Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate “internal control over financial reporting” (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) for Valero Energy Corporation. Our management evaluated the effectiveness of Valero’s internal control over financial reporting as of December 31, 2025. In its evaluation, management used the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management believes that as of December 31, 2025, 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 72 of this report.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Valero Energy Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Valero Energy Corporation and subsidiaries (the Company) as of December 31, 2025 and 2024, 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, 2025, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, 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 25, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 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.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. 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. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated

financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Sufficiency of audit evidence over quantities of inventories

As discussed in Note 4 to the consolidated financial statements, the Company held $7.6 billion of inventories as of December 31, 2025. The Company’s inventories are held across its refineries, renewable diesel plants, ethanol plants, and third-party locations.

We identified the evaluation of the sufficiency of audit evidence obtained related to the quantities of inventories at the multi-locations as a critical audit matter. Evaluating the sufficiency of audit evidence over quantities of inventories at the multi-locations required challenging auditor judgment to determine the nature and extent of procedures to be performed. This included determining the number of locations and which locations to visit.

The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over quantities of inventories at the multi-locations by evaluating:

homogeneity of the locations
historical locations visited and results of prior physical counts
inventory dollars by location.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the quantities of inventories held at multi-locations. This included certain controls related to the Company's inventory count process and reconciliations of inventories at the multi-locations. We assessed the recorded quantities of inventories by counting inventory quantities on a selection basis through location visits during the year and comparing counted quantities to the Company’s inventory records. We also obtained external confirmation of inventory quantities held at certain third-party locations. We evaluated the overall sufficiency of audit evidence obtained over the quantities of inventories at multi-locations by assessing the results of procedures performed including the appropriateness of the nature and extent of audit evidence.

Fair value of certain long-lived assets

As discussed in Note 1 to the consolidated financial statements, long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. A long-lived asset is not deemed recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived asset is not deemed recoverable, an impairment loss is recognized for the amount by which the carrying amount of the long-lived asset exceeds its fair value. As discussed in Note 2, as of March 31, 2025, the Company updated their evaluation of potential impairment and concluded that the carrying values of the Benicia and Wilmington refineries were not recoverable. As a result, the Company reduced the carrying values of these assets to their estimated fair values and recognized a combined asset impairment loss of $1.1 billion. As discussed in Note 19, the fair values of the refineries were determined using a market approach based on a comparison of recent property sales and other relevant real estate and market data.

We identified the evaluation of fair value of the Benicia and Wilmington refineries as a critical audit matter. Subjective and challenging auditor judgment was required to assess certain key assumptions used to value the Benicia and Wilmington refineries as changes in these key assumptions could have a significant impact on the fair values. Key assumptions included identification of comparable transactions and adjustments to the comparable market data based on the specific characteristics of the Benicia and Wilmington refineries. Additionally, the evaluation of the key assumptions required specialized skills and knowledge.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s impairment assessment process for long-lived assets. This included controls related to the selection and application of the key assumptions used to estimate the fair value of the Benicia and Wilmington refineries. We involved valuation professionals with specialized skills and knowledge, who assisted in assessing the reasonableness of the fair values associated with the Benicia and Wilmington refineries by:

developing independent fair value ranges for the Benicia and Wilmington refineries using the market approach and independently identified comparable market transactions and relevant market data
comparing the independent fair value estimate ranges to the Company’s fair value estimates for the Benicia and Wilmington refineries that were ultimately used to identify and record impairment.

/s/ KPMG LLP

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

San Antonio, Texas

February 25, 2026

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Valero Energy Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Valero Energy Corporation and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, 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, 2025, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2026 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. 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.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit 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. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

San Antonio, Texas

February 25, 2026

VALERO ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(millions of dollars, except par value)


	December 31,
	2025		2024
ASSETS
Current assets:
Cash and cash equivalents	$	4,688	$	4,657

Receivables, net	9,877		10,708
Inventories	7,591		7,761
Prepaid expenses and other	1,054		611
Total current assets	23,210		23,737
Property, plant, and equipment, at cost	50,091		52,368
Accumulated depreciation	(22,474)		(23,054)
Property, plant, and equipment, net	27,617		29,314
Deferred charges and other assets, net	7,161		7,092
Total assets	$	57,988	$	60,143
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and finance lease obligations	$	949	$	743
Accounts payable	10,139		12,092
Accrued expenses	1,403		1,130
Taxes other than income taxes payable	1,550		1,360
Income taxes payable	68		170
Total current liabilities	14,109		15,495
Debt and finance lease obligations, less current portion	9,670		9,720
Deferred income tax liabilities	5,146		5,267
Other long-term liabilities	2,458		2,140
Commitments and contingencies
Equity:
Valero Energy Corporation stockholders’ equity:
Common stock, $0.01 par value; 1,200,000,000 shares authorized; 673,501,593 and 673,501,593 shares issued	7		7
Additional paid-in capital	6,981		6,939
Treasury stock, at cost; 374,561,457 and 358,637,890 common shares	(30,753)		(28,178)
Retained earnings	47,959		47,016
Accumulated other comprehensive loss	(469)		(1,272)
Total Valero Energy Corporation stockholders’ equity	23,725		24,512
Noncontrolling interests	2,880		3,009
Total equity	26,605		27,521
Total liabilities and equity	$	57,988	$	60,143

See Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(millions of dollars, except per share amounts)


	Year Ended December 31,
	2025		2024		2023
Revenues (a)	$	122,687	$	129,881	$	144,766
Cost of sales:
Cost of materials and other	101,096		110,616		117,367
Taxes other than income taxes	6,720		5,900		5,720

Operating expenses (excluding depreciation and amortization expense reflected below)	6,344		5,831		6,089
Depreciation and amortization expense	3,095		2,729		2,658
Total cost of sales	117,255		125,076		131,834
Asset impairment loss	1,131		—		—
Other operating expenses	15		44		33
General and administrative expenses (excluding depreciation and amortization expense reflected below)	1,042		961		998
Depreciation and amortization expense	63		45		43
Operating income	3,181		3,755		11,858
Other income, net	380		499		502
Interest and debt expense, net of capitalized interest	(556)		(556)		(592)
Income before income tax expense	3,005		3,698		11,768
Income tax expense	759		692		2,619


Net income	2,246		3,006		9,149
Less: Net income (loss) attributable to noncontrolling interests	(102)		236		314
Net income attributable to Valero Energy Corporation stockholders	$	2,348	$	2,770	$	8,835








Earnings per common share	$	7.57	$	8.58	$	24.93
Weighted-average common shares outstanding (in millions)	309		322		353




Earnings per common share – assuming dilution	$	7.57	$	8.58	$	24.92
Weighted-average common shares outstanding – assuming dilution (in millions)	309		322		353
__________________________
Supplemental information:
(a) Includes excise taxes on sales by certain of our foreign operations	$	6,748	$	5,907	$	5,765

See Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(millions of dollars)


	Year Ended December 31,
	2025		2024		2023
Net income	$	2,246	$	3,006	$	9,149
Other comprehensive income (loss):
Foreign currency translation adjustment	659		(546)		433
Net gain on pension and other postretirement benefits	170		207		30
Net gain (loss) on cash flow hedges	24		(87)		90

Other comprehensive income (loss) before income tax expense	853		(426)		553
Income tax expense related to items of other comprehensive income (loss)	36		21		18
Other comprehensive income (loss)	817		(447)		535
Comprehensive income	3,063		2,559		9,684
Less: Comprehensive income (loss) attributable to noncontrolling interests	(88)		191		360
Comprehensive income attributable to Valero Energy Corporation stockholders	$	3,151	$	2,368	$	9,324

See Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(millions of dollars, except per share amounts)


	Valero Energy Corporation Stockholders’ Equity
	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total		Non- controlling Interests		Total Equity
Balance as of December 31, 2022	$	7	$	6,863	$	(20,197)	$	38,247	$	(1,359)	$	23,561	$	1,907	$	25,468
Net income	—		—		—		8,835		—		8,835		314		9,149
Dividends on common stock ($4.08 per share)	—		—		—		(1,452)		—		(1,452)		—		(1,452)
Stock-based compensation expense	—		94		—		—		—		94		—		94
Transactions in connection with stock-based compensation plans	—		(56)		63		—		—		7		—		7
Purchases of common stock for treasury	—		—		(5,188)		—		—		(5,188)		—		(5,188)
Contributions from noncontrolling interests	—		—		—		—		—		—		75		75
Distributions to noncontrolling interests	—		—		—		—		—		—		(164)		(164)

Other comprehensive income	—		—		—		—		489		489		46		535
Balance as of December 31, 2023	7		6,901		(25,322)		45,630		(870)		26,346		2,178		28,524
Net income	—		—		—		2,770		—		2,770		236		3,006
Dividends on common stock ($4.28 per share)	—		—		—		(1,384)		—		(1,384)		—		(1,384)
Stock-based compensation expense	—		89		—		—		—		89		—		89
Transactions in connection with stock-based compensation plans	—		(51)		52		—		—		1		—		1
Purchases of common stock for treasury	—		—		(2,908)		—		—		(2,908)		—		(2,908)
Contributions from noncontrolling interests	—		—		—		—		—		—		90		90
Distributions to noncontrolling interests	—		—		—		—		—		—		(182)		(182)
Conversion of IEnova Revolver debt to equity (see Notes 9 and 12)	—		—		—		—		—		—		732		732

Other comprehensive loss	—		—		—		—		(402)		(402)		(45)		(447)
Balance as of December 31, 2024	7		6,939		(28,178)		47,016		(1,272)		24,512		3,009		27,521
Net income (loss)	—		—		—		2,348		—		2,348		(102)		2,246
Dividends on common stock ($4.52 per share)	—		—		—		(1,405)		—		(1,405)		—		(1,405)
Stock-based compensation expense	—		100		—		—		—		100		—		100
Transactions in connection with stock-based compensation plans	—		(58)		59		—		—		1		—		1
Purchases of common stock for treasury	—		—		(2,634)		—		—		(2,634)		—		(2,634)
Contributions from noncontrolling interests	—		—		—		—		—		—		328		328
Distributions to noncontrolling interests	—		—		—		—		—		—		(369)		(369)


Other comprehensive income	—		—		—		—		803		803		14		817
Balance as of December 31, 2025	$	7	$	6,981	$	(30,753)	$	47,959	$	(469)	$	23,725	$	2,880	$	26,605

See Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions of dollars)


	Year Ended December 31,
	2025		2024		2023
Cash flows from operating activities:
Net income	$	2,246	$	3,006	$	9,149
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	3,158		2,774		2,701
Gain on early retirement of debt, net	—		—		(11)

Asset impairment loss	1,131		—		—

Deferred income tax expense (benefit)	(197)		(87)		103
Changes in operating assets and liabilities:
Current assets and current liabilities (see Note 18)	(192)		795		(2,326)
Deferred charges and other assets	(171)		(579)		(210)
Long-term liabilities	(136)		296		(127)
Other operating activities, net	(13)		478		(50)
Net cash provided by operating activities	5,826		6,683		9,229
Cash flows from investing activities:
Capital expenditures (excluding variable interest entities (VIEs))	(719)		(649)		(665)
Capital expenditures of VIEs:
Diamond Green Diesel Holdings LLC (DGD)	(71)		(250)		(235)
Other VIEs	(6)		(8)		(11)
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	(990)		(1,079)		(946)
Deferred turnaround and catalyst cost expenditures of DGD	(99)		(71)		(59)



Purchases of available-for-sale (AFS) debt securities	(27)		(29)		(276)
Proceeds from sales and maturities of AFS debt securities	30		81		314

Investments in nonconsolidated joint ventures	(3)		—		—
Other investing activities, net	40		24		13
Net cash used in investing activities	(1,845)		(1,981)		(1,865)
Cash flows from financing activities:
Proceeds from debt issuance and borrowings (excluding VIEs)	6,899		6,700		1,750
Proceeds from debt borrowings of VIEs:
DGD	675		410		550
Other VIEs	—		27		120
Repayments of debt and finance lease obligations (excluding VIEs)	(6,931)		(7,086)		(2,125)
Repayments of debt and finance lease obligations of VIEs:
DGD	(702)		(686)		(480)
Other VIEs	(35)		(13)		(77)
Premiums paid on early retirement of debt	—		—		(5)
Purchases of common stock for treasury	(2,598)		(2,875)		(5,136)
Payment of excise tax on purchases of common stock for treasury	(28)		(49)		—
Common stock dividend payments	(1,405)		(1,384)		(1,452)
Contributions from noncontrolling interests	328		90		75
Distributions to noncontrolling interests	(369)		(182)		(164)
Other financing activities, net	(16)		(1)		3
Net cash used in financing activities	(4,182)		(5,049)		(6,941)
Effect of foreign exchange rate changes on cash	237		(248)		139
Net increase (decrease) in cash, cash equivalents, and restricted cash	36		(595)		562
Cash, cash equivalents, and restricted cash at beginning of year (a)	4,829		5,424		4,862
Cash, cash equivalents, and restricted cash at end of year (a)	$	4,865	$	4,829	$	5,424

(a)Restricted cash is included in prepaid expenses and other in our consolidated balance sheets.

See Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

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

We are a multinational manufacturer and marketer of petroleum-based and low-carbon liquid transportation fuels and petrochemical products, and we sell our products primarily in the United States (U.S.), Canada, the United Kingdom (U.K.), Ireland, and Latin America. We own 15 petroleum refineries located in the U.S., Canada, and the U.K. with a combined throughput capacity of approximately 3.2 million barrels per day. We are a joint venture member in DGD, which produces low-carbon fuels at two plants located in the Gulf Coast region of the U.S. with a combined production capacity of approximately 1.2 billion gallons per year. We also own 12 ethanol plants located in the Mid-Continent region of the U.S. with a combined production capacity of approximately 1.7 billion gallons per year.

Basis of Presentation

General

These consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles (GAAP) and with the rules and regulations of the U.S. Securities and Exchange Commission (SEC).

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2025 presentation. The changes were due to the separate presentation of (i) taxes other than income taxes, which were previously included in cost of materials and other in our statements of income and (ii) changes in deferred charges and other assets and changes in long-term liabilities, which were previously included in “changes in deferred charges and credits and other operating activities, net” in our statements of cash flows.

Significant Accounting Policies

Principles of Consolidation

These financial statements include those of Valero, our wholly owned subsidiaries, and VIEs in which we have a controlling financial interest. The VIEs that we consolidate are described in Note 12. The ownership interests held by others in the VIEs are recorded as noncontrolling interests. Intercompany items and transactions have been eliminated in consolidation. Investments in less than wholly owned entities where we have significant influence are accounted for using the equity method.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash Equivalents

Our cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and have a maturity of three months or less when acquired.

Investments in Debt Securities

Investments in debt securities that have stated maturities of three months or less from the date of acquisition are classified as cash equivalents, and those with stated maturities of greater than three months but less than one year are classified as short-term investments, which are reflected in prepaid expenses and other in our balance sheets. Our investments in debt securities are classified as AFS and are subsequently measured and carried at fair value in our balance sheets with changes in fair value reported in other comprehensive income (loss) until realized. The cost of a security sold is determined using the first-in, first-out method.

