VLO · Q1 2026 Earnings

Bullish

Valero Energy

Reported April 30, 2026

30-second summary

Valero posted $4.22 EPS on $32.38B revenue (+7% YoY) with refining margin per barrel of $14.90 and refining cash opex of $5.13/bbl (a $0.04 beat vs the $5.17 Q1 FY2026 guide). The quarter is defined by two operational events: a March 23 diesel hydrotreater fire at Port Arthur (normalized throughput targeted by May 1, diesel hydrotreater rebuild timeline unknown) and the first full quarter of Venezuelan heavy-crude execution validating the bull thesis laid out in Q4 FY2025. Renewable diesel margin jumped to $1.11/gal, ethanol held $0.66/gal, and cash returns of $938M at 59% payout continue the over-distribution pattern. Q2 FY2026 guide for refining cash opex steps down to $4.85/bbl from the $5.13 Q1 FY2026 actual, signaling the Q1 FY2026 fixed-cost step-up was Benicia-transitional rather than permanent.

Headline numbers

EPS

Q1 FY2026

$4.22

Revenue

Q1 FY2026

$32.38B

+7.0% YoY

Operating margin

Q1 FY2026

5.3%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$32.38B	+7.0%	$30.37B	+6.6%
EPS	$4.22	—	$3.82	+10.5%
Operating margin	5.3%	—	5.2%	+16bps

Guidance

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Refining throughput volumes - Gulf Coast	Q1 FY2026	1.695 to 1.745 million barrels per day	2,914 thousand barrels per day	in-line	Met
Refining throughput volumes - Mid-Continent	Q1 FY2026	430 to 450,000 barrels per day	Q1 FY2026 actual throughput	in-line	Met
Renewable Diesel sales volumes	Q1 FY2026	approximately 260 million gallons	3,027 thousand gallons per day	+40-50% above guide	Beat
Ethanol production volumes	Q1 FY2026	4.6 million gallons per day	4,619 thousand gallons per day	in-line	Met

New guidance

Metric	Period	Guide	YoY
Refining throughput volumes - Gulf Coast	Q2 FY2026	1.69 to 1.74 million barrels per day	—
Refining throughput volumes - Mid-Continent	Q2 FY2026	450 to 470,000 barrels per day	—
Refining throughput volumes - West Coast	Q2 FY2026	120 to 130,000 barrels per day	—
Refining throughput volumes - North Atlantic	Q2 FY2026	480 to 500,000 barrels per day	—
Refining cash operating expenses	Q2 FY2026	approximately $4.85 per barrel	—
Renewable Diesel sales volumes	Q2 FY2026	approximately 320 million gallons	—
Renewable Diesel operating expenses	Q2 FY2026	46 cents per gallon	—
Ethanol production volumes	Q2 FY2026	4.7 million gallons per day	—

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Refining	$30.807B	+7.1%
Renewable Diesel	$1.414B	+57.1%
Ethanol	$1.167B	-4.7%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Refining Throughput Volumes	2,914 thousand barrels per day
Refining Margin per Barrel	$14.90
Renewable Diesel Sales Volumes	3,027 thousand gallons per day
Renewable Diesel Margin per Gallon	$1.11
Ethanol Production Volumes	4,619 thousand gallons per day
Ethanol Margin per Gallon	$0.66
Adjusted Operating Cash Flow	$1,591 million
Stockholder Cash Returns	$938 million

Management tone

Narrative arc: Q2 FY2025 cautious tailwind hedging → Q3 FY2025 structural-supply conviction → Q4 FY2025 aggressive heavy-crude positioning → Q1 FY2026 execution validation under operational disruption.

Volatility reframed from headwind to execution opportunity. Through Q2 FY2025 and Q3 FY2025, management framed commodity volatility as a market context to be navigated; by Q4 FY2025 the posture had shifted to active exploitation; this quarter completes the arc. From prepared remarks: "In a period marked by considerable disruption in the commodity markets, our operations and commercial teams executed well." Paired with a separate line — "Early in the quarter, the availability of incremental Venezuelan supply resulted in wider crude differentials. Our Advantage Gulf Coast refining network was well positioned to benefit from the discounted heavy sour feed stocks" — this is the operational proof of the Q4 FY2025 thesis. Record monthly jet yield in the same quarter as a Port Arthur fire is the kind of result management can only deliver if the optimization framework is genuinely embedded.

Refining fundamentals language hardened to structural conviction. This quarter's framing: "constrained global refining capacity and low product inventories in key markets should continue to support refining fundamentals... our concentration on high-complexity coastal refineries provide significant feedstock flexibility and direct access to global markets, which are especially beneficial in the current environment." The "current environment" qualifier is doing work — management is explicitly tying coastal-refinery complexity to the present geopolitical disruption (the Iran conflict surfaced in Q&A drove a 470 kbpd YoY surge in US product exports), positioning the asset base as countercyclically advantaged rather than just structurally cheap.

