Q1 2020 Earnings Call
Greetings and welcome to the purpose see pick holdings first quarter earnings Conference call.
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It is now my pleasure to introduce your host a machine me, but they'll manager Investor Relations for par Pacific Holdings. Thank you Miss but though you may begin.
Thank you operator, welcome to par Pacific first quarter earnings Conference call. Joining me today, our William Pate, President and Chief Executive Officer, well, mostly young Chief Financial Officer, and Joseph Israel, President and Chief Executive Officer Parks Prolia before we begin note that our comments today may include forward looking statements and.
Forward looking statements are subject to change and are not guarantees of future performance are about.
They are subject to risks and uncertainties and actual results may differ materially from towards looking statements.
Accordingly at Investor should not place undue reliance on forward looking statements and we disclaim any obligation to update or revise them I refer you to our investor presentation on our website onto our filings with the FCC for non-GAAP reconciliations and additional information.
I'll now turn the call over to our President and Chief Executive Officer filled.
Thank you as Jamie Good morning, and welcome to all our conference call participants.
I'd like to begin this call by wishing you and your families. The best of health and wellbeing in these trying times.
Our organization has continued to function seamlessly through this disruption as we've responded swiftly to market conditions and government measures.
Our first quarter results, particularly with respect to Hawaii illustrate the rolling impact of demand destruction on the refining sector.
Singapore refined products products declined rapidly during February after the initial signings lockdown.
While cracks dropped immediately crude oil differentials did not begin to decline until the physical supply market loosened when refiners cut runs.
And the supply chain in the Pacific Basin creates a long lag between market change and realized crude oil differentials.
As a result, we experienced an intense period, we cracks and strong differentials.
The tight crude market collapsed, even further during March when OPEC plus failed to agree on production cuts.
After the market share we began the market structure flipped from backwardation to steep contango.
Waterborne crude supply chain change dramatically, which will improve our cost accrued beginning in the latter part of the second quarter.
These trends are largely related to our Hawaii refining profitability.
Our mainland locations were principally impacted after United States, Social distancing regulations were enacted during mid March.
As we look to the rest of the year, our perspective on product demands quite limited and linked directly to relaxation of social dispensing and other protective measures.
While the timing is uncertain much of the demand destruction for our industry is temporary.
Consequently, our business posture prioritizes flexibility and Optionality.
Broadly, we expect to see a gradual increase in gasoline demand before any changes in jet fuel demand occur.
We expect diesel demand, which has held up well through the early stages of this pandemic to be weakened by declining industrial production.
We're fortunate to be market leaders in our niche markets and we intend to run our refineries solely to meet local market demand.
We're confident that our local refining and logistics operations will be the low cost suppliers to our markets.
However, as market demand evolves, we must address changing needs for example, the Hawaii market demand dropped to 120000 barrels to 65000 barrels per day immediately after quarantine and stay at home orders were implemented.
Decline in commercial jet arrivals and departures created most of this demand destruction.
Our team took early action to reduce the why production by shutting down one of our crude units, reducing refined product imports and limiting refining activities to the original par Pacific facility.
As you know we previously operated that flat on a standalone basis with low operating costs and high operational reliability.
We will operate in this fashion until a significant resumption in commercial jet traffic occurs.
Washington continues to perform well benefiting from favorable inland crude prices and reasonable local demand.
Although Wyoming reported excellent operational performance again during this quarter, the falling crude price environment hampered profitability due to significant FIFO losses.
With the stabilization and eventual increase in WT crude oil prices, we expect a profitable contribution from Wyoming.
We also believe this summer and fall driving season in the Rockies could be strong as the public's uses drive to drive and vacation outdoors.
Our logistics and retail segments continue to bolster overall results during the first quarter.
Retail margins were especially strong which mitigated some of the decrease in fuel demand due to social distancing restrictions.
Our team has responded rapidly to the market impact of the coated 19 pandemic.
The actions, we are taking simultaneously attack multiple key focus areas, including safety production alignment business continuity cost reduction and balance sheet management.
We anticipated declining demand with efforts that began during late February and we intensified these activities when the pandemic began to spread globally.
