Delek US Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 27, 2024

There are 12 speakers on the call.

Operator

Good morning, ladies and gentlemen, and welcome to the Delek U. S. 4th Quarter Earnings Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.

Operator

This call is being recorded on Tuesday, February 27, 2020 4. I would now like to turn the conference over to Rosie Stuklick, VP, Investor Relations. Please go ahead.

Speaker 1

Good morning, and welcome to the Delek U. S. 4th quarter earnings conference call. Participants on today's call will include Abigail Thorek, President and CEO Joseph Israel, EVP, Operations Ruben Siegel, EVP and Chief Financial Officer Marks Hobbs, EVP, Corporate Development. Today's presentation material can be found on the Investor Relations section of the Delek U.

Speaker 1

S. Website. Slide 2 contains our Safe Harbor statement regarding forward looking statements. We'll be making forward looking statements during today's call. These statements involve risks and uncertainties that may cause actual results to differ materially from today's comments.

Speaker 1

Factors that could cause actual results to differ are included here as well as in our SEC filings. The company assumes no obligation to update any forward looking statements. I will now turn the call over to Abigail for opening remarks.

Speaker 2

Thank you, Rosie. Good morning and thank you for joining us today. During the Q4, our operations ran well at the higher end of our guidance. We did a good job of focusing on what we could control. With that, I would like to thank each member of the Delek team.

Speaker 2

From a market perspective, during the quarter, we saw a weakness in product demand consistent with the seasonal trend. In refining, we achieved a record total throughput in the quarter, but still see opportunities for further operational improvement. Joseph will provide the details of our refinery operation and progress at Big Spring. We delivered another record quarter in our logistics segment. The consistent strong performance from our Logistics segment validates our favorable position in the Permian Basin.

Speaker 2

Our Rizza segment reported its best Q4 outside of COVID year 2020. Turning to the full year. 2023 was a strong year for Delek. We achieved $950,000,000 of adjusted EBITDA. We made significant progress on our key objectives.

Speaker 2

As a reminder, they are operational excellence, financial strength and shareholder return and executing our strategic initiatives. In terms of operational excellence, our team delivered a solid performance across all businesses this year. We made strategic investment in our people and assets. This improved our foundation for profitable and sustainable growth. Our planned major turnaround of the Tyler refinery was completed on time, on budget and with no recordable incidents.

Speaker 2

The result was improved reliability, heat recovery and stronger capturing. We are very focused on our safety practices and pushing for constant improvement. I'm pleased to report that 2023 was our best year on record for safety performance. This includes personnel and processes. Turning to financial strength and shareholder return.

Speaker 2

We continue to be shareholder friendly. In 2023, we returned $146,000,000 of shareholders through dividend and share buyback. We also improved our financial position by using our strong cash flow to reduce debt by $454,000,000 We made progress on our strategic initiatives. As a result of our cost reduction effort, we found more efficient ways of working. This has delivered tangible results.

Speaker 2

For example, our inventory management has resulted in improvement in both earnings and debt level. We are making progress to reach our goal of $100,000,000 run rate cost reduction. Lastly, significant headway was made towards unlocking value intrinsic in our business. Now turning to 2024. Our key priorities have not wavered.

Speaker 2

We'll continue our drive towards operational excellence, staying focused and safe and reliable operation. We have turnaround of our Krotz Springs refinery in Q4 of 2024. Joseph will give context on the improvement we expect post turnaround. We'll also talk about additional initiatives we are undertaking in the refining segment. Financial strength and shareholder return will remain key.

Speaker 2

We believe we are well positioned to capture opportunities. We'll continue our disciplined capital allocation with the best interest of our stakeholders in mind. We look to deliver strong portfolio performance and results. We'll continue to optimize the balance sheet and remain committed to sustainable and competitive shareholder returns. In 2023, we returned $146,000,000 to shareholders, dollars 85,000,000 of this was share buyback.

Speaker 2

As we demonstrate in 2023, we are committed to shareholder returns based upon free cash flow. As we execute, 2024 will remain and maintain this approach and will keep balanced approach between improving our financial strength and shareholder return. On our strategic initiatives, we'll remain focused in advance. For 2024, we estimate our CapEx to be approximately $330,000,000 which reflects a reduction from 2023 levels. The capital program show our dedication to maintain and safe reliable operation, enhancing our portfolio with strategic growth projects and delivering shareholder value while maintaining our financial strength and flexibility.

