Welcome to the Valero Energy Corporation Reports 2014 Third Quarter Earnings Results Conference Call. My name is Daniel, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). Please note that this conference is being recorded. I will now turn the call over to Mr. John Locke. Mr. Locke, you may begin.

Thank you, Daniel. Good morning and welcome to Valero Energy Corporation’s third quarter 2014 earnings conference call. With me today are Joe Gorder, our CEO and President; Mike Ciskowski, our Executive Vice President and CFO; Lane Riggs, our Executive Vice President of Refining Operations; Jay Browning, our Executive Vice President and General Counsel; and several other members of Valero’s senior management team. If you have not received the earnings release and would like a copy, you can find one on our website at valero.com. Also, attached to the earnings release are tables that provide additional financial information on our business segments. If you have any questions after reviewing these tables, please feel free to contact our Investor Relations team after the call. Now, I would like to direct your attention to the forward-looking statement disclaimer contained in the press release. In summary, it says that statements in the press release and on this conference call 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 under federal securities laws. There are many factors that could cause actual results to differ from our expectations, including those we’ve described in our filings with the SEC. Now, before we review the quarterly results, I’d like to highlight some of our strategic accomplishments in the last quarter. These actions aligned with our key strategies to reduce feed stock costs by improving access to North American crudes and to grow our logistic investments and Valero Energy Partners LP, our sponsored logistics partnership. In August, we secured shipping rights and the option to purchase a 50% interest in Plain All American Diamond Pipeline. When completed in late 2016, that 440-mile pipeline will connect our Memphis refinery to the crude oil hub at…

Well, thank you, John. And as you may have seen, last week announced that Bill Klesse has chosen to step-down as Chairman of Valero Energy’s Board of Directors at the end of this year. So, on behalf of our Valero team, we just want to thank Bill for all he’s done to make this company successful over his 45-year career. And we really like to wish Marty and Bill, all the best going forward. John?

Thank you, Joe. So, before I turn over to Q&A, I just want to clarify on the 2015 stay-in business capital should be $1.5 billion, I believe I said $1.8 billion. So, okay, Daniel, we have concluded our opening remarks. In a moment, we will open the call to questions. During this segment, we request that callers limit each turn to two questions. The callers may rejoin the queue with additional questions.

Okay, thank you. (Operator Instructions). And our very first question comes from Jeff Dietert from Simmons. Please go ahead. Jeff Dietert – Simmons: Yes. It’s Jeff Dietert with Simmons. Good morning.

Good morning, Jeff. Jeff Dietert – Simmons: So my question has to do with some of your crude feedstock costs and specifically one with Saudi having raised their prices to the U.S. It appears that some of their crudes were not terribly competitive. We saw the crude imports for the total U.S. drop from 1.6 million barrels a day in April to less than 900,000 barrels a day in September while Saudi was increasing prices during that period of time. Since then they’ve had four consecutive months of price reductions. And I was wondering if you could provide some color as to how attractive the Saudi crudes have been in the market through the spring and summer? And whether or not these recent reductions in prices make them more competitive now?

Hi Jeff, this is Gary Simmons. You’re exactly right. I mean the Saudi barrels that gotten to wear, we felt like they were competitive versus all alternatives. In the third quarter our volumes from the total Middle East were down considerably where we’ve historically run. We’re now seeing this they’re making pricing moves to bring their barrels back being competitive in the market. I would say with their recent announcement on their OSP they were competitive or at least within basic sense of marks. Jeff Dietert – Simmons: Okay. And secondly with the Brent pricing being weak and some of the West African prices being soft, have you seen those barrels price themselves back into either of the East Coast market or the Gulf Coast market with some of the softness relative to LLS, we’ve seen this fall?

Yes, Jeff. The place that we pivot first is really our Quebec refinery. And we definitely as Brent got weak, we saw some synergies start buying from West African grades again and backing out some of the grades that we were taking from U.S. Gulf Coast. Jeff Dietert – Simmons: Yes. So both that sounds like increases in imports in a market where we’ve got pretty substantial domestic production growth. Do you think domestic prices have to soften to back those imports back out of the market?

Yes. And you could kind of see that in the markets. The Brent got weak about three or four weeks ago. We started to pivot as others did. And then we’ve had three straight weeks where crude goes towards in the U.S. bill. So it kind of tells you the differential has to come back off to force those barrels back into the market. Jeff Dietert – Simmons: Thanks for your comments.

Our following question comes from Paul Cheng from Barclays. Please go ahead. Paul Cheng – Barclays: Hi guys. Good morning.

Good morning. Paul Cheng – Barclays: I have one request and two questions. The request is that it seems that some of the part in losses may turn out to be an emerging investment team in the sector. I know there’s still a small number, but it would be helpful I think for your shareholders if in your press release somewhere that you put down what is the GP cash flow and your total number of units in the LP and also that the total LP unit. I mean even though that those numbers can be found in your VLP disclosure it’s just helpful there to be in one document. In terms of the question, with the announcement or that from one of your competitors last week in terms of their strategy in drop-down they have substantially as their rate, is there any key or more transparent strategy or data that you can put one in terms of your VLP drop-down pace or the distribution growth for the next several years?

