Q4 2023 Delek US Holdings Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Delek US fourth quarter earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.
Good morning, ladies and gentlemen, and welcome to the Delek U S fourth quarter earnings Conference call.
At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.
If at any time during this call you require immediate assistance. Please press star zero for the operator.
Operator: This call is being recorded on Tuesday, February 27, 2024. I would now like to turn the conference over to Rosie Zuclick, VP of Investor Relations. Please go ahead.
Call is being recorded on Tuesday February 27, 2024, I would now like to turn the conference over to rosy.
<unk> VP Investor Relations. Please go ahead.
Rosie Zuclick: Good morning, and welcome to the Delek US Fourth Quarter Earnings Conference Call. Participants on today's call will include Avigal Soreq, President and CEO, Joseph Israel, EVP, Operations, Reuven Siegel, EVP, and Chief Financial Officer, Mark Hobbs, EVP, Corporate Development. Today's presentation material can be found in the Investor Relations section of the Delek US website. Slide 2 contains our Safe Harbor Statement regarding forward-looking statements. 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 comment. Factors that could cause actual results to differ are included here as well as in our SEC filing. The company assumes no obligation to update any forward-looking statements. I will now turn the call over to Avigal for her opening remarks. Thank you, Uzi. Good morning, and thank you for joining us today.
Rosy: Good morning, and welcome to the Delek U S fourth quarter earnings Conference call participants on today's call will include Apple Golf, Zorich, President and CEO, Joseph Israel E V P operation.
Rosy: N Segal.
Rosy: V P and Chief Financial Officer, Mark Tarr E.
Rosy: E V P corporate development.
Rosy: The presentation material can be found on the Investor Relations section of the Delek U S website.
Rosy: Slide two contains our safe Harbor statement regarding forward looking statements will.
Rosy: We will be making forward looking statements during today's call.
Rosy: These statements involve risks and uncertainties that may cause actual results to differ materially from today's comments.
Rosy: Factors that could cause actual results to differ are included here as well as in our SEC filings.
Speaker Change: The company assumes no obligation to update any forward looking statements I will now turn the call over to avid golfer opening remarks.
Thank you Olivier good morning, and thank you for joining us today.
Avigal Soreq: During the fourth quarter, our operation ran well. At the higher end of our, we did a good job of focusing on what we could control. With that, I would like to thank each member of the Delek team. From a market perspective, during the quarter, we saw a weakness in product demand consistent with the seasonal trend.
David: The only the fourth quarter, although operation and with it the Hyatt and forward guidance.
avid golfer: We did a good job of focusing on what we could control.
Speaker Change: With that I would like to thank each member of the Delek team.
Speaker Change: From a market perspective during the quarter, we saw a weakness in product demand consistent with the seasonal dip.
Avigal Soreq: In refining, we achieved a record total throughput in the quarter, but we still see opportunities for further operational improvement. Joseph will provide the details of our refinery operation and progress at Big Sur. Additionally, we delivered another record quarter in our logistics segment. The consistent strong performance from our logistics segment validates our favorable position in the permanent portfolio. Our reader segment reported its best Q4 outside of COVID year 2020. Turning to the full year, 2023 was a strong year for Delek.
In refining we achieved a record total throughput in the quarter.
Speaker Change: But still see opportunities for further operational improvement.
Speaker Change: Joseph will provide the details of our refinery operation in August at Big Spring.
Speaker Change: We delivered another record quarter in our logistics segment.
Speaker Change: The consistent strong performance for Marvell logistics segment validates our favorable position in the Permian Basin.
Speaker Change: I'll either segment reported its best Q4 outside of cope with your 2020.
Speaker Change: Turning to the full year 2021 the strong beautiful delek, we achieved $950 million of adjusted EBITDA.
Avigal Soreq: We achieved $950 million of adjusted EBITDA. We made significant progress on our key objectives. As a reminder, they are operational excellence, financial strength and shareholder returns, and execution of our strategic initiatives. In terms of operational excellence, our team delivered a solid performance across all businesses this year. We made strategic investments in our people and in us. This improved our foundation for profitable and sustainable growth. Our planned major turnaround of the Tyler Refinery was completed on time, on budget, and with no recordable incident. The result was improved reliability, heat recovery, and stronger capacity.
Speaker Change: We've made significant progress on our key objectives.
Speaker Change: As a reminder, they are operational excellence financial strength and shareholder at denim and executing our strategic initiatives.
Speaker Change: In terms of operational excellence, our team delivered a solid performance across all businesses. This year.
Speaker Change: We made strategic investments in our people and us.
Speaker Change: This improved our foundation for profitable and sustainable growth.
Speaker Change: Our planned major turnaround of the Tyler refinery was completed on time on budget and with no recordable incidents.
Speaker Change: The result was improved reliability ease of recovery and Stonegate capturing.
Avigal Soreq: We are very focused on our safety practices and pushing for constant improvement. I'm pleased to report that 2023 was our best year on record for safety performance. This includes personal and Turn in to financial strength and shareholder returns. We continue to be shareholder friendly. In 2023, we'll return $146 million of shareholders to dividend and share buyers. We will also improve our financial position by using our strong cash flow to reduce debt by $454 million. We made progress on our strategic initiative. As a result of our cost reduction effort, we found more efficient ways of working.
Speaker Change: We are very focused on our safety practices and pushing for constant improvement.
Speaker Change: I am pleased to report that 2023 was our best year on record for safety performance.
Speaker Change: This includes personnel and process safety.
Speaker Change: Turning to financial strength and shareholder return.
Speaker Change: We continue to be shareholder friendly.
Speaker Change: 'twenty, three will return $146 million of shareholder through dividend and share buyback.
Speaker Change: We also improved our financial position by using our strong cash flow to reduce debt by $454 million.
Speaker Change: We made progress on our strategic initiatives.
Speaker Change: Results of our cost reduction effort, we found more efficient ways of working.
Avigal Soreq: This has delivered a tangible result. For example, our inventory management has resulted in improvement in both earnings and debt levels. We are making progress to reach our goal of $100 million run rate cost reduction. Lastly, significant headway has been made towards unlocking value intrinsic to our business. Now turning to 2024.
Speaker Change: This has delivered tangible results for example, our inventory management has resulted in improvements in both Anthony and debt levels.
Speaker Change: We are making progress to reach our goal of $100 million.
Speaker Change: Great cost reduction lastly, significant headway was made towards unlocking value intrinsic in our business.
Speaker Change: Now turning to 2024.
Avigal Soreq: Our key priorities have not wavered. We'll continue our drive towards operational excellence, staying focused, and safe and reliable operations. We have a turnaround of our Broad Springs refinery in Q4 of 2024. Joseph will give context on the improvement we expect post-turnaround and will also talk about additional initiatives we are undertaking in the refining segment. Financial strength and shareholder return will remain key.
Speaker Change: Our key priorities have not wavered.
Speaker Change: We will continue our drive towards operational excellence focus and safe and reliable operation.
Speaker Change: We have done at all of our Hot Springs refinery in Q4 of 2024.
Speaker Change: Joseph will give context on the movement, we expect both down.
Joseph Israel: We'll also talk about the additional initiatives we are undertaking in the refining segment.
Joseph Israel: Financial strength and shareholder return will remain key.
Avigal Soreq: We believe we are well-positioned to capture opportunity. We'll continue our disciplined capital allocation with the best interests of our stakeholders in mind. We look to deliver strong portfolio performance and results, will continue to optimize the balance sheet, and remain committed to sustainable and competitive shareholder returns. In 2023, we will return $146 million to shareholders, $85 million of this was shared by them.
Joseph Israel: We believe we are well positioned to capture opportunities.
Joseph Israel: We will continue our disciplined capital allocation with the best interest of all stakeholders in mind.
Joseph Israel: We look to deliver strong portfolio performance and results will continue to optimize the balance sheet and remain committed to sustainable and competitive shareholder returns.
In 2023, we've done $146 million to shareholders.
