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, ~~2021~~2022


☐			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, 2021~~22, 2022 was ~~408,760,165.~~408,096,416.

VALERO ENERGY CORPORATION

TABLE OF CONTENTS



			Page
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021			1
Consolidated Statements of Income for the Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021			2
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021			3
Consolidated Statements of Equity for the Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021			4
Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2021~~2022 and ~~2020~~2021			5
Condensed Notes to Consolidated Financial Statements			6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			2726
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			4947
ITEM 4. CONTROLS AND PROCEDURES			5149
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			5249
ITEM 1A. RISK FACTORS			5249
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			5350
ITEM 6. EXHIBITS			5451
SIGNATURE			5552

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			March 31, 2022		December 31, 2021
		(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	$	2,638	$	4,122
Receivables, net	Receivables, net	9,014		6,109		Receivables, net	13,080		10,378
Inventories	Inventories	5,881		6,038		Inventories	7,174		6,265
Prepaid expenses and other	Prepaid expenses and other	442		384		Prepaid expenses and other	421		400
Total current assets	Total current assets	17,591		15,844		Total current assets	23,313		21,165
Property, plant, and equipment, at cost	Property, plant, and equipment, at cost	47,370		46,967		Property, plant, and equipment, at cost	49,488		49,072
Accumulated depreciation	Accumulated depreciation	(16,991)		(16,578)		Accumulated depreciation	(18,612)		(18,225)
Property, plant, and equipment, net	Property, plant, and equipment, net	30,379		30,389		Property, plant, and equipment, net	30,876		30,847
Deferred charges and other assets, net	Deferred charges and other assets, net	5,644		5,541		Deferred charges and other assets, net	6,213		5,876
Total assets	Total assets	$	53,614	$	51,774	Total assets	$	60,402	$	57,888
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	$	1,295	$	1,264
Accounts payable	Accounts payable	9,113		6,082		Accounts payable	15,236		12,495
Accrued expenses	Accrued expenses	1,087		994		Accrued expenses	1,140		1,253
Taxes other than income taxes payable	Taxes other than income taxes payable	1,233		1,372		Taxes other than income taxes payable	1,482		1,461
Income taxes payable	Income taxes payable	140		112		Income taxes payable	632		378
Total current liabilities	Total current liabilities	12,307		9,283		Total current liabilities	19,785		16,851
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	11,866		12,606
Deferred income tax liabilities	Deferred income tax liabilities	5,034		5,275		Deferred income tax liabilities	4,971		5,210
Other long-term liabilities	Other long-term liabilities	3,616		3,620		Other long-term liabilities	3,370		3,404
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	6,832		6,827
Treasury stock, at cost; 264,741,072 and 265,096,171 common shares		(15,700)		(15,719)
Treasury stock, at cost; 265,399,517 and 264,305,955 common shares						Treasury stock, at cost; 265,399,517 and 264,305,955 common shares	(15,794)		(15,677)
Retained earnings	Retained earnings	27,849		28,953		Retained earnings	28,785		28,281
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,165)		(1,254)		Accumulated other comprehensive loss	(1,009)		(1,008)
Total Valero Energy Corporation stockholders’ equity	Total Valero Energy Corporation stockholders’ equity	17,801		18,801		Total Valero Energy Corporation stockholders’ equity	18,821		18,430
Noncontrolling interests	Noncontrolling interests	926		841		Noncontrolling interests	1,589		1,387
Total equity	Total equity	18,727		19,642		Total equity	20,410		19,817
Total liabilities and equity	Total liabilities and equity	$	53,614	$	51,774	Total liabilities and equity	$	60,402	$	57,888

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 March 31,
		2021		2020				2022		2021
Revenues (a)	Revenues (a)	$	20,806	$	22,102	Revenues (a)		$	38,542	$	20,806
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		34,949		18,992
Lower of cost or market (LCM) inventory valuation adjustment		0		2,542

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)		1,379		1,656
Depreciation and amortization expense	Depreciation and amortization expense	566		569		Depreciation and amortization expense		595		566
Total cost of sales	Total cost of sales	21,214		24,187		Total cost of sales		36,923		21,214
Other operating expenses	Other operating expenses	38		2		Other operating expenses		19		38
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)		205		208
Depreciation and amortization expense	Depreciation and amortization expense	12		13		Depreciation and amortization expense		11		12

Operating loss		(666)		(2,277)
Other income, net		45		32
Operating income (loss)						Operating income (loss)		1,384		(666)
Other income (expense), net						Other income (expense), net		(20)		45
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		(145)		(149)
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)		1,219		(770)
Income tax expense (benefit)						Income tax expense (benefit)		252		(148)

Net loss		(622)		(1,754)
Net income (loss)						Net income (loss)		967		(622)
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests	82		97		Less: Net income attributable to noncontrolling interests		62		82
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		$	905	$	(704)

Loss per common share		$	(1.73)	$	(4.54)
Earnings (loss) per common share						Earnings (loss) per common share		$	2.21	$	(1.73)
Weighted-average common shares outstanding (in millions)	Weighted-average common shares outstanding (in millions)	407		408		Weighted-average common shares outstanding (in millions)		408		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		$	2.21	$	(1.73)
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

__________________________	__________________________					__________________________
Supplemental information:	Supplemental information:					Supplemental information:
(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 foreign operations						(a) Includes excise taxes on sales by certain of our foreign operations		$	1,423	$	1,120

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,						Three Months Ended March 31,
			2021		2020				2022		2021
Net loss			$	(622)	$	(1,754)
Net income (loss)							Net income (loss)		$	967	$	(622)
Other comprehensive income (loss):	Other comprehensive income (loss):						Other comprehensive income (loss):
Foreign currency translation adjustment	Foreign currency translation adjustment		76		(607)		Foreign currency translation adjustment		13		76
Net gain on pension and other postretirement benefits	Net gain on pension and other postretirement benefits		15		12		Net gain on pension and other postretirement benefits		8		15
Net gain on cash flow hedges			10		29
Net gain (loss) on cash flow hedges							Net gain (loss) on cash flow hedges		(45)		10
Other comprehensive income (loss) before income tax expense	Other comprehensive income (loss) before income tax expense		101		(566)		Other comprehensive income (loss) before income tax expense		(24)		101
Income tax expense related to items of other comprehensive income (loss)	Income tax expense related to items of other comprehensive income (loss)		7		6		Income tax expense related to items of other comprehensive income (loss)		—		7
Other comprehensive income (loss)	Other comprehensive income (loss)		94		(572)		Other comprehensive income (loss)		(24)		94
Comprehensive loss			(528)		(2,326)
Comprehensive income (loss)							Comprehensive income (loss)		943		(528)
Less: Comprehensive income attributable to noncontrolling interests	Less: Comprehensive income attributable to noncontrolling interests		87		111		Less: Comprehensive income attributable to noncontrolling interests		39		87
Comprehensive loss attributable to Valero Energy Corporation stockholders			$	(615)	$	(2,437)
Comprehensive income (loss) attributable to Valero Energy Corporation stockholders							Comprehensive income (loss) attributable to Valero Energy Corporation stockholders		$	904	$	(615)

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
Balance as of December 31, 2021																		Balance as of December 31, 2021	$	7	$	6,827	$	(15,677)	$	28,281	$	(1,008)	$	18,430	$	1,387	$	19,817
Net income																		Net income	—		—		—		905		—		905		62		967
Dividends on common stock ($0.98 per share)																		Dividends on common stock ($0.98 per share)	—		—		—		(401)		—		(401)		—		(401)
Stock-based compensation expense																		Stock-based compensation expense	—		32		—		—		—		32		—		32
Transactions in connection with stock-based compensation plans																		Transactions in connection with stock-based compensation plans	—		(27)		9		—		—		(18)		—		(18)
Open market stock purchases																		Open market stock purchases	—		—		(126)		—		—		(126)		—		(126)
Contributions from noncontrolling interests																		Contributions from noncontrolling interests	—		—		—		—		—		—		165		165
Distributions to noncontrolling interests																		Distributions to noncontrolling interests	—		—		—		—		—		—		(2)		(2)

Other comprehensive loss																		Other comprehensive loss	—		—		—		—		(1)		(1)		(23)		(24)
Balance as of March 31, 2022																		Balance as of March 31, 2022	$	7	$	6,832	$	(15,794)	$	28,785	$	(1,009)	$	18,821	$	1,589	$	20,410
		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	Balance as of December 31, 2020	$	7	$	6,814	$	(15,719)	$	28,953	$	(1,254)	$	18,801	$	841	$	19,642	Balance as of December 31, 2020	$	7	$	6,814	$	(15,719)	$	28,953	$	(1,254)	$	18,801	$	841	$	19,642
Net income (loss)	Net income (loss)	—		—		—		(704)		—		(704)		82		(622)		Net income (loss)	—		—		—		(704)		—		(704)		82		(622)
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)	—		��		—		(400)		—		(400)		—		(400)
Stock-based compensation expense	Stock-based compensation expense	—		28		—		—		—		28		—		28		Stock-based compensation expense	—		28		—		—		—		28		—		28
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	—		(32)		19		—		—		(13)		—		(13)

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

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

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,					Three Months Ended March 31,
		2021		2020			2022		2021
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)	$	967	$	(622)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:						Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense	Depreciation and amortization expense	578		582		Depreciation and amortization expense	606		578
LCM inventory valuation adjustment		0		2,542
Loss on early retirement of debt						Loss on early retirement of debt	50		—

Deferred income tax benefit	Deferred income tax benefit	(239)		(162)		Deferred income tax benefit	(234)		(239)
Changes in current assets and current liabilities	Changes in current assets and current liabilities	184		(1,107)		Changes in current assets and current liabilities	(722)		184
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	(79)		47
Net cash used in operating activities		(52)		(49)
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	588		(52)
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))	(152)		(160)
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)	(219)		(153)
Other VIEs	Other VIEs	(26)		(62)		Other VIEs	(13)		(26)
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)	(453)		(230)
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)		(1)
Investments in unconsolidated joint ventures		(12)		(19)

Investments in nonconsolidated joint ventures						Investments in nonconsolidated joint ventures	—		(12)

Other investing activities, net	Other investing activities, net	2		10		Other investing activities, net	2		2
Net cash used in investing activities	Net cash used in investing activities	(580)		(757)		Net cash used in investing activities	(841)		(580)
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)	939		—
Proceeds from borrowings of VIEs		8		70
Proceeds from borrowings of VIEs:						Proceeds from borrowings of VIEs:
DGD						DGD	99		—
Other VIEs						Other VIEs	28		8
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)	(1,738)		(31)
Repayments of debt of VIEs		(1)		(1)
Repayments of debt and finance lease obligations of VIEs:						Repayments of debt and finance lease obligations of VIEs:
DGD						DGD	(102)		—
Other VIEs						Other VIEs	(16)		(1)
Premiums on early retirement of debt						Premiums on early retirement of debt	(48)		—
Purchases of common stock for treasury	Purchases of common stock for treasury	(14)		(147)		Purchases of common stock for treasury	(144)		(14)
Common stock dividend payments	Common stock dividend payments	(400)		(401)		Common stock dividend payments	(401)		(400)

Contributions from noncontrolling interests						Contributions from noncontrolling interests	165		—

Other financing activities, net	Other financing activities, net	(1)		(1)		Other financing activities, net	(10)		(1)
Net cash used in financing activities	Net cash used in financing activities	(439)		(195)		Net cash used in financing activities	(1,228)		(439)
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	(3)		12
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(1,059)		(1,068)		Net decrease in cash and cash equivalents	(1,484)		(1,059)
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	4,122		3,313
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	$	2,638	$	2,254

See Condensed Notes to Consolidated Financial Statements.

Table of Contents

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 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 months ended March 31, ~~2021~~2022 have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the three months ended March 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~ 2022.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.~~2021.

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~~2021 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.~~2021.

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~~VALERO ENERGY CORPORATION~~

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

~~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~~Policy

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~~

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. UNCERTAINTIES

Developments with respect to the uncertainties described below are occurring at a rapid pace and cannot be predicted. Their overall economic impact and resulting impact on us also cannot be predicted with certainty at this time. However, we are proactively responding to and actively monitoring the known impacts of the Russia-Ukraine conflict and the COVID-19 pandemic on our business, to the extent practicable, and we will strive to continue to do so, but there can be no assurance that our response or other measures we may take will be fully effective.

