Credit Suisse Energy SummitCredit Suisse Energy SummitF b 5 2009February 5, 2009

We Need an Economic RecoveryWe Need an Economic Recovery

U S Freight Shipment IndexU S Non-Farm Payroll Employment Change

1.3

1.4 U.S. Freight Shipment Index

200

400Thousands

U.S. Non-Farm Payroll Employment Change(Month-Over-Month)

amen

tals

amen

tals

1.1

1.2 0

arke

t Fun

dar

ket F

und

0.9

1.0 Jan 1990 = 1.0

-400

-200

MM

0.8 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

Source: Cass Freight Systems

-600Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

Source: U.S. Bureau of Labor Statistics

1

Source: Cass Freight SystemsSource: U.S. Bureau of Labor Statistics

Demand Has Weakened Demand Has Weakened SubstantiallySubstantiallySubstantiallySubstantially

MMBPD Global Refining Supply and Demand3 0

3.5Petroleum Demand Growth

1.5

2.0

2.5

3.0Crude Unit Expansions

Conversion Capacity Growth

Jan 2008 Demand Forecast

-0.5

0.0

0.5

1.0

amen

tals

amen

tals

• Near-term demand weakness creating

Source: Industry reports and Valero forecast; 2008 through 2013 estimates are based on consultant averages and are subject to change; includes capacity creep

-1.02003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E 2013E

• Eventually, economic recovery drives arke

t Fun

dar

ket F

und

gspare capacity

• Projects getting canceled and deferred• Threat to less competitive refiners

L di t b k t i d t ti l

y, ydemand growth

• The world will need more refining capacity again

Building greenfield projects

MM

2

Leading to bankruptcies and potential closures

Building greenfield projectsReturn on investments at replacement costs

Expect OPEC Cut on Relatively Low Expect OPEC Cut on Relatively Low Crude Oil PricesCrude Oil PricesCrude Oil PricesCrude Oil Prices

$150WTI Cushing (per bbl)

31MMBPD OPEC-11 Production and Quota

$90

$110

$130

27

28

29

30

$30

$50

$70

amen

tals

amen

tals

24

25

26

27QuotaActual Crude Production

Nov-05 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08

Source: Argus weekly averages; 2009 through January 30

• Crude oil market looking for support • Longer-term – oil prices may climb as demand increasesar

ket F

und

arke

t Fun

d 24Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09

Source: Average of Industry Reports and Consultants

• 2009 economic activity very weakHuge worldwide stimulus being applied

• Expect OPEC to cut againLo cr de oil prices good for the

demand increasesLower prices causing some project delaysNon-OPEC crude production at low

th d li

MM

33

• Low crude oil prices good for the economy and ultimately demand

growth or declineU.S. restrictions on drilling

Gasoline Supply Capacity in Surplus Gasoline Supply Capacity in Surplus Relative to DemandRelative to DemandRelative to DemandRelative to Demand

240250 U.S. Gasoline Inventory (millions of barrels)

$35$40 Gulf Coast Gas Crack (vs. WTI, per bbl)

20082009

200210220230

5-Yr Avg 2008

2009$10$15$20$25$30

amen

tals

amen

tals 5-Yr Avg

170180190200

-$10-$5$0$5

$10

2009 Forward Curve

• U.S. gasoline inventories in good shape – near 5-year average

• Gulf coast gas crack much impro ed since 4Q08ar

ket F

und

arke

t Fun

d Jan Apr Jul OctSource: DOE unadjusted weekly data; 2009 through January 23

Jan Apr Jul OctSource: Argus weekly averages; 2009 through January 30

shape – near 5-year average• Refiners reducing utilization of

gasoline making units FCCs and reformersValero taking extra units down during

improved since 4Q08• Expect actual 2009 gasoline

margins will be better than forward curve

MM

Valero taking extra units down during planned maintenance

• Lower pump prices helping demand recovery 4

forward curveRefiners must restrict outputDemand improvements

Distillate Margins Continue Distillate Margins Continue To Be FavorableTo Be Favorable

$35

$40 Gulf Coast On-Road Diesel Crack (vs. WTI, per bbl)

To Be FavorableTo Be Favorable

4

500 U.S. and Europe Commercial Distillate/Gasoil Inventories (millions of barrels)

5-Yr Avg

2008

2009

$20

$25

$30

$35

425

450

475 20062005

2008

2007

$5

$10

$152009 Forward Curve

375

400

425 2008

amen

tals

amen

tals

• Expect long-term demand growthGrowing faster than gasoline

Jan Apr Jul OctSource: Argus weekly averages; 2009 through January 27; LSD prior to May 2006; ULSD after April 2006; 2009 Forward Curve as of January 30

