Q2 2022 CVR Energy Inc Earnings Call
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I'd like to turn the conference over to your host Mr. Richard Roberts, Vice President of F. P&A and I aren't for CVR Energy Inc. Thank you you may begin.
Thank you Melissa good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR energy second quarter 2022 earnings call with me today are Dave lamp, our Chief Executive Officer, Dan Newman, Our Chief Financial Officer, and other members of management.
Prior to discussing our 2022 second quarter results. Let me remind you that this conference call may contain forward looking statements as that term is defined under federal securities laws.
This purpose any statements made during this call that are not statements of historical facts may be deemed to be forward looking statements.
You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release as a result, actual operations or results may differ materially from the results.
The forward looking statements, we undertake no obligation to publicly update any forward looking statements, whether as a result of new information future events or otherwise except to the extent required by law.
We also remind you that the CVR partners completed a one for 10 reverse split of its common units on November 23, 2020, and a per unit references made on this call are on a split adjusted basis.
The call also includes various non-GAAP financial measures.
It is supposed to related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures are included in our 2022 second quarter earnings release that we filed with the SEC and Form 10-Q for the period and will be discussed during the call, but that said I'll turn the call over to Dave. Thank.
Thank you Richard good afternoon.
Thank you for joining our earnings call yesterday, we reported our second quarter consolidated net income of 239 million and earnings per share of $1 60 for EBIT.
EBITDA for the quarter was $401 million.
On the metals and refining and fertilizer sector continued to improve during the second quarter and once again, we posted improved results in both segments on a year over year basis, though this was offset by a legal accrual in our corporate segment.
Yeah.
We are pleased to announce an addition to the second quarter regular dividend of <unk> 40 per share. The board has also has also authorized a special dividend of $2 60 per share both of which will be paid on August 20, <unk> to shareholders of record at the close of the market on August 12.
At yesterday's closing price the combined annual dividend of $1 60 per share and a special dividend of $2 60 per share represents a dividend yield of nearly 13%.
Which is currently the most.
Most four times the average dividend yield among the independent refiners.
For our petroleum segment, the combined total throughput for the second quarter of 2022 was approximately 201000 barrels per day with Winnie when completing this planned turnaround on time and on budget in early April .
This compares to 217000 barrels per day in the second quarter of 2021.
With the hydrocracker conversion at <unk>.
To renewable diesel service, we expect crude throughput when he would to be reduced by approximately 5000 barrels per day going forward.
Benchmark cracks increased throughout the quarter. The group 211 crack spread averaged $48 50 per barrel in the second quarter as compared to $19 15 in the us.
Second quarter of 2021 based.
Based on 2021, and 2022 RVO levels that were finalized in June RIN prices averaged approximately $7 58 per barrel in the second quarter, a decrease of 7% from the second quarter of 2021.
The Brent Ti differential averaged $3 38 per barrel in the second quarter compared to $2.91 per barrel in the prior period prior year period.
Light product yield for the quarter was 98% on crude oil processed our distillate yield as a percentage of total crude oil throughput was 43%.
Despite the conversion of the hydrocracker at when he went to renewable diesel service, we have widened our crude slate at when he would and we have not seen them the material decline in our distillate yield.
We continue to operate our refineries and Max distillate mode.
In total we gathered approximately 126000 barrels of crude oil during the second quarter of 2022 compared to 118000 barrels per day for the same period last year, our crude oil or gathering rates have increased on both a quarter over quarter and a year over year basis, and we are encouraged to see.
Producers start to ramp up activity in the Anadarko basin.
The renewable diesel unit at when he would began operations in mid April and is processing and processed approximately 3100 barrels per day of vegetable oil feedstocks during the quarter.
We have been gradually increasing the rate over the past few months the hobo spread averaged a negative the other 95 per gallon for the second quarter, but increased to a negative $1 33 per gallon in June .
With the increases in diesel prices and the improvement in the hobo spread recently received positive economics for the renewable diesel unit.
In the fertilizer segment, we faced some unplanned downtime at both plants during the quarter with consolidated ammonia utilization coming in at approximately 89%.
