Q4 2024 CVR Energy Inc Earnings Call
After discussing our 2020 for fourth quarter and full year 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.
You are cautioned that these statements may be affected by important factors set forth in our filings with Securities and Exchange Commission and in our latest earnings release as a result actual operations or results may differ materially from the 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 to the extent required by law.
This call also includes various non-GAAP financial measures the disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures are included in our 2020 for fourth quarter earnings release that we filed with the SEC and Form 10-K for the period and will be discussed during the call.
Dave: That said I'll turn the call over to Dave. Thank you Richard and good afternoon, everyone and thank you for joining our earnings call.
Dave: For the full year of 2024, we reported a consolidated net income of 45 million and EBITDA of $394 million.
Dave: At the segment level, we generated $223 million of EBITDA at our in our petroleum segment of $179 million of EBITDA in our fertilizer segment.
Dave: We also began separately reporting results from our renewables segment, which generated $3 million of EBITDA for the full year of 2024.
Dave: For the fourth quarter consolidated net income was $40 million and EBITDA was $122 million.
Dave: And then petroleum segment combined total throughput for the fourth quarter of 2024 was approximately 214000 barrels per day.
Dave: Crude utilization for the quarter was approximately 94% of nameplate capacity. Despite planned run cuts in December.
Dave: Light product yield was 103 on crude oil processed.
Dave: Benchmark cracks softened during the fourth quarter with the group 3211, averaging $14 32 per barrel.
Dave: The bulk of the decrease came.
Dave: From the third quarter came.
Dave: From a decline in gasoline crack.
Dave: Which is somewhat typical for the fourth quarter as demand slows seasonally that supply increases was the addition of butane blending.
Dave: In addition, the U S refining fleet continue to run hard through the fourth quarter, averaging 91% utilization compared to a five year average of 30 of 87%.
Dave: RIN prices increased 17 cents per barrel from the third call third quarter of 2024 levels, averaging approximately $4 <unk> per barrel for the quarter.
Dave: In early January EPA denied when he was 2023 small refinery exemption petition once again coming out with new reasons for the denial that we consider alluded, Chris and illegal, forcing us once again to seek protection of.
Dave: The fifth circuit through a stake.
Dave: Our 2024 application for small refinery exemption is already filed and EPA again missed the 90 day deadline to rule on it.
Dave: We are pleased to report.
Dave: That last week EPA advise the fifth circuit.
Dave: That EPA does not opposed to stay when he wasn't requested.
Dave: While the fifth circuit has not yet ruled on our now unopposed motion to stay.
Dave: We expect them to do so soon.
Dave: While we continue to aggressively pursue the small refinery exemptions when he would deserves.
Dave: We are hopeful that EPA is fifth circuit filings last week signals.
Speaker Change: A return to common sense to the agency, we welcome administrators Eldon to the EPA and we're hopeful that under the New administration EPA will see the critical role that small refineries like ours play and rural communities across America exactly why Congress included small refinery exemption.
Dave: And the renewable fuel standard legislation.
Dave: For the fourth quarter of 2024, we processed approximately 17000 17 million gallons of vegetable oil feedstock in the renewable diesel unit at 21.
Dave: Gross margin was approximately 79 per gallon for the fourth quarter and <unk> 80 per gallon for the full year of 2024.
Dave: Although we have a hydraulic capacity to produce 100 million gallons of renewable diesel.
Dave: We are reducing the rated capacity of the unit to 80 million gallons per year going forward due to catalysts limitations.
Dave: Based on the revised capacity utilization for the quarter was approximately 73%, which was negatively impacted by catalyst aggregation in December.
Dave: The hobo spread declined slightly from the third quarter, primarily due to declines in California diesel prices. However, this was more than offset by increased D Force and L. CFS credit prices.
Dave: In the fertilizer segment.
Dave: Both facilities ran well during the quarter with ammonia utilization of 96% realm.
Dave: Relative to the private prior period ammonia prices were higher despite some challenging weather conditions in the quarter we.
