Valero Energy Q4 2025 Valero Energy Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Valero Energy Corp Earnings Call
A question and answer session will follow the formal presentation.
If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Donovan, VP of investor relations. Thank you, please. Go ahead.
Good morning everyone and welcome to Valero Energy. Corporations fourth quarter, 20125 earnings conference call.
I'm joined today by Layne Riggs chairman CEO and president. Gary Simmons, Executive, Vice President and coo Rich, Walsh Executive, Vice, President, and general counsel Homer. Ber senior vice president and CFO as well as several other members of Valero senior management team.
If you have not yet received a copy of our earnings release, it is available on our website at investor valero.com.
Included with the release or supplemental. Tables, providing detailed financial information for each of our business segments.
Rich Walsh: Greetings and welcome to Valero Energy Corp Q4 2025 Earnings Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Donovan, VP of Investor Relations. Thank you. Please go ahead.
Operator: Greetings and welcome to Valero Energy Corp Q4 2025 Earnings Call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Donovan, VP of Investor Relations. Thank you. Please go ahead.
Along with reconciliations and disclosures for any adjusted Financial metrics reference during today's call.
If you have any questions after reviewing these materials, please feel free to reach out to our investor relations team.
Before we begin, I would like to draw your attention to the forward-looking statement. Disclaimer, included in the press release.
Lane Riggs: Good morning, everyone, and welcome to Valero Energy Corporation's Q4 2025 earnings conference call. I'm joined today by Lane Riggs, Chairman, CEO, and President; Gary Simmons, Executive Vice President and COO; Rich Walsh, Executive Vice President and General Counsel; Homer Bhullar, Senior Vice President and CFO; as well as several other members of Valero's senior management team. If you have not yet received a copy of our earnings release, it is available on our website at investovalero.com. Included with the release are supplemental tables providing detailed financial information for each of our business segments, along with reconciliations and disclosures for any adjusted financial metrics referenced during today's call. If you have any questions after reviewing these materials, please feel free to reach out to our investor relations team. Before we begin, I would like to draw your attention to the forward-looking statement disclaimer included in the press release.
Brian Donovan: Good morning, everyone, and welcome to Valero Energy Corporation's Q4 2025 earnings conference call. I'm joined today by Lane Riggs, Chairman, CEO, and President; Gary Simmons, Executive Vice President and COO; Rich Walsh, Executive Vice President and General Counsel; Homer Bhullar, Senior Vice President and CFO; as well as several other members of Valero's senior management team. If you have not yet received a copy of our earnings release, it is available on our website at investovalero.com. Included with the release are supplemental tables providing detailed financial information for each of our business segments, along with reconciliations and disclosures for any adjusted financial metrics referenced during today's call. If you have any questions after reviewing these materials, please feel free to reach out to our investor relations team. Before we begin, I would like to draw your attention to the forward-looking statement disclaimer included in the press release.
In summary it says that statements made in the press release. And during this conference call that expressed the companies or Management's expectations or forecasts of future events. Our forward-looking statements and our intended to be covered by the Safe Harbor Provisions under Federal Securities laws.
Actual results May differ from those expressed or implied due to various factors which are outlined in our earnings release and filings with the SEC.
I'll now turn the call over to Lane for opening remarks.
Thank you, Brian. And good morning everyone. I'd like to begin by highlighting some of our team's accomplishments in 2025.
Last year was our best year for personnel. Safety, and environmental performance building on personnel and process. Safety records. We set in 2024.
Our continued commitment to Safe reliable and environmentally responsible operations result in a record refining. Throughput and record ethanol production
We're both the fourth quarter and the full year.
We also set a record for mechanical availability in 2025, these accomplishments reflect the hard work, expertise and dedication of our entire team.
Lane Riggs: In summary, it says that statements made in the press release and during this conference call that express the company's or management's expectations or forecasts of future events are forward-looking statements and are intended to be covered by the safe harbor provisions under federal securities laws. Actual results may differ from those expressed or implied due to various factors, which are outlined in our earnings release and filings with the SEC. I'll now turn the call over to Lane for opening remarks.
In summary, it says that statements made in the press release and during this conference call that express the company's or management's expectations or forecasts of future events are forward-looking statements and are intended to be covered by the safe harbor provisions under federal securities laws. Actual results may differ from those expressed or implied due to various factors, which are outlined in our earnings release and filings with the SEC. I'll now turn the call over to Lane for opening remarks.
We delivered strong financial results in the fourth quarter, reinforcing our consistent track record of operational and Commercial excellence.
We captured favorable refining margins, during the quarter driven by strong product cracks and widening, sour crude discounts and our fourth quarter performance. Capped off excellent Financial results for the year.
Manav Gupta: Thank you, Brian, and good morning, everyone. I'd like to begin by highlighting some of our team's accomplishments in 2025. Last year was our best year for personnel safety and environmental performance, building on personnel and process safety records we set in 2024. Our continued commitment to safe, reliable, and environmentally responsible operations resulted in a record refining throughput and record ethanol production for both the Q4 and the full year. We also set a record for mechanical availability in 2025. These accomplishments reflect the hard work, expertise, and dedication of our entire team. We delivered strong financial results in the Q4, reinforcing our consistent track record of operational and commercial excellence. We captured favorable refining margins during the quarter, driven by strong product cracks and widening sour crude discounts, and our Q4 performance capped off excellent financial results for the year.
Lane Riggs: Thank you, Brian, and good morning, everyone. I'd like to begin by highlighting some of our team's accomplishments in 2025. Last year was our best year for personnel safety and environmental performance, building on personnel and process safety records we set in 2024. Our continued commitment to safe, reliable, and environmentally responsible operations resulted in a record refining throughput and record ethanol production for both the Q4 and the full year. We also set a record for mechanical availability in 2025. These accomplishments reflect the hard work, expertise, and dedication of our entire team. We delivered strong financial results in the Q4, reinforcing our consistent track record of operational and commercial excellence. We captured favorable refining margins during the quarter, driven by strong product cracks and widening sour crude discounts, and our Q4 performance capped off excellent financial results for the year.
Strategically, we continue to make progress on our FCC unit optimization project at our St. Charles Refinery. This 230 million initiative will enhance our ability to produce high-valued products, including alet
We still expect the project to begin operations in the second half of 2026.
Looking ahead, We Believe refining. Fundamentals should remain supported by continued demand growth and tight Supply environment driven by limited capacity additions.
So our crew differentials are also expected to benefit from increased Canadian crew production along with additional Venezuelan crew Supply and to the US.
In closing plural, strong financial results.
Speaker #3: accomplishments reflect the hard work, expertise, and dedication of our entire team. We delivered strong financial results in the fourth quarter, reinforcing our consistent track record of operational and commercial excellence.
And record. Operating performance highlight, our operational commercial Excellence. We remain committed to our disciplined Capital. Allocation framework that prioritizes balance sheet, strength, discipline, Capital, Investments, and shareholder returns with that. I'll turn the call over to Homer.
Manav Gupta: Strategically, we continue to make progress on our alkylation unit optimization project at our St. Charles Refinery. This $230 million initiative will enhance our ability to produce high-valued product yields, including alkylate. We still expect the project to begin operations in the second half of 2026. Looking ahead, we believe refining fundamentals should remain supported by continued demand growth and a tight supply environment driven by limited capacity additions. Sour crude differentials are also expected to benefit from increased Canadian crude production, along with additional Venezuelan crude supply into the US. In closing, Valero's strong financial results and record operating performance highlight our operational and commercial excellence. We remain committed to our disciplined capital allocation framework that prioritizes balance sheet strength, disciplined capital investments, and shareholder returns. With that, I'll turn the call over to Homer.
Strategically, we continue to make progress on our alkylation unit optimization project at our St. Charles Refinery. This $230 million initiative will enhance our ability to produce high-valued product yields, including alkylate. We still expect the project to begin operations in the second half of 2026. Looking ahead, we believe refining fundamentals should remain supported by continued demand growth and a tight supply environment driven by limited capacity additions. Sour crude differentials are also expected to benefit from increased Canadian crude production, along with additional Venezuelan crude supply into the US. In closing, Valero's strong financial results and record operating performance highlight our operational and commercial excellence. We remain committed to our disciplined capital allocation framework that prioritizes balance sheet strength, disciplined capital investments, and shareholder returns. With that, I'll turn the call over to Homer.
Thank you, Lane for the fourth quarter of 2025 net income attributable to Valero stockholders was 1.1 billion or 3.73 cents per share compared to 281 million or 88 cents per share for the fourth quarter of 2024.
Excluding the adjustments shown in the earnings release tables. Adjusted net income attributable to Valero stockholders was 1.2 billion or 3.82 cents per share for the fourth quarter of 2025 compared to 2007 million or 64 cents per share for the fourth quarter of 2024.
For 2025 net, income attributable to Valero stockholders was 2.3 billion or 757 cents per share compared to 2.8 billion or 8.58 per share in 2024 2025 adjusted. Net income attributable to Valero stockholders was 3.3 billion or $10.61 per share, compared to 2.7 billion or 8.48 cents per share in 2024
Homer Bhullar: Thank you, Lane. For the fourth quarter of 2025, net income attributable to Valero stockholders was $1.1 billion, or $3.73 per share, compared to $281.88 per share for the fourth quarter of 2024. Excluding the adjustments shown in the earnings release tables, adjusted net income attributable to Valero stockholders was $1.2 billion, or $3.82 per share for the fourth quarter of 2025, compared to $207.64 per share for the fourth quarter of 2024. For 2025, net income attributable to Valero stockholders was $2.3 billion, or $7.57 per share, compared to $2.8 billion, or $8.58 per share in 2024. 2025 adjusted net income attributable to Valero stockholders was $3.3 billion, or $10.61 per share, compared to $2.7 billion, or $8.48 per share in 2024. The refining segment reported $1.7 billion of operating income for the fourth quarter of 2025, compared to $437 million for the fourth quarter of 2024.
Homer Bhullar: Thank you, Lane. For the fourth quarter of 2025, net income attributable to Valero stockholders was $1.1 billion, or $3.73 per share, compared to $281.88 per share for the fourth quarter of 2024. Excluding the adjustments shown in the earnings release tables, adjusted net income attributable to Valero stockholders was $1.2 billion, or $3.82 per share for the fourth quarter of 2025, compared to $207.64 per share for the fourth quarter of 2024. For 2025, net income attributable to Valero stockholders was $2.3 billion, or $7.57 per share, compared to $2.8 billion, or $8.58 per share in 2024. 2025 adjusted net income attributable to Valero stockholders was $3.3 billion, or $10.61 per share, compared to $2.7 billion, or $8.48 per share in 2024. The refining segment reported $1.7 billion of operating income for the fourth quarter of 2025, compared to $437 million for the fourth quarter of 2024.
24 adjusted. Operating income was 1.7 billion for the fourth quarter of 2025 compared to 441 million for the fourth quarter of 2024.
Refining, throughput volumes in the fourth quarter of 2025 average 3.1 million barrels per day or 98% throughput capacity utilization. And as Lane highlighted earlier, we achieved record throughput for both the quarter and the full year
Refining cash operating expenses were 5.3 cents per barrel in the fourth quarter of 2025.
The renewable diesel segment. Reported operating income of 92 million for the fourth quarter of 2025 compared to 170 million. For the fourth quarter of 2024 renewable, diesel segments, sales volumes average 3.1 million gallons per day in the fourth quarter of 2025,
the ethanol segment reported 117 million of operating income for the fourth quarter of 2025 compared to 20 million for the fourth quarter of 2024,
Ethanol production volumes average, 4.8 million gallons per day in the fourth quarter. 2025 also setting a quarterly and full year record
Homer Bhullar: Adjusted operating income was $1.7 billion for the fourth quarter of 2025, compared to $441 million for the fourth quarter of 2024. Refining throughput volumes in the fourth quarter of 2025 averaged 3.1 million barrels per day, or 98% throughput capacity utilization. And as Lane highlighted earlier, we achieved record throughput for both the quarter and the full year. Refining cash operating expenses were $5.03 per barrel in the fourth quarter of 2025. The renewable diesel segment reported operating income of $92 million for the fourth quarter of 2025, compared to $170 million for the fourth quarter of 2024. Renewable diesel segment sales volumes averaged 3.1 million gallons per day in the fourth quarter of 2025. The ethanol segment reported $117 million of operating income for the fourth quarter of 2025, compared to $20 million for the fourth quarter of 2024.
Adjusted operating income was $1.7 billion for the fourth quarter of 2025, compared to $441 million for the fourth quarter of 2024. Refining throughput volumes in the fourth quarter of 2025 averaged 3.1 million barrels per day, or 98% throughput capacity utilization. And as Lane highlighted earlier, we achieved record throughput for both the quarter and the full year. Refining cash operating expenses were $5.03 per barrel in the fourth quarter of 2025. The renewable diesel segment reported operating income of $92 million for the fourth quarter of 2025, compared to $170 million for the fourth quarter of 2024. Renewable diesel segment sales volumes averaged 3.1 million gallons per day in the fourth quarter of 2025. The ethanol segment reported $117 million of operating income for the fourth quarter of 2025, compared to $20 million for the fourth quarter of 2024.
GNA, expenses were 315 million for the fourth quarter of 2025 and 1 billion for the full year.
Appreciation. And amortization expense, was 817 million for the fourth quarter of 2025, which includes approximately 100 million incremental, depreciation, expense related, to our plan to see refining operations at our Benicia refinery.
Net interest expense was 139 million and income tax. Expense was 355 million for the fourth quarter of 2025. The effective tax rate was 25% for 2025.
Net cash provided by operating activities was 2.1 billion in the fourth quarter of 2025 included. In this amount was a 349 million unfavorable impact from working capital and 269 million of adjusted. Net cash provided by operating activities associated with the other joint venture members, share of dgd.
Homer Bhullar: Ethanol production volumes averaged 4.8 million gallons per day in the fourth quarter of 2025, also setting a quarterly and full-year record. G&A expenses were $315 million for the fourth quarter of 2025 and $1 billion for the full year. Depreciation and amortization expense was $817 million for the fourth quarter of 2025, which includes approximately $100 million incremental depreciation expense related to our plan to cease refining operations at our Benicia Refinery. Net interest expense was $139 million, and income tax expense was $355 million for the fourth quarter of 2025. The effective tax rate was 25% for 2025. Net cash provided by operating activities was $2.1 billion in the fourth quarter of 2025. Included in this amount was a $349 million unfavorable impact from working capital and $269 million of adjusted net cash provided by operating activities associated with the other joint venture member share of DGD.
Ethanol production volumes averaged 4.8 million gallons per day in the fourth quarter of 2025, also setting a quarterly and full-year record. G&A expenses were $315 million for the fourth quarter of 2025 and $1 billion for the full year. Depreciation and amortization expense was $817 million for the fourth quarter of 2025, which includes approximately $100 million incremental depreciation expense related to our plan to cease refining operations at our Benicia Refinery. Net interest expense was $139 million, and income tax expense was $355 million for the fourth quarter of 2025. The effective tax rate was 25% for 2025. Net cash provided by operating activities was $2.1 billion in the fourth quarter of 2025. Included in this amount was a $349 million unfavorable impact from working capital and $269 million of adjusted net cash provided by operating activities associated with the other joint venture member share of DGD.
Excluding these items adjusted net cash provided by operating activities. Was 2.1 billion in the fourth quarter of 2025 net cash provided by operating activities in 2025 was 5.8 billion.
Speaker #4: Appreciation and amortization expense was $817 million for the fourth quarter of 2025, which includes approximately $100 million of incremental depreciation expense related to our plan to cease refining operations at our Benicia refinery.
Included in this amount was 192 million, unfavorable change in working capital, and 30 million of adjusted net, cash provided by operating activities associated with the other joint venture members, share of dgd.
Excluding these items adjusted. Net cash provided by operating activities was 6 billion in 2025.
Speaker #4: Net interest expense was $139 million and income tax expense was $355 million for the fourth quarter of 2025. The effective tax rate was 25% for 2025.
Speaker #4: Net cash provided by operating activities was $2.1 billion in the fourth quarter of 2025. Included in this amount was a $349 million unfavorable impact from working capital, and $269 million of adjusted net cash provided by operating activities associated with the other joint venture member share of DGD.
Regarding investing activities. We made 412 million of capital investments in the fourth quarter of 2025 of which 368 million was, for sustaining, the business, including costs, for turnarounds, Catalyst, and Regulatory Compliance. And the balance was for growing the business.
Excluding Capital Investments attributable to the other joint venture membership share of dgd and other variable, interest entities, Capital Investments attributable to Valero were 405 million in the fourth quarter of 2025 and 1.8 billion for the year.
Speaker #4: Excluding these items, adjusted net cash provided by operating activities was $2.1 billion in the fourth quarter of 2025. Net cash provided by operating activities in 2025 was $5.8 billion.
Homer Bhullar: Excluding these items, adjusted net cash provided by operating activities was $2.1 billion in the fourth quarter of 2025. Net cash provided by operating activities in 2025 was $5.8 billion. Included in this amount was $192 million unfavorable change in working capital and $30 million of adjusted net cash provided by operating activities associated with the other joint venture member share of DGD. Excluding these items, adjusted net cash provided by operating activities was $6 billion in 2025. Regarding investing activities, we made $412 million of capital investments in the fourth quarter of 2025, of which $368 million was for sustaining the business, including costs for turnarounds, catalysts, and regulatory compliance, and the balance was for growing the business.
Excluding these items, adjusted net cash provided by operating activities was $2.1 billion in the fourth quarter of 2025. Net cash provided by operating activities in 2025 was $5.8 billion. Included in this amount was $192 million unfavorable change in working capital and $30 million of adjusted net cash provided by operating activities associated with the other joint venture member share of DGD. Excluding these items, adjusted net cash provided by operating activities was $6 billion in 2025. Regarding investing activities, we made $412 million of capital investments in the fourth quarter of 2025, of which $368 million was for sustaining the business, including costs for turnarounds, catalysts, and regulatory compliance, and the balance was for growing the business.
Moving to financing activities. We remain committed to our disciplined Capital allocation framework. Shareholder cash returns totaled. 1.4 billion in the fourth quarter of 2025 resulting, in a payout ratio of 66% for the quarter.
Speaker #4: Included in this amount was a $192 million unfavorable change in working capital, and $30 million of adjusted net cash provided by operating activities associated with the other joint venture member share of DGD.
For the full year shareholder cash returns totaled. 4 billion resulting in a payout ratio of 67% for the year.
Speaker #4: Excluding these items, adjusted net cash provided by operating activities was $6 billion in 2025. Regarding investing activities, we made $412 million of capital investments in the fourth quarter of 2025, of which $368 million was for sustaining the business, including costs for turnarounds, catalysts, and regulatory compliance, and the balance was for growing the business.
We ended the year with 299 million shares outstanding reflecting a reduction of 5% for the year and 42% since 2014.
Earlier this month our board approved a 6% increase to the quarterly cash dividend slightly higher than last year reflecting a strong financial position and our commitment to a growing dividend.
Speaker #4: Excluding capital investments attributable to the other joint venture member share of DGD and other variable interest entities, capital investments attributable to Valero were $405 million in the fourth quarter of 2025 and $1.8 billion for the year.
Homer Bhullar: Excluding capital investments attributable to the other joint venture member share of DGD and other variable interest entities, capital investments attributable to Valero were $405 million in Q4 2025 and $1.8 billion for the year. Moving to financing activities, we remain committed to our disciplined capital allocation framework. Shareholder cash returns totaled $1.4 billion in Q4 2025, resulting in a payout ratio of 66% for the quarter. For the full year, shareholder cash returns totaled $4 billion, resulting in a payout ratio of 67% for the year. We ended the year with 299 million shares outstanding, reflecting a reduction of 5% for the year and 42% since 2014. Earlier this month, our board approved a 6% increase to the quarterly cash dividend, slightly higher than last year, reflecting a strong financial position and our commitment to a growing dividend.
Excluding capital investments attributable to the other joint venture member share of DGD and other variable interest entities, capital investments attributable to Valero were $405 million in Q4 2025 and $1.8 billion for the year. Moving to financing activities, we remain committed to our disciplined capital allocation framework. Shareholder cash returns totaled $1.4 billion in Q4 2025, resulting in a payout ratio of 66% for the quarter. For the full year, shareholder cash returns totaled $4 billion, resulting in a payout ratio of 67% for the year. We ended the year with 299 million shares outstanding, reflecting a reduction of 5% for the year and 42% since 2014. Earlier this month, our board approved a 6% increase to the quarterly cash dividend, slightly higher than last year, reflecting a strong financial position and our commitment to a growing dividend.
With respect to our balance sheet, we ended the quarter with 8.3 billion of total debt 2.4 billion of total Finance lease obligations and 4.7 billion of cash and cash. Equivalents
The debt to capitalization ratio net of cash and cash. Equivalents was 18% as of December, 31st, 2025
Speaker #4: Moving to financing activities, we remain committed to our disciplined capital allocation framework. Shareholder cash returns totaled $1.4 billion in the fourth quarter of 2025, resulting in a payout ratio of 66% for the quarter.
And we ended the quarter well capitalized with 5.3 billion of available liquidity. Excluding cash.
Speaker #4: For the full year, shareholder cash returns totaled $4 billion, resulting in a payout ratio of 67% for the year. We ended the year with 299 million shares outstanding, reflecting a reduction of 5% for the year, and 42% since 2014.
Turning the guidance. We expect Capital Investments attributable to Valero for 2026 to be approximately 1.7 billion, which includes expenditures for turnarounds, catalysts Regulatory Compliance, and joint venture Investments.
Speaker #4: Earlier this month, our board approved a 6% increase to the quarterly cash dividend, slightly higher than last year, reflecting a strong financial position and our commitment to a growing dividend.
These growth projects are focused primarily on shorter cycle optimization Investments, that enhance crude and product optionality across our refining system, as well as efficiency and rate expansion projects within our ethanol plants collectively, these projects should strengthen the earnings capacity of our existing asset base.
Speaker #4: With respect to our balance sheet, we ended the quarter with $8.3 billion of total debt, $2.4 billion of total finance lease obligations, and $4.7 billion of cash and cash equivalents.
Homer Bhullar: With respect to our balance sheet, we ended the quarter with $8.3 billion of total debt, $2.4 billion of total finance lease obligations, and $4.7 billion of cash and cash equivalents. The debt-to-capitalization ratio net of cash and cash equivalents was 18% as of 31 December 2025. We ended the quarter well capitalized with $5.3 billion of available liquidity, excluding cash. Turning to guidance, we expect capital investments attributable to Valero for 2026 to be approximately $1.7 billion, which includes expenditures for turnarounds, catalysts, regulatory compliance, and joint venture investments. About $1.4 billion of that is allocated to sustaining the business and the balance to growth projects. These growth projects are focused primarily on shorter-cycle optimization investments that enhance crude and product optionality across our refining system, as well as efficiency and rate expansion projects within our ethanol plants.
With respect to our balance sheet, we ended the quarter with $8.3 billion of total debt, $2.4 billion of total finance lease obligations, and $4.7 billion of cash and cash equivalents. The debt-to-capitalization ratio net of cash and cash equivalents was 18% as of 31 December 2025. We ended the quarter well capitalized with $5.3 billion of available liquidity, excluding cash. Turning to guidance, we expect capital investments attributable to Valero for 2026 to be approximately $1.7 billion, which includes expenditures for turnarounds, catalysts, regulatory compliance, and joint venture investments. About $1.4 billion of that is allocated to sustaining the business and the balance to growth projects. These growth projects are focused primarily on shorter-cycle optimization investments that enhance crude and product optionality across our refining system, as well as efficiency and rate expansion projects within our ethanol plants.
