Valero Energy Corp., FCFF calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net income (loss) attributable to Valero Energy Corporation stockholders	8,835)	11,528)	930)	(1,421)	2,422)
Net income attributable to noncontrolling interests	314)	351)	358)	314)	362)
Net noncash charges	2,406)	2,321)	2,346)	2,400)	2,453)
Changes in current assets and current liabilities	(2,326)	(1,626)	2,225)	(345)	294)
Net cash provided by operating activities	9,229)	12,574)	5,859)	948)	5,531)
Interest paid in excess of amount capitalized, including interest on finance leases, net of tax¹	437)	442)	499)	290)	361)
Capitalized interest, net of tax²	15)	44)	40)	41)	72)
Capital expenditures, excluding variable interest entities (VIEs)	(665)	(788)	(513)	(1,014)	(1,627)
Capital expenditures of VIEs	(246)	(893)	(1,152)	(774)	(367)
Changes in lease balances resulting from new and modified finance leases	(157)	(660)	(378)	(950)	(239)
Free cash flow to the firm (FCFF)	8,612)	10,720)	4,355)	(1,459)	3,731)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

^{1, 2} See details »

Net cash provided by operating activities: The net cash provided by operating activities displays significant fluctuations over the analyzed period. Beginning at 5,531 million USD in 2019, it experienced a steep decline in 2020 to 948 million USD, likely reflecting operational challenges or external pressures. Subsequently, there was a substantial recovery in 2021, when the figure rose to 5,859 million USD, nearly returning to pre-2020 levels. The upward trajectory continued sharply into 2022, reaching a peak of 12,574 million USD, indicating a strong operational performance or improved cash conversion. However, in 2023, there was a moderate decline to 9,229 million USD, suggesting a possible normalization following the exceptionally high 2022 level.
Free cash flow to the firm (FCFF): The free cash flow to the firm also shows notable variability, mirroring the general trend observed in operating cash flows but with more pronounced negative and positive swings. In 2019, FCFF stood at 3,731 million USD, a healthy positive cash flow. This was followed by a sharp reversal in 2020, dropping to -1,459 million USD, indicating negative free cash generation likely due to increased capital expenditures or decreased operational cash inflows. Recovery was evident in 2021, with FCFF climbing back to 4,355 million USD, and a dramatic increase in 2022 to 10,720 million USD, surpassing previous peaks. However, 2023 saw a decline to 8,612 million USD, which, while lower than 2022, remains substantially strong relative to earlier years.

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Valero Energy Corp., interest paid, net of tax calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Effective Income Tax Rate (EITR)
EITR¹	22.30%	22.40%	16.50%	44.90%	20.10%
Interest Paid, Net of Tax
Interest paid in excess of amount capitalized, including interest on finance leases, before tax	562)	570)	598)	526)	452)
Less: Interest paid in excess of amount capitalized, including interest on finance leases, tax²	125)	128)	99)	236)	91)
Interest paid in excess of amount capitalized, including interest on finance leases, net of tax	437)	442)	499)	290)	361)
Interest Costs Capitalized, Net of Tax
Capitalized interest, before tax	19)	57)	48)	75)	90)
Less: Capitalized interest, tax³	4)	13)	8)	34)	18)
Capitalized interest, net of tax	15)	44)	40)	41)	72)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ See details »

² 2023 Calculation
Interest paid in excess of amount capitalized, including interest on finance leases, tax = Interest paid in excess of amount capitalized, including interest on finance leases × EITR
= 562 × 22.30% = 125

³ 2023 Calculation
Capitalized interest, tax = Capitalized interest × EITR
= 19 × 22.30% = 4

Effective Income Tax Rate (EITR): The effective income tax rate exhibited significant volatility over the five-year period. Starting at 20.1% in 2019, it increased sharply to 44.9% in 2020, indicative of a higher tax burden or reduced tax benefits during that year. Subsequently, the rate declined to 16.5% in 2021, representing a considerable reduction, before stabilizing around 22% in 2022 and 2023. This pattern suggests fluctuations in taxable income or adjustments in tax strategies, with the latter years showing a convergence to a rate slightly above the initial 2019 level.
Interest Paid in Excess of Amount Capitalized, Including Interest on Finance Leases, Net of Tax: The interest expense paid beyond the capitalized amount experienced notable variation. Starting at $361 million in 2019, the figure dropped to $290 million in 2020, possibly reflecting lower interest costs or reduced borrowings. In 2021, a significant increase to $499 million occurred, followed by a decrease to $442 million in 2022 and a marginal further reduction to $437 million in 2023. Despite the decline after 2021, levels remained elevated compared to 2019 and 2020, suggesting sustained higher debt servicing costs or interest rate impacts in the recent years.
Capitalized Interest, Net of Tax: Capitalized interest demonstrated a generally decreasing trend during the period. Beginning at $72 million in 2019, the amounts declined sharply over time, reaching $41 million in 2020 and remaining relatively stable at $40 million in 2021. A slight increase to $44 million occurred in 2022, followed by a sharp drop to $15 million in 2023. This pattern indicates a reduction in interest capitalization, which could be due to decreased investment activity or changes in accounting policies related to capital expenditures.

