Q1 2025 Valero Energy Corp Earnings Call

Speaker Change: Greetings and welcome to the Valero Energy Corp. 1st quarter, 2025 earnings call. At this time, all participants are in a listen-only mode.

Speaker Change: A question and answer session will follow the formal presentation. If anyone's required operator assistance during the conference, please press star zero on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Homer Bhullar, VP of Investor Relations and Finance. Thank you. You may begin.

Speaker Change: Good morning, everyone, and welcome to Valero Energy Corporation's first quarter 2025 earnings conference call.

Speaker Change: With me today are Lane Riggs, our Chairman, CEO and President, Jason Fraser, our Executive Vice President and CFO , Gary Simmons, our Executive Vice President and CEO , Rich Walsh, our Executive Vice President and General Counsel, and several other members of Valero Senior Management team.

Speaker Change: If you have not received the earnings release and would like a copy, you can find one on our website at investorvalero.com

Speaker Change: If you have any questions after reviewing these tables please feel free to contact our Investor Relations team after the call

Speaker Change: I would now like to direct your attention to the forward-looking statement disclaimer contained in the press release.

Speaker Change: In summary, it says that statements in the press release and on this conference call that state the company's or management's expectations or predictions of the future are forward looking statements intended to be covered by the safe harbor provisions under federal securities laws

Speaker Change: There are many factors that could cause actual results to differ from our expectations, including those we've described in our earnings release and filings with the SEC Fee.

Lane: Now I'll turn the call over to Lane for opening remarks.

Lane: Thank you, Homer, and good morning, everyone. I am pleased to report that we delivered positive results for the first quarter despite heavy maintenance activity across our

Lane: and a tough margin environment and the renewable default segment. This is a credit to the strength and discipline of our operations, optimization, and commercial teams.

Lane: For finding margins improved through the quarter, with US light product demand slightly higher than last year and product inventory below the same period last year.

Lane: and in January our board approved a 6% increase to the quarterly cash dividend further demonstrating our strong financial position.

Lane: We continue to progress the SEC unit optimization project at St. Charles that will enable the refiner to increase the yield of high-valued products, including high-out cane

Lane: The project is estimated to cost 230 million as expected to start up in 2026 and we are pursuing other short cycle high return optimization projects around our existing refining assets.

Lane: Looking ahead, we expect tight product supply demand balances and low product inventories to support refining fundamentals ahead of the driving seasons.

Lane: In closing, we remain focused on the things that we can control, pursuing excellence in operations, deploying the only capital with the uncompromising focus on return.

and honoring our commitment to stock cold returns.

Lane: Our commitment remains underpinned by a strong balance sheet that provides us plenty of operational and financial flexibility. So with that, Homer, I'll hand the call back to you.

Homer Bhullar: Thanks, Lane. For the first quarter of 2025, we incurred a net loss attributable to Valero stockholders of $595 million or $1.90 per share compared to net income of $1.2 billion or $3.75 cents per share for the first quarter of 2024.

Homer Bhullar: Adjusted net income attributable to Valero soccer holders was 282 million or 89 cents per share for the first quarter of 2025, compared to $1.3 billion or $3.84 per share for the first quarter of 2024

Homer Bhullar: The refining segment reported an operating loss of 530 million for the first quarter of 2025 compared to operating income of 1.7 billion for the first quarter of 2024 24

Homer Bhullar: Adjusted Operating Income was $605 million for the first quarter of 2025 compared to $1.8 billion for the first quarter of 2024 .

Homer Bhullar: Refining throughput volumes in the first quarter of 2025 average, 2.8 million barrels per day, or 89% throughput capacity utilization.

Homer Bhullar: Refining cash operating expenses for $5.07 for Barrel in the first quarter of 2025.

Homer Bhullar: The renewable diesel segment reported an operating loss of 141 million for the first quarter of 2025 compared to operating income of 190 million for the first quarter of 2024 24

Homer Bhullar: Renewable Diesel Sales Volumes Average, 2.4 million gallons per day in the first quarter of 2025.

Homer Bhullar: The ethanol segment reported 20 million of operating income for the first quarter of 2025 compared to 10 million for the first quarter of 2024 2004.

Homer Bhullar: Adjusted Operating Income was $39 million for the first quarter of 2024. That's an all-production volume's average 4.5 million gallons per day in the first quarter of 2025.