Russia-Ukraine Conflict

In late February 2022, Russia began an invasion and military attack on Ukraine. This has resulted in many countries, including the U.S., imposing economic and financial sanctions on Russia and providing humanitarian and military aid to Ukraine. In addition, on March 8, 2022, the U.S. presidential administration issued an Executive Order that, among other matters, banned the import of Russian crude oil and other petroleum and energy products to the U.S. The ~~outbreak~~ban on Russian energy imports took effect immediately, but companies were granted (through issuance of a General License published by the U.S. Office of Foreign Assets Control (OFAC)) 45 days to import petroleum products secured under pre-existing contracts.

As allowed by OFAC’s General License, we took delivery of certain feedstocks (procured under contracts entered into prior to the invasion) before the General License’s expiration on April 22, 2022. We currently do not anticipate any significant future feedstock sourcing disruptions resulting from the U.S. ban on Russian crude oil and other petroleum and energy product imports, as we obtain crude oil and other feedstocks from many other sources.

The conflict and responsive actions taken by the U.S. and other countries have created uncertainty for both domestic and international financial and commodity markets. Crude oil and consumer fuel prices significantly increased in March 2022 and remain volatile, as change in trade flows in Russian crude oil, other feedstocks, and energy products have impacted the global supply markets. Also, the continued increases in fuel prices have the potential to negatively impact the demand for our products. Thus, the implications of the Russia-Ukraine conflict on our financial position and results of operations remain uncertain.

Impact of the COVID-19 ~~and its development into a~~Pandemic

At the onset of the COVID-19 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~~Although we have continued to ~~respond~~experience improvements in our business, compared to the ~~impacts~~significant negative effects from the pandemic ~~on our business, such as reducing transportation fuel production at our refineries and ethanol plants to align with demand. During~~in 2020, 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 effectsimplications of the pandemic on our ~~company may likely continue to be significant. We believe we have proactively responded to many~~financial position and results 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.operations remain uncertain.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVENTORIES

Inventories consisted of the following (in millions):


		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Refinery feedstocks	Refinery feedstocks	$	1,947	$	1,979	Refinery feedstocks	$	2,068	$	1,995
Refined petroleum products and blendstocks	Refined petroleum products and blendstocks	3,284		3,425		Refined petroleum products and blendstocks	4,199		3,567
Renewable diesel feedstocks and products	Renewable diesel feedstocks and products	64		50		Renewable diesel feedstocks and products	245		135
Ethanol feedstocks and products	Ethanol feedstocks and products	297		297		Ethanol feedstocks and products	364		273
Materials and supplies	Materials and supplies	289		287		Materials and supplies	298		295

Inventories	Inventories	$	5,881	$	6,038	Inventories	$	7,174	$	6,265

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, ~~2021~~2022 and December 31, ~~2020,~~2021, the replacement cost (market value) of ~~LIFO~~last-in, first-out (LIFO) inventories exceeded their LIFO carrying amounts by ~~$2.7~~$9.3 billion and ~~$1.3~~$5.2 billion, respectively.

Our non-LIFO inventories accounted for ~~$1.2~~$1.6 billion and ~~$918 million~~$1.4 billion of our total inventories as of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

4. DEBT

Public Debt

In February 2022, we issued $650 million of 4.000 percent Senior Notes due June 1, 2052. Proceeds from this debt issuance totaled $639 million before deducting the underwriting discount and other debt issuance costs. The proceeds and cash on hand were used to repurchase and retire the following notes in connection with cash tender offers that we publicly announced and completed in February 2022 (in millions):


Debt Repurchased and Retired	Principal Amount
3.65% Senior Notes due 2025	$	72
2.850% Senior Notes due 2025	507
4.375% VLP Senior Notes due 2026	168
3.400% Senior Notes due 2026	653
Total	$	1,400

In connection with the early debt retirement activity described above, we recognized a charge of $50 million in “other income (expense), net” primarily comprised of $48 million of premiums paid.

During the threemonths ended March 31, 2021, there was no issuance or redemption activity related to our public debt.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~4. DEBT~~

~~Public Debt~~

~~During the three months ended March 31, 2021 and 2020, there was no issuance or redemption activity related to our public debt.~~

~~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										March 31, 2022
		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	$	—	$	615	$	3,385
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 2022	C$	—	C$	5	C$	145
Accounts receivable sales facility	Accounts receivable sales facility	$	1,000	July 2021	$	0	n/a		$	1,000	Accounts receivable sales facility	$	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 2022	n/a		$	—	$	50
Committed facilities of VIEs (c):
DGD Revolver		$	400	March 2024	$	0	$	0	$	400
Committed facilities of VIEs (b):											Committed facilities of VIEs (b):
DGD Revolver (c)											DGD Revolver (c)	$	400	March 2024	$	100	$	15	$	285
DGD Loan Agreement (d)											DGD Loan Agreement (d)	$	25	April 2023	$	25	n/a		$	—
IEnova Revolver ~~(d)~~(e)	IEnova Revolver ~~(d)~~(e)	$	660	February 2028	$	606	n/a		$	54	IEnova Revolver ~~(d)~~(e)	$	830	February 2028	$	692	n/a		$	138
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		$	834	n/a

________________________

(a)Letters of credit issued as of March 31, ~~2021~~2022 expire at various times in ~~2021~~2022 through 2023.

(b)~~This facility matured on April 12, 2021 and was not renewed.~~

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

~~(d)~~(c)AsThe variable interest rate on the DGD Revolver was 2.140 percent and 1.860 percent as of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(d)In March 2022, the maturity date of this facility was extended to April 2023. The amounts shown for this facility represent the facility amount available from, and borrowings outstanding to, the noncontrolling member as any transactions between DGD and us under this facility are eliminated in consolidation.The variable interest rate on the DGD Loan Agreement was 2.735 percent and 2.603 percent as of March 31, 2022 and December 31, 2021, respectively.

(e)The variable interest rate on the IEnova Revolver was ~~3.888~~3.864 percent and ~~3.870~~3.781 percent as of March 31, 2022 and December 31, 2021, respectively.

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


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
Borrowings:	Borrowings:						Borrowings:
Accounts receivable sales facility	Accounts receivable sales facility	$	0	$	300		Accounts receivable sales facility	$	300	$	—
DGD Revolver							DGD Revolver	99		—

IEnova Revolver	IEnova Revolver	8		70			IEnova Revolver	28		8
Repayments:							Repayments:
Accounts receivable sales facility							Accounts receivable sales facility	(300)		—
DGD Revolver							DGD Revolver	(99)		—

IEnova Revolver							IEnova Revolver	(15)		—

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~DGD Revolver~~

In March 2021, DGD (as described in Note 6) 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 DGD Revolver also provides for the issuance of letters of credit of up to $10 million. The DGD Revolver is available only to the operations of DGD, and the creditors of DGD do 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.

~~During the three months ended March 31, 2021, there were 0borrowings or repayments under the DGD Revolver.~~

Other Disclosures

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


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020				2022		2021
Interest and debt expense	Interest and debt expense	$	164	$	145	Interest and debt expense		$	157	$	164
Less: Capitalized interest	Less: Capitalized interest	15		20		Less: Capitalized interest		12		15
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		$	145	$	149

5. EQUITY

~~Share Activity~~Treasury Stock

~~There was nosignificant share activity~~We purchase shares of our outstanding common stock as authorized under our stock purchase program and with respect to our employee stock-based compensation plans. During the three months ended March 31, 2022, we made open market purchases of 1,334,550 shares for $126 million in connection with our stock purchase program. No open market purchases were made during the three months ended March 31, ~~2021 and 2020.~~2021. As of March 31, 2022, we had $1.2 billion remaining available for purchase under our stock purchase program, which has no expiration date.

~~Common Stock Dividends~~

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

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~~VALERO ENERGY CORPORATION~~

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

Accumulated Other Comprehensive Loss

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


		Three Months Ended March 31,																	Three Months Ended March 31,
		2021								2020									2022								2021
		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	$	(562)	$	(441)	$	(5)	$	(1,008)	$	(515)	$	(737)	$	(2)	$	(1,254)
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	13		(3)		(64)		(54)		76		1		(5)		72
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	—		7		46		53		—		8		9		17

Other comprehensive income (loss)	Other comprehensive income (loss)	76		9		4		89		(606)		9		11		(586)		Other comprehensive income (loss)	13		4		(18)		(1)		76		9		4		89
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	$	(549)	$	(437)	$	(23)	$	(1,009)	$	(439)	$	(728)	$	2	$	(1,165)

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. 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, ~~2021, our~~2022, the significant consolidated VIEs included:

•DGD, a joint venture with a subsidiary of Darling Ingredients Inc.~~, which~~ that owns and operates a plant that processes ~~rendered~~waste and ~~recycled materials, including~~renewable feedstocks (predominately animal fats, used cooking oils, and ~~other vegetable oils,~~inedible distillers corn oils) into renewable diesel; and

•Central Mexico Terminals, ~~which is~~ a collective group of three subsidiaries of Infraestructura Energetica Nova, ~~S.A.B.~~S.A.P.I. de C.V. (IEnova), which is a Mexican company and indirect 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~~the consolidated VIEs can only be used to settle their own obligations and the creditors of ~~our~~the consolidated VIEs have no recourse to our other assets. We generally do not provide financial guarantees to ~~our~~the VIEs. Although we have provided credit facilities to some of ~~our~~the 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~~the 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 the consolidated VIEs, which are included in our balance sheets (in millions):


	DGD		Central Mexico Terminals		Other		Total
March 31, 2022
Assets
Cash and cash equivalents	$	142	$	—	$	15	$	157
Other current assets	702		11		17		730
Property, plant, and equipment, net	2,854		659		92		3,605
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	470	$	716	$	8	$	1,194
Debt and finance lease obligations, less current portion	261		—		19		280

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~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									DGD		Central Mexico Terminals		Other		Total
		DGD		Central Mexico Terminals		Other		Total
December 31, 2021										December 31, 2021
Assets	Assets									Assets
Cash and cash equivalents	Cash and cash equivalents	$	144	$	1	$	16	$	161	Cash and cash equivalents	$	21	$	—	$	15	$	36
Other current assets	Other current assets	219		24		8		251		Other current assets	558		10		13		581
Property, plant, and equipment, net	Property, plant, and equipment, net	1,232		590		96		1,918		Property, plant, and equipment, net	2,629		676		91		3,396
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	$	398	$	729	$	9	$	1,136
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	264		—		20		284

~~Non-Consolidated~~Nonconsolidated VIEs

We hold variable interests in VIEs that have not been consolidated because we are not considered the primary beneficiary. These ~~non-consolidated~~nonconsolidated 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~~

7. 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
	2022		2021		2022		2021










Three months ended March 31
Service cost	$	38	$	40	$	2	$	2
Interest cost	21		18		2		2
Expected return on plan assets	(48)		(48)		—		—
Amortization of:
Net actuarial loss	13		20		—		—
Prior service credit	(4)		(4)		(1)		(2)

Net periodic benefit cost	$	20	$	26	$	3	$	2

The components of net periodic benefit cost other than the service cost component (i.e., the non-service cost components) are included in ~~MVP Terminalling, LLC (MVP)~~“other income (expense), an unconsolidated joint venture with a subsidiary of Magellan Midstream Partners LP (Magellan), for $270 million. 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.net.”

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~7. 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
2021 2020 2021 2020
Three months ended March 31
Service cost $ 40 $ 35 $ 2 $ 1
Interest cost 18 21 2 2
Expected return on plan assets (48) (44) 0 0
Amortization of:
Net actuarial loss 20 18 0 0
Prior service credit (4) (5) (2) (1)
Net periodic benefit cost
$ 26 $ 25 $ 2 $ 2

~~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.~~

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 months ended March 31, 2021 and 2020, we contributed $21 million and $12 million, respectively, to our pension plans and $3 million and $4 million, respectively, to our other postretirement benefit plans.

8. ~~INCOME TAXES~~

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 income tax benefit of $616 million for the three months ended March 31, 2020, of which $110 million was attributable to the 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 we paid federal income tax at a 35 percent tax rate. In addition, we were not limited in the amount of interest expense we could deduct. The remaining income tax benefit was primarily due to the LCM inventory valuation adjustment that resulted in a tax benefit of $551 million.

