Q2 2024 CVR Energy Inc Earnings Call

Greetings and welcome to the CVR Energy second quarter 2024 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.

Operator: 2024 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

Operator: Thank you for your time. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Richard Roberts, Vice President of FP&A and Investor Relations. Thank you, sir. You may begin. Thank you, Christine.

Operator: If anyone should require operator assistance during the conference, please press store zero on your telephone keypad. As a reminder, this conference is being recorded.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Richard Roberts: It is now my pleasure to introduce your host, Richard Roberts, Vice President of STNA in Investor Relations.

As a reminder, this conference is being recorded.

Richard J. Roberts: It is now my pleasure to introduce your host, Richard Roberts, Vice President of FP&A and Investor Relations. Thank you, sir. You may begin.

Operator: Thank you, sir. You may begin.

David Lamp: Thank you, Christine. Good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR Energy second quarter 2024 earnings call. With me today are Dave Lamp, our chief executive officer, Dane Neumann, our chief financial officer, and other members of management.

Richard J. Roberts: We very much appreciate you joining us this afternoon for our CVR Energy Second Quarter 2024 earnings call. With me today are Dave Lamp, our Chief Executive Officer; Dane Neumann, our Chief Financial Officer; and other members of management. Prior to discussing our 2024 second quarter results, let me remind you that this conference call may contain forward-looking statements, as that term is defined under federal securities law. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements.

Richard J. Roberts: Thank you, Christine. Good afternoon, everyone.

Richard J. Roberts: Thank you, Christine. Good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR Energy Second Quarter 2024 earnings call. With me today are Dave Lamp, our Chief Executive Officer, Dane Neumann, our Chief Financial Officer, and other members of management.

David Lamp: Prior to discussing our 2024 second quarter results, let me remind you that this conference call may contain forward-looking statements, as that term is defined under federal securities laws. For this purpose, any statements made during this call are not statements of historical facts; may be deemed to be forward-looking statements. Your caution of these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and our latest earnings release. As a result, actual operations results may differ materially from results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except for the extent required by law.

Richard J. Roberts: You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and our latest earnings release. As a result, actual operations and results may differ materially from those discussed in the forward-looking statement. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except to the extent required by law. This call also includes various non-GAAP financial measures.

Speaker Change: Prior to discussing our 2024 second quarter results, let me remind you that this conference call may contain forward-looking statements, as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements.

Speaker Change: You were cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations and results may differ materially from results discussed in the forward-looking statements.

Speaker Change: We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except to the extent required by law.

David Lamp: This call also includes various non-DIA financial measures. The disclosures later in such non-diat measures, including reconciliation to the most directly comparable gas financial measures, are included in our 2024 second quarter earnings release that we filed with the SEC and Form 10-Q for the period, and will be discussed during the call.

Richard J. Roberts: The disclosures lettered in such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2024 second quarter earnings release that we filed with the SEC and form 10-Q for the period, and will be discussed during the call. With that said, I'll turn the call over to Dave. Thank you.

Speaker Change: This call also includes various non-GAAP financial measures. The disclosures littered in such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures, are included in our 2024 second quarter earnings release that we filed with the SEC in Form 10-Q for the period and will be discussed during the call. With that said, I'll turn the call over to Dave.

David Lamp: With that said, I'll turn the caller to Dave.

David L. Lamp: Thank you, Richard. Good afternoon, everyone, and thank you for joining our earnings call. Yesterday, we reported second quarter consolidated net income of $38 million and earnings per share of $21 cents. EBITDA was $103 million.

David Lamp: Thank you, Richard.

David Lamp: Good afternoon, everyone, and thank you for joining our earnings call. Yesterday, we reported second quarter consolidated net income of $38 million and earnings per share of 21 cents. Yvada was $103 million. Our results for the quarter reflect the weakness of the refining product cracks in the mid-con, in addition to the downtime and increased expenses associated with the fire at Wittywood. We estimate total pre-tax impact of our second quarter results from the fire was approximately $50 million, which does not include the impact of any of the insurance recoveries that may be achieved in the future.

Dave: Thank you, Richard. Good afternoon, everyone, and thank you for joining our earnings call.

Speaker Change: Yesterday, we reported second quarter consolidated net income $38 million and earnings per share of $0.21.

David L. Lamp: Our results for the quarter reflect the weakness in the refining product tracks in the mid-con, in addition to the downtime and increased expenses associated with the fire at Winniewood. We estimate the total pre-tax impact of our second quarter results from the fire was approximately $50 million, which does not include the impact of any insurance recoveries that may be achieved in the future. We are pleased to announce that the Board of Directors has authorized a second quarter dividend of 50 cents per share, which will be paid on August 19th to shareholders of record at the close of market on August 12th. The trailing annualized dividend yield, based on yesterday's close price, is approximately 7%, the highest among independent refiners.

Speaker Change: EBITDA was $103 million. Our results for the quarter reflect the weakness in the refining product tracks in the mid-con in addition to the downtime and increased expenses associated with the fire at Wynnewood.

Speaker Change: We estimate total pre-tax impact of our second quarter results from the fire was approximately 50 million dollars.

Speaker Change: which does not include the impact of any of insurance recoveries that may be achieved in the future.

David Lamp: We are pleased to announce that the board of directors has authorized the second quarter dividend of $0.50 per share, which will be paid on August 19th to shareholders of record at the close of market on August 12th. Our trailing annualized dividend yield, based on yesterday's close price, is approximately seven percent, the highest among independent refiners. In our petroleum segment, combined total throughput for the second quarter of 2024 was approximately 186,000 barrels per day, and light product yield was 99% on crude oil processed. Following the fire at Wittywood in late April, we resumed operations of the number one crude unit within two weeks of the incident, and the number two crude unit began operating in mid-June.

Speaker Change: We are pleased to announce that the Board of Directors has authorized a second quarter dividend of 50 cents per share, which will be paid on August 19th to shareholders of record at the close of market on August 12th.

Speaker Change: Our trailing annualized dividend yield.

Speaker Change: Based on yesterday's close price is approximately 7%, the highest among independent refiners.

David L. Lamp: In our petroleum segment, combined throughput, total throughput for the second quarter of 2024 was approximately 186,000 barrels per day, and light product yield was 99% on crude oil processes. Following the fire at Winniwood in late April, we resumed operations of the No.

Speaker Change: In our petroleum segment, combined throughput, total throughput for the second quarter of 2024 was approximately 186,000 barrels per day and light product yield was 99% on crude oil processed.

David L. Lamp: 1 crude unit within two weeks of the incident, and the No. 2 crude unit began operating in mid-June, when it would is currently operating at normal right. Benchmark cracks softened during the second quarter, with the Group 3 2-1-1 averaging $18.83 per barrel compared to $32.03 per barrel for the second quarter of 2023. Average RIN prices for the second quarter of 2024 also declined from the prior year period and ended the quarter at approximately $0.69 on an RVO-weighted basis.

Speaker Change: Following the fire at Winnie Wood in late April , we resumed operations of the number one crude unit within two weeks of the incident, and the number two crude unit began operating in mid-June.

David Lamp: Wittywood is currently operating at normal rates. Fetchmark cracks often during the second quarter, with the Group 3211 averaging $18.83 per barrel, compared to $32.03 per barrel for the second quarter of 2023.

Speaker Change: Winnie Wood is currently operating at normal rates.

Speaker Change: Benchmark cracks softened during the second quarter with the Group 3 2-1-1 averaging $18.83 per barrel compared to $32.03 per barrel for the second quarter of 2023.

David Lamp: Energy. Average rent prices for the second quarter of 2024 also declined from the prior year period, and we ended the quarter at approximately 69 cents on an RVO weighted basis. Regarding the RFS, we were thrilled with last week's order from the DC Circuit vacating EPA's improper denial of dozens of petitions of other refiners seeking small refinery exemptions. While we await the text of this opinion, the outcome mirrors the Fifth Circuit's damning opinion last year of vacating EPA's denial of small refinery exemptions for Winnywood and other refiners from 2017 to 2021. EPA has still not acted on those petitions, despite eight months since the demand.

Speaker Change: Average RIN prices for the second quarter of 2024 also declined from the prior year period and ended the quarter at approximately 69 cents on an RVO-weighted basis.

David L. Lamp: Regarding the RFS, we were thrilled with last week's order from the D.C. Circuit vacating EPA's improper denial of dozens of petitions from other refiners seeking small refinery exemptions. While we await the text of this opinion, the outcome mirrors the Fifth Circuit's damning opinion last year vacating EPA's denial of small refinery exemptions for Winniwood and other refiners from 2017 to 2021. EPA has still not acted on those petitions despite eight months since their remand. And while we intend to oppose the writ of cert petition they filed for the Supreme Court, we think the favorable D.C. action, the D.C. Circuit action, should work in our favor.

