Q3 2023 PBF Energy Inc Earnings Call
Good day, everyone and welcome to the P. D F energy third quarter of 2023 earnings conference call and webcast. At this time all participants have been placed in a listen only mode and the floor will be open to your questions. Following management's prepared remarks, if anyone should require operator assistance. During the conference. Please press stars here on your tell us.
Don't keep Ed. Please note. This conference is being recorded it has found my pleasure to turn the floor over to Colin Murray of 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, Karen Davis are CFO Continentally, our executive chairman and several other members of our management team.
Copy as of today's earnings release, and our 10-Q filing including supplemental information are available on our web site.
If we're getting started I'd like to direct your attention to the Safe Harbor statement contained in today's press release.
Eight minutes in our press release and those made on this call that express the company's management's expectations or 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 described are filings.
With the S E C.
Consistent with our prior periods will discuss our results today, excluding special items in today's press release describes the non-cash special items included in our quarterly results the cumulative impact of these special items.
Decreased third quarter net income after tax amount of $65 million or 50 cents a share primarily related to a change in the fair value of the contingent consideration associated with the Martinez acquisition.
Lost on extinguishment of debt.
And the exit costs associated with the early termination of the inventory intermediation agreement.
Also included in today's press release is further guidance information related to our expectations for the remainder of 2023 operations for any questions on these items or follow up questions. Please contact investor relations after the call.
For reconciliation spending non-GAAP measures mentioned on today's call. Please refer to the supplemental tables provided in today's press release I'll now turn the call over to Matt Lucy.
Ordering everyone and thanks for joining the call.
Today.
PBF reported another quarter of strong results are third strongest quarter in our history I believe driven by robust refined product markets that dominated most of the quarter.
Ah refineries ran reasonably well with no major planned outages at any of our facilities during the quarter.
Now that we are in the shoulder season, we've seen gasoline cracks come off but as expected diesel margins have remain robust as inventories are tight.
Despite the recent pullback in gasoline, we expect that prices will stabilize and compound cracks on average will remain above previous midcycle levels.
As they are today.
The pricing environment will continue to remain volatile however.
<unk> is well positioned to respond to these market conditions with our high complexity high conversion refining footprint.
With respect to capital allocation.
Our core principle is to create a competition for capital and which capital flows to its highest and best use.
As we've stated previously our first priority, what's the strikes and and simplify our balance sheet.
We operate a cyclical business and a strong balance sheet is imperative and managing the inevitable market cycles.
At this point, we haven't even aspirin gray balance sheet that ranks among the strongest.
And our peer group.
With balance sheets substantially behind us.
P. B S will continue to weigh investments and growth.
Returning capital shareholders and our allocation of excess cash.
A year ago, we reinstated our dividend.
This week, our board approved a five cents per share increase in the quarterly dividend to twenty-five cents per share.
Going forward.
Further potential dividend increases will be evaluated on an annual basis.
And the fourth quarter of twenty-two we announced a $500 million share buyback program and then increase their authorization to $1 billion in may.
From inception of the buyback program in December through today.
We have deployed $590 million in cash repurchasing 14 million shares.
Or 11% of the shares outstanding.
Going forward, we expect to remain active in buying back shares.
The ultimate level buyback activity will be determined by the excess cash generation of our business.
Coupled with a rigorous evaluation.
Reinvestment opportunities relative to share buyback economics.
Investments in growth will be disciplined and we'll leverage pbf's strengths.
We have no plans to get bigger for the shake of getting bigger.
Diversification will not be pursued for the sake of diversification.
Our goal is to leverage our core strengths in assets and expertise to make investments in complementary businesses with compelling risks return ratios.
Perfect example of this blueprint is our investment in Saint Bernard Renewables.
Where are we leveraged and idled asset and our expertise and fuels manufacturing into a compelling renewable diesel joint venture with a world class partner, Indiana.
Turning to renewable diesel where.
We are pleased to announce that in the first quarter of operations.
Saint Bernard Renewables has reported positive earnings.
We continue to align out operations posed to argue you start up in June.
And the Pizza you start up in late July.
We did advance countless change on the Rd, you into the fourth quarter as we work to optimize the assets.
We are more than pleased to have gotten to this point working alongside our joint venture partner in I sustainable mobility, as we continue exploring opportunities to expand our partnership.
