Q3 2020 Par Pacific Holdings Inc Earnings Call
Greetings and welcome to the par Pacific Holdings third quarter earnings Conference call. At this time all participants are in listen only mode. A question and answer session will follow the presentation.
I mean once you require operators. This is during the conference. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded.
It is now my pleasure to introduce your host machine you could stop manager Investor Relations Carcasses holdings. Thank you Ms. Michelle you may begin.
Thank you Somalia welcome purposes, <unk> third quarter earnings Conference call. Joining me today are William Pate, President and Chief Executive Officer, well until young Chief Financial Officer, adjusted EPS, <unk>, President and Chief Executive Officer of <unk> before we begin I'd note that our comments today may include forward looking statements any forward looking statements.
To change and are not guarantees of future performance are about and they are subject to risks and uncertainties. Actual results may differ materially from these forward looking statements accordingly investors should not place undue reliance on forward looking statements and we disclaim any obligation to update or <unk>.
I refer you to our investor presentation on our website at <unk> I like to see us easy for non-GAAP reconciliations and additional information.
I'll now turn the call over to our President and Chief Executive Officer Bill pay.
Thank you Jamie good morning to our conference call participants.
During the third quarter, we reported negative adjusted EBITDA of $16 million and an adjusted net loss of a dollar six per share.
Well conditions improved modestly from the prior period, we continued to experience seasonally weak product cracks during the third quarter.
We're also continuing to see improvements in the crude oil market in the third quarter. The Chinese produced a record breaking of crude oil when compared to late spring and summer and as a result waterborne barrels have been plentiful most of this quarter.
The reduction in crude differentials bodes well next year for our Hawaii refining business.
Global demand is slowly began to recover from the depths of April and may with product inventories declining materially in the third quarter. However, a winter surgeon COVID-19 could halt or even reverse some of the improving trends that we're seeing across our businesses.
Consequently, we are focused on improving earnings capability without regard to market improvements.
On the cost management front, we've identified $45 million in reduced cash expenditures for 2021, when compared to our third quarter run rate.
When combined with contractual improvements, we anticipate well more than 100 million dollar increase to our 2021 earnings profile.
None of these improvements are contingent on market recovery.
We also successfully completed both our Hawaii and Wyoming turned around since our last earnings call. We.
We've decided to reduce the scope of our Washington turnaround scheduled in the first quarter of 2021 to defer some planned growth projects. This was a difficult decision, but given the current outlook. It makes more sense to delay the planned improvements to our facility.
Operationally in Hawaii, we continue to operate only parties to meet lower local demand.
Beginning October 15th Hawaii's 14 day quarantine was modified to permit visitors to pre test for COVID-19, and we are closely watching passenger arrival trends.
Early indications have been very encouraging for a resumption in Hawaii, tourism, and therefore jet fuel demand.
Although the logistics segment was a positive contributor third quarter profit continued to be lower than the historical average due to lower refining throughput some of which was related to the heavy turnaround schedule.
In addition, lower jet fuel demand resulted in under utilization of our Hawaii logistics assets.
We are releasing two barges at the end of 2020 to improve profitability.
This action is a key component of our cost savings for 2021.
We also completed our Biofuels logistics system in Tacoma and are scheduled to receive our first unit train of ethanol next month.
We believe the market demand for these logistics assets, a strong given our facilities unique attributes and proximity to growing demand centers.
Retail continues to be a strong contributor to overall earnings fuel margins were strong, but they declined from record highs in Q2, when commodity price declines benefited margins disproportionately.
Volumes improve from second quarter lows as economic activity increased.
Regarding the pandemic and our ongoing efforts to protect the well being of our employees and communities. Our team has done a great job of maintaining operations and executing our turnarounds with effective social distancing.
We've only identified one possible incident of workplace spread and fed zero positive cases from workplace contact tracing I.
I want to thank our employees for their dedication and for continuing to execute safely and efficiently.
We believe that the commercial improvements we have obtained when coupled with our cost cutting and profit enhancing initiatives positions us to realizing our objective of generating significant profitability and free cash flow.
At this time I will turn the call over to Joseph to further discuss our operational activity.
Thank you Bill and good.
Good morning, everyone.
