DK - Earnings call transcript Q2 2018 | Delek US Holdings, Inc.

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Operator

Good morning. My name is Don and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek US Holdings Inc. Q2 Earnings Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers' the will question-and-answer be After [Operator you. Instructions] Thank Mr. is floor the yours. Johnson,

Keith Johnson

I thank discuss Thank us like you, would Don. to quarter financial conference and second on call everyone webcast US' to Delek XXXX results. today's joining for

Uzi management call CEO; EVP team. as on CFO; Chairman, other as Kremke, our are me President Yemin, Joining members and well today's and Kevin of our

conference that Securities reminder, this call term Laws. defined a forward-looking as may As statements Federal is under contain

during Without this similar historical believes, made that foregoing, For are deemed forward-looking of this statements expects, expressions purpose, words statements call fact, identify to to statements. not any and the intended plans, anticipates, be limiting be are may forward-looking statements. the

set Commission our and You're the Securities in forth and with cautioned release. these important in may that filings Exchange statements latest be our earnings affected factors by

may actual of otherwise. update from statements. undertake no results As obligation the whether a a discussed or statements, forward-looking publicly differ events, result, or in information, forward-looking future as We materially to operations results new any result

addition to call with over review I'll turn the accordance accepted GAAP, which of in the is or non-GAAP reconciliation principles non-GAAP it financial that, of posted Kevin. on the over closing who the review Kevin before strategic Investor to Relations a section few turning of a With to call, with report measures will release, comparable GAAP performance to our website. will the On begin can reporting the comments. which today's be to financial quarter offer of Uzi found certain encouraged accounting results. we financial financial these generally the results, press Investors In are results in

Kevin Kremke

Keith. Thanks

an $X.XX $XX.X share share XXXX. year adjusted in the recorded XXXX, $X.XX of income On difficulty] share of $X.XX per loss million $XX million diluted net to the or income to or the for the $XX US Delek loss US per net basic Delek adjusted million quarter per a quarter second period. an prior share second or [technical per $XX.X million, of compared For of of basis quarter basic $X.XX basic reported net net in compared second or

Our prior million A in reported results million period. quarter reconciliation to the results press $XXX.X the in EBITDA our the is of XXXX year $X.X to financial of compare in adjusted was release. tables of included adjusted second

were or During finished products per results million effective million inventory non-cash of Permian effect share a between is by consisted purchase after to oil the timing $XX.X $XX.X $X.XX of the when per or second of crude non-cash $X.XX items. realized after related quarter approximately sold. price tax share it as of This XXXX, approximately tax and are Basin

Alon. expense of of $XXX inventory approximately addition, basis, included increased or a million of share such previously on loan into year-over-year a primarily have and announced [ph] G&A expenses per $XX.X waiver addition which to transaction would that to been results these were of operating equate Taking received per million interest in rents basis consolidated and On $XX.X for million tax to XXXX. or share. to by non-cash the as higher approximately G&A of our cost. reduced $X.XX In after mark-to-market share million would items due considerations approximately EBITDA El would was $X.XX Krotz refineries like note of line I $X.X position amounts related Spring March, by Dorado per results and net This position. result $X.XX charge the the

non-controlling rate excluding interest income XX.X% the of was tax the XXXX. $X.X in million income second of Our quarter

approximately in XX% effective range rate of tax expect the be For XXXX, we full annual year XX%. the to combined to

to capital now spending. Turning

of last approximately million in capital the were to compared million Our period quarter $XX.X expenditures the second $XX during year.

in million our the logistics During $XX.X million second corporate. $X.X $X.X $XX.X in refining we million and at in segment, retail our segment, XXXX, million quarter spent

$XX.X includes million refining, for This does Our level. at million. $XXX the million $XXX.X This retail right in $XX.X at and is $XX.X XXXX XXXX corporate $XX.X not million forecast amount CapEx amount position million in in logistics, midstream of projects include of to net approximately million consolidated with second ended in approximately the We Permian $XXX $X.X million the our of enhance debt. billion on a cash quarter and Basin. basis

logistics during increased which was performance a from $XXX QX, would at debt XX, million affected net point QX. we working Delek Excluding $XXX to resulting and net financial second quarter had of both XXXX.We have of do of these combination had actually We want the without XXXX, quarter by sales out at the changes in in and improvement us volumes to higher price headwinds even operations cash which from been come but reverse expect during in million, headwind during period. debt operations June cash working back had we capital capital to the in of I great that

principal program investing returning allocation to shareholders, place our which in capital disciplined balance goal our debt the balance we in sheet, premium maintaining to DK program in a With the includes zero September. reduce of strong for a the through result strengthen with we settling further will sheet dilution. with $XXX prudently the opportunities that for convertible will have exploring and cycle, amount shares the Our operations balances hedge in upcoming in leverage cash cash We with growth. the plan amount maturity million the on and

second our X.X that the share quarter. approximately with for note shares There You'll million was associated count note. this diluted

just $XXX segment wide segment. the second benefit year. differential to to a from Spring of contribution transaction. refineries second primarily the year-over-year compared addition in the million In of in million a margin contribution would the of Big and margin results margin refining which contribution Krotz I We in Alon increase is the quarter the reported of XXXX. Next due $XX.X like of Midland the quarter The the to our feel Springs last discuss was beginning to by our