Speaker 2

In 2024, we will continue to explore opportunities in the energy transition space that meet our return to capital objectives. We announced earlier this month that our Big Spring refinery was selected by the Department of Energy for a project that will advance carbon capture technology in a safe environmental responsible manner. This project will serve our industry well into the decades to come. Now, I would like to turn the call over to Josef, who will provide additional detail on our operations.

Speaker 3

Thank you, Avigal. Moving to Slide 5 through 7. In the Q4, our team processed a back to back record high 306 1,000 barrels per day of total throughput. In Tyler, total throughput in the Q4 was approximately 79,000 barrels per day. Production margin in the quarter was $11.54 per barrel and operating expenses were $5.13 per barrel, which reflects approximately $0.55 per barrel of an employee benefit accrual and accelerated tank farm work.

Speaker 3

In the Q1, the estimated total throughput in Taylo is in the 71,000 to 74,000 barrels per day range. In El Dorado, total throughput in the quarter was approximately 88,000 barrels per day, a record high throughput from the plant. Our production margin was $4.94 per barrel and operating expenses were $4.58 per barrel. Estimated throughput for the Q1 is in the 82,000 to 85,000 barrels per day range. After working the El Dorado fundamentals in the past several years and improving reliability, the team is focused on profit improvement opportunities, mainly in the crude sourcing, asphalt and wholesale areas.

Speaker 3

By accessing heavier grades in El Dorado, we will use existing refinery configuration to improve asphalt capabilities and optimize margins. By increasing regional sales of the pipeline on the light product side, we will improve commercial optionality. In Big Spring, total throughput for the quarter was approximately 58,000 barrels per day, driven by maintenance for work, mostly reflected in our guidance, but with additional discoveries that we've addressed. Our production margin was $6.05 per barrel, including an estimated unfavorable $3.40 per barrel impact from the maintenance activities. Operating expenses in Big Spring were $8.98 per barrel, including approximately $1.90 per barrel related to the additional maintenance, $1.40 per barrel for the integrity program and $0.40 per barrel related to employee benefit accrual.

Speaker 3

Estimated throughput for the Q1 is in the 63,000 to 66,000 barrels per day range. In Krotz Springs, total throughput was approximately 81,000 barrels per day. Our production margin was $4.93 per barrel and operating expenses were $4.83 per barrel. BroadSpring's team is preparing for the Q4 turnaround, which will include regular maintenance as well as major upgrades to our FCC and code unit. Execution cost is estimated at $115,000,000 and expected return from the upgrades is approximately $30,000,000 per year, coming mainly from yield and rate flexibility improvement and energy efficiency.

Speaker 3

Plant throughput for the Q1 is in the 73,000 to 76 1,000 barrels per day range. And for our entire refining system, implied throughput target is in the 289,000 to 301,000 barrels per day range. As we position our own sales for the gasoline season. In the 4th quarter, wholesale marketing contributed a loss of approximately $20,000,000 This is a $40,000,000 negative variance to the Q3. The decrease reflects seasonal trends along with challenging mid comp supply demand dynamics and lower rinsprices.

Speaker 3

We are expecting our commercial initiatives to provide us with better optionality in the future. Asphalt Marketing contributed approximately $5,000,000 compared with $15,000,000 in the Q3 and consistent with our seasonal trends. In summary, 2023 was an important and successful year for our system in many ways. Our focus on people, process and equipment is giving us a strong foundation to optimize what we have and position our system for growth. While Tyler, Krotz Springs and El Dorado have optimized operations over the years, we remain confident about our progress in Big Springs reliability ahead of the coming gasoline season.

Speaker 3

U. S. Refining market dynamics for 2024 are constructive and we are well positioned to capture these opportunities. I will now turn the call over to Rosie for the financial variance.

Speaker 1

Thanks, Joseph. Starting on Slide 8. For the Q4 of 2020 3, Delek U. S. Had a loss of $165,000,000 or $2.57 per share.

