Q2 2023 PBF Energy Inc Earnings Call
[noise] Good day, everyone and welcome to the P. B S energy second quarter 2000, twenty-three earnings conference call and webcast. At this time all participants have been placed on a listen only mode.
Floor will be open to your questions. Following management's prepared remarks, if anyone to require operator assistance during the conference police pressed stars here on your telephone keypad. Please note. This conference is being recorded it is now my pleasure to turn the floor over to Colin Murray Other Investor Relations. Sir you may begin.
Thank you that's good morning, and welcome to today's call with me today are met Lucy our president and CEO problem, namely our executive Chairman, Karen Davis R. C. S L and several other members of our management team copy.
Copies of today's earnings release in our 10-Q filing including supplemental information are available on our website.
We're getting started I'd like to direct your attention to the Safe Harbor statements contained in today's press release state.
Statements in our press release and those made on this call that express the companies are management's expectations are predictions of the future are forward looking statements intended to be covered by the safe Harbor provisions under federal Securities laws.
There are many factors that could cause actual results to differ from our expectations, including those we describing our filings with the SEC.
Consistent with our prior periods will discuss our results today, excluding special items in today's press release, we described the special items included in our quarterly results. The cumulative impact of these special items increased second quarter net income by an after tax amount of approximately 729 million.
Or $5.59 per share.
And this relates primarily to the gang realized on the formation of the Saint Bernard Renewables equity message investments.
Also included in today's press release is further guidance related to our 20th 23 operations for any questions on these items or follow up question. Please contact Investor relations after today's call.
For reconciliations of any non-GAAP measures mentioned on today's call. Please refer to the supplemental tables provided in today's press release.
Refiners, followed the markets and respond to consumer demands, we continue to have a higher refining utilization.
C a market supported by low inventory and sustain customer demand.
Crude differentials narrowed over the quarter it.
It is common to have narrow crude dish during peak summer brunch. The narrowest is amplified by the production policies of OPEC, plus and to a lesser degree.
S P R restocking activity.
We believe food market on the other peak of the narrowness and where would expect crude yes to relax published on the.
The industry heads into full turnaround at a forecasted to be higher than seasonal moms.
P. B S refining system is well positioned to manage these market dynamics.
We have accomplished conversion apple reforming capacity short nap.
And a long long our team, we like audio profile and that puts the company and it is advantageous position.
Refinery Marg me remain well above historical mid cycle, and we have seen a recent rebound from the relative lows experienced during the second quarter.
Say relative because those those which tell about mid cycle.
Okay.
[noise] twenty-three the recovery and the demand for jet fuel and gasoline, partially offset by a decline in this with demand as an industrial production has slow.
Diesel inventories are up yet still remain below five year averages.
However, at this time of year, we expect to see additional inventory building instead of coming agricultural season.
And winter.
The fact that we are not seeing this normal seasonal activity provide some support for potentially stronger distillate market to the head.
The mortgage will continue to be volatile protecting the timing of in your future movies in a commodity markets is challenging.
At the same time, we are seeing stable to growing demand for our products that are refinery gauge, thereby continuing to cough a high utilization from our assets with that I will turn the call over to Matt. Thanks, Tom.
Before commenting on the quarter I thought I'd take a moment to give you my perspective of the company.
Cause they take on the role C E O.
First I can say with absolute confidence.
Today P B S as in its strongest position ever as an operating company.
As I reflect on P. B S time, as an operating company, which began in 2010.
I break our history into three distinct periods.
The first five years from 10 to 14.
We set the foundation of the company.
Established are refining platform.
The second 515 to 19, we focused on growth.
We dumbledore refining capacity increase our logistics footprint and geographic diversification.
The three years from 20th 22, we navigated the most volatile marketplace oil markets ever experience.
Maintaining consistent safe and reliable operations through the laws allow.
Allowed us to fully capitalize on the robust market recovery to generate record financial performance.
Which brings us to today.
We have repaid over $3 billion in debt.
Repurchase PBF logistics and PBS inventory in a mediation agreement.
Reduced our environmental crab payables by about 40% since the beginning of the year.
Enter the renewable fuels business with a world class partner Nino.
Re start paying a dividend.
And commenced executing a share buyback program, where we bought about 8% of the shares.
Moving forward.
Our focus is on capital allocation.
Ah repositioned balance sheet, well buttressed the company against future market disruptions.
Which are inevitable in this circle go industry or any circle or industry for that matter.
