Q3 2026 results
| Metric | Result | Change |
|---|---|---|
| Net income | $6.8 billion | Up from $1.1 billion in Q3 2025 |
| Refining operating income | $8.8 billion | Up from $1.6 billion in Q3 2025 |
| Renewable diesel operating income | $353 million | Up from $28 million loss in Q3 2025 |
| Ethanol operating income | $272 million | Up from $183 million in Q3 2025 |
| Refining cash operating expenses | $5.03 per barrel | Not stated |
Guidance and outlook
- We still expect capital investments attributable to Valero for 2026 to be approximately $2 billion.
- We expect refining cash operating expenses in the fourth quarter to be approximately $4.85 per barrel.
- For the renewable diesel segment, we expect sales volumes of approximately 325 million gallons in the fourth quarter.
- Our ethanol segment is expected to produce 4.9 million gallons per day in the fourth quarter.
- For the fourth quarter, net interest expense should be about $135 million and total depreciation and amortization expense should be approximately $700 million.
How management sounded
Positive (+6 on our -10 to +10 scale). Management highlighted record production levels, strong operational execution, and a robust balance sheet while maintaining a disciplined approach to capital allocation. Management sounded more upbeat than on 8% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
Crude Differentials and Freight
Asked: Is the move in crude differentials structural due to heavy supply or cyclical due to freight?
Answer: Management attributed the move primarily to freight rates, noting that inefficient ship-to-ship transfers are tying up global shipping, though they remain constructive on long-term crude differentials.
Cash Balance
Asked: Why carry such a large cash balance?
Answer: Management stated the cash build is to prudently manage commodity price volatility and ensure they are not constrained in returning cash to shareholders if a downturn occurs.
Demand Destruction
Asked: Are there signs of demand destruction?
Answer: Management stated they see no signs of demand destruction, noting that U.S. wholesale gasoline sales are up 4% year-over-year.
St. Charles Project
Asked: How is the St. Charles FCC project performing?
Answer: The project is performing well, with third-quarter EBITDA exceeding the initial investment decision expectations.
M&A
Asked: What is the outlook for M&A?
Answer: Management remains disciplined, stating they look at all market opportunities but will not change their hurdle rates or return metrics regardless of their cash position.
What to watch before the next call
- Completion of repairs to the Port Arthur DHT unit by year-end.
- Potential volatility in freight rates and their impact on global crude pricing.
- Progress on carbon sequestration projects at ethanol sites, expected between late 2027 and mid-2028.
