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Reconciliation of renewable diesel operating income to renewable diesel margin
Renewable diesel operating income	$	108	$	184	$	559	$	511
Adjustments:

Operating expenses (excluding depreciation and amortization expense)	26		23		86		63
Depreciation and amortization expense	11		10		35		33
Other operating expenses	1		—		1		—
Renewable diesel margin	$	146	$	217	$	681	$	607

◦Ethanol margin is defined as ethanol segment operating income (loss) excluding the LCM inventory valuation adjustment, operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses, as reflected in the table below.

Three Months Ended
March 31,
2021 2020
Reconciliation of refining operating loss
to refining margin
Refining operating loss $ (592) $ (2,087)
Adjustments:
LCM inventory valuation adjustment (see note (b)) — 2,414
Operating expenses (excluding depreciation and
amortization expense) (see note (a))
1,471 995
Depreciation and amortization expense 533 536
Other operating expenses 38 2
Refining margin $ 1,450 $ 1,860


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Reconciliation of ethanol operating income (loss) to ethanol margin
Ethanol operating income (loss)	$	(44)	$	22	$	(1)	$	(84)
Adjustments:
LCM inventory valuation adjustment (see note (c))	—		(17)		—		—
Operating expenses (excluding depreciation and amortization expense) (see note (a))	128		105		403		293
Depreciation and amortization expense (see note (d))	70		54		111		97
Other operating expenses	—		1		—		1
Ethanol margin	$	154	$	165	$	513	$	307

◦~~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.

Three Months Ended
March 31,
2021 2020
Reconciliation of renewable diesel operating income
to renewable diesel margin
Renewable diesel operating income $ 203 $ 198
Adjustments:
Operating expenses (excluding depreciation and
amortization expense)
29 20
Depreciation and amortization expense 12 11
Renewable diesel margin $ 244 $ 229

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◦~~Ethanol margin~~ is defined as ethanol segment operating loss excluding the LCM inventory valuation adjustment, operating expenses (excluding depreciation and amortization expense), and depreciation and amortization expense, as reflected in the table below.

Three Months Ended
March 31,
2021 2020
Reconciliation of ethanol operating loss
to ethanol margin
Ethanol operating loss $ (56) $ (197)
Adjustments:
LCM inventory valuation adjustment (see note (b)) — 128
Operating expenses (excluding depreciation and
amortization expense) (see note (a))
156 109
Depreciation and amortization expense 21 22
Ethanol margin $ 121 $ 62

◦Adjusted refining operating income (loss) is defined as refining segment operating ~~loss~~income (loss) excluding the LIFO liquidation adjustment, the LCM inventory valuation adjustment, and other operating expenses, as reflected in the table below.


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Reconciliation of refining operating loss to adjusted refining operating income (loss)
Refining operating loss		$	(592)	$	(2,087)
Reconciliation of refining operating income (loss) to adjusted refining operating income (loss)						Reconciliation of refining operating income (loss) to adjusted refining operating income (loss)
Refining operating income (loss)						Refining operating income (loss)	$	835	$	(629)	$	592	$	(965)
Adjustments:	Adjustments:					Adjustments:
LCM inventory valuation adjustment (see note (b))		—		2,414
LIFO liquidation adjustment (see note (b))						LIFO liquidation adjustment (see note (b))	—		326		—		326
LCM inventory valuation adjustment (see note (c))						LCM inventory valuation adjustment (see note (c))	—		(296)		—		(19)
Other operating expenses	Other operating expenses	38		2		Other operating expenses	18		24		68		29
Adjusted refining operating income (loss)	Adjusted refining operating income (loss)	$	(554)	$	329	Adjusted refining operating income (loss)	$	853	$	(575)	$	660	$	(629)

◦Adjusted renewable diesel operating income is defined as renewable diesel segment operating income excluding other operating expenses, as reflected in the table below.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Reconciliation of renewable diesel operating income to adjusted renewable diesel operating income
Renewable diesel operating income	$	108	$	184	$	559	$	511



Adjustment: Other operating expenses	1		—		1		—
Adjusted renewable diesel operating income	$	109	$	184	$	560	$	511

◦Adjusted ethanol operating ~~loss~~income (loss) is defined as ethanol segment operating ~~loss~~income (loss) excluding the changes in estimated useful lives, the LCM inventory valuation adjustment, and other operating expenses, as reflected in the table below.