As a result of these efforts we have reduced our planned cash outlays in 2020 by approximately $150 million.
We will continue to focus on reducing our cost structure and expect to further increase the reduction in cash outlays in the second quarter.
In light of the current environment. The independent members of the board and I have reduced our cash salaries by 75% effective may fit.
We remain committed to supplying our local markets and are well positioned to ramp up throughput at all our locations when demand recovers.
The health and wellbeing of our employees communities and stakeholders remain Paramount and we're following all local state and federal guidelines in managing our response to covert 19.
At this time I'd like to turn the call over to Joseph.
Thank you Bill.
Starting with one element of three through warning for the first quarter was $15, an 86 cents per barrel.
Systems with past Susan on trends.
The significant reduction include prices.
During the month of March resulted in approximately $10 per barrels of unfavorable five point impact.
As a result will realize the Chuck gross margin was negative 81 cents per buyer.
Oh refinery.
Averaged approximately 16000 barrels per day with 99.7% operational availability and production costs were six north of 51 cents per barrel.
Good morning team started three impart rocky mountains demand for gasoline and jet fuel around March producing for refining utilization rates.
65% through the month.
Thanks.
These are the demand has remained strong with a much lower covers 90 pain impact thus far for both can go our maximum diesel production mode of operation.
From a 50 come 30% to approximately 43%.
Yields.
To balance per man hour target group for the second quarter.
The 12 to 14000 barrels per day range.
In Washington.
Pacific Northwest pipe two to one index.
Third theme to 1024 cents per barrel on an asset base.
Our refinery throughput averaged approximately 41000 barrels per day.
And good strong 100% operational availability.
Adjusted gross margin in the first quarter was $9 in 14 cents per barrel and production costs were three bono's and 40 cents per barrel.
Fivefive refining utilization rates come down to approximately 60% in April.
Good morning premium packed from demand.
So far ill in actively low gasoline mute configuration.
Secondly, prospective.
From the decline in West coast demand.
In addition.
Going to train in March operations continue to provide us with valuable flexibility include on sourcing.
As a result.
Third quarter targets through food is not the 37 40000 barrels.
The range.
The bottom so production with demand, while minimizing gasoline engine production.
And maximizing video and these immune.
System and this before blending activities.
No I.
031 through his finger proving that was Arizona as an 11 cents per barrel on brands base.
Refinery throughput averaged approximately 95000 barrels per day on the quarter as it is known to slower demand solar products and the state of worldwide.
Operational availability was strong 99.7% and production costs were three Luna within 36 cents per barrel.
Waterborne crude pricing continues to impact our Hawaii refining operations.
Our first quarter legalized adjusted gross margin in wind was only.
Thanks.
A number.
Thanks.
Okay.
Yes, that's right.
I was only 21 cents 24 cents 24 cents per barrel.
Oh, no capture was driven by elevated crude differential.
The only thing in the realized $7.04 per barrel premium brand on the legal basis.
Second quarter this event.
To approximately $4 per barrel, reflecting the lower end market condition at the time, we've committed and purchased a crude oil mostly between January and March.
With the recent crude oil and macro changes.
Slide nine Bill the bottom line is not third quarter conclude this for insurance.
Unlikely to be about $10 per barrel both favorable.
First quartile differential.
On the pull in the.
Most of my team demand destruction in Hawaii as being approximately 50%.
Through the month of April with jet fuel demand constantly approximately 75% and gasoline demand cut by 40% to 50%.
As a result.
We have adjusted double operation to bottoms yields with AMAG.
Second quarter, two plans group in why isn't the 70 to 74000 barrels per day range.
I don't know includes unit from West time, and adjust to know staffing accordingly.
Current operations.
We are aggressively minimizing production slow our typical.
From our typical 30% down to 15% to 20% of book value.
At this measure we spent all in diameter production, mainly to the military and freight customers.
We've also reduced the customer anew, an increased fuel really yields to match as close as possible with growing demand portfolio NOI, including utility Fuelcell power generation.
In summary.
We will focus from once we can control.