Furthering P b S participation in the future of energy.
U S Department of energy recently selected marked to project as original hydrogen how that will receive funding under the Iraq.
Although there is still a lot of ground to cover.
We are pleased to be part of the consortium del advanced This project.
Ultimately supply hydrogen is clean energy transportation fuel.
Looking ahead to the fourth border we're in the midst of planned maintenance at towards the F. C C N Appalachian yours.
We're doing additional work on the Martinez Flexi Coker.
The fleshy coker work was unplanned and the downtime from both tourists and Martinez.
[noise] impact fourthquarter catch rates on the West coast.
The good news is that Martinez work should be complete in the next week or so.
And towards work should be completed before the end of the month.
As we saw from actual activity earlier early in the quarter commodity markets will continue to be volatile.
Global we're finding system and P. B F. In particular will be nimble adapting to market conditions.
Before I turn the call over to Karen I want to repeat the Tailwinds that we currently see for P. B S.
First are complex predominantly coastal coking, we're finding system as well situated for the current marketplace.
Second maybe most importantly, the transformation of our balance sheet is now complete.
We have reduced or an extended our gross debt.
We bought in the Intermediation agreement.
And as of today, we have essentially extinguished are outstanding rent allegation.
We've reinstated now increased our dividend immelman share repurchase program.
And are now producing renewable fuels and I've also been selected as part of the growing hydrogen economy with the Mark to project.
These are all Tailwinds that P. B S has had a direct hand in creating it won't help drive long term value.
With that I'll turn it over to Canada.
Thank you Matt.
For the third corner, we reported adjusted net income of $6.61 per share an adjusted EBITDA of 1.3 billion.
It's approximately 14.6 million generated from our equity interest in S. P. R.
Also included in our result isn't approximately 100 million dollar benefit from the market decline in the price of renewable energy credits, which is captured in our gross margin.
Cash flow from operations to the quarter was 1.15 billion, excluding working capital changes.
Working capital was a headwind of $618 million for the quarter, mostly related to our continued efforts to strengthen and simplify our balance sheet those.
Those efforts in the third quarter included exiting our inventory intermediation agreement in July had a total cost of $268 million and second we further reduced our outstanding environmental payable by 339 billion.
That brings the total reduction in our environmental credit liability to over $900 million for the year to date.
The liability totaled 454 million as of September 30th.
One comment on our outstanding environmental tables, and our previous calls we mentioned in normalized range of payable at approximately 200 to 400 million.
Recently, we have seen in the price of environmental credits can indeed come down this impacts the dollar range previously provided.
Going forward, we suggest thinking about are normalized payables is reflecting approximately two to four months Barnett obligation.
Taking into account the rents were buying from S. B R. R normalized environmental payable will likely reflects a balance of approximately 50 to 100 million rent. This range may fluctuate depending on market conditions and commercial strategy.
We further strengthen the balance sheet during the quarter by reducing our gross debt by approximately $170 million, primarily through issuing $500 million and 2030, now and calling the remaining balance of 2025 notes.
No with the issuance of our new 2030 notes in August and redemption of the 2025 now we have no near term that majorities and we also increase the size of our Undrawn, a b L facilities to three and a half billion, an extended and maturity to 2028.
Consolidated Capex for the third quarter was approximately $190 million, which includes $155 million for refining corporate and logistics and approximately $35 million related to F. B R.
For the entirety of 2023, we expect P. D F energy Capex excluding S. P R.
<unk> $800 million to $850 million. This is above the previously provided range primarily due to the increased scope of work for our ongoing west coast turnaround in advance purchases at Longleat items for plan 2024 turnaround.
Also during the third quarter, we received $415 million in proceeds related to the S. P. R. A joint venture, bringing total proceeds received related to our investment nasty or to $845 million.
And continue to demonstrate our commitment to shareholder returns through our quarterly dividends and share repurchase program.
Evidence pain during the third quarter totaled 27 million and is not mentioned, we just announced an increase in our quarterly dividend from 20 to 25 cents.
With respect to our share repurchase program at the almost $590 million of tells repurchases today.
$15 million was executed in the third quarter for.
For the life of the program as of October 31st we have repurchased almost 14.3 million shares.
