Q2 2020 Delek US Holdings Inc Earnings Call
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Good morning, and welcome to the Delek US Holdings second quarter 2020 financial results.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Sarkouhi followed by zero.
After today's presentation, there will be an opportunity to ask a question.
To ask a question you My press Star then one on your Touchtone phone.
Withdraw your question. Please press Star then to please note. This event is being recorded I would now like to turn the conference over to Blake Fernandez Senior Vice President of Investor Relations. Please go ahead warning over lunch. Thank everyone for joining us on todays conference call the webcast to discuss Delek Us holdings.
Second quarter 2020 financial result.
Joining me on todays call, who do you mean, our chairman President and CEO room, Spiegel, SVP, and CFO and Lewis, who bought though he VP and president refining as well as other members of our management team presentation materials used during today's call can be found on the Investor Relations section of the dealt with U.S. website.
As a reminder, this conference call may contain forward looking statements is that term as defined under federal Securities law.
Please see slide two for the Safe Harbor statement. In addition to reporting financial result in accordance with generally accepted accounting principles are gap. We report certain non-GAAP financial result, investors are encouraged to review the reconciliation of these non-GAAP financial measures to comparable GAAP result, which can be found in the press release.
Which is posted on the Investor Relations segment of the website.
Our prepared remarks are being made assuming that the earnings press release has been reviewed and we're covering bus segment and market information then incorporated into the second quarter release.
On today's call Rouven will review financial performance I will cover capitalization liquidity and died and Louis will cover operations and Capex then who's the will offer a few closing strategic comments with that I will turn call over to Reuben.
Thank you Mike.
On an adjusted basis for the second quarter 2020, Delek US reported a net loss was 111 million worth dollar 50, Perisher cumbersome net income was 98 million for adult 27 per diluted share in the prior year period.
Our adjusted EBITDA loss was 85 million in the second quarter of 2020 compared to 211 million income in the prior year period.
Just as a result includes 75 million after the ducks headwinds <unk> dollar and two cents for sure.
This is comprised of an after tax other inventory and breakfast product loss was 92 million realized the realized hedging losses of 104 million optitex, partially offset by a fixed price could benefit as our Tyler refinery or 85 billion after tax.
Lastly, adjusted results reflect the reversal of the 36 million tax headwind disclosed in the first quarter of 2000 Intuity.
I would point out that the other inventory and purchase products mentioned, our separate from the LCM inventory impacts that are already excluded from adjusted results.
On slide four we provide the cash flow waterfall in the second quarter of 2020, we had a negative cash flow for approximately 169 million from continuing operations, which includes the working capital detriment of 363 million.
Within the working capital is 130 million of income tax credit, where we expect to receive the cash in the first part of 2021.
Finally cash capital expenditure in the quarter were $15 million with that I'll turn it over to Greg. Thanks Rubin before discussing the balance sheet I would like to highlight some additional disclosure in the press release this quarter details of other inventory and purchase product impacts are highlighted within the burbage of the bid each business segment.
And broken down by refinery within the refining segment page 10 outlines the details of both realized and unrealized hedging by segment.
Finally, I would like to point out that the Gulf Coast Fivethree to benchmark illustrated on page 13 has been changed from our high sulfur diesel to ultra low sulfur diesel for the distillate component of the equation. This benchmark better aligns with our product yields in sales hopefully this increased transparency will provide bit better visibility into the.
Formats of the business with that we'll move to slide five which highlights our capitalization.
We ended the second quarter with $849 million of cash on a consolidated basis and $1.6 billion of net long term debt excluding debt at Delek logistics of 979 million. We had net long term debt of approximately 627 million at June Thirtyth moving to slide six we provide third quarter guidance for modeling we remain calm.
With that we will meet or exceed the full year guidance provided on last quarters conference call for 100 million, an operating and overhead cost reductions with that I'll now turn the call over to Louis to discuss our operations and Capex.
