þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to _______________ |
Delaware | 74-1828067 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
Large accelerated filer þ Accelerated filer o Non-accelerated filer o |
Smaller reporting company o Emerging growth company o |
Page | |
March 31, 2017 | December 31, 2016 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and temporary cash investments | $ | 4,463 | $ | 4,816 | |||
Receivables, net | 5,104 | 5,901 | |||||
Inventories | 6,025 | 5,709 | |||||
Prepaid expenses and other | 316 | 374 | |||||
Total current assets | 15,908 | 16,800 | |||||
Property, plant, and equipment, at cost | 38,571 | 37,733 | |||||
Accumulated depreciation | (11,580 | ) | (11,261 | ) | |||
Property, plant, and equipment, net | 26,991 | 26,472 | |||||
Deferred charges and other assets, net | 3,148 | 2,901 | |||||
Total assets | $ | 46,047 | $ | 46,173 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Current portion of debt and capital lease obligations | $ | 120 | $ | 115 | |||
Accounts payable | 6,037 | 6,357 | |||||
Accrued expenses | 707 | 694 | |||||
Taxes other than income taxes | 971 | 1,084 | |||||
Income taxes payable | 64 | 78 | |||||
Total current liabilities | 7,899 | 8,328 | |||||
Debt and capital lease obligations, less current portion | 8,369 | 7,886 | |||||
Deferred income taxes | 7,196 | 7,361 | |||||
Other long-term liabilities | 1,932 | 1,744 | |||||
Commitments and contingencies | |||||||
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 | 7 | 7 | |||||
Additional paid-in capital | 7,096 | 7,088 | |||||
Treasury stock, at cost; 226,338,916 and 222,000,024 common shares | (12,310 | ) | (12,027 | ) | |||
Retained earnings | 26,366 | 26,366 | |||||
Accumulated other comprehensive loss | (1,334 | ) | (1,410 | ) | |||
Total Valero Energy Corporation stockholders’ equity | 19,825 | 20,024 | |||||
Noncontrolling interests | 826 | 830 | |||||
Total equity | 20,651 | 20,854 | |||||
Total liabilities and equity | $ | 46,047 | $ | 46,173 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Operating revenues (a) | $ | 21,772 | $ | 15,714 | |||
Costs and expenses: | |||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 19,428 | 13,507 | |||||
Lower of cost or market inventory valuation adjustment | — | (293 | ) | ||||
Operating expenses | 1,117 | 1,030 | |||||
General and administrative expenses | 190 | 156 | |||||
Depreciation and amortization expense | 500 | 485 | |||||
Total costs and expenses | 21,235 | 14,885 | |||||
Operating income | 537 | 829 | |||||
Other income, net | 17 | 9 | |||||
Interest and debt expense, net of capitalized interest | (121 | ) | (108 | ) | |||
Income before income tax expense | 433 | 730 | |||||
Income tax expense | 112 | 217 | |||||
Net income | 321 | 513 | |||||
Less: Net income attributable to noncontrolling interests | 16 | 18 | |||||
Net income attributable to Valero Energy Corporation stockholders | $ | 305 | $ | 495 | |||
Earnings per common share | $ | 0.68 | $ | 1.05 | |||
Weighted-average common shares outstanding (in millions) | 448 | 469 | |||||
Earnings per common share – assuming dilution | $ | 0.68 | $ | 1.05 | |||
Weighted-average common shares outstanding – assuming dilution (in millions) | 451 | 471 | |||||
Dividends per common share | $ | 0.70 | $ | 0.60 | |||
_______________________________________________ | |||||||
Supplemental information: | |||||||
(a) Includes excise taxes on sales by certain of our international operations | $ | 1,272 | $ | 1,395 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Net income | $ | 321 | $ | 513 | |||
Other comprehensive income: | |||||||
Foreign currency translation adjustment | 74 | 122 | |||||
Net gain on pension and other postretirement benefits | 3 | 3 | |||||
Other comprehensive income before income tax expense (benefit) | 77 | 125 | |||||
Income tax expense (benefit) related to items of other comprehensive income | 1 | (7 | ) | ||||
Other comprehensive income | 76 | 132 | |||||
Comprehensive income | 397 | 645 | |||||
Less: Comprehensive income attributable to noncontrolling interests | 16 | 19 | |||||
Comprehensive income attributable to Valero Energy Corporation stockholders | $ | 381 | $ | 626 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 321 | $ | 513 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | 500 | 485 | |||||
Lower of cost or market inventory valuation adjustment | — | (293 | ) | ||||
Deferred income tax expense (benefit) | (4 | ) | 121 | ||||
Changes in current assets and current liabilities | 151 | (177 | ) | ||||
Changes in deferred charges and credits and other operating activities, net | 20 | (9 | ) | ||||
Net cash provided by operating activities | 988 | 640 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (279 | ) | (316 | ) | |||
Deferred turnaround and catalyst costs | (245 | ) | (161 | ) | |||
Investments in joint ventures | (117 | ) | (2 | ) | |||
Acquisition of undivided interest in crude system assets | (72 | ) | — | ||||
Other investing activities, net | (1 | ) | (2 | ) | |||
Net cash used in investing activities | (714 | ) | (481 | ) | |||
Cash flows from financing activities: | |||||||
Repayments of debt and capital lease obligations | (5 | ) | (3 | ) | |||
Purchase of common stock for treasury | (314 | ) | (265 | ) | |||
Common stock dividends | (315 | ) | (282 | ) | |||
Proceeds from issuance of Valero Energy Partners LP common units | 35 | — | |||||
Distributions to noncontrolling interests (public unitholders) of Valero Energy Partners LP | (9 | ) | (7 | ) | |||
Distributions to other noncontrolling interests | (25 | ) | — | ||||
Other financing activities, net | (19 | ) | 13 | ||||
Net cash used in financing activities | (652 | ) | (544 | ) | |||
Effect of foreign exchange rate changes on cash | 25 | 49 | |||||
Net decrease in cash and temporary cash investments | (353 | ) | (336 | ) | |||
Cash and temporary cash investments at beginning of period | 4,816 | 4,114 | |||||
Cash and temporary cash investments at end of period | $ | 4,463 | $ | 3,778 |
1. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
2. | INVENTORIES |
March 31, 2017 | December 31, 2016 | ||||||
Refinery feedstocks | $ | 2,318 | $ | 2,068 | |||
Refined petroleum products and blendstocks | 3,189 | 3,153 | |||||
Ethanol feedstocks and products | 268 | 238 | |||||
Materials and supplies | 250 | 250 | |||||
Inventories | $ | 6,025 | $ | 5,709 |
3. | DEBT AND CAPITAL LEASE OBLIGATIONS |
March 31, 2017 | ||||||||||||||||||
Facility Amount | Maturity Date | Outstanding Borrowings | Letters of Credit Issued | Availability | ||||||||||||||
Committed facilities: | ||||||||||||||||||
Valero Revolver | $ | 3,000 | November 2020 | $ | — | $ | 150 | $ | 2,850 | |||||||||
VLP Revolver | $ | 750 | November 2020 | $ | 30 | $ | — | $ | 720 | |||||||||
Canadian Revolver | C$ | 25 | November 2017 | C$ | — | C$ | 10 | C$ | 15 | |||||||||
Accounts receivable sales facility | $ | 1,300 | July 2017 | $ | 100 | n/a | $ | 1,183 | ||||||||||
Letter of credit facilities | $ | 225 | June 2017 and November 2017 | n/a | $ | — | $ | 225 | ||||||||||
Uncommitted facilities: | ||||||||||||||||||
Letter of credit facilities | n/a | n/a | n/a | $ | 235 | n/a |
4. | COMMITMENTS AND CONTINGENCIES |
5. | EQUITY |
Three Months Ended March 31, | |||||||||||||||||||||||
2017 | 2016 | ||||||||||||||||||||||
Valero Stockholders’ Equity | Non- controlling Interests (a) | Total Equity | Valero Stockholders’ Equity | Non- controlling Interests (a) | Total Equity | ||||||||||||||||||
Balance as of beginning of period | $ | 20,024 | $ | 830 | $ | 20,854 | $ | 20,527 | $ | 827 | $ | 21,354 | |||||||||||
Net income | 305 | 16 | 321 | 495 | 18 | 513 | |||||||||||||||||
Dividends | (315 | ) | — | (315 | ) | (282 | ) | — | (282 | ) | |||||||||||||
Stock-based compensation expense | 13 | — | 13 | 12 | — | 12 | |||||||||||||||||
Stock purchases in connection with stock-based compensation plans | (10 | ) | — | (10 | ) | (42 | ) | — | (42 | ) | |||||||||||||
Stock purchases under purchase program | (292 | ) | — | (292 | ) | (198 | ) | — | (198 | ) | |||||||||||||
Distributions to noncontrolling interests | — | (34 | ) | (34 | ) | — | (7 | ) | (7 | ) | |||||||||||||
Other | 24 | 14 | 38 | 13 | — | 13 | |||||||||||||||||
Other comprehensive income | 76 | — | 76 | 131 | 1 | 132 | |||||||||||||||||
Balance as of end of period | $ | 19,825 | $ | 826 | $ | 20,651 | $ | 20,656 | $ | 839 | $ | 21,495 |
(a) | The noncontrolling interests relate to third-party ownership interests in VIEs for which we are the primary beneficiary and therefore consolidate. See Note 6 for information about our consolidated VIEs. |
Three Months Ended March 31, | |||||||||||||||||||||||
2017 | 2016 | ||||||||||||||||||||||
Foreign Currency Translation Adjustment | Defined Benefit Plans Items | Total | Foreign Currency Translation Adjustment | Defined Benefit Plans Items | Total | ||||||||||||||||||
Balance as of beginning of period | $ | (1,021 | ) | $ | (389 | ) | $ | (1,410 | ) | $ | (605 | ) | $ | (328 | ) | $ | (933 | ) | |||||
Other comprehensive income before reclassifications | 74 | — | 74 | 121 | 8 | 129 | |||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss | — | 2 | 2 | — | 2 | 2 | |||||||||||||||||
Net other comprehensive income | 74 | 2 | 76 | 121 | 10 | 131 | |||||||||||||||||
Balance as of end of period | $ | (947 | ) | $ | (387 | ) | $ | (1,334 | ) | $ | (484 | ) | $ | (318 | ) | $ | (802 | ) |
6. | VARIABLE INTEREST ENTITIES |
• | VLP, a publicly traded master limited partnership formed to own, operate, develop, and acquire crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets; and |
• | Diamond Green Diesel Holdings LLC (DGD), a joint venture formed to construct and operate a biodiesel plant that processes animal fats, used cooking oils, and other vegetable oils into renewable green diesel. |
March 31, 2017 | |||||||||||||||
VLP | DGD | Other | Total | ||||||||||||
Assets | |||||||||||||||
Cash and temporary cash investments | $ | 66 | $ | 159 | $ | 15 | $ | 240 | |||||||
Other current assets | 2 | 48 | — | 50 | |||||||||||
Property, plant, and equipment, net | 940 | 360 | 131 | 1,431 | |||||||||||
Liabilities | |||||||||||||||
Current liabilities | $ | 17 | $ | 16 | $ | 7 | $ | 40 | |||||||
Debt and capital lease obligations, less current portion | 525 | — | 45 | 570 |
December 31, 2016 | |||||||||||||||
VLP | DGD | Other | Total | ||||||||||||
Assets | |||||||||||||||
Cash and temporary cash investments | $ | 71 | $ | 167 | $ | 15 | $ | 253 | |||||||
Other current assets | 3 | 87 | — | 90 | |||||||||||
Property, plant, and equipment, net | 865 | 355 | 133 | 1,353 | |||||||||||
Liabilities | |||||||||||||||
Current liabilities | $ | 15 | $ | 17 | $ | 7 | $ | 39 | |||||||
Debt and capital lease obligations, less current portion | 525 | — | 46 | 571 |
7. | EMPLOYEE BENEFIT PLANS |
Pension Plans | Other Postretirement Benefit Plans | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Three months ended March 31: | |||||||||||||||
Service cost | $ | 31 | $ | 28 | $ | 1 | $ | 2 | |||||||
Interest cost | 21 | 21 | 3 | 3 | |||||||||||
Expected return on plan assets | (37 | ) | (35 | ) | — | — | |||||||||
Amortization of: | |||||||||||||||
Net actuarial (gain) loss | 13 | 12 | (1 | ) | — | ||||||||||
Prior service credit | (5 | ) | (5 | ) | (4 | ) | (4 | ) | |||||||
Net periodic benefit cost | $ | 23 | $ | 21 | $ | (1 | ) | $ | 1 |
8. | EARNINGS PER COMMON SHARE |
Three Months Ended March 31, | |||||||||||||||
2017 | 2016 | ||||||||||||||
Participating Securities | Common Stock | Participating Securities | Common Stock | ||||||||||||
Earnings per common share: | |||||||||||||||
Net income attributable to Valero stockholders | $ | 305 | $ | 495 | |||||||||||
Less dividends paid: | |||||||||||||||
Common stock | 314 | 281 | |||||||||||||
Participating securities | 1 | 1 | |||||||||||||
Undistributed earnings (excess distributions over earnings) | $ | (10 | ) | $ | 213 | ||||||||||
Weighted-average common shares outstanding | 2 | 448 | 2 | 469 | |||||||||||
Earnings (loss) per common share: | |||||||||||||||
Distributed earnings | $ | 0.70 | $ | 0.70 | $ | 0.60 | $ | 0.60 | |||||||
Undistributed earnings (excess distributions over earnings) | — | (0.02 | ) | 0.45 | 0.45 | ||||||||||
Total earnings per common share | $ | 0.70 | $ | 0.68 | $ | 1.05 | $ | 1.05 | |||||||
Earnings per common share – assuming dilution: | |||||||||||||||
Net income attributable to Valero stockholders | $ | 305 | $ | 495 | |||||||||||
Weighted-average common shares outstanding | 448 | 469 | |||||||||||||
Common equivalent shares | 3 | 2 | |||||||||||||
Weighted-average common shares outstanding – assuming dilution | 451 | 471 | |||||||||||||
Earnings per common share – assuming dilution | $ | 0.68 | $ | 1.05 |
9. | SEGMENT INFORMATION |
• | Refining segment includes our refining operations, the associated marketing activities, and certain logistics assets that support our refining operations that are not owned by VLP; |
• | Ethanol segment includes our ethanol operations, the associated marketing activities, and logistics assets that support our ethanol operations; and |
• | VLP segment includes the results of VLP, which provides transportation and terminaling services in support our refining segment. |
Refining | Ethanol | VLP | Corporate and Eliminations | Total | |||||||||||||||
Three months ended March 31, 2017: | |||||||||||||||||||
Operating revenues: | |||||||||||||||||||
Operating revenues from external customers | $ | 20,887 | $ | 885 | $ | — | $ | — | $ | 21,772 | |||||||||
Intersegment revenues | — | 60 | 106 | (166 | ) | — | |||||||||||||
Total operating revenues | 20,887 | 945 | 106 | (166 | ) | 21,772 | |||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales: | |||||||||||||||||||
Cost of sales from external customers | 18,641 | 787 | — | — | 19,428 | ||||||||||||||
Intersegment cost of sales | 166 | — | — | (166 | ) | — | |||||||||||||
Total cost of sales | 18,807 | 787 | — | (166 | ) | 19,428 | |||||||||||||
Operating expenses | 984 | 109 | 24 | — | 1,117 | ||||||||||||||
General and administrative expenses | — | — | — | 190 | 190 | ||||||||||||||
Depreciation and amortization expense | 449 | 27 | 12 | 12 | 500 | ||||||||||||||
Total costs and expenses | 20,240 | 923 | 36 | 36 | 21,235 | ||||||||||||||
Operating income (loss) | $ | 647 | $ | 22 | $ | 70 | $ | (202 | ) | $ | 537 | ||||||||
Three months ended March 31, 2016: | |||||||||||||||||||
Operating revenues: | |||||||||||||||||||
Operating revenues from external customers | $ | 14,920 | $ | 794 | $ | — | $ | — | $ | 15,714 | |||||||||
Intersegment revenues | — | 34 | 79 | (113 | ) | — | |||||||||||||
Total operating revenues | 14,920 | 828 | 79 | (113 | ) | 15,714 | |||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment): | |||||||||||||||||||
Cost of sales from external customers | 12,799 | 708 | — | — | 13,507 | ||||||||||||||
Intersegment cost of sales | 113 | — | — | (113 | ) | — | |||||||||||||
Total cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 12,912 | 708 | — | (113 | ) | 13,507 | |||||||||||||
Lower of cost or market inventory valuation adjustment | (263 | ) | (30 | ) | — | — | (293 | ) | |||||||||||
Operating expenses (a) | 907 | 99 | 24 | — | 1,030 | ||||||||||||||
General and administrative expenses | — | — | — | 156 | 156 | ||||||||||||||
Depreciation and amortization expense (a) | 449 | 12 | 12 | 12 | 485 | ||||||||||||||
Total costs and expenses | 14,005 | 789 | 36 | 55 | 14,885 | ||||||||||||||
Operating income (loss) | $ | 915 | $ | 39 | $ | 43 | $ | (168 | ) | $ | 829 |
(a) | The VLP segment information for the three months ended March 31, 2016 has been retrospectively adjusted for VLP’s acquisitions that occurred subsequent to March 31, 2016. |