He started total share count to just under 122 million shares.
We were we view dividends in share repurchases as important components of our overall long-term capital allocation and shareholder return objective.
R G and a expenses for the third quarter came in at $93 million, which includes our base G&A extent and amounts related to the company's incentive and equity based compensation plan.
As mentioned last quarter, depending on financial and operational performance.
Could be approximately $125 million to $175 million of incremental G. N. A expense annually related to our compensation program above our annual base G&A of approximately $225 million.
We ended the quarter with almost $1.9 million in cash and just over 1.2 billion of debt.
We are retaining incremental cash above our previously guided ranges because it's earmarked for future near term uses including higher turnaround activity in queue for continued reductions an outstanding environmental payables and other current liabilities and the final payment of the Martinez earn out early next year.
We will continue to focus on maintaining a robust balance sheet and exercising sound financial policy.
Our balance sheet and the safe operation of our assets are key priority, while maintaining a disciplined approach to rewarding our shareholders. We believe our sector, leading balance sheet meets or exceeds many investment grade credit neck metrics and we maintain our gold eventually cheating investment grade status.
Operator, we've completed our opening remarks, and we'd be pleased to take questions.
In a moment, we will open the call to questions.
All callers limit each turn to one question and one follow up you may rejoin the queue with additional questions.
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One moment please.
Our first question comes from the line.
Wells Fargo. Please proceed with your question.
Yeah. Thank you good morning and.
Let's say you know congrats on the the overall transformation I mean, it wasn't that long ago. I assumed you were gonna ask the issue shares to keep the company.
Solve it and now you're you know in the process of recording.
That's much cash to shareholders. So great great job. There my question, Matt and you were alluding to a lot of it.
Maybe more than a looting during during your Tom minutes, but.
Growth avoid growth for growth rate sake avoid grows for Ah diversification, but we also know that there is a big auction process <unk> go what what are your thoughts as you look at that or any other.
Let's say U S refining opportunity or maybe even more broadly in North America since there's ER, each Canada unit that might be on the market as well.
Thanks for the question in the comments Roger in regards to said go it's it's a quagmire I mean.
It's.
It's you know in a court process is within geopolitics, you know football that's being thrown around quite frankly, I don't think it's worth talking about at this point I don't see any reason why I Act total is read articles, where the valuations if they're true or.
Exorbitant Lee more than what P. B F as being valued today. So you know I hope it's true because it means our company is worth a lot more than the chairs that we've been buying over the last year I gotta be worth a lot more so I don't think there's anything to comment on in regards to.
<unk> in particular I have no idea, where it's going to go and I don't think it can go anywhere in the near future.
My comments were were specific for a reason and that and I think our company has become much much easier.
It's simple and pristine balance sheets out we have now so.
Thing that we look at has to have a compelling.
Return aspect that is much more attractive than the shares that we've been buying and we bought almost 600 million shares.
$600 million worth of shares over the last year. So it becomes very very simple I can I can assure you is I can assure the marketplace. We have not only are we using the words rigor and discipline, but we've we formalized internal process so that everything.
It'll be you know down into an excel model, making a mathematical calculation that shows the risk return you know results of all of our alternatives.
Will will continue to execute that going forward.
I appreciate that follow up question is on the S. B R. You know a little guidance some work coming here in the fourth quarter.
Stepping back looking at the way that she did it started out where you've been able to abuse the product.
Things look today first in six months ago before starting up in terms of what you expected what the budget look like and.
Kind of what's been better what's been worse you know, we we know a lot of others have had issues, which part outside I'll just curious.
Good the bad and the ugly here.
Yeah, no. It's it's good and it's sort of a multifaceted. So you have the base operation and then you have the market place I can start with the marketplace. You know the way we think about those that are participating in renewable fuels within the diesel market I don't Wanna confuse lingo here, but you know you have one and and.
The spectrum, you've got biodiesel.
Maybe in the Middle you have renewable diesel manufacturers that don't have free treatment units.
And then you've got integrated pretreated are free treatment units with the capability to manufacture renewable diesel then obviously geography plays on that with the fall in some of the regulatory credits I think file based diesel many.
Fax Xraying is threatened in the short term.
I think those that have a pre treatment facility are able to run loads a little apartment fuels.