Jan Apr Jul OctSource: IEA and Euroilstock as of December 2008; Includes heating oil, diesel, gasoil

• Distillate margins strong all of 2008 and in January 2009ar

ket F

und

arke

t Fun

d

Growing faster than gasoline worldwideEconomic growth drives diesel demand

January 2009• Despite U.S. volumes down, getting near-term

support from:Colder-than-normal weather in northern hemisphere

MM

• Supply options limitedFewer substitutes such as ethanol for gasoline

5

pTight European inventories due to disruption of Russian gas supply

• World is still tight on diesel

Expect Feedstock Discounts to Expect Feedstock Discounts to ImproveImproveImproveImprove

35% Maya Percentage Crude Differentials$20 Maya Crude Differentials (per bbl)

25%

30% vs. WTIvs. LLS

$10

$15vs. WTIvs. LLS

amen

tals

amen

tals

10%

15%

20%

$0

$5

• Crude discounts vs. WTI recently • Longer-term, cancellations and arke

t Fun

dar

ket F

und 10%

2002 2003 2004 2005 2006 2007 2008 2009Source: Argus quarterly averages; 2009 through January 30 Source: Argus monthly averages; 2009 through January 30

$02002 2003 2004 2005 2006 2007 2008 2009

YTD YTD

narrowedWTI’s recent weakness and steep contango – Cushing issueOPEC cutting medium sour barrels

deferrals of cokers and upgradersreduce demand for heavy oil

Examples: MRO Detroit, VLO Port Arthur, Petro-Canada Fort Hills, Suncor Voyageur,

d BA E H tl d

MM

6

g• Compared to LLS, discounts still good

and BA Energy Heartland

• Also, Valero working to encourage delivery of Canadian heavy crude oil to Gulf Coast

Why Own Valero?Why Own Valero?

• Larger More Complex Lower cost• Larger, More Complex, Lower-cost Refineries

• Strong Financial Position• Continuing to Invest in Growth ProjectsContinuing to Invest in Growth Projects

with Disciplined Capital Program• Shareholder Focused Company• Shareholder-Focused Company• Improving Competitiveness

7

Valero’s Refineries Are Larger and Valero’s Refineries Are Larger and More ComplexMore Complex

25 U.S. Refinery Crude Distillation Unit Capacity vs. Nelson Complexity

121 MBPD Avg

More ComplexMore Complex

20

y In

dex

121 MBPD Avg. CDU Capacity Valero Refineries

Avg. VLO CDU Capacity = 160 MBPDAvg. VLO Complexity = 11.9Other U.S. refineries

10

15

n C

ompl

exity

10 6 AvgVale

ro?

Vale

ro?

5Nel

son 10.6 Avg.

Complexity

Why

Ow

n V

Why

Ow

n V

00 100 200 300 400 500 600

CDU Capacity, MBPDSource: Oil and Gas Journal, PIRA, and Valero estimates

8

• Smallest, least complex refineries in lower-left quadrant: total of 75 refineries and 3.3 million barrels per day of CDU capacity

• Valero’s average CDU capacity is 160,000 barrels per day and complexity is 11.9

Valero Has Lowest Cost per BarrelValero Has Lowest Cost per Barrel

$

Cash Operating Expense per Barrel for Independent Refiners1

$6.50

$7.00Independent Refiners

$5.50

$6.00

Vale

ro?

Vale

ro?

$5.00

$

Why

Ow

n V

Why

Ow

n V

$4.00

$4.50

TSO FTO HOC SUN WNR ALJ VLOTSO FTO HOC SUN WNR ALJ VLO

12008 1Q through 3Q refining operating expense excluding depreciation and amortization divided by refinery throughput volumes; data per company filings and Valero estimates

Strong Financial PositionStrong Financial Position

$600 • Investment-grade credit rating

Upgraded a notch by Moody’s in 4Q08

Debt Maturities and Puts (millions)

$200

$400

Upgraded a notch by Moody s in 4Q08S&P and Moody’s re-affirmed rating in January

• Over $5 billion in liquidity at year-end$940 illi i h

$-

$200

2009 2010 2011

$940 million in cash$4.7 billion of credit available, net of letters of credit issuedNo borrowings on credit facilitiesVa

lero

?Va

lero

?

