Item 1. FINANCIAL STATEMENTS

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Item 1. FINANCIAL STATEMENTS

VALERO ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(millions of dollars, except par value)


	June 30, 2024		December 31, 2023
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	5,246	$	5,424

Receivables, net	13,145		12,525
Inventories	8,028		7,583
Prepaid expenses and other	696		689
Total current assets	27,115		26,221
Property, plant, and equipment, at cost	52,074		51,668
Accumulated depreciation	(22,305)		(21,459)
Property, plant, and equipment, net	29,769		30,209
Deferred charges and other assets, net	6,731		6,626
Total assets	$	63,615	$	63,056
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and finance lease obligations	$	995	$	1,406
Accounts payable	14,565		12,567
Accrued expenses	1,065		1,240
Taxes other than income taxes payable	1,490		1,452
Income taxes payable	203		137
Total current liabilities	18,318		16,802
Debt and finance lease obligations, less current portion	9,746		10,118
Deferred income tax liabilities	5,224		5,349
Other long-term liabilities	2,077		2,263
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	6,929		6,901
Treasury stock, at cost; 353,118,736 and 340,199,677 common shares	(27,373)		(25,322)
Retained earnings	47,052		45,630
Accumulated other comprehensive loss	(1,172)		(870)
Total Valero Energy Corporation stockholders’ equity	25,443		26,346
Noncontrolling interests	2,807		2,178
Total equity	28,250		28,524
Total liabilities and equity	$	63,615	$	63,056

See Condensed Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(millions of dollars, except per share amounts)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues (a)	$	34,490	$	34,509	$	66,249	$	70,948
Cost of sales:
Cost of materials and other	30,943		29,430		58,625		59,435

Operating expenses (excluding depreciation and amortization expense reflected below)	1,424		1,440		2,835		2,917
Depreciation and amortization expense	684		658		1,367		1,308
Total cost of sales	33,051		31,528		62,827		63,660
Other operating expenses	3		2		37		12
General and administrative expenses (excluding depreciation and amortization expense reflected below)	203		209		461		453
Depreciation and amortization expense	12		11		24		21

Operating income	1,221		2,759		2,900		6,802
Other income, net	122		106		266		235
Interest and debt expense, net of capitalized interest	(140)		(148)		(280)		(294)
Income before income tax expense	1,203		2,717		2,886		6,743
Income tax expense	277		595		630		1,475


Net income	926		2,122		2,256		5,268
Less: Net income attributable to noncontrolling interests	46		178		131		257
Net income attributable to Valero Energy Corporation stockholders	$	880	$	1,944	$	2,125	$	5,011








Earnings per common share	$	2.71	$	5.41	$	6.47	$	13.75
Weighted-average common shares outstanding (in millions)	324		358		327		363





Earnings per common share – assuming dilution	$	2.71	$	5.40	$	6.47	$	13.74
Weighted-average common shares outstanding – assuming dilution (in millions)	324		358		327		363
__________________________
Supplemental information:
(a) Includes excise taxes on sales by certain of our foreign operations	$	1,456	$	1,449	$	2,843	$	2,871

See Condensed Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(millions of dollars)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	926	$	2,122	$	2,256	$	5,268
Other comprehensive income (loss):
Foreign currency translation adjustment	(111)		257		(264)		391
Net loss on pension and other postretirement benefits	(5)		(6)		(11)		(13)
Net gain (loss) on cash flow hedges	(8)		(47)		(92)		10

Other comprehensive income (loss) before income tax benefit	(124)		204		(367)		388
Income tax benefit related to items of other comprehensive income (loss)	(3)		(6)		(18)		(5)
Other comprehensive income (loss)	(121)		210		(349)		393
Comprehensive income	805		2,332		1,907		5,661
Less: Comprehensive income attributable to noncontrolling interests	42		154		84		262
Comprehensive income attributable to Valero Energy Corporation stockholders	$	763	$	2,178	$	1,823	$	5,399

See Condensed Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(millions of dollars, except per share amounts)

(unaudited)


	Valero Energy Corporation Stockholders’ Equity
	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total		Non- controlling Interests		Total Equity
Balance as of March 31, 2024	$	7	$	6,916	$	(26,330)	$	46,519	$	(1,055)	$	26,057	$	2,767	$	28,824
Net income	—		—		—		880		—		880		46		926
Dividends on common stock ($1.07 per share)	—		—		—		(347)		—		(347)		—		(347)
Stock-based compensation expense	—		13		—		—		—		13		—		13

Purchases of common stock for treasury	—		—		(1,043)		—		—		(1,043)		—		(1,043)

Distributions to noncontrolling interests	—		—		—		—		—		—		(2)		(2)

Other comprehensive loss	—		—		—		—		(117)		(117)		(4)		(121)
Balance as of June 30, 2024	$	7	$	6,929	$	(27,373)	$	47,052	$	(1,172)	$	25,443	$	2,807	$	28,250

