Valero Energy Corporation (VLO -0.01%) reported net income of $714 million ($2.28 per share) (GAAP) for Q2 2025 on record throughput from its Gulf Coast refineries. Operating income from Valero's refining segment rose to $1.3 billion.
Additionally, management highlighted a 10% year-over-year increase in diesel sales volume, a 52% payout ratio, and progress on a $230 million Fluid Catalytic Cracking (FCC) unit optimization project scheduled to start up in 2026. The renewable diesel segment recorded a $79 million operating loss.
Valero sets Gulf Coast throughput record
Refining throughput volumes averaged 2.9 million barrels per day (bpd) (92% capacity utilization) in the second quarter, marking an operational record for the U.S. Gulf Coast region and bolstering total segment operating income by $100 million year-over-year. Despite a robust margin environment, gasoline sales volumes were flat year-over-year while diesel sales volumes increased approximately 10% year-over-year.
"In fact, we set a record for refining throughput rate in our U.S. Gulf Coast region in the second quarter, demonstrating the benefits of our investments in growth and optimization projects. Refining margins were supported by strong product demand against the backdrop of low product inventories globally. In particular, early July U.S. diesel inventories and days of supply are at the lowest level for the month in almost thirty years."
— Lane Riggs, Chairman, CEO, and President
Valero's scale and focus on high-valued middle distillate production have enabled it to outperform in a tight global supply environment, increasing the resilience and profitability of its core refining operations.
Shift in diesel markets drives margins for VLO
In Q2 2025, diesel demand in Valero’s system trended 3% above the prior year, with export markets contributing to persistently low inventories amid diminished renewable diesel imports. The company reported that U.S. Gulf Coast distillate exports kept inventories near historic lows in early July, and supported firm diesel crack spreads (the price difference between crude and refined diesel products).
"[W]while domesthile domestic demand has been good, we see a strong pull of U.S. Gulf Coast distillate into the export markets. The exports really have kept inventory down near historic lows during a time where restocking typically occurs. We have seen diesel inventory gain in the last couple of weeks, but really that's just a result of an incredibly strong export market in early June. As exports got really strong, freight rates spiked. And so it closed some of those export ARBs. Freight rates have come back off, so the ARBs are open to export both to Latin America and Europe. With those ARBs open, it's difficult to see how we get the normal build in diesel that occurs in the third quarter. So diesel cracks have been strong with low inventory. We expect diesel cracks to remain strong."
— Gary Simmons, Executive Vice President and COO
With refining margins closely tied to distillate strength, Valero benefits disproportionately from this dynamic, providing a structural tailwind for earnings as long as low inventories and strong export markets persist.
Renewable diesel segment faces negative operating income
The renewable diesel segment reported a $79 million operating loss in Q2 2025, compared to a $112 million operating profit in Q2 2024, amid ongoing policy uncertainty; sales volumes averaged 2.7 million gallons per day. Full-quarter capture of production tax credits (PTC) and the ramp-up of SAF (Sustainable Aviation Fuel) contributed to sequential improvement from Q1 to Q2, but headwinds remained.
"I think, you know, you can see really the linchpin in all of this is gonna be what the EPA says post their comment period...we see the LCFS market in California…moving up after they passed their 9% obligation increase effective July 1. …Europe continues to support its mandate for the 2% staff requirement. …So, you know, long term, there's still enough tailwind out there that says this segment will continue to be in demand. It's really just a question of when we see these credit prices start to move."
— Eric Fisher, Senior Vice President
Until regulatory clarity is established, and credit prices disconnect from feedstock costs, the renewable diesel business remains pressured, making near-term recovery uncertain and reinforcing the importance of government policy in segment profitability.
Looking Ahead
Valero expects 2025 capital investments attributable to the company of approximately $2 billion, including $1.6 billion for sustaining capital and the remainder for growth. For the third quarter, Valero expects refining throughput volumes to fall within the following ranges: Gulf Coast at 1.76 million to 1.81 million barrels per day.
Breaking down further, management expects, Mid Continent refineries throughput to be 430,000 to 450,000 barrels per day, West Coast at 240,000 to 260,000 barrels per day, and North Atlantic at 465,000 to 485,000 barrels per day, with refining cash operating expenses targeted around $4.80 per barrel, and renewable diesel sales volumes expected at approximately 1.1 billion gallons.
Management reaffirmed plans to cease refining operations at the Benicia refinery by the end of 2026, with $100 million incremental quarterly depreciation forecast for the next three quarters impacting earnings by about $0.25 per share per quarter.
