Phillips 66 (PSX) 30 Apr 212021 Q1 Earnings call transcript

Welcome to the First Quarter 2021 Phillips 66 Earnings Conference Call. My name is Hillary, and I will be your operator for today's call. [Operator Instructions]. I will now turn the call over to Jeff Dietert, Vice President, Investor Relations. Jeff, you may begin.

to First welcome Call. Earnings and morning, Phillips Quarter XX Conference Good and EVP, on Greg and and Lashier, EVP include call Commercial; COO; Bob Chairman Mitchell, Participants EVP will Mark and Garland, Tim today's Midstream. EVP, Brian Refining; Mandell, and Roberts, CEO; Kevin CFO; Marketing Herman, President on Today's along and financial with found Relations of the presentation material can the section supplemental operating Investor be Phillips website, information. XX harbor safe X our Slide statement. contains

Actual results will actual and call session. With We the included to over making our comments. as today's filings. during forward-looking results well I'll our in are cause differ presentation today's may Greg. Factors be statements differ here could from as turn that, SEC materially Q&A that to

joining us today. Thanks, good Jeff, and for morning, thanks everyone, and

Mark new Operating our like First, President welcome I'd Officer. to Chief and Lashier,

In Mark here I CEO and to CPChem. as many you think us of share. had of $XXX with his or at first have previous role $X.XX it's million President from XX. per an adjusted And the great you quarter, loss Mark, we of know Phillips

storm-related higher impact supporting repair Gasoline demand normalized, the continues resumed across diesel Our volumes, the and we downtime. our employees utility and and particularly times. challenging reduced inventories their the margins of have maintenance the Central We're following our regions of Coast safely utilization excellence, reflect to proud these commitment to severe during where operating experienced refining product rates. in winter increased and recover costs U.S. costs. results We Gulf and storms and businesses operations

are into strong Also, wrap will have and operations we as season. turnarounds stimulus recovery In margins. the back to indicators for COVID-XX economic first monetary continued shareholders our facilities remain and debt. we returned growth demand which products. We suggests about and to million back in driving summer million year. continued is secure, optimistic $XXX quarter, the normal $XXX vaccines head We on remain expect of with to competitive chemicals the we spring impact We recovery half economic committed accelerating, the growing repaid In of maturing a Leading February, dividend. in the dividends. supports demand and up

allocation, disciplined continue this improves. the a will a total with strong storage, to a the Texas project. balance as commissioned construction credit capital X.X South This generation additional approach sheet completes bringing debt conservative We'll cash repayment million barrels. including phase investment-grade Gateway maintain rating. The for capacity to terminal We final and

Hub, day opportunities. export petrochemical the Partners This debottlenecking capacity approved construction will increase In in Partners Sweeny the mid-XXXX. connecting addition, per Storage completed Christi At of to is CXG Pipeline, facilities XX to in terminal. the area. capacity. the owns by of barrels a long-term Gold its XX% continue terminal XXX,XXX interest XX has up construction The commitments the Caverns Clemens to Cedar project in fractionation and Corpus facility be completion, plan Frac is expected backed will we and In Bayou of resume includes XXXX, and advancing per barrels ethylene second Sweeny barrels in that X the the of long-term Hub have supported of commitments. of day day. at Upon add XXX,XXX CPChem to will XXX,XXX customer is projects per half polyethylene. which Chemicals, by optimization its production Phillips

increasing group creation expected our to development to production barrels will On Francisco will capital-efficient capacity. will of over year the organization. of This lower reduce completion, a diesel renewable on in is month, the have help we the and company. Subject by a per This and production strong to Energy objectives. research plans and research Shell early to XX,XXX deliver meet across and barrels per refinery. California the This Rodeo ramp includes normal conversion venture Soy capacity. addition, this We're Renewed innovation the carbon XX%. its emissions this full energy alpha approvals, earlier permitting Emerging the our In day in hydrotreater is Rock third focus expected in quarter. and its of renewable is carbon project in facility facility joint that facility day Earlier X,XXX the an olefins fuel ongoing facility's greenhouse gas We've San of project investment XXXX. soybean expansion our the new up developing by advancing Processing, construct invested lower conversion, returns CPChem at Iowa. from initiatives We're which began

technical Faradion, to a sodium-ion further develop climate addressing lower-cost, anode while These materials leader higher-performing in will sustainable soybean the the commercialize aviation Southwest sodium-ion We to a collaboration with technology, launched completed be for expect battery the We to and we global of returns. delivering signed production. with attractive We an to fuel. Airlines oil late XXXX, our project in shareholder purchase activities commitment batteries. XXX% MoU challenge

we'd company's comment to Finally, excellence. like our operating on

We refineries by Maria of refineries year recently honor. and City recognized have are performance. and the industry this refineries, received This which AFPM, refining, distinguished our chemicals is were award safety in a our our were XXXX Six our Lake annual honored including midstream and safety that in Santa row received Xth the for highest that safety businesses Ponca awards. recognized Charles,

awarded API Pipeline is was This for Award midstream API Safety the operators. businesses from midstream large recognition Our highest industry. the Distinguished by

in In and Gas recognized outstanding safety midstream. Safety Association addition, the Arthur In Orange Conroe, Elite Award. CPChem's Port facilities the by as recipients of AFPM for Processors selected chemicals, Silver we're performance

proud well done, to congratulations of you. So facilities we're really these all

So Kevin call results. with to over the to financial I'm to the turn review going that,

