Q3 2024 PBF Energy Inc Earnings Call
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Speaker Change: Good day everyone and welcome to the PBS Energy 3rd Quarter, 2024, earnings conference call in Webcast. At this time, all participants have been placed in a listen-only mode, and the floor will be open for questions following management's prepared remarks.
Speaker Change: and I'm going to ask you a question. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.
Colin Murray: Thank you, Brittany. Good morning, happy Halloween and welcome to today's call. With me today, our Matthew Lucey, our president of CEO, Karen Davis, our CFO, and several other members of our management team. Copy that today's earnings release and our thank you filing, including supplemental information or available at our website.
Colin Murray: Before getting started, I'd like to direct your attention to the safe harbor's statement contained in today's press release.
Colin Murray: The statements that express the companies or management to expectations or predictions of the future are forward-looking statements intended to be covered by the State Harbor for the Asians under federal securities laws. There are many factors that could cause absolute loss to differ from our expectations.
Colin Murray: including those we describe in our following, so the SEC.
Colin Murray: Consistent with our prior period, school discuss our results, excluding special items which are described in today's press release.
Colin Murray: Also included in the press release, this guidance information related to fourth quarter, 24 operations. For any questions on these items or follow up questions, please contact investor relations after today's call.
Colin Murray: For our conciliation of any non-gap measures mentioned on today's call, please refer to the supplemental tables provided in the press.
Speaker Change: I'll now turn the call over to Matthew.
Matthew Lucey: Good morning everyone and thank you for joining our call.
Matthew Lucey: are third quarter results for black mark conditions.
Matthew Lucey: Combination of Weekend Margin Environment, and poor crew differentials that challenge for filers.
Matthew Lucey: Oliver Fineries ran well during the quarter.
Matthew Lucey: with no plan maintenance or material unplanned downtime.
Matthew Lucey: The operating performance of our assets reflects the dedication and focus of our standing employees who work 24-7 in all market conditions to supply the refined products that are still very much in demand.
Matthew Lucey: Do weak margins and generating market conditions experienced recently do not reflect our longer-term view that global refining supply and time demand remain tightly balanced.
Matthew Lucey: This tiny bound system should, over the medium to long term, provide a constructive backdrop for refineries as demand for our products continued to grow globally.
Matthew Lucey: 2020-24 is a number of factors negatively impacting the year.
Matthew Lucey: Well, demand for refined products in the US has improved year over year in the third quarter, and it's generally been resilient. Demand across the rest of the world was less constructive.
Matthew Lucey: On the supply side, the market has been impacted by adverse timing as planned refining capacity additions.
Matthew Lucey: [inaudible]
Matthew Lucey: 225 is trying to be a more balanced year.
Matthew Lucey: 2020, forcing net additions of approximately a million barrels per death.
Matthew Lucey: for 2025, the list of closures or announced shutdowns across North America, Europe and Asia is approximately a million barrels per death.
Matthew Lucey: As stated, crude oil was particularly strong across Q3 and was a significant headwind to refinery margins over the quarter.
Matthew Lucey: Importantly, you're now coming out of the seasonal peak demand period of high runs and seasonal crude burns.
Matthew Lucey: As we approach 2020-5, we should see more relief from the announced refinery closures.
Matthew Lucey: Fewer startups as well as the eventual easing of OPEC cuts.
Matthew Lucey: and hopefully a comar geophysical landscape.
Matthew Lucey: Marking conditions will continue to be cyclical and are so in our role as stewards of assets and investments is to make sure that our refineries are positioned to perform in any market.
Matthew Lucey: In contrast to previous cycles, TVF's balance sheet provides us with greater flexibility to weather challenging markets.
Matthew Lucey: With our financial position secure, we can maintain our focus on operating safely, reliably, and environmentally responsible.
Matthew Lucey: and while safe and responsible operations are necessity.
Matthew Lucey: It is not sufficient unto itself.
Matthew Lucey: You must operate safely, reliably and responsibly, and we must do it as efficiently as possible.
Matthew Lucey: With that in mind, our team has been developing a business improvement initiative across our refining footprint.
Matthew Lucey: We have identified up to the cross-our system, both in operating costs and in capital expenditures.
Matthew Lucey: We have strong conviction that we can deliver $200 million in run rate cash savings by year and 2025.
Matthew Lucey: Capturing this optery and ensuring continuing improvement beyond 25 is critical and will take commitment and focus from our entire organization.
Matthew Lucey: We will set clear targets and expectations. We will measure execution and we will hold people accountable.
Matthew Lucey: We will all ultimately be accountable to our investors and we intend to provide updates on this initiative on future calls.
Matthew Lucey: Looking ahead, we are near and completion of our last major turn around of the Air Channel Map.
