Q1 2023 Valero Energy Corp Earnings Call
Keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Palmer Moeller Vice President of Investor Relations. Thank you you may begin.
Good morning, everyone and welcome to Valero Energy Corporation's first quarter 2023 earnings conference call.
With me today are Joe Gorder, our chairman and CEO Lane Riggs, our president and CEO , Jason Fraser, Our executive Vice President and CFO , Gary Simmons, Our executive Vice President and Chief Commercial Officer, and several other members of Valero Senior management team.
If you have not received the earnings release and would like a copy you can find one on our website at Investor Valero Dot com.
Also attached to the earnings release are tables that provide additional financial information on our business segments and reconciliations and disclosures for adjusted metrics mentioned on this call.
If you have any questions. After reviewing these tables, please feel free to contact our investor relations team after the call.
I would now like to direct your attention to the forward looking statement disclaimer contained in the press release.
In summary, it says that statements in the press release and on this conference call that state the company's or management's expectations or predictions of the future are forward looking statements intended to be covered by safe Harbor provisions under federal Securities laws.
There are many factors that could cause actual results to differ from our expectations, including those we've described in our earnings release and filings with the SEC.
Now I'll turn the call over to Joe for opening remarks.
Thanks, Homer and good morning, everyone. We had another strong quarter with all of our segments performing well our refineries operated at 93% capacity utilization rate despite planned maintenance at several facilities.
Our ability to optimize and maximize system throughput, while undertaking maintenance activities illustrates the benefits from our long standing commitment to operational excellence refining margins were supported by lower industry refining capacity and a backdrop of strong product demand.
I'm also proud to report that the Port Arthur Coker project was completed in March and successfully started up in early April which is a testament to the strength of our engineering and operations teams.
The project is expected to increase the refinery's throughput capacity and ability to process incremental volumes of sour crude oils and residual feedstocks, while also improving turnaround efficiency.
Our renewable diesel segment set another sales volume record in the first quarter with the continued ramp up of DGB Port Arthur which was started up in November 2022.
In January we announced the DGB approved a sustainable aviation project at Port Arthur Texas.
The DGB Port Arthur plant will have the capability to upgrade approximately 50% of its current 470 million gallon annual renewable diesel production capacity to sustainable aviation fuel or SaaS.
The project is expected to be completed in 2025 and is estimated to cost approximately $315 million with half of that attributable to Valero with.
With the completion of this project <unk> is expected to be one of the largest manufacturers of SaaS in the world.
In the ethanol segment Blackrock in navigators carbon sequestration project is progressing and they expect to begin startup activities in late 2024.
We expect to be the anchor shipper with eight of our ethanol plants connected to this system, which will allow us to produce a lower carbon intensity ethanol product and significantly improve the margin profile and competitive positioning of our ethanol business.
And we continue to advance other low carbon opportunities such as renewable hydrogen alcohol to jet and additional renewable naphtha and carbon sequestration projects.
All of our projects must meet a minimum return threshold to continue to progress through our gated review process.
On the financial side, we continue to strengthen our balance sheet, reducing debt by $199 million in the first quarter and ending the quarter with a net debt to capitalization ratio of 18%.
In January we announced an increase in our quarterly dividend on our common stock from <unk> 98 per share to $1 two per share demonstrating our long standing commitment to stockholder returns.
Looking ahead, we expect refining fundamentals to remain supported by low global light product inventories tight product supply and demand balances and continued increase in product demand as we approach peak air travel and summer driving season.
In closing our team continues to successfully execute a strategy that enables us to meet the challenge of supplying the world's need for reliable and affordable energy and in an environmentally responsible manner.
The tenants of our strategy underpinned by operational excellence deploying capital with an uncompromising focus on returns and honoring our commitment to stockholders had been in place for nearly a decade and continue to position us well for the future.
So with that Homer I'll hand, the call back to you.