Our goal is to further strengthen our business cash flows and balance sheet and to work with the rating agencies to highlight these improvements with the intention of eventually becoming an investment great company or.
On that front, we have recently been upgraded by S&P, Moody's and Fitch.
We will continue to invest and innovate at each of our refineries to maintain and improve our reliability and competitive positioning.
We will evaluate growth opportunities that leverage our expertise and large industrial footprint into high quality business opportunities that diversify our cash flows beyond refunding.
Similar to renewable diesel business, we develop that chalmette.
Most importantly, we will weigh potential investments and growth against turning capital to shareholders. What's.
With the Golden maximizing longterm value.
By definition.
Any returns associated with any future potential growth opportunities.
Must be and will be superior to buybacks and dividends.
Our process will continue to be rigorous and disciplined and will ensure competition for capital. So that funds will slow the highest and best use.
P B F as committed to driving longterm value for shareholders.
There's obviously begins with working safely.
[noise] operating reliably.
And responsibly.
On that note in the second quarter, our refineries operated reasonably reasonably well with system wide throughput.
In line with our expectations.
We completed the turnaround of the Delaware City Coker and minor work on the hydrocracker towards.
There will be a larger FCC inoculation unit turnaround in the fourth quarter of tours.
As mentioned or a press release this morning, the Saint Bernard renewable joint venture transaction closed in June .
We are more than pleased to have gone to this point.
Look forward to operating this venture alongside Eni sustainable mobility.
The operations of SBR progressing as planned.
Successfully start up both the <unk> and the P. G O.
The facility is running well, we continue lying out operations and we sold our first commercial cargoes in July .
We're more than halfway through the year and market conditions have provided PBF with the opportunity to generate exceptional results.
While the work to maintain the strength of our balance sheet is ongoing the major efforts to approve it have largely been completed.
We will continue to focus on a robust balance sheet with a simplified and transparent.
Whole structure.
We intend to demonstrate the durability of our transformation or a through the cycle financial strength.
Our goal is to generate longterm value for our investors through solid operational performance and disciplined.
Hello allocation wood.
With that I'll turn the calls Karen.
Thank you Matt.
For the second quarter, we reported adjusted net income is $2.29 per share an adjusted EBITDA of more than 560 million.
As mentioned at the opening of the call adjusted net income excludes the game on the investment in Saint Bernard Renewables we.
Closed on the joint venture partnership at the end of June and going forward, We will account for our 50 per cent interest using the equity nothing.
Their value of the S. P. R business was approximately 1.72 billion at closing excluding working capital.
In the second quarter, we recorded a gain of approximately 969 million relating to the formation of the joint venture the.
The gain represents the difference between the value of any consideration we received which includes the fair value of our 50 per cent noncontrolling interest in the partnership plus the cats contributed by our partner.
Carrying value of the related assets when you contributed.
On June 28th upon closing of the transaction, we received 431 million and on August 2nd just yesterday, we received an additional 415 million subsequent to the successful commercial startup at the P. T as in July .
Total P. B S has received 846 million relating to its investment and S. P. R.
P. D F is entitled to potentially receive up to an additional 30 million of contingent consideration if certain performance conditions are met.
Well, we exclude this one time gain from the discussion of our second quarter results. This transaction generated real equity value for P. P. B S and holds the potential future value through additional opportunities, we look forward to exploring with our new partner N I.
With our results from operations in the cash provided by the successful closing at the S. P. R. In debt equity investment we continued our work to improve the financial position of the company strengthen our balance sheet and reward shareholders.
We further reduced our outstanding environment payables by approximately 250 million for a total of approximately 570 million here today.
Environmental credits payables has now been reduced from over 1.3 billion at the end of last year to just under 800 million at the end of June .
Continuing with our efforts to streamline our balance sheet in July we exited our inventory intermediation agreement at a total cost of approximately 270 million, including the cost of repurchasing seen the inventory and transaction fees.
This arrangement had been our highest cost of capital for the first time in our history. The company now owns and control all of its inventory a milestone event and the development of P. B S.
We continued to purchase P. D F shares and through today, we have repurchased almost $440 million worth of P. B F shares, including $100 million in the second quarter.
For the life of the program today, we have repurchased over 11 million shares and reduced our total share count to just under 124 million shares.
R G and a expenses for the second quarter came in at 140 104 million, which includes our base G&A expense and amounts related to the company's incentive and equity based compensation plans.