Matthew Lucey: The pre-work began in Lake September and we should be completed in the first half of November.
Matthew Lucey: In the meantime, safe, reliable, responsible operations with a renewed attention on efficiency remain our primary focus.
Matthew Lucey: We'll continue to prioritize capital allocation to the options that deliver the greatest long-term value to our shareholders.
Matthew Lucey: We returned $14 million in cash to shareholders, including approximately $75 million of share purchases in the third quarter.
Matthew Lucey: Additionally, our board directors approved a 10% increase to a regular quarterly dividend to 27 and a half cents per share.
Matthew Lucey: The A-Creece represents a vote of confidence, not only in our operation, but also the medium to long-term outlook for our business.
Speaker Change: With that, I'll turn the call over to Karen.
Karen Davis: Thank you, Matt. Good morning.
Karen Davis: For the third quarter, we reported an adjusted net loss of a $1.50 per share, and adjusted the $1.60.1 million.
Karen Davis: Included in our results is a $29 million loss related to PDF's equity investment in St. Bernard Renewables.
Karen Davis: As mentioned on our second quarter earnings call, third quarter results for SBR were expected to be lower as a result of the catalyst change and other concurrent work impacting costs and production of RD during the quarter.
Karen Davis: SBR produced an average of 13,000 barrels per day of renewable diesel in the third quarter. Fourth quarter already production is expected to be 16 to 17,000 barrels per day.
Karen Davis: Cash Flow used in operations for the quarter with approximately 68 million, which includes a working capital headwind of approximately 25 million.
Karen Davis: Consolidated CapEx for the third quarter was approximately 153 million, which includes refining, corporate, and logistics.
Karen Davis: Full Year 2024 CapEx is likely to be near the top end of guidance of approximately 8.50.
Karen Davis: You should note that our CAPEX guidance and reported CAPEX is on an incurred basis, but our cash flow statement will reflect actual cash spend for capital expenditures and turn around.
Karen Davis: Our year today, 2024, capital expenditures for the cash flow statements includes approximately 145 million of cash outflows related to our 2023 capital program for work completed at the very end of 2023.
Karen Davis: Through share-re purchases and our dividend, we continue to demonstrate our commitment to shareholder returns by delivering approximately 104 million to shareholders in the third quarter.
Karen Davis: Since our research program was introduced in December of 2022 through the end of the third quarter, we have completed approximately 990 million in share researches. This represents over 17% of our outstanding shares at the beginning of the program.
Karen Davis: We have reduced our total share count to approximately 115 million shares as of September 30th.
Karen Davis: We ended the quarter with approximately 977 million in cash and approximately 1.3 billion of debt.
Karen Davis: and the United States.
Karen Davis: Our ability to fund operations and continuously invest in our assets will always be our first priority. And while dependent in part on our financial results continues to be underpinned by our financial strength.
Karen Davis: Through the challenging market conditions of the past few quarters, we have continued to support both operations and shareholder returns. Operator, we've completed our opening remarks and we've used to take questions.
Karen Davis: and a moment we will open the call for questions.
Speaker Change: The company requests that all colors limit each turn to one question and one follow-up.
Speaker Change: You may rejoin the queue with additional questions.
Speaker Change: 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 question.
Speaker Change: One moment while we pull for questions.
Speaker Change: and we'll take our first question from Roger Reed with Wells Fargo. Your line is now open.
Roger Reed: Yeah, thank you, good morning.
Roger Reed: Good evening.
Roger Reed: Felt.
Roger Reed: We talked about preamble, but it's certainly one of the big topics out there. California was just wondering if we could kind of get your thoughts on some of the changes out there, both on the front end with the government and the announcement bubble in the end of the year.
Roger Reed: and the researchers and researchers, they're going to exit the market about a year from now. Maybe how you're thinking about the outlook in California.
Speaker Change: Thanks for all your hype and some respects that I don't have a lot of interest in throwing sand.
Speaker Change: and I'm really happy to be here.
Speaker Change: but the assault on the industry.
Speaker Change: Continues from the regulators and the politicians in California. I don't know if you saw it.
Speaker Change: Governor, how the press conference a couple of weeks ago.
Speaker Change: where he's actually vilified.
Speaker Change: The chapter on integrity.
Speaker Change: It's called me, all my colleagues and everyone else in the industry, liars and accuses us of stealing from them.
Speaker Change: People in California
Speaker Change: All the while they can't weed.
Speaker Change: Ignorance on the facts, the industry swallowed significant losses.
Speaker Change: They knew that because that's part of California, you know, regulatory regime, we as long as along with all the other market participants.
Speaker Change: Smith, what was the status?
Speaker Change: So I think it's important to know just the reality, it's important to know.