Receivables

Trade receivables are carried at amortized cost, which is the original invoice amount adjusted for cash collections, write-offs, and foreign exchange. We maintain an allowance for credit losses, which is adjusted based on management’s assessment of our customers’ historical collection experience, known or expected credit risks, and industry and economic conditions.

Inventories

The cost of (i) refinery feedstocks and refined petroleum products and blendstocks, (ii) renewable diesel feedstocks (i.e., waste and renewable feedstocks, predominantly animal fats, used cooking oils, vegetable oils, and inedible distillers corn oils (DCOs)) and products, and (iii) ethanol feedstocks and products is determined under the last-in, first-out (LIFO) method using the dollar-value LIFO approach, with any increments valued based on average purchase prices during the year. Our LIFO inventories are carried at the lower of cost or market. The cost of products purchased for resale and the cost of materials and supplies are determined principally under the weighted-average cost method. Our non-LIFO inventories are carried at the lower of cost or net realizable value.

In determining the market value of our inventories, we assume that feedstocks are converted into products, which requires us to make estimates regarding the products expected to be produced from those feedstocks and the conversion costs required to convert those feedstocks into products. We also estimate the usual and customary transportation costs required to move the inventory from our plants to the appropriate points of sale. We then apply an estimated selling price to our inventories. 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. To the extent the aggregate market value of our LIFO inventories subsequently increases, we recognize an increase to the value of our inventories (not to exceed cost) and a gain in our statements of income.

Property, Plant, and Equipment

The cost of property, plant, and equipment (property assets) purchased or constructed, including betterments of property assets, is capitalized. However, the cost of repairs to and normal maintenance of property assets is expensed as incurred. Betterments of property assets are those that extend the useful life, increase the capacity or improve the operating efficiency of the asset, or improve the safety of our

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

operations. The cost of property assets constructed includes interest and certain overhead costs allocable to the construction activities.

Our operations are highly capital intensive. Each of our refineries and plants comprises a large base of property assets, consisting of a series of interconnected, highly integrated and interdependent crude oil and other feedstock processing facilities and supporting infrastructure (Units) and other property assets that support our business. Improvements consist of the addition of new Units and other property assets and betterments of those Units and assets. We plan for these improvements by developing a multi-year capital investment program that is updated and revised based on changing internal and external factors.

Depreciation of crude oil processing and waste and renewable feedstocks processing facilities is recorded on a straight-line basis over the estimated useful lives of these assets primarily using the composite method of depreciation. We maintain a separate composite group of property assets for each of our refineries and our renewable diesel plants. We estimate the useful life of each group based on an evaluation of the property assets comprising the group, and such evaluations consist of, but are not limited to, the physical inspection of the assets to determine their condition, consideration of the manner in which the assets are maintained, assessment of the need to replace assets, and evaluation of the manner in which improvements impact the useful life of the group. The estimated useful lives of our composite groups range primarily from 20 to 30 years.

Under the composite method of depreciation, the cost of an improvement is added to the composite group to which it relates and is depreciated over that group’s estimated useful life. We design improvements to our crude oil processing and waste and renewable feedstocks processing facilities in accordance with engineering specifications, design standards, and practices we believe to be accepted in our industry, and these improvements have design lives consistent with our estimated useful lives. Therefore, we believe the use of the group life to depreciate the cost of improvements made to the group is reasonable because the estimated useful life of each improvement is consistent with that of the group.

Also under the composite method of depreciation, the historical cost of a minor property asset (net of salvage value) that is retired or replaced is charged to accumulated depreciation and no gain or loss is recognized. However, a gain or loss is recognized for a major property asset that is retired, replaced, sold, or for an abnormal disposition of a property asset (primarily involuntary conversions). Gains and losses are reflected in depreciation and amortization expense, unless such amounts are reported separately due to materiality.

Depreciation of our corn processing facilities, administrative buildings, and other assets is recorded on a straight-line basis over the estimated useful lives of the related assets using the component method of depreciation. The estimated useful life of our corn processing facilities is 20 years.

Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the related asset. Finance lease right-of-use assets are amortized as discussed below under “Leases.”

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Deferred Charges and Other Assets

“Deferred charges and other assets, net” primarily include the following:

turnaround costs, which are incurred in connection with planned major maintenance activities at our refineries, renewable diesel plants, and ethanol plants, are deferred when incurred and amortized on a straight-line basis over the period of time estimated to lapse until the next turnaround occurs;
fixed-bed catalyst costs, representing the cost of catalyst that is changed out at periodic intervals when the quality of the catalyst has deteriorated beyond its prescribed function, are deferred when incurred and amortized on a straight-line basis over the estimated useful life of the specific catalyst;
operating lease right-of-use assets, which are amortized as discussed below under “Leases”;
investments in nonconsolidated joint ventures;
surplus assets in our funded pension plans, which represent the fair value of our plan assets that exceed our current projected benefit obligation;
purchased compliance credits, which are described below under “Costs of Renewable and Low-Carbon Fuel Programs”;
goodwill;
intangible assets, which are amortized over their estimated useful lives; and
noncurrent income taxes receivable.

Leases

We evaluate if a contract is or contains a lease at inception of the contract. If we determine that a contract is or contains a lease, we recognize a right-of-use (ROU) asset and lease liability at the commencement date of the lease based on the present value of lease payments over the lease term. The present value of the lease payments is determined by using the implicit rate when readily determinable. If not readily determinable, our centrally managed treasury group provides an incremental borrowing rate based on quoted interest rates obtained from financial institutions. The rate used is for a term similar to the duration of the lease based on information available at the commencement date. Lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise those options.

We recognize ROU assets and lease liabilities for leasing arrangements with terms greater than one year. Except for the marine transportation asset class, we account for lease and nonlease components in a contract as a single lease component for all classes of underlying assets. Our marine transportation contracts include nonlease components, such as maintenance and crew costs. We allocate the consideration in these contracts based on pricing information provided by the third-party broker.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Expense for an operating lease is recognized as a single lease cost on a straight-line basis over the lease term and is reflected in the appropriate income statement line item based on the leased asset’s function. Amortization expense of a finance lease ROU asset is recognized on a straight-line basis over the lesser of the useful life of the leased asset or the lease term. However, if the lessor transfers ownership of the finance lease ROU asset to us at the end of the lease term, the finance lease ROU asset is amortized over the useful life of the leased asset. Amortization expense is reflected in depreciation and amortization expense. Interest expense is incurred based on the carrying value of the lease liability and is reflected in “interest and debt expense, net of capitalized interest.”

Impairment of Assets

Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. A long-lived asset is not deemed recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived asset is not deemed recoverable, an impairment loss is recognized for the amount by which the carrying amount of the long-lived asset exceeds its fair value, with fair value determined based on the most appropriate valuation approach or combination thereof. See Note 2 for information regarding the asset impairment loss recognized during the year ended December 31, 2025 associated with our operations in California.

We evaluate our equity method investments for impairment when there is evidence that we may not be able to recover the carrying amount of our investments or the investee is unable to sustain an earnings capacity that justifies the carrying amount. A loss in the value of an investment that is other than a temporary decline is recognized based on the difference between the estimated current fair value of the investment and its carrying amount.

Goodwill is not amortized, but is tested for impairment annually on October 1st and in interim periods when events or changes in circumstances indicate that the fair value of a reporting unit with goodwill is below its carrying amount. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit.

Asset Retirement Obligations

We record a liability, which is referred to as an asset retirement obligation, at fair value for the estimated cost to retire a tangible long-lived asset at the time we incur that liability, which is generally when the asset is purchased, constructed, or leased. We record the liability when we have a legal obligation to incur costs to retire the asset and when a reasonable estimate of the fair value of the liability can be made. If a reasonable estimate cannot be made at the time the liability is incurred, we record the liability when sufficient information is available to estimate the liability’s fair value. See Notes 2 and 8 for information regarding the expected asset retirement obligations that we recognized in connection with our plan to idle the processing units and cease refining operations at our Benicia Refinery.

Environmental Matters

Liabilities for future remediation costs are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Other than for assessments, the timing and magnitude of these accruals generally are based on the completion of investigations or other studies or a

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

commitment to a formal plan of action. Amounts recorded for environmental liabilities have not been reduced by possible recoveries from third parties and have not been measured on a discounted basis.

Legal Contingencies

We are subject to legal proceedings, claims, and liabilities that arise in the ordinary course of business. We accrue losses associated with legal claims when such losses are probable and reasonably estimable. If we determine that a loss is probable and cannot estimate a specific amount for that loss but can estimate a range of loss, the best estimate within the range is accrued. If no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. Estimates are adjusted as additional information becomes available or circumstances change. Legal defense costs associated with loss contingencies are expensed in the period incurred.

Foreign Currency Translation

Generally, our foreign subsidiaries use their local currency as their functional currency. Balance sheet amounts are translated into U.S. dollars using exchange rates in effect as of the balance sheet date. Income statement amounts are translated into U.S. dollars using the exchange rates in effect at the time the underlying transactions occur. Foreign currency translation adjustments are recorded as a component of accumulated other comprehensive loss.

Revenue Recognition

Our revenues are primarily generated from contracts with customers. We generate revenue from contracts with customers from the sale of products by our Refining, Renewable Diesel, and Ethanol segments. Revenues are recognized when we satisfy our performance obligation to transfer products to our customers, which typically occurs at a point in time upon shipment or delivery of the products, and for an amount that reflects the transaction price that is allocated to the performance obligation.

The customer is able to direct the use of, and obtain substantially all of the benefits from, the products at the point of shipment or delivery. As a result, we consider control to have transferred upon shipment or delivery because we have a present right to payment at that time, the customer has legal title to the asset, we have transferred physical possession of the asset, and the customer has significant risks and rewards of ownership of the asset.

Our contracts with customers state the final terms of the sale, including the description, quantity, and price for goods sold. Payment terms for our customers vary by type of customer and method of delivery; however, the payment is typically due in full within two to ten days from the date of invoice. In the normal course of business, we generally do not accept product returns.

The transaction price is the consideration that we expect to be entitled to in exchange for our products. The transaction price for substantially all of our contracts is generally based on commodity market pricing (i.e., variable consideration). As such, this market pricing may be constrained (i.e., not estimable) at the inception of the contract but will be recognized based on the applicable market pricing, which will be known upon transfer of the goods to the customer. Some of our contracts also contain variable consideration in the form of sales incentives to our customers, such as discounts and rebates. For contracts that include variable consideration, we estimate the factors that determine the variable consideration in order to establish the transaction price.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We have elected to exclude from the measurement of the transaction price all taxes assessed by government authorities that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer (e.g., sales tax, use tax, value-added tax, etc.). We continue to include in the transaction price excise taxes that are imposed on certain inventories in our foreign operations. The amount of such taxes is provided in supplemental information in a footnote to the statements of income.

There are instances where we provide shipping services in relation to the goods sold to our customer. Shipping and handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are included in cost of materials and other. We have elected to account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities rather than as a promised service, and we have included these activities in cost of materials and other.

We enter into certain purchase and sale arrangements with the same counterparty that are deemed to be made in contemplation of one another. We combine these transactions and present the net effect in cost of materials and other. We also enter into refined petroleum product exchange transactions to fulfill sales contracts with our customers by accessing refined petroleum products in markets where we do not operate our own refineries. These refined petroleum product exchanges are accounted for as exchanges of nonmonetary assets, and no revenues are recorded on these transactions.

Cost Classifications

Cost of materials and other primarily includes the cost of materials that are a component of our products sold. These costs include (i) the direct cost of materials (such as crude oil and other refinery feedstocks, refined petroleum products and blendstocks, renewable diesel feedstocks and products, and ethanol feedstocks and products) that are a component of our products sold; (ii) costs related to the delivery (such as shipping and handling costs) of products sold; (iii) costs related to our obligations to comply with the Renewable and Low-Carbon Fuel Programs defined below under “Costs of Renewable and Low-Carbon Fuel Programs”; (iv) U.S. federal tax incentives related to low-carbon fuels; and (v) gains and losses on our commodity derivative instruments.

Taxes other than income taxes includes excise taxes on sales by certain of our foreign operations.

Operating expenses (excluding depreciation and amortization expense) includes costs to operate our refineries (and associated logistics assets), renewable diesel plants, and ethanol plants. These costs primarily include employee-related expenses, energy and utility costs, catalysts and chemical costs, and repair and maintenance expenses.

Depreciation and amortization expense associated with our operations is separately presented in our statements of income as a component of cost of sales and general and administrative expenses and is disclosed by reportable segment in Note 17.

Other operating expenses include costs, if any, incurred by our reportable segments that are not associated with our cost of sales.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Clean Fuel Production Credit

Effective January 1, 2025, Section 45Z of the U.S. Internal Revenue Code of 1986, as amended (the Code), provides a federal income tax credit to producers for qualifying sales of clean transportation fuels produced domestically and sold to unrelated parties. The credit amount is based on an emissions factor that reflects the relative carbon intensity of the fuel. DGD is eligible to claim the clean fuel production credit for the sale of qualifying renewable diesel, renewable naphtha, and neat sustainable aviation fuel (SAF)5 produced at its plants.

The clean fuel production credits, which are nonrefundable, transferable tax credits, are recognized when it is reasonably assured that DGD has complied with the applicable conditions and expects to receive the credits. DGD’s joint venture members may elect to either (i) receive the tax credits attributable to their ownership interest to claim on their U.S. federal income tax return or (ii) have DGD sell the tax credits to third parties and receive cash distributions from the proceeds of those sales. We have elected to receive our share of the tax credits and record them as a reduction of income taxes payable, and the other joint venture member has elected to have DGD sell its share of the tax credits and receive cash proceeds from those sales. Clean fuel production credits that have not been sold on behalf of the other joint venture member as of the balance sheet date are reflected in prepaid expenses and other. Clean fuel production credits that are expected to be sold are recorded at fair value based on the expected sales price. See Note 19 for disclosure of our fair value measurements.

Costs of Renewable and Low-Carbon Fuel Programs

We purchase credits to comply with various government and regulatory blending programs, such as the U.S. Environmental Protection Agency’s Renewable Fuel Standard, California Low Carbon Fuel Standard, Canada Clean Fuel Regulations, U.K. Renewable Transport Fuel Obligation, and similar programs in other jurisdictions in which we operate (collectively, the Renewable and Low-Carbon Fuel Programs). We purchase compliance credits (primarily Renewable Identification Numbers (RINs)) to comply with government regulations that require us to blend a certain volume of renewable and low-carbon fuels into the petroleum-based transportation fuels we produce in, or import into, the respective jurisdiction to be consumed therein based on annual quotas. To the degree that we are unable to blend renewable and low-carbon fuels at the required quotas, we must purchase compliance credits to meet our obligations.

The costs of purchased compliance credits are charged to cost of materials and other when such credits are needed to satisfy our compliance obligations. To the extent we have not purchased enough credits nor entered into fixed-price purchase contracts to satisfy our obligations as of the balance sheet date, we charge cost of materials and other for such deficiency based on the market prices of the credits as of the balance sheet date, and we record a liability for our obligation to purchase those credits. See Note 19 for disclosure of our fair value liability. If the number of purchased credits exceeds our obligation as of the balance sheet date, we record a prepaid asset equal to the amount paid for those excess credits.

