Q1 2026 Delek US Holdings Inc Earnings Call

April 29, 2026

Speaker #1: S first quarter 2026 earnings call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand.

Operator: Q1 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. I will now hand the conference over to Robert Wright, EVP. Robert, please go ahead.

Operator: Q1 2026 Earnings Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. I will now hand the conference over to Robert Wright, EVP. Robert, please go ahead.

Speaker #1: To withdraw your question, please press star 1 again. I will now hand the conference over to Robert Wright, EVP. Robert, please go ahead.

Speaker #2: Good morning, and welcome to the Delek US first quarter earnings conference call. Participants joining me on today's call will include Avigal Soreq, president and CEO; Mark Hobbs, EVP, chief financial officer; as well as other members of our management team.

Robert Wright: Good morning, welcome to the Delek US Q1 Earnings Conference Call. Participants joining me on today's call will include Avigal Soreq, President and CEO, Mark Hobbs, EVP, Chief Financial Officer, as well as other members of our management team. Today's presentation material can be found on the investor relations section of the Delek US website. Slide 2 contains our safe harbor statement regarding forward-looking information. As a reminder, this conference call will contain forward-looking information as defined under the federal securities laws, including statements regarding guidance and future business outlook. Any forward-looking statements made during today's call involve risks and uncertainties that may cause actual results to differ materially from today's comments. Factors that could cause actual results to differ are included in our SEC filings. The company assumes no obligation to update any forward-looking statements. I will now turn the call over to Avigal for opening remarks.

Speaker #2: Today's presentation material can be found on the Investor Relations section of the Delek US website. Slide 2 contains our Safe Harbor statement regarding forward-looking information.

Speaker #2: As a reminder, this conference call will contain forward-looking information as defined under the Federal Securities Laws, including statements regarding guidance and future business outlook.

Speaker #2: Any forward-looking statements made during today's call involve risks and uncertainties that may cause actual results to differ materially from today's comments. Factors that could cause actual results to differ are included in our SEC filings.

Speaker #2: The company assumes no obligation to update any forward-looking statements. I will now turn the call over to Avigal for opening remarks. Avigal?

Robert Wright: Avigol?

Robert Wright: Avigal?

Speaker #3: Thank you, Robert. Good morning, and thank you for joining us today. I'm extremely pleased with our strong execution in the first quarter. The quarter is a testament to our rising capability as demonstrated by, one, disciplined and successful execution of big spring turnout; second, continued progress on increasing our free cash flow profile through restructuring of our intermediation agreement and continued success of EOP; third, successful navigation of challenging macro events such as winter storm Fern and more recently events in Iran; the events in Iran have created many ripple effects in the markets, resulting in around 10 million barrels of crude production and approximately 5 million barrels per day of refining capacity remaining offline.

Avigal Soreq: Thank you, Robert. Good morning, and thank you for joining us today. I'm extremely pleased with our strong execution in Q1. The quarter is a testament to our raising capability as demonstrated by, one, disciplined and successful execution of Big Spring turnaround. Second, continued progress on increase our free cash flow profile through restructuring of our intermediation agreement and continued success of EOP. Third, successful navigation of challenging macro events such as Winter Storm Fern and more recently, events in Iran. The events in Iran have created many ripple effects in the markets, resulting in around 10 million barrels of crude production and approximately 5 million barrels per day of refining capacity remaining offline. This has created an environment of elevated crude and product prices, dislocation between physical and paper grades, steep backwardation, and wide ranges of crude differentials.

Speaker #3: This has created an environment of elevated crude and product prices, dislocation between physical and paper grades, steep backwardation, and wide ranges of crude differentials.

Speaker #3: We believe the structural product shortage created in this event will continue to impact the market well after the conflict comes to an end. In the meantime, under the current environment, we believe the refining companies which will have the biggest advantage are the ones which have direct access to crude, high distillate yield, high jet and, most importantly, ability to quickly respond to changing conditions.

Avigal Soreq: We believe the structural product shortage created in this event will continue to impact the market well after the conflict comes to an end. In the meantime, under the current environment, we believe the refining companies which will have the biggest advantage are the ones which have direct access to crude, high distillate yield, high jet, and most importantly, ability to quickly respond to changing conditions. We believe because of our access to multiple grades of domestic crude, high distillate jet yield, and access to both Gulf and Midcontinent product markets put us in a prime position to navigate the challenges and take advantage of the opportunities created by the ongoing disruption. Now, I will cover some of our Q1 highlights and strategic initiatives in detail. Starting with the planned turnaround in Big Spring. Big Spring successfully completed its planned turnaround.

Speaker #3: We believe because of our access to multiple grades of domestic crude, high distillate and jet yield, and access to both gulf and mid-continent product markets put us in a prime position to navigate the challenges and take advantage of the opportunities created by the ongoing disruption.

Speaker #3: Now, I will cover some of our first quarter highlights and strategic initiatives in detail. Starting with the planned turnout in big spring. Big spring successfully completed its planned turnaround.

Speaker #3: This work was executed safely on budget, on time, and refinery is running at full capacity. The primary focus of the turnout has been to improve big spring reliability, cost structure, and long-term margin capture.

Avigal Soreq: This work was executed safely, on budget, on time, and refinery is running at full capacity. The primary focus of the turnaround has been to improve Big Spring reliability, cost structure, and long-term margin capture. For the turnaround, we expect improved reliability, crude slate optimization, improvement in overall product yields, and finally, higher octane and blending capabilities. With no further planned turnaround, we have the highest spending quarter behind us. Our system is well-positioned to capture the strong crack spread environment and respond to increase in demand as we move into the summer driving season. Moving on to EOP next. Enterprise Optimization continue to drive significant value. We are once again raising our Enterprise Optimization plan target to at least $220 million on an annual run rate basis.

Speaker #3: Both the turnaround we expect improved reliability, crude slate optimization, improvement in overall product yields, and finally higher octane and blending capabilities. With no further planned turnout, we have the highest spending quarter behind us.

Speaker #3: Our system is well positioned to capture the strong crack spread environment and respond to increasing demand as we move into the summer driving season.

Speaker #3: Moving on to EOP next. Enterprise optimization continues to drive significant value. We are once again raising our enterprise optimization plan target to at least 220 million dollars on an annual run rate basis.

Speaker #3: During the first quarter of 2026, we estimate approximately 60 million dollars of EOP contribution to our P&L. We are looking at ways to further advance the program and create another meaningful step change to our free cash flow profile.

Avigal Soreq: During Q1 2026, we estimate approximately $60 million of EOP contribution to our P&L. We are looking at ways to further advance the program and create another meaningful step change to our free cash flow profile. We'll provide more details on this in the future. Our third-party initiative continued to advance with rising strength of our midstream business. DKL today reaffirmed its 2026 EBITDA guidance of $520 million to $560 million. DKL is currently seeing meaningful tailwinds in the business, and we are working hard to capture these opportunities in a prudent fashion. DKL is taking another meaningful step in completing its industry-leading comprehensive sour gas solution. It has completed the drilling of its first acid gas injection well.

Speaker #3: We will provide more details on this in the future. Our summer depart initiative continues to advance with rising strength of our mid-spring business. DKL today reaffirmed its 2026 EBITDA guidance of 520 million dollars to 560 million dollars.

Speaker #3: DKL is currently seeing meaningful tailwinds in the business, and we are working hard to capture this opportunity in a prudent fashion. DKL is taking another meaningful step in completing its industry-leading, comprehensive sour gas solution; it has completed the drilling of its first acid gas injection well.

Speaker #3: The comprehensive gathering treatment processing and acid gas injection solution will provide DKL the ability to fully capitalize on the growth opportunities in the dollar basin and maintain its best-in-class EBITDA growth and yield.