Dave: We saw good demand and had strong shipments from our facilities now.
Dave: Now, let me turn the call over to Dane to such discuss our financial highlights. Thank you, Dave and good afternoon, everyone.
Speaker Change: For the fourth quarter of 2024, our net income attributable to CVI shareholders was $28 million.
Dave: Earnings per share was <unk> 28, and.
Speaker Change: EBITDA was $122 million.
Speaker Change: Our fourth quarter results include a reduction of quarterly <unk> expense due to a mark to market impact on our estimated outstanding RFS obligation of $57 million gain.
Speaker Change: A gain on the sale of our interest in the midway pipeline of $24 million.
Speaker Change: Unfavorable inventory valuation impact of 20 million and unrealized derivative losses of $6 million.
Excluding the above mentioned items adjusted EBITDA for the quarter was $67 million and adjusted losses per share were <unk> 13.
Speaker Change: Adjusted EBITDA in the Petroleum segment was $9 million for the fourth quarter with lower crack spreads driving the majority of the decline from the prior year period.
Speaker Change: Our fourth quarter realized margin adjusted for rent Mark to market impacts inventory valuation and unrealized derivative losses was $6 45 per barrel, representing a 45% capture rate on the group 3211 benchmark.
Speaker Change: Net rent expense for the quarter, excluding the mark to market impact was $56 million or $2 86 per barrel, which negatively impacted our capture rate for the quarter by approximately 20%.
Speaker Change: The estimated accrued RFS obligation on the balance sheet was $323 million at December 31, representing 487 million Rins Mark to market at an average price of 66.
Speaker Change: This is down slightly from the RFS obligation on the balance sheet at the end of 2023 of $329 million comprised of $362 million rents marked at an average price of 91.
Speaker Change: As a reminder, our estimated outstanding ran obligation is primarily related to women with rent obligations for 2020 through 2024 and excludes the impact of any small refinery exemptions.
Speaker Change: Direct operating expenses in the petroleum segment were $5 13 per barrel for the fourth quarter compared to $4 69 per barrel in the fourth quarter of 2023.
Speaker Change: The increase in direct operating expenses per barrel was primarily due to increased repair and maintenance expenses. In addition to lower throughput volumes compared to the prior year period.
Speaker Change: Adjusted EBITDA in the renewable segment was <unk> 9 million for the fourth quarter, a significant improvement from our fourth quarter 2023, adjusted EBITDA of negative $17 million.
Speaker Change: The increase in adjusted EBITDA was driven by a combination of an improved hobo spread.
Speaker Change: And reduced feedstock basis due in part to the addition of the pretreatment unit in 2020 for enabling the processing of cheaper untreated feedstocks.
Speaker Change: Adjusted EBITDA in the fertilizer segment was $50 million for the fourth quarter with the increase in ammonia sales prices lower pet coke feedstock costs and lower direct operating expenses driving the improvement relative to the prior year period.
Speaker Change: The board of directors of CVR Partners' General partner declared a distribution of $1 75 per common unit for the fourth quarter of 2024.
Speaker Change: As CVR energy owns approximately 37% of the CVR partners' common units will receive a proportionate cash distribution of approximately $7 million.
Cash flow from operations for the fourth quarter of 2024 was $98 million and free cash flow was $40 million.
Speaker Change: Our fourth quarter cash flow from operations includes a working capital benefit of approximately $80 million, excluding rent obligation changes and the gain on the sale of our interest in the midway pipeline.
Speaker Change: The working capital benefit was primarily attributed to increases increased lease crude payables.
Speaker Change: Significant uses of cash in the quarter included $62 million of capital and turnaround spending.
Speaker Change: $8 million of cash interest and $7 million for the Noncontrolling interest portion of the CVR partners third quarter distribution.
Speaker Change: Total consolidated capital spending for the full year 2024 was 181 million, which included $128 million in the petroleum segment 37 million in the fertilizer segment and $11 million in the renewable segment.