Joseph Israel: $85 million.
Avigal Soreq: As we demonstrate in 2023, we are committed to shareholder returns based upon pre-cash. As we execute, 2024 will remain and maintain this approach, and we'll keep a balanced approach between improving our financial strength and shareholder return. On our strategic initiative, we will remain focused in advance. For 2024, we estimate our CapEx to be approximately $330 million, which reflects a reduction from 2023 levels. The capital program shows our dedication to maintaining a safe and reliable operation, enhancing our portfolio with strategic growth projects, and delivering shareholder value while maintaining our financial strength and flexibility. 2024.
Joseph Israel: Of this with share buyback.
Joseph Israel: As we demonstrated in 2023, we are committed to shareholder returns based upon free cash flow.
Joseph Israel: As we execute 2024 will remain and maintain this approach.
Joseph Israel: And we'll keep a balanced approach between improving our financial strength and shareholder return.
Joseph Israel: On our strategic initiatives.
Joseph Israel: We will remain focused in advance for 'twenty 'twenty four we estimate our capex to be approximately $330 million.
Joseph Israel: Which reflects a reduction from 2023 11.
Joseph Israel: The capital program, so our dedication to maintaining a safe reliable operation enhancing our portfolio with strategic Gulf projects, and delivering shareholder value, while maintaining our financial strength and flexibility.
Joseph Israel: In 2024.
Avigal Soreq: We will continue to explore opportunities in the energy transition space that meet our return to capital objective. We announced earlier this month that our Big Spring refinery was selected by the Department of Energy for a project that will advance carbon capture technology. In a Safe Environmental Responsible Manner, This project will serve our industry well into the decades to come. Now, I would like to turn the call over to Joseph, who will provide additional details on our operation. Thank you, Avigal.
Joseph Israel: We will continue to explore opportunities in the energy transition space.
Joseph Israel: That meet our return to capital objectives.
Joseph Israel: We announced earlier this month at our Big Spring refinery was selected by the Department of energy for a project that will advance carbon capture technology is safe.
Joseph Israel: Environmentally responsible manner.
Joseph Israel: This project will serve our industry well into the decades to come.
Joseph Israel: Now I would like to turn the call over to Joseph who will provide additional detail on our operations.
Joseph Israel: Thank you Rafi.
Joseph: Moving to slides five through seven. In the fourth quarter, our team processed a back-to-back record high of 306,000 barrels per day of total throughput. In Tilo, total throughput in the fourth quarter was approximately 79,000 barrels per day. Production margin in the quarter was $11.54 per barrel, and operating expenses were $5.13 per barrel, which reflects approximately $0.55 per barrel of an employee benefit accrual and accelerated tank farm work. In the first quarter, the estimated total throughput in Tyler is in the 71 to 74,000 barrels per day range, and Al Dorado. Total throughput in the quarter was approximately 88,000 barrels per day.
Joseph Israel: Moving to slide five through seven.
Joseph Israel: In the fourth quarter, our team processed back to back record high of 306000 barrels per day of total throughput.
Joseph Israel: In Thailand.
Joseph Israel: Total throughput in the fourth quarter was approximately 79000 barrels per day.
Joseph Israel: Production margin in the quarter was $11 54 per barrel and.
Joseph Israel: Operating expenses were five new windows, and 13 cents per barrel, which reflects approximately 55 cents per barrel off an employee benefit accruals and accelerated thanks onward.
Joseph Israel: In the first quarter, we estimated total throughput and Carlo is in the 71 to 74000 barrels per day range.
Joseph Israel: Laredo.
Joseph Israel: Total throughput in the quarter was approximately 88000 barrels per day, a record high throughput for the plant.
Joseph: A record high throughput on the plan. Our production margin was $4.94 per barrel, and operating expenses were $4.58 per barrel. Estimated throughput for the first quarter is in the 82 to 85,000 barrels per day range.
Joseph Israel: Our production margin was $4 94 per barrel and operating expenses.
Joseph Israel: The $150 per barrel.
Joseph Israel: Estimated throughput for the first quarter.
Joseph Israel: The 82 to 85000 barrels per day range.
Joseph: After working on the Eldorado Fundamentals for the past several years and improving reliability, the team is focused on profit improvement opportunities mainly in the goods sourcing, asphalt, and wholesale areas. By accessing heavier grades in El Dorado, we will use existing refinery configuration to improve asphalt capabilities and optimize margins.
Joseph Israel: After working the El Dorado fundamentals in the past several years in improving reliability.
Joseph Israel: Tim it's focused on profit improvement opportunities.
Joseph Israel: Mainly in the crude sourcing asphalt and wholesale areas.
Joseph Israel: By accessing heavier grades in El Dorado, we will use existing refinery configuration to improve excellence capabilities and optimize margins.
Joseph: By increasing regional sales of the pipeline on the light product side, we will improve commercial optionality. In Big Spring, total throughput for the quarter was approximately 58,000 barrels per minute, driven by maintenance work mostly reflected in our guidance. But with additional discoveries that we've addressed. Our production margin was $6.05 per barrel, including an estimated unfavorable $3.40 per barrel impact from the Maintenance Activity. Operating expenses in Big Spring were $8.98 per barrel, including approximately $1.90 per barrel related to additional maintenance.
Joseph Israel: By increasing the regional sales office.
Joseph Israel: Pipeline on the light product side, we will improve commercial optionality.
Joseph Israel: And big Spring total throughput for the quarter was approximately 58000 barrels per day.
Joseph Israel: Driven by maintenance work, most clearly reflected in our guidance, but with additional discoveries that we've addressed.
Joseph Israel: Our production margin was six five cents per barrel <unk>.
Joseph Israel: <unk>, an estimated unfavorable $3 40 per barrel impact.
Joseph Israel: The maintenance activities.
Joseph Israel: Operating expenses in Big spring.
Joseph Israel: The 98 per barrel.
Joseph Israel: <unk> approximately $1 90 per barrel.
Joseph Israel: Two the additional maintenance.
Joseph: $1.40 per barrel for the Integrity Program and $0.40 per barrel related to employee benefit accrual. Estimated throughput for the first quarter is in the 63 to 66 thousand pounds per day rate at Cross Springs. Total throughput was approximately 81,000 barrels per day.
Joseph Israel: $1 40 per barrel.
Joseph Israel: The integrity program.
Joseph Israel: 40 <unk> per barrel.
Joseph Israel: Related to employee benefit accrual.
Joseph Israel: Estimated throughput for the first quarter is in the 63 to 66000.
Joseph Israel: <unk> thousand barrels per day range.
Joseph Israel: Okay.
Joseph Israel: In Krotz Springs total throughput was approximately 81000 barrels per day.
Joseph: Our production margin was $4.93 per barrel, and operating expenses were $4.83 per barrel. The CrowdSprings team is preparing for the fourth quarter tournament, which will include regular maintenance as well as major changes to our FCC and Code U.S. The execution cost is estimated at $115 million, and the expected return from the upgrades is approximately $30 million per year, coming mainly from yield and rate flexibility improvement and energy efficiency. Planned throughput for the first quarter is in the $73,000 to $76,000 per day range, and for our entire funding system, the implied throughput target is in the 200 and 89. 301,000 barrels per day range. As we position ourselves for the gasoline season, In the fourth quarter, Wholesale Marketing contributed a lot, of approximately $20 million.
Joseph Israel: Our production margin was for the.
Joseph Israel: <unk> 93 per barrel.
Joseph Israel: And operating expenses were <unk> 83 per barrel.
Joseph Israel: The Krotz Springs team is preparing for the fourth quarter turnarounds, which will include <unk>.
Joseph Israel: Maintenance as well as major upgrades to our FCC and cooled units.
Joseph Israel: Execution cost is estimated at 115.
Joseph Israel: Donuts and expected return from the upgrades is approximately $30 million per year.
Joseph Israel: <unk> <unk>, mainly from yield and rate flexibility improvement.
Joseph Israel: The energy efficiency.