Speaker 1

Adjusted net loss was $93,000,000 or $1.46 per share and adjusted EBITDA was $61,000,000 Cash flow from operations was $91,000,000 On Slide 9, the waterfall of adjusted EBITDA from the 3rd quarter to the Q4 of 2023 shows that the primary driver for the lower results was from refining. This reflects the significantly lower cracks in the 4th quarter relative to the 3rd quarter. Logistics set a new record quarter at over $99,000,000 Retail was down largely due to seasonal trends. Although we were in a falling crude environment, we saw lower margins, but maintained strong volumes at our stores. Corporate segment cost improved compared with last quarter, largely due to lower employee benefit expenses.

Speaker 1

Moving on to Slide 10 to discuss the cash flow. We drew $80,000,000 in cash during the quarter, ending the 4th quarter with a balance of $822,000,000 Cash flow from operations, as I said, was $91,000,000 Included in this amount is a positive $223,000,000 of working capital. This was largely from improved inventory management and lower product prices reflected in receivables. Investing activities of $69,000,000 is mainly for capital expenditures. Financing activities of $101,000,000 primarily reflects pay down of debt and return to shareholders.

Speaker 1

This includes $41,000,000 debt repayment, $20,000,000 in buybacks, dollars 15,000,000 in dividends and $10,000,000 in distribution payments. On Slide 11, we have the breakout of the 2023 capital program and guidance for 2024. Full year 2023 was $372,000,000 Approximately 80% of the spend was for sustaining and regulatory projects, which include the major turnaround at the Tyler Refinery and reliability work at the Big Spring Refinery. Our forecasted 2024 capital program is $330,000,000 which includes $255,000,000 for sustaining and regulatory projects and $75,000,000 for growth projects. In refining, we plan to invest $220,000,000 with 93% of the capital dedicated towards sustaining and regulatory projects, most of which is for the Krotz Springs refinery major turnaround scheduled during the Q4 of 2024, as well as projects at the Big Spring refinery to improve capture rate.

Speaker 1

In logistics, the company expects the capital program to be approximately $70,000,000 with $50,000,000 for growth projects. Growth projects will advance new connections in both the Midland and Delaware gathering systems, enabling continued volume growth at the Partnership. The Retail segment capital expenditures are expected to be approximately $15,000,000 Funds are dedicated to maintaining Delek's 250 convenience stores, including interior rebranding and reimaging initiatives. The Corporate and Other segment includes approximately $25,000,000 of capital expenditures, which is primarily to fund IT improvements. Net debt is broken out between Delek and Delek Logistics on Slide 12.

Speaker 1

During the quarter, we drew $80,000,000 of cash and paid down $41,000,000 of debt, ending the quarter with a net debt position of $78,000,000 Finally, Slide 13 covers outlook items. In addition to the guidance Joseph provided, for the Q1 of 2024, we expect operating expenses to be between $215,000,000 $225,000,000 G and A to be between $60,000,000 $65,000,000 G and A to be between $90,000,000 95,000,000 and net interest expense to be between $80,000,000 $85,000,000 We will now open the line for questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Speaker 4

Yes. Thank you so much, team. I guess the first question is just an update on the sum of the parts unlock. I know Avogal, it's something you've talked about over the last couple of years. And your latest thinking around that and the milestones we should be watching?

Speaker 2

Amy, how are you? Maybe you know how much energy we have around topic and data during the content, significant headway and some of the part is going to happen. I want to assure you that. Mark, you want to add more?

Speaker 5

Yes, Neil. Look, at this point, I would say, look, although we don't have anything specific to update or say at this time, but we remain committed to highlighting the value that's intrinsic in our business. And look, we're working hard towards that. But what I would say that in anything that we may do, we are very focused on enhancing not only our balance sheet across all of our businesses, but positioning our company to generate and deliver attractive shareholder returns for the foreseeable future. So we're taking all of those things into consideration.

Speaker 4

Okay.

Speaker 5

I'll just sort of leave it at that point.

Speaker 6

I appreciate it.

Speaker 4

Yes. We'll stay tuned. The follow-up is just on the quarter was little bit softer than what we expected. I guess just love your perspective on maybe some one time impact, sounds like marketing could be a dynamic there. And as we think about the sequential build from 4Q to 1Q as midcom margins have strengthened a little bit through the quarter, do you anything that you would want us to keep in mind as we think about incrementals and decrementals?

