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

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

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

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

• the effect, impact, potential duration or timing, or other implications of global geopolitical and other conflicts and tensions;

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

• future Renewable Diesel segment margins;

• future Ethanol segment margins;

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

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

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

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

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

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

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

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

• expectations regarding environmental, tax, and other regulatory matters, including SBx 1-2 and the matters discussed under “PART II, ITEM 1. LEGAL PROCEEDINGS” below, the anticipated amounts and timing of payment with respect to our deferred tax liabilities, matters impacting our ability to repatriate cash held by our foreign subsidiaries, and the anticipated effect thereof on our business, financial condition, results of operations, and liquidity;

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

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

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

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

• expectations regarding our low-carbon fuels strategy, publicly announced greenhouse gas (GHG) emissions reduction/displacement targets, and our current, former, and any future low-carbon projects.

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

• the effects arising out of global geopolitical and other conflicts and tensions, including with respect to changes in trade flows and impacts to crude oil and other markets;

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

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

• the effects of public health threats, pandemics, and epidemics, such as the COVID-19 pandemic and variants of the virus, governmental and societal responses thereto, and the adverse impacts of the foregoing on our business, financial condition, results of operations, and liquidity, and the global economy and financial markets generally;

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

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

• the ability of the members of the Organization of Petroleum Exporting Countries (OPEC), and other petroleum-producing nations that collectively make up OPEC+, to agree on and to maintain crude oil price and production controls;

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

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

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

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

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

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

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

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

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

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

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

• delay of, cancellation of, or failure to implement planned capital or other projects and realize the various assumptions and benefits projected for such projects or cost overruns in constructing such planned capital projects;

• earthquakes, hurricanes, tornadoes, winter storms, droughts, floods, wildfires, and other weather events, which can unforeseeably affect the price or availability of electricity, natural gas, crude oil, waste and renewable feedstocks, corn, and other feedstocks, critical supplies, refined petroleum products, renewable diesel, and ethanol;

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

• legislative or regulatory action, including the introduction or enactment of legislation or rulemakings by government authorities, environmental regulations, changes to income tax rates, introduction of a global minimum tax, windfall taxes or penalties, tax changes or restrictions impacting the foreign repatriation of cash, actions implemented under SBx 1-2, actions implemented under the Renewable and Low-Carbon Fuel Programs and other environmental emissions programs, including changes to volume requirements or other obligations or exemptions under the RFS, and actions arising from the EPA’s or other government agencies’ regulations, policies, or initiatives concerning GHGs, including mandates for or bans of specific technology, which may adversely affect our business or operations;

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

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

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

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

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

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

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

• other factors generally described in the “RISK FACTORS” section included in our annual report on Form 10-K for the year ended December 31, 2022.

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

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

NON-GAAP FINANCIAL MEASURES

The discussions in “OVERVIEW AND OUTLOOK,” “RESULTS OF OPERATIONS,” and “LIQUIDITY AND CAPITAL RESOURCES” below include references to financial measures that are not defined under GAAP. These non-GAAP financial measures include adjusted operating income (including adjusted operating income for each of our reportable segments, as applicable); Refining, Renewable Diesel, and Ethanol segment margin; and capital investments attributable to Valero. We have included these non-GAAP financial measures to help facilitate the comparison of operating results between periods, to help assess our cash flows, and because we believe they provide useful information as discussed further below. See the tables in note (f) beginning on page 54 for reconciliations of adjusted operating income (including adjusted operating income for each of our reportable segments, as applicable) and Refining, Renewable Diesel, and Ethanol segment margin to their most directly comparable GAAP financial measures. Also in note (f), we disclose the reasons why we believe our use of such non-GAAP financial measures provides useful information. See the table on page 60 for a reconciliation of capital investments attributable to Valero to its most directly comparable GAAP financial measure. Beginning on page 59, we disclose the reasons why we believe our use of this non-GAAP financial measure provides useful information.

OVERVIEW AND OUTLOOK

Overview

Business Operations Update

Our results for the third quarter and first nine months of 2023 were favorably impacted by the continued strong worldwide demand for petroleum-based transportation fuels, while the worldwide supply of those products remained constrained. This global supply and demand imbalance has continued to contribute to strong refining margins for 2023.

The strong demand for our products and continued strength in refining margins were the primary contributors to us reporting $2.6 billion and $7.6 billion of net income attributable to Valero stockholders for the third quarter of 2023 and the first nine months of 2023, respectively. Our operating results, including operating results by segment, are described in the following summary under “Third Quarter Results” and “First Nine Months Results,” with more detailed descriptions found under “RESULTS OF OPERATIONS” beginning on page 39.

Our operations generated $8.0 billion of cash during the first nine months of 2023. This cash was used to make $1.4 billion of capital investments in our business and return $5.3 billion to our stockholders through purchases of common stock for treasury and dividend payments. In addition, we reduced our outstanding debt through the purchase of $199 million of our public debt during the first nine months of 2023. As a result of this and other activity, our cash and cash equivalents increased by $969 million, from $4.9 billion as of December 31, 2022 to $5.8 billion as of September 30, 2023. We had $11.0 billion in liquidity as of September 30, 2023. The components of our liquidity and descriptions of our cash flows, capital investments, and other matters impacting our liquidity and capital resources can be found under “LIQUIDITY AND CAPITAL RESOURCES” beginning on page 57.

Third Quarter Results

For the third quarter of 2023, we reported net income attributable to Valero stockholders of $2.6 billion compared to $2.8 billion for the third quarter of 2022. The decrease of $195 million was primarily due to a decrease in operating income of $289 million, partially offset by an increase in “other income, net” of $48 million and a decrease in income attributable to noncontrolling interests of $54 million. The details of our operating income and adjusted operating income by segment and in total are reflected below (in millions). Adjusted operating income excludes the adjustment reflected in the table in note (f) beginning on page 54.

