Q4 2024 PBF Energy Inc Earnings Call
Please stand by, your program is about to begin.
Consistent with our prior periods, we will discuss our results excluding special items, which are described in today's press release.
Also included in the press release as forward looking guidance information or any questions on these items or other follow up questions. Please contact investor relations after today's call.
For reconciliations of any non-GAAP measures mentioned on today's call. Please refer to the supplemental tables provided in the press release I'll now turn the call over to Matt Lucey. Thanks, Colin Good morning, everyone and thank you for joining the call.
Before commenting on the fourth quarter and 24 in general.
I would like to address the fire that we experienced at the Martinez refinery on February 1st.
I personally want to thank all the first responders, including our own employees.
Speaker Change: The Contra Costa County Fire Department Martinez please.
Speaker Change: The mutual aid responders from our local industrial peers.
Speaker Change: Successfully battled the fire and established control.
Speaker Change: I am thankful there were no injuries you honest.
Dave: First Dave on a few folks.
Speaker Change: We cannot ignore the impact of this incident had on the surrounding Martinez community.
Speaker Change: PBF energy earns the right to operate in the communities, where we have facilities by being a responsible safe and reliable operator.
Speaker Change: We apologize everyone affected by the incident.
Speaker Change: We need to maintain a cooperative partnership with the state County and city to.
Speaker Change: To move forward constructively.
Speaker Change: The buyer began as refinery worker preparing for planned maintenance of a process unit.
Speaker Change: We were in the process of isolating shutdown equipment when the fire began.
Speaker Change: We are still early in the recovery process.
Speaker Change: Just the point of origin is limited until the completion of the ongoing investigations.
Speaker Change: We are in the process of assessing the extent of the damage.
Speaker Change: <unk> yeah.
Speaker Change: We have experienced personnel setup to determine the necessary next steps.
Speaker Change: Looking ahead, while we don't have all the answers we fully understand the importance of the products that we manufacture for the people of California.
Speaker Change: Well, California is a difficult regulatory environment in California market.
Speaker Change: With its unique specifications.
Speaker Change: It's short refined products industrial lies on imports.
Speaker Change: Situation is set to compound itself with the announced shutdown of the L. A basin refinery scheduled for this fall.
Speaker Change: While the full impact from this incident is not yet no. It's important to note that PBF is properly insured furnace at events such as this.
Speaker Change: Moving on to the fourth quarter results reflect the challenging markets faced by refiners.
Speaker Change: [noise] comprised mainly of a weak margin environment and poor crude differentials.
Speaker Change: Which is a continuation of the conditions that dominated the second half of 2024.
Speaker Change: For the most part our refineries operated well during the quarter.
Speaker Change: We successfully executed a major cat turnaround on budget at Chalmette.
Speaker Change: The turnaround work did adversely impact capture rates in that region.
Speaker Change: The operating performance of our assets reflects the dedication and focus of our outstanding employees, who worked 24 seven in all market conditions. Despite the refined products that are still very much in demand.
Speaker Change: The weak margins and market conditions experienced recently do not reflect.
Speaker Change: Our longer term view that global refining supply and product demand remain tightly balanced.
Speaker Change: We did we believe this provides a constructive backdrop for refiners as demand for our product continues to grow globally.
Speaker Change: Indeed forward cracks look constructive.
Speaker Change: We expect to see a balancing of the disproportionate capacity additions we saw in 2024.
Speaker Change: 2025, net capacity additions are expected in the 700 to 800000 range.
Speaker Change: With demand growth and the 750000 barrels per day range.
Speaker Change: This assumes new capacity operates near announced capability.
Speaker Change: We have yet to see in some regions.
Speaker Change: Additionally, narrow light heavy sweet sour spreads had been a headwind to our capture rate.
Speaker Change: This rewards lower complexity assets in the near term.
Speaker Change: That said, we like our predominantly coastal system and access to a broad variety of feedstocks that provides.
Speaker Change: <unk> global crude picture continues to evolve if we see a shift in the market conditions that allows well heavy and sour barrels who've come of economically available that will benefit our system.
Speaker Change: There's a lot of turbulence in the markets and PBF is focused on controlling the aspects of our business that we can control.
Speaker Change: To best position ourselves going forward.
Speaker Change: What are the Pvs strengths is our financial position.
Speaker Change: In this current market style mark market six cycle.
Speaker Change: <unk> balance sheet provides us with flexibility to weather challenging markets.
Speaker Change: And look ahead to next market cycle.
To be successful and enhance value for our investors, we must operate say free safely reliably and responsibly and we must do it efficiently.
