Q2 2023 Delek US Holdings Inc Earnings Call
We'll be making forward looking statements during today's call.
These statements involve risks and uncertainties that may cause actual results to differ materially from today's comments.
Factors that could cause actual results to differ are included here as well as in our SEC filings.
The company assumes no obligation to update any forward looking statements I will now turn the call over to <unk> for opening remarks.
Good morning, and thank you for joining us today.
During the second quarter, we delivered solid financial results.
Our team executed well.
And stayed focused on our key objectives, we continue to do what we said we will do.
We kept our commitment to return value to shareholders.
We target a dividend that is competitive and sustainable.
Do you think the market outlook, our share buyback program gives us the ability to further reward our vessels in the news and meet them.
Year to date, we have returned $95 million.
Towards dividends and share buybacks.
Since June of last year to the end of this week, we have returned close to $275 million to.
To investors. We also recognize there is a value and a strong balance sheet and financial flexibility.
We continue to improve the efficiency of our cost structure.
G&A, improving the quarter and Opex will follow.
Pleased with our progress.
<unk> will give more details in the financial section.
Turning to the operation during the quarter.
Within wealth to most of our system.
Improving the safety and reliability of our refining system is fundamental.
During the quarter, we made steps in the right direction.
We continue to make good progress.
Our refining segment reflects strong contribution for our wholesale and asphalt businesses.
Even by local market demand.
In addition, our oilseeds business benefited from higher location differentials we.
We see these trends continuing.
From a micro standpoint in the month of July our benchmark U S Gulf coast crack spread improved by approximately $5 per barrel.
Which further improved our outlook for them.
<unk> is also a good story for us.
We see the heavy light differential continued to compress which is favorable for our configuration.
Our system is fully balanced at 95% light with no excess naphtha.
In addition.
With the growth we see in the Permian production, we expect to be favorable in the Midland differential.
Our logistics segment delivered strong results, which.
With adjusted EBITDA of $91 million.
This quarter.
Our prime acreage is outperforming the Permian basin.
We now forecast around $100 million a.
Quarter Pharma segment. This segment starting in Q4 of this year.
Retail also posted a solid quarter.
This was driven by higher fuel volume increased average margin and higher insights doses.
In closing our team continued to successfully advance our strategy.
I want to thank each and every team member for the contribution.
There is there is still value to unlock as we continued to execute on our strategic initiatives now I would like to turn the call over to Joseph who will provide additional color on our operations.
Thank you Rodrigo.
In the second quarter, our team safely processed 295000 barrels per day of total throughput.
Supported by favorable market conditions in our end markets, the refining system generated $201 million of.
<unk> adjusted EBITDA.
And Tyler.
Throughput in the second quarter was approximately 77000 barrels per day.
Production margin in the quarter was $13 87 per barrel and operating expenses were $3 <unk>.
78 per barrel.
In the third quarter. The estimated total throughput in Tyler is in the 74 to 78000 barrels per day range.
Dorado total throughput in the quarter was approximately 73000 barrels per day.
<unk> of our guidance.
Mainly due to third party transformer failure, which led to a power outage related shutdown.
Our production margin was $6 <unk> per barrel, including an unfavorable impact of approximately $1 50 per barrel due to the power outage.
Operating expenses were five.
Dollars per barrel.
Estimated throughput for the third quarter is in the $76 to 80000 barrels per day range.
In Big Spring total throughput for the quarter was approximately 62000 barrels per day.
Approximately 8000 barrels per day under our guidance, mostly due to unplanned diesel hydro treater catalyst change and vacuum unit maintenance.
Production margin was $11 55 per barrel.
Including an estimated unfavorable $4 30 per barrel impact.
Beyond planned events.
Operating expenses in Big Spring were $8 91 per barrel, including approximately <unk> 50 per barrel of the unplanned maintenance activities.
To support safe and reliable operations and Big Spring, we are investing this year.
In mechanical integrity, and sustaining regulatory items and.
In the second quarter, approximately $2 30 per barrel.
Our reported operating expense.
Related to that important initiative.