Homer Bhullar: For the first quarter of 2025, GNA expenses were $261 million, net interest expense was $137 million, depreciation and amortization expense was $691 million, and income tax benefit was $265 million.

Homer Bhullar: Included in this amount was 157 million favorable change in working capital and 67 million of adjusted net cash used in operating activities associated with the other joint venture member share of DGD

Homer Bhullar: and excluding these items, adjusted net cash provided by operating activities was 862 million in the first quarter of 2025.

Homer Bhullar: Regarding investing activities, we made $660 million of capital investments in the first quarter of 2025 of which $582 million was for sustaining the business, including costs for turnaround, catalysts and regulatory compliance and the balance of what's for growing the business. [inaudible]

Homer Bhullar: Excluding capital investments attributable to the other joint venture member share of DGD and other variable interest entities, capital investments attributable to Valera were 611 million in the first quarter of 2025 35

Homer Bhullar: Moving to financing activities, we returned $633 million to our stockholders in the first quarter of 2025.

Homer Bhullar: Of which, 356 million was paid as dividends and 277 million was for the purchase of approximately 2.1 million shares of common stock, resulting in a payout ratio of 73% for the quarter.

Homer Bhullar: and repaid the outstanding principal balances of 189 million of 3.65% senior notes that matured in March, and 251 million of 2.85% senior notes that matured in April .

Homer Bhullar: We ended the quarter with 8.5 billion of total debt, 2.3 billion of total finance lease obligations, and 4.6 billion of cash and cash equivalents. The debt to capitalization ratio net of cash and cash equivalents was 19% as of March 31st, 2025.

Homer Bhullar: and we enter the quarter well capitalized with 5.3 billion of available liquidity excluding cash.

Homer Bhullar: West Coast at 240 to 260,000 barrels per day and North Atlantic at 320 to 340,000 barrels per day.

Homer Bhullar: With respect to the renewable diesel segment, we now expect sales volumes to be approximately 1.1 billion gallons in 2025, reflecting lower production volumes due to economics.

Homer Bhullar: For the second quarter, net interest expense should be about 135 million.

Homer Bhullar: Total depreciation and amortization expense in the second quarter should be approximately 780 million, which includes 100 million of incremental depreciation expense related to our plan to cease refining operations at our Banisha Refinery by the end of April 2026.

Homer Bhullar: We expect this incremental amount related to the Benesha Refinery to be included in DNA for the next four quarters, resulting in a quarterly earnings impact of approximately 25 cents per share based on current shares outstanding.

Homer Bhullar: For 2025, we still expect GNA expenses to be approximately $985 million.

Homer Bhullar: That concludes our opening remarks. Before we open the call to questions, please limit each turn in the Q&A to two questions. If you have more than two questions, please rejoin the QS time permits to ensure other scholars have time to ask their questions.

Homer Bhullar: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Homer Bhullar: The confirmation tunnel will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue for participants using speaker equipment and maybe necessary to pick up your hands up before pressing the star keys. One moment please will be poll for your questions.

Homer Bhullar: Our first questions come from the line of Manav Gupta with UBS. Please proceed with your questions.

Speaker Change: So Gary, there's a lot of chatter around here on tariffs and recessions and whatever but what are you seeing in terms of you know the market dynamics supply demand out there for refined products and the second one is can you talk a little bit about the crude differentials and the quality discounts given everything which is going around you know opaque probably raising volumes lined up shutting down and probably tariffs so if you could address those two questions thank you.

Speaker Change: If you look at the seven day average trends to our wholesale system, we're back to just below that million barrel a day level. We're showing a 1% year over year increase in gasoline sales.

Speaker Change: and a 6% year-over-year increase in diesel volumes. Diesel sales have really been supported by higher agricultural demand as we started planning season in the mid-continent.

Speaker Change: If you look at the DOE demand data for total life products, it indicates a year-over-year increase in total life product demand in the neighborhood of 300,000 barrels a day, which we believe is pretty accurate. It looks to us like the DOE is under-reporting gasoline demand a little.

Speaker Change: If you look at the ethanol blending data, it would indicate gasoline demand flat to slightly up from last year, jet demand year to date slightly up, and then a really nice bump and diesel demand driven largely by the cold temperatures we experienced early in the year.

