ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is management’s perspective of our current financial condition and results of operations, and should be read in conjunction with “ITEM 1A. RISK FACTORS” and “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” included in this report. This discussion and analysis includes the years ended December 31, 2025 and 2024 and comparison between such years. The discussion for the year ended December 31, 2023 and comparison between the years ended December 31, 2024 and 2023 have been omitted from this annual report on Form 10-K for the year ended December 31, 2025, as such information can be found in “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” in our annual report on Form 10-K for the year ended December 31, 2024, which was filed on February 26, 2025.
CAUTIONARY STATEMENT FOR THE PURPOSE OF SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report, including without limitation our disclosures below under “OVERVIEW AND OUTLOOK,” includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify our forward-looking statements by the words “anticipate,” “believe,” “expect,” “plan,” “intend,” “scheduled,” “estimate,” “project,” “projection,” “predict,” “budget,” “forecast,” “goal,” “guidance,” “target,” “could,” “would,” “should,” “may,” “strive,” “seek,” “pursue,” “potential,” “opportunity,” “aimed,” “considering,” “continue,” “evaluate,” and similar expressions.
These forward-looking statements include, among other things, statements regarding:
• the effect, impact, potential duration or timing, or other implications of global geopolitical and other conflicts and tensions, and government and other responses thereto;
• future Refining segment margins, including gasoline and distillate margins, and differentials;
• future Renewable Diesel segment margins;
• future Ethanol segment margins;
• expectations regarding feedstock costs, including crude oil differentials, product prices for each of our segments, transportation costs, and operating expenses (including natural gas, electricity, and water availability and prices);
• anticipated levels of crude oil and liquid transportation fuel inventories, storage capacity, and production;
• expectations with respect to third-party refining, logistics, and low-carbon fuels projects and operations, and the effect and implications thereof on industry and market dynamics;
• expectations regarding the levels of, and costs and timing with respect to, the production and operations at our existing refineries and plants, projects under evaluation, construction, or development, and former projects;
• our plans, actions, assets, and operations in California and expected timing and cost of obligations and other financial statement impacts;
• our anticipated level of capital investments, including deferred turnaround and catalyst cost expenditures, our expected allocation between, and/or within, growth capital expenditures and sustaining capital expenditures, capital expenditures for environmental and other purposes, and
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joint venture investments, the expected costs and timing applicable to such capital investments and any related projects, and the effect of those capital investments on our business, financial condition, results of operations, and liquidity;
• our anticipated level of cash distributions or contributions, such as our dividend payment rate and contributions to our pension plans and other postretirement benefit plans;
• our ability to meet future cash and credit requirements, whether from funds generated from our operations or our ability to access financial markets effectively, and expectations regarding our liquidity;
• our evaluation of, and expectations regarding, any future activity under our share purchase program or transactions involving our debt securities;
• anticipated trends in the supply of, and demand for, crude oil and other feedstocks, refined petroleum products, renewable diesel, SAF, ethanol, and corn-related co-products in the regions where we operate, as well as globally;
• expectations regarding environmental, tax, and other regulatory matters, including the matters discussed in Notes 2 and 15 of Notes to Consolidated Financial Statements and under “ITEM 3. LEGAL PROCEEDINGS,” the anticipated amounts and timing of payment with respect to our deferred tax liabilities, unrecognized tax benefits, matters impacting our ability to repatriate cash held by our foreign subsidiaries, and the anticipated or potential effects thereof on our business, financial condition, results of operations, and liquidity;
• the effect of general economic and other conditions, including inflation and economic activity levels, on refining, renewable diesel, SAF, and ethanol industry fundamentals, as well as our capital allocation;
• expectations regarding our risk management activities, including the anticipated effects of our hedge transactions;
• expectations regarding our counterparties and VIEs, including our ability to pass on increased compliance costs and timely collect receivables, and the credit risk within our accounts receivable or accounts payable;
• expectations regarding adoptions of new, or changes to existing, low-carbon fuel regulations, policies, and standards issued by governments across the world to address GHG emissions and the percentage of low-carbon fuels in the transportation fuel mix, including, but not limited to, the Renewable and Low-Carbon Fuel Programs, blending and tax credits, efficiency standards, or other benefits or incentives that impact the demand for low-carbon fuels; and
• expectations regarding our low-carbon fuels strategy, publicly disclosed GHG emissions reductions/displacements target, and our current, former, and any future low-carbon projects.
We based our forward-looking statements on our current expectations, estimates, and projections about ourselves, current and potential counterparties, our industry, and the global economy and financial markets generally. We caution that these statements are not guarantees of future performance or results and involve known and unknown risks and uncertainties, the ultimate outcomes of which we cannot predict with certainty. In addition, we based many of these forward-looking statements on assumptions about future events, the ultimate outcomes of which we cannot predict with certainty and which may prove to be inaccurate. Accordingly, actual performance or results may differ materially from the future performance or results that we have expressed, suggested, or forecast in the forward-looking statements. Differences between actual performance or results and any future performance or results expressed, suggested, or forecast in these forward-looking statements could result from a variety of factors, including the following:
• the effects arising out of global geopolitical and other conflicts and tensions, including with respect to changes in trade flows and impacts to crude oil and other markets;
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• demand for, and supplies of, refined petroleum products (such as gasoline, diesel, jet fuel, and petrochemicals), renewable diesel, SAF, ethanol, and corn-related co-products;
• demand for, and supplies of, crude oil and other feedstocks, as well as other critical materials and supplies;
• the effects of public health threats, pandemics, and epidemics, governmental and societal responses thereto, and the adverse impacts of the foregoing on our business, financial condition, results of operations, and liquidity, and the global economy and financial markets generally;
• acts of terrorism or other third-party actions affecting either our refineries and plants or third-party facilities that could impair our ability to produce or transport refined petroleum products, renewable diesel, SAF, ethanol, or corn-related co-products, to receive feedstocks, or otherwise operate efficiently;
• the effects of war or hostilities, and political and economic conditions, in countries that produce crude oil or other feedstocks or consume refined petroleum products, renewable diesel, SAF, ethanol, or corn-related co-products;
• the ability of the members of OPEC, and other petroleum-producing nations that collectively make up OPEC+ , to agree on and to maintain crude oil price and production controls;
• the level of consumer demand, consumption, and overall economic activity, including the effects from seasonal fluctuations and market prices;
• refinery, renewable diesel plant, or ethanol plant overcapacity or undercapacity;
• the risk that any transactions or capital decisions may not provide the anticipated benefits or may result in unforeseen detriments;
• the actions taken by competitors, including both pricing and adjustments to refining capacity or low-carbon fuels production, as well as changes in the geographic markets where they operate, in response to market conditions;
• the level of competitors’ imports into markets that we supply;
• accidents, unscheduled shutdowns, weather events, civil unrest, expropriation of assets, and other economic, diplomatic, legislative, societal, or political events or developments, terrorism, cyberattacks, or other catastrophes or disruptions affecting our operations, production facilities, machinery, pipelines and other logistics assets, equipment, or information systems, or any of the foregoing of our suppliers, customers, or third-party service providers;
• changes in the cost or availability of transportation or storage capacity for feedstocks and our products;
• pressure and influence of environmental groups and other stakeholders upon policies and decisions related to the production, transportation, storage, refining, processing, marketing, and sales of crude oil or other feedstocks, refined petroleum products, renewable diesel, SAF, ethanol, or corn-related co-products;