Avigal Soreq: The comprehensive gathering, treatment, processing, and acid gas injection solution will provide DKL the ability to fully capitalize on the growth opportunities in the Delaware Basin and maintain its best-in-class EBITDA growth and yield. In 2026, on a pro forma basis, with a continued growth in third-party cash flow, we expect DKL third-party EBITDA to exceed 80%. Achieving this level of economic separation has been cornerstone of our sum of the part strategy, and it continue to bring us closer to our deconsolidation goal. We are in the process of taking additional steps to ensure the strength of DKL third-party midstream service are fully reflected in DK share price and DKL unit price. As mentioned last quarter, we are pursuing a proactive strategy to manage our obligation under the RFS.

Speaker #3: In 2026, on a performer basis, with a continued growth in third-party cash flow, we expect DKL third-party EBITDA to exceed 80%. Achieving this level of economic separation has been cornerstone of our summer depart strategy, and it continues to bring us closer to our de-consolidation goal.

Speaker #3: We are in a process of taking additional steps to ensure the strength of DKL third-party mid-spring service is fully reflected in DK share price and DKL unit price.

Speaker #3: As mentioned last quarter, we are pursuing a proactive strategy to manage our obligation under the RFS. SRE provision of the RFS serves the important purpose of mitigating the impact felt on small refineries from the RFS burden.

Avigal Soreq: SRE provision of the RFS serves the important purpose of mitigating the impact felt on small refineries from the RFS burden. We expect EPA to continue to provide relief for 2025 to refineries after clearing the backlog of pending petitions since 2019. We also remain actively involved in our effort to get full value for our 2019 to 2022 RINs, for which we were provided invalid relief. Finally, we believe that the current administration, Senate, Congress, and EPA realize the importance of SREs, not only for the refineries which qualify under the program, but also to the local communities they serve. The final piece of our strategy is being shareholder-friendly and having a strong balance sheet. During the quarter, we paid approximately $60 million in dividends.

Speaker #3: We expect EPA to continue to provide relief for 2025 to refineries after clearing the backlog of pending petitions since 2019. We also remain actively involved in our effort to get full value for our 2019 to 2022 RINs for which we were provided invalid relief.

Speaker #3: Finally, we believe that the current administration, Senate, Congress, and EPA realize the importance of SREs not only for the refineries which qualify under the program but also to the local communities they serve.

Speaker #3: The final piece of our strategy is being shared with a friendly and having a strong balance sheet. During the quarter, we paid approximately $16 million in dividends.

Speaker #3: Our strong balance sheet improved reliability, EOP and confidence in our outlook continue to support a disciplined approach to capital allocation through continued dividend and buybacks.

Avigal Soreq: Our strong balance sheet, improved reliability, EOP, and confidence in our outlook continue to support a disciplined approach to capital allocation through continued dividend and buybacks. We remain committed to a balanced and disciplined capital allocation strategy and look forward to continuing to reward our shareholders. In closing, thank you for our team for their hard work and dedication during Q1 2026. I'm proud of the progress Delek has made and look forward to continue the progress throughout the remaining of the year. Now, I will turn the call over to Mark, who will provide additional color on the quarter.

Speaker #3: We remain committed to a balanced and disciplined capital allocation strategy and look forward to continuing to reward our shareholders. In closing, thank you for our team for the hard work and dedication during the first quarter of 2026.

Speaker #3: I'm proud of the progress Delek has made and look forward to continuing the progress towards the remaining of the year. Now, I will turn the call over to Mark, who will provide additional color on the quarter.

Speaker #4: Thank you, Avigal. For the first quarter, Delek had a net loss of 201 million dollars or 3 dollars and 34 cents per share. Adjusted net income was approximately 5 million dollars or 8 cents per share, and adjusted EBITDA was approximately 212 million dollars.

Mark Hobbs: Thank you, Avigal. For Q1, Delek had a net loss of $201 million or $3.34 per share. Adjusted net income was approximately $5 million or $0.08 per share, and adjusted EBITDA was approximately $212 million. On slide 4, we showed the breakout of adjusted EBITDA and adjusted EPS for Q1. Excluding SREs, adjusted EBITDA and adjusted EPS were approximately $129 million and a loss of $0.98 per share, respectively. This removes the impact of our RVO exemption recognition for Q1 of $82 million. On slide 5, the breakdown of adjusted EBITDA, excluding SREs, from Q4 2025 to Q1, shows that there were two main drivers for the decrease in EBITDA.

Speaker #4: On slide 4, we showed the breakout of adjusted EBITDA and adjusted EPS for the first quarter. Excluding SREs, adjusted EBITDA and adjusted EPS were approximately 129 million dollars and a loss of 98 cents per share, respectively.

Speaker #4: This removes the impact of our RVO exemption recognition for the first quarter of 82 million dollars. On slide 5, the breakdown of adjusted EBITDA excluding SREs from the fourth quarter of 2025 to the first quarter shows that there were two main drivers for the decrease in EBITDA.

Speaker #4: The drivers were primarily in the refining segment, where adjusted EBITDA declined due to the big spring turnaround and the impacts of timing in our supply and marketing segment, which we'll reverse over time.

Mark Hobbs: The drivers were primarily in the refining segment, where adjusted EBITDA declined due to the Big Spring turnaround and the impacts of timing in our supply and marketing segment, which will reverse over time. Both impacts were partially offset by the increase in refining margins that we experienced in March after seasonally weak margins in January and February. Supply and marketing was a loss of approximately $61 million in the quarter. Of that amount, wholesale marketing had a loss of $27.1 million, asphalt contributed a loss of $12.1 million, with the remaining loss coming from supply. In the logistics segment, we delivered our best Q1 to date, generating approximately $132 million of adjusted EBITDA, which includes an approximate -$10 million impact from Winter Storm Fern. Moving to slide 18 to discuss cash flow.

Speaker #4: Both impacts were partially offset by the increase in refining margins that we experienced in March after seasonally weak margins in January and February. Supply and marketing was a loss of approximately 61 million dollars in the quarter.

Speaker #4: Of that amount, wholesale marketing had a loss of $27.1 million, asphalt contributed a loss of $12.1 million, with the remaining loss coming from supply.

Speaker #4: In the logistics segment, we delivered our best first quarter to date, generating approximately $132 million of adjusted EBITDA, which includes an approximate $10 million negative impact from winter storm Fern.

Speaker #4: Moving to slide 18 to discuss cash flow. Cash flow provided by operations was 461 million dollars in the quarter. This includes our net income for the period, adjusted for non-cash items, and a net inflow related to changes in working capital.

Mark Hobbs: Cash flow provided by operations was $461 million in the quarter. This includes our net income for the period, adjusted for non-cash items, and a net inflow related to changes in working capital. Investing activities was a use of $190 million. Financing activities was a use of $273 million, which includes payments on financing agreements and other activities, approximately $16 million in dividend payments and approximately $22 million in DKL distribution payments to public unit holders. On slide 19, we outline our Q1 capital spending, with $181 million invested at Delek on a standalone basis, the majority of which was related to the plant-wide Big Spring turnaround.

Speaker #4: Investing activities was a use of 190 million dollars. Financing activities was a use of 273 million dollars, which includes payments on financing agreements and other activities, approximately 16 million dollars in dividend payments, and approximately 22 million dollars in DKL distribution payments to public unit holders.

Speaker #4: On slide 19, we outline our first quarter capital spending, with 181 million dollars invested at Delek on a standalone basis. The majority of which was related to the plant-wide big spring turnaround.

Speaker #4: With no additional turnarounds or major capital projects planned for the remainder of the year, big spring and the broader system are well positioned to capture stronger margins and meet seasonal demand during the driving season.