Speaker Change: Globally, I think we've seen stronger light product demand as well and more than was expected. The consultant's data varies greatly here but if you take an average of the data, it would show a year over your increase in total light product demand globally of around a million barrels a day which we think is pretty close.

Speaker Change: Our data shows we had about 640,000 barrels a day, a new refining capacity come online during the quarter, but then we had two refineries shut down with a combined capacity of 410,000 barrels a day.

Speaker Change: Total light product demand globally up a million barrels a day, 230,000 barrels a day of net refinery capacity additions and then a little lower refinery utilization due to turn around. So you combine all that and you would expect a disease and inventory draws, which is what we've seen.

Speaker Change: Total light product inventory is drawn back to the point where once again below the five-year average range currently 36 million barrels below the five-year average 8 million barrels below where we were last year at this time [inaudible]

Speaker Change: As we head into driving season gasoline fundamentals, look constructive. Gasoline inventory toward the bottom, the five year average range.

Speaker Change: The man that are slightly above last year, West Coast Gasoline is a 12-year low for this time of year.

Speaker Change: And then the strength in European gasoline is really keeping their barrels in Europe versus the normal transatlantic export flow into Newark Harbor Additionally that strength in European gasoline is opening up more exports for US Gulf Coast refineries in the Latin America

Speaker Change: The Arb to Ship on Colonial to New York Harbor is open. The Arb to Ship from the US Gulf Coast Europe is open and the Arb to Ship to Latin America is open. So, you know, when you look at record low inventories and still have open arms to ship product domestically and globally from the US Gulf Coast, I think that speaks well for diesel not just domestically but also globally. [inaudible]

Speaker Change: VGO remains fairly expensive, you know, indicating tightness in that market, which likely says FCC's and the hydrocrackers have to compete for incremental VGO barrels.

Speaker Change: So, again, the fundamentals look very strong and have exceeded our expectations so far for the year.

Speaker Change: I think when you go through all this data, it's actually surprising. We don't see stronger refinery margins. You know based on the strong fundamentals, I'd say refinery margins are undervalued. I think right now it's the uncertainty around the economy. You know what I mean?

Speaker Change: People have made assumptions of what happens with the economy and its impact on demand for our products and those assumptions are really driving the market right now. Thus far, the economy looks like it's been fairly resistant, but we'll have to see all of you guys probably have better insight to that than what I do.

Speaker Change: Turning to the crude differentials, it's been hard to really have clarity on what's going to happen with the crude differentials in the quarter. A lot of the discussions on tariffs and sanctions have certainly made that hard to see where the direction that's going. I think when you look at bullish factors. [inaudible]

Speaker Change: Certainly, the Line Del Repinary shutting down in the US Gulf Coast to put 200 to 250,000 barrels a day of additional.

Speaker Change: I'm heavy sour barrels on the market. We saw a record Canadian production in the first quarter and it looks like Canadian production continues to ramp up.

Speaker Change: News yesterday, was that maybe even higher than the 500,000 barrels a day?

Speaker Change: Offsetting that somewhat, you know, we continue to see Mexican production decline a little and then the potential for sanctions impacting Iranian and Venezuela in production. But you know, you combine all that and I think the likelihood is that you see more medium and heavy sour barrels on the market which speaks well.

Speaker Change: to the deferentials moving forward. I don't think there's much room for them to come in any because, you know, medium and heavy showers are already trading at economic parity, the light's sweet. And in fact, we're seeing economic singles approach the point where you would back off a heavy peak stocks and even spare coping capacity.

Thank you so much.

Speaker Change: Thank you. Our next questions come from the line of Roger Read with Wells Fargo. Please proceed with your questions.

Roger Reed: Thank you. Good morning. Thank you. Good morning. Good morning, Roger. I'd like to.

Speaker Change: Good morning, everybody. Let's come back on the guidance just to

Speaker Change: for the second quarter, a little light relative to what I was anticipating, a little, I guess you can say a little light relative to a year ago. Is this a function of maintenance? Because it seems to run a little counter to the explanation you were just offering there, Gary. Thank you very much.

Speaker Change: Hey Roger, this is Greg. Yeah, it is maintenance and you can see it in a couple of the particular regions, North Atlantic and Midcon. You can see those quite a bit lower and that's all maintenance driven and the Gulf Coast and the West Coast where most of the maintenance is complete. We're getting those kind of back to what you would typically see for throughput. Bye bye.

