Valero Energy (VLO) 10-K risk factor changes: FY2017 vs FY2016

We may be required to make expenditures to modify operations, discontinue use of certain process [removed: units (e.g., HF alkylation),] [added: units,] or install pollution control equipment that could materially and adversely affect our business, financial condition, results of operations, and liquidity.

While the current [added: U.S.] administration [removed: is considering withdrawal] [added: announced its intent to withdraw] from the Paris [removed: Agreement,] [added: Agreement in June 2017,] there are no guarantees that it will not be [removed: implemented.][added: implemented in the U.S., or in part by U.S. states or local governments.]

[removed: Finally, some scientists have concluded] [added: Some members within the scientific community believe] that [added: the] increasing concentrations of [removed: GHG] [added: greenhouse gas] emissions in the Earth’s [removed: atmosphere] [added: atmosphere, among other reasons,] may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, [removed: droughts,] [added: droughts] and floods and other climatic events.

If any such [removed: effects] [added: climatic events] were to occur, [removed: it is uncertain if] they [removed: would] [added: could] have an adverse effect on our [removed: financial condition] [added: assets] and operations.

[added: The RFS program sets annual quotas for the quantity of renewable fuels (such as ethanol) that must be blended into transportation fuels consumed in the U.S.] A Renewable Identification Number (RIN) is assigned to each gallon of renewable fuel produced in or imported into the U.S. As a producer of petroleum-based transportation fuels, we are obligated to blend renewable fuels into the products we produce at a rate that is at least commensurate to the U.S. EPA’s quota [added: and, to the extent we do not, we must purchase RINs in the open market to satisfy our obligation under the RFS program.]

RINs prices are dependent upon a variety of factors, including U.S. EPA regulations, the availability of RINs for purchase, [removed: the price at which RINs can be purchased,] and levels of transportation fuels produced, [removed: all of] which can vary significantly from quarter to quarter.

New laws and [removed: regulations] [added: regulations,] and changes in existing laws and [removed: regulations] [added: regulations,] are [removed: continuously being] [added: frequently] enacted or [removed: proposed that] [added: proposed, and] could result in increased expenditures for [removed: compliance.][added: compliance, either directly through costs for our owned and leased rail assets, or as passed along to us by rail carriers and operators.]

For example, in May 2014, the U.S. Department of Transportation (DOT) issued an [added: emergency] order requiring rail carriers to provide certain notifications to state agencies along routes used by trains over a certain length carrying crude oil.

In addition, in November 2014, the [removed: U.S. DOT] [added: Federal Railroad Administration (FRA)] issued a final rule regarding safety training standards under the Rail Safety Improvement Act of 2008.

In May 2015, the Pipeline and Hazardous Materials Safety Administration [removed: (PHMSA) and] [added: (PHMSA), in coordination with] the [removed: Federal Railroad Administration (FRA)] [added: FRA,] issued new final rules for enhanced [added: tank car standards and operational controls for high-hazard flammable trains.]

In August 2016, PHMSA [removed: and FRA] adopted a final rule expanding the requirements and mandating additional controls for enhanced tank [removed: cars.][added: cars, as required by the Fixing America’s Surface Transportation (FAST) Act of 2015.]

[removed: Although we] [added: We] do not believe recently adopted rules will have a material impact on our financial position, results of operations, and liquidity, [added: although] further changes in law, regulations or industry standards could require us to incur additional costs to the extent they are applicable to us.

We do not produce any of our crude oil feedstocks and, following the separation of our retail [removed: business,] [added: business in 2013,] we do not have a company-owned retail network.

Significant interruptions in our refining system could also lead to increased volatility in prices for crude oil feedstocks and refined petroleum products, and could increase instability in [removed: the financial and insurance markets, making it more difficult for us to access capital and to obtain insurance coverage that we consider adequate.]

Our information technology systems and network infrastructure may be subject to unauthorized access or attack, which could result in a loss of [added: intellectual property, proprietary information or employee, customer or vendor data; public disclosure of] sensitive [removed: business information,] [added: information; increased costs to prevent, respond to or mitigate cybersecurity events;] systems [removed: interruption,] [added: interruption;] or the disruption of our business operations.

For example, coverage for hurricane damage is very limited, and coverage for terrorism risks includes very broad [added: exclusions.]

We may incur losses and [removed: incur] additional costs as a result of our forward-contract activities and derivative transactions.

For example, the U.S. Environmental Protection Agency (EPA) recently adopted the Residual Risk and Technology Review Rule (RTR) adding new standards for air toxic emissions, among other requirements.

Severe weather events may have an adverse effect on our assets and operations.

Any attempt by the U.S. government to withdraw from or materially modify existing international trade agreements could adversely affect our business, financial condition and results of operations.

The current U.S. administration has questioned certain existing and proposed trade agreements, such as the North American Free Trade Agreement, and has withdrawn the U.S. from others such as the Trans-Pacific Partnership.

The current U.S. administration has also raised the possibility of greater restrictions on trade generally, and significant increases on tariffs on goods imported into the U.S.

Changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment could adversely affect our business.

For example, the imposition of tariffs or other trade barriers with other countries could affect our ability to obtain feedstocks from international sources, increase our costs and reduce the competitiveness of our products.

While there is currently a lack of certainty around the likelihood, timing, and details of any such policies and reforms, if the current U.S. administration takes action to withdraw from, or materially modify, existing

international trade agreements, our business, financial condition and results of operations could be adversely affected.

While some recent actions—including (1) a December 2017 statement that PHMSA intends to initiate rulemaking to rescind portions of its May 2015 rule; and (2) an April 2017 final rule from FRA that delays certain training-program requirements—have provided some regulatory relief, the general trend has been toward greater regulation.

the financial and insurance markets, making it more difficult for us to access capital and to obtain insurance coverage that we consider adequate.

A breach could also originate from, or compromise, our customers’ and vendors’ or other third-party networks outside of our control.

A breach may also result in legal claims or proceedings against us by our shareholders, employees, customers and vendors.

Furthermore, the continuing and evolving threat of cyber-attacks has resulted in increased regulatory focus on prevention.

To the extent we face increased regulatory requirements, we may be required to expend significant additional resources to meet such requirements.

On December 22, 2017, tax legislation commonly known as the Tax Cuts and Jobs Act of 2017 (Tax Reform) was enacted.

Among other things, Tax Reform reduces the U.S. corporate income tax rate from 35 percent to 21 percent (beginning in 2018) and implements a new system of taxation for non-U.S. earnings, including by imposing a one-time tax on the deemed repatriation of undistributed earnings of non-U.S. subsidiaries.

Beginning in 2018, Tax Reform also generally will (i) limit our annual deductions for interest expense to no more than 30 percent of our “adjusted taxable income” (plus 100 percent of our business interest income) for the year and (ii) permit us to offset only 80 percent (rather than 100 percent) of our taxable income with any net operating losses we generate after 2017.

While we are currently evaluating the effects of Tax Reform, including the one-time deemed repatriation tax and the re-measurement of our deferred tax assets and liabilities, we do not expect that the provisions of Tax Reform, taken as a whole, will have any adverse impact on our cash tax liabilities, results of operations, or financial condition.

In the absence of guidance on various uncertainties and ambiguities in the application of certain provisions of Tax Reform, we will use what we believe are reasonable interpretations and assumptions in applying Tax Reform, but it is possible that the Internal Revenue Service (IRS) could issue subsequent guidance or take positions on audit that differ from our prior interpretations and assumptions, which could adversely impact our cash tax liabilities, results of operations, and financial condition.

For example, the U.S. Environmental Protection Agency (EPA) has, in recent years, adopted final rules making more stringent the National Ambient Air Quality Standards (NAAQS) for ozone, sulfur dioxide, and nitrogen dioxide.

The RFS program sets annual quotas for the quantity of renewable fuels (such as ethanol) that must be blended into transportation fuels consumed in the United States.

and, to the extent we do not, we must purchase RINs in the open market to satisfy our obligation under the RFS program.

tank car standards and operational controls for high-hazard flammable trains.

exclusions.

If our spin-off of CST (the “Spin-off”), or certain internal transactions undertaken in anticipation of the Spin-off, were determined to be taxable for U.S. federal income tax purposes, then we and certain of our stockholders could be subject to significant tax liability.

We received a private letter ruling from the Internal Revenue Service (IRS) substantially to the effect that, for U.S. federal income tax purposes, the Spin-off, except for cash received in lieu of fractional shares, qualified as tax-free under sections 355 and 361 of the U.S. Internal Revenue Code of 1986, as amended (Code), and that certain internal transactions undertaken in anticipation of the Spin-off qualified for favorable treatment.

The IRS did not rule, however, on whether the Spin-off satisfied certain requirements necessary to obtain tax-free treatment under section 355 of the Code.

Instead, the private letter ruling was based on representations by us that those requirements were satisfied, and any inaccuracy in those representations could invalidate the private letter ruling.

In connection with the private letter ruling, we also obtained an

opinion from a nationally recognized accounting firm, substantially to the effect that, for U.S. federal income tax purposes, the Spin-off qualified under sections 355 and 361 of the Code.

The opinion relied on, among other things, the continuing validity of the private letter ruling and various assumptions and representations as to factual matters made by CST and us which, if inaccurate or incomplete in any material respect, would jeopardize the conclusions reached by such counsel in its opinion.

The opinion is not binding on the IRS or the courts, and there can be no assurance that the IRS or the courts would not challenge the conclusions stated in the opinion or that any such challenge would not prevail.

Furthermore, notwithstanding the private letter ruling, the IRS could determine on audit that the Spin-off or the internal transactions undertaken in anticipation of the Spin-off should be treated as taxable transactions if it determines that any of the facts, assumptions, representations, or undertakings we or CST have made or provided to the IRS are incorrect or incomplete, or that the Spin-off or the internal transactions should be taxable for other reasons, including as a result of a significant change in stock or asset ownership after the Spin-off.

If the Spin-off ultimately were determined to be taxable, each holder of our common stock who received shares of CST common stock in the Spin-off generally would be treated as receiving a spin-off of property in an amount equal to the fair market value of the shares of CST common stock received by such holder.

Any such spin-off would be a dividend to the extent of our current earnings and profits as of the end of 2013, and any accumulated earnings and profits.

Any amount that exceeded our relevant earnings and profits would be treated first as a non-taxable return of capital to the extent of such holder’s tax basis in our shares of common stock with any remaining amount generally being taxed as a capital gain.

In addition, we would recognize gain in an amount equal to the excess of the fair market value of shares of CST common stock distributed to our holders on the Spin-off date over our tax basis in such shares of CST common stock.

Moreover, we could incur significant U.S. federal income tax liabilities if it ultimately were determined that certain internal transactions undertaken in anticipation of the Spin-off were taxable.

Under the terms of the tax matters agreement we entered into with CST in connection with the Spin-off, we generally are responsible for any taxes imposed on us and our subsidiaries in the event that the Spin-off and/or certain related internal transactions were to fail to qualify for tax-free treatment.

However, if the Spin-off and/or such internal transactions were to fail to qualify for tax-free treatment because of actions or failures to act by CST or its subsidiaries, CST would be responsible for all such taxes.

If we were to become liable for taxes under the tax matters agreement, that liability could have a material adverse effect on us.

| • | future refining [added: segment] margins, including gasoline and distillate margins; |

| • | future ethanol [added: segment] margins; |

| • | the effect of general economic and other conditions on [removed: refining] [added: refining, ethanol,] and [removed: ethanol] [added: midstream] industry fundamentals. |

| • | legislative or regulatory action, including the introduction or enactment of legislation or rulemakings by governmental authorities, including tax and environmental regulations, such as those implemented under the California [removed: Global Warming Solutions Act] [added: cap-and-trade system] (also known as AB 32), [removed: Quebec’s Regulation respecting] the [removed: cap-and-trade system for greenhouse gas emission allowances (the] Quebec cap-and-trade [removed: system),] [added: system, the Ontario cap-and-trade system,] and the U.S. EPA’s regulation of GHGs, which may adversely affect our business or operations; |

| • | changes in currency exchange rates, including the value of the Canadian dollar, the pound sterling, [added: the euro,] and the [removed: euro] [added: Mexican peso] relative to the U.S. dollar; |

These non-GAAP financial measures include adjusted net income attributable to Valero stockholders, [removed: gross margin, and] adjusted operating [removed: income.][added: income (loss), and refining and ethanol segment margin.]