Mark Hobbs: With no additional turnarounds or major capital projects planned for the remainder of the year, Big Spring and the broader system are well-positioned to capture stronger margins and meet seasonal demand during the driving season. We also invested $50 million in Delek Logistics, of which approximately 42 million was for growth projects. Our net debt position is broken out between Delek and Delek Logistics on Slide 20. Excluding Delek Logistics, our Delek standalone net debt remained largely in line with year-end 2025. Moving now to Slide 21, where we cover Q2 outlook items. Our throughput guidance for the Q2 is 72,000 to 77,000 barrels per day for Tyler, 78,000 to 83,000 barrels per day at El Dorado. Big Spring will run 65,000 to 70,000 barrels per day. Lastly, Krotz Springs will run 78,000 to 83,000 barrels per day.

Speaker #4: We also invested 50 million dollars in Delek logistics, of which approximately 42 million dollars was for growth projects. Our net debt position is broken out between Delek and Delek logistics on slide 20.

Speaker #4: Excluding Delek logistics, our Delek standalone net debt remained largely in line with year-end 2025. Moving now to slide 21, where we cover second quarter outlook items.

Speaker #4: Our throughput guidance for the second quarter is 72 to 77 thousand barrels per day for Tyler, 78 to 83 thousand barrels per day at El Dorado, big spring will run 65 to 70 thousand barrels per day, and lastly, cross springs will run 78 to 83 thousand barrels per day.

Speaker #4: Our implied system throughput target for the second quarter is in the 293 to 313 thousand barrels per day range. In addition to the throughput guidance for the second quarter of 2026, we expect operating expenses to be between 215 and 225 million dollars.

Mark Hobbs: Our implied system throughput target for Q2 is in the 293 to 313 thousand barrels per day range. In addition to the throughput guidance, for Q2 2026, we expect operating expenses to be between $215 and $225 million, G&A to be between $47 and $52 million. D&A is expected to be between $105 and $115 million, and net interest expense to be between $80 and $90 million. With that, we will now open the call for questions.

Speaker #4: G&A to be between 47 and 52 million dollars, DNA is expected to be between 105 and 115 million dollars, and net interest expense to be between 80 and 90 million dollars.

Avigal Soreq: D&A is expected to be between $105 and $115 million, and net interest expense to be between $80 and $90 million. With that, we will now open the call for questions.

Speaker #4: With that, we will now open the call for questions.

Speaker #5: We will now begin the question and answer session. Please limit yourself to one question, and one follow-up. If you would like to ask a question, please press star 1 to raise your hand.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line from Allek Petti from Goldman Sachs. Your line is now open.

Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line from Alexa Petrick from Goldman Sachs. Your line is now open.

Speaker #5: To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #5: If you are muted locally, device. Please stand by while we compile the Q&A roster. Your first question, comes from the line from Alexa Petric, from Goldman Sachs.

Speaker #5: Your line is now open.

Speaker #6: Good morning, team, and thank you for taking our question. With the big spring turnaround complete, how should we be thinking about your capital allocation priorities, recognize this quarter had higher spend, but as we look to the rest of the year, how are you thinking about buybacks, and then use of SRE cash inflow?

Allek Petti: Good morning, team, and thank you for taking our question. With the big spring turnaround complete, how should we be thinking about your capital allocation priorities? Recognize this quarter had higher spend, but as we look to the rest of the year, how are you thinking about buybacks and then use of SRE cash inflow?

Alexa Petrick: Good morning, team, and thank you for taking our question. With the big spring turnaround complete, how should we be thinking about your capital allocation priorities? Recognize this quarter had higher spend, but as we look to the rest of the year, how are you thinking about buybacks and then use of SRE cash inflow?

Speaker #7: Yeah, Alexa, first good morning. Thank you for everything. So listen, first of all, we are very, very proud of our performance of capital allocation during 2025.

Avigal Soreq: Yeah. Allek, first, good morning, and thank you for everything. Listen, we First of all, we are very, very proud of our performance of capital allocation during 2025. We are performed around 4% versus our peers. We gave more capital back to investor, around 4% more than the peer group. It's a very good outcome in our mind. We have a very clear, crisp capital allocation program. First, we want to have a balanced approach between buyback and balance sheet that we obviously achieved. Second, we want to maintain dividend through the cycle that we obviously maintain. Third, we wanna make it very, very clear we see a lot of value in our share price and more to come. We have a very good quarter ahead of us, and we are very optimistic.

Avigal Soreq: Yeah. Alexa, first, good morning, and thank you for everything. Listen, we First of all, we are very, very proud of our performance of capital allocation during 2025. We are performed around 4% versus our peers. We gave more capital back to investor, around 4% more than the peer group. It's a very good outcome in our mind. We have a very clear, crisp capital allocation program. First, we want to have a balanced approach between buyback and balance sheet that we obviously achieved. Second, we want to maintain dividend through the cycle that we obviously maintain. Third, we wanna make it very, very clear we see a lot of value in our share price and more to come. We have a very good quarter ahead of us, and we are very optimistic.

Speaker #7: We are around 4% versus our peers. We gave more capital back to investors, around 4% more than the peer group, so it's a very good outcome in our mind.

Speaker #7: And we have a very clear crisp capital allocation program. First, we want to have a balanced approach between buyback and balance sheet that we obviously achieved.

Speaker #7: Second, we want to maintain the dividend through the cycle, which we obviously maintain. And third, we want to make it very, very clear: we see a lot of value in our share price, and more to come.

Speaker #7: We have a very good quarter ahead of us, and we are very optimistic.

Speaker #6: Okay, that's helpful. And then our follow-up is just on QQ. There's definitely a lot of moving pieces in the macro right now, so can you just talk about how we should think about captures and some of these different dynamics?

Allek Petti: Okay, that's helpful. Our follow-up is just on Q2. There's definitely a lot of moving pieces in the macro right now. Can you just talk about how we should think about captures and some of these different dynamics?

Alexa Petrick: Okay, that's helpful. Our follow-up is just on Q2. There's definitely a lot of moving pieces in the macro right now. Can you just talk about how we should think about captures and some of these different dynamics?

Speaker #7: Yeah, yeah. Alexa, in your permission, I will take a step back and talk about the macro in more detail, just a little bit, because there is a lot of moving parts and it's a different macro environment versus regular macro environment.

Avigal Soreq: Yeah, yeah. Allek, in your permission, I will take a step back and talk about the macro in more detail just a little bit because there is a lot of moving parts, and it's a different macro environment versus regular macro environment. I will start with the facts and then we'll take it from there. I think it's pretty obvious that we've seen the state of our moves close to, I don't know, close to 2 months now. It's a continue period of time. I think the consensus in the market that we are stick around 10, maybe a bit more of crude offline and around 5 million barrels of refined capacity remain offline. SPR offset the crude portion just a little bit, but not to a very meaningful way.

Avigal Soreq: Yeah, yeah. Alexa, in your permission, I will take a step back and talk about the macro in more detail just a little bit because there is a lot of moving parts, and it's a different macro environment versus regular macro environment. I will start with the facts and then we'll take it from there. I think it's pretty obvious that we've seen the state of our moves close to, I don't know, close to 2 months now. It's a continue period of time. I think the consensus in the market that we are stick around 10, maybe a bit more of crude offline and around 5 million barrels of refined capacity remain offline. SPR offset the crude portion just a little bit, but not to a very meaningful way.

Speaker #7: So I will start with the facts. And then we'll take it from there. So I think it's pretty obvious that we've seen the strength of our most close to, I don't know, close to two months now.

Speaker #7: It's a continued period of time. I think the consensus in the market is that we still have around 10 million, maybe a bit more, of crude offline, and around 5 million barrels of refined capacity remain offline.

Speaker #7: SPR offset the crude portion just a little bit, but not to a very meaningful way. That's on the fact side. On the effect side, what's really happening, on the markets, obviously we see elevated crude and product market.