Three Months Ended
March 31,
2021 2020
Reconciliation of ethanol operating loss
to adjusted ethanol operating loss
Ethanol operating loss $ (56) $ (197)
Adjustments:
LCM inventory valuation adjustment (see note (b)) — 128
Adjusted ethanol operating loss $ (56) $ (69)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Reconciliation of ethanol operating income (loss) to adjusted ethanol operating income (loss)
Ethanol operating income (loss)	$	(44)	$	22	$	(1)	$	(84)
Adjustments:
Changes in estimated useful lives (see note (d))	48		30		48		30
LCM inventory valuation adjustment (see note (c))	—		(17)		—		—
Other operating expenses	—		1		—		1
Adjusted ethanol operating income (loss)	$	4	$	36	$	47	$	(53)

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◦Adjusted operating income (loss) is defined as total company operating ~~loss~~income (loss) excluding the changes in estimated useful lives, the LIFO liquidation adjustment, the LCM inventory valuation adjustment, and other operating expenses, as reflected in the table below.


		Three Months Ended March 31,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020			2021		2020		2021		2020
Reconciliation of total company operating loss to adjusted operating income (loss)
Total company operating loss		$	(666)	$	(2,277)
Reconciliation of total company operating income (loss) to adjusted operating income (loss)						Reconciliation of total company operating income (loss) to adjusted operating income (loss)
Total company operating income (loss)						Total company operating income (loss)	$	693	$	(621)	$	536	$	(1,109)
Adjustments:	Adjustments:					Adjustments:

Changes in estimated useful lives (see note (d))						Changes in estimated useful lives (see note (d))	48		30		48		30
LIFO liquidation adjustment (see note (b))						LIFO liquidation adjustment (see note (b))	—		326		—		326
LCM inventory valuation adjustment (see note (c))						LCM inventory valuation adjustment (see note (c))	—		(313)		—		(19)
Other operating expenses	Other operating expenses	38		2		Other operating expenses	19		25		69		30
LCM inventory valuation adjustment (see note (b))		—		2,542
Adjusted operating income (loss)	Adjusted operating income (loss)	$	(628)	$	267	Adjusted operating income (loss)	$	760	$	(553)	$	653	$	(742)

~~(d)~~(h)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.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

During the ~~first quarter of~~nine months ended September 30, 2021, our liquidity was ~~negatively~~positively impacted by the ~~ongoing~~cash generated by our operations notwithstanding the lingering impacts of the COVID-19 pandemic, ~~and the negative effects~~excess energy costs arising out of Winter Storm Uri, ~~on energy costs at certain~~and the effects of ~~our refineries and ethanol plants during mid-February 2021,~~Hurricane Ida, as described in “OVERVIEW AND OUTLOOK—Overview—Business Operations Update.” The actions that we took throughout 2020, and have continued to take in 2021, to respond to the impacts from the pandemic on our business improved our liquidity position. Among the actions taken were the deferral of certain capital investments, the deferral of certain income and indirect tax payments, and the suspension of share repurchases. See discussion of these deferrals and the suspension of share repurchases and their impact on our liquidity in 2021 within the discussion of matters impacting our liquidity and capital resources below.

In March 2021, DGD entered into the DGD Revolver, as described in Note 4 of Condensed Notes to Consolidated Financial Statements, to be used for general corporate purposes. As of March 31, 2021 and April 29, 2021, DGD had no outstanding borrowings under this facility.

We believe that we have sufficient funds from operations and from ~~borrowings~~available capacity under our credit facilities to fund our ongoing operating requirements and other commitments. We expect that, to the extent necessary, we can raise additional cash through equity or debt financings in the public and private capital markets or the arrangement of additional credit facilities. 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.

On April 19, 2021, we sold a 24.99 percent membership interest in MVP for $270 million, as described in Note 6 of Condensed Notes to Consolidated Financial Statements. We retained a 25.01 percent interest in MVP.

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Our Liquidity

Our liquidity consisted of the following as of ~~March 31,~~September 30, 2021 (in millions):

Available ~~borrowing~~ capacity from our committed facilities(a):

Valero Revolver

~~3,882~~3,712

~~364-day Revolving Credit Facility~~Canadian Revolver (b)

~~875~~

~~Canadian Revolver(c)~~

~~116~~114

Accounts receivable sales facility

~~1,000~~1,300

Letter of credit facility

Total available ~~borrowing~~ capacity

~~5,923~~5,176

Cash and cash equivalents (c)~~(d)~~

~~2,044~~3,322

Total liquidity

~~7,967~~8,498

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(a)Excludes the committed facilities of our VIEs.

