If refined product prices rise faster than the price of oil, refineries make more money when buying a barrel of oil. In this case, 3-2-1- stands for the cost of 3 crude oil future contracts, 2 gasoline futures contracts, and 1 ULSD diesel futures contract.
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The so-called 3-2-1 crack spread shows what we can expect in terms of refinery profitability. In this case, it's tight supply and the return of demand.Īs I wrote last month, the crack spread is at extremely elevated levels. Margins are driven by a wide range of factors. Higher economic growth requires more energy. If we ignore natural disasters, volume is mainly driven by economic growth. First, refined volumes and, second, margins. Given the size of its refining segment, Valero is driven by two things. Valero has a corn processing capacity of 553 million bushels, which feeds 12 plants in the Midwest producing 1.6 million gallons of ethanol per year and 4.2 million tons of DDGs, which stands for dried distillers grains. Like renewable diesel, ethanol is a clean energy source, and the backbone of America's agriculture industry as a big part of annual corn production is turned into ethanol. On top of that, Valero is one of America's top ethanol producers.
Renewable naphtha is used to produce renewable gasoline and renewable plastics. This expansion increased the DGD Plant’s renewable diesel production capacity by 410 million gallons per year, bringing DGD’s total renewable diesel production capacity to 700 million gallons per year, and provided DGD with the ability to produce 30 million gallons per year of renewable naphtha. This plant turns "waste" and renewable materials into diesel.ĭGD began an expansion of the DGD Plant in 2019 and operations commenced in the fourth quarter of 2021. In its renewable diesel segment, the company works with its joint venture DGD - Diamond Green Diesel - which has operations in Louisiana. This segment is the company's bread and butter as it generated 94% of 2021 sales. The company has 15 petroleum refineries located in the US, Canada, and the UK with an annual throughput capacity of 3.2 million barrels per day. The ethanol segment dominates the ethanol hub of the world, the US Midwest as the map above shows. The company has three operating segments, refining, renewable diesel, and ethanol. With a market cap of $46.7 billion, San Antonio-based Valero is one of the nation's largest refinery companies. I believe that Valero Energy offers the best of two worlds - high yield and dividend growth.
The title of this article isn't clickbait, at all. So, let's dive into the details! Valero's Three Segments In this article, I will guide you through my thoughts and explain why Valero is one of my favorite companies despite my focus on dividend growth over yield. The company has a high yield (>3%), a fantastic business model capable of long-term growth, and a huge tailwind from the ongoing energy crisis, which is boosting margins and allowing the company to reduce debt at a pace faster than what anyone could have guessed prior to 2022.
That company is Valero Energy ( NYSE: VLO), one of America's largest refining companies. In this article, I'm going to present a high-yield stock that's not just high-yielding, but also capable of growing its business on a long-term basis, buying back shares, and benefiting from the ongoing energy crisis. As I'm mainly focused on quality dividend growth, a lot of stocks that I cover don't yield more than 2-2.5%. There's one group of investors that I tend to "neglect" every now and then, and that's high-yield-seeking investors. Our extension allows you to switch back on ads for your favorite websites in case you know there are no intrusive and/or misleading advertising there.Sundry Photography/iStock Editorial via Getty Images Introduction Blocking ads will speed up your website load speed, decrease CPU and memory usage. Unlike other adblockers we do not have a whitelist for websites, advertisers or ad networks to show you unwanted ads. We have included a few extensive filters that offer decent protection against annoying, flashy ads, YouTube commercials, and more. No "acceptable" ads or whitelisted websites/ad networksĪdBlocker Ultimate is a free extension that blocks ads and malicious domains known to spread malware, disables tracking. AdBlocker Ultimate is designed with a single purpose in mind to remove all ads and focus your attention on the content you want.
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