PBF Energy (PBF) 31 Oct 182018 Q3 Earnings call transcript

Company Profile

Participants

Colin Murray	PBF Energy, Inc.
Matthew C. Lucey	PBF Energy, Inc.
C. Erik Young	PBF Energy, Inc.
Thomas J. Nimbley	PBF Energy, Inc.
Roger D. Read	Wells Fargo Securities LLC
Brad Heffern	RBC Capital Markets LLC
Philip M. Gresh	JPMorgan Securities LLC
Prashant Rao	Citigroup Global Markets, Inc.
Paul Sankey	Mizuho Securities USA LLC
Neil Mehta	Goldman Sachs & Co. LLC
Matthew Blair	Tudor, Pickering, Holt & Co. Securities, Inc.
Kalei Akamine	Bank of America Merrill Lynch
Paul Y. Cheng	Barclays Capital, Inc.

Call transcript

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Operator

Good day, everyone, and welcome to the PBF Energy Third Quarter 2018 Earnings Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode, and the floor will be opened for your questions following management's prepared remarks. Please note this call is being recorded. And it's now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

Colin Murray

you. Thank welcome and today's to morning call. Good today our President; me members our are and Tom Lucey, Matt of team. CEO; our management Erik other Nimbley, several With Young, CFO; our supplemental copy information our A earnings today's release, website. and is available of guidance on including

started, that direct your management's I'd on the release statements Harbor contained the by attention filings under Safe the our In release. with quarters, this to differ provisions tax that of today's our the statements forward-looking the be lower‐of‐cost‐or‐market SEC. could predictions we express or and There or in actual in prior expectations contained our press like approximately the quarterly after call, LCM summary, will Federal getting to non-cash Harbor gain Safe our are are million. Before a statement it from company's to many of which we factors outlines results press $XX.X future, with intended Securities laws. or those excluding expectations Consistent to results including discuss cause in describe covered

we in financial also noted results. release, performance measures will PBF's press our non-GAAP be using and while describing As certain operating

non-GAAP tables now over please GAAP the to to the Lucey. release. refer Matt to supplemental For appropriate turn of provided reconciliations press measures today's call in figure, I'll the

Matthew C. Lucey

Colin. Good Thanks, morning, everyone, for joining and call today. you our thank

adjusted approximately million. $XXX reported of EBITDA we quarter, third the For

during unplanned was utilization relatively spreads, perspective, an in downtime quarter XXX,XXX low by a quarter West Total had seasonally well the is reflect versus imports increased our with As high barrels From late demand. flat was strong Paulsboro work to the relatively margins in operations refining West turnaround in for with occurring the Coast remain our system. at the under the Coast, line gasoline and crack somewhat we region. weak, cracks ran open system, our with system throughput for per only refineries the exception driven quarter a throughout coupled quarter. just second continue quarter runway very of with day and the the the as Benchmark guidance. which were during

in improve the quarter. over Coast the the cracks Importantly, course West did of

staying perform the barrel through Reliability expenses Coast, assets West for was West as and Normalizing good. for of well. the continues approximately were gas up quarter refinery to the Operating the operating Torrance Coast. on gas a natural particularly prices, our $X.XX of Going on costs expenses each per the natural this high averaged quarter. result

work full a progress potential. While its Chalmette remains well, to realize ran in it

of We increased which plant and plant-wide are the that ends and well the restarting reformer effort idled we of process commissioned are coker. in in midst running the a year optimization will profitability. last in we are light result The

and by $XXX project to We should time year. in this million, cost service expect this next unit the

strong and this In Importantly, inland and project the ran third cracks. benefit refinery completed oil half well coker our unit. than new Toledo, and to be cost time the crude less product building will a in of was wider a differentials from less able than

the discounts rail are heavy and the the for the were Toledo and variety was favorable and As $XXX differentials. is enter offset of able These guidance In for into to these tightness earnings persisting items, East for very differentials. issue Coast expanding benefit in call fourth Toledo, we Canadian on to barrels very oil certainly with to we some waterborne to Coast we EBITDA, from expressed crude well-positioned fourth discounts an East excluding a per grades ran capacity spread. discounts seeing day able are our at benefit Canadian be crude XX,XXX approximately special Takeaway last of crude to million. quarter. Syncrude differentials partially continues heavy quarter was from line WTI Similar attractive Syncrude. wider well

show crude we continue assets markets. Coast complexity in their advantage East benefit as from wide differentials the have high to certain benefited on Our to continue and to expect

crude system any of high. should activity I'll Toledo and call year, will Torrance, the and aromatics For be has has East reformer Erik. on Paulsboro fall. turnaround turnaround do units over on November. unit. scheduled set remainder work maintenance and that coker work the not planned for availability for be in its our focused and turn Chalmette Coast remainder completed the minor the City its of smaller late the Del the have With

C. Erik Young

you, Thank Matt.

from $XXX.X million excluded income fully PBF and the early share net Special retirement from reported $X.XX on of per million adjusted in $XXX.X third amount of basis. and million exchanged, fully the to diluted converted LTM For previously, gain sale $XX.X the to million mentioned fully a the Torrance, or operations $XX.X of operating income items related include approximately expense of a land related quarter, income railcars. a

estimates to EBITDA Our consensus approximately$XXX comparable was adjusted million.

effective $XX.X G&A by For the million, which $XX.X quarter, the was million, rates. tax state was and were million. and amortization for rate was approximately was quarter expense tax PBF's expense impacted depreciation interest XX.X%, $XX.X expenses approximately

modeling please to tax For rate purposes, XX%. continue of effective an use

was $XXX rate, the can our expenses million as $XXX million $XX range Logistics. $XXX Our CapEx rent acquisitions, approximately by rent At incurred to the quarter, and totaled approximately third in CapEx the XXXX million $XX refining excluding for current for million. and see expense for quarter million of million. $XXX includes PBF to expense we which corporate compared million, Consolidated $XX the full-year