___________________________________________________________________

5 DGD produces synthetic paraffinic kerosene (SPK), a renewable blending component, using the Hydrotreated Esters and Fatty Acids (HEFA) process. SPK is also commonly referred to as “neat SAF.” Current aviation regulations allow SPK to be blended up to 50 percent with conventional jet fuel for use in an aircraft. This blend is commonly referred to as “blended SAF” or “SAF.”

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-Based Compensation

Compensation expense for our share-based compensation plans is based on the fair value of the awards granted and is recognized on a straight-line basis over the shorter of (i) the requisite service period of each award or (ii) the period from the grant date to the date retirement eligibility is achieved if that date is expected to occur during the vesting period established in the award.

Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred amounts are measured using enacted tax rates expected to apply to taxable income in the year those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by unrecognized tax benefits, if such items may be available to offset the unrecognized tax benefit. Income tax effects are released from accumulated other comprehensive loss to retained earnings, when applicable, on an individual item basis as those items are reclassified into income.

We have elected to classify any interest expense and penalties related to the underpayment of income taxes in income tax expense.

We have elected to treat the global intangible low-taxed income tax as a period expense.

Earnings per Common Share

Earnings per common share is computed by dividing net income attributable to Valero stockholders by the weighted-average number of common shares outstanding for the year. Participating securities are included in the computation of basic earnings per share using the two-class method. Earnings per common share – assuming dilution is computed by dividing net income attributable to Valero stockholders by the weighted-average number of common shares outstanding for the year increased by the effect of dilutive securities. Earnings per common share – assuming dilution is also determined using the two-class method, unless the treasury stock method is more dilutive. Potentially dilutive securities are excluded from the computation of earnings per common share – assuming dilution when the effect of including such shares would be antidilutive.

Derivatives and Hedging

All derivative instruments, not designated as normal purchases or sales, are recognized in our balance sheets as either assets or liabilities measured at their fair values with changes in fair value recognized currently in income or in other comprehensive income (loss) as appropriate. The cash flow effects of all of our derivative instruments are reflected in operating activities in our statements of cash flows.

Accounting Pronouncement Recently Adopted

ASU 2023-09

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to improve annual income tax disclosures by requiring further disaggregation of information in the rate reconciliation and disaggregation of income taxes paid by jurisdiction. This ASU also includes certain other amendments intended to improve the effectiveness of annual income tax disclosures. We adopted this

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ASU effective January 1, 2025 on a retrospective basis and it did not affect our financial position or our results of operations, but did result in additional annual disclosures.

Accounting Pronouncement Not Yet Adopted

ASU 2024-03

In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting—Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, to improve interim and annual disclosures about a public business entity’s expenses by requiring more detailed information in the notes to the financial statements about certain expense categories, including purchases of inventory, employee compensation, depreciation, amortization, and selling expenses. We expect to adopt this ASU effective January 1, 2027 and the adoption will not affect our financial position or our results of operations, but will result in additional disclosures.

2. IMPAIRMENT AND OTHER MATTERS

In recent years, the State of California adopted legislation that has subjected our refining and marketing operations to potential increased operational restrictions and new reporting requirements. The considerable uncertainty and potential adverse effects on our operations and financial performance resulted in the evaluation of strategic alternatives for our operations in California.

In March 2025, we approved a plan with respect to the operations at our Benicia Refinery and currently intend to idle the processing units and cease refining operations by the end of April 2026. In addition, we considered strategic alternatives for our remaining operations in California. As a result, we updated our evaluation of potential impairment and concluded that the carrying values of our Benicia and Wilmington refineries were not recoverable as of March 31, 2025. Therefore, we reduced the carrying values of these assets to their estimated fair values of $722 million and $847 million, respectively, and recognized a combined asset impairment loss of $1.1 billion in our Refining segment in March 2025. See Note 19 for disclosure related to the method used to determine the fair values.

Included in the recoverability assessments discussed above was the recognition of expected asset retirement obligations of $337 million, which primarily reflects the fair value of estimated costs for certain legal obligations to decommission the assets based on a range of potential settlement dates as of March 31, 2025.

In connection with our plan to idle the processing units and cease refining operations at our Benicia Refinery, we shortened the estimated useful life of the refinery assets, and as a result, will depreciate the revised carrying value of the net property, plant, and equipment and other noncurrent assets to the estimated salvage value of $107 million through April 2026. Accordingly, we recorded incremental depreciation of approximately $300 million in depreciation and amortization expense during the year ended December 31, 2025.

In anticipation of a phased plan to idle processing units beginning in February 2026, we reduced certain inventory levels during the fourth quarter of 2025. This reduction resulted in the liquidation of LIFO inventory layers with historical costs higher than current costs. As a result, cost of materials and other increased by $37 million for the year ended December 31, 2025.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

We also implemented a transition plan for the affected employees of the Benicia Refinery, which includes retention incentive payments and separation benefits. As a result, we recognized a liability of $50 million for these one-time costs, which we expect to distribute to eligible employees by the end of the second quarter of 2026. These costs are included in operating expenses (excluding depreciation and amortization expense) for the year ended December 31, 2025 and are attributable to our Refining segment.

We continue to evaluate strategic alternatives for our remaining operations in California.

3. RECEIVABLES

Receivables consisted of the following (in millions):


	December 31,
	2025		2024
Receivables from contracts with customers	$	6,233	$	5,812
Receivables from certain purchase and sale arrangements	2,993		3,939
Receivables before allowance for credit losses	9,226		9,751
Allowance for credit losses	(19)		(20)
Receivables after allowance for credit losses	9,207		9,731
Income taxes receivable	236		272
Other receivables	434		705
Receivables, net	$	9,877	$	10,708

4. INVENTORIES

Inventories consisted of the following (in millions):


	December 31,
	2025		2024
Refinery feedstocks	$	1,880	$	2,167
Refined petroleum products and blendstocks	4,182		4,016
Renewable diesel feedstocks and products	809		872
Ethanol feedstocks and products	314		342
Materials and supplies	406		364


Inventories	$	7,591	$	7,761

During the year ended December 31, 2025, we liquidated certain LIFO inventory layers that were established in prior years at costs higher than current costs, resulting in an increase in cost of materials and other. As discussed in Note 2, LIFO inventory levels related to our California operations decreased during 2025 in anticipation of our phased plan to idle the processing units and cease refining operations at the Benicia Refinery by the end of April 2026. This liquidation increased cost of materials and other by $37 million.

As of December 31, 2025 and 2024, the replacement cost (market value) of LIFO inventories exceeded their LIFO carrying amounts by $2.6 billion and $4.0 billion, respectively. Our non-LIFO inventories

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

accounted for $1.2 billion and $1.3 billion of our total inventories as of December 31, 2025 and 2024, respectively.

5. LEASES

General

We have entered into long-term leasing arrangements for the right to use various classes of underlying assets as follows:

Pipelines, Terminals, and Tanks includes facilities and equipment used in the storage, transportation, production, and sale of our feedstocks and products;
Marine Transportation includes time charters for ocean-going tankers and coastal vessels;
Rail Transportation includes railcars and related storage facilities; and
Other includes machinery, equipment, and various facilities used in our operations; facilities and equipment related to industrial gases and power used in our operations; land and rights-of-way associated with our refineries, plants, and pipelines and other logistics assets, as well as office facilities; and equipment primarily used at our corporate offices, such as printers and copiers.

In addition to fixed lease payments, some arrangements contain provisions for variable lease payments. Certain leases for pipelines, terminals, and tanks provide for variable lease payments based on, among other things, throughput volumes in excess of a base amount. Certain marine transportation leases contain provisions for payments that are contingent on usage. Additionally, if the rental increases are not scheduled in the lease, such as an increase based on subsequent changes in the index or rate, those rents are considered variable lease payments. In all instances, variable lease payments are recognized in the period in which the obligation for those payments is incurred.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Lease Costs and Other Supplemental Information

Our total lease cost comprises costs that are included in our statements of income, as well as costs capitalized as part of an item of property, plant, and equipment or inventory. Total lease cost was as follows (in millions):


	Pipelines, Terminals, and Tanks			Transportation					Other		Total
			Marine			Rail
Year ended December 31, 2025
Finance lease cost:
Amortization of ROU assets	$	303		$	—		$	3	$	31	$	337
Interest on lease liabilities	103			—			1		8		112
Operating lease cost	186			200			89		42		517
Variable lease cost	102			29			1		9		141
Short-term lease cost	16			291			3		121		431
Sublease income	—			(23)			—		(2)		(25)
Total lease cost	$	710		$	497		$	97	$	209	$	1,513

Year ended December 31, 2024
Finance lease cost:
Amortization of ROU assets	$	247		$	—		$	3	$	33	$	283
Interest on lease liabilities	107			—			—		9		116
Operating lease cost	167			210			89		42		508
Variable lease cost	114			36			—		10		160
Short-term lease cost	27			196			3		134		360
Sublease income	—			(33)			—		(2)		(35)
Total lease cost	$	662		$	409		$	95	$	226	$	1,392

Year ended December 31, 2023
Finance lease cost:
Amortization of ROU assets	$	213		$	—		$	3	$	30	$	246
Interest on lease liabilities	101			—			1		5		107
Operating lease cost	166			127			80		45		418
Variable lease cost	114			61			—		8		183
Short-term lease cost	18			125			2		112		257
Sublease income	—			(29)			—		(2)		(31)
Total lease cost	$	612		$	284		$	86	$	198	$	1,180

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents additional information related to our operating and finance leases (in millions, except for lease terms and discount rates):


	December 31, 2025						December 31, 2024
	Operating Leases			Finance Leases			Operating Leases			Finance Leases
Supplemental balance sheet information
ROU assets, net reflected in the following balance sheet line items:
Property, plant, and equipment, net	$	—		$	2,078		$	—		$	2,218
Deferred charges and other assets, net	1,072			—			1,098			—
Total ROU assets, net	$	1,072		$	2,078		$	1,098		$	2,218

Current lease liabilities reflected in the following balance sheet line items:
Current portion of debt and finance lease obligations	$	—		$	254		$	—		$	244
Accrued expenses	419			—			378			—
Noncurrent lease liabilities reflected in the following balance sheet line items:
Debt and finance lease obligations, less current portion	—			2,104			—			2,134
Other long-term liabilities	665			—			699			—
Total lease liabilities	$	1,084		$	2,358		$	1,077		$	2,378

Other supplemental information
Weighted-average remaining lease term	5.8 years			13.2 years			6.2 years			13.2 years
Weighted-average discount rate	5.8		%	5.1		%	5.9		%	4.9		%

Supplemental cash flow information related to our operating and finance leases is presented in Note 18.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Maturity Analyses

As of December 31, 2025, the remaining minimum lease payments due under our long-term leases were as follows (in millions):


	Operating Leases		Finance Leases
2026	$	457	$	361
2027	260		312
2028	166		310
2029	100		280
2030	53		257
Thereafter	310		1,877
Total undiscounted lease payments	1,346		3,397
Less: Amount associated with discounting	262		1,039
Total lease liabilities	$	1,084	$	2,358

6. PROPERTY, PLANT, AND EQUIPMENT

Summary by Major Class

Major classes of property, plant, and equipment, including assets held under finance leases, consisted of the following (in millions):


	December 31,
	2025		2024
Land	$	509	$	500
Crude oil processing facilities	31,542		34,089
Transportation and terminaling facilities	6,201		6,013
Waste and renewable feedstocks processing facilities	3,660		3,616
Corn processing facilities	1,075		1,058
Administrative buildings	1,082		1,147
Finance lease ROU assets (see Note 5)	3,397		3,348
Other	2,008		1,993
Construction in progress	617		604
Property, plant, and equipment, at cost	50,091		52,368
Accumulated depreciation	(22,474)		(23,054)
Property, plant, and equipment, net	$	27,617	$	29,314

Depreciation expense for the years ended December 31, 2025, 2024, and 2023 was $2.3 billion, $1.9 billion, and $1.9 billion, respectively. In connection with our plan to idle the processing units and cease refining operations at our Benicia Refinery, we recorded incremental depreciation expense of approximately $300 million in depreciation and amortization expense during the year ended December 31, 2025. See Note 2 for information regarding the asset impairment loss recognized during the year ended December 31, 2025 associated with our operations in California.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. DEFERRED CHARGES AND OTHER ASSETS

“Deferred charges and other assets, net” consisted of the following (in millions):


	December 31,
	2025		2024
Deferred turnaround and catalyst costs, net	$	2,751	$	2,689
Operating lease ROU assets, net (see Note 5)	1,072		1,098
Investments in nonconsolidated joint ventures	684		695
Surplus assets in funded pension plans (see Note 13)	948		724
Purchased compliance credits	—		488
Goodwill	260		260
Intangible assets, net	123		151
Income taxes receivable	347		317
Other	976		670
Deferred charges and other assets, net	$	7,161	$	7,092

Amortization expense for deferred turnaround and catalyst costs and intangible assets was $876 million, $852 million, and $821 million for the years ended December 31, 2025, 2024, and 2023, respectively.

The entire balance of goodwill is related to our Refining segment. See Note 17 for information on our reportable segments.

8. ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES

Accrued expenses and other long-term liabilities consisted of the following (in millions):


	Accrued Expenses				Other Long-Term Liabilities
	December 31,				December 31,
	2025		2024		2025		2024
Operating lease liabilities (see Note 5)	$	419	$	378	$	665	$	699
Liability for unrecognized tax benefits	—		—		441		429
Defined benefit plan liabilities (see Note 13)	49		73		423		423
Environmental liabilities	32		45		243		261
Wage and other employee-related liabilities	469		307		104		102
Accrued interest expense	76		68		—		—
Contract liabilities from contracts with customers (see Note 17)	60		82		—		—
Blending program obligations (see Note 19)	187		78		—		—
Asset retirement obligations (see Note 2)	—		2		382		36
Other accrued liabilities	111		97		200		190
Accrued expenses and other long-term liabilities	$	1,403	$	1,130	$	2,458	$	2,140

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Asset Retirement Obligations

We have obligations with respect to certain of our assets at our refineries and plants to clean and/or dispose of various component parts of the assets at the time they are retired. However, these component parts can be used for extended and indeterminate periods of time as long as they are properly maintained and/or upgraded. It is our practice and current intent to maintain all our assets and continue making improvements to those assets based on technological advances. As a result, we believe that assets at our refineries and plants have indeterminate lives for purposes of estimating asset retirement obligations because dates or ranges of dates upon which we would retire such assets cannot reasonably be estimated at this time. We will recognize a liability at such time when sufficient information exists to estimate a date or range of potential settlement dates that is needed to employ a present value technique to estimate fair value. There are no assets that are legally restricted for purposes of settling our asset retirement obligations. See Note 2 for additional information regarding the additions to our asset retirement obligations during the year ended December 31, 2025.