As we navigate both through the impairment crisis and the demand recovery phase.
We remain optimistic and excited about gold future as an efficient some competitive system.
Now I will turn the corner over two wheel Who'll review our financial results.
Thank you Joseph.
First quarter, adjusted EBITDA, and adjusted earnings totaled 11 million and and a loss of 30 million or 57 cents per fully diluted share.
Focusing on accounting items first.
There are two items that impacted both adjusted EBITDA adjusted earnings and GAAP net income.
One well I mean are finding results, including approximately 15 million dollar FIFO accounting loss and to why refining recognizing approximately $6 million unrealized derivative losses related to the approximately $5 million gain that was called out during the fourth quarter of 2019.
In addition, there were three items that solely impacted GAAP net income.
One we recorded a noncash lower cost for market charge of approximately $182 million.
Related to the LCM charge, we recorded an offsetting game on the reduction of our supply and offtake liability of $204 million.
Two we're recording a goodwill impairment of approximately $68 million to reflect estimates of current fair values.
And three we recorded impairment to our investment in Laramie of approximately $45 million.
Shifting to segment results.
Retail adjusted EBITDA contribution was $15 million driven by increased fuel margins, primarily during the March timeframe. So.
Same store sales fuel volumes were down roughly 5.2%, while merchandise sales were up approximately 2.1% compared to the first quarter of 2019.
We expect gasoline demand to be down approximately 40% to 50% on a year over year basis until social distancing restrictions or relax and Hawaii, Washington, and northwestern Idaho.
Diesel demand is down but has been more resilient and our merchandise sales have been much stronger as customers turn to our stores at times, when social distancing measures make larger format retail locations more cumbersome to access.
Our product views of late April in early May suggest volumes are rebounding from trough levels referenced above.
For logistics segment, adjusted EBITDA contribution was $23 million with increased throughput across principally Hawaii in Washington during the quarter.
We saw minimal impacts to throughput other than late March reductions across certain locations, which did not have a material impact on the quarter's results.
We expect annualized logistics segment results to proportionately move with throughput rates at our respective refining locations.
The refining segment recorded segment adjusted EBITDA loss of $15 million.
The why results reflect the impact of lagged crude differentials paired with compress crack spreads.
As a reminder, Q1, Hawaii crude differentials reflect Q4 2019 market conditions were elevated freight and backwardation drove a tight Pacific basin crude market.
Partially offsetting Hawaii's results with a seasonally strong Washington performance and a modest Wyoming contribution excluding the FIFO crude impacts.
Washington Inland crude advantage was on display as Bakken and Cold Lake cruise traded at attractive delivered discounts the Ns.
Laramie generated adjusted EBITDAX of $12 million and net income of $1 million for Q1 2020.
Net to our interest Laramies results reduced our adjusted earnings by $1 million.
Laramie has extended the term of its credit facility through 2021, and current leverage sits at 2.9 times debt to EBITDA.
Moving to the capital structure and liquidity front.
Our Indian liquidity totaled $137 million made up of 62 million in cash and $75 million and availability.
The decline in the headline liquidity for the quarter was principally driven by the reduction in the underlying collateral value of each intermediation or ABL credit facility.
Of the approximately 105 million dollar decline versus year end 2019 over $90 million was from the reductions in collateral value.
However, this reduction and availability should be viewed in the context of our current operations and daily required crude oil purchases through our refineries.
Which on a $25, Brent and $20 Wi Fi World is approximately $3 million per day.
Compared to nearly $10 million per day, and $60, Brent and $55 $55 Wi Fi World.
In other words, while the decline in commodity prices has impacted our liquidity. It also reduces our daily cash operating requirements.
We generated cash from operations $15 million working capital as a source of funds, excluding the noncash impacts from intermediation revaluations and was principally used to pay down the deferred payment facilities within the financing sections of our cash flow statement by approximately $52 million.
Capital expenditures and turnaround Alice totaled approximately $17 million and cash interest equaled $15 million.
We are taking a number of actions to reduce our total operating expenses capital expenditures and turnaround outlays in response to the current environment.