Joseph Israel: Clients throughput for the first quarter.
Joseph Israel: He is in the 73 to 76000 barrels per day range.
Joseph Israel: And for our entire refining system in <unk>.
Joseph Israel: <unk> throughput targets.
Joseph Israel: In the 289 to 301000 barrels per day range as we position ourselves for the gasoline season.
Joseph Israel: In the fourth quarter wholesale marketing contributing there Ross.
Joseph Israel: Approximately $22 million.
Joseph: This is the $40 million negative variance to the third quarter. The decrease reflects seasonal trends, along with challenging meat consupply demand dynamics and Noah Reinstreich. We are expecting our commercial initiatives to provide us with better optionality in the future. Asphalt Marketing contributed approximately $5 million, compared with $15 million in the third quarter and consistent with our seasonal trend. In summary, 2023 was an important and successful year for our system in many ways. Our focus on people, process, and equipment is giving us a strong foundation to optimize what we have and position our system for growth. While Tyler, Cross Springs, and El Dorado have optimized operations over the years, we remain confident about our progress in Big Springs reliability ahead of the coming Catholic season.
Joseph Israel: This is a $40 million of negative variance to the third quarter.
Joseph Israel: The decrease reflects seasonal trends along with challenging mid con supply demand dynamics and lower rins prices.
Joseph Israel: We are expecting our commercial initiatives to provide us with embedded optionality in the future.
Joseph Israel: Oxford marketing.
Joseph Israel: Contributed approximately $5 million.
Joseph Israel: Compared with $15 million in the third quarter and consistent with our seasonal trends.
Joseph Israel: In summary.
Joseph Israel: 2023 was an important and successful year for our system in many ways.
Joseph Israel: Our focus on people process and equipment, so, giving us a strong foundation to optimize what we have.
Joseph Israel: And position our system for growth.
Joseph Israel: Well, Tyler Krotz Springs, and Eldorado is optimized operations over the years, we remain confident about our progress in Big Springs reliability.
Joseph Israel: Ed of the coming gasoline season.
Roses: Refining Market Dynamics for 2024 are constructive, and we are well positioned to capture this opportunity. I will now turn the call over to Roses for the financial variant. Thanks Joseph. Starting on slide 8, for the fourth quarter of 2023, Delek US had a loss of $165 million, or $2.57 per share. Adjusted net loss was $93 million, or $1.46 per share, and adjusted EBITDA was $61 million.
Joseph Israel: U S refining market dynamics for 2024 are constructive and we are well positioned to capture these opportunities.
Speaker Change: I will now turn the corner here touring.
Speaker Change: Financial variance.
Tyler Krotz: Thanks Joseph.
Speaker Change: On slide eight.
Speaker Change: For the fourth quarter of 2023, Delek U S had a loss of $165 million or $2 57 per share.
Speaker Change: Adjusted net loss was $93 million or $1 46 per share and adjusted EBITDA was $61 million.
Roses: Cash flow from operations was $91 million. On slide nine, the waterfall of adjusted EBITDA from the third quarter to the fourth quarter of 2023 shows that the primary driver for the lower results was from refining. This reflects the significantly lower cracks in the fourth quarter relative to the third quarter. Logistics set a new record quarter at over $99 million. Retail was down largely due to seasonal trends.
Speaker Change: Cash flow from operations was $91 million.
Speaker Change: On slide nine the waterfall of adjusted EBITDA from the third quarter to the fourth quarter of 2023 shows that the primary driver for the lower result was from refining.
Speaker Change: This reflects the significantly lower cracks in the fourth quarter relative to the third quarter.
Speaker Change: Logistics set a new record quarter at over $99 million.
Speaker Change: Retail was down largely due to seasonal trends.
Roses: Although we were in a falling crude environment, we saw lower margins but maintained strong volumes at our stores. Corporate segment costs improved compared with last quarter, largely due to lower employee benefit expenses. Moving on to slide 10, to discuss cash flow, we drew $80 million in cash during the quarter, ending the fourth quarter with a balance of $822 million.
Speaker Change: Although we were in a falling crude environment, we saw lower margins, but maintained strong volumes at our stores.
Speaker Change: Corporate segment cost improved compared with last quarter, largely due to lower employee benefit expenses.
Speaker Change: Moving on to slide 10 to discuss the cash flow.
Speaker Change: We drew $80 million in cash during the quarter and in the fourth quarter with a balance of $822 million.
Roses: Cash flow from operations, as I said, was $91 million. Included in this amount is a positive $223 million of working capital. This was largely from improved inventory management and lower product prices reflected in receivables. Investing activities of $69 million were mainly for capital expenditure.
Speaker Change: Cash flow from operations as I said was $91 million.
Speaker Change: Included in this amount is a positive $223 million of working capital.
Speaker Change: This was largely from improved inventory management and lower product prices reflected in receivables.
Speaker Change: Investing activities of $69 million is mainly for capital expenditures.
Roses: Financing activities of $101 million primarily reflected paydown of debt and return to shareholders. This includes $41 million in debt repayment, $20 million in buybacks, $15 million in dividends, and $10 million in distribution payments. On slide 11, we have the breakout of the 2023 capital program and guidance for 2024. Full year 2023 was $372 million. Approximately 80% of the spend was for sustaining and regulatory projects, which include the major turnaround at the Tyler Refinery and reliability work at the Big Spring Refinery. Our forecasted 2024 capital program is $330 million, which includes $255 million for sustaining and regulatory projects and $75 million for growth projects. In refining, we plan to invest $220 million, with 93% of the capital dedicated to sustaining and regulatory projects, most of which is for the Cross Springs Refinery major turnaround scheduled during the fourth quarter of 2024, as well as projects at the Big Spring Refinery to improve capture rates. In logistics, the company expects the capital program to be approximately $70 million, with $50 million for growth projects. Growth projects will advance new connections in both the Midland and Delaware gathering systems, enabling continued volume growth at the partners. The retail segment capital expenditures are expected to be approximately $15 million.
Speaker Change: Financing activities of $101 million, primarily reflects paydown of debt and returned to shareholders.
This includes 41 million debt repayment of $20 million in buybacks 15 million in dividends and $10 million in distribution payments.
Speaker Change: On slide 11, we have the breakout of the 2023 capital program and guidance for 2024.
Speaker Change: Full year 2023 was $372 million.
Speaker Change: Proximately, 80% of the spend with for sustaining and regulatory projects.
Speaker Change: These include the major turnaround at the Tyler refinery and reliability work at the Big Spring refinery.
Speaker Change: Our forecasted 2024 capital program is $330 million, which included $255 million for sustaining and regulatory projects and 75 million for growth projects.
Speaker Change: In refining we plan to invest 220 million with 93% of the capital dedicated towards sustaining and regulatory projects most of which is for the Krotz Springs refinery major turnaround scheduled during the fourth quarter of 2024 as well as projects at the big spring refinery to improve capture rates and lower.
Speaker Change: This takes the company expect the capital program to be approximately $70 million with $50 million for growth projects.
Speaker Change: Growth projects will advance new connections in both the Midland and Delaware gathering system, enabling continued volume growth at the partnership.
Speaker Change: The retail segment capital expenditures are expected to be approximately $15 million.
Roses: Funds are dedicated to maintaining Delek's 250 convenience stores, including interior rebranding and re-imaging initiatives. The corporate another segment includes approximately 25 million of capital expenditures, which is primarily to fund it improved. Net debt is broken out between Delek and Delek Logistics on slide 12. During the quarter, we drew $80 million of cash and paid down $41 million of debt, ending the quarter with a net debt position of $78 million. Finally, slide 13 covers Outlook items. In addition to the guidance Joseph provided, for the first quarter of 2024, we expect operating expenses to be between $215 and $225 million, and GNA to be between $60 and $65 million. DNA expects revenue to be between $90 and $95 million, and Net Interest Expense to be between $80 and $85 million.