(b)~~The 364-day Revolving Credit Facility matured on April 12, 2021 and was not renewed.~~

~~(c)~~The amount for our Canadian Revolver is shown in U.S. dollars. As set forth in the summary of our credit facilities in Note 45 of Condensed Notes to Consolidated Financial Statements, the availability under our Canadian Revolver as of ~~March 31,~~September 30, 2021 in Canadian dollars was C$145 million.

~~(d)~~(c)Excludes ~~$210~~$176 millionof cash and cash equivalents related to our VIEs that is available for use only by our VIEs.

Information about our outstanding borrowings, letters of credit issued, and availability under our credit facilities is reflected in Note 45 of Condensed Notes to Consolidated Financial Statements.

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Cash Flows

Components of our cash flows are set forth below (in millions):


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Cash flows provided by (used in):	Cash flows provided by (used in):					Cash flows provided by (used in):
Operating activities	Operating activities	$	(52)	$	(49)	Operating activities	$	3,405	$	852
Investing activities	Investing activities	(580)		(757)		Investing activities	(1,412)		(1,852)
Financing activities:	Financing activities:					Financing activities:
Borrowings	Borrowings	8		370		Borrowings	129		4,522
Other financing activities	Other financing activities	(447)		(565)		Other financing activities	(1,868)		(2,052)
Financing activities	Financing activities	(439)		(195)		Financing activities	(1,739)		2,470
Effect of foreign exchange rate changes on cash	Effect of foreign exchange rate changes on cash	12		(67)		Effect of foreign exchange rate changes on cash	(69)		(6)
Net decrease in cash and cash equivalents		$	(1,059)	$	(1,068)
Net increase in cash and cash equivalents						Net increase in cash and cash equivalents	$	185	$	1,464

Cash Flows for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2021

In the first ~~quarter~~nine months of 2021, we used ~~$1.1~~$3.4 billionof ~~our~~ cash ~~on hand to fund~~generated by our operations ~~by $52 million,~~to make ~~$580 million~~$1.4 billion of investments in our business, ~~and~~ fund ~~$447 million~~$1.9 billion of other financing ~~activities.~~activities, and increase our available cash on hand by $185 million.

~~Our~~As previously noted, our operations ~~typically generate positive net~~generated $3.4 billion of cash ~~flows; however,~~ in the first ~~quarter~~nine months of 2021, ~~we used $52 million of cash to fund our operations that was largely~~ driven primarily by a ~~significant increase~~positive change in working capital of $1.6 billion, noncash charges to income of $1.6 billion, and net income of $178 million. Our net income of $178 million reflects the unfavorable impact of increased energy costs at certain of our refineries and ethanol plants due to effects arising out of Winter Storm Uri, as described

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in “OVERVIEW AND OUTLOOK—Overview—Business Operations ~~Update,~~Update.” ~~partially offset by noncash charges to income of $339 million, and a positive change in working capital of $184 million.~~ Noncash charges included ~~$578 million~~$1.8 billion of depreciation and amortization expense, partially offset by a ~~$239~~$150 million deferred income tax ~~benefit.~~benefit and a $62 million gain on the sale of a partial interest in MVP, as described in Note 7 of Condensed Notes to Consolidated Financial Statements. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 1112 of Condensed Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net ~~loss.~~income.

Our investing activities of ~~$580 million~~$1.4 billion consisted of ~~$582 million~~$1.7 billion in capital investments, as defined below, of which ~~$154~~$736 million related to self-funded capital investments by DGD, and ~~$26~~$59 million was related to capital expenditures of VIEs other than DGD. These activities were partially offset by $270 million received from the sale of a partial interest in MVP, as described in Note 7 of Condensed Notes to Consolidated Financial Statements.

Other financing activities of ~~$447 million~~$1.9 billion consisted primarily of ~~$400 million~~$1.2 billion in dividend payments, ~~$31~~$672 million of payments of debt and finance lease obligations (excluding VIEs), and ~~$14~~$15 million for the purchase of common stock for treasury in connection with stock-based compensation plans.

Cash Flows for the ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2020

In the first ~~quarter~~nine months of 2020, we used ~~$1.1 billion~~$852 million of cash ~~on hand~~generated by our operations and ~~$370 million~~$4.5 billion in borrowings to ~~fund our operations by $49 million,~~ make ~~$757 million~~$1.9 billion of investments in our business, ~~and~~ fund ~~$565 million~~$2.1 billion of other

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financing ~~activities.~~activities, and increase our available cash on hand by $1.4 billion. The borrowings are described in Note 45 of Condensed Notes to Consolidated Financial Statements.