Speaker Change: Even currently, the industry in California at this quarter, like I said, swallowed down significant losses and it's still the highest price of gasoline in the country.
Speaker Change: and that's primarily...
Speaker Change: because of the station involvement.
Speaker Change: The state charges either tax or through other mechanisms other costs.
Speaker Change: or proximate, you know, I think it's close to 70 cents more.
Speaker Change: and any other state.
Speaker Change: and that's that's that's potentially go-lop
Speaker Change: 50% and those are, you know, those are impotitions they're putting on the people. And so it's sort of, you know, I started talking up to maybe my cynical view of a rather statement.
Speaker Change: Paul Tissian, seemed to make wherever he accusation, I guess, may be a confession. I was certainly offended by the press conference, but it is what it is. The reality is the state.
Speaker Change: Um, dozens of dressed to root cause of the problem. It only exaggerates it, build, rank and joke of, you know, we're here for government. And we're here to help. That's multiplied by a factor of a thousand when you're talking about, you know, the state of California.
Speaker Change: and every bit of involvement they make, the market becomes less sufficient.
Speaker Change: Now we believe we have two of the most complex refineries on the West Coast.
Speaker Change: and the Sply demand situation.
Speaker Change: is seeing what's getting worse with a major refinery on the heels of the governors.
Speaker Change: [inaudible]
Speaker Change: and the state desperately will need refined products going forward and we intend to provide it to them, provided there's a landscape for us operate. In terms of our refineries being competitive, and well positioned, we do think that. And I think this can be critical for the state.
Speaker Change: I don't know if there's much more to stand than that regard I could go on.
Speaker Change: Yes, yes, it's hard to know where to stop
Speaker Change: and I think that's a little bit of a change in the direction of the increase in the dividend by 10% you mentioned.
Speaker Change: you know, concentrating targets, maybe there's something also that'll happen on the cat backside in terms of trying to work, you know, just.
Speaker Change: Look for ways to turn spending.
Speaker Change: but given that a smaller company slash their dividend, I got to say it was one of those things that wasn't really anticipating. So maybe you could help us understand what goes under the thought process, maybe it's a strength of the balance sheet or outlook, etc. to give you the confidence to raise a dividend here.
Speaker Change: So two years ago we were in post-divine and what we said at that time and we very much like to follow through on everything that we say and what we say and so mean
Speaker Change: Two years ago we re-institute it.
Speaker Change: and we said we were going to look at him, you know, and I've no interest in looking at generating our dividend according to the quarter. We've tried to design it at a dividend that is.
Speaker Change: Conservatives, reliable, and stable through cycles.
Speaker Change: and as we look at it, we look at it in a basis. So year ago we raised it, year ago in this call. We raised it from 20 to 25 cents.
Speaker Change: and this year we looked at it and based on the current market which is challenging, but the cycle, the market place in the mediums of long term looks very constructive.
Speaker Change: and when we look at the cost...
Speaker Change: of 27.5 cents.
Speaker Change: and we compare that to our expectations of
Speaker Change: Mid-Syco.
Speaker Change: 3 cash well.
Speaker Change: We're very, very comfortable with the 27.5 cents and we're happy to give it to shareholders. It's just the reality in our industry in a...
Speaker Change: When you look at a mid-cycle number, there are going to be trees where you're going to be below that.
Speaker Change: and there's going to be periods where you're going to be above it. The reality is you may not even have a cup of coffee.
Speaker Change: and Markets actually end mid-cycle, but we look through the cycles and come up with what we take is a good, solid, defendable, conservative dividend. And again, we intend to look at on any annual basis.
Speaker Change: Great, thank you.
Speaker Change: Thank you, we'll take our next question from Doug Legate with Wolf Wrestler. Your line is open.
Speaker Change: Good morning everyone.
Doug Legate: I guess Matt, I want to also go back to California and not so much on the press conference.
Doug Legate: The Ask of the Industry, but more than the dynamics of what's going on out there
Speaker Change: As we see it, about 70% of these old demand in California is now covered by renewable diesel.
Speaker Change: and even though we're getting another refinery shot at the end of next year potentially, it looks like imports to meet the retail obligation of Philip 66 in particular.
Speaker Change: I think the market is probably going to remain pretty well over supplied. So I guess leaving aside the regulatory issues. How do you see the actual fundamental supply demand dynamics playing out in not market, especially on the digital side?
Speaker Change: Yeah, so there's three major products. On the diesel sound, the lead Paul, and Mike Paul Davis, who is a resident expert on everything California.
Speaker Change: Oh, I'm a comer.
Speaker Change: But obviously the gas flame side is shorter and getting significantly shorter still within out shutdown.