See the accompanying financial tables in “RESULTS OF OPERATIONS” [removed: for a reconciliation of these non-GAAP][added: and note (d) to the]

[added: accompanying tables for reconciliations of these non-GAAP] financial measures to the most directly comparable U.S. GAAP financial measures.

[removed: In] [added: Also in] note [removed: (d) to the accompanying tables,] [added: (d),] we disclose the reasons why we believe our use of the non-GAAP financial measures provides useful information.

| | [removed: |] Year Ended December 31, [added: 2017] | | | | | | | | | | | [added: | | | | | | | |]

| | [removed: | 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | Change | | |

| Net income attributable to Valero Energy Corporation stockholders [removed: from continuing operations] | | [removed: $] | [removed: 2,289] | | | [removed: $] | [removed: 3,990] | | | [added: | | | | | | |] $ | [removed: (1,701] [added: 2,289] | [removed: )] |

| Adjusted net income attributable to Valero Energy Corporation stockholders [removed: from continuing operations(1)] | [removed: | 1,724 | | | | 4,614] [added: $] | [added: 2,203] | | | [removed: (2,890] [added: $] | [added: 1,724] | [removed: )] |

The [removed: decrease] [added: $479 million increase] in [removed: both net income and] adjusted net income attributable to Valero stockholders [removed: from continuing operations] was [added: primarily] due to [removed: lower] [added: a $779 million increase in adjusted] operating income [removed: in 2016 compared to 2015 (net] [added: between the years net] of the resulting [removed: decrease of $1.1 billion] [added: increase] in income tax [removed: expense between the years).][added: expense.]

| [removed: Adjusted] [added: Reconciliation of] operating income [removed: (loss) by segment(1):] [added: to adjusted operating income (d)] | | | | | | | | | | | | | [added: | | | | | | |]

[removed: The $2.8 billion decrease in] [added: | ◦ | Adjusted refining segment] operating income [removed: was impacted by] [added: is defined as refining segment operating income excluding other operating expenses,] the [removed: net effect of noncash adjustments for a] lower of cost or market inventory valuation [removed: adjustment] [added: adjustment,] and [removed: an] [added: the] asset impairment loss. [added: |]

The [removed: resulting $4.3 billion decrease] [added: $779 million increase] in adjusted operating income is primarily due to the following:

Additional details and analysis [removed: of] [added: for] the changes in [removed: the] operating income and adjusted operating income [removed: of] [added: for] our [added: reportable] business segments and other components of net income and adjusted net income attributable to Valero [removed: stockholders from continuing operations,] [added: stockholders,] including a reconciliation of non-GAAP financial measures used in this Overview to their most comparable measures reported under U.S. GAAP, are provided below under “RESULTS OF [removed: OPERATIONS” beginning on page 27.][added: OPERATIONS”.]

Below are several factors that have impacted or may impact our results of operations during the first quarter of [removed: 2017:][added: 2018:]

| • | Refining and ethanol [removed: product] margins are expected to remain near current levels. |

The following tables highlight our results of operations, our operating performance, and market [added: reference] prices that directly impact our operations.

These non-GAAP financial measures are reconciled to their most comparable U.S. GAAP financial measures and include adjusted net income [removed: attributed to Valero stockholders, adjusted net income from continuing operations] attributable to Valero stockholders, adjusted operating income, and [removed: gross] [added: refining and ethanol segment] margin.

[added: | | 2017 | | | |] 2016 [removed: Compared to] [added: | | | |] 2015 [added: | | |]

| | Year Ended December 31, [added: 2016] | | | | | | | | | | | [added: | | | | | | | |]

| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | Change | | |

| Operating [removed: revenues] [added: revenues:] | [removed: $] | [removed: 75,659] | | | [removed: $] | [removed: 87,804] | | | [removed: $] | [removed: (12,145] | [removed: )] | [added: | | | | | | | |]

| [removed: Cost of sales (excluding the lower] [added: Lower] of cost or market inventory valuation [removed: adjustment)] [added: adjustment (b)] | [removed: 65,962] [added: —] | | | | [removed: 73,861] [added: (50] | | [added: )] | | [removed: (7,899] [added: 50] | | [removed: )] |

| Lower of cost or market inventory valuation adjustment [removed: (a) | (747 | | ) |] [added: (b)] | [removed: 790] [added: 747] | | | | [removed: (1,537] [added: (790] | | ) |

| [removed: Operating expenses:] [added: Other operating expenses (a)] | [added: 58] | | | | [added: —] | | | | [added: 3] | | | [added: | — | | | | 61 | | |]

| General and administrative expenses [added: (excluding depreciation and amortization expense reflected below)] | [removed: 715] [added: —] | | | | [removed: 710] [added: —] | | | | [removed: 5] [added: —] | | | [added: | 715 | | | | 715 | | |]

| Depreciation and amortization [removed: expense:] [added: expense] | [added: —] | | | | [added: —] | | | | [added: —] | | | [added: | 52 | | | | 52 | | |]

| Asset impairment loss [removed: (b)] [added: (c)] | 56 | | | | — | | | | [added: — | | | | — | | | |] 56 | | |

| Other income, net | [removed: 56] | | | | [removed: 46] | | | | [removed: 10] | | | [added: | | | | | 76 | | |]

| Interest and debt expense, net of capitalized interest | [removed: (446] | | [removed: )] | | [removed: (433] | | [removed: )] | | [removed: (13] | | [added: | | | | | | (446 | |] ) |

| Income before income tax expense | [removed: 3,182] | | | | [removed: 5,971] | | | | [removed: (2,789] | | [removed: )] | [added: | | | | | 3,182 | | |]

| Income tax expense [removed: (b) (c)] | [removed: 765] | | | | [removed: 1,870] | | | | [removed: (1,105] | | [removed: )] | [added: | | | | | 765 | | |]

| Net income | [removed: 2,417] | | | | [removed: 4,101] | | | | [removed: (1,684] | | [removed: )] | [added: | | | | | 2,417 | | |]

| Less: Net income attributable to noncontrolling interests | [removed: 128] | | | | [removed: 111] | | | | [removed: 17] | | | [added: | | | | | 128 | | |]

| Net income attributable to Valero Energy Corporation stockholders | [removed: $] | [removed: 2,289] | | | [removed: $] | [removed: 3,990] | | | [added: | | | | | | | |] $ | [removed: (1,701] [added: 2,289] | [removed: )] |

See note references on pages [removed: 50] [added: 48] through [removed: 52.][added: 50.]

For 2017, we reported net income attributable to Valero stockholders of $4.1 billion compared to $2.3 billion for 2016, which represents an increase of $1.8 billion.

This increase is primarily due to a $1.9 billion income tax benefit in 2017 resulting from the implementation of the provisions under Tax Reform, which was enacted on December 22, 2017.

See Note 14 of Notes to Consolidated Financial Statements for additional information about Tax Reform and the $1.9 billion benefit recorded by us.

Excluding the impact of Tax Reform, adjusted net income attributable to Valero stockholders in 2017 was $2.2 billion.

This compares to adjusted net income attributable to Valero stockholders of $1.7 billion in 2016, which has been adjusted for the amounts reflected in the table on page 34.

Operating income was $3.6 billion in each of 2017 and 2016.

Excluding the amounts reflected in the tables on page 34 from both years, adjusted operating income was $3.7 billion in 2017 compared to $2.9 billion in 2016, which represents an increase of $779 million.

| • | Refining segment. Refining segment adjusted operating income increased by $942 million due to higher margins on refined petroleum products and higher throughput volumes, partially offset by lower discounts on sour crude oils and other feedstocks, higher cost of biofuel credits, and higher operating expenses (excluding depreciation and amortization expense). This is more fully described on pages 38 through 40. |

| • | Ethanol segment. Ethanol segment adjusted operating income decreased by $118 million primarily due to lower ethanol and corn related co-products prices. This is more fully described on page 40. |

| • | VLP segment. VLP segment adjusted operating income increased by $74 million primarily due to incremental revenues generated from transportation and terminaling services provided to our refining segment associated with terminals acquired in 2016 and 2017, a product pipeline system acquired in 2017, and the acquisition of an undivided interest in crude system assets in 2017. This is more fully described on page 41. |

| • | Corporate and eliminations. Corporate and eliminations, which consists primarily of general and administrative expenses and related depreciation and amortization expense, increased by $119 million primarily due to higher employee related costs, legal and environmental reserves, and other expenses, which are more fully described on page 38. |

| • | Medium and heavy sour crude oil discounts are expected to remain weaker than their five-year averages as supplies of sour crude oils in the market remain suppressed. |

| • | Sweet crude discounts are expected to remain near current levels as export demand remains strong and increased supplies from the Permian Basin are delivered into U.S. Gulf Coast markets. |

| • | Legislation authorizing the extension of the $1 per gallon biodiesel blender’s tax credit for biodiesel volumes blended in 2017 was passed and signed into law in February 2018. As a result, we will recognize a benefit to cost of materials and other in our refining segment results of operations for the first quarter of 2018 of approximately $170 million. The majority of this amount will be recognized by one of our consolidated variable interest entities (VIEs) in which we own a 50 percent interest; therefore, approximately one half of this amount (after taxes) will be excluded from net income attributable to Valero stockholders. |

Effective January 1, 2017, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our business.

Accordingly, we created a new reportable segment — VLP.

The results of the VLP segment, which include the results of our majority-owned master limited partnership referred to by the same name, were transferred from the refining segment.

Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation.

Financial Highlights by Segment and Total Company

| | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | |

| | Refining | | | | Ethanol | | | | VLP | | | | Corporate and Eliminations | | | | Total | | |

| Operating revenues from external customers | $ | 90,651 | | | $ | 3,324 | | | $ | — | | | $ | 5 | | | $ | 93,980 | |

| Intersegment revenues | 6 | | | | 176 | | | | 452 | | | | (634 | | ) | | — | | |

| Total operating revenues | 90,657 | | | | 3,500 | | | | 452 | | | | (629 | | ) | | 93,980 | | |

| Cost of sales: | | | | | | | | | | | | | | | | | | | |

| Cost of materials and other | 80,865 | | | | 2,804 | | | | — | | | | (632 | | ) | | 83,037 | | |

| Operating expenses (excluding depreciation and amortization expense reflected below) | 3,917 | | | | 443 | | | | 104 | | | | (2 | | ) | | 4,462 | | |

| Total cost of sales | 86,582 | | | | 3,328 | | | | 157 | | | | (634 | | ) | | 89,433 | | |

| General and administrative expenses (excluding depreciation and amortization expense reflected below) | — | | | | — | | | | — | | | | 835 | | | | 835 | | |

| Operating income by segment | $ | 4,017 | | | $ | 172 | | | $ | 292 | | | $ | (882 | ) | | 3,599 | | |

| Income before income tax benefit | | | | | | | | | | | | | | | | | 3,207 | | |

| Income tax benefit | | | | | | | | | | | | | | | | | (949 | | ) |

| Net income | | | | | | | | | | | | | | | | | 4,156 | | |

| Less: Net income attributable to noncontrolling interests | | | | | | | | | | | | | | | | | 91 | | |

Financial Highlights by Segment and Total Company (continued)

| | | | | | | | | | | | | | | | | | | | |

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| | | | | | | | | | | | | | | | | | | | |

For the year ended December 31, 2016, we reported net income attributable to Valero stockholders from continuing operations of $2.3 billion and adjusted net income attributable to Valero stockholders from continuing operations of $1.7 billion.