In the third quarter, Oh system continue to operate safely and efficiently to meet customer demand and mitigate the COVID-19 market headwinds.
Oh, we finally, the will tend to match market demand and our cost structure continues to reflect strong reliability and cost control by our team.
Put it in perspective.
Third quarter refining segment operating expense was once again approximately $9 million.
Or 15% under.
Under our average 2019 quarterly expenses.
This is a repeat of our second quarter performance.
In Wyoming Oh.
Oh the team has successfully completed the planned 45 days major turnaround.
We have well in and the plant is starting up as we speak.
The turnaround which started on the commercial team is.
Is expected to give us close to a five year cycle and improve throughput flexibility.
Currently 10%.
Including the Standalone impact third quarter refinery throughput.
Approximately 13000 barrels per day.
0321 index for the quarter.
Lets 19 gold and 63 cents per barrel.
Our realized adjusted gross margin was eight.
No one knows and 53 cents per barrel.
Including an estimated negative $1.90 cents per barrel.
The only impact.
Oh third quarter production cost can weigh on me well $7.51 per barrel.
Oh target throughput for the fourth quarter.
And then on the impact is just under 10000 barrels per day.
Rocky Mountains refineries have responded to the second wave coffee the wave by reducing utilization rates through the third quarter to maintain pad for product inventory within seasonal level.
In October Oh, Wyoming, 321 index averaged just under $20 per barrel.
In Washington.
Oh third quarter refinery throughput averaged approximately 41000 barrels per day.
With an implied 96% of utilize the capacity.
Sales to approximately 70% average.
Well pad five refineries.
As a reminder, our yield and the integrated marketing presence and that the common each market.
Has allowed us to maintain close to normal operations.
With minimal cost 19 demand impact.
Oh third quarter Pacific Northwest five to two one index.
$9.39 per barrel on an EPS basis.
And I realized adjusted gross margin was $2.16 per barrel.
Production costs were $3.40 per barrel.
Oh Pacific Northwest 5321 index has averaged approximately $10 a barrel in October.
On the demand continues to be stable no target refinery throughput for the fourth quarter.
Is in the 30 to 39000 barrels per day range.
We have completed I'll hit an all logistics project.
Which is giving our system.
Good afternoon capabilities with a more favorable cost structure.
And lastly, the.
Oklahoma Hello, Tim continues to plan, an optimized on first quarter panel.
You know why.
We successfully completed our planned major turnaround in the third quarter.
The Hydrocracker discovery works went behind plan and there's always going to total refinery throughput for the quarter came onto the guidance.
51000 barrels per day.
Oh three onto a single index was $1.92 cents per barrel on blend basis, reflecting lower global demand recovery.
Oil products.
Our actual third quarter crude oil differentials.
$1.13 cents per barrel premium to Brent.
And our realized adjusted gross margin in July was a negative 47 cents per barrel, including an estimated negative one dollar an 85 cents per barrel often on impact.
We continue to improve our margin capture in Hawaii.
Commercial logistics and other optimization initiatives.
Cash flow breakeven in the downside and profitability in the long run.
Action cost in the third quarter.
Were $5.80 per barrel.
In the local Hawaii market after a slow demand recovery during the third quarter, we are closely monitoring jet fuel and gasoline demand trends. Following the recent reopening worldwide travel and tourism by the state.
Three onto thing it'll index has averaged approximately $1.90 cents per barrel in October.
No estimated fourth quarter crude differential to love and seven cents per barrel premium to Brent.
Sounds good throughput in Hawaii for the fourth quarter is in the 70 to 81000 barrels per day range in.
In summary, we continue to focus on safe and efficient execution.
Thats really performed two tenants around doing this pandemic and operations are tuned to meet demand and.
And with that I will turn the corner, who will review our financial results.
Thank you Joseph.
Third quarter, adjusted EBITDA and adjusted earnings were a loss of 16 million and $57 million or one dollar and six cents per fully diluted share.
Focusing on accounting items first.
Washington refining non-GAAP results have been adjusted to remove the loss of an approximate $6 million LIFO layer liquidation impacts there.
This impacted reverse in the second quarter.
Shifting to segment results right.
