VALERO ENERGY CORP/TXVLO
VALERO ENERGY CORP/TX Fair Value Disclosure
19. FAIR VALUE MEASUREMENTS
General
GAAP requires or permits certain assets and liabilities to be measured at fair value on a recurring or nonrecurring basis in our balance sheets, and those assets and liabilities are presented below under “Recurring Fair Value Measurements” and “Nonrecurring Fair Value Measurements.” Assets and liabilities measured at fair value on a recurring basis, such as derivative financial instruments, are measured at fair value at the end of each reporting period. Assets and liabilities measured at fair value on a nonrecurring basis, such as the impairment of property, plant and equipment, are measured at fair value in particular circumstances.
GAAP also requires the disclosure of the fair values of financial instruments when an option to elect fair value accounting has been provided, but such election has not been made. A debt obligation is an example of such a financial instrument. The disclosure of the fair values of financial instruments not recognized at fair value in our balance sheets is presented below under “Financial Instruments.”
GAAP provides a framework for measuring fair value and establishes a three-level fair value hierarchy that prioritizes inputs to valuation techniques based on the degree to which objective prices in external active markets are available to measure fair value. The following is a description of each of the levels of the fair value hierarchy.
•Level 1 – Observable inputs, such as unadjusted quoted prices in active markets for identical assets or liabilities.
•Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•Level 3 – Unobservable inputs for the asset or liability. Unobservable inputs reflect our own assumptions about what market participants would use to price the asset or liability. The inputs are developed based on the best information available in the circumstances, which might include
occasional market quotes or sales of similar instruments or our own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant judgment.
Recurring Fair Value Measurements
The following tables present information (in millions) about our assets and liabilities recognized at their fair values in our balance sheets categorized according to the fair value hierarchy of the inputs utilized by us to determine the fair values as of December 31, 2025 and 2024.
We have elected to offset the fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty, including any related cash collateral assets or obligations as shown below; however, fair value amounts by hierarchy level are presented in the following tables on a gross basis. We have no derivative contracts that are subject to master netting arrangements that are reflected gross in our balance sheets.
| December 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Gross Fair Value | Effect of Counter- party Netting | Effect of Cash Collateral Netting | Net Carrying Value on Balance Sheet | Cash Collateral Paid or Received Not Offset | |||||||||||||||||||||||||||||||||||||||||||
| Fair Value Hierarchy | |||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
Commodity derivative contracts | $ | 490 | $ | — | $ | — | $ | 490 | $ | (448) | $ | (7) | $ | 35 | $ | — | |||||||||||||||||||||||||||||||
Physical purchase contracts | — | 1 | — | 1 | n/a | n/a | 1 | n/a | |||||||||||||||||||||||||||||||||||||||
Clean fuel production credits | — | — | 55 | 55 | n/a | n/a | 55 | n/a | |||||||||||||||||||||||||||||||||||||||
Investments of certain benefit plans | 92 | — | 4 | 96 | n/a | n/a | 96 | n/a | |||||||||||||||||||||||||||||||||||||||
Investments in AFS debt securities | 1 | 26 | — | 27 | n/a | n/a | 27 | n/a | |||||||||||||||||||||||||||||||||||||||
Total | $ | 583 | $ | 27 | $ | 59 | $ | 669 | $ | (448) | $ | (7) | $ | 214 | |||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
Commodity derivative contracts | $ | 453 | $ | — | $ | — | $ | 453 | $ | (448) | $ | (5) | $ | — | $ | (39) | |||||||||||||||||||||||||||||||
Physical purchase contracts | — | 4 | — | 4 | n/a | n/a | 4 | n/a | |||||||||||||||||||||||||||||||||||||||
Blending program obligations | — | 85 | — | 85 | n/a | n/a | 85 | n/a | |||||||||||||||||||||||||||||||||||||||
Foreign currency contracts | 2 | — | — | 2 | n/a | n/a | 2 | n/a | |||||||||||||||||||||||||||||||||||||||
Total | $ | 455 | $ | 89 | $ | — | $ | 544 | $ | (448) | $ | (5) | $ | 91 | |||||||||||||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Gross Fair Value | Effect of Counter- party Netting | Effect of Cash Collateral Netting | Net Carrying Value on Balance Sheet | Cash Collateral Paid or Received Not Offset | |||||||||||||||||||||||||||||||||||||||||||
| Fair Value Hierarchy | |||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||||||||
Commodity derivative contracts | $ | 402 | $ | — | $ | — | $ | 402 | $ | (402) | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||
Physical purchase contracts | — | 2 | — | 2 | n/a | n/a | 2 | n/a | |||||||||||||||||||||||||||||||||||||||
Investments of certain benefit plans | 89 | — | 4 | 93 | n/a | n/a | 93 | n/a | |||||||||||||||||||||||||||||||||||||||
Investments in AFS debt securities | 6 | 20 | — | 26 | n/a | n/a | 26 | n/a | |||||||||||||||||||||||||||||||||||||||
Foreign currency contracts | 6 | — | — | 6 | n/a | n/a | 6 | n/a | |||||||||||||||||||||||||||||||||||||||
Total | $ | 503 | $ | 22 | $ | 4 | $ | 529 | $ | (402) | $ | — | $ | 127 | |||||||||||||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
Commodity derivative contracts | $ | 448 | $ | — | $ | — | $ | 448 | $ | (402) | $ | (46) | $ | — | $ | (71) | |||||||||||||||||||||||||||||||
Physical purchase contracts | — | 3 | — | 3 | n/a | n/a | 3 | n/a | |||||||||||||||||||||||||||||||||||||||
Blending program obligations | — | 13 | — | 13 | n/a | n/a | 13 | n/a | |||||||||||||||||||||||||||||||||||||||
Total | $ | 448 | $ | 16 | $ | — | $ | 464 | $ | (402) | $ | (46) | $ | 16 | |||||||||||||||||||||||||||||||||
A description of our assets and liabilities recognized at fair value along with the valuation methods and inputs we used to develop their fair value measurements are as follows:
•Commodity derivative contracts consist primarily of exchange-traded futures, which are used to reduce the impact of price volatility on our results of operations and cash flows as discussed in Note 20. These contracts are measured at fair value using a market approach based on quoted prices from the commodity exchange and are categorized in Level 1 of the fair value hierarchy.
