UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2022

OR

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

Commission File Number 001-13175

VALERO ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

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

One Valero Way

San Antonio, Texas

(Address of principal executive offices)

78249

(Zip Code)

(210) 345-2000

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	VLO	New York Stock Exchange

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

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

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

Large accelerated filer		☑	Accelerated filer			☐	Non-accelerated filer		☐
	Smaller reporting company			☐	Emerging growth company			☐

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

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

The number of shares of the registrant’s only class of common stock, $0.01 par value, outstanding as of October 21, 2022 was 385,523,278.

VALERO ENERGY CORPORATION

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	1
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2022 and 2021	2
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021	3
Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2022 and 2021	4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	6
Condensed Notes to Consolidated Financial Statements	7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	63
ITEM 4. CONTROLS AND PROCEDURES	64
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	64
ITEM 1A. RISK FACTORS	64
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	65
ITEM 6. EXHIBITS	66
SIGNATURE	67

i

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VALERO ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(millions of dollars, except par value)

	September 30, 2022		December 31, 2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,969	$	4,122
Receivables, net	11,581		10,378
Inventories	6,628		6,265
Prepaid expenses and other	518		400
Total current assets	22,696		21,165
Property, plant, and equipment, at cost	49,638		49,072
Accumulated depreciation	(19,130)		(18,225)
Property, plant, and equipment, net	30,508		30,847
Deferred charges and other assets, net	6,125		5,876
Total assets	$	59,329	$	57,888
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and finance lease obligations	$	1,006	$	1,264
Accounts payable	13,003		12,495
Accrued expenses	1,265		1,253
Taxes other than income taxes payable	1,311		1,461
Income taxes payable	652		378
Total current liabilities	17,237		16,851
Debt and finance lease obligations, less current portion	10,570		12,606
Deferred income tax liabilities	4,938		5,210
Other long-term liabilities	2,869		3,404
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	6,858		6,827
Treasury stock, at cost; 287,978,793 and 264,305,955 common shares	(18,466)		(15,677)
Retained earnings	35,510		28,281
Accumulated other comprehensive loss	(1,997)		(1,008)
Total Valero Energy Corporation stockholders’ equity	21,912		18,430
Noncontrolling interests	1,803		1,387
Total equity	23,715		19,817
Total liabilities and equity	$	59,329	$	57,888

See Condensed Notes to Consolidated Financial Statements.

1

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(millions of dollars, except per share amounts)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues (a)	$	44,454	$	29,520	$	134,637	$	78,074
Cost of sales:
Cost of materials and other	38,064		26,624		115,959		70,865
Operating expenses (excluding depreciation and amortization expense reflected below)	1,746		1,348		4,751		4,218
Depreciation and amortization expense	621		630		1,806		1,772
Total cost of sales	40,431		28,602		122,516		76,855
Other operating expenses	6		19		40		69
General and administrative expenses (excluding depreciation and amortization expense reflected below)	214		195		652		579
Depreciation and amortization expense	11		11		34		35
Operating income	3,792		693		11,395		536
Other income, net	74		32		87		179
Interest and debt expense, net of capitalized interest	(138)		(152)		(425)		(451)
Income before income tax expense	3,728		573		11,057		264
Income tax expense	816		65		2,410		86
Net income	2,912		508		8,647		178
Less: Net income attributable to noncontrolling interests	95		45		232		257
Net income (loss) attributable to Valero Energy Corporation stockholders	$	2,817	$	463	$	8,415	$	(79)
Earnings (loss) per common share	$	7.20	$	1.13	$	20.94	$	(0.20)
Weighted-average common shares outstanding (in millions)	390		407		400		407
Earnings (loss) per common share – assuming dilution	$	7.19	$	1.13	$	20.93	$	(0.20)
Weighted-average common shares outstanding – assuming dilution (in millions)	390		408		401		407
__________________________
Supplemental information:
(a) Includes excise taxes on sales by certain of our foreign operations	$	1,213	$	1,610	$	3,890	$	4,152

See Condensed Notes to Consolidated Financial Statements.

2

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(millions of dollars)

(unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income	$	2,912	$	508	$	8,647	$	178
Other comprehensive loss:
Foreign currency translation adjustment	(606)		(259)		(1,035)		(114)
Net gain on pension and other postretirement benefits	8		16		25		44
Net gain (loss) on cash flow hedges	69		(17)		74		(14)
Other comprehensive loss before income tax expense (benefit)	(529)		(260)		(936)		(84)
Income tax expense (benefit) related to items of other comprehensive loss	9		(1)		16		8
Other comprehensive loss	(538)		(259)		(952)		(92)
Comprehensive income	2,374		249		7,695		86
Less: Comprehensive income attributable to noncontrolling interests	129		35		269		249
Comprehensive income (loss) attributable to Valero Energy Corporation stockholders	$	2,245	$	214	$	7,426	$	(163)

See Condensed Notes to Consolidated Financial Statements.

3

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(millions of dollars)

(unaudited)

	Valero Energy Corporation Stockholders’ Equity
	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total		Non- controlling Interests		Total Equity
Balance as of June 30, 2022	$	7	$	6,845	$	(17,537)	$	33,079	$	(1,425)	$	20,969	$	1,764	$	22,733
Net income	—		—		—		2,817		—		2,817		95		2,912
Dividends on common stock ($0.98 per share)	—		—		—		(386)		—		(386)		—		(386)
Stock-based compensation expense	—		13		—		—		—		13		—		13
Transactions in connection with stock-based compensation plans	—		—		(1)		—		—		(1)		—		(1)
Purchases of common stock for treasury	—		—		(928)		—		—		(928)		—		(928)
Distributions to noncontrolling interests	—		—		—		—		—		—		(90)		(90)
Other comprehensive income (loss)	—		—		—		—		(572)		(572)		34		(538)
Balance as of September 30, 2022	$	7	$	6,858	$	(18,466)	$	35,510	$	(1,997)	$	21,912	$	1,803	$	23,715
Balance as of June 30, 2021	$	7	$	6,819	$	(15,696)	$	27,610	$	(1,089)	$	17,651	$	1,053	$	18,704
Net income	—		—		—		463		—		463		45		508
Dividends on common stock ($0.98 per share)	—		—		—		(400)		—		(400)		—		(400)
Stock-based compensation expense	—		11		—		—		—		11		—		11
Contributions from noncontrolling interests	—		—		—		—		—		—		25		25
Other comprehensive loss	—		—		—		—		(249)		(249)		(10)		(259)
Balance as of September 30, 2021	$	7	$	6,830	$	(15,696)	$	27,673	$	(1,338)	$	17,476	$	1,113	$	18,589

See Condensed Notes to Consolidated Financial Statements.

4

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(millions of dollars)

(unaudited)

	Valero Energy Corporation Stockholders’ Equity
	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total		Non- controlling Interests		Total Equity
Balance as of December 31, 2021	$	7	$	6,827	$	(15,677)	$	28,281	$	(1,008)	$	18,430	$	1,387	$	19,817
Net income	—		—		—		8,415		—		8,415		232		8,647
Dividends on common stock ($2.94 per share)	—		—		—		(1,186)		—		(1,186)		—		(1,186)
Stock-based compensation expense	—		60		—		—		—		60		—		60
Transactions in connection with stock-based compensation plans	—		(29)		31		—		—		2		—		2
Purchases of common stock for treasury	—		—		(2,820)		—		—		(2,820)		—		(2,820)
Contributions from noncontrolling interests	—		—		—		—		—		—		240		240
Distributions to noncontrolling interests	—		—		—		—		—		—		(93)		(93)
Other comprehensive income (loss)	—		—		—		—		(989)		(989)		37		(952)
Balance as of September 30, 2022	$	7	$	6,858	$	(18,466)	$	35,510	$	(1,997)	$	21,912	$	1,803	$	23,715
Balance as of December 31, 2020	$	7	$	6,814	$	(15,719)	$	28,953	$	(1,254)	$	18,801	$	841	$	19,642
Net income (loss)	—		—		—		(79)		—		(79)		257		178
Dividends on common stock ($2.94 per share)	—		—		—		(1,201)		—		(1,201)		—		(1,201)
Stock-based compensation expense	—		52		—		—		—		52		—		52
Transactions in connection with stock-based compensation plans	—		(36)		38		—		—		2		—		2
Purchases of common stock for treasury	—		—		(15)		—		—		(15)		—		(15)
Contributions from noncontrolling interests	—		—		—		—		—		—		25		25
Distributions to noncontrolling interests	—		—		—		—		—		—		(2)		(2)
Other comprehensive loss	—		—		—		—		(84)		(84)		(8)		(92)
Balance as of September 30, 2021	$	7	$	6,830	$	(15,696)	$	27,673	$	(1,338)	$	17,476	$	1,113	$	18,589

See Condensed Notes to Consolidated Financial Statements.

5

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions of dollars)

(unaudited)

	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	8,647	$	178
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	1,840		1,807
Loss on early retirement of debt	24		—
Gain on sale of assets	—		(62)
Deferred income tax benefit	(161)		(150)
Changes in current assets and current liabilities	(1,617)		1,630
Changes in deferred charges and credits and other operating activities, net	(255)		2
Net cash provided by operating activities	8,478		3,405
Cash flows from investing activities:
Capital expenditures (excluding variable interest entities (VIEs))	(552)		(368)
Capital expenditures of VIEs:
Diamond Green Diesel Holdings LLC (DGD)	(682)		(730)
Other VIEs	(30)		(59)
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	(820)		(544)
Deferred turnaround and catalyst cost expenditures of DGD	(13)		(6)
Proceeds from sale of assets	32		270
Investments in nonconsolidated joint ventures	(1)		(8)
Other investing activities, net	(4)		33
Net cash used in investing activities	(2,070)		(1,412)
Cash flows from financing activities:
Proceeds from debt issuances and borrowings (excluding VIEs)	1,839		—
Proceeds from borrowings of VIEs:
DGD	684		100
Other VIEs	73		29
Repayments of debt and finance lease obligations (excluding VIEs)	(4,234)		(672)
Repayments of debt and finance lease obligations of VIEs:
DGD	(718)		—
Other VIEs	(51)		(4)
Premiums paid on early retirement of debt	(48)		—
Purchases of common stock for treasury	(2,769)		(15)
Common stock dividend payments	(1,186)		(1,201)
Contributions from noncontrolling interests	240		25
Distributions to noncontrolling interests	(93)		(2)
Other financing activities, net	(6)		1
Net cash used in financing activities	(6,269)		(1,739)
Effect of foreign exchange rate changes on cash	(292)		(69)
Net increase (decrease) in cash and cash equivalents	(153)		185
Cash and cash equivalents at beginning of period	4,122		3,313
Cash and cash equivalents at end of period	$	3,969	$	3,498

See Condensed Notes to Consolidated Financial Statements.

6

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

General

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

These unaudited financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these interim financial statements reflect all adjustments considered necessary for a fair statement of our results for the interim periods presented. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The financial statements presented herein should be read in conjunction with the financial statements included in our annual report on Form 10-K for the year ended December 31, 2021.

The balance sheet as of December 31, 2021 has been derived from our audited financial statements as of that date. For further information, refer to our financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2021.

Significant Accounting Policy

Use of Estimates

The preparation of financial statements in conformity with 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.

2.    INVENTORIES

Inventories consisted of the following (in millions):

	September 30, 2022		December 31, 2021
Refinery feedstocks	$	1,781	$	1,995
Refined petroleum products and blendstocks	4,008		3,567
Renewable diesel feedstocks and products	310		135
Ethanol feedstocks and products	228		273
Materials and supplies	301		295
Inventories	$	6,628	$	6,265

7

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of September 30, 2022 and December 31, 2021, the replacement cost (market value) of last-in, first-out (LIFO) inventories exceeded their LIFO carrying amounts by $8.6 billion and $5.2 billion, respectively. Our non-LIFO inventories accounted for $1.3 billion and $1.4 billion of our total inventories as of September 30, 2022 and December 31, 2021, respectively.

3.    PROPERTY, PLANT, AND EQUIPMENT

In June 2022, we sold our ethanol plant in Jefferson, Wisconsin for $32 million, which resulted in a gain of $23 million that is included in depreciation and amortization expense for the nine months ended September 30, 2022.

The Jefferson plant was temporarily idled in 2020 at the onset of the COVID-19 pandemic in response to the decreased demand for ethanol resulting from the effects of the pandemic on our business, and we had previously evaluated this plant for potential impairment assuming that operations would resume. However, we completed an evaluation of the plant during the third quarter of 2021 and concluded that it was no longer a strategic asset for our ethanol business. The plant’s operations permanently ceased at that time and we reduced its estimated useful life, which reduced its net book value to estimated salvage value. The additional depreciation expense of $48 million for the three and nine months ended September 30, 2021 resulting from this change did not have a material impact on our results of operations nor was there a material impact to our financial position.