For modeling, our first quarter operations, we expect refining, throughput volumes to fall within the following ranges.
Speaker #4: The debt-to-capitalization ratio net of cash and cash equivalents was 18% as of December 31, 2025. And we ended the quarter well-capitalized with $5.3 billion of available liquidity, excluding cash.
Gulf Coast at 1.695 to 1.745 million barrels per day.
Speaker #4: Turning to guidance, we expect capital investments attributable to Valero for 2026 to be approximately $1.7 billion. Which includes expenditures for turnarounds, catalysts, regulatory compliance, and joint venture investments.
Mid-Continent at 430 to 450,000, barrels per day, West Coast at 160 to 180,000, barrels per day, and North Atlantic at 485 to 505005000 barrels per day.
We expect refining cash operating expenses in the first quarter to be approximately 5.7 cents per barrel.
Speaker #4: About $1.4 billion of that is allocated to sustaining the business, and the balance to growth projects. These growth projects are focused primarily on shorter-cycle optimization investments that enhance crude and product optionality across our refining system, as well as efficiency and rate expansion projects within our ethanol plants.
For the renewable diesel segment. We expect sales volumes of approximately 260 million gallons in the first quarter.
Operating expenses should be 72 cents per gallon, including 35 cents per gallon for non-cash costs, such as depreciation and amortization.
Speaker #4: Collectively, these projects should strengthen the earnings capacity of our existing asset base. For modeling our first quarter operations, we expect refining throughput volumes to fall within the following ranges: Gulf Coast at $1.695 to $1.745 million barrels per day, Mid-Continent at $430 to $450,000 barrels per day, West Coast at $160 to $180,000 barrels per day, and North Atlantic at $485 to $505,000 barrels per day.
Homer Bhullar: Collectively, these projects should strengthen the earnings capacity of our existing asset base. For modeling our Q1 operations, we expect refining throughput volumes to fall within the following ranges: Gulf Coast at 1.695 to 1.745 million barrels per day; Midcontinent at 430,000 to 450,000 barrels per day; West Coast at 160,000 to 180,000 barrels per day; and North Atlantic at 485,000 to 505,000 barrels per day. We expect refining cash operating expenses in Q1 to be approximately $5.17 per barrel. For the renewable diesel segment, we expect sales volumes of approximately 260 million gallons in Q1. Operating expenses should be $0.72 per gallon, including $0.35 per gallon for non-cash costs such as depreciation and amortization. Our ethanol segment is expected to produce 4.6 million gallons per day in Q1.
Collectively, these projects should strengthen the earnings capacity of our existing asset base. For modeling our Q1 operations, we expect refining throughput volumes to fall within the following ranges: Gulf Coast at 1.695 to 1.745 million barrels per day; Midcontinent at 430,000 to 450,000 barrels per day; West Coast at 160,000 to 180,000 barrels per day; and North Atlantic at 485,000 to 505,000 barrels per day. We expect refining cash operating expenses in Q1 to be approximately $5.17 per barrel. For the renewable diesel segment, we expect sales volumes of approximately 260 million gallons in Q1. Operating expenses should be $0.72 per gallon, including $0.35 per gallon for non-cash costs such as depreciation and amortization. Our ethanol segment is expected to produce 4.6 million gallons per day in Q1.
Our ethanol segment is expected to produce 4.6 million gallons per day in the first quarter operating expenses should average 49 cents per gallon which includes 5 cents per gallon for non-cash costs, such as depreciation and amortization.
For the first quarter, net interest expansion should be about 140 million.
Total depreciation and amortization expense in the first quarter should be approximately 835 million, which includes the approximately 100 million of incremental depreciation, expense related, to our plan to cease refining operations at our Benicia refinery.
we expect incremental depreciation related to the beashea refinery to be included in DNA for the first quarter and in April,
Speaker #4: We expect refining cash operating expenses in the first quarter to be approximately $5.17 per barrel. For the renewable diesel segment, we expect sales volumes of approximately $260 million gallons in the first quarter.
First quarter, earnings impact is approximately 25 cents per share based on current shares outstanding.
For 2026. We expect G&A expenses to be approximately 960 million.
Speaker #4: Operating expenses should be $72 per gallon, including $35 per gallon for non-cash costs such as depreciation and amortization. Our ethanol segment is expected to produce $4.6 million gallons per day in the first quarter.
Lastly, our Capital allocation framework remains unchanged with a commitment to a through cycle, minimum annual payout ratio of 40 to 50% of adjusted net cash provided by operating activities.
Speaker #4: Operating expenses should average $0.49 per gallon, which includes $0.05 per gallon for non-cash costs such as depreciation and amortization. For the first quarter, net interest expense should be about $140 million.
Homer Bhullar: Operating expenses should average $0.49 per gallon, which includes $0.05 per gallon for non-cash costs such as depreciation and amortization. For the first quarter, net interest expense should be about $140 million. Total depreciation and amortization expense in the first quarter should be approximately $835 million, which includes approximately $100 million of incremental depreciation expense related to our plan to cease refining operations at our Benicia Refinery. We expect incremental depreciation related to the Benicia Refinery to be included in D&A for the first quarter and in April. First quarter earnings impact is approximately $0.25 per share based on current shares outstanding. For 2026, we expect G&A expenses to be approximately $960 million.
Operating expenses should average $0.49 per gallon, which includes $0.05 per gallon for non-cash costs such as depreciation and amortization. For the first quarter, net interest expense should be about $140 million. Total depreciation and amortization expense in the first quarter should be approximately $835 million, which includes approximately $100 million of incremental depreciation expense related to our plan to cease refining operations at our Benicia Refinery. We expect incremental depreciation related to the Benicia Refinery to be included in D&A for the first quarter and in April. First quarter earnings impact is approximately $0.25 per share based on current shares outstanding. For 2026, we expect G&A expenses to be approximately $960 million.
And our long-term Target net debt, Decap ratio remains 20 to 30% with a minimum cash balance between 4 billion to 5 billion, with all excess, free cash flow going towards shareholder returns.
Speaker #4: Total depreciation and amortization expense in the first quarter should be approximately $835 million, which includes approximately $100 million of incremental depreciation expense related to our plan to cease refining operations at our Benicia refinery.
Thanks Homer. That concludes our opening remarks. Before we open the call to questions. Please limit each, turn in the Q&A to 2 questions.
If you have more than 2 questions, please rejoin the queue as time permits to ensure other callers have time to ask their questions.
Speaker #4: We expect incremental depreciation related to the Benicia refinery to be included in D&A for the first quarter and in April. First quarter earnings impact is approximately $0.25 per share based on current shares outstanding.
Thank you. The floor is now. Open for questions.
if you would like to ask a question,
Speaker #4: For 2026, we expect G&A expenses to be approximately $960 million. Lastly, our capital allocation framework remains unchanged, with a commitment to a through-cycle minimum annual payout ratio of 40% to 50% of adjusted net cash provided by operating activities. Our long-term target net debt-to-cap ratio remains at 20% to 30%, with a minimum cash balance between $4 billion and $5 billion, with all excess free cash flow going towards shareholder returns.
please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star 2. If you would like to remove yourself from the queue for participants using speaker equipment, and may be necessary to pick up the handset before pressing the star Keys. Again, that's star 1 to register a question at this time.
Homer Bhullar: Lastly, our capital allocation framework remains unchanged, with a commitment to a through-cycle minimum annual payout ratio of 40% to 50% of adjusted net cash provided by operating activities, and our long-term target net debt-to-cap ratio remains 20% to 30%, with a minimum cash balance between $4 billion to $5 billion, with all excess free cash flow going towards shareholder returns.
Lastly, our capital allocation framework remains unchanged, with a commitment to a through-cycle minimum annual payout ratio of 40% to 50% of adjusted net cash provided by operating activities, and our long-term target net debt-to-cap ratio remains 20% to 30%, with a minimum cash balance between $4 billion to $5 billion, with all excess free cash flow going towards shareholder returns.
The first question is coming from Teresa Chen of barklay, please go ahead.
Speaker #4: returns. Thanks,
Brian Donovan: Thanks, Homer. 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 queue as time permits to ensure other callers have time to ask their questions.
Brian Donovan: Thanks, Homer. 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 queue as time permits to ensure other callers have time to ask their questions.
Speaker #1: Homer. 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 queue as time permits.
Good morning. Uh, looking at the macro Outlook um certainly we're seeing inventories building coupled with relatively High domestic utilization as well as what seems like a precarious supply and demand setup. Given significant capacities later to come online in Asia, balanced against limited closures for the year and in light of these developments, how do you view the evolution of supply and demand? And
For light products and cracked spreads going forward.
Speaker #1: To ensure other callers have time to ask their questions.
Speaker #2: Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time.
Operator: Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star one to register a question at this time. The first question is coming from Teresa Chen of Barclays. Please go ahead.
Operator: Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that's star one to register a question at this time. The first question is coming from Teresa Chen of Barclays. Please go ahead.
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Speaker #2: The first question is coming from Teresa Chen of Barclays. Please go
Speaker #2: ahead. Good
Speaker #3: morning. Looking at the macro outlook, certainly we're seeing inventories building coupled with relatively high domestic utilization. As well as what seems like a precarious supply and demand setup given significant capacity slated to come online in Asia balanced against limited closures for the year.
Theresa Chen: Good morning. Looking at the macro outlook, certainly we're seeing inventories building coupled with relatively high domestic utilization, as well as what seems like a precarious supply and demand setup given significant capacity slated to come online in Asia balanced against limited closures for the year. In light of these developments, how do you view the evolution of supply and demand dynamics for light products and crack spreads going forward?
Theresa Chen: Good morning. Looking at the macro outlook, certainly we're seeing inventories building coupled with relatively high domestic utilization, as well as what seems like a precarious supply and demand setup given significant capacity slated to come online in Asia balanced against limited closures for the year. In light of these developments, how do you view the evolution of supply and demand dynamics for light products and crack spreads going forward?
Speaker #3: And in light of these developments, how do you view the evolution of supply and demand dynamics for light products and crack spreads going forward?
So, especially in December where you're at, 95.4% utilization, very strong for that time of year. I think some of that was related to the very strong margin environment. We had in November uh, cooler weather allows you to push utilization rates as well.
Gary Simmons: Yeah, Teresa, this is Gary. Certainly, during November and December, we saw fairly significant builds in total light product inventory. It followed typical seasonal patterns, but the magnitude of the build was much larger than what we typically see. So we kind of went from below the 5-year average on total light product inventory to above the 5-year average. We didn't see anything abnormal in product demand in our system. Gasoline sales in Q4 were flat year-over-year. Distillate sales in our system were actually up 13%. And I would tell you that's probably more related to a change in our customer mix than anything else. But good domestic demand, our exports quarter-over-quarter were up. Exports year-over-year were up. So again, good demand in the product market. But really, what caused the inventory build is exactly what you alluded to.
Gary Simmons: Yeah, Teresa, this is Gary. Certainly, during November and December, we saw fairly significant builds in total light product inventory. It followed typical seasonal patterns, but the magnitude of the build was much larger than what we typically see. So we kind of went from below the 5-year average on total light product inventory to above the 5-year average. We didn't see anything abnormal in product demand in our system. Gasoline sales in Q4 were flat year-over-year. Distillate sales in our system were actually up 13%. And I would tell you that's probably more related to a change in our customer mix than anything else. But good domestic demand, our exports quarter-over-quarter were up. Exports year-over-year were up. So again, good demand in the product market. But really, what caused the inventory build is exactly what you alluded to.
Speaker #1: This is Gary. Certainly, during November and December, we saw fairly significant builds in total light product inventory. It followed typical seasonal patterns, but the magnitude of the build was much larger than what we typically see.
Speaker #1: So we kind of went from below the five-year average on total light product inventory to above the five-year average. We didn't see anything abnormal in product demand, and our system gasoline sales in the fourth quarter were flat year over year.
Um the thing that's really interesting to us is almost all that inventory build was in pad 3. And, you know, we've always stated we like our position in padd 3 because it allows you to clear any link to the export markets. Uh, we didn't really build any inventory. Uh, during the fourth quarter didn't see any economic incentive to carry inventory or produce summer grade gasoline, so we're not really sure. What caused the inventory, building pad 3. Um, going forward. When you look at 2026,
Speaker #1: Distillate sales in our system were actually up 13%. And I would tell you that's probably more related to a change in our customer mix than anything else.
Speaker #1: But good domestic demand, our exports quarter over quarter were up. Exports year over year were up. So again, good demand in the product market, but really what caused the inventory build is exactly what you alluded to.
Speaker #1: We just ran very high refinery utilization. So especially in December where you were at 95.4% utilization, very strong for that time of year. I think some of that was related to the very strong margin environment we had in November, cooler weather allows you to push utilization rates as well.
Gary Simmons: We just ran very high refinery utilization. So especially in December, where you were at 95.4% utilization, very strong for that time of year. I think some of that was related to the very strong margin environment we had in November. Cooler weather allows you to push utilization rates as well. The thing that's really interesting to us is almost all that inventory build was in PADD 3. We've always stated we like our position in PADD 3 because it allows you to clear any link to the export markets. We didn't really build any inventory during Q4. Didn't see any economic incentive to carry inventory or produce summer-grade gasoline. So we're not really sure what caused the inventory build in PADD 3.
We just ran very high refinery utilization. So especially in December, where you were at 95.4% utilization, very strong for that time of year. I think some of that was related to the very strong margin environment we had in November. Cooler weather allows you to push utilization rates as well. The thing that's really interesting to us is almost all that inventory build was in PADD 3. We've always stated we like our position in PADD 3 because it allows you to clear any link to the export markets. We didn't really build any inventory during Q4. Didn't see any economic incentive to carry inventory or produce summer-grade gasoline. So we're not really sure what caused the inventory build in PADD 3.
Most of the consultant data, we chose similar Supply demand balances to last year, but they are assuming lower, uh, refiner utilization, you know. Refiner, utilization coming back to normal levels. I think we agree with that. You know, you've already seen utilization drop as we started in to turn around activity, as we wrap up, turnarounds, I think you'd get into warmer weather, which again, it's hard to push refiner utilization, uh, due to some overhead temperature limits.
Speaker #1: The thing that's really interesting to us is almost all that inventory build was in PAD 3. And we've always stated we like our position in PAD 3 because it allows you to clear any link to the export markets.
Um, you know, with the Assumption of more normal refiner utilization, uh, to us. It looks like demand is outpacing additional Supply. You know, our numbers would indicate about 400,000 barrels a day and that capacity additions we're showing about 500,000 barrels. A day of Total, light product, demand growth. So things look tight, you know, in the consultant data there's also a lot
Speaker #1: We didn't really build any inventory. During the fourth quarter, didn't see any economic incentive to carry inventory or produce summer-grade gasoline. So we're not really sure what caused the inventory build in pad three.
Speaker #1: Going forward, when you look at 2026, most of the consultant data would show similar supply-demand balances to last year, but they are assuming lower refinery utilization.
Gary Simmons: Going forward, when you look at 2026, most of the consultant data would show similar supply-demand balances to last year, but they are assuming lower refinery utilization, refinery utilization coming back to normal levels. I think we agree with that. You've already seen utilization drop as we start into turnaround activity. As we wrap up turnarounds, I think you'd get into warmer weather, which again, it's hard to push refinery utilization due to some overhead temperature limits. With the assumption of more normal refinery utilization, to us, it looks like demand is outpacing additional supply. Our numbers would indicate about 400,000 barrels a day in net capacity additions. We're showing about 500,000 barrels a day of total light product demand growth. So things look tight in the consultant data. There's also a lot of assumptions in the consultant data. They assume Russian refining capacity comes on, runs normally.
Going forward, when you look at 2026, most of the consultant data would show similar supply-demand balances to last year, but they are assuming lower refinery utilization, refinery utilization coming back to normal levels. I think we agree with that. You've already seen utilization drop as we start into turnaround activity. As we wrap up turnarounds, I think you'd get into warmer weather, which again, it's hard to push refinery utilization due to some overhead temperature limits. With the assumption of more normal refinery utilization, to us, it looks like demand is outpacing additional supply. Our numbers would indicate about 400,000 barrels a day in net capacity additions. We're showing about 500,000 barrels a day of total light product demand growth. So things look tight in the consultant data. There's also a lot of assumptions in the consultant data. They assume Russian refining capacity comes on, runs normally.
Speaker #1: Refinery utilization coming back to normal levels. I think we agree with that. You've already seen utilization drop as we start into turnaround activity. As we wrap up turnarounds, I think you'd get into warmer weather, which again, it's hard to push refinery utilization due to some overhead temperature limits.
Speaker #1: With the assumption of more normal refinery utilization, to us, it looks like demand is outpacing additional supply. Our numbers would indicate about 400,000 barrels a day, and that capacity additions—we're showing about 500,000 barrels a day of total light product demand growth.
Lot of assumptions in the consult the data, they assume Russian refining. Capacity comes on runs normally, they assume a lot of the new capacity. That's, that's starting up runs at name plate. Um, assumptions around bio and renewable. Diesel coming back into the market in a strong way. And then really, no Refinery rationalization outside of what's already been announced. So, you know, I would say our Outlook is a little more bullish that. What the Consultants are showing just because we believe execution risk remains high on a lot of those assumptions that I just mentioned, um, really difficult to get much of a read on the market thus far this year, mainly due to the weather, you know, I can taste that first couple of weeks in January, we're fairly soft on, domestic demand. That's typically the case things, that started to recover nicely last week, we were back up to around the million barrels a day on us wholesale, but then we had the winter storm hit. So last weekend, we saw a wholesale lifting that we're about 40% of the prior weekend. It's remained soft this week, but
Speaker #1: So things look tight in the consultant data. There's also a lot of assumptions in the consultant data. They assume Russian refining capacity comes on, runs normally.
Speaker #1: They assume a lot of the new capacity that's starting up runs at nameplate. Assumptions around bio and renewable diesel coming back into the market in a strong way.
Gary Simmons: They assume a lot of the new capacity that's starting up runs at nameplate. Assumptions around bio and renewable diesel coming back into the market in a strong way. And then really no refinery rationalization outside of what's already been announced. So I would say our outlook is a little more bullish than what the consultants are showing just because we believe execution risk remains high on a lot of those assumptions that I just mentioned. Really difficult to get much of a read on the market thus far this year, mainly due to the weather. I can tell you that first couple of weeks in January were fairly soft on domestic demand. That's typically the case. Things had started to recover nicely. Last week, we were back up to around 1 million barrels a day on US wholesale, but then we had the winter storm hit.
They assume a lot of the new capacity that's starting up runs at nameplate. Assumptions around bio and renewable diesel coming back into the market in a strong way. And then really no refinery rationalization outside of what's already been announced. So I would say our outlook is a little more bullish than what the consultants are showing just because we believe execution risk remains high on a lot of those assumptions that I just mentioned. Really difficult to get much of a read on the market thus far this year, mainly due to the weather. I can tell you that first couple of weeks in January were fairly soft on domestic demand. That's typically the case. Things had started to recover nicely. Last week, we were back up to around 1 million barrels a day on US wholesale, but then we had the winter storm hit.
Gradually recovering sales yesterday. We're about 90% of normal. Continue to see good export demand. Uh diesel export our to Europe. Is open diesel experts in the Latin. America are economic good gasoline demand into Latin America. Um and then you know we don't see an ARB to really send winter grade gasoline to to New York Harbor. So all those things are constructive
Speaker #1: And then really no refinery rationalization outside of what's already been announced. So I would say our outlook is a little more bullish than what the consultants are showing just because we believe execution risk remains high on a lot of those assumptions that I just mentioned.
Speaker #1: Really difficult to get much of a read on the market thus far this year, mainly due to the weather. I can tell you that the first couple of weeks in January were fairly soft on domestic demand.
Speaker #1: That's typically the case. Things had started to recover nicely last week. We were back up to around the million barrels a day on US wholesale, but then we had the winter storm hit.
Super helpful. Thank you, Gary. Um, looking at the feed stock side of things with the Venezuelan crude being rerouted to the Gulf Coast. How much of this can be absorbed within your footprint over time and can you also elaborate on how you see this impacting differentials um, without a meaningful and immediate increase in Venezuelan production itself? How do you see this equilibrium over time and what are the implications for both? Um, golf Health life having to as well as light heavy dips in the mid-con, given the related impact to WCS?
Speaker #1: So last weekend, we saw wholesale liftings that were about 40% of the prior weekend. It's remained soft this week, but gradually recovering. Sales yesterday were about 90% of normal.
Gary Simmons: So last weekend, we saw wholesale liftings that were about 40% of the prior weekend. It's remained soft this week, but gradually recovering. Sales yesterday were about 90% of normal. Continue to see good export demand. Diesel export ARB to Europe is open. Diesel exports into Latin America are economic. Good gasoline demand into Latin America. And then we don't see an ARB to really send winter-grade gasoline to New York Harbor. So all of those things are constructive.
So last weekend, we saw wholesale liftings that were about 40% of the prior weekend. It's remained soft this week, but gradually recovering. Sales yesterday were about 90% of normal. Continue to see good export demand. Diesel export ARB to Europe is open. Diesel exports into Latin America are economic. Good gasoline demand into Latin America. And then we don't see an ARB to really send winter-grade gasoline to New York Harbor. So all of those things are constructive.
Speaker #1: Continue to see good export demand. Diesel export armed to Europe is open. Diesel exports into Latin America are economic. Good gasoline demand into Latin America.
I Teresa, this is Randy. I'll, I'll kick that off, you know, obviously, you haven't Venezuela Supply kind of back in the fold for our system is great news. Um, the exports that are coming out of Venezuela are tend to be very heavy, High silver, high acid and that fits our configuration pretty well. You know, in fact, if you look over the last 10 years, Valero has been the largest uh purchaser of Venezuelan, heavy crude more than any other us refiner.
Speaker #1: And then we don't see an ARB to really send winter-grade gasoline to New York Harbor. So all of those things are constructive.
Speaker #3: Super helpful. Thank you, Gary. Looking at the feedstock side of things, with the Venezuelan crude being rerouted to the Gulf Coast, how much of this can be absorbed within your footprint over time?
Theresa Chen: Super helpful. Thank you, Gary. Looking at the feedstock side of things with the Venezuelan crude being rerouted to the Gulf Coast, how much of this can be absorbed within your footprint over time? And can you also elaborate on how you see this impacting differentials? Without a meaningful and immediate increase in Venezuelan production itself, how do you see this equilibrating over time? And what are the implications for both Gulf Coast light heavy diffs as well as light heavy diffs in the Midcon, given the related impact to WCS?
Theresa Chen: Super helpful. Thank you, Gary. Looking at the feedstock side of things with the Venezuelan crude being rerouted to the Gulf Coast, how much of this can be absorbed within your footprint over time? And can you also elaborate on how you see this impacting differentials? Without a meaningful and immediate increase in Venezuelan production itself, how do you see this equilibrating over time? And what are the implications for both Gulf Coast light heavy diffs as well as light heavy diffs in the Midcon, given the related impact to WCS?