~~Our~~As previously noted, our operations ~~typically generate positive net~~generated $852 million of cash ~~flows; however,~~ in the first ~~quarter~~nine months of 2020, ~~we used $49 million~~which resulted from noncash charges to income of ~~cash to fund our operations due primarily to a negative~~$1.9 billion, partially offset by an unfavorable change in working capital of ~~$1.1 billion. While we incurred a net loss of~~$232 million. Noncash charges primarily included $1.8 billion ~~in the first quarter of 2020, that net loss was driven by $3.0 billion of noncash charges consisting of $582 million~~ of depreciation and amortization expense and ~~the $2.5 billion LCM inventory valuation adjustment.~~$177 million of deferred income tax expense. The ~~negative~~ change in working capital was ~~largely~~affected primarily by a $1.3 billion use of cash1 resulting from the rapid decline in market prices of refined petroleum products and crude oil as a result of ~~rapidly falling market prices for~~ the ~~products~~negative economic effects of the COVID-19 pandemic that ~~we sell. Cash generated by~~impacted our ~~product sales is typically greater than the cash we use to pay for crude oil~~receivables and other feedstocks that we process and other costs that we incur. However, because daily product sales follow the market prices on that day, rapid increases or decreases in product market prices can significantly impact our working capital positively or negatively, respectively. Market prices declined rapidly in the latter half of March 2020 and this rapid decline resulted in a significantaccounts payable. This use of cash, ~~to pay for our crude oil and~~along with other ~~feedstock purchases that~~uses of cash, were ~~purchased earlier~~partially offset by a $1.6 billion source of cash driven by a reduction in ~~the quarter before market prices for those feedstocks declined.~~inventory levels on hand. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 1112 of Condensed Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net loss.

Our investing activities of ~~$757 million~~$1.9 billion consisted of ~~$767 million~~$1.9 billion in capital investments, as defined below, of which ~~$78~~$329 million related to self-funded capital investments by DGD, and ~~$62~~$196 million was related to capital expenditures of VIEs other than DGD.

Other financing activities of ~~$565 million~~$2.1 billion consisted primarily of ~~$401 million~~$1.2 billion in dividend payments, $461 million of payments of debt and finance lease obligations (excluding VIEs), $208 million to pay distributions to noncontrolling interests, and $147 million for the purchase of common stock for ~~treasury, and $15 million of payments of debt and finance lease obligations.~~treasury.

Capital Investments

Our capital investments include capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in unconsolidated joint ventures. Capital investments attributable to Valero, which is a

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non-GAAP financial measure, reflects our net share of capital investments and is defined as all capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in unconsolidated joint ventures presented in our consolidated statements of cash flows, excluding the portion of DGD’s capital investments attributable to our joint venture partner and all of the capital expenditures of other VIEs.

We are a 50/50 joint venture partner in DGD and consolidate DGD’s 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. DGD’s partners use DGD’s operating cash flow (excluding changes in its current assets and current liabilities) to fund its capital investments rather than distribute all of that cash to themselves. Because DGD’s operating cash flow is effectively attributable to each partner, only 50 percent of DGD’s capital investments should be attributed to our net share of capital investments. We also exclude the capital expenditures of our other consolidated VIEs because we do not operate those VIEs. We believe capital investments attributable to Valero is an important measure because it more accurately reflects our capital investments.

Capital investments attributable to Valero should not be considered as an alternative to capital investments, its most comparable U.S. GAAP measure, nor should it be considered in isolation or as a substitute for an analysis of our cash flows as reported under U.S. GAAP. In addition, this non-GAAP

1 Represents the net cash flow change in “receivables, net” of $3.6 billion and accounts payable of $4.9 billion during the nine months ended September 30, 2020, as described in Note 12 of Condensed Notes to Consolidated Financial Statements.

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measure may not be comparable to similarly titled measures used by other companies because we may define it differently, which may diminish its utility.