For the year ended December 31, 2015, we reported net income attributable to Valero stockholders from continuing operations of $4.0 billion and adjusted net income attributable to Valero stockholders from continuing operations of $4.6 billion.

The decrease in net income attributable to Valero stockholders from continuing operations of $1.7 billion and the decrease in adjusted net income attributable to Valero stockholders from continuing operations of $2.9 billion are outlined in the following table (in millions).

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Operating income decreased by $2.8 billion, while adjusted operating income decreased by $4.3 billion, as outlined by segment in the following table (in millions).

| Operating income (loss) by segment: | | | | | | | | | | | | |

| Refining | | $ | 3,995 | | | $ | 6,973 | | | $ | (2,978 | ) |

| Ethanol | | 340 | | | | 142 | | | | 198 | | |

| Corporate | | (763 | | ) | | (757 | | ) | | (6 | | ) |

| Total | | $ | 3,572 | | | $ | 6,358 | | | $ | (2,786 | ) |

| Refining | | $ | 3,354 | | | $ | 7,713 | | | $ | (4,359 | ) |

| Ethanol | | 290 | | | | 192 | | | | 98 | | |

| Total | | $ | 2,881 | | | $ | 7,148 | | | $ | (4,267 | ) |

__________________________

| (1) | Net income and operating income have been adjusted for certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and trends. Each of these adjustments is reflected in the tables on pages 28 and 29. Adjusted amounts are non-GAAP measurements. |

We have excluded such effects from adjusted operating income because we believe that these adjustments are not indicative of our core operating performance and may obscure the underlying business results and trends.

| • | Refining segment - The $4.4 billion decrease in adjusted operating income was primarily due to lower margins on refined petroleum products and lower discounts on light sweet crude oils and sour crude oils relative to Brent crude oil, which also negatively impacted our refining margins. This is more fully described on pages 37 and 38. |

| • | Ethanol segment - The $98 million increase in adjusted operating income was primarily due to higher ethanol margins that resulted from lower corn prices combined with lower operating expenses, partially offset by lower margins on other co-products. This is more fully described on page 38. |

For the year ended December 31, 2016, margins were unfavorable compared to 2015, and thus far in the first quarter of 2017 margins have been mixed.

| • | Crude oil discounts are expected to remain weak due to lower demand resulting from industry-wide refinery maintenance. |

Financial Highlights

(millions of dollars, except share and per share amounts)

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Costs and expenses: | | | | | | | | | | | |

| Refining | 3,792 | | | | 3,795 | | | | (3 | | ) |

| Ethanol | 415 | | | | 448 | | | | (33 | | ) |

| Refining | 1,780 | | | | 1,745 | | | | 35 | | |

| Ethanol | 66 | | | | 50 | | | | 16 | | |

| Corporate | 48 | | | | 47 | | | | 1 | | |

| Total costs and expenses | 72,087 | | | | 81,446 | | | | (9,359 | | ) |

| Operating income | 3,572 | | | | 6,358 | | | | (2,786 | | ) |

| Earnings per common share – assuming dilution | $ | 4.94 | | | $ | 7.99 | | | $ | (3.05 | ) |

| Weighted-average common shares outstanding – assuming dilution (in millions) | 464 | | | | 500 | | | | (36 | | ) |

________________

Reconciliation of Non-GAAP Measures to Most Comparable Measures

Reported under U.S. GAAP (d)

(millions of dollars)

| | | | | | | | |

| 10% increase in underlying commodity prices | $ | [removed: 61] [added: (47] | [added: )] | | $ | [removed: (22] [added: 4] | [removed: )] |

| 10% increase in underlying commodity prices | [removed: (45] [added: 61] | | [removed: )] | | [removed: —] [added: (22] | | [added: )] |

| 10% decrease in underlying commodity prices | [removed: 45] [added: 47] | | | | [removed: 5] [added: (2] | | [added: )] |

See Note 19 of Notes to Consolidated Financial Statements for notional volumes associated with these derivative contracts as of December 31, [removed: 2016.][added: 2017.]

As of December 31, [removed: 2016,] [added: 2017,] there was an immaterial amount of gain or loss in the fair value of derivative instruments that would result from a 10 percent increase or decrease in the underlying price of the contracts.

| | [removed: 2016] [added: 2018] | | | | [removed: 2017] [added: 2019] | | | | [removed: 2018] [added: 2020] | | | | [removed: 2019] [added: 2021] | | | | [removed: 2020] [added: 2022] | | | | There- after | | | | Total (a) | | | | Fair Value | | |

| Average interest rate | — | | % | | [removed: 6.4] [added: 9.4] | | % | | [removed: —] [added: 6.1] | | % | | [removed: 9.4] [added: —] | | % | | [removed: 6.1] [added: —] | | % | | [removed: 6.3] [added: 5.6] | | % | | [removed: 6.6] [added: 6.0] | | % | | | | |

[added: |] (a) [added: |] Excludes unamortized discounts and debt issuance costs. [added: |]

[added: |] (b) [added: |] As of December 31, [added: 2017 and] 2016, we had an interest rate swap associated with [removed: $51] [added: $49] million [added: and $51 million, respectively,] of our floating rate [removed: debt,] [added: debt] resulting in an effective interest rate of 3.85 [removed: percent.][added: percent as of each of those reporting dates. The fair value of the swap was immaterial for all periods presented. |]

As of December 31, [removed: 2016,] [added: 2017,] we had commitments to purchase [removed: $374] [added: $507] million of U.S. dollars.

Our market risk was minimal on these contracts, as all of them matured on or before [removed: February 1, 2017.][added: January 31, 2018.]

| December 31, 2017: | | | | | | | |

| | December 31, 2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Fixed rate | $ | — | | | $ | 750 | | | $ | 850 | | | $ | — | | | $ | — | | | $ | 6,224 | | | $ | 7,824 | | | $ | 9,236 | |

| Floating rate (b) | $ | 106 | | | $ | 6 | | | $ | 416 | | | $ | 6 | | | $ | 6 | | | $ | 19 | | | $ | 559 | | | $ | 559 | |

| Average interest rate | 2.1 | | % | | 3.8 | | % | | 2.9 | | % | | 3.8 | | % | | 3.8 | | % | | 3.8 | | % | | 2.8 | | % | | | | |

| | |

| --- | --- |

| | |

| --- | --- |

| December 31, 2015: | | | | | | | |

| | December 31, 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Fixed rate | $ | — | | | $ | 950 | | | $ | — | | | $ | 750 | | | $ | 850 | | | $ | 4,474 | | | $ | 7,024 | | | $ | 7,467 | |

| Floating rate (b) | $ | 117 | | | $ | — | | | $ | — | | | $ | — | | | $ | 175 | | | $ | — | | | $ | 292 | | | $ | 292 | |

| Average interest rate | 1.7 | | % | | — | | % | | — | | % | | — | | % | | 1.5 | | % | | — | | % | | 1.6 | | % | | | | |

The fair value of the swap was immaterial.

We had no interest rate derivative instruments outstanding as of December 31, 2015.

We are reporting these proceedings to comply with SEC regulations, which require us to disclose certain information about proceedings arising under federal, state, [added: or local provisions regulating the discharge of materials into the environment or protecting the environment if we reasonably believe that such proceedings will result in monetary sanctions of $100,000 or more.]

We continue to work with the [removed: U.S.] EPA to resolve [removed: these matters.][added: this matter.]

U.S. EPA [removed: (Ardmore Refinery).][added: (Fuels).]

We currently have multiple outstanding Violation Notices (VNs) issued by the BAAQMD from [removed: 2013] [added: 2015] to present.

In the fourth quarter of [removed: 2016,] [added: 2017,] we entered into an agreement with BAAQMD to resolve various VNs and continue to work with the BAAQMD to resolve the remaining VNs.

In our [removed: quarterly] [added: annual] report [added: on Form 10-K] for the [removed: quarter] [added: year] ended [removed: June 30,] [added: December 31,] 2016, we reported that we had received a proposed Agreed Order in the amount of $121,314 from the TCEQ as an administrative penalty for alleged excess emissions at our McKee Refinery.

In our quarterly report on Form 10-Q for the quarter ended March 31, 2017, we reported that we had received a Notice of Violation (NOV) from the U.S. EPA related to violations from the Mobile Source Inspection of 2015, which we believe will result in penalties in excess of $100,000.

In our quarterly report on Form 10-Q for the quarter ended September 30, 2017, we reported that the Illinois EPA had filed suit against The Premcor Refining Group Inc. alleging violations of air and waste regulations at Premcor’s Hartford, Illinois terminal and closed refinery.

We have entered into a Partial Consent Order resolving various air and permitting violations.

Our litigation with other potentially responsible parties (PRPs) and the Illinois EPA continues.

We continue to assert our various defenses, limitations and potential rights for contribution from the other PRPs.

or local provisions regulating the discharge of materials into the environment or protecting the environment if we reasonably believe that such proceedings will result in monetary sanctions of $100,000 or more.

U.S. EPA.

In our quarterly report for the quarter ended March 31, 2016, we reported that certain of our refineries had received one or more letters or demands from the Department of Justice on behalf of the U.S. EPA concerning proposed stipulated penalties under an existing consent decree.

Some of these penalty amounts are in excess of $100,000 but are still being evaluated.

In our quarterly report for the quarter ended June 30, 2016, we reported that we had received a penalty demand in the amount of $730,820 from the U.S. EPA for alleged reporting violations at our Ardmore Refinery.

We continue to work with the U.S. EPA to resolve this matter.

U.S. EPA (Meraux Refinery).

In November 2016, we received from the U.S. EPA Region 6 a draft Consent Agreement and Final Order related to a previous Risk Management Plan inspection at our Meraux Refinery, which included proposed penalties of $182,000.

We are working with the U.S. EPA to resolve this matter.

The Illinois EPA (ILEPA) has issued several Notices of Violation (NOVs) alleging violations of air and waste regulations at Premcor’s Hartford, Illinois terminal and closed refinery.

We continue to negotiate the terms of a consent order for corrective action with the ILEPA.

San Francisco Regional Water Quality Control Board (RWQCB) (Benicia Refinery).

In our quarterly report for the quarter ended September 30, 2016, we reported that the RWQCB had issued a Notice of Administrative Civil Liability to our Benicia Refinery for alleged violations of the Refinery’s National Pollutant Discharge Elimination System permit, along with a proposed penalty of $197,500.

We have resolved this matter with the RWQCB.

Environment Canada (EC) (Quebec Refinery).

In our quarterly report for the quarter ended September 30, 2016, we reported that we were involved in a legal proceeding initiated by the EC alleging breaches of certain conditions at our Quebec Refinery of a directive issued under the Canadian Fisheries Act.

We continue to work with the EC to resolve this matter, which we believe will result in penalties in excess of $100,000.

[removed: UNITED STATES] SECURITIES AND EXCHANGE COMMISSION

For the fiscal year ended December 31, [removed: 2016][added: 2017]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or a] smaller reporting [added: company, or an emerging growth] company.

See the definitions of “large accelerated filer,” “accelerated filer,” [removed: and] “smaller reporting [added: company,” and “emerging growth] company” in Rule 12b-2 of the Exchange Act.

| Large accelerated filer þ [removed: |] Accelerated filer o [removed: |] Non-accelerated filer o | [removed: Smaller reporting company o |]

The aggregate market value of the voting and non-voting common stock held by non-affiliates was approximately [removed: $23.6] [added: $29.8] billion based on the last sales price quoted as of June 30, [removed: 2016] [added: 2017] on the New York Stock Exchange, the last business day of the registrant’s most recently completed second fiscal quarter.