4.    DEBT

Public Debt

During the nine months ended September 30, 2022, the following activity occurred:

•In September 2022, we used cash on hand to purchase and retire the following notes in connection with cash tender offers that we publicly announced in August 2022 and completed in September 2022 (in millions):

Debt Purchased and Retired	Principal Amount
3.65% Senior Notes due 2025	$	48
2.850% Senior Notes due 2025	291
4.375% VLP Senior Notes due 2026	62
3.400% Senior Notes due 2026	166
4.350% Senior Notes due 2028	131
4.000% Senior Notes due 2029	552
Total	$	1,250

In connection with the early debt retirement activity described above, we recognized a net gain of $26 million in “other income, net” primarily comprised of $36 million of discounts.

8

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

•In June 2022, we reduced our debt through the acquisition of the $300 million of 4.00 percent Gulf Opportunity Zone Revenue Bonds Series 2010 (GO Zone Bonds) that are due December 1, 2040, but were subject to mandatory tender on June 1, 2022. We have the option to effectuate a remarketing of these bonds.

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

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

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

In September 2021, we redeemed our Floating Rate Senior Notes due September 15, 2023 for $575 million.

9

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Credit Facilities

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

				September 30, 2022
	Facility Amount		Maturity Date	Outstanding Borrowings		Letters of Credit Issued (a)		Availability
Committed facilities:
Valero Revolver	$	4,000	March 2024	$	—	$	538	$	3,462
Canadian Revolver	C$	150	November 2022	C$	—	C$	5	C$	145
Accounts receivable sales facility	$	1,300	July 2023	$	—	n/a		$	1,300
Letter of credit facility	$	50	November 2022	n/a		$	—	$	50
Committed facilities of VIEs (b):
DGD Revolver (c)	$	400	March 2024	$	100	$	8	$	292
DGD Loan Agreement (d)	$	25	April 2023	$	—	n/a		$	25
IEnova Revolver (e)	$	830	February 2028	$	705	n/a		$	125
Uncommitted facilities:
Letter of credit facilities	n/a		n/a	n/a		$	1,613	n/a

________________________

(a)Letters of credit issued as of September 30, 2022 expire at various times in 2022 through 2023.

(b)Creditors of the VIEs do not have recourse against us.

(c)The variable interest rate on the DGD Revolver was 4.320 percent and 1.860 percent as of September 30, 2022 and December 31, 2021, respectively.

(d)The amounts shown for this facility represent the facility amount available from, and borrowings outstanding to, the noncontrolling member as any transactions between DGD and us under this facility are eliminated in consolidation. The variable interest rate on the DGD Loan Agreement was 5.133 percent and 2.603 percent as of September 30, 2022 and December 31, 2021, respectively.

(e)The variable interest rate on the IEnova Revolver was 5.927 percent and 3.781 percent as of September 30, 2022 and December 31, 2021, respectively.

10

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	Nine Months Ended September 30,
	2022		2021
Borrowings:
Accounts receivable sales facility	$	1,200	$	—
DGD Revolver	659		100
DGD Loan Agreement	25		—
IEnova Revolver	73		29
Repayments:
Accounts receivable sales facility	(1,200)		—
DGD Revolver	(659)		—
DGD Loan Agreement	(50)		—
IEnova Revolver	(47)		—

Other Disclosures

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Interest and debt expense	$	154	$	162	$	467	$	488
Less: Capitalized interest	16		10		42		37
Interest and debt expense, net of capitalized interest	$	138	$	152	$	425	$	451

5.    EQUITY

Treasury Stock

We purchase shares of our outstanding common stock as authorized by our board of directors (Board), including under share purchase programs and with respect to our employee stock-based compensation plans. During the three and nine months ended September 30, 2022, we purchased for treasury 8,444,754 shares for $928 million and 24,202,035 shares for $2.8 billion, respectively. Purchases of common stock for treasury for the three and nine months ended September 30, 2021 were not material. On January 23, 2018, the Board authorized our purchase of up to $2.5 billion of our outstanding common stock with no expiration date (the 2018 Program), and we completed all authorized share purchases under that program during the three months ended June 30, 2022. On July 7, 2022, we announced that our Board authorized our purchase of up to an additional $2.5 billion of our outstanding common stock with no expiration date (the July 2022 Program). As of September 30, 2022, we had $1.6 billion remaining available for purchase under the July 2022 Program. On October 26, 2022, our Board authorized our purchase of up to an additional $2.5 billion with no expiration date, which is in addition to the amount remaining under the July 2022 Program.

11

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Common Stock Dividends

On October 26, 2022, our Board declared a quarterly cash dividend of $0.98 per common share payable on December 8, 2022 to holders of record at the close of business on November 17, 2022.

Accumulated Other Comprehensive Loss

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

	Three Months Ended September 30,
	2022								2021
	Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total		Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total
Balance as of beginning of period	$	(991)	$	(430)	$	(4)	$	(1,425)	$	(373)	$	(715)	$	(1)	$	(1,089)
Other comprehensive income (loss) before reclassifications	(606)		—		30		(576)		(255)		—		(8)		(263)
Amounts reclassified from accumulated other comprehensive loss	—		7		(3)		4		—		10		2		12
Effect of exchange rates	—		—		—		—		—		2		—		2
Other comprehensive income (loss)	(606)		7		27		(572)		(255)		12		(6)		(249)
Balance as of end of period	$	(1,597)	$	(423)	$	23	$	(1,997)	$	(628)	$	(703)	$	(7)	$	(1,338)

	Nine Months Ended September 30,
	2022								2021
	Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total		Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total
Balance as of beginning of period	$	(562)	$	(441)	$	(5)	$	(1,008)	$	(515)	$	(737)	$	(2)	$	(1,254)
Other comprehensive income (loss) before reclassifications	(1,035)		(2)		(84)		(1,121)		(113)		1		(20)		(132)
Amounts reclassified from accumulated other comprehensive loss	—		18		112		130		—		32		15		47
Effect of exchange rates	—		2		—		2		—		1		—		1
Other comprehensive income (loss)	(1,035)		18		28		(989)		(113)		34		(5)		(84)
Balance as of end of period	$	(1,597)	$	(423)	$	23	$	(1,997)	$	(628)	$	(703)	$	(7)	$	(1,338)

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.    VARIABLE INTEREST ENTITIES

Consolidated VIEs

We consolidate a VIE when we have a variable interest in an entity for which we are the primary beneficiary. As of September 30, 2022, the significant consolidated VIEs included:

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

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

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

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

	DGD		Central Mexico Terminals		Other		Total
September 30, 2022
Assets
Cash and cash equivalents	$	224	$	—	$	16	$	240
Other current assets	665		7		27		699
Property, plant, and equipment, net	3,214		663		83		3,960
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	385	$	726	$	21	$	1,132
Debt and finance lease obligations, less current portion	255		—		—		255

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	DGD		Central Mexico Terminals		Other		Total
December 31, 2021
Assets
Cash and cash equivalents	$	21	$	—	$	15	$	36
Other current assets	558		10		13		581
Property, plant, and equipment, net	2,629		676		91		3,396
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	398	$	729	$	9	$	1,136
Debt and finance lease obligations, less current portion	264		—		20		284

Nonconsolidated VIEs

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

On April 19, 2021, we sold a 24.99 percent membership interest in MVP Terminalling, LLC (MVP), a nonconsolidated joint venture with a subsidiary of Magellan Midstream Partners, L. P., for $270 million that resulted in a gain of $62 million, which is included in “other income, net” for the nine months ended September 30, 2021. MVP owns and operates a marine terminal located on the Houston Ship Channel in Pasadena, Texas. We retained a 25.01 percent membership interest in MVP.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.    EMPLOYEE BENEFIT PLANS

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

	Pension Plans				Other Postretirement Benefit Plans
	2022		2021		2022		2021
Three months ended September 30
Service cost	$	37	$	40	$	1	$	1
Interest cost	22		19		2		2
Expected return on plan assets	(48)		(48)		—		—
Amortization of:
Net actuarial loss	14		21		—		—
Prior service credit	(5)		(5)		(1)		(2)
Special charges	12		3		—		—
Net periodic benefit cost	$	32	$	30	$	2	$	1
Nine months ended September 30
Service cost	$	114	$	121	$	4	$	4
Interest cost	64		55		6		5
Expected return on plan assets	(144)		(144)		—		—
Amortization of:
Net actuarial loss	40		61		—		—
Prior service credit	(14)		(14)		(3)		(5)
Special charges	12		7		—		—
Net periodic benefit cost	$	72	$	86	$	7	$	4

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

8.    INCOME TAXES

Income Tax Expense

There was no significant variation in the customary relationship between income tax expense and income before income tax expense for the three and nine months ended September 30, 2022.

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

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

represented the net increase in our deferred tax liabilities resulting from the changes in the income tax rates.

Tax Returns Under Audit

We expect to complete the appeals process for certain U.S. federal income tax audits within the next 12 months. We do not expect to have a significant change to our liability for unrecognized tax benefits upon the settlement of our ongoing audits, and we believe that the ultimate settlement of our audits will not be material to our financial condition, results of operations, and liquidity.

9.    EARNINGS (LOSS) PER COMMON SHARE

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Earnings (loss) per common share:
Net income (loss) attributable to Valero stockholders	$	2,817	$	463	$	8,415	$	(79)
Less: Income allocated to participating securities	11		1		31		4
Net income (loss) available to common stockholders	$	2,806	$	462	$	8,384	$	(83)
Weighted-average common shares outstanding	390		407		400		407
Earnings (loss) per common share	$	7.20	$	1.13	$	20.94	$	(0.20)
Earnings (loss) per common share – assuming dilution:
Net income (loss) attributable to Valero stockholders	$	2,817	$	463	$	8,415	$	(79)
Less: Income allocated to participating securities	11		1		31		4
Net income (loss) available to common stockholders	$	2,806	$	462	$	8,384	$	(83)
Weighted-average common shares outstanding	390		407		400		407
Effect of dilutive securities	—		1		1		—
Weighted-average common shares outstanding – assuming dilution	390		408		401		407
Earnings (loss) per common share – assuming dilution	$	7.19	$	1.13	$	20.93	$	(0.20)

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

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10.    REVENUES AND SEGMENT INFORMATION

Revenue from Contracts with Customers

Disaggregation of Revenue

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

Contract Balances

Contract balances were as follows (in millions):

	September 30, 2022		December 31, 2021
Receivables from contracts with customers, included in receivables, net	$	7,439	$	6,228
Contract liabilities, included in accrued expenses	102		78

During the nine months ended September 30, 2022 and 2021, we recognized as revenue $74 million and $44 million that was included in contract liabilities as of December 31, 2021 and 2020, respectively. Revenue recognized related to contract liabilities during the three months ended September 30, 2022 and 2021 was not material.

Remaining Performance Obligations

We have spot and term contracts with customers, the majority of which are spot contracts with no remaining performance obligations. We do not disclose remaining performance obligations for contracts that have terms of one year or less. The transaction price for our remaining term contracts includes a fixed component and variable consideration (i.e., a commodity price), both of which are allocated entirely to a wholly unsatisfied promise to transfer a distinct good that forms part of a single performance obligation. The fixed component is not material and the variable consideration is highly uncertain. Therefore, as of September 30, 2022, we have not disclosed the aggregate amount of the transaction price allocated to our remaining performance obligations.

Segment Information

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

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

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•The Renewable Diesel segment represents the operations of DGD, a consolidated joint venture as discussed in Note 6, and the associated activities to market renewable diesel. The principal product manufactured by DGD and sold by this segment is renewable diesel. This segment sells some renewable diesel to the Refining segment, which is then sold to that segment’s customers.