For the sake of clarity P. B S annual base G&A expense should continue to be in the 200 to 250 million dollar range.
Pending on financial and operational performance on top of this there could be approximately 100 million incremental G&A expense related to our compensation programs.
This incentive component of DNA is variable independent on a number of factors. The most important of which is our financial performance. If the company does well so do our investors and our employees.
Consolidated Capex for the second quarter was approximately 367 million, which includes $260 million for refining corporate logistics and approximately 170 million related to S. P. R.
Ah refineries to continue to demonstrate durable earnings power and we are adding diversified earning streams as SDR comes on line for.
For the second quarter S. P. R was not a contributor to the earnings of our system as we did not fully start up until July .
As of today, we have reached plan throughput rates and expect to continue operating in the 20000 barrel per day range.
We have previously mentioned, our EBITDA per gallon expectations on a steady state basis, but we do not expect to reach that run rate until we receive all of the required regulatory approvals for our pathways and products, which could be into the first half of 2024.
We ended the quarter with over 1.5 billion in cash and approximately 1.44 billion a gross dead <unk>.
Continue to focus on the strength of our balance sheet and ensuring that the needs of the business are satisfied.
We believe our sector, leading balance sheet meets or exceeds many investment grade credit matrix.
And we will continue to exercise balance sheet discipline and sound financial policy.
Operator, we have completed our opening remarks, and we'd be pleased to take questions.
In a moment, we will open the call to questions. The company I request that all callers limit each turn to one question and one follow up.
With additional questions. If you would like to ask a question. Please press star one on your telephone keypad.
Total indicate your line isn't the question queue. You May press Star two 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 pressing the sarkies one moment. Please while we poll for questions.
Our first question comes from the line of Roger read with Wells Fargo. Please proceed with your question.
Yeah, Hello, good morning.
Roger.
I guess, let's well first off not congrats on C O and all but can we.
Take a hard look at the the diesel markets and in your comments right. So diesel demand, it's been relatively weak diesel inventories.
I haven't done anything very extraordinary in terms of building and as we look to the fall and winter you know.
Let's say, even a normalised economy next year on the industrial side, what's your view of the ability to deliver enough diesel end of the market and what this may mean for margins going forward.
I'll I'll.
Dark and maybe pass over to Tom.
He made a couple of comments that I think are on point.
Season was a bit softer, but we also see bring it back to last year, it's the same path.
Pattern we've seen.
Maybe in certain longer longer duration, but gasoline was a much stronger the first part of the year then diesel as a result, we made more gasoline and diesel yield declines there's always unintended consequences.
So you're exactly right.
Over the last couple of weeks, we've seen a tremendous rebound and the diesel crack.
And that's partially because of this time of year, where still well below historical norms for diesel inventories and.
And so the market has to create the incentive to make the diesel going into you know the agricultural season and weather turning.
So I have no doubt that we'll be able to the marketplace will figure out a way to to make the diesel provide the marketplace with sufficient diesel but all of these questions always come back to the same answer which is fun capacity is tight.
Supply is coming on but that supply is needed and so you know.
We view it as being very constructive and in the marketplace is reasonably well to.
To be exceed what is historical norms for mid cycle margins Tommy.
Oh, I mean, Matthew only thing is I would I would really you know it was kind of coming you know we still have to go through the turnaround season, which is active.
Seemingly right, where you just the beginning days of hurricane season, So probably a little bit of premium open to it right now in terms of getting a through there but.
Ultimately the market will be you know in the end.
History will be switching yields and actively over the next several weeks.
Weeks and months as we basically answer into winter jostling season, I certainly expected same purpose for sure.
Okay. Thanks, and then just a pivot to the comments about it you know pursuing an I G rating and the the inventory change.
Is there a way you can quantify for us or or give maybe a couple of key points of what changes.
P D F.
With the change in the inventory control and then if you are.
[noise] able to achieve an I G rating, how we should think about that it's sort of a quantifiable bottom line impact if you can.
Yeah, So and in regards to the interview inventory Intermediation agreement.
And Karen mentioned that if if you go back in our history. When we first began we had suppliers of crude on the east coast and suppliers and all takers of products, we had suppliers of crude in the Midtown for three requirements.
And so this is a moment for the company, which just happened.
Actually earlier this week when it was finally extinguished completely.