Speaker Change: Are we looking at the ability to run some of the downstream units or should we take this at face value on volumes?

Roger, let's Greg again.

Speaker Change: You think about the mid-cond in particular, it's hard to bring other feedstocks in when you've got the front end of the plants down so you probably don't see as much of that in those regions, North Atlantic as well as you would see in like the Gulf Coast [inaudible]

Speaker Change: Great, that would have been my interpretation as well. Okay, thank you, I'll turn it back to you.

Speaker Change: Thank you. Our next questions come from the line of Ryan Todd with Piper Sandler. Please proceed with your questions.

Great, thanks.

Ryan Todd: Can you walk through the decision to close the Venetia Refinery right now, what's changed?

Ryan Todd: and how should we think about the future risk to or the environment for the Wilmington refinery?

Ryan Todd: really for the past 20 years and the consequence of that is the regulatory and enforcement environment is the most stringent and difficult of anywhere else in North America.

Ryan Todd: You know, and so if you sort of think about what's happening on the West Coast since COVID, you've had several Refiners closed, you have another one closed this year.

So then you start thinking about our asset, babe. Bye.

Ryan Todd: and we're looking at the difficulty and all that. So, Venetia operates in the more difficult part of California with respect to the regulatory and enforcement side of this, and then on top of that Venetia costs considerably more to maintain versus Wellington.

Ryan Todd: Can you maybe walk through where we are on the, I mean markets are trying to reach a new equilibrium under the, under the new, you know, PTC regime. Can you maybe walk through where you think we are on the past normalization?

Ryan Todd: You know, I know you booked some 45D credits in the first quarter. You know, how much should we expect to see you book should we expect to see that improve going forward from here. So I guess maybe just some thoughts on how that market normalizes and maybe improves over the course of the year.

Ryan Todd: Yeah, this is Eric. As you look at the first quarter, one thing that we should be clear about is that we had catalyst changes on DGD-1 and DGD-2, so you had a pretty significant volume impact in the first quarter that reduced a lot of the margin opportunity for the segment.

Speaker Change: was able to be captured because it took us a little while to get those contracts and operations shifted over. Going forward, we see we should get 100% of eligible credits on PTC for all three of those product lines.

Speaker Change: PTC eligibility and just call it flat price. We still see the market moving around there but but going forward we think we've got that solved. So you know as I said before. So we're going forward.

Speaker Change: If you look at the shift from the $1 blender tax credit to this

Speaker Change: Foreign feedstocks into SAF still count, but foreign feedstocks into RD do not. And so we have kind of a unique position there that as you look at your product allocations and your feedstocks, you have to take all of that into account. The backdrop, the other backdrop you have here is...

Combine that with this.

Speaker Change: So you have a drop in production plus this anticipated increase in obligation there is some potential tailwind out there in the future at some point if that gets proposed to the EPA and the EPA approves that probably sometime in the third or fourth quarter of this year.

Speaker Change: The California LTFS program, those obligations that were pushed off initially have been resummeted to the OAL for approval so in the next 30 days or so we should hear from California whether or not they're going to increase their work.

Speaker Change: LCFS obligation by 9% going back to Jan 1 that should put another potential increase of LCFS prices.

Speaker Change: on the horizon. So, hard to predict what California will do on that, but that is the timeframe for when we should get an answer, you know, yes or no on on LCFS modifications.

Speaker Change: and or this anticipated increase beginning in the 2026 obligation. That's going to set what the overall volume looks like in terms of performance versus overall obligation. So...

It looks like, you know...

Speaker Change: We still see, we'll capture the PTC and we'll be the ones that can optimize between the feedstocks that are that are most desired into these compliance programs and then whether or not they're covered by the PTC.

Great. Thanks for all the details.

Speaker Change: Thank you. Our next questions come from the line of Theresa Chen with Barclays. Please proceed with your questions

Teresa Chen: My Eric, just to follow up on that last question, so it sounds like the drop-in production in imports is structural, absent recovery in deforever and maybe more to come on that front.

Teresa Chen: from a supply and competitive landscape perspective. Do you see some of that supply creeping back over time, or how does this settle out as the market tries to find equilibrium? [inaudible]

Teresa Chen: Well, maybe I'll put it in context of this run obligation.

