Q3 2019 Earnings Call

During your conference today.

Star Zero.

One on your Touchtone phone. Please note. This call may be recorded it is now my pleasure to turn the floor over to call in Marine of Investor Relations. Sir you may begin.

Thank you Catherine good morning, Happy Halloween and welcome to today's call with me today or Tom Nimbley, Our CEO , Matt Lucey, our president Erik Young our CFO and several other members of our management team a copy of today's earnings release, including supplemental information is available on our website.

We're getting started I'd like to direct your attention to the Safe Harbor statement contained in today's press release in summary, it outlines the statements contained in the press release and on this call, which expressed that companies are management's expectations or predictions of the future are forward looking statements intended to be covered by the safe Harbor provisions under federal secure.

He's lost there are many factors that could cause actual results to differ from our expectations, including those we describe in our filings with the FCC.

Consistent with our prior quarters will discuss our results. Excluding special items. This is a net 10 million dollar adjustment, which includes an after tax non cash lower of cost or market adjustment and they gain related to a land sale completed in the third quarter, which decreased our reported net income and earnings per share.

Sure as noted in our press release will be using certain non-GAAP measures, while describing PBS operating performance and financial results for reconciliations of non-GAAP measures to the appropriate GAAP figure. Please refer to the supplemental tables provided in today's press release I'll now turn the call over to Tom Nimbley.

Thanks Collyn.

Good morning, everyone and thank you for joining our call today.

Our third quarter results reflects solid operational performance and all of our regions.

West Coast margins were very weak for the first couple of months of the corridor, but ended much stronger east coast margins were strong and with both calls bow and Delaware operating well, we were able to capture the benefit of those strong margins.

Now a light heavy differentials continue to be a headwind during the quarter.

But predictably, we are starting to see that shift.

I am though is starting to take hold they started over the late summer with high sulfur fuel all cracks coming off.

Asia has stopped going for high sulfur fuel and trade flows have been disrupted.

Hi, So if you're was backed up in city Atlantic Basin anything Youre.

And is seeking alternative disposition from traditional home and the bunker market.

The industry prepares for IMO.

Hi, so fuel is competing with sour crude into refineries diet for raw material.

With the collapse and Hfs HM adult cracks.

Well refineries will need to make decisions.

To either sweetness legs already producing noneconomic barrel that no longer has a home as 3.5 million barrels a day, hi, shopper bunkers transitions to the new 0.5.

Fuel.

Sweet sour crude differentials are starting to widen.

But not at the rapid pace that sweet sour fuel has.

As always there was a lag into physical crude market.

This will take a bit more time high school purchasing decisions are made moms and dads.

Additionally, sweet sour crude differentials have been very narrow over the past year went like shell grows and extraordinary circumstances, keeping sour crude well the market due to could tell me production quotas and sanctions.

These ships are indeed underway and walk in genuine volatility can be expected. The fact is that sweet sour well have to widen to accommodate the penalty for making south.

So for is the enemy.

Simply stated complexity matters, and we foreigners with deep conversion capabilities like PBF.

We'll be at an advantage to refineries with less complex kicks.

We remain cautiously optimistic on a broader economy in general the consumer is doing well.

Well demand growth is picking up into second half a year from an inventory balance you the market looks constructive in the near term.

Inventories in the U.S. accrued all gasoline and this would have destock in 2019.

This went in particular is lower year over year and versus the five year average and then we will enter IMO.

I have said many times the best way can be prepared to take advantage of opportunities in the market is.

I used to have all assets operating well.

We intend to run our assets and a safe reliable and environmentally responsible manner.

Now I'll turn the call over the Eric <unk> financial results for the quarter.

Thank you Tom today, PBF reported an adjusted third quarter income.

86 cents per share.

Third quarter EBITDA comparable to consensus estimates was approximately 272 million and adjusted EBITDA was approximately 317 million.