Speaker Change: Turnaround spending was approximately $58 million in 2024.
Speaker Change: For the full year 2025, we estimate total consolidated capital spending to be approximately $165 million to $205 million and turnaround spending to be approximately $170 million to $185 million.
Speaker Change: Turning to the balance sheet, we ended the quarter with a consolidated cash balance of $987 million, which includes $91 million of cash in the fertilizer segment.
Speaker Change: During the quarter, we completed two transactions that significantly increased our liquidity generated $318 million of net proceeds from the term loan b issuance and $90 million of gross proceeds from the sale of our 50% interest in the midway pipeline.
Speaker Change: Total liquidity as of December 31, excluding CVR partners was approximately $1 1 billion, which was comprised primarily of $896 million of cash and availability under the ABL facility of $238 million.
Speaker Change: With the actions taken during the fourth quarter to increase our liquidity position.
Speaker Change: You feel confident in our ability to manage through the large turnaround underway at coffeyville and the potential for continued near term weakness in the refining market.
Speaker Change: We do not anticipate the term loan remaining a part of our long term leverage profile.
Speaker Change: Would anticipate working to return to our leverage target of approximately two to two five times mid cycle EBITDA on a gross basis as market conditions permit.
Speaker Change: Looking ahead to the first quarter of 2025 for our petroleum segment, we estimate total throughput to be approximately 120 to 135000 barrels per day, which will be impacted by the planned turnaround at coffeyville in the quarter.
Speaker Change: We estimate direct operating expenses to range between 95 and $105 million.
Speaker Change: Total capital spending to be between 30, and $40 million and turnaround spending to be between 150 and $165 million.
Speaker Change: For the fertilizer segment, we estimate our first quarter 2025 ammonia utilization rate to be between 95 and 100%.
Speaker Change: We estimate direct operating expenses to be approximately $55 million to $65 million, excluding inventory impacts and total capital spending to be between 12 and $16 million.
For the renewable segment, we estimate first quarter 2025, total throughput to be approximately 13 to 16 million gallons, which will be impacted by a catalyst change completed in January.
Speaker Change: We estimate direct operating expenses to be between eight and $10 million and total capital spending to be between 2% and $5 million.
Dave I'll turn it back over to you.
Dave: Thanks, Dan.
Dave: Refining market conditions remained challenging in the fourth quarter largely due to the market being oversupplied as a result of above average utilization levels in the United States as well as the addition of new refining capacity globally.
Dave: As we look to 2025 however.
Dave: We are cautiously optimistic that the refining market conditions will improve relative to 2024 for a number of reasons.
Dave: Looking at the U S supply and demand balance we are starting 2025 in a better position than we were a year ago year to date average gasoline and diesel demand are above or at or above five year averages and inventories of gasoline and diesel are at or below five year averages.
Dave: Spring maintenance.
Dave: The season is currently underway and planned turnaround activity is expected to be fairly heavy particularly for FCC and alky units.
Dave: In addition announced plant planned closures could result in nearly 800000 barrels of refining capacity in the U S and Europe being shut down this year.
Dave: Between these announced closures increased diesel demand, resulting from a cold winter weather in the U S and Europe and any potential increases in refined product demand as a result of those business friendly slash pro growth policies.
We see the potential for tightening supply and demand balances this year, which should be supportive of increased crack spreads.
Dave: The planned turnaround at Coffeyville is currently underway after we elected to accelerate the timing following an incident Coffeyville naphtha hydro treater during freezing weather conditions in January.
Dave: We currently anticipate the duration of the turnaround the extended by 10% to 15 days from the original plan and the cost to increase by 10% to $15 million. Although these figures could change depending on several factors including weather.
Dave: We currently expect the turnaround to be complete by the end of March which should position us well heading into the summer driving season.
Dave: During the turnaround we intend to.
Dave: Complete tie ins for the initial phase of the diesel recovery project at Coffeyville, which should give us the ability to increase distillate yield by approximately 500 barrels per day.