Avigal Soreq: That's on the fact side. On the effect side, what are really happening on the markets, obviously, we see elevated crude and product market. We see this allocation between physical and paper, which is very meaningful for some. We see steep backwardation that obviously is impacting the capture rate for everyone almost. We see a wide swing in crude differentials, and especially around Brent WTI. What does it really mean? On the product side, we start with that, we believe that the product market will outlast the event, and they will see a lingering effect on the crack spread. We also see that the risk premium after the event between Brent and WTI gonna be different.

Speaker #7: We see disallocation between physical and paper, which is very meaningful for some. We see steep accreditation that obviously it's impacting the capture rate for everyone almost.

Speaker #7: And we see a wide swing in crude differentials, and especially around Brent TI. So what does it really mean? On the product side, we start with that.

Speaker #7: We believe that the product market will outlast the event, and we'll see a lingering effect on the crack spread. We also see that the risk premium after the event between Brent and TI is going to be different.

Avigal Soreq: The risk element of Brent putting itself into the market now and probably gonna outlast the event as well. That actually mean higher call on US shale that present a lower premium risk versus Brent, that's something that we'll see more coming into effect. Being a bit more specific on the Delek side, obviously, we have a big operation on the midstream side that very correlated to what's happening in the impairment at any given point. Obviously, we have direct access to crude which make us coming to the market and making changes as needed very quickly.

Speaker #7: The risk element of Brent putting itself into the market now and probably going to outlast the event as well. So that's the second point.

Speaker #7: So what does it really mean? So that actually means higher call on US Shell, that present a lower premium risk versus Brent. And that's something that we'll see more coming into effect.

Speaker #7: And being a bit more specific on the Delek side, obviously we have a big operation on the midstream side that's very correlated to a very correlated to what's happening in the permanent at any given point.

Speaker #7: Obviously, we have direct access to crude which makes us coming to the market and making changes as needed very quickly. And third, we have access to product market, both on the Gulf and on the group, which gives us flexibility around that.

Avigal Soreq: Then third, we have access to product market, both on the Gulf and on the group, which give us flexibility around that. I wanna finish with very important point. We have a very good distillate and jet yield, and part of that is due to the EOP we've done last year. I think you remember a slide I put together. We put together, not I. That present a great project that the El Dorado team conduct to basically do more jet with zero cost capital, and that's paying us very nice dividends today. Mohit, you wanna finish here something?

Speaker #7: I want to finish with a very important point. We have a very good distillate and jet yield. And part of that is due to the EOP we've done last year.

Speaker #7: I think you remember a slide I put together, we put together, not I. That present a great project that Eldorado team conducted to basically do more jet with zero cost.

Speaker #7: Capital, and that's paying us very nice dividends today. Mohit, do you want to finish your something?

Speaker #8: Yeah, Alexa, just one thing to add. I think in this current market environment, as Avigal rightly pointed out, there will be winners and losers in terms of capture rates.

Mohit: Yeah, Allek, just one thing to add. I think in this current market environment, as Avigal rightly pointed out, there'll be winners and losers in terms of capture rates. You have to think about, you know, people who have access to barrels who are closer to the well and who have very high distillate and jet yield. They are going to be the winners in this environment, and we are very well positioned to capture the opportunities in front of us.

Mohit Bhardwaj: Yeah, Alexa, just one thing to add. I think in this current market environment, as Avigal rightly pointed out, there'll be winners and losers in terms of capture rates. You have to think about people who have access to barrels who are closer to the well and who have very high distillate and jet yield. They are going to be the winners in this environment, and we are very well positioned to capture the opportunities in front of us.

Speaker #8: And you have to think about people who have access to barrels who are closer to the well and who have very high distillate and jet yield.

Speaker #8: They are going to be the winners in this environment and we are very well positioned to capture the opportunities in front of us.

Speaker #5: Thank you for your question. Your next question comes from the line of Manav Gupta from UBS. Your line is now open.

Operator: Thank you for your question. Your next question comes from the line of Manav Gupta from UBS. Your line is now open.

Manav Gupta: Good morning, guys. I'm also gonna ask a little bit of a macro question here.

Speaker #9: Good morning, guys. I'm also going to ask a little bit of a macro question here. So my question, sir, here is, when we look at QQ, Delek is very well positioned.

Avigal Soreq: Morning, Manav.

Manav Gupta: My question, sir, here is when we look at Q2, Delek is very well-positioned. There's no doubt about it. I'm also trying to understand from the perspective of what you said. I think Q2 will be a story of haves and have-nots. Haves are people like Delek who have the crude and have-nots are people who may have the best refining system in the world, but have no crude. From my perspective, obviously, Delek is a winner. Do you also think the situation we are in, generally, U.S. refining as such is a winner because you have the crude, you have the demand, you're not really dependent on straight or Fern moves. We have this dynamic playing out where relative to global peers, U.S. refiners and Delek can actually show a lot of outperformance.

Speaker #9: There's no doubt about it. But I'm also trying to understand from the perspective of what you said, I think QQ will be a story of haves and have-nots.

Speaker #9: Haves are people like Delek, who have the crude and have-nots are people who may have the best refining system in the world, but have no crude.

Speaker #9: And from my perspective, obviously Delek is a winner, but do you also think the situation we are in generally US refining as such is a winner because you have the crude, you have the demand, you're not really dependent on trade-off firms, so we have this dynamic playing out where relative to global peers, US refiners and Delek can actually show a lot of outperformance.

Speaker #9: If you can talk a little bit about that. Yeah. Yeah, absolutely. Manav, very smart question. Mohit and I, and Mark in the team, speak about it all the time.

Manav Gupta: If you can talk a little bit about it.

Avigal Soreq: Yeah. Yeah, absolutely, Manav. A very, very smart question. Mohit and I and Mark and the team speak about it all the time. Mohit has a lot of tons of energy around the topic, so I'll let Mohit chime in.

Speaker #9: And Mohit has a lot of tons of energy around the topic, so I'll let Mohit chime in.

Speaker #8: Yeah, thanks, Avigal. And Manav, thanks for all the good work you're doing. You're absolutely right. US refining will have an advantage because US is one of the largest crude producers in the world.

Mohit: Yeah. Thanks, Avigal. Manav, you know, thanks for all the good work you're doing. You're absolutely right. US refining will have an advantage because US is one of the largest crude producers in the world. US has the most flexible refining system in the world. Most importantly, you see US natural gas prices are very low. You know, from an OpEx standpoint, we are also at an advantage. You rightly pointed out, the biggest winners will be the guys, you know, who have access to barrels even within the US and who have very high distillate and jet yield, which is why we like our position versus anybody else in the US refining system right now.

Mohit Bhardwaj: Yeah. Thanks, Avigal. Manav, you know, thanks for all the good work you're doing. You're absolutely right. US refining will have an advantage because US is one of the largest crude producers in the world. US has the most flexible refining system in the world. Most importantly, you see US natural gas prices are very low. You know, from an OpEx standpoint, we are also at an advantage. You rightly pointed out, the biggest winners will be the guys, you know, who have access to barrels even within the US and who have very high distillate and jet yield, which is why we like our position versus anybody else in the US refining system right now.

Speaker #8: The US has the most flexible refining system in the world. And most importantly, you see US natural gas prices are very low. So, from an OPEC standpoint, we are also at an advantage.

Speaker #8: But you rightly pointed out, the biggest winners will be the guys who have access to barrels, even within the US, and who have very high distillate and jet yields.

Speaker #8: And which is why we like our position versus anybody else in the U.S. refining system right now.

Manav Gupta: Perfect. My second quick follow-up, Mohit or Avigal, is that, you know, when we look at the price of the RIN, that's going up, and that does impact the price of gasoline. In my opinion, there is a higher probability of SREs in 2026 than there was even in 2025 and 2024. If you don't issue SREs, you can cause the price of RIN to get to a point where gasoline can go to $5. Can you talk about those dynamics, why the possibility of SREs is even higher now than what it was in 2025 and 2024? Thank you.