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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)


	Three Months Ended March 31,
		2022		2021
Earnings (loss) per common share:
Net income (loss) attributable to Valero stockholders		$	905	$	(704)
Less: Income allocated to participating securities		3		1
Net income (loss) available to common stockholders		$	902	$	(705)

Weighted-average common shares outstanding		408		407

Earnings (loss) per common share		$	2.21	$	(1.73)

Earnings (loss) per common share – assuming dilution:
Net income (loss) attributable to Valero stockholders		$	905	$	(704)
Less: Income allocated to participating securities		3		1
Net income (loss) available to common stockholders		$	902	$	(705)

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

Earnings (loss) per common share – assuming dilution		$	2.21	$	(1.73)

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.

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~~VALERO ENERGY CORPORATION~~

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

~~10.~~9. 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.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Contract Balances

Contract balances were as follows (in millions):


		March 31, 2021		December 31, 2020		Increase			March 31, 2022		December 31, 2021
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	$	8,395	$	6,228
Contract liabilities, included in accrued expenses	Contract liabilities, included in accrued expenses	104		55		49		Contract liabilities, included in accrued expenses	164		78

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

~~For the three~~ months ended March 31, ~~2021~~2022 and ~~2020,~~2021, we recognized as revenue ~~$37~~$69 million and ~~$52~~$37 million ~~respectively,~~ that was included in contract liabilities as of December 31, 2021 and 2020, ~~and 2019,~~ respectively.

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, ~~2021,~~2022, 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,~~Refining, Renewable Diesel, and ~~ethanol.~~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~~Refining segment includes the operations of our petroleum refineries, the associated ~~marketing~~ activities to market our refined petroleum products, and the 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.

•The Renewable Diesel segment represents the operations of DGD, a consolidated joint venture as discussed in Note 6, and the associated activities to market renewable diesel. 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 and the associated activities to market our ethanol and co-products. 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.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~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. 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, 2022												Three months ended March 31, 2022
Revenues:												Revenues:
Revenues from external customers												Revenues from external customers	$	36,813	$	595	$	1,134	$	—	$	38,542
Intersegment revenues												Intersegment revenues	4		386		127		(517)		—
Total revenues												Total revenues	36,817		981		1,261		(517)		38,542
Cost of sales:												Cost of sales:
Cost of materials and other(a)												Cost of materials and other(a)	33,606		755		1,104		(516)		34,949

Operating expenses (excluding depreciation and amortization expense reflected below)												Operating expenses (excluding depreciation and amortization expense reflected below)	1,193		51		135		—		1,379
Depreciation and amortization expense												Depreciation and amortization expense	549		26		20		—		595
Total cost of sales												Total cost of sales	35,348		832		1,259		(516)		36,923
Other operating expenses												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)	—		—		—		205		205
Depreciation and amortization expense												Depreciation and amortization expense	—		—		—		11		11

Operating income by segment												Operating income by segment	$	1,451	$	149	$	1	$	(217)	$	1,384

		Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Three months ended March 31, 2021	Three months ended March 31, 2021											Three months ended March 31, 2021
Revenues:	Revenues:											Revenues:
Revenues from external customers	Revenues from external customers	$	19,469	$	352	$	985	$	0	$	20,806	Revenues from external customers	$	19,469	$	352	$	985	$	—	$	20,806
Intersegment revenues	Intersegment revenues	3		79		60		(142)		—		Intersegment revenues	3		79		60		(142)		—
Total revenues	Total revenues	19,472		431		1,045		(142)		20,806		Total revenues	19,472		431		1,045		(142)		20,806
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)	18,022		187		924		(141)		18,992

Operating expenses (excluding depreciation and amortization expense reflected below)	Operating expenses (excluding depreciation and amortization expense reflected below)	1,471		29		156		0		1,656		Operating expenses (excluding depreciation and amortization expense reflected below)	1,471		29		156		—		1,656
Depreciation and amortization expense	Depreciation and amortization expense	533		12		21		0		566		Depreciation and amortization expense	533		12		21		—		566
Total cost of sales	Total cost of sales	20,026		228		1,101		(141)		21,214		Total cost of sales	20,026		228		1,101		(141)		21,214
Other operating expenses	Other operating expenses	38		0		0		0		38		Other operating expenses	38		—		—		—		38
General and administrative expenses (excluding depreciation and amortization expense reflected below)	General and administrative expenses (excluding depreciation and amortization expense reflected below)	0		0		0		208		208		General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		208		208
Depreciation and amortization expense	Depreciation and amortization expense	0		0		0		12		12		Depreciation and amortization expense	—		—		—		12		12

Operating income (loss) by segment	Operating income (loss) by segment	$	(592)	$	203	$	(56)	$	(221)	$	(666)	Operating income (loss) by segment	$	(592)	$	203	$	(56)	$	(221)	$	(666)

________________________

(a)Cost of materials and other for our Renewable Diesel segment is net of the blender’s tax credit on qualified fuel mixtures of $156 million and $79 million for the three months ended March 31, 2022 and 2021, respectively.

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VALERO ENERGY CORPORATION

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 our principal products by reportable segment (in millions):


		Three Months Ended March 31,						Three Months Ended March 31,
			2021		2020				2022		2021
Refining:	Refining:						Refining:
Gasolines and blendstocks	Gasolines and blendstocks		$	8,729	$	8,244	Gasolines and blendstocks		$	15,560	$	8,729
Distillates	Distillates		8,581		10,663		Distillates		17,444		8,581
Other product revenues	Other product revenues		2,159		2,078		Other product revenues		3,809		2,159
Total refining revenues	Total refining revenues		19,469		20,985		Total refining revenues		36,813		19,469
Renewable diesel:
Renewable Diesel:							Renewable Diesel:
Renewable diesel	Renewable diesel		352		306		Renewable diesel		595		352
Ethanol:	Ethanol:						Ethanol:
Ethanol	Ethanol		752		629		Ethanol		875		752
Distillers grains	Distillers grains		233		182		Distillers grains		259		233
Total ethanol revenues	Total ethanol revenues		985		811		Total ethanol revenues		1,134		985

Revenues	Revenues		$	20,806	$	22,102	Revenues		$	38,542	$	20,806

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


	March 31, 2022		December 31, 2021
Refining	$	51,071	$	47,365
Renewable Diesel	3,933		3,437
Ethanol	1,780		1,812
Corporate and eliminations	3,618		5,274
Total assets	$	60,402	$	57,888

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. SUPPLEMENTAL CASH FLOW INFORMATION

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


	Three Months Ended March 31,
	2022		2021
Decrease (increase) in current assets:
Receivables, net	$	(2,653)	$	(2,946)
Inventories	(940)		175

Prepaid expenses and other	(77)		(24)
Increase (decrease) in current liabilities:
Accounts payable	2,744		2,992
Accrued expenses	(120)		105
Taxes other than income taxes payable	36		(144)
Income taxes payable	288		26
Changes in current assets and current liabilities	$	(722)	$	184

Changes in current assets and current liabilities for the three months ended March 31, 2022 were primarily due to the following:

•The increase in receivables was primarily due to an increase in refined petroleum product prices in March 2022 compared to December 2021;

•The increase in inventories was primarily due to an increase in inventory unit prices and higher inventory levels in March 2022 compared to December 2021; and

•The increase in accounts payable was due to an increase in crude oil and other feedstock prices in March 2022 compared to December 2021, partially offset by a decrease in crude oil and other feedstock volumes purchased.

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

•The increase in receivables was primarily due to an increase in refined petroleum product 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 crude oil and other feedstock prices in March 2021 compared to December 2020 combined with an increase in crude oil and other feedstock volumes purchased.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Total assets by reportable segment~~Cash flows related to interest and income taxes 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


	Three Months Ended March 31,
	2022		2021
Interest paid in excess of amount capitalized, including interest on finance leases	$	93	$	103
Income taxes paid, net	204		36

~~11. SUPPLEMENTAL CASH FLOW INFORMATION~~

~~In order~~Supplemental cash flow information related to ~~determine net cash used in~~our operating ~~activities, net lossis adjusted by, among other things, changes in current assets~~ and ~~current liabilities~~finance leases was 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)


	Three Months Ended March 31,
	2022				2021
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	97	$	20	$	100	$	18

Financing cash flows	—		41		—		31
Changes in lease balances resulting from new and modified leases	79		100		72		7

~~Changes in current assets~~There were no significant noncash investing and ~~current liabilities for~~financing activities during the three months ended March 31, 2022 and 2021, ~~were primarily due to~~except as noted in 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.~~

table above.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Changes in current assets and current liabilities for the three months ended March 31, 2020 were primarily due to the following:~~

•the decrease in receivables was due to (i) a decrease of $3.4 billion as a result of a decrease in commodity prices in March 2020 compared to December 2019 combined with a decrease in sales volumes and (ii) an increase in income taxes receivable of $430 million primarily due to the recognition of the 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.

~~Table of Contents~~

~~VALERO ENERGY CORPORATION~~

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

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

~~12.~~11. 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, ~~2021~~2022 and December 31, ~~2020.~~2021.

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																	March 31, 2022
								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	$	1,815	$	—	$	—	$	1,815	$	(1,811)	$	—	$	4	$	—
Physical purchase contracts	Physical purchase contracts	0		10		0		10		n/a		n/a		10		n/a		Physical purchase contracts	—		24		—		24		n/a		n/a		24		n/a

Foreign currency contracts	Foreign currency contracts	10		0		0		10		n/a		n/a		10		n/a		Foreign currency contracts	48		—		—		48		n/a		n/a		48		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	79		—		6		85		n/a		n/a		85		n/a

Total	Total	$	471	$	10	$	8	$	489	$	(386)	$	0	$	103			Total	$	1,942	$	24	$	6	$	1,972	$	(1,811)	$	—	$	161

Liabilities	Liabilities																	Liabilities
Commodity derivative contracts	Commodity derivative contracts	$	444	$	0	$	0	$	444	$	(386)	$	(58)	$	0	$	(120)	Commodity derivative contracts	$	2,423	$	—	$	—	$	2,423	$	(1,811)	$	(612)	$	—	$	(194)
Environmental credit obligations		0		62		0		62		n/a		n/a		62		n/a
Blending program obligations																		Blending program obligations	—		18		—		18		n/a		n/a		18		n/a
Physical purchase contracts																		Physical purchase contracts	—		2		—		2		n/a		n/a		2		n/a

Foreign currency contracts																		Foreign currency contracts	7		—		—		7		n/a		n/a		7		n/a
Total	Total	$	444	$	62	$	0	$	506	$	(386)	$	(58)	$	62			Total	$	2,430	$	20	$	—	$	2,450	$	(1,811)	$	(612)	$	27

2019

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


		December 31, 2020																							December 31, 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	$	403	$	0	$	0			$	403			$	(373)				$	(18)			$	12			$	0	Commodity derivative contracts		$	522				$	—			$	—			$	522			$	(444)			$	(15)			$	63	$	—
Physical purchase contracts	Physical purchase contracts	0		13		0		13				n/a		n/a			13				n/a			Physical purchase contracts	—				4					—				4				n/a				n/a				4				n/a

Foreign currency contracts																								Foreign currency contracts	1				—					—				1				n/a				n/a				1				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	83				—					6				89				n/a				n/a				89				n/a

Total	Total	$	477	$	13	$	8	$	498			$	(373)	$	(18)		$	107						Total	$	606			$	4				$	6			$	616			$	(444)			$	(15)			$	157

Liabilities	Liabilities																							Liabilities
Commodity derivative contracts	Commodity derivative contracts	$	405	$	0	$	0	$	405			$	(373)	$	(32)		$	0			$	(44)		Commodity derivative contracts	$	472			$	—				$	—			$	472			$	(444)			$	(28)			$	—			$	(41)
Environmental credit obligations		0		96		0		96				n/a		n/a			96				n/a

Blending program obligations																								Blending program obligations	—				57					—				57				n/a				n/a				57				n/a
Physical purchase contracts																								Physical purchase contracts	—				5					—				5				n/a				n/a				5				n/a
Foreign currency contracts	Foreign currency contracts	4		0		0		4				n/a		n/a			4				n/a			Foreign currency contracts	10				—					—				10				n/a				n/a				10				n/a
Total	Total	$	409	$	96	$	0	$	505			$	(373)	$	(32)		$	100						Total	$	482			$	62				$	—			$	544			$	(444)			$	(28)			$	72

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.~~12. 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 foreign 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.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

•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.