Our planned cost going forward is approximately $1 per barrel through the third and fourth quarter of this year.
The estimated third quarter throughput in big spring.
Is in the 64 to 70000 barrels per day range.
In Krotz Springs total throughput was approximately 83000 barrels per day.
Our production margin was $6 21 per barrel.
Operating expenses were $4 74 per barrel.
Planned throughput in the third quarter is in the 70% to 82000 barrels per day range.
Compared with the first quarter.
The system benefited mainly from the improved gasoline crack spreads and reduced <unk> cost in the second quarter.
Our jet fuel and NGL crack spreads provided some headwinds.
Strong, Oxford and wholesale marketing.
Added 82 million.
Our second quarter refining segment earnings.
Outside of our reported margins at each of the refineries and their associated capture rates.
Approximately $30 million.
Of that added the value was generated in Krotz springs, driven by light cycle oil high sulfur diesel and alkylate sales.
$14 million.
We generated by Tyler wholesale marketing.
Approximately $27 million.
We have generated in El Dorado, and close to $11 million.
In Big spring, mostly driven by upfront and wholesale marketing.
Overall estimated system throughput in the third quarter is in the 292% to 310000 barrels per day range.
We continue to focus on safety reliability, and environmental compliance as our top priorities and we expect margin capture and cost performance to follow.
With regards to DKNY as mentioned by Avi go we are clearly beneficiaries of the strong Permian basin growth also in the logistics business level.
The Midland gathering system volumes have more than doubled from a year ago and our team has demonstrated solid operations and growth which are reflected in the financial results.
I will now turn the call over to Rosie for the financial variants.
Thanks, guys.
I'll start on slide five of our presentation material.
For the second quarter of 2023, Delek U S had a net loss of $8 million 13 per share.
Adjusted net income was $65 million or $1 per share and adjusted EBITDA was $259 million.
Cash flow from operations was $95 million.
On slide six we provide a waterfall of our adjusted EBITDA by segment from the first quarter to the second quarter of 2023.
The decrease was primarily from lower results in refining largely reflecting the decrease in crack spread.
The Gulf Coast, <unk> crack averaged $25 84 for the quarter down from $32 55 in the first quarter.
Strong performance from our wholesale and asphalt businesses as well as draws on inventory at quarter end, partly offset the lower crack.
Retail improved versus last quarter as crude prices fell improving pricing at the retail level. In addition volumes were higher consistent with the season.
Moving to slide seven to discuss cash flow.
Drew $43 million in cash during the quarter, ending the second quarter with $822 million in cash.
The $95 million in operating activities include approximately $80 million of cash outflows for the inventory draws executed late in the quarter. The timing of the inventory drive is the primary reason net debt increased this quarter. We received the cash for these sales in July .
Investing activities at 58 million Amy for capital expenditures.
Financing activities of $81 million, primarily reflects return to shareholders.
This includes $40 million in buyback $15 million in dividend and $10 million in distribution payment.
On slide eight we show capital expenditures year to date with <unk>.
<unk> $253 million, we estimate the full year to remain at approximately $350 million.
Net debt is broken out between Delek and Delek logistics on slide nine.
During the quarter consolidated net debt increased by $79 million.
The last slide covers outlook items for the third quarter of 2023.
In addition to the throughput guidance Josef provided we expect operating expenses to be between 210 $220 million.
This includes $10 million to $15 million related to the mechanical integrity work at the Big Spring refinery.
G&A to be between 65% and $70 million D&A to be between $85 million to $90 million and we expect net interest expense between to be between 80 and $85 million.
Before we open the line for questions or comment on our cost initiative effort.
Second quarter G&A as reflected on the income statement is $75 8 million.
This includes $4 3 million of restructuring costs.
Excluding this onetime expense adjusted G&A for second quarter was in line with the first quarter of 2023.
As provided in the guidance, we expect third quarter G&A to be lower in the range of $65 million to $70 million and now expect.
Expect fourth quarter 2023 to be approximately $65 million.
We are on track to meet our annual run rate cost savings of $90 million to $100 million.