We quarter Hello, we costs. an from Pipeline X, a and summarize Special decision first winter Greg. exit results. everyone. the XX on items Liberty well with quarter reported as project Slide our of Phillips million. maintenance Starting included you, resulting $XXX impairment loss overview Thank an to as Partners repair storm-related this

million flow including distributions in an million including had affiliates of share. for generated equity for was we $XXX of million. $XXX items, quarter the We of adjusted growth loss operating million, per $X.XX $XXX special projects. dividends. paid million or these Capital spending $XXX $XXX Excluding from $XXX cash million, We

Moving and fourth results the adjusted quarter the to quarter, decrease shows million. the Improved marketing first refining income a other in X. This and specialties to the change lower in Slide $X offset in segments. results slide of pretax from were by

MLP was of our X proportional Our foreign adjusted XX%. rate midstream Slide from rate shows the results. sources. domestic, pretax tax effective income influenced is by mix and The income

the million, increase lower was lower XXX,XXX pretax the contributed storms. XX from associated Sweeny of the Export $XX cargoes million pretax partially averaged the million. income was The of by to operating prior quarter offset due and adjusted storms. fractionation Midstream DCP operating higher income mainly pretax first higher quarter. from due $XXX First quarter. down quarter decrease Transportation complex equity with a adjusted income the winter million quarter. $XXX per adjusted was and previous $XX was quarter, mainly The a costs LPG previous The the the costs due decrease NGL previous in Freeport day the to million winter adjusted and barrels other to $XX pretax record $X up income $XX $XX from from was million volumes. of earnings, million, loaded facility million

Chemicals to Slide Turning X. on

decrease All adjusted levels due low the primarily by primarily was higher income early Adjusted from to impacts margins, Polyolefins the million and down partially was fourth margins. inventory SA&S This CPChem impacted adjusted $XXX production restarted utilization and O&P quarter. quarter April. pretax The Olefins Global utility supplies, primarily First in the previous to higher which safely for due winter income pretax improved million was quarter. $XX operations quarter was and million. storm pretax resulted due for tight million, to $XXX from income $XX facilities million, costs. $XX strong demand. was offset continued increased by XX% lower

$XXX received During the from cash distributions CPChem. first million in quarter, we

X. first Refining billion, to fourth from adjusted of an loss improvement quarter Slide quarter. million pretax was the $X Turning $XX Refining on

The in of from the higher increased the with product differentials costs reflect higher of in the margins, from margins by and to of well majority utilities results storms. were the million quarter up was costs spring lower help driven Crude We this quarter. market, XX% higher Pretax reflects our costs. $XX by turnaround as as $XXX spreads offset excess activity the million, the XX% turnaround meet RIN electricity demand winter in compared by winter realized increase month. crack partially and completed storms. realized was resulting turnaround the Texas improved prior quarter. largely improvement utilization last The offset First sale impacts

XX%. $X.XX per in first barrel compared previous fourth yield Market covers make Market for The an and Slide XX%. to distillate the first was crack in X:X:X and quarter capture was per capture The margin by the overall quarter market market less than market quarter. We more in Realized was was capture. refineries. capture crack. impacted product XX%. is in configuration premised the the the per barrel $XX.XX resulted clean $X.XX gasoline market barrel of X X:X:X of our quarter

During barrel, improved distillate the quarter, the while barrel. increased per $X.XX the per crack gasoline $X.XX crack

which turnaround In a the costs $X.XX and downtime, barrel addition, products previous barrel with Losses improved $X.XX from result than also unplanned the yield contributed compared per the product quarter. were clean quarter. as of higher to secondary $X.XX we had impact. activity of configuration this prior a quarter lower Feedstock per

per $X.XX This category excess realizations The RINs, the It other revenues and of margins sale reduced into by costs, from includes product barrel. impacts. clean reflects also the category grid. realized freight inventory electricity

balance. base lower primarily and improved contributions the $XXX pretax the XX domestic Marketing segment in per change in the margins. well shows the Adjusted $XX million Specialties for timing with adjusted million, Cash benefit million, Marketing prior spending Specialties in $XXX with quarter. million of upon first of year pretax the In prior oil million by Corporate due $XXX environmental the was international interest. we was February, and $XX an quarter. lower offset cash and increase the On a to a finished million, had XXX,XXX million million. and quarter $XX $XXX was day. We we product lubricant due floating Slide margins. notes from partially $X.X Other million $XX and included on higher quarter million to $XXX from cash as of to first due Capital exports XX. expenses. started were increased charitable capital This the This billion as of capitalized in $XXX $XXX barrels costs improved other maturity. margins, largely was Moving of paid operations to compared dividends. rate Slide Slide senior income quarter. and working repaid Refined XX, million.