conditions. market improve to addition In

conditions million was products finished effect was inventory Basin As related were $XX.X timing Permian sold. mentioned headwind approximately Market the its as spread quarter an to for and previously, between last second crack price measured year-over-year realized, $XX.XX period compared on the per purchase increased to the the per Gulf same basis to a when barrel of year. Coast crude XXXX in barrel there $XX.XX X-X-X for it by

the to per the second On barrel system Midland crude last last year. discount $XX.XX $X.XX year barrel per benefited this refining basis, compared addition quarter WTI quarter lag of differential a to barrel In the average $X.XX compared from second second of differential WTI was per crude in quarter $X.XX average per the year. was in of crude to discount an Midland that an Cushing barrel Brent to

our quarter second to reported the was per the realized barrel due differential results Midland that estimate inventory During and approximately the timing effect. $X XXXX, we

prior Our the this logistics in performance Paline $XX.X Big $X.XX million $XX.X X, of year sold sales and were margin approximately $XX.X that business segment retail the second effective XX.X% was contribution quarter XXXX to down margin wholesale gallon. was average million that Pipeline. period. Texas a approved approved in of with of compared the due approximately improved year-over-year million million $XX.X average Spring basis, On in drop March year the to primarily $XX.X was and West segment performance was Contribution and of margin an were margin million. fuel Merchandise per the retail in gallons from

XXXX on of as in for year-over-year in a period the as prior compared a July is million loss includes was hedging reminder, to offtake $XXX,XXX XXXX. there second margin strategy associated in period. quarter hedging of reminder, in a agreement. crude inventory no a negative Corporate/Other with to realized oil compared net a Again for a $XX.X second minus this segment quarter it these As loss to Alon the million segment million Included the the the prior comparison Xst, supply prior transaction acquired for $XX.X period. year hedging Contribution was of Delek $XX.X a in this loss of million was year related and the approximately the US results $XX.X year on year loss

wanted provide crude Uzi, throughput over some to on it turn guidance modeling I for I Before oil consideration. to our

crude from During increase was the quarter was in first the system which barrels total day refining per year. day our oil per an second this throughput XXX,XXX XXX,XXX of quarter, approximately

in flat from essentially third the crude system refining we QX. barrels so quarter, expect throughput to oil the be For day approximately per XXX,XXX

inventory $X.XX In addition that at X, crude based curve the discussed, timing on our $XX the approximately in the the turn estimate discount per we our the backwardation $XX.XX oil August curve also market I forward has cost. Cushing that the our purchase we will Taking on margin which be call forward it Uzi. that we we based approximately on want in over I'll effect and consideration expect into our Midland in third Midland approximately will realized quarter. discount estimate to barrel. increases and With to be per to crude that barrels note, gross increased

Uzi Yemin

Kevin you and a Alon just the has we since year morning. been USA. good Thank over It acquisition of completed

out a achieve has beginning. time done the the great team to we objective that job at During the laid

First; with in February acquisition structure we XXXX. Alon the simplify the corporate of partner USA

the average refinancing our reduced was utilizing March balance through strong by our completed rate interest in Second; sheet XXXX.

approximately of Coast was West Spring million logistics non-core the completing down $XXX value divesting the Big assets unlocked the drop Third; by and on assets.

XX $XX per which to crude approximately the our refining barrels second of company approximately approximately XX% to our build million to million exceeded on quarter. capture or of for transaction. $XXX million play. $XXX million of synergies basis Finally, to guidance of with synergies our Midland We're annualized annualized basin Permian approximately from access barrels original annually track crude We significantly $XXX is of oil capture XXX,XXX Which the accounts team day this an through million $XXX on million.

We continue to closer wellhead. to get make initiative our the to progress on

cost quarter to the Spring As has our Midland we overall oil When future cost. control approximately more in crude expected support potential with performance. include logistics $X.X a barrels assets this that and added our quarter benefit we results We billion. should unit down play under as to more the improved of We've operating crude is gather barrels lower balance expected the further which from previous quality ended great our DKL. construction to Krotz of cash drop Alki the

million year-to-date dividends through we $XXX a of remain have stock remaining and purchased We our our creating approximately business growth. we've $XX open the returned Don, repurchases. balance to our quarter, our opportunities on XXXX of would questions? During million On call return and total in value long-term With stage June second of through $XXX XX, next the for investing please share exploring as develop approximately million. aggressively the basis, cash we focused you to and shareholders, authorization that

Operator

[Operator Instructions] your Mr. from question. may RBC Capital line of Heffern our first Brad ask Mr. the you question comes Markets. from Heffern,

Brad Heffern

Can II. just think thoughts in Cactus Uzi, for might resolve give trending you when the Plains you and earlier announced spreads issues yesterday in in how transportation the themselves? slightly timing Sunrise see general on your Permian you that