Our third quarter results included 32 million of rent related obligations at prevailing pricing, we expect full year 2019 rent expense and then $125 million to $150 million range.

We ended the quarter with over 2.2 billion of liquidity, which includes over half a billion dollars in cash and our net debt to cap just 30%.

As expected our Frontloaded planned maintenance in 2019 provided our five refineries the opportunity to run unimpeded in Q3, which allowed us to generate more than 300 million in free cash flow.

Included in that figure is consolidated Capex of approximately 128 million, which includes 120 million for refining in corporate Capex.

And $8 million incurred by PBF logistics.

As expected our third quarter Capex was significantly lower than the first half 2019 run rate with most of the spend associated with the coker restart and hydrogen plant tie ins. We continue to expect full year capex to be in the $625 million to $675 million range.

As we look forward to the end of the year, we expect our assets to continue to generate free cash flow as a result of strong market conditions and low capex requirements.

Finally, we're pleased to announce that our board has approved the quarterly dividend of 30 cents per share.

Now I'll turn the call ever to Matt. Thank you, Eric or assets delivered a total throughput averaging approximately 850000 barrels per day.

Simply stated or assets ran well during the quarter.

Looking ahead, our refining system isn't a good place.

All of our assets are ready for tier three.

As stated earlier, we are well positioned for IMO.

PBF circuit has already seen a changing pattern of flows as a result of the regulation.

We're seeing more availability of Atlantic basin high sulfur cracked and straight run stock.

We're currently running HFO in our system.

With throughput ramping up to 50000 barrels a day during the fourth quarter.

Based on pricing and availability that volume could conceivably double depending on crude slate.

We are seeing improved dynamics on the east coast with the shutdown of the Philadelphia refinery.

We believe we'll see improved product realizations going forward as the Philadelphia product market went for long relatively balanced.

Finally, we are coming in on time, it on budget with our projects.

The Chalmette Koken project is in the process of starting up as we speak it was completed on time and on budget.

We believe that is coming on at exactly the right time.

We may be reinvestment decision on the Coker just about a year ago.

The market today, and Perspectively looks as good if not better that did we made the investment decision.

Additionally, at Chalmette, we're completing our last bit a maintenance for the year.

We are in the midst of a catalyst change in the cat food Hydrotreater as well as finishing a small upgrade project, though increased our clean product yield by approximately 3000 barrels per day.

Hi, Jim plan. It brought our hydrogen plant project at Delaware City is also progressing well and we expect that to come online towards the end of the first quarter.

By adding additional hydrogen capacity at Delaware, well, we will be able to run additional volumes of high sulfur inputs and produce low sulfur products.

On the regulatory front, we're pleased that we came to a win win agreement with the governing board of the South Coast Air quality measurement district.

Actively ending the allocation process review in the state of California.

Lastly, we we continue worked closely with shell and completing the acquisition of the Martinez refinery.

We are progressing through the second information request from the FTC.

Pending regulatory and other approvals, we now anticipate that the transaction will close during the first quarter of 2020.

With that we've completed her opening remarks, operator, we'd be please take some questions.

In a moment, we will open the call to questions. The company requests that all callers limit each turn to one question and one follow up you may rejoin the queue with additional questions. At this time, if he would like to ask a question. Please press the star and one on your Touchtone phone you may withdraw your question that anytime by pressing the pound.

Once again to ask a question. Please press the star and one on your Touchtone phone. Your first question comes from Roger read with Wells Fargo. Please go ahead.

Hi, Thank you good morning.

I guess, if we ever write a book about refining I'm going to title. It sulfur is the enemy if that's okay with you Tom.

Yes, just make sure I get a fee for.

[laughter] all right at least an attribution right [laughter] I guess can we dive into the very last comment there on Martinez closing in the first quarter and obviously, there's been questions out there about like being able to lay out all the financing for that from.

Balance sheet perspective, and I was just wondering matter, Eric which one of you most probably best to address that and maybe.

