This document is Valero Energy Corporation's 2005 Summary Annual Report. It discusses Valero's 25-year history of growth and success, including becoming the largest refiner in North America through strategic acquisitions. In 2005, Valero achieved record earnings of $3.6 billion and strong total shareholder returns. The report attributes Valero's success to its strategy of investing in refineries capable of processing heavy sour crude oil, and to its caring corporate culture that prioritizes employees and communities.

1. N1 O
Refiner in North America
1 historic Year Topping Off
25 Years of Achievement
VA L E R O
ENERGY CORPORATION
2005 Summary Annual Report

2. CONTENTs
Financial HigHligHts 1
letter to sHareHolders 2
tHumbs up For anotHer record Year 6
Valero Has grown Hand oVer Fist 8
a Hands-on approacH to operations 12
Hands down tHe best strategY 14
Valero’s brand roll-out grabs
national attention 16
saFetY, reliabilitY & proFitabilitY
go Hand in Hand 18
emploYees single-HandedlY made Valero
america’s tHird best emploYer 20
lending a Helping Hand to our
communities 22
condensed Financial statements 24
You’Ve got to Hand it to our emploYees
For tHe manY Honors tHeY’Ve earned 30
board oF directors 31
tHe nYse Handed out compliments For
marking 25 Years oF success 32
sHareHolder inFormation 33

3. 25 yearS of achieVemenT
M a d e uS n O rt h aM erica’ S n uMber O ne refiner
2005 ToTal Shareholder reTurn
VLO 128% S&P 500 5%
financial highlighTS
(Millions of Dollars, Except per Share Amounts)
2005 2004
$82,162 $54,619
operating revenues
$ 5,459 $ 2,979
operating income
$ 3,590 $ 1,804
net income
–
earnings per common share
$ 6.10 $ 3.27
assuming dilution
$32,728 $19,392
total assets
$15,050 $ 7,798
stockholders’ equity
capital expenditures and deferred
$ 2,574 $ 1,596
turnaround and catalyst costs
Summary annual reporT
In an effort to provide shareholders with more effective communications, Valero Energy Corporation has adopted a summary annual report format,
which provides condensed financial disclosure. The company’s full financial statements are contained in its Annual Report on
Form 10-K for the year ended December 31, 2005, which is provided to all shareholders.

4. Bill greehey Bill KleSSe
chairMan Of the bOard chief executiVe Officer &
Vice chairMan Of the bOard
p ictured at the Va l e r o M e m p h i s re f i n e r y, o n e o f t h e a s s e t s p u r c h a s e d a s p a r t o f t h e p r e m c o r a c q u i sition,
w h i c h c a t a p u l t e d Va l e r o t o b e c o m e t h e n o . 1 r e f i n e r i n n o r t h a m e r i c a .
Va l e r o e n e r g y C o r p or at i o n

5. The BuSineSS aT hand
a L e t t e r t O O ur Shareh OL der S
It was 25 years ago this month that value has increased 128 percent compared to
the SP’s 5 percent increase.
the first Valero Energy Corporation annual
report rolled off the presses. The report’s stark From these record results, it is obvious that
cover didn’t feature a photo, a graphic or even we have had the right strategy. In 1996, we
a logo. believed that we were at the bottom of the
refining cycle and that we could purchase refin-
It simply said: “Valero Energy Corporation had
ing assets for pennies-on-the-dollar of replace-
a record year which exceeded all expectations. The
ment costs. We also believed that historically
company moved significantly nearer a major goal:
low refining margins would improve as global
sustained earnings growth from an expanding
demand continued to grow and as the world-
operating base.” – 1980 Annual Report
wide movement toward cleaner fuels tightened
After six tough years of litigation, which led
refined product supplies. And, we further
to the $1.6 billion settlement of 400 lawsuits
believed that the future would belong to the
against Coastal subsidiary LoVaca Gathering
refiners that could process low-cost, heavy sour
Company, Valero spun off as a separate pub-
crude and residual oils that sell at a big dis-
licly traded company from Coastal on Jan. 1,
count to easier-to-refine, sweet crude oil.
1980. At the time, it was the largest spin-off
And, we were right on all counts! In 1997, we
in the history of Corporate America. While we
sold our natural gas liquids and pipelines busi-
had great plans and high hopes for the fledgling
ness for a record $1.5 billion to PGE, and
company, none of us could ever have envi-
spun off our single refinery in Corpus Christi,
sioned the tremendous growth and success that
Texas, to our shareholders as the new Valero.
Valero would achieve over the next 25 years!
It was a bold move, but one that has paid big
Since the spin-off, our revenues have climbed dividends for all our stakeholders -- employees,
from $1.3 billion to $82 billion. Total assets communities and shareholders!
have jumped from $649 million to $33 billion.
We began a series of refinery acquisitions,
And, along with the growth in our asset base,
many of which were purchased for just 10 to
our employee count has swelled from 1,594
20 percent of replacement cost. This string of
employees in 1980 to 21,923 today.
successful acquisitions culminated in 2005 with
Not surprisingly, the company’s business has our purchase of Premcor Inc. for $7 billion.
changed just as dramatically. Valero has grown The four Premcor refineries added approxi-
from a regional energy company in the natural mately 800,000 barrels per day (BPD) of refin-
gas industry to become the largest refiner in ing capacity and brought our total throughput
North America. Today, our operations have to 3.3 million BPD - making Valero the largest
expanded to include 18 refineries stretching refining company in North America!
from the U.S. West Coast to the East Coast This acquisition not only made us bigger; it
and from Canada to the Caribbean. made us better! In 2006, we estimate that we
Valero has also added 5,000 retail and branded
5-Year tOtaL cuMuLatiVe
wholesale sites in 34 U.S. states. And, this
was a big year because Valero signs began dot- SharehOLder return
ting the landscape throughout the U.S. as we $600
launched our nationwide roll-out of the Valero
$500
retail brand!
With our record growth has come record $400
earnings. Valero has achieved 10 consecutive
quarters of record earnings. 2005 was the best $300
year in history with net income of $3.6 billion
$200
versus $64 million 25 years ago. What a differ-
ence a quarter-of-a-century can make! $100
Of course, I am proud to say that our share-
holders have shared in our success. In fact, $0
12/00 12/01 12/02 12/03 12/04 12/05
total shareholder return is up 480 percent over
the past five years, which compares to a 3 per- VALERO ENERGY CORPORATION – 480%
cent increase for the SP 500 Index for that
PEER GROUP – 66%
same period! And, in 2005 alone, shareholder
SP 500 – 3%
Va l e r o e n e r g y C o r p or at i o n

