Valero Energy NYSE: VLO reported sharply higher third-quarter 2026 earnings as strong refining conditions, high utilization rates and improved renewable diesel profitability lifted results across its operating segments.
Net income attributable to Valero stockholders totaled $6.8 billion, or $23.89 per share, compared with $1.1 billion, or $3.53 per share, in the third quarter of 2025. Adjusted net income was also $6.8 billion, or $23.90 per share, according to Senior Vice President and Chief Financial Officer Homer Bhullar.
Chairman, Chief Executive Officer and President Lane Riggs said the company’s refining teams operated at near-record utilization levels amid market volatility and tight product inventories. Valero’s ethanol segment also posted quarterly record production, he said.
Refining drove segment performance
Valero’s refining segment generated $8.8 billion in operating income during the quarter, compared with $1.6 billion a year earlier. Refinery throughput averaged 3 million barrels per day, while refining cash operating expenses were $5.03 per barrel.
The company completed its $230 million fluid catalytic cracking unit optimization project at its St. Charles refinery during the quarter. Riggs said the project was completed on schedule and within budget and has increased output of higher-value products, including alkylate and gasoline.
Chief Operating Officer Gary Simmons said the St. Charles project’s third-quarter EBITDA contribution exceeded the financial assumptions used when Valero approved the investment, despite the unit not being fully operational for the entire quarter. He said benefits should be greater during the second and third quarters, when gasoline-related economics are typically stronger.
Valero’s renewable diesel segment reported operating income of $353 million, compared with an operating loss of $28 million in the prior-year period. Renewable diesel sales volumes averaged 3.4 million gallons per day.
The ethanol segment reported operating income of $272 million, up from $183 million a year earlier, with production averaging 4.8 million gallons per day. Eric Fisher, senior vice president of product supply, trading and wholesale, said Valero is pursuing smaller-scale capacity expansion projects at ethanol facilities and continuing carbon sequestration efforts at certain sites. He said the company expects those sequestration projects to come online between late 2027 and mid-2028.
Cash position and shareholder returns
Net cash provided by operating activities was $6.9 billion in the third quarter. Excluding a $526 million unfavorable working-capital impact and $205 million related to the other joint-venture member’s share of Diamond Green Diesel, adjusted operating cash flow was $7.3 billion.
Capital investments attributable to Valero totaled $429 million during the quarter. The company maintained a shareholder cash-return payout ratio of 52% and repaid $526 million in notes that matured in July and September.
Valero ended the quarter with $9.8 billion of cash and cash equivalents, $8.6 billion of total debt and $2.4 billion of finance lease obligations. Its debt-to-capitalization ratio, net of cash, was 4% as of Sept. 30.
Bhullar said Valero’s long-term cash target remains $4 billion to $5 billion, but the company is maintaining cash above that range to preserve flexibility in a volatile commodity-price environment. He said excess cash ultimately would be directed to shareholders over time, while the company continues to use disciplined investment standards.
On shareholder returns, Bhullar said Valero views dividends and share repurchases as complementary. He described the dividend as a “permanent commitment” that the company seeks to grow at a ratable pace through cycles, with repurchases providing a more flexible component of total shareholder returns.
Fourth-quarter outlook and project updates
Valero maintained its forecast for approximately $2 billion in 2026 capital investments attributable to the company. About $1.7 billion is expected to be devoted to sustaining activities, including turnarounds, catalysts, regulatory compliance and repairs at the Port Arthur refinery’s distillate hydrotreater unit.
The Port Arthur DHT repair remains on schedule for completion by year-end, with total costs still estimated at approximately $250 million. Valero said the refinery continues to operate at normal throughput rates and expects a substantial portion of repair costs to be covered by insurance.
For the fourth quarter, Valero expects refining throughput in the following ranges:
- Gulf Coast: 1.855 million to 1.905 million barrels per day
- Mid-Continent: 440,000 to 460,000 barrels per day
- West Coast: 100,000 to 110,000 barrels per day
- North Atlantic: 480,000 to 500,000 barrels per day
The company expects refining cash operating expenses of approximately $4.85 per barrel. Renewable diesel sales are projected at roughly 325 million gallons, while ethanol production is expected to average 4.9 million gallons per day.
Management sees supportive market conditions
Management said U.S. Gulf Coast refiners remain advantaged by access to domestic crude supply, cost-competitive feedstocks and the ability to process a variety of crude grades. Randy Hawkins, vice president of international crude oil supply and trading, said higher global freight rates have widened discounts for crude that must compete for export markets, including heavy sour barrels.
Hawkins said the cost of moving a very large crude carrier from the Gulf Coast to Asia had recently averaged about $30 to $35 per barrel, compared with an average of roughly $5 per barrel in 2025. He said Valero’s Gulf Coast system benefits from access to a broad slate of crude grades and has a freight advantage for certain Latin American heavy barrels relative to Asian alternatives.
Simmons said Valero has not seen meaningful demand destruction in its wholesale markets. U.S. wholesale gasoline sales on a seven-day average basis were up 4% from a year earlier, while distillate sales were up about 2%, he said. Export demand for gasoline and diesel from the Gulf Coast also remained strong, according to management.
Valero said it continues to evaluate growth opportunities centered on feedstock flexibility, heavier sour crude processing, refinery optimization and ethanol. Riggs said the company remains interested in potential acquisitions in regions where it already has operational and commercial advantages, but would maintain its established return thresholds and capital-allocation discipline.
About Valero Energy (NYSE:VLO)
Valero Energy Corporation is an international energy company headquartered in San Antonio, Texas. The company’s primary business is refining and marketing transportation fuels, including gasoline, diesel, jet fuel and other products used by commercial, industrial and consumer customers.
Valero operates refineries in the United States, Canada and the United Kingdom. Its refining operations also produce asphalt, petrochemical feedstocks and other petroleum-based products. The company markets fuel through wholesale channels and branded retail networks, including Valero, Beacon and Shamrock-branded locations.
In addition to conventional refining, Valero has businesses focused on renewable fuels.
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