Thanks, Blake during the second quarter, our total refining system crude oil throughput was approximately 266000 barrels per day, our niche market locations continue to support running at higher utilization rate versus the industry.
In the third quarter of 2020, we expect crude oil throughput to average between 230 to 250000 barrels per day or approximately 80% utilization at the midpoint.
On slide seven I want to highlight our capital spending capital expect expenditures during the second quarter were $15 million. We remain confident we will hear at our full year 2020 cap capital guidance of approximately $250 million recall capex excludes the JV.
Investments like Red River as well as the went to Webster connector, we're financing will be provided by the joint venture.
The 2020 capital program is broken down by segment as outlined in the slide I would point out that roughly 81% of the full year capital program was completed and the first half, leaving minimum outlay for the balance of the year.
Next I will turn the call over to Newsy for closing comments.
Thank you Lewis and good morning, everybody.
Our strategic vision toward the business mall, and with more stability and predictability is well underway.
Our midstream investments are coming to fruition and should lead to progressively improving performance over the coming core.
Our diversified portfolio portfolio continues to provide the resilience during this period of weak refining margins with the logistics and retail segments generating a corporate <unk> contribution margin above $80 million collecting collectively.
Yes outlook for these businesses remains robust despite macro volatility and frozen logistics performance supports our 71% ownership in decade.
Delek has a long you story of being nimble and we remain a drought in terms of managing our cost and capital spending to measure prevailing macro environment.
Were committed to maintaining a strong balance sheet with ample liquidity and are well positioned to we've stayed more macro volatility were maintaining our quarterly dividend payment of 31 cents per ship with Dod operator can you. Please open the call for questions.
Well now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using speakerphone, please pick up your handset before passing the keys can withdraw your question. Please press Star then Tim.
Oh first question today comes from Neil Mehta with Goldman Sachs.
Good morning team met and thank you so much for taking the question that.
I guess the first question would be a your your perspective on a on M&A recognizing there's a lot that you can't say here TV I made some comments on their call yesterday, but your thoughts on a consolidation in the industry, whether there's a need for it and whether you.
See delek playing a role.
Well good morning, Neil.
First.
If the company of the industry is ripe for consolidation.
Consolidation I think we're approaching that point I don't know that Oh, we're there yet, but I think that were fortunate that point, especially in light of.
Some assets.
Closure as if you will dust.
Several people many people understand that there should be a some differences if you will in the in the marketplace. So I think we're approaching the.
That point, yeah in regard to Delek <unk>, playing a role in it.
Well along in times like God.
We need to keep our eyes open.
Oh for the opportunities that exist in the marketplace.
And Oh.
Well for us.
Oh summing that up.
The reason, we maintained a strong balance sheet.
And also we feel good with the fact that they are yet to all the segments that we have both a return and midstream are performing well.
That allows us to fill a stronger by telephone.
No I appreciate that is I guess, a follow up its just some working capital in the quarter. It was a big number there is a tax deferred tax item I think embedded in that can you just talk a little bit about working capital how it reverses and then talk about that the tax as well and how we should be modeling that.
Well. Good morning. This is rubin the number of working capital of negative 363 million is comprised of three major number one is the 200 million noncash LCM reversal. The other one is 130 million increase in tax receivable, which we expect to get a in the first half of 2021.
But I will close that for a second opposed here for a second into first quarter. We had 60 million affects receivable. The 130 million is is it is the change into second quarter, which makes the totaled 190 million over the 190 million.
160 is federal tax and 38 years various state taxes that we expect to get in the first half of 2021 and in addition to that there is a 36 million dollar increase in inventory for SBR.
Great guys. Thank you.
Our next question comes from Benny Wong with Morgan Stanley.
Yeah, maybe around me yes.
Hello can you hear me well got.
Well I'm hearing right go ahead, hey, sorry about that having capacity issues here.
I just wanted to get your update on kind of midstream business and your outlook. There I know you any team has been really focus on going got business, but just curious ensures again you updated views on what the business environment might look like coming out of this downturn.