Speaker 4

Yes.

Speaker 2

So sure, Neil, you can see it very easy to see that we had a record throughput during the quarter and we actually need all the guidance to give in terms of G and A, OpEx, very strong cash flow. Supply and marketing obviously had a weaker, which is in line with the seasonal trend. And we've seen the decline of supply marketing, the flat previous quarter and a big positive in Q2. So there is some seasonality into that line, which is more market driven. But listen, we are focusing on what we can control and we did a good job during the quarter.

Speaker 2

Joseph, I don't know if you have anything to add to that.

Speaker 3

Yes. The wholesale marketing contributed

Speaker 2

a negative

Speaker 3

$20,000,000 and as far as the positive $5,000,000 consistent with the seasonal trends. Also marketing was challenged, I think you heard it from me, mostly finance, beyond seasonal trends driven by increment weather in the mid comp. The weather kept demand and margins low especially in December and going through generally freeze. The other element in 4Q was the normal rate price, which has helped to define and capture, but hurt the range value really generated by wholesale marketing, the blended at this point. So in the past several weeks, to your point, Neil, the high events of the situation in the MidCon has resort through both supply and demand fronts.

Speaker 3

The commercial optionality focus in El Dorado, which we discussed in the prepared remarks, will help us in the future to navigate through this type of same volatility.

Speaker 4

Thanks, Joseph. Thanks, team.

Speaker 3

Thank you. Thank you.

Operator

Your next question comes from John Royall with JPMorgan. Please go ahead.

Speaker 7

Hi, good morning. Thanks for taking my question. So my first one is on working capital. You've talked about the inventory management side and you mentioned there wouldn't be a reversal of 3Q's tailwind. It looks like not only did it not reverse, but you had an even bigger tail wind in 4Q, despite the falling crude price.

Speaker 7

Could you speak a little bit more to your efforts around working capital and inventory management? And is there more to go there? Should we expect further working capital tailwinds going forward, all other things equal?

Speaker 2

Yes, absolutely, John. I would ask Hubert maybe to give you some more color around it.

Speaker 8

Sure. Good morning and thank you for the question. I mean, we took a more holistic view around our balance sheet health from the beginning of the year. So the 3rd and 4th quarter work capital were really the fruition of some of the initiatives that we had all along. Obviously, managing and optimizing inventory was one of them.

Speaker 8

We did a big chunk of it in the Q3, but the we completed the work in the Q4 and that contributed roughly €190,000,000 to working capital. In addition to that, we had the CVV effort, which we already accomplished on a run rate $80,000,000 saving a year, of which $57,000,000 were realized in 2023, mostly in the 3rd Q4. Our focus was debt reduction, so reduced debt by roughly 4.50 1,000,000 and that along with the safety and reliability efforts kind of contributed to the end result of the working capital. I think with regard to going forward, we kind of reached an equilibrium at the level of inventory we want to manage. So it will be more a result of quarterly events that will impact the working capital

Speaker 6

in the future. Okay.

Speaker 7

That's really helpful detail. Thank you. And then, could you talk about some of the opportunities you mentioned around energy transition? I think you mentioned carbon capture at Big Spring. Is this committed at this point?

Speaker 7

And is there any capital in the 2024 budget for this? And can you also remind us just on the status of the option you've had on the renewable side that you've spoken to in the past?

Speaker 2

Yes, absolutely, John. So at this point, we were elected to negotiate with the DOE. So there is no material capital for 2024 and we're going to do everything we're going to do under the strict benchmark that we put on ourselves on a cost of capital return or from IRR standpoint. So we're not going to break that metrics. But from a holistic standpoint, you can see a very nice testimony that Big Spring and Delek are marketing leader in this area and were elected the 1st refinery to elect to elected as energy transition by the DOE, which is a very big deal.

Speaker 2

And we believe that those projects will be further in the future and we will make it a capital advantage of capital with our capital benchmark. Now the option we have on the renewable diesel, we are looking on that carefully. Obviously, it's a cheap way to get a look into renewable diesel. As you can see, Rimpeis doesn't have renewable diesel lately. So we are fortunate not to commit the $200,000,000 $300,000,000 and then not benefit from that.