Changes in our asset retirement obligations were as follows (in millions):


	Year Ended December 31,
	2025		2024		2023
Balance as of beginning of year	$	38	$	37	$	7
Additions to accrual	337		—		1
Revisions in estimated cash flows	—		2		28
Accretion expense	15		2		2
Settlements	(8)		(3)		(1)


Balance as of end of year	$	382	$	38	$	37

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. DEBT AND FINANCE LEASE OBLIGATIONS

Debt, at stated values, and finance lease obligations consisted of the following (in millions):


	Final Maturity		December 31,
		2025			2024
Credit facilities:
Valero Revolver	2030		$	—		$	—
Accounts Receivable Sales Facility	2026		—			—
DGD Revolver	2026		—			—
DGD Loan Agreement	2026		—			—
IEnova Revolver	2028		23			58
Public debt:
Valero Senior Notes
2.850%	2025		—			251
3.65%	2025		—			189
3.400%	2026		426			426
2.150%	2027		564			564
4.350%	2028		591			591
4.000%	2029		439			439
5.150%	2030		650			—
8.75%	2030		200			200
2.800%	2031		462			462
7.5%	2032		729			729
6.625%	2037		1,380			1,380
6.75%	2037		24			24
10.500%	2039		113			113
4.90%	2045		621			621
3.650%	2051		829			829
4.000%	2052		508			508
7.45%	2097		70			70
Valero Energy Partners LP (VLP) Senior Notes
4.375%	2026		146			146
4.500%	2028		456			456
Debenture, 7.65%	2026		100			100

Net unamortized debt issuance costs and other			(70)			(71)
Total debt			8,261			8,085
Finance lease obligations (see Note 5)			2,358			2,378
Total debt and finance lease obligations			10,619			10,463
Less: Current portion			949			743
Debt and finance lease obligations, less current portion			$	9,670		$	9,720

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Credit Facilities

Valero Revolver

In October 2025, we amended our revolving credit facility (the Valero Revolver), which has a borrowing capacity of $4 billion, to extend the maturity date from November 2027 to October 2030 and to modify the reference interest rate from the Adjusted Term SOFR, a secured overnight financing rate (SOFR), to the Term SOFR. We have the option to increase the aggregate commitments under the Valero Revolver to $5.5 billion, subject to certain conditions. The Valero Revolver also provides for the issuance of letters of credit of up to $2.4 billion.

Effective October 2025, outstanding borrowings under the Valero Revolver bear interest, at our option, at either (i) the Term SOFR or (ii) the Alternate Base Rate (each of these rates is defined in the Valero Revolver), plus the applicable margins. The Valero Revolver also requires payments for customary fees, including facility fees, letter of credit participation fees, and administrative agent fees. The interest rate and facility fees under the Valero Revolver are subject to adjustment based upon the credit ratings assigned to our senior unsecured debt.

Accounts Receivable Sales Facility

We have an accounts receivable sales facility with a group of third-party entities and financial institutions to sell up to $1.3 billion of eligible trade receivables on a revolving basis. In July 2025, we extended the maturity date of this facility to July 2026. Under this program, one of our marketing subsidiaries (Valero Marketing) sells eligible receivables, without recourse, to another of our subsidiaries (Valero Capital), whereupon the receivables are no longer owned by Valero Marketing. Valero Capital, in turn, sells an undivided percentage ownership interest in the eligible receivables, without recourse, to the third-party entities and financial institutions. To the extent that Valero Capital retains an ownership interest in the receivables it has purchased from Valero Marketing, such interest is included in our financial statements solely as a result of the consolidation of the financial statements of Valero Capital with those of Valero Energy Corporation; the receivables are not available to satisfy the claims of the creditors of Valero Marketing or Valero Energy Corporation.

As of December 31, 2025 and 2024, $2.7 billion and $2.5 billion, respectively, of our accounts receivable composed the designated pool of accounts receivable included in the program. All amounts outstanding under the accounts receivable sales facility are reflected as debt in our balance sheets and proceeds and repayments are reflected as cash flows from financing activities. Outstanding borrowings under the facility bear interest, at either (i) an adjusted daily simple SOFR or (ii) an alternate base rate as allowed under the terms of this facility, plus applicable margins. The interest rates under the program are subject to adjustment based upon the credit ratings assigned to our senior unsecured debt. The program also requires payments for customary fees, including facility fees.

DGD Revolver

DGD, as described in Note 12, has a $400 million unsecured revolving credit facility (the DGD Revolver) with a syndicate of financial institutions that matures in June 2026. DGD has the option to increase the aggregate commitments under the DGD Revolver to $550 million, subject to certain restrictions. The DGD Revolver also provides for the issuance of letters of credit of up to $150 million. The DGD Revolver is only available to fund the operations of DGD, and the creditors of DGD do not have recourse against us.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Outstanding borrowings under the DGD Revolver generally bear interest, at DGD’s option, at (i) an alternate base rate, (ii) an adjusted term SOFR, or (iii) an adjusted daily simple SOFR as allowed under the terms of the agreement for the applicable interest period in effect from time to time, plus the applicable margins. The DGD Revolver also requires payments for customary fees, including unused commitment fees, letter of credit fees, and administrative agent fees.

DGD Loan Agreement

DGD has an unsecured revolving loan agreement (the DGD Loan Agreement) with its members (Darling Ingredients Inc. (Darling) and us) with a maturity date of June 2026. Under this agreement, each member has committed $100 million, resulting in aggregate commitments of $200 million. The DGD Loan Agreement is only available to fund the operations of DGD. Any outstanding borrowings under this agreement represent loans made by the noncontrolling member as any transactions between DGD and us under this agreement are eliminated in consolidation.

Outstanding borrowings under the DGD Loan Agreement bear interest at a term SOFR for the applicable interest period in effect from time to time plus the applicable margin.

IEnova Revolver

Central Mexico Terminals, as described in Note 12, has a combined $1 billion unsecured revolving credit facility (IEnova Revolver) with IEnova (defined in Note 12), that matures in February 2028. IEnova may terminate this revolver at any time and demand repayment of all outstanding amounts; therefore, all outstanding borrowings are reflected in current portion of debt. The IEnova Revolver is only available to fund the operations of Central Mexico Terminals, and the creditors of Central Mexico Terminals do not have recourse against us.

During the year ended December 31, 2024, IEnova converted $732 million of outstanding borrowings under the IEnova Revolver to additional equity in Central Mexico Terminals, which resulted in an increase in the noncontrolling interest related to IEnova.

Outstanding borrowings under the IEnova Revolver bear interest at a term SOFR for the applicable interest period in effect from time to time plus the applicable margin. The interest rate under this revolver is subject to adjustment, with agreement by both parties, based upon changes in market conditions. As of December 31, 2025 and 2024, the variable interest rate was 7.835 percent and 8.443 percent, respectively.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Summary of Credit Facilities

We had outstanding borrowings, letters of credit issued, and availability under our credit facilities as follows (in millions):


				December 31, 2025
	Facility Amount		Maturity Date	Outstanding Borrowings		Letters of Credit Issued (a)		Availability

Committed facilities:
Valero Revolver	$	4,000	October 2030	$	—	$	2	$	3,998
Accounts receivable sales facility	1,300		July 2026	—		n/a		1,300
Committed facilities of VIEs (b):
DGD Revolver	400		June 2026	—		29		371
DGD Loan Agreement (c)	100		June 2026	—		n/a		100
IEnova Revolver	1,000		February 2028	23		n/a		977
Uncommitted facilities:
Letter of credit facilities	n/a		n/a	n/a		7		n/a
Uncommitted facility of VIE (b):
DGD letter of credit facility	n/a		n/a	n/a		66		n/a

(a)Letters of credit issued as of December 31, 2025 expire at various times in 2026 through 2027.

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

(c)The amounts shown for this facility represent the facility amount available from, and borrowings outstanding to, the noncontrolling member as any transactions between DGD and us under this facility are eliminated in consolidation.

We are charged letter of credit issuance fees under our various uncommitted short-term bank credit facilities. These uncommitted credit facilities have no commitment fees or compensating balance requirements.

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


	Year Ended December 31,
	2025		2024		2023
Borrowings:
Accounts receivable sales facility	$	6,250	$	6,700	$	1,750
DGD Revolver	650		310		550
DGD Loan Agreement	25		100		—
IEnova Revolver	—		27		120
Repayments:
Accounts receivable sales facility	(6,250)		(6,700)		(1,750)
DGD Revolver	(650)		(560)		(400)
DGD Loan Agreement	(25)		(100)		(25)
IEnova Revolver	(35)		—		(71)

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Public Debt

On February 7, 2025, we issued $650 million of 5.150 percent Senior Notes due February 15, 2030. Proceeds from this debt issuance totaled $649 million before deducting the underwriting discount and other debt issuance costs. We used a portion of the net proceeds to repay the $189 million outstanding principal balance of our 3.65 percent Senior Notes that matured on March 15, 2025 and the $251 million outstanding principal balance of our 2.850 percent Senior Notes that matured on April 15, 2025.

In March 2024, we repaid the $167 million outstanding principal balance of our 1.200 percent Senior Notes that matured on March 15, 2024.

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


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

Other Disclosures

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


	Year Ended December 31,
	2025		2024		2023
Interest and debt expense	$	576	$	580	$	611
Less: Capitalized interest	20		24		19
Interest and debt expense, net of capitalized interest	$	556	$	556	$	592

Our credit facilities and other debt arrangements contain various customary restrictive covenants, including cross-default and cross-acceleration clauses.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Principal maturities for our debt obligations as of December 31, 2025 were as follows (in millions):


2026 (a)	$	695
2027	564
2028	1,047
2029	439
2030	850
Thereafter	4,736
Net unamortized debt issuance costs and other	(70)
Total debt	$	8,261

(a)Maturities for 2026 include the IEnova Revolver.

10. COMMITMENTS AND CONTINGENCIES

Purchase Obligations

We have various purchase obligations under certain crude oil and other feedstock supply arrangements, industrial gas supply arrangements (such as hydrogen supply arrangements), natural gas supply arrangements, and various throughput, transportation, and terminaling agreements. We enter into these contracts to ensure an adequate supply of feedstock and utilities and adequate storage capacity to operate our refineries, renewable diesel plants, and ethanol plants. Substantially all of our purchase obligations are based on market prices or adjustments based on market indices. Certain of these purchase obligations include fixed or minimum volume requirements, while others are based on our usage requirements. None of these obligations is associated with suppliers’ financing arrangements. These purchase obligations are not reflected as liabilities.

Self-Insurance

We are self-insured for certain medical and dental, workers’ compensation, automobile liability, general liability, and other third-party liability claims up to applicable retention limits. Liabilities are accrued for self-insured claims, or when estimated losses exceed coverage limits, and when sufficient information is available to reasonably estimate the amount of the loss. These liabilities are included in accrued expenses and other long-term liabilities.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. EQUITY

Share Activity

Activity in the number of shares of common stock and treasury stock was as follows (in millions):


	Common Stock	Treasury Stock
Balance as of December 31, 2022	673	(301)
Transactions in connection with stock-based compensation plans	—	1
Purchases of common stock for treasury	—	(40)
Balance as of December 31, 2023	673	(340)

Purchases of common stock for treasury	—	(19)
Balance as of December 31, 2024	673	(359)
Transactions in connection with stock-based compensation plans	—	1
Purchases of common stock for treasury	—	(17)
Balance as of December 31, 2025	673	(375)

Preferred Stock

We have 20 million shares of preferred stock authorized with a par value of $0.01 per share. No shares of preferred stock were outstanding as of December 31, 2025 or 2024.

Treasury Stock

We purchase shares of our outstanding common stock as authorized by our board of directors (Board), including under share purchase programs (described in the table below) and with respect to our employee stock-based compensation plans.

Our Board authorized us to purchase shares of our outstanding common stock under various programs with no expiration dates as follows (in millions):


Program Name	Authorization Date	Total Cost Authorized		Completion of Authorized Share Purchases	Remaining Available for Purchase as of December 31, 2025
October 2022 Program	October 26, 2022	$	2,500	Second quarter of 2023	$	—
February 2023 Program	February 23, 2023	2,500		Fourth quarter of 2023	—
September 2023 Program	September 15, 2023	2,500		Third quarter of 2024	—
February 2024 Program	February 22, 2024	2,500		Fourth quarter of 2025	—
September 2024 Program	September 19, 2024	2,500		n/a	1,739

On February 25, 2026, our Board authorized us to purchase shares of our outstanding common stock for a total cost of up to $2.5 billion with no expiration date, which is in addition to the amount remaining under the September 2024 Program.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Common Stock Dividends

On January 22, 2026, our Board declared a quarterly cash dividend of $1.20 per common share payable on March 9, 2026 to holders of record at the close of business on February 5, 2026.

Income Tax Effects Related to Components of Other Comprehensive Income (Loss)

The tax effects allocated to each component of other comprehensive income (loss) were as follows (in millions):


	Before-Tax Amount		Tax Expense (Benefit)		Net Amount
Year ended December 31, 2025
Foreign currency translation adjustment	$	659	$	(4)	$	663
Pension and other postretirement benefits:
Gain (loss) arising during the year related to:
Net actuarial gain	170		39		131

Prior service cost	(4)		(1)		(3)
Miscellaneous gain	—		(1)		1
Amounts reclassified into income related to:
Net actuarial gain	(16)		(4)		(12)
Prior service cost	6		1		5
Settlement loss	6		2		4
Effect of exchange rates	8		2		6
Net gain on pension and other postretirement benefits	170		38		132
Derivative instruments designated and qualifying as cash flow hedges:
Net gain arising during the year	3		—		3
Net loss reclassified into income	21		2		19
Net gain on cash flow hedges	24		2		22




Other comprehensive income	$	853	$	36	$	817

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Before-Tax Amount		Tax Expense (Benefit)		Net Amount
Year ended December 31, 2024
Foreign currency translation adjustment	$	(546)	$	(16)	$	(530)
Pension and other postretirement benefits:
Gain (loss) arising during the year related to:
Net actuarial gain	224		51		173


Miscellaneous loss	—		1		(1)
Amounts reclassified into income related to:
Net actuarial gain	(9)		(2)		(7)
Prior service credit	(10)		(3)		(7)
Settlement loss	5		1		4
Effect of exchange rates	(3)		(1)		(2)
Net gain on pension and other postretirement benefits	207		47		160
Derivative instruments designated and qualifying as cash flow hedges:
Net gain arising during the year	30		3		27
Net gain reclassified into income	(117)		(13)		(104)
Net loss on cash flow hedges	(87)		(10)		(77)
Other comprehensive loss	$	(426)	$	21	$	(447)

Year ended December 31, 2023
Foreign currency translation adjustment	$	433	$	—	$	433
Pension and other postretirement benefits:
Gain (loss) arising during the year related to:
Net actuarial gain	77		18		59

Prior service cost	(19)		(4)		(15)
Miscellaneous loss	—		2		(2)
Amounts reclassified into income related to:
Net actuarial gain	(12)		(3)		(9)
Prior service credit	(22)		(5)		(17)
Settlement loss	2		—		2
Effect of exchange rates	4		1		3
Net gain on pension and other postretirement benefits	30		9		21
Derivative instruments designated and qualifying as cash flow hedges:
Net gain arising during the year	82		8		74
Net loss reclassified into income	8		1		7
Net gain on cash flow hedges	90		9		81
Other comprehensive income	$	553	$	18	$	535

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accumulated Other Comprehensive Loss

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


	Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total
Balance as of December 31, 2022	$	(1,168)	$	(183)	$	(8)	$	(1,359)
Other comprehensive income before reclassifications	433		42		32		507
Amounts reclassified from accumulated other comprehensive loss	—		(24)		3		(21)
Effect of exchange rates	—		3		—		3
Other comprehensive income	433		21		35		489
Balance as of December 31, 2023	(735)		(162)		27		(870)
Other comprehensive income (loss) before reclassifications	(529)		172		12		(345)
Amounts reclassified from accumulated other comprehensive loss	—		(10)		(45)		(55)
Effect of exchange rates	—		(2)		—		(2)
Other comprehensive income (loss)	(529)		160		(33)		(402)
Balance as of December 31, 2024	(1,264)		(2)		(6)		(1,272)
Other comprehensive income before reclassifications	662		129		1		792
Amounts reclassified from accumulated other comprehensive loss	—		(3)		8		5
Effect of exchange rates	—		6		—		6
Other comprehensive income	662		132		9		803
Balance as of December 31, 2025	$	(602)	$	130	$	3	$	(469)

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Gains (losses) reclassified out of accumulated other comprehensive loss and into net income were as follows (in millions):


Details about Accumulated Other Comprehensive Loss Components										Affected Line Item in the Statements of Income
	Year Ended December 31,
	2025			2024			2023
Amortization of items related to defined benefit pension plans:
Net actuarial gain		$	16		$	9		$	12	(a) Other income, net
Prior service (cost) credit		(6)			10			22		(a) Other income, net
Settlement loss		(6)			(5)			(2)		(a) Other income, net
		4			14			32		Total before tax
		(1)			(4)			(8)		Tax expense
		$	3		$	10		$	24	Net of tax

Gains (losses) on cash flow hedges:
Commodity contracts		$	(21)		$	117		$	(8)	Revenues
		(21)			117			(8)		Total before tax
		2			(13)			1		Tax benefit (expense)
		$	(19)		$	104		$	(7)	Net of tax







Total reclassifications for the year		$	(16)		$	114		$	17	Net of tax

(a)These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost, as discussed in Note 13.