Speaker Change: With that in mind, our team has been developing a business improvement initiatives across our refining footprint.
Speaker Change: And as promised we'll now turn the call over to Mike Koski for comments on our cost savings program.
Mike Koski: Thank you Matt.
Speaker Change: Morning, everyone as Matt mentioned, we have a number of initiatives ongoing at PBS were collectively calling our refining business improvement program.
Mike Koski: RBI for sure.
Mike Koski: Achieving our targeted cash expenditure savings will be a corporate wide effort focuses on improving our current standards of fiscal discipline and operational excellence. We are committed to improving our already excellent programs. We have identified several opportunity areas within the refining business.
Mike Koski: Established schemes to systematically capture these opportunities and effectively institutionalize the improvements ensure the durability of these savings year over year into the future.
Mike Koski: We've launched five separate efforts led by different subject matter experts targeting over $200 million in run rate cost savings to be implemented by the end of 2025.
Mike Koski: As a basic framework for the program, we've identified energy usage and charter ends as the largest opportunity areas, representing approximately 30% to 50% of our overall target.
Mike Koski: Beyond those areas, we are looking at our procurement practices capital planning and expenditures maintenance and organizational design. These areas represent approximately 10% to 15% each of our targeted savings.
Mike Koski: Our teams have held several idea generation sessions in the field at our refineries and have identified multiple initiatives to capture the savings goal.
Mike Koski: Some of these initiatives are already underway, the new ideas will be prioritized developed into implementation plans and resources.
Mike Koski: By the end of the first quarter, we expect to have an overall implementation plan with clear line of sight to our goal.
Mike Koski: As a commitment to our employees into our external stakeholders in the future. We will provide more detail on our progress in terms of what we are doing the savings generated all while continuing to operate safely.
Speaker Change: With that I'll now turn it over to Karen Davis for our financial overview.
Karen Davis: Thank you Mike.
Speaker Change: For the fourth quarter, we reported an adjusted net loss of $2 82 per share and adjusted EBITDA loss of $249 7 million.
Speaker Change: Included in our results is at $4 8 million loss related to Pbf's equity investment in St. Bernard renewables.
Speaker Change: S. P. R produced an average of 17000 barrels per day of renewable diesel in the fourth quarter.
Speaker Change: First quarter Rd production is expected to be 10000 to 12000 barrels per day as a result of a planned catalyst change in March.
Speaker Change: Cash flow used in operations for the quarter was approximately $330 million, which includes a working capital headwind of approximately $83 million.
Speaker Change: Consolidated Capex for the fourth quarter was approximately $237 million, which includes refining corporate and logistics full.
Full year 2020 for Capex was approximately $1 billion.
Speaker Change: As mentioned on our third quarter call. This amount includes approximately 145 million of cash outflows related to our 2023 capital program for work completed at the end of 2023.
Speaker Change: You should note that our capex guidance is on an incurred basis, but our cash flow statement will reflect what we actually spend for the capital expenditures and turnaround in the period.
Speaker Change: Through share repurchases and our dividend, we returned approximately $60 million to shareholders in the fourth quarter.
Speaker Change: Since our repurchase program was introduced in December of 2022 through the end of the fourth quarter. We completed approximately 1 billion in share repurchases. This represents over 17% of our outstanding shares at the beginning of the program.
Speaker Change: Additionally, our board of directors approved a regular quarterly dividend of 27, and a half cents per share.
Speaker Change: We ended the quarter with approximately $536 million in cash and approximately 921 million of net debt.
Speaker Change: Maintaining our firm financial footing and strong balance sheet remain priorities.
Speaker Change: Our ability to fund operations and continuously invest in our assets will always be of Paramount importance.
Speaker Change: We entered last year with the strongest balance sheet, we've ever had.
Speaker Change: Our under Levered balance sheet enabled us to increase net debt during the weak market conditions of 2024.
Speaker Change: The market rebalancing off the 'twenty 'twenty four levels, we expect to use periods of strength to focus on delevering and preserving the balance sheet.
Speaker Change: After prioritizing our balance sheet and operations, we will look at all capital allocation opportunities to determine which promotes the greatest long term value.
Speaker Change: Operator, we've completed our opening remarks, and we'd be pleased to take questions.
Speaker Change: In a moment, we will open the call for questions.
Speaker Change: Yes.
Speaker Change: All callers limit each turn to one question and one follow up you may rejoin the queue with additional questions. If you would like to ask a question. Please press the star and one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, while we poll for questions.