It's simply just the fact that the company didn't have the proper capitalization to own. It all now we do which I think is a good thing it dramatically simplifies our balance sheet. It makes it much more transparent we own inventory as opposed to renting it and and it's sort of buried within the balance sheet. It lowers are.
Cause.
Because the interview the intermediation agreement.
You are paying it essentially the interest rate it was our highest cost of capital.
But as I said it it it just demonstrates that not only properly capitalized, but now that we own it and it's paid for that free it deepens. The killed the company. So it's more wherewithal that we can utilize in terms of liquidity going forward.
And so I think it was absolutely the right thing for us to do those those.
Of structures served us incredibly well over the last 12 years or appreciative.
[noise] partners that we work with they have them, but where we are in our lifestyle, but right now it made the most sense to move on and we're pleased to do it.
In regards to investment grade, we're not doing that for any other reason than we think it will increase the value of our company on a number of fronts, obviously it lowers your cost of capital.
But in this business.
Working capital is.
Incredibly important.
And so it increases the open credit with Counterparties.
Oh, you're talking about a million barrels a day of crude being purchased.
And when you know 85 dollar crude.
Open credit is critically important so to improve our standing with counterparties adds value.
You improve your insurance.
Of course, so it costs across the organization go down.
But also you essentially improve your shareholder base and you attract new Gerald.
As you become a stronger and stronger company. So I do think it's incredibly important and something that it's a goal that we're chasing I think we have a lot of merit to our argument and that's.
Is slowly being recognized we did just get upgraded.
But you know for our industry and for what we do I think it is important and I think it will add tremendous value to our shareholders.
Great. Thanks, good quarter and will catch you the next one.
Thanks Roger.
Thank you. Our next question comes from the line of dog.
Bank of America.
Thanks, Thanks every body Tom Great to hear you on the call.
I I I think you've been pretty clear about the different life stages of P. B S, whose life cycle, but I wonder if I could.
Just touch on on how you see the portfolio today is there anything that you would shift at this point anything you would change anybody you want to be that you are not.
And I I guess, what's behind my question is the.
You know the joint venture, you'll have and I was going to generate some <unk>.
Remains a sizeable headwinds for the company. So when you see the light so collateral with assessing all business and other.
Ways to mitigate or been exposure I'm, just curious of thoughts on your mind as to how you address your obligations going forward.
So I'll I'll go backwards and.
Unfortunately.
Way too much of my time has been focused on Ren mitigation, it's not it's foreign way far and away the best way to mitigate Reds.
As to manufacturing renewable diesel, which we're now doing it so that it is a milestone event for the company.
And not only you know, we're we have half the entity so half the wrens ours, but.
Set up to.
Gated party, so will will procure they're chevron's as well which is good access.
It's simply too to acquiring the Reds.
But you know I would quibble with the idea that.
And that's even ethanol is necessarily a good hedge against friend volatility.
The long and short of it and what makes it difficult is.
The way the program is administered the beneficiaries are entities that trade in much higher multiple then refiner. So it's a difficult.
Has to take on that well I'm, just gonna buy my way through.
The market because much of that benefit will flows wholesale marketers that retail businesses that you know traded different valuations and refining. So I don't think there's any glory and going that way, but you know we we like I said, we're now manufacturing and a 500.
Rented a year and that dynamically changes our position and so we look forward to operating SBR safely and reliably and delivering those reds.
In regards to our portfolio.
Yeah, and I talked a little bit of our history. If you go back to the last cycle too.
2010 to 2019.
Oh to oversimplify the cycle by comparing it to residential real estate, which was <unk>.
Location location location and everything else was.
Secondary are not important and it didn't really matter what your size was what you're here.
Complexity was your ability to process sour grades.
It was are you near the crude Renaissance and do you have access to cheap foods for.
For a whole host of reasons I think.
Our portfolio, which.
We put together.
Very specifically on the back of complexity and access to to coastal markets.
Our our portfolio I think is.
Much better position going forward.
Why is that.
I think there's been a number of closures in the industry and that impacts everyone, but I'm not sure it impacts anyone as directly as it does P. B S.
You look at where the pleasures of occurred they happen to be all.
Our neighbors you know on the East Coast Ah P E S.
You can see that from Paul's borough.
To a lesser extent certainly not our neighbor that come by chance in Atlanta, where direct east coast participants and when you go to the Gulf Coast.
It was really the eastern edge of the Gulf Coast, where.
No Condon and the Lions shut down which are neighbors to chalmette and they already have not only benefits from less refined products are being produced but also on for crude procurement because they're buying very similar crude sauce and then you go out to the West Coast is a marathon Martinez.