Balance as of March 31, 2023	$	7	$	6,877	$	(21,637)	$	40,935	$	(1,205)	$	24,977	$	2,090	$	27,067
Net income	—		—		—		1,944		—		1,944		178		2,122
Dividends on common stock ($1.02 per share)	—		—		—		(367)		—		(367)		—		(367)
Stock-based compensation expense	—		14		—		—		—		14		—		14
Transactions in connection with stock-based compensation plans	—		(2)		2		—		—		—		—		—
Purchases of common stock for treasury	—		—		(951)		—		—		(951)		—		(951)

Distributions to noncontrolling interests	—		—		—		—		—		—		(101)		(101)

Other comprehensive income (loss)	—		—		—		—		234		234		(24)		210
Balance as of June 30, 2023	$	7	$	6,889	$	(22,586)	$	42,512	$	(971)	$	25,851	$	2,143	$	27,994

See Condensed Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(millions of dollars, except per share amounts)

(unaudited)


	Valero Energy Corporation Stockholders’ Equity
	Common Stock		Additional Paid-in Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total		Non- controlling Interests		Total Equity
Balance as of December 31, 2023	$	7	$	6,901	$	(25,322)	$	45,630	$	(870)	$	26,346	$	2,178	$	28,524
Net income	—		—		—		2,125		—		2,125		131		2,256
Dividends on common stock ($2.14 per share)	—		—		—		(703)		—		(703)		—		(703)
Stock-based compensation expense	—		52		—		—		—		52		—		52
Transactions in connection with stock-based compensation plans	—		(24)		25		—		—		1		—		1
Purchases of common stock for treasury	—		—		(2,076)		—		—		(2,076)		—		(2,076)
Contributions from noncontrolling interests	—		—		—		—		—		—		90		90
Distributions to noncontrolling interests	—		—		—		—		—		—		(2)		(2)
Conversion of IEnova Revolver debt to equity (see Notes 4 and 6)	—		—		—		—		—		—		457		457

Other comprehensive loss	—		—		—		—		(302)		(302)		(47)		(349)
Balance as of June 30, 2024	$	7	$	6,929	$	(27,373)	$	47,052	$	(1,172)	$	25,443	$	2,807	$	28,250

Balance as of December 31, 2022	$	7	$	6,863	$	(20,197)	$	38,247	$	(1,359)	$	23,561	$	1,907	$	25,468
Net income	—		—		—		5,011		—		5,011		257		5,268
Dividends on common stock ($2.04 per share)	—		—		—		(746)		—		(746)		—		(746)
Stock-based compensation expense	—		53		—		—		—		53		—		53
Transactions in connection with stock-based compensation plans	—		(27)		28		—		—		1		—		1
Purchases of common stock for treasury	—		—		(2,417)		—		—		(2,417)		—		(2,417)
Contributions from noncontrolling interests	—		—		—		—		—		—		75		75
Distributions to noncontrolling interests	—		—		—		—		—		—		(101)		(101)

Other comprehensive income	—		—		—		—		388		388		5		393
Balance as of June 30, 2023	$	7	$	6,889	$	(22,586)	$	42,512	$	(971)	$	25,851	$	2,143	$	27,994

See Condensed Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(millions of dollars)

(unaudited)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	2,256	$	5,268
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	1,391		1,329
Gain on early retirement of debt, net	—		(11)



Deferred income tax expense (benefit)	(100)		159
Changes in current assets and current liabilities	629		(1,728)
Changes in deferred charges and credits and other operating activities, net	142		(335)
Net cash provided by operating activities	4,318		4,682
Cash flows from investing activities:
Capital expenditures (excluding variable interest entities (VIEs))	(247)		(311)
Capital expenditures of VIEs:
Diamond Green Diesel Holdings LLC (DGD)	(142)		(122)
Other VIEs	(5)		(2)
Deferred turnaround and catalyst cost expenditures (excluding VIEs)	(636)		(508)
Deferred turnaround and catalyst cost expenditures of DGD	(51)		(39)


Purchases of available-for-sale (AFS) debt securities	(14)		(354)
Proceeds from sales and maturities of AFS debt securities	68		251


Other investing activities, net	(2)		7
Net cash used in investing activities	(1,029)		(1,078)
Cash flows from financing activities:
Proceeds from debt borrowings (excluding VIEs)	2,850		1,450
Proceeds from debt borrowings of VIEs:
DGD	250		300
Other VIEs	23		54
Repayments of debt and finance lease obligations (excluding VIEs)	(3,117)		(1,726)
Repayments of debt and finance lease obligations of VIEs:
DGD	(513)		(386)
Other VIEs	(13)		(41)
Premiums paid on early retirement of debt	—		(5)
Purchases of common stock for treasury	(2,056)		(2,393)
Common stock dividend payments	(703)		(746)
Contributions from noncontrolling interests	90		75
Distributions to noncontrolling interests	(2)		(101)
Other financing activities, net	—		(1)
Net cash used in financing activities	(3,191)		(3,520)
Effect of foreign exchange rate changes on cash	(108)		129
Net increase (decrease) in cash, cash equivalents, and restricted cash	(10)		213
Cash and cash equivalents at beginning of period	5,424		4,862
Cash, cash equivalents, and restricted cash at end of period (a)	$	5,414	$	5,075

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

See Condensed Notes to Consolidated Financial Statements.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

General

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

These interim unaudited financial statements have been prepared in conformity with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these interim unaudited financial statements reflect all adjustments considered necessary for a fair statement of our results for the interim periods presented. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. These interim unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2023.