6. [above] Valero’s Port
has 10 of only 20 OSHA-certified VPP Star
will process an additional 250,000 BPD of
arthur refinery, part of
Sites, a designation reserved for the nation’s
medium and heavy sour crude as a result of
the Premcor acquisition,
premier examples of industrial safety.
the acquisition of the Premcor refineries alone.
has a throughput capac-
This is important when you consider that the At Valero, environmental safety has also been
ity of 295,000 bPd.
sour crude oil discount reached record levels one of the company’s highest priorities. We
in 2005, averaging $15.58 per barrel for Maya are proud to be the only refiner to ever win
and $6.88 for Arab Light/Medium. the Governor’s Award for Environmental
Excellence in Texas, and we are proud that we
It is not surprising then that the former
remain on track to reduce greenhouse gas emis-
Premcor refineries alone contributed $810
sions by nearly two million tons per year by
million to operating income in the last four
2008.
months of 2005, or about 24 percent of our
total operating income for refining during that So, as we reflect on the last 25 years, we can
time. We now believe the Premcor acquisi- see that Valero’s success has been fueled by a
tion will be 20 percent accretive to earnings in number of factors. Certainly, we have had the
2006, far surpassing the 14 percent accretion right strategy. Valero’s aggressive acquisition and
we estimated at the time we announced the capital investment strategy fueled the company’s
acquisition. record growth as we added much-needed
refining capacity to meet growing consumer
Even with all of the acquisitions we’ve complet-
demand. Valero not only acquired refineries
ed, Valero has never been in stronger financial
for pennies-on-the-dollar of replacement costs,
shape. We have a debt-to-capitalization ratio of
but we also invested to make them significantly
only 25 percent, which is even more impressive
more profitable.
when you consider we started 2005 at about
higher highS • higher LOwS
31 percent and took on additional debt with And of course, one of
the Premcor acquisition. That’s a strong testa- Valero’s biggest advan-
ment to our great financial success in 2005! tages has been our $6
strategy of configuring
Another key factor to our success has been
our refineries to process $5
our ability to upgrade and expand our refin-
less-expensive heavier,
ing assets. In addition to the refineries we
$4
sour crude oil. That has
have acquired, we have added 533,000 BPD of
enabled us to turn deep
refining capacity since we entered the refining $3
discounts for sour crude
business in 1981, which is the equivalent of
oil into record profits.
building three grassroots world-scale refiner- $2
ies! And we don’t just grow our refineries, we But the biggest reason
also make them safer, more reliable and more for our success has been $1
profitable. our unique culture.
At Valero, we really do
This year alone, capital improvement projects 0
treat our employees as
are expected to add nearly $200 million in 1998-2002 1999-2003 2000-2004 2001-2005
our No. 1 asset. As a
operating income. It is also true that safety and USGC 5-3-2 ProdUCt MarGin
result, our employees do
reliability go hand-in-hand, and I am proud (U.S. Gulf Coast margin calculated with the ratio of five barrels of crude oil vs.
three barrels of gasoline and two barrels of heating oil)
more for the company,
that out of 149 refineries in the U.S., Valero 50/50 arab liGht/MediUM SoUr CrUde diSCoUnt
Va l e r o e n e r g y C o r p or at i o n

7. more for the communities in which they live difficult decision for me because I really do love
and more for the shareholders. Never was this the Valero employees like family.
more evident than during the back-to-back But, because the Valero spirit has never been
hurricanes that we experienced in 2005. stronger and the company has never been more
These two storms damaged our refineries in successful, I feel it’s a good time for me to transi-
St. Charles, Louisiana and Port Arthur, Texas, tion out of my role as CEO and focus on my
and threatened five of our other plants along position as Chairman. This will give me the
the Gulf Coast. We vowed to do whatever was opportunity to continue to be involved in the
necessary to help our employees and communi- strategic direction of Valero as well as employee,
ties recover. civic and governmental initiatives. And, it will
also give me a little more free time to spend with
In response to the company’s outpouring
my family and to work on some important phil-
of support, our St. Charles and Port Arthur
anthropic initiatives.
employees worked around the clock and
restarted our refineries in record time during During my tenure as CEO, the company has
a time of record refining margins. They achieved record growth and success, but my
proved yet again that our unique caring and proudest achievement has been Valero’s unique
sharing culture has tangible benefits for our caring and sharing culture. As I always tell our
shareholders. employees, we won’t be remembered for how
many refineries we acquired or how much share-
I served as CEO of Valero and its predeces-
holder value we created, however we will be
sor for almost 32 years, but I have to say the
remembered for the difference we’ve made in the
response of Valero and our employees during
lives of those who are less fortunate.
hurricanes Katrina and Rita this past year was
one of my proudest moments. The wife of As a result of our unique culture, we reached No. 3
one of our St. Charles employees may have – our highest ranking yet – on FORTUNE’s
summed it up best when she wrote to the local 2006 list of the “100 Best Companies to Work
newspaper and said she was proud to be associ- For”; we earned the Spirit of America award,
ated with Valero because we did what FEMA United Way’s top national honor, twice; and we
could not do to assist our employees and the were ranked the third best-performing stock in
community in post-hurricane relief efforts. 2005 by Forbes. It really says a lot about Valero
that we would receive top honors for being a
As you may know, 2005 was also the year I
great employer, a generous corporate citizen and
stepped down as CEO of Valero. It was a very
a top-performing stock. And, it shows that you
[left] Valero signs really can take care of all stakeholders!
started popping up
As Chairman, my highest priority will be to pre-
across the U.S. as
serve our unique culture because it has been the
part of the roll-out of
cornerstone of all our success during the past 25
the Valero brand.
years and will be the key to our success in the
future.
[below] after
We are fortunate to have one of the best leader-
hurricane Katrina,
ship teams around, and I am happy that Bill
Valero executives
Klesse has assumed the position of CEO and
traveled to the
Vice Chairman of the Board.
company’s St.
As Executive Vice President and COO, Bill did a
Charles refinery
great job of overseeing our refining and commer-
to offer support to
cial operations. With 37 years of industry expe-
employees.
rience, he has held leadership positions in many
different areas in the refining and marketing
business. I worked closely with Bill for several
years and became confident in his business judg-
ment as well as his commitment to Valero.
I look forward to working with Bill in his new
role as we continue Valero’s tremendous growth
and success in the coming years.
With such a great company and such great
employees, I have no doubt that the best is yet
to come!
Chairman of the Board
Va l e r o e n e r g y C o r p or at i o n