Speaker Change: <unk> are dedicated to maintaining delek 250, convenient stores, including interior rebranding and remit imaging initiative.
Speaker Change: The corporate and other segment includes approximately 25 million of capital expenditures, which is primarily to fund improvements.
Speaker Change: Net debt is broken out between Delek and Delek logistics on slide 12.
Speaker Change: During the quarter, we drew $80 million of cash and paid down $41 million of debt ending the quarter with a net debt position of $78 million.
Speaker Change: Finally, slide 13 covers outlook item. In addition to the guidance Josef provided for the first quarter of 2024, we expect operating expenses to be between 215 and $225 million.
Speaker Change: G&A to be between 60 and $65 million.
Speaker Change: D&A to be between 90, and $95 million and net interest expense to be between 80 and $85 million.
Operator: We will now open the line for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star followed by the number on your touch-tone phone. You will hear a three-tone prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the letter a. If you are using a speakerphone, please place the headset on before pressing it.
Speaker Change: We will now open the line for questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: You have a question. Please press star followed by the one on your Touchtone phone, you'll hear three Tom Paul Thank.
Speaker Change: Thank you Han has been rate should you wish to decline from the polling process. Please press star followed by the two if you are using a speakerphone. Please supposed to have played before pressing any keys.
Operator: One moment, please, for your first question. The first question comes from Neil Mehta with Goldman Sachs. Please go ahead.
One moment. Please for your first question.
Speaker Change: Your first question comes from Neil Mehta with Goldman Sachs. Please go ahead.
Neil Mehta: Yeah, thank you so much, team. I guess the first question is just an update on the Sum of the Parts unlock. I know, Avigal, it's something you've talked about over the last couple of years. Your latest thinking around that and the milestones we should be watching. Hey Neil, how are you?
Neil Mehta: Yeah. Thank you so much.
Neil Mehta: Team.
Neil Mehta: The first question is just an update on the sum of the parts unlock I know avago, it's something you've talked about over the last couple of years.
Neil Mehta: Your latest thinking around that and the milestones we should be watching.
Speaker Change: Hey, Andy how are you and maybe how much energy we haven't on the topic in the <unk>.
Avigal Soreq: Neil, you know how much energy we have around the topic and the pace of doing the content? Significant headway and some of the power is going to happen. I want to show you that. Mark, do you want to add more?
Andy: During the call the significant headway and solve the problem going to happen.
Speaker Change: One is truly that Mike do you want to add.
Mark: Yeah, Neil, look, at this point, I would say, although we don't have anything specific to update or or say at this time, but we remain committed to highlighting the value that's intrinsic to our business. And, and look, we're working hard towards that. But I would say that in anything that we may do, we are very focused on enhancing, you know, not only our balance sheet across all of our businesses but, you know, positioning our company to generate and deliver attractive shareholder returns for the foreseeable future. So we're taking all of those things into consideration. I'll just sort of leave it at that for now. I appreciate it.
Speaker Change: Neil at this point I would say like although we don't have anything specific to <unk>.
Date, or let's say at this time.
Speaker Change: We remain committed to highlighting the value that's intrinsic in our business.
Speaker Change: And look we're working hard towards that but what I would say that and anything that we may do.
Speaker Change: We are very focused on enhancing not only our balance sheet.
Speaker Change: Across all of our businesses, but.
Speaker Change: We are positioning our company to generate and deliver attractive shareholder returns for the foreseeable future. So we're taking all of those things into consideration.
Speaker Change: Okay, and just sort of leave it there.
Speaker Change: I appreciate it yeah, we'll stay well stay tuned.
Neil Mehta: Yeah, we'll stay tuned. The follow-up is just that the quarter was a little bit softer than what we expected. I guess I just love your perspective on maybe some one-time impact.
Speaker Change: It does.
Speaker Change: The follow up is just on the quarter was little bit softer than what we expected I guess I'd just love your perspective on maybe some one time impacts sounds like marketing could be a dynamic there and as we think about the sequential build from four Q1 Q as mid con margins have strengthened a little bit through the quarter.
Avigal Soreq: It sounds like marketing could be a dynamic there. And as we think about the sequential build from 4Q to 1Q, as mid-con margins have strengthened a little bit through the quarter, do you have anything that you would want us to keep in mind as we think about incrementals and decrements? Yeah, so sure, Neil, you can see very easily that we had a record group doing the quarter and we actually met all the guidance we were given in terms of GNA, OPEX, very strong cash flow. Supply and marketing obviously had a weaker, which is in line with the seasonal trend, and we've seen the decline in supply and marketing. We are focusing on what we can control, and we did a good job during the quarter. Joseph, I don't know if you have anything to add.
Speaker Change: D D anything that you would want us to keep in mind, as we think about Incrementals and decrementals.
Speaker Change: Yes, so as soon as you can see it very easy to see that we hit the record throughput during the quarter and that's been the need or the guidance. We gave in terms of G&A opex and very strong cash flow.
Speaker Change: Supply is.
Speaker Change: Marketing obviously.
Speaker Change: <unk>, which is in line with seasonal trends.
Speaker Change: And we've seen the deadlines by marketing.
Speaker Change: Yes.
Speaker Change: During this quarter isn't big positive in Q2. So there is some seasonality into decline, which is a more market driven but the reason we're focusing on what we can control and we did the <unk>.
Speaker Change: Good day, which all during the course of Joseph I don't know.
Speaker Change: Thank you Doug.
Joseph: Yeah, ocean marketing contributed the negative 20 million dollars, and asphalt deposited 5 million dollars consistent with the seasonal trends. Ocean marketing was challenged, and I think you heard it from most refiners, beyond seasonal trends driven by inclement weather in the mid-con. The weather kept demand and margins low, especially in December and going through the generally freeze.
Doug: Yes, most of the marketing contributed.
Speaker Change: To me it was no longer.
Joseph Israel: Deposit teams' vision $5 million on system would be.
Joseph Israel: Seasonal trends with some marketing was challenged.
Joseph Israel: <unk> heard it from me most of the refineries.
Joseph Israel: Beyond seasonal trends driven by instrument within even though mid con demand continued demand and margins, especially in December and going through the.
Speaker Change: Jim will be free.
Joseph: The other element in 4Q was the low rain price, which helped to define and capture but hurt the rain's value really generated by porcelain marketing, you know, the blend at this point. So in the past several weeks, to your point, Neil, the high inventory situation in the mid-con has resorted through both supply and demand fronts. The commercial optionality focus in El Dorado, which we discussed in the pre-pandemic, will help us in the future to navigate through this type of volatility. Thanks, Joseph.
Speaker Change: Yes.
Speaker Change: <unk> was normally reprice reach.
Speaker Change: Hello can be funding come through with the range provided really generated by <unk> marketing.
Speaker Change: Blended.
Okay.
Speaker Change: So in the past several weeks.
Speaker Change: The inventory situation, let me just comment.
Speaker Change: Through both supply and demand.
Speaker Change: The commercial channel continues.
Speaker Change: <unk>, which we discussed in the prepared remarks will help us in the future to navigate through this type of volatility.
Team: Thanks, team. Thank you. Thank you. Your next question comes from John Royal with J.P. Morgan. Please go ahead. Hi, good morning.
Speaker Change: Okay. Thanks, Kevin Thanks, Tim.
Speaker Change: Thank you. Thank you.
Speaker Change: Your next question comes from John Royall with Jpmorgan. Please go ahead.
John Royall: Hi, good morning, Thanks for taking my question.
John Royal: Thanks for taking my question. So my first one's on working capital. You've talked about the inventory management side, and you mentioned there wouldn't be a reversal of 3Q's tailwind. It looks like not only did it not reverse, but you had an even bigger tailwind in 4Q, despite the falling crude price. Can you speak a little bit more about your efforts around working capital and inventory management? And is there more to go there?
John Royall: So my first one is on working capital you've talked about the inventory management side and you mentioned there wouldn't be a reversal of a <unk> tailwind, but it looks like not only did it not reverse but you hadn't even bigger tailwind in <unk>.
