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Valero’s Capex and EBITDA Targets: A Focus on Integrated Growth

Maitali Ramkumar - Author
By

Nov. 26 2018, Updated 9:00 a.m. ET

Valero’s third-quarter growth activities

Valero Energy (VLO) is steadily progressing on its path toward the creation of an integrated downstream value chain. In the third quarter, Valero spent $604 million on capex.

Comparatively, Marathon Petroleum (MPC) and Phillips 66 (PSX) incurred capex of $945 million and $779 million, respectively, in the quarter.

Valero completed its Diamond Green Diesel expansion project on schedule in the third quarter. The plant is currently ramping up its production. Valero’s other projects are also progressing on schedule. 

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These projects include the Houston alkylation project (set for completion in the first half of 2019), the St. Charles alkylation units (set for completion in 2020), the Central Texas pipeline sand terminals (set for completion in mid-2019), the Pasadena terminal (set for completion in early 2020), the Pembroke cogeneration units (set for completion in 2020), and the Port Arthur Coker (set for completion in 2022).

Valero’s EBITDA and capex targets

The projects mentioned above are expected to contribute $600 million–$700 million in incremental annual EBITDA to Valero’s total EBITDA. They’re aimed at increasing feedstock flexibility, yielding higher-value products, sustaining growth, and improving logistics capabilities. For example, the Houston alkylation project is expected to upgrade low-value isobutane to high-value alkylate, and Valero’s Port Arthur Coker project will increase the processing of heavy sour crude in its refinery.

Valero also has a series of projects under development in the refining and logistics sectors that are expected to contribute another $600 million–$700 million to its incremental annual EBITDA target.

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Valero expects to incur capex of ~$1 billion annually until 2021. The company aims to achieve an incremental annual EBITDA of ~$1.2 billion–$1.4 billion by 2022. It plans to spend equally between the refining and the logistics sectors. In 2018, Valero’s capex is expected to be ~$2.7 billion, $1.0 billion of which is for growth projects and the rest of which is for sustenance projects.

In short

With numerous projects under execution and in development, Valero is all set to capture synergies at each point in its downstream value chain. Furthermore, Valero’s acquisition activities are enhancing its capabilities and market reach. Overall, it seems that the company is set to achieve its targeted incremental EBITDA in the years to come.

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