$X operations. $X.X $XXX than and During cash. This generated more an we excess billion the resulted billion quarter-ending quarter, in of including of of approximately from million $XXX cash, of liquidity million

capitalization XX%. was our Importantly, debt net consolidated to

later has call are this earnings details approved encourage you a increase to growth Also PBF and consecutive our share. provided XXth we quarterly quarterly announce board note morning. its its that additional pleased of per listen announced Logistics to $X.XX dividend plans. Lastly, on today of to distribution their I

Now, call I'll turn to over Tom. the

Thomas J. Nimbley

good and Erik, you, Thank morning, everyone.

multi-asset of diverse benefit geographically results Our demonstrate refining third positive system. quarter having a the

invest are this strong in as complex in from benefit continue our Recently, Matt refining and help light-heavy fundamentals The overall results to rising refining the demand. to put and we continuing and market markets. market. gasoline softening cause Distillate to by has global favorable. with coupled spreads tailwinds reliability to product This tanks mentioned, are strong support market assets going that flexibility. consumed the to to could improve With plan their area remain We for Globally, positions with sector oil with widening if refiners. an the into in our see demand growing been PBF. watch crude forward-looking driving forward continue to We respect looks rather refineries a is low drive than markets, and going should being crack products differentials inventories inventories.

market. seek favorably many always, we've domestic As which in have in entire differentials the takeaway any differentials should these we our should and advantaged for wider capacity market source to benefit system. and seen the opportunities effects support continue constraints knock-on move most Bakken system and our WCS differentials barrels to

Looking with ahead, fuel system refining standard we the marine believe our XXXX. for high shift prepared upcoming is IMO complexity diesel well

we've of a one (XX:XX:XX) posturing past, the a implementation percentage other PBF we said the month, on seen refining of has but equities around of throughput bit the in capacity coking past of turmoil all impending than independent As a in refiner. result standards. the In more have the as

remain the Despite timeline distillates for both standards IMO feedstocks implementation the high-value on last oil. high-sulfur and XXXX, high-sulfur relatively meetings affirmed their Following the differentials of week, speculations surrounding for carriage unchanged. and both robust IMO new ban the fuel recent out-year and

be a in our and very in strategy manner. profitable assets as our remarks, will strategy to running a our Our to pleased by and will well always, executing this and any this be in to assets and them environment, reliable environmentally position opening our responsible put we've benefit. succeed completed take safe, Operator, disciplined employees shareholders questions. is and By we'll

Operator

question from Roger ahead. Wells comes go Please first Read with Our Fargo.

open. line Your is

Roger D. Read

Yes, thanks. Good and there, guys. morning quarter solid

if that us Just seem should What thing crude you'd crude certainly pretty easy differentials, view. really the on and impacts of Syncrude to cracks, gasoline And be hit other the while is on rather gasoline two could with more for thought forward? maybe a of here. understand point because and our does what to so, railcar I the of idea then behind the kind real think favorable cancellation agree the less it I things standout, WCS from to jump differentials in railcars, you was you I inventories given IMO, if equities was going we could than here, and guess the headwind an want give that.

think a gasoline unsettled. little I has fundamentally people

thoughts If give some that. you kind on of could us

Thomas J. Nimbley

both from be on the beneficial. downtime driven Much of X. been or Erik has those to the occurring is Yes. the Well, on have significant (XX:XX:XX-XX:XX:XX) because PADD of very and Toledo... differentials that I'll it's spread amount occurring But But Canadian to quarter moved Syncrude in a into in pass all still take sweet, rail of of couple story and, frankly, that situation. and the Obviously, on WCS, out Syncrude. predominantly, exacerbated is this

Roger D. Read

I if of for totally first else, blank but went me, about excuse Tom, happened there the it don't real your quick part know answer. there. it everybody to

Thomas J. Nimbley

you then. out particularly Okay. differentials, it hear and Bakken look of North Well, coming let Roger? When now, me Canada American everybody we can differentials and for repeat the the at me –

Roger D. Read

Thanks. absolutely. Yes,

Thomas J. Nimbley

spreads massive activity just were is some, of Syncrude. tailwind now will which of turnaround capacity They by and but sourcing continuing us. narrow were they obviously They lack shifting they and not of by PADD spread is those exacerbated right. out coming to it the is crudes the high of are in for in underpinned WCS, because takeaway Canada. that some of – were X exacerbated the quarter level All And in likely

well expect good capture Toledo. we because that quarter we able in a had were that So, we benefit. very (XX:XX:XX). We all ran to We of did

Erik turnaround in see be and East that But to expect at frankly, a a Canadian the back to differentials and XX,XXX advantages are ran at big now way, comes we we end Matt benefit and those of we is BP expect our says, perhaps month. wide (XX:XX:XX) rationale them. they And crude be system. forward, advantage heavy of Delaware. when talk barrels or Coast will going about big Whiting day seeing the either will up running, not from That railcars. the behind stay we in a Delaware We we're the mid the to for in But as the able case

at really And weeks capacity Europe, and office years. yesterday be the concerned that looking case don't built able There York going have completely doubt (XX:XX:XX) distillate. me we're pricing be several I cuts of out in see next not APIs, up, not will There as as crack. out, there at I of gasoline then I to now even we take indicated the Harbor watched the a too, to we'll several I lag and York the forward. in – move evidence seeing let New markets the particularly closely. from to that concern what have just happens the $X.XX levels to massive mentioned, stock Gulf whopping closed And that Coast (XX:XX:XX) the gasoline (XX:XX:XX). are Harbor. draw that no Europe. next But ago office East the week. as (XX:XX:XX) came gasoline takeaway But be of (XX:XX:XX). is of Coast, was barrels rail in We (XX:XX:XX) the as gasoline to to move. in for three the into base cause closed the negative we put a is that the last the quite into be are but is but in market for expect in had has any Gulf environment that's barrels New until money runs and expect We the that the quarters be because a export and we where crack simply going the APIs moving to Coast because up the from to The probably the We, am inventories. starting is crude incentive the positive

if it, if – watching and we're So, money. tank, you don't the make gasoline goes into products any the