The loan venture. other joint to category our WRP includes million a $XXX

cash consolidated plus and At cash of capacity at credit operating billion ending $X.X billion March committed balance Partners. the and on $X.X at was our liquidity, available had $X XX review of of XX concludes Our results. Phillips we $XXX $X.X This reflecting financial facilities million billion. Phillips XX, my billion

outlook items. to I'll be the a crude global according adjusted In Next, mid-XX% Chemicals, utilization be In the in market cover we rate utilization In few mid-XXs. in to has will the utilization second been O&P Refining, expect quarter April, range. conditions.

We expect corporate pretax quarter second costs be turnaround million in $XXX between come to second and expenses $XXX $XXX $XXX million to anticipate and million quarter pretax. and other between We million.

will the open Now line questions. we for

Instructions]. [Operator

the Mehta with question of Goldman first Your Neil comes Sachs. from line

new And your on congratulations, role. Mark,

Neil. Thanks,

quarter. a And right pretty you, how Greg be think it in environment looking very at puts over the are the able margin, you is about the both spent with start I'll and Maybe that of else equal? to time We're Should well a and cycle here then do and And strong utilization you we in perspective? ramping thinking margin margin from capture polyethylene in are Where years. lot sounds like now. chemicals second the you have you obviously strong all a run Mark, takes?

frankly, bit decimated Right, and for look improve of crude if to XXXX. were record experienced some Yes, pricing, to in really people saw starting back the We and were CPChem question. suppressed Winter XXXX, system. inventory A have strong margins the even moved Uri hits needed late And demand, we oil XXXX. record Storm then into but the out outstanding by turnarounds thanks those operational coming a for Neil, out at production lot the really CPChem. you of and turnarounds margins inventory build demand into excellence

in see the do we see we because do fundamentals, of we it didn't though those margins even improving quarter So storm. winter realize strong and first the

so we those CPChem believe the will benefit And that see of margins.

quarter. maybe second rest quarter, margins then should But seasonal some increase the on the see this average, we'll on of So at weakness to year. in year, the average, continue CPChem fourth above into see and third the mid-cycle or we

those question mid-cycle your for view And a maybe that's has Greg. margins changed? of And

at said cycle the you historically, margin. polyethylene think I fully through $X.XX integrated

Yes.

about think kind you if reinvestment take 'XX go-forward mid-cycle you That's that's it it number. look a XX% what think we're going does kind and a get Neil. of what I basis. return, We at some 'XX, comfortable pretty reference that's to is. averaged, at a to and through on economics And what level kind I of it look of

then And is leverage Great. the on follow-up just levels.

Going pandemic, were Today, $XX at into pre-pandemic, consolidated. Debt levels the $XX billion around they're billion.

program? you down can some level can appropriate with the in levels? mind Just your us those credit your constrained that of around you bondholders the repurchase into and leverage to the having you you share you're agencies do conversations Are get what until leverage take about around

it's Kevin. Neil,

a Let few that. on make me comments

into we off pandemic quarter. the last year. with right, the of added $XX debt. $X first billion billion in over of We paid you're came billion we course So the And $X.X

from primary the around focus leverage standpoint Our credit a is rating.

So an and we strong BBB+ have have on grade, but do rating, we investment a so both. outlook negative AX very

debt to get in. before that, do stable the were want getting and maintain need we to where And towards they levels we to demonstrate that so with back to ratings a somewhere kicked pandemic And back outlook. those we're

about capital improve, we've and as share suspension cash things recovery back As start generation alternatives you dividend, you think dividend at scaling some terms some could at and generation of of done cash we see I the a other repurchases level, more a which think to lot the have we get in paying and And We've still they billion to debt. to we're back $XX on to about once of right flexibility considering somewhere capital. we'll point, make sort nice restrained getting entail should the to that get progress actually to of really lot be flexibility pathway want think like a on start represent our down to increase a quite value at potentially our capital. have shares intentionally Again, buying We and our then growth point. good we'd to time, back. growth back around

year And next in of as And opportunities $X.X we're in reinvesting years, much the Our of availability the capital. the $XXX well billion, that capital total this to function of we're budget pretty of only terms constrained growth anticipating business. that's we'll part million couple are how be of is that. and the continue for of a where

of the we've have. flexibility then got I'd say last So up thing we've is the coming got good with debt we the sort maturities and callable debt