Teresa Chen: Ren obligation. And so what was really keeping a lot of that volume flowing was the BTC. And so when you take the BTC out

Teresa Chen: Then suddenly, as we've always said, the BTC is what kept the marginal producer operating. So we see a lot of those, and this is public, there's a lot of announcements.

Teresa Chen: Marginal producer will come back into the market, because right now there's not an incentive for them to run, particularly any kind of individual-based BD or RD. So...

Teresa Chen: Or you see the Rin bank tightened to the point where we are physically short. I think this year we are still long in the D4 market, but it is starting to tighten and you can kind of see this in the D4-D6 Rin spread which is you know sometimes reaching ten cents. [inaudible]

Teresa Chen: You know, ten cents a gallon on the differential there. So there's there's some anticipation and recognition of this

I think as that continues through the year.

Teresa Chen: the B.D. producer that used to get a dollar and so. So,

Teresa Chen: How that will rationalize is, I think everyone will, and there's no question from an ag standpoint, the farmers want to run their BD units and their soybean oil, otherwise you're going to see soybean oil can continue to get stranded from a fill market [inaudible]

Teresa Chen: So, I think it's really waiting to see if that rim is going to move to offset the loss of the transition from the BTC to the PTC. I think that's the only way you're going to see incremental production come on in the back half of the year.

Speaker Change: That's helpful. Thank you. And on Mexico within the refining segment, was you be able to provide an update on your suspension from the registry of importers, what led to this, and what is the path forward from here?

Speaker Change: We were notified by Mexico's tax administration service that our import permit was being temporarily suspended.

Speaker Change: We were told at the time that customs in Mexico had some questions as a result of an investigation that they had done that we weren't privy to to do.

Speaker Change: It was disappointing to us that our permit was suspended without any prior notification or opportunity to clarify, and the timing of all this right before the Easter holiday was especially bad. Nevertheless, once we had the opportunity to reach out to the stakeholders and countries, sit down and go through all the records and data,

Speaker Change: with Customs in Mexico. The Custom Authority recognized that Valero was in full compliance of our import, reporting, and tax obligations and we were quickly exonerated of any wrongdoing. So, you know, although this is all unfortunate and created significant supply disruption for our customers. [inaudible]

Speaker Change: It is part of an effort in Mexico to limit the importation of illegal fuel which is an effort we very much applaud and will positively impact our business down there going forward.

Thank you.

Speaker Change: Thank you. Our next questions come from the line of Neil Mehta with Goldman Sachs. Please proceed with your questions.

Ted, good morning, Lane team.

Neil Mehta: You know, you guys have done a great job of continuing to return cash to shareholders and you've talked about cash balances of four to five billion dollars and I think you're at four or six right now. So just talk about in this period of macro uncertainty, you know, how you thinking about taking advantage of, you know, the balance sheet to shrink the share count. [inaudible]

Neil Mehta: Hey Neil, it's Homer. Yeah, you're right. I mean, obviously given the strength of our balance sheet and our current cash position we have plenty of flexibility. And we continue to lean into buybacks with excess free cash logon to shareholder returns impact as you can I'm sure you're aware.

Neil Mehta: We've drawn down excess cash the last three quarters as we've guided to.

Neil Mehta: That commitment to shareholder returns should remain a floor in any sort of accessory cash level continue to go toward share buybacks

Neil Mehta: So can you speak specifically to that product as you think about the distillate pool, how you're thinking about the outlook for jet as it feeds into that a lot of moving pieces and diesel but it feels like it's ground zero for the refining debates.

Neil Mehta: Yeah, I agree. Again, you know, kind of some of the things I pointed out. I mean, it's kind of amazing when you're close to historic lows on diesel inventory in the United States and yet we have open arms to export to Latin America and Europe . It tells you, you know, both those regions are very short diesel as well. You know, on jet.

Neil Mehta: We saw very strong nominations the first part of the year. You're starting to see some of the airlines talk about weaker.

Neil Mehta: Jet Demand Moving Forward. We haven't seen signs of that yet. Historically though, you know, when people start to switch and not take flights for their summer vacation plans, it translates into higher gasoline demand. And...

Thank you.

Speaker Change: Thank you. Our next questions come from the line of John Royall with JP Morgan. Please proceed with your questions.