Speaker Change: Okay.
Speaker Change: And we will take our first question from Roger read with Wells Fargo. Your line is now open.
Speaker Change: Yeah.
Roger Read: Hey, good morning, everybody.
Roger Read: I don't think I changed my name, but I'll I'll roll wasn't here.
Roger Read: Anyway quick question for you on just.
Martinez: Focusing on Martinez here.
Speaker Change: Recognizing regulatory environment in California, as you know is what it is what's the timeline do you believe that we will get greater clarity on.
Speaker Change: What the damages are what it'll take to fix it and you know when you will be allowed to to begin to work what what's kind of a abroad.
Speaker Change: A broad guideline we should consider here.
Speaker Change: Oh, thanks, Thanks, Mr Red.
Speaker Change: Look the reality is the sort of ground zero, where ignition took place that's actually still cordoned off.
Speaker Change: We expected quite frankly to have access to it already but we don't so again I'm getting dangerously close to speculating I I suspect that we will get access to that area. Shortly.
Speaker Change: And as I said in my comments I mean, we absolutely have to work collaboratively.
Speaker Change: With all all the different stakeholders as we look at and investigate what happened and so once we get full access to the side and we actually I appreciate it.
Speaker Change: We were commencing a turnaround and obviously now there's a damage from from the fire. So there's there's a multi prong.
Speaker Change: Effort to assess.
Speaker Change: Assess sharp moving forward, but I suspect, we'll be getting access to that cordoned off area very soon and then we already have teams.
Speaker Change: As I said on the ground.
Speaker Change: Doing the work they can do now, but we should be able to you know.
Speaker Change: Over the next.
Speaker Change: Short period of time have a much better estimate it just so happens is called coincide it at a moment in time that that was in front of that but over the next.
Speaker Change: Weaker so I think we'll have a much better view and and all I can promise to you and to our shareholders communicate openly as as we and transparently as as we learn things going forward.
Speaker Change: Understood Yes.
Speaker Change: Is everything right.
Speaker Change: The second part or the second question I have awesome ties in with this.
Speaker Change: Given it is premature to know exactly how long these down and what the costs are if we look at Q4 results, which consumes some cash Q1, which you know, but let's just say, it's neutral or a little bit of a negative impact based on where things are tracking so far what are some of them.
Speaker Change: Levers you can.
Speaker Change: Oh on in 2025 to ensure that the company.
Speaker Change: Isn't a sufficient position liquidity wise too.
Karen Davis: Operate with one of the units down to do whatever repairs are necessary or their deferrals of Capex are you know I'll I'll I'll leave some of the bigger kind of topics out there for you to answer rather than putting words in your mouth, but what should we be watching maybe that's more of a question for you Karen I'm not really sure but.
Karen Davis: Yes, with the uncertainty how should we think about what you'll do from a cash position standpoint.
Speaker Change: I'll make a couple of comments and ill turn it over to Karen are you know in regards to our financial strength, Karen I think mentioned in her remarks that we started 24 with the strongest.
Speaker Change: Financial position of our history I would say, we start started 24 with the strongest financial position in our industry, even where we sit today after a difficult 24 market conditions.
Speaker Change: If you if you go back to when we became a public company, we have the intent I'm coming out with a conservative balance sheet, our balance sheet today, even dollar company is more than twice the size.
Speaker Change: And we own all of the inventory our company today on any debt metric is well below where we originally designed it when we became public and when you look at 2012 44, we were able to navigate the year.
Speaker Change: Without impacting Capex, because we felt like that was right thing to do everything is predicated on your your view of the market.
Speaker Change: You're not always right, but you're always evolving that view and so we'll always take that view.
Speaker Change: In combination with the financial strength, we have and operate our business as best we can so in 'twenty four.
Speaker Change: We didn't defer any spending we invested in our plants as we as we should and E 2025 looks constructive.
Speaker Change: The downtime at Martinez, we were scheduled to be down for 60 days for a major turnaround at our towards this will impact that schedule, but our ability to generate cash as a company are.
Speaker Change: We will not hinder on on Martinez and isolation.
Speaker Change: So we're in a really strong financial position our outlook is positive.
Speaker Change: But we always have the capability to degree our outlook changes or the market changes due to manage our business and the <unk> and the.
Speaker Change: The capital and the work that we do out of our facilities in conjunction with the market that exists Carol if you have any other.
Speaker Change: Well you know I just would add on obviously over the past few quarters, you've seen us rely on our under Levered balance sheet to support both operations and share repurchases at the end of the fourth quarter, we were at 16% net debt to cap ratio.