Yes, Paul that’s a fair question. This is Joe. If we look at VLP, since the IPO we’ve stated that we’re going to grow our distributions between 20% and 25% a year. We’re in target to be in the middle to the high-end to that range. We just completed a drop and a distribution increase and we’re working on the next drop. Now, VLP is less than a year old, well we don’t have a debt rating yet, we’ll be in the process of getting that the next year or so. And it’s our intention to be investment grade. Now, when you consider the size and the pace of our drops to VLP, our original plan was to start with the logistics assets that would be more traditional. And that’s when we said that we’ve got the $800 million of EBITDA that is not a specific business unit that we have within Valero, it’s assets that are used to support the rest of the operations. And so we haven’t had P&Ls for them. That being said, that we can go in and we can calculate what the EBITDA would be for those assets based on market rates and that’s what we’ve done. Now, what’s come up here recently is this additional set of cases that would include do you put fuel margins and process units, into the MLP. So, we’re going to take a look at everything and we’re going to act accordingly. Obviously it’s never simple of taking EBITDA, putting the multiple on it and the same that’s what the value is. You got a lot of tax effects that need to be considered. The other thing then is, with the use of proceeds, could they be used, I mean, I expect we’re going to use them to do growth projects or to return the cash to the shareholders depending on which option has the highest returns. One of the questions we ask ourselves is if we do accelerate the drop we’re going to get some of the parts valuation increase in Valero because that’s something that although we’ve executed the MLP, we haven’t seen it yet. Paul Cheng – Barclays: Yes. But at least based on what Tesoro and MPC reaction on the last several weeks that seems like that is started catching on as a new theme?

Yes, we see it too Paul. Paul Cheng – Barclays: Yes. A second question on the $2.8 billion next year budget is that including anything in the methanol projects? And if it is indeed going to go for FID, should we assume it is just an add-on or that you’re going to compensate and adjusting it so that you still could get the $2.8 billion?

Hi Paul, Lane Riggs. That $150 million in the 2015 led to $2.8 billion, and I’ll predict we’re in the Phase 2 development of the project and we’ll go – we’ll have another review in for side view, we’ll then go somewhere in the second quarter of ‘15. Paul Cheng – Barclays: And Lane if you do go ahead should we assume you’re still keep $2.8 billion or that this is incremental? In other words will you adjust your other projects so that you don’t go beyond the $2.8 billion?

It is in the $2.8 billion.

Yes, Paul the $150 million – we have a $150 million as a place folder in that $2.8 million budget. If we didn’t perceive with the methanol plant, we wouldn’t spend that $150 million and we’d be at $265 million. Paul Cheng – Barclays: Okay, got you. Thank you.

Our following question comes from Blake Fernandez from Howard Weil. Please go ahead. Blake Fernandez – Howard Weil: Guys, good morning. Thanks. Congratulations on the rollover in CapEx into ‘15. I guess this is kind of a combination of a higher level question from Paul and maybe a tie on from Jeff as well as with regard to the Saudi pricing. It looks like the lower – the logistics spending is decreasing like 45% of the total down to about 30% of the growth total. And I guess I’m just wondering with the Saudi’s changing their pricing and I guess I’m just wondering is there a chance where some of the infrastructure in North American crude investments that have been made, do we get to a point where some of that isn’t quite as necessary? Do you still have the flexibility to shift back and forth to foreign versus domestic runs in your system?

Yes, Blake. I would tell you I think we’ve been very selective on what we should invest capital around logistics. We still think it makes sense that as you talked about, we haven’t done anything to lose our optionality that we can continue to import the foreign barrels and Saudi makes more sense around those barrels, we haven’t lost any of our optionality to be able to do that.

Yes, Blake, Gary makes a great point here. I mean, what we’re dealing with the markets that are really volatile. And the opportunity today is the opportunity today and it will change tomorrow or the next day. Again, one thing that is certain is if you don’t have the logistics in place to take advantage of the opportunity when it’s there is gone. And so, we feel very good about the projects that we’ve undertaken. I mean, the rate approved projects to move heavy sour crudes in are very good projects for us as are the unloading facilities that we’ve got. Our commitment to pipelines I think are very solid for us going forward. And the fact that you’ve got the pressure on the crude price right now affecting the start is willing us to move barrels back in. At the end of the day it’s going to be good because we’re going to see pressure on all of the barrels as they try to find all-mineral refinery going forward. So, we feel pretty good about what we’ve done and what we’ve got on the place to do going forward. Blake Fernandez – Howard Weil: Okay. Thanks. The second question is on exports. We’ve seen record high utilization levels earlier this year and you mentioned product exports in your press release. For one, can you give us a capacity number of what your current capacity is? And is that kind of one of the main drivers that’s been driving this higher utilization? Because when I look at my modeling it seems like the earnings in 2012 were very comparable with where we’re going to land this year and basically that insinuates it’s not really that much more incentive from an economic standpoint to run, so is it simply a function of additional export capacity?