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Reconciliation of capital investments to capital investments attributable to Valero	Reconciliation of capital investments to capital investments attributable to Valero					Reconciliation of capital investments to capital investments attributable to Valero
Capital expenditures (excluding VIEs)	Capital expenditures (excluding VIEs)	$	160	$	299	Capital expenditures (excluding VIEs)	$	368	$	775
Capital expenditures of VIEs:	Capital expenditures of VIEs:					Capital expenditures of VIEs:
DGD	DGD	153		74		DGD	730		311
Other VIEs	Other VIEs	26		62		Other VIEs	59		196
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	Deferred turnaround and catalyst cost expenditures (excluding VIEs)	230		309		Deferred turnaround and catalyst cost expenditures (excluding VIEs)	544		529
Deferred turnaround and catalyst cost expenditures of DGD	Deferred turnaround and catalyst cost expenditures of DGD	1		4		Deferred turnaround and catalyst cost expenditures of DGD	6		18
Investments in unconsolidated joint ventures	Investments in unconsolidated joint ventures	12		19		Investments in unconsolidated joint ventures	8		39
Capital investments	Capital investments	582		767		Capital investments	1,715		1,868
Adjustments:	Adjustments:					Adjustments:
DGD’s capital investments attributable to our joint venture partner	DGD’s capital investments attributable to our joint venture partner	(77)		(39)		DGD’s capital investments attributable to our joint venture partner	(368)		(165)
Capital expenditures of other VIEs	Capital expenditures of other VIEs	(26)		(62)		Capital expenditures of other VIEs	(59)		(196)
Capital investments attributable to Valero	Capital investments attributable to Valero	$	479	$	666	Capital investments attributable to Valero	$	1,288	$	1,507

As previously disclosed in our annual report on Form 10-K for the year ended December 31, 2020, we expect to incur $2.0 billion for capital investments attributable to Valero during ~~2021.~~2021; however, we continuously evaluate our capital budget and make changes as conditions warrant. Approximately 60 percent of the expected capital investments attributable to Valero are for sustaining the business and 40 percent are for growth strategies, ~~over half~~ of which over 60 percent is allocated to expanding the renewable diesel business. ~~However, we continuously evaluate our capital budget and make changes as conditions warrant. The~~

47We have publicly announced GHG emissions reduction/offset targets for 2025 and 2035. We believe that our expected allocation of growth capital into lower-carbon projects is consistent with such targets. Certain of these lower-carbon projects are already in execution and the associated capital investments are included in our expected capital investments for 2021 discussed above. Our capital investments in future years to achieve these targets are expected to include investments associated with certain lower-carbon projects currently at various stages of progress, evaluation, or approval.

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~~capital investment estimate for 2021 includes $200 million of the approximately $500 million of capital investments that were deferred in 2020 and excludes strategic acquisitions, if any.~~

Other Matters Impacting Liquidity and Capital Resources

Stock Purchase Program

As of ~~March 31,~~September 30, 2021, we had $1.4 billion available for purchase under our stock purchase program, which has no expiration date. We have not purchased any shares of our common stock under our stock purchase program since mid-March 2020, and we will evaluate the timing of repurchases when appropriate. We have no obligation to make purchases under this program.

Pension Plan Funding

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Financial Statements, during the nine months ended September 30, 2021 we contributed $121 million to our pension plans and $12 million to our other postretirement benefit plans.

Environmental Matters

Our operations are subject to extensive environmental regulations by governmental authorities relating to the discharge of materials into the environment, waste management, pollution prevention measures, GHG emissions, and characteristics and composition of gasolines and distillates. 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 in the future. In addition, any major upgrades in any of our refineries or plants could require material additional expenditures to comply with environmental laws and regulations. See Note 14 of Condensed Notes to Consolidated Financial Statements for additional information on our government and regulatory compliance program and related costs.

Tax Matters

~~Under deferrals provided by recently passed legislation, such as the CARES Act in the U.S. and by various taxing authorities under other existing legislation, we~~We deferred approximately $250 million of ~~income and indirect (e.g., VAT~~value-added and motor fuel ~~taxes)~~ tax payments that were due in ~~2020.~~2020 as permitted by various taxing authorities to help companies address the negative impacts of the COVID-19 pandemic. Of this amount, approximately 90 percent will be paid in 2021 and 10 percent in 2022. ~~No deferred payments were made in~~During the first ~~quarter~~nine months of ~~2021.~~2021, we paid approximately $125 million of these tax payments.

Cash Held by Our International Subsidiaries

As of ~~March 31,~~September 30, 2021, ~~$1.3~~$3.0 billion of our cash and cash equivalents was held by our international subsidiaries. Cash held by our international subsidiaries can be repatriated to us without any U.S. federal income tax consequences, but certain other taxes may apply, including, but not limited to, withholding taxes imposed by certain international jurisdictions and U.S. state income taxes. Therefore, there is a cost to repatriate cash held by certain of our international subsidiaries to us, but we believe that such amount is not material to our financial position or liquidity.

Concentration of Customers

Our operations have a concentration of customers in the refining industry and customers who are refined petroleum product wholesalers and retailers. 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 volatility in the global oil markets. However, we believe that our portfolio of accounts receivable is sufficiently diversified to the extent necessary to minimize potential credit risk. Historically, we have not had any significant problems collecting our accounts receivable.