As of January 31, [removed: 2017, 451,049,519] [added: 2018, 433,176,258] shares of the registrant’s common stock were outstanding.

We intend to file with the Securities and Exchange Commission a definitive Proxy Statement for our Annual Meeting of Stockholders scheduled for May 3, [removed: 2017,] [added: 2018,] at which directors will be elected.

Portions of the [removed: 2017] [added: 2018] Proxy Statement are incorporated by reference in Part III of this Form 10-K and are deemed to be a part of this report.

The following table indicates the headings in the [removed: 2017] [added: 2018] Proxy Statement where certain information required in Part III of this Form 10-K may be found.

| Form 10-K Item No. and Caption | | | Heading in [removed: 2017] [added: 2018] Proxy Statement |

| 11. | Executive Compensation | | Compensation Committee, Compensation Discussion and Analysis, [removed: Director Compensation,] Executive Compensation, [added: Director Compensation, Pay Ratio Disclosure,] and Certain Relationships and Related Transactions |

| [Items 1. & [removed: 2.](#sF67A87E0684553C0BA5EA6EEF6A9D4F5)] [added: 2.](#s2DBCBE3030885C5EBC1F1DF106A3A4C6)] | [Business and [removed: Properties](#sF67A87E0684553C0BA5EA6EEF6A9D4F5)] [added: Properties](#s2DBCBE3030885C5EBC1F1DF106A3A4C6)] | [removed: [1](#sF67A87E0684553C0BA5EA6EEF6A9D4F5)] [added: [1](#s2DBCBE3030885C5EBC1F1DF106A3A4C6)] |

| | [Valero’s [removed: Operations](#s3EE2607385705C61A02AB37C225E2F24)] [added: Operations](#sA31BDB3263DF581EBA7C5E4B5EA4E391)] | [removed: [3](#s3EE2607385705C61A02AB37C225E2F24)] [added: [3](#sA31BDB3263DF581EBA7C5E4B5EA4E391)] |

| | [Environmental [removed: Matters](#sDC91EE43286C5635966195A4B773BD4F)] [added: Matters](#sDA39D7B57A0F55878C6C99F7055DE1AB)] | [removed: [10](#sDC91EE43286C5635966195A4B773BD4F)] [added: [15](#sDA39D7B57A0F55878C6C99F7055DE1AB)] |

| [Item [removed: 1A.](#s09D2147497505D18842E310534FA8A59)] [added: 1A.](#s37E3F51EA10F556F91F3DCCAF93A7D6E)] | [Risk [removed: Factors](#s09D2147497505D18842E310534FA8A59)] [added: Factors](#s37E3F51EA10F556F91F3DCCAF93A7D6E)] | [removed: [11](#s09D2147497505D18842E310534FA8A59)] [added: [16](#s37E3F51EA10F556F91F3DCCAF93A7D6E)] |

| [Item [removed: 1B.](#s12B2F38234C45D02B864DA3B28A5AD63)] [added: 1B.](#s211A23F126915237858A48C7F1746F71)] | [Unresolved Staff [removed: Comments](#s12B2F38234C45D02B864DA3B28A5AD63)] [added: Comments](#s211A23F126915237858A48C7F1746F71)] | [removed: [17](#s12B2F38234C45D02B864DA3B28A5AD63)] [added: [23](#s211A23F126915237858A48C7F1746F71)] |

| [Item [removed: 3.](#sF46038B7CEC85E13841332C8061E9BBD)] [added: 3.](#s51B9CB774609590BA19A095B07E117E5)] | [Legal [removed: Proceedings](#sF46038B7CEC85E13841332C8061E9BBD)] [added: Proceedings](#s51B9CB774609590BA19A095B07E117E5)] | [removed: [17](#sF46038B7CEC85E13841332C8061E9BBD)] [added: [23](#s51B9CB774609590BA19A095B07E117E5)] |

| [Item [removed: 4.](#sB621FC5F78D652BE97119581D8530426)] [added: 4.](#s1C1FC0FC58E35A5B81ED3A332DBA8737)] | [Mine Safety [removed: Disclosures](#sB621FC5F78D652BE97119581D8530426)] [added: Disclosures](#s1C1FC0FC58E35A5B81ED3A332DBA8737)] | [removed: [19](#sB621FC5F78D652BE97119581D8530426)] [added: [24](#s1C1FC0FC58E35A5B81ED3A332DBA8737)] |

| [Item [removed: 5.](#s48B70B7780E1514BAD0947A8F8F4F6D2)] [added: 5.](#s338ED6539CA05F9999FFEA6615FDAC8C)] | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s48B70B7780E1514BAD0947A8F8F4F6D2)] [added: Securities](#s338ED6539CA05F9999FFEA6615FDAC8C)] | [removed: [19](#s48B70B7780E1514BAD0947A8F8F4F6D2)] [added: [24](#s338ED6539CA05F9999FFEA6615FDAC8C)] |

| [Item [removed: 6.](#sE593993C760A561D8DFF046EE33F8E84)] [added: 6.](#s2C532D1BA5A458709B1FFE32977DC2FA)] | [Selected Financial [removed: Data](#sE593993C760A561D8DFF046EE33F8E84)] [added: Data](#s2C532D1BA5A458709B1FFE32977DC2FA)] | [removed: [22](#sE593993C760A561D8DFF046EE33F8E84)] [added: [27](#s2C532D1BA5A458709B1FFE32977DC2FA)] |

| [Item [removed: 7.](#sAC57097D43F3543E80AE455664FF1CF8)] [added: 7.](#s740863B10E795D0E9F668C7134345EA6)] | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sAC57097D43F3543E80AE455664FF1CF8)] [added: Operations](#s740863B10E795D0E9F668C7134345EA6)] | [removed: [23](#sAC57097D43F3543E80AE455664FF1CF8)] [added: [28](#s740863B10E795D0E9F668C7134345EA6)] |

| [Item [removed: 7A.](#s8FCD06FC8F605907BA7501757A54D3C9)] [added: 7A.](#sFD1113C9A4F95DF7AFA3A50342AF6153)] | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s8FCD06FC8F605907BA7501757A54D3C9)] [added: Risk](#sFD1113C9A4F95DF7AFA3A50342AF6153)] | [removed: [64](#s8FCD06FC8F605907BA7501757A54D3C9)] [added: [62](#sFD1113C9A4F95DF7AFA3A50342AF6153)] |

| [Item [removed: 8.](#sDDCCD32F2B2B5144A0A28B98C051A8BE)] [added: 8.](#s981F5AF24A915D14A413CE2342929DC9)] | [Financial Statements and Supplementary [removed: Data](#sDDCCD32F2B2B5144A0A28B98C051A8BE)] [added: Data](#s981F5AF24A915D14A413CE2342929DC9)] | [removed: [66](#sDDCCD32F2B2B5144A0A28B98C051A8BE)] [added: [65](#s981F5AF24A915D14A413CE2342929DC9)] |

| [Item [removed: 9.](#sE0B11D98A8C65E5080DF47C619B7F051)] [added: 9.](#s02B54F6E07A957A48A7EEB3E82743674)] | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sE0B11D98A8C65E5080DF47C619B7F051)] [added: Disclosure](#s02B54F6E07A957A48A7EEB3E82743674)] | [removed: [135](#sE0B11D98A8C65E5080DF47C619B7F051)] [added: [138](#s02B54F6E07A957A48A7EEB3E82743674)] |

| [Item [removed: 9A.](#s32BD8A23234750F8A6C037AA837BF1C8)] [added: 9A.](#s05DD5E1F648A50FCB6C92F9219AC020C)] | [Controls and [removed: Procedures](#s32BD8A23234750F8A6C037AA837BF1C8)] [added: Procedures](#s05DD5E1F648A50FCB6C92F9219AC020C)] | [removed: [135](#s32BD8A23234750F8A6C037AA837BF1C8)] [added: [138](#s05DD5E1F648A50FCB6C92F9219AC020C)] |

| [Item [removed: 9B.](#s4BC061A07608547DAA2AFA701955E9FD)] [added: 9B.](#sC1DF4524CC37578E969954F0C01BA085)] | [Other [removed: Information](#s4BC061A07608547DAA2AFA701955E9FD)] [added: Information](#sC1DF4524CC37578E969954F0C01BA085)] | [removed: [135](#s4BC061A07608547DAA2AFA701955E9FD)] [added: [138](#sC1DF4524CC37578E969954F0C01BA085)] |

| [Item [removed: 10.](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: 10.](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] | [Directors, Executive Officers and Corporate [removed: Governance](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: Governance](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] | [removed: [136](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: [138](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] |

| [Item [removed: 11.](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: 11.](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] | [Executive [removed: Compensation](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: Compensation](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] | [removed: [136](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: [138](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] |

| [Item [removed: 12.](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: 12.](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: Matters](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] | [removed: [136](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: [138](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] |

| [Item [removed: 13.](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: 13.](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: Independence](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] | [removed: [136](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: [138](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] |

| [Item [removed: 14.](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: 14.](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] | [Principal Accountant Fees and [removed: Services](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: Services](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] | [removed: [136](#s2B17E69186555A7FA736AD141BBD6E7B)] [added: [138](#s375DBE0CE60D5BCEB3B58007A6A13F6D)] |

| [Item [removed: 15.](#sE44AC37BFB425F81A176855E8D25E97B)] [added: 15.](#sA21C9BA2247D5A2198BAE5F2D3265EF1)] | [Exhibits and Financial Statement [removed: Schedules](#sE44AC37BFB425F81A176855E8D25E97B)] [added: Schedules](#sA21C9BA2247D5A2198BAE5F2D3265EF1)] | [removed: [136](#sE44AC37BFB425F81A176855E8D25E97B)] [added: [139](#sA21C9BA2247D5A2198BAE5F2D3265EF1)] |

You should read our forward-looking statements together with our disclosures beginning on page [removed: 23] [added: 28] of this report under the heading: “CAUTIONARY STATEMENT FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.”

Our common stock trades on the New York Stock Exchange (NYSE) under the symbol “VLO.” On January 31, [removed: 2017,] [added: 2018,] we had [removed: 9,996] [added: 10,015] employees.

We also own 11 ethanol plants in the Mid-Continent region of the U.S. with a combined production capacity of approximately [removed: 1.4] [added: 1.45] billion gallons per year.

[removed: The refining] [added: | • | Ethanol] segment includes our [removed: refining] [added: ethanol] operations, the associated marketing activities, and logistics assets that support our [removed: refining operations.][added: ethanol operations; and |]

[removed: The ethanol] [added: | • | Refining] segment includes our [removed: ethanol] [added: refining] operations, the associated marketing activities, and [added: certain] logistics [removed: assets] [added: assets, which are not owned by VLP,] that support our [removed: ethanol operations.][added: refining operations; |]

Effective January 1, 2017, we revised our reportable segments to align with certain changes in how our chief operating decision maker manages and allocates resources to our [removed: business and created a new reportable segment — VLP.][added: business.]

The results of [removed: VLP,] [added: the VLP segment,] which [removed: are those] [added: include the results] of our majority-owned master limited partnership referred to by the same name, were transferred from the refining segment.

10-K 1 vloform10-kx12312017.htm 10-K

UNITED STATES

| |

| --- |

| |

| Smaller reporting company o Emerging growth company o |

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.

| [PART I](#s2AF6C96600B655C1B6466E263DCEDDEA) | | [1](#s2AF6C96600B655C1B6466E263DCEDDEA) |

| | [Segments](#s32902C7871F85FCB984A72B9AF035D27) | [2](#s32902C7871F85FCB984A72B9AF035D27) |

| | [Properties](#s50123C5667FB53848E57539A82C29D10) | [15](#s50123C5667FB53848E57539A82C29D10) |

| [PART II](#sDDA284C3B01B5386ABC0792041227298) | | [24](#sDDA284C3B01B5386ABC0792041227298) |

| [PART III](#s5E6D2476BF8650AA9BE52241F30792EF) | | [138](#s5E6D2476BF8650AA9BE52241F30792EF) |

| [PART IV](#sD2CD35BCCE06572A81817D1BCBD9F026) | | [139](#sD2CD35BCCE06572A81817D1BCBD9F026) |

| [Signature](#s05535828E18751FCBF80E6B56EB6911C) | | [143](#s05535828E18751FCBF80E6B56EB6911C) |

Accordingly, we created a new reportable segment — VLP.