			Three Months Ended September 30,
			2023						2022						Change
Refining segment:
Operating income			$	3,445					$	3,810					$	(365)
Adjusted operating income			3,451						3,816						(365)
Renewable Diesel segment:
Operating income			123						212						(89)
Ethanol segment:
Operating income			197						1						196
Total company:
Operating income			3,503						3,792						(289)
Adjusted operating income			3,509						3,798						(289)

While our operating income decreased by $289 million in the third quarter of 2023 compared to the third quarter of 2022, adjusted operating income also decreased by $289 million primarily due to the following:

• Refining segment. Refining segment adjusted operating income decreased by $365 million primarily due to lower distillate (primarily diesel) margins, partially offset by higher gasoline margins, higher discounts on crude oils and other feedstocks, and lower operating expenses (excluding depreciation and amortization expense).

• Renewable Diesel segment. Renewable Diesel segment operating income decreased by $89 million primarily due to lower product prices (primarily renewable diesel), higher operating expenses (excluding depreciation and amortization expense), and higher depreciation and amortization expense, partially offset by lower feedstock costs and higher sales volumes.

• Ethanol segment. Ethanol segment operating income increased by $196 million primarily due to lower corn prices, higher production volumes, and lower operating expenses (excluding depreciation and amortization expense), partially offset by lower ethanol and corn related co-product prices.

First Nine Months Results

For the first nine months of 2023, we reported net income attributable to Valero stockholders of $7.6 billion compared to $8.4 billion for the first nine months of 2022. The decrease of $782 million was primarily due to a decrease in operating income of $1.1 billion, partially offset by an increase in “other income, net” of $270 million and a decrease in income tax expense of $122 million. The details of our operating income and adjusted operating income by segment and in total are reflected below (in millions). Adjusted operating income excludes the adjustments reflected in the table in note (f) beginning on page 54.

			Nine Months Ended September 30,
			2023						2022						Change
Refining segment:
Operating income			$	9,934					$	11,473					$	(1,539)
Adjusted operating income			9,951						11,407						(1,456)
Renewable Diesel segment:
Operating income			768						513						255
Ethanol segment:
Operating income			363						103						260
Adjusted operating income			364						82						282
Total company:
Operating income			10,305						11,395						(1,090)
Adjusted operating income			10,323						11,328						(1,005)

While our operating income decreased by $1.1 billion in the first nine months of 2023 compared to the first nine months of 2022, adjusted operating income decreased by $1.0 billion primarily due to the following:

• Refining segment. Refining segment adjusted operating income decreased by $1.5 billion primarily due to lower gasoline and distillate (primarily diesel) margins, partially offset by higher

discounts on crude oils and other feedstocks, an increase in throughput volumes, and lower operating expenses (excluding depreciation and amortization expense).

• Renewable Diesel segment. Renewable Diesel segment operating income increased by $255 million primarily due to lower feedstock costs and higher sales volumes, partially offset by lower product prices (primarily renewable diesel), higher operating expenses (excluding depreciation and amortization expense), and higher depreciation and amortization expense.

• Ethanol segment. Ethanol segment adjusted operating income increased by $282 million primarily due to lower corn prices, higher production volumes, and lower operating expenses (excluding depreciation and amortization expense), partially offset by lower ethanol and corn related co-product prices.

Outlook

Many uncertainties remain with respect to the supply and demand imbalance in the petroleum-based products market worldwide. While it is difficult to predict future worldwide economic activity and its impact on product supply and demand, as well as any effect that the uncertainty described in Note 2 of Condensed Notes to Consolidated Financial Statements or other political or regulatory developments may have on us, we have noted several factors below that have impacted or may impact our results of operations during the fourth quarter of 2023.

• Gasoline and diesel demand have returned to pre-pandemic levels and are expected to follow typical seasonal patterns. Jet fuel demand continues to improve and is approaching pre-pandemic levels in the U.S.

• Combined light product (primarily diesel) inventories in the U.S. and Europe are below historical levels reflecting tight global petroleum product balances, which should support continued high utilization of refining capacity.

• After narrowing early this year on reduced sour crude oil production from OPEC+ suppliers, crude oil discounts have recently begun to widen; however, the renewed conflict in the Middle East will likely cause increased volatility in the crude oil market and potentially impact crude oil discounts.

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

• Ethanol demand is expected to follow typical seasonal patterns.

RESULTS OF OPERATIONS

The following tables, including the reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures in note (f) beginning on page 54, highlight our results of operations, our operating performance, and market reference prices that directly impact our operations. Note references in this section can be found on pages 53 through 56.

Third Quarter Results -

Financial Highlights By Segment and Total Company

(millions of dollars)

			Three Months Ended September 30, 2023
			Refining						Renewable Diesel						Ethanol						Corporate and Eliminations						Total
Revenues:
Revenues from external customers			$	36,521					$	759					$	1,124					$	—					$	38,404
Intersegment revenues			8						672						310						(990)						—
Total revenues			36,529						1,431						1,434						(990)						38,404
Cost of sales:
Cost of materials and other			31,115						1,169						1,092						(991)						32,385
Operating expenses (excluding depreciation and amortization expense reflected below)			1,366						84						125						3						1,578
Depreciation and amortization expense			597						55						20						(1)						671
Total cost of sales			33,078						1,308						1,237						(989)						34,634
Other operating expenses			6						—						—						—						6
General and administrative expenses (excluding depreciation and amortization expense reflected below)			—						—						—						250						250
Depreciation and amortization expense			—						—						—						11						11
Operating income by segment			$	3,445					$	123					$	197					$	(262)					3,503
Other income, net																											122
Interest and debt expense, net of capitalized interest																											(149)
Income before income tax expense																											3,476
Income tax expense																											813
Net income																											2,663
Less: Net income attributable to noncontrolling interests																											41
Net income attributable to Valero Energy Corporation stockholders																											$	2,622