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Contractual Obligations

As of ~~March 31,~~September 30, 2021, our contractual obligations included debt, finance lease obligations, operating lease obligations, purchase obligations, and other long-term liabilities. In the ordinary course of business, we had debt-related activities during the ~~three~~nine months ended ~~March 31,~~September 30, 2021, as described in Note 45 of Condensed Notes to Consolidated Financial Statements. There were no material changes outside the ordinary course of business with respect to our contractual obligations during the ~~three~~nine months ended ~~March 31,~~September 30, 2021.

Our 4.0 percent Gulf Opportunity Zone Revenue Bonds Series 2010 (GO Zone Bonds), which total $300 million, are due December 1, 2040, but are subject to mandatory tender on June 1, 2022, (the Mandatory Tender Date), at a price equal to par plus accrued and unpaid interest up to, but excluding, the Mandatory Tender Date. However, we have the option to effectuate a remarketing of these bonds, and we

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currently expect to remarket them effective on or soon after the Mandatory Tender Date or otherwise refinance them, but we cannot provide any assurance that we will be able to do so. The GO Zone Bonds are reflected in current portion of debt and finance lease obligations as of September 30, 2021.

Central Mexico Terminals’ outstanding borrowings under the IEnova Revolver are also reflected in current portion of debt and finance lease obligations as of September 30, 2021 as IEnova can demand repayment from Central Mexico Terminals, but we do not expect IEnova to demand repayment during the next 12 months. Central Mexico Terminals is owned by IEnova. See Note 7 of Condensed Notes to Consolidated Financial Statements for a description of and accounting for Central Mexico Terminals.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ from those estimates. As of ~~March 31,~~September 30, 2021, there were no significant changes to our critical accounting estimates since the date our annual report on Form 10-K for the year ended December 31, 2020 was filed.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

COMMODITY PRICE RISK

•inventories and firm commitments to purchase inventories generally for amounts by which our current year inventory levels (determined on a LIFO basis) differ from our previous year-end LIFO inventory levels; and

•forecasted purchases and/or product sales in order to lock-in such forecasted transactions at existing market prices that we deem favorable.

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 of directors.

As of ~~March 31,~~September 30, 2021 and December 31, 2020, 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 wasnotmaterial. See Note 1314 of Condensed Notes to Consolidated Financial Statements for notional volumes associated with these derivative contracts as of ~~March 31,~~September 30, 2021.

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COMPLIANCE PROGRAM PRICE RISK

INTEREST RATE RISK

The following table provides information about our debt instruments (dollars in millions), the fair values of which are sensitive to changes in interest rates. Principal cash flows and related weighted-average interest rates by expected maturity dates are presented. See Note 45 of Condensed Notes to Consolidated Financial Statements for additional information related to our debt.


		March 31, 2021 (a)																								September 30, 2021 (a)
		Expected Maturity Dates																								Expected Maturity Dates
		Remainder of 2021 (b)			2022			2023			2024			2025			There- after			Total			Fair Value			Remainder of 2021 (b)			2022 (c)			2023			2024			2025			There- after			Total			Fair Value
Fixed rate	Fixed rate	$	—		$	—		$	850		$	925		$	1,650		$	8,474		$	11,899		$	13,565	Fixed rate	$	—		$	300		$	850		$	925		$	1,650		$	8,174		$	11,899		$	13,821
Average interest rate	Average interest rate	—		%	—		%	2.7		%	1.2		%	3.1		%	5.1		%	4.4		%			Average interest rate	—		%	4.0		%	2.7		%	1.2		%	3.1		%	5.1		%	4.4		%
Floating rate (c)		$	610		$	6		$	595		$	—		$	—		$	—		$	1,211		$	1,211
Floating rate (d)																									Floating rate (d)	$	728		$	5		$	20		$	—		$	—		$	—		$	753		$	753
Average interest rate	Average interest rate	3.9		%	3.9		%	1.4		%	—		%	—		%	—		%	2.7		%			Average interest rate	3.3		%	3.9		%	3.9		%	—		%	—		%	—		%	3.3		%