•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

~~Table of Contents~~

~~VALERO ENERGY CORPORATION~~

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

~~(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.~~

•~~Environmental credit~~Blending program obligations represent our liability for the purchase of ~~(i) biofuel~~compliance credits ~~(primarily Renewable Identification Numbers (RINs) in the U.S.)~~ needed to satisfy our ~~obligation to blend biofuels into~~blending obligations under various governmental and regulatory blending programs, such as the ~~products we produce and (ii) emission credits under~~U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard (RFS), the California ~~Global Warming Solutions Act~~ ~~(the California cap-and-trade system, also known as AB 32)~~Low Carbon Fuel Standard, and similar programs in other jurisdictions in which we operate (collectively, the ~~cap-and-trade systems)~~Renewable and Low-Carbon Fuel Blending Programs). To the degree we are unable to blend biofuels (such as ethanol and biodiesel) at percentages required under the biofuel programs, we must purchase biofuel credits to comply with these programs. Under the cap-and-trade systems, we must purchase emission credits to comply with these systems. These programs are described in Note 13 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 creditblending program 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, ~~2021~~2022 and December 31, ~~2020.~~2021.

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
Fair Value
Hierarchy Carrying
Amount Fair
Value Carrying
Amount Fair
Value
Financial assets
Cash and cash equivalents Level 1 $ 2,254 $ 2,254 $ 3,313 $ 3,313
Financial liabilities
Debt (excluding finance leases) Level 2 13,024 14,776 13,013 15,103


		March 31, 2022				December 31, 2021
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	Level 1	$	2,638	$	2,638	$	4,122	$	4,122
Financial liabilities:
Debt (excluding finance lease obligations)	Level 2	11,195		11,952		11,950		13,668

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~13.~~12. 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~~the Renewable and ~~regulatory programs.~~Low-Carbon Fuel Blending 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)~~11), 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, waste and renewable feedstocks, 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.~~directors (Board).

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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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of March 31, ~~2021,~~2022, 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			2022	2023
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	1,634	—
Futures – short	Futures – short	1,605	0		Futures – short	4,617	—

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	77,765	6
Futures – short	Futures – short	56,880	22		Futures – short	79,740	—

Corn:	Corn:				Corn:
Futures – long	Futures – long	63,630	10		Futures – long	70,295	205
Futures – short	Futures – short	90,395	365		Futures – short	119,175	1,580
Physical contracts – long	Physical contracts – long	26,563	351		Physical contracts – long	46,597	1,391

Foreign Currency Risk

We are exposed to exchange rate fluctuations on transactions related to our ~~international~~foreign 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 often 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, ~~2021,~~2022, we had foreign currency contracts to purchase ~~$245~~$709 million of U.S. dollars and ~~$2.8~~$3.1 billion of U.S. dollar equivalent Canadian dollars. Of these commitments, ~~$1.0~~$1.8 billion matured on or before April ~~27, 2021~~25, 2022 and the remaining $2.0 billion will mature by ~~July 15, 2021.~~June 16, 2022.

~~Environmental Compliance Program~~Renewable and Low-Carbon Fuel Blending Programs Price Risk

We are exposed to market risk related to the volatility in the price of credits needed to comply with ~~various governmental~~the Renewable and ~~regulatory environmental compliance programs.~~Low-Carbon Fuel Blending Programs. To manage this risk, we enter into contracts to purchase these ~~credits when prices are deemed favorable.~~credits. 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~~The Renewable and Low-Carbon Fuel Blending Programs require us to blend ~~biofuels~~a certain volume of renewable and low-carbon fuels into the ~~products~~petroleum-based transportation fuels we produce ~~and we are subject to such programs~~ in, ~~most of the countries in which we operate. These countries set annual quotas for the percentage of biofuels that must be blended~~or import into, the ~~motor fuels~~respective jurisdiction to be consumed ~~in these countries. 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.~~therein based on annual quotas. To the degree we are unable to blend at the ~~applicable rate,~~required quotas, we must purchase ~~biofuel~~compliance credits (primarily ~~RINs in~~renewable identification numbers (RINs)). For the ~~U.S.). We are exposed to~~three months ended March 31, 2022 and 2021, 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 credit obligations under the Renewable and Low-Carbon Fuel Blending Programs was $302 million and $395 million, respectively, which are reflected in cost of materials and other.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

obligations under these compliance programs was $360 million and $112 million for the three months ended March 31, 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 programs, including the cap-and-trade systems, as discussed in Note 12. Under these cap-and-trade systems, we purchase various GHG emission credits available on the open market. 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 are significant; however, we recovered substantially all of these costs from our customers for the three months ended March 31, 2021 and 2020 and expect to continue to recover the majority of these costs in the future. For the three months ended March 31, 2021 and 2020, the net cost of meeting our obligations under these compliance 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, ~~2021~~2022 and December 31, ~~2020~~2021 (in millions) and the line items in the balance sheets in which the fair values are reflected. See Note 1211 for additional information related to the fair values of our derivative instruments.

As indicated in Note ~~12,~~11, 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		March 31, 2022						December 31, 2021
			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		$	94		$	220		$	3		$	26

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		$	1,721		$	2,203		$	519		$	446
Physical purchase contracts	Physical purchase contracts	Inventories		10			0			13			0		Physical purchase contracts	Inventories		24			2			4			5
Foreign currency contracts	Foreign currency contracts	Receivables, net		10			0			0			0		Foreign currency contracts	Receivables, net		48			—			1			—
Foreign currency contracts	Foreign currency contracts	Accrued expenses		0			0			0			4		Foreign currency contracts	Accrued expenses		—			7			—			10
Total	Total			$	401		$	434		$	412		$	392	Total			$	1,793		$	2,212		$	524		$	461

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.~~Board. 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.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

The following table provides information about the ~~gain (loss)~~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 March 31,
			2022			2021
Commodity contracts:
Loss recognized in other comprehensive income (loss) on derivatives	n/a			$	(164)		$	(13)
Loss reclassified from accumulated other comprehensive loss into income	Revenues			(119)			(23)

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 months ended March 31, ~~2021~~2022 and ~~2020.~~2021. For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, 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, ~~2021~~2022 was immaterial. For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, there wereno amountsreclassified 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 months ended March 31, ~~2021~~2022 and ~~2020~~2021 are described in Note 5.

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 March 31,
			2021		2020								2022			2021
Commodity contracts	Commodity contracts	Revenues	$	7	$	(8)			Commodity contracts					$	(4)		$	7
Commodity contracts	Commodity contracts	Cost of materials and other	(78)		(152)				Commodity contracts		Cost of materials and other						(595)			(78)
Commodity contracts	Commodity contracts	Operating expenses (excluding depreciation and amortization expense)	1		(2)				Commodity contracts	Operating expenses (excluding depreciation and amortization expense)						3			1
Foreign currency contracts	Foreign currency contracts	Cost of materials and other	(8)		49				Foreign currency contracts	Cost of materials and other						(2)			(8)
Foreign currency contracts	Foreign currency contracts	Other income, net	30		(165)				Foreign currency contracts	Other income (expense), net						34			30

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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~~effect, impact, potential duration or timing, or other implications of ~~large excess costs and expenses arising out of storms and other weather events, such as Winter Storm Uri;~~the Russia-Ukraine conflict;

•future ~~refining~~Refining segment margins, including gasoline and distillate margins, and discounts;

•future ~~renewable diesel~~Renewable Diesel segment margins;

•future ~~ethanol~~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~~liquid transportation fuel inventories and storage capacity;

•expectations regarding the levels of, and timing with respect to, the production and operations at our existing refineries and ~~plants;~~plants and projects under construction;

•our anticipated level of capital investments, including deferred turnaround and catalyst cost expenditures, our expected allocation between, and/or within, growth capital expenditures and sustaining capital expenditures, capital expenditures for environmental and other purposes, and joint venture investments, the expected timing applicable to such capital investments and any related projects, and the effect of those capital investments on our business, financial condition, results of ~~operations;~~operations, and liquidity;

•our anticipated level of cash distributions or contributions, such as our dividend payment rate and contributions to our qualified pension plans and other postretirement benefit plans;

•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

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ability to repatriate cash held by our foreign subsidiaries, and the anticipated effect thereof on our business, financial condition, results of operations, and liquidity;

•the effect of general economic and other conditions 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;

•the effects of war or hostilities, and 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;~~

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

•the actions taken by competitors, including both pricing and adjustments to refining capacity or renewable fuels production in response to market conditions;

•the level of competitors’ imports into markets that we supply;

•accidents, unscheduled shutdowns, weather events, civil unrest, expropriation of assets, and other economic, diplomatic, legislative, or political events or developments, terrorism, cyberattacks, or other catastrophes or disruptions affecting our operations, production facilities, machinery, pipelines and other logistics assets, equipment, or information systems, or any of the foregoing of our suppliers, customers, or third-party service providers;

•changes in the cost or availability of transportation or storage capacity for feedstocks and our products;

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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~~compliance 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~~waste and ~~recycled materials,~~renewable feedstocks, corn, and other feedstocks, critical supplies, refined petroleum products, renewable diesel, and ethanol;

•rulings, judgments, or settlements in litigation or other legal or regulatory matters, including unexpected environmental remediation costs, in excess of any reserves or insurance coverage;

•legislative or regulatory action, including the introduction or enactment of legislation or rulemakings by 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~~Renewable and ~~similar~~Low-Carbon Fuel Blending Programs and 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)~~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;

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•the operating, financing, and distribution decisions of our joint ventures or other joint venture members that we do not control;

•changes in currency exchange rates, including the value of the Canadian dollar, the pound sterling, the euro, the Mexican peso, and the Peruvian sol relative to the U.S. dollar;

•the adequacy of capital resources and liquidity, including availability, timing, and amounts of cash flow or our ability to ~~borrow;~~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”~~“RISK FACTORS” section included in our annual report on Form 10-K for the year ended December 31, ~~2020.~~2021.

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~~applicable 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 applicable 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,~~Refining, Renewable Diesel, and ~~ethanol~~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) beginning on page 4139 for reconciliations of adjusted operating income (loss) (including adjusted operating income (loss) for each of our reportable segments, as applicable) and ~~refining, renewable diesel,~~Refining, Renewable Diesel, and ~~ethanol~~Ethanol segment margin to their most directly comparable ~~U.S.~~ GAAP financial measures. Also in note (c), we disclose the reasons why we believe our use of such non-GAAP financial measures provides useful information. See the table on page 4745 for a reconciliation of capital investments attributable to Valero to its most directly comparable ~~U.S.~~ GAAP financial measure. Beginning on page ~~46,~~44, we disclose the reasons why we believe our use of this non-GAAP financial measure provides useful information.

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OVERVIEW AND OUTLOOK

Overview

Business Operations Update

~~The outbreak of~~Despite the ongoing COVID-19 ~~and its development into 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 spread of COVID-19. These actions significantly reduced global economic activity andwhich negatively impacted ~~many businesses, including~~the demand for and market prices of our ~~business. We experienced a decline in~~products throughout much of the last two years, the demand for most of our products returned to near pre-pandemic levels by the ~~transportation fuels~~latter half of 2021 and has remained at those levels during the first quarter of 2022. Demand for most of our products improved along with improvements in the global economy as the worldwide efforts to address the virus have progressed. While increased demand has led to higher market prices for most of our products, including higher market prices for crude oil and other feedstocks that we ~~produce~~purchase and ~~sell, and thus also a decline in the market prices of~~process to make those products, ~~due~~the negative impact to ~~a decrease in~~ the ~~level~~worldwide supply of ~~individual movement~~crude oil and ~~travel~~petroleum-based products resulting from the ~~restrictions. There~~Russian invasion of and military attack on Ukraine in February 2022 was ~~also~~the primary reason for the market price increases during the quarter. Various actions taken by countries and private market participants regarding the purchase and transport of Russian crude oil and petroleum-based products in response to the invasion has resulted in a ~~decline~~lower worldwide supply of these products and a corresponding increase in prices. The strong demand and associated increase in refining margins were the primary contributors to us reporting $905 million of net income attributable to Valero stockholders for the first quarter of 2022. Our operating results, including operating results by segment, are described in the ~~global demand~~following summary under “First Quarter Results” and detailed descriptions can be found under “RESULTS OF OPERATIONS.”

Our operations generated $588 million of cash during the first quarter of 2022. This cash, along with cash on hand, was used to make $843 million of capital investments in our business and return $545 million to our stockholders through dividend payments and the purchase of common stock for ~~crude oil, the primary feedstock for the products of~~treasury. In addition, we completed debt reduction and refinancing transactions that reduced our ~~refining segment, resulting in a decline in crude oil prices and production levels.~~long-term debt by $750 million. As a result of ~~these factors, we generated a net loss attributable to Valero stockholders in 2020~~this 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 increaseother activity, our cash and cash equivalents ~~on hand~~decreased by $1.5 billion, from $4.1 billion as of December 31, ~~2020 compared~~2021 to ~~the prior year end.~~$2.6 billion as of March 31, 2022. We had $7.3 billion in liquidity as of March 31, 2022. The components of our liquidity and descriptions of our cash flows, capital investments, and other matters impacting our liquidity and capital resources, can be found under “LIQUIDITY AND CAPITAL RESOURCES.”