Sales volume for the second quarters were impacted this quarter was at 22 were impacted by a late start to the spring planning.
Along with some demand destruction as a result of higher.
Fertilizer price environment.
Lower sales volumes were more than offset however by increased price realizations, which drove strong results for the quarter.
Global supply of nitrogen fertilizers remains tight and with continued upward pressure on energy prices in Europe , We believe high fertilizer price environment could be continue into 2023.
Now, let me turn the call over to Dave to discuss additional financial highlights.
Thank you, Dave and good afternoon, everyone.
For the second quarter of 2022, our consolidated net income was 239 million.
Earnings per share was $1 64.
And EBITDA was $401 million or.
Our second quarter results include a legal accrual of $79 million, a negative mark to market impact on our estimated outstanding rent obligation of $51 million.
Unrealized derivative losses of $21 million and favorable inventory valuation impacts of $41 million.
Our estimated outstanding rent obligation is based on the 2000 22021 and 2022 RVO as they were recently finalized in June and excludes the impacts of any waivers are exemptions.
Excluding the above mentioned items adjusted EBITDA for the quarter was $511 million and adjusted earnings per share was $2 45.
The petroleum segment's adjusted EBITDA for the second quarter of 2022 was $383 million compared to $18 million for the second quarter of 2021.
The year over year increase in adjusted EBITDA was driven primarily by increased product cracks and over average rents prices offset somewhat by lower throughput volumes realized derivative losses.
In the second quarter of 2022, our petroleum segment's reported refining margin was $26 10 per barrel.
Excluding the mark to market impact of our estimated outstanding rent obligation of $2 79 per barrel.
Several inventory impacts of $2 <unk> per barrel and unrealized derivative losses of $1 20 per barrel refining margin would've been approximately $28 <unk> per barrel.
This basis capture rate for the second quarter of 2022 was 58% compared to 31% in the second quarter of 2021.
<unk> expense, excluding mark to market impacts reduced our second quarter capture rate by approximately 11% compared to a 31% reduction in the prior period.
<unk> expense for the second quarter of 2022 was $153 million or $8 34 per barrel of total throughput compared to an expense of $173 million or $8 77 per barrel for the same period last year.
As a reminder, our reported rent expense does not include the impact of any waivers or exemptions.
Our second quarter Rens expense includes a $51 million mark to market impact on our estimated accrued RFS obligation, which includes a $55 million benefit from the lower RVO is that were finalized in June .
The estimated accrued RFS obligation on the balance sheet was mark to market at an average rent price of $1 61 at quarter end compared to $1 37 at the end of March.
For the full year of 2022, we forecast an obligation of approximately 150 million Rins, which includes approximately 85 million rins expected from our renewable diesel production, but does not include the impact of any waivers are exemptions.
Derivative losses in the petroleum segment totaled $61 million for the second quarter of 2022, which includes unrealized losses of $22 million, primarily associated with crack spread derivatives.
In the second quarter of 2021, we had total derivative losses of $2 million, which include included unrealized losses of $37 million, primarily associated with the crack spread hedges that were closed at the end of the third quarter of 2021.
The petroleum segment's direct operating expenses were $6 12 per barrel in the second quarter of 2022 as compared to $4 23 per barrel in the prior year period.
The increases in direct operating expenses were primarily due to higher personnel costs in part due to share based compensation due to the increase stock price as well as increased natural gas prices and repair and maintenance costs.
For the second quarter of 2020 to the fertilizer segment reported operating income of $126 million net income of $118 million or $11 12 per common unit and EBITDA of $147 million.
This is compared to second quarter 2021, operating income of $30 million net income of 7 million or <unk> 66 per common unit and EBITDA of $51 million.
There were no adjustments to EBITDA in either period.
The year over year increase in EBITDA was primarily driven by higher <unk> and ammonia sales prices offset somewhat by lower sales volumes.
The partnership declared a distribution of $10 <unk> per common unit for the second quarter of 2022.
As CVR energy owns approximately 37% of CVR partners common units will receive a proportionate cash distribution of approximately $39 million.
