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 June 30, 2023

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, par value $0.01 per share	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 July 21, 2023 was 353,132,880.

VALERO ENERGY CORPORATION

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	1
Consolidated Statements of Income for the Three and Six Months Ended June 30, 2023 and 2022	2
Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022	3
Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2023 and 2022	4
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022	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	61
ITEM 4. CONTROLS AND PROCEDURES	62
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	62
ITEM 1A. RISK FACTORS	62
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	63
ITEM 5. OTHER INFORMATION	63
ITEM 6. EXHIBITS	64
SIGNATURE	65

i

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VALERO ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(millions of dollars, except par value)

	June 30, 2023		December 31, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,075	$	4,862
Receivables, net	10,888		11,919
Inventories	6,961		6,752
Prepaid expenses and other	771		600
Total current assets	23,695		24,133
Property, plant, and equipment, at cost	51,125		50,576
Accumulated depreciation	(20,555)		(19,598)
Property, plant, and equipment, net	30,570		30,978
Deferred charges and other assets, net	6,402		5,871
Total assets	$	60,667	$	60,982
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and finance lease obligations	$	1,193	$	1,109
Accounts payable	10,825		12,728
Accrued expenses	1,117		1,215
Taxes other than income taxes payable	1,491		1,568
Income taxes payable	322		841
Total current liabilities	14,948		17,461
Debt and finance lease obligations, less current portion	10,130		10,526
Deferred income tax liabilities	5,382		5,217
Other long-term liabilities	2,213		2,310
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	6,889		6,863
Treasury stock, at cost; 320,378,393 and 301,372,958 common shares	(22,586)		(20,197)
Retained earnings	42,512		38,247
Accumulated other comprehensive loss	(971)		(1,359)
Total Valero Energy Corporation stockholders’ equity	25,851		23,561
Noncontrolling interests	2,143		1,907
Total equity	27,994		25,468
Total liabilities and equity	$	60,667	$	60,982

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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues (a)	$	34,509	$	51,641	$	70,948	$	90,183
Cost of sales:
Cost of materials and other	29,430		42,946		59,435		77,895
Operating expenses (excluding depreciation and amortization expense reflected below)	1,440		1,626		2,917		3,005
Depreciation and amortization expense	658		590		1,308		1,185
Total cost of sales	31,528		45,162		63,660		82,085
Other operating expenses	2		15		12		34
General and administrative expenses (excluding depreciation and amortization expense reflected below)	209		233		453		438
Depreciation and amortization expense	11		12		21		23
Operating income	2,759		6,219		6,802		7,603
Other income, net	106		33		235		13
Interest and debt expense, net of capitalized interest	(148)		(142)		(294)		(287)
Income before income tax expense	2,717		6,110		6,743		7,329
Income tax expense	595		1,342		1,475		1,594
Net income	2,122		4,768		5,268		5,735
Less: Net income attributable to noncontrolling interests	178		75		257		137
Net income attributable to Valero Energy Corporation stockholders	$	1,944	$	4,693	$	5,011	$	5,598
Earnings per common share	$	5.41	$	11.58	$	13.75	$	13.75
Weighted-average common shares outstanding (in millions)	358		404		363		406
Earnings per common share – assuming dilution	$	5.40	$	11.57	$	13.74	$	13.74
Weighted-average common shares outstanding – assuming dilution (in millions)	358		404		363		406
__________________________
Supplemental information:
(a) Includes excise taxes on sales by certain of our foreign operations	$	1,449	$	1,254	$	2,871	$	2,677

See Condensed Notes to Consolidated Financial Statements.

