'Finer Things: Quarterly Capture Tracker Round-Up Plus Our Favorite Crack Spread Chart

Research evidence excerpt

'Finer Things: Quarterly Capture Tracker Round-Up Plus Our Favorite Crack Spread Chart

Industry Update Equity Research

Quarterly Capture Score

Our quarterly Capture Rate Tracker indicates lower capture rate q/q, based on non-RINs adjusted crack

spreads. Even though all Refiners publish indicator margins net of RINs costs, we include RINs cost in

the capture tracker for comparability to NYMEX cracks. RINs costs explain most of the compression

in capture score, but we also note that crude differentials in the Gulf Coast besides WCS have been a

headwind, as ASCI and LLS discounts to Brent have been narrow.

We believe this quarter's capture score understates industry earnings power, as it does not include

multiple optimization drivers, including gasoline blending benefits (RVP waiver) and export

opportunities away from benchmark product prices. Throughout 2Q, large cap refiners and majors

have consistently discussed highly favorable operating conditions, including wide export arbitrage

that in many cases is unprecedented, but hard to track through posted benchmark product prices. We

harken back to SU's analyst day, where the company noted a distillate export from Western Canada to

the Philippines at a $20/bbl premium, but which cannot be tracked in posted prices. Other capture rate

upside drivers include higher jet fuel yield and higher WCS throughput vs. indicator margins in April and

May.

Exhibit 1 - VLO GC Capture Rate vs. Capture Tracker Index

180 140

80 100 Capture Indicator 100 110

0 70

2Q2016 4Q2016 2Q2017 4Q2017 2Q2018 4Q2018 2Q2019 4Q2019 2Q2020 4Q2020 2Q2021 4Q2021 2Q2022 4Q2022 2Q2023 4Q2023 2Q2024 4Q2024 2Q2025 4Q2025 2Q2026e

Capture Indicator VLO GC Margin Capture

Source: Wells Fargo Securities, LLC, company reports, Bloomberg

2 | Equity Research