8. ThumBS up
f O r a n Other rec Ord Year
Va l e r o e n e r g y C o r p or at i o n

9. o the second largest U.S. producer of
After 25 years of achievement, 2005
asphalt, selling to customers in the pav-
was the best year in Valero history!
ing and roofing industries; and
Everyone, from the board members and
o one of the nation’s largest producers of
employees to the company’s business partners,
sulfur with sales primarily to agricul-
had a hand in Valero’s success. Thanks to
tural customers.
their hard work and dedication, Valero broke
• Valero earned more Star Sites in OSHA’s
records in virtually every area of its business:
Voluntary Protection Program, which rec-
• Achieving its best stock performance in a ognizes the best industrial safety programs,
single year, Valero’s total shareholder return than any other U.S. refiner. Out of the
climbed to 128 percent versus the SP 500 nation’s 149 refineries, there are only 20
Index’s 5 percent return. Star Sites and Valero owns half of them.
• Net income hit $3.6 billion, or $6.10 per • Valero’s commitment to community service
common share, the highest earnings in reached new heights, with the company
Valero’s 25-year history. and its employees contributing approxi-
• Revenues jumped to a record $82 billion mately $45 million and 220,000 volunteer
hours to worthy causes.
and assets reached a new high of $33 billion.
• Additionally, the company reached No. 3 –
• As a result of the Premcor Inc. acquisition,
its highest ranking ever – on FORTUNE’s
throughput capacity reached an unprec-
“100 Best Companies to Work For” list.
edented 3.3 million barrels per day (BPD).
• With coast-to-coast operations, the com- With a strong commitment to maintaining
pany’s refining system grew to become the safe, reliable and environmentally sound oper-
most geographically diverse of any U.S. ations, building shareholder value and taking
refiner. care of its employees and communities, Valero
• Valero became the nation’s leader in conver- should continue to hand in great results in the
sion capacity as it can upgrade more low- coming years!
quality, less-costly feedstocks into premium
products than its peers.
“Valero Energy was the top-performing
• Valero also assembled the largest retail/
stock on the blue-chip list of Standard
branded wholesale network in its history
Poor’s 500. Thanks to refinery acqui-
with approximately 5,000 locations in the
U.S., Canada and the Caribbean. sitions in 2005, Valero became the
• Valero maintained its dominance as: largest North American refining com-
o one of the nation’s largest wholesale mar- pany and is quickly becoming a national
keters, selling products through a bulk household trade name...”
and rack marketing network in 40 U.S.
-- Columnist David Hendricks, San Antonio
states, Canada and Latin America;
Express-News, January 4, 2006
o the largest U.S. producer of petroleum
coke, supplying power generation cus-
tomers and cement manufacturers;
Va l e r o e n e r g y C o r p or at i o n

10. Valero haS groWn
h and OV er fi St
Va l e r o e n e r g y C o r p or at i o n

11. as part of Valero’s senior
management team, Mike
Ciskowski, executive Vice
President Chief Financial
officer [left], and Gene
edwards, executive Vice
President - Corporate
development Strategic
Planning, have helped make
Valero the no. 1 refiner in
north america through
strategic acquisitions and
capital improvements.
Valero employees have had their
hands full literally and figuratively during the
“He kind of built a jigsaw puzzle and all of
past eight years.
a sudden it became so clear, I said, ‘My
The company began aggressively acquiring
God, this actually looks a lot better than
refining assets in 1997 because Valero leaders
many people think.’ ... He was right. He
foresaw that the worldwide movement toward
was absolutely right.”
cleaner fuels would tighten refined prod-
uct supplies – making refineries and refined -- Fadel Gheit, Wall Street analyst quoted
products significantly more profitable. They by the Associated Press about the logic of
also predicted that the future would belong Bill Greehey’s huge bet on refining,
to those refiners that could process cheaper, January 2006
heavier and more sour feedstocks into pre-
mium products.
2005 was a capstone to the past eight years
As they noted in the company’s 1996 annual
of unprecedented growth and success, as the
report, “The ability to visualize a changing
Premcor acquisition catapulted Valero to
future is what separates tomorrow’s success
become the No. 1 refiner in North America.
story from today’s competition.”
That certainly has proven true for Valero!
VaLerO’S riSe tO nO. 1
The company has experienced unprecedented Premcor
Inc.
success because its leaders not only saw this fr OM 170,000 b Pd t O 3.3 M iLLiO n b Pd 3.3 Million BPD
unique opportunity, they seized it!
Valero has implemented a winning strategy of
acquiring assets for a fraction of their replace-
ment cost and investing in them to improve UDS
operations and enable them to process less
costly feedstocks.
The company’s steadfast pursuit of refineries
Basis
that meet its acquisition criteria – capacity in Petroleum
excess of 100,000 BPD, upgrade potential, Inc.
good supply logistics and synergies with its 170,000 BPD
system – has led to record success.
2005
2003
2000
1998 1999 2002
2001 2004
1996 1997
Valero has gone from one refinery with Aruba Delaware City
Ardmore St. Charles
Benicia
Houston Paulsboro Corpus
Denver* Lima
Christi
Krotz Springs
170,000 BPD of capacity to 18 plants with McKee Memphis
East
Texas City
Quebec Port Arthur
3.3 million BPD of capacity. But the real tes- Huntway Three Rivers
Wilmington
tament to its success has been the 10 consecu- * de n v e r r e f i n e r y w a s d i v e s t e d i n 2 0 0 5 .
tive quarters that Valero has achieved record
earnings.
Va l e r o e n e r g y C o r p or at i o n