XX%. has never you you really that run us cuts So, in we're if XXX% the and hand said will going the PBF necessary. take I've upcoming make that's the case to that utilization or industry then I say hear in before, think in to if quarter to

Roger's and three going tell frankly, IMO handle very I'm and coming tell You weeks crack run we'll we're was we'll question. you me what again and, distillate, is ago gasoline the Erik, would side for is watch. to and not what as the that's a I concerned what us. at third quite on as positive But you us

C. Erik Young

Sure.

fleet straightforward. on the rail So, is car Roger, I the answer think relatively

absolutely And a coming to really we barrels are we supply heavy on is want complex increase ultimately ultimately barrels when Coast. today car to it being fleet, a look to go leased While very probably Canadian we early. it we that primarily economic what are most leases us, our via are to the in weren't continue rail, utilized East focused use go And barrels the those an and those of taking overall chain and overall. terminate in didn't coming have in and ahead alternative better was really service portion back crude rail at that decided for which

for the you'll result, took a see (XX:XX:XX), a charge As $XX million quarter. million $XX we

Roger D. Read

you. it. Appreciate right. All Thank

Operator

with Please RBC Markets. We'll Heffern take Capital from next Brad ahead. our go question

Brad Heffern

everyone. morning, Good Hey.

sort to of X,XXX question. and you guys day time? the of last barrels to know ramp thoughts any desire you XX,XXX is on Just like base dips load Bakken, to as run that sort but Can over there follow-up up Bakken a your I a of give a of

Thomas J. Nimbley

that the very choice is run on Toledo barrels to Toledo. for crude can now, crude. run X,XXX cracks. because the an we and crude Canadian of and right now an crude attractive for would day both be (XX:XX:XX) most a the Canadian time East source XX,XXX an to It's and good Syncrude, we attractive Specific economic but in we into occasion Midwest Right Bakken not Coast. obviously, question, Bakken But that a do the your of when is crude Bakken in sweet is the Toledo crudes, some have of we attractive

barrels, in XX,XXX is because rail the watch barrels Bakken. pipe of up takeaway around when somewhere that and to very interested the I'll constraint comes Bakken Delaware attractive. much obviously and capacity right obviously Bakken XX,XXX by day happens there running PADD narrows are is on a what We how X be now into spread no

You can in Gulf States. Coast get the it (XX:XX:XX) to down United the

spreads what think we'll third... in be much wide that offline see. so impacted perhaps there's the was So, I the the Midwest might these fact by capacity And

Matthew C. Lucey

is the regards the Bakken. of Bakken I'll run But our barrels we're East the Canadian comment attractive. just can to fact matter to even more a (XX:XX:XX) more make very in Clearly, the looks heavies Coast in trying economic magnitude attractive. most we the orders to of look attractive,

somewhat It's our access to But is So, unloading but Bakken fact have not unload for matter train and can. much the your barrels, and we're and loading whole maximize simply rail to railcars differentials you good that constantly unlimited. we'll have, exist not But trying better. your that to reason of these to take put how heavies together capacity, where a trapped is of simply that not capacity, it. the the a look you Canadian many because is they're it's activity we looks

that. maximizing certainly we're so, And

Thomas J. Nimbley

one favorably into years. supply is, early contracts been just many We said are in were as can't these get early adding you point But I'll rail. day. we've on path – this for not down in the mentioned, Matt chain, and in many, we get out make and can you to get on the what

another would into made. not longer focusing then to long differential to runway Coast, barrels a to to and commitments simply a long-term be would got we compress. and to we into have that the make day a feel make. try enter Bakken the have on of be go going contracts not be That are and costly – are get mistake X,XXX like East we've We're would some because those WCS we on going differentials You we how

Brad Heffern

the obviously of guess Okay. then color. And Appreciate all MLP. I'm you their competitors guys PBFX, know one in I your bought

improving of as wondering whether a any thoughts entity look anything you do potentially around with or just So, the the (XX:XX:XX) the about something to PBFX cost of value there? and soon standalone capital would IERs

Matthew C. Lucey

MLP, obviously Valero would I but I more we specific but at constantly I'd at this I would and expect over been some been say, of We've the market. point committed that to decisions but we looking everything. I our market the we're make PBFX out It's the broader increase. say did. as looking only it's a turn would or – the like well. situation announcing not that's – in straight bit have where to nothing past, will obviously talk acquisition in absolutely next the We're And that's market, market at guess, quarter to what PBFX. XXth sideways But not dynamic a down PBF, be We attractive to well, a today Yes. said so. both terms announce will for beneficiary appreciate to PBF closed been the I little to we expect well as distribution just which for very a we're

of So, mix best that particular going creates forward. but to and we're PBFX, very going to the recognize a market position with in take and headwinds going things things we on, it is broader partnership some positive the steps

Brad Heffern

Okay. I'll turn Thanks. back. it

Operator

with comes Our Please ahead. question from next JPMorgan. Gresh go Phil

Philip M. Gresh

Hi, question way anything? give kind or to the third there is just XQ the in know you hedging the the some good impact morning. the And hedges still are of talked clarity don't those able you might on? to My in past want numbers earlier any hedging too I around if provide but I first in much Coast, you've that. quarter? Erik, And WCS believe any was about to wondering you year, the if that, was XXXX I so, East in of had on probably just there said of be

C. Erik Young

burned XXXX, have to year. hedge the through we course and go loss that tried highlight essentially off to results this the all did the of we an from unrealized that back way has there almost we If quarter fourth

I the WCS-related P&L in to the including impact are relation hedges the think EBITDA. third so million, de relatively overall hedges quarter is for for minimis those of $XX about million which $XXX

Philip M. Gresh

you as of at now, more a look And that onetime are hedges considering future was Okay. things or you situation?