The balance sheet as of December 31, 2023 has been derived from our audited financial statements as of that date. For further information, refer to our audited financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2023.

Significant Accounting Policies

Use of Estimates

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

Accounting Pronouncement Adopted on January 1, 2024

ASU 2023-07

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve the disclosures about a public entity’s reportable segments primarily through improved disclosures about significant segment expenses and other segment related items. We adopted this ASU effective January 1, 2024 and it did not affect our financial position or our results of operations, but will result in additional disclosures for our annual reporting periods beginning December 31, 2024 and interim reporting periods in 2025.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accounting Pronouncement Not Yet Adopted

ASU 2023-09

In December 2023, the FASB issued 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 expect to adopt this ASU effective January 1, 2025 and the adoption will not affect our financial position or our results of operations, but will result in additional disclosures.

2. UNCERTAINTY

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

In March 2023, California adopted Senate Bill No. 2 (such statute, together with any regulations contemplated or issued thereunder, SBx 1-2), which, among other things, (i) authorized the establishment of a maximum gross gasoline refining margin (max margin) and the imposition of a financial penalty for profits above a max margin, (ii) significantly expanded the reporting obligations under SB 1322 and the Petroleum Industry Information Reporting Act of 1980, which include reporting requirements to the California Energy Commission (CEC) for all participants in the petroleum industry supply chain in California (e.g., refiners, marketers, importers, transporters, terminals, producers, renewables producers, pipelines, and ports), (iii) created the Division of Petroleum Market Oversight within the CEC to analyze the data provided under SBx 1-2, and (iv) authorized the CEC to regulate the timing and other aspects of refinery turnaround and maintenance activities in certain instances. SBx 1-2 imposes increased and substantial reporting requirements, which include daily, weekly, monthly, and annual reporting of detailed operational and financial data on all aspects of our operations in California, much of it at the transaction level. The operational data includes our plans for turnaround and maintenance activities at our two California refineries and the manner in which we expect to address the potential impacts on feedstock and product inventories in California as a result of such turnaround and maintenance activities. The provisions of SBx 1-2 became effective June 26, 2023.

In September 2023, Governor Newsom directed the CEC to immediately begin the regulatory processes concerning the potential imposition of a penalty for exceeding a max margin and the timing of refinery turnarounds and maintenance. Consequently, in October 2023, the CEC adopted an order instituting an informational proceeding on a max margin and penalty under SBx 1-2, as well as an order initiating rulemaking activity under SBx 1-2. The CEC indicated in a November 2023 workshop that the latter rulemaking process will be focused on rules relating to the timing of refinery maintenance and turnarounds, as well as the standardization of data collection and reporting. The workshops subsequently announced by the CEC regarding the management of refinery maintenance and turnarounds have since been canceled, and it remains uncertain as to whether and when they will be rescheduled. In May 2024, however, the CEC issued resolutions adopting emergency regulations implementing new and expanded refining margin, refinery maintenance, and marine import reporting requirements, all of which became

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

effective in June 2024. It remains uncertain as to what extent any regulations will address the remaining reporting requirements under SBx 1-2.

SBx 1-2 also requires that certain California agencies prepare specified reports and assessments, including that the CEC prepare and publish a Transportation Fuels Assessment. In April 2024, the CEC published a draft Transportation Fuels Assessment, which among other things, proposes various policy options intended to mitigate gasoline price spikes in California, including polices designed to reduce the demand for gasoline, encourage fuel conservation, and allow more active participation and management of the petroleum industry supply chain by the State. The Transportation Fuels Assessment has not yet been published in final form, and it remains uncertain whether and when the State will pursue any of the policy options proposed therein.

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

The ultimate timing and impacts of SBx 1-2 and any other similarly focused legislation or actions are subject to considerable uncertainty due to a number of factors, including technological and economic feasibility, legal challenges, and potential changes in law, regulation, or policy, and it is not currently possible to predict the ultimate effects of these matters and developments on our financial condition, results of operations, and liquidity. Consequently, we are evaluating strategic alternatives for our operations in California. As a result, we performed an impairment analysis and determined that the carrying value of these assets was recoverable as of June 30, 2024. Future developments from our evaluation of strategic alternatives could significantly impact our asset impairment assumptions and result in an impairment loss that could be material.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVENTORIES

Inventories consisted of the following (in millions):


	June 30, 2024		December 31, 2023
Refinery feedstocks	$	2,036	$	2,223
Refined petroleum products and blendstocks	4,307		3,790
Renewable diesel feedstocks and products	1,024		913
Ethanol feedstocks and products	307		313
Materials and supplies	354		344


Inventories	$	8,028	$	7,583

As of June 30, 2024 and December 31, 2023, the replacement cost (market value) of last-in, first-out (LIFO) inventories exceeded their LIFO carrying amounts by $5.3 billion and $4.4 billion, respectively. Our non-LIFO inventories accounted for $1.5 billion of our total inventories as of June 30, 2024 and December 31, 2023.