12. The former Premcor plants pumped out $810
million in operating income in the last four refinerY thrOughPut caPacitY
months of 2005 alone – about 24 percent of
Valero’s refining segment income during that mbpd
period. That was despite the fact that the Port TOTAL 3,300
350
Arthur refinery was shuttered for nearly three
weeks and ran at reduced rates for another two
250
weeks as a result of Hurricane Rita.
CORPUS CHRISTI* (East West)
Similarly, the Aruba and St. Charles refineries, 150
acquired in 2004 and 2003 respectively, have
DELAWARE CITY
been among the best acquisitions in Valero his-
THREE RIVERS
PORT ARTHU R
KROTZ SPRINGS
W ILMINGTON
ST. CHARLES
PA ULSBORO
50
TEXAS CITY
tory. The company implemented smooth tran-
ARDMORE
HOUSTON
MEMPHI S
BENICIA
QUEBEC
ARUBA
M CKEE
LIM A
sitions, invested in operational improvements,
captured synergies with other Valero plants, mbpd = barrels per day in thousands
benefited from higher margins, and improved throughput Capacity: Crude and other feedstocks imported into the refinery and processed
in one of the processing units. imported blendstocks are not included.
profitability. The result: both of these acquisi- * Corpus Christi is comprised of two plants.
tions paid out within about a year of being
purchased.
Success stories like these have been repeated
time and again at Valero.
“Valero’s fourth fiscal quarter [results]
underscored that the renaissance in
refining--particularly for processors who can
run heavy sour crude or re-refine
residual fuel--is in full bloom.”
-- Tom Kloza, Oil Price Information Service,
February 2005
With its operations well in hand, the company
is in a great position to continue achieving
great success in the coming years.
10 Va l e r o e n e r g y C o r p or at i o n

13. Valero 1997
a firST-hand looK
at VaL e rO ’S c O aS t- t O- cOa St
O Pe r at iO n S
san antonio corpus christi
Valero Today
quebec
(Jean gaulin)
paulsboro
delaWare city
lima
memphis
benicia san antonio
mckee
aruba
ardmore
Wilmington
caribbean sea
st. charles
krotz springs
three rivers
port arthur
corpus christi
houston
(east West)
texas city aruba
In 1997, Valero owned one refinery in Corpus
Retail Branded
le ge nd
Wholesale Presence
Christi, Texas. Today, the company is the most
geographically diverse refiner in the U.S. with
Wholesale
Marketing Presence
operations all over the map!
Valero Refineries
Cameron Highway
Oil Pipeline Project
(Joint Venture)
Third-Party
Off Shore Platforms
Valero Headquarters
11
Va l e r o e n e r g y C o r p or at i o n

14. a handS-on approach
t O OP erati OnS
1 Va l e r o e n e r g y C o r p or at i o n

15. At Valero, employees’ hands-on
approach to operations was borne out of
necessity in the early years, but has proven to
be the key to profitability.
In the early 1980s, Valero employees trans-
formed two small refining units in Corpus
rich Marcogliese, executive
Christi, Texas, into one of the world’s most
Vice President – operations
technologically advanced and profitable refin-
[left], visits with employee
eries. In their pursuit to build the refinery
Steve brewer about
of the future, these employees developed an
improvements being made at
expertise in configuring units to run residual
the newly acquired Memphis
fuel oil – the bottom of the barrel after being
refinery. Valero’s strategy of
processed by less complex refineries – and
investing to improve yields,
produce premium products. They turned what
increase capacity, capture
some called “garbage” into gold. synergies, reduce operating
Since 1997, Valero has pursued this success- costs and process less costly
ful strategy on a much larger scale, earning a sour feedstocks is key to its
reputation for acquiring distressed refineries success.
at deep discounts and making strategic invest-
recent years. In fact, capital projects in 2005
ments to improve their profitability.
and 2006 are expected to add nearly $200 mil-
As Valero has added 17 refineries to its net-
lion in operating income this year alone!
work, it has attracted some of the world’s
Valero has achieved this success by turning
leading refining experts in everything from cat
around struggling facilities, like the St. Charles
crackers to coke gasification. Not only have
refinery, which was purchased out of bankrupt-
they spread the Valero spirit at newly acquired
cy in 2003. After investing time and money
refineries – prioritizing safety, mentoring
to improve the refinery’s performance in every
employees and sharing best practices – but
area, St. Charles claimed the title of Valero’s
they have consistently optimized key units to
third most profitable refinery in 2005.
maximize profitability.
There is a similar story at virtually every Valero
Their charge has been to ensure that Valero’s
refinery. That’s because of the company’s suc-
immense 3.3 million-BPD refining system
cessful acquisition strategy, expertise in improv-
hums along safely, reliably and efficiently day
ing and upgrading refineries, superior opera-
in and day out. And their passion has been
tional flexibility, synergistic refining system
to improve yields, increase capacity, capture
and focus on safe, reliable and environmentally
synergies, reduce operating costs and configure
sound operations.
plants to process deeply discounted feedstocks.
But the No. 1 reason for Valero’s success: its
Of course, the ultimate goal of all of these
dedicated and hard-working employees know
strategies is to make the company’s refining
the refining business like the back of their hands!
system more profitable.
And they’ve succeeded in a big way!
a Leader in uPgrading caPacitY
MBPD
“The company is the ultimate fixer- 1600
upper, transforming ailing refineries CAT CRACKING
hemorrhaging money into well-run, 1400
HYDROCRACKING
highly profitable operations.” COKING
1200
-- CSP Magazine, January 2006
1000
The nation’s leader in conversion capacity, 800
Valero is able to upgrade more low-quality 600
feedstocks into higher-value fuels than its
peers. And as a result of capital investments, 400
the company has added 533,000 BPD of
200
throughput capacity – the equivalent of build-
ing three world-scale refineries. 0
VLO
Valero employees’ expertise in expanding, XOM COP RDS BP CVX MRO SUN TSO
Valero’s upgrading capacity, which is the highest in its peer group, provides
upgrading and improving operations has con- superior operational flexibility. note: includes US, Canada Caribbean
tributed to the company’s record success in Source: oil Gas Journal, Company Web Sites
1
Va l e r o e n e r g y C o r p or at i o n