Thanks, Joe for the first quarter of 2023 net income attributable to Valero stockholders was $3 1 billion or $8 29 per share compared to $905 million or $2 21 per share for the first quarter of 2022.
First quarter 2023, adjusted net income attributable to Valero stockholders was $3 1 billion or $8 27 per share compared to $944 million or $2 31 per share for the first quarter of 2022.
For reconciliations to adjusted amounts please refer to the earnings release and the accompanying earnings release tables.
The refining segment reported $4 1 billion of operating income for the first quarter of 2023 compared to $1 5 billion for the first quarter of 2022.
Refining throughput volumes in the first quarter of 2023 averaged $2 9 million barrels per day, which was 130000 barrels per day higher than the first quarter of 2022.
Throughput capacity utilization was 92% in the first quarter of 2023 compared to 89% in the first quarter of 2022.
Refining cash operating expenses were $4 78 per barrel in the first quarter of 2023 lower than guidance of $4 95, primarily attributed to higher throughput and lower natural gas prices.
Renewable diesel segment operating income was $205 million for the first quarter of 2023 compared to $149 million for the first quarter of 2022.
Renewable diesel sales volumes averaged 3 million gallons per day in the first quarter of 2023, which was $1 3 million gallons per day higher than the first quarter of 2022.
The higher sales volumes in the first quarter of 2023 were due to the impact of additional volumes from the startup of the <unk> Port Arthur plant in the fourth quarter of 2022.
The ethanol segment reported $39 million of operating income for the first quarter of 2023 compared to $1 million for the first quarter of 2022.
<unk> production volumes averaged $4 2 million gallons per day in the first quarter of 2023, which was 138000 gallons per day higher than the first quarter of 2022.
For the first quarter of 2023, G&A expenses were $244 million and net interest expense was $146 million.
Depreciation and amortization expense was $660 million and income tax expense was $880 million for the first quarter of 2023.
The effective tax rate was 22%.
Net cash provided by operating activities was $3 2 billion in the first quarter of 2023.
Excluding the unfavorable change in working capital of $534 million in the first quarter and the other joint venture members share of <unk> net cash provided by operating activities. Excluding changes in <unk> working capital adjusted net cash provided by operating activities was $3 6 billion.
<unk>.
Regarding investing activities, we made $524 million of capital investments in the first quarter of 2023 of which $341 million was for sustaining the business, including costs for turnarounds catalysts and regulatory compliance and.
$183 million was for growing the business.
Excluding capital investments attributable to the other joint venture members share of DVD capital investments attributable to Valero over $467 million in the first quarter of 2023.
Moving to financing activities, we returned over $1 $8 billion to our stockholders in the first quarter of 2023 of which $379 million was paid as dividends and $1 5 billion was for the purchase of approximately 11 million shares of common stock.
Resulting in a payout ratio of 52% of adjusted net cash provided by operating activities.
With respect to our balance sheet as Joe mentioned, we completed additional debt reduction transactions in the first quarter that reduced valero debt by $199 million through opportunistic open market repurchases.
We ended the quarter with 9 billion of total debt to $4 billion of finance lease obligations and $5 5 billion of cash and cash equivalents.
The debt to capitalization ratio net of cash and cash equivalents was 18% as of March 31 2023.
And we ended the quarter well capitalized with $5 4 billion of available liquidity excluding cash.
Turning to guidance, we expect capital investments attributable to Valero for 2023 to be approximately $2 billion, which includes expenditures for turnarounds catalysts and joint venture investments.
One 5 billion of that is allocated to sustaining the business and the balance to growth.
For modeling our second quarter operations, we expect refining throughput volumes to fall within the following ranges.
Gulf Coast at 173% to $1 $7 8 million barrels per day.
Mid continent at 405 to 425000 barrels per day.
West Coast at 250 to 270000 barrels per day.
And North Atlantic at 450 to 470000 barrels per day.
We expect refining cash operating expenses in the second quarter to be approximately $4 60 per barrel.