Speaker Change: We're in slay to bit on a car diesel because that's never been a significant part of our business at Torrance or Martinez. We export a little bit out of California.
Speaker Change: and then yet we're obviously a major producer.
Speaker Change: of Jet. You want to isolate one product you can, but you have to look at the sweeter products and see what's going to happen.
Speaker Change: and there is a limitation on logistics. The state was designed around its refining system.
Speaker Change: So as well as supply and the supply is declining and the resupply is just more difficult, more difficult from a logistics standpoint, as more difficult from a cost standpoint, you'll re-supply in the California from...
Speaker Change: from Inports is three weeks till month of travel time.
Speaker Change: is getting rely on, as you get significantly more in force.
Speaker Change: and on the diesel side we understand that renewable diesel is being called the California and that will continue with the programs and in place and that's not surprised us we've been set up for that with Paul and the other comments.
Speaker Change: Well, on the diesel side, I mean, you're seeing some of the balancing happening as we speak. I mean, the plant that's going to be shutting down at the end of 25 makes a predominant amount of carb diesel.
Speaker Change: and it's going to be balanced by when they shut in, the balancing act is going to be the renewable deceler producing up in the bay.
Speaker Change: We're going to be a lot less imports of renewable diesel coming in from Asia and other parts when the Blender Tax Credit goes away. So there's still some, some wrangling going on in the distillate balances on the way.
Speaker Change: from a PBS standpoint, Matt Sittac correctly. We're primarily a jet maker on the left coast. We make gasoline jets and we make just a dimminimus amount of carb diesel and we make some export diesel that goes into Arizona and Nevada.
Speaker Change: I'm going to outright distal of correct standpoint. Our primary capture is always on the chest.
Speaker Change: Thank you for that. Matt or Karen, my full offer is a kind of a philosophical question when you're decisions on the dividend and bybikes and so on. And if you can give me a minute, I think.
Speaker Change: This is a really key issue as folks look at how you've managed to be a leveraged business over the last several years. With a windfall, cash flows behind after COVID.
Speaker Change: but at the end of the day you're basically on a new IT business and if you know it's not clear how long it's going to take for the market to clean up terms of refinery quotas and so on and I put it to you that in a new IT business.
Speaker Change: You're equity values, what's left after a net debt? I'm raising your dividend and buying by stock is essentially building net debt, I'll be expensive, equity value. So I'm just curious, when you think about it like that, how long or how long are
Speaker Change: The word extent that you've appeared to continue with bi-barks and dividends if the cycle remains the press that at some point do you pause and read the hope pleasure.
Speaker Change: I think it okay so
Speaker Change: Nothing is static, obviously, and there's going to be periods of looking at the weekness.
Speaker Change: and their reactions to that were seeing that now in terms of...
Speaker Change: and so we spent a lot of time this year devising and analyzing what the medium to long term how look for a business looks like. And to be frank, we think it looks very constructive.
Speaker Change: We've had some time issues over 24, the net additions certainly outstripped shutdowns in 24. There are some, you know, and they continue to pile up and it might my suspicion.
Speaker Change: is that they will continue to grow for those refineries that have structural weaknesses for markets that are structurally weaker than the market in which we operate.
Speaker Change: So your thesis of is going to be lower for longer we'll see now it's at this process for many years we can certainly re-evaluate it but
Speaker Change: The Marketplace is a function of supply and demand, and we certainly like our competitive positioning within the marketplace.
Speaker Change: I don't know if it's been many years but I appreciate the Colin Murray.
Speaker Change: Thank you, we'll take our next question from a net of Goopsta with UBS Humanism Open.
Speaker Change: Good morning, you always have a very informed view of the global heavy light spreads and what are you looking over there and then even if you could help us understand what your view on the Canada side is, looks like the production is rising but then the TMX is on which can technically benefit you on the West Coast. So, help us walk through what you are seeing out there in terms of global heavy light spreads and can they improve in 2025.
Speaker Change: Thanks for the novice. When looking at the heavy market right now, we're certainly going through the very high run environment in the third quarter. For the reasons that Matt described earlier in the call, I saw some of the season will crude burn.
Speaker Change: I think we're obviously on the precipice at this point and we'll have certainly some direction next week further from OPEC plus in terms of the taper and the expectations there. I mean obviously there was discussion or you know...
Speaker Change: Sources in the press yesterday referring to that OPEC plus maybe deferring that another month. But I think we're certainly in the expectations that heavy side of the barrel sort of peaked in terms of its strengths. Seasonally in the base case. And then, secondarily, OPEC plus introducing some more oil whether it's in December or whether it's in the first quarter.
Speaker Change: Perfect, my quick follow-up here is a quarter-over quarter-mid-con results, a dictionary on improvement on a relatively flat-ish crack and help us understand whether you ran better what had to drive an improvement in mid-con on an inch quarter-over quarter.