Couple of something along the timing, we take a gen one or we think at March 31st and so forth.

In regard specific timing the driver of it. Unfortunately, the reality is it's not.

Being driven by PBF or shall but you have to deal with the process and dealing with the regulators are we've been.

In the mid so the second request from the FTC and that does just take its own time my expectation is a that we would.

Being the first half of a first quarter, but again, it's not completely under our control we are.

As bullish today as we have been so getting it in the 10 as quickly as possible is absolutely.

The right story.

In regard to financing.

Nothing has changed our can comment.

If you want to follow up but nothing's changed from our our original announcement and in fact, our our strategy and and cash generation.

It's coming in line with right, where we expected so the only other thing with Martinez that the market should be aware of is when we originally announced transaction or we were going to conduct a turnaround that was advanced by shell which is.

Nothing but good news the only thing better than not.

Being reimbursed for the the work is not having to March is up to have a very clean Ron in 2020.

And Roger it's Eric I think on the financing side of things just a follow up on matts comments.

We absolutely are still 100% bought into the plan that we laid out originally in June and then reaffirmed on the last call that ultimately the second half of this year market conditions, you know subject to those market conditions would put us in a position as a result of having very low capex as long as we run well, we should be able to.

Good free cash flow and quite frankly, the for the third quarter is really the first step in the right direction here for US. So you know I know there are lots of questions around working capital rebounding, what I would say on that is we had overall operating cash flow prior to capex up north of $450 million of that a couple of hundred million dollars at work.

And capital came back into the system vast bulk of that is going to come from inventory reductions.

Again, we laid out to plan and I think we're executing on that plan, which was building inventories during the first after the year that then should be reduced throughout the end of the third and fourth quarters, and we took a really big step in the right direction during the third quarter.

Okay, great. Thanks, and then maybe just as a.

Quick follow up but things it sounds like things can be really solid with IMO. We're hearing from multiple low multiple companies that they're really seeing the effect start to hit the market. As you think about the way you front end loaded your maintenance in 19 wouldn't expect you didn't need to do that again in 2000.

But I'm just curious if you take sort of a initial view of the first six months sort of next year.

Well below normal on maintenance and so you should be able to take advantage of the situation or is there something schedule, we need to be paying attention to at this point.

The biggest thing that is schedule, then we will execute into first quarter, a turn around on the FCC block at Toledo.

If you look at Toledo, a under a special light it really is insulated from IMO. So we will be doing a relatively a large turnaround in Toledo and at the end of the first quarter as Matt said, we have a complete.

Lean one way or on Martinez, when we close that deal and for the rest of our system, we expect to be able to run high utilization rates during that first six month period, a first half a year.

I tell you to capture what we think will be you know continued strong margin environment because of IMO related impacts.

Awesome. Thank you.

The next question comes from Manav Gupta with Credit Suisse. Please go ahead.

Hi, guys congrats on a very strong.

Free cash at the end of the day.

Supporting the mocking honesty.

My first question I know it's <unk>.

This happened to pass the call it stops.

And it is now.

So.

Right.

I'm just trying to figure it out new building.

50, 200000 bottoms boost offsetting the U.S. Mckim, how what do you all system respond to it.

Yes.

We are planning we are running a fair amount of crude by rail as we speak but by the way that's a combination of a Canadian heavies.

He said you have got 50000 barrels a day so right now.

And then we also running Bakken and frankly, that's a that's an outflow from P., yes.

As a unfortunate incident, we are now getting some of those crews that were being processed at P.S. and they have so that's just what we're running today, we expect that go up to <unk> prior to the announcement.

Thank you was we were going to run somewhere between 80 90000 barrels a day of rail crude into fourth quarter, and maybe a little bit north of that and as we go into Two Q2 020 in about 20 of that would be light and the rest would be having we've been in constant touch.

And.

With that Canadian government or at the end Hebei and most importantly.

The produces.