		December 31, 2020 (a)																								December 31, 2020 (a)
		Expected Maturity Dates																								Expected Maturity Dates
		2021 (b)			2022			2023			2024			2025			There- after			Total			Fair Value			2021 (b)			2022 (c)			2023			2024			2025			There- after			Total			Fair Value
Fixed rate	Fixed rate	$	—		$	—		$	850		$	925		$	1,650		$	8,474		$	11,899		$	13,899	Fixed rate	$	—		$	300		$	850		$	925		$	1,650		$	8,174		$	11,899		$	13,899
Average interest rate	Average interest rate	—		%	—		%	2.7		%	1.2		%	3.1		%	5.1		%	4.4		%			Average interest rate	—		%	4.0		%	2.7		%	1.2		%	3.1		%	5.1		%	4.4		%
Floating rate (c)		$	603		$	6		$	595		$	—		$	—		$	—		$	1,204		$	1,204
Floating rate (d)																									Floating rate (d)	$	603		$	6		$	595		$	—		$	—		$	—		$	1,204		$	1,204
Average interest rate	Average interest rate	3.9		%	3.0		%	1.4		%	—		%	—		%	—		%	2.7		%			Average interest rate	3.9		%	3.0		%	1.4		%	—		%	—		%	—		%	2.7		%

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(a)Excludes unamortized discounts and debt issuance costs.

(b)As of ~~March 31,~~September 30, 2021, our floating rate debt included $100 million associated with borrowings under the DGD Revolver, which is only available to the operations of DGD. DGD’s lender does not have recourse against us. As of September 30, 2021 and December 31, 2020, our floating rate debt ~~includes $606~~included $627 million and $598 million, respectively, associated with borrowings under the IEnova Revolver for the construction of terminals in Mexico by Central Mexico Terminals. The IEnova Revolver is only available to the operations of Central Mexico ~~Terminals, and its creditors do~~Terminals. IEnova does not have recourse against us.

(c)See “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—LIQUIDITY AND CAPITAL RESOURCES—Other Matters Impacting Liquidity and Capital Resources—Contractual Obligations” for a discussion of the Mandatory Tender Date and maturity date of our GO Zone Bonds.

(d)As of ~~March 31,~~September 30, 2021 and December 31, 2020, we had an interest rate swap associated with ~~$30~~$26 million and $31 million, respectively, of our floating rate debt resulting in an effective interest rate of 3.85 percent as of each of those reporting dates. The fair value of the swap was immaterial for all periods presented.

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FOREIGN CURRENCY RISK

We are exposed to exchange rate fluctuations on transactions related to our international operations that are denominated in currencies other than the local (functional) currencies of those operations. To manage our exposure to these exchange rate fluctuations, we use foreign currency contracts. The following table provides information about our foreign currency contracts (dollars in millions) that, as of the dates set forth below, mature in 2021, the fair values of which are sensitive to changes in foreign currency exchange rates. Currency abbreviations presented below are as follows: U.S. dollars (USD), Canadian dollars (CAD), and pounds sterling (GBP).


		Receive USD/ Pay CAD		Receive USD/ Pay GBP		Receive CAD/ Pay USD			Receive USD/ Pay CAD		Receive USD/ Pay GBP		Receive CAD/ Pay USD
March 31, 2021
September 30, 2021								September 30, 2021
Contract amount	Contract amount	$	160	$	85	$	2,800	Contract amount	$	301	$	162	$	1,100
Weighted-average contractual exchange rate	Weighted-average contractual exchange rate	0.79625		1.37805		0.79271		Weighted-average contractual exchange rate	0.78826		1.36695		0.78799
Fair value asset		$	—	$	—	$	10
Fair value asset (liability)								Fair value asset (liability)	$	1	$	3	$	(5)

December 31, 2020	December 31, 2020							December 31, 2020
Contract amount	Contract amount	$	228	$	97	$	1,600	Contract amount	$	228	$	97	$	1,600
Weighted-average contractual exchange rate	Weighted-average contractual exchange rate	0.78205		1.34454		0.78492		Weighted-average contractual exchange rate	0.78205		1.34454		0.78492
Fair value liability	Fair value liability	$	(1)	$	(1)	$	(2)	Fair value liability	$	(1)	$	(1)	$	(2)

See Note 1314 of Condensed Notes to Consolidated Financial Statements for a discussion about our foreign currency risk management activities.

ITEM 4. CONTROLS AND PROCEDURES

(a)Evaluation of disclosure controls and procedures.

Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report, and has concluded that our disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2021.

(b)Changes in internal control over financial reporting.

There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information below describes new proceedings or material developments in proceedings that we previously reported in our annual report on Form 10-K for the year ended December 31, ~~2020.~~2020 or in our quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2021 and June 30, 2021.

Environmental Enforcement Matters

While it is not possible to predict the outcome of the following environmental ~~proceedings,~~proceeding, if ~~any one or more of them were~~it was decided against us, we believe that there would be no material effect on our financial position, results of operations, or liquidity. We are reporting ~~these proceedings~~this proceeding to comply with U.S. ~~Securities and Exchange Commission (SEC)~~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 protecting the environment if we reasonably believe that such proceedings may result in monetary sanctions of $300,000 or more.