With respect to the renewable diesel segment, we expect sales volumes to be approximately $1 2 billion gallons in 2023.
Operating expenses in 2023 should be 49 per gallon, which includes <unk> 19 per gallon for noncash costs, such as depreciation and amortization.
Our ethanol segment is expected to produce $4 2 million gallons per day in the second quarter.
Operating expenses should average 40 per gallon, which includes <unk> <unk> per gallon for noncash costs, such as depreciation and amortization.
For the second quarter net interest expense should be about $145 million and total depreciation and amortization expense should be approximately $670 million.
For 2023, we expect G&A expenses, excluding corporate depreciation to be approximately $925 million.
That concludes our opening remarks before we open the call to questions. Please adhere to our protocol of limiting each turn in the Q&A to two questions.
If you have more than two questions. Please rejoin the queue as time permits to ensure other callers have time to ask their questions.
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First question is coming from the line of Manav Gupta with UBS. Please proceed with your question.
Congrats on very good results I'm not sure it is.
Any other refineries out there who can show this kind of capture.
Have you done an ounce so congrats on that.
Two quick questions I don't ask them upfront.
We have seen daily data just prone to divisions, but sometimes doesn't make too much sense. So youll in your system across various products. What are you seeing in terms of demand for various products in your system and the second and related question is help us understand a little bit what's going on in the diesel market.
I'll be suddenly oversupplied as the demand weak if you could just talk to those dynamics. Thank you.
No.
We're happy to do that thanks for your comments, Gary you want to give them. Some insight yes sure. So so far our seven day average in our wholesale system. Our gasoline sales are up 16% year over year, our diesel volumes were up 25% year over year. So our wholesale team continues to do a great job in March we set a record at nine.
Hundred 98000 barrels a day in April the volumes are trending right along right along those levels. So demand seems very very strong in our system and even the btn data for for the wholesale racks across the industry is very strong as well.
In terms of your question on diesel weakness, we're just not seeing it I can tell you in addition to the wholesale volumes.
Today, there is domestic arms that are open from pad III into pad. Two is we're seeing a surge in agricultural demand thats going along with planning season. You also have a domestic arb open to ship from pad three to pad. One we see strong waterborne premiums to go to Latin America. The Trans Atlantic Arb is open to Europe , and so for US This will.
Fundamentals look pretty good.
Thank you for taking my questions.
Thank you. Our next question is coming from the line of Theresa Chen with Barclays. Please proceed with your question.
Good morning can you comment on your outlook for Gulf Coast capture from here clearly the startup of the Port Arthur Coker should be a tailwind that would help us differentials come in net net how do you view the profitability of your Gulf Coast system, both near term and longer term.
Yes.
But some general comments about cap rates to sort of compare our first quarter capture rate to a second quarter capture rate holding all things equal will bloom less butane.
Everything.
Holding everything equal our capture rate blocks, we fall just due to butane and then as you alluded to you look at the feedstock what's the trajectory of feedstocks that are lower on the other side of it we're seeing big Arbaugh premiums versus the Bob so to the extent.
But that's not captured in our capture rate that's actually a positive <unk>.
So there are several things you just got to look at and once we got to focus on are the some of the drivers that may not be in our formula for our crack attainment and how those change relative to things that are sort of tied to an example would be <unk>.
<unk> versus WCS or like I said <unk>, let's see Bob those are the things you guys kind of kind of key on and try to predict maybe how our crack attainment looks.
Thank you.
But later on it now.
How do you see the bgs situation evolving in terms of.
Gulf Coast consumption as well as the global supply following the.
The EU embargo on Russian products as well as the Saudis exporting less after or Keith on product on its conversion unit.
Well I'll start on at least our system and let you kind of look at and talk about the supply and the startup of our Port Arthur Coker goes a long way to shoring up our biggio position essentially that's worthy of taking reserve and heavier crudes in the crop came into sort of a.