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

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

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Three months ended September 30, 2022
Revenues:
Revenues from external customers	$	42,280	$	967	$	1,207	$	—	$	44,454
Intersegment revenues	9		508		179		(696)		—
Total revenues	42,289		1,475		1,386		(696)		44,454
Cost of sales:
Cost of materials and other (a)	36,389		1,161		1,203		(689)		38,064
Operating expenses (excluding depreciation and amortization expense reflected below)	1,516		69		162		(1)		1,746
Depreciation and amortization expense	568		33		20		—		621
Total cost of sales	38,473		1,263		1,385		(690)		40,431
Other operating expenses	6		—		—		—		6
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		214		214
Depreciation and amortization expense	—		—		—		11		11
Operating income by segment	$	3,810	$	212	$	1	$	(231)	$	3,792
Three months ended September 30, 2021
Revenues:
Revenues from external customers	$	27,989	$	342	$	1,189	$	—	$	29,520
Intersegment revenues	3		60		115		(178)		—
Total revenues	27,992		402		1,304		(178)		29,520
Cost of sales:
Cost of materials and other (a)	25,395		256		1,150		(177)		26,624
Operating expenses (excluding depreciation and amortization expense reflected below)	1,195		26		128		(1)		1,348
Depreciation and amortization expense	549		11		70		—		630
Total cost of sales	27,139		293		1,348		(178)		28,602
Other operating expenses	18		1		—		—		19
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		195		195
Depreciation and amortization expense	—		—		—		11		11
Operating income (loss) by segment	$	835	$	108	$	(44)	$	(206)	$	693

___________________

See note (a) on page 20.

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	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Nine months ended September 30, 2022
Revenues:
Revenues from external customers	$	128,588	$	2,417	$	3,632	$	—	$	134,637
Intersegment revenues	24		1,490		507		(2,021)		—
Total revenues	128,612		3,907		4,139		(2,021)		134,637
Cost of sales:
Cost of materials and other (a)	111,308		3,129		3,533		(2,011)		115,959
Operating expenses (excluding depreciation and amortization expense reflected below)	4,111		178		464		(2)		4,751
Depreciation and amortization expense	1,682		87		37		—		1,806
Total cost of sales	117,101		3,394		4,034		(2,013)		122,516
Other operating expenses	38		—		2		—		40
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		652		652
Depreciation and amortization expense	—		—		—		34		34
Operating income by segment	$	11,473	$	513	$	103	$	(694)	$	11,395
Nine months ended September 30, 2021
Revenues:
Revenues from external customers	$	73,426	$	1,190	$	3,458	$	—	$	78,074
Intersegment revenues	7		215		259		(481)		—
Total revenues	73,433		1,405		3,717		(481)		78,074
Cost of sales:
Cost of materials and other (a)	67,417		724		3,204		(480)		70,865
Operating expenses (excluding depreciation and amortization expense reflected below)	3,730		86		403		(1)		4,218
Depreciation and amortization expense	1,626		35		111		—		1,772
Total cost of sales	72,773		845		3,718		(481)		76,855
Other operating expenses	68		1		—		—		69
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		579		579
Depreciation and amortization expense	—		—		—		35		35
Operating income (loss) by segment	$	592	$	559	$	(1)	$	(614)	$	536

________________________

(a)Cost of materials and other for our Renewable Diesel segment is net of the blender’s tax credit on qualified fuel mixtures of $191 million and $62 million for the three months ended September 30, 2022 and 2021, respectively, and $545 million and $225 million for the nine months ended September 30, 2022 and 2021, respectively.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Refining:
Gasolines and blendstocks	$	17,862	$	13,132	$	54,026	$	34,293
Distillates	20,481		11,588		62,352		31,044
Other product revenues	3,937		3,269		12,210		8,089
Total refining revenues	42,280		27,989		128,588		73,426
Renewable Diesel:
Renewable diesel	967		342		2,417		1,190
Ethanol:
Ethanol	966		948		2,820		2,683
Distillers grains	241		241		812		775
Total ethanol revenues	1,207		1,189		3,632		3,458
Revenues	$	44,454	$	29,520	$	134,637	$	78,074

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

	September 30, 2022		December 31, 2021
Refining	$	48,617	$	47,365
Renewable Diesel	4,257		3,437
Ethanol	1,538		1,812
Corporate and eliminations	4,917		5,274
Total assets	$	59,329	$	57,888

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11.    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):

	Nine Months Ended September 30,
	2022		2021
Decrease (increase) in current assets:
Receivables, net	$	(1,435)	$	(2,643)
Inventories	(703)		(232)
Prepaid expenses and other	(201)		28
Increase (decrease) in current liabilities:
Accounts payable	746		3,624
Accrued expenses	38		538
Taxes other than income taxes payable	(103)		200
Income taxes payable	41		115
Changes in current assets and current liabilities	$	(1,617)	$	1,630

Changes in current assets and current liabilities for the nine months ended September 30, 2022 were primarily due to the following:

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

•The increase in inventories was due to an increase in inventory volumes with higher inventory unit prices in September 2022 compared to December 2021; and

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

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

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

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

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

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

	Nine Months Ended September 30,
	2022		2021
Interest paid in excess of amount capitalized, including interest on finance leases	$	383	$	397
Income taxes paid (refunded), net	2,630		(876)

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

	Nine Months Ended September 30,
	2022				2021
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	296	$	59	$	296	$	53
Investing cash flows	—		—		1		—
Financing cash flows	—		129		—		97
Changes in lease balances resulting from new and modified leases	132		156		366		93

There were no significant noncash investing and financing activities during the nine months ended September 30, 2022 or 2021, except as noted in the table above.

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12.    FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

The following tables present information (in millions) about our assets and liabilities recognized at their fair values in our balance sheets categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of September 30, 2022 and December 31, 2021.

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

	September 30, 2022
							Total Gross Fair Value		Effect of Counter- party Netting		Effect of Cash Collateral Netting		Net Carrying Value on Balance Sheet		Cash Collateral Paid or Received Not Offset
	Fair Value Hierarchy
	Level 1		Level 2		Level 3
Assets
Commodity derivative contracts	$	1,083	$	—	$	—	$	1,083	$	(922)	$	(12)	$	149	$	—
Physical purchase contracts	—		11		—		11		n/a		n/a		11		n/a
Foreign currency contracts	18		—		—		18		n/a		n/a		18		n/a
Investments of certain benefit plans	70		—		6		76		n/a		n/a		76		n/a
Total	$	1,171	$	11	$	6	$	1,188	$	(922)	$	(12)	$	254
Liabilities
Commodity derivative contracts	$	944	$	—	$	—	$	944	$	(922)	$	(22)	$	—	$	(65)
Blending program obligations	—		42		—		42		n/a		n/a		42		n/a
Physical purchase contracts	—		6		—		6		n/a		n/a		6		n/a
Total	$	944	$	48	$	—	$	992	$	(922)	$	(22)	$	48

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	December 31, 2021
							Total Gross Fair Value		Effect of Counter- party Netting		Effect of Cash Collateral Netting		Net Carrying Value on Balance Sheet		Cash Collateral Paid or Received Not Offset
	Fair Value Hierarchy
	Level 1		Level 2		Level 3
Assets
Commodity derivative contracts	$	522	$	—	$	—	$	522	$	(444)	$	(15)	$	63	$	—
Physical purchase contracts	—		4		—		4		n/a		n/a		4		n/a
Foreign currency contracts	1		—		—		1		n/a		n/a		1		n/a
Investments of certain benefit plans	83		—		6		89		n/a		n/a		89		n/a
Total	$	606	$	4	$	6	$	616	$	(444)	$	(15)	$	157
Liabilities
Commodity derivative contracts	$	472	$	—	$	—	$	472	$	(444)	$	(28)	$	—	$	(41)
Blending program obligations	—		57		—		57		n/a		n/a		57		n/a
Physical purchase contracts	—		5		—		5		n/a		n/a		5		n/a
Foreign currency contracts	10		—		—		10		n/a		n/a		10		n/a
Total	$	482	$	62	$	—	$	544	$	(444)	$	(28)	$	72

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

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

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

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

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

•Blending program obligations represent our liability for the purchase of compliance credits needed to satisfy our blending obligations under various governmental and regulatory blending programs, such as the U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard (RFS), the California Low Carbon Fuel Standard, and similar programs in other jurisdictions in which we operate (collectively, the Renewable and Low-Carbon Fuel Blending Programs). The blending program obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a market approach based on quoted prices from an independent pricing service.

Nonrecurring Fair Value Measurements

There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of September 30, 2022 and December 31, 2021.

Other Financial Instruments

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

		September 30, 2022				December 31, 2021
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	Level 1	$	3,969	$	3,969	$	4,122	$	4,122
Financial liabilities:
Debt (excluding finance lease obligations)	Level 2	9,638		9,000		11,950		13,668

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13.    PRICE RISK MANAGEMENT ACTIVITIES

General

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

Risk Management Activities by Type of Risk

Commodity Price Risk

We are exposed to market risks related to the volatility in the price of feedstocks (primarily crude oil, waste and renewable feedstocks, and corn), the products we produce, and natural gas used in our operations. To reduce the impact of price volatility on our results of operations and cash flows, we use commodity derivative instruments, such as futures and options. Our positions in commodity derivative instruments are monitored and managed on a daily basis by our risk control group to ensure compliance with our stated risk management policy that has been approved by our Board.

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

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

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

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of September 30, 2022, we had the following outstanding commodity derivative instruments that were used as cash flow hedges and economic hedges, as well as commodity derivative instruments related to the physical purchase of corn at a fixed price. The information presents the notional volume of outstanding contracts by type of instrument and year of maturity (volumes in thousands of barrels, except corn contracts that are presented in thousands of bushels).

	Notional Contract Volumes by Year of Maturity
	2022	2023
Derivatives designated as cash flow hedges:
Refined petroleum products:
Futures – long	712	55
Futures – short	5,448	339
Derivatives designated as economic hedges:
Crude oil and refined petroleum products:
Futures – long	80,251	1,756
Futures – short	83,069	1,599
Corn:
Futures – long	48,460	435
Futures – short	73,485	6,945
Physical contracts – long	24,318	6,504

Foreign Currency Risk

We are exposed to exchange rate fluctuations on transactions related to our foreign operations that are denominated in currencies other than the local (functional) currencies of our operations. To manage our exposure to these exchange rate fluctuations, we often use foreign currency contracts. These contracts are not designated as hedging instruments for accounting purposes and therefore are classified as economic hedges. As of September 30, 2022, we had foreign currency contracts to purchase $710 million of U.S. dollars and $150 million of U.S. dollar equivalent Canadian dollars. All of these commitments matured on or before October 25, 2022.

Renewable and Low-Carbon Fuel Blending Programs Price Risk

We are exposed to market risk related to the volatility in the price of credits needed to comply with the Renewable and Low-Carbon Fuel Blending Programs. To manage this risk, we enter into contracts to purchase these credits. Some of these contracts are derivative instruments; however, we elect the normal purchase exception and do not record these contracts at their fair values. The Renewable and Low-Carbon Fuel Blending Programs require us to blend a certain volume of renewable and low-carbon fuels into the petroleum-based transportation fuels we produce in, or import into, the respective jurisdiction to be consumed therein based on annual quotas. To the degree we are unable to blend at the required quotas, we must purchase compliance credits (primarily RINs). The cost of meeting our credit obligations under the Renewable and Low-Carbon Fuel Blending Programs was $461 million and $662 million for the three months ended September 30, 2022 and 2021, respectively, and $984 million and $1.7 billion for the

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

nine months ended September 30, 2022 and 2021, respectively. These amounts are reflected in cost of materials and other.

Fair Values of Derivative Instruments

The following table provides information about the fair values of our derivative instruments as of September 30, 2022 and December 31, 2021 (in millions) and the line items in the balance sheets in which the fair values are reflected. See Note 12 for additional information related to the fair values of our derivative instruments.

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

	Balance Sheet Location	September 30, 2022				December 31, 2021
		Asset Derivatives		Liability Derivatives		Asset Derivatives		Liability Derivatives
Derivatives designated as hedging instruments:
Commodity contracts	Receivables, net	$	96	$	21	$	3	$	26
Derivatives not designated as hedging instruments:
Commodity contracts	Receivables, net	$	987	$	923	$	519	$	446
Physical purchase contracts	Inventories	11		6		4		5
Foreign currency contracts	Receivables, net	18		—		1		—
Foreign currency contracts	Accrued expenses	—		—		—		10
Total		$	1,016	$	929	$	524	$	461

Market Risk

Our price risk management activities involve the receipt or payment of fixed price commitments into the future. These transactions give rise to market risk, which is the risk that future changes in market conditions may make an instrument less valuable. We closely monitor and manage our exposure to market risk on a daily basis in accordance with policies approved by our Board. Market risks are monitored by our risk control group to ensure compliance with our stated risk management policy. We do not require any collateral or other security to support derivative instruments into which we enter. We also do not have any derivative instruments that require us to maintain a minimum investment-grade credit rating.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Effect of Derivative Instruments on Income and Other Comprehensive Loss

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

Derivatives in Cash Flow Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivatives	Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021
Commodity contracts:
Gain (loss) recognized in other comprehensive loss on derivatives	n/a	$	79	$	(21)	$	(215)	$	(52)
Gain (loss) reclassified from accumulated other comprehensive loss into income	Revenues	10		(3)		(289)		(37)

For cash flow hedges, no component of any derivative instrument’s gains or losses was excluded from the assessment of hedge effectiveness for the three and nine months ended September 30, 2022 and 2021. For the three and nine months ended September 30, 2022 and 2021, cash flow hedges primarily related to forward sales of renewable diesel. The estimated deferred after-tax gain that is expected to be reclassified into revenues within the next 12 months as a result of the hedged transactions that are forecasted to occur as of September 30, 2022 was not material. For the three and nine months ended September 30, 2022 and 2021, there were no amounts reclassified from accumulated other comprehensive loss into income as a result of the discontinuance of cash flow hedge accounting. The changes in accumulated other comprehensive loss by component, net of tax, for the three and nine months ended September 30, 2022 and 2021 are described in Note 5.

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

Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021
Commodity contracts	Revenues	$	(6)	$	(7)	$	(12)	$	13
Commodity contracts	Cost of materials and other	(109)		6		(976)		(51)
Commodity contracts	Operating expenses (excluding depreciation and amortization expense)	(18)		(1)		(9)		2
Foreign currency contracts	Cost of materials and other	57		19		104		17
Foreign currency contracts	Other income, net	(38)		(28)		(119)		55

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

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

This Form 10-Q, including without limitation our disclosures below under “OVERVIEW AND OUTLOOK,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify our forward-looking statements by the words “anticipate,” “believe,” “expect,” “plan,” “intend,” “scheduled,” “estimate,” “project,” “projection,” “predict,” “budget,” “forecast,” “goal,” “guidance,” “target,” “could,” “would,” “should,” “may,” “strive,” “seek,” “potential,” “opportunity,” “aimed,” “considering,” “continue,” and similar expressions.

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

•the effects and impact of the emergence of new variants of the COVID-19 virus and government responses thereto;

•the effect, impact, potential duration or timing, or other implications of the Russia-Ukraine conflict;

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

•future Renewable Diesel segment margins;

•future Ethanol segment margins;

•expectations regarding feedstock costs, including crude oil differentials, product prices for each of our segments, and operating expenses;

•anticipated levels of crude oil and liquid transportation fuel inventories and storage capacity;

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

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

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

•our ability to meet future cash requirements, whether from funds generated from our operations or our ability to access financial markets effectively, and our ability to maintain sufficient liquidity;

•our evaluation of, and expectations regarding, any future activity under our share purchase program or transactions involving our debt securities;

•anticipated trends in the supply of, and demand for, crude oil and other feedstocks and refined petroleum products, renewable diesel, and ethanol and corn related co-products in the regions where we operate, as well as globally;

•expectations regarding environmental, tax, and other regulatory matters, including the anticipated amounts and timing of payment with respect to our deferred tax liabilities, matters impacting our ability to repatriate cash held by our foreign subsidiaries, and the anticipated effect thereof on our business, financial condition, results of operations, and liquidity;

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

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

•expectations regarding our counterparties, including our ability to pass on increased compliance costs and timely collect receivables, and the credit risk within our accounts receivable or accounts payable;

•expectations regarding adoptions of new, or changes to existing, low-carbon fuel standards or policies, blending and tax credits, or efficiency standards that impact demand for renewable fuels; and

•expectations regarding our publicly announced greenhouse gas (GHG) emissions reduction/displacement targets and our current and any future carbon transition projects.

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

•the effects arising out of the Russia-Ukraine conflict, including with respect to changes in trade flows and impacts to crude oil and other markets;

•demand for, and supplies of, refined petroleum products (such as gasoline, diesel, jet fuel, and petrochemicals), renewable diesel, and ethanol and corn related co-products;

•demand for, and supplies of, crude oil and other feedstocks;

•the effects of public health threats, pandemics, and epidemics, such as the COVID-19 pandemic and variants of the virus, governmental and societal responses thereto, and the adverse impacts of the foregoing on our business, financial condition, results of operations, and liquidity, including, but not limited to, our growth, operating costs, administrative costs, supply chain, labor availability, logistical capabilities, customer demand for our products, and industry demand generally, margins, production and throughput capacity, utilization, inventory value, cash position, taxes, the price of our securities and trading markets with respect thereto, our ability to access capital markets, and the global economy and financial markets generally;

•acts of terrorism aimed at either our refineries and plants or third-party facilities that could impair our ability to produce or transport refined petroleum products, renewable diesel, ethanol, or corn related co-products, to receive feedstocks, or otherwise operate efficiently;

•the effects of war or hostilities, and political and economic conditions, in countries that produce crude oil or other feedstocks or consume refined petroleum products, renewable diesel, ethanol or corn related co-products;

•the ability of the members of the Organization of Petroleum Exporting Countries to agree on and to maintain crude oil price and production controls;

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

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

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

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

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

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

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

•political pressure and influence of environmental groups and other stakeholders upon policies and decisions related to the production, transportation, storage, refining, processing, marketing, and sales of crude oil or other feedstocks, refined petroleum products, renewable diesel, ethanol, or corn related co-products;

•the price, availability, technology related to, and acceptance of alternative fuels and alternative-fuel vehicles, as well as sentiment and perceptions with respect to GHG emissions more generally;

•the levels of government subsidies for, and executive orders, mandates, or other policies with respect to, alternative fuels, alternative-fuel vehicles, and other low-carbon technologies or initiatives, including those related to carbon capture, carbon sequestration, and low-carbon fuels, or affecting the price of natural gas and/or electricity;

•the volatility in the market price of compliance credits (primarily RINs needed to comply with the RFS) under the Renewable and Low-Carbon Fuel Blending Programs and emission credits needed under other environmental emissions programs;

•delay of, cancellation of, or failure to implement planned capital or other 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 other weather events, which can unforeseeably affect the price or availability of electricity, natural gas, crude oil, waste and renewable feedstocks, corn, and other feedstocks, critical supplies, refined petroleum products, renewable diesel, and ethanol;

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

•legislative or regulatory action, including the introduction or enactment of legislation or rulemakings by governmental authorities, environmental regulations, changes to income tax rates, introduction of a global minimum tax, windfall taxes, tax changes or restrictions impacting the foreign repatriation of cash, actions implemented under the Renewable and Low-Carbon Fuel Blending Programs and other environmental emissions programs, including changes to volume requirements or other obligations or exemptions under the RFS, and actions arising from the EPA’s or other governmental agencies’ regulations, policies, or initiatives concerning GHGs, including mandates for or bans of specific technology, which may adversely affect our business or operations;

•changing economic, regulatory, and political environments and related events in the various countries in which we operate or otherwise do business, including trade restrictions, expropriation or impoundment of assets, failure of foreign governments and state-owned entities to honor their contracts, property disputes, economic instability, restrictions on the transfer of funds, duties and tariffs, transportation delays, import and export controls, labor unrest, security issues involving key personnel, and decisions, investigations, regulations, issuances or revocations of permits and

33

other authorizations, and other actions, policies and initiatives by the states, counties, cities, and other jurisdictions in the countries in which we operate or otherwise do business;

•changes in the credit ratings assigned to our debt securities and trade credit;

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

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

•the adequacy of capital resources and liquidity, including availability, timing, and amounts of cash flow or our ability to borrow or access financial markets;

•the costs, disruption, and diversion of resources associated with campaigns and negative publicity commenced by investors, stakeholders, or other interested parties;

•overall economic conditions, including the stability and liquidity of financial markets, and the effect thereof on consumer demand; 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, 2021.

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

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing, as it may be updated or modified by our future filings with the U.S. Securities and Exchange Commission (SEC). We undertake no obligation to publicly release any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events unless we are required by applicable securities laws to do so.

NON-GAAP FINANCIAL MEASURES

The discussions in “OVERVIEW AND OUTLOOK,” “RESULTS OF OPERATIONS,” and “LIQUIDITY AND CAPITAL RESOURCES” below include references to financial measures that are not defined under GAAP. These non-GAAP financial measures include adjusted operating income (including adjusted operating income for each of our reportable segments, as applicable); Refining, Renewable Diesel, and Ethanol segment margin; and capital investments attributable to Valero. We have included these non-GAAP financial measures to help facilitate the comparison of operating results between periods, to help assess our cash flows, and because we believe they provide useful information as discussed further below. See the tables in note (g) beginning on page 54 for reconciliations of adjusted operating income (including adjusted operating income for each of our reportable segments, as applicable) and Refining, Renewable Diesel, and Ethanol segment margin to their most directly comparable GAAP financial measures. Also in note (g), we disclose the reasons why we believe our use of such non-GAAP financial measures provides useful information. See the table on page 61 for a reconciliation of capital investments attributable to Valero to its most directly comparable GAAP financial measure. Beginning on page 60, we disclose the reasons why we believe our use of this non-GAAP financial measure provides useful information.

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OVERVIEW AND OUTLOOK

Overview

Business Operations Update

Our results for the third quarter and first nine months of 2022 were favorably impacted by the effect from the ongoing recovery in the worldwide demand for petroleum-based transportation fuels while the worldwide supply of those products remained constrained. This supply and demand imbalance has contributed to increases in the market prices of petroleum-based transportation fuels (as well as crude oil and other feedstocks that are processed to make these products) and in refining margins. Supply has remained constrained for a variety of reasons, including, but not limited to, effects from refinery closures and disruptions in the crude oil and petroleum-based products markets resulting from the Russia-Ukraine conflict. Refineries closed over the last two years and other refineries ceased crude oil processing and are being transitioned to renewable fuel production. In addition, these negative impacts to the supply of petroleum-based products were exacerbated during the second quarter of 2022 by the Russia-Ukraine conflict as a result of countries and private market participants responding to the conflict by taking actions to refrain from purchasing and transporting Russian crude oil and petroleum-based products; however, some of the uncertainties and related impacts dissipated during the third quarter.

The strong demand for our products and the increase in refining margins were the primary contributors to us reporting $2.8 billion of net income attributable to Valero stockholders for the third quarter of 2022 and $8.4 billion of net income attributable to Valero stockholders for the first nine months of 2022. Our operating results, including operating results by segment, are described in the following summary under “Third Quarter Results” and “First Nine Months Results.” Detailed descriptions can be found under “RESULTS OF OPERATIONS.”

Our operations generated $8.5 billion of cash during the first nine months of 2022. This cash, along with cash on hand, was used to make $2.1 billion of capital investments in our business and return $4.0 billion to our stockholders through purchases of common stock for treasury and dividend payments. In addition, we completed various debt reduction and refinancing transactions that reduced our debt by $2.3 billion during the first nine months of 2022. As a result of this and other activity, our cash and cash equivalents decreased by $153 million, from $4.1 billion as of December 31, 2021 to $4.0 billion as of September 30, 2022. We had $8.6 billion in liquidity as of September 30, 2022. The components of our liquidity and descriptions of our cash flows, capital investments, and other matters impacting our liquidity and capital resources, can be found under “LIQUIDITY AND CAPITAL RESOURCES.”

Third Quarter Results

For the third quarter of 2022, we reported net income attributable to Valero stockholders of $2.8 billion compared to $463 million for the third quarter of 2021. The increase of $2.4 billion was primarily due to higher operating income of $3.1 billion, partially offset by higher income tax expense of $751 million. The details of our operating income (loss) and adjusted operating income by segment and in total are reflected on the following page. Adjusted operating income excludes the adjustments reflected in the tables in note (g) beginning on page 54.

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	Three Months Ended September 30,
	2022		2021		Change
Refining segment:
Operating income	$	3,810	$	835	$	2,975
Adjusted operating income	3,816		911		2,905
Renewable Diesel segment:
Operating income	212		108		104
Adjusted operating income	212		109		103
Ethanol segment:
Operating income (loss)	1		(44)		45
Adjusted operating income	1		4		(3)
Total company:
Operating income	3,792		693		3,099
Adjusted operating income	3,798		818		2,980

While our operating income increased by $3.1 billion in the third quarter of 2022 compared to the third quarter of 2021, adjusted operating income increased by $3.0 billion primarily due to the following:

•Refining segment. Refining segment adjusted operating income increased by $2.9 billion primarily due to higher gasoline and distillate (primarily diesel) margins, partially offset by lower margins on other products and higher operating expenses (excluding depreciation and amortization expense).

•Renewable Diesel segment. Renewable Diesel segment adjusted operating income increased by $103 million primarily due to higher sales volumes and higher renewable diesel prices, partially offset by higher feedstock costs and higher operating expenses (excluding depreciation and amortization expense).

•Ethanol segment. Ethanol segment adjusted operating income decreased by $3 million primarily due to higher corn prices, higher operating expenses (excluding depreciation and amortization expense), and lower production volumes, partially offset by higher ethanol and corn related co-product prices.

First Nine Months Results

For the first nine months of 2022, we reported net income attributable to Valero stockholders of $8.4 billion compared to a net loss attributable to Valero stockholders of $79 million for the first nine months of 2021. The increase of $8.5 billion was primarily due to higher operating income of $10.9 billion, partially offset by higher income tax expense of $2.3 billion. The details of our operating income (loss) and adjusted operating income by segment and in total are reflected on the following page. Adjusted operating income excludes the adjustments reflected in the tables in note (g) beginning on page 54.

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	Nine Months Ended September 30,
	2022		2021		Change
Refining segment:
Operating income	$	11,473	$	592	$	10,881
Adjusted operating income	11,407		879		10,528
Renewable Diesel segment:
Operating income	513		559		(46)
Adjusted operating income	513		560		(47)
Ethanol segment:
Operating income (loss)	103		(1)		104
Adjusted operating income	82		47		35
Total company:
Operating income	11,395		536		10,859
Adjusted operating income	11,328		872		10,456

While our operating income increased by $10.9 billion in the first nine months of 2022 compared to the first nine months of 2021, adjusted operating income increased by $10.5 billion primarily due to the following:

•Refining segment. Refining segment adjusted operating income increased by $10.5 billion primarily due to higher gasoline and distillate (primarily diesel) margins and higher throughput volumes, partially offset by lower margins on other products and higher operating expenses (excluding depreciation and amortization expense).

•Renewable Diesel segment. Renewable Diesel segment adjusted operating income decreased by $47 million primarily due to higher feedstock costs, an unfavorable impact from commodity derivative instruments associated with our price risk management activities, and higher operating expenses (excluding depreciation and amortization expense), partially offset by higher sales volumes and higher renewable diesel prices.

•Ethanol segment. Ethanol segment adjusted operating income increased by $35 million primarily due to higher ethanol and corn related co-product prices, partially offset by higher corn prices and higher operating expenses (excluding depreciation and amortization expense).

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Outlook

Many uncertainties remain with respect to the supply and demand imbalance in the petroleum-based products market worldwide, and while it is difficult to predict the ultimate economic impacts this may have on us, we have noted several factors below that have impacted or may impact our results of operations during the fourth quarter of 2022.

•Gasoline and diesel demand have returned to near pre-pandemic levels and are expected to follow typical seasonal patterns. Jet fuel demand continues to improve but remains below pre-pandemic levels.

•Light product (primarily gasoline and diesel) inventories in the U.S. are below historical levels and should support continued high utilization of refining capacity.

•Crude oil discounts are expected to remain near current levels absent changes in crude oil supply or availability.

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

•Ethanol demand is expected to follow typical seasonal patterns.

38

RESULTS OF OPERATIONS

The following tables, including the reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures in note (g) beginning on page 54, highlight our results of operations, our operating performance, and market reference prices that directly impact our operations. Note references in this section can be found on pages 53 through 57.

Third Quarter Results -

Financial Highlights By Segment and Total Company

(millions of dollars)

	Three Months Ended September 30, 2022
	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Revenues:
Revenues from external customers	$	42,280	$	967	$	1,207	$	—	$	44,454
Intersegment revenues	9		508		179		(696)		—
Total revenues	42,289		1,475		1,386		(696)		44,454
Cost of sales:
Cost of materials and other	36,389		1,161		1,203		(689)		38,064
Operating expenses (excluding depreciation and amortization expense reflected below)	1,516		69		162		(1)		1,746
Depreciation and amortization expense	568		33		20		—		621
Total cost of sales	38,473		1,263		1,385		(690)		40,431
Other operating expenses	6		—		—		—		6
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		214		214
Depreciation and amortization expense	—		—		—		11		11
Operating income by segment	$	3,810	$	212	$	1	$	(231)	3,792
Other income, net (e)									74
Interest and debt expense, net of capitalized interest									(138)
Income before income tax expense									3,728
Income tax expense									816
Net income									2,912
Less: Net income attributable to noncontrolling interests									95
Net income attributable to Valero Energy Corporation stockholders									$	2,817

39

Third Quarter Results -

Financial Highlights By Segment and Total Company (continued)

(millions of dollars)

	Three Months Ended September 30, 2021
	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Revenues:
Revenues from external customers	$	27,989	$	342	$	1,189	$	—	$	29,520
Intersegment revenues	3		60		115		(178)		—
Total revenues	27,992		402		1,304		(178)		29,520
Cost of sales:
Cost of materials and other	25,395		256		1,150		(177)		26,624
Operating expenses (excluding depreciation and amortization expense reflected below)	1,195		26		128		(1)		1,348
Depreciation and amortization expense (c)	549		11		70		—		630
Total cost of sales	27,139		293		1,348		(178)		28,602
Other operating expenses	18		1		—		—		19
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		195		195
Depreciation and amortization expense	—		—		—		11		11
Operating income (loss) by segment	$	835	$	108	$	(44)	$	(206)	693
Other income, net									32
Interest and debt expense, net of capitalized interest									(152)
Income before income tax expense									573
Income tax expense									65
Net income									508
Less: Net income attributable to noncontrolling interests									45
Net income attributable to Valero Energy Corporation stockholders									$	463

40

Third Quarter Results -

Average Market Reference Prices and Differentials

	Three Months Ended September 30,
	2022		2021
Refining
Feedstocks (dollars per barrel)
Brent crude oil	$	97.59	$	73.22
Brent less West Texas Intermediate (WTI) crude oil	5.83		2.64
Brent less WTI Houston crude oil	3.69		2.01
Brent less Dated Brent crude oil	(2.97)		(0.25)
Brent less Alaska North Slope (ANS) crude oil	(1.53)		0.49
Brent less Argus Sour Crude Index (ASCI) crude oil	8.23		4.52
Brent less Maya crude oil	13.11		7.01
Brent less Western Canadian Select (WCS) Houston crude oil	17.68		7.74
WTI crude oil	91.76		70.58
Natural gas (dollars per million British Thermal Units (MMBtu))	7.31		4.25
Product margins (dollars per barrel)
U.S. Gulf Coast:
Conventional Blendstock of Oxygenate Blending (CBOB) gasoline less Brent	13.81		16.90
Ultra-low-sulfur (ULS) diesel less Brent	49.12		14.15
Propylene less Brent	(46.73)		(5.21)
U.S. Mid-Continent:
CBOB gasoline less WTI	27.38		20.84
ULS diesel less WTI	60.36		19.37
North Atlantic:
CBOB gasoline less Brent	28.28		20.82
ULS diesel less Brent	52.30		16.32
U.S. West Coast:
California Reformulated Gasoline Blendstock of Oxygenate Blending (CARBOB) 87 gasoline less ANS	48.06		27.49
California Air Resources Board (CARB) diesel less ANS	50.26		18.55
CARBOB 87 gasoline less WTI	55.42		29.64
CARB diesel less WTI	57.62		20.70

41

Third Quarter Results -

Average Market Reference Prices and Differentials (continued)

	Three Months Ended September 30,
	2022		2021
Renewable Diesel
New York Mercantile Exchange ULS diesel (dollars per gallon)	$	3.55	$	2.13
Biodiesel RIN (dollars per RIN)	1.71		1.60
California Low-Carbon Fuel Standard (dollars per metric ton)	86.21		175.75
Chicago Board of Trade (CBOT) soybean oil (dollars per pound)	0.66		0.62
Ethanol
CBOT corn (dollars per bushel)	6.60		5.58
New York Harbor ethanol (dollars per gallon)	2.58		2.37

Total Company, Corporate, and Other

The following table includes selected financial data for the total company, corporate, and other for the third quarter of 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

	Three Months Ended September 30,
	2022		2021		Change
Revenues	$	44,454	$	29,520	$	14,934
Cost of sales (see note (c))	40,431		28,602		11,829
Operating income	3,792		693		3,099
Adjusted operating income (see note (g))	3,798		818		2,980
Other income, net (see note (e))	74		32		42
Income tax expense	816		65		751
Net income attributable to noncontrolling interests	95		45		50

Revenues increased by $14.9 billion in the third quarter of 2022 compared to the third quarter of 2021 primarily due to increases in product prices for the petroleum-based transportation fuels associated with sales made by our Refining segment. This increase in revenues was partially offset by an increase in cost of sales of $11.8 billion, which was primarily due to increases in crude oil and other feedstock costs. These changes resulted in a $3.1 billion increase in operating income, from $693 million in the third quarter of 2021 to $3.8 billion in the third quarter of 2022.

Adjusted operating income increased by $3.0 billion, from $818 million in the third quarter of 2021 to $3.8 billion in the third quarter of 2022. The components of this $3.0 billion increase in adjusted operating income are discussed by segment in the segment analyses that follow.

“Other income, net” increased by $42 million in the third quarter of 2022 compared to the third quarter of 2021 primarily due to a benefit of $26 million in the third quarter of 2022 from the early retirement of debt, as more fully described in note (e).

42

Income tax expense increased by $751 million in the third quarter of 2022 compared to the third quarter of 2021 primarily as a result of higher income before income tax expense.

Net income attributable to noncontrolling interests increased by $50 million in the third quarter of 2022 compared to the third quarter of 2021 primarily due to higher earnings associated with DGD. See Note 6 of Condensed Notes to Consolidated Financial Statements regarding our accounting for DGD.

Refining Segment Results

The following table includes selected financial and operating data of our Refining segment for the third quarter of 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

	Three Months Ended September 30,
	2022		2021		Change
Operating income	$	3,810	$	835	$	2,975
Adjusted operating income (see note (g))	3,816		911		2,905
Refining margin (see note (g))	$	5,900	$	2,655	$	3,245
Operating expenses (excluding depreciation and amortization expense reflected below)	1,516		1,195		321
Depreciation and amortization expense	568		549		19
Throughput volumes (thousand barrels per day) (see note (h))	3,005		2,864		141

Refining segment operating income increased by $3.0 billion in the third quarter of 2022 compared to the third quarter of 2021; however, Refining segment adjusted operating income, which excludes the adjustments in the table in note (g), increased by $2.9 billion in the third quarter of 2022 compared to the third quarter of 2021. The components of this increase in the adjusted results, along with the reasons for the changes in those components, are outlined below.

•Refining segment margin increased by $3.2 billion in the third quarter of 2022 compared to the third quarter of 2021.

Refining segment margin is primarily affected by the prices for the petroleum-based transportation fuels that we sell and the cost of crude oil and other feedstocks that we process. The table on page 41 reflects market reference prices and differentials that we believe had a material impact on the change in our Refining segment margin in the third quarter of 2022 compared to the third quarter of 2021.

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

◦An increase in distillate (primarily diesel) margins had a favorable impact of approximately $3.4 billion.

◦An increase in gasoline margins had a favorable impact of approximately $420 million.

◦Lower margins on other products had an unfavorable impact of approximately $540 million.

43

•Refining segment operating expenses (excluding depreciation and amortization expense) increased by $321 million primarily due to higher energy costs of $187 million, higher costs of compliance with environmental emissions programs of $56 million, higher maintenance expense of $31 million, and higher chemicals and catalyst costs of $27 million.

Renewable Diesel Segment Results

The following table includes selected financial and operating data of our Renewable Diesel segment for the third quarter of 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

	Three Months Ended September 30,
	2022		2021		Change
Operating income	$	212	$	108	$	104
Adjusted operating income (see note (g))	212		109		103
Renewable Diesel margin (see note (g))	$	314	$	146	$	168
Operating expenses (excluding depreciation and amortization expense reflected below)	69		26		43
Depreciation and amortization expense	33		11		22
Sales volumes (thousand gallons per day) (see note (h))	2,231		671		1,560

Renewable Diesel segment operating income increased by $104 million in the third quarter of 2022 compared to the third quarter of 2021; however, Renewable Diesel segment adjusted operating income, which excludes the adjustment in the table in note (g), increased by $103 million in the third quarter of 2022 compared to the third quarter of 2021. The components of this increase, along with the reasons for the changes in those components, are outlined below.

•Renewable Diesel segment margin increased by $168 million in the third quarter of 2022 compared to the third quarter of 2021.

Renewable Diesel segment margin is primarily affected by the price for the renewable diesel that we sell and the cost of the feedstocks that we process. The table on page 42 reflects market reference prices that we believe had a material impact on the change in our Renewable Diesel segment margin in the third quarter of 2022 compared to the third quarter of 2021.

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

◦An increase in sales volumes of 1.6 million gallons per day had a favorable impact of approximately $420 million. The increase in sales volumes was primarily due to the additional production capacity resulting from the expansion of DGD’s existing renewable diesel plant (the DGD Plant) that commenced operations in the fourth quarter of 2021.

◦Higher renewable diesel prices had a favorable impact of approximately $153 million.

◦An increase in the cost of the feedstocks that we process had an unfavorable impact of approximately $432 million.

44

•Renewable Diesel segment operating expenses (excluding depreciation and amortization expense) increased by $43 million primarily due to increased costs resulting from the expansion of the DGD Plant that commenced operations in the fourth quarter of 2021.

•Renewable Diesel segment depreciation and amortization expense increased by $22 million primarily due to depreciation expense of $13 million associated with the expansion of the DGD Plant that commenced operations in the fourth quarter of 2021 and higher depreciation expense of $3 million associated with finance leases.

Ethanol Segment Results

The following table includes selected financial and operating data of our Ethanol segment for the third quarter of 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

	Three Months Ended September 30,
	2022		2021		Change
Operating income (loss)	$	1	$	(44)	$	45
Adjusted operating income (see note (g))	1		4		(3)
Ethanol margin (see note (g))	$	183	$	154	$	29
Operating expenses (excluding depreciation and amortization expense reflected below)	162		128		34
Depreciation and amortization expenses (see note (c))	20		70		(50)
Production volumes (thousand gallons per day) (see note (h))	3,498		3,625		(127)

Ethanol segment operating income increased by $45 million in the third quarter of 2022 compared to the third quarter of 2021; however, Ethanol segment adjusted operating income, which excludes the adjustments in the table in note (g), decreased by $3 million in the third quarter of 2022 compared to the third quarter of 2021. The components of this decrease in the adjusted results, along with the reasons for the changes in those components, are outlined below.

•Ethanol segment margin increased by $29 million in the third quarter of 2022 compared to the third quarter of 2021.

Ethanol segment margin is primarily affected by prices for the ethanol and corn related co-products that we sell and the cost of corn that we process. The table on page 42 reflects market reference prices that we believe had a material impact on the change in our Ethanol segment margin in the third quarter of 2022 compared to the third quarter of 2021.

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

◦Higher ethanol prices had a favorable impact of approximately $79 million.

◦Higher prices for the co-products that we produce, primarily dry distillers grains (DDGs) and inedible distillers corn oil (DCO), had a favorable impact of approximately $46 million.

◦Higher corn prices had an unfavorable impact of approximately $85 million.

45

◦A decrease in production volumes of 127,000 gallons per day had an unfavorable impact of approximately $9 million.

•Ethanol segment operating expenses (excluding depreciation and amortization expense) increased by $34 million primarily due to higher energy costs.

First Nine Months Results -

Financial Highlights By Segment and Total Company

(millions of dollars)

	Nine Months Ended September 30, 2022
	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Revenues:
Revenues from external customers	$	128,588	$	2,417	$	3,632	$	—	$	134,637
Intersegment revenues	24		1,490		507		(2,021)		—
Total revenues	128,612		3,907		4,139		(2,021)		134,637
Cost of sales:
Cost of materials and other (a)	111,308		3,129		3,533		(2,011)		115,959
Operating expenses (excluding depreciation and amortization expense reflected below)	4,111		178		464		(2)		4,751
Depreciation and amortization expense (c)	1,682		87		37		—		1,806
Total cost of sales	117,101		3,394		4,034		(2,013)		122,516
Other operating expenses	38		—		2		—		40
General and administrative expenses (excluding depreciation and amortization expense reflected below) (d)	—		—		—		652		652
Depreciation and amortization expense	—		—		—		34		34
Operating income by segment	$	11,473	$	513	$	103	$	(694)	11,395
Other income, net (e)									87
Interest and debt expense, net of capitalized interest									(425)
Income before income tax expense									11,057
Income tax expense									2,410
Net income									8,647
Less: Net income attributable to noncontrolling interests									232
Net income attributable to Valero Energy Corporation stockholders									$	8,415

46

First Nine Months Results -

Financial Highlights By Segment and Total Company (continued)

(millions of dollars)

	Nine Months Ended September 30, 2021
	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Revenues:
Revenues from external customers	$	73,426	$	1,190	$	3,458	$	—	$	78,074
Intersegment revenues	7		215		259		(481)		—
Total revenues	73,433		1,405		3,717		(481)		78,074
Cost of sales:
Cost of materials and other (b)	67,417		724		3,204		(480)		70,865
Operating expenses (excluding depreciation and amortization expense reflected below) (b)	3,730		86		403		(1)		4,218
Depreciation and amortization expense (c)	1,626		35		111		—		1,772
Total cost of sales	72,773		845		3,718		(481)		76,855
Other operating expenses	68		1		—		—		69
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		579		579
Depreciation and amortization expense	—		—		—		35		35
Operating income (loss) by segment	$	592	$	559	$	(1)	$	(614)	536
Other income, net (e)									179
Interest and debt expense, net of capitalized interest									(451)
Income before income tax expense									264
Income tax expense (f)									86
Net income									178
Less: Net income attributable to noncontrolling interests									257
Net loss attributable to Valero Energy Corporation stockholders									$	(79)

47

First Nine Months Results -

Average Market Reference Prices and Differentials

	Nine Months Ended September 30,
	2022		2021
Refining
Feedstocks (dollars per barrel)
Brent crude oil	$	102.21	$	67.77
Brent less WTI crude oil	3.91		2.94
Brent less WTI Houston crude oil	2.28		2.03
Brent less Dated Brent crude oil	(2.92)		0.06
Brent less ANS crude oil	(0.19)		0.46
Brent less ASCI crude oil	6.58		3.62
Brent less Maya crude oil	9.84		5.95
Brent less WCS Houston crude oil	13.22		6.77
WTI crude oil	98.29		64.84
Natural gas (dollars per MMBtu)	6.29		8.95
Product margins (dollars per barrel)
U.S. Gulf Coast:
CBOB gasoline less Brent	20.27		13.82
ULS diesel less Brent	44.34		12.44
Propylene less Brent	(38.04)		(2.37)
U.S. Mid-Continent:
CBOB gasoline less WTI	26.49		18.53
ULS diesel less WTI	49.26		18.33
North Atlantic:
CBOB gasoline less Brent	29.18		16.58
ULS diesel less Brent	51.67		14.43
U.S. West Coast:
CARBOB 87 gasoline less ANS	43.86		23.08
CARB diesel less ANS	46.97		15.99
CARBOB 87 gasoline less WTI	47.96		25.55
CARB diesel less WTI	51.07		18.47

48

First Nine Months Results -

Average Market Reference Prices and Differentials (continued)

	Nine Months Ended September 30,
	2022		2021
Renewable Diesel
New York Mercantile Exchange ULS diesel (dollars per gallon)	$	3.54	$	1.96
Biodiesel RIN (dollars per RIN)	1.61		1.49
California Low-Carbon Fuel Standard (dollars per metric ton)	109.71		185.29
CBOT soybean oil (dollars per pound)	0.71		0.58
Ethanol
CBOT corn (dollars per bushel)	7.02		5.85
New York Harbor ethanol (dollars per gallon)	2.60		2.18

Total Company, Corporate, and Other

The following table includes selected financial data for the total company, corporate, and other for the first nine months of 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

	Nine Months Ended September 30,
	2022		2021		Change
Revenues	$	134,637	$	78,074	$	56,563
Cost of sales (see notes (a) through (c))	122,516		76,855		45,661
General and administrative expenses (excluding depreciation and amortization expense) (see note (d))	652		579		73
Operating income	11,395		536		10,859
Adjusted operating income (see note (g))	11,328		872		10,456
Other income, net (see note (e))	87		179		(92)
Income tax expense (see note (f))	2,410		86		2,324
Net income attributable to noncontrolling interests	232		257		(25)

Revenues increased by $56.6 billion in the first nine months of 2022 compared to the first nine months of 2021 primarily due to increases in product prices for the refined petroleum-based transportation fuels associated with sales made by our Refining segment. This increase in revenues was partially offset by an increase in cost of sales of $45.7 billion, which was primarily due to increases in crude oil and other feedstock costs, and an increase in general and administrative expenses (excluding depreciation and amortization expense) of $73 million, which was primarily due to an increase of $36 million in certain employee compensation expenses and a charge of $20 million for an environmental reserve adjustment (see note (d)). These changes resulted in a $10.9 billion increase in operating income, from $536 million in the first nine months of 2021 to $11.4 billion in the first nine months of 2022.

Adjusted operating income increased by $10.5 billion, from $872 million in the first nine months of 2021 to $11.3 billion in the first nine months of 2022. The components of this $10.5 billion increase in adjusted operating income are discussed by segment in the segment analyses that follow.

49

“Other income, net” decreased by $92 million in the first nine months of 2022 compared to the first nine months of 2021 primarily due to a net charge of $24 million in the first nine months of 2022 from the early retirement of debt and the effect of the gain of $62 million in the first nine months of 2021 on the sale of a 24.99 percent membership interest in MVP, resulting in a decrease of $86 million. This decrease was partially offset by the effect of an asset impairment loss of $24 million in the first nine months of 2021 resulting from the cancellation of a pipeline extension project by a nonconsolidated joint venture, Diamond Pipeline LLC. These items are more fully described in note (e).

Income tax expense increased by $2.3 billion in the first nine months of 2022 compared to the first nine months of 2021 primarily as a result of higher income before income tax expense.

Net income attributable to noncontrolling interests decreased by $25 million in the first nine months of 2022 compared to the first nine months of 2021 primarily due to lower earnings associated with DGD.

Refining Segment Results

The following table includes selected financial and operating data of our Refining segment for the first nine months of 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

	Nine Months Ended September 30,
	2022		2021		Change
Operating income	$	11,473	$	592	$	10,881
Adjusted operating income (see note (g))	11,407		879		10,528
Refining margin (see note (g))	$	17,200	$	6,235	$	10,965
Operating expenses (excluding depreciation and amortization expense reflected below) (see note (b))	4,111		3,730		381
Depreciation and amortization expense	1,682		1,626		56
Throughput volumes (thousand barrels per day) (see note (h))	2,923		2,705		218

Refining segment operating income increased by $10.9 billion in the first nine months of 2022 compared to the first nine months of 2021; however, Refining segment adjusted operating income, which excludes the adjustments in the table in note (g), increased by $10.5 billion in the first nine months of 2022 compared to the first nine months of 2021. The components of this increase, along with the reasons for the changes in those components, are outlined below.

•Refining segment margin increased by $11.0 billion in the first nine months of 2022 compared to the first nine months of 2021.

Refining segment margin is primarily affected by the prices for the petroleum-based transportation fuels that we sell and the cost of crude oil and other feedstocks that we process. The table on page 48 reflects market reference prices and differentials that we believe had a material impact on the change in our Refining segment margin in the first nine months of 2022 compared to the first nine months of 2021.

50

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

◦An increase in distillate (primarily diesel) margins had a favorable impact of approximately $8.2 billion.

◦An increase in gasoline margins had a favorable impact of approximately $2.7 billion.

◦An increase in throughput volumes of 218,000 barrels per day had a favorable impact of approximately $1.3 billion.

◦Lower margins on other products had an unfavorable impact of approximately $800 million.

•Refining segment operating expenses (excluding depreciation and amortization expense) increased by $381 million primarily due to higher costs of compliance with environmental emissions programs of $124 million, higher chemicals and catalyst costs of $73 million, higher maintenance expense of $65 million, and an increase in energy costs of $49 million.

Renewable Diesel Segment Results

The following table includes selected financial and operating data of our Renewable Diesel segment for the first nine months of 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

	Nine Months Ended September 30,
	2022		2021		Change
Operating income	$	513	$	559	$	(46)
Adjusted operating income (see note (g))	513		560		(47)
Renewable Diesel margin (see note (g))	$	778	$	681	$	97
Operating expenses (excluding depreciation and amortization expense reflected below)	178		86		92
Depreciation and amortization expense	87		35		52
Sales volumes (thousand gallons per day) (see note (h))	2,084		819		1,265

Renewable Diesel segment operating income decreased by $46 million in the first nine months of 2022 compared to the first nine months of 2021; however, Renewable Diesel segment adjusted operating income, which excludes the adjustment in the table in note (g), decreased by $47 million in the first nine months of 2022 compared to the first nine months of 2021. The components of this decrease, along with the reasons for the changes in those components, are outlined below.

•Renewable Diesel segment margin increased by $97 million in the first nine months of 2022 compared to the first nine months of 2021.

Renewable Diesel segment margin is primarily affected by the price for the renewable diesel that we sell and the cost of the feedstocks that we process. The table on page 49 reflects market reference prices that we believe had a material impact on the change in our Renewable Diesel segment margin in the first nine months of 2022 compared to the first nine months of 2021.

51

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

◦An increase in sales volumes of 1.3 million gallons per day had a favorable impact of approximately $1.2 billion. The increase in sales volumes was primarily due to the additional production capacity resulting from the expansion of the DGD Plant that commenced operations in the fourth quarter of 2021.

◦Higher Renewable Diesel prices had a favorable impact of approximately $526 million.

◦An increase in the cost of the feedstocks that we process had an unfavorable impact of approximately $1.4 billion.

◦Price risk management activities had an unfavorable impact of $252 million. We recognized a loss of $289 million in the first nine months of 2022 compared to a loss of $37 million in the first nine months of 2021.

•Renewable Diesel segment operating expenses (excluding depreciation and amortization expense) increased by $92 million primarily due to increased costs resulting from the expansion of the DGD Plant that commenced operations in the fourth quarter of 2021.

•Renewable Diesel segment depreciation and amortization expense increased by $52 million primarily due to depreciation expense associated with the expansion of the DGD Plant that commenced operations in the fourth quarter of 2021.

Ethanol Segment Results

The following table includes selected financial and operating data of our Ethanol segment for the first nine months of 2022 and 2021. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

	Nine Months Ended September 30,
	2022		2021		Change
Operating income (loss)	$	103	$	(1)	$	104
Adjusted operating income (see note (g))	82		47		35
Ethanol margin (see note (g))	$	606	$	513	$	93
Operating expenses (excluding depreciation and amortization expense reflected below) (see note (b))	464		403		61
Depreciation and amortization expense (see note (c))	37		111		(74)
Production volumes (thousand gallons per day) (see note (h))	3,799		3,797		2

The Ethanol segment operating income increased by $104 million in the first nine months of 2022 compared to the first nine months of 2021; however, Ethanol segment adjusted operating income, which excludes the adjustments in the table in note (g), increased by $35 million in the first nine months of 2022

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compared to the first nine months of 2021. The components of this increase in the adjusted results, along with the reasons for the changes in those components, are outlined below.

•Ethanol segment margin increased by $93 million in the first nine months of 2022 compared to the first nine months of 2021.

Ethanol segment margin is primarily affected by prices for the ethanol and corn related co-products that we sell and the cost of corn that we process. The table on page 49 reflects market reference prices that we believe had a material impact on the change in our Ethanol segment margin in the first nine months of 2022 compared to the first nine months of 2021.

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

◦Higher ethanol prices had a favorable impact of approximately $365 million.

◦Higher prices for the co-products that we produce, primarily DDGs and inedible DCO, had a favorable impact of approximately $131 million.

◦Higher corn prices had an unfavorable impact of approximately $403 million.

•Ethanol segment operating expenses (excluding depreciation and amortization expense) increased by $61 million primarily due to higher energy costs of $40 million and higher chemical and catalyst costs of $16 million.

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The following notes relate to references on pages 35 through 52.

(a)Under the RFS program, the EPA is required to set annual quotas for the volume of renewable fuels that obligated parties, such as us, must blend into petroleum-based transportation fuels consumed in the U.S. The quotas are used to determine an obligated party’s renewable volume obligation (RVO). The EPA released a final rule on June 3, 2022 that, among other things, reduced the quotas for 2020 and, for the first time, established quotas for 2021 and 2022.

In 2020, we recognized the cost of the RVO using the 2020 quotas set by the EPA at that time, and in 2021 and the three months ended March 31, 2022, we recognized the cost of the RVO using our estimates of the quotas. As a result of the final rule released by the EPA as noted above, we recognized a benefit of $104 million in June 2022 primarily related to the modification of the 2020 quotas. The impacts to the estimated cost of the RVO recognized by us in 2021 and the three months ended March 31, 2022 were not significant; however, there were impacts in the 2021 quarterly periods as follows: (i) benefit of $80 million for the three months ended March 31, 2021; (ii) benefit of $81 million for the three months ended June 30, 2021; (iii) benefit of $58 million for the three months ended September 30, 2021, resulting in a benefit of $219 million for the nine months ended September 30, 2021; and (iv) charge of $220 million related to the three months ended December 31, 2021.

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

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The above-mentioned pre-tax estimated excess energy charge is reflected in our statement of income line items and attributable to our reportable segments for the nine months ended September 30, 2021 as follows (in millions):

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

(c)Depreciation and amortization expense includes the following:

◦a gain of $23 million in the nine months ended September 30, 2022 on the sale of our ethanol plant located in Jefferson, Wisconsin (Jefferson ethanol plant); and

◦accelerated depreciation of $48 million in the three and nine months ended September 30, 2021 related to a change in the estimated useful life of our Jefferson ethanol plant.

(d)General and administrative expenses (excluding depreciation and amortization expense) for the nine months ended September 30, 2022 includes a charge of $20 million for an environmental reserve adjustment associated with a non-operating site.

(e)“Other income, net” includes the following:

◦a gain of $26 million in the three months ended September 30, 2022 and a net charge of $24 million in the nine months ended September 30, 2022 related to the early retirement of approximately $1.25 billion and $2.65 billion aggregate principal amount, respectively, of various series of our senior notes;

◦a gain of $62 million in the nine months ended September 30, 2021 on the sale of a 24.99 percent membership interest in MVP; and

◦a charge of $24 million in the nine months ended September 30, 2021 representing our portion of the asset impairment loss recognized by Diamond Pipeline LLC, a nonconsolidated joint venture with a subsidiary of Plains All American Pipeline, L.P., resulting from the joint venture’s cancellation of its pipeline extension project.

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

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

We have defined these non-GAAP measures and believe they are useful to the external users of our financial statements, including industry analysts, investors, lenders, and rating agencies. We believe these measures are useful to assess our ongoing financial performance because, when reconciled to their most comparable GAAP measures, they provide improved comparability between periods after adjusting for certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and trends. These non-GAAP measures should not be considered as alternatives to their most comparable GAAP

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measures nor should they be considered in isolation or as a substitute for an analysis of our results of operations as reported under GAAP. In addition, these non-GAAP measures may not be comparable to similarly titled measures used by other companies because we may define them differently, which diminishes their utility.

Non-GAAP measures are as follows:

◦Refining margin is defined as Refining segment operating income excluding the modification of RVO adjustment (as defined in note (a)), operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses, as reflected in the table below.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Reconciliation of Refining operating income to Refining margin
Refining operating income	$	3,810	$	835	$	11,473	$	592
Adjustments:
Modification of RVO (see note (a))	—		58		(104)		219
Operating expenses (excluding depreciation and amortization expense) (see note (b))	1,516		1,195		4,111		3,730
Depreciation and amortization expense	568		549		1,682		1,626
Other operating expenses	6		18		38		68
Refining margin	$	5,900	$	2,655	$	17,200	$	6,235

◦Renewable Diesel margin is defined as Renewable Diesel segment operating income excluding operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses, as reflected in the table below.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Reconciliation of Renewable Diesel operating income to Renewable Diesel margin
Renewable Diesel operating income	$	212	$	108	$	513	$	559
Adjustments:
Operating expenses (excluding depreciation and amortization expense)	69		26		178		86
Depreciation and amortization expense	33		11		87		35
Other operating expenses	—		1		—		1
Renewable Diesel margin	$	314	$	146	$	778	$	681

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Reconciliation of Ethanol operating income (loss) to Ethanol margin
Ethanol operating income (loss)	$	1	$	(44)	$	103	$	(1)
Adjustments:
Operating expenses (excluding depreciation and amortization expense) (see note (b))	162		128		464		403
Depreciation and amortization expense (see note (c))	20		70		37		111
Other operating expenses	—		—		2		—
Ethanol margin	$	183	$	154	$	606	$	513

◦Adjusted Refining operating income is defined as Refining segment operating income excluding the modification of RVO adjustment and other operating expenses, as reflected in the table below.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Reconciliation of Refining operating income to adjusted Refining operating income
Refining operating income	$	3,810	$	835	$	11,473	$	592
Adjustments:
Modification of RVO (see note (a))	—		58		(104)		219
Other operating expenses	6		18		38		68
Adjusted Refining operating income	$	3,816	$	911	$	11,407	$	879

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Reconciliation of Renewable Diesel operating income to adjusted Renewable Diesel operating income
Renewable Diesel operating income	$	212	$	108	$	513	$	559
Adjustment: Other operating expenses	—		1		—		1
Adjusted Renewable Diesel operating income	$	212	$	109	$	513	$	560

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◦Adjusted Ethanol operating income is defined as Ethanol segment operating income (loss) excluding the gain on sale of ethanol plant, the change in estimated useful life of ethanol plant, and other operating expenses, as reflected in the table below.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Reconciliation of Ethanol operating income (loss) to adjusted Ethanol operating income
Ethanol operating income (loss)	$	1	$	(44)	$	103	$	(1)
Adjustments:
Gain on sale of ethanol plant (see note (c))	—		—		(23)		—
Change in estimated useful life of ethanol plant (see note (c))	—		48		—		48
Other operating expenses	—		—		2		—
Adjusted Ethanol operating income	$	1	$	4	$	82	$	47

◦Adjusted operating income is defined as total company operating income excluding the modification of RVO adjustment, the gain on sale of ethanol plant, the change in estimated useful life of ethanol plant, the environmental reserve adjustment, and other operating expenses, as reflected in the table below.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Reconciliation of total company operating income to adjusted operating income
Total company operating income	$	3,792	$	693	$	11,395	$	536
Adjustments:
Modification of RVO (see note (a))	—		58		(104)		219
Gain on sale of ethanol plant (see note (c))	—		—		(23)		—
Change in estimated useful life of ethanol plant (see note (c))	—		48		—		48
Environmental reserve adjustment (see note (d))	—		—		20		—
Other operating expenses	6		19		40		69
Adjusted operating income	$	3,798	$	818	$	11,328	$	872

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

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LIQUIDITY AND CAPITAL RESOURCES

Our Liquidity

Our liquidity consisted of the following as of September 30, 2022 (in millions):

Available capacity from our committed facilities (a):
Valero Revolver	$	3,462
Canadian Revolver (b)	106
Accounts receivable sales facility	1,300
Letter of credit facility	50
Total available capacity	4,918
Cash and cash equivalents (c)	3,729
Total liquidity	$	8,647

________________________

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

(b)The amount for our Canadian Revolver is shown in U.S. dollars. As set forth in the summary of our credit facilities in Note 4 of Condensed Notes to Consolidated Financial Statements, the availability under our Canadian Revolver as of September 30, 2022 in Canadian dollars was C$145 million.

(c)Excludes $240 million of cash and cash equivalents related to the consolidated VIEs that is available for use only by the VIEs.

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

We believe we have sufficient funds from operations and from available capacity under our credit facilities to fund our ongoing operating requirements and other commitments over the next 12 months and thereafter for the foreseeable future. We expect that, to the extent necessary, we can raise additional cash through equity or debt financings in the public and private capital markets or the arrangement of additional credit facilities. However, there can be no assurances regarding the availability of any future financings or additional credit facilities or whether such financings or additional credit facilities can be made available on terms that are acceptable to us.

Cash Flows

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

	Nine Months Ended September 30,
	2022		2021
Cash flows provided by (used in):
Operating activities	$	8,478	$	3,405
Investing activities	(2,070)		(1,412)
Financing activities:
Debt issuances and borrowings	2,596		129
Repayments of debt and finance lease obligations (including premiums paid on early retirement of debt)	(5,051)		(676)
Other financing activities	(3,814)		(1,192)
Financing activities	(6,269)		(1,739)
Effect of foreign exchange rate changes on cash	(292)		(69)
Net increase (decrease) in cash and cash equivalents	$	(153)	$	185

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Cash Flows for the Nine Months Ended September 30, 2022

In the first nine months of 2022, we used $8.5 billion of cash generated by our operations, $2.6 billion in debt issuances and borrowings, and $153 million of cash on hand to make $2.1 billion of investments in our business, repay $5.1 billion of debt and finance lease obligations (including premiums paid on the early retirement of debt), and fund $3.8 billion of other financing activities. The debt issuance, borrowings, and repayments are described in Note 4 of Condensed Notes to Consolidated Financial Statements.

As previously noted, our operations generated $8.5 billion of cash in the first nine months of 2022, driven primarily by net income of $8.6 billion and noncash charges to income of $1.4 billion, partially offset by an unfavorable change in working capital of $1.6 billion. Noncash charges primarily included $1.8 billion of depreciation and amortization expense, partially offset by a $161 million deferred income tax benefit. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 11 of Condensed Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net income.

Our investing activities primarily consisted of $2.1 billion in capital investments, as defined below under “Capital Investments,” of which $695 million related to capital investments made by DGD and $30 million related to capital expenditures of VIEs other than DGD.