So we are we're actively in discussions and we would expect and and thank you for telling us piece I'm waiting for this announcement the last two weeks because it was eminent for the last two weeks.

It out there.

We expect this will give us the latitude to procure at a good reasonably good price additional heavy crude and we haven't capability both to unloaded in Delaware, we can bring it further down into Chalmette again, it's just it's a positive because she is going to these barrels are going to come in in addition to what we believe will be distress more distressed Barry.

Charles or perhaps recalibrated barrels.

Sour crudes coming into the system.

Thank you.

Question, if you look at the defining this quarter.

It was actually came in ahead of expectations.

<unk> I'm just trying to understand if something was off on the very closely.

And given the spike.

The stock on this call, how you're thinking about capturing that spike in the best gross margins.

Very much on it.

First two months of the third quarter to West Coast margins were lack luster to say leased.

That does the west coast as we call. If you just replay history here. This this year, we had a lot of operating problems and schedule maintenance in the ended the first quarter into the second quarter as is usually happens people run very hard gaps you to margins those operating problems past and in the third early parts of the third quarter we.

We had a high utilization and a and the cracks responded at a negative way. It did start to recover at the end of the third quarter, but we did have an operating problem, where there was unfortunately, some preventive maintenance being done on hydrogen unit, a big hydrogen unit in Torrance and tripped off the line.

We wind up losing about three days production and that was that the as the margins were starting to.

A recovery rather significantly now as we look into fourth quarter, where this is Halloween on superstitious, but we have had good operations in Torrance.

The month of October .

We obviously had a very good crack environment.

It started to again correct some of the equipment came back.

However, there's been some reported operational problems and over the last three days, we've now gotten to a relatively very strong cracks and the fourth quarter prospects look good.

Thanks, guys. Thanks for taking my question Congrats.

Gosh.

Okay.

Your next question comes from Paul Cheng with Scotia Howard. Please go ahead.

Hey, guys good morning.

Huh.

Common and Matt I think you guys talked about you already one thing some high steel for fuel oil up to 50000 BOE per day can you kind of what's that or does it make any difference what did that are you using to fuas coping with the lake will cut technology and also.

When you do the test one node you won the gets that's easily Sony and then need <unk>, you differences or deficiency loss or anything or <unk>. We need just no different you can't just we pay used to heavy oil and is that one too heavy one bad that you go again, what we pay is two to three both have you only one to one.

Okay, I'm going to try and if I guess don't get them on sequence come back at me first of all.

There is a difference it's not a huge there is a slight advantage.

That is available if you run the copied or fuel and in particular directly to a fluid coker and without getting too technical basically we had the capability and off Louie coker in Delaware to split that heavy fuel half.

Portion of it will go directly into the reactor that chews up hydraulic capacity, which is also most of the time to limiting react the aging for how hard you can run your coker, but in a fluid coke or you can also put some of that material into another processing unit as part of the Coca call Describer and that allows you to flash off.

The lighter products the cars that are in heavy fuel. So effectively you get that out and you don't have to put it into reactors. So you don't take as much about a capacity dead on a delayed coking you're pretty much portion of stuff into the coca directly, but you're you're gonna have backed out.

Crude or resulted from crude if the cocoa has already fall.

Now the second second piece of your question and I think this really all gets related is is there a back out well, yes. It can be dependent upon the type of fuel all you're running and most importantly, the type of crude oil that you're running.

I see if you are running we're running a bunch of my a very heavy crude.

And we decided we want to run a high sulfur fuel into say to crude unit at Chalmette.

The backed out ratio would not be very significant because my is such a heavy crude if on the other and you are backing out maybe an hour medium or more I. Certainly then you would have and your coke, which fall and your crude unit was small there would be a bigger backout ratio. So if I'm getting that Paul but basically the way you would have to look at it is.

What is the what is the gravity and of the crude oil that you're running versus the gravity and the quality of the fuel.