Uh, you know, historically if you look back and we ran as much as 240,000 barrel of the day of Venezuela and heavy and our system. Uh however that was prior to the new Coker project at Port Arthur that was installed in 2023 that project a substantially increased, our processing capability for a heavy crew. So we'd expect our Venezuelan processing capability to be substantially north of that number. Now,
Speaker #3: And can you also elaborate on how you see this impacting differentials without a meaningful and immediate increase in Venezuelan production itself? How do you see this equilibrating over time, and what are the implications for both Gulf Coast lightheavy diffs as well as lightheavy diffs in the Midcon given the related impact to WCS?
Speaker #1: All right, Teresa, this is Randy. I'll kick that off. Obviously, having the Venezuela supply kind of back in the fold for our system is great news.
Gary Simmons: All right, Teresa, this is Randy. I'll kick that off. Obviously, having Venezuela supply kind of back in the fold for our system is great news. The exports that are coming out of Venezuela tend to be very heavy, high sulfur, and high acid. That fits our configuration pretty well. In fact, if you look over the last 10 years, Valero has been the largest purchaser of Venezuelan heavy crude more than any other U.S. refiner. Historically, you look back and we've ran as much as 240,000 barrels a day of Venezuelan heavy in our system. However, that was prior to the new coker project at Port Arthur that was installed in 2023. That project has substantially increased our processing capability for heavy crude. We'd expect our Venezuelan processing capability to be substantially north of that number now.
Randy Hawkins: All right, Teresa, this is Randy. I'll kick that off. Obviously, having Venezuela supply kind of back in the fold for our system is great news. The exports that are coming out of Venezuela tend to be very heavy, high sulfur, and high acid. That fits our configuration pretty well. In fact, if you look over the last 10 years, Valero has been the largest purchaser of Venezuelan heavy crude more than any other U.S. refiner. Historically, you look back and we've ran as much as 240,000 barrels a day of Venezuelan heavy in our system. However, that was prior to the new coker project at Port Arthur that was installed in 2023. That project has substantially increased our processing capability for heavy crude. We'd expect our Venezuelan processing capability to be substantially north of that number now.
Speaker #1: The exports that are coming out of Venezuela tend to be very heavy, high sulfur, high acid, and that fits our configuration pretty well. In fact, if you look over the last 10 years, Valero has been the largest purchaser of Venezuelan heavy crude more than any other US refiner.
Speaker #1: Back, and we've run as much as, historically, you look—240,000 barrels a day of Venezuelan heavy in our system. However, that was prior to the new coker project at Port Arthur that was installed in 2023.
Speaker #1: That project has substantially increased our processing capability for heavy crude. So we'd expect our Venezuelan processing capability to be substantially north of that number now.
Seen a resumption of the Kirk hook exports that started in October and we continue to see um you know high production or growing production out of Canada. That's been helpful. Uh 1 other factor that uh has been helping discounts is is Freight rates have been sharply higher, you know, if we look at current rates compared to where we were in the fourth quarter, Freight's up about 30%. So when Freight goes up, since the US Barrel must price, it clear? Uh, it's having to, to have, you know, wider discounts in order to allow those exports to happen.
Speaker #1: Kind of looking at differentials, I mean, not only Venezuela, but we've had several beneficial factors that have occurred to kind of help move this market weaker.
Gary Simmons: Kind of looking at differentials, I mean, not only Venezuela, but we've had several beneficial factors that have occurred to kind of help move this market weaker. After last year with discounts fairly tight, most of these market moves tend to make differentials increasingly favorable for refiners with high complexity refineries such as ours. I mean, OPEC increases of announced 2.9 million since April of last year. We've seen growing sour crude production in the US Gulf. It's now over 2 million barrels a day. That's up about 200,000 barrels from a year ago. We've seen a resumption of the Kirkuk exports that started in October. We continue to see high production or growing production out of Canada that's been helpful. One other factor that's been helping discounts is freight rates have been sharply higher.
Kind of looking at differentials, I mean, not only Venezuela, but we've had several beneficial factors that have occurred to kind of help move this market weaker. After last year with discounts fairly tight, most of these market moves tend to make differentials increasingly favorable for refiners with high complexity refineries such as ours. I mean, OPEC increases of announced 2.9 million since April of last year. We've seen growing sour crude production in the US Gulf. It's now over 2 million barrels a day. That's up about 200,000 barrels from a year ago. We've seen a resumption of the Kirkuk exports that started in October. We continue to see high production or growing production out of Canada that's been helpful. One other factor that's been helping discounts is freight rates have been sharply higher.
Speaker #1: After last year with discounts fairly tight, most of these market moves tend to are making differentials increasingly favorable for refiners with high complexity refineries such as ours.
Speaker #1: And OPEC increases have announced 2.9 million since April of last year. We've seen growing sour crude production in the US Gulf. It's now over 2 million barrels a day.
So, you know, right now we're seeing, you know, heavy Canadian in the Gulf Coast Trading at about 11 to 11 1150 1150 under Brent. Um, that's about $4 cheaper than our Q4 average. And similarly, Mars in the Gulf has been around 5 bucks. Uh, discount to Brand, that's about a dollar kind of cheaper than we were, uh, in the fourth quarter. So all looks pretty favorable, I think, for discounts, kind of, uh, heading into 2026.
Thank you, Randy.
Sure.
Speaker #1: That's up about 200,000 barrels from a year ago. We've seen a resumption of the Kirkuk exports that started in October. And we continue to see high production or growing production out of Canada that's been helpful.
Thank you. The next question is coming from Neila of Goldman Sachs. Please go ahead
Speaker #1: One other factor that's been helping discounts is freight rates have been sharply higher. If we look at current rates compared to where we were in the fourth quarter, freight's up about 30%.
Gary Simmons: If we look at current rates compared to where we were in Q4, freight's up about 30%. So when freight goes up, since the U.S. barrel must price to clear, it's having to have wider discounts in order to allow those exports to happen. So right now, we're seeing heavy Canadian in the Gulf Coast trading at about $11 to $11.50 under Brent. That's about $4 cheaper than our Q4 average. And similarly, Mars in the Gulf has been around $5 discount to Brent. That's about a dollar kind of cheaper than we were in the fourth quarter. So all looks pretty favorable, I think, for discounts kind of heading into 2026.
If we look at current rates compared to where we were in Q4, freight's up about 30%. So when freight goes up, since the U.S. barrel must price to clear, it's having to have wider discounts in order to allow those exports to happen. So right now, we're seeing heavy Canadian in the Gulf Coast trading at about $11 to $11.50 under Brent. That's about $4 cheaper than our Q4 average. And similarly, Mars in the Gulf has been around $5 discount to Brent. That's about a dollar kind of cheaper than we were in the fourth quarter. So all looks pretty favorable, I think, for discounts kind of heading into 2026.
Yeah, good morning team. Um, the first question, uh, I guess this would be for you. Homer would be around return of capital. Um, last year, you you, you guys, uh, were, uh, were pretty strong versus. I think what Market expected just, um, you know, we do get the question with the stock having done well,
Speaker #1: So when freight goes up, since the US barrel must price to clear, it's having to have wider discounts in order to allow those exports to happen.
How aggressive you will continue to be around buying back stock and love your perspective on that. Especially as you step into the CFO, see,
Speaker #1: So right now, we're seeing heavy Canadian in the Gulf Coast trading at about $11.00 to $11.50, or $11.50 under Brent. That's about $4 cheaper than our Q4 average.
Speaker #1: And similarly, Mars in the Gulf has been around 5 bucks. Discount to Brent. That's about $1 kind of cheaper than we were in the fourth quarter.
Speaker #1: So all looks pretty favorable, I think, for discounts kind of heading into
Speaker #1: 2026. Thank
Speaker #3: you, Randy.
Theresa Chen: Thank you, Randy.
Theresa Chen: Thank you, Randy.
Speaker #1: Sure. Thank you.
Gary Simmons: Sure.
Gary Simmons: Sure.
Operator: Thank you. The next question is coming from Neil Mehta of Goldman Sachs. Please go ahead.
Operator: Thank you. The next question is coming from Neil Mehta of Goldman Sachs. Please go ahead.
Speaker #2: The next question is coming from Neomeda of Goldman Sachs. Please go ahead.
Speaker #2: ahead.
Speaker #4: Yeah. Good morning,
[Analyst]: Yeah, good morning, team. The first question, I guess this would be for you, Homer, would be around return of capital. Last year, you guys were pretty strong versus I think what market expected. Just, we do get the question with the stock having done well. How aggressive you will continue to be around buying back stock and love your perspective on that, especially as you step into the CFO seat.
Neil Mehta: Yeah, good morning, team. The first question, I guess this would be for you, Homer, would be around return of capital. Last year, you guys were pretty strong versus I think what market expected. Just, we do get the question with the stock having done well. How aggressive you will continue to be around buying back stock and love your perspective on that, especially as you step into the CFO seat.
Speaker #4: team. The first question I guess this would be for you, Homer, would be around return of capital. Last year, you guys were pretty strong versus I think what market expected.
Speaker #4: Just we do get the question with the stock having done well. How aggressive you will continue to be around buying back stock and love your perspective on that, especially as you step into the CFO
Hey Neil, good morning. Um, you know I'll start obviously returning excess free cash flow to our shareholders. Through share repurchases. Has been a pretty core tenant of our Capital, allocation framework right for over a decade. And we've reduced our share count by over 40% since 2014. So maybe I'll just talk a little bit about the framework. So it all starts with the balance sheet, right? Uh, it's in 1 of the best positions in the industry. If you look at our net debt, Decap ratio at 18%, it's actually below our long-term Target of 20 to 30%. Our year-end cash balance was at 4.7 billion again towards the high end of our target, range of 4 to 5 billion. So we don't really have any pressing need to pay down debt or build more cash. So then, let's move to like the discretionary uses of cash, right? I'm not going to mention sustaining capex and dividend, which we obviously considered non-discretionary. So on the discretionary side, you've got growth projects, you've got Acquisitions and share repurchases, right? So starting with growth projects, you know,
Speaker #4: seat. Yeah.
Speaker #5: Hey, Neil. Good morning. I'll start. Obviously, returning excess free cash flow to our shareholders through share repurchases has been a pretty core tenet of our capital allocation framework, right, for over a decade.
Gary Simmons: Yeah, hey, Neil, good morning. I'll start. Obviously, returning excess free cash flow to our shareholders through share repurchases has been a pretty core tenet of our capital allocation framework, right, for over a decade. And we've reduced our share count by over 40% since 2014. So maybe I'll just talk a little bit about the framework. So it all starts with the balance sheet, right? It's in one of the best positions in the industry. If you look at our net debt-to-cap ratio at 18%, it's actually below our long-term target of 20% to 30%. Our year-end cash balance was at $4.7 billion, again, towards the high end of our target range of $4 to $5 billion. So we don't really have any pressing need to pay down debt or build more cash. So then let's move to the discretionary uses of cash, right?
Homer Bhullar: Yeah, hey, Neil, good morning. I'll start. Obviously, returning excess free cash flow to our shareholders through share repurchases has been a pretty core tenet of our capital allocation framework, right, for over a decade. And we've reduced our share count by over 40% since 2014. So maybe I'll just talk a little bit about the framework. So it all starts with the balance sheet, right? It's in one of the best positions in the industry. If you look at our net debt-to-cap ratio at 18%, it's actually below our long-term target of 20% to 30%. Our year-end cash balance was at $4.7 billion, again, towards the high end of our target range of $4 to $5 billion. So we don't really have any pressing need to pay down debt or build more cash. So then let's move to the discretionary uses of cash, right?
We've we're going to be guided by our minimum return threshold, right? We're going to stay disciplined on Acquisitions. You know, same, we have to see good strategic value and a clear and quantifiable assessment of synergies. So we're not going to just do growth projects or Acquisitions just because we have excess cash. So absent those uses of cash.
Speaker #5: And we've reduced our share count by over 40% since 2014. So maybe I'll just talk a little bit about the framework. So it all starts with the balance sheet, right?
Uh, we're going to continue to lean into share repurchases. Um, you know, and if you think about share repurchases,
Speaker #5: It's in one of the best positions in the industry. If you look at our net debt to cap ratio at 18%, it's actually below our long-term target of 20 to 30%.
Speaker #5: Our year-end cash balance was at $4.7 billion. Again, towards the high end billion. So we don't really of our target range of 4 to 5 have any pressing need to pay down debt or build more cash.
Speaker #5: So then let's move to the discretionary uses of cash, right? I'm not going to mention sustaining CapEx and dividend, which we obviously consider non-discretionary.
Gary Simmons: I'm not going to mention sustaining CapEx and dividend, which we obviously consider non-discretionary. So on the discretionary side, you've got growth projects, you've got acquisitions, and share repurchases, right? So starting with growth projects, we're going to be guided by our minimum return threshold, right? We're going to stay disciplined. On acquisitions, same. We have to see good strategic value and a clear and quantifiable assessment of synergies. So we're not going to just do growth projects or acquisitions just because we have excess cash. So absent those uses of cash, we're going to continue to lean into share repurchases. And if you think about share repurchases, there's always an underlying ratable part of share repurchases to meet our minimum commitment of 40% to 50%. And then beyond that, we do look for opportunities to be more aggressive around share repurchases.
I'm not going to mention sustaining CapEx and dividend, which we obviously consider non-discretionary. So on the discretionary side, you've got growth projects, you've got acquisitions, and share repurchases, right? So starting with growth projects, we're going to be guided by our minimum return threshold, right? We're going to stay disciplined. On acquisitions, same. We have to see good strategic value and a clear and quantifiable assessment of synergies. So we're not going to just do growth projects or acquisitions just because we have excess cash. So absent those uses of cash, we're going to continue to lean into share repurchases. And if you think about share repurchases, there's always an underlying ratable part of share repurchases to meet our minimum commitment of 40% to 50%. And then beyond that, we do look for opportunities to be more aggressive around share repurchases.
Speaker #5: So on the discretionary side, you've got growth projects, you've got acquisitions, and share repurchases, right? So starting with growth projects, we're going to be guided by our minimum return threshold, right?
there's always like an underlying rateable part of share repurchases to meet our minimum commitment of 40 to 50%. And then beyond that, we do look for opportunities to be more aggressive around Cherry purchases and that's really any given period where we see weakness. Particularly if our share prices is weak on a relative basis to the broader sector and you know to your point on stock trading near all-time highs, I mean you go back 10 years when the stock was trading around 50 to 60 dollars. We've been getting that question ever since then. And for what it's worth our return on BuyBacks is above mid teens over that 10 year period, we'd wear their share prices today. And frankly, I hope we keep getting the same question for the next 10 years, because that means, the stock is doing well.
Speaker #5: We're going to stay disciplined. On acquisitions, same. We have to see good strategic value and a clear and quantifiable assessment of synergies. So we're not going to just do growth projects or acquisitions just because we have excess cash.
Speaker #5: So, absent those uses of cash, we're going to continue to lean into share repurchases. And if you think about share repurchases, there's always an underlying ratable part of share repurchases to meet our minimum commitment of 40% to 50%.
Speaker #5: And then beyond that, we do look for opportunities to be more aggressive around share repurchases, and that's really any given period where we see weakness, particularly if our share price is weak on a relative basis to the broader sector.
Gary Simmons: And that's really any given period where we see weakness, particularly if our share price is weak on a relative basis to the broader sector. And to your point on stock trading near all-time highs, I mean, you go back 10 years when the stock was trading around $50 to $60. We've been getting that question ever since then. And for what it's worth, our return on buybacks is above mid-teens over that 10-year period with where the share price is today. And frankly, I hope we keep getting the same question for the next 10 years because that means the stock is doing well.
And that's really any given period where we see weakness, particularly if our share price is weak on a relative basis to the broader sector. And to your point on stock trading near all-time highs, I mean, you go back 10 years when the stock was trading around $50 to $60. We've been getting that question ever since then. And for what it's worth, our return on buybacks is above mid-teens over that 10-year period with where the share price is today. And frankly, I hope we keep getting the same question for the next 10 years because that means the stock is doing well.
Yeah, that's that's a great answer homer. So, thank you for that perspective, that the, the follow-up is just, um, you know, we are seeing, uh, heavy start to Discount particularly, uh, Western Canadian crude. Um, and so she's just there, there was a story out there that some of the, the folks who are marketing, the Venezuelan barrels were trying to bid them in pretty tight into the Gulf Coast. Maybe even move it into China. I just think from your guys perspective, you have options for Heavies, including Western Canadian down on the Gulf Coast. So, you know, if you, if you could expand a little bit more on that specifically as you are you, as you see, the go forward for the barrels that are being marketed in, you think they're going to have to compete a little bit.
Wider in order to uh in order to compete with your alternatives.
Speaker #5: And to your point on the stock trading near all-time highs, I mean, you go back 10 years when the stock was trading around $50 to $60.
Speaker #5: We've been getting that question ever since then. And for what it's worth, our return on buybacks is above mid-teens over that 10-year period with where the share price is today.
Speaker #5: And frankly, I hope we keep getting the same question for the next 10 years, because that means the stock is doing well.
Speaker #4: Yeah, that's a great answer, Homer. So thank you for that perspective. The follow-up is just we are seeing heavy start to discount, particularly Western Canadian crude.
[Analyst]: Yeah, that's a great answer, Homer. So thank you for that perspective. The follow-up is just we are seeing heavies start to discount, particularly Western Canadian crude. And so there was a story out there that some of the folks who are marketing the Venezuelan barrels were trying to bid them in pretty tight into the Gulf Coast, maybe even move it into China. I just think from your guys' perspective, you have options for heavies, including Western Canadian down on the Gulf Coast. So if you could expand a little bit more on that specifically, as you see the go forward for the barrels that are being marketed in, you think they're going to have to compete a little bit wider in order to compete with your alternatives.
Neil Mehta: Yeah, that's a great answer, Homer. So thank you for that perspective. The follow-up is just we are seeing heavies start to discount, particularly Western Canadian crude. And so there was a story out there that some of the folks who are marketing the Venezuelan barrels were trying to bid them in pretty tight into the Gulf Coast, maybe even move it into China. I just think from your guys' perspective, you have options for heavies, including Western Canadian down on the Gulf Coast. So if you could expand a little bit more on that specifically, as you see the go forward for the barrels that are being marketed in, you think they're going to have to compete a little bit wider in order to compete with your alternatives.
Speaker #4: And so I was just there was a story out there that some of the folks who are marketing the Venezuelan barrels were trying to bid them in pretty tight into the Gulf Coast, maybe even move it into China.
Seen all the articles I read them as well. You know, looking forward. You know we've already kind of engaged with the 3 authors of of crude and we've purchased barrels from all 3. Um so we anticipate the, the Venezuelan crude making up a pretty large part of our our heavy diet as we move into February and March
Ready.
Thank you. The next question is coming.
Gupta of UBS. Please go ahead.
Speaker #4: options for heavies, including Western I just think from your guys' perspective, you have Canadian down on the Gulf Coast. So if you could expand a little bit more on that specifically as you see the go-forward for the barrels that are being marketed in, you think they're going to have to compete a little bit wider in order to compete with your alternatives.
Oh,
Uh plus 1 upon actually Brian on, on the new role of investor relations. And then also really wanted to congratulate the incoming CFO for for pushing the stock price to an all-time high uh Target to see very quickly.
Speaker #5: Yeah. Hey, Neil, this is Randy. I mean, I'll comment a bit on that. We're not going to comment on pricing for deals that we've done, but I'll just say that we're evaluating Venezuelan crude like we always do for all of our alternatives.
Gary Simmons: Hey, Neil, this is Randy. I mean, I'll comment a bit on that. We're not going to comment on pricing for deals that we've done. But I'll just say that we're evaluating Venezuelan crude like we always do for all of our alternatives. We've put it into the basket of alternatives. And we will purchase Venezuelan crude if it beats our alternative. So yeah, you've seen all the articles. I've read them as well. Looking forward, we've already kind of engaged with the 3 authorized sellers of crude. And we've purchased barrels from all 3. So we anticipate the Venezuelan crude making up a pretty large part of our heavy diet as we move into February and March.
Randy Hawkins: Hey, Neil, this is Randy. I mean, I'll comment a bit on that. We're not going to comment on pricing for deals that we've done. But I'll just say that we're evaluating Venezuelan crude like we always do for all of our alternatives. We've put it into the basket of alternatives. And we will purchase Venezuelan crude if it beats our alternative. So yeah, you've seen all the articles. I've read them as well. Looking forward, we've already kind of engaged with the 3 authorized sellers of crude. And we've purchased barrels from all 3. So we anticipate the Venezuelan crude making up a pretty large part of our heavy diet as we move into February and March. Randy. [crosstalk]
Um, on a small.
Speaker #5: We put it into the basket of alternatives, and we will purchase Venezuelan crude if it beats our alternative. So, yeah, you've seen all the articles.
Speaker #5: I've read them as well. Looking forward, we've already kind of engaged with the three authorized sellers of crude, and we've purchased barrels from all three.
Home. Look even when we go back 4 or 5 years for the same refining margin, what we are seeing is the cash flow profile of the company is different, you producing more cash even if the margin was the same 4 or 5 years ago, can you help us understand the Dynamics over there? Like how, what's been behind this transition to generate? The ability to generate more cash with the same refining, margin?
Speaker #5: So we anticipate the Venezuelan crude making up a pretty large part of our heavy diet as we move into February and March.
Speaker #5: So we anticipate the Venezuelan crude making up a pretty large part of our heavy diet as we move into February and March.
[Analyst]: Randy.
Speaker #2: Thank you. The next Randy? question is coming from Manoj Gupta of UBS. Please go
Operator: Thank you. The next question is coming from Manav Gupta of UBS. Please go ahead.
Operator: Thank you. The next question is coming from Manav Gupta of UBS. Please go ahead.
Speaker #2: ahead. Plus water to congratulate
Manav Gupta: First, wanted to congratulate Brian on the new role of investor relations. And then also really wanted to congratulate the incoming CFO for pushing the stock price to an all-time high. Target achieved very quickly. On a more serious note, Homer, look, even when we go back four or five years for the same refining margin, what we are seeing is the cash flow profile of the company is different. You're producing more cash even if the margin was the same four or five years ago. Can you help us understand the dynamics over there? What's been behind this transition to generate the ability to generate more cash with the same refining margin?
Manav Gupta: First, wanted to congratulate Brian on the new role of investor relations. And then also really wanted to congratulate the incoming CFO for pushing the stock price to an all-time high. Target achieved very quickly. On a more serious note, Homer, look, even when we go back four or five years for the same refining margin, what we are seeing is the cash flow profile of the company is different. You're producing more cash even if the margin was the same four or five years ago. Can you help us understand the dynamics over there? What's been behind this transition to generate the ability to generate more cash with the same refining margin?
Speaker #4: Brian. On the new role, of investor relations. And then also really wanted to congratulate the incoming CFO for pushing the stock price to an all-time high.
Speaker #4: Target achieved very quickly. On a more serious note, Homer, look, even when we go back 4 or 5 years, for the same refining margin, what we are seeing is the cash flow profile of the company is different.
Speaker #4: You're producing more cash even if the margin was the same 4 or 5 years ago. Can you help us understand the dynamics over there?