• the price, availability, technology related to, and acceptance of alternative fuels and alternative-fuel vehicles, as well as sentiment and perceptions with respect to low-carbon projects and GHG emissions more generally;
• the levels of government subsidies for, and executive orders, mandates, or other policies with respect to, alternative fuels, alternative-fuel vehicles, and other low-carbon technologies or initiatives, including those related to carbon sequestration, carbon capture and storage, and low-carbon fuels, or affecting the price of natural gas, electricity, and/or water;
• the volatility in the market price of compliance credits (primarily RINs needed to comply with the RFS) under the Renewable and Low-Carbon Fuel Programs;
• delay of, cancellation of, or failure to implement planned capital or other strategic projects and realize the various assumptions and benefits projected for such projects or cost overruns in executing such planned projects;
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• natural disasters/acts of nature and severe weather events, such as earthquakes, storms, hurricanes, droughts, floods, wildfires, and other similar events, which can unforeseeably affect the price or availability of electricity, natural gas, crude oil, waste and renewable feedstocks, corn, and other feedstocks, critical supplies, refined petroleum products, renewable diesel, SAF, ethanol, and corn-related co-products;
• rulings, judgments, or settlements in litigation or other legal or regulatory matters, such as unexpected environmental remediation or enforcement costs, including those in excess of any reserves or insurance coverage;
• legislative or regulatory action, including the introduction or enactment of legislation or rulemakings by government authorities, environmental regulations, changes to income tax rates, profits, procedures, windfall, margin, or other taxes or penalties, tax changes or restrictions impacting the foreign repatriation of cash, actions implemented under SBx 1-2 and related regulation, actions implemented under the Renewable and Low-Carbon Fuel Programs, including changes to volume requirements or other obligations or exemptions under the RFS, and actions arising from the EPA’s or other government agencies’ regulations, policies, or initiatives concerning GHGs, including mandates for or bans of specific technology, which may adversely affect our business, financial condition, results of operations, and liquidity;
• changing economic, regulatory, and political environments and related events in the various countries in which we operate or otherwise do business, including tariffs, duties, and other trade restrictions, de-globalized supply chains or the diversification of historic trade patterns, expropriation or impoundment of assets, failure of foreign governments and state-owned entities to honor their contracts, property disputes, economic instability, restrictions on the transfer of funds, duties and tariffs and their effects on trading relationships, transportation delays, import and export controls, labor unrest, security issues involving key personnel, and decisions, investigations, regulations, issuances or revocations of permits and other authorizations, government shutdowns, and other actions, policies, and initiatives by federal, state, local, and other jurisdictions applicable to us;
• changes in the credit ratings assigned to our debt securities and trade credit;
• the operating, financing, and distribution decisions of our joint ventures, other joint venture members, and other consolidated VIEs that we do not control;
• changes in currency exchange rates, including the value of the Canadian dollar, the pound sterling, the euro, the Mexican peso, and the Peruvian sol relative to the U.S. dollar;
• the adequacy of capital resources and liquidity, including availability, timing, and amounts of cash flow or our ability to borrow or access financial markets;
• the costs, disruption, and diversion of resources associated with lawsuits, proceedings, demands, or investigations, or campaigns and negative publicity commenced by government authorities, investors, stakeholders, or other interested parties;
• overall economic conditions, including the stability and liquidity of financial markets, and the effect thereof on consumer demand; and
• other factors generally described in the “RISK FACTORS” section included in “ITEM 1A. RISK FACTORS” in this report.
Any one of these factors, or a combination of these factors, could materially affect our future business, financial condition, results of operations, and liquidity and whether any forward-looking statements ultimately prove to be accurate. Our forward-looking statements are not guarantees of future performance, and actual results and future performance may differ materially from those expressed, suggested, or forecast in any forward-looking statements. Such forward-looking statements speak only as of the date of this annual report on Form 10-K and we do not intend to update these statements unless we are required by applicable securities laws to do so.
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All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing, as it may be updated or modified by our future filings with the SEC. We undertake no obligation to publicly release any revisions to any such forward-looking statements that may be made to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events unless we are required by applicable securities laws to do so.
NON-GAAP FINANCIAL MEASURES
The following discussions in “OVERVIEW AND OUTLOOK,” “RESULTS OF OPERATIONS,” and “LIQUIDITY AND CAPITAL RESOURCES” include references to financial measures that are not defined under U.S. generally accepted accounting principles (GAAP). These non-GAAP financial measures include Refining, Renewable Diesel, and Ethanol segment margin; adjusted operating income (including adjusted operating income for each of our reportable segments, as applicable); Refining segment adjusted operating expenses (excluding depreciation and amortization expense); and capital investments attributable to Valero. We have included these non-GAAP financial measures to help facilitate the comparison of operating results between years, to help assess our cash flows, and because we believe they provide useful information as discussed further below. Refer to the tables in note (f), beginning on page 53 , for the reconciliations of Refining, Renewable Diesel, and Ethanol segment margin; adjusted operating income (including adjusted operating income for each of our reportable segments, as applicable); and adjusted Refining operating expenses (excluding depreciation and amortization expense) to their most directly comparable GAAP financial measures. Also in note (f), we disclose the reasons why we believe our use of such non-GAAP financial measures provides useful information. See the table on page 61 for a reconciliation of capital investments attributable to Valero to its most directly comparable GAAP financial measure, and also on page 61 , we disclose the reasons why we believe our use of this non-GAAP financial measure provides useful information.
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OVERVIEW AND OUTLOOK
Overview
Business Operations Update
Our results for the year ended December 31, 2025 were supported by strong worldwide demand for petroleum-based transportation fuels, while worldwide supply of those products remained constrained. However, our results were also impacted by the asset impairment loss of $1.1 billion ($877 million after taxes) associated with our operations in California, as described in Note 2 of Notes to Consolidated Financial Statements.
Our results, particularly for our Renewable Diesel segment, were also negatively impacted by trade and other policy changes during 2025. For instance, the U.S. federal government implemented new or revised tariffs, duties, and other actions with respect to U.S. and foreign trade, manufacturing, and investment that impacted our business operations during 2025. Although energy commodities, including crude oil and refined petroleum products, are generally exempt from the recently effective U.S. tariffs, our Renewable Diesel segment was subject to new tariffs on renewable feedstocks imported into the U.S. These tariffs have at times made the use of certain feedstocks, particularly foreign-sourced feedstocks, economically impractical and resulted in reduced margins. We have taken actions to mitigate the impact of tariffs and duties on our business, including utilizing established free-trade zones, adjusting our feedstock slates, and optimizing our supply chain. Also, a significant portion of the new tariffs and existing duties we incurred are eligible for recovery through duty drawback claims, and we have implemented processes that allow us to file such claims in an efficient and timely manner.
In addition, effective January 1, 2025, the blender’s tax credit, which offered a tax incentive of $1.00 per gallon to blenders of certain renewable fuels, was replaced by the clean fuel production credit. The clean fuel production credit is a tax credit available for qualifying sales of certain low-carbon transportation fuels produced in the U.S. and the value of the credit is dependent on the CI of the fuel, among other factors. The transition to the clean fuel production credit has resulted in fewer volumes being eligible for a tax credit as well as lower credit values for fuels that were previously incentivized under the blender’s tax credit, which had a negative impact on our Renewable Diesel segment margins.