First Quarter Results

For the first quarter of ~~2021,~~2022, we reported net income attributable to Valero stockholders of $905 million compared to a net loss attributable to Valero stockholders of $704 million. The factor primarily impacting these 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~~for the first quarter of 2021. ~~Our results for the first quarter are more fully discussed in “First Quarter Results” below~~The increase of $1.6 billion was primarily due to higher operating income of $2.1 billion, partially offset by higher income tax expense of $400 million. The details of our operating income (loss) and adjusted operating income (loss) by segment and in ~~“RESULTS OF OPERATIONS” beginning~~total are reflected on ~~page 33.~~the following page. Adjusted operating income (loss) excludes the adjustments reflected in the tables in note (c).

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	Three Months Ended March 31,
	2022		2021		Change
Refining segment:
Operating income (loss)	$	1,451	$	(592)	$	2,043
Adjusted operating income (loss)	1,469		(506)		1,975
Renewable Diesel segment:
Operating income	149		203		(54)

Ethanol segment:
Operating income (loss)	1		(56)		57
Adjusted operating income (loss)	2		(56)		58
Total company:
Operating income (loss)	1,384		(666)		2,050
Adjusted operating income (loss)	1,403		(580)		1,983

While our operating income increased by $2.1 billion in the ~~significant increase in energy costs was an event isolated~~first quarter of 2022 compared 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.

The 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 our liquidity during the first quarter of 2021. Our operations for the quarter used $52 million of cash largely due to the effect from estimated excess energy costs previously noted, the majority of which were paid by the end of the first quarter. We also made $582 million in capital investments and paid $400 million in dividends during the quarter. As a result, our cash and cash equivalents decreased by $1.0 billion, from $3.3 billion as of December 31, 2020 to $2.3 billion as of March 31, 2021. We did not issue any debt or make any borrowings under our credit facilities during the first quarter of 2021, and we had $8.0 billion in liquidity1 as of March 31, 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~~.”

~~Table of Contents~~

~~First Quarter Results~~

For the first quarter of 2021, we reported a net loss attributable to Valero stockholders of $704 million compared to a net loss attributable to Valero stockholders of $1.9 billion for the first quarter of 2020. The improvement of $1.1 billion was primarily due to a lower operating loss of $1.6 billion, partially offset by a lower income tax benefit of $468 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 by $1.6 billion in the first quarter of 2021 compared to the first quarter of 2020,~~ adjusted operating income ~~decreased~~increased by ~~$895 million. Adjusted operating income excludes the adjustments reflected in the table in note (c) on page 44.~~

~~The $895 million decrease in adjusted operating income was~~$2.0 billion primarily due to the following:

•Refining segment. Refining segment adjusted operating income ~~decreased~~increased by ~~$883 million~~$2.0 billion primarily due to higher gasoline and distillate (primarily diesel) margins, the effect of estimated excess energy costs in the first quarter of 2021 arising ~~out of~~from Winter Storm Uri, ~~lower distillate margins, lower throughput volumes,~~ and higher ~~cost of biofuel credits, partially offset by higher gasoline margins. This is more fully described on pages 37 and 38.~~throughput volumes.

•Renewable ~~diesel~~Diesel segment. Renewable ~~diesel~~Diesel segment operating income ~~increased~~decreased by $5$54 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. This is more fully described on page 39.~~activities, and higher operating expenses (excluding depreciation and amortization expense), partially offset by higher sales volumes and higher renewable diesel prices.

•Ethanol segment. Ethanol segment adjusted operating ~~loss decreased~~income increased by ~~$13~~$58 million primarily due to higher ethanol prices and ~~corn related co-product prices,~~the effect of estimated excess energy costs in the first quarter of 2021 arising from Winter Storm Uri, partially offset by higher corn ~~prices, estimated excess energy costs arising out of Winter Storm Uri, and lower production volumes. This is more fully described on pages 40 and 41.~~prices.

Outlook

~~As previously discussed, many~~Many uncertainties remain with respect to the Russia-Ukraine conflict and the COVID-19 pandemic, and while it is difficult to predict the ultimate economic impacts that ~~the pandemic~~these events may have on us, ~~and how quickly we can recover once the pandemic subsides,~~ we have noted several factors below that have impacted or may impact our results of operations during the second quarter of ~~2021.~~2022.

•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 improve ~~with industry-wide inventory levels returning to historical levels and continued recovery in product demand.~~slowly, but remains below pre-pandemic levels.

•~~Sour crude~~Crude oil discounts are expected to ~~continue to improve as OPEC production increases in response to any further growth in global oil demand.~~remain near current levels until restrictions against Russia, Iran, or Venezuela are lifted.

•Renewable diesel margins are expected to remain consistent with current levels.

•Ethanol margins are expected to improve as ~~domestic consumption increases.~~demand follows typical seasonal patterns.

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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) beginning on page ~~41,~~39, highlight our results of operations, our operating performance, and market reference prices ~~and margins~~ that directly impact our operations. Note references in this section can be found on pages 39 through 42.

First Quarter Results -

Financial Highlights By Segment and Total Company

(millions of dollars)

Three Months Ended March 31, 2021
Refining Renewable
Diesel Ethanol Corporate
and
Eliminations Total
Revenues:
Revenues from external customers $ 19,469 $ 352 $ 985 $ — $ 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 (a) 18,022 187 924 (141) 18,992
Operating expenses (excluding depreciation and
amortization expense reflected below) (a)
1,471 29 156 — 1,656
Depreciation and amortization expense 533 12 21 — 566
Total cost of sales 20,026 228 1,101 (141) 21,214
Other operating expenses 38 — — — 38
General and administrative expenses (excluding
depreciation and amortization expense reflected
below)
— — — 208 208
Depreciation and amortization expense — — — 12 12
Operating income (loss) by segment $ (592) $ 203 $ (56) $ (221) (666)
Other income, net 45
Interest and debt expense, net of capitalized
interest
(149)
Loss before income tax benefit (770)
Income tax benefit (148)
Net loss (622)
Less: Net income attributable to noncontrolling
interests
82
Net loss attributable to
Valero Energy Corporation stockholders
$ (704)

~~________________________~~

~~See note references on pages 41 through 44.~~


	Three Months Ended March 31, 2022
	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Revenues:
Revenues from external customers	$	36,813	$	595	$	1,134	$	—	$	38,542
Intersegment revenues	4		386		127		(517)		—
Total revenues	36,817		981		1,261		(517)		38,542
Cost of sales:
Cost of materials and other	33,606		755		1,104		(516)		34,949

Operating expenses (excluding depreciation and amortization expense reflected below)	1,193		51		135		—		1,379
Depreciation and amortization expense	549		26		20		—		595
Total cost of sales	35,348		832		1,259		(516)		36,923
Other operating expenses	18		—		1		—		19
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		205		205
Depreciation and amortization expense	—		—		—		11		11
Operating income by segment	$	1,451	$	149	$	1	$	(217)	1,384
Other expense, net (b)									(20)
Interest and debt expense, net of capitalized interest									(145)
Income before income tax expense									1,219
Income tax expense									252
Net income									967
Less: Net income attributable to noncontrolling interests									62
Net income attributable to Valero Energy Corporation stockholders									$	905

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First Quarter Results -

Financial Highlights By Segment and Total Company (continued)

(millions of dollars)


		Three Months Ended March 31, 2020											Three Months Ended March 31, 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	$	20,985	$	306	$	811	$	—	$	22,102	Revenues from external customers	$	19,469	$	352	$	985	$	—	$	20,806
Intersegment revenues	Intersegment revenues	2		53		64		(119)		—		Intersegment revenues	3		79		60		(142)		—
Total revenues	Total revenues	20,987		359		875		(119)		22,102		Total revenues	19,472		431		1,045		(142)		20,806
Cost of sales:	Cost of sales:											Cost of sales:
Cost of materials and other(a)	Cost of materials and other(a)	19,127		130		813		(118)		19,952		Cost of materials and other(a)	18,022		187		924		(141)		18,992
LCM inventory valuation adjustment (b)		2,414		—		128		—		2,542

Operating expenses (excluding depreciation and amortization expense reflected below)(a)	Operating expenses (excluding depreciation and amortization expense reflected below)(a)	995		20		109		—		1,124		Operating expenses (excluding depreciation and amortization expense reflected below)(a)	1,471		29		156		—		1,656
Depreciation and amortization expense	Depreciation and amortization expense	536		11		22		—		569		Depreciation and amortization expense	533		12		21		—		566
Total cost of sales	Total cost of sales	23,072		161		1,072		(118)		24,187		Total cost of sales	20,026		228		1,101		(141)		21,214
Other operating expenses	Other operating expenses	2		—		—		—		2		Other operating expenses	38		—		—		—		38
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)	—		—		—		208		208
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	$	(592)	$	203	$	(56)	$	(221)	(666)
Other income, net	Other income, net									32		Other income, net									45
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									(149)
Loss before income tax benefit	Loss before income tax benefit									(2,370)		Loss before income tax benefit									(770)
Income tax benefit	Income tax benefit									(616)		Income tax benefit									(148)
Net loss	Net loss									(1,754)		Net loss									(622)
Less: Net income attributable to noncontrolling interests	Less: Net income attributable to noncontrolling interests									97		Less: Net income attributable to noncontrolling interests									82
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									$	(704)

~~________________________~~

~~See note references on pages 41 through 44.~~33

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First Quarter Results -

Average Market Reference Prices and Differentials


	Three Months Ended March 31,
	2022		2021
Refining
Feedstocks (dollars per barrel)
Brent crude oil	$	97.34	$	61.09
Brent less West Texas Intermediate (WTI) crude oil	2.88		3.26
Brent less Alaska North Slope (ANS) crude oil	1.73		0.33
Brent less Louisiana Light Sweet (LLS) crude oil	0.57		1.11
Brent less Argus Sour Crude Index (ASCI) crude oil	4.93		2.99
Brent less Maya crude oil	8.50		4.70
LLS crude oil	96.77		59.98
LLS less ASCI crude oil	4.36		1.88
LLS less Maya crude oil	7.93		3.59
WTI crude oil	94.46		57.84

Natural gas (dollars per million British Thermal Units)	4.32		19.66

Product margins (dollars per barrel)
U.S. Gulf Coast:
Conventional Blendstock of Oxygenate Blending (CBOB) gasoline less Brent	15.67		10.12
Ultra-low-sulfur (ULS) diesel less Brent	27.95		10.19
Propylene less Brent	(28.82)		18.50
CBOB gasoline less LLS	16.24		11.23
ULS diesel less LLS	28.52		11.30
Propylene less LLS	(28.25)		19.61
U.S. Mid-Continent:
CBOB gasoline less WTI	16.02		14.82
ULS diesel less WTI	27.27		17.21
North Atlantic:
CBOB gasoline less Brent	17.68		11.56
ULS diesel less Brent	32.47		11.89
U.S. West Coast:
California Reformulated Gasoline Blendstock of Oxygenate Blending (CARBOB) 87 gasoline less ANS	28.46		14.56
California Air Resources Board (CARB) diesel less ANS	32.27		14.14
CARBOB 87 gasoline less WTI	29.61		17.49
CARB diesel less WTI	33.42		17.07

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First 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)

~~Table of Contents~~

~~First Quarter Results -~~

~~Average Market Reference Prices and Differentials,~~ (continued)


		Three Months Ended March 31,							Three Months Ended March 31,
		2021		2020		Change			2022		2021
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)	$	3.04	$	1.74
Biodiesel RIN (dollars per RIN)	Biodiesel RIN (dollars per RIN)	1.18		0.46		0.72		Biodiesel RIN (dollars per RIN)	1.43		1.18
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)	138.63		195.30
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)	0.68		0.48

Ethanol	Ethanol							Ethanol
CBOT corn (dollars per bushel)	CBOT corn (dollars per bushel)	5.39		3.74		1.65		CBOT corn (dollars per bushel)	6.70		5.39
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)	2.39		1.78