Third Quarter Results -

Financial Highlights By Segment and Total Company (continued)

(millions of dollars)

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

Third Quarter Results -

Average Market Reference Prices and Differentials

			Three Months Ended September 30,
			2023						2022
Refining
Feedstocks (dollars per barrel)
Brent crude oil			$	86.18					$	97.59
Brent less West Texas Intermediate (WTI) crude oil			3.72						5.83
Brent less WTI Houston crude oil			2.21						3.69
Brent less Dated Brent crude oil			(0.78)						(2.97)
Brent less Argus Sour Crude Index (ASCI) crude oil			3.43						8.23
Brent less Maya crude oil			8.77						13.11
Brent less Western Canadian Select (WCS) Houston crude oil			9.98						17.68
WTI crude oil			82.46						91.76
Natural gas (dollars per million British Thermal Units (MMBTu))			2.38						7.31
Renewable volume obligation (RVO) (dollars per barrel) (e)			7.42						8.11
Product margins (RVO adjusted unless otherwise noted) (dollars per barrel)
U.S. Gulf Coast:
Conventional Blendstock of Oxygenate Blending (CBOB) gasoline less Brent			14.70						5.70
Ultra-low-sulfur (ULS) diesel less Brent			30.87						41.01
Propylene less Brent (not RVO adjusted)			(57.98)						(46.73)
U.S. Mid-Continent:
CBOB gasoline less WTI			25.46						19.27
ULS diesel less WTI			37.10						52.25
North Atlantic:
CBOB gasoline less Brent			22.93						20.17
ULS diesel less Brent			33.91						44.19
U.S. West Coast:
California Reformulated Gasoline Blendstock of Oxygenate Blending (CARBOB) 87 gasoline less Brent			43.33						41.48
California Air Resources Board (CARB) diesel less Brent			47.66						43.68

Third Quarter Results -

Average Market Reference Prices and Differentials (continued)

			Three Months Ended September 30,
			2023						2022
Renewable Diesel
New York Mercantile Exchange ULS diesel (dollars per gallon)			$	3.03					$	3.55
Biodiesel RIN (dollars per RIN)			1.40						1.71
California LCFS carbon credit (dollars per metric ton)			74.46						86.21
U.S. Gulf Coast (USGC) used cooking oil (UCO) (dollars per pound)			0.64						0.73
USGC distillers corn oil (DCO) (dollars per pound)			0.72						0.73
USGC fancy bleachable tallow (Tallow) (dollars per pound)			0.68						0.78
Ethanol
Chicago Board of Trade corn (dollars per bushel)			4.99						6.60
New York Harbor ethanol (dollars per gallon)			2.39						2.58

Total Company, Corporate, and Other

The following table includes selected financial data for the total company, corporate, and other for the third quarter of 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

			Three Months Ended September 30,
			2023						2022						Change
Revenues			$	38,404					$	44,454					$	(6,050)
Cost of sales			34,634						40,431						(5,797)
Operating income			3,503						3,792						(289)
Adjusted operating income (see note (f))			3,509						3,798						(289)
Other income, net (see note (d))			122						74						48
Net income attributable to noncontrolling interests			41						95						(54)

Revenues decreased by $6.1 billion in the third quarter of 2023 compared to the third quarter of 2022 primarily due to decreases in product prices for the petroleum-based transportation fuels associated with sales made by our Refining segment. This decrease in revenues was partially offset by a decrease in cost of sales of $5.8 billion primarily due to decreases in crude oil and other feedstock costs. These changes resulted in a $289 million decrease in operating income, from $3.8 billion in the third quarter of 2022 to $3.5 billion in the third quarter of 2023.

Adjusted operating income also decreased by $289 million, from $3.8 billion in the third quarter of 2022 to $3.5 billion in the third quarter of 2023. The components of this $289 million decrease in adjusted operating income are discussed by segment in the segment analyses that follow.

“Other income, net” increased by $48 million in the third quarter of 2023 compared to the third quarter of 2022 due to the items noted in the following table (in millions):

			Three Months Ended September 30,
			2023						2022						Change
Interest income on cash			$	74					$	36					$	38
Gain from early retirement of debt (see note (d))			—						26						(26)
Equity income on joint ventures and other			48						12						36
Other income, net			$	122					$	74					$	48

Net income attributable to noncontrolling interests decreased by $54 million in the third quarter of 2023 compared to the third quarter of 2022 primarily due to lower earnings associated with DGD, whose operations compose our Renewable Diesel segment. See Note 6 of Condensed Notes to Consolidated Financial Statements regarding our accounting for DGD and the Renewable Diesel segment analysis beginning on page 44.

Refining Segment Results

The following table includes selected financial and operating data of our Refining segment for the third quarter of 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

			Three Months Ended September 30,
			2023						2022						Change
Operating income			$	3,445					$	3,810					$	(365)
Adjusted operating income (see note (f))			3,451						3,816						(365)
Refining margin (see note (f))			5,414						5,900						(486)
Operating expenses (excluding depreciation and amortization expense reflected below)			1,366						1,516						(150)
Depreciation and amortization expense			597						568						29
Throughput volumes (thousand barrels per day) (see note (g))			3,022						3,005						17

Refining segment operating income decreased by $365 million in the third quarter of 2023 compared to the third quarter of 2022. Refining segment adjusted operating income, which excludes the adjustment in the table in note (f), also decreased by $365 million in the third quarter of 2023 compared to the third quarter of 2022. The components of this decrease in the adjusted results, along with the reasons for the changes in those components, are outlined below.

• Refining segment margin decreased by $486 million in the third quarter of 2023 compared to the third quarter of 2022.