Yeah, hey Mana. Uh, so Lane's talked about talked about this in the past, but you know, it's really a result of a number of things and it all starts with being a good operator, you know, having discipline around Capital Investments and then a strong balance sheet, which ultimately all translate to, you know, higher cash flow and higher shareholder return. So, you know, starting with operations, we've obviously worked really hard to manage costs in our reliability over the years. And you can see that with the record throughput and mechanical availability this past year. Um, and then, you know, we've also been very disciplined around growth Investments, obviously, you know, our minimum return threshold, which effectively, you know, ensures you have a good return when things are good, but also hopefully protects us with a return. That's well, above our cost of capital, even in kind of a downside scenario. And you can see that if you look at our, you know, return on Equity or return on invested Capital over the last 5 or 10 years, you know, that's in the mid teens or higher number and again, keep that.
Speaker #4: What's been behind this transition to generate the ability to generate more cash with the same refining
Speaker #4: margin?
Speaker #5: Yeah.
Gary Simmons: Yeah, hey, Mano. So Lane's talked about this in the past, but it's really a result of a number of things. And it all starts with being a good operator, having discipline around capital investments, and then a strong balance sheet, which ultimately all translate to higher cash flow and higher shareholder return. So starting with operations, we've obviously worked really hard to manage costs and our reliability over the years. And you can see that with the record throughput and mechanical availability this past year. And then we've also been very disciplined around growth investments. Obviously, you know our minimum return threshold, which effectively ensures you have a good return when things are good, but also hopefully protects us with a return that's well above our cost of capital, even in kind of a downside scenario.
Homer Bhullar: Yeah, hey, Manav. So Lane's talked about this in the past, but it's really a result of a number of things. And it all starts with being a good operator, having discipline around capital investments, and then a strong balance sheet, which ultimately all translate to higher cash flow and higher shareholder return. So starting with operations, we've obviously worked really hard to manage costs and our reliability over the years. And you can see that with the record throughput and mechanical availability this past year. And then we've also been very disciplined around growth investments. Obviously, you know our minimum return threshold, which effectively ensures you have a good return when things are good, but also hopefully protects us with a return that's well above our cost of capital, even in kind of a downside scenario.
Speaker #5: Manev. So Lane's talk about talked about this in the past, but it's really a result of a number of things. And it all starts with being a good operator, having discipline around capital investments, and then a strong balance sheet, which ultimately all translate to higher cash flow and higher shareholder returns.
Speaker #5: So starting with operations, we've obviously worked really hard to manage costs in our reliability over the years. And you can see that with the record throughput and mechanical availability this past year.
Keep in mind that denominator for that return on Equity or or return on invested, Capital includes all capital right including sustaining capex. And then also generally on Capital we have been trending a little bit lower in recent years, which just frees up, more free, cash flow for shareholder returns. Uh, lastly I mean, you know, the balance sheet obviously plays uh, a strong role in that both in terms of we've got lower debt and higher cash balance. So, at the margin you have
Speaker #5: And then we've also been very disciplined around growth investments. Obviously, you know our minimum return threshold, which effectively ensures you have a good return when things are good, but also hopefully protects us with a return that's well above our cost of capital even in kind of a downside scenario.
Lower interest expense, but then higher interest income as well. But really more importantly, just having a strong balance sheet. Gives you much more flexibility with respect to shareholder returns and then lastly, you know, uh, obviously on a per share basis. Share repurchases have helped a lot as well.
Speaker #5: And you can see that if you look at our return on equity or return on invested capital over the last 5 or 10 years, that's in the mid-teens or higher number.
Gary Simmons: You can see that if you look at our return on equity or return on invested capital over the last 5 or 10 years, that's in the mid-teens or higher number. And again, keep in mind that denominator for that return on equity or return on invested capital includes all capital, right, including sustaining CapEx. And then also generally on capital, we have been trending a little bit lower in recent years, which just frees up more free cash flow for shareholder returns. Lastly, I mean, the balance sheet obviously plays a strong role in that, both in terms of we've got lower debt and higher cash balance. So at the margin, you have lower interest expense, but then higher interest income as well. But really, more importantly, just having a strong balance sheet gives you much more flexibility with respect to shareholder returns.
You can see that if you look at our return on equity or return on invested capital over the last 5 or 10 years, that's in the mid-teens or higher number. And again, keep in mind that denominator for that return on equity or return on invested capital includes all capital, right, including sustaining CapEx. And then also generally on capital, we have been trending a little bit lower in recent years, which just frees up more free cash flow for shareholder returns. Lastly, I mean, the balance sheet obviously plays a strong role in that, both in terms of we've got lower debt and higher cash balance. So at the margin, you have lower interest expense, but then higher interest income as well. But really, more importantly, just having a strong balance sheet gives you much more flexibility with respect to shareholder returns.
Speaker #5: And again, keep in mind that denominator for that return on equity or return on invested capital includes all capital including sustaining CapEx. And then also generally on capital, we have been trending a little bit lower in recent years, which just frees up more free cash flow for shareholder returns.
All very good points. My quick follow-up. Here is, uh, very good Improvement in renewable diesel. I know there were a few quarters where, you know, the industry struggled. You did much better than the industry, but the industry was struggling. Um, I we sign and finally seeing, you know, at the light end of this tunnel where possible our view and then all those policies will become clear and, and do you expect generally a renewable diesel to deliver better earnings in 2026 versus 25? Primarily a function of more maybe policy Clarity. If you could talk about that,
Speaker #5: Lastly, I mean, the balance sheet obviously plays a strong role in that, both in terms of we've got lower debt and higher cash balance.
Speaker #5: So, at the margin, you have lower interest expense, but then higher interest income as well. But really, more importantly, just having a strong balance sheet gives you much more flexibility with respect to shareholder returns.
Yeah. Hey, this is Eric. You're exactly right. We're still waiting on Final policy. Guidance, on the rvo and PTC. And so if you can contrast, the first half of 25, being the transition to PTC, and everyone trying to understand it, we were the first and perhaps 1 of the maybe the only company uh, that has really figured out how to
Speaker #5: And then lastly, obviously on a per-share basis, share repurchases have helped a lot as well.
Gary Simmons: And then lastly, obviously on a per-share basis, share repurchases have helped a lot as well.
And then lastly, obviously on a per-share basis, share repurchases have helped a lot as well.
Speaker #4: All very good points. My quick follow-up here is very good improvement in renewable diesel. I know there were a few quarters where the industry struggled.
Manav Gupta: All very good points. My quick follow-up here is very good improvement in renewable diesel. I know there were a few quarters where the industry struggled. You did much better than the industry, but the industry was struggling. Are we finally seeing the light at the end of this tunnel where possible RVO and then all those policies will become clear? And do you expect generally a renewable diesel to deliver better earnings in 2026 versus 2025? Primarily a function of more maybe policy clarity if you could talk about that.
Manav Gupta: All very good points. My quick follow-up here is very good improvement in renewable diesel. I know there were a few quarters where the industry struggled. You did much better than the industry, but the industry was struggling. Are we finally seeing the light at the end of this tunnel where possible RVO and then all those policies will become clear? And do you expect generally a renewable diesel to deliver better earnings in 2026 versus 2025? Primarily a function of more maybe policy clarity if you could talk about that.
Speaker #4: You did much better than the industry, but the industry was struggling. IV finally seeing at the light end of this tunnel where possible RVO and then all those policies will become clear.
Speaker #4: And do you expect generally a renewable diesel to deliver better earnings in 2026 versus '25? Primarily a function of more maybe policy clarity if you could talk about that.
Speaker #5: Yeah. Hey, Manev, this is Eric. You're exactly right. We're still waiting on final policy guidance on the RVO and PTC. And so if you contrast the first half of '25 being the transition to PTC and everyone trying to understand it, we were the first and perhaps maybe the only company that has really figured out how to capture the PTC.
Capture the PTC. So the second half of 25 was getting into full PTC capture, getting into full sap commercialization and between that differentiation, our ability to capture the PTC and you know the overall margins tightening in in renewable diesel allowed us to out compete a lot of our competitors and and as we have started 2026, there's a lot of capacity offline. There's a lot of players that are now sitting out waiting for guidance to get finalized before they reenter the market and that has caused fat prices to really level off and even drop throughout the fourth quarter and into this first quarter. So, what I see in 26 is, you know, a policy should be a Tailwind. The expectation. Is it should come out favorably for Renewables.
Gary Simmons: Yeah, hey, Mano. This is Eric. You're exactly right. We're still waiting on final policy guidance on the RVO and PTC. And so if you contrast the first half of 2025 being the transition to PTC and everyone trying to understand it, we were the first and perhaps maybe the only company that has really figured out how to capture the PTC. So the second half of 2025 was getting into full PTC capture, getting into full SAF commercialization. And between that differentiation, our ability to capture the PTC, and the overall margins tightening in renewable diesel allowed us to outcompete a lot of our competitors. And as we have started 2026, there's a lot of capacity offline. There's a lot of players that are now sitting out waiting for guidance to get finalized before they re-enter the market.
Eric Fisher: Yeah, hey, Manav. This is Eric. You're exactly right. We're still waiting on final policy guidance on the RVO and PTC. And so if you contrast the first half of 2025 being the transition to PTC and everyone trying to understand it, we were the first and perhaps maybe the only company that has really figured out how to capture the PTC. So the second half of 2025 was getting into full PTC capture, getting into full SAF commercialization. And between that differentiation, our ability to capture the PTC, and the overall margins tightening in renewable diesel allowed us to outcompete a lot of our competitors. And as we have started 2026, there's a lot of capacity offline. There's a lot of players that are now sitting out waiting for guidance to get finalized before they re-enter the market.
You know we'll see what the Supreme Court comes out with and so I think you know you're going to see 2026, starting off more like the second half of 25 and so that would indicate a stronger year in 26 versus 25.
Speaker #5: So the second half of '25 was getting into full PTC capture. Getting into full SAF commercialization. And between that differentiation, our ability to capture the PTC and the overall margins tightening in renewable diesel allowed us to outcompete a lot of our competitors.
Thank you so much.
Thank you. The next question is coming from Doug, Megan of wolf research. Please go ahead.
Speaker #5: And as we have started 2026, there's a lot of capacity offline. There's a lot of players that are now sitting out waiting for guidance to get finalized before they re-enter the market.
Speaker #5: And that has caused fat prices to really level off and even drop throughout the fourth quarter and into this first quarter. So what I see in '26 is a policy should be a tailwind.
Gary Simmons: That has caused fat prices to really level off and even drop throughout the Q4 and into this Q1. So what I see in 2026 is policy should be a tailwind. The expectation is it should come out favorably for renewables. We do see that there's a lot of talk of tariffs continue to be a pretty strong headwind, but we'll see what the Supreme Court comes out with. And so I think you're going to see 2026 starting off more like the second half of 2025. And so that would indicate a stronger year in 2026 versus 2025.
That has caused fat prices to really level off and even drop throughout the Q4 and into this Q1. So what I see in 2026 is policy should be a tailwind. The expectation is it should come out favorably for renewables. We do see that there's a lot of talk of tariffs continue to be a pretty strong headwind, but we'll see what the Supreme Court comes out with. And so I think you're going to see 2026 starting off more like the second half of 2025. And so that would indicate a stronger year in 2026 versus 2025.
Speaker #5: The expectation is it should come out favorably for renewables. We do see that there's a lot of talk of tariffs continuing to be a pretty strong headwind, but we'll see what the Supreme Court comes out with.
Speaker #5: And so I think you're going to see 2026 starting off more like the second half of '25, and so that would indicate a stronger year in '26 versus '25.
Hey, good morning everybody. Um, that's I'm sure. Brian is already uh, told you about my family connection, but uh, well, welcome Brian. Um guys, I wonder if I could uh just ask 2 quick ones. First of all, on all the Dynamics of heavy oil in the Gulf Coast there. There is obviously a lot of complexities or across your system Mexico. Looks like it's now running a little better, so less Imports or less exports rather from from their WCS is TMX. And then, of course, there's Venezuela and my, my question really is about your Coker utilization and the volume of your heavy runs where that can get to not. That could utilization. But where you can actually get your throughput to and my my my specific question is 10 years ago. 15 years ago you were running about 1.3 million barrels, a day of Advantage could including 2 oil.
Divided the Coker. You're less than a million today. Where can that get to?
Speaker #4: Thank you so much.
Manav Gupta: Thank you so much.
Manav Gupta: Thank you so much.
Speaker #2: Thank you. The next question is coming from Doug Leggett of Wolf Research. Please go ahead.
Operator: Thank you. The next question is coming from Doug Leggett of Wolfe Research. Please go ahead.
Operator: Thank you. The next question is coming from Doug Leggett of Wolfe Research. Please go ahead.
Speaker #6: Hey, good morning, everybody. I'm sure Brian is already told you about my family connection, but welcome, Brian. Guys, I wonder if I could just ask two quick ones.
Doug Leggate: Hey, good morning, everybody. I'm sure Brian has already told you about my family connection, but welcome, Brian. Guys, I wonder if I could just ask two quick ones. First of all, on all the dynamics of heavy oil in the Gulf Coast, there's obviously a lot of complexities across your system. Mexico looks like it's now running a little better, so less imports or less exports rather from there. WCS has TMX. And then, of course, there's Venezuela. And my question really is about your COCR utilization and the volume of your heavy runs, where that can get to, not the crude utilization, but where you can actually get your throughput to. And my specific question is, 10 years ago, 15 years ago, you were running about 1.3 million barrels a day of advantage crude, including fuel oil. You've added the COCR. You're less than 1 million today.
Doug Leggate: Hey, good morning, everybody. I'm sure Brian has already told you about my family connection, but welcome, Brian. Guys, I wonder if I could just ask two quick ones. First of all, on all the dynamics of heavy oil in the Gulf Coast, there's obviously a lot of complexities across your system. Mexico looks like it's now running a little better, so less imports or less exports rather from there. WCS has TMX. And then, of course, there's Venezuela. And my question really is about your COCR utilization and the volume of your heavy runs, where that can get to, not the crude utilization, but where you can actually get your throughput to. And my specific question is, 10 years ago, 15 years ago, you were running about 1.3 million barrels a day of advantage crude, including fuel oil. You've added the COCR. You're less than 1 million today. Where can that get to?
Speaker #6: First of all, on all the dynamics of heavy oil in the Gulf Coast, there is obviously a lot of complexities all across your system.
Hey yeah, so hey, Doug its Lane, I'll answer this 1. And if you really look at what happened, we did sort of when we added the Coke or because of the Dynamics you're talking about, in terms of heavy availability, what we really did is we incremented medium and light crude with some heavy actually ramping up into higher rates to ensure that our Coker availability, our Coker, you know, sort of utilization was where we felt like it needed to be to meet FID. Um, we're also purchasing outside resists
Speaker #6: Mexico looks like it's now running a little better, so less imports—or less exports rather—from there. WCS has TMX. And then, of course, there's Venezuela.
Speaker #6: And my question really is about your COCR utilization, and the volume of your heavy runs—where that can get to. Not the crude utilization, but where you can actually get your throughput to.
So we're doing all that. I think what you can expect is you get more available from Venezuela more avails from Canada, you'll see us actually fill the khakhra up sooner. With that crew diet, and we'll see you on an incremental basis. Where we actually increase crude rates.
Um or actually lower them, depending on how incremental crew economics because we believe there will be a driver to to fill the Coker.
Speaker #6: And my specific question is, 10 years ago, 15 years ago, you were running about 1.3 million barrels a day of advantage crude, including fuel oil.
Speaker #6: You've added the COCR. You're less than a million today. Where can that get to?
Doug Leggate: Where can that get to?
Speaker #7: Hey, yeah. So hey, Doug, it's Lane. I'll answer this one. If you really look at what happened, we did sort of when we added the COCR, because of the dynamics you're talking about in terms of heavy availability, what we really did was we incremented medium and light crude with some heavy actually ramping up into higher rates to ensure that our COCR availability or COCR sort of utilization was where we felt like it needed to be to meet FID.
Lane Riggs: Hey, so hey, Doug, it's Lane. I'll answer this one. If you really look at what happened, we did sort of, when we added the COCR, because of the dynamics you're talking about in terms of heavy availability, what we really did is we incremented medium and light crude with some heavy actually ramping up into higher rates to ensure that our COCR availability, our COCR sort of utilization was where we felt like it needed to be to meet FID. We're also purchasing outside resids. So we're doing all that. I think what you can expect is you get more available from Venezuela, more available from Canada. You'll see us actually fill the COCR up sooner with that crude diet.
Lane Riggs: Hey, so hey, Doug, it's Lane. I'll answer this one. If you really look at what happened, we did sort of, when we added the COCR, because of the dynamics you're talking about in terms of heavy availability, what we really did is we incremented medium and light crude with some heavy actually ramping up into higher rates to ensure that our COCR availability, our COCR sort of utilization was where we felt like it needed to be to meet FID. We're also purchasing outside resids. So we're doing all that. I think what you can expect is you get more available from Venezuela, more available from Canada. You'll see us actually fill the COCR up sooner with that crude diet.
With heavy. Well, is it Lynn? Is it possible to give a utilization rate on your coers that you Your coer Capacity today or where it could get to? Or is, is that too granular? Yeah, we I don't know that we've ever really been public with cocoa utilization and in fact I don't think we even have that in front of us. So but you know we we normally from a just from a signaling perspective, most of the time we optimize the crew diet into sort of, you know, the way you would do it and then we purchased outside feed or internal resid feed to make sure that that Co
For most of the time. Yeah.
Speaker #7: We're also purchasing outside resides. So we're doing all that. I think what you can expect is you get more available from Venezuela, more available from Canada.
Speaker #7: You'll see us actually fill the COCR up sooner with that crude diet. And we'll see on an incremental basis whether we actually increase crude rates or actually lower them depending on how incremental crude economics.
Lane Riggs: We'll see on an incremental basis whether we actually increase crude rates or actually lower them depending on how incremental crude economics, because we believe it'll be a driver to fill the coker with heavy.
We'll see on an incremental basis whether we actually increase crude rates or actually lower them depending on how incremental crude economics, because we believe it'll be a driver to fill the coker with heavy.
Speaker #7: Because we believe there'll be a driver to fill the COCR. With
All right. That's that's helpful guys. My my follow-up is actually on 1 of my navs questions about the rvo and Rin. Prices are obviously spiked here pretty dramatically since the start of the year, uh I'm I'm trying to understand how you, how should we think. I don't know if there is such a thing as mid-cycle earnings but at today's run price. Um obviously we're up around the 1 I think we're at 1:20 or something today. Um per gallon what what do you think the mid-cycle earnings capacity of BG is or maybe free cash flow, whichever 1 you prefer to lean on and I'll leave it there. Thanks.
Speaker #7: heavy. Lane, is it possible
Doug Leggate: Lane, is it possible to get a utilization rate on your COCR capacity today and where it could get to, or is that too granular?
Doug Leggate: Lane, is it possible to get a utilization rate on your COCR capacity today and where it could get to, or is that too granular?
Speaker #6: To get a utilization rate on your COCR—so your COCR capacity today and where it could get to? Or is that too—
Yeah that's that's not really a a question that can you can easily come up with an answer on what mid-cycle for for rains. I what I would say is is
Speaker #6: granular? Yeah.
Speaker #7: I don't know if we've ever really been public with COCR utilization. In fact, I don't think we even have it in front of us.
Lane Riggs: I don't know if we've ever really been public with COCR utilization. In fact, I don't think we even have it in front of us. But we normally, just from a signaling perspective, most of the time, we optimize the crude diet into sort of the way you would do it. And then we purchase outside feed or internal resid feed to make sure that that COCR is full most of the time.
Lane Riggs: I don't know if we've ever really been public with COCR utilization. In fact, I don't think we even have it in front of us. But we normally, just from a signaling perspective, most of the time, we optimize the crude diet into sort of the way you would do it. And then we purchase outside feed or internal resid feed to make sure that that COCR is full most of the time.
Speaker #7: So we normally, just from a signaling perspective, most of the time we optimize the crude diet into sort of the way you would do it.
You know, you've kind of been a new framework with the PTC. So the previous 10 years of dgd was on the blenders tax credit. So everyone gets a dollar cash from the government for every gallon that you produce. Now we're into a regime where
Speaker #7: And then we purchase outside feed or internal resid feed to make sure that that COCR is full most of the time.
It is dependent on your CI, it's dependent on your income tax because it's now an income tax credit.
Speaker #7: Yeah. All right.
Doug Leggate: All right. That's helpful, guys. My follow-up is actually on one of Manav's questions about the RVO and RIN prices that have obviously spiked here pretty dramatically since the start of the year. I'm trying to understand how should we think? I don't know if there is such a thing as mid-cycle earnings, but at today's RIN price, obviously we're up around the $1. I think we're at $1.20 or something today per gallon. What do you think the mid-cycle earnings capacity of DGD is, or maybe free cash flow, whichever one you prefer to lean on? And I'll leave it there. Thanks.
Doug Leggate: All right. That's helpful, guys. My follow-up is actually on one of Manav's questions about the RVO and RIN prices that have obviously spiked here pretty dramatically since the start of the year. I'm trying to understand how should we think? I don't know if there is such a thing as mid-cycle earnings, but at today's RIN price, obviously we're up around the $1. I think we're at $1.20 or something today per gallon. What do you think the mid-cycle earnings capacity of DGD is, or maybe free cash flow, whichever one you prefer to lean on? And I'll leave it there. Thanks.
Speaker #6: That's helpful, guys. My follow-up is actually on one of Manav's questions about the RVO and RIN prices. There are obviously spikes here pretty dramatically since the start of the year.
So, you're into a different, just an overall different framework. Now RNs have been underlying, this will be a part of this in the past, as it will in the as it is going forward. I think as as we think about, you know, where this all goes.
Speaker #6: I'm trying to understand how should we think? I don't know if there is such a thing as mid-cycle earnings, but at today's RIN price, obviously we're up around the one, I think we're at 120 or something today.
What the government has suggested as an RV as a obligation range of 52 to 56.
Speaker #6: Per gallon. What do you think the mid-cycle earnings capacity of BGD is or maybe free cash flow, whichever one you prefer to lean on?
Uh, billion gallons for for 26. And 27 is well above domestic production capability. So if you see that, and with the combination of tariffs,
Speaker #6: And I'll leave it there. Thanks.
On foreign feed stocks and the elimination of credits for foreign imports.
Speaker #5: Yeah, that's not really a question that you can easily come up with an answer to about mid-cycle for RINs. What I would say is, you've kind of been in a new framework with the PTC.
Gary Simmons: Yeah, that's not really a question that you can easily come up with an answer on about mid-cycle for RINs. What I would say is you've kind of been a new framework with the PTC. So the previous 10 years of DGD was on the blender's tax credit. So everyone gets a $1 cash from the government for every gallon that you produce. Now we're in a regime where it is dependent on your CI. It's dependent on your income tax because it's now an income tax credit. So you're into just an overall different framework. Now, RINs have been underlying this, will be a part of this in the past as it will as it is going forward.
Eric Fisher: Yeah, that's not really a question that you can easily come up with an answer on about mid-cycle for RINs. What I would say is you've kind of been a new framework with the PTC. So the previous 10 years of DGD was on the blender's tax credit. So everyone gets a $1 cash from the government for every gallon that you produce. Now we're in a regime where it is dependent on your CI. It's dependent on your income tax because it's now an income tax credit. So you're into just an overall different framework. Now, RINs have been underlying this, will be a part of this in the past as it will as it is going forward.
Speaker #5: So the previous 10 years of DGD was on the blender tax credit. So everyone gets a dollar cash from the government for every gallon that you produce.