~~U.S. EPA~~Texas Commission on Environmental Quality ~~(Benicia~~(TCEQ) (Bill Greehey East Refinery). On ~~December 11, 2020,~~August 27, 2021, our ~~Benicia~~Bill Greehey East Refinery received a Notice of ~~Potential Violation and Opportunity to Confer~~Enforcement (NOE) from the ~~U.S. EPA, without penalty demand, related to a series~~TCEQ resulting from violations of ~~inspections the U.S. EPA Region 9 conducted in 2019 to determine the refinery’s compliance with various federal environmental laws.~~its Title V permit. We are working with the ~~U.S. EPA~~TCEQ to resolve ~~this matter,~~the NOE, which we reasonably believe may result in penalties ~~that are in excess of $300,000.~~

~~Bay Area Air Quality Management District (BAAQMD)~~ (Benicia Refinery). On March 21, 2019, we received a Notice of Violation (VN) from the BAAQMD related to atmospheric emissions of hydrogen commingled with non-methane organic compounds at our Benicia Refinery. We are working with the BAAQMD to resolve the VN and related compliance issues, which we now reasonably believe may result in penalties that are in excess of $300,000.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the year December 31, 2020. However, to the extent the COVID-19 pandemic adversely affects our business, financial condition, results of operation, and liquidity, it may also have the effect of heightening many of the other risks described in such risk factors.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)Unregistered Sales of Equity Securities. Not applicable.

(b)Use of Proceeds. Not applicable.

(c)Issuer Purchases of Equity Securities. The following table discloses purchases of shares of our common stock made by us or on our behalf during the ~~first~~third quarter of 2021.

Period Total Number
of Shares
Purchased Average
Price Paid
per Share Total Number of
Shares Not
Purchased as Part of
Publicly Announced
Plans or Programs (a) 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)
January 2021 129,304 $ 59.36 129,304 — $1.4 billion
February 2021 82,040 $ 74.06 82,040 — $1.4 billion
March 2021 9,644 $ 75.21 9,644 — $1.4 billion
Total 220,988 $ 65.51 220,988 — $1.4 billion


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Not Purchased as Part of Publicly Announced Plans or Programs (a)	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)
July 2021	2,276	$	74.38	2,276	—	$1.4 billion
August 2021	1,676	$	67.75	1,676	—	$1.4 billion
September 2021	2,357	$	65.31	2,357	—	$1.4 billion
Total	6,309	$	69.23	6,309	—	$1.4 billion

________________________

(a)The shares reported in this column represent purchases settled in the ~~first~~third quarter of 2021 relating to (i) our purchases of shares in open-market transactions to meet our obligations under stock-based compensation plans and (ii) 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.

(b)On January 23, 2018, we announced that our board of directors authorized our purchase of up to $2.5 billion of our outstanding common stock (the 2018 Program), with no expiration date. As of ~~March 31,~~September 30, 2021, we had $1.4 billion remaining available for purchase under the 2018 Program. We have not purchased any shares of our common stock under the 2018 Program since mid-March 2020, and we will evaluate the timing of repurchases when appropriate. We have no obligation to make purchases under the 2018 Program.

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ITEM 6. EXHIBITS


Exhibit No.						Description

*+10.01						~~Form of Amended and Restated Performance Share Agreement (2020 grant–second and third tranches).~~

*+10.02						~~Form of Performance Share Agreement (2021 grant).~~

*31.01						Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal executive officer.

*31.02						Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal financial officer.

**32.01						Section 1350 Certifications (under Section 906 of the Sarbanes-Oxley Act of 2002).

***101.INS						Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

***101.SCH						Inline XBRL Taxonomy Extension Schema Document.

***101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

***101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

***101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

***101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

***104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

________________________


*			Filed herewith.
**			Furnished herewith.
***			Submitted electronically herewith.
+			~~Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto.~~

Certain agreements relating to our long-term debt have not been filed as exhibits as permitted by paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K since the total amount of securities authorized under any such agreements do not exceed 10 percent of our total consolidated assets. Upon request, we will furnish to the U.S. SEC all constituent agreements defining the rights of holders of our long-term debt not filed herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



						VALERO ENERGY CORPORATION (Registrant)
			By:			/s/ Jason W. Fraser
						Jason W. Fraser
						Executive Vice President and
						Chief Financial Officer
						(Duly Authorized Officer and Principal
						Financial and Accounting Officer)

Date: ~~April 30,~~October 27, 2021

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