The distillate and essentially a biggio boiling arrange a material. So it allows us to sort of our requirement for importing regions fallen post.
The new coker sort of.
In terms of supply I think we were concerned that the ramp up and sanctions against Russia would limit <unk> exports and cause VGL tightness. So far it looks like the Russian barrels are continuing to flow and so we're not nearly as concerned about biggio supply as we were earlier in the year.
Thank you.
Thank you. Our next question is coming from the line of Doug Leggate with Bank of America. Please proceed with your question.
Hey, good morning, everybody. This is clay on for Doug. Thanks for taking the question I've got a follow up to <unk> question and it really goes to the.
<unk> ability of heavy sours that are in the market. There is a perception that that length is getting shorter with the OPEC cuts and that increased demand from new projects, such as your coker and perhaps MPC as Brexit Hydro cracker are squeezing in the market for those kind of supplies can you talk about what you guys are seeing and if the phase startups of the knee.
Refineries were now at all the units are online.
Alleviate that situation.
Yeah. So I'll go through we have seen during the first quarter, we saw the supply demand balances around heavy sour get tighter some of it's supply. He also see solid Chinese refinery utilization ramp up which.
Put more demand in the system, but going forward I think there are some bullish factors.
<unk> reporting 500000 barrels a day of Canadian crude production is offline due to maintenance, we will get that production back Venezuelan production is forecasted to grow and our view is that more chevron production from that region will make its way into the Gulf as we progress through the year at.
At some point in time, all indications are that the lyondell refinery will come down which will kick more heavy sour back to the market and then if the demand and the supply demand balances that are currently being forecasted or correct at some point in time youll need that OPEC production back on the market, which again is bullish of differentials.
Got it and a quick follow up to that can you talk about what youre seeing for new refining capacity, that's supposed to come online like dengue Odeon dose focusing in Mexico.
Yes, I really can't make a lot of comments, we don't we don't have a lot of insight into either one of those refineries.
Alright I appreciate it guys. Thanks for taking my question.
Thank you. Our next question is coming from the line of John <unk> with Jpmorgan. Please proceed with your question.
Hey, guys. Good morning, Thanks for taking my question.
I just wanted to start on the return of capital side, you guys returned above your 40% to 50% range again this quarter I think second quarter in a row.
What's your latest thinking on where you want to be in that range of returns to shareholders.
Given your balance sheet is very strong, but fundamentals appear to be taking down and you can see that in your indicators.
Yes.
This is Jason in your eye, our balance sheets in good shape right now we've got up to over $5 5 billion of cash would feel pretty strong there.
Debt to cap ratio down into a good spot around 80%, which is well at the end of our lower end of our range. So we feel like we're in a pretty good spot with regard to any potential recessionary conditions.
And as far as our.
Our target for where we want to be in a range will continue to target a 40%, 50%. When we are when we have strong results of course will be looking at the upper end.
With that we ended at 45% last year, 52% this quarter.
With the extra cash we had we did kind of an all of the above strategy, we're able to build our cash by $600 million payout at 52% and also even payback a little more debt.
<unk> depend on how the year plays out.
So where we fall in the range right and the payout range.
Great.
And then I was hoping you could also touch on the.
The regulatory changes out in California, and how you expect those to play out.
The potential impact on both your business and maybe just the broader refining market in California.
This is rich I can start out with just sort of the regulatory climate and California has always been a tough regulatory climate.
For operations, and so im assuming youre talking about the California, SPX one too.
Rulemaking, that's out there and what we would just say is that the bill does have some burden some reporting requirements in it.
And then obviously it kicks basically.
Profit tax.
Over to this California Energy Commission to implement it so we'll stay active and engaged in that rulemaking process.
And watch what develops out of the agency there its unclear what price cap if any they will ultimately put in place I would point out that the rulemaking on that the standard that the agency is supposed to use as they're supposed to determine that.