4. DEBT

Public Debt

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 Valero Energy Partners LP Senior Notes	66
Total	$	199

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Credit Facilities

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


				June 30, 2024
	Facility Amount		Maturity Date	Outstanding Borrowings		Letters of Credit Issued (a)		Availability
Committed facilities:
Valero Revolver	$	4,000	November 2027	$	—	$	2	$	3,998
Accounts receivable sales facility (b)	1,300		July 2024	—		n/a		1,300
Committed facilities of VIEs (c):
DGD Revolver (d)	400		June 2026	—		112		288
DGD Loan Agreement (e)	100		June 2026	—		n/a		100
IEnova Revolver (f)	830		February 2028	329		n/a		501
Uncommitted facilities:
Letter of credit facilities	n/a		n/a	n/a		—		n/a

(a)Letters of credit issued as of June 30, 2024 expire at various times in 2024 through 2026.

(b)In July 2024, we extended the maturity date of this facility to July 2025.

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

(d)The variable interest rate on the unsecured revolving credit facility with a syndicate of financial institutions (the DGD Revolver) was 7.201 percent as of December 31, 2023.

(e)The amounts shown for DGD’s unsecured revolving loan agreement with its members (the DGD Loan Agreement) 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.

(f)Central Mexico Terminals (defined in Note 6) has an unsecured revolving credit facility (the IEnova Revolver) with IEnova (defined in Note 6). During the three months ended March 31, 2024, IEnova converted $457 million of outstanding borrowings under this facility to additional equity in Central Mexico Terminals, which resulted in an increase in the noncontrolling interest related to IEnova. The variable interest rate on the IEnova Revolver was 9.152 percent and 9.245 percent as of June 30, 2024 and December 31, 2023, respectively.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Borrowings and repayments under our credit facilities were as follows (in millions):


	Six Months Ended June 30,
	2024		2023
Borrowings:
Accounts receivable sales facility	$	2,850	$	1,450
DGD Revolver	150		300
DGD Loan Agreement	100		—
IEnova Revolver	23		54
Repayments:
Accounts receivable sales facility	(2,850)		(1,450)
DGD Revolver	(400)		(350)
DGD Loan Agreement	(100)		(25)
IEnova Revolver	—		(38)

Other Disclosures

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Interest and debt expense	$	146	$	151	$	293	$	303
Less: Capitalized interest	6		3		13		9
Interest and debt expense, net of capitalized interest	$	140	$	148	$	280	$	294

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. EQUITY

Treasury Stock

We purchase shares of our outstanding common stock as authorized by our board of directors (Board), including under share purchase programs (described in the table below) and with respect to our employee stock-based compensation plans. During the three and six months ended June 30, 2024, we purchased for treasury 6,622,185 shares and 13,256,028 shares, respectively. During the three and six months ended June 30, 2023, we purchased for treasury 8,421,452 shares and 19,414,793 shares, respectively.

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	Announcement Date	Total Cost Authorized		Remaining Available for Purchase as of June 30, 2024


September 2023 Program	September 15, 2023	$	2,500	$	145
February 2024 Program	February 22, 2024	2,500		2,500

Common Stock Dividends

On July 18, 2024, our Board declared a quarterly cash dividend of $1.07 per common share payable on September 3, 2024 to holders of record at the close of business on August 1, 2024.

VALERO ENERGY CORPORATION

CONDENSED 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):


	Three Months Ended June 30,
	2024								2023
	Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total		Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total
Balance as of beginning of period	$	(883)	$	(167)	$	(5)	$	(1,055)	$	(1,031)	$	(188)	$	14	$	(1,205)
Other comprehensive income (loss) before reclassifications	(110)		—		8		(102)		257		—		12		269
Amounts reclassified from accumulated other comprehensive loss	—		(3)		(12)		(15)		—		(6)		(30)		(36)
Effect of exchange rates	—		—		—		—		—		1		—		1
Other comprehensive income (loss)	(110)		(3)		(4)		(117)		257		(5)		(18)		234
Balance as of end of period	$	(993)	$	(170)	$	(9)	$	(1,172)	$	(774)	$	(193)	$	(4)	$	(971)