Yes, what we did in the third quarter is we did 90,000 barrels a day of gasoline exports, that time early we went to Mexico and Latin America. We did 227,000 barrels of straight distillers and 240,000 barrels of diesel when you include the currency. The distilled and exports went to Latin America and Europe. We still have quite a bit of capacity left. On the gasoline side, we can probably give about 255,000 barrels a day, it’s around 400,000 barrels a day this to the next quarter. So, we still have a lot of room to increase our exports. But for us, this is just an optimization that we do every day, Blake. And it’s just the matter of where we can get the best net-net for the barrels. So, when you look today, the domestic diesel market is very strong. And so, some of our diesel exports have slowed down a bit as we send barrels to the best net-net market which today is some of the domestic markets. Blake Fernandez – Howard Weil: Okay. Thanks so much.

Our following question comes from Doug Leggate from Bank of America. Please go ahead. Doug Leggate – Bank of America: Hi, thanks. Good morning everyone. Good morning Joe.

Hello Doug. Doug Leggate – Bank of America: And by the way, Joe congrats on your ascending to the Chairmanship as well. It’s nice to see with all of the titles.

Thank you. Doug Leggate – Bank of America: My, you’ve see what Tesoro has done here recently by talking about a full-service MLP. And obviously a lot of – there’s a lot of different strategies seem to be going on within the space I guess Phillips is pursuing a similar kind of thing. I guess I’m curious as to looking outside of the refining backyard, so to speak, how do you view your MLP vehicle strategically in terms of maybe moving beyond just what we would associate as a normal course of business in the refining?

I’ll tell you Doug. We do look at it as an entity that’s there to support the core business operations of Valero Energy. I mean, we’ve set it up with that in tens, we set it up as a traditional logistics MLP that was going to primarily focus on transportation and terminalling assets. Obviously the market’s changing here a little bit, people are making decisions to quit, a lot of their party assets in some cases in support some of the margin, the fuels margin in the assets also. I mean, that’s something that we’ll take a look at going forward. But our view of it is a very attractive low cost of capital way to support Valero’s core business. Doug Leggate – Bank of America: Okay. I appreciate. I’m going to just I’ll take some follow-up offline because there are multiple costs seeking down with one but. I guess my follow-up is really, could we get your latest thinking on the fuels market, generally the gasoline market in particular. You still have little bit refinery kind of more fold recycled then might found a buyer. And obviously there is a whole crude context has come down. So I’m just kind of curious as to, what’s your prognosis for the Atlantic Basin gasoline market and should we expect the kind of resilience in parts we’ve seen in these last couple of years, of these known supply risk emerging on the margins? And I’ll leave it there. Thanks.

Thanks Joe.

Yes, I guess two separate questions, I don’t know, Lane, do you want to address the root one first.

Go ahead on the gasoline.

Yes. Overall, I think we see gasoline demand in the Atlantic Basin fairly flat. And so, a lot of the question on the Atlantic Basin is really going to be what happens in Western Europe, and do you have rationalization occur in Western Europe, and that would probably be the big driver on the overall supply-demand balances in the Atlantic Basin moving forward. Doug Leggate – Bank of America: Would that assume, you don’t have an acute exports on higher I’m guessing?

Yes. Doug Leggate – Bank of America: Okay. And on the pipe of diesel, do you see, in part of the Gulf Coast markets, particularly?

Hi Doug, look, I think that project is going to be a bit challenged. And I mean, if they’re producing gasoline, it’s going to have to go somewhere so we’ll probably see at the market. But I would stack up the competitive position of our Gulf Coast refineries against any refinery like that. Doug Leggate – Bank of America: Okay. All right, you don’t have the sum. Thanks a lot Joe. I appreciate your time.

Thanks.

Our following question comes from Brad Heffer from RBC Capital Markets. Please go ahead. Brad Heffer – RBC Capital Markets: Good morning, everyone.

Good morning. Brad Heffer – RBC Capital Markets: So, going back, sort of to an earlier question, has there been any change as to the demand that you guys are seeing in export markets currently?

No, I would tell you from the third quarter to the fourth quarter what I would expect is that our exports will probably be up a little bit, most of that will be gasoline exports will increase into the fourth quarter, just to the exports probably fairly flat which is difficult for us. Gasoline, typically the exports are little stronger in the fourth quarter and the first quarter and follow-up when we hear the December driving season here in the U.S. Brad Heffer – RBC Capital Markets: Okay, got you. And then, you had a competitor last week talking about sort of a tight MIA market on the Gulf Coast. I was wondering if you guys have seen that and having difficulty to getting sort of the heavier crudes in the door?

