Valero 2015 Annual Report Download - page 50

Table of Contents
The $4.2 billion of cash provided by our operations in 2014, along with $603 million from available cash on hand, was used mainly to:
• fund $2.8 billion of capital investments, which included capital expenditures and deferred turnaround and catalyst costs;
• make debt and capital lease obligations repayments of $204 million, of which $200 million related to our 4.75 percent senior
notes, and $4 million related to capital lease obligations;
• purchase common stock for treasury of $1.3 billion; and
• pay common stock dividends of $554 million.
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We define capital investments as capital expenditures for additions to and improvements of our refining and ethanol segment assets
(including turnaround and catalyst costs) and investments in joint ventures.
Our operations, especially those of our refining segment, are highly capital intensive. Each of our refineries comprises a large base of
property assets, consisting of a series of interconnected, highly integrated and interdependent crude oil processing facilities and
supporting logistical infrastructure (Units), and these Units are improved continuously. The cost of improvements, which consist of the
addition of new Units and betterments of existing Units, can be significant. We have historically acquired our refineries at amounts
significantly below their replacement costs, whereas our improvements are made at full replacement value. As such, the costs for
improving our refinery assets increase over time and are significant in relation to the amounts we paid to acquire our refineries. We plan
for these improvements by developing a multi-year capital program that is updated and revised based on changing internal and external
factors.
We make improvements to our refineries in order to maintain and enhance their operating reliability, to meet environmental obligations
with respect to reducing emissions and removing prohibited elements from the products we produce, or to enhance their profitability.
Reliability and environmental improvements generally do not increase the throughput capacities of our refineries. Improvements that
enhance refinery profitability may increase throughput capacity, but many of these improvements allow our refineries to process
different types of crude oil and to refine crude oil into products with higher market values. Therefore, many of our improvements do
not increase throughput capacity significantly.
We hold investments in joint ventures and we invest in these joint ventures or enter into new joint venture arrangements to enhance our
operations. In December 2015, we exercised our option to purchase a 50 percent interest in Diamond Pipeline LLC (Diamond Pipeline),
which was formed by Plains Pipeline, L.P. (Plains) to construct and operate a 440-mile, 20-inch crude oil pipeline expected to provide
capacity of up to 200,000 BPD of domestic sweet crude oil from the Plains Cushing, Oklahoma terminal to our Memphis Refinery, with
the ability to connect into the Capline Pipeline. The pipeline is expected to be completed in 2017 for an estimated $925 million,
pending receipt of necessary regulatory approvals. We contributed $136 million upon exercise of our option and expect to invest an
additional $170 million in 2016.
For 2016, we expect to incur approximately $2.6 billion for capital investments, including capital expenditures, deferred turnaround
and catalyst costs, and joint venture investments. This consists of approximately $1.6 billion for stay-in-business capital and $1.0 billion
for growth strategies, including our continued investment in Diamond Pipeline. This capital investment estimate excludes potential
strategic acquisitions. We continuously evaluate our capital budget and make changes as conditions warrant.
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