Speaker #9: Perfect. My second quick follow-up, Mohit, is that when we look at the price of rent, that's going up, and that does impact the price of gasoline.

Speaker #9: In my opinion, there is a higher probability of SREs in 2026 than there was even in 2025 and 2024. If you don't issue SREs, you can cause the price of rent to get to a point where gasoline can go to $5.

Speaker #9: Can you talk about those dynamics? Why the possibility of SREs is even higher now than what it was in 2025 and 2024? Thank you.

Speaker #8: Yeah, absolutely. And I will take Manav with your permission, I will take a step back and give you a wider answer about SREs. So giving SRE is a way bigger topic.

Avigal Soreq: Absolutely. Manav, with your permission, I will take a step back and give you a wider answer about SREs. SRE is a way bigger topic. SRE is not a Delek issue, it's directly impacting close to four refineries, and I would say it's impacting around half of our industry, more or less. It's a very big deal. I want to make it very clear, the SRE, the whole point of the law is disproportionate economic harm. Disproportionate economic harm. It's for each asset and each community. It's not related to companies. The essence of the law is to maintain high-paying job, to maintain local communities and affordable fuel.

Speaker #8: SRE, it's not a Delek issue. And it's directly impacting close to 40 refineries. And I would say it's impacting around half of our industry, more or less.

Speaker #8: So it's a very big, big, big deal. And I want to make it very clear. The SRE, the whole point of the law is disproportionate economic harm.

Speaker #8: Disproportionate economic harm. And it's for each asset and each community. It's not related to companies. And the essence of the law is to maintain high-paying jobs, to maintain local communities, and affordable fuel.

Speaker #8: When we are looking at complying costs, small, mid-cap in the last five years, it's 85% of. Group market number. The bigger group, it's three.

Avigal Soreq: When we are looking at compliance costs of small mid cap in the last 5 years, it's 85% of the whole market number. The big whole is 3. That's a completely different dynamic. Risking SRE, as you smartly stated, will lead to higher price at the pump. Very clear. It's very clear. Just coupling critical topic of SRE, which is that we just mentioned with E15 is like putting square peg in a round hole. It's very, very obvious and clear. Mohit, please chime in.

Speaker #8: That's a completely different dynamic. Risking SRE, as you smartly stated, will lead to higher price at the pump. Very clear. It's very clear. And just coupling critical topic of SRE, which we just mentioned, with E15 is like putting square peg in a round hole.

Speaker #8: So, it's very, very obvious and clear. And Mohit, please chime in. Yeah, Manav, again, very good question. Look, as Avigal rightly pointed out, RFS and RIN issue is an issue about disproportionate economic harm.

Mohit: Yeah. Manav, again, a very good question. Look, as Avigal rightly pointed out, RFS and RIN issue is an issue about disproportionate economic harm. We show in our slide deck at a $1.50 a gallon blended RIN price, our 2026 RVO compliance is close to $750 million. If you think about that number, for us, you know, people like us who stay in compliance, it's not like, you know, you get SREs as cash. You know, you have to stay in compliance, and then you get the money that you spent on mine RINs back. For us, this is not just an issue about how RFS is working. It's only an issue about disproportionate economic harm.

Mohit Bhardwaj: Yeah. Manav, again, a very good question. Look, as Avigal rightly pointed out, RFS and RIN issue is an issue about disproportionate economic harm. We show in our slide deck at a $1.50 a gallon blended RIN price, our 2026 RVO compliance is close to $750 million. If you think about that number, for us, you know, people like us who stay in compliance, it's not like, you know, you get SREs as cash. You know, you have to stay in compliance, and then you get the money that you spent on mine RINs back. For us, this is not just an issue about how RFS is working. It's only an issue about disproportionate economic harm.

Speaker #8: So we show in our slide deck at $1.50 a gallon blended rent price, our 2026 RVO compliance is close to $750 million. So if you think about that number, so for us, people like us who stay in compliance, it's not like you get SREs as cash.

Speaker #8: You have to stay in compliance and then you get the money that you spent on buying rents back. So for us, this is not just an issue about how RFS is working.

Speaker #8: It's only an issue about disproportionate economic harm. And you rightly pointed out, and a lot of market participants are pointing this out, that if you don't have 2026 SREs granted, based upon the current renewable volume obligations, you will have a deep deficit in the 2027 RIN bank.

Mohit: You rightly pointed out, and a lot of market participants are pointing this out, that if you don't have 2026, you know, SREs granted based upon the current renewable volume obligations, you will have a deep deficit in 2027 RIN bank. As Avigal pointed out, that's going to impact affordability at the pump, which is, you know, squarely against this administration's energy dominance agenda. We definitely want, or we definitely expect SREs to continue. You know, that's up to the EPA to decide. Our expectation is, you know, in line with the government's agenda, they'll be granting these SREs on a go-forward basis.

Mohit Bhardwaj: You rightly pointed out, and a lot of market participants are pointing this out, that if you don't have 2026, you know, SREs granted based upon the current renewable volume obligations, you will have a deep deficit in 2027 RIN bank. As Avigal pointed out, that's going to impact affordability at the pump, which is, you know, squarely against this administration's energy dominance agenda. We definitely want, or we definitely expect SREs to continue. You know, that's up to the EPA to decide. Our expectation is, you know, in line with the government's agenda, they'll be granting these SREs on a go-forward basis.

Speaker #8: And as Avigal pointed out, that's going to impact affordability at the pump, which is squarely against this administration's energy dominance agenda. So we definitely want or we definitely expect SREs to continue.

Speaker #8: But that's up to the EPA to decide. But our expectation is in line with the government's agenda, they will be granting these SREs on a go-forward basis.

Avigal Soreq: Yeah. I think the EPA put a very clear, clean framework together, that, it has all the credibility in the world to follow through. As Mohit pointed, very, very well, the administration put a energy dominance program together, that is SRE is a very important part of it.

Speaker #8: Yeah, I think the EPA put a very clear, clean framework together, that we have all the credibility in the world to follow through. And as Mohit pointed very, very well, the administration put energy dominance program together that is SRE is very important part of it.

Speaker #1: Thank you for your question. Your next question comes from the line of Matthew Blair from TPH. Matthew, your line is now open.

Operator: Thank you for your question. Your next question comes from the line of Matthew Blair from TPH. Matthew, your line is now open.

Operator: Thank you for your question. Your next question comes from the line of Matthew Blair from TPH.. Matthew, your line is now open.

Matthew Blair: Thank you, and good morning, and congrats on the strong results. Could you talk about.

Speaker #10: Thank you. And good morning and congrats on the strong results. Could you talk about the big spring could you talk about how the big spring refinery is running post the turnaround?

Matthew Blair: Thank you, and good morning, and congrats on the strong results. Could you talk about.

Avigal Soreq: Morning

Avigal Soreq: Could you talk about how the Big Spring refinery is running, post the turnaround? Are you seeing any operational improvements? I guess we would have thought. Did the turnaround stretch into Q2 at all? We would have thought that the Q2 throughput guidance might have been a touch higher. Could you address that?

Matthew Blair: Could you talk about how the Big Spring refinery is running, post the turnaround? Are you seeing any operational improvements? I guess we would have thought. Did the turnaround stretch into Q2 at all? We would have thought that the Q2 throughput guidance might have been a touch higher. Could you address that?

Speaker #10: Are you seeing any operational improvements? And I guess we would have thought did the turnaround stretch into the second quarter at all? We would have thought that the Q2 throughput guidance might have been a touch higher.

Speaker #10: So could you address that?