Uzi Yemin

what Obviously Plains to with are we're trying do. familiar

of Let problem. me tried experience, or some first our help tried we it all on railcar thinking it's to couple take rail, stages, to people maybe eliminate in facilities almost of Well our ourselves own trucks based some impossible well use to of the so. can and to were truck do

can of we probably of doesn't of idea truck the exist. barrels millions So

take The XXXX, my hesitate commitments. XXXX for knowledge of big sign in second hesitate that, or is part to what because to to producers up happened pay

will see do at end to that least spreads we the we think XXXX. of So great

days. weaker in two. even get you first ago starting sold, the forward actually already We at XXXX a at sold curve if minus look quarter Now few week to last we is

is realized and on based stay but XX, at that of minus remind want minus it quarter I this to three. Now everybody no. was going to

on three. based So the is EBITDA minus achieved we

very on now positioned screen quarter getting month see So XX though in, is we're to between XX is minus showing will don't September it well situation happening month. we franchise for minus The XX the think we weaker. and this minus come that fourth a even and trading the

Brad Heffern

quarter just generated. versus appreciate color, I little lot remarks. seeing usage, front your that, purchase Uzi. bit potential a Should Okay, modest a just acquisition amount talked prepared opportunities about Thanks. that you just given cash how on in building number of the you're you balancing, think about guess it M&A thinking of cash or do Pretty read about And repurchases? cash that into the I this then for

Uzi Yemin

the we - and Brad, were to we this It more something then will. that the of we doesn't need We looking we balance. thinking it to with on on very over feed getting decided at, shares Then we're dividend. increasing aggressive, of and did more, if shareholders, lower we're very need the was one, or we this going for repurchase anything we're to aggressive quarter the quarter were continue beginning first the future mean look cash to you to conservative take [indiscernible] little side of it the are side. bit the increased

Brad Heffern

Okay, thanks.

Operator

Our next Credit Suisse. of the comes Manav Gupta from question from line

may You ask question. your

Manav Gupta

I'm just excluding inventory number trying flow operations issues. to so and cash wrap myself any from Uzi, working around clean capital

I operations, million to about think by. cash off $XXX I'm getting I'm know clean how from in to want just I flow much

Uzi Yemin

You're Kevin park, don't to if you're ball in I ball know want that. park, you go the But Kevin. the in ahead take

Kevin Kremke

That's right, about Manav.

remarks, working quarter. to on, the number increased million. Yes Like sort from by what that or in So was QX we where we park in $XX right had quarter”. said flow really operations for QX, some showing you operations we about ball cash - we capital flow we the have about improvement million We're is increased if the in prepared versus a “clean look prices release actually and $XXX improvement from the million the QX, operations. night last and in from at so cash and in we or driven have have did probably cash ended changes sales $XXX earnings of

Manav Gupta

differential? $XX So about cash I free $XXX quarter, then million Cushing Midland like a it's in let's in Am thinking million cash flow on on I your free realized this differential. that's $XXX about right? CapEx just XXX say flow and out take it barrel $X million $X from

Kevin Kremke

On $X right. realized that's exactly

Manav Gupta

now internal which at if that so Cactus differential actually only II Right in XQ, comes you internal keep that take because quarters if service for now at is, So if question telling much struggling that I'm are XX till are there cash six next your how in what spread generating the Plains to is XX. I the guys the is, what Cactus models? you your and models - I is XX, saying partial online II remains XX, so

Uzi Yemin

need Well, inventory the it's and we project effect is quarter, We now one-month the is you and because don't simple. this do already telling delay. not this quarter, it $XX. traded XX.XX that. you, quarter told even for there September because Manav, This third you at very told realized, just at calculated September XX we're effect that can already for inventory October it's asset we third for the something, is to - is third that We is

to is going So you're be if to big we're so cash in very the That the right now to quarter very right two and the free fourth is reason [ph] obviously go, looking optimistic. September fourth but that's another we've and flow quarter so come numbers will flow. at have free so strong, the showing cash continue is weeks trading far enormous now. $XX, than September even better $XX,so

Manav Gupta

much our so We're big I just six known downturns. a billion to too next a strategically not indicating for this with could such acquire and [indiscernible] That's on both your are $X.X months? who's agree flow very balance in projections XXXX exit in sales to downturn, for why on billion is the that cash a cash built of $X.X sheet. you person

Uzi Yemin

first needs be up. Well it to

repurchased Second, we're look in we six increased doing. what dividend. first million $XXX the months, We

and to bigger We getting thing, want Permian giving on we us will look opportunities will the one at as shareholders continue emphasize side cash bigger Permian aggressive area. continue to I more to to opportunities. we're and to the coming be in

So don't opportunities the we're if looking other be surprised in at Permian.

Manav Gupta

my so and you Thank answering for you Uzi. much taking questions. Thank Perfect. time

Operator

Read, from comes Mr. the may Wells of from Read your Our Roger Mr. next question. line you question ask Fargo.

Roger Read

calls, I the lot probably side in is as there. that or think really out, tongue kind maybe well, I right discussed. there, a talk as think is how values to a the way think about opportunities about been talked more all to there finding there opposed of as line asset better but laid of you line last on worthy equity. cash kind there along or terms maybe you the should Uzi Manav cheek alluded of we're logistic little opportunity? about you wondering what your conference of of that's the just That's was valuation to up, buying now. not either we Manav back comments I Can maybe Relative where course. potentially just of last worse, or less in you for that two

Uzi Yemin

Well going that's I'm think Roger a so different I recorded discussion, being here not one. that I'm