Thank you all you're buying to put into the crude unit and that will be a backout ratio dependent upon what crudes Brenda and then it's just an economic analysis as to what you wanted to.

And you guys wondering directly into the <unk> or that you mix it with the COO and wonderful distillation tower.

And that's that's the case, we advocate the ability of doing particularly in some of our refineries.

We can Ryan heavy fuel and today, we are in an east coast. We are running as Matt said getting close to 50000 barrels a day of heavy fuel and that material is being bypassing the crew tower.

And is going directly into the Coker coking unit and other refineries.

Well well run it through when we want it and Chalmette, we're not running any right now because we haven't I turn around underway on a copy Hydrotreater. We're gonna initially right naturally to crude unit.

My final question for me 2020 cap ex any rough estimate on the pro forma basis.

The next question comes from Brad Heffern with RBC. Please go ahead.

Hi, everyone.

First of all I was hoping we can touch on rents I wanted to get your thoughts on a you know quote deal and any thoughts on the trajectory of friends is sort of that saris go back into the rental.

Consistent with last quarter or my comments.

There's no question the President is ministration is.

Is.

Softening to blow maybe give so the impacts of.

Negotiations with China, and all the other macro things going on.

Containing RIN prices and they've done a reasonable job at that.

Who.

I have to have been very vocal.

And so I think it's going to be a more the same I think.

They weren't as draconian is somewhere predicting.

Putting that aside I think I think this administration is committed to not letting rins move I think the market.

Generally appreciate that.

Okay. Thanks, and then just looking at the East Coast this quarter.

You guys had the highest distillate yield I've seen for quite Awhile and then you also had a much more light crude runs a normal I think the light crude side, you mentioned was potentially due to the Philadelphia energy solutions Bakken volumes, but can you just walk through other reasons for those two thanks.

I think it's a combination.

We would we would switch in the base case, given a tight or light heavy differentials that existed so we've been running some like water bonds.

And Delaware in particular and in fact in Paulsboro as well.

Next the loop skill.

From the unfortunate incident at the end of the commercial people negotiating and picking up some of the crude boxing and other waterborne crudes that we're into Q4 P.S. and that resulted in a relatively high.

Light product like crude slate, which indeed did result in a higher distillate yield.

Realizes that you just kinda back on Paul's question on fuel that is not a one to one.

When we were lightened up the crude slate in Delaware City, Delaware was blocked on how much grew to could run by NAFTA yield.

Okay got it and then just finally, maybe for Eric the Torrance landfill during the quarter can you just talk about what that wise and potentially with the proceeds from that weren't.

Yes, it's roughly $35 million of proceeds this is consistent with the strategy that we laid out I think we had another land sale. Previously these are small parcels of land in and around torrents, not really associated with anything happening day to day operations at the plant ancillary land that ultimately will probably be converted into some type.

Okay. Thank you.

The next question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Good morning, guys and congrats on a on the strong cash generation I guess my first question. It's in a couple of months.

Yeah, you know when when you look at pad one.

Clean product production by 225000 barrels a day ran close to 300000 barrels a day of total throughput.

And so the environment simply what where that local production.

As long and so marginal barrels would have to make its way up to New York Harbor, that's not the case anymore.

And so.

A clear market has tightened up we've seen our business improve as our rack volumes have increased.

Our disposition into Laurel has increased and our sales into New York Harbor have decreased which are all positive now no different than anything else in the physical market.

Flows. These things do take time, you have contracts with a different wholesalers are different customers that you need to change.

Within.

Pad one has improved and then directionally all pad one is improved because it's going to require more input.

Further places away.

That makes sense that does the follow up there's just a can you call out Erica sorry, if I missed this what the working capital swing was in the quarter and just the latest thoughts on the need to issue equity given the cash balances are now north of $500 million I would think the answer is you don't see.

Sure I will go in reverse order I think you know consistent with earlier comments, we are executing on the plan that we laid out based on market conditions that the second half a year, we would generate significant free cash flow to essentially replenished the cash balance and put us in a position to be able to close the deal. We're still very much in line with where we thought we would.