Our MIA volumes for the third quarter were right at our contract levels and up about 20,000 barrels a day what we had in the second quarter. Brad Heffer – RBC Capital Markets: Okay, thank you.

Our following question comes from Ryan Todd from Deutsche Bank. Please go ahead. Ryan Todd – Deutsche Bank: Great. Thanks good morning gentlemen. A couple of questions, maybe one, if you could talk a little bit about capture rate across very strong capture rate we saw across the portfolio this quarter, and I realize the following crude prices probably increase the profitability at the bottom of the barrel. But outside of that, can you talk about maybe any other drivers of strong profitability and how sustainable maybe some of those might be on go-forward quarters?

Hi Ryan, this is Ashley Smith. Yes, we performed well we had a limited turnaround activity in the quarter, so other quarters might not be as comparable when we had more turnaround activity. But a lot of the capture rate is partially due to our investments and hydrocrackers are running well. In fact, St. Charles hydrocracker is running in a – consistingly running in excessive capacity. In addition, you saw some typical market stuff that’s not in the indicator such as DGO as well we achieved in the quarter and that paid us well too. Ryan Todd – Deutsche Bank: Okay. So, probably some outage in non-recurring things but maybe at least underlying there some recurring things from your past investments, I guess it’s in there?

That is – that’s basically, you’re always going to have some movement in items that are not in the indicator. But we also are seeing benefits from our previous investments particularly in the hydrocrackers. Ryan Todd – Deutsche Bank: Okay, thanks. And then maybe one more on and I apologize that this is, I missed it over the call. On crude flows from Corpus feeds in Canada, I know you guys have moved some crude that’s gone around there to the East Coast of Canada refining system. I mean, how much have you been moving and then how do you expect that they would change in 2015?

Yes, so we moved 124,000 barrels a day of Gulf Coast crude to Quebec, that didn’t all move through Corpus. Our project at Corpus will be online and probably functional in quarter terms, for the first quarter. So, we’ll start using our corporate assets in the first quarter. The volume we move was largely over third party logistics assets that we move to Quebec. Ryan Todd – Deutsche Bank: Okay. And if you just look at, I mean, when you look at the 2015 dynamics both on the line 9B, eventual startup and capacity. Is that a number that you think you can grow substantially in 2015 or are there some limits there?

Well, when line 9 starts up, we will run less barrels from the U.S. Gulf Coast than what we ran in the third quarter and we’ll supply more Quebec’s flowing through line 9. Ryan Todd – Deutsche Bank: Okay. All right, I’ll leave it there. Thank you.

Our following question comes from Roger Read from Wells Fargo. Please go ahead. Roger Read – Wells Fargo: Hi, good morning.

Hello Roger. Roger Read – Wells Fargo: Just to pick up a little bit more on sort of the CapEx for ‘15, and maybe for ‘16 with the crude topping projects in I guess Corpus and Houston. And then maybe what the decision timeframe is on that? And I’m thinking also all right, crude softened up a little bit, and they see some slowdown eventually in U.S. production if that has any impact on your thinking? And then whether or not the recent developments on the crude exports side, the DOE or EIA’s report on gasoline prices being driven by brand not by domestic prices is sort of shot across the bow for being in favor of exports – crude exports?

Hi Roger, this is Lane. To answer your questions about crude units, there are crudes and they are under construction, we’re building on them. We’ll right now, we’re forecasting will be complete, mechanically complete into next year for oil and roughly at the beginning of the first quarter of ‘16, somewhere in that timeframe. In terms of the project basis economics, we assume that LLS is parity of brand and that’s not what we recorded for those are still good projects. They aggregate around 30% in that pricing environment. So we still feel it’s a really good project. Ultimately not backing out our intermediate purchases, we’re beginning, we’re long converging capacity, sort of the day, we have to get to the market to buy intermediate in West Africa and then in the North Sea. And this sort of changes our feedstock the way we’re going to feed our system. And what was the second question?

Yes, Roger, could you restate your second question. Roger Read – Wells Fargo: Yes, it was just more along the lines of I was pointing out with the EIA having come out with that report on gasoline, whether that had any impact on these projects overall. I mean, originally these were going to be online in ‘15, so I was just trying to figure out if you were maybe the question is why are they now ‘16 instead of ‘15, or just delayed on construction or was there – you’re looking at it internally and showing well, if things change maybe we don’t want to go forward?

Now, the projects were always sort of in the fourth quarter ‘15, first quarter ‘16 and it’s about mechanical completions versus oil and bay. There has not been any delay with them or not, it’s about these projects and we’re going forward with them. Because we’re not really about trying to produce more gasoline and more diesel this is about trying to feed our system more economically right with domestic role, which were imported in release. Roger Read – Wells Fargo: Okay. And then, as you look at the fourth quarter here relative to the third quarter in terms of what we’ve seen in crude differentials. How is it shaking up for you, I mean, I know we can look at the screens and make our guesses but are you seeing anything significantly different in terms of the Gulf Coast, let’s call it the light-heavies here?