Matthew C. Lucey

we're I address to don't very, not answer. into forward going are is in to looks Look, I that's good what something getting the think that right do call. very going we but the this think market

Philip M. Gresh

things Erik, for of that the of projects, Okay. should the kind a of about about projects capital thinking capital And coker is be just other are then, as spending we a enough. with maintenance terms you PBF more Fair thinking there now next right year or in coker think the CapEx. plus

C. Erik Young

We then to do our fluctuate million to XXXX probably approval maintenance directionally discrete of turnaround-related another safety going magnitude $XXX But five-asset for going spend, couple $XX high obviously hundred every not and roughly have spend. on low final that's million we're board order we million to and capital would $XXX have announced. probably of we a both say we've spend the $XX year, have given million what general million of side, to system, projects that some regulatory is

to on going $XXX be for we're spend, hook calendar million roughly nickel. our probably for up the have coker XXXX. close at $XX that's the we to Delaware plant million project, City, all-in spend which call So, will hydrogen obviously it, And then

Philip M. Gresh

fourth seen cracks utilization the your for course, fade West question thoughts quarter. time here. I Tom, for quite Last year, of guidance the but Great. noticed for seasonally of Okay. on that this is to around your happen the you've It tends high Coast, just obviously

strong have the cracks a on So, do there? out view you

Thomas J. Nimbley

landed change talked that number the that's we now improve down system. Well, seen we moment California, barrels obviously That's sub-XX for time really had in We That what's season. been approaching off as as X. we in better about Canadian and typically third facility. think some when differentials, of high a at number have maybe domestic that $X is is to we been during RVP allows in tailwind the And dollars thing cost on relatively October, is gasoline million into some the than the several which other were have as under summer, crude, knock-off a PADD crude the inventories sourcing of margins we'll actually XX the to had we ANS, for Torrance of and least in actually too quarter. in the low. the SJV we is our one $X been than Certainly, and crudes whole to not for more historically corrected or crude, that have now cracks first year. we over have we've cracks although of crack watch California crude in are we coming it's maybe and month took will effect good it had the crude seasonally that a the has last the have gasoline. about, the September our But going The

as we tailwind. So, do that have a

We We go the and will believe being in goes look If We're going man measures. we accordingly. corrective adjust last the crack the don't to gasoline standing. tank will we in just of adjust. ahead at and will idea take this

Philip M. Gresh

Thanks, Tom.

Operator

Citigroup. question Please Rao with Prashant Our comes next go ahead. from

Prashant Rao

Hi. Thanks taking Good my for questions. morning.

think there? that ANS think other remember it's is there a so there given and there much, Just for that, California broadly crude crude the crude crudes Torrance My incrementally, sort is on in that any sticking and speaking, wanted get thoughts those California differential be could widening are of WCS sourcing to just maybe have an on of I crudes question half the Q-on-Q addition replacing you're or discounts optionality, of I of the flexibility, but non-local bringing your that to half if it? I that, that is versus the some heavies do how on locally-sourced we your correctly, that aspect could sourcing been second some

Thomas J. Nimbley

just good is But here, watch so President to in that been And strategies what bringing the reality Yes, pushing do rail. try Western the it's and limited has which attractive sitting domestic is more And that we've supply waterborne bringing crudes by we're I of crudes is room crudes. with by what backing crudes, of chain we've But valley said, we're is importantly, but as in small volumes of or to the relatively that gathering going Division doing in he and in started less California there. waterborne say. in us has giving some favor I the he'll fact the very as doing addition dip midway sourcing one than in question. landed to of been Canadian the have we're out successful in crude a again better back in of widened that We'll to the helped that either out, ANS we've us a systems, is that is been other out seen be time. doing the has cost heavily crude crudes tight, the Torrance

Prashant Rao

of how great. margins works broadly and be sort that Thanks. interplay Okay, for well those around seem in more maybe to be guess on Northwest Europe – I sort little in as than know of how global get support to is the maybe run Asia We speaking into under Tom, your a the for coasts, more Asia? then reading would on markets, pressure. Northwest the the perspective. the they've like of with help and Europe, Singapore have and of assets bit gasoline you are the happening been through that's coastal might to little coming assured been And sticking this sort the it's jittery that to maybe looked regional response market the from ties a cracks that timing right bit some nervous for PBF around – a cuts in situation. thoughts all is Coast, question East East cracks the same Coast maybe any helpful. to back But, on is the about, you gasoline way that –

Thomas J. Nimbley

Okay, fact The in it point. as is Europe. the the office is completely exactly (XX:XX:XX) I closed said

think barrels the We'll were numbers a today. down week. see last day say imports sub-XXX,XXX I what

refiners pricing crudes. have on sweet really light bringing basis. certainly or – Brent for This You point, crude are Brent-based this that the to crude don't is a run economics and get in I'll to a problem is

an to Brent you you're run you're bringing Coast. you're minus East if Coast Permian crude Gulf even and this Basin prices Brent So, refiner gas any marketplace. of the plus at if couple in the or a and sitting can't But that's money have in going much Coast, Gulf Brent you're running the problem make flat or Brent a a too with of crude crude in not you in bucks,

you're refiner crude and in marketplace. money If can't it, Brent European you're running exporting a and you're any this you make

the course that is yes have we refineries Coast. complex advantage more heavy East have crude, Now, the in of we