Speaker #8: Yeah. So the point of the turnaround, which we are very happy about the turnaround, was the improved reliability to improve crude optimization, higher octane blending option, margin, and cost.

Avigal Soreq: The point of the turnaround, which we are very happy about the turnaround, was to improve reliability, to improve crude optimization, higher octane blending option, margin, and cost. We are very happy about what we see. We have a very good team over there, and we are very optimistic about Big Spring going forward. We leave it to that. More to come. We have a very strong guidance and more to come.

Speaker #8: We are very happy about what we see. We have a very good team over there. And we are very optimistic about the big spring going forward.

Speaker #8: And we leave it to that, more to come. We have a very strong guidance and more to come. Yeah, Matthew, you rightly pointed out our guidance.

Mohit: Yeah, Matthew, you rightly pointed out our guidance. You know, we are, you know, Big Spring coming out of the turnaround, we are just being a little bit more conservative. Hopefully, you know, things will play out the way we expect them to.

Mohit Bhardwaj: Yeah, Matthew, you rightly pointed out our guidance. You know, we are, you know, Big Spring coming out of the turnaround, we are just being a little bit more conservative. Hopefully, you know, things will play out the way we expect them to.

Speaker #8: But we are big spring coming out of the turnaround. We are just being a little bit more conservative and hopefully things will play out the way we expect them to.

Matthew Blair: Sounds good. Could you talk about what you're seeing in end market demand so far in Q2, both for gasoline as well as diesel? I guess for jet as well. Is there any evidence of demand destruction given the higher price environment? Does demand still look pretty strong?

Speaker #10: Sounds good. And then could you talk about what you're seeing in end market demand so far in the second quarter, both for gasoline as well as diesel?

Speaker #10: And I guess for jet as well, is there any evidence of demand destruction given the higher price environment? Or does demand still look pretty strong?

Speaker #8: Yeah, in all the markets, we are operated, we see a strong demand. We see a decent net BEX. The group dynamics improving, as we speak.

Avigal Soreq: Yeah. In all the markets we are operated, we see strong demand. We see a decent net backs. The group dynamics improving as we speak. That's very positive. We do not see a demand destruction this ten seconds. I think that it's the demand we see is pretty resilient at this junction. Please, Mohit.

Speaker #8: And that's a very positive. We do not see a demand destruction these 10 seconds. And I think that the demand we see is pretty resilient.

Speaker #8: At this junction, please, Mohit. Yeah, again, a good question. So if you look at Europe, we have seen some talks around people reducing capacity as far as the airlines are concerned.

Mohit: Yeah, no, again, a good question. If you look at Europe, we've seen some talks around people reducing capacity as far as airlines are concerned. The US demand remains very strong. We are seeing there's going to be potentially a very strong summer gasoline driving season. Gasoline remains the part of the battle right now. As people are focused on distillate and jet, we also think gasoline cracks also have a room to move higher. We don't see any demand destruction in the US just yet. You know, I think we do see the outlook for cracks, especially in Q3 to move higher, is very evident based upon where things are right now.

Mohit Bhardwaj: Yeah, no, again, a good question. If you look at Europe, we've seen some talks around people reducing capacity as far as airlines are concerned. The US demand remains very strong. We are seeing there's going to be potentially a very strong summer gasoline driving season. Gasoline remains the part of the battle right now. As people are focused on distillate and jet, we also think gasoline cracks also have a room to move higher. We don't see any demand destruction in the US just yet. You know, I think we do see the outlook for cracks, especially in Q3 to move higher, is very evident based upon where things are right now.

Speaker #8: But the US demand remains very strong. We are seeing there is going to be potentially very strong summer gasoline driving season. Gasoline remains a part of the battle right now.

Speaker #8: And as people are focused on distillate and jet, we also think gasoline cracks also have a room to move higher. So we don't see any demand destruction in the US just yet.

Speaker #8: But I think we do see the outlook for cracks, especially in Q3, to move higher. It's very evident based upon where things are right now.

Speaker #1: Thank you for your question. Your next question comes from the line of Jason Gableman. From TD Cohen, your line is now open.

Operator: Thank you for your question. Your next question comes from the line of Jason Gabelman from TD Cowen. Your line is now open.

Speaker #10: Yeah, hey, thanks for taking my questions. First, just on, I guess, regional product prices—it’s looking right now like Group 3 is still a bit discounted versus the Gulf Coast.

Jason Gabelman: Yeah, hey, thanks for taking my questions. First, just on, I guess regional product prices. It's looking right now like Group Three is still a bit discounted versus the Gulf Coast. Typically, I think you'd see Group Three already strengthen at this time of year. Could you just talk about your forward outlook for the relative values between those two markets and if you expect normal seasonality to take hold?

Speaker #10: Typically, I think you'd see Group 3 already strengthen. At this time of year, can you just talk about your forward outlook for the relative values between those two markets?

Speaker #10: And if you expect normal seasonality to take hold?

Speaker #8: Yeah, absolutely, Jason. Thank you for the great question. The way we see a group today is actually stronger coming this morning. We just checked that before the call.

Avigal Soreq: Yeah. Absolutely, Jason. Thank you for the great question. The way we see a group today is actually stronger, coming this morning. We just checked it before the call. So that's positive. Obviously the group has dynamic of its own. Even if you are putting your long-term view on that, you see the group dynamic in the near and mid-term future gonna be different. Just seen two pipelines. One is coming H2, and the other one coming, later on the, like, 3, 4 years down the road. That's gonna move barrels from the group into PADD Four and PADD Five.

Speaker #8: So that's positive. Obviously, the group has a dynamic of its own. And even if you are putting your long-term view on that, you see the group dynamic in the near and mid-term future is going to be different.

Speaker #8: We've seen just seen two pipelines: one is coming second half of the year, and the other one coming later on the three, four years down the road.

Speaker #8: That's going to make move bells from the group into a pad 4 and pad 5. So we are looking at the group also on the very tactic basis as today.

Avigal Soreq: we are looking at the group also on a very tactic basis as today, but we have the obligation and the duty to and the opportunity to look at the group down the road. I think the group that we remember versus gonna be very different versus the group that we're gonna see starting H2 of this year. probably even more importantly, when the next line is gonna be executing and move a product into a PADD Five. that's a very good dynamic on the short term, midterm, and long term to our position.

Avigal Soreq: We are looking at the group also on a very tactic basis as today, but we have the obligation and the duty to and the opportunity to look at the group down the road. I think the group that we remember versus gonna be very different versus the group that we're gonna see starting H2 of this year. probably even more importantly, when the next line is gonna be executing and move a product into a PADD Five. that's a very good dynamic on the short term, midterm, and long term to our position.

Speaker #8: But we have the obligation and the duty to and the opportunity to look at the group down the road and I think the group that we remember versus going to be very different versus the group that we're going to see starting second half of this year.

Speaker #8: And probably even more importantly, when the next line is going to be executing and move a product into a pad 5. So that's a very good dynamic on the short term.

Speaker #8: Mid-term and long-term to our position.

Speaker #10: Great. Thanks for that. And maybe if I could go back to the small refinery exemptions. Do you have a sense around timing of when you should expect to receive those?

Jason Gabelman: Great. Thanks for that. Maybe if I could go back to the small refinery exemptions. Do you have a sense around timing of when you should expect to receive those? I know you've kind of presented cases where you think you're able to get up to $400 million, the full, I guess, amount of exemptions for all your plants. How do you square that with kind of the EPA publishing an expected amount of exemptions they'll grant the next two years, which seems consistent with the past few years?

Speaker #10: And I know you've kind of presented cases where you think you're able to get up to 400 the full, I guess, amount of exemptions for all your plants?

Speaker #10: How do you square that with kind of the EPA publishing and expected amount of exemptions they'll grant the next two years, which seems consistent with the past few years?