2

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(millions of dollars)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	2,122	$	4,768	$	5,268	$	5,735
Other comprehensive income (loss):
Foreign currency translation adjustment	257		(442)		391		(429)
Net gain (loss) on pension and other postretirement benefits	(6)		9		(13)		17
Net gain (loss) on cash flow hedges	(47)		50		10		5
Other comprehensive income (loss) before income tax expense (benefit)	204		(383)		388		(407)
Income tax expense (benefit) related to items of other comprehensive income (loss)	(6)		7		(5)		7
Other comprehensive income (loss)	210		(390)		393		(414)
Comprehensive income	2,332		4,378		5,661		5,321
Less: Comprehensive income attributable to noncontrolling interests	154		101		262		140
Comprehensive income attributable to Valero Energy Corporation stockholders	$	2,178	$	4,277	$	5,399	$	5,181

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 March 31, 2023	$	7	$	6,877	$	(21,637)	$	40,935	$	(1,205)	$	24,977	$	2,090	$	27,067
Net income	—		—		—		1,944		—		1,944		178		2,122
Dividends on common stock ($1.02 per share)	—		—		—		(367)		—		(367)		—		(367)
Stock-based compensation expense	—		14		—		—		—		14		—		14
Transactions in connection with stock-based compensation plans	—		(2)		2		—		—		—		—		—
Purchases of common stock for treasury	—		—		(951)		—		—		(951)		—		(951)
Distributions to noncontrolling interests	—		—		—		—		—		—		(101)		(101)
Other comprehensive income (loss)	—		—		—		—		234		234		(24)		210
Balance as of June 30, 2023	$	7	$	6,889	$	(22,586)	$	42,512	$	(971)	$	25,851	$	2,143	$	27,994
Balance as of March 31, 2022	$	7	$	6,832	$	(15,794)	$	28,785	$	(1,009)	$	18,821	$	1,589	$	20,410
Net income	—		—		—		4,693		—		4,693		75		4,768
Dividends on common stock ($0.98 per share)	—		—		—		(399)		—		(399)		—		(399)
Stock-based compensation expense	—		15		—		—		—		15		—		15
Transactions in connection with stock-based compensation plans	—		(2)		5		—		—		3		—		3
Purchases of common stock for treasury	—		—		(1,748)		—		—		(1,748)		—		(1,748)
Contributions from noncontrolling interests	—		—		—		—		—		—		75		75
Distributions to noncontrolling interests	—		—		—		—		—		—		(1)		(1)
Other comprehensive income (loss)	—		—		—		—		(416)		(416)		26		(390)
Balance as of June 30, 2022	$	7	$	6,845	$	(17,537)	$	33,079	$	(1,425)	$	20,969	$	1,764	$	22,733

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, 2022	$	7	$	6,863	$	(20,197)	$	38,247	$	(1,359)	$	23,561	$	1,907	$	25,468
Net income	—		—		—		5,011		—		5,011		257		5,268
Dividends on common stock ($2.04 per share)	—		—		—		(746)		—		(746)		—		(746)
Stock-based compensation expense	—		53		—		—		—		53		—		53
Transactions in connection with stock-based compensation plans	—		(27)		28		—		—		1		—		1
Purchases of common stock for treasury	—		—		(2,417)		—		—		(2,417)		—		(2,417)
Contributions from noncontrolling interests	—		—		—		—		—		—		75		75
Distributions to noncontrolling interests	—		—		—		—		—		—		(101)		(101)
Other comprehensive income	—		—		—		—		388		388		5		393
Balance as of June 30, 2023	$	7	$	6,889	$	(22,586)	$	42,512	$	(971)	$	25,851	$	2,143	$	27,994
Balance as of December 31, 2021	$	7	$	6,827	$	(15,677)	$	28,281	$	(1,008)	$	18,430	$	1,387	$	19,817
Net income	—		—		—		5,598		—		5,598		137		5,735
Dividends on common stock ($1.96 per share)	—		—		—		(800)		—		(800)		—		(800)
Stock-based compensation expense	—		47		—		—		—		47		—		47
Transactions in connection with stock-based compensation plans	—		(29)		32		—		—		3		—		3
Purchases of common stock for treasury	—		—		(1,892)		—		—		(1,892)		—		(1,892)
Contributions from noncontrolling interests	—		—		—		—		—		—		240		240
Distributions to noncontrolling interests	—		—		—		—		—		—		(3)		(3)
Other comprehensive income (loss)	—		—		—		—		(417)		(417)		3		(414)
Balance as of June 30, 2022	$	7	$	6,845	$	(17,537)	$	33,079	$	(1,425)	$	20,969	$	1,764	$	22,733

See Condensed Notes to Consolidated Financial Statements.