The segment information included herein has been retrospectively adjusted for the segment changes described above.

As a result, we have three reportable segments as follows:

| • | VLP segment includes the results of VLP, which provides transportation and terminaling services to our refining segment. |

Crude oil supply is primarily from Cushing over the Diamond pipeline, which began operations in November 2017.

| | blendstocks | 10 | % |

| | gasolines and blendstocks | 59 | % |

Our crude oil feedstocks are purchased through a combination of term and spot contracts.

Our bulk sales are made to

See discussion of the VLP segment on page 11.

We source our corn supply from local farmers and commercial elevators.

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | |

| | | Hartley | | 140 | | 368,000 | | 49 |

| Total | | | | 1,450 | | 3,875,000 | | 509 |

VLP

VLP is a publicly traded master limited partnership formed by us in July 2013 to own, operate, develop, and acquire crude oil and refined petroleum products pipelines, terminals, and other transportation and logistics assets.

VLP’s assets include crude oil and refined petroleum products pipeline and terminal systems in the U.S. Gulf Coast and U.S. Mid-Continent regions that provide transportation and terminaling services to our refining segment and are integral to the operations of our Ardmore, Corpus Christi, Houston, McKee, Memphis, Meraux, Port Arthur, St. Charles, and Three Rivers Refineries.

The following table summarizes information with respect to VLP’s pipelines:

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| Pipeline | | Diameter (inches) | | Length (miles) | | Throughput Capacity (thousand BPD) | | Commodity | | Associated Valero Refinery | | Significant Third-party System Connections |

| Ardmore logistics system | | | | | | | | | | | | |

| Hewitt segment of Red River crude oil pipeline | | 16 | | 138 | | 60(a) | | crude oil | | Ardmore | | Plains Red River, Plains Cushing |

10-K 1 vloform10-kx12312016.htm 10-K

| | | | |

| --- | --- | --- | --- |

| [PART I](#s4C612E7A8ADA55039D07FEC348A48612) | | [1](#s4C612E7A8ADA55039D07FEC348A48612) |

| | [Segments](#sE63C840EFF7D51458FBDF759DA0703CD) | [2](#sE63C840EFF7D51458FBDF759DA0703CD) |

| | [Properties](#s9649F7E4A53257C5BB6D212FBB234801) | [10](#s9649F7E4A53257C5BB6D212FBB234801) |

| [PART II](#s05686FF5C47A5732AA437B67CFB2E550) | | [19](#s05686FF5C47A5732AA437B67CFB2E550) |

| [PART III](#sB44763B3F8B659CDA81F7177E15BE776) | | [136](#sB44763B3F8B659CDA81F7177E15BE776) |

| [PART IV](#s746DDE144147590E9DCDEEEA7CA224E5) | | [136](#s746DDE144147590E9DCDEEEA7CA224E5) |

| [Signature](#s236AC40A28ED54E287BCB92322120EA1) | | [140](#s236AC40A28ED54E287BCB92322120EA1) |

As of December 31, 2016, we had two reportable segments — refining and ethanol.

In 2016, we completed construction of and placed into service a new 90,000 BPD crude distillation unit.

Approximately 55 percent of our crude oil feedstock requirements are purchased through term contracts while the remaining requirements are generally purchased on the spot market.

the other party proper notice within a prescribed period of time (e.g., 60 days, 6 months) before expiration of the current term.

In addition, through subsidiaries, we own the 2.0 percent general partner interest and the majority of the limited partner interest in VLP.

VLP’s common units, representing limited partner interests, are traded on the NYSE under the symbol “VLP.” Its assets support the operations of our Ardmore, Corpus Christi, Houston, McKee, Memphis, Meraux, Port Arthur, St. Charles, and Three Rivers Refineries.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Hartley | | 135 | | | 400,000 | | | 48 | |

| Total | | | | 1,400 | | | 4,195,000 | | | 500 | |

As of January 31, [removed: 2017,] [added: 2018,] there were [removed: 5,751] [added: 5,483] holders of record of our common stock.

The following table shows the high and low sales prices of and dividends declared on our common stock for each quarter of [removed: 2016] [added: 2017] and [removed: 2015.][added: 2016.]

On January [removed: 26, 2017,] [added: 23, 2018,] our board of directors declared a quarterly cash dividend of [removed: $0.70] [added: $0.80] per common share payable March [removed: 7, 2017] [added: 6, 2018] to holders of record at the close of business on February [removed: 15, 2017.][added: 13, 2018.]

The following table discloses purchases of shares of our common stock made by us or on our behalf during the fourth quarter of [removed: 2016.][added: 2017.]

| (a) | The shares reported in this column represent purchases settled in the fourth quarter of [removed: 2016] [added: 2017] relating to (i) our purchases of shares in open-market transactions to meet our obligations under stock-based compensation plans, and (ii) our purchases of shares from our employees and non-employee directors in connection with the exercise of stock options, the vesting of restricted stock, and other stock compensation transactions in accordance with the terms of our stock-based compensation plans. |

| (b) | On [removed: July 13, 2015,] [added: September 21, 2016,] we announced that our board of directors authorized our purchase of up to $2.5 billion of our outstanding common [removed: stock. This authorization has] [added: stock (the 2016 program) with] no expiration date. As of December 31, [removed: 2016, the approximate dollar value of shares that may yet be purchased] [added: 2017, we had $1.2 billion remaining available for purchase] under the [removed: 2015 authorization is $40 million.] [added: 2016 program.] On [removed: September 21, 2016,] [added: January 23, 2018,] we announced that our board of directors authorized our purchase of up to an additional $2.5 billion of our outstanding common stock with no expiration date. [removed: As of December 31, 2016, no purchases have been made under the 2016 authorization.] |

The following line graph compares the cumulative total [removed: return1] [added: return(a)] on an investment in our common stock against the cumulative total return of the S&P 500 Composite Index and an index of peer companies (that we selected) for the five-year period commencing December 31, [removed: 2011] [added: 2012] and ending December 31, [removed: 2016.][added: 2017.]

Our peer group comprises the following [removed: 11] [added: nine] companies: [removed: Alon USA Energy, Inc.;] [added: Andeavor;] BP plc; CVR Energy, Inc.; Delek US Holdings, Inc.; HollyFrontier Corporation; Marathon Petroleum Corporation; PBF Energy Inc.; Phillips 66; [added: and] Royal Dutch Shell [removed: plc; Tesoro Corporation; and Western Refining, Inc.][added: plc.]

COMPARISON OF 5 YEAR CUMULATIVE TOTAL [removed: RETURN1][added: RETURN(a)]

[removed: ][added: ]

| | [removed: 2011 | | | |] 2012 | | | | 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | | [added: | 2017 | | |]

| [removed: 1] [added: (a)] | Assumes that an investment in Valero common stock and each index was $100 on December 31, [removed: 2011.] [added: 2012.] “Cumulative total return” is based on share price appreciation plus reinvestment of dividends from December 31, [removed: 2011] [added: 2012] through December 31, [removed: 2016.] [added: 2017.] |

| 2017: | | | | | | | | | | | | |

| December 31 | | $ | 93.18 | | | $ | 75.84 | | | $ | 0.70 | |

| September 30 | | 77.77 | | | | 64.22 | | | | 0.70 | | |

| June 30 | | 68.39 | | | | 60.69 | | | | 0.70 | | |

| March 31 | | 71.40 | | | | 64.45 | | | | 0.70 | | |

| October 2017 | | 515,762 | | | $ | 77.15 | | | 292,145 | | | 223,617 | | | $1.6 billion |

| November 2017 | | 2,186,889 | | | $ | 81.21 | | | 216,415 | | | 1,970,474 | | | $1.4 billion |

| December 2017 | | 2,330,263 | | | $ | 87.76 | | | 798 | | | 2,329,465 | | | $1.2 billion |

| Total | | 5,032,914 | | | $ | 83.83 | | | 509,358 | | | 4,523,556 | | | $1.2 billion |

| Valero Common Stock | $ | 100.00 | | | $ | 165.00 | | | $ | 165.40 | | | $ | 242.80 | | | $ | 244.71 | | | $ | 342.54 | |

| S&P 500 | 100.00 | | | | 132.39 | | | | 150.51 | | | | 152.59 | | | | 170.84 | | | | 208.14 | | |

| Peer Group | 100.00 | | | | 121.56 | | | | 111.98 | | | | 100.82 | | | | 119.45 | | | | 151.71 | | |

| 2015: | | | | | | | | | | | | |

| December 31 | | 73.88 | | | | 58.98 | | | | 0.50 | | |

| September 30 | | 71.50 | | | | 51.68 | | | | 0.40 | | |

| June 30 | | 64.28 | | | | 56.09 | | | | 0.40 | | |

| March 31 | | 64.49 | | | | 43.45 | | | | 0.40 | | |

| October 2016 | | 433,272 | | | $ | 52.69 | | | 50,337 | | | 382,935 | | | $2.7 billion |

| November 2016 | | 667,644 | | | $ | 62.25 | | | 248,349 | | | 419,295 | | | $2.6 billion |

| December 2016 | | 1,559,569 | | | $ | 66.09 | | | 688 | | | 1,558,881 | | | $2.5 billion |

| Total | | 2,660,485 | | | $ | 62.95 | | | 299,374 | | | 2,361,111 | | | $2.5 billion |

| Valero Common Stock | $ | 100.00 | | | $ | 166.17 | | | $ | 274.19 | | | $ | 274.85 | | | $ | 403.46 | | | $ | 406.63 | |

| S&P 500 | 100.00 | | | | 116.00 | | | | 153.58 | | | | 174.60 | | | | 177.01 | | | | 198.18 | | |

| Peer Group | 100.00 | | | | 109.23 | | | | 132.93 | | | | 122.45 | | | | 110.45 | | | | 130.66 | | |

The selected financial data for the five-year period ended December 31, [removed: 2016] [added: 2017] was derived from our audited financial statements.