John Royall: Despite the falling crude price.
John Royall: Could you speak a little bit more to your efforts around working capital and inventory management.
Ruben: Should we expect further working capital tailwinds going forward, all other things equal? Yeah, absolutely, John. I would ask Ruben, maybe, to give you some more color around that.
John Royall: Is there more to go there should we expect further working capital tailwind going forward all other things equal.
Speaker Change: Yes, absolutely Joe.
Speaker Change: Oscar will be amended to give you some more color around that.
Ruben: Sure. Good morning, and thank you for the question. I mean, we took a more holistic view around our balance sheet health from the beginning of the year. So the third and fourth quarter working capital were really the fruition of some of the initiatives that we had been working on and on. Obviously, managing and optimizing inventory was one of them.
Speaker Change: Sure.
Oscar: Good morning, and thank you for the question.
Oscar: I mean, we took a more holistic view around our balance sheet helps from the beginning of the year. So the third and fourth quarter were companies that were really the fruition of some of the initiatives that we have all the known obviously managing and optimizing inventory was one that we did a big chunk of it in the third quarter, but.
Ruben: We did a big chunk of it in the third quarter, but we completed the work in the fourth quarter, and that contributed roughly $190 million to working capital. In addition to that, we had the ZBB effort, which we already accomplished on a run rate basis, $80 million saving a year, of which $57 million were realized in 2023, mostly in the third and fourth quarters. Our focus was that reduction, so we reduced that by roughly $450 million. And that, along with the safety and reliability efforts, kind of contributed to the end result of working capital. I think with regard to going forward, we kind of reached an equilibrium at the level of inventory we want to manage, so it will be more a result of quarterly events that will impact working capital in the future. That's a really helpful detail. And then, could you talk about some of the opportunities you mentioned around the energy transition? I think you mentioned carbon capture at Big Spring.
Oscar: We completed the work in the fourth quarter and that contributed roughly $190 million to working capital. In addition to that we had.
Oscar: The CBD that effort, which we.
Oscar: We already account based on the run rate $80 million savings either of which 57 million were realized in the.
In 2020 through mostly in the third and fourth quarter.
Oscar: Our focus on debt reduction will reduce debt by roughly $450 million in debt.
Oscar: Along with the <unk>.
Oscar: And reliability efforts kind of contributed to the end result of the working capital.
Oscar: Thank.
Oscar: With regard to going forward, we kind of reached an equilibrium at the level of inventory was a vintage so.
Oscar: It will be more a result of.
Oscar: Quarterly events that will impact the working capital in this region.
Speaker Change: Okay. That's really helpful detail. Thank you and then.
Speaker Change: Could you talk about some of the opportunities you mentioned around energy transition I think you mentioned carbon capture at Big spring.
Avigal Soreq: Is this committed at this point? And is there any capital in the 24 budget for this? And can you also remind us, just on the status of the option you've had on the renewable side that you've spoken about in the past? Absolutely, John.
Is this committed at this point and is there any capital in the 'twenty four budget for this and can you also remind us.
Speaker Change: Just on the status of the option.
Speaker Change: On the renewable side that you've spoken to in the past.
Speaker Change: Yeah, absolutely John So at this point, we've elected to negotiate with the daily.
Avigal Soreq: So, at this point, we were elected to negotiate with the DOE. So there is no material capital for 2024, and we're going to do everything we say we will do under the strict benchmark that we put on ourselves from a cost of capital return or from an IRR standpoint. So we are not going to break that matrix.
Speaker Change: So there is no material capex capital for 2024.
Speaker Change: And we're going to do everything we can do on those is bleak benchmark that we put on ourselves.
Speaker Change: On the cost of capital return or from IR standpoint, So we're not going to break that metrics by John from a holistic standpoint, you can see a very nice testimony that big screen and the like.
Avigal Soreq: But John, from a holistic standpoint, you can see very nice testimony that BigSpring and Delek are marketing leaders in this area. And we're elected, the first refinery to elect an energy transition by the DOE, which is a very big deal. And we believe that those projects will be further in the future, and we will make it a capital advantage or capital to meet our capital benchmark. Now, the option we have on renewable diesel, we are looking into that carefully. Obviously, it's a cheap way to get a look into renewable diesel. As you can see, RIMPX doesn't have renewable diesel lately.
Speaker Change: Our marketing lead them.
Speaker Change: India and were elected the first refinery to elect to elicit a center.
Speaker Change: The transition.
Speaker Change: By the <unk>, which is a very big deal.
Speaker Change: Yes.
Speaker Change: And we believe that those projects will be funded in the future and we will make you happy.
Speaker Change: Capital at vintage capital to meet our capital benchmark.
Speaker Change: The option we have on the renewable diesel we are looking on that carefully.
Speaker Change: Obviously, it's a cheap way to get the look into renewable diesel as you can see repurchases doesn't have renewed renewable diesel lately. So we are fortunate not to connect the $200 million.
Mark: So we are fortunate not to commit $200 million or $300 million and then not benefit from that. So we were fortunate around that. But the market is very close to that. I don't know, Mark, if you want to add anything to that. Yeah, sure. As for the option, John, we're obviously monitoring it very closely. Our understanding, based on publicly available information, is that they're intending to start and commission the facility in the first quarter, and then we will watch it as it runs through the first quarter and the second quarter. And once it hits a run rate for 90 days at 80% utilization, then that's when we would have the opportunity to take a look at it. But we're monitoring it closely, as Avigal said.
Speaker Change: Hey.
Speaker Change: The benefit from that so we will.
Speaker Change: Alton.
Speaker Change: But the market is very close to that is no marketing.
Speaker Change: And then on the.
Speaker Change: In Belgium.
Speaker Change: Belgium, yes, sure around the option John what we we're obviously monitoring it very closely our understanding based on publicly available information is that they are intending to start.
Speaker Change: Commissioned the facility in the first quarter and then we will watch it as it runs through the first quarter in the second quarter.
Speaker Change: And once they hit.
Speaker Change: Run rate for 90 days at 80% utilization and that's when we would have the opportunity to take a look at it but we're monitoring it closely as I've always said, it's a it could be a potentially an attractive and low cost opportunity for us too.
Mark: It could potentially be an attractive and low-cost opportunity for us to acquire a meaningful position in a well-located renewable diesel facility. So we're watching it closely. Thank you. Thank you, John.
To acquire a meaningful position in a in a well located renewable diesel facility. So we're watching it closely.
Speaker Change: Thank you.
Speaker Change: Thank you John.
Roger D. Read: I appreciate it. Your next question comes from Roger Read with Wells Fargo. Please go ahead. Yeah, thank you. Good morning.
Roger D. Read: Your next question comes from Roger read with Wells Fargo. Please go ahead.
Roger D. Read: Yes. Thank you good morning.
Roger D. Read: Um, yes. Two questions for me, both on the operational side. Just again, to follow up on the supply and marketing sort of, let's call it, headwinds in Q4. Is there anything, as you look at Q1, that says that does reverse, right?
Roger D. Read: Yes.
Roger: Two questions from me both on the operational side just to again to follow up on the supply and marketing sort of let's call it headwinds.
Roger: Q4 is there anything as you look at Q1. It says that does reverse right I mean, I know it's market conditions. There is a limit to what you can.
Avigal Soreq: I mean, I know it's market conditions; there's a limit to what, let's say, you know, the buttons you can push to change that, but maybe just give us an idea of how that's kind of evolved in the first couple months of this year. Yeah, so we are not going to give you guidance on that line. It's going to be a fit with the market, what the market usually gives, so we'll be consistent with our builds around that overall, there is a positive trend correlated to seasonal driving seasonality. We have all seen the information around the from a micro standpoint around gasoline and diesel. For gasoline, we are looking at around the five-year average a bit below, and on diesel, we are at the lower end of the five-year average, so Can I just add one thing?
Roger: Let's say the buttons you can push to change that but maybe just give us an idea of how that has kind of evolved the first couple of months of this year.