can easy We of $X.XX have generation care to because it's is that or or cash the maturing. we over of assuming X, the either We've line billion callable there. sight take it's debt of got year next

from Wells the Read from And your next comes line question Fargo. Roger

up forward, NGL pretty I the vessels from mean, X a starting the guess as business, talk away about a maybe Frac to environment. number the static about the bit midstream forecast your you if in we commentary stay could type to robust of the during I'm And any little questions. going But some specific left going that DAPL about and business U.S. think for despite I oil are quarter. production that more of

pandemic issues So the of it's into what and was wondering are for? question already getting underpins Or a that I whole just just the and unit? just that's there, past frac volumes moving if

and it's it's the question. X it's and the demand But good, go there the here, fundamentals this we strength, it's regard Coast, good for answer really, some to strong, in question. global and partly the by ethane, that Tim. the demand back takes the it's by petrochemicals, and growing like puts is But -- clearly as for Actually, driven and with LPGs, has NGLs standpoint, driven just mentioned I'll are go-forward ethane frac just and for Mark got it for feels partially export also winter propanes U.S. Roger, from in growing. to quarter butanes albeit storm. here Thanks Gulf -- then both still to actually had fundamentals in

will specialty that void. and NGLs commitments Frac in X, Frac we've fill capacity, got X. So NGLs on advantaged that

some are okay, we market and to our kind paused project paused We of there uncertainty we the sheet. taking at there liquidity again, to paused Sweeny. looking year. actually was let's start actually, care So but been And demand. get last up We've the of, sure make in half balance it the second year down while we're we frac continued to is in as the hub of X and completed this out continue running build our facility. And we

the a res-com. the that for quarter a versus and becomes that But for was continued see that see for petchem we You LPGs demand as noted future the into record export well level cargoes, on that pie bigger of us. still piece as

in seems understand and probably sure the But Great. was all for wanted my is RIN all the looking RINs, where make maintains forward that just outperformance, think we if and RINs issue the relative the of And like balanced the elevated business? it about more refining? year rest the came of other just it mean capture hits or then that curious refining I running specialties question, and to issue in is benefit the levels on you I these way how I maybe marketing elevated business. follow-up you the are the least less through. of kind on at guidance through how were the RINs kind that. the to I

Yes. that. This shot take is a Bob. Roger, at I'll

RIN priced prices. out continue that right, believe yes, the we RIN at burden with But crack. RIN the of results is cost we refining in it, the in look you the when to and fully I believed our think, run-up so and the

various downstream blended. gets channels trade, as through So our of that moves

own the and blending our we our liquid RINs really it on for consumer. there pass Some get through terminals, at generate of to it does needs, the our ultimate right, downstream and

other of exports that, exports. trade. We had the through not barrels a XXX,XXX of quarter. goes channels it We're in of Some day on the exposed

we fact continue branded and So that own really the to lot our that can market of outlets. watch like our we through a we barrels push

our add about we blend just would half. that I in business,

about obligation to in create for was XX. RINs Phillips half And also then at generate QX, there need -- we margin. we our blend some So the half

So RBOB above ethanol. was

marketing as blend was some and market there So benefit well. in

the line of Your from with next comes Doug question of America. Bank Leggate

Guys, tend my this. issue. [indiscernible] sorry Roger to to on I'm steal beat

So want this a you into bit dig I mind. to little if more, don't

looking -- So I've Kevin, it's -- at I'm -- lost the I slide got think slide I've number.

the Now quarter. this the in quarters at And that it that, issue negative. seems X.XX. the moved showing X XXXX, It or the one Back This is crack. X.XX lockstep $X.XX, the is in around RIN. past basically was started it with almost number up $X.XX X other negative has average

could you Roger's go-forward if we it's And wonder driver to on offer just of a obviously that denting basis a a what here? quite that because color thinking bit that question, be but delta? little Is to, biggest the I So I should on just is guess, capture going rate of what's bit. the

chart. other Yes. as Bob costs, RIN right. that Doug, in up that that being refining, that burdened exactly -- in shows The on you're describing,

think I Slide on deck. it's X the

hit it's a so to direct the capture rate. And

as So there. see pricing increases, RIN that the you'll happening

by last that barrel environment, margin on or you've rates generally comment the been year got are per here are that fixed fact Now a the the when through in we've over costs -- a flow basis. where that capture that so depressed we impacted other just

fixed cost like there's So that per it's and freight the barrel. some

hit in a So you're RINs becomes other of market element. impact capture normalized is a But big bigger takes a a more in when that proportionately, that bigger than environment. out

look a I kind to things you couple them I And on at the Yes. market this up end add would of that of additional particular in analysis they another. that crack, impacted think quarter-to-quarter and

York that Harbor. them and between is pricing of differentials the One Europe New is

particularly the in captured here So that. And was weak Europe first we quarter.