A shot Samara is down in at least 66 announced.
Announced yesterday that rodeo will be converting in the first border.
So all all direct local competitors to Martinez, so I think the closures impact us directly but stepping back more broadly than that.
You know you have obviously the disruption in Europe , which natural gas is now.
Major head waiting for the refunding sector in Europe .
Obviously fired boilers and haters, what natural gas, but you also desulphurize your products with hydrogen that comes from natural gas and so if you're paying four or five times natural gas and we are in the U S.
That's a big headwind in big competitive advantage for us and obviously you have the disruption from the Russian Ukraine, Oh, Brown war and that that creates other distortions out you know I think.
Accrue to the benefit of our coastal we're filing network and then.
Obviously, something we talked about for years and years and years was I am Oh and does it became moot when the pandemic struck but is now the law of the sea and.
And.
You know I I you know, it's it's impacted.
Packages embedded and everything else as we look forward, we've got our footprint, we're very very pleased.
We're very pleased we're just at the beginning stages with with Ian I a N S. B R.
And then we're we're looking to get into new businesses like hydrogen we're working with the federal government I think the company is very well well possession to be central hydrogen hub going forward.
So we've got a refunding footprint, we've got a renewable for print that is established and potentially growing and there are other opportunities with you know our industrial footprint I think we'll be able to capitalize on it.
Mmm very started once and for things without my I guess my pull ups a quick one on the west coast.
It seems to me last December I think you saw 100 dollar crocs at one point when refineries went down for maintenance I I, obviously, what day it was still to close and you're gonna have your F. C. C offline as you pointed out.
I I guess my question is how how do you see the dynamics in the West Coast now it seems to me <unk>.
2005 type volatility incremental in poor setting incremental price I'm. Just curious if you can characterize all you see on the west coast dynamic going forward and I'll leave it there.
Yeah, I think it's gonna be very tight you went through some of the reasons I'll ask Paul Davies a comment he he works in California everyday.
Actually dug I would say you probably nail it right. The the the market is going to have to price a steady flow of imports as we have an experienced refineries shutting down and we have more impending that are gonna shut down.
Gasoline markets on the west coast, including the whole Pat or short.
It's gonna have to price accordingly, and you're gonna see a lot of volatility.
That's that's what we see.
And that was kind of ticked as well. Thanks, so much guys appreciate it.
Thank you. Our next question comes from the line of John J P. Morgan.
With your question.
Hi, Good morning. Thank you for taking my question. So my first ones on working capital can you talk about any working capital builds your scheme from the start up a S. P. R and we don't see the relief, but I assume there was an overall headwind and two Q. So when are you bet reverse in the second half or.
Just as it should we be thinking about kind of more ordinary course seasonality for working capital one two H.
Thanks, John Thanks for the question, yes in the second quarter. There was a building inventory related to S. P. R. In fact, it was $775 million, which whereas contributed to the partnership going forward all of that working capital requirement will be.
Within the F B R.
Sure. So I think you should see in the future return to more normal lives working capital.
Great and then a throughput I think you you cut guidance for the full year can you talk a little bit of the drivers. There was it just turnarounds dragging a little bit beyond plan in one nature anything with two H there.
No I don't think anything in specific but we do have a big turnaround in in queue for tourists.
The cat now if he will be down that'd be down.
Probably 50 days, so that will surely impact throughput there.
Okay. Thank you.
Mhm.
Thank you. Our next question comes from the line.
What's your question.
I just have one question.
You too complex refining assets on the <unk> both of them can process a lot of heavy solid <unk>.
There's a new pipe, which we can debate difficult ones up in one to next year or two Q, but that was delivered close to 500000 bottles of WCS on the vest cost I just wanted to understand how P. B S can benefit from it and if you can be help us out will be shipped by quantifying it that would be absolutely great.
Well I I do think it is a tremendously positive story for our west coast operations, not only bringing new crude into the marketplace, but that crude has to be price to get to Asia.
For the U S and for our California's system. It can be loaded on foreign flag ships and were dramatically cheaper to deliver it.
Torrance and to Martinez, you're absolutely right our Kid out there we can process. The most having the most shower grades of crude out there and so were incredibly well positioned to be able to take that crude we believe it will be the economic advantage.
And you know, we're working diligently right now to figure out.
This is Tom and we are.