5

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions of dollars)

(unaudited)

	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income	$	5,268	$	5,735
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	1,329		1,208
Loss (gain) on early retirement of debt, net	(11)		50
Deferred income tax expense (benefit)	159		(333)
Changes in current assets and current liabilities	(1,728)		(128)
Changes in deferred charges and credits and other operating activities, net	(335)		(99)
Net cash provided by operating activities	4,682		6,433
Cash flows from investing activities:
Capital expenditures (excluding variable interest entities (VIEs))	(311)		(324)
Capital expenditures of VIEs:
Diamond Green Diesel Holdings LLC (DGD)	(122)		(458)
Other VIEs	(2)		(19)
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	(508)		(681)
Deferred turnaround and catalyst cost expenditures of DGD	(39)		(13)
Purchases of available-for-sale (AFS) debt securities	(354)		—
Proceeds from sales and maturities of AFS debt securities	251		—
Proceeds from sale of assets	—		32
Investments in nonconsolidated joint ventures	—		(1)
Other investing activities, net	7		4
Net cash used in investing activities	(1,078)		(1,460)
Cash flows from financing activities:
Proceeds from debt issuances and borrowings (excluding VIEs)	1,450		1,439
Proceeds from borrowings of VIEs:
DGD	300		359
Other VIEs	54		46
Repayments of debt and finance lease obligations (excluding VIEs)	(1,726)		(2,580)
Repayments of debt and finance lease obligations of VIEs:
DGD	(386)		(365)
Other VIEs	(41)		(33)
Premiums paid on early retirement of debt	(5)		(48)
Purchases of common stock for treasury	(2,393)		(1,892)
Common stock dividend payments	(746)		(800)
Contributions from noncontrolling interests	75		240
Distributions to noncontrolling interests	(101)		(3)
Other financing activities, net	(1)		(5)
Net cash used in financing activities	(3,520)		(3,642)
Effect of foreign exchange rate changes on cash	129		(61)
Net increase in cash and cash equivalents	213		1,270
Cash and cash equivalents at beginning of period	4,862		4,122
Cash and cash equivalents at end of period	$	5,075	$	5,392

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 interim unaudited financial statements have been prepared in conformity 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 unaudited 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, 2023. These interim unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2022.

The balance sheet as of December 31, 2022 has been derived from our audited financial statements as of that date. For further information, refer to our audited financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2022.

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 these interim unaudited 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.    UNCERTAINTY

In September 2022, California adopted Senate Bill No. 1322 (SB 1322), which requires refineries in California to report monthly on the volume and cost of the crude oil they buy, the quantity and price of the wholesale gasoline they sell, and the gross gasoline margin per barrel, among other information. The provisions of SB 1322 were effective January 2023, and we began the required monthly reporting for our two California refineries at that time.

In March 2023, California adopted Senate Bill No. 2 (such statute, together with any regulations contemplated or issued thereunder, SBx 1-2), which, among other things, (i) authorizes the establishment of a maximum gross gasoline refining margin (max margin) and the imposition of a financial penalty for profits above a max margin, (ii) significantly expands the reporting obligations under SB 1322 and the