For a discussion on the risks and uncertainties with respect to trade and other policy matters discussed above, see “ITEM 1A. RISK FACTORS—BUSINESS, INDUSTRY, AND OPERATIONS RISKS— The availability and prices of our feedstocks and other critical supplies expose us to risks .”
For the year ended December 31, 2025, we reported $2.3 billion of net income attributable to Valero stockholders driven by strong demand for our products and continued strength in refining margins. Our operating results for 2025, including operating results by segment, are described in the summary on the following page, and detailed descriptions can be found under “RESULTS OF OPERATIONS” beginning on page 46 .
Our operations generated $5.8 billion of cash in 2025. Also, we issued $650 million of 5.150 percent Senior Notes due February 15, 2030 during 2025, as described in Note 9 of Notes to Consolidated Financial Statements. The cash generated by our operations, along with the net proceeds from our debt issuance, was used to make $1.9 billion of capital investments in our business, return $4.0 billion to our stockholders through purchases of common stock for treasury and dividend payments, and repay $440 million of our public debt that matured in 2025. As a result of this and other activity during the year, our cash, cash equivalents, and restricted cash increased by $36 million to $4.9 billion as of December 31, 2025. We had $9.8 billion in liquidity as of December 31, 2025. The components of our liquidity and
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descriptions of our cash flows, capital investments, and other matters impacting our liquidity and capital resources can be found under “LIQUIDITY AND CAPITAL RESOURCES” beginning on page 57 .
Results for the Year Ended December 31, 2025
For 2025, we reported net income attributable to Valero stockholders of $2.3 billion compared to $2.8 billion for 2024. The decrease of $422 million was primarily due to decreases in operating income of $574 million and “other income, net” of $119 million, partially offset by a decrease in net income attributable to noncontrolling interests of $338 million. The details of our operating income (loss) and adjusted operating income, where applicable, by segment and in total are reflected below (in millions). Adjusted operating income excludes the adjustments reflected in the tables in note (f) beginning on page 53 .
Year Ended December 31,
Change
Refining segment:
Operating income
Adjusted operating income
Renewable Diesel segment:
Operating income (loss)
Ethanol segment:
Operating income
Adjusted operating income
Total company:
Operating income
Adjusted operating income
While our operating income decreased by $574 million in 2025 compared to 2024, adjusted operating income increased by $615 million primarily due to the following:
• Refining segment . Refining segment adjusted operating income increased by $1.3 billion primarily due to higher gasoline, distillate (primarily diesel), and other product margins and an increase in throughput volumes, partially offset by a decline in crude oil and other feedstock differentials and increases in adjusted operating expenses (excluding depreciation and amortization expense) and depreciation and amortization expense.
• Renewable Diesel segment . Renewable Diesel segment operating income decreased by $663 million primarily due to higher feedstock costs and a decline in the value of low-carbon fuel tax incentives, partially offset by higher product prices (primarily renewable diesel) and a decrease in operating expenses (excluding depreciation and amortization expense).
• Ethanol segment . Ethanol segment adjusted operating income increased by $59 million primarily due to higher ethanol prices and an increase in production volumes, partially offset by higher corn prices and an increase in operating expenses (excluding depreciation and amortization expense).
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Outlook
Many uncertainties remain with respect to the supply and demand balances in petroleum-based product markets worldwide. While it is difficult to predict future worldwide economic activity and its resulting impact on product supply and demand, including the effects of tariffs thereon, we have noted several factors below that have impacted or may impact our results of operations during the first quarter of 2026.
• Global demand for gasoline, diesel, and jet fuel continues to rise, with growth in demand for jet fuel outpacing growth of other primary petroleum-based transportation fuels. In addition, colder temperatures across the North Atlantic and moderation in biofuel consumption growth are expected to support petroleum-based diesel demand.
• Expected reductions in refining capacity in the U.S. and Europe, unplanned outages at Russian refineries due to the Russia-Ukraine conflict, and a prolonged ramp-up of new capacity in emerging markets continue to support utilization of remaining global refining capacity.
• Crude oil differentials are expected to widen as a result of an increase in sour crude oil production from OPEC+ suppliers and recent developments involving the Venezuelan government and associated sanctions. However, potential sanction adjustments related to Iran and Russia, ongoing uncertainty in Venezuela, and the continued Russia-Ukraine conflict could result in increased volatility in the crude oil market and potentially impact crude oil differentials.
• Renewable diesel demand is expected to remain consistent with current levels.
• Ethanol demand is expected to follow typical seasonal patterns.
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RESULTS OF OPERATIONS
The following tables, including the reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures in note (f) beginning on page 53 , highlight our results of operations, our operating performance, and market reference prices that directly impact our operations. Note references in this section can be found on pages 53 through 56 .
Financial Highlights by Segment and Total Company
(millions of dollars)
Year Ended December 31, 2025
Refining
Renewable
Diesel
Ethanol
Corporate
and
Eliminations
Total
Revenues:
Revenues from external customers
Intersegment revenues
Total revenues
Cost of sales:
Cost of materials and other (a)
Taxes other than income taxes (b)
Operating expenses (excluding depreciation and
amortization expense reflected below) (c)
Depreciation and amortization expense
Total cost of sales
Asset impairment loss (d)
Other operating expenses
General and administrative expenses (excluding
depreciation and amortization expense reflected
below)
Depreciation and amortization expense
Operating income (loss) by segment
Other income, net
Interest and debt expense, net of capitalized
interest
Income before income tax expense
Income tax expense
Net income
Less: Net loss attributable to noncontrolling
interests
Net income attributable to
Valero Energy Corporation stockholders
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Financial Highlights by Segment and Total Company (continued)
(millions of dollars)
Year Ended December 31, 2024
Refining
Renewable
Diesel
Ethanol
Corporate
and
Eliminations
Total
Revenues:
Revenues from external customers
Intersegment revenues
Total revenues
Cost of sales:
Cost of materials and other
Taxes other than income taxes (b)
Operating expenses (excluding depreciation and
amortization expense reflected below)
Depreciation and amortization expense
Total cost of sales
Other operating expenses
General and administrative expenses (excluding
depreciation and amortization expense reflected
below)
Depreciation and amortization expense
Operating income by segment
Other income, net
Interest and debt expense, net of capitalized
interest
Income before income tax expense
Income tax expense (e)
Net income
Less: Net income attributable to noncontrolling
interests
Net income attributable to
Valero Energy Corporation stockholders
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Average Market Reference Prices and Differentials
Year Ended December 31,
Refining
Feedstocks (dollars per barrel)
Brent crude oil
Brent less West Texas Intermediate (WTI) crude oil
Brent less WTI Houston crude oil
Brent less Dated Brent crude oil
Brent less Argus Sour Crude Index crude oil
Brent less Maya crude oil
Brent less Western Canadian Select Houston crude oil
WTI crude oil
Natural gas (dollars per million British thermal units)
RVO (dollars per barrel) (g)
Product margins (RVO adjusted unless otherwise noted)
(dollars per barrel)
U.S. Gulf Coast:
CBOB gasoline less Brent
Ultra-low-sulfur (ULS) diesel less Brent
Polymer Grade Propylene less Brent (not RVO adjusted)
U.S. Mid-Continent:
CBOB gasoline less WTI
ULS diesel less WTI
North Atlantic:
CBOB gasoline less Brent
ULS diesel less Brent
U.S. West Coast:
CARBOB 87 gasoline less Brent
CARB diesel less Brent
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Average Market Reference Prices and Differentials (continued)
Year Ended December 31,
Renewable Diesel
New York Mercantile Exchange ULS diesel
(dollars per gallon)
Biodiesel RIN (dollars per RIN)
California LCFS (dollars per metric ton)
U.S. Gulf Coast (USGC) used cooking oil (dollars per pound)
USGC DCO (dollars per pound)
USGC fancy bleachable tallow (dollars per pound)
Ethanol
Chicago Board of Trade corn (dollars per bushel)
New York Harbor ethanol (dollars per gallon)
2025 Compared to 2024
Total Company, Corporate, and Other
The following table includes selected financial data for the total company, corporate, and other for 2025 and 2024. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Year Ended December 31,
Change
Revenues
Cost of sales (see notes (a) and (c))
Asset impairment loss (see note (d))
Operating income
Adjusted operating income (see note (f))
Other income, net
Net income (loss) attributable to noncontrolling interests
Revenues decreased by $7.2 billion in 2025 compared to 2024 primarily due to decreases in product prices for the petroleum-based transportation fuels associated with sales made by our Refining segment. This decrease in revenues, along with the effect of an asset impairment loss of $1.1 billion in 2025 (see note (d)), was partially offset by a decrease in cost of sales of $7.8 billion primarily due to decreases in crude oil and other feedstock costs.