Is there anything new we need to think about as you guys towards your target EBITDA grew up there.
Well I'll put to good morning Binney.
We've said all along over the last 24 month Dot we want to create a more stability to delek us though.
Earnings power.
And.
We provided a I think we we demonstrated Dod this quarter with midstream being your long $65 million EBITDA, we did see Doug the outlook continues to be a positive and we expect to improve that number over the next.
A few quarters and then.
Obviously, we have the winked Webster.
Idea that sits right now I've delek.
You as.
We have several avenues now we several agreements that we can take.
From a different point.
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Well, we will have the ability to do.
To take both from Midland Cushing, all the way to the goal.
So we continue to look at.
That's what digitally and we continue to think that we need to provide more stability.
Due to our and power earnings power.
Oh for Us and we said that all along.
$400 million EBITDA over the next three years, you thought target we set to be 72, 390, I think with the corn surprised we would think about 400, we don't see any reason why we won't be on track to achieve that.
Okay. Appreciate those thoughts you. The second question is is around your retail business, you had a pretty strong quarter.
In terms of margins and merchandise sales.
Just wanted to get a sense of the dispatchers and you're seeing driving that how does that compare to July and do you expect those trends that kind of continue into the third quarter.
We did see double digit in the core July is I'm going by memory I think it's like 9%.
Same store sales.
We mentioned that in the past several component for us.
The people see that home.
Oh and they go out so they go in and out.
Two convenient stores I'm sure Oh, you heard it from all our peers second in our area of the.
Big boxes don't operate any more 24 hours so after hours.
Yes business, if picking up have picked up if picked up.
In the third.
Component is.
People really don't want to stand in line.
Outside big boxes, so they prefer to do their shopping I believe.
You know areas.
In an hour. So these are the three reasons.
Great and do you see a these trends are still persisting or do you think it's just more of a more of a isolated events.
What changes as we kind of get passed this call it a whatever that's fine.
Where are you an unusual times, it's hard to predict.
Do I think that we can sustain 12, 13% or.
Oh Vera.
Same store sales, probably not but I think people are changing their behaviors Elizabeth so I expect over the next to do we use.
To have a strong merchandise sales in the stores again, it's hard to predict but if I need to guess.
Appreciate it thank you so much.
Our next question comes from Manav Gupta with credit Suisse.
Hey, Louis So back in 16 had a good retail business I'm, making 60, 65, and then EBITDA and Commscope back call for the nine times you take it and you sound like the marketplace today are much higher.
I'm just trying to understand can get screen repeat itself, you don't need attached not saying we need it feels an on site.
The multiples are higher than they would even last time when you're building business out so is that a possibility his pay depicts itself.
Well looking I've got business, all always or every business Oh, we're focusing now on a continued to build the a abysmal, but we're always open.
To a discussion a wrong multiples and Oh, we were very proud none of I think I mentioned that do you.
With the fact that between retail and ER in midstream, we are approaching $80 million to $83 million EBITDA for the core. So these are higher multiple businesses you see it indicates a performance yeah and.
If an opportunity to get a high multiples Com then we'll look at it very carefully.
Great and include quick one up a lot of progress was being eight on throttling back up in last quarter's kratos, Yeah. That's performing assets. This quarter, it's got going into other than just trying one understand wasn't harder one times like kratos really really well until this quarter. So if you could tell us what happens with dogs this particular quarter.
Hey, good morning, and obviously, we got so there are two elements those numbers fell offset between physical loss and put the vision game that we called out in the reconciliation on thinking about downtime from like that and the second quarter say is based upon park and we have seen high on finding in Q1 in some it's more gibbons.
So that's explained there they they'll sit diffusing.
Well thanks, guys.
Our next question comes from Ryan Todd of extending energy.
Yeah. Thanks.
Good morning.
As.
Maybe I'll start out one on strategy as your business model continues to transition towards more stable cash flow can you talk about priorities for do you see that cash in particular, how we should think about dividends sustaining the dividend in the near term and longer term growth.
That's a great question for Oh, It is or is this correct. We are we want to create more stability of on their earnings in the past we used to be all no based on differentials and nothing that's what we're trying to do is to a continued to increase.
Got a stuff that's stability.
Speaking about the dividend or we got a lot of questions about the dividend.
During the quarter.
Obviously, what Oh Oh. The reason we chose to continue would be a dividend is that the outlook for both a midstream as well as retail is.
Uh huh.
Very bright.
And or bright.
And Oh, we Didnt see a reason to a Spanish.
Our shareholders.
Over weakness in the refining no obviously, if the weakness in refining.
Continues then we will look adopt especially in light of like you. Just said are there opportunities that exist in the marketplace.
Okay. Thanks, I guess if.
If this weakness at the week operating environment.
Were to persist Ben.
There could potentially be a change in dividend policy the.
Yeah, that's something that we look at it every quarter. So we well I don't know that though we are necessarily need to make a decision now making enough that we don't have a decision we do need to lucrative a every quarter Oh, we'll look at dividend is something that is ER versus buyback something that can much more much more long term.
And and as it is a woman says we have a $850 million on the balance sheet blocky, that's crazy to call. It $130 million. So that's something that we'll look at it every quarter.
Okay. Thanks, maybe if I could.
I love with one on on the current environment utilization to meet with with cracks are still relatively soft and.
Got your trends.
As we think about catchy trends in the third quarter, we still have relatively narrow differentials and that the contain goes not what it was during the second quarter can you help us brand the relative competitiveness of operating in third quarter versus Twoq, you and what that could mean for your utilization rates in the second half I'm, giving you were pretty strong in the second quarter.
Good morning, Ron This is Louis so yeah. Ron you you said it so the Midland differential you know what it does not exist. So we're anticipating 80% utilization in Q3.
Mainly to keep pace with demand around local markets and also we want to make sure. We focus on not building any any unum untoward right. So we want to say stay competitive with that.
And Ryan as Blake I'll chime in on the on the capture side of things you know, there's not a lot of things that are going to change quarter to quarter necessarily as you know when the prevailing environment at the low margin environment. It makes it a little difficult on capture because you had some fixed cost component. So as a percentage that hurt you, but the one a uplift we should get going into next quarter.
It is cross topical already mentioned the impact of bulk versus ratable sales, but we are restarting the FCC unit. There. So you should see an improvement in gasoline yield.
And so in theory, you should see a little bit of uplifting capture at krotz.
Potentially could serve as a little bit of a buffer for any compression in contango in Midland So hopefully that helps.
That's great thanks to the color.
Our next question comes from Phil Gresh with JP Morgan.
Hey, good morning, and just trying to follow up on Ryan's question just around that their accordingly.
And the lower utilization comment you made it is it just spread out across the refineries or any.
Area in particular, what would be lower and then just with the Opex guide that look sequentially higher.
Yeah, I'm, just trying to understand what drove it down so much in the second quarter. Andy just as you think about this expensive the sustainability of the cost savings that you've outlined where do we stand with that.
So two different question so good morning field.
The first one a wrong or utilization or for the most part we're running big spring food and the rest based on the economic.
Situation and the LP, but you can assume for modeling standpoint, that's a big spring is running forward with regard to a opex I'm sure Blake would love to think that's cool, but Oh, Hey, Phil Good morning, Yeah. So you know at the end of the they're going to stick with our 100 million dollar reduction in Opex GE in a year over year if you.
Yeah, we obviously have two quarters in a bag and we have guidance for Threeq you. So if you take the midpoint of guidance for Threeq, you and you extrapolate that Fourq you you can see that we're well on our way.
Theoretically it could almost 125 million, but we're not going to change guidance, we want to be conservative. So you know I think the main messaging on the full year basis is we're delivering on what we said and we feel very comfortable were going to meet that to your question specifically on Twoq you in the ramp up to Threeq you. There's a couple of different components in there one is just some deferred.
All of maintenance activity from Twoq, you, that's going to restart into Threeq. You. There is the restarted the FCC unit that I mentioned at Krotz. So there's some cost around that and then there's a couple of renewables plants that are coming back online. So we do have some incremental cost, but like I say, even at the three Q level extrapolated to Fourq, you Oh, we're going to exceed the cost guidance or for your base.
Yes.
Okay got it.
Second question. He is just and I think attack allocation one as we look at 2021 branch, it's a little bit early but just any additional tax and potential capital spending levels next year and that Newsy, you had mentioned I don't pass range and not too long ago, you're talking about renewable diesel.
Actual.
That's an opportunity so I just started age see any latest thoughts you have.
Okay. So these are two different question.
It depends on the macro environment can do macro environment stays the way Dave.
Trimming down if it's a for next year I mean, if we are if things will improve and honestly, we don't believe that this year there would improve dramatically from where they are now but next year. There's a there's a chance that they'll improved in.
We'll open it up.
In regard to renewable diesel we mentioned that.
In the past, we cannot talk about unfortunately, because of some disclosure issues, we have with our partners.
But we do have an option.
To buy one third of renewable diesel.
Another company built now as part of our.
Bakersfield deal does that these are.
An option for nominal Oh amount.
And I'll leave it to Dot is is a we work are on disclosure.
Issues with our partners will be happy to provide you for more details, but we do have an option to buying too for a nominal amount into a.
Nubile diesel blend in California.
Okay, just saying 21 Capex I mean is can you give us an order of magnitude of that flexibility you would have year over year, if the environment.
To to be challenged.
Oh, we can swing no problem between $75 million to $125 million.
Okay.
Right. Thank you.
Our next question comes from Brad Heffern with RBC capital markets.
Hey, good morning, everyone. Thanks for taking the questions.
I'll start off just on DKL. So obviously the units of have come back almost all the way from the trough. So I'm wondering if.
With that that sort of reiterate your commitment to that has a isn't sort of separate vehicle or whether you still think that the performance there needs to improve.
You know sort of for it to add value for Teekay.
That's a great question.
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The only stepper.
I have performed very well, but still the yield is is pretty high school.
Our cost of capital is a is below 12%.
So while MLP is in general we're all ought to favor like any other a vehicle would the energy sector, we perform pretty good.
Finally door that we we increased our EBITDA almost five times in the units are around where they were up five years ago.
So.
Oh, that's something that we need to look at it carefully into future I do believe that eventually something needs to give and not the MLP is need to be traded that was down for 14 does the 16 time.
Yield and when the time Com then we need to look at it strategically.
It is or something that.
We're very proud that.
DKL, it's performed as well as she is indeed.
Okay, Great and I was just wondering if you had any thoughts on the Gallup closure I know, it's obviously a pretty hard in the last but does it have any impact on.
You know the product or crude sourcing sizing the business for big spring.
Well first of the closure itself are you probably I need to ask marathon.
Does it have a impact on on a on the osten into Big Spring area, where we sell as you know products to one new Mexico, a out of big spring So.
That helps.
We are in an environment as you know for utilization the wrong between 75% in 80%.
No. It's something that that is a surprise to anybody so closure of small refinery like this in todays market doesn't mean much but in the future and certainly I think that there should be are the closures.
They ate up and when the market comes our comes back.
We will see the impact.
Appreciate the answers thanks.
Our next question comes from Theresa Chen with Barclays.
Good morning, and I guess my first question that you know as a follow up to Brad's question on the gallery closure and if you'd like to pick your brain about you know the macro environment as we are in a friendly in the second half how do you see it refining economics evolving from here.
And in terms of you know.
Getting cracks in margins better getting back into the right inventory range isn't it a question has additional closure is or tweaking utilization or across the industry. What are your thoughts here.