we Gulf delta that issues the for always of we go York between a New Coast and as Harbor the then the quarter. So up Colonial off get that fourth part accounts timing Pipeline. And good into

we as is eventually. a there the back and on other up, saw negative run pretty so really that get And side hit timing prices we'll it

up we don't -- capture analysis, but them, other end they this in -- place So to in that so category. no other there's

again, see look seems on me I I'm labor back. want Roger's business, Kevin. Understood, you're elsewhere marketing can't building if where don't It question getting this guys. the I that at whatever, here, or even point, whether to in but the that I

just I you to can neutral for negative clarify is or Phillips. So when again a ask net

Yes.

as covered earlier, at RINs. about the other right, to of market half we those half day, end exposed and the is blend on So for commercial we're blending and Brian the people then

So of not to the end capture net-net, it at level. the at is do RIN day. us a XXX% negative the the We

It My answer to is Okay. be you actually, It's and welcome, guys wants of about on and availability. more perhaps one as this maybe not to Mark. you hear Mark, for good might see operational call. this. follow-up, It's the I'll really but

you're that Kevin back mentioned early April. think I

I I'm sure refining referencing in of think about not the everything. reference the --

the of there. after refining I'll obviously, about leave downtime then storm, you and last mechanical it your had And both furthering So should chemicals? we the the system, what and availability think the year,

comment I Chemicals. on can

normal activity. and at plan turnaround the is full is available I think excluding capability. basically They're They're back. run back, Chemicals them to

for XX% And we guided quarter. utilization O&P to the

much normal pretty So operations. normal,

And our quarter was on -- part we us. quarter side, the first first for -- turnaround heavy of refining fairly actually

quarter second week to season. quarter the into here for gasoline to as days. second in FCCs of here turnaround we we're XX for rest month really we sailing the couple first of core we'll Some of And got the of we've the speak. And out third in mode carries got and the But of kind that that up quarter. next a the be of the finishing

season, expect in quarter coming here we of our first kind run. out ready we're gasoline summer And feel roll in ready to about back as good all we kit of of the demand the to So really with shape run. to

with comes of Your Gresh next from JPMorgan. line Phil the question

in One on the factors many recognizing there first onetime are refining, so question quarter. follow-up

Your similar to utilization, peers. the was here you sounds which your said in pretty quarter, second mid-XXs

run One into longer -- March, of as for move you dated storms the level rating that you we that that your income. effects the recognize but also of profitability? a April operating May, would are feel able Phillips, in positive to at peers is commented And the type they I comfortable or say that you're of that they of achieve

Yes.

think right? burden. depresses capture the I in clean a on we And were activity system, FCC had our market a still turnaround refining long heavy was product April, mostly it going within yields that and still Alky our works and

As that now. coming I said, we're of out

market As will our the continues capture to improve, rates improve.

And I into a we're were all think should the feeling of so better May, better as some of diffs market head where in obviously, this to. see lot our quarter. capture. quarter, then first But that that month kind we'll the market here help moves about crude we it's we

report peers Phil, of and marketing our mean lot together. I to I a -- refining think

pretty of of feel kind If those good. you both add think I together, we

enough, you also fair No, Yes. expense Okay. and your turnaround.

on mean, running full chain chemical actually if now. above to mean, the kind I The there I first margin So the -- because of at is a I way the isolate quarter, were ask I reason guess, you onetime is side, impacts? look $X.XX that the

your there million annualized EBITDA, to of many billion, So said that for better in would I'm be sense your second be trying you've quarterly. quarter. $X chain $X.XX would a Considering profitability get margin, $XXX times, which full the land to Greg,

really how the you think about or the color first would on quarter second helpful. any So be quarter

Yes. downtime. significant from it's was Kevin. There Phil, impact a

So say that is And But the look I where going margin lost the and through first today quantify are. not we're the of where fair at environment operations rest number quarter. is think out. quarter impact the and what's production to give projections to in the that the you

discussion. I and the this earlier touched on we think -- in

you'd I falloff contribution we'd year, the of the expect mid-cycle the of quarter. above comfortable some sustained to that in see half expect some although in second year. that feel And end margins hopefully, into the towards think pretty second of we normally saying the EBITDA

quarter So a we in feel that optimistic have should second pretty we strong chemicals.