No, not anything too significant. Overall when you look at the LLS market in Mars, Mars continues to price competitive with LLS. And I think the heavies continue to price competitively with Mars. As you move west in the Gulf, you start to see a bigger advantage to run some of the light sweep, but that’s not too different from what we saw in the third quarter. Roger Read – Wells Fargo: Okay, thank you.

Our following question comes from Phil Gresh from JPMorgan. Please go ahead. Phil Gresh – JPMorgan: Hi, good morning.

Good morning.

Good morning, Phil. Phil Gresh – JPMorgan: Yes, a couple of questions. First, first one is just on the cash flow for the quarter and just the – what’s the working capital contribution might have been. I know there is a few sizable negatives in the first quarter for working capital. I wasn’t sure if there was a reversal of the big positive over the fourth quarter of last year, just kind of where we stand on working capital in general and how to think about that in the fourth quarter?

Okay. Our change in cash for the quarter was an increase of $700 million. And of that amount about $300 million of that was attributable to working capital so we had an increase in our payables receivable in that. So that’s – I mean, that’s going to be a timing issue most likely. Phil Gresh – JPMorgan: And for the fourth quarter, any thoughts on whether there is additional contribution?

Towards the end of the year, as we manage around the life of inventory levels there, things so that we could have a reduction in our working capital. Phil Gresh – JPMorgan: Okay. And then, just with respect to the cash flow generation profile in general obviously, very strong and your stock is cheaper around free cash flow yield than most refiners. So I’m just wondering how you’re thinking about kind of impacting that valuation rather, you’ve talked – obviously talked about the MLP structure as an opportunity but whether it’s increasing buybacks or meaningful step-up in the dividend or something else you can do to change the game? I’m just curious how you’re thinking about things?

Phil, that’s a good question. I mean, when we look at the use of cash, we’ve got some very good projects. So we’re going to continue with the projects that we have underway these very strong returns and they make us much more efficient. And we realize that there is a balance between investments for growth in returning cash to shareholders. Now, I think our actions in the third quarter and through this year really reflect its realization. And we’ve had two dividend increases and we’ve had increased share repurchases while continuing with the growth projects that improve our overall business. And to the extent that we have free cash flow going forward and to the extent that there are, tremendous capital projects to use the cash for. I think you can see us continue on this path. And we’ll be comfortable with returning it to shareholders. Phil Gresh – JPMorgan: Okay, thanks. I’ll turn it on.

Our following question comes from Mohit Bhardwaj from Citigroup. Please go ahead. Mohit Bhardwaj – Citigroup: Thanks for taking my question. Joe, if you could just tackle this follow-up on your comments about the landing mason. If you look at where the crude prices are right now and it seems like there is excess crude supply in the Atlantic Basin. What do you think it does for the refining business in the U.S. and how do you think production moves or these supply moves going forward?

Okay, I’ll let Gary Simmons give you a shot at that.

Very difficult to state. I think the key question there, is what is the marginal cost of production in North America versus other regions in the globe, and of course we’re not an upstream company. So, I don’t really know how all that shakes out. I think the assumption you’re kind of making with the question is that as crude price falls in the North American production falls with, the flat price falls. And that may happen, but I really don’t know, I’m not sure to be able to comment on that. Mohit Bhardwaj – Citigroup: Right. So, if you look at third quarter versus fourth quarter, one other thing that you said for the third quarter was that you were utilizing the front of the refining, a lot more is sort of little bit more in utilizing the downstream, it’s little less and where the VGO prices and availability of light speed crude. Or do you think that’s still the case in the fourth quarter?

Lane.

I’ll try to take a shot at this, this is Lane. Our signals in the third quarter were obviously max on everything. And to the extent that we’re signaled around high crude rate half way to the 1,000 crude margins. And we had really good converging unit margins because VGO prices were inexpensive. We still see those signals going forward in the fourth quarter, they’re not as strong as they were in the third quarter but they’re still have signals put on our system relatively bold. Mohit Bhardwaj – Citigroup: Right. And one final one from me, just on the diamond pipeline. So, just to be clear, you guys have not exercised the 50% option on the pipelines yet? And if you could also follow-up on if you look at some of your peers were talking about doing a study on cap line and you were the main consumer as far as Memphis refinery is concerned on cap line. Does diamond pipeline option also allow you to sort of if there is a reversible cap line to participate in that?

Rich, do you want to?

Yes, I’ll take a crack at that. So, the diamond pipeline is progressing. It is connected it will be connected to the cap line. So, today, we’re connected – Memphis is connected to the cap line pipeline. So we have dual supply source into the Memphis refinery potentially and be able to take advantage of a reversal. I think they’re just undertaking a study as we speak, so maybe some time before that actually becomes reality.

As far as the option on the diamond pipeline.

So, yes, I’m sorry, I missed that first part. So, on the option, we have not exercised the option. We have that option through early January of ‘16 to make that decision. Mohit Bhardwaj – Citigroup: All right. Thank you for taking my questions.