Speaker 2

So we were fortunate around that, but the market is very close to that. I don't know, Mark, if you want to add anything around the option.

Speaker 5

Yes, sure. Around the option, John, we were obviously monitoring it very closely. Our understanding based on publicly available information is that they're intending to start commission the facility in the Q1 and then we will watch it as it runs through the Q1 and the Q2. And once they hit a run rate for 90 days at 80% utilization, then that's when we would have the opportunity to take a look at it. But we're monitoring it closely.

Speaker 5

As Abhugal said, It's a it could be a potentially an attractive and low cost opportunity for us to acquire a meaningful position in a well located renewable diesel facility. So we're watching it closely. Thank you.

Speaker 2

Thank you, John. Appreciate it.

Operator

Your next question comes from Roger Read with Wells Fargo. Please go ahead.

Speaker 9

Yes. Thank you. Good morning.

Speaker 3

Good morning, Roger.

Speaker 9

I guess two questions for me, both on the operational side. Just again to follow-up on the supply and marketing sort of, let's call it, headwinds in Q4. Is there anything as you look at Q1 that says that does reverse, right? I mean, I know it's market conditions. There's a

Speaker 2

Yes. So we are not going to give the guidance for that line. It's going to be so fit with market what the market usually gives. So we'll be consistent with our build around that. Overall, there is a positive trend correlated to seasonal driving seasonal.

Speaker 2

We all seen the information around the from a macro standpoint around gasoline and diesel. We are gasoline, we are looking at around the 5 year average, a bit below. And on diesel, we are at the lower end of the 5 year average. So both look constructive. But beyond the general market information, we are not going to give guidance for supply marketing.

Speaker 3

Yes, nothing to add.

Speaker 1

Can I just add one thing? I think the only thing I would maybe add, Roger, is the fact that some of the weather impacts that Joseph referred to and he said it in his prepared remarks were persistent through January. And I think others saw that. And so that would be the one thing that I would just be mindful of that that obviously it will be reflected in that line.

Speaker 9

Okay. Fair enough. Although I guess it seems the weather is more benign here as we are 2 thirds of the way through so we get a tailwind. The other question I have and this is on Slide 7. Big Spring Refinery has been typically we think of it as one of the better units overall in the company, but it's been challenged here recently.

Speaker 9

You've got the reliability improvement, the 100,000,000 dollars 2 thirds roughly this year, a 3rd next year. What would you point to as we look at, let's call it progress the 1st two quarters of the year that are going to get capture rate above 70? I mean, is it just that the unit should run more consistently? Is there some actual changes in the facilities that would affect yield, a change in crudes you're going to put in there, something along those lines? Maybe just kind of help us understand what we should look for as the favorable road signs as we go through 2024?

Speaker 2

Yes, for sure. And Joseph will give a complete answer, but I will say just as a from a big picture standpoint, big spring is a refinery that's the new to 1 consistent 70,000 barrels a day of throughput and more and with $5.25 OpEx and less, you can see that what the trend years before. And there is no reason we cannot bring it back to where it used to be, and that's the highlight of the $100,000,000 So if we are consistent as the refinery used to 1 in the past, there is no reason we cannot get to what it used to 1 years ago. Joseph, please. Yes.

Speaker 2

So as we mentioned in

Speaker 3

the prepared remarks, we are positioning the experience of our ability to serve us well already through the coming gasoline season. We've been on clear execution path addressing the people, process, equipment gaps. And as we mitigate the different risks, we should see improved reliability meaning, lower LPO, metal capture, lower cost structure. So as we communicated in the past, we are expecting throughput to stabilize north of 70,000 and capture around 17% with Celine Roger on mid cycle basis. OpEx run rate should stabilize around $550,000,000 probably per barrel by end of the year and the linear deduction may be a lot of the barrel reduction every quarter until end of the year would probably be a good assumption.

Speaker 3

So bottom line, it will take all of the fields out and people process equipment to get to where we want to get. And we are very encouraged by the forces. We have less and less surprises as the time goes by and we are very confident about our capabilities already this coming year spring.