We'll be able to operate profitably, but albeit at a lower margin than where it was a year ago. Obviously, there's lots of dynamic factors and it's not just the regulatory fred's.
But at the end of the day I'm very very confident.
That there will be a market incentive.
Ah resilient market incentive for those with a pre tripping you to manufacture renewable diesel.
In regards to our operations. It's it's no difference is the startup both probably any other operation there's fits and starts there's a pluses and minuses all all in all we've been very pleased we got our unit up in a time frame that was consistent with what we talked about we did accelerate.
Some countless work into the fourth quarter, which was earlier than we had planned but that's all a attempt to optimize.
A unit that will impact our queue for operations literally cause we're.
Down to do that.
But you know as we're working through it.
Were you know as I said, I think we're gonna be able to improve on the throughput of the unit. So I think our capacity and.
Ultimately able to work through other you will probably be a positive surprise myopically focused on what the yields look like coming off the unit and they've been they've been a little bit worse than we expected. So there there's pluses and minuses.
We're we're working everyday to make sure it's optimized and that we're getting a huge benefit from our partners Vietnam like they've got a couple of these facilities are ready to have expertise they have relationships.
Some of the service provider. So it's it's Ah more than pleased with it.
Its entirety.
Alright, thank you.
Our next question comes from the lineup.
With Bank of America. Please proceed with your question.
Oh, Thanks, good morning, everyone <unk>. Thanks for taking my questions phenomenal <unk> short and I Wonder if you could speak to.
The absence of as you pointed out in your prepared remarks any meaningful downtime.
How unusual should rethink this quarter Luke's versus the <unk> do you think a higher sustainable level of capturing going forward. I think this is one of the highest <unk>.
You know your history frankly.
Sustainable that might be as anything change to the top reinforces your confidence so operational reliability has moved to a new level.
Well look I think when you're talking about work you always have to look at the calendar.
And you know, we obviously play in our work during periods at where where demand is not as high as soon is usually at its highest in the in the third quarter. So by definition, you're gonna want the second quarter in third quarter to have less work that being said.
I as as much as it frustrates Frustrates me I would like to set a memo out and cancel all future work and just run but that's not.
Hospitals.
Have you know turnarounds that will happen in the first quarter.
We will have turnarounds, you know and but like I said, usually said your calendar up to match with what the market has traditionally been so in the fourth quarter.
We have a big turnaround a towards it it is I have to take a moment dog.
Tom Nimbly sitting here to the right my right as stated that what about to say maybe 4000 times.
Which is you can never.
Measure the success of a turnaround.
Until the run is complete.
And I do have to take a moment for the people towards.
We just ran the cat cracker at tours for eight years a phenomenal.
And if you're able to do that you reduce.
Your your your Capex Oh, no you know amortized basis.
Ah you increase your uptime, and it's really a great result.
So they they deserve a lot of credit and and we intend to clearly communicate that to them.
But that work is impactful in queue for for sure.
We did have an issue with our flexi coker Butch by the way we had a turnaround are on and and early in the year in the first quarter.
Part of the equipment that was untouched, but it was it wasn't it wasn't touch because it it shouldn't have been in touch, but we we had an issue with a blower there.
And so we've had to take that equipment.
That is probably a more maybe the most complex yet we have in our entire system.
So that was unfortunate and and but that's being addressed.
You said in my comments, we expect that to be up over the next week yourself without that also will have an impact on Q4.
Oh, that's a great color. Thanks. Thanks, My my my follow up is.
I guess, it's a regulatory question.
Halfway through the core for go into new submit some changes to.
R V P standard sort of timing rather.
In California, and I'm, just wondering you know when you saw the strength of cracks in the first half of the quarter.
And obviously attracted some kind of regulatory response was she was thinking an old.
The noise around hold on it might play out with the commission and so on assuming volatility in the West coast.
Also move to a new level, given the pending closure old phone with you.
Yeah. So it's interesting on the butane I actually think it was a smart thing to do and it increased supply the problem, we have with much of the regulatory framework when they see problems with fries. They don't address the core issue.
So advancing that butane blending by a couple of weeks increased supply of gasoline and we saw a precipitous drop in margins, which was it was fine it was.
It was.
Probably a prudent thing to do for the people, California again, the issue as many of the steps that most of the steps if not all the steps besides that.