Speaker Change: I don't know that I would.
Speaker Change: Point to anyone saying the refined or pletal has run well.
Speaker Change: and they've actually performed well all year, so we've been pleased with that. Obviously, there can be generations quarter and quarter on different aspects of products or on the crude side that can be played with.
Speaker Change: Play with Capture A to Bit, but nothing to call out for Tweetle. Other than the fact that they've been operating well.
Speaker Change: Thank you for taking my questions.
Speaker Change: Thank you. I'll take our next question from Ryan Todd with Piper Samar. Your mind is open.
Ryan Todd: Some of the bigger, the primary pockets that you see in terms of driving that savings, any sort of detail is the might be able to ride there.
Speaker Change: I'm going to hand that over to Mike Bacousey. Sure Ryan, thanks for the question. So...
Mike Bacousey: Over the past month or so we put together a task force so we looked at internal and external benchmarking and looked at some best practices across the system to see work and identify opportunities. And again with any maintenance budget your biggest category of expenses is going to be energy.
Mike Bacousey: So that's $200 million we think there's about 30 to 40% of it we can get an energy reduction and then the other categories run the game in terms of...
Mike Bacousey: of our maintenance or third-party spend. So look at that in terms of cattle and chemicals.
Mike Bacousey: and some of our operating supplies.
Mike Bacousey: there are two capital categories in there and those are turn around in capital projects.
Mike Bacousey: and so.
Mike Bacousey: We think that there's an opportunity on the maintenance and turnaround as for instance. It's really about driving better efficiency on turnaround. It's also some scope optimization, some interval optimization. And I would say, as I said before, the energy pieces are about 30 to 40 percent and the balance of that of those other buckets are roughly evenly distributed across.
Speaker Change: Thank you, it's a terrible...
Speaker Change: and maybe a follow up on, as you think about capture and I know it's...
Speaker Change: and it can be a tough topic but we generally seem to the cross-much industry kind of decline over the last 18 months there have been headwinds to capture. As we look into maybe into the fourth quarter or in the early part of the 20-25, anything you can point to in terms of some of the moving pieces, whether it's...
Speaker Change: McReward, you know, crude backwardation or secondary products or differentials that where we might see an improvement, anything encouraging on the capture side is what we're looking forward.
Speaker Change: Yeah, the biggest driver is an inserted into it and so the couple of things you mentioned is
Speaker Change: is on the crew side and in third quarter is Tom Went through and you know some of comments are transcripts.
Speaker Change: There was particular strength on the crew side.
Speaker Change: The crew market was significantly stronger.
Speaker Change: and then on the product side, and we went through those reasons why, you know, in terms of new plants coming on, you know, drawing more crude. It was, you know, Q3 when all our plants sort around the world are trying to run in front, certainly turns around.
Speaker Change: and Northern Hemisphere. You have seasonal food burning in Middle East.
Speaker Change: and then all the while you had, and then you had geophysical sort of noise which was adding to it.
Speaker Change: and hopefully I was super political side we can all pray for a more stable environment there.
Speaker Change: But also a big flywheel here is the OPEC and whether it's in December or January, where some want their after I'm not sure, but there's certainly conviction that they're eventually going to sell their oil.
Speaker Change: and it becomes a self-fulying prophecy that that should, that market should do snuff, indeed we're seeing it. We're seeing it today just on the backs of entering terror on season.
Speaker Change: So, the biggest driver on Colin's capterates, if you're running well and we ran well, we instead to continue and well.
Speaker Change: is on your discount on the feedstock you're running and I'm hopeful that the worse is behind us in that regard.
Speaker Change: Thank you.
Speaker Change: Thank you, we'll take our next question from Neil Metta with Coleman Sachs, your mind is open.
Speaker Change: and Morgan and Madden team. I guess the first question is, you've talked to the past about the potential for...
Speaker Change: Asset monetization specifically.
Speaker Change: Underutilized assets like the development available real estate. It just curious on your perspective of, you know, as you think about your portfolio, does that make sense and where do you stand in that process?
Speaker Change: Capitalizing on Dio that's within the company on assets that are underutilized. I real estate. We are actively working to serve.
Speaker Change: and developed and create value in that regard.
Speaker Change: I think there's actually...
Speaker Change: and the United States. It's a very constructive possibility there that, and that's the reason we've allocated. The resources do it, and we'll continue to do it.
Speaker Change: and in terms of other unutilized assets or a non-course or two-juggasets.
Speaker Change: Yes, we're constantly evaluating those and exploring.
Speaker Change: whether they should be held by us or by other parties that will value them in more constructed way. And so that is that's...