Refining segment margin is primarily affected by the prices for the petroleum-based transportation fuels that we sell and the cost of crude oil and other feedstocks that we process. The table on page 41 reflects market reference prices and differentials that we believe impacted our Refining segment margin in the third quarter of 2023 compared to the third quarter of 2022.

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

◦A decrease in distillate (primarily diesel) margins had an unfavorable impact of approximately $1.3 billion.

◦An increase in gasoline margins had a favorable impact of approximately $534 million.

◦Higher discounts on crude oils had a favorable impact of approximately $180 million.

◦Higher discounts on other feedstocks had a favorable impact of approximately $150 million.

• Refining segment operating expenses (excluding depreciation and amortization expense) decreased by $150 million primarily due to a decrease in energy costs (primarily natural gas) of $208 million, partially offset by increases in certain employee compensation expenses of $15 million and chemicals and catalyst costs of $14 million.

Renewable Diesel Segment Results

The following table includes selected financial and operating data of our Renewable Diesel segment for the third quarter of 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

			Three Months Ended September 30,
			2023						2022						Change
Operating income			$	123					$	212					$	(89)
Renewable Diesel margin (see note (f))			262						314						(52)
Operating expenses (excluding depreciation and amortization expense reflected below)			84						69						15
Depreciation and amortization expense			55						33						22
Sales volumes (thousand gallons per day) (see note (g))			2,992						2,231						761

Renewable Diesel segment operating income decreased by $89 million in the third quarter of 2023 compared to the third quarter of 2022. The components of this decrease, along with the reasons for the changes in those components, are outlined below.

• Renewable Diesel segment margin decreased by $52 million in the third quarter of 2023 compared to the third quarter of 2022.

Renewable Diesel segment margin is primarily affected by the price for the renewable diesel that we sell and the cost of the feedstocks that we process. The table on page 42 reflects market reference prices that we believe impacted our Renewable Diesel segment margin in the third quarter of 2023 compared to the third quarter of 2022.

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

◦A decrease in product prices, primarily renewable diesel, had an unfavorable impact of approximately $393 million.

◦A decrease in the cost of feedstocks we process had a favorable impact of approximately $234 million.

◦An increase in sales volumes of 761,000 gallons per day had a favorable impact of approximately $118 million. The increase in sales volumes was primarily due to the additional production resulting from the completion of the new DGD Port Arthur Plant that commenced operations in the fourth quarter of 2022, partially offset by the effect of unplanned downtime resulting from a fire at the DGD St. Charles Plant in the third quarter of 2023.

• Renewable Diesel segment operating expenses (excluding depreciation and amortization expense) increased by $15 million primarily due to increased costs resulting from the new DGD Port Arthur Plant that commenced operations in the fourth quarter of 2022.

• Renewable Diesel segment depreciation and amortization expense increased by $22 million primarily due to depreciation expense associated with the new DGD Port Arthur Plant that commenced operations in the fourth quarter of 2022.

Ethanol Segment Results

The following table includes selected financial and operating data of our Ethanol segment for the third quarter of 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

			Three Months Ended September 30,
			2023						2022						Change
Operating income			$	197					$	1					$	196
Ethanol margin (see note (f))			342						183						159
Operating expenses (excluding depreciation and amortization expense reflected below)			125						162						(37)
Depreciation and amortization expense			20						20						—
Production volumes (thousand gallons per day) (see note (g))			4,329						3,498						831

Ethanol segment operating income increased by $196 million in the third quarter of 2023 compared to the third quarter of 2022. The components of this increase, along with the reasons for the changes in those components, are outlined below.

• Ethanol segment margin increased by $159 million in the third quarter of 2023 compared to the third quarter of 2022. Ethanol segment margin is primarily affected by prices for the ethanol and corn related co-products that we sell and the cost of corn that we process. The table on page 42 reflects market reference prices that we believe impacted our Ethanol segment margin in the third quarter of 2023 compared to the third quarter of 2022.

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

◦Lower corn prices had a favorable impact of approximately $184 million.

◦An increase in production volumes of 831,000 gallons per day had a favorable impact of approximately $71 million.

◦Lower ethanol prices had an unfavorable impact of approximately $69 million.

◦Lower prices for the co-products that we produce, primarily dry distillers grains (DDGs), had an unfavorable impact of approximately $29 million.

• Ethanol segment operating expenses (excluding depreciation and amortization expense) decreased by $37 million primarily due to a decrease in energy costs (primarily natural gas).

First Nine Months Results -

Financial Highlights By Segment and Total Company

(millions of dollars)

			Nine Months Ended September 30, 2023
			Refining						Renewable Diesel						Ethanol						Corporate and Eliminations						Total
Revenues:
Revenues from external customers			$	102,924					$	2,990					$	3,438					$	—					$	109,352
Intersegment revenues			8						2,367						790						(3,165)						—
Total revenues			102,932						5,357						4,228						(3,165)						109,352
Cost of sales:
Cost of materials and other			87,398						4,143						3,422						(3,143)						91,820
Operating expenses (excluding depreciation and amortization expense reflected below)			3,832						274						383						6						4,495
Depreciation and amortization expense			1,751						172						59						(3)						1,979
Total cost of sales			92,981						4,589						3,864						(3,140)						98,294
Other operating expenses			17						—						1						—						18
General and administrative expenses (excluding depreciation and amortization expense reflected below)			—						—						—						703						703
Depreciation and amortization expense			—						—						—						32						32
Operating income by segment			$	9,934					$	768					$	363					$	(760)					10,305
Other income, net (d)																											357
Interest and debt expense, net of capitalized interest																											(443)
Income before income tax expense																											10,219
Income tax expense																											2,288
Net income																											7,931
Less: Net income attributable to noncontrolling interests																											298
Net income attributable to Valero Energy Corporation stockholders																											$	7,633

First Nine Months Results -

Financial Highlights By Segment and Total Company (continued)