| | [removed: 2016] [added: 2017] (a) | | | | [removed: 2015] [added: 2016] (b) | | | | [removed: 2014] [added: 2015 (c)] | | | | [removed: 2013 (c)] [added: 2014] | | | | [removed: 2012] [added: 2013 (d)] | | |

| Operating revenues | $ | [removed: 75,659] [added: 93,980] | | | $ | [removed: 87,804] [added: 75,659] | | | $ | [removed: 130,844] [added: 87,804] | | | $ | [removed: 138,074] [added: 130,844] | | | $ | [removed: 138,393] [added: 138,074] | |

| Income from continuing operations | [removed: 2,417] [added: 4,156] | | | | [removed: 4,101] [added: 2,417] | | | | [removed: 3,775] [added: 4,101] | | | | [removed: 2,722] [added: 3,775] | | | | [removed: 3,114] [added: 2,722] | | |

| Earnings per common share from continuing operations – assuming dilution | [removed: 4.94] [added: 9.16] | | | | [removed: 7.99] [added: 4.94] | | | | [removed: 6.97] [added: 7.99] | | | | [removed: 4.96] [added: 6.97] | | | | [removed: 5.61] [added: 4.96] | | |

| Dividends per common share | [removed: 2.40] [added: 2.80] | | | | [removed: 1.70] [added: 2.40] | | | | [removed: 1.05] [added: 1.70] | | | | [removed: 0.85] [added: 1.05] | | | | [removed: 0.65] [added: 0.85] | | |

| Total assets [removed: (d)] | [removed: 46,173] [added: 50,158] | | | | [removed: 44,227] [added: 46,173] | | | | [removed: 45,355] [added: 44,227] | | | | [removed: 46,957] [added: 45,355] | | | | [removed: 44,163] [added: 46,957] | | |

| Debt and capital lease obligations, less current portion [removed: (d)] | [removed: 7,886] [added: 8,750] | | | | [removed: 7,208] [added: 7,886] | | | | [removed: 5,747] [added: 7,208] | | | | [removed: 6,224] [added: 5,747] | | | | [removed: 6,423] [added: 6,224] | | |

| [removed: (a)] [added: (b)] | Includes a noncash lower of cost or market inventory valuation reserve adjustment that resulted in a net benefit to our results of operations of $747 million as described in Note 4 of Notes to Consolidated Financial Statements. |

| [removed: (b)] [added: (c)] | Includes a noncash lower of cost or market inventory valuation [added: reserve] adjustment that resulted in a net charge to our results of operations of $790 million. |

| [removed: (c)] [added: (d)] | Includes the operations of our retail business prior to its separation from us on May 1, 2013. |

| (a) | Includes the impact of Tax Reform that was enacted on December 22, 2017 and resulted in a net income tax benefit of $1.9 billion ($4.26 per share – assuming dilution) as further described in Note 14 of Notes to Consolidated Financial Statements. |

| (d) | Amounts reported as of December 31, 2015, 2014, 2013, and 2012 have been reclassified to reflect the retrospective adoption of certain amendments to the Accounting Standards Codification as of January 1, 2016 as described in Note 1 of Notes to Consolidated Financial Statements. |

Our management evaluated the effectiveness of Valero’s internal control over financial reporting as of December 31, [removed: 2016.][added: 2017.]

Management believes that as of December 31, [removed: 2016,] [added: 2017,] our internal control over financial reporting was effective based on those criteria.

Our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal control over financial reporting, which begins on page [removed: 68] [added: 67] of this report.

[removed: Valero Energy Corporation:][added: VALERO ENERGY CORPORATION]

We have audited the accompanying consolidated balance sheets of Valero Energy Corporation and subsidiaries [added: (the Company)] as of December 31, [removed: 2016 and 2015,] [added: 2017] and [added: 2016,] the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, [removed: 2016.][added: 2017, and the related notes (collectively, the consolidated financial statements).]

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States) (the PCAOB).][added: PCAOB.]

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the [added: consolidated] financial statements are free of material [removed: misstatement.][added: misstatement, whether due to error or fraud.]

[removed: An audit includes] [added: Such procedures included] examining, on a test basis, evidence [removed: supporting] [added: regarding] the amounts and disclosures in the [added: consolidated] financial statements.

[removed: An audit] [added: Our audits] also [removed: includes assessing] [added: included evaluating] the accounting principles used and significant estimates made by management, as well as evaluating the overall [added: presentation of the consolidated] financial [removed: statement presentation.][added: statements.]

In our opinion, the consolidated financial statements [removed: referred to above] present fairly, in all material respects, the financial position of [removed: Valero Energy Corporation and subsidiaries] [added: the Company] as of December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for each of the years in the three-year period ended December 31, [removed: 2016,] [added: 2017,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the [removed: PCAOB, Valero Energy Corporation’s] [added: Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s] internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February [removed: 23, 2017] [added: 28, 2018] expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We have audited Valero Energy Corporation’s [added: (the Company)] internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway [removed: Commission (COSO).][added: Commission.]

We conducted our audit in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States) (the PCAOB).][added: PCAOB.]

Our audit [added: of internal control over financial reporting] included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

[removed: A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial] statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

In our opinion, [removed: Valero Energy Corporation] [added: the Company] maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal Control – Integrated Framework (2013) issued by [removed: COSO.][added: the Committee of Sponsoring Organizations of the Treadway Commission.]

We also have audited, in accordance with the standards of the [removed: PCAOB,] [added: Public Company Accounting Oversight Board (United States) (PCAOB),] the consolidated balance sheets of [removed: Valero Energy Corporation and subsidiaries] [added: the Company] as of December 31, [removed: 2016 and 2015,] [added: 2017] and [added: 2016,] the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, [removed: 2016,] [added: 2017,] and [added: the related notes (collectively, the consolidated financial statements), and] our report dated February [removed: 23, 2017] [added: 28, 2018] expressed an unqualified opinion on those consolidated financial statements.

| | [added: 2017 | | | |] 2016 | | | | 2015 | | |

| Cash and temporary cash investments | $ | [removed: 4,816] [added: 5,850] | | | $ | [removed: 4,114] [added: 4,816] | |

| Receivables, net | [removed: 5,901] [added: 6,922] | | | | [removed: 4,464] [added: 5,901] | | |

| Inventories | [removed: 5,709] [added: 6,384] | | | | [removed: 5,898] [added: 5,709] | | |

| Income taxes receivable | [removed: 58] [added: 673] | | | | [removed: 218] [added: 447] | | |

| Prepaid expenses and other | [removed: 316] [added: 156] | | | | [removed: 204] [added: 374] | | |

| Total current assets | [removed: 16,800] [added: 19,312] | | | | [removed: 14,898] [added: 16,800] | | |

| Property, plant, and equipment, at cost | [removed: 37,733] [added: 40,010] | | | | [removed: 36,907] [added: 37,733] | | |

| Accumulated depreciation | [removed: (11,261] [added: (12,530] | | ) | | [removed: (10,204] [added: (11,261] | | ) |

| Property, plant, and equipment, net | [removed: 26,472] [added: 27,480] | | | | [removed: 26,703] [added: 26,472] | | |

| Deferred charges and other assets, net | [removed: 2,901] [added: 3,366] | | | | [removed: 2,626] [added: 2,901] | | |

| Total assets | $ | [removed: 46,173] [added: 50,158] | | | $ | [removed: 44,227] [added: 46,173] | |

| Current portion of debt and capital lease obligations | $ | [removed: 115] [added: 122] | | | $ | [removed: 127] [added: 115] | |

| Accounts payable | [removed: 6,357] [added: 8,348] | | | | [removed: 4,907] [added: 6,357] | | |

| Accrued expenses | [removed: 694] [added: 712] | | | | [removed: 554] [added: 694] | | |

| Taxes other than income taxes [added: payable] | [removed: 1,084] [added: 1,321] | | | | [removed: 1,069] [added: 1,084] | | |

| Income taxes payable | [removed: 78] [added: $] | [added: —] | | | [removed: 337] [added: $] | [added: (7] | [added: )] |

| Total current liabilities | [removed: 8,328] [added: 11,071] | | | | [removed: 6,994] [added: 8,328] | | |

| Debt and capital lease obligations, less current portion | [removed: 7,886] [added: 8,750] | | | | [removed: 7,208] [added: 7,886] | | |

| Other long-term liabilities | [removed: 1,744] [added: 2,729] | | | | [removed: 1,611] [added: 1,744] | | |

| Additional paid-in capital | [removed: 7,088] [added: 7,039] | | | | [removed: 7,064] [added: 7,088] | | |

| Treasury stock, at cost; [removed: 222,000,024] [added: 239,603,534] and [removed: 200,462,208] [added: 222,000,024] common shares | [removed: (12,027] [added: (13,315] | | ) | | [removed: (10,799] [added: (12,027] | | ) |

| Retained earnings | [removed: 26,366] [added: 29,200] | | | | [removed: 25,188] [added: 26,366] | | |

Valero Energy Corporation and subsidiaries:

Opinion on the Consolidated Financial Statements

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We have served as the Company’s auditor since 2004.

Valero Energy Corporation and subsidiaries:

Opinion on Internal Control Over Financial Reporting

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial

February 28, 2018

| | 2017 | | | | 2016 | | |

| Deferred income tax liabilities | 4,708 | | | | 7,361 | | |

| Cost of materials and other | 83,037 | | | | 65,962 | | | | 73,861 | | |

| Operating expenses (excluding depreciation and amortization expense reflected below) | 4,462 | | | | 4,207 | | | | 4,243 | | |

| Depreciation and amortization expense | 1,934 | | | | 1,846 | | | | 1,795 | | |

| Total cost of sales | 89,433 | | | | 71,268 | | | | 80,689 | | |

| Other operating expenses | 61 | | | | — | | | | — | | |

| Earnings per common share | $ | 9.17 | | | $ | 4.94 | | | $ | 8.00 | |

| Transactions in connection with stock-based compensation plans | — | | | | (155 | | ) | | (7 | | ) | | — | | | | — | | | | (162 | | ) | | — | | | | (162 | | ) |

| Issuance of Valero Energy Partners LP common units | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 11 | | | | 11 | | |

| Net income | — | | | | — | | | | — | | | | 4,065 | | | | — | | | | 4,065 | | | | 91 | | | | 4,156 | | |

| Issuance of Valero Energy Partners LP common units | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 33 | | | | 33 | | |

| Other comprehensive income | — | | | | — | | | | — | | | | — | | | | 470 | | | | 470 | | | | — | | | | 470 | | |

| Balance as of December 31, 2017 | $ | 7 | | | $ | 7,039 | | | $ | (13,315 | ) | | $ | 29,200 | | | $ | (940 | ) | | $ | 21,991 | | | $ | 909 | | | $ | 22,900 | |

| Net income | $ | 4,156 | | | $ | 2,417 | | | $ | 4,101 | |

| Acquisition of undivided interest | (72 | | ) | | — | | | | — | | |

| Capital expenditures of certain variable interest entities | (26 | | ) | | — | | | | — | | |

Effective January 1, 2017, we revised our reportable segments to reflect a new reportable segment — VLP.

The results of the VLP segment include the results of VLP, our majority-owned master limited partnership.

Our prior period segment information has been retrospectively adjusted to reflect our current segment presentation.

Certain prior year amounts have been reclassified to conform to the 2017 presentation.

The changes were primarily due to the separate presentation of depreciation and amortization expense related to operating expenses and general and administrative expenses.

These financial statements include those of Valero, our wholly owned subsidiaries, and variable interest entities (VIEs) in which we have a controlling interest.

Our non-LIFO inventories are carried at the lower of cost or net realizable value.

If the aggregate market value of our LIFO inventories or the aggregate net realizable value of our non-LIFO inventories is less than the related aggregate cost, we recognize a loss for the difference in our statements of income.

We design improvements to our

In addition, we have asset retirement obligations with respect to our ethanol plants and certain of our logistics assets that require us to perform under law or contract once the asset is retired from service.