Speaker Change: Regarding the RFS, we were thrilled with last week's order from the D.C. Circuit vacating EPA's improper denial of dozens of petitions of other refiners seeking small refinery exemptions.

Speaker Change: While we await the text of this opinion, the outcome mirrors the Fifth Circuit's damning opinion last year vacating EPA's denial of small refinery exemptions for Wynnewood and other refiners from 2017 to 2021.

Speaker Change: EPA has still not acted on those petitions despite eight months since their remand.

David Lamp: And while we intend to oppose the writ of cert. they filed for this pre-import, we think the favorable DC Circuit action should work in our favor. As previously reported, we have a pending suit against the EPA in the Fifth Circuit for the denial of our 2022 petition. And earlier this month, we filed suit for their illegal failure to rule on our 2023 petition. We submitted our 2024 petition last week in the caucus ticking for EPA to act. We will continue to fight for small refinery exemptions for the smaller refinery exemptions with a deserves and also compel EPA to fix what we believe is EPA's clear violation of RFS by allowing non-obligated parties to trade in and manipulate the written market.

Speaker Change: And while we intend to oppose the writ of cert they filed for the Supreme Court, we think the favorable D.C. action, D.C. Circuit action, should work in our favor.

David L. Lamp: As previously reported, we have a pending suit against EPA and the Fifth Circuit for the denial of our 2022 petition. And earlier this month, we filed suit for their illegal failure to rule on our 2023 petition. We submitted our 2024 petition last week, and the clock is ticking for EPA to act. We will continue to fight for small refinery exemptions, for the small refinery exemptions, what it deserves, and also compel EPA to fix what we believe is its clear violation of RFS by allowing non-obligated parties to trade in and manipulate sovereign markets.

Speaker Change: As previously reported, we have a pending suit against EPA and the Fifth Circuit for the denial of our 2022 petition. And earlier this month, we filed suit for their illegal failure to rule on our 2023 petition.

Speaker Change: We submitted our 2024 petition last week and the clock is ticking for EPA to act.

Speaker Change: We will continue to fight for small refineries.

Speaker Change: Thank you very much.

David Lamp: Supreme Court's recent overturn of the Chevron doctrine may represent an incremental positive for our efforts, though the ultimate impact remains to be seen. For the second quarter of 2024, we processed approximately 12 million gallons of vegetable fuel through the pre-treater and the renewable diesel unit at Winniewood, with throughput in the quarter indirectly impacted by the fire in April. The Hobo spread weakened slightly from the first quarter of 2024 with lower diesel prices. And the D4 rims remained depressed as a result of EPA's continued mismanagement of the RFS program.

David L. Lamp: The Supreme Court's recent overturn of the Chevron Doctrine may represent an incremental positive for our efforts, though the ultimate impact remains to be seen. For the second quarter of 2024, we processed approximately 12 million gallons of vegetable fuel oil through our pre-treater, the pre-treater, and the renewable diesel unit at Winnewood, with throughput in the quarter indirectly impacted by the fire in April. The hobo spread weakened slightly from the first quarter of 2024 with lower diesel prices, and D4 RINs remain depressed as a result of EPA's continued mismanagement of the RFS program.

Speaker Change: The Supreme Court's recent overturn of the Chevron Doctrine may represent an incremental positive for our efforts, though the ultimate impact remains to be seen.

Speaker Change: For the second quarter of 2024, we processed approximately 12 million gallons of vegetable fuel oil through the pretreater and the renewable diesel unit at Wynnewood, with throughput in the quarter indirectly impacted by the fire in April .

Speaker Change: The HOBO spread weakened slightly from the first quarter of 2024 with lower diesel prices and the D4 RENs remained depressed as a result of EPA's continued mismanagement of the RFS program.

David Lamp: As a reminder, our renewable diesel business is currently reported within our Corporate and Other segments. In the fertilizer segment, both facilities ran well for the quarter, with a combined ammonia utilization rate of 102 percent. Nitrogen fertilizer prices were relatively consistent with first quarter pricey, and we saw strong demand for nitrogen for the spring planning season.

David L. Lamp: As a reminder, our renewable diesel business is currently reported within our corporate and other segments. In the fertilizer segment, both facilities ran well for the quarter with a combined ammonia utilization rate of 102%. Nitrogen fertilizer prices were relatively consistent with first-quarter prices, and we saw a strong demand for nitrogen for the spring planting season.

Speaker Change: As a reminder, our Renewable Diesel business is currently reported within our Corporate and Other segment.

Speaker Change: In the fertilizer segment, both facilities ran well for the quarter with a combined ammonia utilization rate of 102 percent.

Speaker Change: Nitrogen fertilizer prices were relatively consistent with first quarter pricing and we saw strong demand for nitrogen for the spring planting season.

Dane Neumann: Now let me turn the call over to Dane to discuss our financial highlights.

Dane J. Neumann: Now, Dave, I will turn the call over to Dane to discuss our financial highlights. Thank you, Dave. Good afternoon, everyone.

Dane Neumann: Thank you, Dave.

Speaker Change: Now let me turn the call over to Dane to discuss our financial highlights.

Dane Neumann: Good afternoon, everyone. For the second quarter of 2024, our consolidated net income was 38 million. Erick's per share was 21 cents, and Eva Dah was 103 million. Our second quarter results include unrealized derivative gains of 17 billion, and an unfavorable inventory valuation impact of 1 million. Excluding the above mentioned items, adjusted EBITDA for the quarter was 87 million, and adjusted earnings per share was 9 cents. Adjusted EBITDA in the petroleum segment was 37 million for the second quarter, with the decline from the prior year period, primarily driven by lower product cracks in Group 3, and reduced throughput volumes due to the downtime of Winniewood.

Dane J. Neumann: For the second quarter of 2024, our consolidated net income was $38 million, earnings per share was $0.21, and EBITDA was $103 million. Our second quarter results include unrealized derivative gains of $17 million and an unfavorable inventory valuation impact of $1 million. Excluding the above-mentioned items, adjusted EBITDA for the quarter was $87 million, and adjusted earnings per share was nine cents. Adjusted EBITDA in the petroleum segment was $37 million for the second quarter, with the decline from the prior year period primarily driven by lower product cracks in Group 3 and reduced throughput volumes due to the downtime of winning. Our second quarter realized margin, adjusted for unrealized derivative gains and inventory valuation impacts, was $9.81 per barrel, representing a 52% capture rate on the Group 3 2-1-1 benchmark.

Dane: Thank you, Dave. Good afternoon, everyone.

Dane: For the second quarter of 2024, our consolidated net income was $38 million, earnings per share was $0.21, and EBITDA was $103 million.

Dane: Our second quarter results include unrealized derivative gains of $17 million and an unfavorable inventory valuation impact of $1 million.

Dane: Excluding the above-mentioned items, adjusted EBITDA for the quarter was $87 million and adjusted earnings per share was $0.09.

Dane: The adjusted EBITDA in the petroleum segment was $37 million for the second quarter, with the decline from the prior year period primarily driven by lower product cracks in Group 3 and reduced throughput volumes due to the downtime at Winniwood.

Dane Neumann: Our second quarter realized margin, adjusted for unrealized derivative gains and inventory valuation impacts, was $9.81 per barrel, representing a 52% capture rate on the Group 3211 benchmark. We're in expense for the quarter, excluding the market market impact was 40 million, or $2.33 cents per barrel, which negatively impacted our capture rate for the quarter by approximately 12%. The estimated accrued RFS obligation on the balance sheet was 312 million at June 30th, representing 471 million wins marked market at an average price of 66 cents. As a reminder, our estimated outstanding rate obligation excludes the impact of any smaller, finer exemptions.

Dane: Our second quarter realized margin adjusted for unrealized derivative gains and inventory valuation impacts was $9.81 per barrel, representing a 52% capture rate on the Group 3 2-1-1 benchmark.

Dane J. Neumann: RIN's expense for the quarter, excluding the mark-to-market impact, was $40 million, or $2.33 per barrel, which negatively impacted our capture rate for the quarter by approximately 12%. The estimated accrued RFS obligation on the balance sheet was $312 million at June 30th, representing 471 million wins marked to market at an average price of $0.66. As a reminder, our estimated outstanding rent obligation excludes the impact of any small refine

Dane: RIN's expense for the quarter, excluding the mark-to-market impact, was $40 million, or $2.33 per barrel, which negatively impacted our capture rate for the quarter by approximately 12 percent.

Dane: The estimated accrued RFS obligation on the balance sheet was $312 million at June 30th, representing 471 million wins marked market at an average price of $0.66.

Dane: As a reminder, our estimated outstanding RAN obligation excludes the impact of any small refinery exemptions.