Your from comes Paul next Scotiabank. Cheng the line of question with

debt or curious to incremental looking term, at about cash the start you that to the talk near around that you pre-pandemic $XX And billion. of should Kevin, back return to flexibility. will a the get just is then bad alternative question trying debt shareholder is you're or that, number? the lower company. refining And we market the nature the $XX really and the even for that all target of much right Given unpredictable is kind level billion

So question. first the that's

or lower level. we Now same increase down sheet not, that doesn't flow or or balance the one on mean But much that a sheet free return. at put cash you debt of that to is shareholder concurrently the the maybe portion that debt the drive have time, a the should other that until the can to continue being the balance will be

first the that's question. So

brand, is is this for that second given for question U.S. I Bob the RIN really total your think network big XX%, and low, seems maybe is how The in

all of wholesale allow pretty today both Phillips So contracts Phillips a something historically given that you thought XX are because capture missing here win. those and will we that have network is that combination to the we one that large and a Chronical

So one XX%. we than thought far more will that brand you

we are missing So here? something

Kevin?

first Paul, Okay. talk question. let me to the

of back will right you're that as to what And objective. So the to priorities, saw level, direction looks get that permanently I sense. of I'd that we -- on on extreme optimize level. delevering, I'd maybe when you're whatever opportunities, debt on a debt-to-EBITDA makes like. structure state basis the on as a evaluating there's our underlying like cash where that we XXXX, volatility in that say That's there in and while that. of the just near-term expect, to to optimal execute think period capital may business is is business, and sort continually conclude generation margins of depressed that or growing. you And that the like should through billion a the sort effectively pre-pandemic, pathway right, say we depending say thereabouts would say we -- we're lead -- growth also I the at be But -- you other a come of were growth there's we those you to increase, you a capital also as run allocation a sort programs. $XX we'd I'd lower on is

I an reduction I'd debt know ongoing an point a need saying we objective. so And don't get of debt have or to to level that ongoing

investment-grade main rating. we sort or back get the level to that think strong billion $XX I priority And to thereabouts. credit want is of that maintain to

the mean look you think that you're And of debt, your driven that efficient When around us I really at billion. $XX an in probably lands capital to cost structure company. have Yes. I

So leaves XX-XX we the book. billion last the paying down in do $X guidance company. lot mid-cycle billion cash flow, sustaining still that further certainly the we've invest we're given years. our really And trying creates It's the increasing get fund more we think share here to optionality, us back Paul, I not capital dividend. billion glide repurchases. a our and be us to to we're investing with the that of debt that around then on comfortable an grow the to optionality that our that $X guidance And We want a that that for to dividend get over with want is in dividend, or $X.X decision few hit to at before of gating looking billion $X to or target to absolute cash back that. for slope to us and mid-cycle

guidance good And company. still so we that, forward think for going that's our

large it marketing on and is overseas blending that have we here RINs Paul, both the Europe. true a in question, business,

U.S. those large of in the a operator business, have XXX also about based We fixed

So the pull refineries much how out and of the have we you gasoline. operations and look in produce we pull we the you if XX Europe if U.S., business, you at stores so lot blend, forget a don't out fixed-based in

our our So in in little XX% we the generally, we we through our stores gasoline of through normal run times refineries, to stores. a XX% over produce about went

that's So we blend create those those that -- RINs. the and gasoline

line of with Chen comes the next Your from Theresa question Barclays.

diesel renewable hydrotreater you update the on bit Have are any other gears at switching conversion? And key an from fuels What puts that takes point, recent forward? the at permitting renewable give us moving there and in full strategy project here? what Maybe Can the been Verde? are conversion -- for a where from learnings your the your this are early to you on initiative

Theresa, it's Bob.

it's turnaround XXX, came how the unit it soybean to unit here actually has different started run clean unit time April And around we're process. unit -- for a well. a Even we after it's and the so products the same good before to big we on shut curve get unit very operators some kit So and coming the of we some really the It's the that operate. It's the diesel. running up there. out to first and that the There's early learnings down before in though up us. very had the was we off handle to run how run soybean convert actually to It's to oil and around for different projects. oil, processing learning everything product

continue input feed some of to to able a of those that we're of the unit to soybean to of the as oil. And to unit up some quarter third barrels So day get projects the get get into out here X,XXX the there the we'll logistics finished. ramp

in full-time very to next issued which expect our in third have County, hand to year the have feed to out statement full-time of And also It's start early us impact the Rodeo been a environmental construction in really process worked into supply bigger impact the there need for permit do that's Permitting we've much way you learning California the a And permit authority. progressing. all process statement. the sometime go rote team Costa our and a to work we machine that's you the then yourself in well. work permitting a to team with at comment and a able be is much in which us We working 'XX. would So kind really on-site is through period we quarter as key for into logistics work. soybean test chain then that opportunity and public bring how to California, Contra to as to oil available, and early to you draft environmental out and

the the engineering the work ongoing. system is of in meantime, of the parts cleanup, final for the unit, the details continue all for we So part unit to and all for pretreatment the that

where feel really So we timeline on. good and our we're about

our We as running schedule optimize continue forward construction and to and opportunities as possible. look to pull up for the and get soon unit

project? that And kind And potentially came you would stands, naphtha this on aviation what entail? Southwest? the with production of sustainable then project about And such? versus XXX the that Would MoU the significantly do it. Got envision talk of gallons can fuel would the million what be percentage about? alter renewable renewable of and How CapEx dedicated fuel, aviation with your front, diesel Rodeo to or you economics it as scope sustainable it