March 31, 2017 | December 31, 2016 | ||||||
Refining | $ | 38,219 | $ | 38,095 | |||
Ethanol | 1,338 | 1,316 | |||||
VLP | 1,039 | 972 | |||||
Corporate | 5,451 | 5,790 | |||||
Total assets | $ | 46,047 | $ | 46,173 |
10. | SUPPLEMENTAL CASH FLOW INFORMATION |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Decrease (increase) in current assets: | |||||||
Receivables, net | $ | 817 | $ | (47 | ) | ||
Inventories | (291 | ) | 147 | ||||
Income taxes receivable | 41 | 45 | |||||
Prepaid expenses and other | 12 | (126 | ) | ||||
Increase (decrease) in current liabilities: | |||||||
Accounts payable | (306 | ) | 108 | ||||
Accrued expenses | 20 | (137 | ) | ||||
Taxes other than income taxes | (123 | ) | (113 | ) | |||
Income taxes payable | (19 | ) | (54 | ) | |||
Changes in current assets and current liabilities | $ | 151 | $ | (177 | ) |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Interest paid in excess of amount capitalized | $ | 128 | $ | 95 | |||
Income taxes paid, net | 96 | 95 |
11. | FAIR VALUE MEASUREMENTS |
March 31, 2017 | |||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Commodity derivative contracts | $ | 661 | $ | 12 | $ | — | $ | 673 | $ | (637 | ) | $ | — | $ | 36 | $ | — | ||||||||||||||
Investments of certain benefit plans | 59 | — | 11 | 70 | n/a | n/a | 70 | n/a | |||||||||||||||||||||||
Total | $ | 720 | $ | 12 | $ | 11 | $ | 743 | $ | (637 | ) | $ | — | $ | 106 | ||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Commodity derivative contracts | $ | 636 | $ | 9 | $ | — | $ | 645 | $ | (637 | ) | $ | (8 | ) | $ | — | $ | (61 | ) | ||||||||||||
Environmental credit obligations | — | 289 | — | 289 | n/a | n/a | 289 | n/a | |||||||||||||||||||||||
Physical purchase contracts | — | 3 | — | 3 | n/a | n/a | 3 | n/a | |||||||||||||||||||||||
Foreign currency contracts | 2 | — | — | 2 | n/a | n/a | 2 | n/a | |||||||||||||||||||||||
Total | $ | 638 | $ | 301 | $ | — | $ | 939 | $ | (637 | ) | $ | (8 | ) | $ | 294 |
December 31, 2016 | |||||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Commodity derivative contracts | $ | 874 | $ | 38 | $ | — | $ | 912 | $ | (875 | ) | $ | — | $ | 37 | $ | — | ||||||||||||||
Foreign currency contracts | 3 | — | — | 3 | n/a | n/a | 3 | n/a | |||||||||||||||||||||||
Investments of certain benefit plans | 58 | — | 11 | 69 | n/a | n/a | 69 | n/a | |||||||||||||||||||||||
Total | $ | 935 | $ | 38 | $ | 11 | $ | 984 | $ | (875 | ) | $ | — | $ | 109 | ||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Commodity derivative contracts | $ | 872 | $ | 23 | $ | — | $ | 895 | $ | (875 | ) | $ | (20 | ) | $ | — | $ | (88 | ) | ||||||||||||
Environmental credit obligations | — | 188 | — | 188 | n/a | n/a | 188 | n/a | |||||||||||||||||||||||
Physical purchase contracts | — | 5 | — | 5 | n/a | n/a | 5 | n/a | |||||||||||||||||||||||
Total | $ | 872 | $ | 216 | $ | — | $ | 1,088 | $ | (875 | ) | $ | (20 | ) | $ | 193 |
• | Commodity derivative contracts consist primarily of exchange-traded futures and swaps, and as disclosed in Note 12, some of these contracts are designated as hedging instruments. These contracts are measured at fair value using the market approach. Exchange-traded futures are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. Swaps are priced using third-party broker quotes, industry pricing services, and exchange-traded curves, with appropriate consideration of counterparty credit risk, but because they have contractual terms that are not identical to exchange-traded futures instruments with a comparable market price, these financial instruments are categorized in Level 2 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. |
• | 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 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 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 entered into for our international operations to manage our exposure to exchange rate fluctuations on transactions denominated in currencies other than the local (functional) currencies of those operations. These contracts are valued based on quoted prices from the exchange and are categorized in Level 1 of the fair value hierarchy. |
• | Environmental credit obligations represent our liability for the purchase of (i) biofuel credits (primarily Renewable Identification Numbers (RINs) in the U.S.) needed to satisfy our obligation to blend biofuels into the products we produce and (ii) emission credits under the California Global Warming Solutions Act (the California cap-and-trade system, also known as AB 32) and Quebec’s Regulation respecting the cap-and-trade system for greenhouse gas emission allowances (the Quebec cap-and-trade system), (collectively, the cap-and-trade systems). 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 further described in Note 12 under “Environmental Compliance Program Price Risk.” The liability for environmental credits is based on our deficit for such credits as of the balance sheet date, if any, after considering any credits acquired or under contract, and is equal to the product of the credits deficit and the market price of these credits as of the balance sheet date. The environmental credit obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using the market approach based on quoted prices from an independent pricing service. |
March 31, 2017 | December 31, 2016 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
Financial assets: | |||||||||||||||
Cash and temporary cash investments | $ | 4,463 | $ | 4,463 | $ | 4,816 | $ | 4,816 | |||||||
Financial liabilities: | |||||||||||||||
Debt (excluding capital leases) | 7,926 | 8,935 | 7,926 | 8,882 |
• | The fair value of cash and temporary cash investments approximates the carrying value due to the low level of credit risk of these assets combined with their short maturities and market interest rates (Level 1). |
• | The fair value of debt is determined primarily using the market approach based on quoted prices provided by third-party brokers and vendor pricing services (Level 2). |
12. | PRICE RISK MANAGEMENT ACTIVITIES |
• | Economic Hedges – Economic hedges represent commodity derivative instruments that are used to manage price volatility in certain (i) feedstock and refined petroleum product inventories, (ii) fixed-price purchase contracts, and (iii) forecasted feedstock, refined petroleum product or natural gas purchases and refined petroleum product sales. The objectives of our economic hedges are to hedge price volatility in certain feedstock and refined petroleum product inventories and to lock in the price of forecasted feedstock, refined petroleum product, or natural gas purchases or refined petroleum product sales at existing market prices that we deem favorable. Economic hedges are not designated as fair value or cash flow hedges for accounting purposes, usually due to the difficulty of establishing the required documentation at the date the derivative instrument is entered into for them to qualify as hedging instruments for accounting purposes. |
Notional Contract Volumes by Year of Maturity | ||||||
Derivative Instrument | 2017 | 2018 | ||||
Crude oil and refined petroleum products: | ||||||
Swaps – long | 22,246 | — | ||||
Swaps – short | 22,660 | — | ||||
Futures – long | 110,287 | 2,100 | ||||
Futures – short | 115,080 | 6,981 | ||||
Corn: | ||||||
Futures – long | 18,040 | 5 | ||||
Futures – short | 40,575 | 2,185 | ||||
Physical contracts – long | 16,273 | 2,177 | ||||
Soybean oil: | ||||||
Futures – long | 125,338 | — | ||||
Futures – short | 158,758 | — |
• | Trading Derivatives – Our objective for entering into commodity derivative instruments for trading purposes is to take advantage of existing market conditions for crude oil and refined petroleum products. |
Notional Contract Volumes by Year of Maturity | ||||||
Derivative Instrument | 2017 | 2018 | ||||
Crude oil and refined petroleum products: | ||||||
Swaps – long | 3,105 | — | ||||
Swaps – short | 3,105 | — | ||||
Futures – long | 24,358 | 4,300 | ||||
Futures – short | 22,304 | 6,400 | ||||
Options – long | 106,990 | 29,700 | ||||
Options – short | 104,990 | 29,700 | ||||
Corn: | ||||||
Futures – long | 2,250 | — | ||||
Futures – short | 2,000 | — |
Balance Sheet Location | March 31, 2017 | ||||||||
Asset Derivatives | Liability Derivatives | ||||||||
Derivatives not designated as hedging instruments | |||||||||
Commodity contracts: | |||||||||
Futures | Receivables, net | $ | 661 | $ | 636 | ||||
Swaps | Receivables, net | 7 | 7 | ||||||
Options | Receivables, net | 5 | 2 | ||||||
Physical purchase contracts | Inventories | — | 3 | ||||||
Foreign currency contracts | Accrued expenses | — | 2 | ||||||
Total | $ | 673 | $ | 650 |
Balance Sheet Location | December 31, 2016 | ||||||||
Asset Derivatives | Liability Derivatives | ||||||||
Derivatives not designated as hedging instruments | |||||||||
Commodity contracts: | |||||||||
Futures | Receivables, net | $ | 874 | $ | 872 | ||||
Swaps | Receivables, net | 32 | 21 | ||||||
Options | Receivables, net | 6 | 2 | ||||||
Physical purchase contracts | Inventories | — | 5 | ||||||
Foreign currency contracts | Receivables, net | 3 | — | ||||||
Total | $ | 915 | $ | 900 |
Derivatives Designated as Economic Hedges | Location of Loss Recognized in Income on Derivatives | Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||||
Commodity contracts | Cost of sales | $ | (97 | ) | $ | (139 | ) | |||
Foreign currency contracts | Cost of sales | (6 | ) | (3 | ) |
Trading Derivatives | Location of Gain Recognized in Income on Derivatives | Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||||
Commodity contracts | Cost of sales | $ | 1 | $ | 41 |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | future refining margins, including gasoline and distillate margins; |
• | future ethanol margins; |
• | expectations regarding feedstock costs, including crude oil differentials, and operating expenses; |
• | anticipated levels of crude oil and refined petroleum product inventories; |
• | our anticipated level of capital investments, including deferred costs for refinery turnarounds and catalyst, capital expenditures for environmental and other purposes, and joint venture investments, and the effect of those capital investments on our results of operations; |
• | anticipated trends in the supply of and demand for crude oil and other feedstocks and refined petroleum products in the regions where we operate, as well as globally; |
• | expectations regarding environmental, tax, and other regulatory initiatives; and |
• | the effect of general economic and other conditions on refining, ethanol, and midstream industry fundamentals. |
• | acts of terrorism aimed at either our facilities or other facilities that could impair our ability to produce or transport refined petroleum products or receive feedstocks; |
• | political and economic conditions in nations that produce crude oil or consume refined petroleum products; |
• | demand for, and supplies of, refined petroleum products such as gasoline, diesel, jet fuel, petrochemicals, and ethanol; |
• | demand for, and supplies of, crude oil and other feedstocks; |
• | the ability of the members of the Organization of Petroleum Exporting Countries to agree on and to maintain crude oil price and production controls; |
• | the level of consumer demand, including seasonal fluctuations; |
• | refinery overcapacity or undercapacity; |
• | our ability to successfully integrate any acquired businesses into our operations; |
• | the actions taken by competitors, including both pricing and adjustments to refining capacity in response to market conditions; |
• | the level of competitors’ imports into markets that we supply; |
• | accidents, unscheduled shutdowns, or other catastrophes affecting our refineries, machinery, pipelines, equipment, and information systems, or those of our suppliers or customers; |
• | changes in the cost or availability of transportation for feedstocks and refined petroleum products; |
• | the price, availability, and acceptance of alternative fuels and alternative-fuel vehicles; |
• | the levels of government subsidies for alternative fuels; |
• | the volatility in the market price of biofuel credits (primarily RINs needed to comply with the U.S. federal Renewable Fuel Standard) and GHG emission credits needed to comply with the requirements of various GHG emission 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 weather, which can unforeseeably affect the price or availability of natural gas, crude oil, grain and other feedstocks, and refined petroleum products 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 tax and environmental regulations, such as those implemented under the California Global Warming Solutions Act (also known as AB 32), the Quebec cap-and-trade system, and the U.S. EPA’s regulation of GHGs, which may adversely affect our business or operations; |
• | changes in the credit ratings assigned to our debt securities and trade credit; |
• | changes in currency exchange rates, including the value of the Canadian dollar, the pound sterling, and the euro relative to the U.S. dollar; |
• | overall economic conditions, including the stability and liquidity of financial markets; and |
• | other factors generally described in the “Risk Factors” section included in our annual report on Form 10-K for the year ended December 31, 2016 that is incorporated by reference herein. |
• | Refining segment. Refining segment operating income decreased by $5 million due to lower margins on other refined products (e.g. petroleum coke, propane, and sulfur), an increase in charges from the VLP segment related to additional transportation and terminaling services provided by that segment to the refining segment, and higher operating expenses, partially offset by higher margins on refined petroleum products. This is more fully described on pages 37 and 38. |
• | Ethanol segment. Ethanol segment operating income increased by $13 million due to higher ethanol margins, which improved because of higher ethanol prices. This is more fully described on pages 38 and 39. |
• | VLP segment. VLP segment operating income increased by $27 million due to incremental revenues generated from transportation and terminaling services provided to the refining segment associated with businesses acquired from Valero in 2016 and the acquisition of an undivided interest in crude system assets in January 2017. This is more fully described on page 39. |
• | General and administrative expenses. General and administrative expenses increased by $34 million primarily due to an increase in environmental reserves. |
• | Gasoline margins are expected to improve as domestic and export demand strengthen with the upcoming driving season. Distillate margins are expected to remain near current levels. |
• | Medium and heavy sour crude oil discounts are expected to remain weaker than their five-year averages as supplies of sour crude oils available in the market continue to decline. |
• | Ethanol margins are expected to improve as domestic gasoline demand strengthens. |
Three Months Ended March 31, 2017 | |||||||||||||||||||
Refining | Ethanol | VLP | Corporate and Eliminations | Total Company | |||||||||||||||
Operating revenues: | |||||||||||||||||||
Operating revenues from external customers | $ | 20,887 | $ | 885 | $ | — | $ | — | $ | 21,772 | |||||||||
Intersegment revenues | — | 60 | 106 | (166 | ) | — | |||||||||||||
Total operating revenues | 20,887 | 945 | 106 | (166 | ) | 21,772 | |||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales: | |||||||||||||||||||
Cost of sales from external customers | 18,641 | 787 | — | — | 19,428 | ||||||||||||||
Intersegment cost of sales | 166 | — | — | (166 | ) | — | |||||||||||||