Speaker 9

All right. Appreciate that. Thanks.

Operator

Your next question comes from Matthew Blair with TPH. Please go ahead.

Speaker 10

Thank you and good morning. I wanted to follow-up on some of the parts efforts and appreciate your hard at work here. My question is, could you talk about your openness to a sale of your retail assets? And how attractive would a retail sale be relative to some other options that you might have?

Speaker 2

Matthew, that's a great question. Everything is on the table, and we are active more than one front line, so absolutely.

Speaker 10

Okay. And then my follow-up is on your trading and supply activities. What do you think normalized annual EBITDA for this line item should be? I have an old note in here that says roughly $130,000,000 to $210,000,000 as an annual ballpark figure. And I think that compares to roughly $50,000,000 in 2023.

Speaker 10

So what do you think going forward trading and supply should contribute on an annual basis?

Speaker 2

But we don't give guidance for that line, and we will remain consistent with that with best practice among our peers. And all that, I think you have a lot of energy around that topic. So

Speaker 1

Yes. And the thing I would say is you may have an old note based on what previously we would have in there. And as you said trading and supply, the line is no longer trading and supply, It's supply and marketing. And again, what we have in there is 3 components. There's the wholesale marketing, there's the asphalt marketing and then we have the supply business.

Speaker 1

And the wholesale marketing and the asphalt business tend to have a little bit more stability. Now they do have fluctuations based on market conditions. Case in point, what Joseph spoke about the fact that we had a $40,000,000 variance between the Q3 and the Q4 because of the mid con environment that we saw in the 4th relative to the 3rd and then obviously the movement in the rent prices. Asphalt tends to be a little bit more stable. You've got seasonality with the fact that the months the quarters during the summer months tend to be more stable and stronger.

Speaker 1

And you've got the Q1 and the Q4 being a little bit on the weaker side. So I think the Q4 is a good indicator of what a first Q4 tend to look like and you've got stronger quarters in the middle. The 3rd component being the supply, that was the one that's a little bit harder to model because the supply business handles both supplying our refineries from a crude perspective and also unloading the refineries and also supplying our DKL system, right? And so depending on disruptions throughout the entire system, you may have a little bit of fluctuation, right? So but the other two pieces are a little bit easier to model.

Speaker 10

Great. Thank you.

Operator

Your next question comes from caeli Akamai with Bank of America. Please go ahead.

Speaker 6

Hey guys, Doug Sens with regards to the West Coast. I've just got a couple also on Slide number 6 here. I guess the first question is on the Crocs turnaround. Just hoping that you can give us some idea of the scope of the work that you're performing and how that could potentially drive better commercial performance on the back end, whether that's reliability or whether that's in yield? And I guess same question for El Dorado as you're thinking about the commercial opportunities there.

Speaker 2

Jonathan will start with the answer about the KA Cold Springs and I will give some more color around as well. Yes.

Speaker 3

First, I'd like to remind everyone that we guided an annualized $18,000,000 of improvement ahead of the guidance down now, which we achieved on apples to apples market condition assumptions. They actually achieved 24, but the margins were limited. So it's exactly what we expected. Now back to KSL, we are expecting $30,000,000 to the year coming from maybe 3 things. 1 is a core unit piping scope that will help our yield and raise flexibility.

Speaker 3

In other words, we will make more jet fuel and have more catch up capacity. 2nd is SSCU. We're going to put a new reactor in there. We will make some regenerated ground grades that will provide us with improved conversion and yields. And in addition, we are expecting better energy efficiency with corporate targets that we are replacing and higher performing capital activity post terminal.

Speaker 6

I appreciate that. I guess the next go ahead.

Speaker 2

If you want some highlights up around Endo Werdo, Joseph prepared in his prepared remarks that we are planning to run a bit more heavy slate in Eduardo and take advantage of weakness that we have seen of Canadian grades, heavier grades. And we're also addressing wholesale opportunity in the area. So and the way the refinery that was built to run heavier than we running where the just as what we were running it, and we are trying to capture that opportunity.

Speaker 3

And it's really a question. When you think about Tendo Enu because of its configuration. In order to have the benefit from optionality, make outside the full bottle of asphalt quality and netbacks and also what it would really contribute to that system capture.

