Integrateds, Refining, and Midstream: Long-term RD value supported by supply discipline & RVO coalition political policy

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Integrateds, Refining, and Midstream: Long-term RD value supported by supply discipline & RVO coalition political policy

in tight by sustaining 2026 undersupply, in our view. naomi.marfatia@bofa.com

Terminal Value aided by US coalition for biofuels growth

The lack of hard demand visibility beyond the few years of finalized RVOs has led to

highly volatile and procyclical valuation multiples for RD equity value (for the Glossary

Darling/Valero, Diamond Green Diesel JV implied value in particular, which we think is BBD: biomass-based diesel

BD: biodiesel

representative of peer refiner RD segments). Going forward, we believe investors can CARB: California air resources board

ascribe stable terminal value for RD businesses, at a significant premium vs petroleum CARBOB: California gasoline

refining, on account of the political and electoral interests that have driven biofuels CFR/CFP/CFS: clean fuel regulations / clean

fuel program / clean fuel standardgrowth since the creation of the RFS ~20 years ago. Farmers and agribusinesses are (essentially the same as LCFS)

beneficiaries of secularly growing biofuel capacity via oilseed crushing – and are also CI: carbon intensity

located in key swing states. Once mostly opposed to RVO growth (in part due to RINs D4: RIN code for BBD

compliance cost), essentially all public petroleum refiners benefit from high RINs prices DGD: Diamond Green Diesel

EPA: Environmental Protection Agency

via RD segments built largely after 2020. Thus, different industries in the biofuels Esp: especially

complex which can influence EPA policy are more aligned than ever, for reasons mostly Est: estimate/estimated

irrelevant to partisan views on decarbonization. Investors we speak to are often FOG: fats, oils, greases