Roger Read

there? front, out Yes do just what on really acquisition see the certainly, you

Uzi Yemin

Permian there's of all Well on the growth. combination acquisition first and a of organic

to if You our matures, to assets as the logistics see plain and is with we here look of know, MLP the on on logistics million under Permian we that developing want will, have out that. to hard and pressure around $XX market favor the we set that market I we're the Permian, need for plain aside come emphasize side, that. you still will we

and do buying be don't want money. want be but have to the clear, do we at just of And something to Now we sake look disciplined it. not buy we to past, because the want something for want I the we to we in try

So we times we times acquisition are. that's a you not an balance. or XX Obviously XX is XX with times who or that that's surprise won't

we and with acquisitions to of the organic pricing remember is just project returning this to right shareholders So that combination cash aggressively. need

Roger Read

the an valuation. was of Okay, result thanks. started was operation of that getting where premium and particular retail company, the it but And improving off you you area then retail a years originally operation sold investment

presume should - you look places leave as there. of look say enough is had maybe it the path or higher what some it's mean that it, cash not at a those one at year kind at and is good the opportunities really a could I the retail it alone more is you of Are we it Alon CapEx. As a there CapEx there go of CapEx, or is? flow of it's I almost

Uzi Yemin

are the days the three Well booming. is just let yes me spent we well there area days over three were last Midland, tell just in And you, there. in - Spring and Big

the results if as and for in. areas some because did area retail however in quarters achieve that stores so stores the we're we our we record side, now strong is just including ago. years will on retail results next building On also market that some, few the quarter in that Mapco record have are actually stores help you megastore sometimes that see every think the I side. remember the the like [indiscernible] with are need the you we

that So not talking the at, of XX hundreds to we're magnitude stores scenario with. we're here that in looking it of of about dollars. call stores It's or eight millions start probably

wouldn't it, of scheme that I producing flow we're So producing. great of the in read cash into much the amount

Roger Read

then way to just last that. about and maybe Okay think the

just the got necessarily environment do quarter. acquisition diff piece I in here is cash end the sheet You've else that's balance of prepayment know all any has one convertible they repo flow like lot a was won't debt crude value, and a to What away of as for sheet generation. be going you look favorable balancing forever but here forward. balance would not go wise debt share curious near at I for the of you stronger your it's were very term, terms

Just you overall at how look there. the do picture

Uzi Yemin

opportunity neglected for earlier. I Well an thanks about that that's convertible, mention asking to the again

that's Obviously won't million the mind $XXX settle $XXX cash. impact you debt semi-equity to the of but September away million. had obviously with with We net convertibles potential go be will in end by our cash so with something will the cash, the

El facilities Coast months alone live. at moved to going The that's noise. traditional in of has [Indiscernible] does facility, The are this that expired. ,our with at means thing of as West or the lot early the without we XXXX our very about that looking there to remaining more at that on didn't area. that create the that's one sell two Kevin thing at of facilities, Dorado facility So need talked We're point the it we ago, so a other intent and we expirations CNI the two for [ph] carefully then coming obviously and renew XXXX. in expired same step saying, look and is our next system within and

Roger Read

thank you. Okay,

Operator

from comes question Prashant next Citi. of line the The from Rao

question. You may ask your

Prashant Rao

IMO and out and on in wanted sort in, call, what I'm market? are yet very the you think there is a circle surprised the terms the of I that's I been the the there's and XXXX expectations allocation of understand in question that but story back you have Permian focused guys Specifically play [indiscernible] to I balance crude cash lighter on capital sheet guys seeing you're is narrative in and expectation that's way that heavy that something widening use you of of like some cash there take been is we terms differentials, working, back discount could but or be in maybe in about out from in problem, advantage as perspective term. thinking that, of sort tightens at transportation the investments should Midland up intermediate of how least exploring

think flow the I story, become of term latest thoughts next your wanted longer so cash on might that that? leg

Uzi Yemin

you do obviously we sure XX it everybody to a conservative I'm more I allow again but be think to minus remember all first up. the up not now that logistics we're - configuration I thought we're maybe steps more when need Absolutely, know want not. if taking at WTI minus all see, benefiting people be can as of and will IMO we're one easy, typical showed us I but just now everybody to medium, to sour, El going to refineries I'm so from Midland like I Dorado and and and too pretty that and to and IMO. two to to areas or capture Big it's see I do we around between the on the Spring more we or can that if expects that right and that benefit that now, that's wait on that around side. the when taking light here opens comes conservative more their Both sudden. emphasize little few it want mass then other the see WTS this XX, of I was that. go remind Midland cannot steps,

Prashant Rao

in - Okay, the synergies ask you been to announced in expectations if target quarter the call then came anything [indiscernible] versus guys have it is that from and just where several what anything particular particular the do ways not QoQ but there's maybe in in seems to question a the out going maybe where the this target like for we're powdering then upside quarters wanted backlog just dry now, forward, counting. your beating else there's

Uzi Yemin

Yes I actually think that, much Krotz in pretty we haven't informed - as board. I think two we're saying well, days the filing next the presentation investors today the

guys I seeing think you we're week. next

the on is So the new to side, estimate million commercial $XX $XX between million.

capital On and $XX we've it's to million $XX pretty million. the $XX the corporate million same more operation $XX million. of around between million and earlier side Cost $XX little reported much what

Prashant Rao

Okay, take another last was asking fantastic to at one going what just stab earlier. and Manav I'm one