Thus far we have identified approximately $150 million, an annualized total reductions versus our 2020 planned outlays, consisting of $65 million to $70 million and reductions to cost of goods sold.
$50 million to $55 million introductions to operating expenses and $20 million to $25 million introductions to capital expenditures and turnaround outlays and $5 million to $10 million and reductions in interest expense.
The largest driver of the 65 to 70 million dollar reduction in cost of goods sold is reduced internal fuel burn of between $45 million to $50 million within our refineries.
Followed by projected reductions in our supply and offtake fees, which flowed through our cost of goods sold of $15 million to $20 million.
Opex reductions are a combination of reduced Hawaii refining operations and deferrals of non critical expenditures across all segments.
Our capital expenditure reductions and turnaround outlay reductions were approximately 60% maintenance and 40% growth.
Our revised capital expenditure and turnaround outlay outlook for the full year is now $95 million to $110 million with the majority of this scheduled for the second half of the year.
These actions demonstrate our commitment to navigating this environment.
This concludes our prepared remarks, operator, I'll turn it back to you for QNX.
Thank you we will now begin to question and answer session to join the question Q You May Press Star then one on your telephone keypad.
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Our first question comes from Neil Mehta with Goldman Sachs. Please go ahead.
Hi, Good morning. This is carlyon for Neal thanks, very much for taking the questions.
Good morning, Jefferson was just around the 150 million reduction the cash outlays. Thanks for the color on kind of walking through some of the key line items driving not reduction just curious on your thoughts on if any that should be viewed as structural versus cyclical in response to the current environment.
Sure I mean, I think the cost of goods sold reductions were referencing 65 to 70 million are.
Correlated to the price oil so.
Depending on your your structural view of the price of oil I think thats.
Repeatable, so and again, a low price environment, we think those benefits flow through.
Again, the Opex reductions.
Our reflection of reduced activity in Hawaii, so to the extent, we increased activity levels, there you'd see that return.
And again I think we've deferred a number expenses.
To future years.
Great. Thanks, and then the follow up is just around Hawaii can you talk a little bit about what you're seeing real time from a demand perspective and that market, particularly as it relates to jet fuel and then could you also touched upon how operations around crude slate and product yields have been slacks.
In order to address the changes that you've seen in that market.
Sure early this is bill let me, let me address the changes in the them in the market and then I'll, let Joseph handle the discussion on the crude yield in the and the other the product yield in the crude slate.
Generally speaking as you know the when the Governor announced the quarantine our jet fuel demand or commercial jet traffic dropped.
Within literally 72 hour period and.
That demand in the past has been as high as.
50000 barrels a day in peak seasons.
That that's including all demand on the loan.
Commercial.
Military and cargo.
When the commercial jet activity dropped we've really dropdown virtually to only cargo and military at this point so.
45 to 50000 barrels a day, depending on the seasonality has gone down too.
The 12 to 15000 barrels a day level and that's again really related principally to military cargo and some commercial jet traffic, but even the commercial jet traffic that I think we are seeing is somewhat cargo related because the load factors are so low.
On the gasoline side very different story.
Very similar to the mainland I think we'd probably bottomed at about 50% declines at the at the.
Kind of peak of the shelter in place.
We're seeing a trend up we're probably up 20% from the bottom I. We've we've we're probably closer to 65% today.
I would say gasoline demand, probably only about 10% of gasoline demand really related as tourism markets. So keep in mind, 90% of the gasoline demand a local demand factor diesel demand has been relatively a strong just like the mainland it's down a little bit, but it's clawed its way back alongside with gasoline to.
Man, where again, we're probably in the 65% range given the tourism variability you tend to see lower demand in neighbor islands than you do in Oahu, where two thirds of the population lives, where you've got military activity and much more commercial activity as opposed to Maui, the big Allen and Kalei, where you have.
A much larger impact from the tourism trade.
Just if you want to handle okay, originally and we had some production and match our oil yields.
Thanks.
Visible to the point, where we actually sell everything that we make so a number one week.
Throughput volume, 40% by shutting down I'll follow as crude unit number through we've got hold jet fuel production by almost 50% by dropping Max trend for diesel and Doosan Hydro Cracker and then them Hydro treater number three we are running the former.