Total consolidated capital spending for the second quarter of 2022 was 41 million, which included $19 million for the petroleum segment $9 million from the fertilizer segment and $12 million on the renewable diesel unit.
And environmental and maintenance capital spending comprised $28 million included $19 million in the petroleum segment and $8 million in the fertilizer segment.
We estimate total consolidated capital spending for 2022 to be approximately $195 million to $224 million of which approximately 134 to 148 million is expected to be environmental and maintenance capital.
Our consolidated capital spending plan excludes planned turnaround spending, which we estimate will be approximately $80 million to $85 million for the year for the recently completed planned turnaround of Wynwood and in preparation for the planned turnaround at Coffeyville in 2023.
Cash provided.
By operations for the second quarter of 2022 was $390 million and free cash flow was 275 million.
Significant cash uses in the quarter included 115 million for Capex and turnaround spending.
59 million for income tax $40 million of dividends of $19 million of interest at $15 million for the Noncontrolling interest portion of the CVR partners first quarter distribution.
Yeah.
Turning to the balance sheet at June 30, we ended the quarter with approximately $893 million of cash.
Our consolidated cash balance includes 156 million in the fertilizer segment.
As of June 30, excluding CVR partners, we had approximately $983 million of liquidity.
Was primarily comprised of approximately $737 million of cash and availability under the ABL of approximately $246 million.
In June we completed an amendment of the ABL agreement right sizing the facility to $275 million extending the maturity five years, removing cash from the borrowing base and potentially adding renewables inventory.
Looking ahead to the third quarter of 2022 for our Petroleum segment, we estimate total throughput to be approximately 190 to 205000 barrels per day.
We expect total direct operating expenses to range between 90, and $100 million and total capital spending to be between 30% and $35 million.
For the fertilizer segment, we estimate our third quarter 2022, ammonia utilization rate to be between 60 and 65% as a result of the two planned turnarounds in the summer we.
We expect direct operating expenses to be approximately $60 to $65 million, excluding inventory and turnaround impacts and total capital spending to be between 22 and $27 million.
Turnaround spending is expected to be 30% to $35 million of expense.
For renewables, we estimate third quarter 2022, total throughput to be approximately 4500 to 6000 barrels per day and direct operating expenses to be between two and $4 million.
With that Dave I'll turn it back over to you.
Thank you Dan.
In summary, we are proud of our strong results for the second quarter of 2022 and pleased to be returning $3 per share.
And dividends to our shareholders.
Tight supply and demand fundamentals in both refining and fertilizer businesses contributed to the strength in our consolidated results and we believe the outlook for the near term continues to be favorable for both businesses.
Starting with refining domestic and global inventories of crude and refined products remain below five year average levels driven by a combination of demand returning to pre COVID-19 levels and global refining capacity would be reduced by approximately 5 million barrels per day.
We're starting to see some demand destruction as a result of increased prices, particularly for gasoline with U S vehicle miles traveled.
Travel turned negative in April and May compared to the same periods in 19.
More specifically to the mid Con we have seen some tapering in gasoline and distillate demand, but both are still comfortably within the five year average levels.
Looking at crude oil inventories are still on the low side and have been distorted to some degree by the sales from the strategic Petroleum reserve. The SBR sales have also distorted inland crude differentials and we have seen a widening of WCS differentials, despite little or no production growth in that area.
With crude oil prices comfortably under $100 barrel per barrel range, we're starting to see more activity in our backyard as evidenced by our evidenced by our increased crude oil gathering rates in the second quarter.
We believe that these crude oil prices, we could see further acceleration in drilling activity, although E&P companies continue to grapple with investor calls for capital discipline.
Along with limited available availability of manpower, well services steel and Kentucky with general cost inflation.
Underinvestment in upstream activities over the past seven years is evident worldwide and as part of the reasons, we're seeing the prices where they are today. The main concern. However continues to be the potential and the severity of a global recession that could impact demand.
Turning to refined products crude.
Crude spreads in the second quarter reached levels that are typically only seen during a hurricane or some other major disruption and even then only for a short period of time.