Dave: We believe we can further increase coffeyville is distillate yield by another 2500 barrels per day over the next few years, if we elect to invest additional capital.
Dave: We also plan to install some piping and revamped some of our tankage at Coffeyville, which should enable us to begin making up to 9000 barrels per day of jet fuel with.
Dave: With the potential to increase that capacity with further additional investment.
Dave: Well it will take time to develop a significant book of business for the jet fuel by shifting up to 9000 barrels of distillate production to jet, we could potentially reduce coffeyville to Italy annual RFS obligation by up to 18 million Rins.
Dave: Based on 2024 average just a diesel spreads and average RIN prices, we estimate the potential margin uplift of approximately five to $7 a barrel on any new jet fuel sales.
Dave: We currently expect to have the piping in Turner and take its work associated with the jet fuel production complete by the end of the third quarter.
Dave: In the renewable segment, we completed the catalyst change in January.
Dave: Currently running the unit at 5000 barrels per day in an effort to optimize yield and catalyst slide.
Dave: We currently intend to run the unit until we get clarity on the on the blenders tax credit <unk> see the final rules on production tax credit.
Dave: Without the dollar per gallon.
Dave: Blender tax credit, we believe RIN prices <unk> low carbon fuel standard credits must increase significantly to compensate.
Dave: If not a significant amount of biodiesel and renewable diesel production will likely be out of the money and would have to shut in.
Dave: Given these headwinds as the renewable space moves forward. It is difficult to ignore that we have invested approximately $290 million million.
Dave: And our.
Dave: Renewable business over the last several years to participate in carbon emission reduction.
Dave: That would generate ribs and optimize our assets we have in doing so.
Dave: We have been reminded that reliance on government credits is not a sustainable business.
Dave: And we already have enough exposure to politically mismanaged regulations like RFS.
Dave: As a result, we are left with an investment with uncertain returns in the business that today is breakeven at best.
Dave: We have completed the design of Saf Rd project near our coffee Coffeyville facilities have a firm understanding of our capability to convert our when he would renewable diesel unit to Saf production with additional capital.
Dave: Well, we do believe there is potential for these opportunities in the future it.
Dave: It is critical to get clarity on available and durability of government subsidies before we continued investing additional capital our time it has such ventures.
Dave: We remain willing to participate further in this space, but are pausing our intentions to actively pursue the.
Dave: The market for partners or investors.
Dave: We remain open to the opportunity of somewhat approaches us that is willing to accept the subsidy risk and.
Dave: And if an appropriate environment develops resume an active approach to offering our value proposition to the market.
Dave: In the fertilizer segment recent USDA estimates for ending corn and soybean inventories have declined.
Dave: Which is supportive of grain prices recently.
Dave: The outlook for fertilizer demand for the spring is good and we've seen prices increase to start the new year.
Dave: We are continuing to invest in plant infrastructure for reliability, including the installation of two new boilers at Coffeyville in the fourth quarter and planned projects in 2025 that focus on water and electricity reliability.
Dave: And quality at both plants.
Dave: We are also looking at the potential to expand our capacity to make D. E F and we continue to evaluate the potential natural gas feedstock Optionality project at the Coffeyville facility.
Dave: Looking at the first quarter of 2025 quarter to date metrics are as follows group.
Dave: Group 231 group 3211 cracks have averaged $15 three per barrel with the Brent Ti spread of $3 33 per barrel and the WCS differential of $13 19.
As of yesterday group 3211 cracks were $18 68 per barrel Brent Ti was third $3 99 per barrel and WCS was $13 70 under WTO.
Dave: Returns were approximately $5 32.
Dave: Per barrel.
Dave: Prompt fertilizer prices are $600 per ton for ammonia and three $3 15 for per ton for uhm.
Dave: Although 2024 was challenging year.
Dave: For us both operationally and from a broader market perspective, we feel we are well positioned to capitalize on any improvements in crack spreads. This year as a result from supply rationalization.