$X remember you I what means everything think is dollar I correctly, be to sort million re-incremental [indiscernible] in EBITDA previously to on sensitivity out you guys be of call ago honest, now? terms Midland right is being few or if have number $XX of around little that there's the called in on specific would every willing EBITDA, out annualized just the months sensitivity

Uzi Yemin

less here, move the barrels quarter it end we that's' times that exactly or four, it's the the gave million million pennies essentially you there can more inventory few $XX.XX quarter. that's because we so third Midland. of that's the of But by essentially the divide quarter of basically number, Well impact you XX $XX pennies gave few the what reason $XX.XX you the for on can Midland if the that take you -

million If in incremental of XX quarter. you saw top that's four divide times you on second want $X.XX it's the understand by to barrels the what

Prashant Rao

just probably we much I'll very sure what wanted to make - it you over. Thank confirmed. that's Okay, we're turn

Operator

you the The question. Phil next JP Gresh from question your Mr. Sir of Morgan. may ask comes line from

Phil Gresh

offset guess modest on prepared back a I'll component right just to gave be in just that you the that degradation there, quarter-over-quarter. remarks, I just of color that partial follow-up you clarify the

said you think $X.XX. I

Uzi Yemin

is it, setback That full suffer we Phil give way versus versus in any we refinery, will wanted see roughly that's we the you quarter like we XX $X.XX correct, disclosure. or exactly. last about market buy what to And the $X.XX. Contango other from was Contango backwardation

that's That's but the think crude, more how buys probably for everybody wanted everybody else. just to I [indiscernible].

Phil Gresh

that's Yes, How the tax much of first for pretty expect deferred have just but quarter half in that to back would big base. Q reverse We provided had then first helpful the the what's color Kevin on yet, and the headwind you happened the no the you a working capital. on half secondarily. in flow the on obviously don't cash and

how as Just cash reversal rate you're some wanted about year there to to clarify thinking relative is taxes that basis, there a book full tax on happens well.

Kevin Kremke

now to back the right capital fully expecting we're headwind of end. full come, working As to revert by year

about in $XX then So the tax piece, year. full cash estimating half taxes paid we the million year would expect And on from for cash changes. here on out essentially we're capital zero net of the second working

Phil Gresh

is million the for $XX full year.

Kevin Kremke

Yes will hit. in that QX

Phil Gresh

here you everyone probably but the at you got your mentioned opportunities then cash things. allocation some still capital mentioned it. think exceed And as of that highlighting generation this flow M&A is convert piece, down, would all Okay, about we obviously you're pay looking these

looking at opportunities looking three buyback at So if of even this in there you other quarters you're kind next anyway any you're is the two the these modest things, your positioning? reason are in size. M&A couldn't given And that extinguish to

Uzi Yemin

be we perhaps unless say on there's billion - we say all that door. of Unless balance one write and I sheet. don't or opportunity that's $X sudden the past there's knocking expect nobody of an well - will When billion very opportunity but expect should our our should something, check agree. We stands as us right $X.X in for maintaining on shouldn't see a conservative We I to conservative now were continue nobody it that. to

for these be here pretty let's free cash clear are upcoming flow. quarters big of the - However, numbers the

that if value, do in, there's out loan it at are create so and So which going it dividend we carefully. special remember no outside you memory to $XX, like day we believe was in shares that the from by I'm we going - the the very just that did a the reason mid quarter, big out to see Last buy opportunities we a a market is XXs. loan, there to today other from chunk the increased look buyback, day means we to if won't before at raised.

to want So just smart we're to want bear with it us, that. in We committed to way. we just cash, do return

Phil Gresh

lot. a thanks Okay,

Operator

you of Paul The next may Sir, Mr. your from Barclays. Cheng question line comes from the ask question.

Paul Cheng

has the very is quarter last you achieve really somewhat the think and that that being maybe actually Do several lot than Uzi, you're sustainable rate good. have of differently that downtime, to you been don't lucky done that? in what utilization have just or

Uzi Yemin

said third That's as expect something great bearing happening, same expect unusual earlier question, similar thing in we the in the quarter. we the the a situation Kevin

of on expect We we way There's and checking do the continue won't and believe smoothly. I but took pretty got bear years think completed in we to Fred reliability, proving our in back for no we have three and couple the performing crude, the we them years turn [ph] coming quarter we reliability of we quality mid ago, bear care El as gathering we attention until [ph] team, but control of and system. did a Obviously Dorado in the [ph] as job asset. reason first that perform. great run to growth our project to ago then the to XXXX, had

Paul Cheng

And is Dorado for quarter the how first XXXX? turnaround big El in the

Uzi Yemin

of of I'll terms both. or terms you give in dollars In

Paul Cheng

impact. The

Uzi Yemin

the it's would Downturn $XX turnaround. terms number the a million probably million it always of $XX XX XX say that's for million. we oil-to-oil, budgeted I major $XX cost, And turnaround. call to and days in

Paul Cheng

be down? to going is unit What

Uzi Yemin

sorry? I'm

Paul Cheng

Which units be going will down?

Uzi Yemin

entire will down. refinery be The

Paul Cheng

The entire.

Uzi Yemin

Yes.