•Physical purchase contracts represent the fair value of fixed-price corn purchase contracts. The fair values of these purchase contracts are measured using a market approach based on quoted prices from the commodity exchange or an independent pricing service and are categorized in Level 2 of the fair value hierarchy.
•Clean fuel production credits represent the fair value of the tax credits that DGD intends to sell on behalf of the other joint venture member. These tax credits are categorized in Level 3 of the fair value hierarchy and are measured at fair value using a market approach based on historical sales prices and third-party consultant estimates. Significant unobservable inputs used in the valuation include the expected market discount per $1.00 of credit value.
•Blending program obligations represent our liability for the purchase of compliance credits needed to satisfy our blending obligations under the Renewable and Low-Carbon Fuel Programs. The blending program obligations are categorized in Level 2 of the fair value hierarchy and are measured at fair value using a market approach based on quoted prices from an independent pricing service.
•Investments of certain benefit plans consist of investment securities held by trusts for the purpose of satisfying a portion of our obligations under certain U.S. nonqualified benefit plans. The plan assets categorized in Level 1 of the fair value hierarchy are measured at fair value using a market approach based on quoted prices from national securities exchanges. The plan assets categorized in Level 3 of the fair value hierarchy represent insurance contracts, the fair value of which is provided by the insurer.
•Investments in AFS debt securities consist primarily of commercial paper and U.S. government treasury bills and have maturities within one year. The securities categorized in Level 1 are measured at fair value using a market approach based on quoted prices from national securities exchanges and the securities categorized in Level 2 are measured at fair value using a market approach based on quoted prices from independent pricing services. The amortized cost basis of the securities approximates fair value. Realized and unrealized gains and losses were de minimis for the years ended December 31, 2025 and 2024.
•Foreign currency contracts consist of foreign currency exchange and purchase contracts related to our foreign operations to manage our exposure to exchange rate fluctuations on transactions denominated in currencies other than the local (functional) currencies of our operations. These contracts are measured at fair value using a market approach based on quoted foreign currency exchange rates and are categorized in Level 1 of the fair value hierarchy.
Nonrecurring Fair Value Measurements
There were no assets or liabilities that were measured at fair value on a nonrecurring basis as of December 31, 2025 and 2024.
As discussed in Note 2, we concluded that the carrying values of the Benicia and Wilmington refineries were impaired as of March 31, 2025. The fair values of the refineries were determined using a market approach based on a comparison of recent property sales and other relevant real estate and market data, which we determined reflects the highest and best use of these assets. These fair values involved significant assumptions and actual results could differ from these estimates.
The following table presents information (in millions) about our nonfinancial assets measured at fair value on a nonrecurring basis during the year ended December 31, 2025.
| March 31, 2025 | |||||||||||||||||||||||||||||||||||
| Fair Value Measurements Using | |||||||||||||||||||||||||||||||||||
| Quoted Prices in Active Markets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Fair Value | Carrying Value as of December 31, 2025 (a) | Loss Recognized (b) | ||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||
Long-lived assets of the Benicia Refinery | $ | — | $ | — | $ | 722 | $ | 722 | $ | 304 | $ | 901 | |||||||||||||||||||||||
Long-lived assets of the Wilmington Refinery | — | — | 847 | 847 | 788 | 230 | |||||||||||||||||||||||||||||
| Total | $ | — | $ | — | $ | 1,569 | $ | 1,569 | $ | 1,092 | $ | 1,131 | |||||||||||||||||||||||
________________________
(a)The carrying values of the Benicia and Wilmington refineries as of December 31, 2025 are lower than the fair values as of March 31, 2025 primarily due to the recognition of depreciation and amortization expense.
(b)The asset impairment loss was recognized in our Refining segment in March 2025.
Financial Instruments
Our financial instruments include cash and cash equivalents, restricted cash, investments of certain benefit plans, investments in AFS debt securities, receivables, payables, debt obligations, operating and finance lease obligations, commodity derivative contracts, and foreign currency contracts. The estimated fair values of cash and cash equivalents, restricted cash, receivables, payables, and operating and finance lease obligations approximate their carrying amounts; the carrying value and fair value of debt are shown in the table below (in millions).
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||
| Fair Value Hierarchy | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
Debt (excluding finance lease obligations) | Level 2 | $ | 8,261 | $ | 8,190 | $ | 8,085 | $ | 7,776 | ||||||||||||||||||||
Investments in AFS debt securities, commodity derivative contracts, and foreign currency contracts are recognized at their fair values as shown in “Recurring Fair Value Measurements” above.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 25, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.