Dave: We are confident the liquidity enhancing measures we took in the fourth quarter should provide ample cash to get through the coffeyville turnaround and weather any near term weakness in cracks.
Speaker Change: I want to reiterate something Dave mentioned in his prepared remarks that one of our focuses.
Dave: One of our.
Dave: Primary focus is after the completion of the turnaround will be to start reducing debt and restoring our balance sheet target levels as soon as we can subject to market conditions and other conditions.
Dave: As always we continue to focus on safe reliable operations of our facilities and continue to look for ways to.
Dave: To profitably grow our business.
Dave: With that operator, we're ready for questions.
Speaker Change: Thank you we will now be conducting a question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: May press Star two if you would like to remove your question from Mchugh.
Speaker Change: 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.
Speaker Change: Okay.
Speaker Change: Thank you. Our first question comes from the line of Manav Gupta with UBS. Please proceed with your question.
Speaker Change: Morning, Dave and team.
Speaker Change: Jim.
Speaker Change: About $40 million in free cash flow in the fourth quarter.
Speaker Change: Obviously, the first quarter, you are going to be doing around but in line with the comments you made it looks like second quarter things would be even in a better position and so you should continue to generate free cash flow scale coffee they've done around just trying to understand what would be better used in your mind just to pay down debt.
Speaker Change: Is that some point you could rethink about instituting a dividend.
Manav: Hey, Manav.
Manav: As we said in our prepared remarks, one of the key focuses we do want to work on is the Delevering.
Manav: <unk> with the original $1 billion.
Manav: I want to work off the term loan I don't think it should be a scenario, where if we should expect to see the term loan fully gone before a dividend where potentially to return, but we'd want to see some sustained strength in the market as well. So we'll look to take a balanced approach and see how things develop as we go forward.
As you know Manav the dividend is something the board looks at every quarter.
Manav: And as <unk> improved the likelihood goes up.
Manav: <unk> X on that.
Speaker Change: Perfect. My quick follow up here is you mentioned that you are looking at some projects.
Manav: Could give you a higher <unk>.
Manav: So I understand what could be the capex required to pull all of those projects and what kind of timeline I'd be looking at could you. If you do decide to move ahead could you bring those on within the next 12 15 months by making some tweaks. So help us understand what could give you higher jet is going ahead.
Manav: Well I think right now Manav, our constraint is really building a book of business.
Manav: For jet a lot of the airlines major airlines are on three year contract terms. So it is going to take a little time to build it but.
Manav: In essence, it's just a.
Manav: A jumper too and some pipe that we have to install and rearrange our tankage at coffeyville too to add additional volume of jet.
Manav: As you know we already produce jet at the at the <unk> refinery and are mainly sales constrained on that also with the loss of our military contract last year.
Manav: So it was not going to take us long as I said in my prepared remarks.
Manav: We should be ready at the end of the third quarter or two to produce jet at Coffeyville.
Speaker Change: Thank you so much identical.
Manav: Thank you.
Speaker Change: Our next question comes from the line of Adam <unk> with Goldman Sachs. Please proceed with your question.
Adam <unk>: Yes, good afternoon team and thank you for taking my questions. First one is just on how you guys think about the operating footprint of the company I know, it's probably more of a near term focus on the big turnaround going on right now and then the balance sheet, but in the past you've talked about looking to potentially diversify the company's refining operating footprint from the mid con into other regions.
Adam <unk>: Just wanted to get your latest views here. If you think there are any regions of focus we should be mindful of and then anything on a potential timeline there. Thanks.
Well Adam.
Adam <unk>: Think we've mentioned many times, we look at everything that comes on the market bid.
Adam <unk>: Bid ask has been too wide for us to even consider a lot of these deals that have <unk>.
Adam <unk>: Come up but.
Adam <unk>: But we'll continue to look for everything our biggest weakness as a company is really our concentration in the group III.
Adam <unk>: Market and the mid Con pad two.
Adam <unk>: And anything they can diversify us from that is a benefit.