Total cost of sales | 18,807 | 787 | — | (166 | ) | 19,428 | |||||||||||||
Operating expenses | 984 | 109 | 24 | — | 1,117 | ||||||||||||||
General and administrative expenses | — | — | — | 190 | 190 | ||||||||||||||
Depreciation and amortization expense | 449 | 27 | 12 | 12 | 500 | ||||||||||||||
Total costs and expenses | 20,240 | 923 | 36 | 36 | 21,235 | ||||||||||||||
Operating income (loss) | $ | 647 | $ | 22 | $ | 70 | $ | (202 | ) | 537 | |||||||||
Other income, net | 17 | ||||||||||||||||||
Interest and debt expense, net of capitalized interest | (121 | ) | |||||||||||||||||
Income before income tax expense | 433 | ||||||||||||||||||
Income tax expense | 112 | ||||||||||||||||||
Net income | 321 | ||||||||||||||||||
Less: Net income attributable to noncontrolling interests | 16 | ||||||||||||||||||
Net income attributable to Valero Energy Corporation stockholders | $ | 305 |
Three Months Ended March 31, 2016 | |||||||||||||||||||
Refining | Ethanol | VLP | Corporate and Eliminations | Total Company | |||||||||||||||
Operating revenues: | |||||||||||||||||||
Operating revenues from external customers | $ | 14,920 | $ | 794 | $ | — | $ | — | $ | 15,714 | |||||||||
Intersegment revenues | — | 34 | 79 | (113 | ) | — | |||||||||||||
Total operating revenues | 14,920 | 828 | 79 | (113 | ) | 15,714 | |||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment): | |||||||||||||||||||
Cost of sales from external customers | 12,799 | 708 | — | — | 13,507 | ||||||||||||||
Intersegment cost of sales | 113 | — | — | (113 | ) | — | |||||||||||||
Total cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 12,912 | 708 | — | (113 | ) | 13,507 | |||||||||||||
Lower of cost or market inventory valuation adjustment (a) | (263 | ) | (30 | ) | — | — | (293 | ) | |||||||||||
Operating expenses (b) | 907 | 99 | 24 | — | 1,030 | ||||||||||||||
General and administrative expenses | — | — | — | 156 | 156 | ||||||||||||||
Depreciation and amortization expense (b) | 449 | 12 | 12 | 12 | 485 | ||||||||||||||
Total costs and expenses | 14,005 | 789 | 36 | 55 | 14,885 | ||||||||||||||
Operating income (loss) | $ | 915 | $ | 39 | $ | 43 | $ | (168 | ) | 829 | |||||||||
Other income, net | 9 | ||||||||||||||||||
Interest and debt expense, net of capitalized interest | (108 | ) | |||||||||||||||||
Income before income tax expense | 730 | ||||||||||||||||||
Income tax expense | 217 | ||||||||||||||||||
Net income | 513 | ||||||||||||||||||
Less: Net income attributable to noncontrolling interests | 18 | ||||||||||||||||||
Net income attributable to Valero Energy Corporation stockholders | $ | 495 | |||||||||||||||||
Reconciliation of actual (U.S. GAAP) to adjusted (non-GAAP) amounts (c) | |||||||||||||||||||
Actual and adjusted operating income (loss) | |||||||||||||||||||
Operating income (loss) | $ | 915 | $ | 39 | $ | 43 | $ | (168 | ) | $ | 829 | ||||||||
Exclude adjustment: | |||||||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | 263 | 30 | — | — | 293 | ||||||||||||||
Adjusted operating income (loss) | $ | 652 | $ | 9 | $ | 43 | $ | (168 | ) | $ | 536 | ||||||||
Actual and adjusted net income attributable to Valero Energy Corporation stockholders | |||||||||||||||||||
Net income attributable to Valero Energy Corporation stockholders | $ | 495 | |||||||||||||||||
Exclude adjustment: | |||||||||||||||||||
Lower of cost or market inventory valuation adjustment (a) | 293 | ||||||||||||||||||
Income tax expense related to lower of cost or market inventory valuation adjustment | (81 | ) | |||||||||||||||||
Lower of cost or market inventory valuation adjustment, net of taxes | 212 | ||||||||||||||||||
Adjusted net income attributable to Valero Energy Corporation stockholders | $ | 283 |
Three Months Ended March 31, | |||||||||||
2017 | 2016 | Change | |||||||||
Throughput volumes (thousand barrels per day) | |||||||||||
Feedstocks: | |||||||||||
Heavy sour crude oil | 448 | 427 | 21 | ||||||||
Medium/light sour crude oil | 455 | 533 | (78 | ) | |||||||
Sweet crude oil | 1,245 | 1,172 | 73 | ||||||||
Residuals | 235 | 289 | (54 | ) | |||||||
Other feedstocks | 149 | 136 | 13 | ||||||||
Total feedstocks | 2,532 | 2,557 | (25 | ) | |||||||
Blendstocks and other | 306 | 322 | (16 | ) | |||||||
Total throughput volumes | 2,838 | 2,879 | (41 | ) | |||||||
Yields (thousand barrels per day) | |||||||||||
Gasolines and blendstocks | 1,360 | 1,378 | (18 | ) | |||||||
Distillates | 1,090 | 1,067 | 23 | ||||||||
Other products (d) | 425 | 470 | (45 | ) | |||||||
Total yields | 2,875 | 2,915 | (40 | ) | |||||||
Operating statistics | |||||||||||
Gross margin (c) | $ | 2,080 | $ | 2,008 | $ | 72 | |||||
Adjusted operating income (c) | $ | 647 | $ | 652 | $ | (5 | ) | ||||
Throughput volumes (thousand barrels per day) | 2,838 | 2,879 | (41 | ) | |||||||
Throughput margin per barrel (e) | $ | 8.14 | $ | 7.66 | $ | 0.48 | |||||
Operating costs per barrel: | |||||||||||
Operating expenses | 3.85 | 3.46 | 0.39 | ||||||||
Depreciation and amortization expense | 1.76 | 1.71 | 0.05 | ||||||||
Total operating costs per barrel | 5.61 | 5.17 | 0.44 | ||||||||
Adjusted operating income per barrel (f) | $ | 2.53 | $ | 2.49 | $ | 0.04 |
Three Months Ended March 31, | |||||||||||
2017 | 2016 | Change | |||||||||
Operating statistics | |||||||||||
Gross margin (c) | $ | 158 | $ | 120 | $ | 38 | |||||
Adjusted operating income (c) | $ | 22 | $ | 9 | $ | 13 | |||||
Production volumes (thousand gallons per day) | 4,041 | 3,740 | 301 | ||||||||
Gross margin per gallon of production (e) | $ | 0.43 | $ | 0.35 | $ | 0.08 | |||||
Operating costs per gallon of production: | |||||||||||
Operating expenses | 0.30 | 0.29 | 0.01 | ||||||||
Depreciation and amortization expense | 0.07 | 0.03 | 0.04 | ||||||||
Total operating costs per gallon of production | 0.37 | 0.32 | 0.05 | ||||||||
Adjusted operating income per gallon of production (f) | $ | 0.06 | $ | 0.03 | $ | 0.03 |
Three Months Ended March 31, | |||||||||||
2017 | 2016 | Change | |||||||||
Volumes (thousand barrels per day) | |||||||||||
Pipeline transportation throughput | 962 | 919 | 43 | ||||||||
Terminaling throughput | 2,734 | 1,850 | 884 | ||||||||
Operating statistics | |||||||||||
Pipeline transportation revenue | $ | 23 | $ | 20 | $ | 3 | |||||
Pipeline transportation revenue per barrel (e) | $ | 0.27 | $ | 0.24 | $ | 0.03 | |||||
Terminaling revenue | $ | 83 | $ | 59 | $ | 24 | |||||
Terminaling revenue per barrel (e) | $ | 0.34 | $ | 0.35 | $ | (0.01 | ) | ||||
Total operating revenues | $ | 106 | $ | 79 | $ | 27 |
Three Months Ended March 31, | |||||||||||
2017 | 2016 | Change | |||||||||
Feedstocks | |||||||||||
Brent crude oil | $ | 54.65 | $ | 35.14 | $ | 19.51 | |||||
Brent less West Texas Intermediate (WTI) crude oil | 2.82 | 1.90 | 0.92 | ||||||||
Brent less Alaska North Slope (ANS) crude oil | 0.82 | 0.69 | 0.13 | ||||||||
Brent less Louisiana Light Sweet (LLS) crude oil (g) | 1.13 | 0.05 | 1.08 | ||||||||
Brent less Argus Sour Crude Index (ASCI) crude oil (h) | 5.05 | 5.37 | (0.32 | ) | |||||||
Brent less Maya crude oil | 9.93 | 9.09 | 0.84 | ||||||||
LLS crude oil (g) | 53.52 | 35.09 | 18.43 | ||||||||
LLS less ASCI crude oil (g) (h) | 3.92 | 5.32 | (1.40 | ) | |||||||
LLS less Maya crude oil (g) | 8.80 | 9.04 | (0.24 | ) | |||||||
WTI crude oil | 51.83 | 33.24 | 18.59 | ||||||||
Natural gas (dollars per million British thermal units (MMBtu)) | 2.95 | 1.93 | 1.02 | ||||||||
Products | |||||||||||
U.S. Gulf Coast: | |||||||||||
CBOB gasoline less Brent | 8.78 | 7.81 | 0.97 | ||||||||
Ultra-low-sulfur diesel less Brent | 11.12 | 7.92 | 3.20 | ||||||||
Propylene less Brent | 1.22 | (2.39 | ) | 3.61 | |||||||
CBOB gasoline less LLS (g) | 9.91 | 7.86 | 2.05 | ||||||||
Ultra-low-sulfur diesel less LLS (g) | 12.25 | 7.97 | 4.28 | ||||||||
Propylene less LLS (g) | 2.35 | (2.34 | ) | 4.69 | |||||||
U.S. Mid-Continent: | |||||||||||
CBOB gasoline less WTI | 12.71 | 10.00 | 2.71 | ||||||||
Ultra-low-sulfur diesel less WTI | 13.99 | 11.03 | 2.96 | ||||||||
North Atlantic: | |||||||||||
CBOB gasoline less Brent | 8.68 | 10.30 | (1.62 | ) | |||||||
Ultra-low-sulfur diesel less Brent | 12.06 | 9.53 | 2.53 | ||||||||
U.S. West Coast: | |||||||||||
CARBOB 87 gasoline less ANS | 16.77 | 17.34 | (0.57 | ) | |||||||
CARB diesel less ANS | 14.84 | 11.19 | 3.65 | ||||||||
CARBOB 87 gasoline less WTI | 18.77 | 18.55 | 0.22 | ||||||||
CARB diesel less WTI | 16.84 | 12.40 | 4.44 | ||||||||
New York Harbor corn crush (dollars per gallon) | 0.23 | 0.13 | 0.10 |
(a) | During the three months ended March 31, 2016, we recorded a change in our lower of cost or market inventory valuation reserve that was established on December 31, 2015, resulting in a noncash benefit of $293 million ($263 million and $30 million attributable to our refining and ethanol segments, respectively). This adjustment is further discussed in Note 2 of Condensed Notes to Consolidated Financial Statements. |
(b) | The VLP segment information for the three months ended March 31, 2016 has been retrospectively adjusted for VLP’s acquisitions that occurred subsequent to March 31, 2016. |
(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. |
◦ | Adjusted net income attributable to Valero Energy Corporation stockholders is defined as net income attributable to Valero Energy Corporation stockholders excluding the lower of cost or market inventory valuation adjustment and its related income tax effect. |
◦ | Gross margin for the refining and ethanol segments is defined as operating income excluding the lower of cost or market inventory valuation adjustment, operating expenses, and depreciation and amortization expense as shown below: |
Three Months Ended March 31, 2017 | |||||||
Refining | Ethanol | ||||||
Reconciliation of operating income to gross margin | |||||||
Operating income | $ | 647 | $ | 22 | |||
Add back: | |||||||
Operating expenses | 984 | 109 | |||||
Depreciation and amortization expense | 449 | 27 | |||||
Gross margin | $ | 2,080 | $ | 158 |
Three Months Ended March 31, 2016 | |||||||
Refining | Ethanol | ||||||
Reconciliation of operating income to gross margin | |||||||
Operating income | $ | 915 | $ | 39 | |||
Add back: | |||||||
Lower of cost or market inventory valuation adjustment (a) | (263 | ) | (30 | ) | |||
Operating expenses | 907 | 99 | |||||
Depreciation and amortization expense | 449 | 12 | |||||
Gross margin | $ | 2,008 | $ | 120 |
◦ | Adjusted operating income is defined as operating income excluding the lower of cost or market inventory valuation adjustment. |
(d) | Other products primarily include petrochemicals, gas oils, No. 6 fuel oil, petroleum coke, sulfur, and asphalt. |
(e) | Throughput margin per barrel represents gross margin (as defined in (c) above) for our refining segment divided by throughput volumes. Gross margin per gallon of production represents gross margin (as defined in (c) above) for our ethanol segment divided by production volumes. Pipeline transportation revenue per barrel and terminaling revenue per barrel represents pipeline transportation revenue and terminaling revenue for our VLP segment divided by pipeline transportation throughput and terminaling throughput volumes, respectively. Throughput and production volumes are calculated by multiplying throughput and production volumes per day (as provided in the accompanying tables) by the number of days in the applicable period. |
(f) | Adjusted operating income per barrel represents adjusted operating income (defined in (c) above) for our refining segment divided by throughput volumes. Adjusted operating income per gallon of production represents adjusted operating income (defined in (c) above) for our ethanol segment divided by production volumes. Throughput and production volumes are calculated by multiplying throughput and production volumes per day (as provided in the accompanying tables) by the number of days in the applicable period. |
(g) | Average market reference prices for LLS crude oil, along with price differentials between the price of LLS crude oil and other types of crude oils are reflected without adjusting for the impact of the futures pricing for the corresponding delivery month. Therefore, the prices reported reflect the prompt month pricing only, without an adjustment for futures pricing (known in the industry as the Calendar Month Average (CMA) “roll” adjustment). We previously had provided average market reference prices that included the CMA “roll” adjustment. Accordingly, the average market reference price and price differentials for LLS crude oil for the three months ended March 31, 2016 have been adjusted to conform to the current presentation. |
(h) | Average market reference price differentials to Mars crude oil have been replaced by average market reference price differentials to ASCI crude oil. Mars crude oil is one of the three grades of sour crude oil used to create ASCI crude oil, and therefore, ASCI crude oil is a more comprehensive price marker for medium sour crude oil. Accordingly, the price differentials for ASCI crude oil for the three months ended March 31, 2016 are included to conform to the current presentation. |
• | Increase in distillate margins. We experienced an increase in distillate margins throughout all of our regions in the first quarter of 2017 compared to the first quarter of 2016. For example, the Brent-based benchmark reference margin for U.S. Gulf Coast ultra-low-sulfur diesel was $11.12 per barrel in the first quarter of 2017 compared to $7.92 per barrel in the first quarter of 2016, representing a favorable |
• | Lower costs of biofuel credits. As more fully described in Note 12 of Condensed Notes to Consolidated Financial Statements, we must purchase biofuel credits in order to meet our biofuel blending obligation under various government and regulatory compliance programs, and the cost of these credits (primarily RINs in the U.S.) decreased by $15 million from $161 million in the first quarter of 2016 to $146 million in the first quarter of 2017. This decrease was due to a decrease in the market price of RINs. |
• | Decrease in other refined product margins. We experienced a decrease in the margins of other refined products (such as petroleum coke and sulfur) relative to Brent crude oil in the first quarter of 2017 compared to the first quarter of 2016 due to an increase in the cost of crude oils between the periods. Because the market prices for our other refined products remain relatively stable, our margins decline when the cost of crude oils that we process increases. For example, the benchmark price of Brent crude oil was $54.65 in the first quarter of 2017 compared to $35.14 in the first quarter of 2016, an increase of $19.51. We estimate that the decrease in other refinery products margins per barrel in the first quarter of 2017 compared to the first quarter of 2016 had an unfavorable impact of $130 million. |
• | Lower throughput volumes. Refining throughput volumes decreased by 41,000 barrels per day in the first quarter of 2017. We estimate that the decrease in refining throughput volumes had a negative impact on our refining margin of approximately $30 million. |
• | Increase in charges from VLP. Charges from the VLP segment for transportation and terminaling services increased $27 million in the first quarter of 2017 compared to the first quarter of 2016 primarily due to new charges from businesses acquired by VLP after the first quarter of 2016. Details regarding the increase in charges from VLP are discussed in the VLP segment analysis below. |
• | Incremental terminaling throughput from acquired businesses. VLP experienced a 38 percent increase in terminaling revenues in the first quarter of 2017 compared to the first quarter of 2016 generated by contributions from the McKee Terminal Services and the Meraux and Three Rivers Terminal Services Businesses, which were acquired by VLP from Valero in the second and third quarters of 2016, respectively. The incremental throughput volumes generated at these terminals had a favorable impact to VLP’s operating revenues of $23 million. |