The benefits to consumers are outweighed by the potential cost to consumers.
It goes without saying that attempts by governments to artificially limit commodity prices never been really good for the economy and it ultimately ends up hurting consumers. So.
And we'll just have to see how that all plays out in.
And John This is Joe just let me bolt on something to what rich said so.
We have a great team operating both of our refineries on the West coast. Great teams are running those plants and we have been very consistent and clear and our approach to the California business and that is we aggressively managed the capital we invest to maintain safe and reliable operations out there, but we haven't <unk>.
Vested capital in growing that business for many years now now historically.
<unk> in a normal operating environment isn't a strong contributor to our earnings we've always viewed it as an option on periodically strong margins and if the margin capture said at levels that remove the upside the opportunity to earn a return isn't there the way its been in the past and we will have to reevaluate our options right now.
Rich and his team are communicating.
To the California Energy Commission and others. The concerns that we have and we're just going to have to wait and see what happens out there. So it is an environment that is a difficult operating environment I would not even take.
<unk> it.
Stating what might happen to the overall refining environment out there, but I can just tell you that from our perspective, we're just going to have to watch it and see and then we'll evaluate our options.
Thank you very much.
Sure.
Sure.
Thank you. The next question is coming from the line of Paul Sankey with Thank you research. Please proceed with your question.
Hi, everyone.
Could you repeat the the wholesale sales demand number that you just gave and explain how come with if I heard you right that's growing so massively.
Yes, so our wholesale on the gasoline side were up 16% year over year on distillate were up 25% year over year March we set a sales volume record 998000 barrels a day and then April the volumes are trending about like they did in March. So certainly when you look at the broader DTC and wholesale volume data it is not.
As significant growth is what we're seeing and so indicates we're doing a good job of capturing market share.
So there's no structural change its just that a wholesale performance.
Yes.
Okay, I'm not counting that as a question Joe.
On the.
We could talk all day.
Yeah.
On the DC actually on the Iras.
Your latest thinking on how that could impact your business.
Yeah in terms of the regulatory environment. We've had we've dealt with the California, one I think on the call already but if you've got any.
The latest thoughts on.
On how things in Washington are shifting.
And the other one I guess is a big deal here, obviously is carbon capture and how you're thinking about that right.
Okay.
Well this is rich wiles again, I'll guess I'll take an effort to respond on that in terms of I think you're probably alluding to.
Negotiations that are going on right now and just this morning I think the Republican Bill has been revised to include some of the some of the credits to be back in that that they were proposing to pull out and so we're looking at.
Clean energy tax credits.
Being put back in and so the things that help us on a renewable side and in some of our seas.
Sequestration projects back in and they also have grandfather, those that have already made investment decisions on these so.
While SaaS is out the projects that have been announced on SaaS or back in so.
That means our projects would be still eligible for the for the proper treatments on that.
Yes got it.
The surface.
A very interesting one.
Okay, and then generally speaking the market.
You've seen margins come off an awful lot.
Which is a bit odd seasonally is there anything that you can observe about.
Especially given what you're saying about your wholesale.
Margins Youll wholesale deliveries.
The big sell off that we've seen is somehow doesn't seem to be entirely supported by fundamentals. We had a great gasoline demand number for example, this week and the DLA.
Any thoughts on how Q2 is going to shape out and I'll leave it there. Thanks a lot guys.
Thanks, Paul Yes, Paul our view is whenever inventories as low as it is today. It just puts you way out on the margin curve, where the slope is really steep and any type of market news can have a significant impact on prices and margin. So early in the year. The market headlines were all about losing Russian supply with the ramp up and sanctions in it.
It drove the market up today I think people are generally comfortable that the Russian barrels will continue to flow and then a lot of concern on the economy and what happens with demand in the future as I've said, we're not seeing any indication of demand weakness today, but I think thats a concern is what happens in the future.
Understood. Thank you.
Thank you.