	Six Months Ended June 30,
	2024								2023
	Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total		Foreign Currency Translation Adjustment		Defined Benefit Plans Items		Gains (Losses) on Cash Flow Hedges		Total
Balance as of beginning of period	$	(735)	$	(162)	$	27	$	(870)	$	(1,168)	$	(183)	$	(8)	$	(1,359)
Other comprehensive income (loss) before reclassifications	(258)		—		(15)		(273)		394		—		49		443
Amounts reclassified from accumulated other comprehensive loss	—		(7)		(21)		(28)		—		(13)		(45)		(58)
Effect of exchange rates	—		(1)		—		(1)		—		3		—		3
Other comprehensive income (loss)	(258)		(8)		(36)		(302)		394		(10)		4		388
Balance as of end of period	$	(993)	$	(170)	$	(9)	$	(1,172)	$	(774)	$	(193)	$	(4)	$	(971)

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. VARIABLE INTEREST ENTITIES

Consolidated VIEs

We consolidate a VIE when we have a variable interest in an entity for which we are the primary beneficiary. As of June 30, 2024, the significant consolidated VIEs included:

DGD, a joint venture with a subsidiary of Darling Ingredients Inc. that owns and operates two plants that process waste and renewable feedstocks (predominantly animal fats, used cooking oils, vegetable oils, and inedible distillers corn oils) into renewable diesel and renewable naphtha; and
Central Mexico Terminals, a collective group of three subsidiaries of Infraestructura Energetica Nova, S.A.P.I. de C.V. (IEnova), which is a Mexican company and indirect subsidiary of Sempra Energy, a U.S. public company. We have terminaling agreements with Central Mexico Terminals that represent variable interests. We do not have an ownership interest in Central Mexico Terminals.

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

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


	DGD		Central Mexico Terminals		Other		Total
June 30, 2024
Assets
Cash and cash equivalents	$	400	$	—	$	16	$	416
Other current assets	1,369		9		47		1,425
Property, plant, and equipment, net	3,823		656		69		4,548
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	384	$	357	$	2	$	743
Debt and finance lease obligations, less current portion	656		—		—		656

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	DGD		Central Mexico Terminals		Other		Total
December 31, 2023
Assets
Cash and cash equivalents	$	237	$	—	$	23	$	260
Other current assets	1,520		11		46		1,577
Property, plant, and equipment, net	3,772		665		75		4,512
Liabilities
Current liabilities, including current portion of debt and finance lease obligations	$	616	$	808	$	19	$	1,443
Debt and finance lease obligations, less current portion	669		—		—		669

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

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. EMPLOYEE BENEFIT PLANS

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


	Pension Plans				Other Postretirement Benefit Plans
	2024		2023		2024		2023
Three months ended June 30
Service cost	$	28	$	28	$	1	$	1
Interest cost	32		30		3		3
Expected return on plan assets	(54)		(51)		—		—
Amortization of:
Net actuarial gain	(2)		(1)		(1)		(2)
Prior service credit	(2)		(4)		—		(1)

Net periodic benefit cost	$	2	$	2	$	3	$	1

Six months ended June 30
Service cost	$	56	$	56	$	2	$	2
Interest cost	63		60		6		6
Expected return on plan assets	(107)		(101)		—		—
Amortization of:
Net actuarial gain	(3)		(3)		(2)		(3)
Prior service credit	(5)		(9)		—		(2)

Net periodic benefit cost	$	4	$	3	$	6	$	3

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.”

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. EARNINGS PER COMMON SHARE

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Earnings per common share:
Net income attributable to Valero stockholders	$	880	$	1,944	$	2,125	$	5,011
Less: Income allocated to participating securities	3		6		6		16
Net income available to common stockholders	$	877	$	1,938	$	2,119	$	4,995

Weighted-average common shares outstanding	324		358		327		363

Earnings per common share	$	2.71	$	5.41	$	6.47	$	13.75

Earnings per common share – assuming dilution:
Net income attributable to Valero stockholders	$	880	$	1,944	$	2,125	$	5,011
Less: Income allocated to participating securities	3		6		6		16
Net income available to common stockholders	$	877	$	1,938	$	2,119	$	4,995

Weighted-average common shares outstanding	324		358		327		363
Effect of dilutive securities	—		—		—		—
Weighted-average common shares outstanding – assuming dilution	324		358		327		363

Earnings per common share – assuming dilution	$	2.71	$	5.40	$	6.47	$	13.74

Participating securities include restricted stock and performance awards granted under our 2020 Omnibus Stock Incentive Plan (OSIP) or our 2011 OSIP. Dilutive securities include participating securities as well as outstanding stock options. For the three and six months ended June 30, 2024 and 2023, we computed earnings per common share – assuming dilution using the two-class method for all dilutive securities.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. REVENUES AND SEGMENT INFORMATION

Revenue from Contracts with Customers

Disaggregation of Revenue

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

Contract Balances

Contract balances were as follows (in millions):


	June 30, 2024		December 31, 2023
Receivables from contracts with customers, included in receivables, net	$	6,821	$	7,209
Contract liabilities, included in accrued expenses	33		40

Remaining Performance Obligations

We have spot and term contracts with customers, the majority of which are spot contracts with no remaining performance obligations. We do not disclose remaining performance obligations for contracts that have terms of one year or less. The transaction price for our remaining term contracts includes a fixed component and variable consideration (i.e., a commodity price), both of which are allocated entirely to a wholly unsatisfied promise to transfer a distinct good that forms part of a single performance obligation. The fixed component is not material and the variable consideration is highly uncertain. Therefore, as of June 30, 2024, we have not disclosed the aggregate amount of the transaction price allocated to our remaining performance obligations.