• | Incremental operating revenues from acquired crude system assets. Incremental throughput volumes related to the crude system assets that were acquired by VLP in January 2017, had a favorable impact to VLP’s operating revenues of $2 million. |
• | a decrease in receivables, partially offset by a decrease in accounts payable, primarily as a result of the timing of collections of receivables and payments of invoices, respectively; and |
• | an increase in inventory volumes held. |
• | fund $641 million in capital investments, which include capital expenditures, deferred turnaround and catalyst costs, and equity-method joint venture investments; |
• | acquire an undivided interest in crude system assets for $72 million; |
• | purchase common stock for treasury of $314 million; |
• | pay common stock dividends of $315 million; and |
• | pay distributions to noncontrolling interests of $34 million. |
• | the prepayment of certain expenses, primarily for the purchase of emissions credits related to cap-and-trade systems at prices we deemed favorable in anticipation of our annual obligation; |
• | the payment of accrued incentive compensation related to 2015; |
• | payments of sales, excise, and ad valorem taxes; and |
• | the partial liquidation of our inventories. |
• | fund $479 million in capital investments, which include capital expenditures, deferred turnaround and catalyst costs, and equity-method joint venture investments; |
• | purchase common stock for treasury of $265 million; and |
• | pay common stock dividends of $282 million. |
Rating | ||||
Rating Agency | Valero | VLP | ||
Moody’s Investors Service | Baa2 (stable outlook) | Baa3 (stable outlook) | ||
Standard & Poor’s Ratings Services | BBB (stable outlook) | BBB- (stable outlook) | ||
Fitch Ratings | BBB (stable outlook) | BBB- (stable outlook) |
March 31, 2017 | ||||||||||||||||||
Facility Amount | Maturity Date | Outstanding Borrowings | Letters of Credit Issued | Availability | ||||||||||||||
Committed facilities: | ||||||||||||||||||
Valero Revolver | $ | 3,000 | November 2020 | $ | — | $ | 150 | $ | 2,850 | |||||||||
VLP Revolver | $ | 750 | November 2020 | $ | 30 | $ | — | $ | 720 | |||||||||
Canadian Revolver | C$ | 25 | November 2017 | C$ | — | C$ | 10 | C$ | 15 | |||||||||
Accounts receivable sales facility | $ | 1,300 | July 2017 | $ | 100 | n/a | $ | 1,183 | ||||||||||
Letter of credit facilities | $ | 225 | June 2017 and November 2017 | n/a | $ | — | $ | 225 | ||||||||||
Uncommitted facilities: | ||||||||||||||||||
Letter of credit facilities | n/a | n/a | n/a | $ | 235 | n/a |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET 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 feedstock and refined petroleum product purchases, refined petroleum product sales, natural gas purchases, and corn purchases to lock in the price of those forecasted transactions at existing market prices that we deem favorable. |
Derivative Instruments Held For | |||||||
Non-Trading Purposes | Trading Purposes | ||||||
March 31, 2017: | |||||||
Gain (loss) in fair value resulting from: | |||||||
10% increase in underlying commodity prices | $ | (67 | ) | $ | (3 | ) | |
10% decrease in underlying commodity prices | 67 | (4 | ) | ||||
December 31, 2016: | |||||||
Gain (loss) in fair value resulting from: | |||||||
10% increase in underlying commodity prices | 61 | (22 | ) | ||||
10% decrease in underlying commodity prices | (61 | ) | 11 |
March 31, 2017 | |||||||||||||||||||||||||||||||
Expected Maturity Dates | |||||||||||||||||||||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | There- after | Total (a) | Fair Value | ||||||||||||||||||||||||
Fixed rate | $ | — | $ | — | $ | 750 | $ | 850 | $ | — | $ | 6,224 | $ | 7,824 | $ | 8,755 | |||||||||||||||
Average interest rate | — | % | — | % | 9.4 | % | 6.1 | % | — | % | 5.6 | % | 6.0 | % | |||||||||||||||||
Floating rate (b) | $ | 104 | $ | 5 | $ | 5 | $ | 35 | $ | 5 | $ | 26 | $ | 180 | $ | 180 | |||||||||||||||
Average interest rate | 1.6 | % | 3.4 | % | 3.4 | % | 2.5 | % | 3.4 | % | 3.4 | % | 2.2 | % | |||||||||||||||||
December 31, 2016 | |||||||||||||||||||||||||||||||
Expected Maturity Dates | |||||||||||||||||||||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | There- after | Total (a) | Fair Value | ||||||||||||||||||||||||
Fixed rate | $ | — | $ | — | $ | 750 | $ | 850 | $ | — | $ | 6,224 | $ | 7,824 | $ | 8,701 | |||||||||||||||
Average interest rate | — | % | — | % | 9.4 | % | 6.1 | % | — | % | 5.6 | % | 6.0 | % | |||||||||||||||||
Floating rate (b) | $ | 105 | $ | 5 | $ | 5 | $ | 35 | $ | 5 | $ | 26 | $ | 181 | $ | 181 | |||||||||||||||
Average interest rate | 1.4 | % | 3.4 | % | 3.4 | % | 2.5 | % | 3.4 | % | 3.4 | % | 2.1 | % |
(a) | Excludes unamortized discounts and debt issuance costs. |
(b) | As of March 31, 2017 and December 31, 2016, we had an interest rate swap associated with $50 million and $51 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. |
ITEM 4. | CONTROLS AND PROCEDURES |
(a) | Evaluation of disclosure controls and procedures. |
(b) | Changes in internal control over financial reporting. |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
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 2017. |
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 2017 | 784,858 | $ | 67.54 | 132,555 | 652,303 | $2.5 billion | |||||||||
February 2017 | 1,735,651 | $ | 66.41 | 5,692 | 1,729,959 | $2.4 billion | |||||||||
March 2017 | 2,165,563 | $ | 67.14 | 2,935 | 2,162,628 | $2.2 billion | |||||||||
Total | 4,686,072 | $ | 66.93 | 141,182 | 4,544,890 | $2.2 billion |
(a) | The shares reported in this column represent purchases settled in the first quarter of 2017 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 September 21, 2016, we announced that our board of directors authorized our purchase of up to $2.5 billion of our outstanding common stock (the 2016 program) with no expiration date, which was in addition to the remaining amount available under our $2.5 billion program previously authorized on July 13, 2015 (the 2015 program). During the first quarter of 2017, we completed our purchases under the 2015 program. As of March 31, 2017, we had $2.2 billion remaining available for purchase under the 2016 program. |
ITEM 6. | EXHIBITS |
Exhibit No. | Description | |
*31.01 | ||
*31.02 | ||
**32.01 | ||
***101 | Interactive Data Files |
* | Filed herewith. |
** | Furnished herewith. |
*** | Submitted electronically herewith. |
VALERO ENERGY CORPORATION (Registrant) | |||
By: | /s/ Michael S. Ciskowski | ||
Michael S. Ciskowski | |||
Executive Vice President and | |||
Chief Financial Officer | |||
(Duly Authorized Officer and Principal | |||
Financial and Accounting Officer) |
/s/ Joseph W. Gorder | ||
Joseph W. Gorder Chief Executive Officer and President |
/s/ Michael S. Ciskowski | ||
Michael S. Ciskowski Executive Vice President and Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Joseph W. Gorder | |
Joseph W. Gorder | |
Chief Executive Officer and President | |
May 8, 2017 |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Michael S. Ciskowski | |
Michael S. Ciskowski | |
Executive Vice President and Chief Financial Officer | |
May 8, 2017 |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Apr. 28, 2017 |
|
Document and Entity Information | ||
Entity Registrant Name | VALERO ENERGY CORP/TX | |
Entity Central Index Key | 0001035002 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 447,231,409 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Valero Energy Corporation stockholders’ equity: | ||
Common stock, par value (in usd per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 1,200,000,000 | 1,200,000,000 |
Common stock, shares issued | 673,501,593 | 673,501,593 |
Treasury stock, common shares | 226,338,916 | 222,000,024 |
Consolidated Statements of Income (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Supplemental information: | ||
Includes excise taxes on sales by certain of our international operations | $ 1,272 | $ 1,395 |
Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Net income | $ 321 | $ 513 |
Other comprehensive income: | ||
Foreign currency translation adjustment | 74 | 122 |
Net gain on pension and other postretirement benefits | 3 | 3 |
Other comprehensive income before income tax expense (benefit) | 77 | 125 |
Income tax expense (benefit) related to items of other comprehensive income | 1 | (7) |
Other comprehensive income | 76 | 132 |
Comprehensive income | 397 | 645 |
Less: Comprehensive income attributable to noncontrolling interests | 16 | 19 |
Comprehensive income attributable to Valero Energy Corporation stockholders | $ 381 | $ 626 |
Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Cash flows from operating activities: | ||
Net income | $ 321 | $ 513 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 500 | 485 |
Lower of cost or market inventory valuation adjustment | 0 | (293) |
Deferred income tax expense (benefit) | (4) | 121 |
Changes in current assets and current liabilities | 151 | (177) |
Changes in deferred charges and credits and other operating activities, net | 20 | (9) |
Net cash provided by operating activities | 988 | 640 |
Cash flows from investing activities: | ||
Capital expenditures | (279) | (316) |
Deferred turnaround and catalyst costs | (245) | (161) |
Investments in joint ventures | (117) | (2) |
Acquisition of undivided interest in crude system assets | (72) | 0 |
Other investing activities, net | (1) | (2) |
Net cash used in investing activities | (714) | (481) |
Cash flows from financing activities: | ||
Repayments of debt and capital lease obligations | (5) | (3) |
Purchase of common stock for treasury | (314) | (265) |
Common stock dividends | (315) | (282) |
Proceeds from issuance of Valero Energy Partners LP common units | 35 | 0 |
Distributions to noncontrolling interests (public unitholders) of Valero Energy Partners LP | (9) | (7) |
Distributions to other noncontrolling interests | (25) | 0 |
Other financing activities, net | (19) | 13 |
Net cash used in financing activities | (652) | (544) |
Effect of foreign exchange rate changes on cash | 25 | 49 |
Net decrease in cash and temporary cash investments | (353) | (336) |
Cash and temporary cash investments at beginning of period | 4,816 | 4,114 |
Cash and temporary cash investments at end of period | $ 4,463 | $ 3,778 |
Basis of Presentation and Significant Accounting Policies |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2017 | |||||
Accounting Policies [Abstract] | |||||
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation General As used in this report, the terms “Valero,” “we,” “us,” or “our” may refer to Valero Energy Corporation, one or more of its consolidated subsidiaries, or all 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 have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The balance sheet as of December 31, 2016 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, 2016. Reclassifications As of January 1, 2017, we revised our reportable segments to reflect a new reportable segment — VLP. The results of the VLP segment include the results of Valero Energy Partners LP (VLP), our majority-owned master limited partnership. Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation. See Note 9 for additional information. Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in facts and circumstances may result in revised estimates. Accounting Pronouncements Adopted During the Period In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-11, “Inventory (Topic 330),” to simplify the measurement of inventory measured using the first-in, first-out or average cost methods. The provisions of this ASU require the inventory to be measured at the lower of cost and net realizable value rather than the lower of cost or market. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The provisions of this ASU are to be applied prospectively and are effective for annual reporting periods beginning after December 15, 2016, and interim reporting periods within those annual periods, with early adoption permitted. Our adoption of this ASU effective January 1, 2017 did not affect our financial position or results of operations since the majority of our inventory is stated at last-in, first-out (LIFO). In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740),” to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The provisions of this ASU require an entity to recognize the income tax consequences of intra-entity transfers of assets other than inventory immediately when the transfer occurs. These provisions are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual periods, with early adoption permitted. The provisions should be applied on a modified retrospective basis with a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the period of adoption to recognize the income tax consequences of intra-entity transfers of assets that occurred before the adoption date. Our early adoption of this ASU using the modified retrospective method effective January 1, 2017 did not have a material affect on our financial position or results of operations. Adoption of this guidance more accurately reflects the economics of an intra-entity asset transfer when it occurs by eliminating the previous exception that prohibited the recognition of the income tax consequences of an intra-entity asset transfer until the asset had been sold to an outside party. In October 2016, the FASB issued ASU No. 2016-17, “Consolidation (Topic 810),” to provide guidance on how a reporting entity that is a single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary. The provisions of this ASU are effective for annual reporting periods beginning after December 15, 2016, and interim reporting periods within those annual periods, with early adoption permitted. The provisions should be applied on a retrospective basis to all relevant prior periods beginning with the fiscal year in which the VIE guidance was adopted with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Our adoption of this ASU effective January 1, 2017 did not affect our financial position or results of operations. In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805),” to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The provisions of this ASU provide a more robust framework to use in determining when a set of assets and activities is a business by clarifying the requirements related to inputs, processes, and outputs. These provisions are to be applied prospectively and are effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted. Our early adoption of this ASU effective January 1, 2017 did not have an affect on our financial position or results of operations. However, more of our future acquisitions may be accounted for as asset acquisitions. Accounting Pronouncements Not Yet Adopted In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” to clarify the principles for recognizing revenue. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual periods. We recently completed our evaluation of the provisions of this ASU and concluded that our adoption of the ASU will not materially change the amount or timing of revenues recognized by us, nor will it materially affect our financial position. The majority of our revenues are generated from the sale of refined petroleum products and ethanol. These revenues are largely based on the current spot (market) prices of the products sold, which represents consideration specifically allocable to the products being sold on a given day, and we recognize those revenues upon delivery and transfer of title to the products to our customers. The time at which delivery and transfer of title occurs is the point when our control of the products is transferred to our customers and when our performance obligation to our customers is fulfilled. We will adopt this ASU effective January 1, 2018, and we expect to use the modified retrospective method of adoption as permitted by the ASU. Under that method, the cumulative effect of initially applying the standard is recognized as an adjustment to the opening balance of retained earnings, and revenues reported in the periods prior to the date of adoption are not changed. During 2017, we are developing our revenue disclosures and enhancing our accounting systems. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10),” to enhance the reporting model for financial instruments regarding certain aspects of recognition, measurement, presentation, and disclosure. The provisions of this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual periods. This ASU is to be applied using a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this ASU effective January 1, 2018 will not affect our financial position or results of operations, but will result in revised disclosures. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new standard is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those annual periods, with early adoption permitted. We anticipate adopting the new standard on January 1, 2019 and we expect to use the modified retrospective method of adoption as permitted by the ASU. We recently completed our evaluation of the provisions of this standard, and a multi-disciplined implementation team has gained an understanding of the standard’s accounting and disclosure provisions. This team is developing enhanced contracting and lease evaluation processes and information systems to support such processes, as well as new and enhanced accounting systems to account for our leases and support the required disclosures. We continue to evaluate the effect that adopting this standard will have on our financial statements and related disclosures. In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The new standard requires that an employer report the service cost component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. This ASU is to be applied retrospectively for income statement items and prospectively for any capitalized benefit costs. The provisions of this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual periods, with early adoption permitted. The adoption of this guidance effective January 1, 2018 is not expected to materially affect our financial position or results of operations. |
Inventories |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORIES |
Inventories consisted of the following (in millions):
Inventories are valued at the lower of cost or market. As of December 31, 2015, we had a valuation reserve of $766 million in order to state our inventories at market. During the three months ended March 31, 2016, we recorded a change in our lower of cost or market inventory valuation reserve that resulted in a net benefit to our results of operations of $293 million. As of March 31, 2017 and December 31, 2016, the replacement cost (market value) of LIFO inventories exceeded their LIFO carrying amounts by $1.8 billion and $1.9 billion, respectively. As of March 31, 2017 and December 31, 2016, our non-LIFO inventories accounted for $663 million and $641 million, respectively, of our total inventories. |
Debt and Capital Lease Obligations |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT AND CAPITAL LEASE OBLIGATIONS |
There was no significant activity related to our debt during the three months ended March 31, 2017 and 2016. Summary of Credit Facilities We had outstanding borrowings, letters of credit issued, and availability under our credit facilities as follows (in millions):
As of March 31, 2017 and December 31, 2016, the weighted-average interest rate on the VLP Revolver was 2.3125 percent. As of March 31, 2017 and December 31, 2016, the weighted-average interest rate on the accounts receivable sales facility was 1.4805 percent and 1.3422 percent, respectively. Capital Leases In January 2017, we recognized capital lease assets and related obligations of approximately $490 million for the lease of storage tanks located at three of our refineries. These lease agreements have initial terms of 10 years each with successive 10-year automatic renewal terms. |
Commitments and Contingencies |
3 Months Ended | ||||
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Mar. 31, 2017 | |||||
Commitments and Contingencies Disclosure [Abstract] | |||||
COMMITMENTS AND CONTINGENCIES |
Environmental Matters We are involved, together with several other companies, in an environmental cleanup in the Village of Hartford, Illinois (the Village) and during 2015, one of these companies assumed the ongoing remediation in the Village pursuant to a federal court order. We had previously conducted an initial response in the Village, along with other companies, pursuant to an administrative order issued by the U.S. Environmental Protection Agency (EPA). The parties involved in the initial response may have further claims among themselves for costs already incurred. We also continue to be engaged in site assessment and interim measures at the adjacent shutdown refinery site, which we acquired as part of an acquisition in 2005, and we are in litigation with other potentially responsible parties and the Illinois EPA relating to the remediation of the site. In each of these matters, we have various defenses, limitations, and potential rights for contribution from the other responsible parties. We have recorded a liability for our expected contribution obligations. However, because of the unpredictable nature of these cleanups, the methodology for allocation of liabilities, and the State of Illinois’ failure to directly sue third parties responsible for historic contamination at the site, it is reasonably possible that we could incur a loss in a range of $0 to $200 million in excess of the amount of our accrual to ultimately resolve these matters. Factors underlying this estimated range are expected to change from time to time, and actual results may vary significantly from this estimate. Litigation Matters We are party to claims and legal proceedings arising in the ordinary course of business. We have not recorded a loss contingency liability with respect to some of these matters because we have determined that it is remote that a loss has been incurred. For other matters, we have recorded a loss contingency liability where we have determined that it is probable that a loss has been incurred and that the loss is reasonably estimable. These loss contingency liabilities are not material to our financial position. We re-evaluate and update our loss contingency liabilities as matters progress over time, and we believe that any changes to the recorded liabilities will not be material to our financial position, results of operations, or liquidity. |
Equity |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY |
Reconciliation of Balances The following is a reconciliation of the beginning and ending balances of equity attributable to our stockholders, equity attributable to noncontrolling interests, and total equity (in millions):
___________________________
Share Activity There was no significant share activity during the three months ended March 31, 2017 and 2016. Common Stock Dividends On May 3, 2017, our board of directors declared a quarterly cash dividend of $0.70 per common share payable on June 7, 2017 to holders of record at the close of business on May 17, 2017. Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive loss by component, net of tax, were as follows (in millions):
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Variable Interest Entities |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
VARIABLE INTEREST ENTITIES |
Overview In the normal course of business, we have financial interests in certain entities that have been determined to be VIEs. We consolidate a VIE when we have a variable interest in an entity for which we are the primary beneficiary such that we have (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE. In order to make this determination, we evaluated our contractual arrangements with the VIEs, including arrangements for the use of assets, purchases of products and services, debt, equity, or management of operating activities. Our significant VIE’s include:
The VIEs’ assets can only be used to settle their own obligations and the VIEs’ creditors have no recourse to our assets. We do not provide financial guarantees to our VIEs. Although we have provided credit facilities to 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 our consolidated VIEs’ performance, net of intercompany eliminations, to the extent of our ownership interest in each VIE. The following tables present summarized balance sheet information for the significant assets and liabilities of our VIEs, which are included in our balance sheets (in millions).
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Employee Benefit Plans |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EMPLOYEE BENEFIT PLANS |
The components of net periodic benefit cost related to our defined benefit plans were as follows (in millions):
Our anticipated contributions to our pension and other post retirement benefit plans during 2017 have not changed from amounts previously disclosed in our financial statements for the year ended December 31, 2016. We contributed $7 million and $8 million, respectively, to our pension plans and $5 million and $4 million, respectively, to our other postretirement benefit plans during the three months ended March 31, 2017 and 2016. |
Earnings Per Common Share |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EARNINGS PER COMMON SHARE |
Earnings per common share were computed as follows (dollars and shares in millions, except per share amounts):
Participating securities include restricted stock and performance awards granted under our 2011 Omnibus Stock Incentive Plan. |
Segment Information |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION |
Effective January 1, 2017, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our business. Accordingly, we created a new reportable segment — VLP. The results of the VLP segment, which include the results of our majority-owned master limited partnership referred to by the same name, were transferred from the refining segment. Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation. As a result, we have three reportable segments as follows:
Operations that are not included in any of the reportable segments are included in the corporate category. Our reportable segments are strategic business units that offer different products and services. They are managed separately as each business requires unique technologies and marketing strategies. Performance is evaluated based on segment operating income, which includes revenues and expenses that are directly attributable to management of the respective segment. Intersegment sales are generally derived from transactions made at prevailing market rates. The following table reflects activity related to our reportable segments (in millions):
___________________________
Total assets by reportable segment were as follows (in millions):
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Supplemental Cash Flow Information |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION |
In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions):
Noncash investing and financing activities during the three months ended March 31, 2017 included the recognition of a capital lease asset and related obligation associated with an agreement for storage tanks near three of our refineries. This noncash transaction is further described in Note 3. There were no significant noncash investing or financing activities during the three months ended March 31, 2016. Cash flows related to interest and income taxes were as follows (in millions):
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS |
Recurring Fair Value Measurements The tables below 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, 2017 and December 31, 2016. 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 tables below on a gross basis. We have no derivative contracts that are subject to master netting arrangements that are reflected gross on the balance sheet.
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:
There were no transfers between levels for assets and liabilities held as of March 31, 2017 and December 31, 2016 that were measured at fair value on a recurring basis. There was no activity during the three months ended March 31, 2017 and 2016 related to the fair value amounts categorized in Level 3 as of March 31, 2017 and December 31, 2016. Nonrecurring Fair Value Measurements There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of March 31, 2017 and December 31, 2016. Other Financial Instruments Financial instruments that we recognize in our balance sheets at their carrying amounts are shown in the table below along with their associated fair values (in millions):
The methods and significant assumptions used to estimate the fair value of these financial instruments are as follows:
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Price Risk Management Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRICE RISK MANAGEMENT ACTIVITIES |
We are exposed to market risks primarily related to the volatility in the price of commodities, and foreign currency exchange rates, and the price of credits needed to comply with various government and regulatory programs. We enter into derivative instruments to manage some of these risks, including derivative instruments related to the various commodities we purchase or produce, and foreign currency exchange and purchase contracts, as described below under “Risk Management Activities by Type of Risk.” These derivative instruments are recorded as either assets or liabilities measured at their fair values (see Note 11), as summarized below under “Fair Values of Derivative Instruments,” with changes in fair value recognized currently in income. The effect of these derivative instruments on our income is summarized below under “Effect of Derivative Instruments on Income.” Risk Management Activities by Type of Risk Commodity Price Risk We are exposed to market risks related to the volatility in the price of crude oil, refined petroleum products (primarily gasoline and distillate), grain (primarily corn), soybean oil, 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, including futures, swaps, and options. We use the futures markets for the available liquidity, which provides greater flexibility in transacting our hedging and trading operations. We use swaps primarily to manage our price exposure. 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. To manage commodity price risk, we use economic hedges, which are not designated as fair value or cash flow hedges, and we use fair value and cash flow hedges from time to time. We also enter into certain commodity derivative instruments for trading purposes. Our objectives for entering into hedges or trading derivatives are described below.
As of March 31, 2017, we had the following outstanding commodity derivative instruments that were used as 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 those identified as corn contracts that are presented in thousands of bushels and soybean oil contracts that are presented in thousands of pounds).