Dane Neumann: Direct operating expenses in the petroleum segment were $6.94 per barrel for the second quarter, compared to $5.46 cents per barrel in the second quarter of 2023. The increase in direct operating expenses was primarily driven by increased repair and maintenance expenses and lower throughput volumes as a result of the Winniewood fire. Adjusted even down, the fertilizer segment was 54 million for the second quarter, with lower feeds dot costs and direct operating expenses somewhat offsetting the decline in prices relative to the prior year period. Partnership declared a distribution of $1.90 per common unit for the second quarter of 2024.

Dane J. Neumann: Direct operating expenses in the petroleum segment were $6.94 per barrel for the second quarter, compared to $5.46 per barrel in the second quarter of 2023. The increase in direct operating expenses was primarily driven by increased repair and maintenance expenses and lower throughput volumes as a result of the Winniwood fire. Adjusted evens on the fertilizer segment was $54 million for the second quarter, with lower feedstock costs and direct operating expenses somewhat offsetting the decline in prices relative to the prior year period. The Partnership declared a distribution of $1.90 per common unit for the second quarter of 2024. CVR Energy owns approximately 37% of CVR Partners' common units.

Dane: Direct operating expenses in the petroleum segment were $6.94 per barrel for the second quarter, compared to $5.46 per barrel in the second quarter of 2023.

Dane: The increase in direct operating expenses was primarily driven by increased repair and maintenance expenses and lower throughput volumes as a result of the Wynnewood fire.

Dane: Adjusted EBITDA on the fertilizer segment was $54 million for the second quarter, with lower feedstock costs and direct operating expenses somewhat offsetting the decline in prices relative to the prior year period.

Dane: Partnership declared a distribution of $1.90 per common unit for the second quarter of 2024.

Dane Neumann: Severe Energy owns approximately 37% of CVR Partners' common units, who will receive a proportionate cash distribution of approximately $7 million. Cash provided by operations for the second quarter of 2024 was $81 million, and free cash flow was $7 million. Significant uses of cash in the quarter included $76 million of capital and turnaround expenditures, $52 million per cash taxes and interest. $50 million for the first for the CVI first quarter of 2024 dividend, and $13 million paid for the non-controlling interest portion of the CVR Partners first quarter of 2024 distribution. Total consolidated capital spending on a cruel basis was $41 million, which included $33 million in the petroleum segment, $5 million in the fertilizer segment, and $2 million for the R.D.U.

Speaker Change: As CVR Energy owns approximately 37% of CVR Partners common units, we will receive a proportionate cash distribution of approximately $7 million.

Dane J. Neumann: We will receive a proportionate cash distribution of approximately $7 million. Cash provided by operations for the second quarter of 2024 was $81 million, and free cash flow was $7 million. Significant uses of cash in the quarter included $76 million of capital and turnaround expenditures, $52 million for cash taxes and interest, $50 million for the CBI first quarter 2024 dividend, and $13 million paid for the non-controlling interest portion of the CBR partner's first quarter 2024 distribution.

Speaker Change: Cash provided by operations for the second quarter of 2024 was $81 million, and free cash flow was $7 million.

Speaker Change: Significant uses of cash in the quarter included 76 million of capital and turnaround expenditures, 52 million for cash taxes and interest.

Speaker Change: 50 million for the CBI first quarter 2024 dividend, and 13 million paid for the non-controlling interest portion of the CBR partner's first quarter 2024 distribution.

Dane J. Neumann: Total consolidated capital spending on an accrual basis was $41 million, which included $33 million in the petroleum segment, $5 million in the fertilizer segment, and $2 million for the RDU, primarily related to debris treatment units. Turnaround spending in the second quarter was approximately $3 million. For the full year 2024, we estimate total consolidated capital spending to be approximately $195 to $220 million and turnaround spending to be approximately $55 to $65 million.

Speaker Change: The total consolidated capital spending on an accrual basis was $41 million, which included $33 million in the petroleum segment, $5 million in the fertilizer segment, and $2 million for the RDU, primarily related to the pretreatment unit.

Dane Neumann: primarily related to the pre-treatment unit. Turnaround spending in the second quarter was approximately $3 million.

Dane Neumann: For the full year 2024, we estimate total consolidated capital spending to be approximately $195 to $220 million, and turnaround spending to be approximately $55 to $65 million. Starting to the balance sheet, we ended the quarter with a consolidated cash balance of $586 million, which includes $48 million of cash in the fertilizer segment. Total liquidity as of June 30, excluding CVR Partners, was approximately $790 million, which was comprised primarily of $539 million of cash and availability under the ABL facility of $251 million. Looking ahead to the third quarter of 2024 for our petroleum segment, we estimate total outputs to be approximately $200 to $215,000 per day.

Speaker Change: Turnaround spending in the second quarter was approximately $3 million.

Speaker Change: For the full year 2024, we estimate total consolidated capital spending to be approximately $195 to $220 million, and turnaround spending to be approximately $55 to $65 million.

Dane J. Neumann: Turning to the balance sheet, we ended the quarter with a consolidated cash balance of $586 million, which included $48 million of cash in the fertilizer segment. Total liquidity as of June 30th, excluding CVR partners, was approximately $790 million, which was comprised primarily of $539 million of cash and availability under the AVL facility of $251 million. Looking ahead to the third quarter of 2024, for our petroleum segment, we estimate total throughputs to be approximately 200 to 215,000 barrels per day, direct operating expenses to range between $95 million and $105 million, and total capital spending to be between $35 million and $40 million.

Speaker Change: Turning to the balance sheet, we ended the quarter with a consolidated cash balance of $586 million, which includes $48 million of cash in the fertilizer segment.

Speaker Change: Total liquidity as of June 30th, excluding CVR partners, was approximately $790 million, which was comprised primarily of $539 million of cash and availability under the AVL facility of $251 million.

Speaker Change: Looking ahead to the third quarter of 2024, for our petroleum segment, we estimate total throughputs to be approximately 200,000 to 215,000 barrels per day, direct operating expenses to range between $95 million and $105 million, and total capital spending to be between $35 million and $40 million.

Dane Neumann: today. Direct operating expenses to range between 95 and 105 million, and total capital spending to be between 35 and 40 million. For the fertilizer segment, we estimate our third quarter of 2024 ammonia utilization rate to be between 95 and 100 percent. Direct operating expenses to be approximately 53 to 58 million, excluding inventory impacts, and total capital spending to be between 10 and 15 million.

Dane J. Neumann: For the fertilizer segment, we estimate our third quarter 2024 ammonia utilization rate to be between 95 and 100 percent, direct operating expenses to be approximately $53 to $58 million, excluding inventory impacts, and total capital spending to be between $10 million and $15 million.

Speaker Change: For the fertilizer segment, we estimate our third quarter 2024 ammonia utilization rate to be between 95 and 100 percent.

Speaker Change: direct operating expenses to be approximately $53 million to $58 million, excluding inventory and PACs, and total capital spending to be between $10 million and $15 million.

Dane Neumann: But that day about to turn it back over you.

David L. Lamp: With that, Dave, I will turn it back over to you. Thanks, Dane.

David Lamp: Thanks, Dane.

David L. Lamp: Thanks, Dane. In summary, petroleum market conditions remain challenging in the second quarter, and we would characterize second quarter crack spreads as below the mid-cycle level. Part of the second quarter weakness in cracks can be attributed to high fleet utilization and somewhat lackluster refined product demand in the U.S., although demand in the mid-con has remained within the five-year band. However, over the past week, we have seen an uptick in the benchmark cracks in the mid-con, primarily driven by the tightness in the gasoline and diesel basis, likely due to unplanned downtime by other refineries in Pad As I often say, the best cure for low prices is low prices.

David Lamp: In summary, petroleum market conditions remain challenging in the second quarter, and we would characterize second quarter crack spreads as below mid-cycle levels. Part of the second quarter weakness in cracks can be attributed to high fleet utilization and somewhat lackluster refined product demand in the U.S. although demand in the mid-con has remained within five-year bans. Over the past week, we have seen an uptick in the benchmark cracks in the mid-con, primarily driven by the tightness in the gasoline and diesel basis, likely due to unplanned downtime by other refineries in pad two. As I often say, the best cure for low prices is low prices.

Dave: With that, Dave, I will turn it back over to you. Thanks, Dane. In summary, petroleum market conditions remain challenging in the second quarter. And we would characterize second quarter crack spreads as below mid-cycle levels.

Dave: Part of the second quarter weakness in cracks can be attributed to high fleet utilization.

Dave: and somewhat lackluster refined product demand in the U.S., although demand in the mid-con has remained within five-year bands.

Speaker Change: Over the past week, we have seen an uptick in the benchmark cracks in the mid-con, primarily driven by the tightness in the gasoline and diesel basis, likely due to unplanned downtime by other refineries in Pad 2.