Total Company, Corporate, and Other

The following table includes selected financial data for the total company, corporate, and other for the first quarter of ~~2021~~2022 and ~~2020.~~2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, ~~on pages 33 and 34,~~ 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 March 31,
	2022		2021		Change
Revenues	$	38,542	$	20,806	$	17,736
Cost of materials and other (see note (a))	34,949		18,992		15,957
Operating expenses (excluding depreciation and amortization expense) (see note (a))	1,379		1,656		(277)

Operating income (loss)	1,384		(666)		2,050
Adjusted operating income (loss) (see note (c))	1,403		(580)		1,983
Other income (expense), net (see note (b))	(20)		45		(65)

Income tax expense (benefit)	252		(148)		400
Net income attributable to noncontrolling interests	62		82		(20)

Revenues ~~decreased~~increased by ~~$1.3~~$17.7 billion in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020~~2021 primarily due to ~~a decrease~~increases in the ~~volume~~product prices of ~~refined petroleum products sold~~the petroleum-based transportation fuels associated with sales made by our ~~refining~~Refining segment. This ~~decrease~~increase in revenues, along with ~~an increase in general and administrative~~lower operating expenses (excluding depreciation and amortization expense) of ~~$31~~$277 million, ~~was more than offset by a decrease in cost~~which includes the impact of ~~sales~~estimated excess energy costs of ~~$3.0 billion, which resulted in a $1.6 billion decrease in operating loss, from $2.3 billion~~$532 million arising out of Winter Storm Uri in the first quarter of ~~2020~~2021, was partially offset by an increase in cost of materials and other of $16.0 billion primarily due to increases in crude oil and other feedstock costs. These changes resulted in a $2.1 billion increase in operating income, from an operating loss of $666 million in the first quarter of ~~2021. The decrease in cost~~2021 to operating income of ~~sales was primarily due to the effect of the $2.5~~$1.4 billion ~~LCM inventory valuation adjustment~~ in the first quarter of ~~2020 and lower production volumes resulting in lower crude oil and other feedstock costs~~2022.

Adjusted operating income increased by $2.0 billion, from an adjusted operating loss of $580 million in the first quarter of 2021 ~~partially offset by a $532 million increase in operating expenses (excluding depreciation and amortization expense).~~

~~Table of Contents~~

~~Adjusted~~to adjusted operating income ~~decreased by $895 million, from $267 million~~ of ~~adjusted operating income~~$1.4 billion in the first quarter of ~~2020 to an adjusted operating loss of $628 million in the first quarter of 2021.~~2022. 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 this increase is discussed below. The remaining components of ~~the decrease~~this $2.0 billion increase in adjusted operating income are discussed by segment in the segment analyses that follow.

~~General and administrative expenses (excluding depreciation and amortization expense) increased~~35

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“Other income (expense), net” decreased by ~~$31~~$65 million in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020~~2021 primarily due to ~~an increase~~a charge of $50 million from the early retirement of debt in ~~certain employee compensation expenses~~the first quarter of ~~$23 million and higher advertising expenses of $7 million.~~2022 (see note (b)).

~~“Interest and debt~~Income tax expense ~~net of capitalized interest”~~ increased by ~~$24~~$400 million in the first quarter of ~~2021~~2022 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 quarter of 2020~~ primarily as a result of ~~a lower loss~~higher income before income tax ~~benefit.~~expense. Our effective tax rate was 21 percent for the first quarter of 2022 compared to 19 percent for the first quarter of ~~2021 compared~~2021.

Net income attributable to ~~26 percent for~~noncontrolling interests decreased by $20 million in the first quarter of ~~2020. The effective tax rate for~~2022 compared to the first quarter of ~~2020 was impacted by the U.S. federal tax NOL for 2020, which was carried back~~2021 primarily due to ~~2015 when the U.S. federal statutory rate was 35 percent, as described in~~lower earnings associated with DGD, a consolidated joint venture. See Note 86 of Condensed Notes to Consolidated Financial ~~Statements.~~Statements regarding our accounting for DGD.

Refining Segment Results

The following table includes selected financial and operating data of our ~~refining~~Refining segment for the first quarter of ~~2021~~2022 and ~~2020.~~2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, ~~on pages 33 and 34, 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 March 31,
	2022		2021		Change




Operating income (loss)	$	1,451	$	(592)	$	2,043
Adjusted operating income (loss) (see note (c))	1,469		(506)		1,975

Refining margin (see note (c))	$	3,211	$	1,498	$	1,713
Operating expenses (excluding depreciation and amortization expense reflected below) (see note (a))	1,193		1,471		(278)
Depreciation and amortization expense	549		533		16

Throughput volumes (thousand barrels per day) (see note (e))	2,800		2,410		390

Refining segment operating ~~loss decreased~~income increased by ~~$1.5~~$2.0 billion in the first quarter of ~~2021; however, refining~~2022 compared to the first quarter of 2021. Refining segment adjusted operating income, which excludes the adjustments in the table in note (c) ~~on page 43, decreased~~, also increased by ~~$883 million~~$2.0 billion in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020.~~2021. 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~~$1.7 billion in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020.~~2021.

Refining segment margin is primarily affected by the prices of the ~~refined petroleum products~~petroleum-based transportation fuels that we sell and the cost of crude oil and other feedstocks that we process. The table on page 3534 reflects market reference prices and differentials that we believe had a material impact on the change in our ~~refining~~Refining segment margin in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020.~~2021.

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

◦~~A decrease~~An increase in distillate (primarily diesel) margins had ~~an unfavorable~~a favorable impact of approximately ~~$280 million.~~$1.1 billion.

◦
~~A decrease in throughput volumes of 414,000 barrels per day had an unfavorable impact of $249 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 the demand for the transportation fuels we produce, and 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 to align with improvements in demand, which reached near pre-pandemic levels in March 2021.

◦~~An increase in the cost~~Table of biofuel credits (primarily RINs in the U.S.) had an unfavorable impact of $248 million. See Note 13 of Condensed Notes to Consolidated Financial Statements for additional information on our government and regulatory compliance program.Contents

◦~~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~~$278 million.

◦An increase in throughput volumes of 390,000 barrels per day had a favorable impact of approximately $243 million.

•Refining segment operating expenses (excluding depreciation and amortization expense) ~~increased~~decreased by ~~$476~~$278 million primarily due to lower energy costs, which includes the effect of estimated excess energy costs in the first quarter of 2021 arising out of Winter Storm Uri of $478 million (see note (a) ~~on page 41)~~).

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Renewable Diesel Segment Results

The following table includes selected financial and operating data of our ~~renewable diesel~~Renewable Diesel segment for the first quarter of ~~2021~~2022 and ~~2020.~~2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, ~~on pages 33 and 34, respectively,~~ unless otherwise noted.


									Three Months Ended March 31,
									2022		2021		Change
		Three Months Ended March 31,
		2021		2020		Change
Operating income	Operating income	$	203	$	198	$	5	Operating income	$	149	$	203	$	(54)

Renewable diesel margin (see note (c) on page 42)		$	244	$	229	$	15
Renewable Diesel margin (see note (c))								Renewable Diesel margin (see note (c))	$	226	$	244	$	(18)
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)	51		29		22
Depreciation and amortization expense	Depreciation and amortization expense	12		11		1		Depreciation and amortization expense	26		12		14

Sales volumes (thousand gallons per day) (see note (d) on page 44)		867		867		—
Sales volumes (thousand gallons per day) (see note (e))								Sales volumes (thousand gallons per day) (see note (e))	1,738		867		871

Renewable ~~diesel~~Diesel segment operating income ~~increased~~decreased by $5$54 million in the first quarter of 2022 compared to the first quarter of 2021. The ~~increase was primarily due to higher renewable diesel segment margin.~~components of this decrease, along with the reasons for the changes in those components, are listed below.

•Renewable ~~diesel~~Diesel segment margin ~~increased~~decreased by ~~$15~~$18 million in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020.~~ 2021.

Renewable ~~diesel~~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 3635 reflects market reference prices that we believe had a material impact on the change in our ~~renewable diesel~~Renewable Diesel segment margin in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020.~~

2021.

The ~~increase~~decrease in ~~renewable diesel~~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~~$392 million.

•◦Price risk management activities had an unfavorable impact of ~~$49~~approximately $96 million. We recognized a hedge loss of $119 million in the first quarter of 2022 compared to a hedge loss of $23 million in the first quarter of ~~2021 compared to a hedge gain of $26 million in the first quarter of 2020.~~2021.

◦An increase in sales volumes of 871,000 gallons per day had a favorable impact of approximately $291 million. The increase in sales volume was primarily due to the

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additional production capacity resulting from the expansion of DGD’s existing renewable diesel plant (the DGD Plant) that commenced operations in the fourth quarter of 2021.

◦Higher renewable diesel prices had a favorable impact of approximately $166 million.

•Renewable Diesel segment operating expenses (excluding depreciation and amortization expense) increased by $22 million primarily due to increased costs resulting from the expansion of the DGD Plant that commenced operations in the fourth quarter of 2021.

•Renewable Diesel segment depreciation and amortization expense increased by $14 million primarily due to depreciation expense associated with the expansion of the DGD Plant that commenced operations in the fourth quarter of 2021.

Ethanol Segment Results

The following table includes selected financial and operating data of our ~~ethanol~~Ethanol segment for the first quarter of ~~2021~~2022 and ~~2020.~~2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, ~~on pages 33 and 34, 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 March 31,
	2022		2021		Change



Operating income (loss)	$	1	$	(56)	$	57
Adjusted operating income (loss) (see note (c))	2		(56)		58

Ethanol margin (see note (c))	$	157	$	121	$	36
Operating expenses (excluding depreciation and amortization expense reflected below) (see note (a))	135		156		(21)
Depreciation and amortization expenses	20		21		(1)

Production volumes (thousand gallons per day) (see note (e))	4,045		3,562		483

Ethanol segment operating ~~loss decreased~~income increased by ~~$141~~$57 million in the first quarter of ~~2021;~~2022; however, ~~ethanol~~Ethanol segment adjusted operating ~~loss,~~income, which excludes the adjustment in the table in note (c) ~~on page 43, decreased~~, increased by ~~$13~~$58 million in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020.~~2021. The components of this ~~decrease,~~increase in the adjusted results, along with the reasons for the changes in those components, are outlined below.

•Ethanol segment margin increased by ~~$59~~$36 million in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020.~~2021.

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 3635 reflects market reference prices that we believe had a material impact on the change in our ~~ethanol~~Ethanol segment margin in the first quarter of ~~2021~~2022 compared to the first quarter of ~~2020.~~

2021.

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

◦Higher ethanol prices had a favorable impact of approximately ~~$178~~$171 million.

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◦An increase in production volumes of 483,000 gallons per day had a favorable impact of approximately $21 million.

◦Higher prices on the co-products that we produce, primarily ~~distillers grains,~~inedible corn oil, had a favorable impact of approximately ~~$94~~$16 million.

◦Higher corn prices had an unfavorable impact of approximately ~~$188~~$175 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~~decreased by ~~$47~~$21 million primarily due to lower energy costs, which includes the effect of estimated excess energy costs in the first quarter of 2021 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.~~).

________________________

The following notes relate to references on pages 3032 through ~~41.~~39.

(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 for the three months ended March 31, 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 for the three months ended March 31, 2021 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)~~The market value~~“Other income (expense), net” for the three months ended March 31, 2022 includes a charge of $50 million from the early retirement of approximately $1.4 billion aggregate principal amount of various series 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. Of the $2.5 billion adjustment, $2.4 billion and $128 million are attributable to our refining and ethanol segments, respectively.

senior notes.