Adam <unk>: That said our focus is more in land in going.
Adam <unk>: Going west and it is going south or.
Adam <unk>: Or east.
Mike: Mike consider going north of if the right deal ever came up but.
Mike: Again, we want to diversify out of pad two as much as possible.
Speaker Change: Got it very clear and just a follow up from me on the renewable segment saw that you guys broke the segment earnings profile out this quarter and when we think about the path to run rate.
Speaker Change: Positive EBITDA contribution going forward aside from improving margins more broadly operationally is there anything you think we should be focused on and then can you tie that into how you guys think about potential opportunities within renewables, specifically in SaaS kind of what's needed from a supply demand standpoint, or an incentive standpoint to further make.
Speaker Change: Call there thanks.
Speaker Change: Sure Adam I mean, as I mentioned in prepared remarks.
Speaker Change: Problem with renewables is the uncertainty of government subsidies.
Speaker Change: And there they will swing wildly I guess I'd say it.
Speaker Change: I would say that politically drew.
Speaker Change: Driven RFS regulation that.
Speaker Change: Seems to be there's nobody driving the ship.
Speaker Change: And.
Speaker Change: I will just use the example of the fact that.
Speaker Change: The mandate is 22 billion in.
Speaker Change: <unk> 16 of that us ethanol.
Speaker Change: Ethanol does little for the environment, whereas renewable diesel does.
And Lo and Behold, you've got <unk>, coupled with the force that started to break a little bit but even so.
Speaker Change: I think the government would drive towards lower carbon.
Speaker Change: Material rather than just.
Speaker Change: Doing a mandate on ethanol, which is really not necessary at all.
Speaker Change: Ethanol is part of the fuel blend, it's a cheap blendstock for octane and it would be blended no matter what.
Speaker Change: So until we get clarity on some of these these these these regulations and somebody in adults in the room controlling them.
Speaker Change: It would be difficult to see how we make some investments just to give you an idea on saf.
Speaker Change: The subsidies.
Speaker Change: Today, the people are reporting that selling for about $1 to $2 premium over R&D.
Speaker Change: If you take all of the subsidies and add them all up you need more like four bucks to really to even have that kind of sales price.
Speaker Change: <unk>.
Speaker Change: To us it's.
Speaker Change: We've had all we can stand up.
Speaker Change: <unk>.
Speaker Change: Our exposure to government subsidies.
Speaker Change: And it's just going to take a shift change for us to really invest in it.
Speaker Change: We do have projects that look attractive on a capital per barrel capital basis for both Saf in renewables, but again the subsidies are just scary.
Speaker Change: Got it very clear thank you.
Our next question comes from the line of John Royall with Jpmorgan. Please proceed with your question.
John Royall: Hi, good afternoon, Thanks for taking my question.
John Royall: My first one is on asset sales and maybe a two parter if I can first can.
John Royall: Can you tell us the tax implications of the $90 million Midway pipeline sale and have the tax has been paid out yet and then.
John Royall: Secondly, how should we think about asset sales from here and if other assets could potentially shake loose.
John Royall: It's a better environment.
John Royall: Refining maybe change your thinking on raising cash.
John Royall: The asset sales.
John Royall: Okay.
John Royall: Afternoon, John Yes, so on the midway.
John Royall: The 99 proceeds there will be a tax impact.
John Royall: Our tax basis in that joint venture was call it $15 million of the remaining would be exposed to tax.
John Royall: It has not been paid would anticipate paying out as we move through the beginning of 2025 here.
John Royall: As far as other logistics assets, we have.
John Royall: He used to advertise the $80 million, which was kind of a.
John Royall: An aggressive EBITDA content that included if we were to spin off our logistics.
John Royall: Separate MLP, we think that revised that number is more of that.
John Royall: As more realistic around $20 million, that's post the sale of midway.
John Royall: So theres a few out there, but not near as much as we had originally advertised John so hopefully that answers your question.
John Royall: It does thank you and then.