Speaker Change: That's a significant part of our job that we take very seriously and evaluate our real time basis and we'll certainly communicate if there's something to be done on one of those items.
Speaker Change: Matt is there specific asset or region that you're...
Matthew Lucey: [inaudible] Yeah, well, obviously, the obvious one on the real estate side is because we have incremental value. It's not in substitution of.
Speaker Change: We have excess land in Delaware.
Speaker Change: and you know that plan is being utilized.
Speaker Change: in Ag today we rented farmers and there's no question there is going to be a higher and better use for that property and we think it potentially holds a tremendous amount of value.
Speaker Change: Thank you, and then the follow-up is around environmental payables, which is going to be focused for you guys to reduce the outstanding levels. Can you just talk about where you are, how we should be thinking about that in 2025 in the moving pieces.
Speaker Change: Sure, I know things. The environmental liability in I need to remind you that includes not just rents but LCFS cap and trade, it's the entire bucket. It increased from 429 million to 474 at the end of this quarter.
Speaker Change: and which is slightly above our guidance range this quarter, primarily because of its significantly affects some extended payment terms for a cabin trade payables. Typically we view that as ranging between two to four hundred million dollars.
Speaker Change: Next team.
Speaker Change: Thank you, if you have had any questions from John Rale with JP Morgan, your line is open.
Speaker Change: Hi, good morning, thanks for taking my questions.
John Rale: So I just had a follow-up on Doug's question and maybe just drilling in a little bit more on the balance sheet.
John Rale: You've spent almost two years at negative net debt.
John Rale: and Leather's is now picked up to be a little bit positive, not meaning we so, but you are remaining aggressive on your buyback and hiking dividend and cracks have come down.
John Rale: Do you still expect to kind of live in that close to net zero type range on net debt? Or at the low point in the cycle or you come to delivering up a little bit? Is that more of kind of a through the cycle target with the zero net debt?
Speaker Change: I think it's...
Speaker Change: is having zero net debt.
Speaker Change: Physicians, you will incredibly well for a cycle. There's a period of time where you have to move into the balance sheet. You're still talking about it.
Speaker Change: and very, very conservative balance sheet. And so we take it very, very seriously. We monitor it very, very closely, but we also have.
Speaker Change: and now look that goes beyond the next number of weeks for the next couple of months.
Speaker Change: and so we have confidence in our business and where we stand with an industry in that regard. So, you know, as we go through a difficult period of time, and we need to lean into the balance sheet, that's what's there for.
Speaker Change: Great, thank you and then follow up as just operationally on the west coast.
Speaker Change: Can you just give a feed stock update on the West Coast? I think you had mentioned previously that you were running about 25 KBD of TMX barrels and hoping to get to 50. Where are you on that today? And there are any challenges with running those barrels or any kind of warning curve you have to get up in general.
Speaker Change: Yeah, I make a couple comments who I apologize to follow up.
Speaker Change: and the third quarter ran 20,000 girls a day, and actuality in the fourth quarter, I expect to run less than that, but that is not.
Speaker Change: That there's a little bit of we're doing some maintenance on the sulfur equipment that, you know, that those crews are hiring sulfur, then some other alternatives, but that's not really the driver that driver is how those black barrels price.
Speaker Change: and so we look at the marketplace and we look at the suite of goods that are available. They have, we're going to pick the most economic.
Speaker Change: Now what we've been focused on is we've been preparing our catchers net where...
Speaker Change: to the extent those crews are available in economics.
Speaker Change: We can run up to a 50,000-year-old today of Transbound.
Speaker Change: and Washington Fading Crews.
Speaker Change: and so we have the capability, the optionality.
Speaker Change: But they have to be delivered in a cost-competitive way. And I think for a whole host reason, some of which we were talking before in regard to the tightness of the crude market and some of the things that are going on in Asia, those barrels have been bid up a bit.
Speaker Change: That is not my long-term projection, I think we're in the very early innings.
Speaker Change: and at the end of the day, the California Refineries are going to be.
Speaker Change: have the least amount in the Jessica's cost to get that crude into those refineries.
Speaker Change: So I think over span of a long period of time.
Speaker Change: My suspicion is that we will be running significantly more at over time. Any other comments?
Speaker Change: I think you kind of covered it. It got down to price and right now, we're going to the third and fourth quarter of the Asian markets that are very aggressively and it wound up going trans-specific.
Speaker Change: and the Lesco systems can run a fair amount of TMX type barrels, whether they're sins, we serve our WCSs, so I'll have been a dependant on price and that's going to be for us and everybody else on the Lesco.
Speaker Change: very clear thank you.
Speaker Change: Thank you, we'll take our next question from Paul Chang with Squishabank. Your mind is open.