Speaker Change: We've got $2 4 billion available under our ABL as well as you know the other triggers that that that Matt mentioned.
Speaker Change: Going forward as the market normalizes, and we see improved cash generation, we're gonna refocused again on reducing leverage is a top priority.
Speaker Change: Share repurchase.
Speaker Change: It is a core tenet of <unk>.
Speaker Change: We're running this business and that is when markets are strong and were generating cash.
Speaker Change: We intend to under lever ourselves and that gives us the flexibility and the luxury of managing the business.
Speaker Change: Without being hindered by financial constraints.
When markets are more difficult.
Thank you.
Speaker Change: Thanks Roger.
Speaker Change: We'll take our next question from Ryan Todd with Piper Sandler Your line is open.
Speaker Change: Thanks.
Speaker Change: Maybe a follow up one follow up on marketing as you mentioned.
Speaker Change: The insurance that you have that should offset some of the impact that it can can you maybe help.
Speaker Change: Help us walk through how the insurance offset works, what what sort of the impact that might offset.
Speaker Change: It's too early to say at this point.
Speaker Change: And then as a second question on the on renewable diesel if we switch gears over there could you maybe provide an update there's a lot of moving pieces here into the early part of 225.
Speaker Change: Maybe an update on your view of the market and how you might approach. How do you think you might approach a 45 C credits in the first quarter.
Speaker Change: Thank you will be able to book run off book or in any of those dynamics. Thanks.
Speaker Change: Sure so in regards to insurance.
Get into absolute specifics of it.
Speaker Change: But as a as a company.
Speaker Change: Yeah, we've been procuring property.
Speaker Change: <unk> since we began as a proper risk management tool a we have a very good relationship with our insurance providers with the insurance community.
Speaker Change: And we've worked very closely with them every year and so all I can tell you is we are absolutely.
Speaker Change: Or have the proper coverages with the proper proper providers and we'll be working with them as we assess what happens and it's too early to speculate on that so I feel very very comfortable and pleased insurance is a funny thing yet you hate.
Speaker Change: Paying for it when you don't need it.
Speaker Change: The fact that you need it but you're happy that's there.
Speaker Change: And it's at times like this so.
Speaker Change: In regards to our D. Nothing is nothing is static obviously.
Speaker Change: I think the developments over 25 are getting into.
Speaker Change: Incredibly interesting to watch the biodiesel guys I have a lot of headwinds you got less imports into the country.
Speaker Change: The 45 G is gonna be below it and by all indications. Although you know that was the previous administrations.
Speaker Change: <unk> guidance. So there's there's no guarantees, but I would think the 45 Z economics from the 45 was he will probably be less than the blenders tax credit over time. My guess is the red will will sort of set the market for how much.
Speaker Change: It needs to be manufactured but I come back to and I can't bring up our D without bringing up our partner.
Speaker Change: You bet in lock step with them a similar outlook on the marketplace.
Speaker Change: Similar commitment to our SPR venture.
Speaker Change: So we're very pleased with the partnership we have I think as we look at the marketplace our ability to pretreat feeds our location in the Gulf Coast.
Speaker Change: I think we're well positioned.
Speaker Change: To be a top quartile performer in the marketplace as it evolves.
Speaker Change: And in regards to accounting for unclear for a 45 zero or a producer tax credit language.
Speaker Change: We're going to use the language that we have at the time that.
Speaker Change: That we that we create a you know we published our books and records scared, although if you know that that's right.
Speaker Change: Similar to what some of our peers have announced we will we do expect to accrue the credit.
Speaker Change: Based on the guidelines that are available right now.
Speaker Change: Great. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you we'll take our next question from <unk> Gupta with UBS. Your line is open.
Speaker Change: Yeah.
Speaker Change: Good morning or more.
Speaker Change: So the ethical question, but let's say you do go down the line of obese between Ukraine, and Russia. He will have multiple impacts southern fine. There's obviously more product can come in but what can also happen is more heavier crudes come to the market video comes to the market.
Speaker Change: Do you think in that scenario, if we do have a complete piece between UK and Russia, you could see a wider quality discounts heavy light lightening, which could help P. B S L.
Speaker Change: I do but that's the Thomas Yeah. Thanks, Manav I'm you know in regards to the question I mean, I think it's probably really what are the terms of the piece, but you know broadly speaking in the way that you presented at.
Speaker Change: In terms of peace at that point, certainly should be a catalyst for a a wider light heavy differential I think particularly also in the Atlantic Basin I'm, just because the Pacific Basin has been the primary beneficiary of.