Have unintended consequences that usually exasperate, the problem, which could be you know limiting supply.
So it was not a surprise to us we've seen regions do that when there are you know when there's tightness in the market.
I don't know what will happen in the future, but that that's always sort of a narrow that can be Paul.
But you know we continue to.
Recognized California's a very very tight market.
And I'm about to get tighter.
Yeah, we're we're watching with interest. Thanks, so much appreciate the the comments.
Thank you. Our next question comes from the line.
Please proceed with your question.
Great. Thanks, congratulations on a great quarter guys and.
Matt if I could follow up and thanks for your comments on the corporate and balance your priorities.
With the balance sheet reductions complete the.
Virginia and facility retired like you said and and women liabilities retired.
Reduced significantly can you talk about cash priorities from here should we expect to see.
A greater share of free cash flow targeted for for share buybacks going forward or are there other things that we should be other than the hydrogen projects that we should be considering.
Well look I you know, we've talked a lot of wood, reducing leverage for the company over the last year, but as I sit here today as we sit here today, it's complete there's nothing left to address.
We've got our bonds Donna Karan entertained did a great job extending our bond maturity reduce all that we've got $1.3 billion of bonds outstanding we have no interest in producing it further.
As you said the wrens hasn't been put to bed intermediation agreement has been paid off.
So there is no more balance sheet work to be done and it's a pretty amazing moment that we should all sort of taken and recognize so going forward.
As we as we generate excess cash.
You know, we'll look to deploy it the best way we can.
No major project on our books out we're reserving for at the moment, we're actively looking for opportunities.
For us to Ah, you know explore and and bring to the market, but as of the moment, we have a very very clean balance sheet no more no work to be done so as we generate a cash will look to reward shareholders.
Thank you that's great.
And then maybe just to follow up on the on the Capex increase that you talked about it. It sounds like you you may have pulled forward.
A little bit of the long lead time items for the 20 to 24 turnaround tossed into the Twenty's twenty-three budget. There you know with our do you spend now complete and as you said no major projects on the books going forward.
Can you make me walk through how we should think about the run rate for for Catholics for the business going forward in particular as we look at the end of 2024.
Yeah, Yeah, I mean, it's simple answers not going down I mean, there's there's cost pressures and that's our job to manage.
We haven't put out capex guidance for next year, yet I use it I think that's usually maybe on the next call, but you know I don't think Ah, there's someone should be saying that there's there's going to be a step down it's our job to manage it so it's not a step up.
Okay. Thank you.
Thank you. Our next question comes from the lineup.
B S. Please proceed with your question.
Oh, good morning, guys I'm, hoping you can give me some more macro commentary on the regional gasoline markets you operate in all regions, where are you seeing strength and gasoline relatively and there is some there's some weakness and also are you actually seeing any kind of red flags in terms of demand, which could could <unk> I mean the gasoline.
When to mixing it has rebounded, but it's still lower so cause it just seasonal or do you think that it's something structural <unk>. If you could talk about those points.
So I'll I'll start with the first part of the Passover to Paul.
On the specific region in regards to demand I think what you're getting it from us is consistent with what you've heard from others.
It's been stable and we've had no problem moving products through our system. We've had no decline in our wholesale business and so I was I was struck by sort of a monthly data.
It came out the other day that sort of corroborated that I mean, your weekly swings and denounce and that's a bouncing ball that can be hard to follow but when he pulled back a little bit I think maybe you get a little bit better picture. So the demand I I think it's been okay. Obviously, we've we've hit the shoulder season.
As as we always do and you see seasonal differences, but Paul you won't run through regions, Yeah from a regional standpoint, obviously the coastal market. So that have been and are still the strongest markets West coast, primarily as our strongest markets that we see from a demand standpoint, obviously for value to east coast is just right.
There, though east coast has been a very strong through through this year, there's certainly through the third quarter and even as we speak today weakest you know coming out on the third quarter I'd say pets, who was the weakest and that's what we saw in our circuit, but that's migrated down to the Gulf and right now I would say the Gulf Coast is the weakest market both of them value in overall demand.
Perfect I have a quick follow up there you'll basically be sees you are outstanding and then environmental credit papers were reduced by T 40 million I'm just trying to understand did you actually b T $40 million <unk>, they're in prices and stuff came down a little and then you paint and also I think in the opening comments.