It is possible that cracks peaked in the second quarter as I've said many times the best cure for high prices is high prices and we are seeing the effects of high prices on demand in the market today.
Utilization across the U S. The refining fleet has been very high at 95% and there is still quite a bit of maintenance scheduled for the second half of the year.
Despite the decline in the peaks of the second quarter crack spreads are still incredibly strong today, particularly for diesel.
Cracks are significantly better than gasoline the forward curve for the group three distillate crack is nearly $43 per barrel for calendar year, 'twenty, three and over 47% or $37 per barrel for 'twenty calendar year 'twenty four.
Although it has not been discussed most recently, we believe I M. O 2020 is having a meaningful impact on the price of diesel with nearly 1 million barrels of diesel headed to bunker fuel markets.
In order to meet sulfur specs.
We also see a material impact on the price of gasoline for the renewable fuel standard, which is adding approximately <unk> 30 per gallon to the retail prices and is incentivizing refiners to export as much fuel as possible.
The government, we're serious about doing everything in its power to bring down the price of gasoline fixing RFS and bringing down our RIN prices would be a very quick and easy solution.
In the fertilizer segment, we had a strong second quarter results, despite cold and wet weather across the mid continent significantly delayed the planting season.
We also believe there is some demand destruction of as a result of the high fertilizer pricing environment. Once again high prices are the best cure for high prices.
Looking ahead, we believe the world remains tight on nitrogen fertilizer supply and with the persistent high natural gas prices in Europe . The floor for natural gas prices is significantly higher than its been in the past few years.
The summer fill program for ammonia and <unk> were both recently completed at favorable pricing and we expect prices to continue to increase in the fall.
We had a turnaround scheduled at both fertilizer plants for the third cohort in the third quarter with Coffeyville nearly complete in east Dubuque, starting in a couple of weeks.
Following the completion of these turnarounds, we do not have any planned activity for the fertilizer segment until 24 at the earliest.
Finally on the renewable diesel business, we are seeing improved fundamentals with the hobo spread averaging.
Less than a dollar a dollar per gallon or negative in the past month.
Offsetting this somewhat as continued weakness in the low carbon fuel standard credits in California, which have fallen to around 80 to 90.
90% to $95 per ton.
Taken into account the expected credit values from our blended soybean oil and corn oil.
We see an advantage see an advantage to sending product out to California at these levels.
Total throughput volumes in July were approximately 3600 barrels per day, and we continue to ramp up to full production.
In October we're planning, our first catalyst change, which will take the renewable diesel down for about 20 days. We're also continuing to work on the pre treatment unit, which is expected to be completed and online in the second half of 'twenty three.
With the addition of the <unk> unit.
We believe we could see margin improvement in the renewable diesel of approximately a dollar per gallon.
As we discussed over the past few quarters, we continued to make progress on reorganization of the company to segregate the renewables business we.
We have created 17, new entities internally and in early July completed distribution of certain refining real estate assets into the appropriate entities.
We anticipate completing the reorganization in the first half of 'twenty, three and intend to begin reporting.
Separate renewable segments when appropriate.
Looking at the third quarter of 22 quarter to date metrics are as follows group 211 cracks have averaged $45 58 per barrel with the Brent Ti or $5 32 per barrel and the Midland differential of $1 67 over W. T I D.
<unk> differential has averaged 49 over WTO and the WCS differential has averaged $19 70 per barrel under WTS.
Fertilizer prices remained strong as well with ammonia prices over 90 $950 per ton in U M prices over 444 hundred $50 per ton.
As of yesterday group 3211 cracks were $33 85 per barrel, Brent Ti was $7 64 per barrel and WCS was at $20 75 under W. T.
Returns were approximately $7 90 per barrel.
<unk> prices were about $1000 per done and UA and prices are up $450 per ton.
In June the EPA, finally announced the 'twenty, one and 'twenty two RVO is along with an adjustment to the 2020 RVO at the same time it denied all small refinery waiver requests.
These announcements only caused RIN prices to move higher as the blending mandates where we once again set at levels that are unachievable, particularly for small and merchant refiners.
As we have continued to state as we have continuously stated we believe winwood's obligation should be exempt under RFS as intended by Congress.