Avigal Soreq: Yeah. It's a great question. We have a tremendous amount of trust in the EPA. I think the EPA put a very strong, strict guidance. The EPA was able to clear a backlog of 2019 to 2022, and we are confident the EPA are gonna do what it says it's gonna do. It's a very reliable administration in this regard. I am sure the administration see the correlation between small refinery exemption and the price at the pump. We leave it to that.

Speaker #8: Yeah, it's a great question. We have a tremendous amount of trust in the EPA. I think the EPA put a very strong strict guidance.

Speaker #8: The EPA was able to clear a backlog from 2019 to 2022, and we are confident the EPA is going to do what it says it's going to do.

Speaker #8: It's a very reliable administration in this regard. I'm sure the administration sees the correlation between small refinery exemption and the price at the pump.

Speaker #8: And we leave it to that.

Speaker #1: Thank you for your question. Your next question comes from the line of Doug Leggett from Wolf Research. Your line is now open.

Operator: Thank you for your question. Your next question comes from the line of Doug Leggate from Wolfe Research.

Doug Leggate: Hey, guys. I had some connection problems. I apologize for dialing in a bit late. Guys, I know the SREs have been fairly well flogged on the call, but I just wanna make sure I understand something. The guidance you've given for or not the guidance, but the indication you've given for 2026, what are you assuming for the RIN? Because it's basically doubled since the beginning of the year.

Speaker #11: Hi, guys. I had some connection problems. I apologize for dialing in a bit late. Guys, I know that the SREs have been fairly well flogged on the call, but I just want to make sure I understand something.

Speaker #11: The guidance you've given for 20 or not the guidance, but the indication you've given for 2026, what are you assuming for the RIN? Because it's basically doubled since the beginning of the year.

Speaker #11: And I'm trying to get a feel for if you I can't really I don't know what the scenario is where you don't get the RIN or the SRE.

Doug Leggate: I'm trying to get a feel for if you know, I don't know what the scenario is where you don't get the RIN or the SRE in the duration, at least for the Trump administration. What would you if you were to roll forward the current RIN price into 27 and 28, you know, basically the 4 years, I guess of that period, the Trump administration, what would your number be?

Speaker #11: In the duration, at least for the Trump administration, so what would you if you were to roll forward the current RIN price into 2027 and 2028, basically the four years I guess of that period, the Trump administration, what would your number be?

Avigal Soreq: Yeah. Thank you, Doug, and thank you for joining us. It's really important for us. I will let the Mohit to stay very close to the topic to take this one.

Speaker #8: Yeah, thank you, Doug, and thank you for joining us. It's really important for us. And I will let Mohit stay very close to the topic to take this one.

Speaker #12: Yeah, Doug, as we've talked about in the past, the way EPA is looking at a lot of these issues is trying to have a happy medium.

Mohit: Yeah, Doug, as we've talked about in the past, the way EPA is looking at a lot of these issues is trying to have a happy medium. It's a mathematical equation that they have in their minds. Looking at SREs, they're looking at RVO, they're looking at imports, and they're looking at all of these issues together and reallocation as well to come up with a price which is so that affordability at the pump remains. As far as our 2026 numbers are concerned, we show that very clearly in our slide based upon our current estimates. A $1.50 a gallon blended D4, D6, D3 RIN price, we should have a $750 million RVO obligation in 2026.

Mohit Bhardwaj: Yeah, Doug, as we've talked about in the past, the way EPA is looking at a lot of these issues is trying to have a happy medium. It's a mathematical equation that they have in their minds. Looking at SREs, they're looking at RVO, they're looking at imports, and they're looking at all of these issues together and reallocation as well to come up with a price which is so that affordability at the pump remains. As far as our 2026 numbers are concerned, we show that very clearly in our slide based upon our current estimates. A $1.50 a gallon blended D4, D6, D3 RIN price, we should have a $750 million RVO obligation in 2026.

Speaker #12: It's a mathematical equation that they have in their minds. So, looking at SREs, they're looking at RVO, they're looking at imports, and they're looking at all of these issues together, and reallocation as well, to come up with a price which is so that affordability at the pump remains.

Speaker #12: As far as our 2026 numbers are concerned, so we show that very clearly in our slide based upon our current estimates. And a dollar 50 a gallon blended D4, D6, D3 RIN price we should have a $750 million RVO obligation in 2026.

Doug Leggate: Just to be clear, the RIN, Mohit, isn't $1.50, it's $1.90.

Speaker #11: But just to be clear, the RIN, Mohit, isn't a dollar 50. It's a dollar 90.

Doug Leggate: Just to be clear, the RIN, Mohit, isn't $1.50, it's $1.90.

Speaker #12: Yeah, yes, Doug, you're absolutely right about that.

Mohit: Yeah. Yes, Doug, you're absolutely right about that.

Mohit Bhardwaj: Yeah. Yes, Doug, you're absolutely right about that.

Speaker #11: Yeah, that's what I was confused about your previous answer to the when Manav asked the question. Because so what in your mind, Dan, if you don't mind my follow-up, what would drive what would cause the RIN value from the RIN bank standpoint to move back significantly lower from here?

Doug Leggate: Yeah, that's what I was confused about your previous answer to the when Manav asked the question. 'Cause so what in your mind then, if you don't mind my follow-up, what would cause the RIN value from the RIN bank standpoint to move back significantly lower from here?

Mohit: Look, Doug, from our vantage point, you know, based upon the numbers, and Jason gave when he was talking about those numbers in the previous question, you would have a significant 2027 deficit if those are the level of SREs which are granted. That is one toggle that EPA does have, and that is why, you know, I think 2026 SREs are extremely important to manage 2027 RIN bank. What exactly EPA will do, and they're extremely smart, honest people working at the EPA, they will figure it out. For us, we're just trying to manage our situation and highlight the fact that, you know, SREs are an issue about disproportionate economic harm, and we just are trying to manage our position based upon that.

Speaker #12: Yeah, look, Doug, from our vantage point, based upon the numbers and Jason Gabelman was talking about those numbers in the previous question, you would have a significant 2027 deficit if those are the level of SREs which are granted.

Mohit Bhardwaj: Look, Doug, from our vantage point, you know, based upon the numbers, and Jason gave when he was talking about those numbers in the previous question, you would have a significant 2027 deficit if those are the level of SREs which are granted. That is one toggle that EPA does have, and that is why, you know, I think 2026 SREs are extremely important to manage 2027 RIN bank. What exactly EPA will do, and they're extremely smart, honest people working at the EPA, they will figure it out. For us, we're just trying to manage our situation and highlight the fact that, you know, SREs are an issue about disproportionate economic harm, and we just are trying to manage our position based upon that.

Speaker #12: So that is one toggle that EPA does have. And that is why I think 2026 SREs are extremely important to manage the 2027 RIN bank. What exactly EPA will do—and they're extremely smart, honest people working at the EPA.

Speaker #12: They will figure it out. But for us, we're just trying to manage our situation. And highlight the fact that SREs are an issue about disproportionate economic harm.

Speaker #12: And we just are trying to manage our position based upon that.

Speaker #1: Thank you for your question. Your final question comes from the line of Joe Letch from Morgan Stanley. Your line is now open.

Operator: Thank you for your question. Your final question comes from the line of Joe Laetsch from Morgan Stanley. Your line is now open.

Speaker #10: Hey, good morning, Avigal and team, and thanks for taking my questions. So I wanted to start on the EOP. Absolutely. So I wanted to start on the EOP program where you've made good progress to increase the target again to over 220 million if it goes to six rates of if I heard you right.

Joe Laetsch: Hey, good morning, Avigal and team, and thanks for taking my questions. I wanted to start on the EOP-

Avigal Soreq: Thank you, Joe, for joining us.