Hi, good morning. Thanks for taking my question.

Speaker Change: Should we think about through puts as relatively locked in sitting at the end of April , or can we see some economic adjustments if this downside demand case were to materialize and reflect more in spot cracks?

Speaker Change: Hey John , it's Greg. I would tell you that's how we see the quarter shaping up as we look at it now. Obviously, as we always do, we evaluate the market conditions and adjust our plans accordingly.

Speaker Change: I think if you think about what Gary just shared kind of the macro view, it'd be hard to imagine in this short-term period this next few months that we would see ourselves moving to some kind of a lower throughput on an economic basis.

Speaker Change: So, I think you can probably say this is where we expect to be to be in.

Speaker Change: Maximaise, through put, maximise margin to capture as much value as we can.

Speaker Change: You know, so really our lower guidance is a function of maintenance, not some outlook that we think there's lower demand in the future. Yeah, absolutely. And maybe just on that, we always talk about doing a lot of maintenance in the first quarter. Again, if you think about the regions we're talking about the mid-continent and the North Atlantic.

Speaker Change: from a weather perspective to doing a lot of work early in the year. You kind of wait till you've got a little better weather. Take less risk from that standpoint. So that's why you see a bit more work in the second quarter that you might typically see out of us. And you don't see a lot in the Gulf Coast where we tend to do that in the first quarter.

Speaker Change: That's very helpful. Thank you. And then my follow-up is just another one on Benisha and forgive me if I'm overanalyzing this, but just just reading the wording on the press release. It struck us as maybe not 100% definitive in terms of the plan. So, maybe my question is. Okay.

Speaker Change: is the door open for the state or the city to make any changes or concessions that could cause you to think differently about your plans for Benisha and do you expect that there will be some sort of discussion there?

Speaker Change: You know, it's also a really very complex regulatory and policy-driven environment that we're dealing with and so, you know, if you understand that challenge and how significant it is,

Speaker Change: I think you need to factor that in, but we are having discussions with the state, but our intent right now is to close the refinery.

Very clear, thank you.

Speaker Change: Thank you. Our next questions come from the line of Doug Leggate with Wolf Research. Please proceed with your questions.

Speaker Change: Thanks, good morning everyone. Glenn, I'm sorry to pown on the West Coast, but I also have a question on that, still mind.

Speaker Change: I think that was the implication of the language. Can you talk about what the prognosis is for Wilmington as part of this overall debate, over the viability, the future viability of the West Coast Assetters? I've got to follow up on the same topic, please.

Well, I'll start. I'll let Homer start soon.

Speaker Change: explaining the impairment process, and then I'll add to it. So go ahead. Yeah, Doug, the impairment, so obviously we perform an impairment asset.

Speaker Change: on both of these assets based on the continued evaluation of strategic alternatives, which remains.

Speaker Change: But based on the analysis, we obviously concluded that the current book value of the refinery was not recoverable.

Speaker Change: And so therefore we revised it down to reflect the fair value of the assets [inaudible]

Speaker Change: Benesha, and for Wilmington. In terms of the overall impairment, it was 1.13 billion of which about 900 million was for Benesha 900 1 million and Wilmington was 230 million.

Speaker Change: Obviously, presumably, these are free cashflow negative, otherwise you wouldn't be taking the impairment, so you can give some idea of what the implications are for your capital spending going forward when Benisha does go offline and whether Wilmington is still free cashflow positive. I'll leave it there.

Speaker Change: for the last 10 years. Benisha was generally higher operating expense, lower EBIDA, higher capital, and then as a result, obviously lower cash flow compared to Wilmington. So, I'm not sure we'll break it down any more detail than that, but that would give you some sense for.

Speaker Change: which is a large cash outlay and you think about how the facility has performed, looking back. Well, that's no guarantee in the future. It does give you some sense or some cause you to pause as to whether or not this is the time to take different action, which is what you see us doing.

Speaker Change: Great, that's very helpful guys, thanks so much, I'll take the rest of lane.

Speaker Change: Thank you. Our next questions come from the line of Paul Cheng with Scotia Bank. Please proceed with your questions.

Hey guys, good morning.

Speaker Change: I have to apologize because I want to ask a slightly different angle on when we can, when we can. Can you tell us that when the, when was the last major turn of runs that you did at Wemmington?