We have challenged EPA is unlawful denial of our small refinery exemptions for 2018 through 2021.
And we will vigorously pursue this in court.
We continue to fight for the right. The Reits, we believe when he would is entitled to and will continue to carry an obligation on our balance sheet related to when he woods.
Outstanding rent obligation.
Although the misguided actions by EPA are troublesome and ultimately hurting the American consumer at the pump. We are pleased with our strong results for the second quarter and are optimistic about the near term outlook.
We will continue to focus on safe reliable operations of our assets in an environmentally responsible manner to ensure we are ready to capture any market opportunities that may develop.
With that operator, we're ready for questions.
Thank you at this point.
Ducking the question and answer session, if you'd 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 star two if he like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Carly Davenport with Goldman Sachs. Please proceed with your question.
Hey, good afternoon. Thanks for taking my question I wanted to just start on the capital return side.
Think about the current macro can you talk about your priorities from a capital allocation perspective is there preference to continue to look at Incrementals special dividends from here or is there potential for further growth in regular dividend or around buybacks.
Sure currently though as we've said many times are you know we're we're a.
Accompany that returns cash to shareholders as soon as we have no better use for it.
I don't think we'll see any change in that strategy as evidenced by our special this time.
You know I don't I don't know that the board will continue to select special dividend as the mechanism or increase the regular but it'll be revisit that every every every quarter and decisions will be made around that as we go forward, but bottom line is our commitment is to return cash to shareholders.
Great I appreciate that color and then the follow up was just around when you would renewable diesel can you just give us some color in terms of how the asset has been performing from an operational perspective, what you've learned from from starting that up and then perhaps how the potential extension of the blenders tax credit.
It could impact your future views on incremental renewable fuel its plans going forward.
Sure well, we've really had no problems, making this conversion to renewable diesel from an operating standpoint logistics have been more of a challenge for us.
Just getting the railroad in tune with our needs to deliver soybean oil corn oil on a timely basis as well as remove product on a timely basis has been some of our bigger challenges.
But we continue to work through those and they're all coming to be I think some of the things that have developed in the in the business ourselves as we have begin to look at sourcing some pretreated feed.
That looks very attractive to us not only that'll happen before our pre treaters online or potentially before a pre treaters online.
But even with the <unk> Oh sourcing feedstock doesn't appear to be any any concern. We can we can easily do it.
And.
Look we're really our challenge going forward is really around sourcing.
Sourcing more of the lower Ci materials.
We continue to work that that strategy as we go but overall, it's been a it's been a pretty straightforward easy conversion.
Great. Thank you.
Thank you. Our next question comes from the line of Manav Gupta with Credit Suisse. Please proceed with your question.
Hey, guys. Congrats on a good cadre just wanted to follow up a little bit on the BPL side I might be wrong, but I think the modeling it sooner I think somewhere around second quarter. So like gone at this time.
Why is it moving or if it's moving back a level and also should we think about this as a reportable segment should we basically assume that you've been reporting once the btu stocks than it kind of can become its own reportable segment. If you could just.
Talk about those two things.
Sure I think we've mentioned are our strategy going forward is to maintain our refining assets.
Going forward, but very little investment except for sustaining capital turnarounds.
Keeping in the good good working order.
The reason for breaking out renewables as a business as you know that's where our future dollar are going should the markets develop.
So our plan is to report as a separate segment when appropriate.
I don't know that it'll be triggered off of the off the P to you or not it's more around the restructuring and getting our systems are built or financial systems built to be able to to accomplish that.
And that would at best would be probably the.
The second quarter of next year.
Maybe later.
But as far as the PTU moving back a bit yeah. I think it's just engineering just some of the supply problems of have caught us a bit and moved us back a quarter.
On that we originally thought we'd be in it on the in the second quarter I think it's more likely that it'll be in the second half some time.
Maybe and towards the end of the second quarter, the third quarter somewhere in that timeframe that we haven't actually have it up and running.
Okay, and then a quick follow up here is if you could help us understand.