So hi, Brian Theresa, this Mandell. is

start and this Southwest MoU off is with, Just with a Airlines. agreement to

into and airline. in California of largest domestically California, and just jets of terms In they're out the

an to of we in work So Airlines. policymakers public Southwest policymaking, with an work and opportunity have on them, the with public on kind opportunity R&D to educate both

know research that energy, may we have and group. innovation You

makes think to economics we're think including fuel if renewable to now, fuel also diesel, solar, and have development the of Right versus technology, things, peers we one different about where want the then that only produce. the our improving sustainable aviation that of cells, at look on work sustainable fuel fuel. aviation we work you more battery sense diesel renewable And oxide I lots of on economics. solid of that

credits, the about that think price come of the can can how from the from make thinking from could come It it fuel. to need the economics it. we come So to about

we exploring So of take day, capital can a And without that sense. capital. whether we all plant, with think produce have whether to We to going will finally, up forward. produce the supply that. at XX,XXX some want some that And then Southwest agreement any have a to we're makes Airlines, barrels can through we

a make we to capital, want diesel? much renewable at So how whether spend we to want look we're taking with and how competes it

Yes.

As about sustainable the fuel it through anything. today without phase is as its going is, make aviation XX% project doing design will

little So more a of kit. got that, options add we've couple you can beyond a

there, Brian to to to reformulations. pool. on You to be get a way pool be a sustainable distillate work the jet there to need can signal the needs pull makes a pathway point, and of catalyst good really and out it price all But aviation the into the

add to to just that. And

If credit it's on credit, a aviation you the lower about on but if think go the for fuel sustainable you CI. predicated LCFS credits LCFS

renewable is the get tax diesel you X.X multiplier of but instead credit as well. and X.X RINs, get biodiesel on You

The also other for and naphtha thing is some you lower. when you economics renewable make renewable SAF, are make naphtha the

and and with So economics you the have that also to deal segregation naphtha. blending naphtha with of lower associated

Your next Gupta of with from line Manav question Suisse. the comes Crédit

quickly that this my because a Again, feedstock CI the the on to is high cannot CI that feedstock. the lower for focus here feedstock but a majority up deal wanted getting feedstock, was is signed. congrats of Just on and be the this plant a portion you feedstock is designed assumption coming

this able So of percentage contract? what with the been secure actually you to have feedstock

Brian. Manav, this is

from we'll think XX,XXX about the ultimately XX,XXX that need. plants barrels we and So coming when and up the

X,XXX we barrels, first will the need For soybean.

will feedstock. we the any of For need plant, form rest of the

the will of feedstocks be and oil, feedstock It's And the to predicated on us CI higher, benefit is So some oils, feedstock. some also feedstock, having it's in a different run the just the the the be the buying cooking which is LP the CI not lower of our also we'll low will kind where buying model but change the hydrotreater feedstock different some used mostly of transportation, plant a in cost of fats, front buy. feedstocks. plant price. can kind of we'll to of And you location, vegetable it's feedstock, dictate

too, goal, much gasoline and crude the do in commercial and -- we our group in like just more buy, to the than our our is we buys need. market, diesel So

As as as we to And the crude. refineries an us the example, buy need optimize in market, the that twice crude much crude allows

about what thing that could could we plan in we to So at have the available at each and think we optimize the time, refinery at do any feedstock business. And what that and given time. same could refinery

It now. we've a feedstock up now Humber, X and buying for we've business for do almost So the while set in cooking to just years, that. in -- commercial organization used been been we've our oil

We have business.

Houston. in here an an have London office in in We Singapore, one China, and in one office

that the in goes time feedstocks as around Europe. we'll We and do for tanks used moving cooking business, with tanks we have cooking And the other we're oil. have In optimizing use Asia, world, same all on. the

That's were forget, for feed responsible don't responsible And barrels the also supplying a facilities. procuring. to XX,XXX the right we're for feedstock a day,

on recovering quick think I Okay. which are and is, follow-up here A the is where the went at last areas fastest quarter, the Jeff I think explained, demand pace.

next understand other And have which system, us in which the mean where full you jet would X But like you wise, you are think if expect if recovery? So in that -- recover we could international I the achieved remain help where will can than areas to your weak. months? do pad you go X

Manav, I'll take that one.

us, levels. at side, XXXX for diesel take we're a you to demand On the back look If

off where because and have off in further out Germany, still about side, we're gasoline XX% XX% U.S., about We're the coming on lockdowns the gasoline off. we On of the X% diesel off. in May Europe business They're on in about Austria in lockdowns and XX. they're

And Switzerland, sunlight. open about now. some they're XX%. off see then They're we in So