12. VARIABLE INTEREST ENTITIES

Consolidated VIEs

In the normal course of business, we have financial interests in certain entities that have been determined to be VIEs. We consolidate a VIE when we have a variable interest in an entity for which we are the primary beneficiary such that we have (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of or the right to receive benefits from the VIE that could potentially be significant to the VIE. In order to make this determination, we evaluated our contractual arrangements with the VIE, including arrangements for the use of assets, purchases of products and services, debt, equity, or management of operating activities.

The following discussion summarizes our involvement with the consolidated VIEs:

DGD is a joint venture with a subsidiary of Darling that owns and operates two plants that process waste and renewable feedstocks (predominantly animal fats, used cooking oils, vegetable oils, and inedible DCOs) into renewable diesel, renewable naphtha, and neat SAF. One plant is located next to our St. Charles Refinery (the DGD St. Charles Plant) and the other plant is located

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

next to our Port Arthur Refinery (the DGD Port Arthur Plant). Our significant agreements with DGD include an operations agreement that outlines our responsibilities as operator of both plants.

As operator, we operate the plants and perform certain day-to-day operating and management functions for DGD as an independent contractor. The operations agreement provides us (as operator) with certain power to direct the activities that most significantly impact DGD’s economic performance. Because this agreement conveys such power to us and is separate from our ownership rights, we determined that DGD was a VIE. For this reason and because we hold a 50 percent ownership interest that provides us with significant economic rights and obligations, we determined that we are the primary beneficiary of DGD. DGD has risk associated with its operations because it generates revenues from external customers.

Central Mexico Terminals is a collective group of three subsidiaries of Infraestructura Energética Nova, S.A.P.I. de C.V. (IEnova), a Mexican company and indirect subsidiary of Sempra Energy, a U.S. public company. We have terminaling agreements with Central Mexico Terminals that represent variable interests because we have determined them to be finance leases due to our exclusive use of the terminals. Although we do not have an ownership interest in the entities that own each of the three terminals, the finance leases convey to us (i) the power to direct the activities that most significantly impact the economic performance of all three terminals and (ii) the ability to influence the benefits received or the losses incurred by the terminals because of our use of the terminals. As a result, we determined each of the entities was a VIE and that we are the primary beneficiary of each. Substantially all of Central Mexico Terminals’ revenues will be derived from us; therefore, we believe there is limited risk to us associated with revenues from external customers.
We also have financial interests in other entities that have been determined to be VIEs because the entities’ contractual arrangements transfer the power to us to direct the activities that most significantly impact their economic performance or reduce the exposure to operational variability and risk of loss created by the entity that otherwise would be held exclusively by the equity owners. Furthermore, we determined that we are the primary beneficiary of these VIEs because (i) certain contractual arrangements (exclusive of our ownership rights) provide us with the power to direct the activities that most significantly impact the economic performance of these entities and/or (ii) our 50 percent ownership interests provide us with significant economic rights and obligations.

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

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	DGD		Central Mexico Terminals		Other		Total
December 31, 2025
Assets
Cash and cash equivalents	$	196	$	2	$	30	$	228
Other current assets	1,106		18		49		1,173
Property, plant, and equipment, net	3,643		619		61		4,323

Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	297	$	43	$	4	$	344
Debt and finance lease obligations, less current portion	616		—		—		616



December 31, 2024
Assets
Cash and cash equivalents	$	353	$	—	$	21	$	374
Other current assets	976		9		42		1,027
Property, plant, and equipment, net	3,806		647		64		4,517

Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	304	$	75	$	4	$	383
Debt and finance lease obligations, less current portion	642		—		—		642

Nonconsolidated VIEs

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

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. EMPLOYEE BENEFIT PLANS

Defined Benefit Plans

We have defined benefit pension plans, some of which are subject to collective bargaining agreements, that cover most of our employees. These plans provide eligible employees with retirement income based primarily on years of service and compensation during specific periods under final average pay and cash balance formulas. We fund all of our pension plans as required by local regulations. In the U.S., all qualified pension plans are subject to the Employee Retirement Income Security Act’s minimum funding standard. We typically do not fund or fully fund U.S. nonqualified and certain foreign pension plans that are not subject to funding requirements because contributions to these pension plans may be less economic and investment returns may be less attractive than our other investment alternatives.

We also provide health care and life insurance benefits for certain retired employees through our postretirement benefit plans. Most of our employees become eligible for these benefits if, while still working for us, they reach normal retirement age or take early retirement. These plans are unfunded, and retired employees share the cost with us. Individuals who became our employees as a result of an acquisition became eligible for postretirement benefits under our plans as determined by the terms of the relevant acquisition agreement.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The changes in benefit obligation related to all of our defined benefit plans, the changes in fair value of plan assets(a), and the funded status of our defined benefit plans as of and for the years ended below were as follows (in millions):


	Pension Plans				Other Postretirement Benefit Plans
	December 31,				December 31,
	2025		2024		2025		2024
Changes in benefit obligation
Benefit obligation as of beginning of year	$	2,566	$	2,618	$	235	$	266
Service cost	109		112		3		4
Interest cost	135		125		12		13

Participant contributions	—		—		27		24
Plan amendments	4		—		—		—


Benefits paid	(226)		(186)		(45)		(41)
Actuarial (gain) loss	27		(99)		3		(29)

Foreign currency exchange rate changes	15		(4)		—		(2)

Benefit obligation as of end of year	$	2,630	$	2,566	$	235	$	235

Changes in plan assets (a)
Fair value of plan assets as of beginning of year	$	3,029	$	2,835	$	—	$	—
Actual return on plan assets	422		310		—		—
Company contributions	91		76		18		17
Participant contributions	—		—		27		24
Benefits paid	(226)		(186)		(45)		(41)

Foreign currency exchange rate changes	25		(6)		—		—

Fair value of plan assets as of end of year	$	3,341	$	3,029	$	—	$	—

Reconciliation of funded status (a)
Fair value of plan assets as of end of year	$	3,341	$	3,029	$	—	$	—
Less: Benefit obligation as of end of year	2,630		2,566		235		235
Funded status as of end of year	$	711	$	463	$	(235)	$	(235)

Accumulated benefit obligation	$	2,484	$	2,423	n/a		n/a

(a)Plan assets include only the assets associated with pension plans subject to legal minimum funding standards. Plan assets associated with U.S. nonqualified pension plans are not included here because they are not protected from our creditors and therefore cannot be reflected as a reduction from our obligations under the pension plans. As a result, the reconciliation of funded status does not reflect the effect of plan assets that exist for all of our defined benefit plans. See Note 19 for the assets associated with certain U.S. nonqualified pension plans.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The actuarial loss for the year ended December 31, 2025 primarily resulted from a decrease in the discount rates used to determine our benefit obligations for our pension plans from 5.72 percent in 2024 to 5.62 percent in 2025. The actuarial gain for the year ended December 31, 2024 primarily resulted from an increase in the discount rates used to determine our benefit obligations for our pension plans from 5.01 percent in 2023 to 5.72 percent in 2024.

The fair value of our plan assets as of December 31, 2025 and 2024 was favorably impacted by the return on plan assets resulting primarily from an improvement in equity market prices during each year.

Amounts recognized in our balance sheets for our pension and other postretirement benefit plans include (in millions):


	Pension Plans				Other Postretirement Benefit Plans
	December 31,				December 31,
	2025		2024		2025		2024
Deferred charges and other assets, net	$	948	$	724	$	—	$	—
Accrued expenses	(28)		(51)		(21)		(22)
Other long-term liabilities	(209)		(210)		(214)		(213)
	$	711	$	463	$	(235)	$	(235)

The following table presents information for our pension plans with projected benefit obligations in excess of plan assets (in millions):


	December 31,
	2025		2024
Projected benefit obligation	$	237	$	260
Fair value of plan assets	—		—

The following table presents information for our pension plans with accumulated benefit obligations in excess of plan assets (in millions):


	December 31,
	2025		2024
Accumulated benefit obligation	$	200	$	220
Fair value of plan assets	—		—

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Benefit payments that we expect to pay, including amounts related to expected future services that we expect to receive, are as follows for the years ending December 31 (in millions):


	Pension Benefits		Other Postretirement Benefits
2026	$	205	$	21
2027	272		21
2028	204		20
2029	194		20
2030	221		19
2031-2035	1,105		91

During 2026, we plan to contribute approximately $70 million to our pension plans and $20 million to our other postretirement benefit plans, respectively.

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


	Pension Plans						Other Postretirement Benefit Plans
	Year Ended December 31,						Year Ended December 31,
	2025		2024		2023		2025		2024		2023
Service cost	$	109	$	112	$	111	$	3	$	4	$	4
Interest cost	135		125		121		12		13		13
Expected return on plan assets	(222)		(214)		(202)		—		—		—
Amortization of:
Net actuarial gain	(9)		(5)		(6)		(7)		(4)		(6)
Prior service cost (credit)	6		(10)		(18)		—		—		(4)
Settlement loss	6		5		2		—		—		—
Net periodic benefit cost	$	25	$	13	$	8	$	8	$	13	$	7

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

Amortization of the net actuarial gain shown in the preceding table was based on the straight-line amortization of the excess of the unrecognized (gain) loss over 10 percent of the greater of the projected benefit obligation or market-related value of plan assets (smoothed asset value) over the average remaining service period of active employees expected to receive benefits under each respective plan. Amortization of prior service cost (credit) shown in the preceding table was based on a straight-line amortization of the cost (credit) over the average remaining service period of employees expected to receive benefits under each respective plan.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Pre-tax amounts recognized in other comprehensive income (loss) were as follows (in millions):


	Pension Plans						Other Postretirement Benefit Plans
	Year Ended December 31,						Year Ended December 31,
	2025		2024		2023		2025		2024		2023
Net gain (loss) arising during the year:
Net actuarial gain (loss)	$	173	$	195	$	87	$	(3)	$	29	$	(10)
Prior service cost	(4)		—		(19)		—		—		—

Net (gain) loss reclassified into income:
Net actuarial gain	(9)		(5)		(6)		(7)		(4)		(6)
Prior service cost (credit)	6		(10)		(18)		—		—		(4)
Settlement loss	6		5		2		—		—		—
Effect of exchange rates	7		(2)		4		1		(1)		—

Total changes in other comprehensive income (loss)	$	179	$	183	$	50	$	(9)	$	24	$	(20)

The pre-tax amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost were as follows (in millions):


	Pension Plans				Other Postretirement Benefit Plans
	December 31,				December 31,
	2025		2024		2025		2024
Net actuarial (gain) loss	$	(115)	$	62	$	(87)	$	(96)
Prior service cost	20		22		1		1
Total	$	(95)	$	84	$	(86)	$	(95)

The weighted-average assumptions used to determine the benefit obligations were as follows:


	Pension Plans				Other Postretirement Benefit Plans
	December 31,				December 31,
	2025		2024		2025		2024
Discount rate	5.62	%	5.72	%	5.42	%	5.64	%
Rate of compensation increase	3.97	%	4.04	%	n/a		n/a
Interest crediting rate for cash balance plans	4.12	%	4.25	%	n/a		n/a

The discount rate assumption used to determine the benefit obligations as of December 31, 2025 and 2024 for the majority of our pension plans and other postretirement benefit plans was based on the Aon AA Only Above Median yield curve and considered the timing of the projected cash outflows under our plans. This curve was designed by Aon, our actuarial consultant, to provide a means for plan sponsors to

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

value the liabilities of their pension plans or postretirement benefit plans. To develop this curve, a hypothetical double-A yield curve represented by a series of annualized individual discount rates with maturities from six months to 99 years is constructed. Each bond issue underlying the double-A yield curve is required to have an average rating of double-A when averaging all available ratings by Moody’s Investors Service, Standard & Poor’s Ratings Services, and Fitch Ratings. Only the bonds representing the 50 percent highest yielding issuances of this double-A yield curve are then included in the Aon AA Only Above Median yield curve.

We based our discount rate assumption on the Aon AA Only Above Median yield curve because we believe it is representative of the types of bonds we would use to settle our pension and other postretirement benefit plan liabilities as of those dates. We believe that the yields associated with the bonds used to develop this yield curve reflect the current level of interest rates.

The weighted-average assumptions used to determine the net periodic benefit cost were as follows:


	Pension Plans						Other Postretirement Benefit Plans
	Year Ended December 31,						Year Ended December 31,
	2025		2024		2023		2025		2024		2023
Discount rate	5.72	%	5.01	%	5.19	%	5.64	%	5.01	%	5.20	%
Expected long-term rate of return on plan assets	7.33	%	7.29	%	7.31	%	n/a		n/a		n/a
Rate of compensation increase	4.04	%	3.84	%	3.76	%	n/a		n/a		n/a
Interest crediting rate for cash balance plans	4.24	%	3.59	%	3.76	%	n/a		n/a		n/a

The assumed health care cost trend rates were as follows:


	December 31,
	2025		2024
Health care cost trend rate assumed for the next year	8.23	%	8.13	%
Rate to which the cost trend rate was assumed to decline (the ultimate trend rate)	4.97	%	4.97	%
Year that the rate reaches the ultimate trend rate	2038		2036

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the fair values of the assets of our pension plans (in millions) as of December 31, 2025 and 2024 by level of the fair value hierarchy. Assets categorized in Level 1 of the hierarchy are measured at fair value using a market approach based on unadjusted quoted prices from national securities exchanges. Assets categorized in Level 2 of the hierarchy are measured at net asset value in a market that is not active or using inputs other than quoted prices that are observable. No assets were categorized in Level 3 of the hierarchy as of December 31, 2025 and 2024. As previously noted, we do not fund or fully fund U.S. nonqualified and certain foreign pension plans that are not subject to funding requirements, and we do not fund our other postretirement benefit plans.