The the entire compliant, you know, essentially, you're raising the obligation while also making it harder to generate that all points to a higher D4, Ren price, especially as you draw the bank down which a 52 to 56. Obligation number would certainly do. And so
Speaker #5: Now we're in the regime where it is dependent on your CI. It's dependent on your income tax because it's now an income tax credit.
You know, there's a good chance, D4 wrens are going to go up. And so then the next question is,
Speaker #5: So you're into a different just an overall different framework. Now, RINs have been underlying this will be a part of this in the past as it will in the as it is going forward.
Speaker #5: I think as we think about where this all goes, what the government has suggested as an obligation range of 5.2 to 5.6 billion gallons for '26 and '27 is well above domestic production capability.
Gary Simmons: I think as we think about where this all goes, what the government has suggested as an obligation range of 5.2 to 5.6 billion gallons for 2026 and 2027 is well above domestic production capability. So if you see that and with the combination of tariffs on foreign feedstocks and the elimination of credits for foreign imports, the entire compliance year, essentially you're raising the obligation while also making it harder to generate. That all points to a higher D4 RIN price, especially as you draw the bank down, which a 5.2 to 5.6 obligation number would certainly do. And so what I would say is it's not really trying to think about what a mid-cycle it is, more just saying that there's a good chance D4 RINs are going to go up.
I think as we think about where this all goes, what the government has suggested as an obligation range of 5.2 to 5.6 billion gallons for 2026 and 2027 is well above domestic production capability. So if you see that and with the combination of tariffs on foreign feedstocks and the elimination of credits for foreign imports, the entire compliance year, essentially you're raising the obligation while also making it harder to generate. That all points to a higher D4 RIN price, especially as you draw the bank down, which a 5.2 to 5.6 obligation number would certainly do. And so what I would say is it's not really trying to think about what a mid-cycle it is, more just saying that there's a good chance D4 RINs are going to go up.
Does fat prices. Just follow that up and keep overall Rd margins tight or do you see from a competitive standpoint? Going back to the PTC that low CI and the ability to run waste oils over. Veg oils is still going to have an advantage in this in this new framework of PTC. So
all of that, you know, just really saying
Speaker #5: So if you see that and with the combination of tariffs on foreign feedstocks and the elimination of credits for foreign imports, the entire compliant essentially you're raising the obligation while also making it harder to generate.
2026 is going to likely look better than 2025 for the segment and then it particularly looks better for those that can export into Advantage markets into Canada.
And Europe and the UK, those that operate just like refining, the most efficient capacity in the Gulf Coast and then those that can run waste oils over veg oils.
Speaker #5: That all points to a higher D4 RIN price especially as you draw the bank down, which a 5.2 to 5.6 obligation number would certainly do.
Can we answer Eric? Thanks so much.
Thank you. The next question is coming from Paul Chang of Scotia Bank, please go ahead.
Speaker #5: And so what I would say is it's not really trying to think about what a mid-cycle is. It's more just saying that there's a good chance D4 RINs are going to go up.
Hey guys. Good morning.
Speaker #5: And so then the next question is, does fat prices just follow that up and keep overall RD margins tight? Or do you see from a competitive standpoint going back to the PTC that low CI and the ability to run waste oils over veg oils is still going to have an advantage in this new framework of PTC?
Gary Simmons: And so then the next question is, does fat prices just follow that up and keep overall RD margins tight? Or do you see, from a competitive standpoint, going back to the PTC, that low CI and the ability to run waste oils over veg oils is still going to have an advantage in this new framework of PTC? So all of that just really saying 2026 is going to likely look better than 2025 for the segment. And then it particularly looks better for those that can export into advantage markets into Canada, Europe, and the UK, those that operate just like refining in the most efficient capacity in the Gulf Coast, and then those that can run waste oils over veg oils.
And so then the next question is, does fat prices just follow that up and keep overall RD margins tight? Or do you see, from a competitive standpoint, going back to the PTC, that low CI and the ability to run waste oils over veg oils is still going to have an advantage in this new framework of PTC? So all of that just really saying 2026 is going to likely look better than 2025 for the segment. And then it particularly looks better for those that can export into advantage markets into Canada, Europe, and the UK, those that operate just like refining in the most efficient capacity in the Gulf Coast, and then those that can run waste oils over veg oils.
Morning, morning, um, name. I don't know whether you guys will be willing to share it. Um, that's the, uh, as usual, every several years that we have, uh, the neighbor, uh, contract being negotiate, and marathon is, uh, heading that with the, uh, us W. And can you tell us that which of you will be finally, uh, is currently under that contract?
Speaker #5: So all of that just really saying 2026 is going to likely look better than 2025 for the segment. And then it particularly looks better for those that can export into advantage markets into Canada, and Europe, and the UK, those that operate just like refining in the most efficient capacity in the Gulf Coast, and then those that can run waste oils over veg
So in other words, that if that's in case if there's any sorry, I'm sure that you guys are well, prepared management will be able to take care of it for a few of time. But which we find, you know, what percent of your uh, capacity is actually will be impacted.
Speaker #5: oils. Great
Speaker #6: answer, Eric. Thanks so
Doug Leggate: Great answer, Eric. Thanks so much.
Doug Leggate: Great answer, Eric. Thanks so much.
Speaker #6: much. Thank you.
Operator: Thank you. The next question is coming from Paul Cheng of Scotiabank. Please go ahead.
Operator: Thank you. The next question is coming from Paul Cheng of Scotiabank. Please go ahead.
Speaker #8: The next question is coming from Paul Chang of Scotiabank. Please go ahead.
Speaker #9: Hey, guys. Good
Manav Gupta: Hey, guys. Good morning.
Paul Cheng: Hey, guys. Good morning.
Speaker #9: morning. Good Lane, I don't know whether you
Speaker #5: morning.
Lane Riggs: Morning.
Lane Riggs: Morning.
Manav Gupta: Lane, I don't know whether you guys will be willing to share. That's a, as usual, every several years that we have the labor contract being negotiated, Marathon is heading that with the USW. And can you tell us that which of your refineries is currently under that contract? So in other words, that if that's in case if there's any strike, I'm sure that you guys are well-prepared management will be able to take care of it for a period of time. But which refinery or what percent of your capacity is actually will be impacted? Second question is that I think that has been asked previously. If we look back in your utilization way, historically, I think on a four-year basis that your maximum may be doing somewhere in the 94%, 95%.
Paul Cheng: Lane, I don't know whether you guys will be willing to share. That's a, as usual, every several years that we have the labor contract being negotiated, Marathon is heading that with the USW. And can you tell us that which of your refineries is currently under that contract? So in other words, that if that's in case if there's any strike, I'm sure that you guys are well-prepared management will be able to take care of it for a period of time. But which refinery or what percent of your capacity is actually will be impacted? Second question is that I think that has been asked previously. If we look back in your utilization way, historically, I think on a four-year basis that your maximum may be doing somewhere in the 94%, 95%.
Speaker #9: guys will be willing to share. That's a, as usual, every several years that we have the labor contract being negotiated and marathon years. Having that with the USW and can you tell us that which of your refinery is currently under that contract?
Uh, second question is that I think uh that have been awesome. The previously if we look back in your uh, utilization rate, historically I think on a 4 year basis that your maximum may be doing somewhere in the 94. 95%, do you believe? Uh, given you've been look like that have been done a phenomenal job in operating your facility better and better. Do you think that now on a maximum full cycle basis? Uh, that you will be able to do better than that? Or that, I mean, that the, the entire curve have been shift up what? I mean, their campaign to maybe 10 years ago, was 1 or 2%? Is there anything that you can help to quantify you?
Speaker #9: So in other words, that in case if there's any strike, I'm sure that you guys are well prepared management will be able to take care of it for a period of time.
Speaker #9: But which refinery or what percent of your capacity is actually will be impacted? Second question is that I think that has been asked previously.
Hey Paul. It's fine. I'll take a stab at the first 1. I just. Yeah. So your instincts were correct. We're very, we're not really the most disclosed exactly where what, which 1 of our sites and everything are are under usw. We some of the other maybe, uh, unions that are out there. What I will say, 1 of the advantages of Valero has versus our competitors in that space.
Speaker #9: If we look back in your utilization rate, historically, I think on a full-year basis that your maximum may be doing somewhere in the 94, 95 percent.
What however you think about it is, we are, you know, we're less unionized directionally than a lot of the other people in the space. I want to, I don't about everybody, but directionally that's true.
and on the second 1, I guess it's
Speaker #9: Do you believe given you've been looked like there have been done a phenomenal job in operating your facility better and better, do you think that now on a maximum full-cycle basis, that you will be able to do better than that?
Manav Gupta: Do you believe, given you've been it looks like that has been done a phenomenal job in operating your facility better and better? Do you think that now on a maximum full-cycle basis that you would be able to do better than that? Or that, I mean, that the entire curve has been shipped up, what I mean, they compared to maybe 10 years ago, what, 1% or 2%? Is there anything that you can help to quantify it?
Do you believe, given you've been it looks like that has been done a phenomenal job in operating your facility better and better? Do you think that now on a maximum full-cycle basis that you would be able to do better than that? Or that, I mean, that the entire curve has been shipped up, what I mean, they compared to maybe 10 years ago, what, 1% or 2%? Is there anything that you can help to quantify it?
Yeah, so I think, you know, Paul I you know what, I tell you is we obviously had our a record year in terms of mechanical availability last year. Um, with better mechanical availability you would expect to see better refiner utilization. Um, you know, to try to quantify that would be very difficult.
Speaker #9: Or that, I mean, that the entire curve has been shipped up, what, I mean, the complaint to maybe 10 years ago, what, 1 or 2 percent?
Hey, Gary, do you think that the whole industry is getting better?
Speaker #9: Is there anything that you can help to quantify it?
Speaker #5: Hey, Paul, it's Lane. I'll take a stab at the first one. Yeah. So your instincts were correct. We're very we're not really going to disclose exactly which one of our sites and everything are under USW.
Lane Riggs: Hey, Paul, it's Lane. I'll take a stab at the first one. Yeah, so your instincts were correct. We're not really going to disclose exactly which one of our sites and everything are under USW and some of the other maybe unions that are out there. What I will say, one of the advantages that Valero has versus our competitors in that space, however you think about it, is we're less unionized directionally than a lot of the other people in the space. I don't buy everybody, but directionally, that's true. And on the second one, I guess that's.
Lane Riggs: Hey, Paul, it's Lane. I'll take a stab at the first one. Yeah, so your instincts were correct. We're not really going to disclose exactly which one of our sites and everything are under USW and some of the other maybe unions that are out there. What I will say, one of the advantages that Valero has versus our competitors in that space, however you think about it, is we're less unionized directionally than a lot of the other people in the space. I don't buy everybody, but directionally, that's true. And on the second one, I guess that's.
Speaker #5: And some of the other maybe unions that are out there. What I will say, one of the advantages that Valero has versus our competitors in that space, however you think about it, is we're less unionized, directionally, than a lot of the other people in the space.
It's, you know, it's a good question. I think you know a lot of what you saw on the fourth quarter um was very strong margins and moderate temperatures. And so you know that allows you to kind of push Refinery Hardware a little bit harder than you normally could. I think it'll come back off. I don't think what we saw in in December is is sustainable, but everyone is certainly trying to to drive up mechanical availability, as, as we have
And that uh, you're talking about the weather, but did you guys have any noticeable downtime from the winter?
Uh, that's my last question. Thank you.
Yeah.
Speaker #5: I don't buy everybody, but directionally, that's true. And on the second one, I guess that's—yeah. So I think, Paul, what I'd tell you is we obviously had our record year in terms of mechanical availability last year.
Manav Gupta: Yeah. So I think, Paul, what I'd tell you is we obviously had a record year in terms of mechanical availability last year. With better mechanical availability, you would expect to see better refinery utilization. To try to quantify that would be very difficult. Hey, Gary, do you think that the whole industry is getting better?
Gary Simmons: Yeah. So I think, Paul, what I'd tell you is we obviously had a record year in terms of mechanical availability last year. With better mechanical availability, you would expect to see better refinery utilization. To try to quantify that would be very difficult.
Speaker #5: With better mechanical availability, you would expect to see better refinery utilization. To try to quantify that would be very—
Speaker #5: difficult. Hey, Gary, do you think that the
Paul Cheng: Hey, Gary, do you think that the whole industry is getting better?
Yeah, Paul. We really figured the winter storm pretty well. Uh, we had a few nuisance type heater trips but nothing material. I think most of what we saw was really things. External to the refinery, some interruptions and hydrogen steam, um, hitting up against, uh, product containment type limits. But, you know, if you look at our guidance, I would tell you there was nothing material uh that related to the winter storm. That's going to impact the quarter. Thank you.
Speaker #9: whole industry is getting better?
Speaker #5: It's a good question. I think a lot of what you saw in the fourth quarter was very strong margins. And moderate temperatures. And so that allows you to kind of push refinery hardware a little bit harder than you normally could.
Gary Simmons: It's a good question. I think a lot of what you saw in Q4 was very strong margins and moderate temperatures. And so that allows you to kind of push refinery hardware a little bit harder than you normally could. I think it'll come back off. I don't think what we saw in December is sustainable, but everyone is certainly trying to drive up mechanical availability as we have.
Gary Simmons: It's a good question. I think a lot of what you saw in Q4 was very strong margins and moderate temperatures. And so that allows you to kind of push refinery hardware a little bit harder than you normally could. I think it'll come back off. I don't think what we saw in December is sustainable, but everyone is certainly trying to drive up mechanical availability as we have.
Thank you. The next question is coming from Ryan. Todd of Piper Sandler. Please go ahead.
Good, thanks. Um, maybe 1 on the west coast, if you could just talk a little bit about West Coast refining, um,
Speaker #5: I think it'll come back off. I don't think what we saw in December is sustainable. But everyone is certainly trying to drive up mechanical availability as we have.
Speaker #9: And that you're talking about the weather—did you guys have any noticeable downtime from the winter? That's my last question. Thank you.
Manav Gupta: And that you're talking about the weather, do you guys have any noticeable downtime from the winter? That's my last question. Thank you.
Paul Cheng: And that you're talking about the weather, do you guys have any noticeable downtime from the winter? That's my last question. Thank you.
Couple things maybe profitability was was a little weaker in the quarter. Can you maybe talk about what some of the drivers were there. And then um, can you maybe walk us through the the timeline of of the coming shutdown of benisha? Um, and how you're thinking about West Coast Dynamics for 2026?
Speaker #5: Yeah, yeah, Paul. We really fared the winter storm pretty well. We had a few nuisance-type heater trips, but nothing material. I think most of what we saw was really things external to the refinery.
Gary Simmons: Yeah. Yeah, Paul, we really fared the winter storm pretty well. We had a few nuisance-type heater trips, but nothing material. I think most of what we saw was really things external to the refinery, some interruptions in hydrogen steam hitting up against product containment-type limits. But if you look at our guidance, I would tell you there was nothing material that related to the winter storm that's going to impact the quarter.
Gary Simmons: Yeah. Yeah, Paul, we really fared the winter storm pretty well. We had a few nuisance-type heater trips, but nothing material. I think most of what we saw was really things external to the refinery, some interruptions in hydrogen steam hitting up against product containment-type limits. But if you look at our guidance, I would tell you there was nothing material that related to the winter storm that's going to impact the quarter.
Speaker #5: Some interruptions in hydrogen steam, hitting up against product containment-type limits. But if you look at our guidance, I would tell you there was nothing material.
Speaker #5: That related to the winter storm that's going to impact
Speaker #5: the quarter. Thank
Manav Gupta: Thank you.
Paul Cheng: Thank you.
Yes I'll start on the first yeah. Our capture race were a little down on the west coast. Uh some of that is to do with the fact that you know gasoline relative to diesel gasoline was pretty weak, relative to diesel. We've talked about especially our Benicia Refinery has a really strong gasoline yield and so it tends to lower our capture rates. The other thing that hurt us is there was a retroactive tariff adjustment on 1 of the pipelines. We utilize on the west coast and all those charges hit during the fourth quarter. So those are the 2, big things that that impacted our our capture rates in the fourth quarter on the West Coast,
Speaker #8: Thank you. The next question is coming to you from Ryan Todd of Piper Sandler. Please go ahead.
Operator: Thank you. The next question is coming from Ryan Todd of Piper Sandler. Please go ahead.
Operator: Thank you. The next question is coming from Ryan Todd of Piper Sandler. Please go ahead.
Speaker #10: Good. Thanks. Maybe one on the West Coast, if you could just talk a little bit about West Coast refining. A couple of things, maybe profitability was a little weaker in the quarter.
[Analyst]: Good. Thanks. Maybe one on the West Coast, if you could just talk a little bit about West Coast refining. A couple of things, maybe profitability was a little weaker in the quarter. Can you maybe talk about what some of the drivers were there? And then can you maybe walk us through the timeline of the coming shutdown of Benicia and how you're thinking about West Coast dynamics for 2026?
Ryan Todd: Good. Thanks. Maybe one on the West Coast, if you could just talk a little bit about West Coast refining. A couple of things, maybe profitability was a little weaker in the quarter. Can you maybe talk about what some of the drivers were there? And then can you maybe walk us through the timeline of the coming shutdown of Benicia and how you're thinking about West Coast dynamics for 2026?
Speaker #10: Can you maybe talk about what some of the drivers were there? And then can you maybe walk us through the timeline of the coming shutdown of Venetia and how you're thinking about West Coast dynamics for 2026?
Speaker #5: Yes. I'll start on the first. Yeah. Our capture rates were a little down on the West Coast. Some of that is to do with the fact that gasoline, relative to diesel, was pretty weak.
Gary Simmons: Yes. I'll start on the first. Yeah, our capture rates were a little down on the West Coast. Some of that is to do with the fact that gasoline relative to diesel gasoline was pretty weak relative to diesel. As we've talked about, especially our Benicia Refinery has a really strong gasoline yield. And so it tends to lower our capture rates. The other thing that hurt us is there was a retroactive tariff adjustment on one of the pipelines we utilize on the West Coast, and all those charges hit during Q4. Those are the two big things that impacted our capture rates in Q4 on the West Coast.
Lane Riggs: Yes. I'll start on the first. Yeah, our capture rates were a little down on the West Coast. Some of that is to do with the fact that gasoline relative to diesel gasoline was pretty weak relative to diesel. As we've talked about, especially our Benicia Refinery has a really strong gasoline yield. And so it tends to lower our capture rates. The other thing that hurt us is there was a retroactive tariff adjustment on one of the pipelines we utilize on the West Coast, and all those charges hit during Q4. Those are the two big things that impacted our capture rates in Q4 on the West Coast.
Um, and this Rich, uh, Walsh, I'll try to answer on the timeline there, you know, in terms of the Benicia idling, you know, we're, we're executing our plan to safely Idol it. Um, the refinery operating units. Uh, that is and, you know, so well planned out and phase process and in February, you know, we've you saw sure you saw our most recent announcement, you know, we will be idling the process units because they have some mandatory inspection requirements, that are that are kicking in then and so we'll, we'll be pulling those uh, offline. And but, you know, we will be continuing to produce fuel as we work down, the inventory, um,
Speaker #5: So, we've talked about—especially our Venetia refinery has a really strong gasoline yield, and so it tends to lower our capture rates. The other thing that hurt us is there was a retroactive tariff adjustment on one of the pipelines we utilize on the West Coast.
Speaker #5: And all those charges hit during the fourth quarter. So those are the two big things that impacted our capture rates in the fourth quarter on the West Coast.
Speaker #10: And this is Rich Walsh. I'll try to answer on the timeline there. In terms of the Venetia idling, we're executing our plan to safely idle it.
Lane Riggs: And this is Rich Walsh. I'll try to answer on the timeline there. In terms of the Benicia idling, we're executing our plan to safely idle it, the refinery operating units that is. And it's a well-planned out and phased process. And in February, I'm sure you saw our most recent announcement. We will be idling the process units because they have some mandatory inspection requirements that are kicking in then. And so we'll be pulling those offline. But we will be continuing to produce fuel as we work down the inventory through this process. And as we've shared with the governor and the CEC, we are going to be importing some gasoline and/or gasoline blend components over the near term. And we remain committed to our contractual obligations out there to meet the supply obligations that we have.
Rich Walsh: And this is Rich Walsh. I'll try to answer on the timeline there. In terms of the Benicia idling, we're executing our plan to safely idle it, the refinery operating units that is. And it's a well-planned out and phased process. And in February, I'm sure you saw our most recent announcement. We will be idling the process units because they have some mandatory inspection requirements that are kicking in then. And so we'll be pulling those offline. But we will be continuing to produce fuel as we work down the inventory through this process. And as we've shared with the governor and the CEC, we are going to be importing some gasoline and/or gasoline blend components over the near term. And we remain committed to our contractual obligations out there to meet the supply obligations that we have.
Through this process. And and, you know, as we've shared with the governor and the CEC, we are going to be importing some gasoline, Andor gasoline blend components. Um, you know over the over the near near term and uh we remain committed to our, you know, contractual obligations um out there to meet to meet the uh Supply obligations that we have. So we're working cooperatively with State officials, the CC, and the governor on our plans, and we've kept them fully informed, and they're aware of our supplemental Supply, uh, commitments to the, to the Bay Area. So, uh, I think that's pretty much where we are and then, in terms of Wilmington, you know, it's normal operations. Um, and you know, we'll continue to supply them. California Market, out of Wilmington.
Speaker #10: The refinery operating units that is. And it's a well-planned out and phased process. And in February, we've I'm sure you saw our most recent announcement.
Great, thank you. And then maybe, um,
Speaker #10: We will be idling the process units because they have some mandatory inspection requirements that are kicking in then. And so we'll be pulling those offline.
Just maybe we want to follow up for you Eric. Um on the rvo stuff. Any any thoughts in terms of what you're hearing on?
on timing or any of the
Speaker #10: But we will be continuing to produce fuel as we work down the inventory through this process. And as we've shared with the governor and the CEC, we are going to be importing some gasoline and/or gasoline blend components over the near term.
Any of the items which are are kind of debated out there whether it's you know, Sr is a reallocations or penalties for foreign fees or products. Um,
Yeah. Directly. What? What you're hearing on those things?
Yeah, that's really kind of a government question of what uh, Rich that.
Speaker #10: And we remain committed to our contractual obligations out there to meet the supply obligations that we have. So we're working cooperatively with state officials: the CEC and the governor on our plans.
Great. Yeah.
Lane Riggs: So we're working cooperatively with state officials, the CEC, and the governor on our plans. And we've kept them fully informed, and they're aware of our supplemental supply commitments to the Bay Area. So I think that's pretty much where we are. And then in terms of Wilmington, it's normal operations, and we'll continue to supply the California market out of Wilmington.
So we're working cooperatively with state officials, the CEC, and the governor on our plans. And we've kept them fully informed, and they're aware of our supplemental supply commitments to the Bay Area. So I think that's pretty much where we are. And then in terms of Wilmington, it's normal operations, and we'll continue to supply the California market out of Wilmington.
Look. Look, you guys got a big Challenge on the on, uh, you know, on dealing with the rvo right now. Um, and and you know the sres um,
Speaker #10: And we've kept them fully informed, and they're aware of our supplemental supply commitments to the Bay Area. So I think that's pretty much where we are.
Speaker #10: And then, in terms of Wilmington, it's normal operations, and we'll continue to supply the California market out of Wilmington. Great, thank you. And then maybe just maybe one follow-up for you, Eric.