Speaker Change: I'm going to go back and look at the biggest ones, the FCCO, okay, we just did it all up here. Yeah, just here and just recently we did the FCC unit fall if that's what you're looking for.

Speaker Change: Paul, nice drive and unfortunately we can't comment on our future turnaround plans.

Okay, that's fair. Second question on F-E-F.

Speaker Change: Maybe this is for Eric. What's your production expectation in the second quarter based on the current margin for Sanct? And also that what's the current pipeline gint in plan for the second unit, FID?

Speaker Change: We see HBO, Oversaf, and the Arcus Quote. So, you know, our last barrel economics are still looking at some barrels are more economic to put into an RD product into Europe .

So, but overall we see growing interest in SAF.

We see some growing interest in the voluntary markets.

Speaker Change: You know, we see in the US there's there's there's interest in the US and like I said particularly some of these corporations that are maybe looking to buy direct rather than through an airline. [inaudible]

from a certainly standpoint.

Speaker Change: So, you think that even in today's economic and with the PTC, you still not sufficient that for you to join the max out itself, compared to Audi?

So,

Speaker Change: That is correct. The PTC is not adequate by itself to justify the project. The other thing to keep in mind is

Speaker Change: When you are allocating, so if you have a unit that makes 50% RD, 50% SAF, you can't allocate all the feed stocks to one product. You have to allocate based on your product mix coming off the tower. And so what you see is...

Speaker Change: and more of the work in order to justify the project. And as I said before, the PTC is much lower compared to the BTC, and that is reducing the overall RD margins. So if you think about

Speaker Change: If RD was break even and SAF was positive, then the SAF market has to be even stronger in order to meet your...

Speaker Change: Your minimum 25% return, whereas before, you know, both products were positive and so really what we're looking for is you've got to see the RD market become . . . .

Speaker Change: More Attractive, and then I think you still have to see the staff demand exceed our current capability before we would commit to a further project. But yes, on paper it looks like it should work, but I think you've got to see the market actually create a poll before we would commit to doing that project.

Okay, thank you.

Thank you, Paul.

Speaker Change: Thank you. Our next questions come from the line of Joe Latch with Morgan Stanley . Please proceed with your questions.

Great. Thanks for wanting me to take my questions.

Joe Latch: So, it's hoping to get your perspective on pad sides going forward with Wonder Fund are closing this year, Venetia closing early next year, California is going to become even more reliant on imports. So, this result took the more volatile and probably higher margins to pull sufficient imports in the west coast or how do you see it playing out?

Joe Latch: Yeah, this is Gary. Our view has been California potentially be short gasoline for several years, with periods of higher import needs during turnarounds and unplanned outages.

Joe Latch: Decel, the market looks well supplied, but the tighter supply demand balances will likely cause more volatility in the market. One unplanned refinery outages occur, however, you know, from what we've seen so far, these tend to be fairly short lived and only last until waterborne barrels can make their way into the market. .

Speaker Change: Great, thanks, that makes sense. And then Chippin Gears, I wanted to ask about the ethanol segment. While margins are still challenged, tougher came in a bit better than we had expected, could you talk to the latest dynamics for that segment and outlook going forward for this year?

Speaker Change: You're going to have a record planting for corn, Brazil has a record crop that is in the ground, so we expect corn prices, flat corn prices to be out or below where they are from last year [inaudible]

Speaker Change: Natural Gas is cheap. So from a feedstock standpoint, ethanol looks advantaged. Obviously it follows a lot of gas lean demand. We're the largest exporter of ethanol. So we saw record exports in the first quarter, but I think it's going to be a question of

Speaker Change: Last year was right around mid-cycle, so I'd say ethanol looks like sort of a mid-cycle year from an outlook standpoint, but from our, you know, operation plan, I mean we'll be at max production given these economics.

Great. Thanks for taking my questions.

Speaker Change: Thank you. Our next questions come from the line of Jason Gabelman with Cowan. Please proceed with your questions

Speaker Change: Related to natural gas dynamics and it's a two-parter, you know, in the U.S.

Speaker Change: You've seen natural gas prices move higher impacting your operating expense and I wonder if you're doing anything on the ground to mitigate that expense and then conversely in Europe given you have

Speaker Change: You know, in an asset there, as an natural gas prices are moving lower, are you seeing the ability for that region to run its secondary units at higher rates and add more product to the market? Thanks.