It could use trades to make less gas mullen and numbers ruler manager fuel blending to two really increase those system flexibility.
That's great. Thank you.
Thank you.
Our next question is from Matthew Blair with Tudor Pickering Holt. Please go ahead.
40, Matthew Hey, good good morning, everybody hope everybody is safe.
I was hoping you could talk about your exposure to contango.
All three of your refineries fear mainland refineries looks likes a W.G. I assume a market structure is showing about a four dollar and 16% discount.
So would you expect to capture a 100% of that in Wyoming and.
And in Washington, and then I guess for Hawaii.
I guess can you comes from that you do have exposure to the benefits of Brent contango in Inc. and walk us through maybe just how to think about modeling that.
Sure, Yes, some at the I think.
In Washington, again, we do have.
Exposure to that with respect to most of our barrels and given the.
Way in which we hedge in the way our intermediation functions, we do capture the benefit of the Wi Fi contango there.
Again, I think thats.
Evident in the way that are intermediation functions in Hawaii again, a similar dynamic is in place with the way the intermediation with geron functions.
Again, I would say the benefit there's probably not dollar for dollar as we manage the.
Exposure to the front of the curve and again tend to be spread out further down the curve and the majority of our barrels that said, we do have a fair amount of exposure to the front of the curve. There as we are using our tankage as another one of our assets in Hawaii to manage and optimize production and contango is one of those tools that's available to us.
But the intermediation, we can capture that.
Let me add than in Hawaii dimension.
Going from a plus seven this quarter two plus four in the second quarter.
Going to minus three basically in the third quarter two at $10 per barrel improvement in between.
First quarter through the third quarter that contango you just mentioned is eliminated the build fan this differential and will really help our competitive position.
Hi.
Indeed, indeed, okay, great. Thanks for the color I.
I guess just turning to logistics. So results were strong for second quarter in a row just wanted to confirm it kind of sounds like this low 20 million EBITDA.
A number it is kind of the baseline going forward.
However, this number would be impacted by.
By lower runs at your refineries in Q2 is that is that correct.
Yeah, Matt I think thats, the right way to look at and if you.
Through Josephs numbers again from a throughput perspective.
Nearly the largest impacts in Hawaii.
And again, I think that's where you'll see the proportional response on the logistics side.
And again I think Wyoming had does have some reductions, but it's just a much smaller overall contributor to our logistics EBITDA profitability and then you can see Washington, the reductions there are projected to be much smaller so less impact through logistics on that front and then I would generally mentioned that.
The increase this quarter was driven by increased throughput in Hawaii in particular.
And Thats really logistics throughput not refining throughput and then also the synergies that were able to capture between Washington, and Hawaii as we're using our freight to move product and balance the systems between Washington in Hawaii, So we'd expect that to continue.
Again, but I think there will be some reductions due to lower throughput in Hawaii.
During the second quarter very clear.
Thanks, everybody.
Thank you.
Our next question is from Brad Heffern with RBC capital markets. Please go ahead.
Hi, everyone. Good morning.
Another question on Hawaii, just on the margin side of things so.
Obviously the indicator for April was minus two unchanged you're talking about.
$4 differential to Brad.
So you are starting the quarter it seems like while behind on the margin product, but at the same time I assume that really the indicator at this point isn't necessarily indicative of what's actually happening. So can you talk about how we should think about.
Capture versus days is really sort of penal indicators in the second quarter.
Yes, Brad its will I think one thing to keep in mind in the three one to.
Today is that a third thats jet fuel and today or let's say over the course April the spread between jet fuel and diesel has been.
Negative $10, a barrel in Singapore, and so again that is.
Impacting the three one to index as you heard Joseph reference and typical market environment, we would be operating the refinery to maximize jet yields in this environment, where minimizing jet yields and are moving our production slate to between 15 and 20% versus the implied and 30.
3%.
In the indicator, so I think thats.
One dynamic that's significant there.
And then I think the other thing to consider is.
As you approach a zero down for the three one to indicator.
You are.