So, coming, only steps get we'll happens. have cut the going I see we with production that can they're can't, think rebound, up. we see what of that's money But crude refineries and have crack to differentials that in, holds to and way cost those crude we'll take landed to gasoline actually the the long coming make diesel the as as to and that I so

Prashant Rao

– on do you there, Coast been... the of X crack, stepping I you East color on sort some some gas great puts West think far Do because the but that market Coast on Asia I'm pressure gave as PADD you insofar as that they've the – well? that off see see of as

Thomas J. Nimbley

is if move PADD up the may we'll got in (XX:XX:XX) inventories the Yes, see the see into happened of you RVP if high absolutely, then But likely be right it and as see good for mentioned, indeed, I that most in cuts, cracks now will on we've an and impact think inventories PADD season run impact therefore, corresponding pretty the fact and what Matt and, imports gasoline goes. headed the X – we an part had on if X. we'll But as (XX:XX:XX). cuts

Prashant Rao

sort the could how capital about flow we you what last just of sort if on coker guys the on sort hurdle you a (XX:XX:XX) you're apologize get of Great, – coker. could cash on IRR And Chalmette have restart. us remind one so previously. sense But disclosed return I this of is or question maybe thanks. housekeeping the on the the of that thinking extra incremental

Matthew C. Lucey

Yes.

would look it of that. market, describe I over as a you you're post-IMO If else, more But in you environment, what look a at everything like million in if the probably than double at coker EBITDA. $XX mid-cycle you're

the that's a And one this is of project today extraordinary that it so, fact operational. about the things should year be from

a market, So, the simply X, in very, sort and attractive. post-January extraordinary looks on good IMO It are it market. a market whatever very looks your looks views normalized in XXXX it of

Prashant Rao

All I will gentlemen. right, for the great. over. Thanks it. turn Appreciate time, it

Operator

Please Paul We'll next our ahead. Mizuho. go question take from with Sankey

Paul Sankey

Good morning, all.

Matthew C. Lucey

Good morning.

Paul Sankey

but Delaware on could this, yesterday, there hate in that? raise City you I accident to just reports of was an update on Reuters us

Matthew C. Lucey

And Yes, there routine normally City. and, going we plant Delaware were performing while obviously. some maintenance. injuries quite to some contractor specific they disruption our was to people frankly, wouldn't, can't not explosion at obligated. with misreporting specific yesterday was extraordinary I'm or unfortunately operations. There get except no Paul. were no There we somewhat our feel There injuries into so, was

going the We have the individuals. highest for care highest and concern the

impact so, operations, operations. wildly And I'm no to there into the inaccurate our not yesterday. in but is going specifics to reporting the And there, was regards

Paul Sankey

is context to prices you, of guess your or the project that market guess IMO that a a whatever Thank Matt. response the to Washington. obviously assumptions at not put to you're I coker are crisis? react looking we're a the The high rather Understood. becomes the committing assume that about simply think point is with concern that that from be I it tenable the the potential doesn't pricing that in has driven there view some in not so impacts And I market of through also where knee-jerk markets. which of it's IMO, or for sort Is I

Thomas J. Nimbley

course. to is And the what there X% sulfur over for we've content But it at XX% (XX:XX:XX) demand think politicians fuel. transportation of look the will this, before, – politicians X% look of think at bunker at is sulfur I personally this a bunker stay the the emissions that fuel you really of the going fuel, the fuel when XX%, from said say the do when I some transportation and do. accounts IMO you

a too to bit it's require in and to much, think little and distillate the fact moves market and ports to and is whether cleaned the about this interesting and help put in, go it's ban thing the the carriage through with in come X.X going that not associated as go So, this think fast. the the United ports, places they It's some But XXXX that sulfur I concerned take a is will ships right too States the other I having to this. going levels world or be sulfur up step. the the eco it's compliance. in There with gasoline going

be likely distillate the diesel see we to think the industry clean-dirty respond expect and pricing therefore, the go will up I down, fact to and price heavy finite demands to in the fuel view incentive how case. and expect the to a for be and market goes out coke this on will to my oil the (XX:XX:XX) own But that well-known side. see opportunity go that's is we figuring up spread this particularly is

us, $XX But reasons or influence on again legs shut marriage now sweet-sour $X said, did the with more was world enemy barrel have and and is the or it's away shut the stay down on a by project to term it'll clean-dirty a the $X differentials and longer shouldn't to joint good returns goes that terrific a project of that spread $X busted the and an been that venture. might about crude project somewhere happy starting associated think we're if $X certain great had that. or upside there's contemplating of crude We that between normal have Matt a spreads on sulfur a crude good up. if extent, It for coker. it's a the and it and oils differentials $XX restart with coker in of and wider the a It's on down. non-IMO I a because as

Matthew C. Lucey

because us The fact ground the whenever as the the it at half ground for the and coker are is coker comes good project economic (XX:XX:XX) this associated newbuild with are on a the for twice cost. economics

Thomas J. Nimbley

$XXX Yes. that when million, say million it million Paul, It's is we turnaround. important million and a of $XX note, but basically it's to $XXX is that $XXX doing

nitrogen to since $XX But million that basically under it it down shut okay, turnaround. of safety but a was was it's (XX:XX:XX) safer. it So, saying, additional enhancements we're it unit's avoid the protected, doing make there's to another been $XX million, doing they down

almost have turnaround start up, we do it's (XX:XX:XX) the to to it For us maintenance and

C. Erik Young

the Just of there, carefully. around were for were the acquisition Chalmette idled is of down one years attractive few taken key this units that is very was ago really, that a Paul, pieces us a we that had handful

group do essentially elected turnaround ownership work. to prior not the However,

and sourcing and us is will refinery project great viability allow and long-term the lot this Chalmette that forward. flexibility the of for crude flexibility on feedstock a going optionality more a So,

Paul Sankey

guys. Thanks, Great.