Speaker Change: As I often say, the best cure for low prices is low prices.

David Lamp: We already see an evidence of run cuts for more marginal refineries, particularly in Asia and Europe, due to the weakness in refining margins in those areas. We believe there's likely more to come in order to rationalize supply, which, along with an increase in product exports or an uptick in U.S. product demand on improved economic sentiment, could provide additional support for refining margins.

David L. Lamp: We are already seeing evidence of run cuts from more marginal refineries, particularly in Asia and Europe, due to the weakness in refining margins in those areas. We believe there's likely more to come in order to rationalize supply, which, along with an increase in product exports or an uptick in U.S. product demand on improved economic sentiment, could provide additional support for refining margins. Turning to the fertilizer segment, the spring planting season went well, and demand for nitrogen was strong.

Speaker Change: We are already seeing evidence of run cuts from more marginal refineries, particularly in Asia and Europe , due to the weakness in refining margins in those areas.

Speaker Change: We believe there is likely more to come in order to rationalize supply, which, along with an increase in product exports or an uptick in U.S. product demand, can improve economic sentiment.

Speaker Change: could provide additional support for refining margins.

David Lamp: Turning to the fertilizer segment, the spring planning season went well, and demand for nitrogen was strong. In July, we completed both summer UAN Phil and the fall ammonia prepay and saw solid demand for both products at prices that were above 2023 Phil pricing. Better than most were expecting. We currently have a solid order book heading into the fall, and UAN price pricing has risen from summer Phil prices.

Speaker Change: Turning to the fertilizer segment, the spring planting season went well and demand for nitrogen was strong.

David L. Lamp: In July, we completed both summer UAN fill and the fall ammonia prepay and saw solid demand for both products at prices that were above 2023 fill prices, better than most were expected. We currently have a solid order book heading into the fall, and UAN price pricing has risen from summer fill prices. Finally, in renewables, we resumed planned operations at the Renewable Diesel Unit in early June following the downtime associated with the Wynnewood fire in April.

Speaker Change: In July , we completed both summer UAN fill and the fall ammonia prepay and saw solid demand for both products at prices that were above 2023 fill pricing.

Speaker Change: better than most were expecting.

Speaker Change: We currently have a solid order book heading into the fall, and UAN pricing has risen from summer fill prices.

David Lamp: Finally, in renewables, we resumed plant operations at the Renewable Diesel Unit in early June following the downtime associated with the Winniewood fire in April. The pre-treater for the Renewable Diesel Unit is also operating at planned rates, and so far we were seeing an improvement in Renewable Diesel yield and resulting economics at current market prices. Discussions are ongoing to the potential conversion of Winniewood Renewable Diesel Unit to 100% SAF, and we expect to have a development plan together in the next few months for a larger project at Coffeeville. We continue to believe there will be a market for renewable diesel and sustainable aviation going forward, and while there is significant interest in the market from potential off-takers for SAF, the bid-ask spread remains fairly wide.

Speaker Change: Finally, in Renewables, we resumed planned operations at the Renewable Diesel Unit in early June following the downtime associated.

David L. Lamp: The pretreater for the Renewable Diesel Unit is also operating at planned rates, and so far, we are seeing an improvement in renewable diesel yield and resulting economics at current market prices. Discussions are ongoing for the potential conversion of Winniwood Renewable Diesel Unit to 100% SAF, and we expect to have a development plan together in the next few months for a larger project at Coffeyville. We continue to believe there will be a market for renewable diesel and sustainable aviation going forward.

Speaker Change: with the Wynnewood Fire in April .

Speaker Change: The pretrader for the renewable diesel unit is also operating at planned rates and so far we were seeing an improvement in renewable diesel yield and resulting economics at current market prices.

Speaker Change: Discussions are ongoing to the potential conversion of Winniwood Renewable Diesel Unit to 100% SAF and we expect to have the development plan together in the next few months for a larger project at Coffeyville.

Speaker Change: We continue to believe there will be a market for renewable diesel and sustainable aviation going forward.

David L. Lamp: And while there is significant interest in the market from potential offtakers for SAF, the bid-ask spread remains fairly wide. In addition to these potential projects and renewables, we continue to explore strategic transactions, both in refining and potentially related to the CVR partner, although we have nothing to report at this point.

Speaker Change: And while there is significant interest in the market from potential offtakers for SAF, the bid-ask spread remains fairly wide.

David Lamp: In addition to these potential projects and renewables, we continue to explore strategic transactions both in refining and potentially related to the CVR partner.

Speaker Change: In addition to these potential projects and renewables, we continue to explore strategic transactions both in refining and potentially related to the CVR partner.

David Lamp: Although we have nothing to report at this point, looking at the third quarter of 2024, quarter-to-date metrics are as follows. Group 211 cracks of average $19.12 per barrel with a Brent TI spread of $3.22 per barrel and the WCS differential at $14.39 per barrel under WTI. Prompt fertilizer prices are approximately $520 per ton for ammonia and $240 per ton for UAM. As of yesterday, Group 3211 cracks were $21.74 per barrel. Brent TI was approximately $4 per barrel, and WCS was $15.75 under WTI. Rins were $3.96 per barrel.

Speaker Change: although we have nothing to report at this point.

David L. Lamp: Looking at the third quarter of 2024, the quarter-to-date metrics are as follows. Group 2-1-1 cracks have averaged $19.12 per barrel, with a Brent TI spread of $3.22 per barrel, and the WCS differential at $14.39 per barrel under WTI. Prompt fertilizer prices are approximately $520 per ton for ammonia and $240 per ton for UAM. As of yesterday, Group 3 2-1-1 cracks were $21.74 per barrel, the Brent TI was approximately $4 per barrel, and WCS was $15.75 under WTI.

Speaker Change: Looking at the third quarter of 2024, quarter-to-date metrics are as follows. Group 2-1-1 cracks have averaged $19.12 per barrel.

Speaker Change: with a Brent TI spread of $3.22 per barrel.

Speaker Change: and the WCS differential at $14.39 per barrel under WTI.

Speaker Change: Prompt fertilizer prices are approximately $520 per ton for ammonia and $240 per ton for UAM.

Speaker Change: As of yesterday, Group 3 2-1-1 cracks were $21.74 per barrel, the Brent TI was approximately $4 per barrel, and WCS was $15.75 under WTI.

Speaker Change: RINs were $3.96 per barrel.

David Lamp: As always, we continue to strive to operate our plants in a safe, reliable, and environmentally responsible manner to explore opportunities to grow the company. We also continue to focus on maximizing free cash flow and protecting the balance sheet while aiming to provide an attractive return to shareholders.

David L. Lamp: RINs were $3.96 per barrel. As always, we continue to strive to operate our plants in a safe, reliable, and environmentally responsible manner to explore opportunities to grow and to explore opportunities to grow the company. We also continue to focus on maximizing free cash flow and protecting the balance sheet while aiming to provide an attractive return to shareholders. With that, Operator, we're ready for questions.

Speaker Change: As always, we continue to strive to operate our plants in a safe, reliable, and environmentally responsible manner to explore opportunities to grow the company.

Speaker Change: We also continue to focus on maximizing free cash flow and protecting the balance sheet while aiming to provide an attractive return to shareholders.

Operator: With that operator, we're ready for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: Thank you.

Speaker Change: With that, operator, we're ready for questions.

Operator: We will now be conducting your question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation term will indicate your line in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your hands up before a press in the star keys. When moment please, while we pull for questions.

Speaker Change: Thank you. We will now be conducting a question and answer session.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Speaker Change: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.

Operator: Thank you.

Operator: One moment, please, while we poll for questions. Thank you. Our first question comes from the line of John Royall with J.P. Morgan. Please proceed with your question.

John Royall: Our first question comes from a line of John Royal with JP Morgan.

Speaker Change: Thank you. Our first question comes from the line of John Royall with J.P. Morgan. Please proceed with your question.

John Royall: Please proceed with your question. Hi, good morning. Thanks for taking my question.

John Macalister Royall: Hi, good morning; thanks for taking my question. Dave mentioned a potential insurance recovery regarding the $50 million loss from the Wynnewood outage. Is there an expectation you can share for how much of that $50 million you might see coming back, and maybe a timeline as well?

John Macalister Royall: Hi, good morning. Thanks for taking my question.

David Lamp: Dave mentioned potential insurance recovery regarding the $50 million loss from the Winniewood outage. Is there an expectation you can share for how much of that $50 million you might see coming back, and maybe a timeline as well? Well, we have a deductible, and from a property and equipment standpoint, it's probably where most of that will come from. We don't really have a good estimate yet, but I'm guessing around $20 million.