Thank you. The next question is coming from the line of Roger read with Wells Fargo. Please proceed with your question.
Yes, thanks, good morning.
And Rob I guess I'd like to follow up.
No.
Like to follow up on the comments or how youre looking at the diesel and gasoline markets. I mean, there is a ton of ways to.
To track demand and shortfalls of supply, but one we pay attention to is each end of the colonial pipeline and it shows clear stress in the gasoline market. So I guess I'd like to dig into maybe what you see in the Atlantic Basin, particularly between New York and northwest.
We're up in terms of just outright gasoline supply or is it a component issue or what exactly is going on there.
Yes. So I think there are several factors that come into play there Roger you know historically.
We see an incentive to store summer grade gasoline or component to New York Harbor. This winter the market structure really made it to where it wasn't economic to do that and so we did build inventory for that and then again typically in the first quarter you see a lot of volume going across the Atlantic from Europe into New York Harbor early in the year and the strikes that occurred in <unk>.
France kind of minimize those volumes as well so we've come into driving season with 10 million barrels below where we were last year on gasoline inventories, so, especially summer grade gasoline is very tight and it is going to stress the colonial system as we move into driving season.
Yes, I mean, it's early in the quarter, but.
Really really havent seen.
The gap quite this large at this time of the year before so definitely show stress.
Follow up question, if I could on the Saf.
Obviously, you mentioned there are some opportunities in terms of what's moving four legislatively.
If you want to see.
Let's call it fundamental support for Saf margins do you want to make SaaS I mean, whats the driver to do that versus renewable diesel, which obviously already enjoys support as well as El CFS programs.
Hey, Roger This is Eric I think we still see a big demand for SaaS in the future.
You just talked about mandating it beginning in 2025 and at an increasing percentages as you get to 2030 in 2050 so.
<unk> isn't the only driver for SaaS I think between what we see in.
Different jurisdictions, starting to obligate jet and make it a mandatory.
Requirement as well as just the internal commitments that a lot of the airlines and cargo carriers have made.
From a corporate standpoint, we still see that that SaaS is going to be a strategic growth area for our renewables.
Alright ill leave it there thank you.
Thank you. The next question is coming from the line of Ryan Todd with Piper Sandler. Please proceed with your question.
Hey, Thanks, Good morning, maybe maybe I'll stick for one follow up on.
On the low carbon fuel side.
Can you talk a little bit about a couple of low carbon possibilities that you mentioned earlier in the call you mentioned renewable hydrogen and alcohol to jet.
What would either of those projects look like in your current operations and are there further changes in product prices or regulatory support that would be required to make either of those businesses makes sense.
Well I think this is Eric again in particular to say well I will start with ethanol the jet.
Assuming the navigator project goes forward that will lower the carbon intensity of our ethanol to a point, where it will qualify as a feedstock into SaaS and so if you look at that as the precursor project that would then enable SaaS and ethanol the jet SaaS project.
That's one of the things we're looking at now.
Years out from a from anything we would talk about in any sort of detail, but conceptually that's kind of what would lineup that possibility from a project standpoint, and then renewable hydrogen that's another sort of horizon opportunity that as you look at your low carbon platforms. If you could make blue or green hydrogen is just another way to.
Further lower your <unk> on your on your low carbon.
On your low carbon operations.
Great. Thanks, and then maybe.
Just a quick follow up on the Port Arthur Coker.
Congratulations on getting that started up is there any sort of ramp associated.
With operation there how should we expect kind.
Contributions from that.
In the second quarter.
And any kind of update your thought on what the what you think the annualized EBITDA contribution is in the current environment.
Yes. This is wade so we put we started up on April 5th I would say actually this week, we've sort of ramped up most of the refinery up to where we're running.
Fuel to full we're.
From now through the rest of the quarter, you'll see I believe the benefit of being a cohort.
Clean startup as Joe alluded to earlier in his comments.
Really well by our team.