Retail segment adjusted EBITDA contribution was $15 million driven by increases in fuel volumes more than offset by decreases in margins compared to the prior quarter results.
Same store sales fuel volumes were down roughly 21% on merchandise sales were up approximately 2% compared to the third quarter of 2019.
Gasoline demand in Hawaii has remain in the 80% a pre covert levels and we anticipate some modest growth as tourism activities begin to pick up into the holiday season.
Merchandise performance, particularly in the northwest has remained strong.
The logistics segment adjusted EBITDA contribution was $12 million.
7 million from 2019 quarterly averages with reduced activity in Hawaii, causing most of this decline.
While refining throughput was a good metric to track matching up well with reduced why logistics profitability.
Key driver of growing profitability from the third quarter levels will be neighbor island refined product demand not growth in refining throughput.
Our Washington in Wyoming locations performed in line with throughput and sales.
As bill alluded to in his opening remarks, we also anticipate the delivery of our Biofuels logistics project in Washington during the late fourth quarter, which should drive further logistics revenue as we internalized our own ethanol requirements beginning in 2021.
The refining segment recorded a segment adjusted EBITDA loss $34 million.
Major factors impacting Hawaii results compared to the second quarter include an approximate $4 per barrel improvement in crude differentials.
A $2 per barrel an improvement in the Singapore 312 crack spread.
And the partial quarter contribution of improved contract terms. These.
These improvements were partially offset by turnaround impacts, including increased refined product imports, while the plant was undergoing planned turnaround activity.
We estimate the turnaround reduced our adjusted gross margin by approximately $8 million to $10 million during the quarter.
Wyoming run profitably during the seasonally strong driving season.
The overall margins were still depressed versus historical third quarter averages.
Additionally, at the end of the quarter throughput and sales will reduce as we entered turnaround reducing profitability.
Washington was negatively impacted by decreases in our feedstock advantage versus an EPS and compression and diesel crack spreads in the Pacific northwest market.
Laramie generated adjusted EBITDAX of $8 million and a net loss of $13 million for the third quarter.
Cash consumed from operations with $8 million, which included $19 million of net cash turnaround outlays.
Working capital excluding the net cash turnaround outlays was a source of approximately $5 million.
Capital expenditures were $12 million and accrued deferred turnaround expenditures were $34 million totaling approximately $46 million.
The 46 million includes an approximate $7 million and overruns in our Hawaii turnaround.
Accrued cash interest equaled 16 million.
Our ending liquidity totaled 191 million made up of 127 million in cash and 64 million and availability and benefited from working capital inflows.
It was another strong quarter for cost control across the organization.
We maintained our operating expenses and logistics cost of goods sold reductions of approximately $50 million on an annual run rate basis versus our prior year spend.
With the overrun in the Hawaii turnaround, we are increasing the upper end of our Capex and turnaround range by $5 million to between 95 and $115 million for the year we.
We expect to be in the upper end of this range.
We are on track to achieve our initial covert cash outlay reduction targets, which include energy related cost of sales operating expense capital expenditures.
Turnarounds interest expense of $150 million versus previously planned amounts.
Looking forward to 2021.
In addition to the achieved opex and logistics cost to sales reductions of $50 million versus our prior year spend.
We have identified an additional approximate $45 million cash savings for the 2021 calendar year spread across operating expense and cost of sales that are unrelated to market conditions.
Two thirds of these savings relate to the Rightsizing of logistics assets and driving our Hawaii refining cost structure to historical part east only levels.
Currently and in addition to the previously mentioned savings we have elected to narrow our planned turnaround during Q1 2021 to the $10 million to $15 million range from the previously referenced $35 million.
We have no plan growth projects and our historical regulatory spend has.
Has been between $30 million to $40 million.
Putting the pieces together from our comments, we anticipate more than $100 million and improvements during 2021 from the third quarter runway breakdown.
To break this down further we expect more than $55 million, and Hawaii topline improvements and roughly $45 million of cost cuts discussed above that.
The cost cuts.
Oh, the cost cuts approximately $15 million impact, our logistics opex and cost of sales and approximately $8 million to specific to lie refining and the remainder is spread throughout our business units. In addition reductions in our Washington turnaround spend further improve our liquidity position through 2021.