John Macalister Royall: So Dave mentioned a potential insurance recovery regarding the 50 million dollar loss from the Wynnewood outage. Is there an expectation you can share for how much of that 50 million you might see coming back and maybe a timeline as well?

David L. Lamp: Well, we have a deductible. And, you know, from a property and equipment standpoint, that's probably where most of that will come from. We don't really have a good estimate yet, but I'm guessing around 20 million.

Speaker Change: Well, we have a deductible and from a property and equipment standpoint is probably where most of that will come from. We don't really have a good estimate yet, but I'm guessing around 20 million.

David L. Lamp: And, you know, the time frame of getting it back is always an interesting process.

David Lamp: The timeframe of getting it back is always an interesting process. Okay, thank you.

Speaker Change: And, you know, the time frame of getting it back is always an interesting process.

David L. Lamp: Okay, thank you. And then, can you talk about the broader strategy around renewables in today's market? I know you have a couple of potential projects that are moving forward. But obviously, the margin environment is challenging right now, and I know this is all kind of pending, finding agreements with partners, but are you waiting at this point to see if the market improves before you sanction these projects? Or do you remain confident in the long-term viability of RD and staff such that you might take FID in a lower margin environment? Well, you know, I think you have to remember how we got

John Royall: Can you talk about the broader strategy around renewables in today's market? I know you have a couple of potential projects that are moving forward, but obviously the margin environment is challenged right now, and I know this is all kind of pending finding agreements with partners. But are you waiting at this point to see if the market improves before you sanction these projects, or do you remain confident in the long-term viability of RD and staff such that you might take FID in a lower margin environment? Well, you know, I think you've got to remember how we got here, you know, the RBO that was set for three years was set.

Speaker Change: Okay, thank you. And then, can you talk about the broader strategy around renewables in today's market? I know you have a couple of potential projects that are moving forward, but...

Speaker Change: [inaudible]

Speaker Change: you might take FID in a lower margin environment.

David L. Lamp: Well, you know, I think you have to remember how we got here. The RBO that was set for three years was set, I think, basically for political reasons, if nothing else, with an election coming up to lower the price of gasoline and diesel. And that's what manifested itself into D4s being way under RBOs. And as a result, you know, the reds dropped, and then there was the largely economic, of RD.

Speaker Change: Well, you know, I think you've got to remember how we got here. You know, the RBO that was set for three years was set, I think, basically for political reasons, if nothing else.

David Lamp: I think basically, for political reasons, if nothing else, with an election coming up, to lower the price of gasoline and diesel. and that's what it manifests itself into is, D4, we're way under R.V.O.D. and as a result, you know, the reds dropped and they're largely the economics of R.D. That said, you know, if you still look at what the market offers, even on a B-noil basis, you can eke out some profit just if you operate well at design rates and minimize your costs. So I think there's no question decarbonization is still going to be with us for a long time, and probably the best material out there that can handle heavy machinery and trucks and such is renewable diesel if you really want to reduce carbon.

Speaker Change: with an election coming up to lower the price of gasoline and diesel.

Speaker Change: And that, what it manifested itself into is D4 were way under, under RVOed. And as a result, you know, the, the reds dropped and, and then there went the, largely the economics of, of RD.

David L. Lamp: That said, if you still look at what the market offers, even on a bean oil basis, you can eke out some profit just if you operate well at design rates and Minimize Your Cost. So I think there's no question decarbonization is still going to be with us for a long time. Probably the best material out there that can handle heavy machinery and trucks and such is renewable diesel if you really want to reduce carbon.

Speaker Change: That said, if you still look at what the market offers, even on a bean oil basis...

Speaker Change: You can eke out some profit just if you operate well at design rates.

Speaker Change: and Minimize Your Costs.

Speaker Change: So, I think, you know, there's no question decarbonization is still going to be with us for a long time.

Speaker Change: Probably the best material out there that can handle heavy machinery and trucks and such is renewable diesel if you really want to reduce carbon.

David Lamp: So I think that the markets there, and of course from an SAF standpoint, really airlines really have no other alternative to really reduce carbon. So you can do ethanol to SAF, but if you look at the yields and the costs, that it's almost identical to the SAF will be vegetable oils and waste oils. So you know, I think it's around a long time, John. And you know, our timing is we're not in a big hurry to push these things out. From an SAF standpoint and converting Winniewood, we really want to have contractual terms that give us a return, or we just won't do it.

David L. Lamp: So I think that the market's there. And of course, from an SAF standpoint, we airlines really have no other alternative to really reduce carbon. You can do ethanol to SAF, but if you look at the yields and the cost, it's almost identical to the SAF route via vegetable oils and waste oils.

Speaker Change: So I think that the markets there and of course from an SAF standpoint where the airlines really have no other alternative

Speaker Change: to really reduce carbon, so.

Speaker Change: You can do ethanol to SAF, but if you look at the yields and the cost, it's almost identical to the SAF route via vegetable oils and waste oils.

David L. Lamp: So, you know, I think it will be around for a long time, John, and, you know, our timing is we're not in a big hurry to push these things out. From an SAF standpoint and converting Winniwood, we really want to have contractual terms that give us a return, or we just won't do it. And the Coffeyville side is, you know, this is really a deal where we're putting sweat equity into it, a little bit of money to seed it, but the bottom line is we're looking for partners that we could roll the winning business into with and eventually monetize our investment there.

John Macalister Royall: So, you know, I think it's around a long time, John , and, you know, our timing is, we're not in a big hurry to push these things out. From an SAF standpoint and converting Winniewood, we really want to have contractual terms that give us a return or we just won't do it.

John Royall: And the Coffeeville side is, you know, this is really a deal where we're putting sweat equity into it. It's a little bit of money to seed it, but bottom line is we're looking for partners that we could roll the Winniewood business in with and eventually monetize our investment there. So we're still positive on it. Time means not perfect, but you know a new RBO coming out here with a new president, and hopefully they'll put some sense into it and decouple sixes from fours. And I think you'll see the market improve dramatically if that occurs. Very helpful.

John Macalister Royall: And the Coffeyville side is, you know, it's, this, this is really a.

Speaker Change: a deal where we're putting sweat equity into it, a little bit of money to seed it, but bottom line is we're looking for partners that we could roll the winning one business in with and eventually monetize our investment there.

David L. Lamp: So we're still positive on it. Timing's not perfect, but, you know, a new RVO is coming out here with a new president, and hopefully they'll put some sense into it and decouple sixes from fours. And I think you'll see the market improve dramatically if that happens.

Speaker Change: So we're still positive on it.

Speaker Change: Timing's not perfect, but you know a new RVO coming out here with a new president and hopefully they'll put some sense into it and decouple sixes from fours.

Speaker Change: And I think you'll see the market improve dramatically if that occur.

John Royall: Thank you, Dave.

Speaker Change: Very helpful. Thank you, Dave.

Neil Mehta: Our next question comes from a line of deal, Meadow with Goldman Sachs.

Neil Singhvi Mehta: Our next question comes from Neil Mehta with Goldman Sachs. Please proceed with your question.

Neil Mehta: Please proceed with your question. Morning, Dave and team. I guess the first question just building on the UAN commentary was the very strong quarter at UAN and in the fertilizer segment. Sometimes we, those of us in refining, have less visibility into some of the comings and goings of that segment.

Speaker Change: Our next question comes from the line of Neil Mehta with Goldman Sachs. Please proceed with your question.

Neil Singhvi Mehta: Morning, Dave and team. I guess the first question, just building on the UAN commentary, was that UAN had a very strong quarter in the fertilizer segment. Sometimes those of us in refining have less visibility into some of the comings and goings of that segment. So can you talk about what you're seeing on the ground, anything that's one-time in nature, or have we found a sustainable level of higher profitability?

Neil Singhvi Mehta: Morning Dave and team. I guess the first question, just building on the UAN commentary, was there's a very strong quarter at UAN and in the fertilizer segment.

Neil Singhvi Mehta: Sometimes, those of us in refining have less visibility into some of the comings and goings of that segment. So, can you talk about what you're seeing on the ground, anything that's one time in nature, or have we found a sustainable level of higher profitability?

David Lamp: So can you talk about what you're seeing on the ground, anything that's one time in nature or have we found a sustainable level of higher profitability? Well, I think, Meowley, if you look at the market, it's really stabilized. I think it's kind of in balance, and that's driven the prices back to what we would call mid-cycle. 520 and 250 on UAN is 520 on ammonia and 250 on UAN is right in the wheelhouse of mid-cycle. Farmer economics are still fairly good, although the price of grains have dropped quite a bit. But they're still very profitable if you own the land; a little less if you're leasing the land.