40%

50%

60%

• Manageable debt scheduleIn 2008, paid off $357 million of debt2009 debt maturities of $310 million2010 debt maturities only $30 millionW

hy O

wn

VW

hy O

wn

V

Net Debt-to-Capitalization Ratio (period-end)

10%

20%

30%

40%2010 debt maturities only $30 million• Year-end net debt-to-cap ratio at 26.2%

Includes goodwill write-off in 4Q08Maximum net debt-to-cap ratio per bank

0%2001 2002 2003 2004 2005 2006 2007 2008

agreement is 60%No coverage-type ratios in covenants

• No goodwill on year-end balance sheet10

Continuing to Invest in Growth Projects Continuing to Invest in Growth Projects with Disciplined Capital Programwith Disciplined Capital Programwith Disciplined Capital Programwith Disciplined Capital Program

• 2009 budget estimated at $2.7 billion, down from previous $3.5 billionWill continue to evaluate budget for additional reductionsWill continue to evaluate budget for additional reductions

• Non-strategic workload declining as legacy issues addressed• Strategic capital focused on flagship refineries• Estimate minimum capital of $1.8 billion over next couple of years, including p $ p y , g

regulatory

Millions

Vale

ro?

Vale

ro?

$3,750

$990 $50

$920

$680$1,110

$1,020

$3,200$2,700

Strategic

Tier II

Why

Ow

n V

Why

Ow

n V

$2,695

$550$505 $410

$490

$705 $895

$1,200 $555

$325 $50

$-

$ ,0 0

Turnarounds

Sustaining/ Reliability

11

$585 $290 $430 $635 $505 $

Regulatory2008 2009 Estimate2006 2007

ShareholderShareholder--Focused CompanyFocused Company

$0.60 700Diluted Shares Outstanding (Wtd. Avg.)Millions Annual Dividends per Share

$0.40

$0.50

$

620

660

700

Cut share count by 134 million (21%) since

d 2005

$0.10

$0.20

$0.30

500

540

580

Vale

ro?

Vale

ro?

year-end 2005

$0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008

Why

Ow

n V

Why

Ow

n V

Stock Buybacks Reduced SharecountI 2008 h d 23 illi h

Dividend GrowthAt t k i f $23/ h 2 5% i ld• In 2008, purchased 23 million shares,

reducing share count by 4%• Since early 2006, have reduced share

count by 21%

• At stock price of $23/sh., 2.5% yieldusing last 4 quarters of dividends payments

• In 2008, raised quarterly dividend per

12

• In 2009, plan is to conserve cash share by 25% from $0.12 to $0.15 • In 2009, planning to maintain dividend

Improving CompetitivenessImproving Competitiveness

$1,000Other

millions

$600

$800

Other Operating Expenses

Energy$250

$200

$400

$600 Energy Efficiency

Mechanical$550

Vale

ro?

Vale

ro?

$0

$200

2008 2009 2010 2011

Mechanical Availability (Reliability)

Why

Ow

n V

Why

Ow

n V

• In early 2007, identified gaps of approximately $1 billion of annual operating income

2008 2009 2010 2011

13

Assessed refining system based on 2006 Solomon Survey results and prices• Developed initiatives to close gaps• Reliability a main focus via “Commitment to Excellence Management System”

Improving CompetitivenessImproving Competitiveness

• Improving reliabilityImplementing standards for consistent, world-class operationsImplementing standards for consistent, world class operationsNo cracks in Port Arthur coke drums since repair in spring 2008

• Increasing energy efficiency Implemented strategies at six refineries in 2008 and already achieving savingsachieving savings

• Reducing maintenance costsBetter work scheduling and improvements in reliability

• Improving margins with molecule management Vale

ro?

Vale

ro?

initiativeIdentified and achieving savings through non-capital improvements to optimize profitability of each refinery unit

• Reducing costs via measurement assuranceWhy

Ow

n V

Why

Ow

n V

Reducing costs via measurement assuranceIdentified and achieving savings by mass/volume analysis throughout system

• Adjusting feedstock slateAdd d 11 di t d d i 2007 d 13 i 2008

14

Added 11 new discounted crudes in 2007 and 13 in 2008• Systematically reviewing each department’s costs and how we do

business

Stock Price Same as Early 2005, But Stock Price Same as Early 2005, But Much Stronger Company NowMuch Stronger Company NowMuch Stronger Company NowMuch Stronger Company Now

$80Valero Split-Adjusted Stock Priceper

share

$50$60$70$80

$20$30$40$50

Vale

ro?

Vale

ro?