(millions of dollars)

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

First Nine Months Results -

Average Market Reference Prices and Differentials

			Nine Months Ended September 30,
			2023						2022
Refining
Feedstocks (dollars per barrel)
Brent crude oil			$	82.12					$	102.21
Brent less WTI crude oil			4.68						3.91
Brent less WTI Houston crude oil			3.19						2.28
Brent less Dated Brent crude oil			(0.10)						(2.92)
Brent less ASCI crude oil			5.53						6.58
Brent less Maya crude oil			14.16						9.84
Brent less WCS Houston crude oil			12.19						13.22
WTI crude oil			77.44						98.29
Natural gas (dollars per MMBtu)			2.21						6.29
RVO (dollars per barrel) (e)			7.77						7.45
Product margins (RVO adjusted unless otherwise noted) (dollars per barrel)
U.S. Gulf Coast:
CBOB gasoline less Brent			12.57						12.82
ULS diesel less Brent			25.26						36.89
Propylene less Brent (not RVO adjusted)			(46.32)						(38.04)
U.S. Mid-Continent:
CBOB gasoline less WTI			22.25						19.04
ULS diesel less WTI			32.12						41.81
North Atlantic:
CBOB gasoline less Brent			18.96						21.73
ULS diesel less Brent			28.19						44.22
U.S. West Coast:
CARBOB 87 gasoline less Brent			32.89						36.59
CARB diesel less Brent			31.43						39.70

First Nine Months Results -

Average Market Reference Prices and Differentials (continued)

			Nine Months Ended September 30,
			2023						2022
Renewable Diesel
New York Mercantile Exchange ULS diesel (dollars per gallon)			$	2.80					$	3.54
Biodiesel RIN (dollars per RIN)			1.51						1.61
California LCFS carbon credit (dollars per metric ton)			73.65						109.71
USGC UCO (dollars per pound)			0.61						0.77
USGC DCO (dollars per pound)			0.65						0.77
USGC Tallow (dollars per pound)			0.62						0.76
Ethanol
CBOT corn (dollars per bushel)			5.95						7.02
New York Harbor ethanol (dollars per gallon)			2.42						2.60

Total Company, Corporate, and Other

The following table includes selected financial data for the total company, corporate, and other for the first nine months of 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

			Nine Months Ended September 30,
			2023						2022						Change
Revenues			$	109,352					$	134,637					$	(25,285)
Cost of sales (see notes (a) and (b))			98,294						122,516						(24,222)
Operating income			10,305						11,395						(1,090)
Adjusted operating income (see note (f))			10,323						11,328						(1,005)
Other income, net (see note (d))			357						87						270
Income tax expense			2,288						2,410						(122)
Net income attributable to noncontrolling interests			298						232						66

Revenues decreased by $25.3 billion in the first nine months of 2023 compared to the first nine months of 2022 primarily due to decreases in product prices for the petroleum-based transportation fuels associated with sales made by our Refining segment. This decrease in revenues was partially offset by a decrease in cost of sales of $24.2 billion primarily due to decreases in crude oil and other feedstock costs. These changes resulted in a $1.1 billion decrease in operating income, from $11.4 billion in the first nine months of 2022 to $10.3 billion in the first nine months of 2023.

Adjusted operating income decreased by $1.0 billion, from $11.3 billion in the first nine months of 2022 to $10.3 billion in the first nine months of 2023. The components of this $1.0 billion decrease in adjusted operating income are discussed by segment in the segment analyses that follow.

“Other income, net” increased by $270 million in the first nine months of 2023 compared to the first nine months of 2022 primarily due to the items noted in the following table (in millions):

			Nine Months Ended September 30,
			2023						2022						Change
Interest income on cash			$	197					$	49					$	148
Net gain (loss) from early retirement of debt (see note (d))			11						(24)						35
Equity income on joint ventures and other			149						62						87
Other income, net			$	357					$	87					$	270

Income tax expense decreased by $122 million in the first nine months of 2023 compared to the first nine months of 2022 primarily as a result of lower income before income tax expense.

Net income attributable to noncontrolling interests increased by $66 million in the first nine months of 2023 compared to the first nine months of 2022 primarily due to higher earnings associated with DGD, whose operations compose our Renewable Diesel segment. See Note 6 of Condensed Notes to Consolidated Financial Statements regarding our accounting for DGD and the Renewable Diesel segment analysis beginning on page 51.

Refining Segment Results

The following table includes selected financial and operating data of our Refining segment for the first nine months of 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

			Nine Months Ended September 30,
			2023						2022						Change
Operating income			$	9,934					$	11,473					$	(1,539)
Adjusted operating income (see note (f))			9,951						11,407						(1,456)
Refining margin (see note (f))			15,534						17,200						(1,666)
Operating expenses (excluding depreciation and amortization expense reflected below)			3,832						4,111						(279)
Depreciation and amortization expense			1,751						1,682						69
Throughput volumes (thousand barrels per day) (see note (g))			2,974						2,923						51

Refining segment operating income decreased by $1.5 billion in the first nine months of 2023 compared to the first nine months of 2022. Refining segment adjusted operating income, which excludes the adjustments in the table in note (f), also decreased by $1.5 billion in the first nine months of 2023 compared to the first nine months of 2022. The components of this decrease, along with the reasons for the changes in those components, are outlined below.

• Refining segment margin decreased by $1.7 billion in the first nine months of 2023 compared to the first nine months of 2022.

Refining segment margin is primarily affected by the prices for the petroleum-based transportation fuels that we sell and the cost of crude oil and other feedstocks that we process.

The table on page 48 reflects market reference prices and differentials that we believe impacted our Refining segment margin in the first nine months of 2023 compared to the first nine months of 2022.

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

◦A decrease in distillate (primarily diesel) margins had an unfavorable impact of approximately $3.6 billion.