	2025						2024
	Level 1		Level 2		Total		Level 1		Level 2		Total
Equity securities (a)	$	597	$	—	$	597	$	542	$	—	$	542
Mutual funds	259		—		259		233		—		233
Corporate debt instruments	—		260		260		—		261		261
Government securities	122		169		291		81		169		250
Common collective trusts (b)	—		1,468		1,468		—		1,337		1,337
Pooled separate accounts (c)	—		365		365		—		325		325

Insurance contract	—		12		12		—		13		13
Interest and dividends receivable	6		—		6		6		—		6
Cash and cash equivalents	85		—		85		64		—		64
Securities transactions payable, net	(2)		—		(2)		(2)		—		(2)
Total pension plan assets	$	1,067	$	2,274	$	3,341	$	924	$	2,105	$	3,029

(a)This class of securities includes domestic and international securities, which are held in a wide range of industry sectors.

(b)This class primarily includes investments in approximately 70 percent equities and 30 percent bonds as of December 31, 2025 and 2024.

(c)This class primarily includes investments in approximately 45 percent equities and 55 percent bonds as of December 31, 2025 and 2024.

The investment policies and strategies for the assets of our pension plans incorporate a well-diversified approach that is expected to earn long-term returns from capital appreciation and a growing stream of current income. This approach recognizes that assets are exposed to risk and the market value of the pension plans’ assets may fluctuate from year to year. Risk tolerance is determined based on our financial ability to withstand risk within the investment program and the willingness to accept return volatility. In line with the investment return objective and risk parameters, the pension plans’ mix of assets includes a diversified portfolio of equity and fixed-income investments. Equity securities include international securities and a blend of U.S. growth and value stocks of various sizes of capitalization. Fixed income securities include bonds and notes issued by the U.S. government and its agencies, corporate bonds, and mortgage-backed securities. The aggregate asset allocation is reviewed on an annual basis. As of December 31, 2025, the target allocations for plan assets under our primary pension plan are 65 percent equity securities and 35 percent fixed income investments.

The expected long-term rate of return on plan assets is based on a forward-looking expected asset return model. This model derives an expected rate of return based on the target asset allocation of a plan’s assets. The underlying assumptions regarding expected rates of return for each asset class reflect Aon’s

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

best expectations for these asset classes. The model reflects the positive effect of periodic rebalancing among diversified asset classes. We select an expected asset return that is supported by this model.

Defined Contribution Plans

We have defined contribution plans that cover most of our employees. Our contributions to these plans are based on employees’ compensation and/or a partial match of employee contributions to the plans. Our contributions to these defined contribution plans were $93 million, $92 million, and $87 million for the years ended December 31, 2025, 2024, and 2023, respectively.

14. STOCK-BASED COMPENSATION

Overview

Our 2020 Omnibus Stock Incentive Plan (the 2020 OSIP) was approved by our stockholders on April 30, 2020. Under the 2020 OSIP, various stock and stock-based awards may be granted to employees, non-employee directors, and third-party service providers. The 2020 OSIP permits grants of (i) restricted stock and restricted stock units; (ii) stock options (including incentive and non-qualified stock options); (iii) stock appreciation rights; (iv) performance awards of cash, stock, or other securities; and (v) other stock-based awards (e.g., stock unit awards). Awards under the 2020 OSIP are granted at the discretion of our Board’s Human Resources and Compensation Committee (and, as applicable, approved by the independent directors) and may be subject to vesting or performance periods, performance goals, or other restrictions. As of December 31, 2025, 10,512,602 shares of our common stock remained available to be awarded under the 2020 OSIP.

The following table reflects activity related to our stock-based compensation arrangements (in millions):


	Year Ended December 31,
	2025		2024		2023
Stock-based compensation expense:
Restricted stock	$	73	$	67	$	69
Performance awards	44		33		38
Total stock-based compensation expense	$	117	$	100	$	107
Tax benefit recognized on stock-based compensation expense	$	16	$	13	$	14
Tax benefit realized for tax deductions resulting from exercises and vestings	—		—		2

Restricted Stock

Restricted stock is our most significant stock-based compensation arrangement. Employees, non-employee directors, and third-party service providers are eligible to receive restricted stock, which vests in accordance with individual written agreements between the participants and us, usually in equal annual installments over a period of three years beginning one year after the date of grant. The fair value of each share of restricted stock is equal to the market price of our common stock.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of the status of our restricted stock awards is presented in the following table:


	Number of Shares	Weighted- Average Grant-Date Fair Value Per Share
Nonvested shares as of January 1, 2025	795,220	$	126.63
Granted	473,834	155.18
Vested	(527,122)	128.53
Forfeited	(6,835)	126.89
Nonvested shares as of December 31, 2025	735,097	143.67

As of December 31, 2025, there was $54 million of unrecognized compensation cost related to outstanding unvested restricted stock awards, which is expected to be recognized over a weighted-average period of approximately two years.

The following table reflects activity related to our restricted stock:


	Year Ended December 31,
	2025		2024		2023
Weighted-average grant-date fair value per share of restricted stock granted	$	155.18	$	131.68	$	125.57
Fair value of restricted stock vested (in millions)	82		82		99

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. INCOME TAXES

Income Statement Components

Income before income tax expense was as follows (in millions):


	Year Ended December 31,
	2025		2024		2023
U.S. operations	$	899	$	2,685	$	9,335
Foreign operations	2,106		1,013		2,433
Income before income tax expense	$	3,005	$	3,698	$	11,768

Statutory income tax rates applicable to the countries in which we operate during each of the years ended December 31, 2025, 2024, and 2023 were as follows:


	Statutory Income Tax Rates
U.S.	21	%
Canada	15	%
U.K. (a)	25	%
Ireland	13	%
Mexico	30	%
Peru	30	%

(a)Statutory income tax rate was increased to 25 percent from 19 percent effective April 1, 2023.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following is a reconciliation of income tax expense computed by applying statutory income tax rates to actual income tax expense (dollars in millions):


	Year Ended December 31,
	2025				2024				2023
	Amount		Percent		Amount		Percent		Amount		Percent
U.S. federal statutory income tax rate	$	631	21.0	%	$	777	21.0	%	$	2,471	21.0	%
Domestic federal:
Tax credits
Foreign tax credits	(61)		(2.0)	%	(46)		(1.2)	%	(149)		(1.3)	%
Biofuels tax credits (a)	(4)		(0.1)	%	(248)		(6.7)	%	—		—	%
Other	(1)		—	%	(1)		—	%	(1)		—	%
Nontaxable and nondeductible items
Nontaxable production tax credits (b)	(66)		(2.2)	%	—		—	%	—		—	%
Nontaxable blender’s tax credits (c)	—		—	%	(127)		(3.4)	%	(125)		(1.1)	%
Tax on biofuels tax credits	1		—	%	52		1.4	%	—		—	%
Other (d)	13		0.4	%	14		0.4	%	34		0.3	%
Cross-border tax laws	4		0.1	%	7		0.2	%	27		0.2	%
Changes in valuation allowances	63		2.1	%	49		1.3	%	149		1.3	%
Other reconciling items
Tax effects of income associated with noncontrolling interests	25		0.8	%	(50)		(1.3)	%	(84)		(0.7)	%
Other	(3)		(0.1)	%	(43)		(1.2)	%	34		0.3	%
Domestic state and local income taxes, net of federal effect (e)	22		0.7	%	19		0.5	%	122		1.0	%
Foreign tax effects:
Canada
Provincial and local income taxes	90		3.0	%	101		2.7	%	161		1.4	%
Statutory income tax rate differential	(47)		(1.5)	%	(52)		(1.4)	%	(84)		(0.7)	%
Withholding taxes	41		1.4	%	59		1.6	%	45		0.4	%
Other	—		—	%	(2)		(0.1)	%	21		0.2	%
Mexico
Changes in valuation allowances	(61)		(2.0)	%	57		1.5	%	—		—	%
Statutory income tax rate differential	42		1.4	%	(26)		(0.7)	%	15		0.1	%
Other	1		—	%	(4)		(0.1)	%	35		0.3	%
U.K.
Statutory income tax rate differential	33		1.1	%	14		0.4	%	19		0.2	%
Other	1		—	%	1		—	%	(13)		(0.1)	%
Other foreign	8		0.3	%	(4)		(0.1)	%	(7)		(0.1)	%
Worldwide changes in unrecognized tax benefits	27		0.9	%	145		3.9	%	(51)		(0.4)	%
Income tax expense	$	759	25.3	%	$	692	18.7	%	$	2,619	22.3	%

(a)As permitted under Section 40(b) of the Code, producers of second-generation biofuels that are registered with the Internal Revenue Service (IRS) were eligible for an income tax credit of up to $1.01 per gallon of qualified biofuel that was produced and sold in the U.S. through December 31, 2024. We recorded a gross tax benefit in December 2024 related to these tax credits for the cellulosic ethanol produced by our Ethanol segment from 2020 through 2024, excluding the effects of unrecognized tax benefits, which are presented separately.

(b)As permitted under Section 45Z of the Code, a clean fuel production credit was available through December 31, 2025 for qualifying sales of low-carbon transportation fuels that were produced in the U.S. This credit was extended through December 31, 2029, with specific qualifications under the OBBB, as defined and described beginning on page 123.

(c)As permitted under Section 6426 of the Code, blenders of certain renewable fuels were eligible for a refundable tax credit of $1.00 per gallon of qualified fuel mixtures produced and either sold or used as fuel through December 31, 2024.

(d)Tax effects of share-based payment awards are included in this category.

(e)State and local income taxes in California and Texas composed the majority of the tax effect in this category.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Components of income tax expense were as follows (in millions):


	Year Ended December 31,
	2025		2024		2023
Current tax expense:
U.S. federal	$	574	$	464	$	1,804
U.S. state and local	52		37		157
Foreign	330		278		555
Total current tax expense	956		779		2,516
Deferred tax expense (benefit):
U.S. federal	(364)		(99)		25
U.S. state and local	(11)		(13)		(12)
Foreign	178		25		90
Total deferred tax expense (benefit)	(197)		(87)		103
Total income tax expense:
U.S. federal	210		365		1,829
U.S. state and local	41		24		145
Foreign	508		303		645
Total income tax expense	$	759	$	692	$	2,619

Income Taxes Paid

Income taxes paid, net of any refunds, to U.S. and foreign taxing authorities were as follows (in millions):


	Year Ended December 31,
	2025		2024		2023
U.S. federal (a)	$	287	$	664	$	1,985
U.S. state and local	16		37		173
Foreign:
Canada
Federal	173		66		683
Quebec	78		34		385
U.K.	128		—		199
Other	17		42		69
Total foreign	396		142		1,336
Income taxes paid, net	$	699	$	843	$	3,494

(a)In 2025, the U.S. federal income taxes paid are shown net of the utilization of foreign tax credits and clean fuel production credits.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Deferred Income Tax Assets and Liabilities

The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows (in millions):


	December 31,
	2025		2024
Deferred income tax assets:
Tax credit carryforwards	$	924	$	858
Net operating losses (NOLs)	632		689
Inventories	159		197



Finance lease obligations	633		607
Operating lease liabilities	210		212
Other	226		195
Total deferred income tax assets	2,784		2,758
Valuation allowance	(1,507)		(1,484)
Net deferred income tax assets	1,277		1,274
Deferred income tax liabilities:
Property, plant, and equipment	4,871		5,131
Deferred turnaround costs	428		450
Operating lease ROU assets	199		211

Investments	437		417
Other	488		332
Total deferred income tax liabilities	6,423		6,541
Net deferred income tax liabilities	$	5,146	$	5,267

We had the following income tax credit and loss carryforwards as of December 31, 2025 (in millions):


	Amount		Expiration
U.S. state income tax credits (gross amount)	$	84	2026 through 2040
U.S. state income tax credits (gross amount)	3		Unlimited
U.S. foreign tax credits	855		2027 through 2035
U.S. state income tax NOLs (gross amount)	12,289		2026 through 2040

We have recorded a valuation allowance as of December 31, 2025 and 2024 due to uncertainties related to our ability to utilize some of our deferred income tax assets primarily associated with our U.S. foreign tax credits and certain U.S. state income tax credits and NOLs before they expire. The valuation allowance is based on our estimates of future taxable income in the various jurisdictions in which we operate and the period over which deferred income tax assets will be recoverable. The valuation allowance increased by a net change of $23 million in 2025 primarily due to the generation of foreign tax credits that cannot be realized.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Unrecognized Tax Benefits

Changes in Unrecognized Tax Benefits

The following is a reconciliation of the changes in unrecognized tax benefits, excluding related interest and penalties (in millions):


	Year Ended December 31,
	2025		2024		2023
Balance as of beginning of year	$	316	$	186	$	284
Additions for tax positions related to the current year	4		52		18
Additions for tax positions related to prior years	13		106		4
Reductions for tax positions related to prior years	(12)		(19)		(73)
Reductions for tax positions related to the lapse of applicable statute of limitations	(6)		(7)		(9)
Settlements	—		(2)		(38)

Balance as of end of year	$	315	$	316	$	186

As of December 31, 2025 and 2024, there was $252 million and $236 million, respectively, of unrecognized tax benefits that, if recognized, would reduce our annual effective tax rate.

Interest and penalties incurred during the years ended December 31, 2025, 2024, and 2023 were not material. Accrued interest and penalties as of December 31, 2025 and 2024 were not material.

Tax Returns Under Audit

U.S. Federal

As of December 31, 2025, our U.S. federal income tax returns for 2017 through 2020 were under audit by the IRS. We continue to work with the IRS to resolve these audits and we believe that they will be resolved for amounts consistent with our recorded amounts of unrecognized tax benefits associated with these audits.

In 2023, we settled the audits related to our U.S. federal income tax returns for 2012 through 2015, with the exception of one issue regarding the timing of deductibility of certain costs at our refineries. The settlement related to these audits resulted in a favorable reduction in our unrecognized tax benefits. During 2024, we filed formal claims for refund with the IRS for the disagreed-upon issue. As of December 31, 2025, this disagreed-upon issue remains unresolved. We do not expect that the ultimate disposition of this issue will result in a material change to our financial position, results of operations, or cash flows.