David L. Lamp: Well, Neal, if you look at the market, it's really stabilized. I think it's kind of in balance, and that's driven the prices back to what we would call mid-cycle. 520 and 250 on UAN, 520 on ammonia, and 250 on UAN are right in the wheelhouse of mid-cycle.

Speaker Change: Well, I think, Neal, if you look at the market, it's really stabilized, I think it's kind of in balance, and that's driven the prices back to what we would call mid-cycle.

Speaker Change: 520 and 250 on UAN, 520 on ammonia and 250 on UAN is right in the wheelhouse of mid-cycle.

David L. Lamp: Pharma economics are still fairly good, although the price of grains has dropped quite a bit, they're still very profitable if you own the land, a little less if you're leasing the land. But, you know, as our customers go, we go. And I think the demand for fertilizers is quite strong, as evidenced by our fill pre-pay on ammonia and our fill on UAN. That kind gives you a look into the market going forward. So it looks very positive to us.

Speaker Change: Farmer economics are still fairly good, although price of grains have dropped quite a bit. But they're still very profitable if you own the land, a little less if you're leasing the land.

David Lamp: But, as our customers go, we go. And I think that demand for fertilizers is quite strong, as evidenced by our fill prepay on ammonia and our fill on UAN. That kind of gives you a look into the market going forward.

Speaker Change: But, you know, as our customers go, we go.

Speaker Change: And I think the demand for fertilizers is quite strong, as evidenced by our fill prepay on ammonia and our fill on UAN. That kind of gives you a look into the market going forward.

David Lamp: Award. So it looks very positive to us.

David L. Lamp: Thanks, David. And you talked a little bit about trying to figure out the right long-term corporate structure around some of these assets, from whether it makes sense to monetize the nitrogen business. But you also talked over the years about if you're not a seller, then you could be a buyer. And just put that in the context of the refining business. Are there assets in the market that look interesting to you? And, you know, you've talked about diversifying outside of Group 3 as well. So how does that fit into the strategy? Yeah, I think, you know, if you have any weakness in our

Neil Mehta: Thanks, David.

Speaker Change: So it looks very positive to us.

David Lamp: And you talked a little bit about, you know, trying to figure out the right long-term corporate structure around some of these assets from whether it makes sense to monetize the nitrogen business, but we've also talked over the years about if you're not a seller, then you could be a buyer, and just put down the context of the refining business or are there assets on the market that look interesting to you? And, you know, you've talked about diversifying outside of Group 3 as well, so how does that fit into the strategy? Yeah, I think, you know, if you have any weakness in our company, we're concentrated in the mid-con in one market with the, you know, pushing crudes, and that's about it.

David L. Lamp: Thanks, David. And you talked a little bit about, you know, trying to figure out the right long-term corporate structure around some of these assets from whether it makes sense to monetize the nitrogen business. But you also talked over the years about if you're not a

Speaker Change: If you're not a seller, then you could be a buyer. And just put that in the context of the refining business.

Speaker Change: Are there...

Speaker Change: Are there assets on the market that look interesting to you? You've talked about diversifying outside of Group 3 as well, so how does that fit into the strategy?

David L. Lamp: Yeah, I think, you know, if you have any weakness in our company, it's that we're concentrated in the mid-con and one market, with the Cushing Crudes, and that's about it. Obviously, diversification away from that, or in addition to that, is a good thing. So, you know, we look at everything that comes on the market, and there are some interesting deals out there. We don't have anything to announce yet or even discuss, but we will look at everything and continue to look at everything, just as we do with the UAN and how it's structured in our 100% ownership of the GP but 37% of the unit. We continue to innovate on that and look at all options.

Speaker Change: Yeah, I think, you know, if you have any weakness in our company, it's we're concentrated in the mid-con and one market.

Speaker Change: with the, you know, Cushing Crudes, and that's about it.

David Lamp: Obviously, diversification away from that, or in addition to that, is a good thing. So, you know, we look at everything that comes on the market, and there are some interesting deals out there. We don't have anything to announce yet, or even discuss, but we will look at everything and continue to look at everything, just as we do with the UAN, and how it's structured in our 100% ownership of the GP, but 37% of the units. So, we continue to innovate on that, and it could look at all options.

Speaker Change: Obviously, diversification away from that, or in addition to that, is a good thing.

Speaker Change: So, you know, we look at everything that comes on the market and there are some interesting deals out there.

Speaker Change: We don't have anything to announce yet or even discuss.

Speaker Change: But we will look at everything and continue to look at everything, just as we do with UAN and how it's structured in our 100% ownership of the GP, but 37% of the units.

Speaker Change: So we continue to innovate on that and look at all options.

Neil Mehta: Thanks, Dave.

David Lamp: You're welcome.

Steve: Thanks, Tim.

Steve: You're welcome.

Operator: As a reminder, if you would like to ask a question, press star one on your telephone keypad.

Operator: As a reminder, if you would like to ask a question, press star 1 on your telephone keypad. Our next question comes from the line of Paul Cheng with Scotiabank. Please proceed with your question. Hey guys.

Speaker Change: As a reminder, if you would like to ask a question, press star 1 on your telephone keypad.

Paul Chang: Our next question comes from a line of Paul Chang with Scotiabank. Please proceed with your question. Good guys. Good afternoon. Dave, I think in the past you have, at one point, suggested that you may even consider converting the Audi back into just running cool oil. Can you give us some idea that, I mean, underwater circumstances that you will make such a decision, and that what kind of timeline or that precondition that you are looking for? Well, Paul, I think, if you look at the RD business we have today, is what it does is mitigate a lot of rents for us, and that has some value that we have to go out, the marketplace and buy it.

Speaker Change: Our next question comes from the line of Paul Cheng with Scotiabank. Please proceed with your question.

Paul Cheng: Hey guys, good afternoon. Dave, in the past, you have at one point suggested that you may even consider converting the RD back into just running oil, running cool oil. Can you give us some idea of, I mean, under what circumstances will you make such a decision and what kind of timeline or peak condition that you are looking for?

Paul Cheng: Hey guys, good afternoon.

Paul Cheng: Dave, I think in the past you have at one point suggested that you may even consider

Speaker Change: to convert the RD back into just running oil, running cool oil.

Paul Cheng: Can you give us some idea that, I mean...

Speaker Change: Under what circumstances that you will make such a decision and that what kind of timeline or that precondition that you are looking for?

David L. Lamp: Well, Paul, I think if you look at the RD business we have today, what it does is mitigate a lot of rents for us, and that that has some value that we have to go out in the marketplace and buy. Even if we may have a small loss on renewable diesel, we think that's a benefit to us going forward. But I am very confident that even in today's market, we can print the $0.30 to $0.40 a gallon profit pretty easily if we just run to design. And that's where we are now. We're at a rate that's slightly reduced to really optimize our catalyst life.

Dave: Well Paul, I think if you look at the R&D business we have today is what it does is mitigate a lot of rents for us and that that has some value that we have to go out in the marketplace and buy it.

David Lamp: Even if we may have a small loss on renewable diesel, we think that's a benefit to us going forward. But I am very confident that even in today's market, we can print the 30 to 40 cents a gallon profit pretty easily if we just run to design, and that's where we're at now. We're at a rate that's slightly reduced to really optimize our catalyst life. And if we get that all in line, you get the cost in line. Even under today's market conditions, we think that can happen. Now, we do have the BTC expiring at the end of the year.

Dave: Even if we may have a small loss on renewable diesel, we think that's a benefit to us.

Dave: going forward. But I am very confident that even in today's market, we can print the 30 to 40 cents a gallon profit.

Speaker Change: pretty easily if we just run to design.

Speaker Change: And that's where we're at now. We're at a rate that's slightly reduced to really optimize our catalyst life. And if we get that all in line, get the cost in line, you know, even under today's market conditions, we think that can happen.

David L. Lamp: And if we get that all in line, get the cost in line, you know, even under today's market conditions, we think that can happen. Now, we do have the BTC expiring at the end of the year. There's legislation that's being proposed to extend it. What's going to happen, nobody knows.

Speaker Change: Now, we do have the BTC expiring at the end of the year. There's legislation that's being proposed to extend it. What's going to happen, nobody knows. But our view is that the RIN will respond if the BTC goes away, almost dollar for dollar.

David Lamp: There's legislation that's being proposed to extend it. What's going to happen, nobody knows. But our view is that the rent will respond if the BTC goes away, almost dollar for dollar. and that will probably cement the RD economics even better. We really like our location in terms of being close to the egg belt. We still have exploring to do on the lower C.I. materials. Just recently, we got our C.I.s on both corn oil and bean oil reduced by 10, which helps us on the economics also. We're in it for the long haul. We always keep an eye on it to what it would take for us to switch back to hydrocarbon surface service.