Typically our contracts have a fixed.
At or to them and so when you start trying to model capture.
Have a very low 31 to indicator.
Again, you need to keep in mind that we've got a fixed.
Patter on almost all of our refined product sales contracts. So.
Keep in mind and then the other color I'd provide on the crude side as while we're at.
Hi, $4 Dif for the second quarter, there's a large spread between let's say the month April in the month of June and the June numbers are closer to what Joseph Syndicating to expect in the third quarter.
And so again I think.
April is really the timeframe, where the residual lag on crude kind of fully works its way through our system.
And Brad fill there's there's probably one other factor to take into consideration when you think about capturing the 312 and the and that is as our jet declines.
A lot of the remaining jet fuel demand is actually priced off the west coast markers and so our exposure to Singapore jet cracks in particular is very low as if commercial traffic comes back I think you can expect to see awaiting that's more consistent with the Singapore oriented marker, but at these low.
Levels as long as the quarantines in place our jet exposure is more likely to be west coast oriented.
We have been will you spoke about.
Recapture let me just.
A couple of sentences above.
The market.
I think it's very clear the negative $2 barrel core today is not feasible and the definitional feasible is maintaining.
Refiners in the mid Pacific.
Yes for long term too to survive five years average has been $10 per barrel produce index. So there is about $12 per barrel.
Up to two recover Andy on the question is.
How fast timing on the gasoline side, we are now let's concern, we think that pay markets own headed back to.
Routine. We also think we'll be demand in the PCP impact that we'll have gasco NIM consumers will drive more as the prices is lower we appreciate the jet fuel recoveries, probably going to be smaller and we're going to watch this decent longer term Luke.
Good promising with the most impact from covered 90 theme, but we will no longer term, we passed amount industrial production economy type of impact so.
This is the market for now we will watch and wait for things to rebound at a feasible point.
Okay, great appreciate although that detailed answers.
And then I guess switching to the inland refiners are the normal refineries.
Is there any chance that we see move around.
Slate other facility just given other shutdowns or the fact that Salesforce is trading so right now thanks.
Yes, Brad its will I think.
Keep in mind fruit for Washington, We do have some flexibility there given our waterborne access so we do have.
Levers to pull and then with respect to Wyoming.
Keep in mind, where pipe connected and we also by feel barrels so it gives us some flexibility.
To try and manage it as effectively as possible there is.
No doubt that the producer in the ammonia United States is responding to low prices and we are seeing that I think were.
We will use all available logistics options, we've got to ensure that we keep the refineries supplied as economically as possible.
Okay. Thank you.
Our next question is from Jason Gibson with Cowen. Please go ahead.
Hey, good morning.
I wanted to circle back on the.
Hey on the Opex cuts you announced.
About a third of it.
I guess is related to the fuel burn.
Let us do with.
Oil prices so what's the delta.
Or the price you're assuming for that fuel just given there's been a lot of volatility and the crude price.
Over the past.
A few weeks and I guess several months.
Because having an understanding of what kind of the assumption that are that underpin that $50 million and savings would be helpful.
Hi, Jason is it was roughly the forward curve.
Probably about two weeks ago, so, let's just assume that its.
On average for the rest of the year, you're probably looking at close to $30 Brent.
And $25 WTI.
Okay.
Great. That's helpful. And then my second question is just circling back on the Asian market.
I mean, thanks, a lot of.
And indicators out there so just some rebound in Asia market, but margins remain.
Low based on kind of the indicator margins are youve provided can you just discuss what dynamics are going on there that would keep margins depressed despite demand.
Rebounding in kind of how long do you think it's going to take until.
The margin environment our versa.
We think it's the short term inventories are starting to respond to people going back to who'd been negative pressure from inventory.
Morning, guys related to impact gasoline cracks.
And then jet fuel you know we will watch recovery.
Same with you in this new.
End of the data refineries need to cash code paid online and obviously funding.
Yes.
Cutting runs snowing downs and supply demand is taking care of it.
Yes, I think what you see in the market today is a reflection of just the kind of imbalance that exists. When you see this type of demand shock happen and again, it's it's literally refiners that have.