A little time and have them, but they it's an interesting crude because it's the style of heavy crude but it has it has the day you wanted it to ship it.
And that is naphtha pipeline launch so we know what we're looking at trying to figure out how to make sure we eat bottleneck.
And our ability to handle.
[noise] products from that crude at the top of the tower.
We have the team working on that and we we didn't see it as a terrific opportunity for the company.
Thank you so much for the detailed responses.
Thank you as a reminder, ladies and gentlemen.
Ask a question please press.
ER one on your telephone keypad.
This question comes from the line.
Please proceed with your question.
Yeah. Good morning, Thanks for taking my questions I guess, starting out on refining could you talk a little bit about the capture rates in the east coast in the second quarter.
I guess, what would you expect for Q3 here.
Yeah, you have it right the coke or impacted.
You too what two aspects with a coke or a turnaround.
Which went into the second course, certainly impacted capture Rachel East Coast, but also crew differentials are narrow and hopefully the navy or is upon us and Tom and Paul can comment on that we expect crew differentials to why now in Dell City and and <unk>.
<unk> have a clean run in regards to turnarounds going forward pulling any other comments.
I think that's right and we have a police laid on work and we think we're we're picking on the light heavy spreads on cruise so.
When you take a look of September October programs are.
They're a little more advantageous in July and August .
Sounds good and then could you could you help us understand a little bit more.
On your expectations for our D profitability in the back half of the sphere Kinky mentioned that some of the pathways for I presume green some <unk> might not come through until the first half of 24.
But it sounds like you're still selling cargos I guess one question is you know is there an opportunity to to simply put that rd into storage and and wait for the pathways.
You know to to fully monetize it.
And and then like a second question is what kind of rough even arrange might you expect and does that dollar 25 to $1.50 longterm target.
The hold.
Right. So I would I would characterize in three different pockets absolutely to answer your question, we believe longterm.
Profitability and Rd will settle out between a dollar and $1.50.
You said $1.20 500 dollar 50, it's it's in that range, whether it's a dollar to $1.50 or $1.25 to $1.50.
I would characterize the current market.
Is a bit softer than that for a whole host of reasons, but the current market. If you want to call. This the second half of twenty-three that's fine if you're fully optimized and getting the full benefit of the L. C. F S credits.
Probably 75 cents to a dollar at the moment.
EBITDA margin per gallon.
But what happens when you begin operations you get an arbitrary.
Ah Ah low carbon score essentially and that's suboptimized to what our reality as as we have a fault for treatment facility and we'll be able to run.
The sort of temporary debit.
Will will saying that that runs for you know six to nine months from the time. He began operations. That's nothing pbf's specific that's for any new entrant into the marketplace.
And so for you know are the remainder of this year maybe early into next year, you know you'd probably take 25 cents of what the current market is so you know call that 50 to 75 cents a gallon of EBITDA, obviously the markets are dynamic.
Things can change quickly, but that's the current album.
But I don't think I don't think there's any incentive.
To store a diesel.
We'll be selling actively as we go through the year.
Very helpful. Thank you.
Thank you. Our next question comes from the lineup.
Please proceed with your question.
Matt Congrats and I'm sure you can like it to be free of Tom.
The.
But you you gave an interesting little historical perspective early in the cool and you know one thing that's always struck me about P. B S as you've consistently surprised.
But you were willingness to buy major assets.
Now that you have a million barrels a day passed.
C N yours.
Highly pursuing the investment grade racing.
How do you think about if you have a.
Cost of capital future acquisitions cashed returned.
You're gonna pursue a dividend policy of growth is there any potential for special dividends.
Oh do you think it will be a buyback with with a lot less on the acquisition from there you'll <unk>. Thanks.
Mmm Mmm, Okay. There's a couple of things that are one I do think there was tremendous benefits to getting to scale. I think we have scale. You know one small example, you know when we when we were three refineries.
You know we didn't have much of a refunding organization.
The three plant managers reported into executive management now we have a head of refining we've got a whole organization under him that self supported or access to expertise and operational excellence improves as we got scale, but to your point, we have scale as I said in my remarks.
The rigor that we will pay at looking at all uses of capital going forward, whether it's for potential expansion in or out of refining.
We'll all be.
Analyze together.
And compared and everything will always be brought back to our alternative which always exist in buying back our shares.
Or or dividends and up until this point you know, but you've been very very focused on debt reduction obviously, that's sort of extended to the inventory intermediation agreement, which we just took out.