Be at this point, along the system and quite frankly, I think we saw in the third quarter inventory reductions, which ultimately drove almost a $150 million of working capital increase associated with inventories being reduced so overall working capital was north of $200 million, but.

The vast bulk of that comes down from inventory reductions.

First question is just a follow up to Paul's question, when you're talking about fuel oil versus heavy crude Tom I think you mentioned that there would be a slight benefit to doing that right now and my question is more obviously fuel oil should continue to weaken so should we be viewing kind of todays.

Heavy diffs versus fuel oil Dev says kind of that that crossover point and then if fuel oil continues to weaken faster than heavy crude and there's a there's a timing effect there that that'd be more of a one for one capture for every.

Incremental dollar of fuel oil weakening if that makes sense.

I think it obviously depends on the spread between the crude yes, oh, the other option or what would accrue days.

Right now it's very clear we don't have we're starting to see some whiting on accrued debts.

Secondly, and say my but the rest of the sour crudes medium salaries are heavy crude so not as economic is running fuel all through the coca or fuel to the crude unit to get exotic okay. So that's clearly economic.

That will likely going to say is the light heavy so a suite salaries and it really is I said self is the enemy for reason.

I am always not just getting rid of losing a market for high sulfur fuel.

Requiring an 83% reduction in the sulfur content of the new fuel so sulfur is really under the gun here.

So we expect those groups to those differentials widen out and then it'll be simply a function of if you have a crude that you are running that is economic let's just say Basra.

And you want to run fuel you are going to and you wanted you to crude unit you are going to back out more than one barrel accrued a basra to run one barrel a few law and then you just simply have to look at the economics of that and it's going to be an ongoing alright.

The crude oil that you're running.

It can change Briggs do other opportunities outside of Martinez or would you say your primary focuses martinez at this point. Thanks, Yeah. I think you started the question and answer the question with the right answer and that we're focused on.

We're focused on Martinez and we're focused on Martinez, we've never comment on what other people are selling or potentially selling.

But our focus is on Martinez.

Okay. Thank you.

The next question comes from Matthew Blair with Tudor Pickering Holt. Please go ahead.

Hey, good morning, everyone. We've seen a recent increase in tanker rates could you talk about how that might affect your your earnings in fourth quarter as rolls into 2020.

Yeah.

Recently, there's been again.

External influences.

On that have impacted that are.

Some questions regarding what the attack on the Saudi facilities I might add did I I think the saudis ought to be congratulated for putting their customers first during that whole a incident and the response that incident and effectively taking steps to not only protecting customers, but to keep the market stable.

And they were successful with that.

Micron effect on on rates and then of course the sanctions.

Exacerbated that.

We think that calm down and it is coming down we also think or if you look at our system, We've got five refineries and right now.

Torrance and Toledo effectively pipeline supported refiners.

We have a significant amount of.

Domestic crude crude oil Canadian crude obviously crude by rail that we're bringing into our east coast system.

And.

Chalmette runs a fair amount of Gulf coast crude so so when you look at our system and the waterborne crudes that we are running and our system, whether they be necessity east coast, the balance with one exception or chalmette.

Effectively short haul crudes from.

South America Latin America predominantly in one area that we have a higher.

Sounds good and then Tom any thoughts on NAFTA into 2020 cracks have been pretty weak. This year do you think NAFTA will be less appealing gasoline blendstock with tier three coming into full effect in 2020.

Actually I do it's a very good question I don't see the NAFTA Lance.

Going away anytime soon there's going to be more.

Well likely pressure to run sweet crudes as as the menu conversion was simple refineries are running sour crudes have to take some steps you have this ongoing.

You know tremendous increase in Ngls Indianapolis that are coming up pentanes that it coming with that they're competing into the petrochemical business, but the bottom line is there's napa length, and I think that's going to continue.