7

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Petroleum Industry Information Reporting Act of 1980, which include reporting requirements to the California Energy Commission (CEC) for all participants in the petroleum industry supply chain in California (e.g., refiners, marketers, importers, transporters, terminals, producers, renewables producers, pipelines, and ports), (iii) creates the Division of Petroleum Market Oversight within the CEC to analyze the data provided under SBx 1-2, and (iv) authorizes the CEC to regulate the timing and other aspects of refinery turnaround and maintenance activities in certain instances. The provisions of SBx 1-2 became effective June 26, 2023. The CEC has not yet undertaken rulemaking with respect to SBx 1-2, including the establishment of any max margin, the imposition of a financial penalty, or restrictions on turnaround and maintenance activities, and it is uncertain when or whether any such rulemaking will occur. SBx 1-2 imposes increased and substantial reporting requirements, which include daily, weekly, monthly, and annual reporting of detailed operational and financial data on all aspects of our operations in California, much of it at the transaction level. The operational data includes our plans for turnaround and maintenance activities at our two California refineries and the manner in which we expect to address the potential impacts on feedstock and product inventories in California as a result of such turnaround and maintenance activities.

We continue to review and analyze the provisions of SBx 1-2 and the possible impacts to our refining and marketing operations in California. While the CEC has not yet established a max margin, imposed a financial penalty for profits above a max margin, or imposed restrictions on turnaround and maintenance activities, the potential implementation of a financial penalty or any restrictions or delays on our ability to undertake turnaround or maintenance activities creates uncertainty due to the potential adverse effects on us. Any adverse effects on our operations or financial performance in California could indicate that the carrying value of our assets in California is not recoverable, which would result in an impairment loss that could be material. In addition, if the circumstances that trigger an impairment loss result in a reduction in the estimated useful lives of the assets, we may be required to recognize an asset retirement obligation that could be material. Other jurisdictions are contemplating similarly focused legislation or actions.

The ultimate timing and impacts of SBx 1-2 and any other similarly focused legislation or actions are subject to considerable uncertainty due to a number of factors, including technological and economic feasibility, legal challenges, and potential changes in law, regulation, or policy, and it is not currently possible to predict the ultimate effects of these matters and developments on us.

3.    INVENTORIES

Inventories consisted of the following (in millions):

	June 30, 2023		December 31, 2022
Refinery feedstocks	$	1,980	$	1,949
Refined petroleum products and blendstocks	3,773		3,579
Renewable diesel feedstocks and products	585		583
Ethanol feedstocks and products	293		328
Materials and supplies	330		313
Inventories	$	6,961	$	6,752

8

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2023 and December 31, 2022, the replacement cost (market value) of last-in, first-out (LIFO) inventories exceeded their LIFO carrying amounts by $5.1 billion and $6.3 billion, respectively. Our non-LIFO inventories accounted for $1.0 billion and $1.6 billion of our total inventories as of June 30, 2023 and December 31, 2022, respectively.

4.    DEBT

Public Debt

In February 2023, we used cash on hand to purchase and retire a portion of the following notes (in millions):

Debt Purchased and Retired	Principal Amount
6.625% Senior Notes due 2037	$	62
3.650% Senior Notes due 2051	26
4.000% Senior Notes due 2052	45
Various other Valero and Valero Energy Partners (VLP) Senior Notes	66
Total	$	199

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 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 a portion of 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

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):

				June 30, 2023
	Facility Amount		Maturity Date	Outstanding Borrowings		Letters of Credit Issued (a)		Availability
Committed facilities:
Valero Revolver	$	4,000	November 2027	$	—	$	6	$	3,994
Canadian Revolver	C$	150	November 2023	C$	—	C$	5	C$	145
Accounts receivable sales facility (b)	$	1,300	July 2023	$	—	n/a		$	1,300
Committed facilities of VIEs (c):
DGD Revolver (d)	$	400	June 2026	$	50	$	58	$	292
DGD Loan Agreement (e)	$	100	June 2026	$	—	n/a		$	100
IEnova Revolver (f)	$	830	February 2028	$	733	n/a		$	97
Uncommitted facilities:
Letter of credit facilities	n/a		n/a	n/a		$	70	n/a

________________________

(a)Letters of credit issued as of June 30, 2023 expire at various times in 2023 through 2024.

(b)In July 2023, we extended the maturity date of this facility to July 2024.