Cash position framing flipped from defense to optionality. In Q4 FY2025 management held the $4–5B range as a minimum floor; this quarter the explicit positioning is "high end of our long-term $4 to $5 billion cash target to preserve optionality in a volatile market environment." Total liquidity ended Q1 FY2026 near $11B, and management pre-financed upcoming maturities in March at what they characterized as record-low spreads. The shift is from cash-as-buffer to cash-as-strike-capital — and the $938M cash return at 59% payout shows the optionality is not coming at the expense of distribution.

Renewable diesel narrative completed its arc from policy hostage to standalone economics. This quarter posts $1.11/gal margin, 57% YoY revenue growth, and a Q2 FY2026 volume guide of 320M gallons — a ~23% sequential lift from the ~260M Q1 FY2026 guide. The segment has decoupled from the policy debate that dominated three of the last four briefs.

Port Arthur framing is conspicuously calm. Rather than emphasizing the disruption, management quantified the operational response: smaller crude unit, coker, hydrocrackers, and reformer restarted by early April; larger crude unit, FCC, and alkylation starting up; normalized throughput targeted by May 1. Insurance is positioned as covering the bulk of repair capex subject to deductibles. The kerosene hydrotreater is expected back in Q3 FY2026, but the diesel hydrotreater "sustained extensive damage with no rebuild timeline yet" — this is the one specific risk that did not get resolved on the call and is the cleanest watch item for Q2 FY2026.

Recurring themes management leaned on this quarter:

Operational excellence and system-wide optimizationFeedstock flexibility and crude arbitrage captureStructural support from constrained global refining capacityDisciplined capital allocation and shareholder returnsStrategic balance sheet positioning for volatilityHigh-complexity coastal refinery advantage

Risks management surfaced:

Port Arthur refinery damage assessment and repair timeline uncertaintyVolatile commodity pricing environment requiring active hedgingGlobal supply disruptions impacting crude and product marketsInsurance coverage adequacy for Port Arthur incidentBenicia refinery idling impact on West Coast throughput

Q&A highlights

Manav Gupta · UBS

Given rising transportation fuel prices, is management seeing early signs of demand destruction? Additionally, can the company source crude freely and run at full capacity, or are there constraints like other refiners face?

Management indicated U.S. domestic demand remains resilient (gasoline flat to slightly up, diesel up). Volume reductions reflect refinery idling (Venetia) and Boston market exit, not demand destruction. Export demand has surged 470,000 bpd due to Iran conflict. Crude sourcing is not an issue; the company's Gulf Coast and mid-continent location provides excellent access. The company is actively optimizing crude slate, favoring heavy sour crude given current discounts (Canadian heavy ~$16/bbl vs. TI).

U.S. exports up 470,000 barrels/day year-over-yearTotal light product inventories drawn 30 million barrels since January vs. five-year averageDistillate inventories at five-year lowsGasoline inventory at bottom of five-year average range

Neil Mehta · Goldman Sachs

What are the pluses and minuses for Q2 margins given current backwardation and physical market dynamics? Specifically, how is the company thinking about jet fuel production and the global jet shortage?

Management identified headwinds (steep backwardation, physical-futures disconnects affecting capture rate clarity) and tailwinds (heavy sour discounts, premium regrading for jet, secondary product premiums). On jet, management confirmed shortages are real and material. The company has increased jet yields from a typical 26% of total distillates to >30% in March and is converting two refineries into jet production mode to further maximize yields.

Q2 backwardation cited as headwindJet fuel typically 26% of total distillates; increased to >30% in MarchCompany converting refineries to increase jet production furtherJet shortages confirmed as founded and material globally

Teresa Chen · Barclays

Why has the company experienced lower earnings volatility than peers despite operating in the same macro environment? How is the company thinking about its elevated cash position as a buffer against volatility?

Management attributed lower volatility to proactive risk management and hedging discipline. The company meets daily during volatile periods to manage derivative positions, maintains inventory closer to LIFO to reduce exposure, and minimizes cash margin calls. On cash: the company deliberately moved its base cash position to the high end of its $4-5B minimum range post-pandemic to ensure liquidity is never questioned. The company ended Q1 with ~$11B total liquidity. Management also opportunistically pre-financed upcoming maturities at record-low spreads.

Cash position moved to high end of $4-5 billion minimum rangeTotal liquidity at end of Q1: ~$11 billionPre-financed upcoming maturities at record-low spreadsMinimal working capital impact from margin calls in Q1

Joe Lach · Morgan Stanley

How does the company view the global supply-demand balance over the next few years given the Middle East disruption? Does this change mid-cycle margin assumptions? What is the timeline for Port Arthur refinery restart?

Management maintains conservative mid-cycle margin approach for capital discipline purposes but notes the conflict has accelerated inventory restocking needs. Global demand was already expected to outpace new capacity by year-end 2024; Iran conflict has brought this forward. At minimum, 6 months to 1 year needed to restock inventories given limited excess refining capacity. On Port Arthur: diesel hydrotreater fire on March 23 shut the refinery; smaller crude unit, coker, hydrocrackers, reformer, and distillate hydrotreater restarted by early April. Larger crude unit, FCC, and Alki currently starting up. Expected normalized throughput by May 1. Kerosene hydrotreater expected back by Q3; diesel hydrotreater sustained extensive damage with no rebuild timeline yet. Q2 capture rates will be negatively impacted.