As of March 31, 2017, we had the following outstanding commodity derivative instruments that were entered into for trading purposes. The information presents the notional volume of outstanding contracts by type of instrument and year of maturity (volumes represent thousands of barrels, except those identified as corn contracts that are presented in thousands of bushels).
We had no commodity derivative contracts outstanding as of March 31, 2017 and 2016 or during the three months ended March 31, 2017 and 2016 that were designated as fair value or cash flow hedges. Foreign Currency Risk We are exposed to exchange rate fluctuations on transactions entered into by our international operations that are denominated in currencies other than the local (functional) currencies of those operations. To manage our exposure to these exchange rate fluctuations, we use foreign currency exchange and purchase contracts. These contracts are not designated as hedging instruments for accounting purposes and therefore are classified as economic hedges. As of March 31, 2017, we had forward contracts to purchase $350 million of U.S. dollars. These commitments matured on or before April 30, 2017. Environmental Compliance Program Price Risk We are exposed to market risk related to the volatility in the price of credits needed to comply with various governmental and regulatory environmental compliance programs. To manage this risk, we enter into contracts to purchase these credits when prices are deemed favorable. 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 require us to blend biofuels into the products we produce, and we are subject to such programs in most of the countries in which we operate. These countries set annual quotas for the percentage of biofuels that must be blended into the motor fuels 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. To the degree we are unable to blend at the applicable rate, we must purchase biofuel credits (primarily RINs in the U.S.). We are exposed to the volatility in the market price of these credits, and we manage that risk by purchasing biofuel credits when prices are deemed favorable. The cost of meeting our obligations under these compliance programs was $146 million and $161 million for the three months ended March 31, 2017 and 2016, respectively. These amounts are reflected in cost of sales. We are subject to additional requirements under greenhouse gas (GHG) emission programs, including the cap-and-trade systems, as discussed in Note 11. 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 the majority of these costs from our customers for the three months ended March 31, 2017 and 2016 and expect to continue to recover the majority of these costs in the future. For the three months ended March 31, 2017 and 2016, 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, 2017 and December 31, 2016 (in millions) and the line items in the balance sheets in which the fair values are reflected. See Note 11 for additional information related to the fair values of our derivative instruments. As indicated in Note 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 tables below, however, are 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.
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 market risk on a daily basis in accordance with policies approved by our board of directors. Market risks are monitored by our risk control group to ensure compliance with our stated risk management policy. We do not require any collateral or other security to support derivative instruments into which we enter. We also do not have any derivative instruments that require us to maintain a minimum investment-grade credit rating. Effect of Derivative Instruments on Income The following tables provide information about the gain or loss recognized in income on our derivative instruments and the income statement line items in which such gains and losses are reflected (in millions).
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Basis of Presentation and Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation General As used in this report, the terms “Valero,” “we,” “us,” or “our” may refer to Valero Energy Corporation, one or more of its consolidated subsidiaries, or all 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 have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. The balance sheet as of December 31, 2016 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, 2016. |
Reclassifications | Reclassifications As of January 1, 2017, we revised our reportable segments to reflect a new reportable segment — VLP. The results of the VLP segment include the results of Valero Energy Partners LP (VLP), our majority-owned master limited partnership. Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation. See Note 9 for additional information. |
Use of Estimates | 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. |
New Accounting Pronouncements | Accounting Pronouncements Adopted During the Period In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-11, “Inventory (Topic 330),” to simplify the measurement of inventory measured using the first-in, first-out or average cost methods. The provisions of this ASU require the inventory to be measured at the lower of cost and net realizable value rather than the lower of cost or market. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The provisions of this ASU are to be applied prospectively and are effective for annual reporting periods beginning after December 15, 2016, and interim reporting periods within those annual periods, with early adoption permitted. Our adoption of this ASU effective January 1, 2017 did not affect our financial position or results of operations since the majority of our inventory is stated at last-in, first-out (LIFO). In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740),” to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The provisions of this ASU require an entity to recognize the income tax consequences of intra-entity transfers of assets other than inventory immediately when the transfer occurs. These provisions are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual periods, with early adoption permitted. The provisions should be applied on a modified retrospective basis with a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the period of adoption to recognize the income tax consequences of intra-entity transfers of assets that occurred before the adoption date. Our early adoption of this ASU using the modified retrospective method effective January 1, 2017 did not have a material affect on our financial position or results of operations. Adoption of this guidance more accurately reflects the economics of an intra-entity asset transfer when it occurs by eliminating the previous exception that prohibited the recognition of the income tax consequences of an intra-entity asset transfer until the asset had been sold to an outside party. In October 2016, the FASB issued ASU No. 2016-17, “Consolidation (Topic 810),” to provide guidance on how a reporting entity that is a single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary. The provisions of this ASU are effective for annual reporting periods beginning after December 15, 2016, and interim reporting periods within those annual periods, with early adoption permitted. The provisions should be applied on a retrospective basis to all relevant prior periods beginning with the fiscal year in which the VIE guidance was adopted with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Our adoption of this ASU effective January 1, 2017 did not affect our financial position or results of operations. In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805),” to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The provisions of this ASU provide a more robust framework to use in determining when a set of assets and activities is a business by clarifying the requirements related to inputs, processes, and outputs. These provisions are to be applied prospectively and are effective for annual reporting periods beginning after December 15, 2017, with early adoption permitted. Our early adoption of this ASU effective January 1, 2017 did not have an affect on our financial position or results of operations. However, more of our future acquisitions may be accounted for as asset acquisitions. Accounting Pronouncements Not Yet Adopted In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” to clarify the principles for recognizing revenue. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual periods. We recently completed our evaluation of the provisions of this ASU and concluded that our adoption of the ASU will not materially change the amount or timing of revenues recognized by us, nor will it materially affect our financial position. The majority of our revenues are generated from the sale of refined petroleum products and ethanol. These revenues are largely based on the current spot (market) prices of the products sold, which represents consideration specifically allocable to the products being sold on a given day, and we recognize those revenues upon delivery and transfer of title to the products to our customers. The time at which delivery and transfer of title occurs is the point when our control of the products is transferred to our customers and when our performance obligation to our customers is fulfilled. We will adopt this ASU effective January 1, 2018, and we expect to use the modified retrospective method of adoption as permitted by the ASU. Under that method, the cumulative effect of initially applying the standard is recognized as an adjustment to the opening balance of retained earnings, and revenues reported in the periods prior to the date of adoption are not changed. During 2017, we are developing our revenue disclosures and enhancing our accounting systems. In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10),” to enhance the reporting model for financial instruments regarding certain aspects of recognition, measurement, presentation, and disclosure. The provisions of this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual periods. This ASU is to be applied using a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The adoption of this ASU effective January 1, 2018 will not affect our financial position or results of operations, but will result in revised disclosures. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new standard is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those annual periods, with early adoption permitted. We anticipate adopting the new standard on January 1, 2019 and we expect to use the modified retrospective method of adoption as permitted by the ASU. We recently completed our evaluation of the provisions of this standard, and a multi-disciplined implementation team has gained an understanding of the standard’s accounting and disclosure provisions. This team is developing enhanced contracting and lease evaluation processes and information systems to support such processes, as well as new and enhanced accounting systems to account for our leases and support the required disclosures. We continue to evaluate the effect that adopting this standard will have on our financial statements and related disclosures. In March 2017, the FASB issued ASU 2017-07, “Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The new standard requires that an employer report the service cost component in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. It also requires the other components of net periodic pension cost and net periodic postretirement benefit cost to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. This ASU is to be applied retrospectively for income statement items and prospectively for any capitalized benefit costs. The provisions of this ASU are effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within those annual periods, with early adoption permitted. The adoption of this guidance effective January 1, 2018 is not expected to materially affect our financial position or results of operations. |
Variable interest entities | In the normal course of business, we have financial interests in certain entities that have been determined to be VIEs. We consolidate a VIE when we have a variable interest in an entity for which we are the primary beneficiary such that we have (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE. In order to make this determination, we evaluated our contractual arrangements with the VIEs, including arrangements for the use of assets, purchases of products and services, debt, equity, or management of operating activities. |
Offsetting fair value amounts of commodity derivative contracts | 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 tables below on a gross basis. We have no derivative contracts that are subject to master netting arrangements that are reflected gross on the balance sheet. |
Derivatives | We are exposed to market risks primarily related to the volatility in the price of commodities, and foreign currency exchange rates, and the price of credits needed to comply with various government and regulatory programs. We enter into derivative instruments to manage some of these risks, including derivative instruments related to the various commodities we purchase or produce, and foreign currency exchange and purchase contracts, as described below under “Risk Management Activities by Type of Risk.” These derivative instruments are recorded as either assets or liabilities measured at their fair values (see Note 11), as summarized below under “Fair Values of Derivative Instruments,” with changes in fair value recognized currently in income. The effect of these derivative instruments on our income is summarized below under “Effect of Derivative Instruments on Income.” |
Derivative instruments collateral requirements | We do not require any collateral or other security to support derivative instruments into which we enter. |
Inventories (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventories | Inventories consisted of the following (in millions):
|
Debt and Capital Lease Obligations (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of credit facilities | We had outstanding borrowings, letters of credit issued, and availability under our credit facilities as follows (in millions):
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Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of changes in equity | The following is a reconciliation of the beginning and ending balances of equity attributable to our stockholders, equity attributable to noncontrolling interests, and total equity (in millions):
___________________________
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Schedule of changes in accumulated other comprehensive loss | Changes in accumulated other comprehensive loss by component, net of tax, were as follows (in millions):
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Variable Interest Entities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized balance sheet information of VIEs | The following tables present summarized balance sheet information for the significant assets and liabilities of our VIEs, which are included in our balance sheets (in millions).
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Employee Benefit Plans (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Periodic benefit cost related to our defined benefit plans, net | The components of net periodic benefit cost related to our defined benefit plans were as follows (in millions):
|
Earnings Per Common Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of earnings per common share, basic and diluted | Earnings per common share were computed as follows (dollars and shares in millions, except per share amounts):
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Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment information for our reportable segments | The following table reflects activity related to our reportable segments (in millions):
___________________________
Total assets by reportable segment were as follows (in millions):
|
Supplemental Cash Flow Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of cash flows, supplemental disclosures | Cash flows related to interest and income taxes were as follows (in millions):
In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions):
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of assets and liabilities measured on recurring basis | The tables below 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, 2017 and December 31, 2016. 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 tables below on a gross basis. We have no derivative contracts that are subject to master netting arrangements that are reflected gross on the balance sheet.
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Carrying amounts and estimated fair value of financial instruments | Financial instruments that we recognize in our balance sheets at their carrying amounts are shown in the table below along with their associated fair values (in millions):
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Price Risk Management Activities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk management activities by type of risk | As of March 31, 2017, we had the following outstanding commodity derivative instruments that were entered into for trading purposes. The information presents the notional volume of outstanding contracts by type of instrument and year of maturity (volumes represent thousands of barrels, except those identified as corn contracts that are presented in thousands of bushels).
As of March 31, 2017, we had the following outstanding commodity derivative instruments that were used as 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 those identified as corn contracts that are presented in thousands of bushels and soybean oil contracts that are presented in thousands of pounds).
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Fair values of derivative instruments | The following tables provide information about the fair values of our derivative instruments as of March 31, 2017 and December 31, 2016 (in millions) and the line items in the balance sheets in which the fair values are reflected. See Note 11 for additional information related to the fair values of our derivative instruments. As indicated in Note 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 tables below, however, are 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.
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Effect of derivative instruments on income | The following tables provide information about the gain or loss recognized in income on our derivative instruments and the income statement line items in which such gains and losses are reflected (in millions).