Sure Mohit.

Our following question comes from Evan Calio from Morgan Stanley. Please go ahead. Evan Calio – Morgan Stanley: Hi, good afternoon guys.

Good morning, Evan. Evan Calio – Morgan Stanley: Joe, can you walk us through the decision to reduce 2015 CapEx sequentially from ‘14 and is that a top-down decision to raise distributable cash or a function of higher hurdle rates or the project queue, particularly in relation to midstream?

No, is it related to the midstream? Evan Calio – Morgan Stanley: It is just in total, you ditched down sequentially, is that a desire to increase distributable cash flow or a function of how those each projects shook out in the review process?

No, it’s the latter. As we – we started with a list of projects. And if you look at it from the refining perspective, Lane has the process that he goes through tremendous rigorous review. And I think the fact that he’s got this rigorous review shows up in the timing on the methanol project, right. It’s a big project, and we want to be sure that we’ve got the capital right. So he’s going through this in a very methodical way, just to be sure on target. We put together a list of prospective projects and we do this every year. And what we’re doing now is we, our list of projects that we talk about are those we scrubbed at the point that we feel that there is a reasonable probability that we’re going to do them. So, the projects we feel we could execute next year from either the refining side or the logistic side, as we’ve included in the budget, we feel we’re fairly committed to that 2.65 million numbers, $150 million from ethanol is kind of let’s see what we get. But it is a kind of bottom-up, what projects do we have to take a look at and then we look at it from the top-down and say these are the ones that we want to undertake based on the return thresholds. There is though, a general view among this management team that we’d like to try to return more cash to shareholders. And so, having a capital and having our capital at this level is something we’re very comfortable with. We believe it creates that proper value between, proper balance between continued investment to grow and optimize the business and rewarding the shareholder for his loyalty to us. Evan Calio – Morgan Stanley: And just for clarification, I think in the opening, you stated that midstream is 50% of that growth CapEx, it releases 30% which would be sequentially down. Is it, which of the two is midstream is a function of growth?

No, I think if you look at ‘14 versus ‘15, we’ve got significant investment for example in the rail carts in 2014. That falls off. We have it intentionally tried to reduce the investments that we’re making in the midstream side of the business. Okay, what we’ve got is probably timing issues here, developing the projects in the form where we’re willing to put them in to the capital budget, that’s all we’re dealing with. Evan Calio – Morgan Stanley: Okay. So, mid – plus $390 million I guess its $390 million I presume if it’s that 30% figure. And then, should we, is that right?

Hi Evan, this is Ashley. Yes, you’re correct. So, we’re going from ‘14, it was over 50% of our capital with the logistics and it’s because of rail power is falling off, it’s going to be next year, little over 30%. And you’re right, it’s right around $400 million in logistics. Evan Calio – Morgan Stanley: Great. So, the MLP, I believe the EBITDA exists be around $70 million-ish kind of estimate, is that reasonable?

It certainly keeps growing. Evan Calio – Morgan Stanley: Right, great. All right, good luck. I look forward to your analysis of larger scope of droppable assets and good results guys.

Thanks a lot.

Thanks Evan.

Our following question comes from Ed Westlake from Credit Suisse. Please go ahead. Ed Westlake – Credit Suisse: Hi, pretty soon we’re just going to call this logistics conference calls as opposed to refining conference calls.

We did notice that Ed.

If they’re truly higher, we’ll do it. Ed Westlake – Credit Suisse: Yes. I will be most pulled arbitrage is pretty obvious. But, so let’s carry on that lane. So, diamond pipe, any sort of color on the EBITDA that that might contribute if you guys work with that plan or overall investment level?

Well, I think we’ve talked about the cost being approximately $900 million, and when we look at a proper most pulling around 10 times that would give you $90 million and 50% of that would kind of back you into $45 million of EBITDA. Ed Westlake – Credit Suisse: Great. And then, another strategic, I mean, obviously I don’t know, you must have seen the EPG Oil-Tanking Acquisition which was somewhat elevated multiple. And obviously assuming that there was going to be a lot of export drugs to obviously drive throughputs and drive that multiple down. So, I look at your logistics and your refining system in Texas, I look at what Phillip 66 has done at Vermont and the Bakken pipe project as associated with that. I look at the Permian and the Eagle Ford and still growing, and I think there has to be something to be done. So, how, am I off in terms of the landscape or while that, competitive barriers for you being able to compete as effectively?