Speaker Change: Russian crude over the last several years, but.
Speaker Change: I think we really need to watch that as that plays out I mean, clearly there's a there's a lot of factors in the market today I think in terms of some aspects of the things that we see that for every policy action, there's a countermeasure or another reaction and some other things as we gone through the sequencing, but in a vacuum.
Speaker Change: Coming to some.
Speaker Change: Some some resolution.
Speaker Change: Certainly would be a positive catalyst for borgwarner.
Speaker Change: Oh perfect Oh, My my quick follow up which I wanted to ask you was when you did by Martinez one of this podcast citizens.
Speaker Change: One of the assets on the West Coast does go down you want to a couple of pockets there could benefit from it.
Speaker Change: In this scenario with my goodness is down can you run hard at nameplate capacity and maybe even over to actually benefit from a spike in the west coast margins.
Speaker Change: Torched refineries running and it will maximize Oh as we do at all of our facilities to the market that that exists so.
Speaker Change: Yeah, as I said Oh.
Speaker Change: Towards is there and is producing products.
Speaker Change: Which are desperately needed in California.
Speaker Change: Thank you.
Speaker Change: Thank you we'll take our next question from Neil Mehta with Goldman Sachs. Your line is open.
Speaker Change: Yeah, they're staying on on the macro I'm, obviously very dynamic environment around tariffs and are you guys do you import some barrels including some crude from Canada, but also some waterborne barrels. So just your perspective on how this potentially could ripple through the system and any.
Speaker Change: Any framework that you're using to evaluate a very dynamic situation.
Speaker Change: [laughter] dynamic it is I'll ask Tom to comment as well look that.
Tom: The Canadian Mexican tariffs seem to be different.
Tom: And some of the other tariffs that are being imposed and that it does seem to be a cordial too you know broader geopolitical issues, whether it's immigration or a federal or other things and so the duration of those tariffs may be different.
Tom: It does seem to be.
Tom: It sort of isolated into a person of one of you know how these decisions are being made but it's clearly getting advice because even with.
Tom: The tariffs were threatened before.
Tom: There was a recognition obviously that.
Tom: Oil was getting a different a different market than the rest.
Speaker Change: Oh, the imports from Canada.
Speaker Change: In Canada, and Mexico are a bit different I started chuckling to myself, Canada is more of a Mexican stand off because there are alternatives are much less in terms of if they don't sell to the U S.
Speaker Change: It's going to stay in the ground.
Speaker Change: Mexico, obviously has more flexibility you know what.
Speaker Change: You know being having access to water.
Speaker Change: That being said.
The mid con needs Canadian refineries Canadian oil too.
Speaker Change: Maintaining throughput and so any time that there's going to be disruption of that size. If it happens it will have some impact on throughput I'm sure I do think it's important to note and certainly on the Canadian side the movement the respective dollars. So if if you're Canadian producer what.
Speaker Change: As a what is the net difference Ah if you're looking at it sort of on a pose currency trade.
Speaker Change: But it'll be interesting dynamic tariffs are being threatened and initiated on a daily basis or that one day, when the Canadian and Mexican tariffs.
Speaker Change: It's supposed to be implemented and then postponed we went in a six hour period, where obviously there was going to be a bullish gi event by imposing tariffs on Canada and Mexico.
Speaker Change: Six hours later that was off the table, but the Chinese where tariffs putting tariffs on U S crude which was bearish so.
Speaker Change: There's nothing nothing static for you in a moment, but we've got a perfect team I'll hand, it over to Tom sort of on every aspect of this.
Speaker Change: Yeah.
Speaker Change: In terms of Matt give a very you know.
Speaker Change: Fulsome response, there I mean, I think in terms of I think that market reaction, which we saw on that Monday I think is very you know a key indicator as to how the market would respond in terms of you know Ti was outperforming.
Speaker Change: Warming.
Speaker Change: Waterborne crudes.
Speaker Change: You certainly had a strong crack response in terms of products on the.
Speaker Change: Particularly in the observable markets are just staring at screens right, even though you had outperformance in Nymex.
Speaker Change: Cash markets and certain areas didn't have time to sort of respond as people were sort of just waiting in terms of figuring out for a little bit more certainty.
Speaker Change: But you know I think it does get to the point where.
Speaker Change: When you look at the market today I do think that the likelihood of tariffs on the market is saying, they're they're not there I mean, you have ti spreads are basically on.