This concludes our prepared remarks, operator, I will turn it back to you for Q1 EPS.
And at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press card too if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before question to start.
One moment, please while we pull for questions.
Our first question is from Neil Mehta with Goldman Sachs. Please proceed with your question.
Hey, good morning team and thanks, Thanks for taking the questions I guess the first one was another strong set of results here from your retail business. It's one of the things that I know, we all have been talking about is how do you help to better ILLUMENATE the value of those retail assets, especially.
Given the successful monetization.
Some other assets in the industry.
And how do you unlock the value of a retail business is performing well.
Yes, Neil it's bill thanks, Thanks for that question.
Clearly our retail businesses, a extremely valuable asset and needless to say, it's continued to grow and generate profitability.
At a high level of free cash flow through the downturn, even even when volumes were down.
We're fortunate to have some very strong franchises that I think are unique and a lot of ways, our Hawaii business.
In particular benefits from very strong barriers to entry in the form of high real estate cost and.
Difficult supply logistics, given the island nature of the state.
And a scarcity of land, which makes the real estate extremely valuable.
In addition to that labor pressures that our competitors are often feel are also mitigated in Hawaii by our unique relationship with third party store operators like 711. So let me let me just say, we're very pleased with the team and the performance of this business.
In terms of how we illuminated I always start from the perspective of our capital structure.
Is structured the way it is because of what we get from retail not just the retail the strategic nature of being vertically integrated but.
Owning retail allows us to be comfortable with the level of debt, we have and if you think about the free cash flow that we get out of retail.
It supports our entire regular debt service.
I think that we probably should do a better job of illuminating the value.
But as you know we operate the business on a on a vertically integrated basis.
I think one of the things that we have to think about is just given the cost of capital.
That we face given the fact that we're downstream operator.
Are there ways for us to reduce that cost of capital income.
In conjunction with how we capitalize that retail business.
But we continue to believe it's a very attractive part of our business and fits well with our overall business strategy.
Okay. The follow up here is on liquidity, which you referenced and it was down slightly quarter over quarter, but still in a good place around 200 million Bucks.
Just talk about how you feel about your liquidity situation, especially in a downside scenario and if we don't get as the demand recovery that we're anticipating here in 2021 what.
What is your confidence in your ability to navigate this for a balance sheet perspective.
Neil This is will I.
I think we're comfortable with our liquidity position and I think that the best way to think about it probably refresh some of the commentary that I provided earlier this year.
And really.
Hi back to our 2021 view that we've outlined here and and again I think the best way to think about it is to start with our fixed charges. So if you exclude the Washington turnaround and we expect our quarterly capex requirements to be somewhere between eight and $10 million a quarter and then whats all our cash interest in our amortization somewhere in that six.
$18 million range. So between let's just say base maintenance Capex interest enamored, it's about $25 million quarterly fixed charges.
So I think thats, probably a good place to start.
And then let's take a look at the retail side of the equation, which has been running at about $15 million a quarter of EBITDA and I think our logistics a fair way to think about that is somewhere in the 15% to $20 million per quarter range, which is up from where we've been over the last two quarters, but I think reflects.
In our expectation of improvements and tourism, particularly in the neighbor Islands.
And then you take our corporate overhead at 10 million. So you add up all of those pieces you get about $20 million to $25 million of EBITDA before you consider refining so.
I think thats, probably a good place to start and so if you assume a zero quarterly contribution from refining you're really looking at somewhere between a zero to 10 million dollar quarterly cash burn versus our September ending liquidity of $191 million.
So there is likely to be a working capital reversal as I referenced.
But we feel like Thats gives us adequate liquidity to address our needs.
Great guys. Thank you.
And our next question is from Brad Heffern RBC.
Capital markets. Please proceed with your question.
Yes, thanks, everyone.
Just to follow on on what you just said well about the working capital can you talk about some of the puts and takes we can see there.
Going forward and maybe how larger over so we should expect.
Sure I think during the quarter.
The accrued turnarounds that we incurred were about $35 million Brad.
And about 18 million of that was paid out during the quarter. So let's call it about a $16 million working capital benefit.
During the quarter on associated with the turnaround side.