Operating income decreased by $574 million in 2025; however, adjusted operating income, which excludes the adjustments in the table in note (f), increased by $615 million, from $3.8 billion in 2024 to $4.4 billion in 2025. The components of this $615 million increase in adjusted operating income are discussed by segment in the segment analyses that follow.
“Other income, net” decreased by $119 million in 2025 compared to 2024 primarily due to lower interest income on cash driven by a decrease in interest rates in 2025.
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Net income attributable to noncontrolling interests decreased by $338 million in 2025 compared to 2024 primarily due to lower earnings associated with DGD, whose operations compose our Renewable Diesel segment. See Note 12 of Notes to Consolidated Financial Statements regarding our accounting for DGD and the Renewable Diesel segment analysis beginning on page 51 .
Refining Segment Results
The following table includes selected financial and operating data of our Refining segment for 2025 and 2024. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Year Ended December 31,
Change
Operating income
Adjusted operating income (see note (f))
Refining margin (see note (f))
Operating expenses (excluding depreciation and amortization
expense reflected below)
Adjusted operating expenses (excluding depreciation and
amortization expense reflected below) (see note (f))
Depreciation and amortization expense
Asset impairment loss (see note (d))
Throughput volumes (thousand BPD) (see note (h))
Refining segment operating income increased by $69 million in 2025 compared to 2024; however, Refining segment adjusted operating income, which excludes the adjustments in the table in note (f), increased by $1.3 billion in 2025 compared to 2024. The components of this increase in the adjusted results, along with the reasons for the changes in those components, are outlined below.
• Refining segment margin increased by $2.1 billion in 2025 compared to 2024.
Refining segment margin is primarily affected by the prices for the petroleum-based transportation fuels that we sell and the cost of crude oil and other feedstocks that we process. The table on page 48 reflects market reference prices and differentials that we believe impacted our Refining segment margin in 2025 compared to 2024.
The increase in Refining segment margin was primarily due to the following:
◦ An increase in distillate (primarily diesel) margins had a favorable impact of approximately $1.8 billion.
◦ An increase in margins for products other than gasoline and distillates had a favorable impact of approximately $940 million.
◦ An increase in gasoline margins had a favorable impact of approximately $650 million.
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◦ An increase in throughput volumes of 76,000 barrels per day had a favorable impact of approximately $340 million.
◦ A decline in crude oil differentials had an unfavorable impact of approximately $1.1 billion.
◦ A decline in differentials for other feedstocks had an unfavorable impact of approximately $600 million.
• Refining segment adjusted operating expenses (excluding depreciation and amortization expense), which excludes the adjustment in the table in note (f), increased by $430 million primarily due to increases in energy costs of $197 million, certain employee compensation expenses of $84 million, and maintenance expenses of $69 million.
• Refining segment depreciation and amortization expense increased by $363 million primarily due to incremental depreciation expense of approximately $300 million related to our plan to idle the processing units and cease refining operations at our Benicia Refinery by the end of April 2026, as described in Note 2 of Notes to Consolidated Financial Statements.
Renewable Diesel Segment Results
The following table includes selected financial and operating data of our Renewable Diesel segment for 2025 and 2024. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Year Ended December 31,
Change
Operating income (loss)
Renewable Diesel margin (see note (f))
Operating expenses (excluding depreciation and amortization
expense reflected below)
Depreciation and amortization expense
Sales volumes (thousand gallons per day) (see note (h))
Renewable Diesel segment operating income decreased by $663 million in 2025 compared to 2024. The components of this decrease, along with the reasons for the changes in those components, are outlined below.
• Renewable Diesel segment margin decreased by $703 million in 2025 compared to 2024.
Renewable Diesel segment margin is primarily affected by the price for the low-carbon fuels that we sell, the value of the related low-carbon fuel tax credits, and the cost of the feedstocks that we process. The table on page 49 reflects market reference prices that we believe impacted our Renewable Diesel segment margin in 2025 compared to 2024.
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The decrease in Renewable Diesel segment margin was primarily due to the following:
◦ An increase in the cost of the feedstocks processed during the period had an unfavorable impact of approximately $940 million. During 2025, we became subject to newly imposed tariffs on certain foreign-sourced renewable feedstocks, resulting in higher costs for those feedstocks. Furthermore, these tariffs resulted in increased demand for qualifying domestic feedstocks and, consequently, higher market prices for domestic-sourced feedstocks. See “OVERVIEW AND OUTLOOK— Overview— Business Operations Update” beginning on page 43 for additional discussion.
◦ A decline in the value of tax incentives for low-carbon fuels had an unfavorable impact of approximately $675 million. Effective January 1, 2025, the blender’s tax credit was replaced by the clean fuel production credit. This transition resulted in a reduction in the volumes of fuel eligible for a tax credit, as well as lower credit values for certain fuels that were previously incentivized under the blender’s tax credit regime. See “OVERVIEW AND OUTLOOK— Overview— Business Operations Update” beginning on page 43 for additional discussion.
◦ An increase in product prices, primarily renewable diesel, had a favorable impact of approximately $880 million.
• Renewable Diesel segment operating expenses (excluding depreciation and amortization expense) decreased by $42 million primarily due to decreases in outside services of $22 million and chemicals and catalysts costs of $19 million.
Ethanol Segment Results
The following table includes selected financial and operating data of our Ethanol segment for 2025 and 2024. The selected financial data is derived from the Financial Highlights by Segment and Total Company tables, unless otherwise noted.