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

(d)In June 2023, DGD amended this facility to (i) extend the maturity date to June 2026 and (ii) transition the benchmark reference interest rate previously based on the London Interbank Offered Rate (LIBOR) to a secured overnight financing rate (SOFR). The variable interest rate on the DGD Revolver was 6.980 percent and 5.880 percent as of June 30, 2023 and December 31, 2022, respectively.

(e)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. In April 2023, DGD extended the maturity date of this facility to June 2023. In June 2023, DGD amended this facility to (i) extend the maturity date to June 2026, (ii) increase each member’s commitment from $25 million to $100 million, resulting in an increase in aggregate commitments from $50 million to $200 million, and (iii) transition the benchmark reference interest rate previously based on the LIBOR to Term SOFR. The variable interest rate on the DGD Loan Agreement was 6.672 percent as of December 31, 2022.

(f)Both parties to this facility have agreed to use a SOFR as the interest rate applied to outstanding borrowings. The variable interest rate on the IEnova Revolver was 8.740 percent and 7.393 percent as of June 30, 2023 and December 31, 2022, respectively.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	Six Months Ended June 30,
	2023		2022
Borrowings:
Accounts receivable sales facility	$	1,450	$	800
DGD Revolver	300		359
IEnova Revolver	54		46
Repayments:
Accounts receivable sales facility	(1,450)		(800)
DGD Revolver	(350)		(359)
DGD Loan Agreement	(25)		—
IEnova Revolver	(38)		(30)

Other Disclosures

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Interest and debt expense	$	151	$	156	$	303	$	313
Less: Capitalized interest	3		14		9		26
Interest and debt expense, net of capitalized interest	$	148	$	142	$	294	$	287

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 (described below) and with respect to our employee stock-based compensation plans.

During the three and six months ended June 30, 2023, we purchased for treasury 8,421,452 shares and 19,414,793 shares, respectively. During the three and six months ended June 30, 2022, we purchased for treasury 14,211,408 shares and 15,757,281 shares, respectively. On October 26, 2022, our Board authorized us to purchase shares of our outstanding common stock for a total cost of up to $2.5 billion with no expiration date, and we completed all authorized share purchases under that program during the second quarter of 2023. On February 23, 2023, our Board authorized us to purchase shares of our outstanding common stock for a total cost of up to $2.5 billion with no expiration date (the 2023 Program). As of June 30, 2023, we had $2.5 billion remaining available for purchase under the 2023 Program.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Common Stock Dividends

On July 20, 2023, our Board declared a quarterly cash dividend of $1.02 per common share payable on September 5, 2023 to holders of record at the close of business on August 3, 2023.

Accumulated Other Comprehensive Loss

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

	Three Months Ended June 30,
	2023								2022
	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	$	(1,031)	$	(188)	$	14	$	(1,205)	$	(549)	$	(437)	$	(23)	$	(1,009)
Other comprehensive income (loss) before reclassifications	257		—		12		269		(442)		1		(50)		(491)
Amounts reclassified from accumulated other comprehensive loss	—		(6)		(30)		(36)		—		4		69		73
Effect of exchange rates	—		1		—		1		—		2		—		2
Other comprehensive income (loss)	257		(5)		(18)		234		(442)		7		19		(416)
Balance as of end of period	$	(774)	$	(193)	$	(4)	$	(971)	$	(991)	$	(430)	$	(4)	$	(1,425)

	Six Months Ended June 30,
	2023								2022
	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	$	(1,168)	$	(183)	$	(8)	$	(1,359)	$	(562)	$	(441)	$	(5)	$	(1,008)
Other comprehensive income (loss) before reclassifications	394		—		49		443		(429)		(2)		(114)		(545)
Amounts reclassified from accumulated other comprehensive loss	—		(13)		(45)		(58)		—		11		115		126
Effect of exchange rates	—		3		—		3		—		2		—		2
Other comprehensive income (loss)	394		(10)		4		388		(429)		11		1		(417)
Balance as of end of period	$	(774)	$	(193)	$	(4)	$	(971)	$	(991)	$	(430)	$	(4)	$	(1,425)

12

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.    VARIABLE INTEREST ENTITIES

Consolidated VIEs

We consolidate a VIE when we have a variable interest in an entity for which we are the primary beneficiary. As of June 30, 2023, the significant consolidated VIEs included:

•DGD, a joint venture with a subsidiary of Darling Ingredients Inc. that owns and operates two plants that process waste and renewable feedstocks (predominately animal fats, used cooking oils, and inedible distillers corn oils) into renewable diesel and renewable naphtha; 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
June 30, 2023
Assets
Cash and cash equivalents	$	318	$	—	$	26	$	344
Other current assets	1,204		6		31		1,241
Property, plant, and equipment, net	3,748		672		74		4,494
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	432	$	782	$	18	$	1,232
Debt and finance lease obligations, less current portion	680		—		—		680

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	DGD		Central Mexico Terminals		Other		Total
December 31, 2022
Assets
Cash and cash equivalents	$	133	$	—	$	16	$	149
Other current assets	1,106		7		32		1,145
Property, plant, and equipment, net	3,785		681		79		4,545
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	626	$	737	$	21	$	1,384
Debt and finance lease obligations, less current portion	693		—		—		693

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.

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7.    EMPLOYEE BENEFIT PLANS

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

	Pension Plans				Other Postretirement Benefit Plans
	2023		2022		2023		2022
Three months ended June 30
Service cost	$	28	$	39	$	1	$	1
Interest cost	30		21		3		2
Expected return on plan assets	(51)		(48)		—		—
Amortization of:
Net actuarial (gain) loss	(1)		13		(2)		—
Prior service credit	(4)		(5)		(1)		(1)
Net periodic benefit cost	$	2	$	20	$	1	$	2
Six months ended June 30
Service cost	$	56	$	77	$	2	$	3
Interest cost	60		42		6		4
Expected return on plan assets	(101)		(96)		—		—
Amortization of:
Net actuarial (gain) loss	(3)		26		(3)		—
Prior service credit	(9)		(9)		(2)		(2)
Net periodic benefit cost	$	3	$	40	$	3	$	5

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.”

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.    EARNINGS PER COMMON SHARE

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Earnings per common share:
Net income attributable to Valero stockholders	$	1,944	$	4,693	$	5,011	$	5,598
Less: Income allocated to participating securities	6		17		16		20
Net income available to common stockholders	$	1,938	$	4,676	$	4,995	$	5,578
Weighted-average common shares outstanding	358		404		363		406
Earnings per common share	$	5.41	$	11.58	$	13.75	$	13.75
Earnings per common share – assuming dilution:
Net income attributable to Valero stockholders	$	1,944	$	4,693	$	5,011	$	5,598
Less: Income allocated to participating securities	6		17		16		20
Net income available to common stockholders	$	1,938	$	4,676	$	4,995	$	5,578
Weighted-average common shares outstanding	358		404		363		406
Effect of dilutive securities	—		—		—		—
Weighted-average common shares outstanding – assuming dilution	358		404		363		406
Earnings per common share – assuming dilution	$	5.40	$	11.57	$	13.74	$	13.74

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

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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9.    REVENUES AND SEGMENT INFORMATION

Revenue from Contracts with Customers

Disaggregation of Revenue

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

Contract Balances

Contract balances were as follows (in millions):

	June 30, 2023		December 31, 2022
Receivables from contracts with customers, included in receivables, net	$	5,878	$	7,189
Contract liabilities, included in accrued expenses	85		129

During the six months ended June 30, 2023 and 2022, we recognized as revenue $123 million and $72 million that was included in contract liabilities as of December 31, 2022 and 2021, respectively. Revenue recognized related to contract liabilities during the three months ended June 30, 2023 and 2022 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 June 30, 2023, 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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VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

•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 and renewable naphtha. The principal products manufactured by DGD and sold by this segment are renewable diesel and renewable naphtha. This segment sells some renewable diesel to the Refining segment, which is then sold to that segment’s customers.

•