John Royall: Next question is on renewable diesel I think you.
John Royall: You mentioned in the opener that you have some limitations on the catalyst side that are impacting your capacity. Thank you took it down about 20% if I heard it right can you just give us a little more detail on what those constraints are.
John Royall: Well.
John Royall: This was a revamp so we took an existing reactor in unit and.
John Royall: Converted it to what we thought was 7500 barrels of capacity for per day of vegetable oil.
John Royall: And corn oil.
John Royall: As it turns out we are woefully short of catalyst.
Our run lengths are between six and eight months at best.
John Royall: And it's just the yield is just so affected by the highest space velocity at the higher rates.
John Royall: We just think we have to downgrade the unit to to really do it with the addition of another catalyst bed, we'd be right back to that 7500, possibly even more.
John Royall: So and if you look at the Saf project, that's largely how we would accomplish that we'd add a reactor.
John Royall: And that would take care of the pretreatment of remove the oxygen and then the existing reactor would be adequate for isomerization. So.
John Royall: That's kind of the ultimate plan problem is as I mentioned earlier subsidies are scary.
John Royall: Thank you.
John Royall: Youre welcome.
Speaker Change: Our next question comes from the line of Matthew Blair with Tudor Pickering. Please proceed with your question.
Matthew Blair: Thank you and good morning.
Speaker Change: The refining capture improved quarter over quarter, which seems pretty good in the context of a higher RVO and perhaps some other challenges can you talk about the tailwind to capture in the fourth quarter and then also discuss any major moving parts on capture we should be thinking about for the first quarter.
Tim: Yes, so Tim.
Tim: Tier ones to capture I would say two things.
Tim: Not massive contributors, but with the run cuts we did enact in December.
Tim: That kind of drove our margin to a higher per barrel number.
Tim: On the cracks earlier in the period relative to the average across the quarter.
Tim: When they fall off in December.
Tim: Small inventory benefits call it 30% to 50, a barrel also when they're not a big number but on a depressed cracker. It does give you a little bit of a benefit other than that not a lot of unusual things.
Tim: To report.
Tim: We look to that.
Tim: The first quarter.
Tim: Again, I think it's going to be more a function of just getting back to normal operations.
Tim: And.
Tim: Having a lower percentage of the crack being taken up by fixed cost as if the crack stays elevated here.
Tim: Sounds good and then I had two questions in regards to the Rd feedstock mix.
Tim: First in the reporting Theres been other feedstocks and blend stocks line item that it's fairly large it's about one third of the total throughput could you talk about what goes into that line item and then second with the 45 Z coming out your pre treaters online are you anticipating any changes in your R&D. If you could talk mix going forward.
Tim: <unk>.
Speaker Change: Well, Matt I think on your first question.
Speaker Change: The other is just the refinery grass streams that are processed with.
Speaker Change: With the.
Speaker Change: <unk> Rd unit when it was previously on the Hydrocracker service.
Speaker Change: And then there's also I think others includes hydrogen as a part of it so that's probably the bigger piece.
Speaker Change: On your second question, which I already forgot can you repeat it again please.
Speaker Change: Is anything changing on your feedstock mix going forward in light of the 45 Z.
Speaker Change: Well, we would desire to run more corn oil, if we could which is a low ci material.
Speaker Change: And.
Speaker Change: The the problem again, it comes back to catalyst and our ability to do that is limited by our ability to process.
Speaker Change: More corn oil without a yield penalty.
Speaker Change: We continue to explore that though and look at other ways to do it.
Speaker Change: The Z is good but it doesn't it doesn't quite make up for the BTC.
Speaker Change: In any case.
Speaker Change: Great. Thanks for your insights.
Speaker Change: Youre welcome.
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.
Speaker Change: Again I'd like to thank you all for your interest in CVR energy. Additionally, I'd like to thank our employees for their hard work and commitment towards safe reliable environmentally responsible operations.
Speaker Change: We look forward to reviewing our first quarter results.
The next earnings call. Thank you.
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.