Speaker Change: Six month lows and that is a reflection of the fundamentals and the seasonal reality of the marketplace that we are in today right I mean, you're in the maintenance period, you got low runs and you're sitting in a situation where crude is building coming off of basically the low of the five year and is now moving closer toward some five year, but still have some work to do.
Speaker Change: Products had been drawing I mean, so I mean, if we get back specifically to the effects of tariffs I think in terms of I don't really have anything else. There in terms of milk Matt's response was.
Speaker Change: The only thing else I would add is as I look at it.
Speaker Change: C P b F being disadvantaged relative to the rest of the industry in the U S and then in any way shape or form.
Speaker Change: That's great and the follow up is maybe the scream and maybe scared but.
Speaker Change: You pointed to you know net debt to cap kind of at that 16% range.
Speaker Change: Therefore, the priority, even though that's a pretty good balance sheet to get you know just to Delever a bit before you return capital to shareholders in the form of buybacks. What's the framework is that decision point of a certain leverage level.
Speaker Change: On that metric or net debt to EBITDA that we should be looking for for when you say you want to flip from deleveraging back to buybacks.
Speaker Change: I think it would be impossible for us to give you one metric.
Speaker Change: It's a combination of.
Speaker Change: The current market, where in the outlook going forward in the short term to medium term.
Speaker Change: What how our assets are running.
Speaker Change: You have a lot of sort of a different.
Speaker Change: The equations in the bowl of soup.
Speaker Change: But what we intend to do is set up our company.
Speaker Change: As best we can for our investors that includes a really really strong balance sheet and it also includes returning cash to shareholders. It will balance out to the best of our ability.
Speaker Change: Is there a target through the cycle.
Speaker Change: Net debt number maybe it's another way of asking it.
Speaker Change: I, you know I I would say.
Speaker Change:
Maybe I'll answer the question with what we would see as the Maxim and that would be our goal has always been to maintain investment grade level credit metrics, which we think could be as high as you know less than 35% currently we're at 16% is hard.
Speaker Change: Our goal to be a very conservative.
Speaker Change: Okay. Thanks.
Speaker Change: Thanks, Karen Thanks Man.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question will come from John Royall with Jpmorgan. Your line is open.
John Royall: Hi, good morning, Thanks for taking my question.
Speaker Change: So my first question for.
Speaker Change: <unk> cash flows are we noticed a cash from ops.
Speaker Change: Even ex working capital came in a little light relative to earnings.
Speaker Change: It looks like there was a $100 million close of deferred taxes.
Speaker Change: It's one of the drivers just hoping for some color on the preferred stock.
Speaker Change: Any other major items to call out before you see them.
Speaker Change: Yeah, I I think you hit on one of one of the drivers the other one was just.
Speaker Change: And overall and this is the main one is an overall decline in our net payable.
Speaker Change: <unk> inventory.
Speaker Change: Looking forward into Q1.
Speaker Change: Capital is going to be driven primarily by hydrocarbon pricing, but I would also point out that we did make a TRA payment of $130 million in January which will provide a headwind.
Speaker Change: Great. Thank you and then my.
Speaker Change: And my follow up is on the business improvement plan.
Speaker Change: Gave a little bit of color on the Joker and I've mentioned, the key piece being around energy usage and turnaround.
Speaker Change: And I think you know next quarter, maybe some more detail but.
Speaker Change: How do you expect the 200 million the season this year.
Speaker Change: How should we think about kind of first half versus second half.
Speaker Change: Does the outage at Martinez impacts the plan in any way.
Speaker Change: I'll make a couple comments then turn it over to Mike in regards to the $200 million, what we said last quarter and what the 200 million is pointing to its run rate savings as of January one 2026, So we're going through each of our refineries each of our.
Speaker Change: Assesses that support our refineries and coming up with the cost saving initiatives players.
Speaker Change: And beginning to execute those savings what went to pledge that we made was as of the beginning of next year. It will be fully implemented so over the course of 'twenty five there will be some savings, but the savings will not be fully achieved in 2025 and no I don't believe.
Speaker Change: The events at Martinez will impact this initiative at all.
Speaker Change: Yes, well said, Matt I think as we as we developed the detailed implementation plans prior to the end of the first quarter will have a really good line of sight to how much exactly going to hit in 2025, but we will be adjusting every time, we do an initiative.
Speaker Change: To account for the run rate savings, we will be adjusting our budget targets for 2026, so that those savings remain sustainable we'll be putting in operating kpis as well as the financial Kpis, but operating kpis associated with all of those cost savings initiatives. So that we keep our eye on the ball and that those savings will be continue to be.