Speaker Change: and I'm a little bit nervous.
Speaker Change: and Matthew, maybe that's the...
Paul Chang: Do you have a rough outlook for 2025 Capix? And yet the market condition really we're managing the entire new year. What is the minimum unit to spend? That's the first question.
Speaker Change: Well, with respect to 25, CapEx, we're still in the process of finalizing our 2025 Capital Budget.
Speaker Change: I would just point you in terms of a range we often talk about a typical range of between 750 to 800 and some years is going to be hired based on turnaround activity and magnitude of margin improvement, projects, et cetera.
Speaker Change: On the other hand, if we could refine emergency materialized, we'll look to reduce capital spin where we can. But while S is our custom, we expect to release the guidance in early January along with our turnaround schedule.
Speaker Change: That's 750 to 800, you're studying including an equal capital in there, or you're already saved on a main-term-man's capital and lived the turn of our basis.
Speaker Change: Our CAPX, such as always, includes an element of discretionary growth projects. So yes, it would be included.
Speaker Change: Okay.
Speaker Change: on Matt, can I sorry that to ask this question? If we go back into the dividend.
Speaker Change: Based on your dividend one way and your cap expanding like 750 to 800 years, what is the crack spread and why are you late in order for you to be cashflow-breaking even?
Speaker Change: I mean, compared to the last 12 months that you think you need to be five dollars better or any kind of what number that you can share.
Speaker Change: I think it would be too difficult to isolate to a specific rack.
Speaker Change: So I hate because there's two other dynamic Thursdays.
Speaker Change: Operate Cause, crew differentials, energy cause, but over the long span of time as we have realized our business.
Speaker Change: through multiple cycles.
Speaker Change: You know, in a mid-cycle environment.
Speaker Change: which includes a lot of low learning and up cycles. We generate free cash flow, it call it $3 to $500 million.
Speaker Change: Um
Speaker Change: and that can be in multiple markets where strong cracks and we grew differentials or vice versa. So isolating one crack I think is...
Speaker Change: is too difficult or quite frankly, it's not an accurate assessment.
Speaker Change: but as we look forward in all the advantages.
Speaker Change: Art, the North American Refinery has, but more specifically that PBF has of having to complex it that we have, the location that we have, the optionality that we have.
Speaker Change: We think we're well-positioned, not only within North America
Speaker Change: and Clark, when you compare globally.
Speaker Change: Thank you, we'll take our next question from Joe Luce with Morgan Stanley, your line is open.
Joe Luce: Hey good morning, team. Thanks for taking my questions. I wanted to follow up on the 200 million agron rate cash savings. On the energy reduction side, we think about that as being smaller, quick, projects or there will be larger projects, more capital. I'm just trying to get a sense of in thinking through the cap X needs to do it. That's $2 million reduction. Thank you.
Speaker Change: Yeah, Joe, on the energy side we expect these to be a combination of some small maintenance dollars that we need to spend and some small capital and then just increase governance increased stock.
Speaker Change: and I'm an author of the presentation at the plant so I wouldn't expect large capital on these projects.
Joe Luce: Great, thank you. I'm in shifting gears. I wanted to ask on SPR. I know that that's been online for a little bit more than a year. You just talked to the performance of that asset relative to expectations. Thank you.
Speaker Change: Yeah, so you guys start with the market.
Speaker Change: New Market clearly has been the low market and I think that's shaking itself out a bit.
Speaker Change: Overgoed again, sort of looking through any quarter or any month.
Speaker Change: My Expectation, sort of like the highest level for investment summary.
Speaker Change: is that governments are going to incentivize renewable diesel. Now there's multiple players within renewable diesel.
Speaker Change: Um...
Speaker Change: and I think world vision.
Speaker Change: with our free treatment capacity as well as our location.
Speaker Change: and our ability to distribute our products to a whole host of markets. I think we're in the top quartile of the manufacturers of renewable diesel.
Speaker Change: That is not translating the profits over 24, and I can choose on that.
Speaker Change: But again.
There's a little bit of shaking down, and there's been a number of players whether it's on the biodiesel side or as some players morph into sustainable aviation fuel, the market is dynamic and will continue to shake off.
with our partnership with the Italians in I, which is very, very good. I'm highly confident that are all for you to really open these all.
Speaker Change: is as competitive as it needs to be.
Speaker Change: That being said, any time starting a business, there's pluses of minuses. And I think the minuses for us, I think, quite frankly, have been shared by others in the industry, countless as underperformed sort of original expectations.
Speaker Change: and the need to be a bit more maintenance in terms of powerless changes and shorter cycles.
But we'll continue to line that out and make improvements on that. You never underestimate engineers in that regard. I'm hoping for continuing to improve on that side. As far as our partnership could be more, please.