Speaker Change: Yeah. So we are not going to give the guidance for this line is going to be.
Speaker Change: So since this market with the market due to the good so we'll be consistent with our deals around that.
Speaker Change: Although many of the positive trends.
Speaker Change: <unk> correlated to seasonal driving season.
Speaker Change: We have all seen the information around the from a micro standpoint on gasoline and diesel gasoline. We're looking at the five year average a bit below and the reason we are at the lower end of.
Speaker Change: The five 5 billion and evidence of both the nuclear constructive but beyond the general market information, we all know when it gives a guidance for the supply and marketing.
Speaker Change: Yes, nothing to add.
Speaker Change: Good.
Speaker Change: I can I just add one thing I think the only thing I would maybe add Roger is is the fact that some of the the weather impacts that Joseph referred to and you said it in his prepared remarks, where persistent.
Speaker Change: Here in January and you know I think others saw that and so that would be the one thing that I would just be mindful of that that obviously it will be reflected in that line.
Avigal Soreq: I think the only thing I would maybe add, Roger, is the fact that some of the weather impacts that Joseph referred to, and he said it in his prepared remarks, were persistent through January. And, you know, I think others saw that, and so that would be the one thing that I would just be mindful of, that obviously will be reflected in that line. Okay, fair enough. Although I guess it seems the weather is more benign here as we are two thirds of the way through.
Speaker Change: Okay fair enough, although I guess, it seems and whether it's more benign hears me.
Two thirds of the way through so we could get a tailwind.
Speaker Change: Other question I have and this is on slide seven.
Speaker Change: Big Spring refinery has been you know.
Speaker Change: Typically we think of it as one of the better units overall in the company, but it's been challenged.
Roger D. Read: So if you get a tailwind, the other question I have, and this is on slide seven, big spring refinery has been, you know, typically, we think of it as one of the better units overall in the company, but it's been, you know, challenged here recently. You've got the reliability improvement, the 100 million, you know, two-thirds roughly this year, third next year. What would you point to as we get, you I mean, is it just that the unit should run more consistently? Is there some actual change in the facilities that would affect yield, a change in crews you're going to, you know, put in there, something along those lines?
Speaker Change: Challenged here recently, you've got the reliability improvement the 100 million two.
Speaker Change: Two thirds roughly this year third next year, what would you point to as we get.
Speaker Change: Let's call it a progress the first two quarters of the year.
Speaker Change: That are going to get capture rate above 70% I mean is it just that the unit should run more consistently is there some actual changes.
In the facilities that would affect yield to changing crude youre going to put in there or something along those lines, maybe just kind of help us understand what we should look for as the favorable road signs as we go through 'twenty four.
Speaker Change: Yeah for sure.
Speaker Change: Joseph we did a complete answer but I would say just as Ed.
Roger D. Read: Maybe just kind of help us understand what we should look for as the favorable, you know, road signs as we go through 2024. Yeah, for sure. And Joseph will give a complete answer, but I will say it just as a, from a big picture standpoint, big spring is the refinery that is new to one consistent $70,000 a day of throughput and more, and with $5, $25 OPEX and less. You can see that that's what it ran years before. And there is no reason we cannot bring it back to where it used to be.
Speaker Change: From a big picture standpoint Big spring.
Speaker Change: As a final visits and new to one consistent.
Speaker Change: 70000 barrels a day of throughput in mall, and we said 525.
Speaker Change: Dollar Opex and as you can see that what the than it was before.
Speaker Change: There is always and we cannot get back to where it used to be and thats. The highlight of the 100 and a daughter.
Speaker Change: So if we like consistent.
Speaker Change: The refinery used one in the past there is no reason, we cannot get to what it used to want musical chairs.
Speaker Change: So as we mentioned in the.
Speaker Change: Two remarks.
Speaker Change: There's plenty of ability to serve us well for Lindsay <unk> coming to your gasoline season.
Avigal Soreq: And that's the highlight of the $100 billion. So if we run it consistently, as the refinery used to run in the past, there is no reason we cannot get to what it used to run years ago. Joseph, please.
We have been unclear execution I'm curious if you can get your people.
Speaker Change: So for instance equipment and gaps.
Speaker Change: And what do you need to keep the different theories.
Joseph: Yeah, so as we mentioned in the preliminary remarks, well, positioning the experience and ability to serve us well, already through the coming gasoline season, we've been on a clear execution path addressing the people, process, and equipment gap, and as we mitigate the different trees, we should see improved reliability, meaning no LPO, metal capture, and no cost capture. So, as we communicated in the past, we are expecting the throughput to stabilize north of 70,000 and capture around 17 percent, Roger, on a mid-cycle basis. OPEX run rate should stabilize around 560, probably. Barron by the end of the year.
Speaker Change: We should see improvement in our ability meeting no moves you mentioned come true.
Speaker Change: Cost structure.
Speaker Change: So as we communicated we would expect.
Speaker Change: <unk> group.
Throughput to stabilize north of 70000.
Speaker Change: And it comes from around 70%.
Speaker Change: Would you on midsize conventions.
Speaker Change: Hope it's run rates would stay remains around 2016, probably.
Speaker Change: Apparel by end of the year.
Speaker Change: And the linear reduction maybe youll see.
Speaker Change: Comparing reduction as we quarter continue into view would probably be.
Speaker Change: A good assumption.
Speaker Change: So.
Speaker Change: Bottom line it will take all of the deals now.
Speaker Change: People process equipment to get truly will be one where we want to get in.
Speaker Change: We are really encouraged me to close as we have mentioned this surprises at the time goes by.
Speaker Change: Im really confident.
Speaker Change: Total capability is already this coming spring.
Speaker Change: Alright, I appreciate that thanks.
Speaker Change: Your next question comes from Matthew Blair with T. P. H. Please go ahead.
Matthew Blair: Thank you and good morning, I wanted to follow up on the sum of the parts efforts and I. Appreciate you are hard at work here.
Joseph: And the linear reduction, as you say, doesn't have to bear the reduction every quarter until the end of the year would probably be a good assumption. So, the bottom line is we take all of the above and people process equipment to get to where we want to get. And we are really encouraged by the process.
Matthew Blair: The question is could you talk about your openness to a sale of your retail assets and how attractive with a retail sale be relative to some other options that you might have.
Matthew Blair: Yes.
Speaker Change: Great question everything is on the table.
Joseph: We have fewer and fewer surprises as the time goes by, and we are very confident about our capabilities already this coming spring. All right. Appreciate that. Thanks. Your next question comes from Matthew Blair with TPH. Please go ahead. Thank you and good morning.
Speaker Change: We are active in more than one nine so awesome.
Speaker Change: Okay clear.
Speaker Change: Yes.
Speaker Change: Okay and then my follow up is on your trading and supply activities.
Speaker Change: What what do you think normalized annual EBITDA for this line item should be I have an old note in here.
Matthew Blair: I wanted to follow up on some of the parts efforts, and I appreciate your hard work here. My question is, could you talk about your openness to a sale of your retail assets and how attractive a retail sale would be relative to some other options that you might have? Yeah, Matthew, that's a great question.
Speaker Change: Says roughly $130 million to 210.
Speaker Change: It's an annual ballpark figure and I think that compares to roughly $50 million in 2023, So what do you think.
Speaker Change: Going forward trading and supply should contribute on an annual basis.
Speaker Change: So that's what we we don't give guidance for that line.
Speaker Change: And we will remain consistent with that.
Speaker Change: The bid packages and.
Speaker Change: Among our bills in August I think you have a lot of energy around that topic. So yes.
Avigal Soreq: Everything is on the table, and we are active on more than one front line. Okay. And, um...
Speaker Change: The thing I would say.
Speaker Change: You may have.
Speaker Change: No based on what previously we would have in there and as you said trading and supply the line is no longer trading and supply it.