Year Ended December 31,
Change
Operating income
Adjusted operating income (see note (f))
Ethanol margin (see note (f))
Operating expenses (excluding depreciation and amortization
expense reflected below)
Depreciation and amortization expense
Production volumes (thousand gallons per day) (see note (h))
Ethanol segment operating income increased by $86 million in 2025 compared to 2024; however, Ethanol segment adjusted operating income, which excludes the adjustment in the table in note (f), increased by $59 million in 2025 compared to 2024. The components of this increase in the adjusted results, along with the reasons for the changes in those components, are outlined below.
• Ethanol segment margin increased by $136 million in 2025 compared to 2024.
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Ethanol segment margin is primarily affected by prices for the ethanol and corn-related co-products that we sell and the cost of corn that we process. The table on page 49 reflects market reference prices that we believe impacted our Ethanol segment margin in 2025 compared to 2024.
The increase in Ethanol segment margin was primarily due to the following:
◦ An increase in ethanol prices had a favorable impact of approximately $150 million.
◦ An increase in production volumes of 73,000 gallons per day had a favorable impact of approximately $30 million.
◦ An increase in corn prices had an unfavorable impact of approximately $50 million.
• Ethanol segment operating expenses (excluding depreciation and amortization expense) increased by $75 million primarily due to increases in energy costs of $55 million and certain employee compensation expenses of $12 million.
The following notes relate to references on pages 46 through 52 .
(a) Cost of materials and other for the year ended December 31, 2025 includes a charge of $37 million related to the liquidation of certain LIFO inventory layers attributable to our Refining segment. Inventory levels for our West Coast refining operations decreased during the year ended December 31, 2025 in connection with our plan to idle the processing units and cease refining operations at the Benicia Refinery by the end of April 2026.
(b) Taxes other than income taxes includes excise taxes on sales by certain of our foreign operations.
(c) Operating expenses (excluding depreciation and amortization expense) for the year ended December 31, 2025 includes employee retention and separation costs of $50 million related to the Benicia Refinery. In connection with our plan to idle the processing units and cease refining operations at the Benicia Refinery, we implemented a transition plan for eligible employees, which includes retention incentive payments and separation benefits.
(d) In March 2025, we approved a plan with respect to the operations at our Benicia Refinery and currently intend to idle the processing units and cease refining operations by the end of April 2026. In addition, we considered strategic alternatives for our remaining operations in California. As a result, we evaluated the assets of the Benicia and Wilmington refineries for impairment as of March 31, 2025 and concluded that the carrying values of these assets were not recoverable. Therefore, we reduced the carrying values of the Benicia and Wilmington refineries to their estimated fair values and recognized a combined asset impairment loss of $1.1 billion in the year ended December 31, 2025.
(e) In December 2024, the Internal Revenue Service (IRS) approved our application for registration as a producer of second-generation biofuels with respect to the cellulosic ethanol produced at our ethanol plants. As a result, we recognized a current income tax benefit of $79 million in December 2024 for the tax credit attributable to volumes of cellulosic ethanol produced and sold by us in the U.S. from 2020 through 2024.
(f) We use certain financial measures (as noted below) that are not defined under GAAP and are considered to be non-GAAP measures.
We have defined these non-GAAP measures and believe they are useful to the external users of our financial statements, including industry analysts, investors, lenders, and rating agencies. We believe these measures are useful to assess our ongoing financial performance because, when reconciled to their most comparable GAAP measures, they provide improved comparability between periods after adjusting for certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and
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trends. These non-GAAP measures should not be considered as alternatives to their most comparable GAAP measures nor should they be considered in isolation or as a substitute for an analysis of our results of operations as reported under GAAP. In addition, these non-GAAP measures may not be comparable to similarly titled measures used by other companies because we may define them differently, which diminishes their utility.
Non-GAAP financial measures are as follows (in millions):
• Refining margin is defined as Refining segment operating income excluding the LIFO liquidation adjustment, operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, the asset impairment loss, and other operating expenses, as reflected in the table below.
Year Ended December 31,
Reconciliation of Refining operating income
to Refining margin
Refining operating income
Adjustments:
LIFO liquidation adjustment (see note (a))
Operating expenses (excluding depreciation and
amortization expense) (see note (c))
Depreciation and amortization expense
Asset impairment loss (see note (d))
Other operating expenses
Refining margin
• Renewable Diesel margin is defined as Renewable Diesel segment operating income (loss) excluding operating expenses (excluding depreciation and amortization expense) and depreciation and amortization expense, as reflected in the table below.
Year Ended December 31,
Reconciliation of Renewable Diesel operating
income (loss) to Renewable Diesel margin
Renewable Diesel operating income (loss)
Adjustments:
Operating expenses (excluding depreciation and
amortization expense)
Depreciation and amortization expense
Renewable Diesel margin
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• Ethanol margin is defined as Ethanol segment operating income excluding operating expenses (excluding depreciation and amortization expense), depreciation and amortization expense, and other operating expenses, as reflected in the table below.
Year Ended December 31,
Reconciliation of Ethanol operating income
to Ethanol margin
Ethanol operating income
Adjustments:
Operating expenses (excluding depreciation and
amortization expense)
Depreciation and amortization expense
Other operating expenses
Ethanol margin
• Adjusted Refining operating income is defined as Refining segment operating income excluding the LIFO liquidation adjustment, employee retention and separation costs, the asset impairment loss, and other operating expenses, as reflected in the table below.
Year Ended December 31,
Reconciliation of Refining operating income
to adjusted Refining operating income
Refining operating income
Adjustments:
LIFO liquidation adjustment (see note (a))
Employee retention and separation costs (see note (c))
Asset impairment loss (see note (d))
Other operating expenses
Adjusted Refining operating income
• Adjusted Ethanol operating income is defined as Ethanol segment operating income excluding other operating expenses, as reflected in the table below.
Year Ended December 31,
Reconciliation of Ethanol operating income
to adjusted Ethanol operating income
Ethanol operating income
Adjustment: Other operating expenses
Adjusted Ethanol operating income
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• Adjusted operating income is defined as total company operating income excluding the LIFO liquidation adjustment, employee retention and separation costs, the asset impairment loss, and other operating expenses, as reflected in the table below.
Year Ended December 31,
Reconciliation of total company operating income
to adjusted operating income
Total company operating income
Adjustments:
LIFO liquidation adjustment (see note (a))
Employee retention and separation costs (see note (c))
Asset impairment loss (see note (d))
Other operating expenses
Adjusted operating income
• Adjusted Refining operating expenses (excluding depreciation and amortization expense) is defined as Refining segment operating expenses (excluding depreciation and amortization expense) excluding employee retention and separation costs, as reflected in the table below.
Year Ended December 31,
Reconciliation of Refining operating expenses (excluding
depreciation and amortization expense) to adjusted
Refining operating expenses (excluding depreciation
and amortization expense)
Operating expenses (excluding depreciation and amortization
expense)
Adjustment: Employee retention and separation costs (see
note (c))
Adjusted Refining operating expenses (excluding
depreciation and amortization expense)
(g) The RVO cost represents the average market cost on a per barrel basis to comply with the RFS program. The RVO cost is calculated by multiplying (i) the average market price during the applicable period for the RINs associated with each class of renewable fuel (i.e., biomass-based diesel, cellulosic biofuel, advanced biofuel, and total renewable fuel) by (ii) the quotas for the volume of each class of renewable fuel that must be blended into petroleum-based transportation fuels consumed in the U.S., as set or proposed by the EPA, on a percentage basis for each class of renewable fuel and adding together the results of each calculation.