$0$10$20

Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09Why

Ow

n V

Why

Ow

n V

Then NowCash (millions) $846 $940Additional Available Liquidity (billions) $1.5 $4.7Debt-to-Cap Ratio, net of cash 30.7% 26.2%Average Refinery Throughput Capacity (MBPD) 164 188Total Refining Throughput Capacity (MMBPD) 2.5 3.0 15

Committed to Creating Committed to Creating LongLong--Term Shareholder ValueTerm Shareholder ValueLongLong--Term Shareholder ValueTerm Shareholder Value

• Refining IndustryE t i t b l til d lExpect margins to be volatile and seasonalRefiners showing production disciplineAsset values very cheapy pEconomic recovery will improve demandRefined products still most economic

• ValeroGeographically diverse portfolio of refineriesRefineries are larger more complex and have lowerRefineries are larger, more complex, and have lower cost per barrelExporting diesel/gasoline to a global marketProfitable in 4Q08 and profitable nowBest value in refining!

16

AppendixAppendix

17

Refining PortfolioRefining Portfolio

Benicia, California• 170,000 bpd capacity• 15.0 Nelson complexity

Paulsboro New Jersey

Quebec, Canada• 235,000 bpd capacity• 7.7 Nelson complexity

Wilmington, California• 135,000 bpd capacity• 15.9 Nelson complexity

Paulsboro, New Jersey• 195,000 bpd capacity• 9.4 Nelson complexity

Delaware City, Delaware• 210,000 bpd capacity• 13.2 Nelson complexity

McKee, Texas• 170,000 bpd capacity• 9.4 Nelson complexity

Memphis, Tennessee195 000 b d it

Lima, Ohio• 165,000 bpd capacity• SOLD in 2007 for $1.9

billion

Three Rivers, Texas• 100,000 bpd capacity• 12.4 Nelson complexity

Corpus Christi, Texas• 315,000 bpd capacity

Ardmore, Oklahoma• 90,000 bpd capacity• 12.0 Nelson complexity• Under Strategic Evaluation

• 195,000 bpd capacity• 7.5 Nelson complexity• Under Strategic Evaluation

Valero Marketing Presence

• 19.1 Nelson complexityKrotz Springs, Louisiana• 85,000 bpd capacity• 6.5 Nelson complexity• Sold July 2008 for more

than $500 million

Texas City, Texas• 245,000 bpd capacity• 11.1 Nelson complexity

Houston, Texas Port Arthur, Texas

St. Charles, Louisiana• 250,000 bpd capacity• 15.3 Nelson complexity

• Under Strategic Evaluation

San Nicholas, ArubaCore Refinery

Legend

18

• 145,000 bpd capacity• 15.1 Nelson complexity

• 310,000 bpd capacity• 12.5 Nelson complexity

,• 235,000 bpd capacity• 8.0 Nelson complexity• Under Strategic Evaluation

Note: Capacity shown in terms of crude and feedstock throughputSources: Nelson complexities, Oil & Gas Journal and Valero estimates

Non-Core Refinery Under Strategic Evaluation

Non-Core Refinery – Sold

Prudently Investing in Strategic Prudently Investing in Strategic Growth ProjectsGrowth ProjectsGrowth ProjectsGrowth Projects

Estimated Total Cost1 Start-

Refinery ProjectCost1

$mm Up Description

Port ArthurHydro-

cracker/ $1,700 3Q11New hydrocracker – 50 mbpd estimatedCrude expansion – unlock up to 75

b d i ti iter V

alue

er V

alue

Crude mbpd existing capacity

St. Charles Crude/ Coker $250 1Q10

Crude unit expansion – 45 mbpd estimatedCoker expansion – 10 mbpd estimatedS

hare

hold

eS

hare

hold

e

St. Charles FCC $225 2Q10Convert to conventional designImprove reliability and get 5%+ volume expansion

Hydro New hydrocracker – 50 mbpdo E

nhan

ce S

o E

nhan

ce S

St. Charles Hydro-cracker $1,250 4Q12

New hydrocracker 50 mbpdUpgrades low-value feedstocks mainly into ULSD with 25% volume expansion

1 Total project cost includes non-strategic capital costs and interest and overhead

Stra

tegy

toS

trate

gy to

To maintain financial strength focusing on key projects and adjusting schedule

19

To maintain financial strength, focusing on key projects and adjusting schedule• Delayed St. Charles hydrocracker and Port Arthur hydrocracker, gasifier, and new coker• Reduced scope of St. Charles paraxylene project• Cut other, discretionary projects at many refineries

Safe Harbor StatementSafe Harbor Statement

Statements contained in this presentation that state the Company's or management's expectations or predictions of the future are forward–looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The words "believe," "expect," "should," "estimates," and other similar expressions identify forward–looking statements. It is important to note that actual results could differ materially from those projected in such forward–looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see Valero’s annual reports on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission, and available on Valero’s website at www.valero.com.

20