Matthew Blair: Okay, and then my follow-up question is on your trading and supply activities. What do you think the normalized annual EBITDA for this line item should be? I have an old note here that says roughly $130 million to $210 million as an annual ballpark figure, and I think that compares to roughly $50 million in 2023.
Speaker Change: Its supply and market again and again, what we have in there is three components. There's the wholesale marketing there's the asphalt marketing and then we have the supply business and you know.
Speaker Change: The wholesale marketing and the asphalt business you know tend to have a little bit more.
Roger: So, what do you think, you know, going forward, trading and supply should contribute on an annual basis? But we don't give guidance for that line, and we will remain consistent with that, with best practice among our peers. And Roger, I think you have a lot of energy around that topic, so. Yeah, and the thing I would say is, you know, you may have an old note based on what we would have had in there, and as you said, trading and supply. The line's no longer trading and supply; it's supply and marketing. And again, what we have in there are three, you know, components. There's the wholesale marketing, there's the asphalt marketing, and then we have the supply business.
Speaker Change: Now they do have fluctuations based on market conditions.
Speaker Change: At some point, what Joseph spoke about the fact that we had a 40 million variance between the third and the fourth quarter because of the mid con environment that was strong in the fourth relative to the target and then obviously the movement in the RIN prices.
Speaker Change: Asphalt tends to be a little bit more and more stable you've got seasonality with with the fact that the months the quarters during the summer months seem to be more stable and stronger.
Speaker Change: And you got the first quarter and the fourth quarter being a little bit on the weaker side. So I think the fourth quarter is a good indicator of what our first fourth quarter tend to look like and you've got stronger quarters in the middle.
Roger: And, you know, the wholesale marketing and the asphalt business tend to have a little bit more stability. Now, they do have fluctuations based on market conditions. You know, case in point, what Joseph spoke about the fact that we had a 40 million variance between the third quarter and the fourth quarter because of the mid-prime environment that we saw in the fourth quarter relative to the third, and then obviously the movement in rent prices. As fall tends to be a little bit more stable, you've got seasonality with the fact that the month, the quarters during the summer months tend to be more stable and stronger, and you've got the 1st quarter and the 4th quarter being a little bit on the weaker side.
Speaker Change: And the third component being the supply that was the one that's a little bit harder to model because he did the supply business handles the supplying our our refinery from a crude perspective and also unloading the refineries and also declining R&D KL system, right and so depending on disruption to <unk>.
Speaker Change: Route the entire system, you may have a little bit of fluctuation right. So but the other two pieces are a little bit easier to model.
Great. Thank you.
Speaker Change: Mhm.
Speaker Change: Your next question comes from Kelly <unk> with Bank of America. Please go ahead.
Kelly: Hey, guys Doug sends his regards from the West Coast I've just got a couple also on slide number six here I guess the first question is on the crowds turnaround just hoping that you can give us some idea of the scope of the work that you are performing again, how that could potentially drive better commercial performance on the back end, whether that's reliability or whether that's in yield.
Roger: So, I think the 4th quarter is a good indicator of what a 1st and 4th quarter tend to look like, and you've got stronger quarters in the middle. The 3rd component being the supply, that was the one that's a little bit harder to model because the supply business handles both supplying our refineries from a crude perspective and also unloading the refineries and also supplying our DKL system. Right? And so, depending on disruptions throughout the entire system, you may have a little bit of fluctuation. Right? So, but the other 2 pieces are a little bit easier to model.
Kelly: And I guess same question for El Dorado, as you're thinking about the commercial opportunity there.
Kelly: So if we start with the uncertainty about the U K a towards springs, and I will give some more color around that as well.
Kelly: First of all I'd like to remind everyone that.
Kelly: We can tell you there's no news really 18 million.
Roger: Great, thank you. Thank you. Your next question comes from Kaylee Ackerman with Bank of America. Please go ahead. Hey guys, Doug Senz with Regards from the West Coast. I've just got a couple on slide number six here.
Kelly: It will be.
Kelly: We don't know.
Kelly: Which when achieved will now constructing multi.
Kelly: Mortgage condition assumptions.
Kelly: We achieved 24.
Kelly: On the margin.
It's exactly what we expected.
Kelly: Back to some of them we haven't spent.
Kaylee Ackerman: I guess the first question is on the cross turnaround, just hoping that you can give us some idea of the scope of the work that you're performing and how that could potentially drive better commercial performance on the back end, whether that's reliability or whether that's yield. And I guess the same question for Eldorado as you think about the commercial opportunities there. I will start with the answer about the K-8 cold springs, and I will give some more color around the algorithm.
Kelly: 70 million genome can either.
Kelly: Menu three things one is <unk>.
Kelly: Could you find these.
Kelly: Okay.
Kelly: <unk> reached stability in other words, we will.
Kelly: Mobile Gen two and has more catch up.
Kelly: Secondly, MCU.
Kelly: Keith can you be October.
Keith: We did make some regenerate Congress this week.
Keith: Find us with improved conversion and yields.
Keith: In addition, we are expecting winter inventory efficiency.
Keith: Company's turbines that went into play.
Speaker Change: No I am just wondering companies' activity post spin.
Joseph: Yes. First, I'd like to remind everyone that we guided an annualized $18 million improvement ahead of the pilot panel, which we achieved on apples-to-apples and market condition assumptions. We actually achieved 24, but the margins were better, so it's exactly what we expected. Now back to KSL, we are expecting $30 million this year, coming from maybe three things. One is a cold unit piping scope that will help us increase yield and raise flexibility. In other words, we will make more jet fuel and have more catch-up capacity. Second, is SBCU.
Speaker Change: I appreciate that I guess.
Speaker Change: Good.
Speaker Change: If you won some highlights up around the end of the window.
Speaker Change: Joseph with built in his prepared remarks, since we are planning to run a bit more heavy slate and a lager in tickets vintage, let's see weakness that we're seeing.
Speaker Change: Canadian grades of <unk> and we are also advancing a wholesale opportunity in the area. So.
Speaker Change: The weather was the refinery as it moves into a heavier than we learning.
Speaker Change: Versus what we were running it and we're trying to capture that opportunity.
Speaker Change: It's really a question.
Speaker Change: When you think about tend to win because of its consideration.
Joseph: We're going to put a new reactor in there. We're going to make some regenerative ground grades that will provide us with improved conversion and yields, and, in addition, we are expecting better energy efficiency with the copper turbines that we are replacing and higher reform and catalyst activity post-terminal. I appreciate that. I guess the next time, go ahead. If you want some highlights around El Dorado, Joseph prepared in his prepared remark that we are planning to run a bit more heavy slate in El Dorado and take advantage of the weakness that we have seen in Canadian grades, heavier grades, and we're also addressing wholesale opportunities in the area. So, the weather with the refinery that was built ran heavier than we were running, versus what we were running, and we are trying to capture that opportunity. And it's really exciting when you think about the way, because of this configuration, in order to inherit benefits from nationality, make asphalt, improve our asphalt quality and air products, and overall, it will really contribute to that system capture. I'm so sorry for interrupting, guys.
Speaker Change: Two enhancing benefits how much of honesty may constant improvement.
Quality and net backs.
Speaker Change: Also wanted to really contribute.
That system.
Speaker Change: So sorry for interrupting.
Speaker Change: My follow up question is just trying to understand the scope of the work the scope of the work plan. It seems like it goes through 2025 so.
Speaker Change: I'm trying to understand if that suggests that 25 capex is going to be very similar to 'twenty four and I'll leave it there.
Speaker Change: Are you asking about new 20 funds went through.
Speaker Change: Hi.
Speaker Change: Well you lay out the capital Committee.
Speaker Change: Commitments are these accomplishments for 23 through 25, I think on slide number seven.
Speaker Change: Given that the work plan basically known for 25 years I'm trying to get a handle on what 2025 capital looks like it would be if you've argued define the work so I'm trying to figure out if that's similar to 2024.
Speaker Change: Yes, so we in turn scope when it.