(h) We use throughput volumes, sales volumes, and production volumes for the Refining segment, Renewable Diesel segment, and Ethanol segment, respectively, due to their general use by others who operate facilities similar to those included in our segments.
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LIQUIDITY AND CAPITAL RESOURCES
Our Liquidity
Our liquidity consisted of the following as of December 31, 2025 (in millions):
Available capacity from our committed facilities (a):
Valero Revolver
Accounts receivable sales facility
Total available capacity
Cash and cash equivalents (b)
Total liquidity
(a) Excludes the committed facilities of the consolidated VIEs.
(b) Excludes $228 million of cash and cash equivalents related to the consolidated VIEs that is for their use only.
Information about our outstanding borrowings, letters of credit issued, and availability under our credit facilities is reflected in Note 9 of Notes to Consolidated Financial Statements.
Our debt and financing agreements do not have rating agency triggers that would automatically require us to post additional collateral. However, in the event of certain downgrades of our senior unsecured debt by the ratings agencies, the cost of borrowings under some of our bank credit facilities and other arrangements may increase. As of December 31, 2025, all of our ratings on our senior unsecured debt, including debt guaranteed by us, were at or above investment grade level as follows:
Rating Agency
Rating
Moody’s Investors Service
Baa2 (stable outlook)
Standard & Poor’s Ratings Services
BBB (stable outlook)
Fitch Ratings
BBB (stable outlook)
We cannot provide assurance that these ratings will remain in effect for any given period of time or that one or more of these ratings will not be lowered or withdrawn entirely by a rating agency. We note that these credit ratings are not recommendations to buy, sell, or hold our securities. Each rating should be evaluated independently of any other rating. Any future reduction below investment grade or withdrawal of one or more of our credit ratings could have a material adverse impact on our ability to obtain short- and long-term financing and the cost of such financings.
We believe we have sufficient funds from operations and from available capacity under our credit facilities to fund our ongoing operating requirements and other commitments over the next 12 months and thereafter for the foreseeable future. We expect that, to the extent necessary, we can raise additional cash through equity or debt financings in the public and private capital markets or the arrangement of additional credit facilities. However, there can be no assurances regarding the availability of any future financings or additional credit facilities or whether such financings or additional credit facilities can be made available on terms that are acceptable to us.
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Cash Flows
Components of our cash flows are set forth below (in millions):
Year Ended December 31,
Cash flows provided by (used in):
Operating activities
Investing activities
Financing activities:
Debt issuance and borrowings
Repayments of debt and finance lease obligations
Return to stockholders:
Purchases of common stock for treasury
Common stock dividend payments
Return to stockholders
Other financing activities
Financing activities
Effect of foreign exchange rate changes on cash
Net increase (decrease) in cash, cash equivalents, and restricted cash
Cash Flows for the Year Ended December 31, 2025
In 2025, we used the $5.8 billion of cash generated by our operations and the $7.6 billion from our debt issuance and borrowings to make $1.8 billion of investments in our business, repay $7.7 billion of debt and finance lease obligations, return $4.0 billion to our stockholders through purchases of our common stock for treasury and dividend payments, and increase our available cash on hand by $36 million. The debt issuance, borrowings, and repayments are described in Note 9 of Notes to Consolidated Financial Statements.
As previously noted, our operations generated $5.8 billion of cash in 2025, resulting from net income of $2.2 billion and noncash charges of $3.8 billion, partially offset by a negative change in working capital of $192 million. Noncash charges primarily included a $1.1 billion asset impairment loss associated with our operations in California, as described in Note 2 of Notes to Consolidated Financial Statements, and $3.2 billion of depreciation and amortization expense, partially offset by a $197 million deferred income tax benefit. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 18 of Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net income.
Our investing activities of $1.8 billion primarily consisted of $1.9 billion in capital investments, as defined on the following page under “Capital Investments,” of which $170 million related to capital investments made by DGD.
Cash Flows for the Year Ended December 31, 2024
In 2024, we used the $6.7 billion of cash generated by our operations, $7.1 billion in debt borrowings, and $595 million of cash on hand to make $2.0 billion of investments in our business, repay $7.8 billion of debt and finance lease obligations, and return $4.3 billion to our stockholders through purchases of our common stock for treasury and dividend payments. The debt borrowings and repayments are described in Note 9 of Notes to Consolidated Financial Statements.
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As previously noted, our operations generated $6.7 billion of cash in 2024, driven by net income of $3.0 billion, noncash charges of $2.9 billion, and a positive change in working capital of $795 million. Noncash charges primarily included $2.8 billion of depreciation and amortization expense. Details regarding the components of the change in working capital, along with the reasons for the changes in those components, are described in Note 18 of Notes to Consolidated Financial Statements. In addition, see “RESULTS OF OPERATIONS” for an analysis of the significant components of our net income.
Our investing activities of $2.0 billion primarily consisted of $2.1 billion in capital investments, of which $321 million related to capital investments made by DGD.
Our Capital Resources
Our material cash requirements as of December 31, 2025 primarily consisted of working capital requirements, capital investments, contractual obligations, and other matters, as described below. Our operations have historically generated positive cash flows to fulfill our working capital requirements and other uses of cash as discussed below.
Capital Investments
Capital investments consist of our capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in nonconsolidated joint ventures, as reflected in our statements of cash flows as shown on page 78 . Capital investments exclude acquisitions, if any.
We also identify our capital investments by the nature of the project with which the expenditure is associated as follows:
• Sustaining capital investments are generally associated with projects that are expected to extend the lives of our property assets, sustain their operating capabilities and safety (including deferred turnaround and catalyst cost expenditures), or comply with regulatory requirements. Regulatory compliance capital investments are generally associated with projects that are incurred to comply with government regulatory requirements, such as requirements to reduce emissions and prohibited elements from our products.
• Growth capital investments , including low-carbon growth capital investments that support the development and growth of our low-carbon fuels businesses, are generally associated with projects for the construction of new property assets that are expected to enhance our profitability and cash-generating capabilities, including investments in nonconsolidated joint ventures.
We have developed an extensive multi-year capital investment program, which we update and revise based on changing internal and external factors. Our capital investment program aims to manage our capital investments on average over a multi-year period given the year-to-year variability with respect to timing, costs, and other aspects of capital projects, particularly growth capital projects. Capital projects may be accelerated, deferred, or canceled based on costs, market and economic conditions, regulatory approvals, project execution, competing uses of capital, and other variables, and capital investments and costs may particularly increase or decrease at the beginning and ending of a project. The variability in our year-to-year growth capital investments primarily reflects shifts in expected timing and costs of capital projects rather than a change in our capital allocation strategy. See also “ITEM 1A. RISK FACTORS—BUSINESS, INDUSTRY, AND OPERATIONS RISKS— Our pursuit of capital and other strategic projects and actions exposes us to various risks ” regarding other considerations with respect to our capital investments.