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Inventories (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Schedule of Inventories | ||||
Refinery feedstocks | $ 2,318 | $ 2,068 | ||
Refined petroleum products and blendstocks | 3,189 | 3,153 | ||
Ethanol feedstocks and products | 268 | 238 | ||
Materials and supplies | 250 | 250 | ||
Inventories | 6,025 | 5,709 | ||
Inventories (Textual) | ||||
Lower of cost or market inventory valuation reserve | $ 766 | |||
Lower of cost or market inventory valuation adjustment | 0 | $ 293 | ||
Excess of market value over carrying amount of LIFO inventories | 1,800 | 1,900 | ||
Amount of non-LIFO inventory | $ 663 | $ 641 |
Debt and Capital Lease Obligations, Credit Facilities (Details) CAD in Millions, $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017
CAD
|
Mar. 31, 2017
USD ($)
|
Dec. 31, 2016 |
|
Valero Revolver [Member] | Credit Facilities [Member] | |||
Line of Credit Facility | |||
Line of credit facility, maximum borrowing capacity | $ 3,000 | ||
Line of credit facility, expiration date | Nov. 30, 2020 | ||
Amount outstanding | 0 | ||
Line of credit facility, remaining borrowing capacity | 2,850 | ||
Valero Revolver Letter of Credit [Member] | Credit Facilities [Member] | |||
Line of Credit Facility | |||
Amount outstanding | 150 | ||
VLP Revolver [Member] | Credit Facilities [Member] | |||
Line of Credit Facility | |||
Line of credit facility, maximum borrowing capacity | 750 | ||
Line of credit facility, expiration date | Nov. 30, 2020 | ||
Amount outstanding | 30 | ||
Line of credit facility, remaining borrowing capacity | $ 720 | ||
Credit Facilities (Textual) | |||
Weighted-average interest rate | 2.3125% | 2.3125% | 2.3125% |
VLP Revolver Letter of Credit [Member] | Credit Facilities [Member] | |||
Line of Credit Facility | |||
Amount outstanding | $ 0 | ||
Canadian Revolver [Member] | Credit Facilities [Member] | |||
Line of Credit Facility | |||
Line of credit facility, maximum borrowing capacity | CAD | CAD 25 | ||
Line of credit facility, expiration date | Nov. 30, 2017 | ||
Amount outstanding | CAD | CAD 0 | ||
Line of credit facility, remaining borrowing capacity | CAD | 15 | ||
Canadian Revolver Letter of Credit [Member] | Credit Facilities [Member] | |||
Line of Credit Facility | |||
Amount outstanding | CAD | CAD 10 | ||
A/R Sales Facility [Member] | Credit Facilities [Member] | |||
Line of Credit Facility | |||
Line of credit facility, maximum borrowing capacity | 1,300 | ||
Line of credit facility, expiration date | Jul. 31, 2017 | ||
Amount outstanding | 100 | ||
Line of credit facility, remaining borrowing capacity | $ 1,183 | ||
Credit Facilities (Textual) | |||
Weighted-average interest rate | 1.4805% | 1.4805% | 1.3422% |
Committed Letter of Credit Facility [Member] | Credit Facilities [Member] | |||
Line of Credit Facility | |||
Line of credit facility, maximum borrowing capacity | $ 225 | ||
Amount outstanding | 0 | ||
Line of credit facility, remaining borrowing capacity | 225 | ||
Committed Letter of Credit Facility Expires June 2017 [Member] | Credit Facilities [Member] | |||
Line of Credit Facility | |||
Line of credit facility, expiration date | Jun. 30, 2017 | ||
Committed Letter of Credit Facility Expires November 2017 [Member] | Credit Facilities [Member] | |||
Line of Credit Facility | |||
Line of credit facility, expiration date | Nov. 30, 2017 | ||
Uncommitted Letter of Credit Facility [Member] | |||
Line of Credit Facility | |||
Amount outstanding | $ 235 |
Debt and Capital Lease Obligations, Capital Lease Obligations (Details) $ in Millions |
1 Months Ended |
---|---|
Jan. 31, 2017
USD ($)
| |
Capital Lease Obligations [Member] | |
Capital Lease Obligations (Textual) | |
Capital lease obligations incurred | $ 490 |
Capital lease, initial lease term (in years) | 10 years |
Capital lease, duration of renewal option (in years) | 10 years |
Assets Held under Capital Leases [Member] | |
Capital Lease Obligations (Textual) | |
Capital lease assets, additions | $ 490 |
Commitments and Contingencies (Details) $ in Millions |
Mar. 31, 2017
USD ($)
|
---|---|
Minimum [Member] | |
Commitments and Contingencies (Textual) | |
Range of possible loss contingency | $ 0 |
Maximum [Member] | |
Commitments and Contingencies (Textual) | |
Range of possible loss contingency | $ 200 |
Equity (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |||||
---|---|---|---|---|---|---|
May 03, 2017 |
Mar. 31, 2017 |
Mar. 31, 2016 |
||||
Reconciliation of the Beginning and Ending Balances of the Carrying Amounts of Equity | ||||||
Balance as of beginning of period | $ 20,854 | $ 21,354 | ||||
Net income | 321 | 513 | ||||
Dividends | (315) | (282) | ||||
Stock-based compensation expense | 13 | 12 | ||||
Distributions to noncontrolling interests | (34) | (7) | ||||
Other | 38 | 13 | ||||
Other comprehensive income | 76 | 132 | ||||
Balance as of end of period | 20,651 | 21,495 | ||||
Dividend Declared [Member] | Subsequent Event [Member] | ||||||
Equity (Textual) | ||||||
Dividends payable, date declared | May 03, 2017 | |||||
Dividends payable, amount per share | $ 0.70 | |||||
Dividends payable, date to be paid | Jun. 07, 2017 | |||||
Dividends payable, date of record | May 17, 2017 | |||||
Stock-Based Compensation Plans Purchase Program [Member] | ||||||
Reconciliation of the Beginning and Ending Balances of the Carrying Amounts of Equity | ||||||
Stock purchases | (10) | (42) | ||||
Common Stock Purchase Program [Member] | ||||||
Reconciliation of the Beginning and Ending Balances of the Carrying Amounts of Equity | ||||||
Stock purchases | (292) | (198) | ||||
Parent [Member] | ||||||
Reconciliation of the Beginning and Ending Balances of the Carrying Amounts of Equity | ||||||
Balance as of beginning of period | 20,024 | 20,527 | ||||
Net income | 305 | 495 | ||||
Dividends | (315) | (282) | ||||
Stock-based compensation expense | 13 | 12 | ||||
Distributions to noncontrolling interests | 0 | 0 | ||||
Other | 24 | 13 | ||||
Other comprehensive income | 76 | 131 | ||||
Balance as of end of period | 19,825 | 20,656 | ||||
Parent [Member] | Stock-Based Compensation Plans Purchase Program [Member] | ||||||
Reconciliation of the Beginning and Ending Balances of the Carrying Amounts of Equity | ||||||
Stock purchases | (10) | (42) | ||||
Parent [Member] | Common Stock Purchase Program [Member] | ||||||
Reconciliation of the Beginning and Ending Balances of the Carrying Amounts of Equity | ||||||
Stock purchases | (292) | (198) | ||||
Noncontrolling Interests [Member] | ||||||
Reconciliation of the Beginning and Ending Balances of the Carrying Amounts of Equity | ||||||
Balance as of beginning of period | [1] | 830 | 827 | |||
Net income | [1] | 16 | 18 | |||
Distributions to noncontrolling interests | [1] | (34) | (7) | |||
Other | [1] | 14 | 0 | |||
Other comprehensive income | [1] | 0 | 1 | |||
Balance as of end of period | [1] | $ 826 | $ 839 | |||
|
Equity, Changes in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Changes in Accumulated Other Comprehensive Loss, By Component | ||
Beginning balance, accumulated other comprehensive loss, net of tax | $ 20,024 | |
Ending balance, accumulated other comprehensive loss, net of tax | 19,825 | |
Accumulated Other Comprehensive Loss [Member] | ||
Changes in Accumulated Other Comprehensive Loss, By Component | ||
Beginning balance, accumulated other comprehensive loss, net of tax | (1,410) | $ (933) |
Other comprehensive income before reclassifications | 74 | 129 |
Amounts reclassified from accumulated other comprehensive loss | 2 | 2 |
Net other comprehensive income | 76 | 131 |
Ending balance, accumulated other comprehensive loss, net of tax | (1,334) | (802) |
Foreign Currency Translation Adjustment [Member] | ||
Changes in Accumulated Other Comprehensive Loss, By Component | ||
Beginning balance, accumulated other comprehensive loss, net of tax | (1,021) | (605) |
Other comprehensive income before reclassifications | 74 | 121 |
Amounts reclassified from accumulated other comprehensive loss | 0 | 0 |
Net other comprehensive income | 74 | 121 |
Ending balance, accumulated other comprehensive loss, net of tax | (947) | (484) |
Defined Benefit Plans Items [Member] | ||
Changes in Accumulated Other Comprehensive Loss, By Component | ||
Beginning balance, accumulated other comprehensive loss, net of tax | (389) | (328) |
Other comprehensive income before reclassifications | 0 | 8 |
Amounts reclassified from accumulated other comprehensive loss | 2 | 2 |
Net other comprehensive income | 2 | 10 |
Ending balance, accumulated other comprehensive loss, net of tax | $ (387) | $ (318) |
Variable Interest Entities (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|---|---|
Assets | ||||
Cash and temporary cash investments | $ 4,463 | $ 4,816 | $ 3,778 | $ 4,114 |
Property, plant, and equipment, net | 26,991 | 26,472 | ||
Liabilities | ||||
Current liabilities | 7,899 | 8,328 | ||
Debt and capital lease obligations, less current portion | 8,369 | $ 7,886 | ||
Variable Interest Entity, Primary Beneficiary [Member] | ||||
Assets | ||||
Cash and temporary cash investments | 240 | 253 | ||
Other current assets | 50 | 90 | ||
Property, plant, and equipment, net | 1,431 | 1,353 | ||
Liabilities | ||||
Current liabilities | 40 | 39 | ||
Debt and capital lease obligations, less current portion | 570 | 571 | ||
Valero Energy Partners LP [Member] | ||||
Assets | ||||
Cash and temporary cash investments | 66 | 71 | ||
Other current assets | 2 | 3 | ||
Property, plant, and equipment, net | 940 | 865 | ||
Liabilities | ||||
Current liabilities | 17 | 15 | ||
Debt and capital lease obligations, less current portion | 525 | 525 | ||
Diamond Green Diesel Holdings LLC [Member] | ||||
Assets | ||||
Cash and temporary cash investments | 159 | 167 | ||
Other current assets | 48 | 87 | ||
Property, plant, and equipment, net | 360 | 355 | ||
Liabilities | ||||
Current liabilities | 16 | 17 | ||
Debt and capital lease obligations, less current portion | 0 | 0 | ||
Other Variable Interest Entities [Member] | ||||
Assets | ||||
Cash and temporary cash investments | 15 | 15 | ||
Other current assets | 0 | 0 | ||
Property, plant, and equipment, net | 131 | 133 | ||
Liabilities | ||||
Current liabilities | 7 | 7 | ||
Debt and capital lease obligations, less current portion | $ 45 | $ 46 |
Employee Benefit Plans (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Pension Plans [Member] | ||
Components of net periodic benefit cost: | ||
Service cost | $ 31 | $ 28 |
Interest cost | 21 | 21 |
Expected return on plan assets | (37) | (35) |
Amortization of: | ||
Net actuarial (gain) loss | 13 | 12 |
Prior service credit | (5) | (5) |
Net periodic benefit cost | 23 | 21 |
Employee Benefit Plans (Textual) | ||
Contributions to benefit plans | 7 | 8 |
Other Postretirement Benefit Plans [Member] | ||
Components of net periodic benefit cost: | ||
Service cost | 1 | 2 |
Interest cost | 3 | 3 |
Expected return on plan assets | 0 | 0 |
Amortization of: | ||
Net actuarial (gain) loss | (1) | 0 |
Prior service credit | (4) | (4) |
Net periodic benefit cost | (1) | 1 |
Employee Benefit Plans (Textual) | ||
Contributions to benefit plans | $ 5 | $ 4 |
Earnings Per Common Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Less dividends paid: | ||
Weighted-average common shares outstanding (in shares) | 448 | 469 |
Earnings per common share – assuming dilution: | ||
Weighted-average common shares outstanding (in shares) | 448 | 469 |
Weighted-average common shares outstanding – assuming dilution (in shares) | 451 | 471 |
Common Class A [Member] | ||
Earnings per common share: | ||
Net income attributable to Valero stockholders | $ 305 | $ 495 |
Less dividends paid: | ||
Common stock | 314 | 281 |
Participating securities | 1 | 1 |
Undistributed earnings (excess distributions over earnings) | $ (10) | $ 213 |
Weighted-average common shares outstanding (in shares) | 448 | 469 |
Earnings (loss) per common share: | ||
Distributed earnings (in usd per share) | $ 0.70 | $ 0.60 |
Undistributed earnings (excess distributions over earnings) (in usd per share) | (0.02) | 0.45 |
Total earnings per common share (in usd per share) | $ 0.68 | $ 1.05 |
Earnings per common share – assuming dilution: | ||
Net income attributable to Valero stockholders | $ 305 | $ 495 |
Weighted-average common shares outstanding (in shares) | 448 | 469 |
Common equivalent shares (in shares) | 3 | 2 |
Weighted-average common shares outstanding – assuming dilution (in shares) | 451 | 471 |
Earnings per common share – assuming dilution (in usd per share) | $ 0.68 | $ 1.05 |
Participating Securities [Member] | ||
Less dividends paid: | ||
Weighted-average common shares outstanding (in shares) | 2 | 2 |
Earnings (loss) per common share: | ||
Distributed earnings (in usd per share) | $ 0.70 | $ 0.60 |
Undistributed earnings (excess distributions over earnings) (in usd per share) | 0.00 | 0.45 |
Total earnings per common share (in usd per share) | $ 0.70 | $ 1.05 |
Earnings per common share – assuming dilution: | ||
Weighted-average common shares outstanding (in shares) | 2 | 2 |
Segment Information, Activity (Details) $ in Millions |
3 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Mar. 31, 2017
USD ($)
segments
|
Mar. 31, 2016
USD ($)
|
||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | [1] | $ 21,772 | $ 15,714 | ||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 19,428 | 13,507 | |||||
Lower of cost or market inventory valuation adjustment | 0 | (293) | |||||
Operating expenses | 1,117 | 1,030 | |||||
General and administrative expenses | 190 | 156 | |||||
Depreciation and amortization expense | 500 | 485 | |||||
Total costs and expenses | 21,235 | 14,885 | |||||
Operating income (loss) | $ 537 | 829 | |||||
Disclosure of Entity's Reportable Segments (Textual) | |||||||
Number of reportable segments | segments | 3 | ||||||
Intersegment Eliminations [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | $ (166) | (113) | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | (166) | (113) | |||||
Corporate, Non-Segment [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | (166) | (113) | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | (166) | (113) | |||||
Operating expenses | 0 | 0 | |||||
General and administrative expenses | 190 | 156 | |||||
Depreciation and amortization expense | 12 | 12 | |||||
Total costs and expenses | 36 | 55 | |||||
Operating income (loss) | (202) | (168) | |||||
Refining [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | 20,887 | 14,920 | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 18,641 | 12,799 | |||||
Refining [Member] | Intersegment Eliminations [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | 0 | 0 | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 166 | 113 | |||||
Refining [Member] | Operating Segments [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | 20,887 | 14,920 | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 18,807 | 12,912 | |||||
Lower of cost or market inventory valuation adjustment | (263) | ||||||
Operating expenses | 984 | 907 | |||||
General and administrative expenses | 0 | 0 | |||||
Depreciation and amortization expense | 449 | 449 | |||||
Total costs and expenses | 20,240 | 14,005 | |||||
Operating income (loss) | 647 | 915 | |||||
Ethanol [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | 885 | 794 | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 787 | 708 | |||||
Ethanol [Member] | Intersegment Eliminations [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | 60 | 34 | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 0 | 0 | |||||
Ethanol [Member] | Operating Segments [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | 945 | 828 | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 787 | 708 | |||||
Lower of cost or market inventory valuation adjustment | (30) | ||||||
Operating expenses | 109 | 99 | |||||
General and administrative expenses | 0 | 0 | |||||