16. handS doWn
t h e beSt Strateg Y
1 Va l e r o e n e r g y C o r p or at i o n

17. Wade Upton, Senior Vice
President – transportation
Services [left], and bob
beadle, Senior Vice President
– Crude Feedstock Supply
trading [center], work
together to secure and
ship the most economical
crude oils and feedstocks
to Valero’s 18 refineries.
Processing deeply discounted
feedstocks was a big advan-
tage in 2005 as discounts
reached record levels.
Never afraid to take a calculated risk, The discounts for the heavier, sour feedstocks
Valero executives made a fortuitous bet when – which make up over 60 percent of Valero’s
the company entered the refining business feedstock slate – widened to record levels in
more than 20 years ago. 2005 and early 2006.
They predicted that as global oil consump- Recent acquisitions and internal projects have
tion rose, it would be met with more plentiful given Valero even more leverage to these dis-
heavy, sour feedstocks. Seeing an opportunity counts. For example, the company estimates
to gain a competitive advantage, Valero config- that it will process an additional 250,000 BPD
ured its refining system to process these harder- of medium and heavy crude in 2006 as a result
to-refine feedstocks that sell at a discount to of its acquisition of the Port Arthur refinery
sweet crude oil. alone.
Over the years, this bet has paid off hand- Internal projects like the 2003 construction of
somely! the 45,000-BPD coker at the Valero Texas City
Refinery have strengthened this advantage. The
As oil demand has continued to grow, the
coker’s original economics were based upon
incremental demand has been increasingly
an historic $6-7 Maya discount (compared to
met by medium and heavier sour crude oils.
the benchmark West Texas Intermediate), but
Because of the limited refining capacity capable
in 2005 that discount actually averaged nearly
of upgrading these crudes, demand hasn’t been
$16!
as strong for sour crude oils and as a result,
supplies have been increasingly more plentiful, Valero’s bet should continue to pay off as dis-
resulting in big discounts for complex refiners counts for heavy, sour feedstocks are expected
like Valero. to stay wide. Because Valero has the most con-
version capacity of any U.S. refiner, this advan-
At the same time, demand for sweet crude oils
tage should continue to give the company a
– fueled by the ongoing domestic and global
real hand up on the competition!
movement toward cleaner fuels – has been on
the rise. To meet the new low-sulfur specifica-
$20
recOrd diScOuntS
tions for fuel, many refiners are relying on
$18
sweet crudes, which has further widened the reSiduaL fueL and SOur crude OiL diScOuntS
$16 tO weSt texaS interMediate crude
sweet/sour price differential.
$14
And, of course, these bullish fundamentals
$12 $20
have played right into Valero’s hands!
$10 $18
$8 $16
“With a focus on the harder-to-refine sour
$6 $14
types of crude oil, Valero’s profits are being
$4 $12
boosted by a glut in supplies of sour crude,
$2 $10 RESID
which means 2002 feedstock 2005 relatively
its 2003 2004 is
1998 1999 2000 2001
$8 MAYA
cheap…If I had to pick one (to invest in out
RESID ARAB LIGHT/MEDIUM
$6
of all refiners), given its scale, ambition, and
MAYA
$4
lower LIGHT/MEDIUM it would be Valero.”
ARAB valuation,
$2
-- BusinessWeek, October 24, 2005 2002 2003 2004 2005
1
Va l e r o e n e r g y C o r p or at i o n

