Thought Leadership

2021 Trends Among U.S. Pure-Play Refiners

Client Updates

Many U.S.-based pure-play refiners began 2021 in much the same vein as 2020, with the uncertainties of the COVID-19 pandemic and muted demand for refined products suggesting another year of hunkering down and weathering the storm.  Additionally, refiners with significant operations along the Gulf Coast were impacted by outsized natural gas costs resulting from the winter storms that swept through that region in early 2021.  Despite these challenges, however, 2021 was not a repeat of 2020, as vaccine uptake and lower COVID-19 numbers spurred a rebound in demand for refined products over the course of the year.  As demand recovered and refining margins improved, refiners began to deploy the cash that they had been stockpiling in 2020.  Several themes emerged as these refiners executed their business strategy over the course of 2021:

Right Sizing the Balance Sheet

One major focus of U.S. refiners in 2021 was addressing the short-term debt they had accumulated as they stockpiled cash over a COVID-ravaged 2020.  The turbulence of 2020 caused refiners to establish short-term credit facilities and issue near-term debt securities in the capital markets.  As business prospects recovered and commodity prices and margins began to boost cash flows in 2021, however, U.S. refiners were willing to deploy cash to refinance or eliminate this debt.  For example, Valero Energy Corporation (“Valero”) undertook a series of debt-reduction transactions that significantly delivered its balance sheet.  Similarly, several U.S. refiners redeemed notes with near-term maturities and repaid short-term credit facilities with the goal of normalizing their debt maturity profiles.  As refiners return leverage to pre-pandemic levels, expect them to turn the page in 2022 to pursue other strategic business priorities.

Returning Capital to Shareholders

Another key theme for U.S. refiners in 2021 was a continued emphasis on returning capital to shareholders.  Although the larger refiners were generally able to weather 2020 without cutting their dividends, Marathon Petroleum Corporation (“Marathon”), Phillips 66 Company (“Phillips 66”) and Valero each halted their share repurchase programs during that year.  In 2021, the larger refiners began to generate additional cash and reversed course by reaffirming their commitments to return capital to shareholders. For example, Marathon used a significant portion of the proceeds from the sale of its retail business on share repurchases, Phillips 66 increased the amount of its dividend towards the end of 2021 and HollyFrontier Corporation (“HollyFrontier”) has announced its intention to resume dividends in the first half of 2022.  As refiners look ahead to 2022, there is likely to be a continued focus on returning capital to shareholders through increased dividends and share repurchases.

Focus on Sustainability

The overall market’s ever-growing focus on ESG matters did not overlook U.S. refiners in 2021.  Amidst increasing investor pressure to focus on renewable energy and sustainability, significant uncertainty relating to renewable fuel blending requirements from the EPA and related volatility in the market for Renewable Identification Numbers, refiners invested heavily in renewable projects in 2021, with renewable diesel playing a particularly large role. For example, Valero announced an expansion of the plant owned by its renewable diesel joint venture, while Marathon and HollyFrontier announced plans to convert existing plants to produce renewable diesel and other renewable fuels.  A key related trend for U.S. refiners in 2021 included efforts to secure reliable access to key feedstocks for renewable fuel production.  In connection with conversion projects, both Marathon and Phillips 66 announced key investments to source renewable feedstocks in 2021. And renewable energy was not the only focus of refiners in 2021, with various companies announcing projects ranging from carbon sequestration to green hydrogen to battery technology.  Expect refiners to continue investing in and expanding their “green” business segments during 2022.

Looking Ahead

The landscape for refiners in 2022 again looks uncertain amid a spike in the Omicron variant of COVID-19.  While demand for refined products has improved since 2020 lows, it remains to be seen what impact new variants may have on the refining industry.  Regardless of the effects of the pandemic, however, we expect pure-play refiners to focus on returning cash to shareholders and developing sustainable projects into 2022 and beyond.

Visit 2021 – Traditional Energy Rebounds and Increased Energy Transition, for the complete list of individual, detailed articles associated with this publication.

Baker Botts is an international law firm whose lawyers practice throughout a network of offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit

Related Professionals