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Valero Energy Corp., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (US$ in millions)
Enterprise value (EV)	49,032)
Free cash flow to the firm (FCFF)	8,612)
Valuation Ratio
EV/FCFF	5.69
Benchmarks
EV/FCFF, Competitors¹
Chevron Corp.	17.76
ConocoPhillips	15.49
Exxon Mobil Corp.	15.77
Occidental Petroleum Corp.	13.17
EV/FCFF, Sector
Oil, Gas & Consumable Fuels	13.59
EV/FCFF, Industry
Energy	13.54

Based on: 10-K (reporting date: 2023-12-31).

¹ Click competitor name to see calculations.

If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Valero Energy Corp., historical EV/FCFF calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Enterprise value (EV)¹	54,752)	57,832)	46,270)	43,178)	37,180)
Free cash flow to the firm (FCFF)²	8,612)	10,720)	4,355)	(1,459)	3,731)
Valuation Ratio
EV/FCFF³	6.36	5.39	10.62	—	9.96
Benchmarks
EV/FCFF, Competitors⁴
Chevron Corp.	14.85	8.27	13.33	106.63	—
ConocoPhillips	15.38	7.43	10.72	92.48	—
Exxon Mobil Corp.	12.47	7.84	10.06	—	—
Occidental Petroleum Corp.	11.15	5.95	8.39	25.58	—
EV/FCFF, Sector
Oil, Gas & Consumable Fuels	13.39	7.72	10.86	163.02	—
EV/FCFF, Industry
Energy	13.70	8.29	11.22	117.62	—

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ See details »

² See details »

³ 2023 Calculation
EV/FCFF = EV ÷ FCFF
= 54,752 ÷ 8,612 = 6.36

⁴ Click competitor name to see calculations.

Enterprise Value (EV): The enterprise value exhibited an overall upward trend from 2019 through 2022, increasing from $37,180 million to a peak of $57,832 million. However, in 2023, there was a noticeable decline to $54,752 million, indicating a slight reduction in valuation after several years of growth.
Free Cash Flow to the Firm (FCFF): Free cash flow demonstrated significant variability over the analyzed period. It started positively at $3,731 million in 2019, followed by a negative figure of -$1,459 million in 2020, reflecting a downturn likely related to external financial pressures or operational challenges. Subsequently, FCFF recovered strongly, rising to $4,355 million in 2021 and more than doubling to $10,720 million in 2022. In 2023, the free cash flow decreased to $8,612 million, still robust but indicating some contraction relative to the prior year.
EV to FCFF Ratio: This valuation ratio, indicative of how the firm's value relates to its ability to generate cash flow, was relatively high in 2019 at 9.96 and again in 2021 at 10.62, signaling potentially elevated valuation levels relative to cash flow. The ratio sharply declined to 5.39 in 2022, corresponding with the significant increase in FCFF, implying improved value generation or better market valuation relative to cash flow. In 2023, the ratio rose moderately to 6.36, reflecting the decreased FCFF and slight drop in enterprise value, suggesting a less favorable but still strong valuation environment compared to earlier years.
Overall Trends and Insights: The data reveals a period of recovery and growth after a challenging 2020, likely influenced by external factors impacting cash flow. The strong rebound in FCFF during 2021 and 2022 contributed to a more attractive enterprise value relative to cash flow, as evidenced by the lowered EV/FCFF ratio. The slight declines in both EV and FCFF in 2023 suggest some caution or market adjustment but the company's ability to generate free cash flow remains solid compared to earlier periods. These patterns underscore resilience and potential value optimization over the medium term, despite intermittent volatility.

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Valero Energy Corp. (NYSE:VLO)

Enterprise Value to FCFF (EV/FCFF)

Free Cash Flow to The Firm (FCFF)

Interest Paid, Net of Tax

Enterprise Value to FCFF Ratio, Current

Enterprise Value to FCFF Ratio, Historical