(c)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~~Refining and ~~ethanol~~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~~after adjusting for 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~~Refining margin, ~~renewable diesel~~Renewable Diesel margin, and ~~ethanol~~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~~Refining segment operating ~~loss~~income (loss) excluding the ~~LCM inventory valuation~~modification of RVO adjustment (as defined in note(d)), 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,			Three Months Ended March 31,
			2021			2020			2022		2021
Reconciliation of refining operating loss to refining margin
Refining operating loss			$	(592)		$	(2,087)
Reconciliation of Refining operating income (loss) to Refining margin								Reconciliation of Refining operating income (loss) to Refining margin
Refining operating income (loss)								Refining operating income (loss)	$	1,451	$	(592)
Adjustments:	Adjustments:							Adjustments:
LCM inventory valuation adjustment (see note (b))			—			2,414
Modification of RVO (see note (d))								Modification of RVO (see note (d))	—		48

Operating expenses (excluding depreciation and amortization expense) (see note (a))	Operating expenses (excluding depreciation and amortization expense) (see note (a))		1,471			995		Operating expenses (excluding depreciation and amortization expense) (see note (a))	1,193		1,471
Depreciation and amortization expense	Depreciation and amortization expense		533			536		Depreciation and amortization expense	549		533
Other operating expenses	Other operating expenses		38			2		Other operating expenses	18		38
Refining margin	Refining margin		$	1,450		$	1,860	Refining margin	$	3,211	$	1,498

◦Renewable ~~diesel~~Diesel margin is defined as ~~renewable diesel~~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


	Three Months Ended March 31,
	2022		2021
Reconciliation of Renewable Diesel operating income to Renewable Diesel margin
Renewable Diesel operating income	$	149	$	203
Adjustments:

Operating expenses (excluding depreciation and amortization expense)	51		29
Depreciation and amortization expense	26		12

Renewable Diesel margin	$	226	$	244

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

Three Months Ended
March 31,
2021 2020
Reconciliation of refining operating loss
to adjusted refining operating income (loss)
Refining operating loss $ (592) $ (2,087)
Adjustments:
LCM inventory valuation adjustment (see note (b)) — 2,414
Other operating expenses 38 2
Adjusted refining operating income (loss) $ (554) $ 329

◦~~Adjusted ethanol operating loss~~ ~~is defined as ethanol segment operating loss excluding the LCM inventory valuation adjustment, 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 March 31,
	2022		2021
Reconciliation of Ethanol operating income (loss) to Ethanol margin
Ethanol operating income (loss)	$	1	$	(56)
Adjustments:

Operating expenses (excluding depreciation and amortization expense) (see note (a))	135		156
Depreciation and amortization expense	20		21
Other operating expenses	1		—
Ethanol margin	$	157	$	121

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◦Adjusted Refining operating income (loss) is defined as Refining segment operating income (loss) ~~is defined as total company operating loss~~ excluding the ~~LCM inventory valuation~~modification of RVO adjustment and other operating expenses, as reflected in the table below.

Three Months Ended
March 31,
2021 2020
Reconciliation of total company operating loss
to adjusted operating income (loss)
Total company operating loss $ (666) $ (2,277)
Adjustments:
Other operating expenses 38 2
LCM inventory valuation adjustment (see note (b)) — 2,542
Adjusted operating income (loss) $ (628) $ 267


	Three Months Ended March 31,
	2022		2021
Reconciliation of Refining operating income (loss) to adjusted Refining operating income (loss)
Refining operating income (loss)	$	1,451	$	(592)
Adjustments:
Modification of RVO (see note (d))	—		48

Other operating expenses	18		38
Adjusted Refining operating income (loss)	$	1,469	$	(506)

◦Adjusted Ethanol operating income (loss) is defined as Ethanol segment operating income (loss) excluding other operating expenses, as reflected in the table below.


	Three Months Ended March 31,
	2022		2021
Reconciliation of Ethanol operating income (loss) to adjusted Ethanol operating income (loss)
Ethanol operating income (loss)	$	1	$	(56)



Other operating expenses	1		—
Adjusted Ethanol operating income (loss)	$	2	$	(56)

◦Adjusted operating income (loss) is defined as total company operating income (loss) excluding the modification of RVO adjustment and other operating expenses, as reflected in the table below.


	Three Months Ended March 31,
	2022		2021
Reconciliation of total company operating income (loss) to adjusted operating income (loss)
Total company operating income (loss)	$	1,384	$	(666)
Adjustments:

Modification of RVO (see note (d))	—		48

Other operating expenses	19		38
Adjusted operating income (loss)	$	1,403	$	(580)

(d)Under the RFS program, the EPA is required to set annual quotas for the volume of renewable fuels that must be blended into petroleum-based transportation fuels consumed in the U.S. by obligated parties. The quotas are used to determine an obligated party’s renewable volume obligation (RVO). In December 2021, the EPA released a proposed rule that, among other things, modified the volume standards for 2020 and, for the first time, established volume standards for 2021.

Because the existing volume standards for 2020 were established under a currently enforceable rule, we will recognize the effect of the modification in volume standards for 2020 in the period the final rule is enacted. However, because volume standards had not previously been established for 2021, we considered the new information available in the proposed rule in determining the estimated RVO for our Refining segment for the year ended December 31, 2021. As a result, we recognized in December 2021 a benefit related to the

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modification of our RVO estimate of $205 million, of which $48 million is attributable to the three months ended March 31, 2021.

(e)We use throughput volumes, sales volumes, and production volumes for the ~~refining~~Refining segment, ~~renewable diesel~~Renewable Diesel segment, and ~~ethanol~~Ethanol segment, respectively, due to their general use by others who operate facilities similar to those included in our segments.

LIQUIDITY AND CAPITAL RESOURCES

Overview

During the first quarter of ~~2021,~~2022, our liquidity was ~~negatively~~ impacted by the ~~ongoing impacts~~significant increases in commodity prices and our planned debt reduction and refinancing transactions. The significant increases in commodity prices affected the amount of cash generated by our product sales, as well as the ~~COVID-19 pandemic~~cash used to pay for our feedstock purchases. In addition, the debt reduction and ~~the negative effects arising out of Winter Storm Uri on energy costs at certain of~~refinancing transactions reduced our ~~refineries and ethanol plants during mid-February 2021, 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,~~long-term debt by $750 million as described in Note 4 of Condensed Notes to Consolidated Financial ~~Statements,~~Statements. Overall, our liquidity declined by $1.9 billion during the first quarter of 2022, from $9.2 billion as of December 31, 2021 to ~~be used for general corporate purposes. As~~$7.3 billion as of March 31, ~~2021~~2022.

Our Liquidity

Our liquidity consisted of the following as of March 31, 2022 (in millions):


Available capacity from our committed facilities (a):
Valero Revolver	$	3,385
Canadian Revolver (b)	117
Accounts receivable sales facility	1,300
Letter of credit facility	50
Total available capacity	4,852
Cash and cash equivalents (c)	2,481
Total liquidity	$	7,333

________________________

(a)Excludes the committed facilities of the consolidated VIEs.

(b)The amount for our Canadian Revolver is shown in U.S. dollars. As set forth in the summary of our credit facilities in Note 4 of Condensed Notes to Consolidated Financial Statements, the availability under our Canadian Revolver as of March 31, 2022 in Canadian dollars was C$145 million.

(c)Excludes $157 million of cash and ~~April 29, 2021, DGD had no~~cash equivalents related to the consolidated VIEs that is available for use only by the VIEs.

Information about our outstanding borrowings, letters of credit issued, and availability under ~~this facility.~~our credit facilities is reflected in Note 4 of Condensed Notes to Consolidated Financial Statements.

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.~~commitments over the next 12 months and thereafter for the foreseeable future. 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, 2021 (in millions):~~

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

~~Valero Revolver~~

~~3,882~~

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

~~875~~

~~Canadian Revolver(c)~~

~~116~~

~~Accounts receivable sales facility~~

~~1,000~~

~~Letter of credit facility~~

~~Total available borrowing capacity~~

~~5,923~~

~~Cash and cash equivalents(d)~~

~~2,044~~

~~Total liquidity~~

~~7,967~~

~~________________________~~

~~(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 4 of Condensed Notes to Consolidated Financial Statements, the availability under our Canadian Revolver as of March 31, 2021 in Canadian dollars was C$145 million.

~~(d)Excludes $210 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 4 of Condensed Notes to Consolidated Financial Statements.~~

Cash Flows

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


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020			2022		2021
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	$	588	$	(52)
Investing activities	Investing activities	(580)		(757)		Investing activities	(841)		(580)
Financing activities:	Financing activities:					Financing activities:
Borrowings		8		370
Debt issuances and borrowings						Debt issuances and borrowings	1,066		8
Repayments of debt and finance lease obligations (including premiums on early retirement of debt)						Repayments of debt and finance lease obligations (including premiums on early retirement of debt)	(1,904)		(32)
Other financing activities	Other financing activities	(447)		(565)		Other financing activities	(390)		(415)
Financing activities	Financing activities	(439)		(195)		Financing activities	(1,228)		(439)
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	(3)		12
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	$	(1,059)	$	(1,068)	Net decrease in cash and cash equivalents	$	(1,484)	$	(1,059)

Cash Flows for the Three Months Ended March 31, 2022

In the first quarter of 2022, we used $588 million of cash generated by our operations, $1.5 billion of cash on hand, and $1.1 billion in debt issuances and borrowings to make $841 million of investments in our business, repay $1.9 billion of debt and finance lease obligations (including premiums on the early retirement of debt), and fund $390 million of other financing activities. The debt issuance, borrowings, and repayments are described in Note 4 of Condensed Notes to Consolidated Financial Statements.

As previously noted, our operations generated $588 million of cash in the first quarter of 2022, driven primarily by net income of $967 million and noncash charges to income of $343 million, partially offset by an unfavorable change in working capital of $722 million. Noncash charges primarily included $606 million of depreciation and amortization expense and a $50 million loss on the early retirement of debt, partially offset by a $234 million deferred income tax benefit. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 10 of Condensed Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net income.

Our investing activities of $841 million consisted of $843 million in capital investments, as defined below under “Capital Investments,” of which $225 million related to capital investments by DGD and $13 million related to capital expenditures of VIEs other than DGD.

Other financing activities of $390 million consisted primarily of $401 million in dividend payments and $144 million for the purchase of common stock for treasury, partially offset by $165 million in contributions from the other joint venture member in DGD.

Cash Flows for the Three Months Ended March 31, 2021

In the first quarter of 2021, we used $1.1 billionof our cash on hand to fund our operations by $52 million, make $580 million of investments in our business, repay $32 million of debt and finance lease obligations, and fund ~~$447~~$415 million of other financing activities.

Our operations typically generate positive net cash flows; however, in the first quarter of 2021, we used $52 million of cash to fund our operations that was largely driven by a significant increase in energy costs

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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,”~~ partially offset by noncash charges to income of ~~$339~~$386 million, and a positive change in working capital of $184 million. Noncash charges primarily included $578 million of depreciation and amortization expense, partially offset by a $239 million deferred income tax benefit. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 1110 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 $580 million consisted of $582 million in capital investments, ~~as defined below,~~ of which $154 million related to ~~self-funded~~ capital investments by DGD and $26 million ~~was~~ related to capital expenditures of VIEs other than DGD.

Other financing activities of ~~$447~~$415 million consisted primarily of $400 million in dividend payments ~~$31 million of payments of debt and finance lease obligations,~~ and $14 million for the purchase of common stock for ~~treasury in connection with stock-based compensation plans.~~

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

In the first quarter of 2020, we used $1.1 billion of cash on hand and $370 million in borrowings to fund our operations by $49 million, make $757 million of investments in our business, and fund $565 million of other financing activities. The borrowings are described in Note 4 of Condensed Notes to Consolidated Financial Statements.treasury.

Our ~~operations typically generate positive net~~Capital Resources

Our material cash ~~flows; however, in the first quarter~~requirements as of ~~2020, we used $49 million~~March 31, 2022 primarily consist of ~~cash to fund our operations due primarily to a negative change in~~ working capital of $1.1 billion. While we incurred a net loss of $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. The negative change in workingrequirements, capital ~~was largely the result of rapidly falling market prices for the products that we sell. Cash generated by our product sales is typically greater than the cash we use to pay for crude oil~~investments, contractual obligations, 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 impactmatters, as described below. Our operations have historically generated positive cash flows to fulfill 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 significant use of cash to pay for our crude oil and other feedstock purchases that were purchased earlier in the quarter before market prices for those feedstocks declined. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 11 of Condensed Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of our net loss.

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

Other financing activities of $565 million consisted primarily of $401 million in dividend payments, $147 million for the purchase of common stock for treasury, and $15 million of payments of debt and finance lease obligations.requirements.

Capital Investments

~~Our capital~~Capital investments ~~include~~are comprised of our capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in ~~unconsolidated~~nonconsolidated joint ~~ventures.~~ ventures, as reflected in our consolidated statements of cash flows as shown on page 5. Capital investments exclude strategic investments or acquisitions, if any.

We 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 have been completed or are already in execution and the associated capital investments are included in our expected capital investments for 2022 discussed below. 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.