David L. Lamp: But our view is that the RIN will respond if the BTC goes away, almost dollar for dollar. And, you know, that will probably cement the RD economics even better. We really like our location in terms of being close to the Ag Belt. We still have exploring to do on the lower CI materials. Just recently, we got our CIs on both corn oil and bean oil reduced by 10, which helps us with the economy also.

Speaker Change: and that will that will probably cement the RD economics even better.

Speaker Change: We really like our location in terms of being close to the Ag Belt. We still have exploring to do on the lower CI materials. Just recently we got our CIs on both corn oil and bean oil reduced by 10.

Speaker Change: which helps us on the economics also.

David L. Lamp: So, we're in it for the long haul. You know, we always keep an eye on it to see what it would be, what it would take for us to switch back to hydrocarbon service. And obviously, where cracks are today, it's not a very hard decision to keep running RD.

Speaker Change: So, we're in it for the long haul. You know, we always keep an eye on it to what it would be, what it would take for us to switch back to hydrocarbon service.

Paul Chang: Obviously, as we're at the crack start of the day, it's not a very hard decision to keep running our day. Dave, how far do you and what else do you need to take in order for you to be able to run at the full design capacity?

Speaker Change: And obviously, as where, you know, cracks are today, you know, it's not a very hard decision to keep running RD.

Paul Cheng: And Dave said, "What else do you need to take in order for you to be able to run at the full design capacity? I mean, you are running more like 65-70%. So, what needs to be changed in order for you to be able to get to 9500%?"

Speaker Change: And Dave said, what else do you need to take in order for you to be able to run at the full design capacity? I mean, you are running more like 65, 70 percent.

David Lamp: You are running more like 65-70%, so what needs to be changed in order for you to be able to get to 95%? I didn't get your question. In your window with your Audi facility currently, you're running at about 65-70% utilization rate or 100%. I thought you can get there. Well, I think this run that we're at now with the pre-treater, we're going to see at least a year catalyst life. That's going to bring our utilization right on up with it. To get to 100%, as I mentioned, we're looking at how to optimize the catalyst load and how to get the maximum life out of it, which affects the economics tremendously.

Dave: So what needs to be changed in order for you to be able to get to 9,500%?

David L. Lamp: I didn't understand your question, Paul. In your Winniwood, your RD facility, currently, you're running at about 65% to 70% utilization rate or nameplate capacity, on what it will take or what needs to be changed in order for you to be able to run at close to 100 and how far you can get there. Yeah, well, I think, you know, this run that we're at now with the pretreater, we're going to see at least a year of catalyst light.

Dave: I didn't get your question, Paul. In your Wynnewood, your R&D facility, currently you are running at about 65 to 70 percent utilization rate on impact capacity.

Paul: What will you take or what needs to be changed in order for you to be able to run at close to 100%?

Speaker Change: and how far you can get there.

Speaker Change: Yeah, well, I think, you know, this run that we're at now with the pre-treater, we're going to see at least a year of catalyst life.

David L. Lamp: And that's going to bring our utilization right on up. To get to 100%, you know, we're, you know, we, as I mentioned, we're looking at how to optimize the catalyst load and how to get the maximum life out of it, which affects economics tremendously. So we have cut back a little bit; we're running closer to the 80 million gallon rate right now, and we plan to hold that for this entire run. And then we'll walk it up probably another 500 or 600 barrels, something like that, 10%, 20% on the next load to really get us all the way up to the highest run, we think.

Speaker Change: And that's going to bring our utilization right on up with it.

Speaker Change: To get to 100%, you know, we're, you know, we, we, as I mentioned, we're, we're looking at how to optimize the catalyst load and how to, to get the maximum life out of it, which affects economics tremendously.

Paul Chang: We have cut back a little bit. We're running more closer to the 80-million-gallon rate right now, and we plan to hold that for this entire run. Then we'll walk it up in probably another 500 or 600 barrels, something like that, 10%, 20% on the next load to really get us all the way up to the highest run we think we could optimize on. It's going to take another cycle to do that. So you're talking about sometime by the end of next year? Yeah, I'd say by the end of that, we should be on the fourth load and fifth load, excuse me, and that will give us the curve we need and the data we need to know where the optimum is.

Speaker Change: So we have cut back a little bit. We're more running more closer to the 80 million gallon rate right now and we plan to hold that for this entire run.

Speaker Change: And then we'll walk it up probably another 500 or 600 barrels, something like that, 10%, 20% on the next load to really get us all the way up to the highest run we think we can optimize on.

David L. Lamp: It's going to take another cycle to do that, so are you talking about sometime by the end of next year?

Speaker Change: It's going to take another cycle to do that.

David L. Lamp: Yeah, I'd say by the end of that, we should be on the fourth load, or in the fifth load, excuse me. And that will give us the curve we need and the data we need to know where the optimum is.

Speaker Change: So you're talking about sometime by the end of next year?

Speaker Change: Yeah, I'd say by the end of that we should be on the fourth load, and fifth load, excuse me, and that will give us the curve we need and the data we need to know where the optimum is.

David Lamp: I think. And then you're talking about the EPA more soon. So what's the next step for you? And then the timeline and the action that you're going to take? I mean that you sort of get a somewhat favorable warning from the court, but that haven't been able to translate into anything yet. So what's the next step for you to be able to pursue? Well, the DC Circuit ruling was a big one, okay? That kind of confirmed the Fifth Circuit ruling. So it took an appeal out of a question, I think, for EPA to go to the Supreme Court to try to overturn those.

David L. Lamp: I see. And Dane, you're talking about the EPA lawsuit. So what's the next step for you, and then the timeline and the action that you're going to take? I mean, you sort of got a somewhat favorable ruling from the court, but that hasn't been able to translate into anything yet. So what's the next step for you to be able to pursue?

Speaker Change: What is the next step for you and the timeline and the action that you are going to take?

Speaker Change: I mean that you sort of get a somewhat favorable ruling from the court, but that hasn't been able to translate into anything yet. So what's the next step for you to be able to pursue?

David L. Lamp: Well, the D.C. Circuit ruling was a big one, okay? That kind of confirmed the Fifth Circuit ruling. So it took an appeal out of the question, I think, for EPA to go to the Supreme Court to try to overturn it. But, all that said, you know, EPA may try to come up with some other lousy excuse to deny small refinery waivers, which we'll have to battle. In the meantime, we have submitted our 24th Small Refinery Waiver. Our 23 has been pending for five months now, and they missed the 90-day requirement by the law.

Speaker Change: Well, the DC circuit ruling was a big one, okay? That kind of confirmed the 5th Circuit ruling.

Speaker Change: So it took an appeal out of question, I think, for EPA to go to the Supreme Court to try to overturn those.

David Lamp: Councils. But all that said, you know, an EPA may try to come up with some other lousy excuse to deny small refinery waivers, which we'll have to battle. In the meantime, we have submitted our 24 small refinery waiver. Our 23 has been pending for five months now, and they missed the 90-day requirement by the law, so we're suing over that. So we continue to pilot on, if you will, with lawsuits on this poor management by EPA on this whole ruling. And I did mention the other factor that we're petitioning the government to start rulemaking again on changing the obligated parties to only include people that are obligated parties to be able to trade or buy or sell or generate rents.

Speaker Change: But, all that said, EPA may try to come up with some other lousy excuse to deny small refinery waivers, which we'll have to battle.

Speaker Change: In the meantime, we have submitted our 24.

Speaker Change: small refinery waiver.

Speaker Change: Our 23 has been pending for five months now, and they missed the 90-day requirement by the law.

David L. Lamp: So we're suing over that. And we continue to pile on, if you will, with lawsuits on this poor management by EPA of this whole ruling. And I did mention the other factor that we're petitioning the government to start rulemaking again on changing the obligated parties to only include people that are obligated parties to be able to trade or buy or sell or generate rent. The way it is today, anybody and their brother can do it, and that's led to manipulation.

Speaker Change: So we're suing over that. So we continue to pile on, if you will, with lawsuits on this poor management by EPA on this whole ruling.

Speaker Change: And I did mention the other the other factor that we're petitioning the government to start rulemaking again

Speaker Change: on changing the obligated parties to only include people that are obligated parties to be able to trade or buy or sell or generate rents.

David Lamp: The way it is today, anybody in their brother can do it. And that's led to manipulation. And I'll just use today's example of renewable diesel. If you looked at the RVO that was set on the volume of renewable diesel that's being produced, rent should be zero, frankly. And because of all these other players in there hoarding rents and hiding them and doing this and that, it's actually 60 cents, or it's got as low as 32, I think, and has whittled its way back up. So, you know, we're going to pursue that one also against the EPA.

Speaker Change: The way it is today, anybody and their brother can do it, and that's led to manipulation. And I'll just use today's example of renewable diesel. If you looked at the RVO that was set and the volume of renewable diesel that's being produced, RIN should be zero.