Segment Information

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

The Refining segment includes the operations of our petroleum refineries, the associated activities to market our refined petroleum products, and the logistics assets that support our refining operations. The principal products manufactured by our refineries and sold by this segment include gasolines and blendstocks, distillates, and other products.
The Renewable Diesel segment represents the operations of DGD, a consolidated joint venture as discussed in Note 6, and the associated activities to market renewable diesel and renewable naphtha. The principal products manufactured by DGD and sold by this segment are renewable diesel and renewable naphtha. This segment sells some renewable diesel to the Refining segment, which is then sold to that segment’s customers.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

The following tables reflect information about our operating income, including a reconciliation to our consolidated income before income tax expense, by reportable segment (in millions):


	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Three months ended June 30, 2024
Revenues:
Revenues from external customers	$	33,044	$	554	$	892	$	—	$	34,490
Intersegment revenues	3		630		229		(862)		—
Total revenues	33,047		1,184		1,121		(862)		34,490
Cost of sales:
Cost of materials and other (a)	29,995		930		874		(856)		30,943

Operating expenses (excluding depreciation and amortization expense reflected below)	1,219		80		125		—		1,424
Depreciation and amortization expense	604		62		19		(1)		684
Total cost of sales	31,818		1,072		1,018		(857)		33,051
Other operating expenses	5		—		(2)		—		3
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		203		203
Depreciation and amortization expense	—		—		—		12		12

Operating income by segment	$	1,224	$	112	$	105	$	(220)	1,221
Other income, net									122
Interest and debt expense, net of capitalized interest									(140)
Income before income tax expense									$	1,203

See note (a) on page 23.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Three months ended June 30, 2023
Revenues:
Revenues from external customers	$	31,996	$	1,296	$	1,217	$	—	$	34,509
Intersegment revenues	(3)		950		257		(1,204)		—
Total revenues	31,993		2,246		1,474		(1,204)		34,509
Cost of sales:
Cost of materials and other (a)	27,773		1,643		1,199		(1,185)		29,430

Operating expenses (excluding depreciation and amortization expense reflected below)	1,205		104		128		3		1,440
Depreciation and amortization expense	582		59		19		(2)		658
Total cost of sales	29,560		1,806		1,346		(1,184)		31,528
Other operating expenses	1		—		1		—		2
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		209		209
Depreciation and amortization expense	—		—		—		11		11

Operating income by segment	$	2,432	$	440	$	127	$	(240)	2,759
Other income, net									106
Interest and debt expense, net of capitalized interest									(148)
Income before income tax expense									$	2,717

See note (a) on page 23.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Six months ended June 30, 2024
Revenues:
Revenues from external customers	$	63,187	$	1,256	$	1,806	$	—	$	66,249
Intersegment revenues	5		1,339		419		(1,763)		—
Total revenues	63,192		2,595		2,225		(1,763)		66,249
Cost of sales:
Cost of materials and other (a)	56,606		1,996		1,783		(1,760)		58,625

Operating expenses (excluding depreciation and amortization expense reflected below)	2,403		170		262		—		2,835
Depreciation and amortization expense	1,204		127		38		(2)		1,367
Total cost of sales	60,213		2,293		2,083		(1,762)		62,827
Other operating expenses	10		—		27		—		37
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		461		461
Depreciation and amortization expense	—		—		—		24		24

Operating income by segment	$	2,969	$	302	$	115	$	(486)	2,900
Other income, net									266
Interest and debt expense, net of capitalized interest									(280)
Income before income tax expense									$	2,886

See note (a) on page 23.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Refining		Renewable Diesel		Ethanol		Corporate and Eliminations		Total
Six months ended June 30, 2023
Revenues:
Revenues from external customers	$	66,403	$	2,231	$	2,314	$	—	$	70,948
Intersegment revenues	—		1,695		480		(2,175)		—
Total revenues	66,403		3,926		2,794		(2,175)		70,948
Cost of sales:
Cost of materials and other (a)	56,283		2,974		2,330		(2,152)		59,435

Operating expenses (excluding depreciation and amortization expense reflected below)	2,466		190		258		3		2,917
Depreciation and amortization expense	1,154		117		39		(2)		1,308
Total cost of sales	59,903		3,281		2,627		(2,151)		63,660
Other operating expenses	11		—		1		—		12
General and administrative expenses (excluding depreciation and amortization expense reflected below)	—		—		—		453		453
Depreciation and amortization expense	—		—		—		21		21

Operating income by segment	$	6,489	$	645	$	166	$	(498)	6,802
Other income, net									235
Interest and debt expense, net of capitalized interest									(294)
Income before income tax expense									$	6,743