I mean, there is competitive barriers to everything right, but there is no reason that we can’t compete effectively with this. And as I mentioned earlier, we talked about the capital. We’ve included in the capital budget project we’re highly confident we’re going to do. The one exception is that methanol plant, I’m not saying we will or won’t do it we’re just still in the process of looking at it. But we’ve got a lot of logistics projects right now that Rich Lashway and his team are in the process of developing. They’re not far enough well to include in the capital budget but they would be logistics type path that would use to support the existing refining portfolio. And there’s some of them that look like they are very good projects. Ed Westlake – Credit Suisse: Okay. And then, I should ask a refining question. The turnarounds obviously were pretty high as you connected up a lot of the hydrocrakers and did lot of reliability work in ‘12 and ‘13, and obviously still in the second quarter in off seeds. Easy to see, how good your throughputs were in the third quarter. As you look out from here, I mean, do you feel that you have a more reliable refining system or is that still more work that needs to be done to get the reliability to where you need it to be? And maybe a comment on general turnaround schedules into next year?

Yes, this is Lane. So, our last really big liability projects we did and we’re looking at systems that in the quarter and that were replacing the reactors. We went and now we’re in the process of starting up the Meraux hydrocracker which should begin, sort of reconfigure in that refiner. We don’t really have anything quite like that going forward in our capital plan. It’s sort of, we’re going to be in premium, doesn’t really impact our throughputs per say. So, really from here going forward, we just have our round phase, our regimen of standard turnaround execution themselves. Ed Westlake – Credit Suisse: Yes, that was all things equal we should expect that sort of overall utilization next year and perhaps a year after than the last three year run-rate?

Yes, and we always, I mean, our number one focus on everything we do is to try, with first is safety. But right behind that is really liability. And we do never squeeze for reliability stand, is actually slowing. And we’re pretty confident that we have spent the right money on the right things to maintain a higher liability rate in our system. Ed Westlake – Credit Suisse: Very clear, thanks so much.

Our next question comes from Sam Margolin from Cowen & Company. Please go ahead. Sam Margolin – Cowen & Company: Hi, good morning everybody.

Hi Sam. Sam Margolin – Cowen & Company: Lots have been covered, I guess, I’ll stick to ethanol if refining questions are I say we do. So, the business has responded really well to lower corn prices obviously results have been getting better and better. Just strategically, do you think you can, it can tolerate any kind of stabilizing business component, a tolling agreement or something like that that might make it eligible for a different structure or is this just normal volatility in the industry with a really good corn crop this year in your mind?

Martin, you want to speak to the market aspect of this.

Sure, Sam, this is Martin Parish. On the market aspect, we like where we’re positioned. Production has been high as you can see inventories have only built like a million barrels in total for the year. So, we feel really good, we’re positioned exports are high. We think margins going forward are going to be good, we like the business. Now, as far as the totaling type deal, I mean, Sam, what do you think in there, is this a question about doing what to monetize the business or? Sam Margolin – Cowen & Company: Yes, I suppose, I mean, it’s been a pretty steady stream of better on better results in the segment until, you mentioned your similar parts earlier, I was just wondering if this sectors into it at all, I know that if maybe you see earnings getting more reliable or visible in the segment?

We like the delay at these levels forever. But I think 2012 it was, it would remind us there can be a lot of volatility in this business too. And we’ve looked at this the ethanol plant portfolio and if you look at costs, there just aren’t a whole bunch of them first of all. And it tends to trade at the same multiples as the refining assets trade at. So, there is really not a big significant incentive for whether monetization through try to create additional value. At the same time, I would say that we’re very pleased with the operation of the business. Martin has done a fine job leading it he’s got a very settled team. And the cash flow is being produced by these assets is tremendous. And we feel like having it as part of our core business. And we do believe long-term that ethanol is going to be fundamentally part of the fuel mix instead of having this businesses part of our portfolio makes sense. Sam Margolin – Cowen & Company: Okay. And then, just touching on that as a follow-up and the RFS seemed to be a little bit behind schedule on an update here. It seems like your thesis is quite out based on refining margins, that rings were kind of being pass through. Is that, do you see that as giving momentum into maybe mandate reduction or any kind of movement at all if you can get any update that would be great?

I don’t know if we have lot of insight here. I think we feel like it’s going to be after the elections here before we get the new RBO. And it’s so late in the year at this stage that we don’t think it will be potentially different from where we were last year. Sam Margolin – Cowen & Company: Okay, great.

It is pretty interesting that we’re here in November we don’t know what the 2014 obligation number is yet. Sam Margolin – Cowen & Company: Interesting is one word for it, yes, I guess.

Thank you, Pal. Sam Margolin – Cowen & Company: Okay. Well, thanks a lot guys. Have a good one.

Okay, you too.

Our following question comes from Paul Sankey from Wolfe Research. Please go ahead. Paul Sankey – Wolfe Research: Hi, good morning everyone.

Hi, good morning Paul. Paul Sankey – Wolfe Research: You’ve covered a lot of ground here with getting to the point of the ethanol MLP. I wanted to ask you a follow-up on that one. Could we just sort of be able to gather a bit here Joe, what concerns I mean, I think we were hoping for quite a significant debt down in CapEx late this year? And what I’m listening to is that you’re competing in a mature market, but you’re still spending on these numbers about doubled your maintenance or stay-in business CapEx, would be remained at being obviously growth CapEx? Can’t we get to a place where you are much more aggressive about cash return to shareholders as the kind of predominant aim? I heard good stuff about you potentially not doing any methanol project but at the same time there seems to be a potential for logistics and to step up, and I would say, to me, this is a CapEx number which is kind of flat next year with this year whereas we were hoping for something that is quite a bit lower? Thanks.