You mentioned the rain reevaluation Bennett pick up 100 million if you could confirm that thank you.
Yes, I'll I'll take that question, yes, there was a 99 million dollar mark to market benefit. That's included in our gross margin and with respect to cash outlay for reducing environmental credits, yes. The amount that we provided was the cash outlay.
Thank you.
Thank you. Our next question comes from the line.
Please proceed with your question.
Hey, good morning, Thanks for taking my questions I wanted to follow up on this mark two hydrogen pub is your opportunity impacted at all by the hydrogen deal that you did with air products in 2020, and do you have any early fall upon capex or or the <unk> opportunity here.
First first answer is no.
In regards to their products deal.
In regards to capital.
It is too early to get into that we're going to spend the next.
12 to 18 months working with the consortium and developing a detailed plans.
Once we get to that point.
That.
Could.
Ah Ah include P. B F looking to participate in regards contributing capital to the project. It could also include P. B upbringing and a partner at the returns don't meet.
Our expectations to do that but there's no question that marked to project.
Extended benefits and positive impact to P. B S. Obviously, there's a potential for a capital project that capital projects as I said, we will need to be competitive from a return standpoint.
But also you know I and by the way I would describe P. B S participation in this as the anchor Ah within Mark too and I I don't say that Ah lately, it's just.
City is where that much of this is going to be located intertwined at the refinery. So you know it. It will further diversify you know P. B S energy platform and and sort of further extend us into renewable fuels, even if we're just hosting it.
But it also highlights the importance of having refining capacity in Delaware, because if that were not there the competitiveness of this hydrogen hub would decline precipitously.
And also the last piece is you know we're in the early days of a developing what we believe is a meaningful real estate portfolio around Delaware City, we own 5000 acres around it and if we're able to construct a hydrogen hobbits base. There we think the value of that real estate, which is I.
Nearly situated for warehouse and distribution in refrigerated storage and data processing.
You can have a green hydrogen project, that's there and situated the value of all those projects go up. So we think is profoundly interesting, but it is a long slog and we are in the very early days.
Alright, thanks for the the details I wanted to turn to the Rd side of things and congrats on the strong initial operation, but at S. B R could you share anything on on what you're seeing in various Hardy and markets. For example, we've heard the areas like British Columbia in Oregon.
Have become more appealing in the California market and then also if you could share anything on them.
Feedstock side of things I think the deal we showed a big increase in tallow consumption in August and we were thinking that might be due to to your pizza you start up thanks.
Yeah and in regards to look I think there's going to be competitive markets and all the market started dynamic.
I think there's gonna be the ability to export into Europe.
And so as regulatory crabs move move around a natural gas prices move around feedstock prices move around we are beholden to Ah nobody we do have logistical advantages to the degree we import into California, and that's where we've been sending our product up until this point.
But the moment that we are able to economically improve our physician by delivering other places we will.
In regards to specific.
Ah Ah grades of feedstocks, I think you've got to see lots of gyrations because he's markets are a relatively small but again, having the free treatment capability is incredibly important it's like having a complex for fun or if you're a heavy shower Coca we're fine or you can run any crude whereas if you're a sweet were corrupt recliner.
You can't run heavy grades will having to pre treatment unit were able to buy the most economic feeds weekend, we're focused on behind them every single day.
Great. Thank you.
Thank you. Our next question comes from the line.
Gosh.
With your question.
Alright, Thank you come on in guys.
Okay, maybe that I would not want to ask about Tomatoes bitcoin Lee.
It seems like the Utah patiently for that that's anything over the pumps Cynthia that's been Lola and say early in the last decade.
The first <unk>.
Change the way how you won and that's what we felt that that one way has been <unk>, yet that some structure <unk>.
No nothing's changed it to laid off.
Ah the the facility.
Optimises itself on a daily basis, obviously, a pipeline fed refinery and so you have to operate within the confines of that refinery Ah you know the pipelines are treated but no no major step change.
And that you know you've been wondering it somewhere between the high eighties.
<unk> 1991 to send me is that the <unk>.
Utilization, what you do for the expense Uhm.
<unk> Oh, no I mean, they they have not operated as well as they could and therefore, it we've had some impacts to throughput.