U.S. State

As of December 31, 2025, our California tax returns for 2011 through 2016 were under audit by the state of California. During 2024, we settled the audits related to our California income tax returns for 2017 through 2019 for amounts consistent with our recorded amounts for unrecognized tax benefits. We do not expect that the ultimate disposition of the remaining audits will result in a material change to our financial position, results of operations, or cash flows. We believe that these audits will be resolved for amounts consistent with our recorded amounts for unrecognized tax benefits associated with these audits.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign

As of December 31, 2025, certain of our Canadian subsidiaries’ federal tax returns for 2013 through 2015 and 2017 through 2022 were under audit by the Canada Revenue Agency, and our Quebec provincial tax returns for 2013 through 2015 and 2017 through 2019 were under audit by Revenu Québec. As of December 31, 2025, the 2020 and 2021 tax returns for one of our Mexican subsidiaries were under audit by Servicio de Administración Tributaria (SAT), and we continue to engage with SAT to resolve these audits. We do not expect that the ultimate disposition of these audits by the foreign tax authorities will result in a material change to our financial position, results of operations, or cash flows.

Other Disclosures

Undistributed Earnings of Foreign Subsidiaries

As of December 31, 2025, there are certain cumulative undistributed earnings of our foreign subsidiaries that are considered permanently reinvested in the relevant foreign countries. We are able to distribute cash via a dividend from our foreign subsidiaries with a full dividends received deduction in the U.S. However, there is a cost to repatriate the undistributed earnings of certain of our foreign subsidiaries to us, including, but not limited to, withholding taxes imposed by certain foreign jurisdictions, U.S. state income taxes, and U.S. federal income tax on foreign exchange gains. During 2025, we accrued $42 million of withholding and other taxes on the $1.1 billion of earnings that are no longer considered permanently reinvested, but it is not practicable to estimate the amount of additional tax that would be payable on the undistributed earnings that are considered permanently reinvested.

Repatriation Tax Liability

Our repatriation tax liability relates to our recognition of a one-time transition tax on the deemed repatriation of previously undistributed accumulated earnings and profits of our foreign subsidiaries and was previously included in other long-term liabilities. This transition tax, which was reflected in income taxes payable as of December 31, 2024, was remitted to the IRS over the eight-year period provided in the Code, with the final installment paid in 2025.

One Big Beautiful Bill Act

On July 4, 2025, legislation commonly known as the One Big Beautiful Bill Act (OBBB) was enacted, which resulted in a broad range of changes to the Code. The most significant provisions affecting us include the following:

extension of the clean fuel production credit through December 31, 2029;
requirement that fuel produced after December 31, 2025 must be exclusively derived from feedstocks produced or grown in the U.S., Mexico, or Canada in order for such fuel to be eligible for the clean fuel production credit;
elimination of the special clean fuel production credit rate for SAF produced after December 31, 2025;
permanent reinstatement of the provision that allows companies to expense 100 percent of the cost of qualified property acquired and placed in service after January 19, 2025; and

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

modification of several international tax provisions, including those relating to net controlled foreign corporation tested income (formerly global intangible low-taxed income) and foreign-derived deduction eligible income (formerly foreign-derived intangible income), each beginning January 1, 2026.

These changes and other provisions of this legislation did not have a material effect on our financial position, results of operations, and cash flows in 2025. However, we will continue to evaluate the effects of the OBBB on our financial position, results of operations, and cash flows in the future.

16. EARNINGS PER COMMON SHARE

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


	Year Ended December 31,
	2025		2024		2023
Earnings per common share:
Net income attributable to Valero stockholders	$	2,348	$	2,770	$	8,835
Less: Income allocated to participating securities	7		8		27
Net income available to common stockholders	$	2,341	$	2,762	$	8,808

Weighted-average common shares outstanding	309		322		353

Earnings per common share	$	7.57	$	8.58	$	24.93

Earnings per common share – assuming dilution:
Net income attributable to Valero stockholders	$	2,348	$	2,770	$	8,835
Less: Income allocated to participating securities	7		8		27
Net income available to common stockholders	$	2,341	$	2,762	$	8,808

Weighted-average common shares outstanding	309		322		353
Effect of dilutive securities	—		—		—
Weighted-average common shares outstanding – assuming dilution	309		322		353

Earnings per common share – assuming dilution	$	7.57	$	8.58	$	24.92

Participating securities include restricted stock and performance awards granted under our 2020 OSIP. Dilutive securities include participating securities as well as outstanding stock options. For the years ended December 31, 2025, 2024, and 2023, we computed earnings per common share – assuming dilution using the two-class method for all dilutive securities.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. REVENUES AND SEGMENT INFORMATION

Revenue from Contracts with Customers

Disaggregation of Revenue

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

Contract Balances

Contract balances were as follows (in millions):


	December 31,
	2025		2024
Receivables from contracts with customers, included in receivables, net (see Note 3)	$	6,233	$	5,812
Contract liabilities, included in accrued expenses (see Note 8)	60		82

During the years ended December 31, 2025, 2024, and 2023, we recognized as revenue $81 million, $39 million, and $127 million, respectively, that was included in contract liabilities as of December 31, 2024, 2023, and 2022, respectively.

Remaining Performance Obligations

We have spot and term contracts with customers, the majority of which are spot contracts with no remaining performance obligations. We do not disclose remaining performance obligations for contracts that have terms of one year or less. The transaction price for our remaining term contracts includes a fixed component and variable consideration (i.e., a commodity price), both of which are allocated entirely to a wholly unsatisfied promise to transfer a distinct good that forms part of a single performance obligation. The fixed component is not material and the variable consideration is highly uncertain. Therefore, as of December 31, 2025, we have not disclosed the aggregate amount of the transaction price allocated to our remaining performance obligations.

Segment Information

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

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

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Renewable Diesel segment includes the operations of DGD, a consolidated joint venture as discussed in Note 12, and the associated activities to market low-carbon fuels. The principal products manufactured by DGD and sold by this segment are renewable diesel, renewable naphtha, and neat SAF. This segment sells some renewable diesel and neat SAF to the Refining segment for blending into petroleum-based diesel and conventional jet fuel, respectively, which is then sold to that segment’s customers as finished product.
The Ethanol segment includes the operations of our ethanol plants and the associated activities to market our ethanol and co-products. The principal products manufactured by our ethanol plants are ethanol and distillers grains. This segment sells some ethanol to the Refining segment for blending into gasoline, which is sold to that segment’s customers as a finished gasoline product.

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

Our chief operating decision maker (CODM) is our Chairman of the Board, Chief Executive Officer and President. Our CODM uses operating income (loss) by segment to allocate resources (including employees, property, and financial or capital resources) for each segment primarily during the annual budget process. On a monthly basis, our CODM considers budget-to-actual variances for operating income (loss) by segment when evaluating the operating performance of each segment.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables reflect information about our reportable segments and includes the reconciliation to our consolidated income before income tax expense (in millions):


	Refining		Renewable Diesel		Ethanol		Total
Year ended December 31, 2025
Revenues:
Revenues from external customers	$	116,158	$	2,508	$	4,021	$	122,687
Intersegment revenues	8		2,089		956		3,053
	116,166		4,597		4,977		125,740

Reconciliation of revenues by segment to consolidated revenues
Elimination of intersegment revenues							(3,053)
Total consolidated revenues							$	122,687
Less:
Cost of sales:
Cost of materials and other (a)	96,080		4,178		3,913

Taxes other than income taxes	6,720		—		—
Operating expenses (excluding depreciation and amortization expense reflected below)	5,426		308		611
Depreciation and amortization expense	2,754		267		79
Total cost of sales	110,980		4,753		4,603
Asset impairment loss	1,131		—		—
Other operating expenses	15		—		—
Operating income (loss) by segment	$	4,040	$	(156)	$	374	$	4,258

Reconciliation of operating income (loss) by segment to income before income tax expense
Elimination of intersegment losses							28
Unallocated amounts:
Other corporate expenses (b)							(1,105)
Other income, net							380
Interest and debt expense, net of capitalized interest							(556)
Income before income tax expense							$	3,005

Other segment disclosures
Segment assets	$	44,498	$	5,317	$	1,501	$	51,316
Expenditures for long-lived assets (c)	1,606		170		39		1,815

See notes on page 129.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Refining		Renewable Diesel		Ethanol		Total
Year ended December 31, 2024
Revenues:
Revenues from external customers	$	123,853	$	2,410	$	3,618	$	129,881
Intersegment revenues	10		2,656		868		3,534
	123,863		5,066		4,486		133,415

Reconciliation of revenues by segment to consolidated revenues
Elimination of intersegment revenues							(3,534)
Total consolidated revenues							$	129,881
Less:
Cost of sales:
Cost of materials and other (a)	106,638		3,944		3,558

Taxes other than income taxes	5,900		—		—
Operating expenses (excluding depreciation and amortization expense reflected below)	4,946		350		536
Depreciation and amortization expense	2,391		265		77
Total cost of sales	119,875		4,559		4,171

Other operating expenses	17		—		27
Operating income by segment	$	3,971	$	507	$	288	$	4,766

Reconciliation of operating income by segment to income before income tax expense
Elimination of intersegment profits							(5)
Unallocated amounts:
Other corporate expenses (b)							(1,006)
Other income, net							499
Interest and debt expense, net of capitalized interest							(556)
Income before income tax expense							$	3,698

Other segment disclosures
Segment assets	$	46,729	$	5,680	$	1,545	$	53,954
Expenditures for long-lived assets (c)	1,635		321		34		1,990

See notes on page 129.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Refining		Renewable Diesel		Ethanol		Total
Year ended December 31, 2023
Revenues:
Revenues from external customers	$	136,470	$	3,823	$	4,473	$	144,766
Intersegment revenues	18		3,168		1,086		4,272
	136,488		6,991		5,559		149,038

Reconciliation of revenues by segment to consolidated revenues
Elimination of intersegment revenues							(4,272)
Total consolidated revenues							$	144,766
Less:
Cost of sales:
Cost of materials and other (a)	111,681		5,550		4,395

Taxes other than income taxes	5,720		—		—
Operating expenses (excluding depreciation and amortization expense reflected below)	5,208		358		515
Depreciation and amortization expense	2,351		231		80
Total cost of sales	124,960		6,139		4,990

Other operating expenses	17		—		16
Operating income by segment	$	11,511	$	852	$	553	$	12,916

Reconciliation of operating income by segment to income before income tax expense
Elimination of intersegment profits							(17)
Unallocated amounts:
Other corporate expenses (b)							(1,041)
Other income, net							502
Interest and debt expense, net of capitalized interest							(592)
Income before income tax expense							$	11,768

Other segment disclosures
Segment assets	$	49,031	$	5,790	$	1,549	$	56,370
Expenditures for long-lived assets (c)	1,488		294		43		1,825

(a)Cost of materials and other for our Renewable Diesel segment is net of the clean fuel production credit on qualifying sales of certain low-carbon transportation fuels of $607 million for the year ended December 31, 2025 and the blender’s tax credit on qualified fuel mixtures of $1.3 billion and $1.2 billion for the years ended December 31, 2024 and 2023, respectively.

(b)Other corporate expenses include general and administrative expenses and depreciation and amortization expense, as reflected in our consolidated statements of income as shown on page 75.

(c)Total expenditures for long-lived assets include amounts related to capital expenditures and deferred turnaround and catalyst costs.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Total assets by reportable segments reconciled to our consolidated assets were as follows (in millions):


	December 31,
	2025		2024
Total assets for reportable segments	$	51,316	$	53,954
Corporate assets	6,938		6,565
Elimination of intercompany receivables and other assets	(266)		(376)
Total consolidated assets	$	57,988	$	60,143

Expenditures for long-lived assets by reportable segments reconciled to our consolidated expenditures for long-lived assets were as follows (in millions):


	Year Ended December 31,
	2025		2024		2023
Expenditures for long-lived assets for reportable segments	$	1,815	$	1,990	$	1,825
Corporate expenditures for long-lived assets	70		67		91
Total consolidated expenditures for long-lived assets	$	1,885	$	2,057	$	1,916

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


	Year Ended December 31,
	2025		2024		2023
Refining:
Gasolines and blendstocks	$	50,917	$	56,014	$	61,538
Distillates	55,077		55,636		63,664
Other product revenues	10,164		12,203		11,268
Total Refining revenues	116,158		123,853		136,470
Renewable Diesel:
Renewable diesel	2,073		2,316		3,665
Renewable naphtha	138		94		158
Neat SAF	297		—		—
Total Renewable Diesel revenues	2,508		2,410		3,823
Ethanol:
Ethanol	3,174		2,647		3,300
Distillers grains	847		971		1,173
Total Ethanol revenues	4,021		3,618		4,473

Revenues	$	122,687	$	129,881	$	144,766

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenues by geographic area are shown in the following table (in millions). The geographic area is based on the location of the customer, and no customer accounted for 10 percent or more of our revenues.


	Year Ended December 31,
	2025		2024		2023
U.S.	$	87,819	$	93,311	$	104,208
Canada	8,137		8,577		10,107
U.K. and Ireland	15,830		15,236		16,148
Mexico and Peru	5,168		5,405		6,438
Other countries	5,733		7,352		7,865
Revenues	$	122,687	$	129,881	$	144,766

Long-lived assets include “property, plant, and equipment, net” and certain long-lived assets included in “deferred charges and other assets, net.” Long-lived assets by geographic area consisted of the following (in millions):


	December 31,
	2025		2024
U.S.	$	26,544	$	28,359
Canada	1,567		1,414
U.K. and Ireland	1,512		1,484
Mexico and Peru	785		798
Total long-lived assets	$	30,408	$	32,055

As of December 31, 2025 and 2024, our investments in nonconsolidated joint ventures accounted for under the equity method were $684 million and $695 million, respectively, all of which related to the Refining segment and are reflected in “deferred charges and other assets, net” in our balance sheets and as presented in Note 7.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. SUPPLEMENTAL CASH FLOW INFORMATION

In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in current assets and current liabilities as follows (in millions):


	Year Ended December 31,
	2025		2024		2023
Decrease (increase) in current assets:
Receivables, net	$	1,125	$	1,562	$	(387)
Inventories	362		(286)		(684)

Prepaid expenses and other	99		320		(34)
Increase (decrease) in current liabilities:
Accounts payable	(2,016)		(430)		(169)
Accrued expenses	237		(168)		(50)
Taxes other than income taxes payable	138		(57)		(226)
Income taxes payable	(137)		(146)		(776)
Changes in current assets and current liabilities	$	(192)	$	795	$	(2,326)

Changes in current assets and current liabilities for the year ended December 31, 2025 were primarily due to the following:

The decrease in receivables was due to a decrease in refined petroleum product prices combined with a decrease in related sales volumes in December 2025 compared to December 2024 and the collection of $246 million for a blender’s tax credit receivable;
The decrease in inventories was primarily due to lower inventory levels in December 2025 compared to December 2024; and
The decrease in accounts payable was due to a decrease in crude oil and other feedstock prices combined with a decrease in related volumes purchased in December 2025 compared to December 2024.