Okay, Paul, I know this has been your perspective. We look at the capital, okay. We got $1.4 billion or $1.5 billion that we spend on the assets to maintain them the way we want to maintain them. We’ve got the crude unit project which have 25% plus rates of return, and they’re not putting anymore juice in the market per say. They’re optimization projects. We’ve got the opportunity to drop at higher multiples logistics assets. We’re going to continue to invest in those. If you extract the methanol plant $150 million our place holder from the $2.8 billion or $2.65 billion that is well below the $3 billion that we forecasted this year. And we don’t arbitrarily select projects to undertake to outlook if the alternative use for the cash. And so, if we’re deciding to do a capital project, I think we’re very comfortable making our day in sports in sharing what the returns are going to look like on this and why it’s a better alternative to us and repurchasing shares for example. So, I do think that this management team has reduced the capital spend, I think if we look at it going forward with the rigor we have in the process and the thresholds we’re setting for acceptance of the projects, we’re going to see this continue to be at this level. It may continue to decline. But I don’t want to not do projects that improve the operation of the business and have good returns when they are available to us. Paul Sankey – Wolfe Research: Yes, then I guess the plan is really what you’re saying is you have to see European refineries shut down, it will also make room for some of the stuff. And thus, it’s the concern we have there is too much capital going into the business overall that’s kind of dependent on the competitive environment moving into favor?

Okay.

Paul, keep in mind, our projects are designed principally to reduce feedstock cost. And if we have cheaper crude, we’re going to shut down that’s going to force excess capacity and you have to shut down, so we will become more competitive. Paul Sankey – Wolfe Research: Great. And just my final part of this is, what do you think a competitive return to shareholders is, you’ve got a couple of percent yield. Can you just talk a little bit more about that Joe and I’ll leave it there? Thanks.

I’m sorry Paul, real quick you’re talking about is VLP or are you talking about Valero Energy? Paul Sankey – Wolfe Research: Well, just yes, for example if I own a Valero share, how do you think, what do you think of this being a good return to the shareholder in terms of you saying that you respect full of cash return to shareholders?

From a cash perspective or just total? Paul Sankey – Wolfe Research: Yes, total side. I mean, people obviously prefer regular dividend but I understand that they look at the business makes sense, a tough commitment to discuss?

Okay. And I think what we would say is we have a cost of capital, we got a cost of capital there which We haven’t set a target per say, but 10% range, 12% range and it’s certainly going to be the dividend, the share repurchase aspect of it. But we recognize that we’ve got a need to exceed counts of capital on our projects in our business. Paul Sankey – Wolfe Research: Understood. Thank you very much, Joe.

Last question comes from Allen Good from Morningstar. Please go ahead. Allen Good – Morningstar: Good morning, don’t worry, I’ll be brief, it’s getting here late. Suncor CEO made some comments last week about shipping medium heavy to Europe and down the U.S. Atlantic Coast and even to a Gulf Coast. Do you think there is a viable alternative long-term to get greater, heavy volumes to the Gulf Coast and could that even be a potentially a source of opportunity for Pembroke at some point?

Yes. So, of course for us, I think we feel like there is, better options to get Canadian heavy to the U.S. Gulf Coast and taking it to the East Coast and around. But absence of any of those opportunities moving forward, we definitely see it’s an option to get additional heavy side to the Gulf. And we also see that there is an opportunity to move the Canadian barrels to Pembroke as well. Allen Good – Morningstar: Great, thanks. And then, could you just give us an update on the projects you have either to weigh or sort of on a planned stages to increase competitiveness of California and get some discount crude out there and just your latest thoughts on your assets out there as well?

Allen, this is Lane. That would also we are still working on the Venetian rail project. Our comments her are, we’re working on those, answering all the questions and we sort of expect that to be finished in December. We think permits would be issued in the first quarter. That’s really the – in terms of the strategic capital that we have spending on the West Coast, that’s pretty much it. Everything else would be very careful in our, spend on the West Coast. Because we have obviously great opportunities in our Gulf Coast and our Mid-Continent market on North Eastern capital. So, we’re very careful, we run a very tight shift out there and that’s sort of how we’re managing the West Coast.

And then, from a strategic perspective, we think it’s great to have good assets with strong management teams out there that provide us the option to take advantage of the strong market environment we have from time to time out there. Allen Good – Morningstar: Great. Thanks I appreciate it.

Okay. We have no further questions at this time, yes sorry.

Well, that’s okay. I was just going to say, we appreciate everyone calling in and listening to the call today. If you have additional questions or didn’t get a chance to ask your question, please contact our Investor Relations department. Thank you.

Okay. Thank you to all speakers and thank you ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.