Well first three so you did a really good questions I'm not sure Oh, we have the onset completely I'm just going by the history, who look at what happened in 2008, it with a combination now the magnitude of 2008 wasn't any anywhere close to what we see here.
I think that had there should be a we think there shouldn't be more closures of refineries.
I think that.
People everybody came into this down cycle with a lot of cash so.
It will definitely more time as people realize that there should be more closure I think that right now we're talking about so far out five refineries that are was shot either permanently or.
I'm not operating.
I think that there should be probably.
Few more that will be a shot and not the same time demand yeah should come back now do I expect this to happen over the next we must probably not I think that who are in this environment for a little big maybe two three quarters.
And that's.
Something that we all b to b discipline as an industry to hinder.
Got it and and then in terms of your long term strategy to high grade at your earnings and like more cash flow stability by transitioning incrementally can midstream so.
Currently your projects are primarily from that supply push perspective, and you know many midstream operators as well as finding competitors have given commentary shying away from that just given the volatility upstream as you go forward and develop further projects down. The line are you still lucky.
At a primarily supply push on strategy or are you on focused more on demand pull side of things.
Well [laughter], obviously I'm anything changed over the last six months. So we why we continue to be comedian and shouldn't be committed to more stability in our earnings and not to be the proxy for the Midland differentials.
The same time, we need to be mindful to changing market. So I didn't know that I can articulate now a long term strategy.
That's what we're doing right now we're committed to a long term stability.
I I just same time.
One to make sure that when the market comes back in the market will come back.
Well I've been here long enough to see it every time when it's so such dooming gloom.
All of us on something happens.
So when the market comes up we're here to to capture that Oh, I don't know that I can articulate.
In this call longtime strategy.
Especially in light of.
The change in the market.
Viz, a viz a questions you off.
Okay, and then maybe just one quick housekeeping one for me, so and the crops and asset the quarter over quarter uptick in the other products to almost 19000 barrels per day when is that just related to building intermediates actually.
Turning down from the downstream units and just any color on what's going on there and how should that trend going forward.
Why don't we do this that the receptor the fast trying to Oh I'm sorry on the fly Blake will take it offline.
Would you and obviously, it's important to everybody will you will publish it.
A follow up with your traffic at thick.
Thanks, Thank you [laughter].
Our next question comes from Doug Leggate with Bank of America.
Hi, guys. Good morning, this is clay on for Doug.
I guess my first question is really on your cash balance it's still very strong here wondering if there's any plans to deploy that strategically or should we think about that'd be insurance for a deterioration up there's pandemic.
That's the.
Good morning play that's a good question, we always say that between 800 in a billion dollars. There well this is where we are comfortable.
Oh, we don't know how long this trend will last.
We have been into it though now what five month so.
I don't know duct, we oh, we necessarily feel that we are we have too much cash at the same time before putting does a a show themselves. Then there's no reason to believe that we want to act.
Okay. Thank you for my follow up question I, just want to get your updated thoughts on the crude differentials structure given that a U.S. producers seem to be asking up little bit more disciplined and obviously there is not supply shock because of the pandemic, what's the view on Midland Cushing.
Right.
I think that off for the next Oh, you're too with their wrong zero.
And Brent Ti <unk>, it's now $3 I think would probably widened a little bit maybe two three the hard dollars before but nothing much here.
Thank you for my last question I, just want to ask about the retail business. So delek has a strong record.
Managing this business why not stepping into it a little bit more aggressively.
It seems like the store count is down from when you guys took it on from online.
It is but just remember that we are building mega stores. So when we divest or 10 stores, we build the store that makes 10 times that.
That volume so we are trying to monetize our oh stores and it shows in the a in the earnings.
And probably will continue to showing the earnings that are these npis, new Oh stores are performing.
Very well for us.
And why not accelerate its Greg.
Oh, that's something that we're looking very carefully we need to balance between retail midstream returning cash to our shareholders. These are all the things that we tried to do.