Other financing activities of $3.8 billion consisted primarily of $2.8 billion for purchases of common stock for treasury and $1.2 billion in dividend payments.

Cash Flows for the Nine Months Ended September 30, 2021

In the first nine months of 2021, we used $3.4 billion of cash generated by our operations to make $1.4 billion of investments in our business, repay $676 million of debt and finance lease obligations, fund $1.2 billion of other financing activities, and increase our available cash on hand by $185 million.

As previously noted, our operations generated $3.4 billion of cash in the first nine months of 2021, driven primarily by a positive change in working capital of $1.6 billion, noncash charges to income of $1.6 billion, and net income of $178 million. Our net income of $178 million reflects the unfavorable impact of increased energy costs at certain of our refineries and ethanol plants due to effects arising out of Winter Storm Uri. See note (b) on page 53 regarding the effects of Winter Storm Uri. Noncash charges primarily included $1.8 billion of depreciation and amortization expense, partially offset by a $150 million deferred income tax benefit and a $62 million gain on the sale of a partial interest in MVP, as described in Note 6 of Condensed Notes to Consolidated Financial Statements. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 11 of Condensed Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net income.

Our investing activities of $1.4 billion consisted of $1.7 billion in capital investments, of which $736 million related to capital investments made by DGD and $59 million related to capital expenditures of VIEs other than DGD. These activities were partially offset by $270 million received from the sale of a partial interest in MVP, as described in Note 6 of Condensed Notes to Consolidated Financial Statements.

Other financing activities of $1.2 billion consisted primarily of $1.2 billion in dividend payments and $15 million for purchases of common stock for treasury.

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Our Capital Resources

Our material cash requirements as of September 30, 2022 primarily consisted of working capital requirements, capital investments, contractual obligations, and other matters, as described below. Our operations have historically generated positive cash flows to fulfill our working capital requirements and other uses of cash as discussed below.

Capital Investments

Capital investments are comprised of our capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in nonconsolidated joint ventures, as reflected in our consolidated statements of cash flows as shown on page 6. Capital investments exclude strategic investments or acquisitions, if any.

We have publicly announced GHG emissions reduction/displacement targets for 2025 and 2035. We believe that our expected allocation of growth capital into lower-carbon projects is consistent with such targets. Certain of these lower-carbon projects have been completed or are already in execution and the associated capital investments are included in our expected capital investments for 2022 discussed below. Our capital investments in future years to achieve these targets are expected to include investments associated with certain lower-carbon projects currently at various stages of progress, evaluation, or approval.

Capital Investments Attributable to Valero

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

We are a 50 percent joint venture member in DGD and consolidate its financial statements. As a result, all of DGD’s net cash provided by operating activities (or operating cash flow) is included in our consolidated net cash provided by operating activities. DGD’s members use DGD’s operating cash flow (excluding changes in its current assets and current liabilities) to fund its capital investments rather than distribute all of that cash to themselves. Because DGD’s operating cash flow is effectively attributable to each member, only 50 percent of DGD’s capital investments should be attributed to our net share of capital investments. We also exclude all of the capital expenditures of other VIEs that we consolidate because we do not operate those VIEs. See Note 6 of Condensed Notes to Consolidated Financial Statements for more information about the VIEs that we consolidate. We believe capital investments attributable to Valero is an important measure because it more accurately reflects our capital investments.

Capital investments attributable to Valero should not be considered as an alternative to capital investments, which is the most comparable GAAP measure, nor should it be considered in isolation or as a substitute for an analysis of our cash flows as reported under GAAP. In addition, this non-GAAP measure may not be comparable to similarly titled measures used by other companies because we may define it differently, which may diminish its utility.

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	Nine Months Ended September 30,
	2022		2021
Reconciliation of capital investments to capital investments attributable to Valero
Capital expenditures (excluding VIEs)	$	552	$	368
Capital expenditures of VIEs:
DGD	682		730
Other VIEs	30		59
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	820		544
Deferred turnaround and catalyst cost expenditures of DGD	13		6
Investments in nonconsolidated joint ventures	1		8
Capital investments	2,098		1,715
Adjustments:
DGD’s capital investments attributable to the other joint venture member	(347)		(368)
Capital expenditures of other VIEs	(30)		(59)
Capital investments attributable to Valero	$	1,721	$	1,288

We have developed an extensive multi-year capital investment program, which we update and revise based on changing internal and external factors. As previously disclosed in our annual report on Form 10-K for the year ended December 31, 2021, we expect to incur $2.0 billion for capital investments attributable to Valero during 2022. Approximately 60 percent of the expected capital investments attributable to Valero are for sustaining the business and 40 percent are for growth strategies, of which approximately 50 percent is allocated to expanding our low-carbon businesses.

Contractual Obligations

As of September 30, 2022, our contractual obligations included debt obligations, interest payments related to debt obligations, operating lease liabilities, finance lease obligations, other long-term liabilities, and purchase obligations. In the ordinary course of business, we had debt-related activities during the nine months ended September 30, 2022, as described in Note 4 of Condensed Notes to Consolidated Financial Statements. There were no material changes outside the ordinary course of business with respect to our contractual obligations during the nine months ended September 30, 2022.

We raised $4.0 billion of incremental debt in 2020 due to the negative impacts of the COVID-19 pandemic on our business. During the third quarter of 2022, we reduced our debt by $1.25 billion. This transaction, combined with debt reduction and refinancing transactions completed in the second half of 2021 and the first half of 2022, have collectively reduced our debt by approximately $3.6 billion. We will continue to evaluate further deleveraging opportunities.

Other Matters Impacting Liquidity and Capital Resources

Treasury Stock Purchases

During the three and nine months ended September 30, 2022, we purchased for treasury 8,444,754 shares for $928 million and 24,202,035 shares for $2.8 billion, respectively. We completed all authorized share purchases under the 2018 Program during the second quarter of 2022. On July 7, 2022, our Board authorized our purchase of up to an additional $2.5 billion of shares under the July 2022 Program with no

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expiration date. On October 26, 2022, our Board authorized our purchase of up to an additional $2.5 billion with no expiration date, which is in addition to the amount remaining under the July 2022 Program. We will continue to evaluate the timing of purchases when appropriate. We have no obligation to make purchases under this program.

Pension Plan Funding

As disclosed in our annual report on Form 10-K for the year ended December 31, 2021, we plan to contribute approximately $116 million to our pension plans and $22 million to our other postretirement benefit plans during 2022. For the nine months ended September 30, 2022, we have contributed $107 million to our pension plans and $11 million to our other postretirement benefit plans.

Environmental Matters

Our operations are subject to extensive environmental regulations by governmental authorities relating to the discharge of materials into the environment, waste management, pollution prevention measures, GHG emissions, and characteristics and composition of many of our products. Because environmental laws and regulations are becoming more complex and stringent and new environmental laws and regulations are continuously being enacted or proposed, the level of future expenditures required for environmental matters could increase in the future.

Cash Held by Our Foreign Subsidiaries

As of September 30, 2022, $3.2 billion of our cash and cash equivalents was held by our foreign subsidiaries. Cash held by our foreign subsidiaries can be repatriated to us through dividends without any U.S. federal income tax consequences, but certain other taxes may apply, including, but not limited to, withholding taxes imposed by certain foreign jurisdictions, U.S. state income taxes, and U.S. federal income tax on foreign exchange gains. Therefore, there is a cost to repatriate cash held by certain of our foreign subsidiaries to us, but we believe that such amount is not material to our financial position and liquidity.

Concentration of Customers

Our operations have a concentration of customers in the refining industry and customers who are refined petroleum product wholesalers and retailers. These concentrations of customers may impact our overall exposure to credit risk, either positively or negatively, in that these customers may be similarly affected by changes in economic or other conditions, including the uncertainties concerning the COVID-19 pandemic and other worldwide events causing volatility in the global crude oil markets. However, we believe that our portfolio of accounts receivable is sufficiently diversified to the extent necessary to minimize potential credit risk. Historically, we have not had any significant problems collecting our accounts receivable.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ from those estimates. There have been no changes to the critical accounting policies disclosed in our annual report on Form 10-K for the year ended December 31, 2021.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST RATE RISK

The following tables provide information about our debt instruments (dollars in millions), the fair values of which are sensitive to changes in interest rates. A 10 percent increase or decrease in our floating interest rates would not have a material effect to our results of operations. Principal cash flows and related weighted-average interest rates by expected maturity dates are presented. See Note 4 of Condensed Notes to Consolidated Financial Statements for additional information related to our debt.

	September 30, 2022 (a)
	Expected Maturity Dates
	Remainder of 2022			2023			2024			2025			2026			There- after			Total			Fair Value
Fixed rate	$	—		$	—		$	169		$	456		$	677		$	7,604		$	8,906		$	8,175
Average interest rate	—		%	—		%	1.2		%	3.2		%	4.2		%	5.0		%	4.8		%
Floating rate	$	807		$	18		$	—		$	—		$	—		$	—		$	825		$	825
Average interest rate	5.7		%	3.9		%	—		%	—		%	—		%	—		%	5.7		%
	December 31, 2021 (a)
	Expected Maturity Dates
	2022			2023			2024			2025			2026			There- after			Total			Fair Value
Fixed rate	$	300		$	—		$	169		$	1,374		$	1,726		$	7,637		$	11,206		$	12,838
Average interest rate	4.0		%	—		%	1.2		%	3.0		%	3.9		%	5.0		%	4.5		%
Floating rate	$	810		$	20		$	—		$	—		$	—		$	—		$	830		$	830
Average interest rate	3.5		%	3.9		%	—		%	—		%	—		%	—		%	3.5		%

________________________

(a)Excludes unamortized discounts and debt issuance costs.

OTHER MARKET RISKS

We are exposed to market risks primarily related to the volatility in the price of commodities, the price of credits needed to comply with the Renewable and Low-Carbon Fuel Blending Programs, and foreign currency exchange rates. There have been no material changes to these market risks disclosed in our annual report on Form 10-K for the year ended December 31, 2021. See Note 13 of Condensed Notes to Consolidated Financial Statements for a discussion about these market risks as of September 30, 2022.

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ITEM 4. CONTROLS AND PROCEDURES

(a)Evaluation of disclosure controls and procedures.

Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report, and has concluded that our disclosure controls and procedures were effective as of September 30, 2022.

(b)Changes in internal control over financial reporting.

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

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no new proceedings or material developments in proceedings that we previously reported in our annual report on Form 10-K for the year ended December 31, 2021 or in our quarterly reports on Form 10-Q for the quarter ended March 31, 2022 and June 30, 2022.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in our annual report on Form 10-K for the year December 31, 2021. However, to the extent the Russia-Ukraine conflict, the potential impact of inflation on our business, or the COVID-19 pandemic adversely affect our business, financial condition, results of operations, and liquidity, they may also have the effect of heightening many of the other risks described in such risk factors.

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

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 third quarter of 2022.

Period	Total Number of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (b)
July 2022	1,391	$	105.37	—	$2.5 billion
August 2022	4,288,361	$	112.68	4,286,149	$2.0 billion
September 2022	4,155,002	$	107.00	4,153,012	$1.6 billion
Total	8,444,754	$	109.88	8,439,161	$1.6 billion

________________________

(a)The shares reported in this column include 5,593 shares related to our purchases of shares from our employees and non-employee directors in connection with the exercise of stock options, the vesting of restricted stock, and other stock compensation transactions in accordance with the terms of our stock-based compensation plans.

(b)On January 23, 2018, we announced that our Board authorized our purchase of up to $2.5 billion of our outstanding common stock with no expiration date, and we completed all authorized share purchases under that program during the second quarter of 2022. On July 7, 2022, we announced that our Board authorized our purchase of up to an additional $2.5 billion with no expiration date. As of September 30, 2022, we had $1.6 billion remaining available for purchase under this program. On October 26, 2022, our Board authorized our purchase of up to an additional $2.5 billion with no expiration date, which is in addition to the amount remaining under the July 2022 Program.

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ITEM 6. EXHIBITS

Exhibit No.	Description
*31.01	Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal executive officer.
*31.02	Rule 13a-14(a) Certification (under Section 302 of the Sarbanes-Oxley Act of 2002) of principal financial officer.
**32.01	Section 1350 Certifications (under Section 906 of the Sarbanes-Oxley Act of 2002).
***101.INS	Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
***101.SCH	Inline XBRL Taxonomy Extension Schema Document.
***101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
***101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
***101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
***101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
***104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

________________________

*	Filed herewith.
**	Furnished herewith.
***	Submitted electronically herewith.

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

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SIGNATURE

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

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

Date: October 26, 2022

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