It's working just as we are.
We had indicated in terms of the contribution on EBITDA when you take sort of the current.
Volume metrics in <unk>.
These forward pricing on this anomaly about a half a billion dollars a year as the benefit.
Great. Thank you.
Thank you. Our next question is coming from the line of Jason <unk> with TD Cowen. Please proceed with your question.
Hey, good morning, everyone. Thanks for taking my questions.
I wanted to ask one on market structure I think there is some concern.
Cause there's headlines around Asia.
Cutting refining runs because margins are low there and there is some concern that that could permeate into the U S. And so the question is how should the market kind of take that indicators.
Indicators should they think that well Asia margins are falling and so U S will follow because theres global weakness or Conversely, because Asia margins are falling.
U S cracks are.
Around the levels, they are probably closer to a floor because of the structural.
Kind of tail winds that are out there and Asia is kind of absorbing all of the throughput declines related to global demand issues I know, it's a bit of a complex question, but I guess given a shot thanks.
Yes, so I think the way we would view it as much like you said, we would view it as it's kind of telling us that we are at a floor on margins its not just Asia, but in Europe Hydro skimming margins are negative and so a lot of that is the distillate weakness, we still see diesel inventories very very low and.
We view that some of that capacity should actually be running and so it is kind of telling you. We're at a floor on where margins are.
Okay. Thanks, that's helpful. And then a follow up on <unk>, where are we in terms of the DVD distribution have you received the one yet is that coming soon.
How are you thinking about that cash being moved up to the partners moving forward.
Yes, we've looked at the <unk> cash flow and we would still say, we see a distribution in the back half of this year, becoming an opportunity for the partners.
Yeah.
Okay any idea around the quantity.
No, we're not going to give a number like that out but it does look positive through the end of the year.
Okay. Thanks, guys.
Jason.
Thank you. Our next question is coming from the line of Matthew Blair with Tudor Pickering Holt. Please proceed with your question.
Hey, good morning, everyone, Joe could you help us understand.
The Q1 refining capture.
Strong figure a little bit more I think Wayne mentioned.
Butane blending with a tailwind.
What else drove it up and I guess, specifically where product exports.
More of a supporting factor than normal and then also was there any impact from turning in the 2021 rooms that can be sort of mark to market. As you as you submitted the 2021 Rins in March of 'twenty three.
So Matt this is lane I'll start out with first part of it the things that are contributing factors were.
Backwardation sort of flattened out in the market on feedstock. That's always wanted to go to market structure plays in the capture rate in a big way. So it's flattened out some you had wider differentials in the first quarter versus the fourth quarter on all the on all the crudes that we run and then finally, there were pretty good jet premium versus distillate in the first quarter.
<unk>.
Those are the other things driving our capture rate with respect to.
The other item I mentioned.
<unk> had anything to do with it.
And I wouldn't say exports had any kind of material impact on capture rates either.
Great. Thanks for the color and then.
On the Q2 refining guidance it looks like it implies about 90% to 93% utilization you already did 93% in Q1, so I guess I'd be surprised if it if.
If it ticks down is that just should we think about it just a conservative number or are there other major turnarounds that we should be aware of it thats pulling down your Q2 expected run rates.
Again, we forever line, we have a policy of not really commenting directly on our turnaround.
Activity.
But I would just take the guidance to be kind of where we think it is going to be and Matthew I mean, you know our history and our tendency.
We're not going to oversell anything so we'll just we'll see how the markets look in.
Lanes right.
We will operate.
As appropriate.
Great. Thank you very much.
Okay.
Thank you we have no additional questions at this time, so I'll pass the floor over to management for any additional closing remarks.
Thanks, Jesse we appreciate everyone joining us today, obviously feel free to contact the IR team. If you have any questions have a great week. Thank you everyone.
Ladies and gentlemen, this does conclude our call and webcast you may disconnect. Your lines at this time, we thank you for your participation.