◦A decrease in gasoline margins had an unfavorable impact of approximately $237 million.

◦Higher discounts on crude oils had a favorable impact of approximately $1.6 billion.

◦An increase in throughput volumes of 51,000 barrels per day had a favorable impact of approximately $266 million.

◦Higher discounts on other feedstocks had a favorable impact of approximately $364 million.

• Refining segment operating expenses (excluding depreciation and amortization expense) decreased by $279 million primarily due to a decrease in energy costs of $473 million (primarily natural gas), partially offset by increases in chemicals and catalyst costs of $81 million, maintenance expense of $32 million, and certain employee compensation expenses of $22 million.

Renewable Diesel Segment Results

The following table includes selected financial and operating data of our Renewable Diesel segment for the first nine months of 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

			Nine Months Ended September 30,
			2023						2022						Change
Operating income			$	768					$	513					$	255
Renewable Diesel margin (see note (f))			1,214						778						436
Operating expenses (excluding depreciation and amortization expense reflected below)			274						178						96
Depreciation and amortization expense			172						87						85
Sales volumes (thousand gallons per day) (see note (g))			3,460						2,084						1,376

Renewable Diesel segment operating income increased by $255 million in the first nine months of 2023 compared to the first nine months of 2022. The components of this increase, along with the reasons for the changes in those components, are outlined below.

• Renewable Diesel segment margin increased by $436 million in the first nine months of 2023 compared to the first nine months of 2022.

Renewable Diesel segment margin is primarily affected by the price for the renewable diesel that we sell and the cost of the feedstocks that we process. The table on page 49 reflects market reference prices that we believe impacted our Renewable Diesel segment margin in the first nine months of 2023 compared to the first nine months of 2022.

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

◦A decrease in the cost of the feedstocks that we process had a favorable impact of approximately $1.2 billion.

◦An increase in sales volumes of 1.4 million gallons per day had a favorable impact of approximately $515 million. The increase in sales volumes was primarily due to the additional production resulting from the completion of the new DGD Port Arthur Plant that commenced operations in the fourth quarter of 2022, partially offset by the effect of unplanned downtime resulting from a fire at the DGD St. Charles Plant in the third quarter of 2023.

◦A decrease in product prices, primarily renewable diesel, had an unfavorable impact of approximately $1.3 billion.

• Renewable Diesel segment operating expenses (excluding depreciation and amortization expense) increased by $96 million primarily due to increased costs resulting from the new DGD Port Arthur Plant that commenced operations in the fourth quarter of 2022.

• Renewable Diesel segment depreciation and amortization expense increased by $85 million primarily due to depreciation expense associated with the new DGD Port Arthur Plant that commenced operations in the fourth quarter of 2022.

Ethanol Segment Results

The following table includes selected financial and operating data of our Ethanol segment for the first nine months of 2023 and 2022. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.

			Nine Months Ended September 30,
			2023						2022						Change
Operating income			$	363					$	103					$	260
Adjusted operating income (see note (f))			364						82						282
Ethanol margin (see note (f))			806						606						200
Operating expenses (excluding depreciation and amortization expense reflected below)			383						464						(81)
Depreciation and amortization expense (see note (b))			59						37						22
Production volumes (thousand gallons per day) (see note (g))			4,319						3,799						520

Ethanol segment operating income increased by $260 million in the first nine months of 2023 compared to the first nine months of 2022; however, Ethanol segment adjusted operating income, which excludes the adjustments in the table in note (f), increased by $282 million in the first nine months of 2023

compared to the first nine months of 2022. The components of this increase in the adjusted results, along with the reasons for the changes in those components, are outlined below.

• Ethanol segment margin increased by $200 million in the first nine months of 2023 compared to the first nine months of 2022.

Ethanol segment margin is primarily affected by prices for the ethanol and corn related co-products that we sell and the cost of corn that we process. The table on page 49 reflects market reference prices that we believe impacted our Ethanol segment margin in the first nine months of 2023 compared to the first nine months of 2022.

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

◦Lower corn prices had a favorable impact of approximately $326 million.

◦An increase in production volumes of 520,000 gallons per day had a favorable impact of approximately $117 million.

◦Lower ethanol prices had an unfavorable impact of approximately $182 million.

◦Lower prices for the co-products that we produce, primarily inedible DCO and DDGs, had an unfavorable impact of approximately $64 million.

• Ethanol segment operating expenses (excluding depreciation and amortization expense) decreased by $81 million primarily due to a decrease in energy costs (primarily natural gas) of $99 million, partially offset by increases in chemical and catalyst costs of $6 million and certain employee compensation expenses of $6 million.

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The following notes relate to references on pages 39 through 52.

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

In 2020, we recognized the cost of the RVO using the 2020 quotas set by the EPA at that time, and in 2021 and the three months ended March 31, 2022, we recognized the cost of the RVO using our estimates of the quotas. As a result of the final rule released by the EPA as noted above, we recognized a benefit of $104 million in the nine months ended September 30, 2022 primarily related to the modification of the 2020 quotas.

(b)Depreciation and amortization expense for the nine months ended September 30, 2022 includes a gain of $23 million on the sale of our ethanol plant located in Jefferson, Wisconsin.

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

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

◦a net gain of $11 million in the nine months ended September 30, 2023 related to the early retirement of $199 million aggregate principal amount of various series of our senior notes; and

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

(e)The RVO cost represents the average market cost on a per barrel basis to comply with the RFS program. The RVO cost is calculated by multiplying (i) the average market price during the applicable period for the RINs associated with each class of renewable fuel (i.e., biomass-based diesel, cellulosic biofuel, advanced biofuel, and total renewable fuel) by (ii) the quotas for the volume of each class of renewable fuel that must be blended into petroleum-based transportation fuels consumed in the U.S., as set or proposed by the EPA, on a percentage basis for each class of renewable fuel and adding together the results of each calculation.