Paul Cheng

been you're see you that get Uzi, about reason you've to and talking the oil, on prioritize one And you why sale. able of your more more

So what is the now? percent your of oil post getting that You there sale. by

Uzi Yemin

on than I between probably of West would gather little our either Texas say places that we oil. in two-third more

Paul Cheng

or now is that it getting, So you're I you're that of too seeing presume not Spring majority is that [ph]? spreaded Krotz

Uzi Yemin

it, obviously is do. to easiest Spring of Big Some place the

we start to Tyler the Dorado and of El some is Spring Big thing portion it, good do as So most we do in Krotz. now actually get at same and in

Paul Cheng

you for say too And XX do next that's XX can XX%, to target get what is you or months, to XX% think aggressive. your the

Uzi Yemin

We can. No, absolutely can. we

Paul Cheng

couple related that's J. solely that the including Okay, Kevin, inventory is Aron and timing questions earlier you said impact. $XX.X or three-month maybe Kevin. when order on for to that also million

Kevin Kremke

J. also P&L. No simply when inventory that nothing crude and the a we effect in crude, between physical effect our Midland on a then the it processed in inventory between Aron when and with system just so top to up there's shows has that. it it purchased goes of when there's do FIFO that gets the actually lag purchased we is through timing and

So if every FIFO we the got except you Tyler. recall refinery method, for with - account that inventory for we've

additional in effect. P&L seeing you're the realized So impact the purchased due delay between of and to kind that crude

Paul Cheng

the But Because because of J. company. your FIFO effect Aron, right? for under sensory is you're LIFO

Kevin Kremke

right. exactly that's Yes

Paul Cheng

other? I'm what Do and related So the out separate is which have XX.X you is the to Aron breakdown? to what to related J. between trying the is FIFO,

Kevin Kremke

it's break our inventory process system. the combination it way, just it the of lag in way and crude but physical we through both didn't FIFO down We the that a

Paul Cheng

and realized everything. over process million, Yes you because three-month so three, is UC spot the actually difference is of kind difficulty that you the on and five earlier the that and [ph] the that, to between you over so $XX over your realized number Midland fully what is $X I've over XXX on be should to and reconcile $X the that some according day, talk the about spot

to trying what understand I'm So mean. XX.X really the

Uzi Yemin

think where no, don't the there's got that I I There's don't $X. know we $X.

Paul Cheng

On mean on. price I spot the spot,

Uzi Yemin

but to remember. Yes

Paul Cheng

guess over eight, I eight. Approaching

Uzi Yemin

ahead right. we month buy time. it it, of we You're one always But buy

Paul Cheng

to that, what is trying that's that I'm understand XX.X? understand why I

Uzi Yemin

we Okay, ahead one month time. the of is, buy XX.X

Okay.

at look part ahead its So month spot, if you processing the mentioned month one that of bought the not $X actually we after we bought crude it. Then actually one but the we're time. just we

we another that it. we're month actually $X to the For it bought, now takes process

- earlier. the on we back $XX.XX. do, So month the to to the one start though you you the need need you if to spot even forward but average, is month What did the of number envelope, want calculate do but not you to

was and the in in is you just was traded average to August do was as - June it So the the July, it need third told close as May, as June. to what quarter you'll I for July traded get in to do take of traded you. And for very number month it

Paul Cheng

means is - think number so the that realized, carry that between I that three month that Yes, you that what to basically the fair difference later? so defense [ph] in is

Uzi Yemin

Exactly.

back in because future doesn't change. Now obviously the the that system come will

will XX Midland morning a $X. to a from benefit if that XX, all So of you to sudden tomorrow go see of

Paul Cheng

that, Kevin any realized And missed the when loss were or gain quarter? the have you in do hedging about you I what hedging talking

Uzi Yemin

We little bit and gain have hedging a loss. of

Midland me little fluctuates We're now. It's However point a I far. the XX we do a about the look bit say, so XX% pretty hedging production. want I of would for the less much. at that talking differential, months it with to, little from good of It to call obviously. than that's

money, will start So we with did you of going hedging forward bit Midland at start the to curve. little information, look forward but we're it we providing we're the because a around we - once do

Paul Cheng

then in realized right, gain about have did loss? hedging we we quarter any All second saw, or how the

Uzi Yemin

for up this. second, at a us let look Hold

Kevin Kremke

the at the on was It back table, of release. our

Unidentified Company Representative

Paul, you Yes, loss from on so of if $X.X quarter. release million Page hedging the of XX look unrealized the

Paul Cheng

I hedging loss? talking you I'm Right, realized realized. - particular have with about gain realized. saw I'm do or that any

Uzi Yemin

number look okay? to at that that and we don't why give you, it is [Indiscernible]

Paul Cheng

saying explicit of think talking the [indiscernible] I will Q that just Yes this XX%. return for some that you you? that cash cash the policy a your that's have final when way about fine. of or more is debt Uzi want you to that, A you Is of very or a people need flow they or is cycle adopt flexibility so XX% not strategy competitor

Uzi Yemin

to That's directly. great it I'm question, answer very Paul and going

bigger that feel that great value is on the we job cash. we as for combination of acquisition company return and are peers based as shareholders shareholder well us. value not of or Some growth are trading growth than doing And they're by in much our our create to

So make sure continue now. to we like Alon can the We acquisition to aggressive want we El will and want before to the [indiscernible] like a Dorado nimble company, be when maintain with have you and to we that cash grow did to be why cash flow our still return or - if we acquisition.