You have a fair amount of transportation.

Speaker Change: and logistics disruptions as well. So with that volatility, we've been a bit cautious to try to go out and do anything on a forward basis and let's talk to you.

kind of readable as needed basis. [inaudible]

Speaker Change: Again, as you know, some of that depends on where that LNG is pointed.

Speaker Change: and some of the economic factors that will drive that. In Pembroke, the only thing I could really say about that is we're natural gas prices are currently for our operation. They aren't causing us to really change our mode of operation.

Speaker Change: They're in a place where we're going to run the way we typically run, maximizing throughput, maximizing production. The only thing we ever look at there is maybe shifting fuel sources between natural gas and different NGLs that might prove to be a bit more economic, but that's a fairly typical optimization we do on a regular basis. [inaudible]

Okay.

Speaker Change: I think most of my other questions were answered, so I'll leave it there. Thanks

Bye.

Speaker Change: Thank you. Our next questions come from the line of Jean Ann Salisbury with Bank of America. Please proceed with your questions

Speaker Change: Hi, good morning. Can you talk about what you expect for the one-time overall cash impact that you expect from closing Venetia between, you know, the land value is selling down inventory and then just closure cash costs? And is Venetia a good proxy for the exit cost of a US refinery?

That's the number.

Speaker Change: Yeah, this is Jason. You'll get the cash for the inventory fairly quickly. The other cash will be expanded that's represented by the AOLRO for a series of years.

Several years after the closure. [inaudible]

Speaker Change: As we take, undertake clean up and dismantling and things like that and any realization of real estate related proceeds a several years out too.

Speaker Change: Okay, thank you. And then as a follow-up LPG tariffs on US LPG have kind of gone into effect in China. Do you see this materially impacting feedstock costs or just not there are light ends pricing if it continues?

Speaker Change: Jean, this is Greg. Yeah, I'll start Gary, may have something to add, but at this point we haven't seen it have much of a disruption on overall trade flows and market prices here in the US. So I think it will remain to be seen whether that starts to develop as the year progresses.

Speaker Change: Yeah, I think the combination of what's happening in China and Venezuela, NAFTA is still flowing to Venezuela as deal you in, but that'll kind of come to an end at the end of May. At that time frame, it's likely that you could see NAFTA get a little weaker.

OK, great. That's all for me. Thank you.

Speaker Change: Thank you. Our final questions will come from the line of Matthew Blair with Tudor Pickering Holden Company. Please proceed with your questions.

Matthew Blair: Great, thanks and good morning. You provided some helpful commentary on the biofuel regulatory front in regards to things like the RVO and the California low carbon fuel standard. I wanted to get your take. Do you see momentum building for nationwide E 15 and if so, could you talk about how that might affect your business?

You know, I don't think you see a lot of...

Speaker Change: Positive support for that supply chain, completely shifting to E15, there's still a lot of complexity at the retail level, at the consumer level's willingness to switch so...

Speaker Change: Now, that all being said, in a lot of those Midwest states we're watching, we do see some incremental E-15, it's not

substantial growth.

Speaker Change: Sales of E-15. I think nationally we're still far away from that becoming a reality or even a proposal. The governors did ask for that but I doubt EPA is going to do that.

perform

Speaker Change: But there is not enough ethanol in the US to go to E-15. I think we've done the math and you can get to a max of about E-12.

Speaker Change: So, if there was some kind of mandate to go to E15, you would be you would be short in the US and it would require [inaudible]

Speaker Change: Probably, in the short term, some import of ethanol from likely Brazil. So,

Speaker Change: Great, thank you. And then on the refining side, do you think it's reasonable to assume a quarter of a quarter improvement in capture for the second quarter as you roll off the maintenance from the first quarter or are there other considerations that we should take into account?

Against us on capture, so that's one thing to watch.

Great, thanks for your comments.

Speaker Change: Thank you. We have reached the end of our question and answer session. I would now like to hand the floor back over to Homer Bhullar for closing comments.

Speaker Change: Thanks Darrell and appreciate everyone joining us today. Obviously feel free to contact the IR team if you have any additional questions. Thanks everyone and have a great day.

Speaker Change: Ladies and gentlemen, thank you. This does conclude today's telecomference. We appreciate your participation. You may disconnect your lines at this time.