As we exit 2024.
We will now open the line for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
Draw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Okay.
Our first question comes from Manav Gupta with UBS. Please go ahead.
Good morning, guys. My only question here is.
The other inventory impact for the big number about $96 billion.
Can you help us understand all the components that went into that $96 million other inventory numbers. Thank you Emma.
Hey, Manav good morning, <unk>, thanks for joining us today.
Thanks, Robert Yeah.
Manav you know that we are working to FIFO.
The whole point of the inventories to bring us back to LIFO.
So when we are showing the adjusted EBITDA to 60, Thats the way to comparisons to our peers, So that's where our headlining.
The headline is we're FIFO, we want to go back to our LIFO to be comparable.
What we actually DJ on the adjustment simple and easy.
So just to be clear no other adjustments just from FIFO LIFO.
Alright.
Thank you so much for taking my question.
The next question is from Matthew Blair with Tudor Pickering Holt. Please go ahead.
Hey, good morning is there any update to the sum of the parts effort.
The goal still to get the <unk>.
Detail of the Dk balance sheet.
Some smaller things you can do in the meantime, and is there any update on the timing of Angola.
Yes. Thank.
Thank you for joining us today I will start.
Marco.
Sitting here with me to follow but just to give you kind of high level comments. We are extremely focused on some of the file at some of the management compensation related to some of the above and we are very well aware for the inherent value of our assets, mainly logistics retail, but also diluted.
And the biodiesel plant, we have and we are actively working to execute the plan, but then led to a mark to yeah sure sure Avago and thanks for the question Matt as.
As we said in the past and this is still we continue.
To believe that our current share price does not fully reflect the value of our respective business segments.
And in evaluating the sum of the parts, we've analyzed and looked at all the options that are available to us.
And we do believe that there is a clear path on the actions that we need to take and we're working hard to execute on that plan, we're not in a position to announce anything at this time, but I can tell you that we're working hard on the initiative and it's complicated.
It takes time, and we're not going to rush into anything.
Cross.
Unlocking the value across any of our business segments as we've talked about in the past.
But we are committed to unlocking the value we're committed to doing what's in the best interest of all of our stakeholders and so when you think about whether it's across.
Midstream retail wink to Webster all the things that we've discussed in the past all of those things or are things that we're evaluating and as I said, we do have a clear path forward that we're working on.
Now I'll leave it at that.
Okay sounds good and then the trading and supply contribution of $115 million.
In Q2, some quite large, especially relative to the loss in <unk>.
In Q1.
Could you talk about what drove that again.
For example was the wholesale side was that.
Due to better retail fundamentals.
And then to asphalt contribution was that due to just the falling crude price in the quarter.
You also talk about how that's trending in Q3 and then finally would you say that this is your regular business operations or does it involve taking some risk.
On your side. Thank you.
So very comprehensive question I'll try to give you as much clarity as we possibly can.
I think Joseph did a great job on his prepared remarks of giving some color around $82 million of the 114 and actually outlined it by asset.
And by year business through all of those assets, we see them as the core business. So assets that support the refinery. So it's very well something that is repeatable, but now I will let Joseph.
Got into that area very very well in our lithium may have some comments on this as well.
We mentioned the numbers per site.
Ill prepared remarks, let me add few some inflammation as we are making progress with our <unk>.
Visibility here and transparency so.
We move around 210000 barrels per day.
Light products through our rack.
The typical quarter.
We make $45 million to $50 million.
<unk> contribution coming from the wholesale marketing obviously different things.
Create some volatility ups and downs this quarter was really good at $60 million of.
The 82 was wholesale.
Related most of it is really just the location advantage that we have in the markets. We operate in and then on the asphalt side. We do have 750000 tons per year type of a fund approximately 75%.
Is in the El Dorado, driven by Oklahoma, Arkansas, Poten type of pricing, 25% left is more of a big spring in a good quarter. Obviously in the season, we are making approximately $20 million.
<unk> contribution.
In the off season, and the way I will transfer price work, it's probably around $5.