Depreciation and amortization expense | 27 | 12 | |||||
Total costs and expenses | 923 | 789 | |||||
Operating income (loss) | 22 | 39 | |||||
VLP [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | 0 | 0 | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 0 | 0 | |||||
VLP [Member] | Intersegment Eliminations [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | 106 | 79 | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 0 | 0 | |||||
VLP [Member] | Operating Segments [Member] | |||||||
Segment Information for our Reportable Segments | |||||||
Operating revenues | 106 | 79 | |||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 0 | 0 | |||||
Lower of cost or market inventory valuation adjustment | 0 | ||||||
Operating expenses | 24 | 24 | [2] | ||||
General and administrative expenses | 0 | 0 | |||||
Depreciation and amortization expense | 12 | 12 | [2] | ||||
Total costs and expenses | 36 | 36 | |||||
Operating income (loss) | $ 70 | $ 43 | |||||
|
Segment Information, Assets (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Total Assets by Reportable Segment | ||
Reportable segment assets | $ 46,047 | $ 46,173 |
Corporate, Non-Segment [Member] | ||
Total Assets by Reportable Segment | ||
Reportable segment assets | 5,451 | 5,790 |
Refining [Member] | ||
Total Assets by Reportable Segment | ||
Reportable segment assets | 38,219 | 38,095 |
Ethanol [Member] | ||
Total Assets by Reportable Segment | ||
Reportable segment assets | 1,338 | 1,316 |
VLP [Member] | ||
Total Assets by Reportable Segment | ||
Reportable segment assets | $ 1,039 | $ 972 |
Supplemental Cash Flow Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Decrease (increase) in current assets: | ||
Receivables, net | $ 817 | $ (47) |
Inventories | (291) | 147 |
Income taxes receivable | 41 | 45 |
Prepaid expenses and other | 12 | (126) |
Increase (decrease) in current liabilities: | ||
Accounts payable | (306) | 108 |
Accrued expenses | 20 | (137) |
Taxes other than income taxes | (123) | (113) |
Income taxes payable | (19) | (54) |
Changes in current assets and current liabilities | 151 | (177) |
Cash Flows Related to Interest and Income Taxes | ||
Interest paid in excess of amount capitalized | 128 | 95 |
Income taxes paid, net | $ 96 | $ 95 |
Fair Value Measurements, Recurring (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Millions |
Mar. 31, 2017 |
Mar. 31, 2016 |
---|---|---|
Assets: | ||
Investments of certain benefit plans | $ 70 | $ 69 |
Total gross fair value, assets | 743 | 984 |
Effect of Counterparty Netting | (637) | (875) |
Effect of Cash Collateral Netting | 0 | 0 |
Net Carrying Value on Balance Sheet, Assets | 106 | 109 |
Liabilities: | ||
Environmental credit obligations | 289 | 188 |
Total gross fair value, liabilities | 939 | 1,088 |
Effect of Counterparty Netting | (637) | (875) |
Effect of Cash Collateral Netting | (8) | (20) |
Net Carrying Value on Balance Sheet, Liabilities | 294 | 193 |
Commodity Contracts [Member] | ||
Assets: | ||
Derivative contracts | 673 | 912 |
Effect of Counterparty Netting | (637) | (875) |
Effect of Cash Collateral Netting | 0 | 0 |
Derivative contracts, net assets | 36 | 37 |
Cash Collateral Received Not Offset | 0 | 0 |
Liabilities: | ||
Derivative contracts | 645 | 895 |
Effect of Counterparty Netting | (637) | (875) |
Effect of Cash Collateral Netting | (8) | (20) |
Derivative contracts, net liabilities | 0 | 0 |
Cash Collateral Paid Not Offset | (61) | (88) |
Physical Purchase Contracts [Member] | ||
Liabilities: | ||
Derivative contracts | 3 | 5 |
Derivative contracts, net liabilities | 3 | 5 |
Foreign Currency Contracts [Member] | ||
Assets: | ||
Derivative contracts | 3 | |
Derivative contracts, net assets | 3 | |
Liabilities: | ||
Derivative contracts | 2 | |
Derivative contracts, net liabilities | 2 | |
Fair Value, Inputs, Level 1 [Member] | ||
Assets: | ||
Investments of certain benefit plans | 59 | 58 |
Total gross fair value, assets | 720 | 935 |
Liabilities: | ||
Environmental credit obligations | 0 | 0 |
Total gross fair value, liabilities | 638 | 872 |
Fair Value, Inputs, Level 1 [Member] | Commodity Contracts [Member] | ||
Assets: | ||
Derivative contracts | 661 | 874 |
Liabilities: | ||
Derivative contracts | 636 | 872 |
Fair Value, Inputs, Level 1 [Member] | Physical Purchase Contracts [Member] | ||
Liabilities: | ||
Derivative contracts | 0 | 0 |
Fair Value, Inputs, Level 1 [Member] | Foreign Currency Contracts [Member] | ||
Assets: | ||
Derivative contracts | 3 | |
Liabilities: | ||
Derivative contracts | 2 | |
Fair Value, Inputs, Level 2 [Member] | ||
Assets: | ||
Investments of certain benefit plans | 0 | 0 |
Total gross fair value, assets | 12 | 38 |
Liabilities: | ||
Environmental credit obligations | 289 | 188 |
Total gross fair value, liabilities | 301 | 216 |
Fair Value, Inputs, Level 2 [Member] | Commodity Contracts [Member] | ||
Assets: | ||
Derivative contracts | 12 | 38 |
Liabilities: | ||
Derivative contracts | 9 | 23 |
Fair Value, Inputs, Level 2 [Member] | Physical Purchase Contracts [Member] | ||
Liabilities: | ||
Derivative contracts | 3 | 5 |
Fair Value, Inputs, Level 2 [Member] | Foreign Currency Contracts [Member] | ||
Assets: | ||
Derivative contracts | 0 | |
Liabilities: | ||
Derivative contracts | 0 | |
Fair Value, Inputs, Level 3 [Member] | ||
Assets: | ||
Investments of certain benefit plans | 11 | 11 |
Total gross fair value, assets | 11 | 11 |
Liabilities: | ||
Environmental credit obligations | 0 | 0 |
Total gross fair value, liabilities | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | Commodity Contracts [Member] | ||
Assets: | ||
Derivative contracts | 0 | 0 |
Liabilities: | ||
Derivative contracts | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | Physical Purchase Contracts [Member] | ||
Liabilities: | ||
Derivative contracts | 0 | 0 |
Fair Value, Inputs, Level 3 [Member] | Foreign Currency Contracts [Member] | ||
Assets: | ||
Derivative contracts | $ 0 | |
Liabilities: | ||
Derivative contracts | $ 0 |
Fair Value Measurements, Level 3 Reconciliation (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Fair Value, Measurements, Recurring [Member] | ||
Fair Value Measurements (Textual) | ||
Activity related to fair value amounts categorized in level 3 | $ 0 | $ 0 |
Fair Value Measurements, Nonrecurring (Details) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Value Measurements (Textual) | ||
Assets measured at fair value, nonrecurring | $ 0 | $ 0 |
Liabilities measured at fair value, nonrecurring | $ 0 | $ 0 |
Fair Value Measurements, Other Financial Instruments (Details) - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|---|---|
Financial assets: | ||||
Cash and temporary cash investments, at carrying amount | $ 4,463 | $ 4,816 | $ 3,778 | $ 4,114 |
Financial liabilities: | ||||
Debt (excluding capital leases), at carrying amount | 7,926 | 7,926 | ||
Fair Value, Inputs, Level 1 [Member] | ||||
Financial assets: | ||||
Cash and temporary cash investments, at fair value | 4,463 | 4,816 | ||
Fair Value, Inputs, Level 2 [Member] | ||||
Financial liabilities: | ||||
Debt (excluding capital leases), at fair value | $ 8,935 | $ 8,882 |
Price Risk Management Activities (Details) lb in Thousands, bu in Thousands, $ in Millions |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Apr. 30, 2017 |
Mar. 31, 2017
USD ($)
lb
bu
MBbls
|
Mar. 31, 2016
USD ($)
|
|
Price Risk Management Activities (Textual) | |||
Compliance program costs | $ | $ 146 | $ 161 | |
Foreign Currency Contracts [Member] | |||
Price Risk Management Activities (Textual) | |||
Monetary notional amount of derivative liabilities | $ | $ 350 | ||
Foreign Currency Contracts [Member] | Subsequent Event [Member] | |||
Price Risk Management Activities (Textual) | |||
Foreign currency commitments maturity date | Apr. 30, 2017 | ||
Economic Hedging [Member] | Swap, Maturity Current Year [Member] | Long (Purchases) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 22,246 | ||
Economic Hedging [Member] | Swap, Maturity Current Year [Member] | Short (Sales) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 22,660 | ||
Economic Hedging [Member] | Swap, Maturity Year Two [Member] | Long (Purchases) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 0 | ||
Economic Hedging [Member] | Swap, Maturity Year Two [Member] | Short (Sales) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 0 | ||
Economic Hedging [Member] | Future, Maturity Current Year [Member] | Long (Purchases) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 110,287 | ||
Economic Hedging [Member] | Future, Maturity Current Year [Member] | Long (Purchases) [Member] | Grain (in bushels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | bu | 18,040 | ||
Economic Hedging [Member] | Future, Maturity Current Year [Member] | Long (Purchases) [Member] | Soybean Oil (in pounds) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, pounds | lb | 125,338 | ||
Economic Hedging [Member] | Future, Maturity Current Year [Member] | Short (Sales) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 115,080 | ||
Economic Hedging [Member] | Future, Maturity Current Year [Member] | Short (Sales) [Member] | Grain (in bushels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | bu | 40,575 | ||
Economic Hedging [Member] | Future, Maturity Current Year [Member] | Short (Sales) [Member] | Soybean Oil (in pounds) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, pounds | lb | 158,758 | ||
Economic Hedging [Member] | Future, Maturity Year Two [Member] | Long (Purchases) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 2,100 | ||
Economic Hedging [Member] | Future, Maturity Year Two [Member] | Long (Purchases) [Member] | Grain (in bushels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | bu | 5 | ||
Economic Hedging [Member] | Future, Maturity Year Two [Member] | Long (Purchases) [Member] | Soybean Oil (in pounds) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, pounds | lb | 0 | ||
Economic Hedging [Member] | Future, Maturity Year Two [Member] | Short (Sales) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 6,981 | ||
Economic Hedging [Member] | Future, Maturity Year Two [Member] | Short (Sales) [Member] | Grain (in bushels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | bu | 2,185 | ||
Economic Hedging [Member] | Future, Maturity Year Two [Member] | Short (Sales) [Member] | Soybean Oil (in pounds) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, pounds | lb | 0 | ||
Economic Hedging [Member] | Forward Contracts, Maturity Current Year [Member] | Long (Purchases) [Member] | Grain (in bushels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | bu | 16,273 | ||
Economic Hedging [Member] | Forward Contracts, Maturity Year Two [Member] | Long (Purchases) [Member] | Grain (in bushels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | bu | 2,177 | ||
Trading Derivatives [Member] | Swap, Maturity Current Year [Member] | Long (Purchases) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 3,105 | ||
Trading Derivatives [Member] | Swap, Maturity Current Year [Member] | Short (Sales) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 3,105 | ||
Trading Derivatives [Member] | Swap, Maturity Year Two [Member] | Long (Purchases) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 0 | ||
Trading Derivatives [Member] | Swap, Maturity Year Two [Member] | Short (Sales) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 0 | ||
Trading Derivatives [Member] | Future, Maturity Current Year [Member] | Long (Purchases) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 24,358 | ||
Trading Derivatives [Member] | Future, Maturity Current Year [Member] | Long (Purchases) [Member] | Grain (in bushels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | bu | 2,250 | ||
Trading Derivatives [Member] | Future, Maturity Current Year [Member] | Short (Sales) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 22,304 | ||
Trading Derivatives [Member] | Future, Maturity Current Year [Member] | Short (Sales) [Member] | Grain (in bushels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | bu | 2,000 | ||
Trading Derivatives [Member] | Future, Maturity Year Two [Member] | Long (Purchases) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 4,300 | ||
Trading Derivatives [Member] | Future, Maturity Year Two [Member] | Long (Purchases) [Member] | Grain (in bushels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | bu | 0 | ||
Trading Derivatives [Member] | Future, Maturity Year Two [Member] | Short (Sales) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 6,400 | ||
Trading Derivatives [Member] | Future, Maturity Year Two [Member] | Short (Sales) [Member] | Grain (in bushels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | bu | 0 | ||
Trading Derivatives [Member] | Options Held, Maturity Current Year [Member] | Long (Purchases) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 106,990 | ||
Trading Derivatives [Member] | Options Held, Maturity Current Year [Member] | Short (Sales) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 104,990 | ||
Trading Derivatives [Member] | Options Held, Maturity Year Two [Member] | Long (Purchases) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 29,700 | ||
Trading Derivatives [Member] | Options Held, Maturity Year Two [Member] | Short (Sales) [Member] | Crude Oil (in thousands of barrels) [Member] | |||
Volume of Outstanding Contracts | |||
Nonmonetary notional amount of price risk derivatives, volume | 29,700 |
Price Risk Management Activities, Hedging Instruments by Consolidated Balance Sheet Location (Details) - Not Designated as Hedging Instrument [Member] - USD ($) $ in Millions |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Fair Values of Derivative Instruments | ||
Derivative asset, fair value, gross asset | $ 673 | $ 915 |
Derivative liability, fair value, gross liability | 650 | 900 |
Commodity Future [Member] | Trade Accounts Receivable [Member] | ||
Fair Values of Derivative Instruments | ||
Derivative asset, fair value, gross asset | 661 | 874 |
Derivative asset, fair value, gross liability | 636 | 872 |
Commodity Swap [Member] | Trade Accounts Receivable [Member] | ||
Fair Values of Derivative Instruments | ||
Derivative asset, fair value, gross asset | 7 | 32 |
Derivative asset, fair value, gross liability | 7 | 21 |
Commodity Option [Member] | Trade Accounts Receivable [Member] | ||
Fair Values of Derivative Instruments | ||
Derivative asset, fair value, gross asset | 5 | 6 |
Derivative asset, fair value, gross liability | 2 | 2 |
Physical Purchase Contracts [Member] | Inventories [Member] | ||
Fair Values of Derivative Instruments | ||
Derivative asset, fair value, gross asset | 0 | 0 |
Derivative asset, fair value, gross liability | 3 | 5 |
Foreign Currency Contracts [Member] | Trade Accounts Receivable [Member] | ||
Fair Values of Derivative Instruments | ||
Derivative asset, fair value, gross asset | 3 | |
Derivative asset, fair value, gross liability | $ 0 | |
Foreign Currency Contracts [Member] | Accrued Liabilities [Member] | ||
Fair Values of Derivative Instruments | ||
Derivative liability, fair value, gross asset | 0 | |
Derivative liability, fair value, gross liability | $ 2 |
Price Risk Management Activities, Gain (Loss) by Income Statement Location (Details) - Cost of Sales [Member] - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Economic Hedging [Member] | Commodity Contracts [Member] | ||
Effect of Derivative Instruments on Income and OCI | ||
Gain (loss) recognized in income on derivatives | $ (97) | $ (139) |
Economic Hedging [Member] | Foreign Currency Contracts [Member] | ||
Effect of Derivative Instruments on Income and OCI | ||
Gain (loss) recognized in income on derivatives | (6) | (3) |
Trading Derivatives [Member] | Commodity Contracts [Member] | ||
Effect of Derivative Instruments on Income and OCI | ||
Gain (loss) recognized in income on derivatives | $ 1 | $ 41 |
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