Speaker Change: <unk> realized throughout 2026 and beyond.
Speaker Change: Very clear thank you.
Speaker Change: Thank you we'll take our next question from Jason <unk> with TD Cowen Your line is open.
Jason: Yeah, Hey, good morning, Thanks for taking my questions.
Jason: Wanted to go back to the Martinez incident, if I could and it's not completely clear is the entire facility shutdown right now or is it just a unit that shut down can you give us any more color as to what unit.
Jason: Was impacted.
Jason: And as you think about your contractual obligations do you need to source product from third parties in order to meet those while the while the assets down thanks.
Jason: Alright, so specifically in regards to.
Jason: The units are.
Jason: We were in the midst of commencing.
Jason: What are referred to as a essentially a 60 day catch her around.
Jason: The cat feed hydro treater was shut down in front of that.
Jason: And pipe work was being done and so it's in the vicinity of the cat feed hydro treater.
Jason: As a result of the fire we did take down.
Jason: The entire refinery so the refinery is down completely now and so you have multiple work streams you have the turnaround work at in assessing the fire and then what it will take to get other units are back on stream all three on their own schedule.
Jason: Got it and in terms of.
Speaker Change: Commitments with customers and needing to source product from so yeah, I'm sorry, yes.
Jason: From a commercial standpoint.
Speaker Change: Don't have anything to report.
Jason:
Jason: We'll be able to manage through all the commercial.
Jason: Sse's.
Jason: With.
Jason: Our team in and Theres nothing nothing to highlight at this point.
Jason: Okay.
Jason: Got it and then just a quick accounting one I noticed in your full year 25 guidance that Jan one share count was actually up versus four Q I think it was guided to 121 million versus 115 in <unk> was that just related to incentive comp or.
Jason: Was there something else that drove that thanks.
Jason: I think that's gonna be related to dilution potential dilution from incentive comp.
Speaker Change: Okay great.
Jason: Great. Thanks for the answers.
Thanks.
Speaker Change: Our next question comes from Matthew Blair with T. P. Eat your line is now open.
Speaker Change: Oh, great. Thank you.
Speaker Change: I wanted to circle back to the RBI programs. So the 200 million of run rate cost savings I think that comes out to about 60, a barrel could you talk about how how we can measure that because that all come through refining opex or you know would also come through corporate G&A.
Speaker Change: And then.
Speaker Change: Just just looking at your published Opex in 2024 versus 2018 2019 levels.
Speaker Change: $2 a barrel higher so is this 60 cents she used to be thought of as a pretty conservative figure.
Speaker Change: And there might be more wood to chop after that thanks.
Speaker Change: So first of all in terms of the accounting most of it's going to come through refining opex, but the capital projects and turnarounds will come through our capital program.
Speaker Change: I would think about it that way on the <unk> 60 per barrel versus previous.
Speaker Change: Previous years I would consider this a start.
Speaker Change: We think.
Speaker Change: We think that there's more opportunity beyond 2025. This is a program, which has now gone in and this is gonna be a new way of life for us in terms of driving continuous improvement not only in how we manage costs, but how we innovate to drive efficiency.
Speaker Change: And we will let that spillover to all of the things that we do in terms of managing our business, including how we manage our reliability and how we manage our health and safety as well. So I would I would look at the 67 per barrel as the first step of a long journey.
Mike Koski: Mike just said as well.
Mike Koski: My expectation to our internal expectations are.
Mike Koski: Our higher than what we'd promised the street.
Mike Koski: As a management team, we certainly are focused on.
Mike Koski: Meaning what we say and in and say, what we mean in regards to where we're going to not over promise and deliver our results.
Mike Koski: As we communicate them so.
Mike Koski:
Mike Koski: The other thing I would say that this program is very very focused on if you go back to the depths of Covid at that time, we announced cost savings to the tune of a.
Mike Koski: We achieved cost savings to the tune of about $140 million.
Mike Koski: Much of that eventually came back through the different cycles that we existed at all.
Mike Koski: We're very very focused oh, the sustainability of these cost savings on a go forward basis, so not that cut was but its cut once and it's it doesn't return.
Speaker Change: It sounds good and then you also mentioned that refining capacity additions should match up pretty well with incremental demand growth. This year I think there's also a comment that the Ford cracks look constructive do you think that the strip the P. B F would be free cash flow positive.
Mike Koski: Is this year.
Mike Koski: Yes.
Mike Koski: Great I'll leave it there thanks.
Speaker Change: Thank you. Your final question will come from Paul Cheng with Scotiabank. Your line is open.