$5 million of positive contribution this will give you a good start for the new modeling. Therefore, I hope you all see it through the numbers I would say of the 82.
<unk> inventories and derivative type of numbers.
Yes.
Did I answer your question and thank you very much. Thank.
Yes, Thank you Joseph.
The next question is from Neil Mehta with Goldman Sachs. Please go ahead.
Hi, This is Nick <unk> on for Neil Mehta, Thanks for taking the time. So the first question here is on a more macro side of things just any views you can share on the current product market and any additional thoughts around Midland spreads and where differentials may be trending. Thank you.
Yes.
Thanks, so much for joining us today.
We see that trend.
These slides we see them.
Diesel at the close to a five year low and figures Lynn.
Lynn.
At five year low we see demand.
Pick up we see the recession feel that bodes very well during the first half of the fading out just a little bit has also improved the cost of goods for the right thing for the right way.
We see heavy downtown season, coming Q3, and that we are not we are not the Q3 and Q4 that we are not the we are not part of business, you're very well aware. So it seems that we see the heavy light differentials.
Compressing, which is obviously going our way so it seems it seems that <unk> is a good days to be refinance those days and we see that then they continue with system crack spreads.
So we're very positive around.
Midland differentials.
I think when the market the market is a bit underestimate.
The production and what can you make two differential.
At some point I'm sure that we can see that movement and widening the Midland differential we see production coming up.
As the positive we'll see that on our own acreage obviously in our own acreage, we will more than doubling versus last year, but generally speaking we see the collegiate.
The Midland.
Production coming up so it's a very positive news for us as well. So we are well positioned our configuration is good for the for this time being.
<unk> Luxe is solid and the inventory looks low.
Although very constructive.
That's very helpful color. Thank you and then the follow up here is unrelated but just wanted to ask about shareholder returns in the $25 million of share repurchases as seen here subsequent to quarter end can you share any thoughts around the buyback cadence and what you may be seeing from either macro or in the current share price that is contributing to the repurchase levels.
Yes, I will give more broader.
View around capital allocation, so we see a dividend sort of a competitive and sustainable through the cycle and we are planning to maintain it.
And the two older than <unk>.
If we have opportunity in the future even to upgrade it. So thats something we are looking at a pretty pretty.
Incidentally.
Obviously, we gave guidance for buyback.
Now opportunities will absolutely executing on them, but we have also balanced approach between buyback and the dividend and the debt reduction.
<unk>.
We are seeing a constructive.
2023, which allow us to.
Have a good return to investors in all the three ways as I mentioned.
Great. Thank you.
The next question is from Doug Leggate with Bank of America. Please go ahead.
Thanks, Good morning, everyone.
Morning <unk>.
Joe I'm not sure who wants to take this but Joe you've been there now for.
You guys you've been there for about four months now.
You've obviously got pretty good chance to take a look at the operations by asset I was just wondering if you could share your high level thoughts.
On what what you might do differently going forward. What have you seen that provides margin opportunities cost reduction opportunities or maybe even portfolio high grading opportunities any color you could offer from your observations and I've got a follow up for.
So Doug.
That's a great question for Joseph is excited about that thanks for joining us today.
Thank you Doug.
And I'll take the operations angle.
Angle of it.
So we spoke about the two events in big Spring this quarter right. So we made the appropriate repairs and we moved on but I think moving.
More importantly.
We have shifted gears.
Much more proactive.
Reliability approach you and we are fully fully focused on.
Three key aspects of our operations people processes and equipment with regards to people.
We were able to fill key positions in the past couple of months with really strong industry talent.
And with more people around who understand what good looks like and the foundation is very sound.
To really build on Android.
Procedures training very important, especially with young force.
Our workforce and really lastly equipment.
In our prepared remarks, we'll discuss the $2 3 billion barrels spend into Q.
There are mechanical integrity.
Most of the scope is has been around inspection and eliminations of Barak tools really to mitigate.
Hello.
The plan is to continue in this.
Second half of 'twenty, three with approximately $1 a barrel.