In addition to that Theres about another $5 million source. So in aggregate you had about $20 million to $21 million working capital benefit.
During the quarter.
I think it's fair to assume that organic we expect a likely reversal of some of that benefit during the fourth quarter.
Obviously, a lot of moving pieces to give you a precise number but I think thats, probably the best way to think about it and scoping the way the turnarounds flow during the quarter.
Okay. Thanks.
Thanks for that and then I guess in terms of the crude diffs guidance for Hawaii. So you said a $1.13 premium but in the prepared remarks, you talked about some of the you know.
The looseness in the crude market that could benefit Hawaiian 21.
Any thoughts about just where you are seeing.
The depth for the barrels that you're buying now for Hawaii.
Yes. This is bill I'm going to let Joseph handle this but let me just say that.
I think the big factor that we've seen has generally been.
Fairly tight dips in the spring and the summer. It then loosened up for most of the third quarter.
And then as prices have started to deteriorate and as the Asian economies, you've started to pick up we have seen some strengthening of the death, although thats a fairly recent trend so the outlooks pretty good.
For Q1, and frankly, even going into Q2, but as given our supply chain. We are starting to already think about the latter.
Q2, and even the latter part of Q2 and Thats where.
We might start to see some tightening again, but just depending on if you'd add anything to that yes.
As much too and I will only say that we started to pickup some may Q on cargoes and as you would expect to win over 19 dominate the market.
So weak and the differential though they may know so.
Fully agree with everything you just said.
And Brad the only thing I'd add is fourth quarter does still have some impact from I'll say early.
Earlier in this year acquired cargos that are bringing the number up in that $2 range that Joseph quoting.
Okay got it and then if I could just sneak one more in on the Biofuels project that you guys are completing.
Here in the fourth quarter.
Any thoughts on what EBITDA generation from that looks like.
More on like the current environment.
Yeah, I think Brad based on our internalization of our ethanol consumption, we think it's worse somewhere between three and $5 million a year.
Probably more likely on the upper end of the range and we think there is some attractive.
Growth projects that allow us to serve.
Growing demand centers, there that could make that number grow.
Okay. Thank you.
Thank you.
Our next question.
Is from Matthew Blair.
With Tudor Pickering, Holt and company please.
Please proceed with your question.
Hey, good morning, Bill and will.
Even given the improvement in natural gas prices could you talk about your strategy for Laramie.
I guess, both in terms of just current operations as well as potentially monetizing that investment.
Sure Matthew this is will.
I think we've we've written down our investment in Laramie to zero and again I think the recent improvements in gas prices certainly improved their outlook for 2021.
And I think our positive for that business that said I still think it's a very difficult.
Market environment to monetize the natural gas assets, so well I think the free cash flow outlook for Laramies improved.
The ability to market that assets challenging.
I think ultimately.
That's something we'll continue to monitor.
But I think that's a yes a difficult puzzle.
Position today.
Okay, and then on the refining side so in the third quarter, even par you stood at 51, a day did not run power west if demand recovers.
Is there any significant costs or other hurdles to restart.
Restarting par west.
Matt. This is bill there's there's no significant cost at this point to restarting far West I would say, though that based on current cracks in the crude oil differentials.
And really looking forward for.
At the Singapore market Theres Theres no.
Justification for a restart at this point.
EBITDA resumption in jet fuel demand, which would.
Improve the economics, a little bit would not matter unless product cracks improved materially.
At that point.
Sounds good thanks for taking my questions.
Our next question is from Jason gave element with Cowen. Please proceed with your question.
Jason if you're speaking we can't hear you.
Thank you Dr. Stein, who is actually use accidently dropped off further question in queue.
Jason If you can you can press star one while my time to apologize.
All right and our aim is we now have Jason gave away from Cowen. Your question. Please proceed.
Hey can you hear me.
Yes, sorry about that Jason all right.
Yeah, Yeah, sorry about that.
I wanted to ask two questions firstly on.
On Hawaii, you mentioned.
Some benefit from.
New contracts new product sales contracts.
Hitting your earnings can you talk about just the.
Kind of order of magnitude magnitude what that benefit is and if you expect those benefits to continue to.
Got reflected in our earnings meaning are there additional contracts.
You signed that are going to be improving margin capture in Hawaii, and then secondly, I noticed that your guidance for Tacoma throughput and for Hugh is.
Pretty strong better than what your peers in the lower 48 are guiding too are there some attributes to that market that you see as.
Keeping throughput.
Supported even during this period of weak demand. Thanks.
Jason This is bill I'm going to let Joseph handle the Tacoma question on throughput and ISL.
Just to address your question on the commercial improvements in Hawaii in particular as you know Hawaii is.
Somewhat of an unusual market and then almost all the volumes are contracted.
Sometimes a year or more and we've had a number of contracts that have come up.
In the last six months.
And we've had conversations with our customers regarding the.
The improvements of the economics.
We still supply fuel.
To virtually all of our customers below where we think the cost of importing that product is and I think thats, because we have a very low cost refining operation but.
Overall.
Conversations with a number of our customers in the last six months have.
Improved the economics of our business and as I alluded to when we look at the earnings profile.
In 2021, we see a $100 million uplift $45 million of that is related to cost savings and the remainder 55 million.
Reflects the improvement over the Q3 run rate. So the Q3 run rate already reflected some improvement. So you can assume that the overall commercial improvements for greater than that $55 million number.
And Greg whether they go up to the Tacoma question first you know Tacoma me.
Money I mean contributed cash flow in the third quarter, leaving they know.
In the very low market margins environment.
So we're running the incremental barrel.
Actually helpful.
And as long as the incremental barrel margin is better than the variable cost.
This will continue to be.
Directionally a good thing.
Now with regards to the full quarter.
Hey, we are dropping Oh, throughputs my guidance by almost 10% compared to the third quarter, we are adjusting to this.
Market environment, I do think I will mention about the coma.
I remember we have a very unique.
Yields structure, 40% of what we make.
He is really asphalt and videos. So we are relying on the light product demand and have more stable commodities to continue to sale.
On the downside.
Cycle environment.
Great. Thanks, a lot for the color.
Thank you.
And our next question is from Patrick Sheffield with Beach Point Capital Management. Please proceed with your question.
Hey, guys. Thanks for taking my question one quick follow up on.
The cash outlay for turnarounds in the fourth quarter. It sounded like you said there was about 20 million ish of working capital reversal.
I just wasn't sure if that.
Thanks, Kash, Thanks, Matt for turnarounds that were accrued but not paid in the third quarter and just like can you just level set and tells how much you're going to spend.
Actual cash outflow in the fourth quarter related to turnarounds and.
Can you go over what 2021 was again I thought I heard 15 million instead of.
The 35 million guidance you had previously given for 21.
And what's the what's the driver of that reduction in 21 versus the original guidance.
Sure Patrick So it will I think couple of different questions in there I think.
Basically on the accrued turnaround there is about $16 million of.
It's just a pity that was on the books at the end of 932 actually with the turnarounds. So we'd expect that to to be paid out during the fourth quarter.
Right and then I think there's the ongoing activity that Joseph referenced in Wyoming.
That will continue in the fourth quarter. So it's really both the the eightqi the carryover really from the third quarter activity as well as the turnaround spend that we're expecting in the fourth quarter for Wyoming, which is probably in the 10 to 15 range. If you look at.
The aggregate.
Annual guidance that we provided.
That answers your question with respect to yes, that's perfect and then and then with respect to 21.
Weve narrowed the outlay for Washington, It was previously.
Referenced that 35 million, we've not we've reduced that to 10 to 15 million.
Most of that will be incurred during the first quarter.
And then again, we don't have any planned growth projects and our historical.
Regulatory and maintenance and then between 30 and $40 million. So you.
You take the midpoint of that range at 30 to 40 and take the low end of the Washington, you're somewhere in that $45 million range for the 2021.
For turnaround as a result of that.
Thank you that's super helpful and as a result of the reduction.
And scope does that mean youre going to have.
They may now another turnaround activity and 22 or 23, I think before we were experiencing of there being several years without any major turnaround. Once you had finished thats kind of busy period.
Yes, so I think there will be a likely additional turnaround that needs to occur and somewhere in 2022 in Washington.
So again, we're going in and really hitting the critical items.