I think the well. really really, U.S. is doing

gotten than look you one population of vaccines, the the If XX XX% COVID has dose. population has more over XX% least of gotten dose, at at one

So of a we see can sunlight. lot

back travel seeing forward up July. The said just XX%, don't We net-net, be as people we gasoline going strength and economy, containerships. think about amount if start jet we of still year getting out want the jets the is about roughly strength We start will think that up But you a quarantine, up of back international the that, refinery think lot the that Jet, you on XXXX. as then goes in we've in travel the CDC we'll levels people of work. XX% X%. over and the coming the that to in U.S. as that since that about same XXXX will we've barrels down be the and expect are capacity about view XX% here we up think needing mostly XXXX. where capacity, think much. about given at in XX% And of seen of down the that ships economy. diesel We're ultimately, going about whole We lots is cruise house Our that refining think the be if gasoline X%, means we that million to on. That represents top diesel think X of of be half can shut down

shut least up million to with XXXX capacity at in of X be of refining the U.S. back we'll down. levels barrels demand So

So we're that very makes in of bullish we that this half -- us think for -- the second reason. year

at I demand, you pre-COVID has we the activity trips slightly think are to seeing I gasoline gone look recreational grocery might add, when store, above just back levels. to

more suburban And of areas people gasoline. more, so there's some where strong big a movement demand out there. We're seeing consume into the cities of drive

it's I robust summer. like negatives, travel the the the are So positives to season It I think and you be thing a are for other up. there to look reservations looks think going as summer, hotel but is,

comes next with from Pickering, Tudor, line Matthew question Holt. Blair Your the

just don't the on diesel conversation. an I Currently, for renewable a see had LCFS fuel follow-up pathway I Phillips.

LCFS an wanted capturing credit XXX this gallons? be just clarify to will million I So whether you initial on

Yes, we will.

you your that an X And demonstrate and your to from. -- you is for feedstock come capability CI kind run have and they operations. the and of way first assign where is average of works coming So that up quarters the actually

and will demonstrate we'll assigned a CI that a larger as capture the we're we're into over between the than are the one ramp actual two So LCFS and quarters, And the will providing getting lower the level and today. of next then run we benefit feedstocks CI. statutory an we assigns kind that than LCFS difference

don't prescribed by process we that's have choice but any CARB, a and So fall. to It's

the And since so that operating. we're in now middle we're of

difference is X CI or points. that And around XX CI

after get at couple of X that or currently machine better quarters first we about So points we're than that getting. we'll expect running CI the XX of

these with to just and capture, BTC we'll so LCFS, be RINs And barrels. clear,

is a credits think Do as maybe opinion on LCFS date? California then the overall And oversupplied. LCFS have concerns compliance good. do an past have month? issue market a you Sounds follow-up, do Or becoming off seasonal have that annual it's you the around the sold over why like you

with it's down, think We utilization less No. demand. utilization there's

If contango you so obligation because -- makes the forward look at it's the every forward curve is the year. increases a curve, That sense the higher.

we up rises it would expect in So to California. come back utilization as rate

mid-June, announced up opening support which has California demand. should

with correlation a are the increase demand models increase traveled We seeing for gasoline. vaccines vehicle in and and the in

Gabelman from comes with action Cowen. Jason line the next Your

fill-ups difficult of just to because the back it kind seems during RIN pass is, periods I'm one. more it's just like cost I demand important cost an customer. to I'd thinking business. go the during marketing ring guess, of your like trying net go to, I'm the understand does to up pass ability COVID, RIM like to through to discussion the to consumer what the the of weak because through cost And the within

could is? So the then is second one. a volatility impact Uri? you business that some creating the own of in provide exposure simple from to kind I And if my hoping was just question your OpEx is what refining understanding

So Jason, passed customer. we think that we the to the RIN

the the RIN, I we think gets barrels. marketing it's in of our margins have But the to RIN of ultimately. suffer because compete true times consumer to low during that think demand, sell passed our terms to we

from Uri. was -- system cost the storm your question to Second second refining around

plants saw in the kind gas significant pricing right, works, in but our system. fuel gas system. of the Coast, because that saw Gulf saw FX costs, we and of the Mid-Con affected of U.S. just we X electricity we So the heavily were There just costs across wasn't kind our the way first across

of kind increased in increase and pipes the things. $XXX utility the of sector. costs look million most cost bit in $XXX up you range that really have right, operations for of a in broken in and impact we're didn't at million, if to kind there, damage, we of much So fix saw us utility to We little our total that that

I now have will over today's We the call. back call end the to Jeff. reached of turn

you your for and Shannon questions, in contact Thank with your for help. All happy Please Phillips much follow-up me right. any XX. we're time very and/or interest to

Thank you. Ladies and concludes today's gentlemen, conference. this

may disconnect. You now