Budget to knock the high priority items out really of the lease.
When you look back at.
Delek has gone through a similar program and they'll do it in the past.
Really good results.
To really runs win.
This days and KSL mechanical availability has trended up in the past couple of years and you can see high.
Hi rates more consistently.
I personally around big spring as Chief operating Officer, 15 years ago under a different company and I know, what the big spring and its workforce are capable of so.
Thank you for everything to get the dog.
I am very confident about the direction here.
I am sure reliability and capture would follow.
I appreciate the color Josef thanks, so much.
Follow up this might actually be rosy, but whoever wants to try and tackle it.
The trading of the supply and trading contribution has already been addressed by a number of my peers, but.
I wanted to ask about the July movement.
On a go forward basis is there a different level.
A different magnitude that we should be thinking about.
Do you consider what's happened here recently, including July to be more one off in nature.
How do you how should we be thinking about that going forward.
Hey, Doug its <unk> so.
Joseph a bank to give some highlights.
Im going out to look at that going forward.
Most of the assets of over there are sustainable in <unk>.
And joined form in each market, but I'm sure that they want to with the Joseph answer it will make perfect sense and if not <unk> was the last follow up.
Yes, we want you guys to understand <unk> results and we want you to be able to model them going forward, then <unk> really has all the tools to support you there.
Alright, Okay I'll follow up thanks, guys.
The next question is from Ryan Todd with Piper Sandler. Please go ahead.
Hey, Thanks, maybe a question on Capex to start.
I know 2023, Capex is front end loaded because of the turnaround work, but are you still on pace to hit your $350 million.
Target for 2023, and then I know, it's a little early but as you look forward to 2024, how are you thinking about the puts and takes in terms of what the 2020 for budget may look like.
Yes.
Thanks for the question.
We said that.
<unk> is the number that we are at.
And therefore were 2024 number of it's a bit early too.
To talk about it relative to just helping budget season now.
So I'm sure that we will be able to disclose that data on in deposits. So thanks for the great question.
Okay.
Thanks.
And I guess, one on the expense side operating expenses corporate expense were both lower than we expected. This quarter I know you talked some about the G&A trends expected through the end of the year.
Opex back up a little higher on guidance in <unk>.
Can you talk about Directionally, what you saw in the second quarter the trend on operating expenses going forward and how all of this fits within the context of your cost reduction and efficiency goals, how far along are you on.
Im hitting those targets yes.
Yeah absolutely.
So.
And then hand, the CFO and give some highlights on the what we call internally zero based budget and then maybe Joseph will add some comments around opex.
Thank you and thank you for the question. So during the discovery process, we looked at the.
Dk and DKNY and we challenged the organization structure organizational structure and how we can streamline thing.
By using technology implementation to many functions.
Various operational initiatives such as stream in <unk>.
System improvement Heathrow health and maintenance and reliability.
In addition to that we worked on optimizing our transportation segments trucking specifically.
And we divided the execution to three stages.
Some of the projects require more perforation and technology implementation and execution.
Phase one was executed in June .
Most of the impact on the G&A, we're working on execution on phase two in the fourth quarter in phase III in the first half of 'twenty four.
For 'twenty three as Rajeev said in our prepared remarks, we expect to achieve approximately $46 million in cost savings split of 40% to 60% between G&A and operations and those initiatives plus the one plan for the first half of 'twenty four it will put us on track for a run rate of approximately 100 million.
Those savings.
Great I'll take it from the Opex and the sites.
$5 43 per barrel.
To be competitive when you look at the peers, but it's really not acceptable.
For us we find elevated run rate closer to the $4 75 to $5 per barrel type of range for our entire system, obviously and <unk>. The elephant in the room was was.
It was big spring I want to make sure.
We all know how to model that going forward the 50 cents.
Barrel related to the outage is non.
Nonrecurring and then the $2 30 per barrel related to the mechanical integrity nonrecurring you take those from the $8 to $90.
Our reported.
And we are at.
Approximately six six is still $1 per barrel higher than the run rate in big spring. Most of it is really just the low throughput and the inefficiencies around try it you cannot bring down variable cost as efficiently you cannot turn down key tools et cetera.
$5 per barrel in big spring run rate.
Eldorado also with the outage type of works was approximately $1 per barrel higher than the run rate KSL entirely had a good quarter in the range.
Yes.
And as you think about the <unk> guidance.
Are you implying that those are still relatively elevated in the third quarter or is there.
Anything else driving the Opex guidance there.
Yes, we mentioned the dollar per barrel lift in big spring for the second half so take the five big spring <unk>.
So don't know there is probably a good.
A way to grow and the rest of the system you should be in the run rate.
Okay.
Thank you.
Thank you.
The next question is from Roger read with Wells Fargo. Please go ahead.
Yes, good morning.
Roger I think.
To go down continue down the road on the cost savings, but maybe thinking even the next steps if it's not too premature to ask but.
Obviously, you want to get your cost under control you want to run well, but have you started to look at or consider.
Something on the optimization side, I know feedstock wise theres not as much flexibility for you given inland units and pipelines and a lot of cases, but.
To the extent you could do something on the feedstock side or anything you can do on sort of the yield or commerciality side I was just curious how thats starting to shape up yes.
Well, Joe we obviously once we announce something and executing something we are thinking about the next steps.
<unk>.
We have we have.
Other plants coming up but we're not we're not going to give numbers and timeline for the job. If we have a few others.
Although the initiative that we are working extremely.
Diligently in order to be able to share with you guys.
The advantage we finished its mature like the zero based budget process was.
Detroit mature, we will come back to you with another another leg of initiatives a number of them being more diligent around it and specific so the answer is yes, and we'll come back to you when it's ready.
Joseph you want to add to that.
Yes, so collecting reliability logility is definitely our best project right. So we are doing it and we feel good about it.
For the 20 full Capex, we will bring some great ideas, we have several projects that are 50% and up in the high <unk>.
And our return most of them are refining related.
Fire units and liquidity recovery type of fee upsides for hourly.
Plants, we do have dose optimization projects lined up for us in the next few two used to.
Execute.
Okay. That's helpful. Thanks.
I think my other question is along the lines of increase in the dividend, yes, if we looked at sort of the cash flow statement balance sheet. This quarter it didn't really.
Maybe I should say really it didn't to me necessarily justify an increase in our dividend. So I'm just curious.
What whats going on behind the numbers.
Provides the confidence to raise the dividend here.
Yes, so I'll start and then I will let <unk>.
Follow so.
Very strong.
Cox led environment, our retail performance coming very well, we see the cash cash flow is down.
Just a little bit because of timing of product receipts and payables. So it's nothing.
That we are.
Looking on the too much its just minor tweaks in few days, though doesn't need to change to our view of the business, which it isn't that the reason we are still confident very confident that the business and the ability to increase the dividend.
Anna.
Just one add on.
The June 30, as a cutoff date with the inventory draw of $82 million in the last couple of days of the quarter, we had the $82 million already coming in July so that kind of made us to determine that there should not be any change in our policy.
Okay. So the cash flows are stronger than what they look like in terms of the cut off there.
Correct.
Okay I appreciate that thank you.
Thank you next.
The next question is from Paul Cheng with Scotiabank. Please go ahead.
Hi, good morning.
Morning.
I think that to question one.
Sean.
On your cost reduction.
And all of that so when we're looking at.
Thank you Brian that the comp rate.
Adjusted EBITDA on a maybe they're looking out by 2024 will begin.
While normal one way that we shouldn't assume.
That line.
Hey, guys. Good morning, Thank you for joining us today.
So if we're looking on the G&A basis, if you remember like two quarters ago, We gave a guidance that we're going to be 70 of lower full exiting data now we upgrade.
The guidance and we are seeing a better number.
Hopefully going to come back to you next quarter with some more type of guidance for 2024 in terms of G&A. It's a bit early we see that we want to see that all the projects that we are aligning up actually materialize. The way. We wanted and then we'll probably going to give you more advice guidance full SG&A for 2024.
