Why Valero Energy benefits from export opportunities

Location-advantaged refiners like Valero Energy (VLO), Phillips 66 (PSX), and Marathon Petroleum (MPC), with refineries along the Gulf Coast, can export refined products.

Most of these companies are components of the Energy Select Sector SPDR ETF (XLE).

Valero Energy, in particular, has significant operations in the US Gulf Coast compared to its peers—including HollyFrontier (HFC) and Tesoro (TSO)—as the graph above shows.

Valero has been increasing its US product exports even as it continues to invest in enhancing its export capacity. As per the latest company presentation, the company’s current export capacity is 255 Mbpd (thousand barrels per day) for gasoline and 412 Mbpd for diesel. Valero further expects to expand its Gulf Coast exporting capacity to 308 Mbpd for gasoline and 472 Mbpd for diesel.

Higher export levels mean higher and stabler utilization rates.

Apart from focusing on expanding export capacity, Valero also focuses on increasing its logistics operations. It allocated ~50% of its 2014 capex to logistics investments. The company said on its recent earnings call, “The majority of our growth investments for 2015 and 2016 are allocated to logistics and to increasing our capability to access and process advantaged crude oils through our flexible refining system.”

The following part of this series discusses in detail Valero’s 2015 spending strategies.