(a)Cost of materials and other for our Renewable Diesel segment is net of the blender’s tax credit on qualified fuel mixtures of $308 million and $388 million for the three months ended June 30, 2024 and 2023, respectively, and $639 million and $634 million for the six months ended June 30, 2024 and 2023, respectively.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Refining:
Gasolines and blendstocks	$	15,517	$	15,229	$	28,643	$	30,277
Distillates	14,303		13,992		28,431		30,830
Other product revenues	3,224		2,775		6,113		5,296
Total Refining revenues	33,044		31,996		63,187		66,403
Renewable Diesel:
Renewable diesel	540		1,249		1,219		2,125
Renewable naphtha	14		47		37		106
Total Renewable Diesel revenues	554		1,296		1,256		2,231
Ethanol:
Ethanol	662		898		1,300		1,661
Distillers grains	230		319		506		653
Total Ethanol revenues	892		1,217		1,806		2,314

Revenues	$	34,490	$	34,509	$	66,249	$	70,948

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


	June 30, 2024		December 31, 2023
Refining	$	49,871	$	49,031
Renewable Diesel	5,941		5,790
Ethanol	1,514		1,549
Corporate and eliminations	6,289		6,686
Total assets	$	63,615	$	63,056

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. 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):


	Six Months Ended June 30,
	2024		2023
Decrease (increase) in current assets:

Receivables, net	$	(801)	$	1,225
Inventories	(503)		(73)

Prepaid expenses and other	218		(55)
Increase (decrease) in current liabilities:
Accounts payable	2,021		(1,909)
Accrued expenses	(215)		(128)
Taxes other than income taxes payable	17		(136)
Income taxes payable	(108)		(652)
Changes in current assets and current liabilities	$	629	$	(1,728)

Changes in current assets and current liabilities for the six months ended June 30, 2024 were primarily due to the following:

The increase in receivables was primarily due to an increase in refined petroleum product sales volumes in June 2024 compared to December 2023; and
The increase in inventories was due to an increase in inventory volumes valued at higher unit prices in June 2024 compared to December 2023; and
The increase in accounts payable was due to an increase in crude oil and other feedstock volumes purchased combined with an increase in related prices in June 2024 compared to December 2023.

Changes in current assets and current liabilities for the six months ended June 30, 2023 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 sales volumes in June 2023 compared to December 2022;
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 June 2023 compared to December 2022; and
The decrease in income taxes payable was primarily due to income tax payments made in 2023.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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


	Six Months Ended June 30,
	2024		2023
Interest paid in excess of amount capitalized, including interest on finance leases	$	283	$	273
Income taxes paid, net	659		2,410

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


	Six Months Ended June 30,
	2024				2023
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	250	$	58	$	206	$	54

Financing cash flows	—		113		—		107
Changes in lease balances resulting from new and modified leases	276		194		237		48

Noncash financing activities for the six months ended June 30, 2024 included the conversion by IEnova of $457 million of outstanding borrowings under the IEnova Revolver to additional equity in Central Mexico Terminals, as described in Note 4. There were no other significant noncash investing and financing activities during the six months ended June 30, 2024, except as noted in the table above.

There were no significant noncash investing and financing activities during the six months ended June 30, 2023, except as noted in the table above.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

The following tables present information (in millions) about our assets and liabilities recognized at their fair values in our balance sheets categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of June 30, 2024 and December 31, 2023.

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.


	June 30, 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	$	695	$	—	$	—	$	695	$	(664)	$	(1)	$	30	$	—



Investments of certain benefit plans	83		—		4		87		n/a		n/a		87		n/a
Investments in AFS debt securities	8		18		—		26		n/a		n/a		26		n/a
Foreign currency contracts	1		—		—		1		n/a		n/a		1		n/a
Total	$	787	$	18	$	4	$	809	$	(664)	$	(1)	$	144

Liabilities
Commodity derivative contracts	$	705	$	—	$	—	$	705	$	(664)	$	(41)	$	—	$	(109)
Physical purchase contracts	—		11		—		11		n/a		n/a		11		n/a
Blending program obligations	—		22		—		22		n/a		n/a		22		n/a


Foreign currency contracts	1		—		—		1		n/a		n/a		1		n/a
Total	$	706	$	33	$	—	$	739	$	(664)	$	(41)	$	34

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2023
							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	$	803	$	—	$	—	$	803	$	(642)	$	(66)	$	95	$	—

Investments of certain benefit plans	76		—		4		80		n/a		n/a		80		n/a
Investments in AFS debt securities	36		75		—		111		n/a		n/a		111		n/a

Total	$	915	$	75	$	4	$	994	$	(642)	$	(66)	$	286

Liabilities
Commodity derivative contracts	$	643	$	—	$	—	$	643	$	(642)	$	(1)	$	—	$	(67)
Physical purchase contracts	—		6		—		6		n/a		n/a		6		n/a
Blending program obligations	—		58		—		58		n/a		n/a		58		n/a
Foreign currency contracts	7		—		—		7		n/a		n/a		7		n/a
Total	$	650	$	64	$	—	$	714	$	(642)	$	(1)	$	71

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 12. 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.
Blending program obligations represent our liability for the purchase of compliance credits needed to satisfy our blending obligations under various government and regulatory blending programs, such as the U.S. Environmental Protection Agency’s (EPA) Renewable Fuel Standard (RFS), the California Low Carbon Fuel Standard (LCFS), the Canada Clean Fuel Regulations, and similar programs in other jurisdictions in which we operate (collectively, 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.