Capital Investments Attributable to Valero

Capital investments attributable to Valero ~~which~~ is a

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

We are a ~~50/~~50 percent joint venture ~~partner~~member in DGD and consolidate ~~DGD’s~~its financial ~~statements; as~~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~~members 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,~~member, only 50 percent of DGD’s capital investments should be attributed to our net share of capital investments. We also exclude all of the capital expenditures of ~~our~~ other ~~consolidated~~ VIEs that we consolidate because we do not operate those VIEs. See Note 6 of Condensed Notes to Consolidated Financial

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Statements for more information about the VIEs that we consolidate. We believe capital investments attributable to Valero is an important measure because it more accurately reflects our capital investments.

Capital investments attributable to Valero should not be considered as an alternative to capital investments, ~~its~~which is the 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 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,						Three Months Ended March 31,
		2021		2020			2022			2021
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)		$	152		$	160
Capital expenditures of VIEs:	Capital expenditures of VIEs:					Capital expenditures of VIEs:
DGD	DGD	153		74		DGD		219			153
Other VIEs	Other VIEs	26		62		Other VIEs		13			26
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)		453			230
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			1
Investments in unconsolidated joint ventures		12		19
Investments in nonconsolidated joint ventures						Investments in nonconsolidated joint ventures		—			12
Capital investments	Capital investments	582		767		Capital investments		843			582
Adjustments:	Adjustments:					Adjustments:
DGD’s capital investments attributable to our joint venture partner		(77)		(39)
DGD’s capital investments attributable to the other joint venture member						DGD’s capital investments attributable to the other joint venture member		(112)			(77)
Capital expenditures of other VIEs	Capital expenditures of other VIEs	(26)		(62)		Capital expenditures of other VIEs		(13)			(26)
Capital investments attributable to Valero	Capital investments attributable to Valero	$	479	$	666	Capital investments attributable to Valero		$	718		$	479

We have developed an extensive multi-year capital investment program, which we update and revise based on changing internal and external factors. As previously disclosed in our annual report on Form 10-K for the year ended December 31, ~~2020,~~2021, we expect to incur $2.0 billion for capital investments attributable to Valero during ~~2021.~~2022. 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 approximately 50 percent is allocated to expanding our low-carbon businesses.

Contractual Obligations

As of March 31, 2022, our contractual obligations included debt obligations, interest payments related to debt obligations, operating lease liabilities, finance lease obligations, other long-term liabilities, and purchase obligations. In the ~~renewable diesel business. However,~~ordinary course of business, we ~~continuously evaluate~~had debt-related activities during the three months ended March 31, 2022, as described in Note 4 of Condensed Notes to Consolidated Financial Statements. There were no material changes outside the ordinary course of business with respect to our ~~capital budget~~contractual obligations during the three months ended March 31, 2022.

As of March 31, 2022, our current portion of debt and ~~make changes as conditions warrant. The~~finance lease obligations included $300 million of 4.00 percent Gulf Opportunity Zone Revenue Bonds Series 2010 (GO Zone Bonds) that 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. We

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~~capital investment estimate for 2021 includes $200 million~~have the option, however, to effectuate a remarketing of these bonds. We currently expect to acquire the ~~approximately $500 million of capital investments that were deferred in 2020 and excludes strategic acquisitions, if any.~~GO Zone Bonds on their Mandatory Tender Date.

Other Matters Impacting Liquidity and Capital Resources

Stock Purchase Program

As of March 31, ~~2021,~~2022, we had ~~$1.4~~$1.2 billion remaining available for purchase under our stock purchase program, which has no expiration date. ~~We have~~During the three months ended March 31, 2022, we made open market purchases of 1,334,550 shares for $126 million. Prior to these purchases, however, we had not purchased any shares of our common stock under our stock purchase program since mid-March 2020, and we will continue to evaluate the timing of repurchases when appropriate. We have no obligation to make purchases under this program.

Pension Plan Funding

As ~~previously~~ disclosed in our annual report on Form 10-K for the year ended December 31, ~~2020,~~2021, we plan to contribute approximately ~~$128~~$116 million to our pension plans and $22 million to our other postretirement benefit plans during ~~2021.~~2022. No significant contributions were made during the three months ended March 31, 2022.

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.~~many of our products. 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~~See Note 12 of Condensed Notes to Consolidated Financial Statements for disclosure of our ~~refineries or plants could require material additional expenditures to comply with~~ environmental ~~laws and regulations.~~

~~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 deferred approximately $250 million of income and indirect (e.g., VAT and motor fuel taxes) tax payments that were due in 2020. Of this amount, approximately 90 percent will be paid in 2021 and 10 percent in 2022. No deferred payments were made in the first quarter of 2021.liabilities.

Cash Held by Our ~~International~~Foreign Subsidiaries

As of March 31, ~~2021, $1.3~~2022, $1.4 billion of our cash and cash equivalents was held by our ~~international~~foreign subsidiaries. Cash held by our ~~international~~foreign subsidiaries can be repatriated to us through dividends 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~~foreign jurisdictions, ~~and~~ U.S. state income ~~taxes.~~taxes, and U.S. federal income tax on foreign exchange gains. Therefore, there is a cost to repatriate cash held by certain of our ~~international~~foreign subsidiaries to ~~us, but~~us. However, we have accrued for withholding taxes and U.S. state income taxes on a portion of the cash held by certain of our foreign subsidiaries and we believe that ~~such amount~~the remaining cost is not material to our financial position orand 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 other worldwide events causingvolatility in the global crude 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, 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 months ended March 31, 2021, as described in Note 4 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 months ended March 31, 2021.

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, ~~2021,~~2022, 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~~2021 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.~~Board.

~~As of March 31, 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~~The following sensitivity analysis includes all of our ~~commodity~~ derivative instruments entered into for purposes other than trading with which we have market risk ~~was not material.~~ (in millions):


	March 31, 2022		December 31, 2021
Gain (loss) in fair value resulting from:
10% increase in underlying commodity prices	$	(106)	$	(61)
10% decrease in underlying commodity prices	106		61

See Note 1312 of Condensed Notes to Consolidated Financial Statements for notional volumes associated with these derivative contracts as of March 31, ~~2021.~~

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COMPLIANCE PROGRAM PRICE RISK

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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 4 of Condensed Notes to Consolidated Financial Statements for additional information related to our debt.


		March 31, 2021 (a)																								March 31, 2022 (a)
		Expected Maturity Dates																								Expected Maturity Dates
		Remainder of 2021 (b)			2022			2023			2024			2025			There- after			Total			Fair Value			Remainder of 2022			2023			2024			2025			2026			There- after			Total			Fair Value
Fixed rate	Fixed rate	$	—		$	—		$	850		$	925		$	1,650		$	8,474		$	11,899		$	13,565	Fixed rate	$	300		$	—		$	169		$	795		$	905		$	8,287		$	10,456		$	11,111
Average interest rate	Average interest rate	—		%	—		%	2.7		%	1.2		%	3.1		%	5.1		%	4.4		%			Average interest rate	4.0		%	—		%	1.2		%	3.1		%	4.1		%	4.9		%	4.6		%
Floating rate (c)		$	610		$	6		$	595		$	—		$	—		$	—		$	1,211		$	1,211
Floating rate																									Floating rate	$	821		$	20		$	—		$	—		$	—		$	—		$	841		$	841
Average interest rate	Average interest rate	3.9		%	3.9		%	1.4		%	—		%	—		%	—		%	2.7		%			Average interest rate	3.6		%	3.9		%	—		%	—		%	—		%	—		%	3.6		%

		December 31, 2020 (a)																								December 31, 2021 (a)
		Expected Maturity Dates																								Expected Maturity Dates
		2021 (b)			2022			2023			2024			2025			There- after			Total			Fair Value			2022			2023			2024			2025			2026			There- after			Total			Fair Value
Fixed rate	Fixed rate	$	—		$	—		$	850		$	925		$	1,650		$	8,474		$	11,899		$	13,899	Fixed rate	$	300		$	—		$	169		$	1,374		$	1,726		$	7,637		$	11,206		$	12,838
Average interest rate	Average interest rate	—		%	—		%	2.7		%	1.2		%	3.1		%	5.1		%	4.4		%			Average interest rate	4.0		%	—		%	1.2		%	3.0		%	3.9		%	5.0		%	4.5		%
Floating rate (c)		$	603		$	6		$	595		$	—		$	—		$	—		$	1,204		$	1,204
Floating rate																									Floating rate	$	810		$	20		$	—		$	—		$	—		$	—		$	830		$	830
Average interest rate	Average interest rate	3.9		%	3.0		%	1.4		%	—		%	—		%	—		%	2.7		%			Average interest rate	3.5		%	3.9		%	—		%	—		%	—		%	—		%	3.5		%

________________________

(a)Excludes unamortized discounts and debt issuance costs.

~~(b)~~As of March 31, 2021 and December 31, 2020, our floating rate debt includes $606 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 not have recourse against us.

~~(c)~~As of March 31, 2021 and December 31, 2020, we had an interest rate swap associated with $30 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~~foreign 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 often use foreign currency contracts. ~~The following table provides information about~~As of March 31, 2022 and December 31, 2021, the fair value of 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
March 31, 2021
Contract amount $ 160 $ 85 $ 2,800
Weighted-average
contractual exchange rate
0.79625 1.37805 0.79271
Fair value asset $ — $ — $ 10
December 31, 2020
Contract amount $ 228 $ 97 $ 1,600
Weighted-average
contractual exchange rate
0.78205 1.34454 0.78492
Fair value liability $ (1) $ (1) $ (2)
wasnot material.

See Note 1312 of Condensed Notes to Consolidated Financial Statements for a discussion about our foreign currency risk management activities.

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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, ~~2021.~~2022.

(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.~~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,~~condition, results of operations, orand 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 U.S. federal, state, or local provisions regulating the discharge of materials into the environment or protecting the environment if we reasonably believe that such proceedings ~~may~~have the potential to result in monetary sanctions of $300,000 or more.

~~U.S. EPA~~ (Benicia Refinery). On December 11, 2020, our Benicia Refinery received a Notice of Potential Violation and Opportunity to Confer from the U.S. EPA, without penalty demand, related to a series of inspections the U.S. EPA Region 9 conducted in 2019 to determine the refinery’s compliance with various federal environmental laws. We are working with the U.S. EPA to resolve this matter, which we reasonably believe may result in penalties that are in excess of $300,000.

Bay Area Air Quality Management District ~~(BAAQMD)~~(BAAQMD) (Benicia Refinery). ~~On March 21,~~Between May 2017 and June 2019, weour Benicia Refinery received ~~a Notice of~~several Violation ~~(VN)~~Notices (VNs) from the BAAQMD ~~related to atmospheric~~for excess emissions, ~~of hydrogen commingled with non-methane organic compounds~~which all resulted from the 2017 third-party induced power outage at ~~our Benicia Refinery.~~the refinery. We ~~are working~~aggregated such VNs and resolved them with the BAAQMD ~~to resolve~~during the ~~VN and related compliance issues, which we now reasonably believe may result in penalties that are in excess~~first quarter of ~~$300,000.~~2022.

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.~~2021. However, to the extent the Russia-Ukraine conflict or the COVID-19 pandemic adversely ~~affects~~affect our business, financial condition, results of ~~operation,~~operations, and liquidity, itthey 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 quarter of ~~2021.~~2022.

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)
January 2022	126,802	$	82.97	126,802	—	$1.4 billion
February 2022	82,074	$	86.45	82,074	—	$1.4 billion
March 2022	1,336,997	$	94.18	2,447	1,334,550	$1.2 billion
Total	1,545,873	$	92.85	211,323	1,334,550	$1.2 billion

________________________

(a)The shares reported in this column represent purchases settled in the first quarter of ~~2021~~2022 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~~Board 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, ~~2021,~~2022, we had ~~$1.4~~$1.2 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.this program.

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ITEM 6. EXHIBITS


Exhibit No.						Description

*+10.013.01						~~Form of~~ Amended and Restated ~~Performance Share Agreement (2020 grant–second~~Bylaws of Valero Energy Corporation–incorporated by reference to Exhibit 3.01 to Valero’s current report on Form 8-K dated March 15, 2022 and ~~third tranches).~~filed March 18, 2022 (SEC File No. 001-13175)

*+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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Table of Contents

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, 2021~~27, 2022

5552


	Receive USD/ Pay CAD		Receive USD/ Pay GBP		Receive CAD/ Pay USD
March 31, 2021
Contract amount	$	160	$	85	$	2,800
Weighted-average contractual exchange rate	0.79625		1.37805		0.79271
Fair value asset	$	—	$	—	$	10

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