And then that gets you into situation, but what do you do with its tough to blend it directly into a into gasoline. The reform as are gonna have to run full and in order to generate I came to be able to call out into the gasoline pool.

But I think you're going to wind up with a distressed and aftermarket.

I appreciate the thoughtful response thanks.

The next question comes from Jason Gammel men with Cowen. Please go ahead.

Thanks, It looks like the gasoline market is holding up.

Well here as we head into.

Winter from month is like a $10 about crack it seems as higher year over year I Wonder what you're seeing in the margin if you expect that strength.

Continue and then just following up on the working capital benefit for the quarter do you expect.

Any additional benefit to come through in the in the fourth quarter or did you kind of get at all this quarter. Thanks.

Okay.

I'll take the first question and again I go back to.

What is happening with all ammo is this shift of EUR 3.5 million barrels a day of high sulfur fuel.

Disappearing as a market, obviously there'll be some of that that stays because subscribers, but an increase in light.

Product demand like lower solve a product demand.

You know 2.8 million barrels a day.

I think it's going to go across the spectrum of it's again, it's just going to be an analysis and an economic analysis.

Spectrum of jet fuel gasoline and diesel.

And frankly that could be quite your deconverting gasoline in the back end of a cat cracker.

To this what if you have strong different prices, but obviously then things will tend to acquire libre. So we think that in fact as there's a benefit across the whole light products system because of what's happening with IMO if that makes sense.

And on the working capital again, we generated over $200 million from working capital during the second quarter, which was a bit more than we originally anticipated.

The vast bulk of that just to reiterate was driven by reductions in inventory and so I think we've gotten our inventory back on a level flooding, where we really wanted it to be in shouldn't see material decreases in inventory as we go through the remainder of the fourth quarter working capital now from an A. are in a p. standpoint is really going to be driven by.

Where the crude price and product prices go so we can fluctuate a bit quarter to quarter, but the biggest piece I think our message is going to be ultimately the vast bulk of the driver of working capital coming back in the system was inventory reductions, which we materially received during the third quarter.

The final question today comes from Doug Leggate with Bank of America. Please go ahead.

Thanks. Thanks, guys. Appreciate all your detailed this morning, just those two quick follow ups hopefully.

I would you look to try and adjusted feedstock once you take possession of machines.

More on the.

Effectively we Ron.

As you know a significant amount of heavy crude from the valley. That's what we're running and there's a significant amount of crude that marketing is runs for the same area.

That is a heavy relatively light.

The value of the reserves, even if you don't go into a coke we were actually selling some fuel for resulted from.

The Torrance refinery now.

And some catch slurry, which is really the bottom of the product from the cat cracker at a premium to ANS and that's because of the quality of the fuel because it's it's high density, meaning beat you contact and its low sulfur.

Anything changed by far the economic support running domestic crude versus the waterborne heavies and that's because of the lag and widening out and in fact, obviously some freight.

I appreciate it like that detail I forgive me for this so I'm going to completely changed topics.

I guess, given relatively limited do with opportunities, although not as you've got a buck as part of the broader the boiler system I'll leave it there. Thanks.

Sure, but the MLP market has been very.

Very frustrating.

To us and we are continuously evaluating it.

The prospects for our MLP.

Our are good and we've we've laid out a strategy for the MLP that we're delivering on.

But we are continuously evaluating the market to market, which we operate in the market.

There's value us and so we're shirley.

I'm, making news with these comments, but we will continue to evaluate it.

But the MLP has been a net positive for.

Our suite of companies.

And the strategy it laid out.

As in front of it so.

Yeah, well well nothing is static and we'll continue to.

Evaluate as we go forward.

Thanks for taking my questions guys. Good luck.

Thanks.

This does conclude the question and answer session I would now like to turn the call over to Tom Nimbley for closing remarks.

Thank you.

This does conclude today's program. Thank you for your participation you may disconnect at anytime.