February 23, 2017

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Deferred income taxes | 7,361 | | | | 7,060 | | |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Costs and expenses: | | | | | | | | | | | |

| Operating expenses | 4,207 | | | | 4,243 | | | | 4,387 | | |

| Total costs and expenses | 72,087 | | | | 81,446 | | | | 124,942 | | |

| Income from continuing operations | 2,417 | | | | 4,101 | | | | 3,775 | | |

| Loss from discontinued operations | — | | | | — | | | | (64 | | ) |

| Continuing operations | $ | 2,289 | | | $ | 3,990 | | | $ | 3,694 | |

| Discontinued operations | — | | | | — | | | | (64 | | ) |

| Total | $ | 2,289 | | | $ | 3,990 | | | $ | 3,630 | |

| Continuing operations | $ | 4.94 | | | $ | 8.00 | | | $ | 7.00 | |

| Discontinued operations | — | | | | — | | | | (0.12 | | ) |

| Total | $ | 4.94 | | | $ | 8.00 | | | $ | 6.88 | |

| Continuing operations | $ | 4.94 | | | $ | 7.99 | | | $ | 6.97 | |

| Total | $ | 4.94 | | | $ | 7.99 | | | $ | 6.85 | |

| Net gain on derivative instruments designated and qualifying as cash flow hedges | — | | | | — | | | | 1 | | |

| Balance as of December 31, 2013 | $ | 7 | | | $ | 7,187 | | | $ | (7,054 | ) | | $ | 18,970 | | | $ | 350 | | | $ | 19,460 | | | $ | 486 | | | $ | 19,946 | |

| Net income | — | | | | — | | | | — | | | | 3,630 | | | | — | | | | 3,630 | | | | 81 | | | | 3,711 | | |

| Stock issuances | — | | | | (178 | | ) | | 225 | | | | — | | | | — | | | | 47 | | | | — | | | | 47 | | |

| Stock purchases | — | | | | — | | | | (128 | | ) | | — | | | | — | | | | (128 | | ) | | — | | | | (128 | | ) |

| Stock issuances | — | | | | (155 | | ) | | 189 | | | | — | | | | — | | | | 34 | | | | — | | | | 34 | | |

| Stock purchases | — | | | | — | | | | (196 | | ) | | — | | | | — | | | | (196 | | ) | | — | | | | (196 | | ) |

| Stock issuances | — | | | | (89 | | ) | | 95 | | | | — | | | | — | | | | 6 | | | | — | | | | 6 | | |

| Stock purchases | — | | | | — | | | | (61 | | ) | | — | | | | — | | | | (61 | | ) | | — | | | | (61 | | ) |

| Aruba Refinery asset retirement expense and other | — | | | | — | | | | 63 | | |

| Distributions to noncontrolling interests (public unitholders) of Valero Energy Partners LP | (30 | | ) | | (20 | | ) | | (12 | | ) |

We operated under two reportable segments, refining and ethanol.

Certain amounts reported as of December 31, 2015 have been reclassified to conform to the 2016 presentation, including the retrospective adoption of certain amendments to the Accounting Standards Codification (ASC) effective January 1, 2016.

The adoption of Accounting Standards Update (ASU) No. 2015-15, “Interest–Imputation of Interest (Subtopic 835-30),” resulted in the reclassification of certain debt issuance costs from “deferred charges and other assets, net” to “debt and capital lease obligations, less current portion.” The adoption of ASU 2015-17, “Income Taxes (Topic 740)” resulted in the reclassification of current deferred income tax assets and current deferred income tax liabilities to noncurrent deferred income tax liabilities.

The following table presents our previously reported balance sheet line items retrospectively adjusted for the adoption of these pronouncements (in millions):

| | Previously Reported | | | | Reclassifications | | | | Currently Reported | | |

| Current deferred income taxes | $ | 74 | | | $ | (74 | ) | | $ | — | |

| Current deferred income taxes | 366 | | | | (366 | | ) | | — | | |

| Deferred income taxes | 6,768 | | | | 292 | | | | 7,060 | | |

These financial statements include the accounts of Valero, our subsidiaries, and the accounts of partnerships and joint ventures that we control through an ownership interest greater than 50 percent or through a controlling financial interest with respect to our variable interest entities (VIEs).

Market value is determined based on the net realizable value of the inventories.

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 December 31, [removed: 2016.][added: 2017.]

The management report on Valero’s internal control over financial reporting required by Item 9A appears in Item 8 on page [removed: 66] [added: 65] of this report, and is incorporated herein by reference.

KPMG LLP’s report on Valero’s internal control over financial reporting appears in Item 8 beginning on page [removed: 68] [added: 67] of this report, and is incorporated herein by reference.

We continue the implementation process to prepare for the adoption of ASU No. 2016-02, “Leases (Topic 842),” which we discuss more fully in Note 1 of Notes to Consolidated Financial Statements.

We expect that there will be changes affecting our internal control over financial reporting in conjunction with adopting this standard.

The most significant changes we expect relate to the implementation of a lease evaluation system and a lease accounting system, including the integration of our lease accounting system with our general ledger and modifications to the related procurement and payment processes.

The information required by Items 10 through 14 of Form 10-K is incorporated herein by reference to the definitive proxy statement for our [removed: 2017] [added: 2018] annual meeting of stockholders.

We will file the proxy statement with the SEC on or before March 31, [removed: 2017.][added: 2018.]

| [Management’s report on internal control over financial [removed: reporting](#s9BE9632039CC5BB692F0D99F10727D7A)] [added: reporting](#s7E7D3A0F86B25CF1AA7DF21AFA8F4467)] | [removed: [66](#s9BE9632039CC5BB692F0D99F10727D7A)] [added: [65](#s7E7D3A0F86B25CF1AA7DF21AFA8F4467)] |

| [Reports of independent registered public accounting [removed: firm](#s01F0ADF381E6587DB460B7460E0D5C80)] [added: firm](#s51FBCC8E68C5504E99116CF397129B84)] | [removed: [67](#s01F0ADF381E6587DB460B7460E0D5C80)] [added: [66](#s51FBCC8E68C5504E99116CF397129B84)] |

| [Consolidated balance sheets as of December 31, [removed: 2016] [added: 2017] and [removed: 2015](#sA1141206CEB85D6FA5A023649AC35AE9)] [added: 2016](#s9A951D2AB080531A9E18E310D5D771A2)] | [removed: [70](#sA1141206CEB85D6FA5A023649AC35AE9)] [added: [69](#s9A951D2AB080531A9E18E310D5D771A2)] |

| [Consolidated statements of income for the years ended December 31, [added: 2017,] 2016, [removed: 2015,] and [removed: 2014](#s04037A5A499B5E2C9F43A02960557C12)] [added: 2015](#s73AF0CEC6DD6543599379FCCE28ED007)] | [removed: [71](#s04037A5A499B5E2C9F43A02960557C12)] [added: [70](#s73AF0CEC6DD6543599379FCCE28ED007)] |

| [Consolidated statements of comprehensive income for the years ended December 31, [added: 2017,] 2016, [removed: 2015,] and [removed: 2014](#s76A404D4F16F581D8F1F9AC34C91B125)] [added: 2015](#s86F4A76B542B5FA4B9BC27CBBE546933)] | [removed: [72](#s76A404D4F16F581D8F1F9AC34C91B125)] [added: [71](#s86F4A76B542B5FA4B9BC27CBBE546933)] |

| [Consolidated statements of equity for the years ended December 31, [added: 2017,] 2016, [removed: 2015,] and [removed: 2014](#sD0DB4CF5EC9050459A033AA4D8DC9358)] [added: 2015](#sD041F2E540C2525FAE118F2374F25280)] | [removed: [73](#sD0DB4CF5EC9050459A033AA4D8DC9358)] [added: [72](#sD041F2E540C2525FAE118F2374F25280)] |

| [Consolidated statements of cash flows for the years ended December 31, [added: 2017,] 2016, [removed: 2015,] and [removed: 2014](#s3223C640FEEB5DBE92A014602C2659DF)] [added: 2015](#s35C9ED5654F45E33988170A1C2F5979A)] | [removed: [74](#s3223C640FEEB5DBE92A014602C2659DF)] [added: [73](#s35C9ED5654F45E33988170A1C2F5979A)] |

| [Notes to consolidated financial [removed: statements](#s9DB046DCBB9D5C5B84927A308F4A99DD)] [added: statements](#s22310909DD2B5EB6855EDF8EC034B464)] | [removed: [75](#s9DB046DCBB9D5C5B84927A308F4A99DD)] [added: [74](#s22310909DD2B5EB6855EDF8EC034B464)] |

| 3.01 | [removed: |] — | Amended and Restated Certificate of Incorporation of Valero Energy Corporation, formerly known as Valero Refining and Marketing Company–incorporated by reference to Exhibit 3.1 to Valero’s Registration Statement on Form S-1 (SEC File No. 333-27013) filed May 13, 1997. |

| [removed: 3.02 |] [added: [3.02](http://www.sec.gov/Archives/edgar/data/1035002/000095013404003420/d13299exv3w02.txt)] | — | [removed: Certificate] [added: [Certificate] of Amendment (July 31, 1997) to Restated Certificate of Incorporation of Valero Energy Corporation–incorporated by reference to Exhibit 3.02 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2003 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095013404003420/d13299exv3w02.txt)] |

| [removed: 3.03 |] [added: [3.03](http://www.sec.gov/Archives/edgar/data/1035002/000095013404003420/d13299exv3w03.txt)] | — | [removed: Certificate] [added: [Certificate] of Merger of Ultramar Diamond Shamrock Corporation with and into Valero Energy Corporation dated December 31, 2001–incorporated by reference to Exhibit 3.03 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2003 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095013404003420/d13299exv3w03.txt)] |

| [removed: 3.04 |] [added: [3.04](http://www.sec.gov/Archives/edgar/data/1035002/000089882202000035/exhibit3-1.txt)] | — | [removed: Amendment] [added: [Amendment] (effective December 31, 2001) to Restated Certificate of Incorporation of Valero Energy Corporation–incorporated by reference to Exhibit 3.1 to Valero’s Current Report on Form 8-K dated December 31, 2001, and filed January 11, 2002 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000089882202000035/exhibit3-1.txt)] |

| [removed: 3.05 |] [added: [3.05](http://www.sec.gov/Archives/edgar/data/1035002/000103500204000038/f10q093004exh03-04.htm)] | — | [removed: Second] [added: [Second] Certificate of Amendment (effective September 17, 2004) to Restated Certificate of Incorporation of Valero Energy Corporation–incorporated by reference to Exhibit 3.04 to Valero’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500204000038/f10q093004exh03-04.htm)] |

| [removed: 3.06 |] [added: [3.06](http://www.sec.gov/Archives/edgar/data/1035002/000095013405020997/d30089exv2w01.htm)] | — | [removed: Certificate] [added: [Certificate] of Merger of Premcor Inc. with and into Valero Energy Corporation effective September 1, 2005–incorporated by reference to Exhibit 2.01 to Valero’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095013405020997/d30089exv2w01.htm)] |

| [removed: 3.07 |] [added: [3.07](http://www.sec.gov/Archives/edgar/data/1035002/000095013406004061/d32462exv3w07.htm)] | — | [removed: Third] [added: [Third] Certificate of Amendment (effective December 2, 2005) to Restated Certificate of Incorporation of Valero Energy Corporation–incorporated by reference to Exhibit 3.07 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2005 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095013406004061/d32462exv3w07.htm)] |

| [removed: 3.08 |] [added: [3.08](http://www.sec.gov/Archives/edgar/data/1035002/000095012311053384/c17847exv4w8.htm)] | — | [removed: Fourth] [added: [Fourth] Certificate of Amendment (effective May 24, 2011) to Restated Certificate of Incorporation of Valero Energy Corporation–incorporated by reference to Exhibit 4.8 to Valero’s Current Report on Form 8-K dated and filed May 24, 2011 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095012311053384/c17847exv4w8.htm)] |

| [removed: 3.09 |] [added: [3.09](http://www.sec.gov/Archives/edgar/data/1035002/000119312516594127/d162819dex302.htm)] | — | [removed: Fifth] [added: [Fifth] Certificate of Amendment (effective May 13, 2016) to Restated Certificate of Incorporation of Valero Energy Corporation–incorporated by reference to Exhibit 3.02 to Valero’s Current Report on Form 8-K dated May 12, 2016, and filed May 18, 2016 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000119312516594127/d162819dex302.htm)] |

| [removed: 3.10 |] [added: [3.10](http://www.sec.gov/Archives/edgar/data/1035002/000119312517289621/d452366dex301.htm)] | — | [removed: Amended] [added: [Amended] and Restated Bylaws of Valero Energy Corporation–incorporated by reference to Exhibit 3.01 to Valero’s Current Report on Form 8-K dated September [removed: 21, 2016] [added: 20, 2017] and filed September [removed: 27, 2016] [added: 21, 2017] (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000119312517289621/d452366dex301.htm)] |