Lost light product production since Strait closure requires minimum 3 days of inventory rebuild per day of closure6 months to 1 year estimated to restock inventories to prior levelsGlobal demand expected to outpace new capacity additions for several yearsPort Arthur diesel hydrotreater fire on March 23

Doug Leggett · Wolf Research

How is the physical crude market impacting capture rates? With one of the best balance sheets in the sector and elevated cash position, how does management think about valuation and share buybacks?

On capture: steep backwardation ($11-14 range earlier, now $6+) is a headwind, but company has offset through Venezuelan purchases (ramped meaningfully since January sanctions removal) and heavy sour optimizations already reflected in capture. On capital allocation: management does not annuitize current margins; uses conservative mid-cycle prices and disciplined return thresholds. Share repurchases are efficient/flexible; management emphasizes net debt-to-cap still below 20-30% long-term range. Company has reduced share count 42% since 2014 with ~20% return on buybacks. Buyback approach will continue as primary tool for returning excess cash, though management may adjust within stated bounds.

Backwardation peaked at $11-14/bbl, now $6+Venezuelan crude runs ramped meaningfully since JanuaryNet debt-to-cap below 20-30% long-term rangeShare count reduced 42% since 2014

Answers to last quarter's watch list

Venezuelan heavy crude landed economics — Refining margin of $14.90/bbl came in strong. Management explicitly credited Venezuelan supply for wider crude differentials early in the quarter and the Advantage Gulf Coast network for capturing it. The Q4 FY2025 thesis executed cleanly even with Port Arthur down for the last week of March. Status: Resolved positively

Refining cash opex trajectory — Q1 FY2026 guide was $5.17/bbl; actual came in at $5.13/bbl, a $0.04 beat. The Q2 FY2026 guide of $4.85/bbl is a further $0.28 step-down from the Q1 FY2026 actual, indicating the Q1 FY2026 fixed-cost lift was transitional (Benicia idling, lower throughput base) rather than a permanent run-rate reset. The through-cycle EPS modeling thesis holds. Status: Resolved positively

Renewable diesel margin sustainability under new PTC framework — Q1 FY2026 margin of $1.11/gal on volumes (~272M gallons) beat the 260M guide. Q2 FY2026 volume guide of ~320M gallons and cash opex of $0.24/gal ($0.46 headline less $0.22 non-cash) point to the segment compounding rather than fading. Status: Resolved positively

West Coast post-Benicia footprint — Q2 FY2026 throughput guide of 120–130 kbpd is a further ~28% cut from the Q1 FY2026 guide of 160–180 kbpd, confirming the Wilmington-only base. Management did not provide Wilmington-specific strategic review commentary on the call. Status: Continue monitoring

Capex discipline carry-through — FY2026 capex envelope of ~$1.7B and ~$1.4B sustaining capex were both reaffirmed; G&A held at ~$960M; St. Charles FCC project on track for Q3 FY2026 startup. The one open thread: Port Arthur incident is expected to drive additional FY2026 capex subject to insurance deductibles, with no dollar quantification yet. Status: Resolved positively (envelope held; insurance-driven add to be quantified next quarter)

What to watch into next quarter

Port Arthur diesel hydrotreater rebuild timeline and deductible exposure: management has not committed to a rebuild timeline. Watch the Q2 FY2026 print for (a) a stated reopening quarter for the diesel hydrotreater, (b) a dollar quantification of insurance deductible exposure, and (c) whether Q2 FY2026 capture rate comes in materially below the $14.90 Q1 FY2026 baseline.

Refining cash opex print at $4.85/bbl guide: the step-down from the $5.13 Q1 FY2026 actual to a $4.85 Q2 FY2026 guide is the cleanest test of whether the Benicia-idling fixed-cost lift was transitional. Watch for the actual Q2 FY2026 refining cash opex per barrel; a print at or below $4.85 confirms the through-cycle baseline, anything above $5.00 reignites the structural-cost question.

Renewable diesel volume delivery at ~320M gallons: Q1 FY2026 beat the volume guide by ~5%. Watch whether Q2 FY2026 hits the ~320M target and whether unit cash opex tracks toward the guided $0.24/gal — sustained delivery validates the segment as a non-policy-dependent profit center.

Refining margin per barrel: $14.90 is the bar to clear. Watch whether Q2 FY2026 holds (broadly affirming the Iran-conflict structural tightness thesis) or whether margins compress with backwardation easing (suggesting Q1 FY2026 was the peak).

Cash position deployment: ~$11B liquidity and a 59% payout this quarter. Watch whether Q2 FY2026 buyback pace accelerates (consistent with management's "optionality" framing being deployed) or whether the cash position stays at the high end of the $4–5B range (suggesting management sees more attractive use cases ahead).

Sources

Valero Energy Q1 FY2026 earnings press release (SEC filing), https://www.sec.gov/Archives/edgar/data/1035002/000162828026028602/a3312026exh9901earningsrel.htm
Valero Energy Q1 FY2026 earnings call commentary and Q&A

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