Paul Cheng: Hey, guys good morning.
Speaker Change: Mattson with nine looking at your first quarter throughput guidance.
Speaker Change: Our east Coast seems slow, yes, low given that you only have the hydro cracker.
Speaker Change: The wrong deal, which is pretty small unit is there anything we should be a win white that guidance.
Speaker Change: Yes, I'm glad to be low in the hope that impact on your food your expectation for that region Oh, that's the first question.
Speaker Change: The second question that Hum.
Speaker Change: The nature of the panic buying market went to all that what do you think about the tenant but instead.
Speaker Change: Photo Nieto, you run them all off the same cool.
Speaker Change: If you were pacing crew with domestic light oil how would that impact your we find where you you full pud and Opex just trying to get some better understanding on that thank you.
Speaker Change: Yeah.
Speaker Change: Okay. So your first question was in regards to east coast throughput.
Speaker Change: I think this throughput.
Speaker Change: That is down a bit on the back of the market that has existed.
Speaker Change: So you know obviously, we throttle ER throughput based on the market in which we're operating in what is a weaker market throughput can come down and so there's certainly nothing structural or not.
Speaker Change: Nothing from a work standpoint, that's precluding us and if the market's there will certainly capture as much of it as we possibly can in regards to Toledo. There is some element I referred to it as a Mexican standoff.
Speaker Change: Before in terms of our.
Speaker Change: We do not have the ability nor does anyone anyone in the region have the ability to simply replace all Canadian barrels by domestic supplies the pipeline capacities of their pipelines have been reversed.
Speaker Change: And so there is some element.
Speaker Change: Uh huh.
Speaker Change: Tariffs could could push down throughput.
Speaker Change: Or the yellow or ultimately the producers go to pay for and consumers get a pay.
Speaker Change: But to the degree there's not a market for the refiner Sharon.
Speaker Change: We're not we're not in the business of manufacturing fuel that is an economic to run so.
You said, it's an incredibly dynamic situation and there is tariffs put in the market will balance itself to produce the products that are needed in all the regions.
Speaker Change: Hum.
Matt Lucey: Matt Yes, the domestic.
Matt Lucey: Oh, yeah, something reasonable photo nito, and indeed that you're going to re pace.
Matt Lucey: <unk> one yet.
Matt Lucey: That impact your potent U N fool you.
Speaker Change: Yes that is available and you make that decision until I'm trying to understand what the Cody yeah. So available cat just to keep it pretty tight that you can do.
Speaker Change: In that particular case and also with that on my first question on the East Coast, if the first quarter and that will be the one way should we assume full year.
Speaker Change: Your one way would be lower than the previous full year guidance. Thank you.
Speaker Change: No as I said.
Speaker Change: You have to make a market assumption.
Speaker Change: To drive what do you think throughput Saar, but we're not limited by.
Speaker Change: By any stretch on the east coast in regards to the theater I think your question is the theoretical if you were able to deliver on all U S. Domestic light sweet crude what would be the yield impact to Toledo Toledo not unlike any other refiner would have a yield impact.
Speaker Change: We run a significant slate of synthetic crude out of Canada, which has.
Speaker Change: Specifications and qualities that so we'd always optimize around to the extent you change that Chris say virtually no or for any other refinery in Chicago or throughout the pad there will be yield impacts and it's it's it's too difficult to get into specifics of exactly what happens.
Speaker Change: Throughput will be down there.
Speaker Change: Theres no question by the way that's not limited to pad too I mean, that's true in pad five or any other pad to the degree you're not running your optimized crude it's the optimized crude for a reason there will be throughput yield impact.
Matt Lucey: Thank you Matt.
Speaker Change: Since I'm the last corner here can I sneak in a third question.
Speaker Change: I'll, just redo banking, we know P J.
Speaker Change: On your insurance I assume that you have to business interruption insurance also hog in here and can you tell us that what's the deductible.
Speaker Change: Well I don't want to get into any specifics on on insurance, we have a we have a manageable deductible and as I said before we have all the property insurance in place Okay. Thank you.
Speaker Change: Yeah.
Speaker Change: Yeah, we have reached the end of our question and answer session.
Matt Lucey: Oh over to Matt Lucey for closing remarks.
Matt Lucey: We greatly appreciate your participation today and look forward to communicating with each of you in the future. Thank you very much.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Matt Lucey: [music].
Matt Lucey: Yeah.
Matt Lucey: Uh huh.
Matt Lucey: [music].
Matt Lucey: Okay.
Matt Lucey: [music].
Matt Lucey: