Q1 2026 Valero Energy Corp Earnings Call

April 30, 2026

Speaker #1: Greetings and welcome to Valero Energy Corp Q1 2026 earnings conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation.

Operator: Greetings, welcome to Valero Energy Corp Q1 2026 Earnings Conference 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 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Donovan, VP Investor Relations. Thank you. You may begin.

Operator: Greetings, welcome to Valero Energy Corp Q1 2026 Earnings Conference 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 Investor Relations. Thank you. You may begin.

Speaker #1: operator assistance during the conference, please press *0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Donovan, VP Investor Relations, thank you, you may begin.

Brian Donovan: Good morning, everyone, welcome to Valero Energy Corporation's Q1 2026 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 investorvalero.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 questions after reviewing these materials, please feel free to reach out to our investor relations team. Before we begin, I'd like to draw your attention to the forward-looking statement disclaimer included in the press release.

Speaker #2: and welcome to Valero Energy Corporation's Q1 2026 earnings conference call. I'm joined today by Lane Riggs, Chairman and 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 Senior Management Team.

Speaker #2: If you have not yet received a copy of our earnings release, it is available on our website at investorvalero.com. Included with the release are supplemental tables providing detailed financial information for each of our business segments.

Speaker #2: Along with reconciliations and disclosures for any adjusted financial metrics referenced during today's call. If you have questions after reviewing these materials, please feel free to reach out to our investor relations team.

Speaker #2: Before we begin, I'd 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 express the company's or management's expectations or forecasts of future events are

Brian Donovan: 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.

Speaker #1: Our 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

Speaker #2: Thank you Brian . And good morning , everyone I'm pleased to report that an excellent first quarter demonstrating our team's ability to optimize our refining system and deliver strong financial returns in a period marked by considerable disruption to commodity markets .

Lane Riggs: Thank you, Brian. Good morning, everyone. I am pleased to report that Valero had an excellent Q1, demonstrating our team's ability to optimize our refining system and deliver strong financial returns. In a period marked by considerable disruption in the commodity markets, our operations and commercial teams executed well. Early in the quarter, the availability of incremental Venezuelan supply resulted in wider crude differentials. Our advantage Gulf Coast refining network was well-positioned to benefit from the discounted heavy sour feedstocks. Market conditions shifted sharply in March as the global supply of crude and refined products tightened. Our operations team responded decisively, adjusting the product slate to reflect market signals, delivering a record monthly jet yield. At the same time, our commercial and financial teams proactively managed commodity risk to mitigate any adverse impacts of a highly dynamic pricing environment.

Speaker #2: Our operations and commercial teams executed well Are advantaged Gulf Coast Refining Network was well positioned to benefit from the discounted heavy sour feedstocks market conditions shifted sharply in March as the global supply of crude and refined products tightened our operations team responded decisively , adjusting the product slate to reflect market signals , delivering a record monthly jet yield At the same time , our commercial and financial teams proactively manage commodity risk to mitigate any adverse impacts of a highly dynamic pricing environment Financially , we maintained a strong balance sheet while continuing to honor our commitment to shareholder returns On the strategic front , we continue to make progress on the SEC unit Optimization project at our Saint Charles refinery The $230 million initiative will enhance our ability to produce high value products , including Alkylate .

Lane Riggs: Financially, we maintained a strong balance sheet while continuing to honor our commitment to shareholder returns. On the strategic front, we continue to make progress on the FCC unit optimization project at our St. Charles refinery. The $230 million initiative will enhance our ability to produce high-value products, including alkylate. Expect the project to begin operations in Q3 2026. Looking ahead, constrained global refining capacity and low product inventories in key markets should continue to support refining fundamentals. Our concentration on high-complexity coastal refineries provide significant feedstock flexibility and direct access to global markets, which are especially beneficial in the current environment. Additionally, our disciplined financial strategy and capital allocation framework position us to perform well across market cycles. In closing, our strong performance in a volatile first quarter underscores Valero's operational, commercial, and financial strength.

Speaker #2: We expect the project to begin operations in the third quarter of 2026 . Looking ahead , constrained global refining capacity and low product inventories and key markets should continue to support refining fundamentals .

Speaker #2: Our concentration on high-complexity coastal refineries provides significant feedstock flexibility and direct access to global markets, which are especially beneficial in the current environment. Additionally, our disciplined financial strategy and capital allocation framework have positioned us to perform well across market cycles.

Speaker #2: In closing , our strong performance in a volatile first quarter underscores of operational , commercial , and financial strength remain focused on things we can control .

Lane Riggs: Remain focused on things we can control: operational excellence, system-wide optimization, and disciplined financial decision-making. Consistent execution across these priorities positions us to benefit from the current margin environment and will continue to differentiate Valero. With that, I'll turn the call over to Homer.

Speaker #2: Operational excellence system wide optimization and disciplined financial decision making . Consistent execution across these priorities positions us to benefit from the current margin environment and will continue to differentiate Valero .

Speaker #2: With that , I'll turn the call over to Homer

Speaker #3: Thank you Elaine , for the first quarter of 2026 , net income attributable to Valero stockholders was $1.3 billion , or $4.22 per share , compared to a net loss of $595 million , or $1.90 per share , for the first quarter of 2025 .

Homer Bhullar: Thank you, Lane. For Q1 2026, net income attributable to Valero stockholders was $1.3 billion or $4.22 per share, compared to a net loss of $595 million or $1.90 per share for Q1 2025. Excluding the adjustments shown in the earnings release tables, adjusted net income attributable to Valero stockholders for Q1 2025 was $282 million or $0.89 per share. The Refining Segment reported $1.8 billion of operating income for Q1 2026 compared to an operating loss of $530 million for Q1 2025. Adjusted operating income for Q1 2025 was $605 million.

Speaker #3: Excluding the adjustments shown in the earnings release , tables , adjusted net income attributable to Valero stockholders for the first quarter of 2025 was $282 million , or $0.89 per share The refining segment reported $1.8 billion of operating income for the first quarter of 2026 , compared to an operating loss of $530 million for the first quarter of 2025 .

Speaker #3: Adjusted operating income for the first quarter of 2025 was 605 million . Refining throughput volumes in the first quarter of 2026 averaged 2.9 million barrels per day .

Homer Bhullar: Refining throughput volumes in Q1 2026 averaged 2.9 million barrels per day. Refining cash operating expenses was $5.13 per barrel in Q1 2026. The Renewable Diesel segment reported operating income of $139 million for Q1 2026 compared to an operating loss of $141 million for Q1 2025. Renewable Diesel segment sales volumes averaged 3 million gallons per day in Q1 2026. The Ethanol segment reported $90 million of operating income for Q1 2026 compared to $20 million for Q1 2025. Ethanol production volumes averaged 4.6 million gallons per day in Q1 2026.

Speaker #3: Refining cash operating expenses was $5.13 per barrel in the first quarter of 2026 . The renewable diesel segment reported operating income of $139 million for the first quarter of 2026 , compared to an operating loss of $141 million for the first quarter of 2025 .

Speaker #3: Renewable diesel segment sales volumes averaged 3 million gallons per day in the first quarter of 2026 . The ethanol segment reported $90 million of operating income for the first quarter of 2026 , compared to $20 million for the first quarter of 2025 .

Speaker #3: Ethanol production volumes averaged 4.6 million gallons per day in the first quarter of 2026 , G&A expenses were $285 million for the first quarter of 2026 .

Homer Bhullar: G&A expenses were $285 million for Q1 2026. Depreciation and amortization expense was $840 million for Q1 2026, which includes approximately $100 million of incremental depreciation expense related to ceasing refining operations at our Benicia Refinery. Net interest expense was $140 million, and income tax expense was $401 million for Q1 2026. The effective tax rate was 23%. Net cash provided by operating activities was $1.4 billion in Q1 2026. Included in this amount was a $303 million unfavorable impact from working capital and $102 million of adjusted net cash provided by operating activities associated with the other joint venture member's share of DGD.

Speaker #3: Depreciation and amortization expense was $840 million for the first quarter of 2026 , which includes approximately $100 million of incremental depreciation expense related to ceasing , refining operations at our Benicia refinery Net interest expense was $140 million , and income tax expense was $401 million .

Speaker #3: For the first quarter of 2026 . The effective tax rate was 23% . Net cash provided by operating activities was 1.4 billion in the first quarter of 2026 , included in this amount was a $303 million unfavorable impact from working capital , and $102 million of adjusted net cash provided by operating activities associated with the other joint venture members .

Speaker #3: Share of Dgd . Excluding these items , adjusted net cash provided by operating activities was 1.6 billion in the first quarter of 2026 .

Homer Bhullar: Excluding these items, adjusted net cash provided by operating activities was $1.6 billion in Q1 2026. Regarding investing activities, we made $448 million of capital investments in Q1 2026, of which $404 million was for sustaining the business, including costs for turnarounds, catalysts, and regulatory compliance, and the balance was for growing the business. Excluding capital investments attributable to the other joint venture member's share of DGD and other variable interest entities, capital investments attributable to Valero were $430 million in Q1 2026. Moving to financing activities, we remain committed to our disciplined capital allocation framework. Shareholder cash returns totaled $938 million in Q1 2026, resulting in a payout ratio of 59% for the quarter.

Speaker #3: Regarding investing activities , we made $448 million of capital investments in the first quarter of 2026 , of which $404 million was for sustaining the business , including costs for turnarounds , catalysts and regulatory compliance , and the balance was for growing the business .

Speaker #3: Excluding capital investments attributable to the other joint venture members' share of DGD and other variable interest entities, capital investments attributable to Valero were $430 million in the first quarter of 2026.

Speaker #3: Moving to financing activities , we remain committed to our disciplined capital allocation framework , shareholder cash returns totaled $938 million in the first quarter of 2026 , resulting in a payout ratio of 59% for the quarter .

Speaker #3: And on January 22nd , our board approved a 6% increase to the quarterly cash dividend , reflecting a strong financial position . And our commitment to a growing dividend Turning to the balance sheet , in March , we opportunistically issued $850 million of ten year notes at a 5.15% coupon to Derisk upcoming debt maturities later this year .

Homer Bhullar: On 22 January, our board approved a 6% increase to the quarterly cash dividend, reflecting a strong financial position and our commitment to a growing dividend. Turning to the balance sheet, in March, we opportunistically issued $850 million of 10-year notes at a 5.15% coupon to de-risk upcoming debt maturities later this year. The notes priced at a refining sector record low 10-year spread of 102 basis points over Treasuries. At quarter-end, we had $9.2 billion of total debt, $2.3 billion of total finance lease obligations, and $5.7 billion of cash and cash equivalents. Our debt to capitalization ratio, net of cash and cash equivalents, was 18% as of 31 March 2026.

Speaker #3: The notes , priced at a refining sector , record low ten year spread of 102 basis points over treasuries at quarter end . We had $9.2 billion of total debt , 2.3 billion of total finance lease obligations and 5.7 billion of cash and cash equivalents .

Speaker #3: Our debt to capitalization ratio , net of cash and cash equivalents , was 18% as of March 31st , 2026 . Our cash balance was higher at quarter end , reflecting the opportunistic timing of the March debt issuance and our decision to move towards the high end of our long term 4 to 5 billion cash target to preserve optionality in a volatile market environment .

Homer Bhullar: Our cash balance was higher at quarter-end, reflecting the opportunistic timing of the March debt issuance and our decision to move towards the high end of our long-term $4 billion to $5 billion cash target to preserve optionality in a volatile market environment. Overall, we ended the quarter well-capitalized while still honoring our commitment to shareholder returns. Turning to guidance, as we operate the Port Arthur refinery at reduced rates, we continue to assess the full extent of the damages and develop a plan for repairs. We expect the incident to result in additional capital expenditures in 2026, which should be covered by insurance subject to our applicable insurance deductibles. We will update our 2026 capital investment guidance when we are able to provide a definitive cost estimate and expected repair timeline. Outside of Port Arthur, our previous guidance regarding capital investments for sustaining the business and growth projects remains unchanged.

Speaker #3: Overall , we end of the quarter well capitalized while still honoring our commitment to shareholder returns Turning to guidance as we operate the Port Arthur refinery at reduced rates , we continue to assess the full extent of the damages and develop a plan for repairs .

Speaker #3: We expect the incident to result in additional capital expenditures in 2026, which should be covered by insurance, subject to our applicable insurance deductibles.

Homer Bhullar: We expect the incident to result in additional capital expenditures in 2026, which should be covered by insurance subject to our applicable insurance deductibles. We will update our 2026 capital investment guidance when we are able to provide a definitive cost estimate and expected repair timeline. Outside of Port Arthur, our previous guidance regarding capital investments for sustaining the business and growth projects remains unchanged.

Speaker #3: We'll update our 2026 capital investment guidance when we are able to provide a definitive cost estimate and expected repair timeline . Outside of Port Arthur , our previous guidance regarding capital investments for sustaining the business and growth projects remains unchanged .

Speaker #3: Our 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 .

Homer Bhullar: Our 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. For modeling our Q2 operations, we expect refining throughput volumes to fall within the following ranges: Gulf Coast at 1.69 to 1.74 million barrels per day, reflecting reduced rates at Port Arthur. Mid-Continent at 450 to 470 thousand barrels per day. West Coast at 120 to 130 thousand barrels per day, reflecting the idling of Benicia. North Atlantic at 480 to 500 thousand barrels per day.

Speaker #3: For modeling our second quarter operations , we expect refining throughput volumes to fall within the following ranges . Gulf coast at 1.69 to 1.74 million barrels per day , reflecting reduced rates at Port Arthur Mid-Continent at 450 to 470,000 barrels per day , West Coast at 120 to 130,000 barrels per day , reflecting the idling of Benicia and North Atlantic at 480 to 500,000 barrels per day .

Speaker #3: We expect refining cash , operating expenses in the second quarter to be approximately $4.85 per barrel for the renewable diesel segment , we expect sales volumes of approximately 320 million gallons in the second quarter , operating expenses should be $0.46 per gallon , including $0.22 per gallon for non-cash costs such as depreciation and amortization .

Homer Bhullar: We expect refining cash operating expenses in Q2 to be approximately $4.85 per barrel. For the renewable diesel segment, we expect sales volumes of approximately 320 million gallons in Q2. Operating expenses should be $0.46 per gallon, including $0.22 per gallon for non-cash costs such as depreciation and amortization. Our ethanol segment is expected to produce 4.7 million gallons per day in Q2. Operating expenses should average $0.39 per gallon, which includes $0.04 per gallon for non-cash costs such as depreciation and amortization. For Q2, net interest expense should be about $145 million.

Speaker #3: Our ethanol segment is expected to produce 4.7 million gallons per day in the second quarter , operating expenses should average $0.39 per gallon , which includes $0.04 per gallon for non-cash costs such as depreciation and amortization .

Speaker #3: For the second quarter . Net interest expense should be about 145 million . Total depreciation and amortization expense in the second quarter should be approximately 730 million , which includes approximately 33 million of incremental depreciation expense related to our plan to idle the processing units and cease refining operations at our Benicia refinery completed this month , we expect incremental depreciation related to the Benicia refinery to be included in DNA through April .

Homer Bhullar: Total depreciation and amortization expense in Q2 should be approximately $730 million, which includes approximately $33 million of incremental depreciation expense related to our plan to idle the processing units and cease refining operations at our Benicia refinery completed this month. We expect incremental depreciation related to the Benicia refinery to be included in D&A through April. The Q2 earnings impact of this incremental depreciation is expected to be approximately $0.09 per share based on current shares outstanding. For 2026, we expect G&A expenses to be approximately $960 million.

Speaker #3: The second quarter earnings impact of this incremental depreciation is expected to be approximately $0.09 per share , based on current shares outstanding 2026 .

Speaker #3: We expect . G&A expenses to be approximately 960 million .

Speaker #1: Thanks to . That concludes our opening remarks before we open the call to questions , please limit each turn in the Q&A to two questions .

Gary Simmons: 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.

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 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 #1: 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 #4: 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 .

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 your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that is star one to register a question at this time. Today's first question is coming from Manav Gupta of UBS. Please go ahead.

Speaker #4: 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 your question from the queue for participants using speaker equipment , it may be necessary to pick up the handset before pressing the star keys again .

Speaker #4: That is star one to register a question at this time Today's first question is coming from Manav Gupta of UBS . Please go ahead .

Speaker #5: Good morning guys . Very strong quarter considering everything else that we are seeing out there . I just quickly wanted to pivot to the global refining macro , and I'm trying to understand , as these prices are rising .

Manav Gupta: Good morning, guys. Very strong quarter considering everything else that we are seeing out there. I just quickly wanted to pivot to the global refining macro, I'm trying to understand, as these prices are rising, Gary Simmons, if you or somebody could comment as to what you're seeing for demand out there. Are you seeing any early signs of demand destruction in your system?

Speaker #5: Gary , if you or somebody could comment as to what you're seeing for demand out there , are you seeing any early signs of demand destruction ?

Speaker #5: In your system

Gary Simmons: Manav, this is Gary. You know, despite the fact, as you alluded to, that prices for transportation fuels are moving higher, it appears, especially domestic demand appears to be very resilient. If you look at our wholesale volumes year over year, we do show a reduction in sales volumes in our system. However, this isn't really a reflection of demand, but it's a result of idling the Benicia Refinery, and then we exited a position in the Boston market. When we look at sales, we would say US demand for gasoline is flat to slightly up. Diesel demand is up a little, and that seems to be consistent with what you're seeing in the DOEs as well, with the DOEs reflecting really increases in demand, both gasoline, diesel, and jet.

Speaker #6: This is Gary . You know , despite the fact , as you alluded to , that prices for transportation fuels are moving higher , it appears that especially domestic demand appears to be very resilient .

Speaker #6: If you look at our wholesale volumes year over year , we do show a reduction in sales volumes in our system . However , this isn't really a reflection of demand , but it's a result of idling .

Speaker #6: The Benicia refinery. And then we exited a position in the Boston market. So when we look at sales, we would say U.S.

Speaker #6: Demand for gasoline is flat to slightly up. Diesel demand is up a little, and that seems to be consistent with what you're seeing in the DOES as well.

Speaker #6: With the dose reflecting really increases in demand , both gasoline , diesel and jet . Really the big change in demand year over year is the pull into the export market .

Gary Simmons: The big change in demand year over year is the pull into the export market since the conflict in Iran started. The recent DOE data shows exports from the US are up 470,000 barrels a day year over year. The pull into the export market is causing inventory to draw in the US. Relative to the 5-year average, total light product inventories in the US have drawn 30 million barrels since January. Distillate inventory is at 5-year lows. Domestic demand remains strong for diesel with good agricultural demand as we've started planting season. The freight indices are beginning to improve a little. The export demand for distillate, especially jet, has been very strong with interest for US Gulf Coast barrels from all over the world.

Speaker #6: Since the conflict in Iran started , the recent Doe data shows exports from the U.S. are up 470,000 barrels a day year over year .

Speaker #6: The pull into the export market is causing inventory to draw in the U.S. . So relative to the five year average , total light product inventories in the U.S.

Speaker #6: have drawn 30 million barrels since January . This . Inventories at five year lows . Domestic demand remains strong for diesel , with good agricultural demand .

Speaker #6: As we started planting season and then the freight indices are beginning to improve a little . And then the export demand for distillate , especially jet , has been very strong with interest for U.S.

Speaker #6: Gulf Coast barrels from all over the world . As we approach driving season gasoline inventory now , at the bottom of the five year average range , the transatlantic ARB to ship to pad one from Europe is closed .

Gary Simmons: As we approach driving season, gasoline inventory now at the bottom of the 5-year average range. The transatlantic arb to ship to Pad 1 from Europe is closed. Both domestic and export demand remain strong. The Jones Act waiver is allowing us to supply Pad 1 and Pad 5 more efficiently from the US Gulf Coast. I think as we approach driving season, VGO availability will start to become an issue. It doesn't appear there's sufficient VGO to fill both FCC and hydrocracking capacity. Current economics would favor hydrocracking, which could reduce gasoline production moving forward. I think you have read a lot about global demand destruction since the straits have been closed. It really appears to us that this isn't really demand destruction, it's more insufficient supply to meet demand.

Speaker #6: Both domestic and export demand remain strong . The Jones Act waiver is allowing us to supply pad one and pad five more efficiently from the U.S.

Speaker #6: Gulf Coast , and I think as we approach driving season Vgo availability will start to become an issue . It doesn't appear there sufficient vgo to fill both FCC and Hydrocracking capacity .

Speaker #6: Current economics would favor Hydrocracking , which could reduce gasoline production , moving forward . I think you have read a lot about global demand destruction since the straights have been closed .

Speaker #6: It really appears to us that this isn't really demand destruction . It's more insufficient supply to meet demand . You know , our expectations coming into the year was that new capacity additions , along with more bio renewable fuels on the market , would be sufficient to meet incremental demand .

Gary Simmons: You know, our expectations coming into the year was that new capacity additions, along with more biorenewable fuels on the market, would be sufficient to meet incremental demand. We thought supply-demand balances would be similar to last year, and then you start to see a tightening at the end of this year. The conflict in Iran has really created a market with demand significantly outpacing supply. We have very little excess refining capacity globally, so it's gonna be difficult to restock inventories even when the conflict is resolved.

Speaker #6: We thought supply demand balances would be similar to last year . And then you'd start to see a tightening at the end of this year .

Speaker #6: But the conflict in Iran has really created a market with demand significantly outpacing supply . We have very little excess refining capacity globally .

Speaker #6: So it's going to be difficult to restock inventories even with the conflict . Is resolved

Speaker #5: Perfect . You kind of alluded to it . So I just want to confirm this . So look , as you look into the next at least 6 or 9 months , you have some refineries like Valero who can run as they wish .

Randy: Perfect. You kind of alluded to it, so I just wanted to confirm this. Look, as you look into the next at least 6 or 9 months, you have some refiners like Valero who can run as they wish, and then there are some refiners, they may have a good gig somewhere globally, but they can't run because they don't have enough crude. I'm just trying to understand, within your refining system, sir, are you able to source any crude that you're looking for and run all out if you want to?

Manav Gupta: Perfect. You kind of alluded to it, so I just wanted to confirm this. Look, as you look into the next at least 6 or 9 months, you have some refiners like Valero who can run as they wish, and then there are some refiners, they may have a good gig somewhere globally, but they can't run because they don't have enough crude. I'm just trying to understand, within your refining system, sir, are you able to source any crude that you're looking for and run all out if you want to?

Speaker #5: And then there are some refiners . They may have a good kid somewhere globally , but they can't run because they don't have enough crude .

Speaker #5: I'm just trying to understand within your refining system , sir , are you able to source any crude that you're looking for and run all out ?

Speaker #5: If you want to ?

Speaker #6: And this is Randy , and I think the short answer is yes . I mean , most of our system is located kind in the Mid-Continent Gulf Coast .

Eric Fisher: Manav, this is Randy, and I think the short answer is yes. I mean, most of our system is located kind of in the Mid-continent and Gulf Coast. You know, crude availability is really not much of an issue. I think as we've seen in the stats this week, you know, the US has become a major exporter of crude, and that's been, you know, amplified by the SPR release. Any exports out of the US have to overcome high freight and pretty steep backwardation. I mean, we're always kind of optimizing our crude slate in the Gulf Coast and, you know, this time kind of no different, just the volatility on the, on price and freight have been more extreme than normal.

Randy Hawkins: Manav, this is Randy, and I think the short answer is yes. I mean, most of our system is located kind of in the Mid-continent and Gulf Coast. You know, crude availability is really not much of an issue. I think as we've seen in the stats this week, you know, the US has become a major exporter of crude, and that's been, you know, amplified by the SPR release. Any exports out of the US have to overcome high freight and pretty steep backwardation. I mean, we're always kind of optimizing our crude slate in the Gulf Coast and, you know, this time kind of no different, just the volatility on the, on price and freight have been more extreme than normal.

Speaker #6: So crude availability is really not much of an issue . I think as we've seen in the stats this week , the US has become a major exporter of crude .

Speaker #6: And that's been , you know , amplified by the SPR release . So any exports out of the US have to overcome high freight and pretty steep backwardation .

Speaker #6: So I mean we're always kind of optimizing our cruise slate in the Gulf Coast . And you know , this time kind of no different .

Speaker #6: Just the volatility on price and freight have been more extreme than normal . You know , you know , with , with the high freight costs .

Gary Simmons: You know, with the high freight costs, we have made some changes in our system by cutting back waterborne crudes, running more pipeline. In addition, more SPR volume that's on the market. We've purchased more of that grade, just kind of optimizing against other crudes. Since the start of January with the Venezuela sanctions removed, heavy discounts were already very advantaged for our system. We were already kind of pointing our refining system to run max heavy sour crude. Since the Iranian event started, those trends have only continued. Canadian heavy crude today is trading like a $16 discount versus WTI in the Gulf.

Randy Hawkins: You know, with the high freight costs, we have made some changes in our system by cutting back waterborne crudes, running more pipeline. In addition, more SPR volume that's on the market. We've purchased more of that grade, just kind of optimizing against other crudes. Since the start of January with the Venezuela sanctions removed, heavy discounts were already very advantaged for our system. We were already kind of pointing our refining system to run max heavy sour crude. Since the Iranian event started, those trends have only continued. Canadian heavy crude today is trading like a $16 discount versus WTI in the Gulf.

Speaker #6: And we have made some changes in our system by , you know , cut back waterborne cruise running more pipeline . In addition , you know , more SPR , the volume that's on the market .

Speaker #6: You know , we've , we've purchased more of that grade , just kind of optimizing against other crudes , you know , and then since the start of January with the Venezuela sanctions removed , you heavy discounts were already very advantaged for our system .

Speaker #6: And we were already kind of pointing our refining system to run max heavy sour crude , you know , since the Iranian event started , you know , those those trends have only continued , you know , Canadian heavy crude today is trading like a $16 discount versus T in the Gulf .

Speaker #6: So , you know , the location of our system , you know , in the Gulf Coast makes it a pretty advantaged backdrop there .

Gary Simmons: You know, the location of our system, you know, in the Gulf Coast makes it a pretty advantaged backdrop there.

Randy Hawkins: You know, the location of our system, you know, in the Gulf Coast makes it a pretty advantaged backdrop there.

Speaker #5: Thank you . And congrats on a great quarter .

Randy: Thank you, and congrats on a great quarter.

Manav Gupta: Thank you, and congrats on a great quarter.

Gary Simmons: All right. Thanks, Manav.

Speaker #6: Thanks , Manav .

Speaker #4: Thank you. Our next question is coming from Neil Mehta of Goldman Sachs. Please go ahead.

Operator: Thank you. Our next question is coming from Neil Mehta of Goldman Sachs. Please go ahead.

Speaker #7: Yeah . Thanks so much . Team . And again , really solid results . Not to focus too much quarter to quarter stuff , but you know , you think about the second quarter indicators .

Neil Mehta: Yeah. Thanks so much, team, really solid results. Not to focus too much on quarter-to-quarter stuff, you know, when you think about the Q2 indicators, they're already showing $30 on the Gulf Coast versus Q1 levels, which were $18. You know, it really hearkens back to the Q2 of 2022 when at that point, your share count was kind of closer to 400 million. Today, it's closer to 300 million. Maybe this is a question for Homer, as we start thinking about modeling out Q2 here, you know, any pluses and minuses that we should sort of be thinking about and anchoring to, and anything about March profitability that can give us a sense of what Q2 could shape up like?

Speaker #7: They're already showing $30 on the Gulf Coast versus Q1 levels , which were $18 . And you know , it really hearkens back to the second quarter of 2022 , when and at that point , your share count was kind of closer to 400 million .

Speaker #7: Today , is closer to 300 million . So maybe this is a question for Homer . But as we start thinking about modeling out Q2 here , you know , any pluses and minuses that we should sort of be thinking about in anchoring to and anything about March profitability that can give us a sense of , of what Q2 could shape up like

Speaker #8: Yeah , Neil , I think if you look to the second quarter , definitely some headwinds and tailwinds , certainly the steep backwardation in the crude market is a headwind in addition to the backwardation .

Gary Simmons: Yeah, Neil, I think, you know, if you look to Q2, definitely some headwinds and tailwinds. Certainly the steep backwardation in the crude market is a headwind. In addition to the backwardation, you know, when you see the physical markets disconnect from the futures, it's also difficult to see. It becomes very complex, you know, to look at what that's gonna do to capture rates. In terms of tailwinds, you know, certainly the heavy sour discounts our system, being able to maximize heavy sour crude is a tailwind. The premium regrade for jet fuel is a tailwind, as well as premiums for secondary products. A lot of pluses and minuses as we move into Q2.

Speaker #8: You know , when you see the physical markets disconnect from the futures , it's also difficult to see . It becomes very complex to , you know , to look at what that's going to do to capture rates .

Speaker #8: But in terms of tailwinds , you know , certainly the heavy seller discounts , our system be able to maximize heavy sour crude as a tailwind .

Speaker #8: The premium grade for jet fuel is a tailwind as well as the premium for secondary products . So a lot of pluses and minuses as we move into the second quarter

Speaker #7: All right . Well , one specific product want to to dig into was jet Gary . I mean , there's a lot of talk about the potential shortages in parts of the world .

Neil Mehta: All right. Well, one specific product I want to dig into is jet, Gary. I mean, there's a lot of talk about the potential for shortages in parts of the world. You know, how are you just thinking about that product in general? How you can maximize your production of it? Where are you trying to get it to? Are these concerns about jet availability globally founded or unfounded?

Speaker #7: You know , how are you just thinking about that product in general , how you can maximize your production of it ? Where are you trying to get it to ?

Speaker #7: And are these concerns about jet availability globally founded or unfounded ?

Speaker #8: Yeah . So to start with , I would say they are founded . Jet is incredibly short . We've been trying to maximize jet in our system .

Gary Simmons: Yeah. To start with, I would say they are founded. Jet is incredibly short. We've been trying to maximize jet in our system. Typically, if you look at jet as a percentage of total distillates, that's a number that averages about 26% in our system. In March, we got that up to over 30%, jet as a % of total distillates. In addition to that, we have a couple refineries that don't make jet today that we're moving into jet production mode to try to increase jet yields even further as we go forward.

Speaker #8: Typically , if you look at jet as a percentage of total distillates , that's a number that averages about 26% in our system .

Speaker #8: In March, we got that up to over 30% jet as a percent of total distillates. In addition to that, we have a couple of refineries that don't make jet today that we're moving into jet production mode to try to increase jet yields even further as we go forward.

Neil Mehta: Thanks, Gary.

Speaker #7: Here

Speaker #4: Thank you . Our next question is coming from Theresa Chen of Barclays . Please go ahead .

Operator: Thank you. Our next question is coming from Theresa Chen of Barclays. Please go ahead.

Speaker #9: Hi there . This quarter has highlighted the earnings volatility that refiners have faced in the range of outcomes has been wide in part due to a different commercial and financial strategies .

Theresa Chen: Hey there. This quarter has highlighted the earnings volatility that refiners have faced, and the range of outcomes has been wide, in part due to different commercial and financial strategies. But despite operating in the same macro environment, your results appear to have been less volatile. From your perspective, I'm curious as to what you think has enabled that. Does it reflect differences in crude sourcing, product placement or hedging strategies or something else structural in the business?

Speaker #9: But despite operating in the same macro environment , your results appear to have been less volatile . And from your perspective , I'm curious as to what you think has enabled that .

Speaker #9: Does it reflect differences in crude sourcing , product placement or hedging strategies or something else structural in the business ? And relatedly , this environment is also stress testing .

Theresa Chen: Relatedly, this environment is also stress testing the balance sheets and leverage thresholds across the sector. You've chosen to maintain a relatively elevated cash position, to Homer's earlier point in the prepared remarks. How are you thinking about that capital strategy today, particularly as a buffer against the volatility?

Speaker #9: The balance and leverage thresholds across the sector . You've chosen to maintain a relatively elevated cash position to Homer's earlier point in the prepared remarks .

Speaker #9: How are you thinking about that capital strategy today , particularly as a buffer against the volatility

Speaker #10: Yeah . Hey , Theresa , it's Homer . I mean , let me start on the risk side and hedging specifically . You know , under normal market conditions , our approach can be more formulaic .

Homer Bhullar: Yeah. Hey, Theresa, it's Homer. I mean, let me start on the risk side and hedging specifically. You know, under normal market conditions, our approach can be more formulaic, you know, and process driven, where we basically manage our exposure above or below LIFO with derivatives positions. When we started seeing higher volatility in both crude and product markets, our team met frequently, daily, to review our positions, and we were just more proactive in managing our exposure. For example, we maintained our inventory positions much closer to LIFO, that reduced our overall exposure to derivatives and associated price swings, right? In addition to that also ensures that you don't have a significant draw on cash for margin calls, you can see that we had minimal impact on that through working capital.

Speaker #10: You know , and process driven where we basically manage our exposure above or below LIFO with derivatives positions . But when we started seeing higher volatility in both crude and product markets , our team met frequently daily to review our positions .

Speaker #10: And we were just more proactive in managing our exposure . For example , we maintained our inventory positions much closer to life so that reduced our overall exposure to derivatives and associated price swings .

Speaker #10: Right . And then in addition to that , that also ensures that you don't have a significant draw on cash for margin calls .

Speaker #10: And you can see that we had minimal impact on that through working capital , you know , to your second point around cash , we did move our overall base cash position towards the high end of the 4 to $5 billion minimum cash balance that we talked about .

Homer Bhullar: You know, to your second point around cash, we did move our overall base cash position towards the high end of the $4 to 5 billion minimum cash balance that we talked about. This is why we moved to a higher cash balance, really, after the pandemic, right? To ensure that our liquidity never, ever comes into question. While we didn't have a huge cash flow draw, hopefully this quarter highlights the value of a higher cash balance. Our cash balance, coupled with our bank facilities, we ended the quarter with almost $11 billion of total liquidity, so we're really well-positioned for whatever the rest of the year brings.

Speaker #10: This is why we moved to a higher cash balance , really after the pandemic . Right ? To ensure that our liquidity never , ever comes into question .

Speaker #10: And while we didn't have a huge cash flow draw , hopefully this highlight , this quarter highlights the value of a higher cash balance .

Speaker #10: So our cash balance , coupled with our bank facilities , we ended the quarter with $11 billion of total liquidity . So we're really well positioned for whatever the rest of the year brings .

Speaker #10: The last thing I'll mention is , you know , separately , we were also proactive , as I mentioned in the opening remarks .

Homer Bhullar: The last thing I'll mention is, you know, separately, we were also proactive, as I mentioned in the opening remarks, and we opportunistically pre-financed our upcoming maturities for the balance of the year. We saw an attractive window to de-risk that part of the balance sheet, and we were able to do that at a record low spread. You know, we just try to be proactive on every financial aspect of our business, whether that's risk or balance sheet or shareholder returns.

Speaker #10: And we opportunistically pre our upcoming maturities for the balance of the year . So we saw an attractive window to de-risk that part of the balance sheet .

Speaker #10: And we were able to do that at a record low spread . So , you know , we just try to be proactive on every financial aspect of our business , whether that's risk or balance sheet or shareholder returns

Speaker #9: Thank you . And shifting gears , how should we think about the trajectory of Dgd profitability going forward , considering current macro conditions , feedstock considerations and regulatory changes that we've seen recently ?

Theresa Chen: Thank you. Shifting gears, how should we think about the trajectory of DGD profitability going forward, considering current macro conditions, feedstock considerations, and regulatory changes that we've seen recently?

Speaker #6: Yeah . This is Eric Holder did a great job explaining the risk management structure for Dgd is a little bit different . And so the mark to market that we have on our forward feedstock positions will be a little bit of a headwind .

Gary Simmons: Yeah. This is Eric. Homer did a great job explaining. The risk management structure for DGD is a little bit different, and so the mark-to-market that we have on our forward feedstock positions will be a little bit of a headwind if we see the underlying commodities continue to rise like we did for the last month or so. That being said, the RVO is a pretty strong tailwind. We see a lot of higher margins, certainly higher in Q2 than in Q1 and overall a better 2026 versus 2025.

Eric Fisher: Yeah. This is Eric. Homer did a great job explaining. The risk management structure for DGD is a little bit different, and so the mark-to-market that we have on our forward feedstock positions will be a little bit of a headwind if we see the underlying commodities continue to rise like we did for the last month or so. That being said, the RVO is a pretty strong tailwind. We see a lot of higher margins, certainly higher in Q2 than in Q1 and overall a better 2026 versus 2025.

Speaker #6: If we see the underlying commodities continue to rise , like we did for the last month or so . So that being said , the Rvo is a pretty strong tailwind .

Speaker #6: We see a lot of higher margins , certainly higher in to Q than in one Q and and overall a better 26 versus 25 .

Theresa Chen: Thank you.

Speaker #9: Thank you

Speaker #4: Thank you . Our next question is coming from Joe Lache of Morgan Stanley . Please go ahead

Operator: Thank you. Our next question is coming from Joe Laetsch of Morgan Stanley. Please go ahead.

Speaker #11: Great . Thanks . Good morning . Thanks for taking my questions . So as we look beyond the Middle East disruptions , can you just talk about how you see the supply demand balance shaping up over the next couple of years ?

Joe Laetsch: Great. Thanks. Good morning. Thanks for taking my questions. As we look beyond the Middle East disruptions, can you just talk about how you see the supply-demand balance shaping up over the next 2 years? It seems like the balance was already pretty tight before the disruption, and now there is refinery damage and the need to replace inventories to contend with. Does this change how you think about mid-cycle margins going forward?

Speaker #11: It seems like the balance was already pretty tight before the disruption . And other is refinery damage and the need to replace inventories to contend with .

Speaker #11: Does this change how you think about mid-cycle margins going forward?

Speaker #8: Yeah . So I don't know that you know it'll change our approach to mid cycle margins . You know we take a fairly conservative approach because of our additional approach around capital investment .

Gary Simmons: Yeah. I don't know that, you know, it'll change our approach to mid-cycle margins. You know, we take a fairly conservative approach because of our disciplined approach around capital investment. We like to take a conservative mid-cycle because we use it to justify the capital. Certainly it'll create a market that's very tight. I think even before the conflict started, our view was starting at the end of this year, global demand would outpace new refining capacity additions, and we'd have several years of tightness. That has brought that all forward, you know, with the situation that's happened. In our view, if you look at the lost total light product production that's happened since the straits have closed, you know, it takes a minimum of at least 3 days to rebuild stock for every day that the straits have been closed.

Speaker #8: We like to take a conservative midcycle because we use it to justify the capital . But certainly it will create a market that's very tight .

Speaker #8: I think even before the conflict started, our view was that starting at the end of this year, global demand would outpace new refining capacity.

Speaker #8: Additions , and we'd have several years of tightness . That has brought that all forward . You know , with the situation that's happened in our view , if you look at the loss , total light product production that's happened since the Straits have closed , you know , it takes a minimum of at least three days to rebuild stock for every day that the Straits have been closed .

Speaker #8: So , you know , at this stage , you know , it's at least six months to a year to start restocking inventories back to where they were .

Gary Simmons: You know, at this stage, you know, it's at least six months to a year to start restocking inventories back to where they were. There's just not a lot of excess refining capacity out there. As we move forward and global demand continues to grow, it makes that situation even tighter.

Speaker #8: There's just not a lot of excess refining capacity out there. And then, as we move forward and global demand continues to grow, it makes that situation even tighter.

Speaker #11: Great . Thanks . That's helpful . And then on on Port Arthur . So I recognize you're still going through the assessment , but to the extent you can , could you just talk through the refinery damage assessment process and potential restart timeline ?

Joe Laetsch: Great. Thanks. That's helpful. On Port Arthur, I recognize you're still going through the assessment, but to the extent you can, could you just talk through the refinery damage assessment process and potential restart timeline? What are the signposts that we should be watching for from the outside here?

Speaker #11: And what are the signposts that we should be watching for from the outside here ?

Speaker #8: Yeah . So on March 23rd , we had a fire in the diesel Hydrotreater Port Arthur . The refinery was shut down as a precaution .

Gary Simmons: Yeah. On 23 March, we had a fire in the diesel hydrotreater Port Arthur. The entire refinery was shut down as a precaution. All employees were accounted for. No refinery reportable injuries as a result of the incident. The investigation into cause is ongoing, so I can't share too much around that. Our operations team did an excellent job getting the smaller crude unit train back up early April, along with a coker, hydrocrackers, the reformer, and distillate hydrotreater. We're currently starting up the larger crude unit as we speak, along with the FCC and Alky. We would expect by 1 May that throughput looks fairly normalized at the Port Arthur refinery. The diesel hydrotreater that experienced the fire, along with an adjacent kerosene hydrotreater do remain down, which could negatively impact capture rates some in Q2.

Speaker #8: All employees were accounted for. No refinery, reportable injuries as a result of the incident. The investigation into the cause is ongoing.

Speaker #8: So I can't share too much around that . But our operations team did an excellent job getting the smaller crude unit train back up early April , along with a Coker Hydrocracker and the reformer distillate Hydrotreater .

Speaker #8: We're currently starting up the larger crude unit as we speak , along with the FCC and Alky , so we would expect by May 1st that throughput looks fairly normalized at the Port Arthur refinery .

Speaker #8: The diesel hydrotreater that experienced the fire , along with an adjacent kerosene hydrotreater , do remain down , which could negatively impact capture rates .

Speaker #8: Some . In the second quarter . We expect to get the kerosene hydrotreater back by the third quarter . The diesel hydrotreater did sustain extensive damage .

Gary Simmons: We expect to get the kerosene hydrotreater back by Q3. The diesel hydrotreater did sustain extensive damage. We don't have a timeline for the rebuild yet on that. As Homer mentioned, the throughput guidance, all of that is reflected in our throughput guidance for the quarter.

Speaker #8: We don't have a timeline for the rebuild yet on that , but as Homer mentioned , the throughput guidance , all of that is reflected in our throughput guidance for the quarter

Speaker #11: Thanks . That's helpful

Joe Laetsch: Thanks. That's helpful.

Speaker #4: Thank you . Our next question is coming from Doug Leggate of Wolfe Research . Please go ahead

Operator: Thank you. Our next question is coming from Doug Leggate of Wolfe Research. Please go ahead.

Speaker #12: Oh , hey everyone . I think you might have just answered part of my question there . Thanks for having me on . I'm trying to understand what's going on with physical crude impact on capture rates and if , if I can kind of walk through the thought process here , we saw Maya , we saw Pemex , you know , cut their key factor in half .

Doug Leggate: Oh, hey, everyone. I think you might have just answered part of my question there. Thanks for having me on. I'm trying to understand what's going on with physical crude impact on capture rates. If I can kind of walk through the thought process here. We saw Maya, we saw Pemex, you know, cut their K-factor in half. We're seeing Dated Brent obviously at big premiums. Now apparently a flotilla of tankers coming to the US Gulf Coast, perhaps putting a bid under WTI. I'm just curious, when you look at your slate, how is the physical side of the crude market impacting the capture rate? My, if I may, my follow-up is specifically for Homer. You've got.

Speaker #12: We're seeing dated Brent , obviously a big premiums . And now apparently a flotilla of tankers coming to the US Gulf Coast , perhaps putting a bid under TI .

Speaker #12: So I'm just curious , when you look at your slate , how is the physical side of the crude market impacting the capture rate ?

Speaker #12: And if I may , my follow up is specifically for Homer . You've got Homer , you've got probably one of the best balance sheets , if not the best balance sheet in the sector , which means you don't have a lot of options for your surplus cash .

Doug Leggate: Homer, you've got probably one of the best balance sheets, if not the best balance sheet in the sector, which means you don't have a lot of options for your surplus cash. My, my question is that your valuation today, if you sort of look at the implied free cash flow forever, not the windfall you have now, is north of $7 billion at a 10% discount rate. How, how do you think about your valuation in the context of what you do with that cash as it relates specifically to share buybacks?

Speaker #12: And my question is that your valuation today , if you sort of look at the implied free cash flow forever , not the windfall we have now is north of $7 billion at a 10% discount rate .

Speaker #12: How do you think about your valuation in the context of what you do with that cash , as it relates specifically to share buybacks

Speaker #6: So I'll Doug , I'll start on the crude side . I mean , for the most part , as Gary mentioned before , you know , part of the headwind on capture is on the backwardation that is in the market .

Eric Fisher: Doug Leggate, I'll start on the crude side. I mean, for the most part, as Gary Simmons mentioned before, you know, part of the headwind on capture is on the backwardation that is in the market. You know, the steep backwardation. I mean, it hit some highs last month at 11 to 14. It's into the $6 range now, and, you know, it has moved higher over the last couple days. You know, as a look kind of in the capture, I mean, some of the grades are already included in the capture calculation. It's already reflecting some of that movement in the capture calculation. But outside of that, I mean, there's things that we're doing that's not captured in it. It's, you know, Venezuelan purchases.

Speaker #6: You know , that steep backwardation , I mean , I hit some highs last month at 11 to 14 . It's into the $6 range now .

Speaker #6: And you know as has has moved higher over the last couple days , you know as I look at kind of in the capture , I mean , some of the grades are already included in the the capture calculation .

Speaker #6: So it's already reflecting some of that movement in the capture calculation . But outside of that , I mean , there's things that we're doing that's not captured in it .

Speaker #6: It's , you know , Venezuelan purchases . You know , since the January sanctions removal , we've meaningful ramped up Venezuela runs in our systems and all of that done at better economics and our alternative on heavy , sour .

Eric Fisher: You know, since the January sanctions removal, we've meaningful ramped up Venezuela runs in our systems, and all that done at better economics than our alternative on heavy sour. As we touched on before, the heavy grades in the Gulf Coast continue to look very attractive for our system.

Speaker #6: And as we touched on before, the heavy grades in the Gulf Coast continue to look very, very attractive for our system.

Speaker #10: Doug . Hey , this is Homer . Thanks for your comment on the balance sheet . But , you know , I think your comment on annuity current margins , there's no doubt current margins are good .

Homer Bhullar: Doug, hey, this is Homer. Thanks for commenting on the balance sheet. You know, I think your comment on annuitizing current margins, there's no doubt current margins are good. As you can tell by our results, we've put ourselves in a really good position to take advantage of that, right? We're not hanging our strategy on just the current margin environment. Obviously, we continue to optimize and grow the business, but we're doing that with discipline around minimum return thresholds, and we're using a longer mid-cycle price set, as Gary highlighted earlier. We also continue to work hard to manage our costs, and all this puts us in a great position for shareholder returns.

Speaker #10: But as you can tell by our results , we put ourselves in a really good position to take advantage of that . Right .

Speaker #10: And we're not hanging our strategy on just the current margin environment . Obviously , we continue to optimize and grow the business , but we're doing that with discipline around minimal return thresholds , and we're using a longer midcycle price set .

Speaker #10: As Gary highlighted earlier , we also continue to work hard to manage our costs . And all this puts us in a great position for shareholder returns .

Speaker #10: And with respect to buybacks, I think you have to start by understanding that share repurchases are really an efficient and flexible means of returning excess cash to shareholders in the broader context of capital allocation, right?

Homer Bhullar: With respect to buybacks, I think you have to start by understanding that share repurchases are really an efficient and flexible means of returning excess cash to shareholders in the broader context of capital allocation, right. When you look at other uses of cash in our balance sheet, and as you touched on, our balance sheet and cash position are in the best position that they've been for a very, very long time. You know, what we will do is, you know, our underlying commitments around balance sheet, minimum cash, and shareholder returns will not change. We may move within the bounds we've laid out, depending on the environment that we're in. We clearly did that with respect to cash, during the Q1.

Speaker #10: When you look at other uses of cash in our balance sheet , and as you touched on our balance sheet and cash position are in the best position that they've been for a very , very long time .

Speaker #10: And so , you know what we will do is , you know , our underlying commitments around balance sheet , minimum cash and shareholder returns will not change , but we may move within the bounds .

Speaker #10: We've laid out depending on the environment that we're in . And we clearly did that with respect to cash during the first quarter .

Speaker #10: You know , outside of that , our net debt to Cap is still below our long term range , 20 to 30% . Right .

Homer Bhullar: You know, outside of that, our net debt to cap is still below our long-term range, 20% to 30%, right? We've got plenty of coverage of other uses of cash. I think you'll continue to see us return excess free cash flow to shareholders through share repurchases. You know, this approach has reduced our overall share count by 42% since 2014. For what it's worth, Doug, our return on buybacks is close to 20% over that time period, buybacks do create perpetual value by reducing the share count. I think you should expect us to continue to operate in that mode.

Speaker #10: And we've got plenty of coverage of other uses of cash. And so, I think you'll continue to see us return excess free cash flow to shareholders through share repurchases.

Speaker #10: And you know , this approach has reduced our overall share count by 42% since 2014 . And for what it's worth , Doug , our return on buybacks is close to 20% over that time period .

Speaker #10: So, buybacks do create perpetual value by reducing the share count. So I think you should expect us to continue to operate in that mode.

Speaker #12: Yeah . A lot of downturns gave you that opportunity in the last ten years for sure . Thanks so much guys . I appreciate it .

Doug Leggate: Yeah. A lot of downturns gave you that opportunity in the last 10 years, Homer, for sure. Thanks so much, guys. I appreciate it.

Speaker #6: Thanks , Doug .

Eric Fisher: Thanks, Doug.

Speaker #4: Thank you . Our next question is coming from Philip Jungwirth of BMO Capital Markets . Please go ahead

Operator: Thank you. Our next question is coming from Phillip Jungwirth of BMO Capital Markets. Please go ahead.

Speaker #13: Thanks . Good morning . You mentioned earlier making some adjustments in the Gulf Coast on the feedstock sourcing side and was just wondering if you could talk about any changes you made specific to the North Atlantic region you use dated Brent in the indicator , but I assume you can do a bit better here , especially at Quebec City , and maybe also just touch on the export side too , and how you're optimizing , given given market volatility and global demand for products .

Phillip Jungwirth: Thanks. Good morning. You mentioned earlier making some adjustments in the Gulf Coast on the feedstock sourcing side. I was just wondering if you could talk about any changes you've made specific to the North Atlantic region. You've Dated Brent in the indicator, but I assume you can do a bit better here, especially at Quebec City. Maybe also just touch on the export side too and how you're optimizing, given market volatility and global demand for products.

Speaker #6: Yeah , sure . Philip , this is Randy . For for Quebec . I mean , it's mostly 100% North America crude slate .

Eric Fisher: Sure, Phillip. This is Randy. You know, for Quebec, I mean, it's mostly a 100% North America crude slate. It, you know, it's taking barrels from Western Canada and from the Gulf Coast that, you know, tend to avoid some of the spikes that we saw in Dated Brent earlier in the month. For Pembroke, I mean, obviously we do have some, you know, volatility that we saw in the prompt dated. That seems to have lined out, you know, as some of the initial panic buying that was happening in the market. It even got to the point where, you know, some people were reportedly cutting runs as dated spiked higher.

Randy Hawkins: Sure, Phillip. This is Randy. You know, for Quebec, I mean, it's mostly a 100% North America crude slate. It, you know, it's taking barrels from Western Canada and from the Gulf Coast that, you know, tend to avoid some of the spikes that we saw in Dated Brent earlier in the month. For Pembroke, I mean, obviously we do have some, you know, volatility that we saw in the prompt dated. That seems to have lined out, you know, as some of the initial panic buying that was happening in the market. It even got to the point where, you know, some people were reportedly cutting runs as dated spiked higher.

Speaker #6: So it , you know , it's , it's , it's taking barrels from Western Canada and from the Gulf Coast that tend to avoid some of the spikes that we saw in dated Brent kind of earlier in the month for Pembroke .

Speaker #6: I mean , obviously we do have some some , you know , volatility that we saw in the prompt dated that seems to have lined out , you know , as as some of the initial panic buying that was happening in the market , it even got to the point where , you know , some people were , were reportedly cutting runs as dated spiked higher , you know , fortunately , we've kind of avoided some of the peak numbers on some of the crude purchases .

Eric Fisher: You know, fortunately, we've kind of avoided some of the peak numbers on some of the crude purchases. You know, looking ahead, it looks like, you know, our margin environment for Pembroke still looks favorable as we, as we move forward.

Randy Hawkins: You know, fortunately, we've kind of avoided some of the peak numbers on some of the crude purchases. You know, looking ahead, it looks like, you know, our margin environment for Pembroke still looks favorable as we, as we move forward.

Speaker #6: So , you know , looking ahead , it looks like , you know , our margin environment for Pembroke still looks favorable as we as we move forward

Speaker #13: Okay , great . And then one of the questions we regularly get is around some form of restriction on , on product exports , just , just based on your conversations , where would you put the level of government support here ?

Phillip Jungwirth: Okay. Great. One of the questions we regularly get is around some form of restriction on product exports. Just based on your conversations, where would you put the level of government support here? What would be any unintended consequences? What other levers are there to pull to ease some of the upward pressure on gasoline prices, whether it's RVP or other things that could be done?

Speaker #13: What would be any unintended consequences ? And then what other levers are there to pull to ease some of the upward pressure on gasoline prices , whether it's rvp or other things that could be done ?

Speaker #8: Yeah , this .

Rich Walsh: Yeah, this is Rich Walsh. You know, what I would say is, you know, there's been lots of conversations with the administration, and they're, you know, keenly aware of, you know, what they, you know, watching the prices out there. They've already taken actions. You know, they gave a Jones Act waiver real early on. That really helped out. You know, the reality is, you know, any kind of export ban actually just makes the situation way worse, and they are keenly aware of that already. You know, the US is, you know, long crude and long refining production, and so, you know, we are tethered to the world market.

Speaker #12: Rich Walsh you know what , what I would say is , you know , we've we've had there's been lots of conversations with the administration .

Speaker #12: And their keenly , keenly aware of , you know , what they , you know , watching the prices out there and they've already taken actions , you know , they gave a Jones Act waiver real early on that really helped out .

Speaker #12: And , you know , the reality is , you know , any kind of export ban actually just makes the situation way worse .

Speaker #12: And they're keenly aware of that already . You know , the U.S. is , is long , crude and long refining production . And so , you know , we are tethered to the to the world market .

Speaker #12: So it's important for , you know , to make sure that we get optimized and provide . And this is a huge competitive advantage for the U.S.

Rich Walsh: It, it's important, you know, to make sure that we get optimized and provide, and this is a huge competitive advantage for the US as well. I think the administration fully understands that. They're looking at all the options and tools that are out there. We're not positioned like some other countries where they just don't have the resources that we have. I don't think those kinds of strategies really make sense for us. I think the administration's well aware of that, and I don't think there's any real meaningful potential for that to happen.

Speaker #12: as well . So I think the administration fully understands that they're looking at all the options and tools that are out there , but we're not positioned like some other countries where they just don't have .

Speaker #12: They just don't have the the resources that we have . And , and so I don't think those kinds of strategies really make sense for us .

Speaker #12: I think the administration is well aware of that . And I don't think there's any real meaningful potential for that to happen

Speaker #13: Thank you

Phillip Jungwirth: Thank you.

Speaker #4: 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 #14: Yeah . Hey , thanks for taking my questions . The first . Conflict at all and really to conflicts that have resulted in pretty massive dislocations in the market .

Jason Gabelman: Yeah. Hey, thanks for taking my questions. The first conflict at all and really two conflicts that have resulted in pretty massive dislocations in the market change your way you think about investment opportunities and how you run the business in the medium term? I know, for example, you talked about a potential VGO shortage in the country. If that's an area that you could figure out some investment in to help close your own shortage or other opportunities such as that?

Speaker #14: Change your way you think about investment opportunities and how you run the business in the medium term. I know, for example, you talked about a potential shortage in the country.

Speaker #14: If that's an area that that you could figure out some investment in to help close your own shortage or other opportunities , such as that .

Speaker #6: Hey , Jason , it's Elaine . You know , I think it is a good point and how I think about it . And of course , we think about it is the Ukrainian Iran conflict is really demonstrated .

Lane Riggs: Hey, Jason, it's Lane Riggs. You know, I think it is a good point. How I think about it, and of course we think about it, is the Ukrainian-Iran conflict has really demonstrated, I would say, the resilience of North America. Largely due to the fact that we have such a robust and oil and gas industry has really helped position us for the two conflicts that have occurred. Of course, we sit here in the Gulf Coast. We have the most flexibility on crude feedstocks. We can export anywhere in the world. In terms of how we sort of think about our projects, we like to bucket them, right? The way I'm gonna characterize it is we like projects that increase our commercial leverage.

Speaker #6: I would say the resilience of North America , largely due to the just the the fact that we have such a robust and oil and gas industry has really helped position us for the two conflicts that have occurred .

Speaker #6: And of course , we sit here in the Gulf Coast . We have the most flexibility on crude feedstocks . We can export anywhere in the world .

Speaker #6: So in terms of how we sort of think about our projects , we like to bucket them , right ? And so the way I like the way I'm going to characterize it is we like projects that increase our commercial leverage .

Speaker #6: So if you think about your question , that's a that's a position that we we want to get through our gating system to maybe position ourselves not to be .

Lane Riggs: If you think about your VGO question, that's a position that we wanna get through our gating system to maybe position ourselves not to be so lenient or so dependent upon VGO imports. It doesn't mean we're gonna lose our discipline, but it means that we see that there's an issue that has been really pointed out with respect to these projects, this issue, the conflicts. We also obviously like reliability projects. You know, the key to this is to be able to run through all these, you know, be able to move your assets around and run reliably through it. Finally yields, you know, better yields, which is essentially the FCC project. When we can upgrade to what we're making, we like that.

Speaker #6: So lenient or so dependent upon imports . And so doesn't mean we're going to lose our discipline , but it means that we see that there's a there's an issue that's been really pointed out with respect to these projects , this this issue , the the conflicts .

Speaker #6: And then we also obviously like reliability projects . You know , the key to this is to be able to run through all these , you know , be able to move your assets around and run reliably through it .

Speaker #6: And then finally , yields , you know , better yields , which is essentially the SEC project . We can upgrade what we're making that we like that ethanol , which isn't obviously , you wouldn't think of it as being directly tied to this , but what you are seeing in the world is people are looking at , hey , can I blend more ethanol in the fuel mix ?

Lane Riggs: Ethanol, which isn't obviously, you wouldn't think of it as being directly tied to this, but what you are seeing in the world is people are looking at, Hey, can I blend more ethanol in the fuel mix? We have a positive view of the ethanol business. We have been investing in ethanol. Same thing, incremental growth and how, you know, how much we make, yield improvements to increase the amount of ethanol. Again, there's this backdrop of improving carbon intensity. The renewable diesel, I don't know that it's so much dependent on, you know, what we've seen in the world, but obviously we have the SAF project hanging out there. We just wanna see policy.

Speaker #6: And so we , we have a positive view of the ethanol business . And so we , we have been investing in ethanol .

Speaker #6: Same thing , incremental growth and how , how much we make yield improvements to increase the amount of ethanol . And again , there's this backdrop of improving carbon intensity and renewable diesel .

Speaker #6: I don't know that it's so much dependent on what we've seen in the world, but obviously we have the SAF project hanging out there.

Speaker #6: We just want to see policy . Everything that happens in that space is very dependent on how how policy works out and how it can sort of survive from administration to administration .

Lane Riggs: Everything that happens in that space is very dependent on how policy works out and how it can sort of survive from administration to administration.

Speaker #14: Great . That's that's a really helpful framework . Thanks . My follow up is just on the futures curves and specifically on , on futures cracks .

Jason Gabelman: Great. That's, that's a really helpful framework. Thanks. My follow-up is just on the futures curves and specifically on futures cracks. Thinking about your comment that it could take six to 12 months if Hormuz was open to today for inventories to. How do you think about where cracks are on futures in H2 of the year? Do you think we see a similar dynamic as during the Russia-Ukraine war where, you know, cracks kind of in the back end trend higher through the year and end up higher than what was represented early in the year?

Speaker #14: And , you know , I think the market broadly uses that to help price the refining stocks . But the reality is based on conversations we've had , it seems like there's not so much liquidity on the back end of those curves .

Speaker #14: And thinking about your comment that it could take 6 to 12 months if Hormuz was open to today inventories to How do you think about where cracks are on futures in the second half of the year ?

Speaker #14: Do you think we see a similar dynamic as during the Russia Ukraine war , where , you know , cracks kind of in the back end ?

Speaker #14: Trend , higher through the year and end up higher than what was represented early in the year . Just any color around futures cracks would be helpful .

Jason Gabelman: Just any color around futures cracks would be helpful. Thanks.

Speaker #14: Thanks .

Speaker #8: Yeah . So that is our view is we think the back end of the curve is undervalued . And I think , you know , a lot of it is it's it's somewhat hindering trade flows that need to happen .

Gary Simmons: Yeah. That is our view is we think the back end of the curve is undervalued. I think, you know, a lot of it is it's somewhat hindering trade flows that need to happen. The high freight rates along with steep backwardation are making markets that are really short and need product today, looking to the future and thinking they're gonna be able to buy that product at lower values in the future. In reality, you know, it's the curve just rolling up, and we expect that to continue.

Speaker #8: The , the high freight rates , along with steep backwardation are making markets that are really short and need product today . Looking to the future and thinking they're going to be able to buy that product at lower values in the future .

Speaker #8: And in reality , you know , the curve just rolling up . And we expect that to continue

Speaker #14: Great . Thanks for the answers

Jason Gabelman: Great. Thanks for the answers.

Speaker #4: Thank you . Our next question is coming from Matthew Blair , Tudor Pickering , Holt . Please go ahead .

Operator: Thank you. Our next question is coming from Matthew Blair of Tudor, Pickering Holt. Please go ahead.

Speaker #15: Hey , thanks and good morning . You mentioned some of your commercial opportunities in areas like the North Atlantic . Do you also have opportunities on the West Coast ?

Matthew Blair: Hey, thanks, and good morning. You mentioned some of your commercial opportunities in areas like the North Atlantic. Do you also have opportunities on the West Coast? I guess in particular, are you using Jones Act waivers to ship both crude and products to the West Coast?

Speaker #15: And I guess in particular , are you using Jones Act waivers to ship both crude and products to the West Coast

Speaker #8: Matthew , this is Randy . I'll touch on that . I mean , we have issued several Jones Act waivers , primarily for products , both renewables and conventional products , moving both from the Gulf Coast to the West Coast and to Florida

Lane Riggs: Hey, Matthew, this is Randy. I'll touch on that. I mean, we have issued several Jones Act waivers, primarily for products, both renewables and conventional products, moving both from the Gulf Coast to the West Coast and to Florida.

Randy Hawkins: Hey, Matthew, this is Randy. I'll touch on that. I mean, we have issued several Jones Act waivers, primarily for products, both renewables and conventional products, moving both from the Gulf Coast to the West Coast and to Florida.

Speaker #15: Sounds good . And then the ethanol results seem pretty good , but better than our expectations . Was that just a function of improving values on the co-products , or were you able to record any 45 Z contributions in ethanol segment ?

Matthew Blair: Sounds good. The ethanol results seem pretty good, better than our expectations. Was that just a function of improving values on the co-products, or were you able to record any 45Z contributions in the ethanol segment? I guess, what's the overall outlook for 45Z and the potential contribution this year in ethanol? Thank you.

Speaker #15: And I guess, what's the overall outlook for 45Z and the potential contribution this year in ethanol? Thank you.

Speaker #16: Yeah . This is Eric . You know , Lane alluded to what we're seeing in ethanol demand globally . So as the one of the largest exporters of ethanol , you're seeing a pull on ethanol .

Eric Fisher: Yeah, this is Eric. You know, Lane alluded to what we're seeing in the ethanol demand globally. As one of the largest exporters of ethanol, you're seeing a pull on ethanol. The underlying value is really as the hydrocarbon prices have increased, so has the value of octane. Ethanol being an octane component, has now become the cheapest form of octane in the world. That is why you're seeing a lot of interest, and you can use ethanol as a supplement, you know, just like it has in the US. You see a lot of countries going from E0 to E10. Brazil is going from E30 to E32. India's going to E20 and talking about going higher than that. Everyone sees that ethanol is a cheaper form of liquid fuel.

Speaker #16: And so the underlying value is really as the hydrocarbon prices have increased . So has the value of octane and ethanol being an octane component , has now become the cheapest form of octane in the world .

Speaker #16: And so that is why you're seeing a lot of interest . And you can use ethanol as a supplement , just like it has in the US .

Speaker #16: You see a lot of countries going from zero to E10 . Brazil's going from E 30 to E 32 . India is going to E20 and talking about going higher than that .

Speaker #16: Everyone sees that ethanol as a cheaper form of liquid fuel . So you're seeing demand in ethanol as far as what we booked in the first quarter was $0.10 a gallon on ten of our plants using the original original definition of qualified sales .

Eric Fisher: You're seeing demand in ethanol. As far as PTC, what we booked in Q1 was $0.10 a gallon on 10 of our plants using the original definition of qualified sales. What we'll ultimately see once the guidance is published, which hopefully is the end of this year, but it may not be till next year, is you'll get the next $0.10 to $0.20 across all our plants, across all our sales.

Speaker #16: And so what we what will ultimately see once the guidance is published , which . Hopefully is the end of this year , but it may not be till next year , is you'll get the next 10 to $0.20 across all our plants , across all our sales

Speaker #15: Great . Thank you

Matthew Blair: Great. Thank you.

Speaker #4: Thank you . Our next question is coming from Paul Sankey of Sankey Research . Please go ahead .

Operator: Thank you. Our next question is coming from Paul Sankey of Sankey Research. Please go ahead.

Speaker #17: Morning, all. Can you hear me?

Paul Sankey: Morning, all. Can you hear me?

Eric Fisher: Good morning, Paul.

Speaker #18: Paul ?

Speaker #17: Hello ?

Paul Sankey: Hello?

Speaker #16: Hey , can .

Eric Fisher: Hey, Paul.

Paul Sankey: Can you hear me?

Speaker #18: You hear me ?

Speaker #6: Yeah , we can hear you .

Eric Fisher: Yeah, we can hear you.

Speaker #17: Hi . Can you hear me ? Guys ?

Paul Sankey: Hi, can you hear me, guys?

Speaker #19: Yep . We can hear you .

Lane Riggs: Yep, we can hear you.

Speaker #17: Sorry , I , I got , like , a $15 phone here . Thanks for everything . You you had mentioned a shortage of VGO .

Paul Sankey: Sorry, I got like a $15 phone here. Thanks for everything. You had mentioned the shortage of VGO, and I just wondered if you could talk a little bit about where you might anticipate other shortages, actual physical shortages emerging in the oil chain. That's sort of question number 1. Thanks.

Speaker #17: And I just wondered if you could talk a little bit about where you might anticipate other shortages , actual physical shortages emerging in the oil chain .

Speaker #17: That's sort of question number one . Thanks

Speaker #8: Yeah. I don't know. There haven't been any other—

Eric Fisher: Yeah, I don't know that there'd be any other.

Speaker #6: I don't know of anybody . Yeah , obviously VGOS and issues Lane . I mean , we if you think about how trade flow worked before all this started , Nat VGO flowed from essentially Europe .

Lane Riggs: I don't know of any. Yeah, obviously VGO is an issue, as is Lane. I mean, we. If you think about how trade flow worked before all this started, net VGO flowed from essentially Europe and the Middle East into the US to sort of satisfy the complexity, the FCCs and the hydrocrackers here. I don't know that we see a, you know, like. Besides the jet, where it's just everybody knows about jet. We're talking about all these other intermediates. I don't know that, at least in the United States, we see any other sort of structural issues in terms of intermediates.

Eric Fisher: I don't know of any. Yeah, obviously VGO is an issue, as is Lane. I mean, we. If you think about how trade flow worked before all this started, net VGO flowed from essentially Europe and the Middle East into the US to sort of satisfy the complexity, the FCCs and the hydrocrackers here. I don't know that we see a, you know, like. Besides the jet, where it's just everybody knows about jet. We're talking about all these other intermediates. I don't know that, at least in the United States, we see any other sort of structural issues in terms of intermediates.

Speaker #6: And the Middle East into into the US to sort of satisfy the complexity . The SEC and the Hydrocracker here . I don't know that we see , you know , besides the jet , we're just everybody knows about jet .

Speaker #6: We're talking about all these other intermediates . I don't know that at least in the United States , we see a see any other sort of structural issues in terms of intermediates .

Speaker #17: Okay . That's great . And secondly , Lane , you've talked about in the past , I remember Joe certainly saying this , that when you look at your inventories over time , you kind of don't play inventories .

Paul Sankey: Okay, that's great. Secondly, Lane, you've talked about in the past, I remember Joe certainly saying this, that when you look at your inventories over time, you kind of don't play inventories. It's almost more that you're just, you know, working operationally to optimize your performance. I had a question. Firstly, I assume that you're still doing that. Secondly, how do you see a situation where inventories deplete? I assume that the industry won't go to zero inventories, right? I was thinking as we get these draws, when is the point at which, I guess, prices go a ton higher is the best guess? Thanks.

Speaker #17: It's almost more that you're just , you know , working operationally to optimize your performance . I had a question . Firstly , I assume that you're still doing that .

Speaker #17: And secondly , how do you see a situation where inventories deplete ? I assume that the industry won't go to zero inventories , right ?

Speaker #17: So I was thinking as we get these draws , when is the point at which I guess prices go a ton higher is the best guess ?

Speaker #17: Thanks .

Speaker #6: Hey , Paul , I'll tackle the first thing . So the answer is yes . I mean , I think it was Homer earlier alluded to the fact we , you know , we could see all this volatility in the commodity market .

Lane Riggs: Hey, Paul. I'll tackle the first thing. The answer is yes. I mean, I think it was Homer earlier alluded to the fact. We, you know, we could see all this volatility in the commodity market. We were keenly aware that, you know, the tendency would be for us is, you know, say you have a refinery incident and crude oil inventories start creeping up above what we would consider to be our working inventories. We can get into where it puts us short paper. We worked very hard just to avoid the derivative volatility and, and worked hard to make sure that we were operating around our working inventory, which equals our LIFO inventories. In terms of the latter part of that question?

Speaker #6: We , we were we we keenly aware of that . You know , the tendency would be for us to , you know , say , every refinery incident and you're not and crude oil inventories start creeping up above what we would consider to be our working inventories .

Speaker #6: We can get into where it puts us short paper . And so we worked very hard just to avoid the derivative volatility . And work hard to make sure that we are operating around our working inventory , which equals our life , our LIFO inventories , in terms of the latter part of that question .

Speaker #8: Yeah , it's very difficult for us to tell . I do think , as I alluded to before , with the steep backwardation that you see in the market , a lot of markets that are short product today are basically trying to live hand to mouth , thinking that they'll be able to buy replacement barrels in the future at cheaper values at some point in time , they'll realize that they need the volume .

Gary Simmons: It's very difficult for us to tell. I do think, as I alluded to before, with the steep backwardation that you see in the market, a lot of markets that are short product today are basically trying to live hand-to-mouth, thinking that they'll be able to buy replacement barrels in the future at cheaper values. At some point in time, they'll realize that they need the volume, and I think you'll see a reaction in price. At what inventory level that occurs, I don't really have any insight.

Speaker #8: And I think you'll see a reaction in price . But at what inventory level that occurs , I don't really have any insight .

Speaker #17: Yeah , I understand it's a tough one . Thanks a lot .

Paul Sankey: Yeah, I understand. It's a tough one. Thanks a lot.

Speaker #6: Hey . Thanks .

Lane Riggs: Yeah, thanks, Paul.

Speaker #18: Paul .

Speaker #4: Thank you . At this time , I would like to turn the floor back over to Mr. Donovan for closing comments .

Operator: Thank you. At this time, I would like to turn the floor back over to Mr. Donovan for closing comments.

Speaker #19: All right . Well , we appreciate everyone joining us today for the call . And as always , feel free to contact our Investor Relations team if you have any additional questions .

Lane Riggs: All right. Well, we appreciate everyone joining us today for the call. As always, feel free to contact our investor relations team if you have any additional questions. Have a great day.

Brian Donovan: All right. Well, we appreciate everyone joining us today for the call. As always, feel free to contact our investor relations team if you have any additional questions. Have a great day.

Speaker #19: Have a great 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.

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