Speaker Change: Performed for the marketplace standpoint and then a lot will last on, you know, the new programs at the government's get roll out at once, one of the tax credits retired at the end of this year.
but I said, you know, for us.
Speaker Change: We like the asset, quite frankly, it is no doubt a hedge for us against road prices.
and has it may have contributed to when prices come and down, that's to the benefit of PBF as well.
Speaker Change: Thanks for not appreciated.
Speaker Change: Thank you, let's take our final question from Jason, go woman with TD Gow and your mind is open.
Speaker Change: Yeah, hey, this is Jason Gapybleman. I wanted to go back to this 200 million dollars in cost savings because we've seen others try to implement similar programs and...
Speaker Change: It's unclear to what extent these programs have.
Speaker Change: Offset Cost Inflation versus Resulted in Actual.
Speaker Change: Reduction in...
Speaker Change: Cash costs. So you just kind of discuss what you've seen in the market from an inflation standpoint and what you expect going forward and if you expect the 200 million to be kind of on an absolute basis or if you expect to offset continued inflation.
So this is Mike, I'll take that question. So the 200 million is the basis of that is on the 2223.
Speaker Change: Actual Expenses, we did make some adjustments for the reliability of the plant where we set our baseline or the plants when we set our baseline. We wanted to take credit for improved reliability. So we're going to do...
You're at the field, new bottoms up initiatives to actual drive reduction of
Energy consumption is not going to be driven by price. We're going to do efficiency-based projects in terms of how we do our maintenance. So it's not going to be driven. There may be some scope adjustment as we optimize our PMs, but it's going to be done driving how we improve our efficiency.
Of course we're going to have to eat the...
Speaker Change: The raises that are made to some employees get contractually, that's going to be a piece of that. Turn around. It's another example where...
Now it's largely driven by initiatives to drive efficiency and doing the same work.
at the last course. Given the timeframe that we're talking about driving these costs reductions, there's we don't expect inflation to be that high and it hasn't been that high to kind of team down. And those are some of those other companies that have done that have done that and have done that in a real high period of inflation, so it's been difficult to show those savings.
but given the time frame that we're talking about here, I don't expect to be a large piece of it to be inflationary offsets.
Okay, great. And then my little and just comb back to a Ryan's question on some of the headwinds to capture, appreciate the comments on heavy light dips. But it seems like this year there's also been impacts from backwardation and co-products.
and I'm just wondering in a more normalized environment.
and I think that's a great idea. If you could kind of approximate what those headwinds would look like, relative to what they've been like this year on the co-product realizations and crude backwardation. Thanks.
Speaker Change: Jason is tall. I mean, certainly in terms of the crude side of the equation, I think.
Speaker Change: Wilson, one album in a third quarter, right in the end, was the...
the lack of hurricanes impacting anything in terms of the US health coast. Clearly obviously hurricanes were in the eastern Gulf and obviously...
through the things in terms of the damage and to demand and to communities certainly on the eastern side of the Gulf. But basically refineries weren't impacted.
and Crude's apply was jirated down obviously subsequent when they came back, but was just another contributing factor at that point to strong Crude.
I think when you also have to think about it at this point is that when looking at the basic of the assessments and the markets is cash crude, is even more expensive than just examining data, the grades are trading at a premium to the data market.
Speaker Change: So that really contributes to that point really sort of like you know the water pump it's for even tighter than expectations I think at some point I think you could have looked at it and that
I think it was released September if you were just looking at sort of like simple margins in Europe or actually weaker that day during the midst of the pandemic.
and it wasn't because of products, because the crude market was just subsequently very different. I mean, that was a crude market and we go back then that data was trading multiple dollars under ice print.
This time around was multiple dollars above.
and I think that contributing factors right you had the Libyan issues and it was a a confluence of events that sort of really contributed to a tight market and it's also been the micro management of the heavy side of the barrel from OPEC Plus. And the S&Ds and the Sermon Development is for 2025.
Look a little bit looser in terms of crude supply, right? So that should obviously, you know, accrued in the benefit of the refiner.
In terms of co-products, I mean, I think in terms of, you know, we're kind of really examining, right? You know, tech co-com, and other things that have been trading on the weaker side of the equation.
Speaker Change: If we look at the asphalt markets, certainly weaker, you know, sort of year over year, you know, I think in terms of those expectations for us going forward, I think it's really just getting back to the crew side of the equation that it is about the cold products.
Great, thanks for that, Colin
Thank you. We have reached the end of our question and the intercession. I will now turn a call over to Matt Lucey for closing remarks.
I greatly appreciate your one's participation today and look forward to speaking with you again next quarter. Have a great day happy Halloween.
This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.