Paul Cheng

Thank you.

Operator

Sankey Mehta question. Our Mr. of from the next question. may Securities. Goldman question Mr. ask Sankey your may next question may your from you line the Paul Sir ask you of comes ask Sachs. from comes you The from Neil Sir question. Mizuho Mr. line your

Neil Mehta

terms what's first So or business spear how has of big had in are become, guys question I given the production. of tip your Permian oil happening you gathering on

Given any the what of differentials, seen at suppliers? your terms in terms in from or you're customers producing of seeing slowdown you activity have

Uzi Yemin

the I'm production technical, here At every many but Actually the we I'll it them. do month projection of of the business opposite, getting get with we and producers way from system little the anyhow. and works beginning of many, do

month, see oil? every middle say, you just booming okay and wrong. every one, take they towards West freezing the And So you then and huge the by near the of following first the because quarter the do or call more they Can you just little with the I end month are there the and that in as Texas producers month, we're you the summer saw the we whatever month And end then what from is Well and Well differential the, slow but that's of it because weakening month. comes will tanking that how saw the was in plan, our purchases. us we of what it was once see the if first get to down speed, that once of production we leads now we of plan that what the remember that, we the go slowdown. comes flow. obviously

So absolutely no slowdown.

Neil Mehta

playing back see that's just inventories Cushing a here WTI WTI. here? Midland, thoughts from talking terms basically guys How differential. lot this bottoms effective of out think and you Okay, [indiscernible] in the your the of to that, WTI. time really helpful. build at about also see Brent One to between tanked are up great is point. you start And but on Cushing We we'll spent and Brent Spread that Brent would curios do there. latest WTI

Uzi Yemin

now. [ph]. WTI continues if Brent around then And back to is just what a I asking Midland of before Brent obviously great that question, look go Brent cannot which You're Midland emphasize mine is one does we Neil. $XX I to right in to thing it answer, was our in at access more do, $XX,

the there's and opportunity, WTI, an However, being Brent little to that I in there's opportunity in we an first do in a for that fourth think quarter do there's bit the think Midland quarter such despite why discount.

aim and would to you core Brent if So a will, the $X.XX discount I probably and WTI. between

Neil Mehta

Krotz. last been Alon. has The Historically is I question have for asset this on a problematic

of Krotz. historically the looks ran terms Can getting This realized and problem just from talk you the quarter area, of pretty that is type Krotz expenses you crudes able facility is downside what you type I on where you beat performance because well discounted decent turnaround can to into great it and the of were like, in into about because sustainable us the margin. is it operating a the in which run the crude to and drive that's rate bring assets think this

Uzi Yemin

say you it. also Neil, with And two on me ago positive put the this between with Krotz then and that that Krotz because and companies do fixed well have thing combine let Colonial RINs privately you space so is has a enjoying are space and a of that increasing we to year just I'm or I yield crude Obviously either effort, yield. not as remind now. synergies the into of the cheaper, actually backs. we we'll refineries net lot energy the to told we sweat going cost bringing something negative

to want So ways have when clear. go improvement. We of Krotz of $XX, all shows I still go, to crude $XX to be prices sudden the

a it little of reliability, on a tweaking there. refinery still have over working though even we great First have we management we're do

need to need commission complete is thing we big the second the project, to The unit. it a we Alki and Alki. The is

hold of blending to are get year us as in things, need next XX, we has of and then XX than to different IMO and part maybe Krotz first the and more bringing, market the said, for of in but now XX XX. we're as opportunity We'll today's EBITDA or we to and that early Sometimes - what opportunities around probably stick there ready well. that

So will Krotz I be perform us. if surprised well for wouldn't continue to

Neil Mehta

Uzi. right, soon. a lot see All you and Thanks

Operator

from Doug Leggate The your Sir question next ask question. of Mr. Bank line from you of comes the may America.

Kalei Akamine

This on Doug. for is Kalei

been a spreads side, opportunities here? E&P Where the few So DK deals strength. lighter duration? Wondering is nearer for flow are margins to if participate could for potentially on deal to prolong producers any for trading there's term announced longer there where

Uzi Yemin

like that, behind you Well cash We it do do market. and anything that XXXX. paper if deals the do you not we we haven't done several something have deals, away do from deals but

So if done XXXX, you ask long-term we not have behind it. about

Kalei Akamine

Okay got it.

accounting quarter? on Just the Can impact the the Midland I on could like been wanted reporting capture you it have $X questions. higher. there, earlier a to expand on it of Paul's spread one the bit and expand looked little but just the and understand differential the

we're was perhaps was, for front when XQ? crude the be tighter. towards we a of spreads were And any bit watching that question are weighted modeling the of the out were there issues quarter end buying the out the for So should my

Uzi Yemin

a obviously be beat nothing buy we that to you a pay we ratably play with little. attention very, our the crude to, little just very strong. We try I'll bit, it spread

and ask in Not is less. penny strong. the very the Second Whatever even question screen, not you see this times on one we we would I that the I'll get. what do past be many

it because [indiscernible] just to more, As let's that. but the leave gathering little of

you than Third; simple. how to very that It's what you I is weaker you expected. Kalei got don't know

time. said, of I inventory as think one we have very you and we because formula month is month one ahead simple the If for buy

little you was average the July, was you June that and will the but of take what take you there's was in at to we look you. three, So then August take and May what traded get what around provide July XX.XX the in in do if May and noise, then you you traded traded - the you June around