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

We have defined these non-GAAP measures and believe they are useful to the external users of our financial statements, including industry analysts, investors, lenders, and rating agencies. We believe these measures are useful to assess our ongoing financial performance because, when reconciled to their most comparable GAAP measures, they provide improved comparability between periods after adjusting for certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and trends. These non-GAAP measures should not be considered as alternatives to their most comparable GAAP measures nor should they be considered in isolation or as a substitute for an analysis of our results of operations as reported under GAAP. In addition, these non-GAAP measures may not be comparable to similarly titled measures used by other companies because we may define them differently, which diminishes their utility.

Non-GAAP measures are as follows (in millions):

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Reconciliation of Refining operating income to Refining margin
Refining operating income			$	3,445					$	3,810					$	9,934					$	11,473
Adjustments:
Modification of RVO (see note (a))			—						—						—						(104)
Operating expenses (excluding depreciation and amortization expense)			1,366						1,516						3,832						4,111
Depreciation and amortization expense			597						568						1,751						1,682
Other operating expenses			6						6						17						38
Refining margin			$	5,414					$	5,900					$	15,534					$	17,200

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Reconciliation of Renewable Diesel operating income to Renewable Diesel margin
Renewable Diesel operating income			$	123					$	212					$	768					$	513
Adjustments:
Operating expenses (excluding depreciation and amortization expense)			84						69						274						178
Depreciation and amortization expense			55						33						172						87
Renewable Diesel margin			$	262					$	314					$	1,214					$	778

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Reconciliation of Ethanol operating income to Ethanol margin
Ethanol operating income			$	197					$	1					$	363					$	103
Adjustments:
Operating expenses (excluding depreciation and amortization expense)			125						162						383						464
Depreciation and amortization expense (see note (b))			20						20						59						37
Other operating expenses			—						—						1						2
Ethanol margin			$	342					$	183					$	806					$	606

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Reconciliation of Refining operating income to adjusted Refining operating income
Refining operating income			$	3,445					$	3,810					$	9,934					$	11,473
Adjustments:
Modification of RVO (see note (a))			—						—						—						(104)
Other operating expenses			6						6						17						38
Adjusted Refining operating income			$	3,451					$	3,816					$	9,951					$	11,407

**◦**Adjusted Ethanol operating income is defined as Ethanol segment operating income excluding the gain on sale of ethanol plant and other operating expenses, as reflected in the table below.

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Reconciliation of Ethanol operating income to adjusted Ethanol operating income
Ethanol operating income			$	197					$	1					$	363					$	103
Adjustments:
Gain on sale of ethanol plant (see note (b))			—						—						—						(23)
Other operating expenses			—						—						1						2
Adjusted Ethanol operating income			$	197					$	1					$	364					$	82

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

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Reconciliation of total company operating income to adjusted operating income
Total company operating income			$	3,503					$	3,792					$	10,305					$	11,395
Adjustments:
Modification of RVO (see note (a))			—						—						—						(104)
Gain on sale of ethanol plant (see note (b))			—						—						—						(23)
Environmental reserve adjustment (see note (c))			—						—						—						20
Other operating expenses			6						6						18						40
Adjusted operating income			$	3,509					$	3,798					$	10,323					$	11,328

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

LIQUIDITY AND CAPITAL RESOURCES

Our Liquidity

Our liquidity consisted of the following as of September 30, 2023 (in millions):

Available capacity from our committed facilities (a):
Valero Revolver																								$	3,996
Canadian Revolver (b)																								107
Accounts receivable sales facility																								1,300
Total available capacity																								5,403
Cash and cash equivalents (c)																								5,608
Total liquidity																								$	11,011

---

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

(b)The amount for our Canadian Revolver is shown in U.S. dollars. As set forth in the summary of our credit facilities in Note 4 of Condensed Notes to Consolidated Financial Statements, the availability under our Canadian Revolver as of September 30, 2023 in Canadian dollars was C$145 million.

(c)Excludes $223 million of cash and cash equivalents related to the consolidated VIEs that is for their use only.

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

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

Cash Flows

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

			Nine Months Ended September 30,
			2023						2022
Cash flows provided by (used in):
Operating activities			$	7,990					$	8,478
Investing activities			(1,382)						(2,070)
Financing activities:
Debt issuances and borrowings			2,336						2,596
Repayments of debt and finance lease obligations (including premiums paid on early retirement of debt)			(2,609)						(5,051)
Return to stockholders:
Purchases of common stock for treasury			(4,180)						(2,769)
Common stock dividend payments			(1,106)						(1,186)
Return to stockholders			(5,286)						(3,955)
Other financing activities			(86)						141
Financing activities			(5,645)						(6,269)
Effect of foreign exchange rate changes on cash			6						(292)
Net increase (decrease) in cash and cash equivalents			$	969					$	(153)

Cash Flows for the Nine Months Ended September 30, 2023

In the first nine months of 2023, we used the $8.0 billion of cash generated by our operations and the $2.3 billion in debt borrowings to make $1.4 billion of investments in our business, repay $2.6 billion of debt and finance lease obligations (including premiums paid on the early retirement of debt), return $5.3 billion to our stockholders through purchases of our common stock for treasury and dividend payments, and increase our available cash on hand by $969 million. The debt borrowings and repayments are described in Note 4 of Condensed Notes to Consolidated Financial Statements.

As previously noted, our operations generated $8.0 billion of cash in the first nine months of 2023, driven primarily by net income of $7.9 billion and noncash charges to income of $1.8 billion, partially offset by an unfavorable change in working capital of $1.7 billion. Noncash charges primarily included $2.0 billion of depreciation and amortization expense. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 10 of Condensed Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net income.

Our investing activities primarily consisted of $1.4 billion in capital investments, as defined below under “Capital Investments,” of which $239 million related to capital investments made by DGD.