18. Valero’S Brand roll-ouT
g r a b S nati O naL attenti On
1 Va l e r o e n e r g y C o r p or at i o n

19. When Valero set out to acquire the
Benicia refinery and related retail sites in
northern California in 2000, company leaders
handed down a challenge: create a retail brand
that would look like a major but price like an
independent. In a matter of weeks, the com-
pany’s bold teal-and-yellow design and stylized
“V” insignia were born.
Fast forward to 2005: Valero’s retail and
branded wholesale network had grown to
nearly 5,000 sites sporting a variety of brands.
But the fastest-growing one was Valero, as
teal-and-yellow signs were popping up from
California to the Carolinas. And the Valero
name was taking on national prominence as
the company was poised to become North
America’s largest refiner. There’s also great potential in Valero’s retail divi- a sign of the times: Gary
sion. It has continued to optimize its network arthur, Senior Vice President
With its heightened brand awareness, its coast-
– closing or selling about 440 underperforming - retail Specialty Products
to-coast operations, and the synergies that
Marketing [left], and Joe
stores to date, pushing ahead with its remodel-
could be realized by moving to one brand, the
Gorder, executive Vice
ing program and building ten new-to-industry
timing couldn’t have been better to put the President - Marketing
stores in 2005 alone.
company name on its premier sites. Supply, watch as a Valero
At the same time, the retail group has worked sign goes up at a diamond
Valero signs soon began sprouting up on
to enhance the customer experience and posi- Shamrock store in the midst
highways and byways across America. Positive
tion the network for long-term competitiveness. of a conversion.
reviews followed. Customers loved the bright
Just as new signs, lighting and landscaping have
colors and distinctive look. One distributor
spruced up the stores’ exteriors, the interiors
said, “It seemed like it was a little outside the
have received more food selections, exciting soda
norm. But when you actually physically get it
fountains and expanded coffee bars.
up on the site, it’s beautiful.”
Retail also has extended its Fresh Choices brand
But the most important measure of success:
to bottled water, snacks and soda; introduced a
fuel volumes remained steady at existing
full line of gift cards; and rolled out new prod-
sites converted to Valero and jumped at
ucts like DVDs and prepaid mobile phones.
new-to-industry and newly remodeled Valero
To better supply its locations with the right
locations.
products at the right time, Valero has opened
a 132,000-square-foot distribution center to
“We’ll get phone calls from independent serve 600 of its
operators almost begging for the Valero Texas stores. All of
brand. The Valero name and new color this innovation has
scheme draw attention.” paid off. Retail store
merchandise gross
-- Brad Smith, Double S Petroleum,
profits jumped more
February 2006
than 14 percent in
2005.
With distributors clamoring for the brand, the And with plans to
wholesale division has kept up a breakneck complete the Valero
pace of expansion. In 2005 alone, it added brand roll-out by
over 560 branded wholesale sites, bringing the mid-2007, Valero is
network to nearly 3,000 locations. now poised to ben-
And wholesale has just gotten started! In efit handsomely from
2006, it plans to chart new territory, moving its national brand
into the Pacific Northwest and Great Lakes presence and grow-
regions. At the rate it’s growing, wholesale ing network!
should handily reach its goal to have 5,000
branded sites by 2008.
1
Va l e r o e n e r g y C o r p or at i o n

20. SafeTy, reliaBiliTy profiTaBiliTy
g O hand in hand
1 Va l e r o e n e r g y C o r p or at i o n

21. At Valero, all employees, from top
management to the newest hire, have a hand
in the safety of the company’s operations. Not
only are they committed to safety, they take
ownership of it.
In fact, a group of Texas City employees took
so much ownership that a few years ago they
took the initiative to research and recom-
mend that their refinery participate in OSHA’s
Voluntary Protection Program (VPP). They set
their sights on achieving certification as a VPP
Star Site, a designation reserved only for the
best industrial safety and health programs in
the nation.
Upon hearing about the program, Valero’s top
management not only threw their support
behind the Texas City employees, they chal-
produce cleaner fuels and further reduce emis-
lenged every refinery to pursue Star Site certi- President Greg King [right]
sions at its refineries are planned for this year
fication. gets a first-hand look at the
safety programs in place at a
alone.
And, each one has accepted the challenge.
construction site at the Valero
These projects include major investments to
In the past year alone, Valero has added its houston refinery. this plant
produce clean gasoline and diesel that meet the
two Corpus Christi plants and its Ardmore is one of 10 VPP Star Sites in
EPA’s new fuels standards, which dramatically
and St. Charles refineries to its stable of certi- the Valero system and one of
lowered the sulfur content in motor fuels. The
fied facilities, bringing its total to 10 VPP Star only 20 in the nation.
company also continues to install the latest
Sites. Earning this designation is so rigorous
control technology to protect the environ-
that only 20 of the nation’s 149 refineries have
ment, such as state-of-the-art scrubber units
achieved it, and Valero now owns half of them.
that even further reduce emissions to keep the
air clean.
“Valero has set a new standard for
As a result of its efforts to improve efficiency
safety and health excellence in the
and operational reliability and invest in the
refining industry.”
latest environmental control technology, Valero
-- John Miles, OSHA Regional estimates it will reduce its greenhouse gas emis-
Administrator, Corpus Christi sions by nearly 2 million tons per year by 2008.
VPP Celebration, November 2005
At Valero, environmental excellence, safety and
reliability work hand in hand to make Valero
VPP is so effective that it has ushered in a new a better refiner. And that helps make the com-
era in safety at Valero. It has been a major fac- pany a better investment!
tor in the company’s continually improving VaLerO’S tOtaL recOrdabLe
safety record, especially in 2005.
incident rate (trir)
Valero’s U.S. refining system had a total
recordable incident rate (TRIR) that improved
to a record low of just .76, which is a 23 per-
cent improvement over its 2004 TRIR, and
53 percent better than the three-year industry .99
average of 1.6. .76
Also, eight Valero refineries completed the year
without any employee lost-time injuries, and
six had no contractor lost-time injuries.
Environmental safety is as high a priority at VLO U.S.
VLO U.S.
Refineries
Refineries
Valero as the safety of its workers and neigh- 2005
2004
bors. In fact, the company has invested $2.4
Valero’s current trir of its u.S. refineries is 53% better than
billion in environmental projects since 1997. the 3-year industry average recorded by the national bureau
An additional $1.3 billion in projects to of Labor Statistics.
Numbers do not include former Premcor refineries since they were not part of Valero in 2004 or for
the full year in 2005.
1
Va l e r o e n e r g y C o r p or at i o n

22. employeeS Single-handedly
Ma d e Va L e r O aM erica’ S third be St e MPLOY er
0 Va l e r o e n e r g y C o r p or at i o n