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Investments of certain benefit plans consist of investment securities held by trusts for the purpose of satisfying a portion of our obligations under certain U.S. nonqualified benefit plans. The plan assets categorized in Level 1 of the fair value hierarchy are measured at fair value using a market approach based on quoted prices from national securities exchanges. The plan assets categorized in Level 3 of the fair value hierarchy represent insurance contracts, the fair value of which is provided by the insurer.
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 three and six months ended June 30, 2024 and 2023.
Foreign currency contracts consist of foreign currency exchange and purchase contracts and foreign currency swap agreements related to our foreign operations to manage our exposure to exchange rate fluctuations on transactions denominated in currencies other than the local (functional) currencies of our operations. These contracts are valued based on quoted foreign currency exchange rates and are categorized in Level 1 of the fair value hierarchy.

Nonrecurring Fair Value Measurements

There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of June 30, 2024 and December 31, 2023.

Financial Instruments

Our financial instruments include cash and cash equivalents, restricted cash, 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 is shown in the table below (in millions).


		June 30, 2024				December 31, 2023
	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities:
Debt (excluding finance lease obligations)	Level 2	$	8,353	$	8,096	$	9,218	$	9,109

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

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. 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 11), 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 is described below.

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

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

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of June 30, 2024, 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
	2024	2025
Derivatives designated as cash flow hedges:
Refined petroleum products:

Futures – short	4,209	—



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


Futures – long	120,247	4,206
Futures – short	121,193	2,026
Options – long	550	—
Options – short	550	—





Corn:
Futures – long	93,865	155
Futures – short	115,970	3,885
Physical contracts – long	21,078	3,778

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 June 30, 2024, we had foreign currency contracts to purchase $765 million of U.S. dollars. Of these commitments, $580 million matured on or before July 22, 2024 and the remaining $185 million will mature by July 30, 2024.

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 Renewable Identification Numbers (RINs)). The cost of meeting our credit obligations under the Renewable and Low-Carbon Fuel Programs was $173 million and $387 million for the three months ended June 30, 2024 and 2023, respectively, and $377 million and

VALERO ENERGY CORPORATION

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$800 million for the six months ended June 30, 2024 and 2023, respectively. These amounts are reflected in cost of materials and other.

Fair Values of Derivative Instruments

The following table provides information about the fair values of our derivative instruments as of June 30, 2024 and December 31, 2023 (in millions) and the line items in our balance sheets in which the fair values are reflected. See Note 11 for additional information related to the fair values of our derivative instruments.

As indicated in Note 11, 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		June 30, 2024						December 31, 2023
		Asset Derivatives			Liability Derivatives			Asset Derivatives			Liability Derivatives
Derivatives designated as hedging instruments:
Commodity contracts	Receivables, net		$	23		$	15		$	141		$	34

Derivatives not designated as hedging instruments:
Commodity contracts	Receivables, net		$	672		$	690		$	662		$	609
Physical purchase contracts	Inventories		—			11			—			6
Foreign currency contracts	Receivables, net		1			—			—			—
Foreign currency contracts	Accrued expenses		—			1			—			7
Total			$	673		$	702		$	662		$	622

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

CONDENSED 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		Three Months Ended June 30,					Six Months Ended June 30,
2024	2023	2024			2023
Commodity contracts:
Gain (loss) recognized in other comprehensive income (loss)	n/a		$	22		$	31	$	(38)	$	126
Gain reclassified from accumulated other comprehensive loss into income	Revenues		30			78		54		116

For cash flow hedges, no component of any derivative instrument’s gain or loss was excluded from the assessment of hedge effectiveness for the three and six months ended June 30, 2024 and 2023. For the three and six months ended June 30, 2024 and 2023, cash flow hedges primarily related to forecasted sales of renewable diesel. As of June 30, 2024, the estimated deferred after-tax loss 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 three and six months ended June 30, 2024 and 2023 are described in Note 5.

The following table provides information about the gain (loss) recognized in income on our derivative instruments with respect to our economic hedges and our foreign currency hedges and the line items in 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		Three Months Ended June 30,					Six Months Ended June 30,
2024	2023	2024			2023
Commodity contracts	Revenues		$	(3)		$	(10)	$	(7)	$	(17)
Commodity contracts	Cost of materials and other		(57)			91		(57)		174
Commodity contracts	Operating expenses (excluding depreciation and amortization expense)		—			—		—		1
Foreign currency contracts	Cost of materials and other		4			(17)		19		(20)

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