Cash Flows for the Nine Months Ended September 30, 2022

In the first nine months of 2022, we used the $8.5 billion of cash generated by our operations, $2.6 billion in debt issuances and borrowings, and $153 million of cash on hand to make $2.1 billion of investments in our business, repay $5.1 billion of debt and finance lease obligations (including premiums paid on the early retirement of debt), and return $4.0 billion to our stockholders through purchases of our common stock for treasury and dividend payments. The debt issuance, borrowings, and repayments are described in Note 4 of Condensed Notes to Consolidated Financial Statements.

As previously noted, our operations generated $8.5 billion of cash in the first nine months of 2022, driven primarily by net income of $8.6 billion and noncash charges to income of $1.4 billion, partially offset by an unfavorable change in working capital of $1.6 billion. Noncash charges primarily included $1.8 billion of depreciation and amortization expense, partially offset by a $161 million deferred income tax benefit. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 10 of Condensed Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net income.

Our investing activities primarily consisted of $2.1 billion in capital investments, of which $695 million related to capital investments made by DGD and $30 million related to capital expenditures of VIEs other than DGD.

Our Capital Resources

Our material cash requirements as of September 30, 2023 primarily consisted of working capital requirements, capital investments, contractual obligations, and other matters, as described below. Our operations have historically generated positive cash flows to fulfill our working capital requirements and other uses of cash as discussed below.

Capital Investments

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

We have publicly announced GHG emissions reduction/displacement targets for 2025 and 2035. We believe that our expected allocation of growth capital into low-carbon projects is consistent with such targets. Certain of these low-carbon projects have been completed or are already in execution and the associated capital investments are included in our expected capital investments for 2023. Our capital investments in future years, consistent with our targets, are expected to include investments associated with certain low-carbon projects currently at various stages of progress, evaluation, or approval.

Capital Investments Attributable to Valero

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

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

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

									Nine Months Ended September 30,
(millions of dollars)						2023						2022
Reconciliation of capital investments to capital investments attributable to Valero
Capital expenditures (excluding VIEs)									$	468					$	552
Capital expenditures of VIEs:
DGD									183						682
Other VIEs									4						30
Deferred turnaround and catalyst cost expenditures (excluding VIEs)									665						820
Deferred turnaround and catalyst cost expenditures of DGD									56						13
Investments in nonconsolidated joint ventures									—						1
Capital investments									1,376						2,098
Adjustments:
DGD’s capital investments attributable to the other joint venture member									(120)						(347)
Capital expenditures of other VIEs									(4)						(30)
Capital investments attributable to Valero									$	1,252					$	1,721

We have developed an extensive multi-year capital investment program, which we update and revise based on changing internal and external factors. As previously disclosed in our annual report on Form 10-K for the year ended December 31, 2022, we expect to incur approximately $2.0 billion for capital investments attributable to Valero during 2023. Approximately $1.5 billion of the expected capital investments attributable to Valero are for sustaining the business and the balance towards growth strategies, of which approximately 40 percent is allocated to expanding our low-carbon businesses.

Contractual Obligations

As of September 30, 2023, our contractual obligations included debt obligations, interest payments related to debt obligations, operating lease liabilities, finance lease obligations, other long-term liabilities, and purchase obligations. In the ordinary course of business, we had debt-related activities during the nine months ended September 30, 2023, as described in Note 4 of Condensed Notes to Consolidated Financial Statements. There were no material changes outside the ordinary course of business with respect to our contractual obligations during the nine months ended September 30, 2023.

In March 2021, we announced our participation in Navigator’s proposed large-scale carbon capture and sequestration pipeline system in the Mid-Continent region of the U.S. In October 2023, Navigator announced that due to the unpredictable nature of the regulatory and government processes involved, particularly in South Dakota and Iowa, it has decided to cancel this project. Under the terms of agreements associated with the project, we may have some rights from and obligations to Navigator,

including a portion of the aggregate project costs to date, but we do not expect such obligation will be material.

During the nine months ended September 30, 2023, we used cash on hand to purchase and retire $199 million of our public debt. We will continue to evaluate further deleveraging opportunities.

Other Matters Impacting Liquidity and Capital Resources

Stock Purchase Programs

During the three and nine months ended September 30, 2023, we purchased for treasury 12,805,162 of our shares for a total cost of $1.8 billion and 32,219,955 of our shares for $4.2 billion, respectively. See Note 5 of Condensed Notes to Consolidated Financial Statements for additional information related to our stock purchase programs. As of September 30, 2023, we had $649 million remaining available for purchase under the February 2023 Program. On September 15, 2023, we announced that 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 February 2023 Program. We will continue to evaluate the timing of purchases when appropriate. We have no obligation to make purchases under these programs.

Pension Plan Funding

As disclosed in our annual report on Form 10-K for the year ended December 31, 2022, we plan to contribute $108 million to our pension plans and $21 million to our other postretirement benefit plans during 2023. For the nine months ended September 30, 2023, we have contributed $94 million to our pension plans and $14 million to our other postretirement benefit plans.

Cash Held by Our Foreign Subsidiaries

As of September 30, 2023, $4.1 billion of our cash and cash equivalents was held by our foreign subsidiaries. Cash held by our foreign subsidiaries can be repatriated to us through dividends without any U.S. federal income tax consequences, but certain other taxes may apply, including, but not limited to, withholding taxes imposed by certain foreign jurisdictions, U.S. state income taxes, and U.S. federal income tax on foreign exchange gains. Therefore, there is a cost to repatriate cash held by certain of our foreign subsidiaries to us.

Environmental Matters

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

Concentration of Customers

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

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ from those estimates. There have been no changes to the critical accounting policies that involve critical accounting estimates disclosed in our annual report on Form 10-K for the year ended December 31, 2022.