Operator

next We'll Please take question Mehta our Sachs. ahead. Goldman with Neil from go

Neil Mehta

taking guys. question. Hey, Thanks for the

M&A. So, views around first question on is your just

transaction not of how (XX:XX:XX). You've there a coming assets it's of around involvement in around terms around is on your some shy bid-ask. have markets refining, M&A by refining that's perceptive you wanting your curious any and would you continue to the series guys doing for side. of company to the business into thoughts built firsthand just is more that? been particularly just the and factors in this talk the grow really But yourselves on see acquisitions assets refining to challenging But your guys valuing up the in imagine about market, I one on IMO where price so of

Thomas J. Nimbley

in terms at wheelhouse the that is really obviously has growing the Nothing asset in business. a asset, do the terms have changed our a taking strategy. of We of desire, in price our right

part of It's is form cheap record honest, we of a our have insurance, that one operate that. to to in that region you been have We strategy a if be have in. on more the refinery than

PADD X. an it PADD going in your that's bid-ask. that already on to We'll to We likely X, So, point get not objective. in have

with Canadian done. deal the to I case base would a think be hard situation IMO, then and get it

and we and X strategic therefore, areas PADD are to go to us. for they PADD X So,

IMO, to be hit has for could we owns but advantage could a That out a them. figured a IMO you refinery teakettle. heavy be going they – of I a advantaged way believe to approach be who as everybody looking refinery, are We it But think be to complex is because correctly, it an say a refinery, that IMO. going it's

changed. bid-asks we looking hasn't deal that IMO some at wide. bit getting because That that being things So, or problematic, done a makes said, bit But are the a more creates the are on and yes. think strategy the little do a I were there focusing wider bid-ask

Neil Mehta

that sense. No, a of no, makes lot

on basis, a is be go-forward the lower XX% second right little general rate bit be is tax a could where we still in than tactical, more question that? just or should number using little The the more number a

C. Erik Young

simply XX% is No, past during quarter, probably to number. this frankly, it state comes tax apportionment. the long-term down right Quite

a but certain so, term to tax and have We pretty making the guidance implied goes ultimately, then XX% if again lower regions our geographic operating basis, that your guidance. obviously on you're diversity rate, rate come just system. longer And in state this money a of more will is think down, good

Neil Mehta

And talking predictions could Venezuela the you little then light earlier the panel a and the think was of eventually end the situation at our of could be on about conference last was were at tunnel. question, it and bit your I the that Tom, deteriorate there this one year

of buying on it way barrels, the latest curious Venezuelan views recognizing terms in we the you're has about impact on there light-heavy but on Just Gulf your think the an less certainly Coast.

Thomas J. Nimbley

thing. were say the I I'd having think panel today, same if the we

down deteriorate, if come it refinery week to to I hit I ultimately XX%. I utilization – number the – look the back. saw think think And a their continued I at and Venezuela, guess is you but then last has – situation – to has bottom don't

it selling crude they're production they're to is it. selling And not haven't and their selling crude crude up, U.S., consuming they're the know I they're getting because now checked now lately, we're selling crude. don't So, any, I not back because if but they're

So, order they then sell in fit products turn the consumption country. and the they then crude to have products buy demand around get the to and to in

frankly, can get they to Citgo be people have the these (XX:XX:XX) when know to do, to huge investment time that that settled the think coming point got what those a debt in step the but with they the that bring whatever It (XX:XX:XX) to to to is problems to earlier solve I reality those debt I country right Venezuela, do gets be to then that the the and a bit move I counterparty calls then on they've – got ConocoPhillips is and really would stable, that a do and settled or quote can a natural me fact don't deserve whether issues still deals, in, they've that It's back. their direction. and was resolved going little resources they country all not would the seem what will would sell because with more try better. hope hopefully or of they're to get there get and they

Neil Mehta

Thanks, guys. Appreciate time. the

Operator

to ahead. We'll Blair & go Matthew Tudor, go next Please Holt. with Pickering

open. Your line is

Matthew Blair

morning, good guys. Hey,

is mentioned the to does look compared year last. progress margin this in capture down work a is You like it and Chalmette that

timing roll also this any by benefits is into to the Chalmette? for the on through crude optimization WCS opportunity of In terms plant-wide and would expect there see effort, when you rail

Thomas J. Nimbley

there that that is resource shifted the effort priority. effort Torrance, the opportunities effort, first initially now the now massive the key in and emphasis already base I that optimization done with rest That pay-outs had our We've the take was we're Torrance me and on people on and not the optimization Chalmette. we at seen system point of clearly that. piece. focus in to the some admitted we primary looking Let but we're took The the on think a we Torrance, completely at that

into That looking big. a and of couple additional We But time an in a jet iceberg. are at it increase one – significantly. system capital, things pool to But and significantly, million the in was We probably asphalt increase reduced Torrance business, because We very of that markets a Venezuela. isolated really – That's the and a to we're really to year oil. light but – on area, half six are Chalmette the focus the out product about really opportunities I into good some area that different say and of Arizona of in involve going want of the isobutane of may look to sourcing. especially opportunities we sourcing is the nothing some of that. what's yield of is going get can got ULSD crude take at we Torrance business to think couple that light not and cheaper. that big has relatively tip get gasoline low production extent given (XX:XX:XX) months little saw into dollars there in we when Vegas we in and there's of bit a the the back rather maybe kind giveaway cycle the We've octane that's

to So, a lot there's of coming opportunities there be of yet optimization in Chalmette.