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The following table reflects our expected capital investments for the year ending December 31, 2026 by nature of the project and segment, along with historical amounts for the years ended December 31, 2025 and 2024 (in millions). The following table also reflects capital investments attributable to Valero, which is a non-GAAP measure that we define and reconcile to capital investments below under “Capital Investments Attributable to Valero.”
Year Ending
December 31,
Year Ended
December 31,
Capital investments by nature of the project (b):
Sustaining capital investments
Growth capital investments
Total capital investments
Capital investments by segment:
Refining
Renewable Diesel
Ethanol
Corporate
Total capital investments
Adjustments:
Renewable Diesel capital investments attributable
to the other joint venture member in DGD
Capital expenditures of other VIEs
Capital investments attributable to Valero
(a) All expected amounts for the year ending December 31, 2026 exclude capital expenditures that the consolidated VIEs (other than DGD) may incur because we do not operate those VIEs.
(b) Capital investments attributable to Valero by nature of the project are as follows (in millions):
Year Ending
December 31,
Year Ended
December 31,
Sustaining capital investments
Growth capital investments
Capital investments attributable to Valero
We have a publicly disclosed GHG emissions reductions/displacements target and our capital investments in future years are expected to include investments associated with certain low-carbon projects currently at various stages of progress, evaluation, or approval in line therewith. Certain low-carbon projects and the associated capital investments are also included in our expected capital investments for 2026.
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Capital Investments Attributable to Valero
Capital investments attributable to Valero is a non-GAAP financial measure that reflects our net share of capital investments and is defined as all capital expenditures, deferred turnaround and catalyst cost expenditures, and investments in nonconsolidated joint ventures, excluding the portion of DGD’s capital investments attributable to the other joint venture member and all of the capital expenditures of other consolidated VIEs.
We are a 50 percent joint venture member in DGD and consolidate its financial statements, and DGD’s operations compose our Renewable Diesel segment. As a result, all of DGD’s net cash provided by operating activities (or operating cash flow) is included in our consolidated net cash provided by operating activities. In general, DGD’s members use DGD’s operating cash flow (excluding changes in its current assets and current liabilities) to fund its capital investments rather than distribute all of that cash to themselves. Because DGD’s operating cash flow is effectively attributable to each member, only 50 percent of DGD’s capital investments should be attributed to our net share of capital investments. We also exclude all of the capital expenditures of other VIEs that we consolidate because we do not operate those VIEs. See Note 12 of Notes to Consolidated Financial Statements for more information about the VIEs that we consolidate. We believe capital investments attributable to Valero is an important measure because it more accurately reflects our capital investments.
Capital investments attributable to Valero should not be considered as an alternative to capital investments, which is the most comparable GAAP measure, nor should it be considered in isolation or as a substitute for an analysis of our cash flows as reported under GAAP. In addition, this non-GAAP measure may not be comparable to similarly titled measures used by other companies because we may define it differently, which may diminish its utility.
The following table (in millions) reconciles our capital investments to capital investments attributable to Valero for the years ended December 31, 2025 and 2024.
Year Ended December 31,
Reconciliation of capital investments
to capital investments attributable to Valero
Capital expenditures (excluding VIEs)
Capital expenditures of VIEs:
DGD
Other VIEs
Deferred turnaround and catalyst cost expenditures
(excluding VIEs)
Deferred turnaround and catalyst cost expenditures
of DGD
Investments in nonconsolidated joint ventures
Capital investments
Adjustments:
DGD’s capital investments attributable to the other joint
venture member
Capital expenditures of other VIEs
Capital investments attributable to Valero
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Contractual Obligations
Below is a summary of our contractual obligations (in millions) as of December 31, 2025 that are expected to be paid within the next year and thereafter. These obligations are reflected in our balance sheets, except (i) the interest payments related to debt obligations, operating lease liabilities, and finance lease obligations and (ii) purchase obligations.
Payments Due by Period
Short-Term
Long-Term
Total
Debt obligations (a)
Interest payments related to debt obligations (b)
Operating lease liabilities (c)
Finance lease obligations (c)
Other long-term liabilities (d)
Purchase obligations (e)
(a) Debt obligations and a maturity analysis of our debt are described in Note 9 of Notes to Consolidated Financial Statements. Debt obligations exclude amounts related to net unamortized debt issuance costs and other.
(b) Interest payments related to debt obligations are the expected payments based on information available as of December 31, 2025.
(c) Operating lease liabilities, finance lease obligations, and maturity analyses of remaining minimum lease payments are described in Note 5 of Notes to Consolidated Financial Statements. Operating lease liabilities and finance lease obligations reflected in this table include related interest expense.
(d) Other long-term liabilities are described in Note 8 of Notes to Consolidated Financial Statements. Other long-term liabilities exclude amounts related to the long-term portion of operating lease liabilities that are separately presented above.
(e) Purchase obligations are described in Note 10 of Notes to Consolidated Financial Statements. Purchase obligations are based on (i) fixed or minimum quantities to be purchased and (ii) fixed or estimated prices to be paid based on current market conditions.
In 2025, we issued $650 million of public debt and used a portion of the net proceeds to repay $440 million of our public debt that matured in 2025, as described in Note 9 of Notes to Consolidated Financial Statements.
The amount outstanding associated with the IEnova Revolver, as defined and described in Note 9 of Notes to Consolidated Financial Statements, is reflected in current portion of debt and finance lease obligations in our balance sheet as of December 31, 2025, and also included in the table above in debt obligations – short-term. The IEnova Revolver is subject to repayment on demand; however, we do not expect the lender to demand repayment during the next 12 months. Thus, the final cash flows for this instrument cannot be predicted with certainty at this time.
We have not entered into any transactions, agreements, or other contractual arrangements that would result in off-balance sheet liabilities.
Other Matters Impacting Liquidity and Capital Resources
Stock Purchase Programs
During the year ended December 31, 2025, we purchased for treasury 16,659,800 of our shares for a total cost of $2.6 billion. See Note 11 of Notes to Consolidated Financial Statements for additional information related to our stock purchase programs. As of December 31, 2025, we had $1.7 billion remaining available for purchase under the September 2024 Program. On February 25, 2026, our Board authorized us to purchase shares of our outstanding common stock for a total cost of up to $2.5 billion with no
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expiration date, which is in addition to the amount remaining under the September 2024 Program. We will continue to evaluate the timing of purchases when appropriate. We have no obligation to make purchases under these programs.
Pension Plan Funding
During 2026, we plan to contribute approximately $70 million and $20 million to our pension plans and other postretirement benefit plans, respectively. See Note 13 of Notes to Consolidated Financial Statements for a discussion of our employee benefit plans.
Tax Matters
The OBBB
On July 4, 2025, the OBBB was enacted, which resulted in a broad range of changes to the Code, as more fully described in Note 15 of Notes to Consolidated Financial Statements. These changes and other provisions of this legislation did not have a material effect on our financial condition, results of operations, and liquidity in 2025. However, certain provisions of this legislation become effective over time and may require further clarification through regulations and other guidance issued by the U.S. Department of the Treasury and the IRS. We will continue to evaluate the effects of the OBBB on our financial condition, results of operations, and liquidity in the future.