David L. Lamp: And I'll just use today's example of renewable diesel. If you looked at the RVO that was set and the volume of renewable diesel that's being produced, the rent should be zero, frankly, because of all these other players in there hoarding RINs and hiding them and doing this and that It's actually 60 cents, or it got as low as 32, I think, and has whittled its way back up. So, you know, we're going to pursue that one also against EPA.

Speaker Change: Frankly.

Speaker Change: and because of all these other players in there hoarding RINs and hiding them and doing this and that it's actually 60 cents or it's got as low as 32 I think and and has whittled its way back up

Speaker Change: So, you know, we're going to pursue that one also against EPA.

David Lamp: We've got multiple fronts working. All right. Good luck on that. Thank you. We'll need it. You're doing with the government. Yeah, that's right.

Paul Cheng: All right. Good luck with that. Thank you. Thank you. We'll need it. You're dealing with the government.

Speaker Change: So we've got multiple fronts working.

Speaker Change: [inaudible]

David L. Lamp: Yeah, that's right.

Matthew Blair: Our next question comes from a line of Matthew Blair with Tutor Pickering.

Matthew Robert Lovseth Blair: Our next question comes from a line from Matthew Blair with Tudor Pickering. Please proceed with your question.

Speaker Change: Our next question comes from the line of Matthew Blair with Tudor Pickering. Please proceed with your question.

Matthew Blair: Please proceed with your question.

Matthew Robert Lovseth Blair: Good afternoon. Thanks for taking my question. On Coffeyville, it looks like the crude diet reflected a nice move up to gathered barrels. Looks like you're gathering more of your own barrels and pushing out. I guess it would be just like Cushing source barrels of WTI. Could you talk about how you're able to increase these gathered barrel volumes and uplift your refining system?

David Lamp: Good afternoon. Thanks for taking my question. On Coffeeville, it looks like the crude diet reflected a nice move up to gathered barrels. Looks like you're gathering more of your own barrels and pushing out. I guess it would be just like Cushing source barrels of WTI. Could you talk about how you're able to increase these gathered barrel volumes and uplift to your refining system?

Matthew Robert Lovseth Blair: Good afternoon. Thanks for taking my question. On Coffeyville, it looks like the crude diet reflected a nice move up to gathered barrels. Looks like you're gathering more of your own barrels and pushing out.

Speaker Change: I guess it would be just like Cushing source barrels of WTI. Could you talk about how you're able to increase these gathered barrel volumes and uplift your refining system?

David L. Lamp: Well,

David L. Lamp: Well, I think what you're seeing there, Matt, is mostly the effect of the fire at Wynnewood. Normally, we'd run a lot of those barrels at Wynnewood and with Wynnewood out of commission for two weeks, and cut back for about almost two months. A lot of those barrels went to Coffeyville, and it backed out Domestic Suite, which is the Cushing Common or commonly called WTI out of Cushing, which is a blended barrel. You know, our strategy has always been to gather at the wellhead, pick and choose the most profitable crew. And we will continue that.

David Lamp: Well, I think what you're seeing there, Matt, is mostly the effect of the fire at Wini Wood. Normally, we'd run a lot of those barrels at Wini Wood, and with Wini Wood out of commission for two weeks and cut back for about almost two months. A lot of those barrels went to Coffeeville. And it backed out domestic suite, which is domestic suite is the Cushing Common, or commonly called WTI out of Cushing, which is a blended barrel. So, you know, our strategy has always been to gather at the well-ed, pick and choose the most profitable crude.

Speaker Change: Well, I think what you're seeing there, Matt, is mostly the effect of the fire at Wynnewood.

Speaker Change: Normally we'd run a lot of those barrels at Wynnywood and with Wynnywood out of commission for two weeks and cut back for about almost two months, a lot of those barrels went to Coffeyville.

Speaker Change: and it backed out domestic suite, which is the Cushing Common or commonly called WTI out of Cushing, which is a blended barrel.

Speaker Change: You know, our strategy has always been to gather at the wellhead, pick and choose the most profitable crudes.

David Lamp: And we continue that. Our gathering right now is up to about 136,000 barrels a day, which is probably up. I don't know; over five years, probably about double, roughly. It's really important for Winniewood because Winniewood's configuration is, it needs about a 48 gravity crew because we take the VTBs and crack them in the calf, and that requires certain quality crews. So it's given us the ability to do RD and a few other things that the fact that we have to gather a crewed system.

David L. Lamp: Our gathering right now is up to about 136,000 barrels a day, which is probably up, I don't know, over five years, probably about double, roughly. And it's really important for Wynnywood because Wynnywood's configuration needs about a 48 gravity crude and because we take the VTBs and crack them in the cap, and that requires certain quality proof. So it's given us the ability to do RD and a few other things that the fact that we have the gathered crude system hasn't allowed us to do.

Speaker Change: And we continue that. Our gathering right now is up to about 136,000 barrels a day, which is probably up, I don't know, over five years, probably about double, roughly.

Speaker Change: And it's really important for Wynnywood because Wynnywood's configuration is

Speaker Change: It needs about a 48 gravity crude, because we take the BTBs and crack them in the cap.

Speaker Change: And that requires certain quality proofs.

Speaker Change: So, it's given us the ability to do RD and a few other things that the fact that we have the gathered crude system.

David Lamp: Sounds good. And then on the RD side, I just want to clarify, so for the pre-treatment, should we expect that that will be fully online and contributing for Q3 and beyond? Because it looks like it wasn't really a factor in the second quarter, is that correct? Yeah, well, it was a factor in the second quarter, but the fire kind of knocked our, you know, we should have made 19 million gallons, and we only did about 12. That was the effect of the fire, but our yield is up over 95%, which is a fast improvement over where we were without the pre-treater.

Matthew Robert Lovseth Blair: Sounds good. And then on the RD side, I just wanted to clarify, so for the pre-treatment, should we expect that that will be fully online and contributing for Q3 and beyond because it looks like it wasn't really a factor in the second quarter? Is that correct? Yeah.

Speaker Change: Sounds good. And then on the RD side, I just wanted to clarify, so for the pre-treatment...

Speaker Change: Should we expect that that will be fully online and contributing for Q3 and beyond because it looks like it wasn't really a factor in the second quarter. Is that correct?

David L. Lamp: Yeah, well, it was a factor in the second quarter, but the fire kind of knocked us out. We should have made 19 million gallons, and we only did about 12. That was the effect of the fire, but our yield is up over 95 percent, which is a vast improvement over where we were without the pre-treater. And, you know, the metals, everything looks, the pre-treaters are really doing a fantastic job of pre-treating, and it's really making a difference in what we see in the unit, the downstream unit. So it's expected to run forever from now on.

Speaker Change: Yeah, well it was a factor in the second quarter, but the fire kind of knocked our, you know, we should have made 19 million gallons, and we only did about 12.

Speaker Change: That was the effect of the fire, but our yield is up over 95%, which is a vast improvement over where we were without the pretreater.

David Lamp: And you know, the metals, everything looks, you know, the pre-treaters really doing a fantastic job on pre-treating, and it's really making a difference in what we see in the downstream unit. So it's expected to run forever from now on.

Speaker Change: And, you know, the metals, everything looks, you know, the pre-treaters really doing a fantastic job on pre-treating. And it's really making a difference in what we see in the unit, the downstream unit. So it's expected to run forever from now on.

Matthew Blair: Great. Thank you very much. You're welcome.

Matthew Robert Lovseth Blair: Great, thank you very much. You're welcome.

Speaker Change: Great. Thank you very much. You're welcome.

Operator: We have reached the end of the question and answer session.

Operator: We have reached the end of the question and answer session. I would now like to turn the floor back over to management for closing comments.

David Lamp: I would now like to turn the floor back over to management for closing comments. Again, I'd like to thank you for your interest in CVI Energy. Additionally, I'd like to thank our employees for their hard work and commitment towards safe, reliable, and environmentally responsible operations.

Speaker Change: We have reached the end of the question and answer session. I would now like to turn the floor back over to management for closing comments.

David L. Lamp: Again, I'd like to thank you for your interest in CVI Energy. Additionally, I'd like to thank our employees for their hard work and commitment towards safe, reliable, and environmentally responsible operations. We look forward to reviewing our third quarter 2024 results during our next earnings call.

Speaker Change: Again, I'd like to thank you for your interest in CVI Energy. Additionally, I'd like to thank our employees for their hard work and commitment towards safe, reliable, and environmentally responsible operations.

David Lamp: We look forward to reviewing our third quarter of 2024 results during our next earnings call. Thank you. Have a great day.

Speaker Change: We look forward to reviewing our third quarter 2024 results during our next earnings call.

Speaker Change: Thank you. Have a great day.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Speaker Change: Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.