Run out of college and have to.
Clear barrels into the market and therefore, you're going to see the marginal barrel until that.
Refiners become feasible again, and again I think they're shifting back there quickly.
Be incredibly volatile and you're also need to factor in the fact that freight is a huge impact on the Singapore indexes barrels are trying to cleared alternate markets. So recently, you've seen clean product freight spike that's impacted the Singapore.
Refined product cracks.
Only because again theres less options for those refiners that are out of college that are trying to use floating storage too.
Flex their supply chains to move barrels. So again I think as soon as you see that feasibility rebalance I think you're going to see.
The margin profiles.
Begin to regress toward the mean.
Got it.
Hi, just sneak one more and just about this swing from $7.
Well or I guess, a $10 benefit on the landed costs in Hawaii part of that I guess is that contango, but then what's the what's the other parts of driving that is that.
Freight costs or is there or is there something else in there.
Freight costs because actually offsetting.
Contango, a little bit field.
Good contribution when you have contango the amortization so floating storage is bigger than it's it's Paul.
Pushing freight cost a little bit top $10 per barrel improvement indication peaks that quarterly into account. The other Q2 is just to weakness.
Qunar with its overall supply.
And now is proprietary and we'll do everything agree Ken to move to Pilbara and you have looked really found in his prepared comments on the supply side you have.
Sure and on the demand side, we have the recorded 19 Shaw can to combination was.
It was very strong include differentials.
I think Jason the other thing to Justice point Theres a large.
Spread between the physical crude market in the financial crude market and so again, we're quoting everything off of ice Brent.
And again I think if you look at the dated Brent.
Relationship to ice Brent there's large discounts that are evident and we're capturing that has a physical buyer crude.
Got it.
Thanks.
Once again, if you have a question. Please press Star then one on your telephone.
And our next question is from Andrew Shapiro Lawndale Capital Management. Please go ahead.
Hi, Thank you.
With the past few impairment write downs, what does Lear me.
Net book value left on our books.
Just shy of $1 million Andrew.
Okay. So.
Not much more impairment risk there.
Okay.
If this.
Drags on or when we get a second wave in the flu season have you guys already identified further cuts the company's could make if needed.
Andrew its Delaware constantly assessing our cost structure.
And we're certainly looking at what other actions could be done to the extent that this.
That this pandemic and frankly, we're planning on a long recovery here I think our cost structure in place actually allows us to.
Handle.
The current demand environment for quite some period of time, but if it should drop even further.
There are other actions that will take into consideration that would further reduce our cost structure.
Okay. So you feel like you have already adjusted to the current demand levels.
Adequately.
Yes, good and since since since you are on the ground.
Mers on the ground in Hawaii, and the state has kept its curve well under control as its and island like New Zealand in Australia have done the same.
What are you hearing about the states.
Reopening plans with respect to first off locals and then the timing or the steps necessary for it to open to tourism, which would obviously.
Improve the jet demand.
Well as you mentioned, it's actually a very.
Safe place with respect to the pandemic I think there's been no fewer than 10 positive cases in the last week in Hawaii.
And the Governor has begun to discuss limited openings they've done a really good job of.
Tamping down the virus in Hawaii.
The climate May help a little bit so I think you're going to see an increase in activity.
Within the within the the main community there.
In the next.
Month.
Your question about tourism is something that really is just up in the air and I could I couldn't really tell you what they're going to do at this point.
Obviously, if they're bringing tourists into the state they run the risk.
Of.
Run the risk of introducing the virus and having an outbreak. So I think the state will be very careful.
And do what they can to ensure that they limit any.
Ability to EUR 80 risk associated with tourists entering the market.
And and lastly, given that you're not going to be attending any in person investor conferences for the foreseeable future.
What are you.
Doing to continue to.
Now on used the word market per se, but to conduct investor relations.
For current and potential future shareholders, and what I guess virtual conferences or on the calendar.
Yes, Andrew its will I think at this point, we don't have any.
Kind of current virtual conferences on the calendar I think the.
Typical scheduling still.
I think reforming in reshaping with respect to how.