I appreciate.
You can call in the mouth, because they should be called out there.
Expect it to improve.
Okay, and when I'm looking at your four quarter, who put diapers. It seems to be no give them that you really don't have much of a kind of <unk> in the west coast.
Is that <unk> <unk> economic one slowdown due to the current <unk> or with that why is that the one <unk>.
No I I think it's it's based on a whole host of factors.
And obviously the the current market Ah shoot.
Should impacted but there's no there's no other limitations commute to.
Worry about it.
Okay I just find the one yes, I need more request uhm.
We wouldn't be able to see some <unk> with the John venture operating data Yep, that's possible in the past my niece going to call back. Thank you.
Thanks, Paul.
[noise]. Thank you. Our next question comes from the lineup.
With Morgan Stanley.
Proceed with your question.
Good morning to you you've got some good corner and thanks for taking my questions.
To cut the Lady question, So I'll just ask Scott.
That's all right so.
So first just on.
Branch lying down in the past couple of months I was hoping you could just talk to the impact of add in a corner and set it for for the fourth.
Go ahead, and then next year with a G M X coming online and then it looks like to us at least east coast and West Coast captured came in particularly strong until just hoping you could talk to encourage there.
Look I think widening Kurdish are are a tailwind time you want to just.
Joe I think it is.
You mentioned in terms of widening wcf's differentials him as a kind of a combination of.
A lot of fits and starts as to when T. M X was going to be starting you know so obviously more clarity in terms of that being delayed.
Combination also with you know fairly robust turnarounds activity worth.
Several refineries the consumer WCS.
Which ultimately impacted really the value of whereas WCS was landing in the Gulf Coast, and then sort of several knock on effects on that point right that coming out of the third quarter, where we have very strong differentials and you don't particularly very strong fuel L values fuel oil market basically responded to the WCS values and came off and there's also just sort of.
Well not spit.
Specifically in the market or any for something to change.
Change at this point, but there's also you know any potential relaxations on Venezuela sort of opening up a more competitive environment for barrels being available on the Gulf coast. So I think that those are what we've seen.
And I think that certainly our expectations would be is is that you know the crew differentials will continue to fall around the seasonal at this point right you know differentials a bit wider and fork you wouldn't want you and then as we get into the second quarter of the third quarter of next year with G. M X meets its targets to coming online probably could expect the differentials to be a little bit tighter in there but.
There's a whole system impacts in terms of what the free market is dawn, which is ultimately sort of chopped the move on U S domestics, which were quite strong sort of internet late part of the.
The third quarter and then it was sort of decline in values.
Thank you I appreciate it.
Thank you our final question comes from the lineup Jason game.
Please proceed with your question.
Hey morning, Thanks for taking my questions.
Strong margin performance has already been called out a couple of times and part of that you alluded to was driven by the red Mark to market.
I wanted to give you an opportunity if if if there was anything else unique that drove the strong margins in the corner that may be won't repeat in in four Q and then you know somewhat tied to that we've seen a lot of peers.
Have pressure on the margins driven by weaker secondary product realizations and I'm wondering if your secondary product yields or perhaps a bit unique in the market or a relative to your peers and and perhaps that supported three Q margins and that will continue into for.
Thanks.
I don't think there's anything unique in regards to P. B I fall you won't make any comments on secondary products, you mean secondary I mean the.
One of the best attribute you got as our high high level of acting production in our jet fuel production is higher than probably some of the other appears that we have and depending on that market. It definitely has some impact on our on our captures west coast.
Definitively pretty strong on yet.
Yeah, and then the other aspect is you know and and Q3 is Tom just went through grew differentials were tight that's actually a headwind for our capture rates.
To the extent to the extent crew differentials why now or capture race should improve provided we're operating obviously that work on the west coast.
Is going to impact our operations out there, but I don't see anything else as you mentioned on like the Reds I've now been cleaned up and are behind us.
So I think it's pretty clean.
Alright, great. Thanks.
We have reached the end of the question and answer session.
Let's see for closing remarks.
Well I appreciate everyone's participation in today's call like I said, we're very very pleased with where the company is in regards to our asset base in our balance sheet and we look forward to speaking again after the holidays have a have a great rest of the year. Thank you.
This concludes today's teleconference.
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