Matthew C. Lucey

quarters. It rolling will feather four over the next in

differentials which but we've Tom you'll As I clearly entire it the it. that projects some would is many down but has rate, seeing quick dependent like control, can other expect improvement in be of said marked on embraced some In the there exercise. crude Chalmette. start capture the can achieved leadership things I things mentioned, they respects, And and

Matthew Blair

then... And Sounds good.

Matthew C. Lucey

some a amount. can in not get there overly quantities. it's significant And WCS it's but We terms down by of modest then in rail,

Matthew Blair

little then where And use to shifting, then or Could you bit forward of the Toledo? a lights also been terms modeling thought share in discounts instead good QX it. Toledo why just down I are? you're Canadian I throughputs are forward Syncrude higher was to those you going guess, XX%. the they now, of seeing. QX at I going appealing crude a maybe Syncrude guess are, that talk about, Is in Got have given would And have the might number

Thomas J. Nimbley

move Canada, routinely, question Actually, lights you part differentials the Syncrude we latest the is coming beat at if on Syncrude (XX:XX:XX) look Canadian out and if Canadian look your of of this before last sweets. would

where, we the quarter going more six to try a fact, – is source in that in of (XX:XX:XX). there's inverted or even months Now, we're Syncrude last to run sweets. amount times in last and been the still run significant But

in change is what going the going real mix to no be material forward. there's raw So,

that's on what your go that's don't X PADD self-sufficient imports all products, market to the turn which need you from got some Midwest overhang does If because going products crude going the reality the time, is into Canada, sourcing think as Toledo But in and likely as the wide overhang. us prorations when that pipe didn't you're a is that you'll a up, normally to well run anticipate difficulty to crude X more I assuming the get in we we'll XXX take – are to there's were on that refineries we then we're and come (XX:XX:XX) isn't, full case or it we – PADD on that as more it the crude the being is of after XXX of to source programmed can. try as the run then care we in (XX:XX:XX) the would take going where has the Toledo. it things of Toledo (XX:XX:XX). opportunity in the runs If

Matthew Blair

Thanks, guys.

Operator

Our next go ahead. Merrill Doug with Lynch. Leggate Bank America question Please of comes from

Kalei Akamine

on good Kalei guys, Doug. IMO an got is morning. for I've question. This Hey,

of your other system tie to XXXX And talk does is that feed? about flexibility you'll in what minimize maximize to I'm and So, and cracks let's your they diesel the trends margins, ripping. where are into marine the What's and ability unprofitable are over cracks gasoline bunker products? say view how of this And and gasoline carry these the cat gasoline the diesel all XXXX, hoping your of margins?

Thomas J. Nimbley

question, the of you I'm view of piece what sorry, last feed? The Okay. said

Unknown Speaker

feed. Cat

Thomas J. Nimbley

Oh, feed. cat

Okay. Good.

to, that can about and gasoline (XX:XX:XX). answer the of and XXX,XXX between XX% simple volumes you swing can of barrels we pool we a day the together all, assume make distillate the XXX,XXX, of our out First system

a distillate max there at by not (XX:XX:XX) are the if in these So, everywhere, margins. California go pretty yet max maybe we wide because we distillate, way, to much of

is wide would definitely between run a max that's And gasoline distillate will this in industry in if you we we're expect. whole a paint you these carry scenario distillate. forecast, and So, the max what you the mode. spreads distillate, and The forward have which possibility

because as full going distillate max move it into go you to people go that cracks to into it's one because ultimately the season, factor, a to and you That's March right, mode into go going as gasoline extent well, do is don't gasoline gasoline gasoline such diesel (XX:XX:XX) in demand demand next you're are scenario gasoline driving or goes of many you're pretty and why distillate. a into to if you going that the unmake shortage gas you is, have that's get the margins to if on up prices because turn of think much be then likely is but a IMO we anticipation season. diesel, Now, going that not going (XX:XX:XX). in the to April craters won't – unless And the have year – crack good everybody in going to up

And we hydrotreater high fuel that, might you Torrance that, of the high-pressure and you people carrying take turn to low-sulfur real is oil, X on the going the (XX:XX:XX) demand going do you make that well fuel, into XXX,XXX a of who low-sulfur the and but has not oil, to barrels that. made part see other has Well, to feed hey, a and hydrotreater now. your sulfur can high the we're fuel for everybody point the price off shut say, pressure knob I've – a if fuel – you'll runs of are can of a oil, before, million fuel compliant go the you The coming of be don't X.X the it oil whatever, day enough ahead material make cracker day (XX:XX:XX) a X.X especially that barrels is hydrotreater. coming with margins you'll ultra-low up fuel, good point gasoline say the comes people compliant able really to and have cat this have question increased fuel do cat valve how short on off to a

of the knobs that So, knobs refiners because our have more most. different than in complexity, have system our we there's lots of

Kalei Akamine

it guys. appreciate all Really I there. That's had. insight. the parts, moving of Lot I'll leave

Operator

with Roger Wells Fargo. from Next Please questions Read go ahead.

Roger D. Read

guys, sorry question it. my answered. been has I'm Yes. Appreciate

Thomas J. Nimbley

Okay.

C. Erik Young

Thanks, Roger.

Operator

We'll ahead. to Please Paul go go Barclays. next Cheng with

Paul Y. Cheng

morning. Good guys. Hey,

Thomas J. Nimbley

Good morning, Paul.