23. Gaining an upper hand in business Port Arthur even before the rain stopped fall- [above left to right] Mary
often requires grace under pressure. And in ing. Fuel and hot meals were offered to anyone rose brown, Senior Vice
President – Corporate
2005, the pressure was on as Valero rebound- in need.
Communications, helps
ed from two of the nation’s most powerful
spread the Valero corporate
storms. In every way imaginable, employees
“Valero personnel worked around-the-clock culture to its employees.
handily passed the test!
to get much-needed fuel to stranded motor- after the hurricanes, exec-
On August 29, 2005, Hurricane Katrina ists, Houston hospitals and emergency utives hosted barbecues at
slammed ashore in Louisiana and passed just response crews. Valero’s efforts were truly the impacted refineries and
to the east of Valero’s St. Charles refinery. extraordinary during Texas’ time of need.” pledged to do whatever was
It caused minor damage at the refinery, but necessary to help.
-- Victoria Ford, Texas Gov. Rick Perry’s
wreaked havoc on the community.
Deputy Legislative Director, bill Greehey, Chairman of the
Valero pledged to do whatever was necessary March 2006 board, visits with St. Charles
to help its employees and the community Security lieutenant Melvin
recover. It delivered truckloads of supplies; edgar about his harrowing
Valero’s newest employees got a crash course in
sent cooks to prepare three meals a day, every story of trying to ride out
the company’s unique culture. As a result, they
day; and established a town of 47 residential hurricane Katrina at home. “i
worked around the clock to restore electricity
trailers – dubbed “Valeroville” – to house can guarantee Valero eased
to the plant before many areas of the city even the pain,” edgar said.
workers who returned to help restart the
had power. Then, they repaired and restarted
plant.
their plant safely and quickly in true Valero
Less than 24 hours after Katrina struck, crews
fashion.
from Valero’s other refineries hit the road
Months later, Valero was still providing relief.
to help restore power and function in St.
Nearly $1.2 million in grants from its Support
Charles.
Aid for Family Emergencies Fund, which does
Bolstered by the outpouring of support, the
not require repayment, was handed out to
St. Charles employees worked night and day
employees who suffered damage.
to restart their refinery in record time. While
Inspired by Valero’s $1 million donation to the
other refiners were still making repairs, the
American Red Cross, employees donated nearly “When disaster strikes, this
Valero St. Charles refinery was already pro-
$300,000 and 9,000 volunteer hours to hur- team pulls together. After
ducing much-needed fuels. Mission accom-
ricane relief efforts. The unprecedented hur- hurricanes Katrina and Rita
plished, in just nine days.
hit, Valero dispatched semis
ricane response is the embodiment of Valero’s
Less than a month later, Hurricane Rita filled with supplies, set
caring and sharing culture.
churned over the city of Port Arthur, hob- up temporary housing for
It’s a culture that earned Valero the No. 3
bling one of the company’s newest refineries. employees, fed volunteers
spot – its best ranking yet – on FORTUNE’s
Valero Port Arthur suffered flooding across -- and donated $1 million to
“100 Best Companies to Work For” list. And
much of its 5,000 acres, a toppled flare stack the Red Cross.”
one that brought two refineries back to life in
and wind-damaged cooling towers. -- FORTUNE, “100 Best
record time – during a time of record refin-
But as they had with Katrina, workers Companies to Work For”
ing margins, which is another example of how
responded immediately. Supplies, food, water list, February 27, 2006
Valero shareholders benefit from the company’s
and 69 residential trailers made their way to
unique caring and sharing culture.
1
Va l e r o e n e r g y C o r p or at i o n

24. lending a helping hand
t O Our c OMM unitie S
Va l e r o e n e r g y C o r p or at i o n

25. An abandoned baby. A youngster
on dialysis. A lonely elder. A park in disrepair.
Whatever the need, whenever the call, Valero
and its employees stand ready to serve. With
outstretched hands and open wallets, they
invest thousands of hours and millions of dol-
Chief executive officer
lars each year to improve their communities.
bill Klesse led Valero’s
It’s not a philosophy or frame of mind that
record $12 million United Way
began in 2005, only perfected. It’s a culture
campaign in 2005. agency
that actually came to life when the company
tours, like this one to the
was born 25 years ago, and one that remains
daughters of Charity Services
vital to Valero’s mission today.
of San antonio, helped
From volunteering to donating money, employees see how their
employees vow annually to make a positive dif- contributions meet the needs
ference in people’s lives. In fact, that pledge in of the community.
2005 led to 220,000 hours of community ser- build up the community by starting with its
vice companywide, and more than $45 million littlest citizens.
contributed to charitable causes.
Before Valero became the title sponsor in
Thanks to the generosity of Valero employ- 2002, the Texas Open raised less than $5 mil-
ees, United Way agencies received nearly $12 lion during the previous 79 years combined.
million – up from $100,000 in 1980 when But with Valero’s backing, the tournament has
the company was first listed on the New York raised nearly $14 million in just four years! In
Stock Exchange. A 97 percent employee partic- 2005 alone, a record-breaking $5.35 million
ipation rate, which is among the very highest was donated to nearly 500 worthy community
in the nation, meant that communities from groups. As a result of the meteoric rise in char-
Canada to the Caribbean found funds to keep ity dollars, the tournament has gone from the
vital service programs alive. bottom of the PGA TOUR’s charity rankings
to the top at No. 3.
“Valero’s genuine spirit of sharing and The result of this success: children were cared
caring has created a brighter future for, the homeless were housed, the hungry
for countless individuals and families were fed and communities were built.
across the nation.” Valero’s family of 21,923 employees will
-- Howard Nolan, President and CEO, always be there to help those who need it
United Way of San Antonio Bexar County, most. And by extending a helping hand and
August 2005 embracing a caring and sharing spirit, Valero
and all of its stakeholders – communities,
employees and shareholders – will continue to
The company’s caring culture has also spread
grow and succeed in the coming years.
to its retail employees, who raised more
than $1.2 million for the Muscular Dystrophy
Association and over $884,000 for 38
Children’s Miracle Network hospitals.
Valero employees have taken to heart
Chairman Bill Greehey’s favorite philosophy:
You are never truly a success until you share your
success with others.
Nowhere has that statement been truer than
with the success of Valero’s largest grassroots
fundraiser – the Valero Benefit for Children
Golf Classic. Held in conjunction with the
Valero Texas Open, this event encourages par-
ticipants to focus on more than just golf. They
focus on raising money for children in each of
the communities where Valero has operations,
and they help fund educational programs,
medicine, child care and more – grants that
Va l e r o e n e r g y C o r p or at i o n