Kaylee Ackerman: My follow-up question is just trying to understand the scope of the work, the scope of the work plan. It seems like it goes through 2025. So I'm trying to understand if that suggests that 25 CapEx is going to be very similar to 24. And I'll leave it there. Are you asking about the 25 scope for wind drill?
Speaker Change: Can some of his 24 would be.
Speaker Change: 100 <unk>.
Speaker Change: Mentioned.
Speaker Change: Our capital program.
Speaker Change: With regards to the movies.
Speaker Change: No.
Speaker Change: <unk>.
Speaker Change: <unk> can make it to this point, it's mostly commercial and influence and no home and gaming and we will come back to the future. If we see my key.
Speaker Change: So that would.
Speaker Change: We believe that this is now going to.
Speaker Change: Moving to <unk>.
Speaker Change: And there isn't the case.
Kaylee Ackerman: Well, you lay out this capital commitment or these accomplishments for 23 through 25, I think on slide number 7. So given that the work plan is basically known for 25, I'm trying to get a handle on what 2025 capital looks like if you've already defined the work. So I'm trying to figure out if that's similar to 2024.
Speaker Change: Slide 24 to 35 as you can see big spring.
Speaker Change: It is not related to Coffey does some of the upside is coming going into 2025.
Speaker Change: The reason the slides say, it's 24 to 25.
Speaker Change: Don't read into that too we implemented two of capital.
Speaker Change: So commitment to 25 just to make it very clear.
Speaker Change: That was nothing desert slightly slightly was saying that the benefit is going to come over time, but the delta which is the heavy capital.
Speaker Change: 2024 going to be completed in 2024.
Joseph: Yeah, so the entire scope for KSR is 24, with the 116 that we mentioned, and it's a part of our capital program for the year. With regard to end-to-end, there is no cost estimate at this point; it's mostly commercial efforts and know-how and blending, and we will come back later in the future if we feel like some kind of survival upgrades will be needed now, this is uh, down the road more than a year from now, yeah, and the reason that the slides say 24 to 25, as you can see, big spring, which is not related to capital. Some of the upside is coming only in 2025. That's the reason the slide says 24 to 25.
Speaker Change: I got it that's very clear thank you.
Speaker Change: Your next question comes from Jason Kopelman with TD Cowen. Please go ahead.
Jason Kopelman: Hey, it's Jason gave him and thanks for taking my questions.
Jason Kopelman: I wanted to ask about shareholder returns there wasn't discussed yet I think the past few press releases you had disclosed.
Jason Kopelman: Buy backs quarter to date at the time the press release came out for earnings you didn't do that this quarter. So wondering if you have made any buybacks quarter to date and the outlook for repurchases through 2024.
Joseph: Don't read into that a capital commitment to 2025, just to make it very clear. That was not the intent of the slide. The slide was saying that the benefit is going to come over time, but the turnaround, which is the heavy capital during 2024, is going to be completed in 2024. I got it. That's very clear. Thank you. Your next question comes from Jason Gabelman with TD Cowen. Please go ahead. Yeah, it's Jason Gabelman.
Speaker Change: Hey, thanks, Thanks for the question.
Speaker Change: We view that although view around what we are.
Speaker Change: Thinking in how we think about the capital return to invest though first of all.
Speaker Change: We will be we are very <unk>.
Speaker Change: Is it to shareholder return.
Speaker Change: We had the influence free cash flow this year over $146 million with the $85 million of the buybacks of $61 million of dividend.
Speaker Change: Committed to maintain the same philosophy going into 2020 full and you can probably appreciate that we bought 8% 8% of our shelf or set in place.
Jason Gabelman: Thanks for taking my questions. Um, I wanted to ask about shareholder returns. It wasn't discussed yet. I think in the past few press releases, you had disclosed buybacks quarter to date at the time the press release came out for earnings. You didn't do that this quarter. So wondering if you have made any buybacks quarter to date and the outlook for repurchases through 2024. Hey, thanks for the question.
Speaker Change: So nothing of what we are disclosing is the way I'd suggest any waves of a powerboat were very committed to shareholder return, we want to see us as the market leader around it and we are holding ourselves to that standard.
Avigal Soreq: I will give an overview of what we are thinking and how we think about capital return to investors. First of all, we are very committed to shareholder return. We had over $146 million in free cash flow this year, $85 million of that buyback, and $61 million of dividend.
Speaker Change: Okay. So sorry, it's a bit difficult to hear you.
Speaker Change: <unk> does that 8% level kind of something you feel like thats achievable, either in 2024, and <unk> and <unk>.
Speaker Change: Cycle environment.
Speaker Change: So.
Speaker Change: Lastly was at the mid cycle environment.
Speaker Change: We want to do it for free cash flow.
Avigal Soreq: We are committed to maintaining the same philosophy going to 2024. And you can probably appreciate that we bought 8% of our share in 2023. So nothing of what we are disclosing is intended in any way to suggest any waiver of our approach.
Speaker Change: So we are committed to bid.
Speaker Change: It might be that it might be more it depends on market conditions and don't want to predict market condition and I'm optimistic about market condition, but you'll hold me to that number and I don't want to be held to a number that is a market condition driven.
Speaker Change: To understand the state of mind is find ways to bring return to shareholder.
Avigal Soreq: We are very committed to shareholder return. We want to see us as a market leader around it, and we are holding to that standard. Okay, so sorry, it's a bit difficult to hear you. Is that 8% level kind of something you feel like that's achievable, either in 2024 and or in a mid cycle environment?
Speaker Change: On the show them, a short term midterm and long term and we're committed to all of them and you have seen the US you have seen us demonstrate that.
Speaker Change: Jason last year very nicely with we did exactly what we said we're going to do.
Speaker Change: We're going to keep doing what we say it.
Speaker Change: Okay.
Speaker Change: Understood and then.
Speaker Change: Maybe just if you could comment on demand that you're seeing in the niche markets that you operate in.
Avigal Soreq: We want to do it with free cash flow. So we are committed to that. And it might be less; it might be more.
Speaker Change: And so I think that there was enough discussion about the weather in everyone.
Speaker Change: A cornerstone.
Avigal Soreq: It depends on market conditions. I don't want to predict market conditions. I'm optimistic about the market conditions, but you will hold me to that number. And I don't want to be held to a number that it's market condition driven. You need to understand the state of mind is to find ways to bring return to shareholders on the short-term, mid-term, and long-term. And we are committed to all of them, and you have seen us demonstrate that.
Speaker Change: We're not going to talk about the weather.
Speaker Change: Other than the weather with other than the weather, we have a very good niche market.
Speaker Change: And we are very.
Speaker Change: Less than optimistic on it.
Speaker Change: Okay. Thanks.
Speaker Change: But.
Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star one.
Speaker Change: There are no further questions at this time I would now like to turn the conference over to Avago.
Avago: Please proceed.
Avago: Thank you and I would like to thank my colleagues around the table Colgate quota to thank the board of directors, our investable, obviously that join US for this call and most importantly to our employees that make this company what it is and we're talking to you again in the next quarter. Thank you operator.
Jason Gabelman: Jason, last year, we did exactly what we said we would do, and we're going to keep doing what we say we will do. Okay, understood. And then maybe just if you could comment on the demand that you're seeing in the niche markets that you operate in. So I think there was enough discussion about the weather on everyone's calls, so we are not going to talk about the weather. Other than the weather, we have a very good niche market, and we are very blessed and optimistic about it.
Speaker Change: Thank you ladies and gentlemen. This concludes your conference call for today, we thank you for participating and I say you. Please disconnect your lines.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Avigal Soreq: Okay, thanks. But, Ladies and gentlemen, as a reminder, should you have a question, please press star 1. There are no further questions at this time. I would now like to turn the conference over to Avigal. Please proceed. Thank you. I would like to thank my colleagues around the table for a great quarter, to thank the Board of Directors, our investors, obviously, that joined us for this call, and, most importantly, to our employees who make this company what it is. And we'll talk again in the next quarter. Thank you, operator. Thank you, ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.