Joe Laetsch: Absolutely. I wanted to start on the EOP program where you've made good progress to increase the target again to over $220 million. I think that was the sixth raise if I heard you right. Could you just talk through some of the initiatives that help drive this improvement and how we should think about the potential upside and maybe a potential seventh raise from here?

Speaker #10: Can you just talk through some of the initiatives to help drive this improvement and how we should think about the potential upside and maybe a potential seventh raise from here?

Speaker #8: Yeah, absolutely. Thank you for that question. It's a question I really like. Because EOP, first and foremost, Joe, and you know that we spoke about the privately in the past, it's all about lifestyle.

Avigal Soreq: Yeah, absolutely. Thank you for that question. It's a question I really like because EOP, first and foremost, Joe, and you know that we spoke about it privately in the past, it's all about lifestyle. When it was really important for us, and we are extremely proud of the ability to push EOP to the entire organization. You see the buy-in, you see people talking about it in the hallway. It's not a project, it's not a spreadsheet. It's people really think how to make more of what we have. If I'm going to refinery, I hear it between the units. If I'm going to the accounting team, I hear them speaking about it. If we are going to commercial, it's across the company.

Speaker #8: And when we it was really important for us, and we are extremely proud of the ability to push EOP to the entire organization. You see the buy-in, you see people talking about it in the hallway.

Speaker #8: It's not a project. It's not a spreadsheet. It's people really think how to make more of what we have. And if I'm going to refinery, I hear it in the between the units.

Speaker #8: If I'm going to the accounting team, I hear them speaking about it. If we are going to commercial, it's across the company. So it's not just about cost saving.

Avigal Soreq: It's not just about cost saving, as we said in the past. It's what we make, where we sell, and all the value chain that we are owning A to Z. As you probably can see very easily, Joe, it's very clear in our financial results. You can see it very clearly in El Dorado, in G&A, in the capture rate of the rest of the refinery. That's very obvious that we can all see it. We are always looking, I said it on my prepared remarks, Joe, how to make it better, what else we can do, how else we can improve.

Speaker #8: As we said in the past, it's what we make, where we sell, and all the value chain that we are owning A to Z.

Speaker #8: As you can as you probably can see very easily, Joe, it's very clear in our You can see it very, very clearly in El Dorado, in GNA, in the capture rate of the rest of the refineries.

Speaker #8: So that's very, very obvious that we can all see it. And we are always looking. I said it on my prepared remarks. We are always looking how to make it better.

Speaker #8: What else we can do? How else we can improve? And I'm very, very, very proud of the team here that taking the high road on that and making that part of our DNA.

Avigal Soreq: I'm very, very, very proud of the team here that taking the high road on that and making that a part of our D&A. I want to finish with important comment. If you look in our deck slide, in our deck that we prepared, we are seeing around $600 to 700 million on a mid-cycle environment of a free cash flow. That's around 20% to 30% of our current market price. That's a tremendous opportunity. I want to capture this comment and the comment that I answer, Alex, and put those together, that we see a tremendous amount of value about where we are. Thank you for that great question.

Speaker #8: I want to finish with important comment. If you're looking at our deck slide in our deck that we prepared, we are seeing around 600 to 700 million dollar on a mid-cycle environment of a free cash flow.

Speaker #8: And that's around 20 to 30 percent of our current market price. That's a tremendous opportunity. And I want to capture this comment and the comment that I answer Alex and put those together, that we see a tremendous amount of value about where we are.

Speaker #8: So thank you for that great question.

Speaker #10: Perfect. That's helpful. And then I want to just ask on some of the part side, can you talk through latest thinking about current deconsolidation, value unlock options from here as well?

Joe Laetsch: Perfect. That's helpful. Then, I wanted to just ask on the sum of the parts side, can you talk through latest thinking about current deconsolidation, value unlock options from here, as well? You've done a good job with bolt-ons and, or, and organic growth at DKL. Just any thoughts on the path forward here would be helpful. Thank you.

Speaker #10: You've done a good job with bolt-ons and organic growth at DKL. So just any thoughts in the path forward here would be helpful. Thank you.

Speaker #8: Yeah, absolutely. So you're absolutely right. Deconsolidation is our ultimate goal. And we're going to do it on the right price, on the right condition.

Avigal Soreq: Yeah, absolutely. You're absolutely right. Deconsolidation is our ultimate goal, and we're gonna do it on the right price, on the right condition. We see tremendous amount of value in our DKL story, performer basis, 80% of parity. It's unheard of versus what we used to be. We've done, as you said, two, the acquisition that we are extremely pleased. We've built a gas plant that we are extremely pleased. We have a very clear, clean strategy of being a premier provider of crude gas and water in the most prolific area of the Permian Basin, and we have created something here very beautiful that we are very proud of. We see that the current value based upon the intrinsic assets sit in DKL needs to have a 7 handle on this unit.

Speaker #8: We see tremendous amount of value in our DKL story performer basis, 80% third party. It's unheard of versus what we used to be. We've done as you said, two very acquisitions that we are extremely pleased.

Speaker #8: We've built a gas plant that we are extremely pleased. We have a very clear clean strategy of being a premier provider of crude, gas, and water in the most prolific area of the permanent basin.

Speaker #8: And we are creating something here very, very, very beautiful that we are very proud of. We see that the current value, based upon the intrinsic asset seat in DKL, needs to have a seven handle on this unit.

Speaker #8: So for the right price, we will award deconsolidate and reward investor going forward. We need to make sure that the great value creation that was created in the midstream business vis-à-vis the 80 performer third party is fully reflected both on the DK share price and unit and DKL unit price.

Avigal Soreq: For the right price, we will reward deconsolidate and reward investor going forward. We need to make sure that the great value creation that was created in the Midstream business, vis-a-vis the 80 pro forma, third party is fully reflected both on the DK share price and DKL unit price. We're gonna do one of four ways that as we are doing, we are doing one or more of four ways. Keep doing bolt-on acquisition deconsolidation because people see the value in the DKL unit price. 53 consecutive increase in distribution, it's pretty much unheard of in our ability to reward investors. Second, for the right price, we might be selling asset.

Speaker #8: So we're going to do one of four ways that as we are doing, we are doing one or more of four ways. Keep doing bolt-on acquisition and deconsolidation because people see the value in the DKL unit, right?

Speaker #8: 53 consecutive increase in distribution is pretty much unheard of. And our ability to reward investors. Second, if a price for the right price might be selling asset.

Speaker #8: For the right price, DKL has the ability to buy own its unit from DK. And we can always sell DKL for the right price as I mentioned.

Avigal Soreq: For the right price, DKL has the ability to buy own its unit from DK, and we can always sell DKL for the right price. As I mentioned, we see the intrinsic value of seven handle on the unit price. We are extremely aggressive and disciplined around this opportunity and more to come.

Speaker #8: We see the intrinsic value of seven handle on the unit price. So we are extremely aggressive and disciplined around this opportunity and more to come.

Operator: There are no further questions at this time, and we have reached the end of the Q&A session. I will now turn the call back to Avigal Soreq, CEO, for closing remarks.

Speaker #1: There are no further questions at this time. And we have reached the end of the Q&A session. I will now turn the call back to Avigal Soreq, CEO for Closing Remarks.

Speaker #8: Thank you. Thank you for everyone that joined the call. Thank you for my colleagues here around the table that did a great job. Thank you for the investors that are sticking with the story.

Avigal Soreq: Thank you. Thank you for everyone that joined the call. Thank you for my colleagues here around the table that did great job. Thank you for the investors that sticking with the story and like what we are doing. I want to thank the board of directors and most importantly, our great employees that make this company what it is. Thank you.

Speaker #8: And like what we are doing, I want to thank the board of directors and most importantly, our great employees that make this company what it is.

Speaker #8: Thank you.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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