Doug Leggate: Great. Thank you. And then maybe just maybe one follow-up for you, Eric, on the RVO stuff. Any thoughts in terms of what you're hearing on timing or any of the items which are kind of debated out there, whether it's SREs, or reallocations, or penalties for foreign feeds or products, directionally, what you're hearing on those things?
Ryan Todd: Great. Thank you. And then maybe just maybe one follow-up for you, Eric, on the RVO stuff. Any thoughts in terms of what you're hearing on timing or any of the items which are kind of debated out there, whether it's SREs, or reallocations, or penalties for foreign feeds or products, directionally, what you're hearing on those things?
Speaker #10: On the RVO stuff, any thoughts in terms of what you're hearing on timing or any of the items which are kind of debated out there, whether it's SREs or reallocations or penalties for foreign feeds or products?
Speaker #10: Directionally, what you're hearing on those
Speaker #10: Directionally, what you're hearing on those things? Yeah.
Speaker #5: That's really kind of a government question. I'm going to let Rich answer that.
Lane Riggs: Yeah. That's really kind of a government question. I'm going to let Rich answer that.
Eric Fisher: Yeah. That's really kind of a government question. I'm going to let Rich answer that.
Doug Leggate: Great.
Ryan Todd: Great.
Speaker #5: Yeah. I Great. mean, look, UPA has got a big challenge on the dealing with the RVO right now. And the SREs in this, I think the administration is starting to recognize how now that all of this is getting caught up with these SREs, they've really gotten out of hand.
Rich Walsh: Yeah. I mean, look, EPA has got a big challenge on dealing with the RVO right now and the SREs. I think the administration is starting to recognize however that all of this is getting caught up with these SREs; they've really gotten out of hand. If you look at EPA, they sort of defaulted to this outdated DOE process that the Government Accountability Office has already said was a flawed process, and both EPA and DOE had acknowledged that previously. And this matrix is so out of date; it doesn't even account for the shale revolution and the domestic production, which has completely transformed the US energy market. So it's a really flawed SRE basis that's out there.
Rich Walsh: Yeah. I mean, look, EPA has got a big challenge on dealing with the RVO right now and the SREs. I think the administration is starting to recognize however that all of this is getting caught up with these SREs; they've really gotten out of hand. If you look at EPA, they sort of defaulted to this outdated DOE process that the Government Accountability Office has already said was a flawed process, and both EPA and DOE had acknowledged that previously. And this matrix is so out of date; it doesn't even account for the shale revolution and the domestic production, which has completely transformed the US energy market. So it's a really flawed SRE basis that's out there.
In this, I think the administration is trying to recognize how now that, you know, all of this is getting caught up with these sres, they've really gotten out of hand. You know, if you look at EPA they they sort of defaulted to this outdated. Um, doe process that that the government accounting office has already, you know, said, was was a flawed process in both EPA and doe had acknowledged that previously. Um, and you know, this this Matrix is so out of date, it doesn't even account for the, the Shale Revolution and the domestic production, which is completely transformed to the US Energy market. So it's it's a really flawed SRE basis. That's out there. Um, you know, and in terms of, you know Solutions, I mean, I think there is a legislative, you know, proposal out there that's a compromise that supported by API by a interest, by retail trades and most refiners that, you know, would allow a process to go forward. That would kind of help correct. All of this and get this kind of realigned and and supporting the uh, the RFS.
Speaker #5: If you look at EPA, they sort of defaulted to this outdated DOE process that the Government Accounting Offices already said was a flawed process in both EPA and DOE.
Um, but, you know, there are a small number of conglomerate so-called small refiners that are, that are out there that are having a windfall on these sres and that, you know, they're kind of holding it up. So, um, that's where we, uh, where we think. Uh, this stuff is going to have to be worked down. It's a, it's a challenge for the agency that kind of gotten into a, into a fix width with over issuing these SRS
Okay, thank you.
Speaker #5: Had acknowledged that previously. And this matrix is so out of date, it doesn't even account for the shale revolution and the domestic production, which is completely transforming the U.S. energy market.
Thank you. The next question is coming from Paul sanki of sanki research. Please go ahead.
Speaker #5: So, it's a really flawed SRE basis that's out there. And in terms of solutions, I mean, I think there is a legislative proposal out there as a compromise that's supported by API, by ag interest, by retail trades.
Morning, everyone. Um, good morning. This is glad to hear. Brian that you got the job because you're close, uh, family relationship to Doug legit. So,
Rich Walsh: And in terms of solutions, I mean, I think there is a legislative proposal out there that's a compromise that's supported by API, by ag interest, by retail trades, and most refiners that would allow a process to go forward that would kind of help correct all of this and get us kind of realigned and supporting the RFS. But there are a small number of conglomerate, so-called small refiners that are out there that are having a windfall on these SREs, and they're kind of holding it up. So that's where we think this stuff is going to have to be worked out. And it's a challenge for the agency that kind of gotten into a fix with overissuing these SREs.
And in terms of solutions, I mean, I think there is a legislative proposal out there that's a compromise that's supported by API, by ag interest, by retail trades, and most refiners that would allow a process to go forward that would kind of help correct all of this and get us kind of realigned and supporting the RFS. But there are a small number of conglomerate, so-called small refiners that are out there that are having a windfall on these SREs, and they're kind of holding it up. So that's where we think this stuff is going to have to be worked out. And it's a challenge for the agency that kind of gotten into a fix with overissuing these SREs.
Speaker #5: And most refiners that would allow a process to go forward that would kind of help correct all of this and get us kind of realigned in supporting the RFS.
Yeah, just tons of demand and Supply, uh, at the moment, obviously, we're seeing oil through 70. Is that, would you say that's related to the sanctions and Shadow Fleet being
Speaker #5: But there are a small number of conglomerate so-called small refiners that are out there that are having a windfall on these SREs. And they're kind of holding it up.
Uh, shut down. Effectively will will more shut down than it has been. Uh, you know, I'm just wondering it's a big surprise. I think to all of us there's obviously the demand side of the equation.
Speaker #5: So that's where we think this stuff is going to have to be worked out. And it's a challenge for the agency that kind of got into a fix with overissuing these SREs.
And, um, I was just wondering what your perspective is on us, oil Demand right now in this storm, because we're seeing some big numbers.
Uh, from some of the northeastern generators. I mean, 300,000 plus type.
Daily use of oil to generate power.
Speaker #10: Great. Thank you.
Doug Leggate: Great. Thank you.
Ryan Todd: Great. Thank you.
Speaker #8: Thank you. The next question is coming from Paul Sankey of Sankey Research. Please go ahead.
Operator: Thank you. The next question is coming from Paul Sankey of Sankey Research. Please go ahead.
Operator: Thank you. The next question is coming from Paul Sankey of Sankey Research. Please go ahead.
Speaker #8: ahead. Morning,
[Analyst]: Morning, everyone.
Paul Sankey: Morning, everyone.
Speaker #10: Good morning, everyone. Paul. Glad to hear, Brian, that you got the job because you're close. Family relationship to Doug Leggett, that's but I joke.
Doug Leggate: Good morning, Paul.
Brian Donovan: Good morning, Paul.
[Analyst]: Glad to hear, Brian, that you got the job because of your close family relationship to Doug Leggett.
Paul Sankey: Glad to hear, Brian, that you got the job because of your close family relationship to Doug Leggett. [crosstalk] But I joke. Hey, guys. I'd love to clarify that.
You didn't seem to really highlight that in, in your very complete comments, so far, I just wondered if you're seeing a big, uh, a big impact from this storm in terms of the demand side of the equation, which might help to explain why we're at 70. So the overall question is, you know, how come we've gone through 70 here at a time? Seasonally of weak uh, of weak oil prices. Thanks.
Doug Leggate: But I joke.
Speaker #10: Hey, guys. Just to clarify that. Just on demand and supply at the moment, obviously, we're seeing oil through 70. Would you say that's related to the sanctions and shadow fleet being shut down effectively?
[Analyst]: Hey, guys.
Lane Riggs: I'd love to clarify that.
Doug Leggate: Just on demand and supply, at the moment, obviously, we're seeing oil through $70. Would you say that's related to the sanctioned shadow fleet being shut down effectively or more shut down than it has been? I'm just wondering. It's a big surprise, I think, to all of us. There's obviously the demand side of the equation. And I was just wondering what your perspective is on US oil demand right now in this storm because we're seeing some big numbers from some of the northeastern generators, I mean, 300,000+ type daily use of oil to generate power. You didn't seem to really highlight that in your very complete comments so far. I just wondered if you're seeing a big impact from this storm in terms of the demand side of the equation, which might help to explain why we're at $70.
Paul Sankey: Just on demand and supply, at the moment, obviously, we're seeing oil through $70. Would you say that's related to the sanctioned shadow fleet being shut down effectively or more shut down than it has been? I'm just wondering. It's a big surprise, I think, to all of us. There's obviously the demand side of the equation. And I was just wondering what your perspective is on US oil demand right now in this storm because we're seeing some big numbers from some of the northeastern generators, I mean, 300,000+ type daily use of oil to generate power. You didn't seem to really highlight that in your very complete comments so far. I just wondered if you're seeing a big impact from this storm in terms of the demand side of the equation, which might help to explain why we're at $70.
Speaker #10: Or more shut down than it has been? I'm just wondering—it's a big surprise, I think, to all of us. There's obviously the demand side of the equation.
Yeah, Paul just touched on the flat price and I think what we're seeing right now, they're with the uh, the geopolitical uh, you know, wrangling going on in Iran. I think is, is put a quite a bit of geopolitical risk factor on top of flat price. Plus you had, you know, the winter storm. Take off some some uh oil production in the Shale patch in addition to the continued issues with the CPC and tingey's over in Kazakhstan and had quite a bit of oil offline. So I think all those are leading to some short-term tightness plus the geopolitical
Speaker #10: And I was just wondering what your perspective is on US oil demand right now in this storm. Because we're seeing some big numbers from some of the northeastern generators.
Factor this kind of running up oil here in the short term.
Speaker #10: I mean, 300,000-plus type daily use of oil to generate power. You didn't seem to really highlight that in your very complete comments so far.
Speaker #10: I just wondered if you're seeing a big impact from this storm in terms of the demand side of the equation, which might help to explain why we're at $70.
Yeah, in terms of heating oil demand, I think you know, a lot of that is just where we have a strong wholesale presence. We're not really strong in the heating oil markets. Um you know and and markets like Boston, where we do have a presence. We have seen a significant uplift and and Diesel demand as a result of heating oil and then the rest of it for us you know a strong incentive to ship to New York Harbor which is again tied to to heating oil demand.
Speaker #10: So the overall question is, how come we've gone through 70 here at a time seasonally of weak oil prices?
Doug Leggate: So the overall question is, how come we've gone through 70 here at a time seasonally of weak oil prices? Thanks.
So the overall question is, how come we've gone through 70 here at a time seasonally of weak oil prices? Thanks.
Great, thanks. And if I could ask a follow up, um Lane, is there a way that you could see more investment?
Speaker #10: Thanks.
uh, as you shut down California and I'm wondering how you were exposure to California is going to change if you're going to
Speaker #5: Yeah, Paul, I'll just touch on the flat price. I mean, I
Lane Riggs: Yeah, Paul, I'll just touch on the flat price. I mean, I think what we're seeing right now with the geopolitical wrangling going on in Iran, I think, has put quite a bit of geopolitical risk factor on top of flat price. Plus, you had the winter storm take off some oil production in the Shell patch, in addition to the continued issues with the CPC and Tengiz over in Kazakhstan that had quite a bit of oil offline. So I think all those are leading to some short-term tightness, plus the geopolitical factor that's kind of running up oil here in the short term.
Lane Riggs: Yeah, Paul, I'll just touch on the flat price. I mean, I think what we're seeing right now with the geopolitical wrangling going on in Iran, I think, has put quite a bit of geopolitical risk factor on top of flat price. Plus, you had the winter storm take off some oil production in the Shell patch, in addition to the continued issues with the CPC and Tengiz over in Kazakhstan that had quite a bit of oil offline. So I think all those are leading to some short-term tightness, plus the geopolitical factor that's kind of running up oil here in the short term.
Speaker #5: I think what we're seeing right now, with the geopolitical wrangling going on in Iran, has put quite a bit of geopolitical risk factor on top of flat price.
Kind of effectively exit that market or if you'll have access to it. Um through other means
Speaker #5: Plus, you've had the winter storm take off some oil production in the shale patch. In addition to the continued issues with the CPC and Tingis over in Kazakhstan that had quite a bit of oil offline.
And secondly, whether or not you would consider perhaps with more heavy oil coming back on the market with the decline of potential. Certainly, the decline of, uh, us light sweep production, whether there might be more capex uh, to be undertaken.
Speaker #5: So, I think all those are leading to some short-term tightness. Plus, the geopolitical factor—that's kind of running up oil here in the short term.
Speaker #10: Yeah. In terms of heating oil demand, I think a lot of that is just where we have a strong wholesale presence. We're not really strong in the heating oil markets.
Gary Simmons: Yeah. In terms of heating oil demand, I think a lot of that is just where we have a strong wholesale presence. We're not really strong in the heating oil markets. In markets like Boston, where we do have a presence, we have seen a significant uplift in diesel demand as a result of heating oil. And then the rest of it for us, a strong incentive to ship to New York Harbor, which is, again, tied to heating oil demand.
Gary Simmons: Yeah. In terms of heating oil demand, I think a lot of that is just where we have a strong wholesale presence. We're not really strong in the heating oil markets. In markets like Boston, where we do have a presence, we have seen a significant uplift in diesel demand as a result of heating oil. And then the rest of it for us, a strong incentive to ship to New York Harbor, which is, again, tied to heating oil demand.
Speaker #10: And markets like Boston, where we do have a presence, we have seen a significant uplift. And diesel demand as a result of heating oil.
Hey Paul, this is L I don't think you'll see our capex increase with respect to the West Coast. As a matter of fact I'd have to go back and look how long we've sort of. We've obviously what we've done out there is to maintain our sustaining capital for all these years with with with respect to the West Coast because we didn't see a market that we were going to grow, you know, grow the capacity to produce into it. Um,
Speaker #10: And then the rest of it for us, a strong incentive to ship to New York Harbor, which is, again, tied to heating oil demand.
Speaker #10: Great, thanks. And if I could ask a follow-up, Lane, is there a way that you could see more investment as you shut down California?
Doug Leggate: Great. Thanks. And if I could ask a follow-up, Lane, is there a way that you could see more investment as you shut down California? I'm wondering how your exposure to California is going to change if you're going to kind of effectively exit that market or if you'll have access to it through other means. And secondly, whether or not you would consider perhaps with more heavy oil coming back on the market with the decline of potential, certainly decline of US light sweet production, whether there might be more CapEx to be undertaken.
Paul Sankey: Great. Thanks. And if I could ask a follow-up, Lane, is there a way that you could see more investment as you shut down California? I'm wondering how your exposure to California is going to change if you're going to kind of effectively exit that market or if you'll have access to it through other means. And secondly, whether or not you would consider perhaps with more heavy oil coming back on the market with the decline of potential, certainly decline of US light sweet production, whether there might be more CapEx to be undertaken.
Speaker #10: I'm wondering how your exposure to California is going to change if you're going to kind of effectively exit that market, or if you'll have access to it through other means.
Speaker #10: And secondly, whether or not you would consider perhaps with more heavy oil coming back on the market with the decline of potential, certainly decline of US light sweep production, whether there might be more CapEx to be
So what you realize they're going to see is when as we shut benisha down our sustaining capex should fall. I'm going to pick a number somewhere around. 150 million is so our standing Capital actually fall with respect to how, how we see California is still a very, you know, it's a challenge to operate out there. Uh, we'll continue to operate Wilmington. It's a, it's a, a good asset and a, and a, a good Market. Um, it has its challenges with respect to regulatory Capital at the end of the decade. And that's when we'll sort of make our decisions on how we'll uh how how our presence on the west coast will with you know how it'll be so
and anything on incremental, spending on a heavier slate going forward potentially Lane
Speaker #10: undertaken. Hey, Paul, this is Lane.
No, not not on the west coast. Meaning the powerful front.
Lane Riggs: Hey, Paul, this is Lane. I don't think you'll see our CapEx increase with respect to the West Coast. As a matter of fact, I'd have to go back and look how long we've sort of obviously what we've done out there is maintain our sustaining capital for all these years with respect to the West Coast because we didn't see a market that we were going to grow the capacity to produce into it. So what you're actually going to see is when we shut Benicia down, our sustaining CapEx should fall. I'm going to pick a number, somewhere around $150 million or so. Our sustaining capital will actually fall. With respect to how we see California, it's still a very, it's a challenge to operate out there. We'll continue to operate Wilmington. It's a good asset and a good market.
Lane Riggs: Hey, Paul, this is Lane. I don't think you'll see our CapEx increase with respect to the West Coast. As a matter of fact, I'd have to go back and look how long we've sort of obviously what we've done out there is maintain our sustaining capital for all these years with respect to the West Coast because we didn't see a market that we were going to grow the capacity to produce into it. So what you're actually going to see is when we shut Benicia down, our sustaining CapEx should fall. I'm going to pick a number, somewhere around $150 million or so. Our sustaining capital will actually fall. With respect to how we see California, it's still a very, it's a challenge to operate out there. We'll continue to operate Wilmington. It's a good asset and a good market.
Speaker #5: I don't think you'll see our CapEx increase with respect to the West Coast. As a matter of fact, I'd have to go back and look how long we've sort of—we've obviously, what we've done out there is maintain our sustaining capital for all these years with respect to the West Coast because we didn't see a market that we were going to grow the capacity to produce into it.
Speaker #5: So what you're actually going to see is, we shut Benicia down, our sustaining CapEx should fall—I'm going to pick a number—somewhere around $150 million or so. Our sustaining capital actually falls.
Speaker #5: With respect to how we see California is still a very it's a challenge to operate out there. We'll continue to operate Wilmington. It's a good asset and a good market.
Yeah, we will definitely look at we'll definitely look at that. You know, in terms of our strategic app we are looking at that we have you know, a lot of things that we have in our gated process. We don't necessarily our tendency is the company is to talk about projects as we fidm. Not as we are studying them but you know we have a pretty good position as it is. So we want to make sure that we don't hurt that position but clearly as we as there's more avails in the heavy oil market and we hit these constraints, again, we'll we'll study we'll we'll see what it would take to do, you know? So it'll, it'll probably still fit into the small capex. We're not going to do a great Cochran expansion or anything like that. That's not a foreseeable future.
I appreciate that. Thanks.
Thank you. The next question is coming.
Speaker #5: It has its challenges with respect to regulatory capital. At the end of the decade, and that's when we'll sort of make our decisions on how we'll how our presence on the West Coast will how it'll be, so.
Lane Riggs: It has its challenges with respect to regulatory capital at the end of the decade, and that's when we'll sort of make our decision on how our presence on the West Coast will be, so.
It has its challenges with respect to regulatory capital at the end of the decade, and that's when we'll sort of make our decision on how our presence on the West Coast will be, so.
Question. Um,
Speaker #10: And anything on incremental spending on a heavier slate going forward potentially, Lane?
Doug Leggate: Anything on incremental spending on a heavier slate going forward, potentially, Lane?
Paul Sankey: Anything on incremental spending on a heavier slate going forward, potentially, Lane?
Speaker #5: No, not on the West Coast. Meaning the power footprint? We will definitely look at—we'll definitely look.
Lane Riggs: No. Not on the West Coast.
Lane Riggs: No. Not on the West Coast.
Doug Leggate: Not in general?
Paul Sankey: Not in general?
Lane Riggs: I mean, in the entire footprint?
Lane Riggs: I mean, in the entire footprint?
Speaker #10: Yeah.
Doug Leggate: Yeah.
Paul Sankey: Yeah.
Lane Riggs: We will definitely look at that in terms of our strategic cap. We are looking at that. We have all the things that we have in our gated process. We don't necessarily, our tendency as a company is to talk about projects as we FID them, not as we are studying them. But we have a pretty good position as it is, so we want to make sure that we don't hurt that position. But clearly, as there's more available in the heavy oil market and we hit these constraints again, we'll study. We'll see what it would take to do. It'll probably still fit into the small CapEx. We're not going to do a great coker expansion or anything like that. That's not in the foreseeable future.
Lane Riggs: We will definitely look at that in terms of our strategic cap. We are looking at that. We have all the things that we have in our gated process. We don't necessarily, our tendency as a company is to talk about projects as we FID them, not as we are studying them. But we have a pretty good position as it is, so we want to make sure that we don't hurt that position. But clearly, as there's more available in the heavy oil market and we hit these constraints again, we'll study. We'll see what it would take to do. It'll probably still fit into the small CapEx. We're not going to do a great coker expansion or anything like that. That's not in the foreseeable future.
Speaker #5: at that in terms of our strategic cap. We are looking at that. We have things that we have in our gated process. We don't necessarily our tendency as a company is to talk about projects as we FID and not as we are studying them.
I'm revisiting capex. I you know, growth capex is is pretty moderated. I think you've you've explained why just drink don't drilling into it. How much is inflation a factor with with the Gated process and returns and, you know, if it is a big factor, what do you think that means for sort of buy versus build decision making? Um, you know, to the extent that you're interested in growth?
Speaker #5: But we have a pretty good position as it is. So we want to make sure that we don't hurt that position. But clearly, as there's more availed in the heavy oil market and we hit these constraints again, we'll study we'll see what it would take to do it'll probably still fit into the small CapEx.
Build back up and explain that kind of our strategic capex. If you really go back for a long time and we, we, we feel like we have the capacity to strategically develop about building and a half dollars of strategic capex.
Uh, when we went into Co, we sort of lowered that number to about half a billion really emphasizing at a time, renewable the renewable side of the business.
Speaker #5: We're not going to do a great COCR expansion or anything like that. That's not a foreseeable future.
Speaker #8: The next question is coming from Sam Margolin of Wells Fargo. Please go ahead.
Operator: Thank you. The next question is coming from Sam Margolin of Wells Fargo. Please go ahead.
Operator: Thank you. The next question is coming from Sam Margolin of Wells Fargo. Please go ahead.
Speaker #8: ahead. Hey, morning.
[Analyst]: Hey, morning. Thanks for the question. Revisiting CapEx, growth CapEx is pretty moderated. I think you've explained why. Just drilling into it, how much is inflation a factor with the gated process and returns? And if it is a big factor, what do you think that means for sort of buy versus build decision-making to the extent that you're interested in growth?
Sam Margolin: Hey, morning. Thanks for the question. Revisiting CapEx, growth CapEx is pretty moderated. I think you've explained why. Just drilling into it, how much is inflation a factor with the gated process and returns? And if it is a big factor, what do you think that means for sort of buy versus build decision-making to the extent that you're interested in growth?
Speaker #11: Thanks for the question. Revisiting CapEx, growth CapEx is pretty moderated. I think you've explained why—just drilling into it. How much a factor with the gated process is inflation and returns?
So if you kind of, if you were to look at the the trend of where we've been for like the past 5 years or 6 years or something like that, our half of the of the joint venture where we're spending about, 250 million dollars is of Capac with respect to Rd but with all the policy uncertainty starting last year and on an ongoing basis, until we get some more clearing on, how all that will work. You'll that's falling, right? Our refining capex, strategic capex is fairly stable and it is in that, you know, sort of 300
Speaker #11: And if it is a big factor, what do you think that means for sort of buy-versus-build decision-making, to the extent that you're interested in growth?
2, you know 300 is kind of of number uh and that that is I'm not going to with respect to inflation what I will say about inflation and our gated process
Speaker #5: Hey, Sam. So I will back up and explain the kind of our strategic CapEx. If you really go back for a long time and we feel like we have the capacity to strategically develop about a billion and a half dollars of strategic CapEx.
Lane Riggs: Thanks, Sam. So I will back up and explain kind of our strategic CapEx. If you really go back for a long time, and we feel like we had the capacity to strategically develop about $1.5 billion of strategic CapEx. When we went into COVID, we sort of lowered that number to about $0.5 billion, really emphasizing at the time renewable. The renewable side of the business. So if you kind of if you were to look at the trend of where we've been for the past 5 years or 6 years or something like that, our half of the joint venture, we're spending about $250 million-ish of CapEx with respect to R&D. But with all the policy uncertainty starting last year and on an ongoing basis until we get some more clarity on how all that'll work, that's falling, right?
Lane Riggs: Thanks, Sam. So I will back up and explain kind of our strategic CapEx. If you really go back for a long time, and we feel like we had the capacity to strategically develop about $1.5 billion of strategic CapEx. When we went into COVID, we sort of lowered that number to about $0.5 billion, really emphasizing at the time renewable. The renewable side of the business. So if you kind of if you were to look at the trend of where we've been for the past 5 years or 6 years or something like that, our half of the joint venture, we're spending about $250 million-ish of CapEx with respect to R&D. But with all the policy uncertainty starting last year and on an ongoing basis until we get some more clarity on how all that'll work, that's falling, right?
Speaker #5: When we went into COVID, we sort of lowered that number to about half a billion. Really, emphasizing at the time renewable to renewable side of the business.
If it does make these projects more difficult to to do because the cost of building has gone up. I mean our is an example, our alkes costs, I don't know, 4 or 3 or 35400 million and now they're up to you know. We we costed 1 out on not too long ago. It was more like a 600 million so when you it is you have to have, you have to think about, you have to think about Ford price set.
Speaker #5: So if you kind of if you were to look at the trend of where we've been for the past five years or six years or something like that, our half of the joint venture where we're spending about 250 million dollars-ish of CapEx with respect to R&D, but with all the policy uncertainty, starting last year and on an ongoing basis until we get some more clarity on how all that will work, you'll that's falling, right?
And do you believe the 4 price that is going to accommodate the inflationary cost of standing up standing up units? And obviously, we are always interested in existing assets.
We looked at them through a lens of.
Are there, you know, are there Arbitrage with our current system? Either through, uh, you know, sort of, I would call a processing Arbitrage, or trading Arbitrage. That's how we like to think of these things. And we're, we're obviously, we always look at those and through the in particularly, through that lens
Speaker #5: Our refining CapEx strategic CapEx is fairly stable, and it is in that sort of 300-ish, 300-ish kind of number. And that is I'm not going to with respect to inflation, what I will say about inflation in our gated process is it does make these projects more difficult to do because the cost of building has gone up.
Lane Riggs: Our refining CapEx, strategic CapEx is fairly stable, and it is in that sort of 300-ish, 300-ish kind of number. That is, I'm not going to with respect to inflation. What I will say about inflation and our gated process is it does make these projects more difficult to do because the cost of building them has gone up. I mean, as an example, our alky's cost, I don't know, $350 to 400 million. And now they're up. We costed one out not too long ago. It was more like $600 million. So it is you have to think about you have to think about a forward price set. And do you believe the forward price set is going to accommodate the inflationary cost of standing up units? And obviously, we are always interested in existing assets.
Our refining CapEx, strategic CapEx is fairly stable, and it is in that sort of 300-ish, 300-ish kind of number. That is, I'm not going to with respect to inflation. What I will say about inflation and our gated process is it does make these projects more difficult to do because the cost of building them has gone up. I mean, as an example, our alky's cost, I don't know, $350 to 400 million. And now they're up. We costed one out not too long ago. It was more like $600 million. So it is you have to think about you have to think about a forward price set. And do you believe the forward price set is going to accommodate the inflationary cost of standing up units? And obviously, we are always interested in existing assets.
Got it. Okay, thank you. And then just revisiting heavy crude
Speaker #5: I mean, as an example, our Alki's cost, I don't know, 350, 400 million. And now they're up to we costed one out not too long ago.
Uh, for a second, you know, I know there's competitive reasons why you might not want to give an exact number of, of what, you know, the Headroom is for incremental barrels, but maybe we could frame it this way on crude valuation. Just like, you know, while TMX has been ramping and availability has been low, do you have just kind of a ballpark number off the top of your head of how much you think heavy crude?
Speaker #5: It was more like 600 million. So when you it is you have to think about you have to think about forward price set and do you believe the forward price set is going to accommodate the inflationary cost of standing up units?
Globally has sort of been overvalued from our Refinery, economics perspective. And you know where, where it could normalize to, um, whether that's freight costs or or some other um, method that you use.
Speaker #5: And obviously, we are always interested in existing assets. We looked at them through a lens of are there arbitrages with our current system either through sort of I will call it processing arbitrage or trading arbitrage?
Lane Riggs: We look at them through a lens of, are there arbitrages with our current system, either through sort of, I would call it, processing arbitrage or trading arbitrage? That's how we like to think of these things. We always look at those and particularly through that lens.
We look at them through a lens of, are there arbitrages with our current system, either through sort of, I would call it, processing arbitrage or trading arbitrage? That's how we like to think of these things. We always look at those and particularly through that lens.
Speaker #5: That's how we like to think of these things. And we obviously—we always look at those, and through the, and particularly through that...
Hey Sam just ready it, probably difficult to kind of give a value. I just will maybe hearken back to 2025, when, when differentials on the sour are all pretty narrow and we got to a point where we were indifferent on a running. Sweet crew versus sour for most of the Year, especially in through Q2 and Q3, I think where we're at today. It's, it's firmly planted. We're going to buy as much on the heavy and medium sized as we can to fill up the focus and downstream units.
Speaker #5: lens. Got it.
All right, thank you so much.
Speaker #11: Okay. Thank you. And then just revisiting heavy crude, for a second, I know there's competitive reasons why you might not want to give an exact number of what the headroom is for incremental barrels.
Doug Leggate: Got it. Okay. Thank you. And then just revisiting heavy crude for a second. I know there's competitive reasons why you might not want to give an exact number of what the headroom is for incremental barrels. But maybe we could frame it this way. On crude valuation, just like while TMX has been ramping and availability has been low, do you have just kind of a ballpark number off the top of your head of how much you think heavy crude globally has sort of been overvalued from a refinery economics perspective and where it could normalize to, whether that's freight costs or some other method that you use?
Sam Margolin: Got it. Okay. Thank you. And then just revisiting heavy crude for a second. I know there's competitive reasons why you might not want to give an exact number of what the headroom is for incremental barrels. But maybe we could frame it this way. On crude valuation, just like while TMX has been ramping and availability has been low, do you have just kind of a ballpark number off the top of your head of how much you think heavy crude globally has sort of been overvalued from a refinery economics perspective and where it could normalize to, whether that's freight costs or some other method that you use?
Thank you. The next question is coming from Joe batch of Morgan Stanley. Please go ahead.
Speaker #11: But maybe we could frame it this way. On crude valuation, just like while TMX has been ramping and availability has been low, do you have just kind of a ballpark number off the top of your head of how much you think heavy crude globally has sort of been overvalued from a refinery economics perspective?
Great. Thanks. Good morning and thanks for taking my questions. Uh, Eric, can you talk a bit about the ethanol segment? Uh, the segment continues to perform to perform well from both the volume and capture standpoint. Uh, can you unpack some of the drivers here? And then, as part of that, I was hoping you could talk about how you think about the potential impact and probability of Nationwide. E15, thank you.
Speaker #11: And where it could normalize to, whether that's freight costs or some other method that you—
Speaker #11: use? Hey, Sam.
Speaker #5: Just ready. Probably difficult to kind of give a value. I just will maybe hearken back to 2025 when differentials on the sours were all pretty narrow and we got to a point where we were in different on a running sweet crude versus sour for most of the year, especially through Q2 and Q3.
Lane Riggs: Hey, Sam. Just ready. It's probably difficult to kind of give a value. I just will maybe harken back to 2025 when differentials on the sours were all pretty narrow. We got to a point where we were indifferent on running sweet crude versus sour for most of the year, especially through Q2 and Q3. I think where we're at today, it's firmly planted. We're going to buy as much on the heavy and medium side as we can to fill up the cokers and downstream units.
Lane Riggs: Hey, Sam. Just ready. It's probably difficult to kind of give a value. I just will maybe harken back to 2025 when differentials on the sours were all pretty narrow. We got to a point where we were indifferent on running sweet crude versus sour for most of the year, especially through Q2 and Q3. I think where we're at today, it's firmly planted. We're going to buy as much on the heavy and medium side as we can to fill up the cokers and downstream units.
Speaker #5: And I think where we're at today, it's firmly planted. We're going to buy as much on the heavy and medium side as we can to fill up the COCRs and downstream units.
Sure. Uh, yeah, ethanol has had another good year and continues to, as Lane said, break, throughput records, uh, as we've kind of grown capacity, the correct, you know, capacity to create for the last couple of years and and have plans to continue to creep capacity uh in the ethanol segment. Uh the corn crop has been good the last 2 years. So we see uh essentially a cheap feed stock is 1 of the big drivers and and then I think overall you know it's easy to see with the way. Export demand has grown, that the world is figuring out that ethanol is a very cheap.
Speaker #11: All right. Thank you so
Doug Leggate: All right. Thank you so much.
Sam Margolin: All right. Thank you so much.
Speaker #11: much. Thank you.
Speaker #8: The next question is coming from Joe Latch of Morgan Stanley. Please go
Operator: Thank you. The next question is coming from Joe Laetsch of Morgan Stanley. Please go ahead.
Operator: Thank you. The next question is coming from Joe Laetsch of Morgan Stanley. Please go ahead.
Speaker #8: ahead.
Speaker #11: Great. Thanks. Good morning. And
[Analyst]: Great. Thanks. Good morning, and thanks for taking my questions. Eric, can you talk a bit about the ethanol segment? The segment continues to perform well from both the volume and capture standpoints. Can you unpack some of the drivers here? And then as part of that, I was hoping you could talk about how you think about the potential impact and probability of nationwide E15. Thank you.
Joe Laetsch: Great. Thanks. Good morning, and thanks for taking my questions. Eric, can you talk a bit about the ethanol segment? The segment continues to perform well from both the volume and capture standpoints. Can you unpack some of the drivers here? And then as part of that, I was hoping you could talk about how you think about the potential impact and probability of nationwide E15. Thank you.
Speaker #11: thanks for taking my questions. Eric, can you talk a bit about the ethanol segment? The segment continues to perform well from both the volume and capture standpoints.
Speaker #11: Can you unpack some of the drivers here? And then as part of that, I was hoping you could talk about how you think about the potential impact and probability of nationwide E15.
Speaker #11: Thank
Speaker #11: you. Sure.
Lane Riggs: Sure. Yeah. Ethanol has had another good year and continues to, as Lane said, break throughput records as we've kind of grown capacity, capacity creep for the last couple of years and have plans to continue to creep capacity in the ethanol segment. The corn crop has been good the last two years. So we see essentially cheap feedstock as one of the big drivers. And then I think overall, it's easy to see with the way export demand has grown that the world is figuring out that ethanol is a very cheap source of octane. And so we've seen a lot of growth in ethanol exports. There's also continued growth in ethanol as a low-carbon solution. So we see a lot of programs that are now allowing first-gen ethanol into low-carbon programs. So between those two things, you've seen export demand grow.
Lane Riggs: Sure. Yeah. Ethanol has had another good year and continues to, as Lane said, break throughput records as we've kind of grown capacity, capacity creep for the last couple of years and have plans to continue to creep capacity in the ethanol segment. The corn crop has been good the last two years. So we see essentially cheap feedstock as one of the big drivers. And then I think overall, it's easy to see with the way export demand has grown that the world is figuring out that ethanol is a very cheap source of octane. And so we've seen a lot of growth in ethanol exports. There's also continued growth in ethanol as a low-carbon solution. So we see a lot of programs that are now allowing first-gen ethanol into low-carbon programs. So between those two things, you've seen export demand grow.
Speaker #5: Yeah. Ethanol has had another good year. And continues to, as Lane said, break throughput records as we've kind of grown capacity. Capacity creep for the last couple of years.
Speaker #5: And we have plans to continue to creep capacity in the ethanol segment. The corn crop has been good the last two years, so we see essentially cheap feedstock as one of the big drivers.
The entire SRE conversation. And this idea that
Speaker #5: And then I think, overall, it's easy to see with the way export demand has grown that the world is figuring out that ethanol is a very cheap source of octane.
Speaker #5: And so we've seen a lot of growth in ethanol exports. There's also continued growth in ethanol as a low-carbon solution. So we see a lot of programs that are now allowing first-gen ethanol into low-carbon programs.
You know what part of Renewables is going to? Uh, what part is renewable is going to play in the in the domestic slate is is what we're waiting for clarification on. I don't know Rich if you had other comments about. E15 know, I mean I think I do think it's it's you know, the nationally
Waiver is caught up with this SRE uh issue and it you know.
You can't have anything.
Speaker #5: So between those two things, you've seen export demand grow. So the ethanol segment continues to be very competitive and flow a lot of cash.
Lane Riggs: So the ethanol segment continues to be very competitive and flow a lot of cash. I think in terms of E15, all of our ethanol plants are registered to sell E15. We still see very slow customer acceptance of that, but it is slowly growing. I think that's one of those that if and when that happens, we're positioned to take advantage of that. And it's just a question of how this RVO policy is going to work out. So Rich alluded to this. This is all wrapped up in the entire SRE conversation. And this idea that what part of renewables is going to what part is renewables going to play in the domestic slate is what we're waiting for clarification on. I don't know, Rich, if you had other comments about E15.
So the ethanol segment continues to be very competitive and flow a lot of cash. I think in terms of E15, all of our ethanol plants are registered to sell E15. We still see very slow customer acceptance of that, but it is slowly growing. I think that's one of those that if and when that happens, we're positioned to take advantage of that. And it's just a question of how this RVO policy is going to work out. So Rich alluded to this. This is all wrapped up in the entire SRE conversation. And this idea that what part of renewables is going to what part is renewables going to play in the domestic slate is what we're waiting for clarification on. I don't know, Rich, if you had other comments about E15.
Against the RFS. But like like you said, so I think I think you're going to see you see a and and and most of the refinery aligned on how to look forward and a solution for SRE um over over over.
Conversation. And so, I
Speaker #5: I think in terms of E15, all of our ethanol plants are registered to sell E15. That said, we still see very slow customer acceptance of that.
Think those will have to be.
Speaker #5: But it is slowly growing. I think that's one of those that, if and when that happens, we're positioned to take advantage of that. And it's just a question of how this RVO policy is going to work out.
Great. Thanks. It's helpful. Uh and then shifting to the refining side. I was hoping to get your perspective on the fuel oil Market here. Uh cracks if we can recently which I think is driven by the prospects of more Venezuela crude. Uh but I was hoping to get your thoughts on the recent Dynamics and outlook here for fuel oil as it relates to COC economics. Thank you.
Speaker #5: So, Rich alluded to this is all wrapped up in the entire SRE conversation. And this idea that what part of renewables is going to—what part is renewables going to play in the domestic slate—is what we're waiting for clarification on.
Speaker #5: I don't know, Rich, if you had other comments about
Speaker #5: E15. No, I mean, I do.
Rich Walsh: No. I mean, I do think the national E15 waiver has caught up with this SRE issue. And you can't have anything that's going to undermine the RFS like these SREs are doing. And so I think you're going to see UCAG and most of the refinery aligned on how to afford E15 and a solution for SRE over authorization. And so those will have to be reconciled.
Rich Walsh: No. I mean, I do think the national E15 waiver has caught up with this SRE issue. And you can't have anything that's going to undermine the RFS like these SREs are doing. And so I think you're going to see UCAG and most of the refinery aligned on how to afford E15 and a solution for SRE over authorization. And so those will have to be reconciled.
Speaker #3: think it's the national E15 waivers caught up with this SRE. Issue. And you can't have anything that's going to undermine the RFS, like these SREs are doing.
Yeah, this is Randy again. Uh, I I would say, yeah. Things look really weak right now. I think we're hit 79% on the highest level for fuel oil. Uh, this morning if I look at the paper, um, you know, I think it's it's, it's, it's what you mentioned before, more heavy recruiter in the market. We're also seeing some of the Venezuelan fuels get pointed to the US, at least, get offered this way, which our barrels that normally didn't, uh, get shown into the US market. Uh, we're also seeing a little bit higher.
Runs out of Mexico which they tend to make fuel in uh incrementally. So that's uh that's more barrels. That are getting pointed this way as well.
Speaker #3: And so I think you're going to see you see Ag and most of the refinery aligned on how to afford E15 and a solution for SRE over authorization.
All that's kind of pushing uh, you know, and freight costs are high. So the there's typically a movement from the West to the east on fuel oil. So the higher Freight Goes, West just needs a discount more.
Great. Thank you.
Speaker #3: And so I think those will have to be.
Speaker #3: reconciled. Great.
Speaker #11: Thanks. It's helpful. And then shifting to the refining side, I was hoping to get your perspective on the fuel oil market here. Crack, if we can recently, which I think is driven by the prospects of more Venezuela crude, but I was hoping to get your thoughts on the recent dynamics and outlook here for fuel oil as it relates to COCR economics.
[Analyst]: Great. Thanks. That's helpful. And then shifting to the refining side, I was hoping to get your perspective on the fuel oil market here. Cracks we've seen recently, which I think is driven by the prospects of more Venezuela crude. But I was hoping to get your thoughts on the recent dynamics and outlook here for fuel oil as it relates to coker economics. Thank you.
Joe Laetsch: Great. Thanks. That's helpful. And then shifting to the refining side, I was hoping to get your perspective on the fuel oil market here. Cracks we've seen recently, which I think is driven by the prospects of more Venezuela crude. But I was hoping to get your thoughts on the recent dynamics and outlook here for fuel oil as it relates to coker economics. Thank you.
Thank you. The next question is coming from Philip Jeong worth of BMO Capital markets. Please, go ahead.
Thanks, good morning.
Speaker #11: Thank you.
Speaker #5: Yeah. This is Randy again. I would say, yeah, things look really weak right now. I think we're hit 79% on high sulfur fuel oil.
Lane Riggs: Yeah. This is Randy again. I would say, yeah, things look really weak right now. I think we're hit 79% on high-sulfur fuel oil this morning if I look at the paper. I think it's what you mentioned before, more heavy crude in the market. We're also seeing some of the Venezuelan fuel get pointed to the US, at least get offered this way, which are barrels that normally didn't get shown into the US market. We're also seeing a little bit higher runs out of Mexico, which they tend to make fuel incrementally. So that's more barrels that are getting pointed this way as well. So all that's kind of pushing freight costs are high. So there's typically a movement from the west to the east on fuel oil. So the higher freight goes, the west just needs to discount more.
Randy Hawkins: Yeah. This is Randy again. I would say, yeah, things look really weak right now. I think we're hit 79% on high-sulfur fuel oil this morning if I look at the paper. I think it's what you mentioned before, more heavy crude in the market. We're also seeing some of the Venezuelan fuel get pointed to the US, at least get offered this way, which are barrels that normally didn't get shown into the US market. We're also seeing a little bit higher runs out of Mexico, which they tend to make fuel incrementally. So that's more barrels that are getting pointed this way as well. So all that's kind of pushing freight costs are high. So there's typically a movement from the west to the east on fuel oil. So the higher freight goes, the west just needs to discount more.
Speaker #5: This morning, if I look at the paper, I think it’s what you mentioned before—more heavy crude in the market. We’re also seeing some of the Venezuelan fuel get pointed to the US, at least get offered this way.
It it, as far as Russia. Um, how are you seeing the EU Refinery loophole, sanctions impacting, diesel markets and and could there be a greater call on, uh, us Gulf Coast? Barrels, and, and tougher question and answer. But it's, it's been acquired our month, as far as drone strikes on Russell refineries. Um, just how, how are you thinking about the fundamental versus geopolitical tightness and Diesel cracks currently.
Speaker #5: Which are barrels that normally didn’t get shown into the US market. We’re also seeing a little bit higher runs out of Mexico, which—they tend to make fuel incrementally.
Speaker #5: So that's more barrels that are getting pointed this way as well. So all that's kind of pushing freight costs are high. So there's typically a movement from the west to the east on fuel oil.
This is Gary. I think, you know overall you are seeing EU shy away from Russian diesel barrels, thus far. We've seen that being able to rebalance throughout other parts of the world. I think the big area. We saw some of those barrels were going to South America. We've seen those South American markets return to, to the US Gulf Coast, which has been supportive of the US Gulf Coast Market.
Speaker #5: So the higher freight goes, the west just needs a discount more.
Um, I don't know. We have seen a fairly quiet month in terms of drone attacks on Russia. What happens there going forward? I really don't have any insight.
Speaker #11: Great. Thank you.
[Analyst]: Great. Thank you.
Joe Laetsch: Great. Thank you.
Speaker #8: Thank you. The next question is coming from Philip Jungworth of BMO Capital Markets. Please go ahead.
Operator: Thank you. The next question is coming from Philip Jungwirth of BMO Capital Markets. Please go ahead.
Operator: Thank you. The next question is coming from Philip Jungwirth of BMO Capital Markets. Please go ahead.
Speaker #4: Thanks. Good morning. As far as Russia, how are you seeing the EU refinery loophole sanctions impacting diesel markets? And could there be a greater call on US Gulf Coast barrels?
Doug Leggate: Thanks. Good morning. As far as Russia, how are you seeing the EU refinery loophole sanctions impacting diesel markets? And could there be a greater call on US Gulf Coast barrels? And tougher question to answer, but it's been a quieter month as far as drone strikes on Russian refineries. Just how are you thinking about the fundamental versus geopolitical tightness and diesel cracks growing?
Philip Jungwirth: Thanks. Good morning. As far as Russia, how are you seeing the EU refinery loophole sanctions impacting diesel markets? And could there be a greater call on US Gulf Coast barrels? And tougher question to answer, but it's been a quieter month as far as drone strikes on Russian refineries. Just how are you thinking about the fundamental versus geopolitical tightness and diesel cracks growing?
Okay, great. And then uh this might be a short answer but you've always said, you'll stay out of the the sitco auction but just give given the regime changes in in, in Venezuela. Is there any reason you might revisit this stance depending on what happens with the process in?
Speaker #4: And tougher question to answer, but it's been acquired over months as far as drone strikes on Russian refineries. Just how are you thinking about the fundamental versus geopolitical tightness in diesel cracks currently?
Speaker #4: And tougher question to answer, but it's been acquired over months as far as drone strikes on Russian refineries. Just how are you thinking about the fundamental versus geopolitical tightness in diesel cracks
Your yeah, this is Lane. You know, it's still I mean if anything it's better to be of uncertainty of the process I think again. So we're still sort of you know we've we've we've we chose to stay out of it because of
Speaker #5: Yeah. This is Gary. I think overall, you are seeing EU shy away from Russian diesel barrels. Thus far, we've seen that being able to rebalance throughout other parts of the world.