Okay.
And second one is also we wish Sean.
Have you made that this is Sean.
Got that.
<unk> that you will make a decision on.
With that you're going to make the investment that Tom on.
Foundry in California.
And also that one of your peers.
We used on the signs of that.
Inventory.
Arrangement.
Damn Brenda and because they think that the.
Of course, the financing clause is much higher and then they would be able to do better by themselves.
So we'll have the company consider whether you should continue to have that inventory management.
Englishman someday LSI.
Yes, So let me answer the first part and the second second so in terms of.
<unk> seen in the renewable diesel over there, it's obviously a free option.
Honestly looking on that.
At this point, we didn't make any decision.
We didn't make an incision, but once there is a decision around that we'll obviously, let you know at this point, it's not a major item on our list if we option.
Opportunity presents itself, we definitely will definitely be there around the intermediate agreement, we obviously improve our situation by moving from one vendor to another.
Looking on the capital allocation extensively and if will.
<unk> assumed that we have a better way.
Will act around it obviously debt agreement. These are shorter and there is ensure that it's part of that is to allow us flexibility in the future.
Hey, Eric.
For the option on the.
On the Bakersfield facility.
Is there a time line in <unk>.
So when you have to make that decision at all that your newest option or just the evergreen Ken.
Can you remind us.
Yes, there is no there is no timeline.
Timeline for that auction is exist and there is no way timeline for us to make a decision.
The smaller wind opportunity presents itself, if we find that the constructive.
And beneficial for shareholders, we'll do it and vice versa.
Alright, thank you.
Thank you.
The next question is from Jason <unk> with Cowen. Please go ahead.
Thanks.
Hey, good morning.
I just wanted to clarify something on Paul's question as the Bakersfield renewable diesel asset is that up and running.
There was.
Kind of option is once it's up and running so just to clarify that.
It's not linear.
Yes.
Alright. Thanks My questions. The first one is going back to the trading supply and other line item and I. Appreciate all the color and the run rate guidance forward is helpful. But I guess, if I look last year.
<unk> 22 was over negative $100 million each quarter versus kind of the $60 million positive run rate you would expect so I was hoping you could elaborate on what drove that massive delta between the expected run rate and what you reported.
In the first half of 2002 and even at <unk> 23.
That'd be helpful. Thanks.
Yes so.
We changed a few.
Always we are showing the <unk> in the last half also so I think that the guidance that Joseph going forward is more.
I'm going to be going to be allow you to model that better going forward versus looking on the path in the past it had different objective outlet entities and when we streamline processes, we made it a bit more clear and thats part of the reasoning that Joseph give a much more clear guidance around that.
We're comfortable with the asset and there is a big part of that is sustainable.
Okay, So finer sand, what youre, saying there were other activities.
Within that bucket that you're no longer engaging into the same extent you were over the past year and a half is that fair.
Yes, Phil.
Okay.
Thanks, and then my follow up is just on the strategic reward.
Mark Thanks for the color should we should we expect an update before the end of the year is that is that a reasonable expectation for the market.
So I said that in my remark.
Thanks Elliot.
Executive compensation has a big component.
Some of the bulk.
So you understand that everyone motivation is around debt and inland focused around it.
But we are going to make the right transaction for the company and we try to balance between fast.
And the production so well in the same boat so we wanted.
The heightened incentives in place to make everyone wants it we have the right planning place.
To make it work.
We just need to make sure that that's what we committed and that's what we want to happen. So it's a big decision, we're going to make it right.
Yes.
Okay.
Thanks for that.
This concludes our question and answer session I would like to turn the conference back over to Albert <unk> for any closing remarks.
Yeah. Thank you so I want to take care of my friends around the table here.
The executive team.
Delek employees that had a very good quarter very proud of safe and reliable operation our ability to be safe and reliable is key and I'm very proud of the great progress that operations team is doing this quarter want to thank the board of directors for their support and for your shareholders for their support Delek us up fully.
Germany, and a very and we're all very excited and we'll talk soon in the next quarter. Thank you so much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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Okay.
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