26. financial informaTion
c O n d e nS ed c O nSOL idated
The financial information presented on pages 25-29 of this summary annual report should be read
in conjunction with Valero Energy Corporation’s complete Consolidated Financial Statements
(including the notes) and Management’s Discussion and Analysis of Financial Condition and
Results of Operations. This and other information about the Company is contained in Valero’s
Proxy Statement for the 2006 Annual Meeting of Stockholders and Valero’s Form 10-K for the
year ended December 31, 2005. These documents are provided to all shareholders of record as
of March 1, 2006. In addition, anyone may request, without charge, a Form 10-K by writing or
calling Valero’s Investor Relations Department. Address and contact information can be found
on the inside back cover of this report. Valero’s 2005 Annual Report on Form 10-K and the
Proxy Statement also may be accessed via the Company’s web site at: www.valero.com.
the bOard Of directO rS tO the bOard Of directO rS
and StOckhOL derS Of and StO ckhOLderS O f
VaL erO energY cOr POrati On VaLerO energY cOrPOratiO n
and SubSidiarieS: We have audited, in accordance with the
We have audited, in accordance with the standards of the Public Company Accounting
standards of the Public Company Accounting Oversight Board (United States), the
Oversight Board (United States), the consolidated statements of income,
consolidated balance sheets of Valero Energy stockholders’ equity, cash flows and
Corporation and subsidiaries (the Company) comprehensive income of Valero Energy
as of December 31, 2005 and 2004, and the Corporation and subsidiaries (the Company)
related consolidated statements of income, for the year ended December 31, 2003,
stockholders’ equity, cash flows and appearing in the Company’s 2005 Annual
comprehensive income for the years then Report on Form 10-K (not presented herein).
ended appearing in the Company’s 2005 In our report dated March 11, 2004, also
Annual Report on Form 10-K (not presented appearing in that Annual Report, we
herein). In our report dated March 1, expressed an unqualified opinion on those
2006, also appearing in that Annual Report, consolidated financial statements.
we expressed an unqualified opinion on those In our opinion, the information set forth in
consolidated financial statements. the accompanying condensed consolidated
In our opinion, the information set forth in statements of income and cash flows for the
the accompanying condensed consolidated year ended December 31, 2003, are fairly
balance sheets as of December 31, 2005 and stated, in all material respects, in relation to the
2004, and the related condensed consolidated consolidated financial statements from which
statements of income and cash flows for the it has been derived.
years then ended, are fairly stated, in all Ernst Young LLP
material respects, in relation to the San Antonio, Texas
consolidated financial statements from which March 11, 2004
it has been derived.
KPMG LLP
San Antonio, Texas
March 1, 2006
Va l e r o e n e r g y C o r p or at i o n

27. condenSed conSolidaTed Balance SheeTS
millions of dollars)
(
December 31, 2005 2004
ASSeTS
Current Assets $ 8,276 $ 5,264
Property, Plant and Equipment, Net 17,856 10,317
Goodwill 4,926 2,401
Intangible Assets, Deferred Charges
and Other Assets, Net 1,670 1,410
ToTAl ASSeTS $ 32,728 $ 19,392
liAbiliTieS AND STockholDerS’ equiTy
Current Liabilities $ 7,305 $ 4,534
Long-Term Debt and Capital Lease Obligations,
Less Current Portions 5,156 3,901
Deferred Income Taxes 3,615 2,011
Other Long-Term Liabilities 1,602 1,148
Stockholders’ Equity 15,050 7,798
ToTAl liAbiliTieS AND
STockholDerS’ equiTy $ 32,728 $ 19,392
Va l e r o e n e r g y C o r p or at i o n

28. condenSed conSolidaTed STaTemenTS of income
millions of dollars, except per share amounts)
(
yeAr eNDeD December 31, 2005 2004 2003
operATiNg reveNueS $ 82,162 $ 54,619 $ 37,969
coSTS AND expeNSeS:
71,673
Cost of Sales 47,797 33,587
2,926
R
efining Operating Expenses 2,141 1,656
771
Retail Selling Expenses 705 694
458
G
eneral and Administrative Expenses 379 299
875
Depreciation and Amortization Expense 618 511
ToTAl coSTS AND expeNSeS 76,703
51,640 36,747
operATiNg iNcome 5,459 2,979 1,222
equiTy iN eArNiNgS oF vAlero l.p. 41
39 30
oTher iNcome (expeNSe), NeT 53
( 48 ) 15
i
NTereST AND DebT expeNSe, NeT ( 266 )
( 260 ) ( 261 )
miNoriTy iNTereST iN NeT iNcome oF
vAlero l.p.
––
— ( 2 )
DiSTribuTioNS oN preFerreD SecuriTieS
oF SubSiDiAry TruSTS –– — ( 17 )
iNcome beFore iNcome TAx expeNSe 5,287
2,710 987
iNcome TAx expeNSe 1,697
906 365
NeT iNcome 3,590 1,804 622
preFerreD STock DiviDeNDS 13
13 5
NeT iNcome ApplicAble To
commoN STock $ 3,577 $ 1,791 $ 617
eArNiNgS per commoN ShAre (a) $ 6.51 $ 3.51 $ 1.34
Weighted Average Common Shares Outstanding
549
(in millions) (a) 510 459
eArNiNgS per commoN ShAre —
ASSumiNg DiluTioN (a) $ 6.10 $ 3.27 $ 1.27
Weighted Average Common Equivalent Shares
588
Outstanding (in millions) (a) 552 488
DiviDeNDS per commoN ShAre (a) $ 0.19 $ 0.145 $ 0.105
(a) hare and per share amounts for 2004 and 2003 have been adjusted to reflect the effect of two separate two-for-one stock
S
splits, which were effected in the form of common stock dividends distributed on December 15, 2005 and October 7, 2004.
Va l e r o e n e r g y C o r p or at i o n