Pillar Two
The Organisation for Economic Co-operation and Development (OECD) has introduced a framework that provides for a 15 percent global minimum effective tax rate for large multinational corporations on the income arising in each jurisdiction where they operate, known as Pillar Two. While all OECD countries and jurisdictions have agreed to Pillar Two, the related rules are being implemented on a country-by-country basis. Certain countries in which we operate, such as Canada, the U.K., and Ireland, have enacted tax legislation to implement Pillar Two with effective dates beginning in 2024, and we are subject to the tax laws of those countries. The Pillar Two rules did not have a material effect on our financial condition, results of operations, or liquidity in 2025. On January 5, 2026, the OECD released an administrative guidance package, including a “Side-by-Side System” designed to prevent other jurisdictions from imposing tax on U.S. profits of U.S. companies. We will continue to monitor U.S. and international legislative developments to assess the potential impacts of these rules. We currently do not expect that compliance with these rules will have a material effect on our financial condition, results of operations, or liquidity in the future.
Cash Held by Our Foreign Subsidiaries
As of December 31, 2025, $4.1 billion of our cash and cash equivalents was held by our foreign subsidiaries. Cash held by our foreign subsidiaries can be repatriated to us through dividends without any U.S. federal income tax consequences, but certain other taxes may apply, including, but not limited to, withholding taxes imposed by certain foreign jurisdictions, U.S. state income taxes, and U.S. federal income tax on foreign exchange gains. Therefore, there is a cost to repatriate cash held by certain of our foreign subsidiaries to us.
Asset Retirement Obligations
See Notes 2 and 8 of Notes to Consolidated Financial Statements for information regarding our expected asset retirement obligations.
Environmental Matters
Our operations are subject to extensive environmental regulations by government authorities relating to, among other matters, the release or discharge of materials into the environment, climate, waste
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management, pollution prevention measures, GHG and other emissions, our facilities and operations, and characteristics and composition of many of our products. Because environmental laws and regulations have become more complex and stringent and new or revised environmental laws and regulations are continuously being enacted or proposed, the level of future costs and expenditures required for environmental matters could increase. See Note 1 of Notes to Consolidated Financial Statements regarding our accounting for our environmental liabilities under “Environmental Matters” and see Note 8 of Notes to Consolidated Financial Statements for disclosure of these liabilities. See also “ITEMS 1. and 2. BUSINESS AND PROPERTIES—GOVERNMENT REGULATIONS” and the items incorporated by reference therein.
Concentration of Customers
Our operations have a concentration of customers in the refining industry and customers who are refined petroleum product wholesalers and retailers. These concentrations of customers may impact our overall exposure to credit risk, either positively or negatively, in that these customers may be similarly affected by changes in economic or other conditions, including the uncertainties concerning worldwide events causing volatility in the global crude oil markets. However, we believe that our portfolio of accounts receivable is sufficiently diversified to the extent necessary to minimize potential credit risk. Historically, we have not had any significant problems collecting our accounts receivable. See also “ITEM 1A. RISK FACTORS—LEGAL, GOVERNMENT, AND REGULATORY RISKS— We are subject to risks arising from legal, regulatory, and political developments regarding climate- and environmental-related matters, or that are adverse to or restrict refining and marketing operations .”
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions, which we believe to be reasonable, that affect the amounts reported in our financial statements and accompanying notes. However, actual results could differ from those estimates and assumptions. The following summary provides further information about our critical accounting policies that involve critical accounting estimates, and should be read in conjunction with Note 1 of Notes to Consolidated Financial Statements, which summarizes our significant accounting policies. The following accounting policies involve estimates that are considered critical due to the level of subjectivity and judgment involved, as well as the impact on our financial position and results of operations. Unless otherwise noted, estimates of the sensitivity to earnings that would result from changes in the assumptions used in determining our estimates are not practicable due to the number of assumptions and contingencies involved, and the wide range of possible outcomes.
Unrecognized Tax Benefits
We take tax positions in our tax returns from time to time that ultimately may not be allowed by the relevant taxing authorities. When we take such positions, we evaluate the likelihood of sustaining those positions and determine the amount of tax benefit arising from such positions, if any, that should be recognized in our financial statements. Tax benefits not recognized by us are recorded as a liability for unrecognized tax benefits, which represents our potential future obligation to various taxing authorities if the tax positions are not sustained.
The evaluation of tax positions and the determination of the benefit arising from such positions that are recognized in our financial statements requires us to make significant judgments and estimates based on an analysis of complex tax laws and regulations and related interpretations. These judgments and estimates are subject to change due to many factors, including the progress of ongoing tax audits, case law, and changes in legislation.
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Details of our changes in unrecognized tax benefits, along with other information about our unrecognized tax benefits, are included in Note 15 of Notes to Consolidated Financial Statements.
Fair Value Measurements
Fair value represents the amount that we expect to receive or pay in an orderly transaction with a market participant at the measurement date. There are three generally accepted valuation approaches for measuring the fair value of assets and liabilities: the market approach, the income approach, and the cost approach. We primarily use the market approach for fair value measurements, which is based on observable information available as of the measurement date, such as quoted prices and other relevant market data for identical or comparable assets or liabilities. The income approach estimates fair value by discounting expected future amounts into a single present value that reflects current market expectations. Fair value under the cost approach reflects the amount that would currently be required to replace the service capacity of the asset and is often referred to as current replacement cost. Regardless of the valuation approach or combination thereof utilized, fair value estimates require us to apply considerable judgment in selecting inputs, which may be observable or unobservable, and significant assumptions based on historical and industry trends and other market conditions.
As discussed in Note 2 of Notes to Consolidated Financial Statements, we concluded that the carrying values of the Benicia and Wilmington refineries were impaired as of March 31, 2025, and as a result, reduced the carrying values of these assets to their estimated fair values. These nonrecurring fair value measurements were determined using a market approach based on the best information available. See Note 19 of Notes to Consolidated Financial Statements for further details on our fair value measurements.
Impairment of Long-Lived Assets
Long-lived assets (primarily property, plant, and equipment) are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. A long-lived asset is not recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived asset is not recoverable, an impairment loss is recognized for the amount by which the carrying amount of the long-lived asset exceeds its fair value, with fair value determined based on the most appropriate valuation approach or combination thereof.
In order to test for recoverability, we must make estimates of projected cash flows related to the asset being evaluated. Such estimates include, but are not limited to, assumptions about future sales volumes, commodity prices, operating costs, margins, the use or disposition of the asset, the asset’s estimated remaining useful life, and future expenditures necessary to maintain the asset’s existing service potential in light of existing and expected regulations. Due to the significant subjectivity of the assumptions used to test for recoverability, changes in market and economic conditions could result in significant impairment charges in the future, thus affecting our earnings.
New environmental and tax laws and regulations, as well as changes to existing laws and regulations, are continuously being enacted or proposed. The implementation of future legislative and regulatory initiatives (such as those discussed in ITEM 1A. RISK FACTORS) that may adversely affect our operations could indicate that the carrying value of an asset may not be recoverable and result in an impairment loss that could be material. If the circumstances that trigger an impairment also result in a reduction in the estimated useful life of the asset, then we may also be required to recognize an asset retirement obligation for that asset.
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Details of the asset impairment loss and associated expected asset retirement obligations recognized during the year ended December 31, 2025 related to our Benicia and Wilmington refineries are included in Notes 2 and 8 of Notes to Consolidated Financial Statements.