Changes in current assets and current liabilities for the year ended December 31, 2024 were primarily due to the following:

The decrease in receivables was due to a decrease in refined petroleum product prices combined with a decrease in related sales volumes in December 2024 compared to December 2023;
The increase in inventories was primarily due to an increase in inventory volumes in December 2024 compared to December 2023; and
The decrease in accounts payable was due to a decrease in crude oil and other feedstock prices in December 2024 compared to December 2023, partially offset by an increase in related volumes purchased.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Changes in current assets and current liabilities for the year ended December 31, 2023 were primarily due to the following:

The increase in receivables was primarily due to an increase in refined petroleum product sales volumes in December 2023 compared to December 2022, partially offset by a decrease in related prices;
The increase in inventories was primarily due to an increase in inventory volumes in December 2023 compared to December 2022;
The decrease in accounts payable was due to a decrease in crude oil and other feedstock prices in December 2023 compared to December 2022, partially offset by an increase in related volumes purchased; and
The decrease in income taxes payable was primarily due to income tax payments made during the year ended December 31, 2023.

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


	Year Ended December 31,
	2025		2024		2023
Interest paid in excess of amount capitalized, including interest on finance leases	$	533	$	556	$	562
Income taxes paid, net (see Note 15)	699		843		3,494

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


	Year Ended December 31,
	2025				2024				2023
	Operating Leases		Finance Leases		Operating Leases		Finance Leases		Operating Leases		Finance Leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	527	$	112	$	527	$	116	$	428	$	107
Investing cash flows	—		—		1		—		—		—
Financing cash flows	—		268		—		245		—		250
Changes in lease balances resulting from new and modified leases	477		237		448		318		396		157

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Noncash investing activities for the year ended December 31, 2025 included the recognition of expected asset retirement obligations of $337 million, as described in Note 2. There were no other significant noncash investing and financing activities during the year ended December 31, 2025, except as noted in the table above.

Noncash financing activities for the year ended December 31, 2024 included the conversion by IEnova of $732 million of outstanding borrowings under the IEnova Revolver to additional equity in Central Mexico Terminals, as described in Note 9. There were no other significant noncash investing and financing activities during the year ended December 31, 2024, except as noted in the table above.

There were no significant noncash investing and financing activities during the year ended December 31, 2023, except as noted in the table above.

19. FAIR VALUE MEASUREMENTS

General

GAAP requires or permits certain assets and liabilities to be measured at fair value on a recurring or nonrecurring basis in our balance sheets, and those assets and liabilities are presented below under “Recurring Fair Value Measurements” and “Nonrecurring Fair Value Measurements.” Assets and liabilities measured at fair value on a recurring basis, such as derivative financial instruments, are measured at fair value at the end of each reporting period. Assets and liabilities measured at fair value on a nonrecurring basis, such as the impairment of property, plant and equipment, are measured at fair value in particular circumstances.

GAAP also requires the disclosure of the fair values of financial instruments when an option to elect fair value accounting has been provided, but such election has not been made. A debt obligation is an example of such a financial instrument. The disclosure of the fair values of financial instruments not recognized at fair value in our balance sheets is presented below under “Financial Instruments.”

GAAP provides a framework for measuring fair value and establishes a three-level fair value hierarchy that prioritizes inputs to valuation techniques based on the degree to which objective prices in external active markets are available to measure fair value. The following is a description of each of the levels of the fair value hierarchy.

*•*Level 1 – Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities.

*•*Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

*•*Level 3 – Unobservable inputs for the asset or liability. Unobservable inputs reflect our own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

occasional market quotes or sales of similar instruments or our own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant judgment.

Recurring Fair Value Measurements

The following tables present information (in millions) about our assets and liabilities recognized at their fair values in our balance sheets categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of December 31, 2025 and 2024.

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


	December 31, 2025
							Total Gross Fair Value		Effect of Counter- party Netting		Effect of Cash Collateral Netting		Net Carrying Value on Balance Sheet		Cash Collateral Paid or Received Not Offset
	Fair Value Hierarchy
	Level 1		Level 2		Level 3
Assets
Commodity derivative contracts	$	490	$	—	$	—	$	490	$	(448)	$	(7)	$	35	$	—
Physical purchase contracts	—		1		—		1		n/a		n/a		1		n/a
Clean fuel production credits	—		—		55		55		n/a		n/a		55		n/a
Investments of certain benefit plans	92		—		4		96		n/a		n/a		96		n/a
Investments in AFS debt securities	1		26		—		27		n/a		n/a		27		n/a

Total	$	583	$	27	$	59	$	669	$	(448)	$	(7)	$	214

Liabilities
Commodity derivative contracts	$	453	$	—	$	—	$	453	$	(448)	$	(5)	$	—	$	(39)
Physical purchase contracts	—		4		—		4		n/a		n/a		4		n/a
Blending program obligations	—		85		—		85		n/a		n/a		85		n/a
Foreign currency contracts	2		—		—		2		n/a		n/a		2		n/a
Total	$	455	$	89	$	—	$	544	$	(448)	$	(5)	$	91

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2024
							Total Gross Fair Value		Effect of Counter- party Netting		Effect of Cash Collateral Netting		Net Carrying Value on Balance Sheet		Cash Collateral Paid or Received Not Offset
	Fair Value Hierarchy
	Level 1		Level 2		Level 3
Assets
Commodity derivative contracts	$	402	$	—	$	—	$	402	$	(402)	$	—	$	—	$	—
Physical purchase contracts	—		2		—		2		n/a		n/a		2		n/a
Investments of certain benefit plans	89		—		4		93		n/a		n/a		93		n/a
Investments in AFS debt securities	6		20		—		26		n/a		n/a		26		n/a
Foreign currency contracts	6		—		—		6		n/a		n/a		6		n/a
Total	$	503	$	22	$	4	$	529	$	(402)	$	—	$	127

Liabilities
Commodity derivative contracts	$	448	$	—	$	—	$	448	$	(402)	$	(46)	$	—	$	(71)
Physical purchase contracts	—		3		—		3		n/a		n/a		3		n/a
Blending program obligations	—		13		—		13		n/a		n/a		13		n/a

Total	$	448	$	16	$	—	$	464	$	(402)	$	(46)	$	16

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

Commodity derivative contracts consist primarily of exchange-traded futures, which are used to reduce the impact of price volatility on our results of operations and cash flows as discussed in Note 20. These contracts are measured at fair value using a market approach based on quoted prices from the commodity exchange and are categorized in Level 1 of the fair value hierarchy.
Physical purchase contracts represent the fair value of fixed-price corn purchase contracts. The fair values of these purchase contracts are measured using a market approach based on quoted prices from the commodity exchange or an independent pricing service and are categorized in Level 2 of the fair value hierarchy.
Clean fuel production credits represent the fair value of the tax credits that DGD intends to sell on behalf of the other joint venture member. These tax credits are categorized in Level 3 of the fair value hierarchy and are measured at fair value using a market approach based on historical sales prices and third-party consultant estimates. Significant unobservable inputs used in the valuation include the expected market discount per $1.00 of credit value.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Blending program obligations represent our liability for the purchase of compliance credits needed to satisfy our blending obligations under the Renewable and Low-Carbon Fuel Programs. The blending program obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a market approach based on quoted prices from an independent pricing service.
Investments of certain benefit plans consist of investment securities held by trusts for the purpose of satisfying a portion of our obligations under certain U.S. nonqualified benefit plans. The plan assets categorized in Level 1 of the fair value hierarchy are measured at fair value using a market approach based on quoted prices from national securities exchanges. The plan assets categorized in Level 3 of the fair value hierarchy represent insurance contracts, the fair value of which is provided by the insurer.
Investments in AFS debt securities consist primarily of commercial paper and U.S. government treasury bills and have maturities within one year. The securities categorized in Level 1 are measured at fair value using a market approach based on quoted prices from national securities exchanges and the securities categorized in Level 2 are measured at fair value using a market approach based on quoted prices from independent pricing services. The amortized cost basis of the securities approximates fair value. Realized and unrealized gains and losses were de minimis for the years ended December 31, 2025 and 2024.
Foreign currency contracts consist of foreign currency exchange and purchase contracts related to our foreign operations to manage our exposure to exchange rate fluctuations on transactions denominated in currencies other than the local (functional) currencies of our operations. These contracts are measured at fair value using a market approach based on quoted foreign currency exchange rates and are categorized in Level 1 of the fair value hierarchy.

Nonrecurring Fair Value Measurements

There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of December 31, 2025 and 2024.

As discussed in Note 2, we concluded that the carrying values of the Benicia and Wilmington refineries were impaired as of March 31, 2025. The fair values of the refineries were determined using a market approach based on a comparison of recent property sales and other relevant real estate and market data, which we determined reflects the highest and best use of these assets. These fair values involved significant assumptions and actual results could differ from these estimates.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents information (in millions) about our nonfinancial assets measured at fair value on a nonrecurring basis during the year ended December 31, 2025.


	March 31, 2025
	Fair Value Measurements Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value		Carrying Value as of December 31, 2025 (a)		Loss Recognized (b)
Assets
Long-lived assets of the Benicia Refinery	$	—	$	—	$	722	$	722	$	304	$	901
Long-lived assets of the Wilmington Refinery	—		—		847		847		788		230
Total	$	—	$	—	$	1,569	$	1,569	$	1,092	$	1,131

(a)The carrying values of the Benicia and Wilmington refineries as of December 31, 2025 are lower than the fair values as of March 31, 2025 primarily due to the recognition of depreciation and amortization expense.

(b)The asset impairment loss was recognized in our Refining segment in March 2025.

Financial Instruments

Our financial instruments include cash and cash equivalents, restricted cash, investments of certain benefit plans, investments in AFS debt securities, receivables, payables, debt obligations, operating and finance lease obligations, commodity derivative contracts, and foreign currency contracts. The estimated fair values of cash and cash equivalents, restricted cash, receivables, payables, and operating and finance lease obligations approximate their carrying amounts; the carrying value and fair value of debt are shown in the table below (in millions).


		December 31, 2025				December 31, 2024
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities:
Debt (excluding finance lease obligations)	Level 2	$	8,261	$	8,190	$	8,085	$	7,776

Investments in AFS debt securities, commodity derivative contracts, and foreign currency contracts are recognized at their fair values as shown in “Recurring Fair Value Measurements” above.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. PRICE RISK MANAGEMENT ACTIVITIES

General

We are exposed to market risks primarily related to the volatility in the price of commodities, foreign currency exchange rates, and the price of credits needed to comply with the Renewable and Low-Carbon Fuel Programs. We enter into derivative instruments to manage some of these risks, including derivative instruments related to the various commodities we purchase or produce, and foreign currency exchange and purchase contracts, as described below under “Risk Management Activities by Type of Risk.” These derivative instruments are recorded as either assets or liabilities measured at their fair values (see Note 19), as summarized below under “Fair Values of Derivative Instruments.” The effect of these derivative instruments on our income and other comprehensive income (loss) is summarized below under “Effect of Derivative Instruments on Income and Other Comprehensive Income (Loss).”

Risk Management Activities by Type of Risk

Commodity Price Risk

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

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

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

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

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2025, we had the following outstanding commodity derivative instruments that were used as cash flow hedges and economic hedges, as well as commodity derivative instruments related to the physical purchase of corn at a fixed price. The information presents the notional volume of outstanding contracts by type of instrument and year of maturity (volumes in thousands of barrels, except corn contracts that are presented in thousands of bushels).


						Notional Contract Volumes by Year of Maturity
						2026
Derivatives designated as cash flow hedges:
Refined petroleum products:

Futures – short						2,720

Derivatives designated as economic hedges:
Crude oil and refined petroleum products:


Futures – long						93,157
Futures – short						98,482





Corn:
Futures – long						54,410
Futures – short						87,530
Physical contracts – long						31,193

Renewable and Low-Carbon Fuel Programs Price Risk

We are exposed to market risk related to the volatility in the price of credits needed to comply with the Renewable and Low-Carbon Fuel Programs. To manage this risk, we enter into contracts to purchase these credits. Some of these contracts are derivative instruments; however, we elect the normal purchase exception and do not record these contracts at their fair values. The Renewable and Low-Carbon Fuel Programs require us to blend a certain volume of renewable and low-carbon fuels into the petroleum-based transportation fuels we produce in, or import into, the respective jurisdiction to be consumed therein based on annual quotas. To the degree we are unable to blend at the required quotas, we must purchase compliance credits (primarily RINs). For the years ended December 31, 2025, 2024, and 2023, the cost of meeting our credit obligations under the Renewable and Low-Carbon Fuel Programs was $1.6 billion, $730 million, and $1.3 billion, respectively, which are reflected in cost of materials and other.

Foreign Currency Risk

We are exposed to exchange rate fluctuations on transactions related to our foreign operations that are denominated in currencies other than the local (functional) currencies of our operations. To manage our exposure to these exchange rate fluctuations, we often use foreign currency contracts. These contracts are not designated as hedging instruments for accounting purposes and therefore are classified as economic hedges. As of December 31, 2025, we had foreign currency contracts to purchase $395 million of U.S. dollars. These commitments matured on or before January 26, 2026.

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Values of Derivative Instruments

The following table provides information about the fair values of our derivative instruments as of December 31, 2025 and 2024 (in millions) and the line items in our balance sheets in which the fair values are reflected. See Note 19 for additional information related to the fair values of our derivative instruments.

As indicated in Note 19, we net fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty under master netting arrangements, including cash collateral assets and obligations. The following table, however, is presented on a gross asset and gross liability basis, which results in the reflection of certain assets in liability accounts and certain liabilities in asset accounts:


	Balance Sheet Location		December 31, 2025						December 31, 2024
		Asset Derivatives			Liability Derivatives			Asset Derivatives			Liability Derivatives
Derivatives designated as hedging instruments:
Commodity contracts	Receivables, net		$	31		$	7		$	12		$	13



Derivatives not designated as hedging instruments:
Commodity contracts	Receivables, net		$	459		$	446		$	390		$	435


Physical purchase contracts	Inventories		1			4			2			3
Foreign currency contracts	Receivables, net		—			—			6			—
Foreign currency contracts	Accrued expenses		—			2			—			—
Total			$	460		$	452		$	398		$	438

Market Risk

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

VALERO ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Effect of Derivative Instruments on Income and Other Comprehensive Income (Loss)

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


Derivatives in Cash Flow Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivatives	Year Ended December 31,
2025	2024	2023
Commodity contracts:
Gain recognized in other comprehensive income (loss)	n/a	$	3	$	30	$	82
Gain (loss) reclassified from accumulated other comprehensive loss into income	Revenues	(21)		117		(8)

For cash flow hedges, no component of any derivative instrument’s gain or loss was excluded from the assessment of hedge effectiveness for the years ended December 31, 2025, 2024, and 2023. For the years ended December 31, 2025, 2024, and 2023, cash flow hedges primarily related to forecasted sales of renewable diesel. As of December 31, 2025, the estimated deferred after-tax gain that is expected to be reclassified into revenues within the next 12 months was not material. The changes in accumulated other comprehensive loss by component, net of tax, for the years ended December 31, 2025, 2024, and 2023 are described in Note 11.

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


Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Year Ended December 31,
	2025	2024		2023
Commodity contracts	Revenues	$	(10)	$	(18)	$	(27)
Commodity contracts	Cost of materials and other	(19)		(86)		208
Commodity contracts	Operating expenses (excluding depreciation and amortization expense)	—		—		1
Foreign currency contracts	Cost of materials and other	(12)		36		(34)

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