We've been paying down environmental credits.
We've we've demonstrated.
Fairly aggressive by about back buyback program and.
And we're coming up on the anniversary next quarter of of restarting the dividend and.
So every day, it's my job and I've got a team with me that works every day figure out our best uses of.
A capital going forward, there is no need to get bigger and so everything will be an opportunity in a way it against our alternative.
Got it.
It also what kind of food that you would say frankly, the and by the way <unk> that was a joke.
You told the joke that's good [laughter].
Alright.
The the the Valero laugh as much much harder regardless of how bad the jokes because.
They're much more dangerous.
Can you you have a you.
You have a fantastic influence global market <unk> could you just talk a little bit of <unk> could you just talk about it I mean, we just took saturday or across.
Across the headline saying will be to the extent cut since September .
Big moves in Canadian this product flows whether or not the additional mega capacity that we're seeing in Asia has perhaps west coast impacts.
Excuse.
Huge question, but that'd be very interested by your own right.
Paul It's a it's a great question will go back with you on it I think the capacity additions.
They're real but they're.
They're not going to be imminent.
Some time.
To be able to get those.
Huge refinery find out there will be some all steps that you have a chance in the U S. There's certainly <unk> and whatever happens with wind up as Hell. If they continue to say do as they say and ended up to exit that business.
So I think we're certainly going to watch that.
Ultimately those refineries won't get up to speed, but at the same time, they're mostly in Asia. The population growth in the world is going to be mostly in Asia and those refineries are being built predominantly to put down the road, making sure those those Ah cause.
Confidence or self.
By themselves in terms of trade flows I I I think the expert in this room in our team on watching what's been happening with Russia et cetera, and even then you'll be fine just coming on as time will tell me you have anything you would at yeah I mean.
Let me pull along with that I mean, I think it's really kind of the the developments that really happened related to the OPEC cause you know mantic base in long crude Pacific place in short cruise.
Refineries in Asia.
I'm starting to see an increase in trade flows basically girls, leaving the Atlantic based on particularly on whites right. I mean, you know Western Africa programs, you know my provider months, which were sort of softer and we're moving sloshing around the Atlantic Basin are just now starting to get cold to the east and I think that's probably the biggest change we've seen which is not on.
Common but that's the change that's most of the parent in front of us today.
Yeah anything on Canada, Thanks, and they'll leave it there.
I don't think anything that hasn't already been mentioned.
No I agree with Tom we're gonna see Big movie I woke up happened when insurance take trains Python gets on board.
Great. Thank you.
Thank you our final question comes from the lineup.
Please proceed with your question.
Okay. Thanks, maybe it's just a follow up on how old are they request on the use of cash I mean, you've made material probably with you today <unk> senior environmental liabilities.
As well as staying active in the buyback market, how how much further on the environmental liabilities, how much lower or would you like to get that before you feel like you're in a normalized place.
And then with you know with the cash in hand, particularly from I'm in both your organic free cash flow and the cash in hand from closing the an ideal.
Yeah, I I guess, you know you mentioned about being aggressive on the buyback is is the room to lean and even more on the buyback or how do you. How do you view the kind of the appropriateness of that I guess I would say.
Sure Uhm, Hi, Brian Uhm with respect to environmental liabilities were at 800 now down from 1.3, and we would see ourselves skating to arrange a C. Two to 400 by the middle of next year, England call that two to 400 range no normal more normal.
And then with respect to the.
See you know we've we've long been talking that you know the balance sheet is our first priority, but the list of cleanup items is is decreasing we talked about taking any.
Uhm enemy inventory intermediation agreement continuing to reduce the environmental liabilities. There is with respect to the balance sheet. There is the potential that we might refinance our 2025 notes.
And then beyond that it's really way as.
The all alternatives for excess cash, which includes stock buybacks, but and everything else has to compete against that return.
Great. Thanks, and then maybe just one one last quick one opex came in.
You know, there's a really strong performance on operating expenses there on the refining business came in lower than expectations can you talk about some of the drivers there and how sustainable some of those are has to be looked through the the second half of the year.
The biggest driver no question about it is natural gas prices and so I know there was a lot.
Concentration on you know opex early in the year that was primarily to the back of a much higher natural gas prices.
For guys natural gas prices come down next to him so.
Thanks.
With that that's it includes a call today, we appreciate everyone's participation and we look forward to speaking in an excellent. Thank you.
[music].
Mmm.
[music].