Speaker 6

I'm so sorry for interrupting guys. My follow-up question is just trying to understand the scope of the work. The scope of the work plan, it seems like it goes through 2025. So I'm trying to understand if that suggests that 25 CapEx is going to be very similar to 2024 and I'll leave it there.

Speaker 3

Are you asking about the 25 scope for West Dorito?

Speaker 6

Well, you lay out this capital commitments or these accomplishments for 2023 through 2025, I think on Slide 7. So given that the work plan basically is known for 2025, I'm trying to get a handle on what 2025 capital looks like, if you've already defined the work. So I'm trying to figure out if that's similar to 2024.

Speaker 3

Yes. So the entire scope for the K-seven is 24, with the 115,000,000 that we mentioned and it's a part of our capital program for the year. With regards to end of April, there is no real cost estimate at this point. It's mostly commercial efforts and know how and blending and we will come back later in the future if we feel like tanks or agil outbreaks will be needed. Now this is down the road more than a year from now.

Speaker 2

And the reason that the slide say 24 to 25, as you can see, big spring, which is not related to capital, some of the upside is coming only in 2025. That's the reason the slide says 2024 to 2025. Don't read into that to a capital commitment to 2025, just to make it very clear. That was not the intent of the slide. The slide was saying that the benefit is going to come over time, but the turnaround, which is the heavy capital during 2024, going to be completed in 2024.

Speaker 6

I got it. That's very clear. Thank you.

Operator

Your next question comes from Jason Gabelman with TD Cowen. Please go ahead. Yes. Hey, it's

Speaker 6

Jason Gabelman. Thanks for taking my questions.

Speaker 11

Cowen. Please go ahead. I wanted to ask about shareholder returns. It wasn't discussed yet. I think the past few press releases you had disclosed buybacks quarter to date at the time.

Speaker 11

The press release came out for earnings. You didn't do that this quarter. So wondering if you have made any buybacks quarter to date and the outlook for repurchases through 2024?

Speaker 8

Hey, thanks for the question.

Speaker 2

I will give an overview around what we are thinking and how we think about the capital return to investor. First of all, we'll be we are very committed to shareholder return. We had from a free cash flow this year over $146,000,000 of return, dollars 85,000,000 of debt buyback and $61,000,000 of dividend. We are committed to maintain the same philosophy going to 2024. And you can probably appreciate that we bought 8% of our share in 2023.

Speaker 2

So nothing of what we are disclosing is way suggest any way of our approach. We are very committed to shareholder return. We want to see us as a market leader around it, and we are holding ourselves to that standard.

Speaker 11

Okay. So sorry, it's a bit difficult to hear you. Is that 8% level kind of something you feel like that's achievable either in 2024 and or in a mid cycle environment?

Speaker 2

So, that was not a mid cycle environment. We want to do it from free cash flow. So we are committed to that. And it might be less, it might be more. It depends on market condition.

Speaker 2

I don't want to predict market condition. I'm optimistic about market condition, you will hold me to that number and I don't want to be head to a number that it's a market condition driven. You need to understand the state of mind is find ways to bring return to shareholder on the short term, mid term and long term, and we are committed to all of them. And you have seen that us you have seen us demonstrate that, Jason, last year very nicely. We did exactly what we said we're going to do, and we're going to keep doing what we say we're going to do.

Speaker 11

Okay. Understood. And then maybe just if you could comment on demand that you're seeing in the niche markets that you operate in?

Speaker 2

So I think there was enough discussion about the weather in everyone calls, so we're not going to talk about the weather. Other than the weather, we have a very good niche market and we are very blessed and optimistic on that.

Speaker 11

Okay. Thanks.

Speaker 6

You bet.

Operator

Time. I would now like to turn the conference over to Avigal. Please proceed.

Speaker 2

Thank you. I would like to thank my colleagues around the table for a great quarter, to thank the Board of Directors, our investor obviously that joined us for this call and most importantly to our employees that make this company what it is. And we'll talk again in the next call. Thank you, operator.

Operator

Thank you. Ladies and gentlemen,

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Earnings Conference Call
Delek US Q4 2023
00:00 / 00:00
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