Look on the WPS side is it only a function of you know Kevin ethers and other things or is it also a function of you know heska lindland volume starting to grow.
If you could just give us the medium to near term outlook.
Outlook on the Vindaloo DSI. Thank you so much sure well I've always said that the Brent Ti is very dependent on shale oil production.
And the Permian is growing nicely.
The rest of them are kind of anemic.
We are starting to see a little bit in the Anadarko basin, but if you look at the Bakken, it's pretty flat.
The Eagle Ford is fairly flat Niobrara is fairly flat D. J is fairly flat.
So you know I think we're in the early throws of that starting to happen, but you know until rig count continues to grow.
You know I think the strategic Petroleum reserve releases are probably influenced the Brent Ti as much as anything.
But we're optimistic that this is a shell oil growth that are in.
And there is still plenty of takeaway capacity that the Brent Ti will widen to force barrels offshore because once again the ability to over the U S fleet to run light mid.
<unk> type crudes is very limited.
Basically flat.
Thank you so much for taking my question.
You're welcome.
Thank you. Our next question comes from the line of John Royall with Jpmorgan. Please proceed with your question.
Okay.
Hey, good afternoon, thanks for taking my questions.
Could you give a little more color on the near term fundamentals in the fertilizer business I know it was a it was a difficult planting season. This year and there's also been this decision by.
The ITC to waive certain tariffs.
So just looking for an update on how you think about the back half shaping up and I know you'll be impacted by turnarounds, there, but just more on the fundamental picture over the near term.
Well I think.
Prices are still very very strong.
Even at levels they are at today.
Yeah, I don't think there's anything that's going on that I can see is going to change that.
Tariff situation was a disappointment but.
Frankly, it's a it's not it's not the driver of the market right now.
All natural gas in Europe , and pricing there a good number of the plants. There are shut down because of the high natural gas prices, they're actually importing ammonia.
To run their upgrades and that's really about all they are doing.
And I don't see that situation changing in fact, we just had another big uptick in natural gas prices approaching 60 Bucks a million btu.
Puts ammonia at 1800, almost $2000 a ton.
So those fundamentals are very very strong and probably are not going to change in the short term unless there is a resolution to the EU created war in Russia.
Stops its activities with the with maintenance and other.
Things designed to starve Europe from from natural gas.
So we're very bullish on on fertilizer prices and demand.
Great. That's really helpful. Thank you and then just switching over to the Rd side, you spoke a little bit on the fundamentals there but is there any update you can provide on how you're thinking about the potential conversion of the hydro treater at Coffeyville.
Last quarter, you were sort of characterizing it as somewhat of a wait and see.
There has been some kind of news flow since then we have to.
National L. CFS program in Canada, starting next year.
Potential for renewable the BTC. So just any update on kind of how youre thinking about that project.
Yeah, No I think we're still you know this is.
Probably a $650 million project. So it's a big one for us and it's a.
Really need to see some other states opt into renewables.
The low carbon fuel standard or frankly, a pivot of the RFS, which the with the reset coming up that could happen.
And RFS pivot towards a low carbon fuel standard and those those would move it as far as the BTC goes you know that.
As we get as extensions two years two years, one year, that's hard to plan a business around when you have that level of uncertainty.
All that said you know I think R. R.
Our desire is we have a project, that's that's scoped and ready.
And we'll be able to pull the pull the trigger when that when we feel that timing is right.
Don't think it's there yet.
Okay. Thanks, very much very helpful.
Thank you. Our next question comes from the line of Matthew Blair with Tudor Pickering Holt. Please proceed with your question.
Hey, good morning, Dave.
Hey, Matt.
The reporting showed I believe 1000 barrel WCS runs in the second quarter at your refinery, but are you still tightening down extra WCS barrels and refine them at Cushing and getting the economics, there and if so could you remind us on the ball.
Sure we have pipeline space on paper of 35000 barrels per day.
We're usually restricted or have been in the past to about 30000 of delivery. So when that arbs open we'll we'll oh not only beat our own needs and were limited to about 11 12000 barrels a day at our Coffeyville refinery on on runs.
But we will sell the rest in Cushing.