Lane Riggs: Yeah. This is Gary. I think overall, you are seeing EU shy away from Russian diesel barrels. Thus far, we've seen that being able to rebalance throughout other parts of the world. I think the big area we saw was some of those barrels were going to South America. We've seen those South American markets return to the US Gulf Coast, which has been supportive of the US Gulf Coast market. I don't know. We have seen a fairly quiet month in terms of drone attacks on Russia. What happens there going forward? I really don't have any insight.
Gary Simmons: Yeah. This is Gary. I think overall, you are seeing EU shy away from Russian diesel barrels. Thus far, we've seen that being able to rebalance throughout other parts of the world. I think the big area we saw was some of those barrels were going to South America. We've seen those South American markets return to the US Gulf Coast, which has been supportive of the US Gulf Coast market. I don't know. We have seen a fairly quiet month in terms of drone attacks on Russia. What happens there going forward? I really don't have any insight.
The uncertainty of the process, the length of it all just to all the difficulty with respect to how that would all work. And I I don't know that it's I don't know that our the change with respect to Venezuela has made that clearer.
Uh,
I would say like we always do, we're obviously interested in any assets.
Speaker #5: I think the big area we saw was some of those barrels were going to South America. We've seen those South American markets return to the US Gulf Coast, which has been supportive of the US Gulf Coast market.
Become open or the or there gets to be more certainty around the process that might change the way we think of it.
That's helpful. Thank you guys.
Speaker #5: I don't know. We have seen a fairly quiet month in terms of drone attacks on Russia. What happens there going forward? I really don't have any insight.
Thank you. The next question is coming from Gene and Salsbury of Bank of America. Please go ahead.
Speaker #4: Okay, great. And then this might be a short answer, but you've always said you'll stay out of the CITGO auction. But just given the regime changes in Venezuela, is there any reason you might revisit this stance depending on what happens with the process from here?
Doug Leggate: Okay. Great. And then this might be a short answer, but you've always said you'll stay out of the CITGO auction. But just given the regime changes in Venezuela, is there any reason you might revisit this stance depending on what happens with the process from here?
Philip Jungwirth: Okay. Great. And then this might be a short answer, but you've always said you'll stay out of the CITGO auction. But just given the regime changes in Venezuela, is there any reason you might revisit this stance depending on what happens with the process from here?
Hi. Good morning. Uh, capture in the North Atlantic has outperformed in recent quarters, is this driven by a closure related tightness in Europe? And do you view it as a structural shift?
Speaker #2: Yeah. This is Lane. It's still, I mean, if anything, it's at a degree of uncertainty of the process, I think, again. So we're still sort of we chose to stay out of it because of the uncertainty of the process, the length of it all, just all the difficulty with respect to how that would all work.
Lane Riggs: Yeah. This is Lane. It's still, I mean, if anything, it's at a degree of uncertainty to the process, I think, again. So we're still sort of chose to stay out of it because of the uncertainty of the process, the length of it all, just all the difficulty with respect to how that would all work. And I don't know that the change with respect to Venezuela has made that clearer. I would say, like we always do, we're obviously interested in any assets that become open or there gets to be more certainty around the process. That might change the way we think of it.
Lane Riggs: Yeah. This is Lane. It's still, I mean, if anything, it's at a degree of uncertainty to the process, I think, again. So we're still sort of chose to stay out of it because of the uncertainty of the process, the length of it all, just all the difficulty with respect to how that would all work. And I don't know that the change with respect to Venezuela has made that clearer. I would say, like we always do, we're obviously interested in any assets that become open or there gets to be more certainty around the process. That might change the way we think of it.
Yeah, I think a lot of it has been um you know, from our pinbrook Refinery, our highest net back. Barrels are the ones that we can sell domestically and as people have chosen to exit that market, we've seen our wholesale volumes grow in the UK significantly and it's certain improves the capture rate. When that happens.
Speaker #2: And I don't know that it's—I don't know that the change with respect to Venezuela has made that clearer. I would say, like we always do, we're obviously interested in any assets that become open or there gets to be more certainty around the process that might change the way we think of it.
Okay. Thanks. And then as a follow-up, um, both refined products pipeline Open Seasons where extended and I believe 1 now, offers a path to multiple California markets now. Um, do you still prefer as you kind of said on previous calls to move product, waterborne thinking that that's a better solution here.
Speaker #4: That's helpful. Thanks,
Doug Leggate: That's helpful. Thanks, guys.
Philip Jungwirth: That's helpful. Thanks, guys.
Speaker #4: guys. Thank you.
Speaker #8: The next question is coming from Jean Ann Salisbury of Bank of America. Please go ahead.
Operator: Thank you. The next question is coming from Jean Ann Salisbury of Bank of America. Please go ahead.
Operator: Thank you. The next question is coming from Jean Ann Salisbury of Bank of America. Please go ahead.
Speaker #7: Hi. Good morning. Capture in the North Atlantic has outperformed in recent quarters. Is this driven by closure-related tightness in Europe? And do you view it as a structural
Jean Ann Salisbury: Hi. Good morning. Capture in the North Atlantic has outperformed in recent quarters. Is this driven by closure-related tightness in Europe, and do you view it as a structural shift?
Jean Ann Salisbury: Hi. Good morning. Capture in the North Atlantic has outperformed in recent quarters. Is this driven by closure-related tightness in Europe, and do you view it as a structural shift?
Market. So we're hate to be committed to a pipeline, that has a shipping in the closed arbs. Uh, we like the optimization opportunities for waterborne Supply, you can supply the barrels from anywhere in the world. The 1 thing I would clarify is, you know, we have a significant commitment to supply the market in Phoenix. And to the extent 1 of these pipeline projects. Offers us some more efficient way to get to the Phoenix Market. We would certainly entertain that.
Speaker #7: shift? Yeah.
Speaker #5: I think a lot of it has been. From our Pembroke refinery, our highest netback barrels are the ones that we can sell domestically.
Lane Riggs: Yeah. I think a lot of it has been from our Pembroke Refinery, our highest netback barrels are the ones that we can sell domestically. And as people have chosen to exit that market, we've seen our wholesale volumes grow in the UK significantly, and it certainly improves the capture rate when that happens.
Lane Riggs: Yeah. I think a lot of it has been from our Pembroke Refinery, our highest netback barrels are the ones that we can sell domestically. And as people have chosen to exit that market, we've seen our wholesale volumes grow in the UK significantly, and it certainly improves the capture rate when that happens.
Question is coming from Matthew. Blair of Tudor, Pickering, Holt, please go ahead.
Speaker #5: And as people have chosen to exit that market, we've seen our wholesale volumes grow in the UK significantly. And it's certainly improved the capture rate when that happens.
Speaker #7: Okay, thanks. And then as a follow-up, both refined products pipeline open seasons were extended, and I believe one now offers a path to multiple California markets as well.
Jean Ann Salisbury: Okay. Thanks. And then, as a follow-up, both refined products' pipeline open seasons were extended, and I believe one now offers a path to multiple California markets now. Do you still prefer, as you kind of said on previous calls, to move product waterborne, thinking that that's a better solution here?
Jean Ann Salisbury: Okay. Thanks. And then, as a follow-up, both refined products' pipeline open seasons were extended, and I believe one now offers a path to multiple California markets now. Do you still prefer, as you kind of said on previous calls, to move product waterborne, thinking that that's a better solution here?
Uh thank you and and good morning you touched on the 45 for your renewable diesel segment. But are you going to be recording? 45z credits in your ethanol segment, in 2026? Due to the removal of the indirect land use change. Um, and if so, do you have a a approximate you know, ebita benefit it might be, we're estimating somewhere between like 50 and 100 million.
Speaker #7: Do you still prefer, as you kind of said on previous calls, to move product waterborne, thinking that that's a better solution here?
Speaker #5: Yeah, so overall, there's a lot of volatility in the California market. And so we'd hate to be committed to a pipeline that has us shipping into closed arms.
Lane Riggs: Yeah. So overall, there's a lot of volatility in the California market. So we hate to be committed to a pipeline that has us shipping into closed arms. We like the optimization opportunities for waterborne supply. You can supply the barrels from anywhere in the world. The one thing I would clarify is we have a significant commitment to supply the market in Phoenix. To the extent one of these pipeline projects offers us a more efficient way to get to the Phoenix market, we would certainly entertain that.
Lane Riggs: Yeah. So overall, there's a lot of volatility in the California market. So we hate to be committed to a pipeline that has us shipping into closed arms. We like the optimization opportunities for waterborne supply. You can supply the barrels from anywhere in the world. The one thing I would clarify is we have a significant commitment to supply the market in Phoenix. To the extent one of these pipeline projects offers us a more efficient way to get to the Phoenix market, we would certainly entertain that.
Speaker #5: We like the optimization opportunities for waterborne supply. You can supply the barrels from anywhere in the world. The one thing I would clarify is we have a significant commitment to supply the market in Phoenix.
Yeah, this is our. We are looking at that very closely. So what I'd say is, you know, given our experience with PTC through dgd. We have set the ethanol segment up to capture PTC from a prevailing wage and qualified sales standpoint. So really, we're just waiting on Final guidance from the PTC to be able to answer your questions.
Speaker #5: And to the extent one of these pipeline projects offers us a more efficient way to get to the Phoenix market, we would certainly entertain
Speaker #5: that. That's helpful.
Speaker #7: Thank
Jean Ann Salisbury: That's helpful. Thank you.
Jean Ann Salisbury: That's helpful. Thank you.
Speaker #7: you. Thank you.
Uh, directly so, but what I would say is, we are poised to capture whatever the PTC is going to give us and um, you know, you could well, we'll add, is it works in, uh, 10-cent increments. So you know, you'll if you qualify, you'll get 10 or 20 cents a gallon for whatever they ultimately Define as qualified sales. So, you know, you can
Speaker #8: The next question is coming from Matthew Blair of Tudor Pickering Holt. Please go ahead.
Operator: Thank you. The next question is coming from Matthew Blair of Tudor Pickering Holt. Please go ahead.
Operator: Thank you. The next question is coming from Matthew Blair of Tudor Pickering Holt. Please go ahead.
Speaker #8: ahead. Thank you.
Speaker #2: And good morning. You touched on the 45Z for your renewable diesel segment, but are you going to be recording 45Z credits in your ethanol segment in 2026 due to the removal of the indirect land use change?
Manav Gupta: Thank you. And good morning. You touched on the 45Z for your renewable diesel segment, but are you going to be recording 45Z credits in your ethanol segment in 2026 due to the removal of the indirect land use change? And if so, do you have an approximate EBITDA benefit it might be? We're estimating somewhere between $50 and 100 million.
Matthew Blair: Thank you. And good morning. You touched on the 45Z for your renewable diesel segment, but are you going to be recording 45Z credits in your ethanol segment in 2026 due to the removal of the indirect land use change? And if so, do you have an approximate EBITDA benefit it might be? We're estimating somewhere between $50 and 100 million.
You know, you can speculate on, you know how that's all going to work, but really. Yes, we are poised to capture PTC and the ethanol segment we're just waiting on finalization of guidance.
Speaker #2: And if so, do you have an approximate EBITDA benefit it might be? We're estimating somewhere between like 50 and 100 million?
Thank you and and 1 follow up on the Venezuela discussion. You mentioned, you're already running more Venezuelan food in the first quarter. What what barrels are you pushing out to do? That are, are you shifting to an overall heavier recruit slate for pushing out, lights and mediums? Or are you pushing out other heavies?
Speaker #5: Yeah. We are looking at that very closely. So what I'd say is given our experience with PTC through DGD, we have set the ethanol segment up to capture PTC from a prevailing wage and qualified sales standpoint.
Lane Riggs: Yeah. We are looking at that very closely. So what I'd say is, given our experience with PTC through DGD, we have set the ethanol segment up to capture PTC from a prevailing wage and qualified sales standpoint. So really, we're just waiting on final guidance from the PTC to be able to answer your question directly. But what I would say is we are poised to capture whatever the PTC is going to give us. And what I will add is it works in $0.10 increments. So if you qualify, you'll get $0.10 or $0.20 a gallon for whatever they ultimately define as qualified sales. So you can speculate on how that's all going to work. But really, yes, we are poised to capture PTC in the ethanol segment. We're just waiting on finalization of guidance.
Lane Riggs: Yeah. We are looking at that very closely. So what I'd say is, given our experience with PTC through DGD, we have set the ethanol segment up to capture PTC from a prevailing wage and qualified sales standpoint. So really, we're just waiting on final guidance from the PTC to be able to answer your question directly. But what I would say is we are poised to capture whatever the PTC is going to give us. And what I will add is it works in $0.10 increments. So if you qualify, you'll get $0.10 or $0.20 a gallon for whatever they ultimately define as qualified sales. So you can speculate on how that's all going to work. But really, yes, we are poised to capture PTC in the ethanol segment. We're just waiting on finalization of guidance.
Speaker #5: So really, we're just waiting on final guidance from the PTC to be able to answer your question directly. But what I would say is, we are poised to capture whatever the PTC is going to give us.
Yeah, this is Randy get out. Uh, it's kind of a mix of everything. I mean, depending on the location, uh, it may be some incremental, uh, you know, few oil carros. It may be some Latin America heavy and it could be uh, Canadian heavy. So it's kind of a bit of a mix. But I would say, you know, as mentioned before we are pushing to to maximize heavy crew processing in the system going forward with the with the better differentials.
Speaker #5: And you could what I will add is it works in Tencent increments. So if you qualify, you'll get 10 or 20 cents a gallon for whatever they ultimately define as qualified sales.
Great. Thank you.
Thank you. The next question is coming from Jason gableman of TD Cowen. Please go ahead.
Speaker #5: So you can speculate on how that's all going to work, but really, yes, we are poised to capture PTC in the ethanol segment. We're just waiting on finalization of guidance.
Speaker #2: Thank you. And one follow-up on the Venezuela discussion. You mentioned you're already running more Venezuelan crude in the first quarter. What barrels are you pushing out to do that?
Manav Gupta: Thank you. And one follow-up on the Venezuela discussion. You mentioned you're already running more Venezuelan crude in Q1. What barrels are you pushing out to do that? Are you shifting to an overall heavier crude slate for pushing out lights and mediums, or are you pushing out other heavies?
Matthew Blair: Thank you. And one follow-up on the Venezuela discussion. You mentioned you're already running more Venezuelan crude in Q1. What barrels are you pushing out to do that? Are you shifting to an overall heavier crude slate for pushing out lights and mediums, or are you pushing out other heavies?
Speaker #2: Are you shifting to an overall heavier crude slate by pushing out lights and mediums, or are you pushing out other heavies?
Speaker #5: Yeah. This is Randy. It's kind of a mix of everything. I mean, depending on the location, it may be some incremental fuel cargos. It may be some Latin America heavy.
Lane Riggs: Yeah. This is Randy. It's kind of a mix of everything. I mean, depending on the location, it may be some incremental fuel cargoes. It may be some Latin America heavy, and it could be Canadian heavy. So it's kind of a bit of a mix. But I would say, as mentioned before, we are pushing to maximize heavy crude processing in the system going forward with the better differentials.
Randy Hawkins: Yeah. This is Randy. It's kind of a mix of everything. I mean, depending on the location, it may be some incremental fuel cargoes. It may be some Latin America heavy, and it could be Canadian heavy. So it's kind of a bit of a mix. But I would say, as mentioned before, we are pushing to maximize heavy crude processing in the system going forward with the better differentials.
Yeah. Hey thanks for taking my questions. Um I wanted to ask another 1 on the crude quality discs given, they've they've widened out quite a bit and and I know you kind of mentioned a bunch of reasons why that is but if we kind of look back a few years prior to Coe, it seems like there was more kind of sour availability back then than there is now. Um but at the same time, differentials look wider today than they were prior to Coe. Um so I guess the question is do you think that the levels were at today are sustainable? Are there reasons why the differential should be wider now than than they were prior to Coe? Thanks.
Yeah, this is Randy. Again I I mean
Speaker #5: And it could be Canadian heavy. So it's kind of a bit of a mix. But I would say, as mentioned before, we are pushing to maximize heavy crude processing in the system going forward with the better differentials.
Speaker #2: Great. Thank
Speaker #2: you. Thank you.
Manav Gupta: Great. Thank you.
Matthew Blair: Great. Thank you.
Speaker #8: The next question is coming from Jason Gabelman of TD Cowen. Please go ahead.
Operator: Thank you. The next question is coming from Jason Gabelman of TD Cowen. Please go ahead.
Operator: Thank you. The next question is coming from Jason Gabelman of TD Cowen. Please go ahead.
Speaker #8: ahead. Yeah.
I don't know that I have a, a firm answer on where what we think Market should be. I think the, the things that I mentioned before, uh, are kind of Chief reasons and I don't see those really going away as we as we head through the year. Probably the 1 thing on the freight side, that is kind of pressuring differentials down in the prompt is, is Freight rates have have went up significantly? That's kind of result is, is more enforcement on some of these shadow Fleet vessels and that could be with us as we head through the rest of the year.
Speaker #4: Hey, thanks for taking my questions. I wanted to ask another one on the crude quality discs. Given they've widened out quite a bit and I know you kind of mentioned a bunch of reasons why that is, but if we kind of look back a few years prior to COVID, it seems like there was more kind of sour availability back then than there is now.
Homer Bhullar: Yeah. Hey, thanks for taking my questions. I wanted to ask another one on the crude quality mix. Given they've widened out quite a bit, and I know you kind of mentioned a bunch of reasons why that is, but if we kind of look back a few years prior to COVID, it seems like there was more kind of sour availability back then than there is now. But at the same time, differentials look wider today than they were prior to COVID. So I guess the question is, do you think that the levels we're at today are sustainable? Are there reasons why the differentials should be wider now than they were prior to COVID? Thanks.
Jason Gabelman: Yeah. Hey, thanks for taking my questions. I wanted to ask another one on the crude quality mix. Given they've widened out quite a bit, and I know you kind of mentioned a bunch of reasons why that is, but if we kind of look back a few years prior to COVID, it seems like there was more kind of sour availability back then than there is now. But at the same time, differentials look wider today than they were prior to COVID. So I guess the question is, do you think that the levels we're at today are sustainable? Are there reasons why the differentials should be wider now than they were prior to COVID? Thanks.
Speaker #4: But at the same time, differentials look wider today than they were prior to COVID. So I guess the question is, do you think that the levels we're at today are sustainable?
Speaker #4: Are there reasons why the differentials should be wider now than they were prior to COVID?
Got it. Great. Thanks and my quick follow-up is, is just on 2026 throughput and it seems like sustaining capex is is down a couple hundred million dollars uh versus what um you've you've done the past couple years so is that an indication that mechanical availability should be higher and and giving your your your uh track record of squeezing out more barrels, out of the system. Should we expect kind of throughput excluding the shutdown of Benicia to continue to improve
Speaker #4: Thanks. Yeah.
Speaker #5: This is Randy again. I mean, I don't know that I have a firm answer on what we think markets should be. I think the things that I mentioned before are kind of chief reasons.
Lane Riggs: Yeah. This is Randy again. I mean, I don't know that I have a firm answer on what we think markets should be. I think the things that I mentioned before are kind of chief reasons, and I don't see those really going away as we head through the year. Probably the one thing on the freight side that is kind of pressuring differentials down in the prompt is freight rates have went up significantly. That's kind of a result is more enforcement on some of these shadow fleet vessels, and that could be with us as we head through the rest of the year.
Randy Hawkins: Yeah. This is Randy again. I mean, I don't know that I have a firm answer on what we think markets should be. I think the things that I mentioned before are kind of chief reasons, and I don't see those really going away as we head through the year. Probably the one thing on the freight side that is kind of pressuring differentials down in the prompt is freight rates have went up significantly. That's kind of a result is more enforcement on some of these shadow fleet vessels, and that could be with us as we head through the rest of the year.
Uh Lane I would say you know, attribute most of it. There's timing obviously timing year-over-year differences but a big, big part of it is. We are, you know, is Benicia.
We have 1 less Refinery to to sustain and capital 1.
All right, thanks.
Speaker #5: And I don't see those really going away as we head through the year. Probably the one thing on the freight side that is kind of pressuring differentials down in the prompt is freight rates have went up significantly.
Thank you. This brings us to the end of the question and answer session. I would like to turn the floor back over to Mr. Donovan for closing comments.
Speaker #5: That's kind of resulted in more enforcement on some of these shadow fleet vessels. And that could be with us as we head through the rest of the year.
Speaker #5: That's kind of resulted in more enforcement on some of these shadow fleet vessels. And that could be with us as we head through the rest of the year.
Yeah. Well we appreciate everyone joining us today and of course feel free to contact our IR team. If you have any follow-up questions and have a wonderful day,
Speaker #4: Got it, great, thanks. And my quick follow-up is just on 2026 throughput. It seems like sustaining CapEx is down a couple of hundred million dollars versus what you've done the past couple of years.
Homer Bhullar: Got it. Great. Thanks. And my quick follow-up is just on 2026 throughput. And it seems like sustaining CapEx is down $200 million versus what you've done the past couple of years. So is that an indication that mechanical availability should be higher? And given your track record of squeezing out more barrels out of the system, should we expect kind of throughput, excluding the shutdown of Benicia, to continue to improve?
Jason Gabelman: Got it. Great. Thanks. And my quick follow-up is just on 2026 throughput. And it seems like sustaining CapEx is down $200 million versus what you've done the past couple of years. So is that an indication that mechanical availability should be higher? And given your track record of squeezing out more barrels out of the system, should we expect kind of throughput, excluding the shutdown of Benicia, to continue to improve?
Ladies and gentlemen, thank you for your participation. This concludes today's event, you may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
Speaker #4: So is that an indication that mechanical availability should be higher and given your track record of squeezing out more barrels out of the system should we expect kind of throughput excluding the shutdown of Benicia to continue to improve?
Speaker #3: This is Wayne. I would say it should be most of it. There's timing, obviously, timing year over year differences, but a big part of it is we're is Benicia.
Lane Riggs: This is Lane. I would say it should be most of it. There's timing, obviously, timing year-over-year differences. But a big part of it is Benicia. We have one less refinery to sustain capital on.
Lane Riggs: This is Lane. I would say it should be most of it. There's timing, obviously, timing year-over-year differences. But a big part of it is Benicia. We have one less refinery to sustain capital on.
Speaker #3: We have one less refinery to sustain and capital
Speaker #3: on. All
Speaker #4: right. Thanks.
Homer Bhullar: All right. Thanks.
Jason Gabelman: All right. Thanks.
Speaker #8: Thank you. This brings us to the end of the question and answer session. I would like to turn the floor back over to Mr. Donovan for closing comments.
Operator: Thank you. This brings us to the end of the question and answer session. I would like to turn the floor back over to Mr. Donovan for closing comments.
Operator: Thank you. This brings us to the end of the question and answer session. I would like to turn the floor back over to Mr. Donovan for closing comments.
Speaker #3: Yeah. Well, we appreciate everyone joining us today. And of course, feel free to contact our IR team if you have any follow-up questions. And have a wonderful day.
Lane Riggs: Yeah. Well, we appreciate everyone joining us today. And of course, feel free to contact our IR team if you have any follow-up questions. And have a wonderful day.
Brian Donovan: Yeah. Well, we appreciate everyone joining us today. And of course, feel free to contact our IR team if you have any follow-up questions. And have a wonderful day.
Speaker #8: Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time.
Operator: Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
Operator: Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.