Paul Y. Cheng

that it. If market about it take what so, is have (XX:XX:XX) both and come Bakken the the offline. if clear you to how ramp (XX:XX:XX) that I well fourth I seen? think been have mark in capacity in WCS that not both talked that because means (XX:XX:XX). late Tom, how is that would able the what case, the Bakken Northeast not the you do addressed you much expect may the third quarter, you so much yet Is the has have I more And and And in is that's recently to already we more quarter? into guys apologize can that up first quickly create to sufficient you importantly you've those (XX:XX:XX) that how can capacity?

Thomas J. Nimbley

to take It's and let of we're near-term. you Coast ran going but rail Paul. is, talked they're XX,XXX to not the briefly, WCS our see Matt me reinforce going XX,XXX, to day just and plan by – and the barrels East going aware, well run to the XX,XXX, takeaway that that's be We it, forward in to years. the that and differentials we overcome with limitations on capacity as several are a going

continue expect we're East and and would system. we it to do that Coast today that So, helping to our is doing

an Gulf surprised the that (XX:XX:XX) The a In XX,XXX addition, was significantly. interesting United day in terms has of Bakken was these TI certainly, Bakken States on and down It's tight to moved WCS (XX:XX:XX) we the of in Bakken – got price in I'm out because barrels more with into market pay X,XXX appears and all it to Coast is to rail transport tariffs, so always Torrance. you've but to DAPL, that cost.

we'll do do railing into on what day enter XX,XXX, know. in more. are and going is which a supply to to a not chain some are to you need Bakken you try We barrels long-term But as really we contracts, incrementally XX,XXX

North got have either wherever. to You've Canada the or someplace in in load Dakota space or

to the the the rails have have to unloading to you've to it contracts have then and got your area. You railcars, got get you with

all and and back a down a out running Bakken refineries going are could up we've no XX,XXX We to because commitment, four not (XX:XX:XX) to path to be the to do move we be We're that. and could trading to Bakken, of there's would Brent Midwest three we $X about But on the right before. and going doubt the have reluctant and we enter into the that years is money where that. now been day on area, or from long-term a barrels month get unloading

Paul Y. Cheng

past Tom, for just this capacity (XX:XX:XX) that if sign ramp the curious because in contract bit don't operator they're long-term is to resisting any up a discussion? the really that easier well time there little the around you

Thomas J. Nimbley

are let's we want first four, barrels to to on out – something the on I contracts Canada bigger something doing of that's we're Yes, we've is with take to point, if Bakken. and was doing do think not facility, to were to were put edges more can to whatever them. Delaware the ready the just early, on we've And they're years a and leap three, do the this, make on and in City, for or to the more of go time order want trim big into are got what sourcing business successfully pay then and view system a the But it with Yes, do in to significantly us railing focus We their more, to like on we ad on we'll our that. the the and business well, this. they XXX,XXX but (XX:XX:XX), going this out have was where Maybe done, with we okay, and about be MVCs ahead going you may piece crew, in we're WCS and were for the on grain commitments, they ahead fortunately nauseam rail, that place that a now we and big when exactly staff, crude. to change and commitment contracts buck going of that on have incremental we'll longer-term and they prohibitive more five that sat enter take biggest our crude going like around bang talked that more and our up you're is want if you're and loading if to a (XX:XX:XX). for Paul. less do engines, day go to go it's you before want to and when the Bakken around And

Paul Y. Cheng

long-term means Tom, does is volume WCS contract? that that your under

Thomas J. Nimbley

it of – have not termed all for it. We up

of want in and thing don't for we is these crude. look yes, part the go and this But, (XX:XX:XX) go making there then crude. – find to continue and to can't all We buy out have we railcars,

So, we've in place the load we've to in barrels. termed deals the deals place or We've us to got got barrels. up show

We facility. have unloading move the barrels railcars to we of unit to the in course, trains have be able and, our

the WCS shape. the future, for near we're good side, in on So,

Paul Y. Cheng

move in Can Alberta with move us cost? you Bakken, barrel, from your Northeast? is then (XX:XX:XX) barrel currently And what what's (XX:XX:XX) into share what the the XX,XXX also is the cost XX,XXX that per you day

Thomas J. Nimbley

ports upon talked the really contracts nothing railing are changed can you that to we've has WCS load ports in give dependent It's crude $XX exact $XX an is don't $XX really particularly get (XX:XX:XX) Bakken. not We've we before somewhere about to and (XX:XX:XX) different place, but in we're changed that move we're Bakken places, – we talked $XX cost, but like where has and the loading the to in. nothing to in

Paul Y. Cheng

XX,XXX is the want to But not it. $XX much going That's the barrel, do more I than XX,XXX doing not you really that that barrel why supposed (XX:XX:XX). to if to $XX you're

Thomas J. Nimbley

and into we more to a $XX that to we railcars have at able would correct. and leases That's do... could be to on out get and not We'd new loading replicate space or go $XX enter

Paul Y. Cheng

(XX:XX:XX)? if today that is much to want How it you ramp up

Thomas J. Nimbley

Actually, to could rail have it to that And Bakken doing think probably you by we're we longevity has. you'd that the Bakken is get don't that issue, it the done, that has commit to five Paul, ready that years. for because biggest but not – by do WCS got

Paul Y. Cheng

Thank see. you. I

Operator

I'll does Nimbley return no have closing appear floor further Tom questions. the to we remarks. for it And

Thomas J. Nimbley

everybody for look forward give good will when day. had have you attending we to everybody results. you thank hopefully We next and call quarter Well, we a the call. good a the Thank and great

Operator

program. And participation. conclude today's this will Thanks for your

disconnect. now may You

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