During during Q1 and again there was some growth aspects of the spend that we had.
Plans that were electing to differ.
So.
Hopefully that answers your question.
It does thanks.
Thanks and.
Congrats on well have the tough market, but we've got strong quarter. Thank you.
And as a reminder, if anyone has any questions you May press star one on your telephone keypad.
Our next question is from James.
Good long ski Echo.
Ellington Management group. Please proceed with your question.
Hey, good morning, and thank you for taking the questions.
Good morning, good morning.
The uptick in Hawaii passenger traffic that we're seeing looks like it's up four to five that September volumes obviously.
While the small numbers here going from something like.
2000 to.
202000, a day.
We had 7000 plus a day.
One point in mid October.
Are you seeing any positive impact from that increase in passenger traffic and is that.
Driven by the change in coal bed restrictions from Hawaii.
Jack This is bill.
It's very early keep in mind that the quarantine was lifted on October 15th. So we're only 15 days into it and as I mentioned in our in my comments, we were pleasantly we're very pleased with the upturn I mean it is material.
Cracks are still weak so volumes.
Don't dramatically change and we Havent.
It's really early to kind of try to quantify the impact I would point out though.
A resumption in Hawaii tourism will inevitably lead to not only an increase in jet fuel demand, but you're likely to see greater consumption of ground transportation fuels, especially on the neighbor islands and as we start to see more demand on the neighbor islands, where you're likely to see an improvement in our profile.
First we'll be in the Hawaii logistics, because with the increase in demand in those neighbor islands, whether it be jet fuel our ground transportation fuels. It will increase the utilization of our logistics assets, which will contribute to the bottom line.
I think.
The jet fuel demand is such that we.
We are likely to be in a position sooner rather than later, where our par Easter our existing refinery.
Is unable to support the jet fuel demand for the Allen and we start importing to some.
Support all of the island demand, we probably only need to see about 50%.
Of the passenger demand and will be in a position where you have to start thinking about importing and weve effectively fully utilized parties now thats not to say I want to be very clear that doesnt mean that economically it makes sense for us to start at par westar or were justified and increasing because of the cracks just aren't there so will the imports the better option.
At that point.
All right.
No. That's that's that's helpful. I guess is still a fair amount of wood to chop were I guess would be I'm, assuming there was a blip in the data given public bunch of people, leaving their quarantine took us from 93% to 75% down but ways to go to 50%, but thats good to hear.
But based on what you are seeing and terms of the forward curves and your outlook.
I would love to go back in the transcript data numbers, but what is your anticipated cash burn.
Between 930, and when you anticipate the inflection to positive free cash flow.
I think Jay the the best way to think about this is obviously, there's a lot of moving pieces for the different businesses, but I'll just focus you and on on Hawaiian refining given that's where there's been.
The largest cash cash consumption year.
Year to date, and I think with the contract improvements you heard bill referenced as well as the cost reductions that we've referenced for 2021 I.
I think the best way to think about it from a market index perspective is to take the 312 less the crude diffs guidance that we give and I think if you're on a one to $2 per barrel range here.
You're approaching breakeven with the improvements that we've made.
Okay.
Hi.
Okay. I guess, we can put together between the last questions on working capital and the turnaround numbers I just wasn't sure. If you had a number that you sort of anticipated in terms of cash consumption.
Based on those forward that you're seeing.
Between now and the inflection point.
And I think whats.
Trying to just figure out what the question is between liquidity and that number.
Yes, I think theres, probably too many pieces there to give a concrete piece of guidance on free cash burn there, but I think trying to give you the variables you need to consider.
In order to effectively model it.
Okay.
That was it for me that's very helpful. Though thank you. Thank.
Thank you Jay.
And our next question is from Neil Mehta.
And we have reached the end of our question and answer session.
I will now turn the call over to Willy and pay for closing remarks.
Thank you Somali.
The pandemic is created unprecedented destruction in the energy sector.
While we obviously cannot influence market demand, we can control our costs, we can control our asset base as numerous other factors.
Your management team is focused on managing what we can control to ensure that we generate significant profitability when the global economy recovers I. Appreciate your support have a good day.
And this concludes today's conference you may disconnect. Your line at this time. Thank you for your participation.