April you you traded, average in roughly. April the what March, the take If traded three, I'm May you was traded March traded for the second what the the what do in will of $X What to do February. April, same quarter, exercise sorry in get was was the was

Kalei Akamine

there wide for to breakdown were think out following and that the Thanks they're going the question, as year? the you to if refinery on XXXX, just last as spreads turnaround pushing we would in consider be,

Uzi Yemin

why. you very It's I'll and tell No simple.

play If barrels, you a crude remember, of we have day. going a down we around with or XX,XXX advantage much will will crude refinery crude through cheaper barrel system $XXX the to The system. going have as

is So while down. going it to be

in We crude will of pathway else. the system were part the cheap and try we somewhere to moving - for successful that the most

Kalei Akamine

guys. answers Thanks for the

Operator

Mr. question. from Sir The next you of line Mizuho. ask may your the come Micheloto question from Silvio

Paul Sankey

me? hear you Can

Uzi Yemin

back. welcome Sankey, Mr.

Paul Sankey

[indiscernible] Finally, Uzi.

Uzi Yemin

I'm excited. so

Paul Sankey

about at you I'm I there's only new one can ask which question sorry private? Delek considered possibly Mizuho. get the is, taking to I'm have you early announcement. Uzi, used phones trying to

Uzi Yemin

yes. As you probably know many times,

do probably grow shouldn't there's we continue buy opportunity so that. something than However, us to first to we cheaper to for if us then want an

right we at However, we're the know screen. look cheap We pretty to compared that as peers. now our

but comes say so. was So opportunity wouldn't we that I is be this if lately, will considered the something seriously to do nimble

Paul Sankey

the I guess just gathering opportunities good of in like industrially. opportunities you've what the lot type, these it Yes of feels got a the there nature is Permian.

Uzi Yemin

directly at will from be last much few quarters. the opportunities will want want. standpoint, some looking there be There the if a Don't deal refineries to what in surprised announcement be organic did and people we Permian. pretty work. of lot we're with over the People This

Paul Sankey

more you Thanks. circumspect. not because the but know the the a just because It's or bit there. acquisitions of been feeling the get you're talk just there's Can us rather us Can you little you coy of think to You've more it's you of value certain scale to the intrinsic of on not to out somewhat that buyback view a you're, I about? have about bit buyback a give Delek? it's being tend remind huge

Uzi Yemin

light powder, this in, that quarter flow at we to in. to buyback key options. were But if and reason we I dry from We be That coming leave leave the no believe many were aggressive. honestly cash want comes the do it side a on the there's it we component. the as more we other and know to years. I Well reason because looking see no there's it's want is different said we mature as now arises. I some quarter won't if in each an opportunity that more past many,

Paul Sankey

Yes, you. noticed I'll XX, Look that's I past jump. forward seeing Uzi, so understood. it's to

Operator

Blair, Pickering, The Matthew of from ask may the question. line you next comes your Blair question Mr. from Tudor, Holt.

Matthew Blair

It last Longview about So be you expand they consider barrels by a the for just talk into additional DK. seems would being expanded like River barrels night, day. may this pipeline positive a shipper Plains mentioned line? WTI Can opportunity here Red the you XXX,XXX will and on

Uzi Yemin

specific Well but I as lines Longview. won't to hub be here, we not a be have big going specifically in on professional know do - you going

correct. absolutely You're

it then our So the is that and opportunity Matt. to the I'll barrels to by sense. the it cost makes bring to hub, of hub finish leave unloading more

Matthew Blair

Okay hedging. two on and then questions

sum purchase hedge, have when the when that the XQ you So hedges you. XX% run in impact, actually inventory shouldn't this Midland you really a then that crude And for would negative place mentioned timing one it. you this you approximate for was basis Mid-Cush between account and on in two, gap

Uzi Yemin

no. second memory, there the is going negative Not answer question, and if not no. answer I'm first is the I'll by no, well well no the was answer positive.

I we can doesn't would on the inventory moment differential or money so counting spending I'm of it the but or money that. sudden paper. company, positive besides the go it's accounting do. completely much an work will It bigger something to On probably not should sure that to a something impact why Why accounting which be do and because anyhow. it to something don't hedging we noise, we The on make that's will doesn't there but being - all the from that standpoint, creates XX, that know, to is from cash that something spend month money spend XX a not inventory, come us to is negative, need mean some next on

Matthew Blair

right? timing XX.X XQ, so cash in up impact, the benefit CFO that showed And in your

Uzi Yemin

Right.

Matthew Blair

very thank Okay, much. you

Operator

I turn the to question-and-answer Presenters. would the presenters to our concludes like This closing. session. the call now for over

Uzi Yemin

I my Don. their and thank you, Thank would to for in Thank us you for support. the here like the Both morning. thank colleague this around everybody analyst interest like I'd great investors. table. to

mostly the support company. With of company great that each Directors, like employees Thank give like you. and executives the this and thank they give makes I'd our great. one the of of thank me the company but the I'd Board to so to

to talk the you will We future. in

Operator

today's concludes you Thank This call. for conference your participation.

disconnect. You now may

Delek US (DK) 8 Aug 182018 Q2 Earnings call transcript