And frankly, we're looking at the other alternatives to sell it on the Gulf Coast also but but generally we sell in Cushing today.
And that.
It was typically the whatever's left us from what we don't run at our Coffeyville refinery.
And that that market is pretty liquid and pretty pretty pretty much are always in the money on it.
Our cost of deliver from Canada is about $6 a little over $6.
And and typically where we're making money.
Making money on those sales.
Great. Thank you I'll leave it there.
Thank you. Our next question comes from the line of Paul Cheng with Scotiabank. Please proceed with your question.
Hey, guys good afternoon.
Oh.
Yeah.
Maybe I missed it.
Can you just remind us that how much is the on the bottle shape for the how the omni.
Complication that you unique to this year and next year.
Yeah, Paul the total obligation on our balance sheet as of the end of the quarter was $708 million and that's for all of 2020, 2021 and 2022 open positions.
And so those states open up.
Our next year right, yes that does.
Nothing to setup.
Ask again.
No I'm, saying that that and Pi among its 202022021 and <unk> that.
Like what that settlement.
Yeah between the first quarter in the third quarter.
And yet not going to have any cat settlement on the balance sheet, we need that to the balance sheet obligations.
Yes, yes.
And then when you.
Seven $708 mainland donor or 708 million.
When.
That is dollars.
Okay. Thank you.
And that.
Just kill it that.
David.
Diesel crack way, we all know that.
I'll point, you to that two one.
I'll be.
Going to wanted to conventional oil or that I mean that why is that we still have one thing.
Even though that you might be positive concho.
Contribution at this point, but I think you mentioned, there's going to be far more.
Also take contribution yet you've won the conventional oils.
Quite clear.
Well, Paul as you know I think as we've said you know we get the choice to make the decision every time, we do a catalyst change and we've made the decision to convert to <unk>.
Our D and I think it's been a good one even with the cracks where they are and you can argue the opportunity cost was was pretty high during that period of time, but the incentive to run our D has not been bad either with the hobo spread being where it's been.
Uh huh.
Well look at it and we thought it would be when we do this catalyst change, but the but I think we'll probably stay in R&D. Because you can't you know the practicality is you can jump in and out a little bit, but you know it takes railcars. It takes a lot of setup logistics to get it going and unless we just see a train wreck I don't think youll see us convert back.
And typically how long is that change on the captain us that'd be 18 months to two years or longer no.
Now on our D. It's it's at full capacity, we're estimating between six months and a year of life. So okay.
Six months basically.
Okay.
And that.
Two really quick question on the home.
Did that then.
Yes.
I'm gonna approach or that we need county on the question that way.
The time, let's say 260, I mean, how exactly is the thought process.
Right.
Well, Paul its somewhat subjective to the board makes that decision every time, you know where we're going to cover our maintaining our assets sustaining capital, we're going to recover our turnaround costs.
We're going to cover our interest charges on on any debt, we have and now we're going to you know we have to buy crude on a monthly basis and we're going to cover those those expenses. So that's how the board generally looks at it and and and you know our rent obligation is also another another consideration.
But that it's just in every quarter look.
But where we sit on cash and then you know the volatility of the cracks are drives those numbers up and down like math as you might imagine.
Okay and final one with a Y thank via our <unk> session.
Pat.
Your honor.
Bonhams shape management in terms of like how much cash balance that you want to keep.
And what is the cash return I mean, how is that.
Affecting.
Thanks.
<unk> been building into your thought process.
Well I mean, the the price of crude matters as that crude settlement day and grows with the higher prices.
So and then we also have to be careful of the inventory we hold that gets resolved and that's cash out the door should that happen should crude drop in half for instance.
So we consider all those factors.
And you know typically.
Our cash minimum cash balances between $2 50 at low crude prices and 500 and high crude prices.
Yeah.
Thank you.
Youre welcome.
Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to management for any final comments.
Again I'd like to thank you all for your interest in CVR energy. Additionally, I'd like to thank our employees for their hard work and commitment towards safe reliable and environmentally responsible operations.
We look forward to reviewing our third quarter 'twenty two results in our next earnings call. Thank you.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.