| [removed: 4.01 |] [added: [4.01](http://www.sec.gov/Archives/edgar/data/1035002/0001035002-98-000010.txt)] | — | [removed: Indenture] [added: [Indenture] dated as of December 12, 1997 between Valero Energy Corporation and The Bank of New York–incorporated by reference to Exhibit 3.4 to Valero’s Registration Statement on Form S-3 (SEC File No. 333-56599) filed June 11, [removed: 1998.] [added: 1998.](http://www.sec.gov/Archives/edgar/data/1035002/0001035002-98-000010.txt)] |

| [removed: 4.02 |] [added: [4.02](http://www.sec.gov/Archives/edgar/data/1035002/000095012900003531/ex4-6.txt)] | — | [removed: First] [added: [First] Supplemental Indenture dated as of June 28, 2000 between Valero Energy Corporation and The Bank of New York (including Form of 7 3/4% Senior Deferrable Note due 2005)–incorporated by reference to Exhibit 4.6 to Valero’s Current Report on Form 8-K dated June 28, 2000, and filed June 30, 2000 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095012900003531/ex4-6.txt)] |

| [removed: 4.03 |] [added: [4.03](http://www.sec.gov/Archives/edgar/data/1035002/000095012904004177/h16034exv4w7.txt)] | — | [removed: Indenture] [added: [Indenture] (Senior Indenture) dated as of June 18, 2004 between Valero Energy Corporation and Bank of New York–incorporated by reference to Exhibit 4.7 to Valero’s Registration Statement on Form S-3 (SEC File No. 333-116668) filed June 21, [removed: 2004.] [added: 2004.](http://www.sec.gov/Archives/edgar/data/1035002/000095012904004177/h16034exv4w7.txt)] |

| [removed: 4.04 |] [added: [4.04](http://www.sec.gov/Archives/edgar/data/1035002/000095012904004177/h16034exv4w8.txt)] | — | [removed: Form] [added: [Form] of Indenture related to subordinated debt securities–incorporated by reference to Exhibit 4.8 to Valero’s Registration Statement on Form S-3 (SEC File No. 333-116668) filed June 21, [removed: 2004.] [added: 2004.](http://www.sec.gov/Archives/edgar/data/1035002/000095012904004177/h16034exv4w8.txt)] |

| [removed: 4.05 |] [added: [4.05](http://www.sec.gov/Archives/edgar/data/1035002/000095012904004177/h16034exv4w1.txt)] | — | [removed: Specimen] [added: [Specimen] Certificate of Common Stock–incorporated by reference to Exhibit 4.1 to Valero’s Registration Statement on Form S-3 (SEC File No. 333-116668) filed June 21, [removed: 2004.] [added: 2004.](http://www.sec.gov/Archives/edgar/data/1035002/000095012904004177/h16034exv4w1.txt)] |

| [removed: +10.01 |] [added: [+10.02](http://www.sec.gov/Archives/edgar/data/1035002/000119312512081439/d307449dex101.htm)] | — | [removed: Valero] [added: [Valero] Energy Corporation Annual [removed: Bonus Plan, amended and restated as of July 29, 2009–incorporated] [added: Incentive Plan for Named Executive Officers–incorporated] by reference to Exhibit 10.01 to Valero’s Current Report on Form 8-K dated [removed: July 29, 2009,] [added: February 22, 2012,] and filed [removed: August 4, 2009] [added: February 27, 2012] (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000119312512081439/d307449dex101.htm)] |

| [removed: +10.02 |] [added: [+10.15](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000120/a1002changeofctrlseverance.htm)] | — | [added: [Form of Change of Control Severance Agreement (Tier II-A) between] Valero Energy Corporation [removed: Annual Incentive Plan for Named Executive Officers–incorporated] [added: and executive officer–incorporated] by reference to Exhibit [removed: 10.01] [added: 10.02] to Valero’s Current Report on Form 8-K dated [removed: February 22, 2012,] [added: November 2, 2016,] and filed [removed: February 27, 2012] [added: November 7, 2016] (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000120/a1002changeofctrlseverance.htm)] |

| [removed: +10.03 |] [added: [+10.03](http://www.sec.gov/Archives/edgar/data/1035002/000095012310018097/d70408exv10w2.htm)] | — | [removed: Valero] [added: [Valero] Energy Corporation 2005 Omnibus Stock Incentive Plan, amended and restated as of October 1, 2005–incorporated by reference to Exhibit 10.02 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2009 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095012310018097/d70408exv10w2.htm)] |

| [removed: +10.04 |] [added: [+10.04](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1004-12312015.htm)] | — | [removed: Valero] [added: [Valero] Energy Corporation 2011 Omnibus Stock Incentive Plan, amended and restated February 25, 2016–incorporated by reference to Exhibit 10.04 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2015 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1004-12312015.htm)] |

| [removed: +10.05 |] [added: [+10.05](http://www.sec.gov/Archives/edgar/data/1035002/000095013409003971/d66469exv10w04.htm)] | — | [removed: Valero] [added: [Valero] Energy Corporation Deferred Compensation Plan, amended and restated as of January 1, 2008–incorporated by reference to Exhibit 10.04 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2008 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095013409003971/d66469exv10w04.htm)] |

| [removed: +10.09 |] [added: [+10.06](http://www.sec.gov/Archives/edgar/data/1035002/000095013409003971/d66469exv10w08.htm)] | — | [removed: Valero] [added: [Valero] Energy Corporation Amended and Restated Supplemental Executive Retirement Plan, amended and restated as of November 10, 2008–incorporated by reference to Exhibit 10.08 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2008 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000095013409003971/d66469exv10w08.htm)] |

| [removed: +10.10 |] [added: [+10.07](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1010.htm)] | — | [removed: Valero] [added: [Valero] Energy Corporation Excess Pension Plan, as amended and restated effective December 31, 2011–incorporated by reference to Exhibit 10.10 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2011 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1010.htm)] |

| [removed: +10.11 |] [added: +10.08] | — | Form of Indemnity Agreement between Valero Energy Corporation (formerly known as Valero Refining and Marketing Company) and certain officers and directors–incorporated by reference to Exhibit 10.8 to Valero’s Registration Statement on Form S-1 (SEC File No. 333-27013) filed May 13, 1997. |

| [removed: +10.12 |] [added: [+10.09](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1012-12312015.htm)] | — | [removed: Schedule] [added: [Schedule] of Indemnity Agreements–incorporated by reference to Exhibit 10.12 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2015 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1012-12312015.htm)] |

| [removed: +10.13 |] [added: [+10.10](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1015.htm)] | — | [removed: Form] [added: [Form] of Change of Control Severance Agreement (Tier I) between Valero Energy Corporation and executive officer–incorporated by reference to Exhibit 10.15 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2011 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1015.htm)] |

| [removed: +10.14 |] [added: [+10.11](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1014-12312015.htm)] | — | [removed: Schedule] [added: [Schedule] of Tier I Change of Control Severance Agreements–incorporated by reference to Exhibit 10.14 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2015 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1014-12312015.htm)] |

| [removed: +10.15 |] [added: [+10.12](http://www.sec.gov/Archives/edgar/data/1035002/000103500214000008/vloexh1016-12312013.htm)] | — | [removed: Form] [added: [Form] of Change of Control Severance Agreement (Tier II) between Valero Energy Corporation and executive officer–incorporated by reference to Exhibit 10.16 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2013 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500214000008/vloexh1016-12312013.htm)] |

| [removed: +10.16 |] [added: [+10.13](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1016-12312015.htm)] | — | [removed: Schedule] [added: [Schedule] of Tier II Change of Control Severance Agreements–incorporated by reference to Exhibit 10.16 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2015 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500216000069/vloexh1016-12312015.htm)] |

| [removed: +10.17 |] [added: [+10.14](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1017.htm)] | — | [removed: Form] [added: [Form] of Amendment (dated January 7, 2013) to Change of Control Severance Agreements (to eliminate excise tax gross-up benefit)–incorporated by reference to Exhibit 10.17 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2012 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1017.htm)] |

| [removed: +10.20 |] [added: [+10.17](http://www.sec.gov/Archives/edgar/data/1035002/000103500217000002/exhibit1001formofamendment.htm)] | — | [removed: Form] [added: [Form] of Amendment (dated January 17, 2017) to Change of Control Severance Agreements, amending Section 9 thereof–incorporated by reference to Exhibit 10.01 to Valero’s Current Report on Form 8-K dated and filed January 17, 2017 (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500217000002/exhibit1001formofamendment.htm)] |

| [removed: +10.21 |] [added: [+10.19](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1021.htm)] | — | [removed: Form] [added: [Form] of [removed: Performance Share Award] [added: Stock Option] Agreement pursuant to the Valero Energy Corporation 2011 Omnibus Stock Incentive Plan–incorporated by reference to Exhibit [removed: 10.19] [added: 10.21] to Valero’s Annual Report on Form 10-K for the year ended December 31, [removed: 2013] [added: 2011] (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500212000008/a2011ex1021.htm)] |

| [removed: +10.22 |] [added: [+10.20](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1021.htm)] | — | [removed: Form] [added: [Form] of Performance [removed: Share Award] [added: Stock Option] Agreement [removed: (with Dividend Equivalent Award)] pursuant to the Valero Energy Corporation 2011 Omnibus Stock Incentive Plan–incorporated by reference to Exhibit [removed: 10.20] [added: 10.21] to Valero’s Annual Report on Form 10-K for the year ended December 31, [removed: 2014] [added: 2012] (SEC File No. [removed: 1-13175).] [added: 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500213000008/a2012ex1021.htm)] |

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| [*+10.01](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1001-12312017.htm) | — | [Valero Energy Corporation Annual Bonus Plan, amended and restated as of February 28, 2018.](https://www.sec.gov/Archives/edgar/data/1035002/000103500218000010/vloexh1001-12312017.htm) |

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| [+10.16](http://www.sec.gov/Archives/edgar/data/1035002/000103500217000009/vloexh1019-12312016.htm) | — | [Schedule of Tier II-A Change of Control Severance Agreements–incorporated by reference to Exhibit 10.19 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2016 (SEC File No. 1-13175).](http://www.sec.gov/Archives/edgar/data/1035002/000103500217000009/vloexh1019-12312016.htm) |

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| *+10.06 | | — | Form of Elective Deferral Agreement pursuant to the Valero Energy Corporation Deferred Compensation Plan. |

| *+10.07 | | — | Form of Investment Election Form pursuant to the Valero Energy Corporation Deferred Compensation Plan. |

| *+10.08 | | — | Form of Distribution Election Form pursuant to the Valero Energy Corporation Deferred Compensation Plan. |

| +10.18 | | — | Form of Change of Control Severance Agreement (Tier II-A) between Valero Energy Corporation and executive officer–incorporated by reference to Exhibit 10.02 to Valero’s Current Report on Form 8-K dated November 2, 2016, and filed November 7, 2016 (SEC File No. 1-13175). |

| *+10.19 | | — | Schedule of Tier II-A Change of Control Severance Agreements. |

| +10.24 | | — | Form of Performance Stock Option Agreement pursuant to the Valero Energy Corporation 2011 Omnibus Stock Incentive Plan–incorporated by reference to Exhibit 10.21 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2012 (SEC File No. 1-13175). |

| +10.25 | | — | Form of Restricted Stock Agreement pursuant to the Valero Energy Corporation 2011 Omnibus Stock Incentive Plan–incorporated by reference to Exhibit 10.25 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2012 (SEC File No. 1-13175). |

| *21.01 | | — | Valero Energy Corporation subsidiaries. |

| *23.01 | | — | Consent of KPMG LLP dated February 23, 2017. |

| 99.01 | | — | Audit Committee Pre-Approval Policy–incorporated by reference to Exhibit 99.01 to Valero’s Annual Report on Form 10-K for the year ended December 31, 2014 (SEC File No. 1-13175). |