Investor outreach is going to function in this environment. So again I think for the time being were.
Ensuring that we're reaching out to our known shareholders and ensuring that we're reaching out to prospective shareholders that we've either receive reverse inquiry from or again and have had historical dialogue with.
Okay. Thank you guys.
Yes, good luck.
Current tool with Scotia, and it was very successful.
We may see this activity coming back yeah.
Thank you.
Our next question is from Patrick Sheffield with Beach Ball and capital. Please go ahead.
Hey, guys. Thanks for taking my question.
Just for just one follow up on.
Good morning.
Wonderful follow up on your liquidity position.
And.
He is maybe a little more colour on the cadence of the turnaround Capex spend sounds like based on your guidance you have 100 million left to spend.
And Q2 is going to be the trough for EBITDA based on what you guys. The today.
Is that.
Thank you Matt.
36 million of liquidity at 100 Capex needed.
Turnarounds.
Well like how do you look at that playing out over the rest.
Sure.
So I.
Victor the best way to think about our liquidity is to start with our fixed charges. Ryan. So, let's just start with excluding the turnarounds and basically we've got quarterly capex requirements of about $15 million and cash interest and amortization 16.
So, it's let's call that $30 million of quarterly fixed charges that we've got.
And then if you just think about our retail logistics businesses right. So last year in our retail adjusted EBITDA average about $13 million quarterly and logistics averaged 19, and then layer on top our corporate overhead of about $11 million quarterly. So you add up all those pieces before you get to refining.
You've got about $21 million a quarter of EBITDA.
So I think even before you get to refining so if you assume refining zero.
Contribution from the refining segment for the remainder of the year, which I'd say is close to where we were in Q1, if you exclude the Wyoming FIFO impact for refining Youre looking at approximately.
10 million dollar per quarter cash burn.
Yes, our ending March liquidity of 137 million.
So I think that's probably the best way to think about it and then I would just say keep in mind that the $90 million compression and collateral that I referenced.
That drove.
The decline in liquidity.
I would start to increase if crude bounces off of let's call. It at the March flows at $20 diabetes and $22. Brent. So we're not planning on this but I think it's worth watching and I think with respect to the turnarounds again I think we will it certainly our preference to conduct those.
On time as we planned I think they're up our alternatives that we have identified that.
If needed we can defer those further.
So again I think we've also identified a series of smaller options to bolster liquidity should it be required and I'd. Just say, we'll continue to actively manage the balance sheet and further adjust our operations as we need to respond to market conditions.
That's very helpful on and a turnaround that $60 million ish for the rest of the year of $50 million, but you want and Thats plans.
GAAP you just take.
Really the residual remaining for Hawaii and.
Wyoming is roughly $40 million and then again, there is sort of $10 million of Presplit pre spend for Washington, Bucketed in there, which is really a Q1 21 item, but again I think.
The timing and the outflow of that I think is.
Certainly very late in the year, if not probably trickling into Q1 of 21.
Got it.
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And then sorry last question I guess you Didier.
Retail average and logistics average based on last year I guess, we can just take look logistics and flex it down by however, much loans are going down.
And then retail.
They had a good Q1, but I forget what you said earlier in the call that that is April was down a bunch, but it bounced back BDNA or I don't know thousand reference to another part of business, but.
Yes, I think the logistic logistics based divesting to think about is just the Hawaii impact is probably the most meaningful.
On to our logistics.
EBITDA.
During the second quarter, and then again retail.
Again without getting into the dynamic between margins in volume keep in mind margins have continued to expand at the price falls and on faster, which was the case during April so again, there's dynamics with respect to both volume and margin.
To to consider so.
Great Awesome. Thanks, I appreciate the color thanks, guys.
Thanks, Patrick.
This concludes the question and answer session I would like to turn the conference back over to William paid for any closing remarks.
Thank you for joining us today everyone.
We certainly began 2020 in a challenging environment.
However, I remain confident in the durability of our business through the market cycle and our track record of delivering long term value to our stakeholders.
Thank you have a good day.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Mhm.
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Yes.
And.
Yes.
Okay.
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