Great. Thanks for taking the questions. Thank you Kelly.
Our next question comes from Matthew Blair with Tudor Pickering Holt.
Hey, good morning, Newsy could you talk about the contribution from asphalt in Q2 was that a bright spot was lower crude prices.
Hey, Matt Yeah, I am I don't have any hard numbers to give you, but what I would just tell you is the stickiness.
Hi in those margins and a lot of that is sold on a contracted basis. So when you see a collapse in crude prices you do tend to see a nice uptick in the margin for asphalt.
At the end of the day, the bulk of our exposure, there's El Dorado, and I think to certain extent big spring as well. So it was it was definitely additive to the to the overall picture.
Sounds good and then you see you mentioned a few times you expect more refinery closures.
How are you thinking about the competitiveness of crops in El Dorado, just given this a low demand environment are you pretty confident those refineries will.
Stay up or is that something that you're looking at right now.
That's a wonderful question first of all I'm sure the Big Spring and thought are doing a good now you ask a great question the.
But enjoy doing quite well, let me think them one by one here.
The way the we invested a lot of money in investment follow me I know a very reliable, we just need to remember that enjoy they'll get some oh wrong, 20%.
Production from or 20% of its crude from local production, which we buy a deep discount if we can get it.
If we can get these <unk> producers to produce more wood with wanting to do a dent a <unk> I'm, sorry, I enjoy though will be its competitive it's a big spring, we just need to work on it a little more and I think.
We have a plane and ER don't be surprised before we executed on ducts in over the next few quarters.
Especially lack of who are coming up more affordable that's one thing.
Second quarter in cost we have a project that we're not ready to disclose just yes, it's not a lot of money. We're looking at something over there that can increase the competitiveness of of the a refinery we just need to remember because all these four refineries.
Our Oh.
Last week, we finally and they all got hurt.
Oh it during this time when when producers are a stop producing but now as they come back.
If we assume that what comes out of the Mark what comes into the market is light sweet barrel.
Then a decent we father with would be Oh, comparative well I think that any of them is a a candidate for closure at this point I don't think.
Thank you.
Our next question comes from Jason gave woman with Cowen.
Morning.
I had a two questions first on no Red River expansion project I believe that started up now and I know, there's some logistics EBITDA or that you get.
From that expansion, but I think in the past you had discussed potential for also some commercial earnings from that expansion with a wider cushing or Midland differential given that.
Cushing Midland differential has come in.
Is there still earnings potential from that expansion above whatever though the fixed fees on a pipeline and I have a follow up thanks.
[noise], Jason the morning itself. He got so as you all know the business model for final easily lightening optionality and flexibility.
And then although the time and I believe it off tonight's inflexibility to get to saw a small portion.
[noise] prove itself into the catch I didn't refining we do not need to measure that over there if Midland Cushing differential unless we see now that's all the time it was presented a very nice skeptically pleasing and finally.
Okay got it and then the second question, you've mentioned or M&A opportunities a few times. It just was wondering within the three.
Business segments that you operate in where do you see opportunities or where are you most eager to expand between refining midstream and retail if at all in.
Specific to refining are there specific regions that that you think are most opportunistically you guys. Thanks.
Jason Thats a good question, but it depends on if you are buyer or seller.
And M&A or opportunity yeah exists.
All right.
These three segments, we just need to make sure that we create a enough value for shareholders and I'll leave it to that.
Alright, thank you.
This concludes our question and answer session and then I would like to turn call back over to management for any closing remarks.
Well I appreciate everybody's a a good questions. This morning I appreciate dog management executives along the table would meet you Oh I think everybody is doing great job in these times I'd like to thank you investors and analysts for you willing to within our company I'd Love to Ah think the board of directors for their trust enough.
And most good luck to think each one of the employees.
But oh I'm doing this a time stayed safe and healthy.
And made this company what did you have a great day Stacey thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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