PBF Energy Inc.

Good day everyone and welcome to the PBF Energy Third Quarter 2024 Earnings Conference Call and Webcast. At this time all participants have been placed in a listen-only mode and the floor will be open for questions following management's prepared remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

Thank you, Brittany. Good morning, happy Halloween and welcome to today's call. With me today are Matt Lucey, our President and CEO, Karen Davis, our CFO, and several other members of our management team. Copies of today's earnings release and our 10Q filing, including supplemental information, are available on our website. Before getting started, I'd like to direct your attention to the Safe Harbor Statement contained in today's press release. Statements that express the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the Safe Harbor provisions under federal securities law. There are many factors that could cause actual results to differ from our expectations, including those we describe in our filings with the SEC. Consistent with our prior periods, we will discuss our results excluding special items which are described in today's press release. Also included in the press release is guidance information related to 4th quarter 24 operations. For any questions on these items or follow-up questions, please contact Investor Relations after today's call. For reconciliations of any non-GAP measures mentioned on today's call, please refer to the supplemental tables provided in the press release. I'll now turn the call over to Matt

Lucy. Good morning everyone, and thank you for joining our call. Our 3rd quarter results reflect marked conditions, a combination of weaker margin environment and poor crew differentials that challenged refiners. Our refineries ran well during the quarter. We had no planned maintenance or material unplanned downtime. The operating performance of our assets reflects the dedication and focus of our outstanding employees who are 24-7 in all market conditions to supply the refined products that are still very much in demand. Weak margins and gyrating market conditions experienced recently do not reflect our longer-term view that global refining supply and product demand remain tightly balanced. This tightly balanced system should, over the medium to long term, provide a constructive backdrop for refiners as demand for our products continue to grow globally. 2024 has had a number of factors negatively impacting the year. While demand for refined products in the US has improved year over year in the 3rd quarter and has generally been resilient, demand across the rest of the world was less constructive. On the supply side, the market has been impacted by adverse timing as planned refining capacity additions came online in 2024 in front of planned and announced shutdowns that are scheduled for 2025. 2025 is trying to be a more balanced year. 2024 is seeing net additions of approximately a million barrels per day. For 2025, the list of closures or announced shutdowns across North America, Europe, and Asia is approximately a million barrels per day. As stated, crude oil was particularly strong across Q3 and was a significant headwind to refinery margins over the quarter. Importantly, we are now coming out of the seasonal peak demand period of high runs and seasonal crude burns. As we approach 2025, we should see more relief from the announced refinery closures, fewer startups, as well as the eventual easing of OPEC cuts and hopefully a calmer geopolitical landscape. Market conditions will continue to be cyclical and our role as stewards of assets and investments is to make sure that our refineries are positioned to perform in any market. In contrast to previous cycles, PBS' balance sheet provides us with greater flexibility to weather challenging markets. With our financial positions secure, we can maintain our focus on operating safely, reliably, and environmentally responsibly. And while safe and responsible operations are a necessity, it is not sufficient unto itself. We must operate safely, reliably, and responsibly and we must do it as efficiently as possible. With that in mind, our team has been developing a business improvement initiative across our refining footprint. We have identified opportunities across our system, both in operating costs and in capital expenditures. We have strong conviction that we can deliver $200 million in run rate cash savings by year end 2025. Capturing this opportunity and ensuring continuing improvement beyond 2025 is critical and will take sustained commitment and focus from our entire organization. We will set clear targets and expectations, we will measure execution, and we will hold people accountable. We will all, ultimately, be accountable to our investors and we intend to provide updates on this initiative on future calls. Looking ahead, we are nearing completion of our last major turnaround of the year ChalMet. The pre-work began in late September and we should be completed in the first half of November. In the meantime, safe, reliable, responsible operations with a renewed attention on efficiency remain our primary focus. We will continue to prioritize capital allocation toward the opportunities that deliver the greatest long-term value to our shareholders.

We

returned $104 million in cash to shareholders, including approximately $75 million of share repurchases in the third quarter. Additionally, our board of directors approved a 10% increase to our regular quarterly dividend to $0.275 per share. The increase represents a vote of confidence not only in our operation, but also in the medium to long-term outlook for our business. With that, I'll turn the call over to Karen.

Thank you, Matt. Good morning. For the third quarter, we reported an adjusted net loss of $1.50 per share, an adjusted EBITDA loss of $60.1 million. Included in our results is a $29 million loss related to PBF's equity investment in St. Bernard Renewables. As mentioned on our second quarter earnings call, third quarter results for SBR were expected to be lower as a result of the catalyst change and other concurrent work impacting costs and production of RD during the quarter. SBR produced an average of 13,000 barrels per day of renewable diesel in the third quarter. Fourth quarter RD production is expected to be 16 to 17,000 barrels per day. Cash flow used in operations for the quarter was approximately $68 million, which includes a working capital headwind of approximately $25 million. Consolidated capex for the third quarter was approximately $153 million, which includes refining, corporate and logistics. Full year 2024 capex is likely to be near the top end of guidance of approximately $850. You should note that our capex guidance and reported capex is on an incurred basis, but our cash flow statement will reflect actual cash spend for capital expenditures and turnarounds. Our year to date 2024 capital expenditures per the cash flow statement includes approximately $145 million of cash outflows related to our 2023 capital program for work completed at the very end of 2023. Through share repurchases and our dividend, we continue to demonstrate our commitment to shareholder returns by delivering approximately $104 million to shareholders in the third quarter. Since our repurchase program was introduced in December of 2022 through the end of the third quarter, we have completed approximately $990 million in share repurchases. This represents over 17% of our outstanding shares at the beginning of the program. We have reduced our total share count to approximately 115 million shares as of September 30th. We ended the quarter with approximately $977 million in cash and approximately $1.3 billion of debt. Maintaining our firm financial footing and strong balance sheet remain priorities. Our ability to fund operations and continuously invest in our assets will always be our first priority. And while dependent in part on our financial results, continues to be underpinned by our financial strength. Through the challenging market conditions of the past few quarters, we have continued to support both operations and shareholder returns. Operator, we've completed our opening remarks and we'd be pleased to take questions.

In a moment, we will open the call for questions. The company requests that all callers limit each turn to one question and one follow-up. You may rejoin the queue with additional questions. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. And we will take our first question from Roger Reed with Wells Fargo. Your line is now open.

Yeah, thank you. Good morning.

Didn't really talk about the preamble, but it's certainly one of the big topics out there. California, I was just wondering if we could kind of get your thoughts on some of the changes out there, both on the front end with the government and then the announcement by one of your competitors that they're going to exit the market about a year from now, maybe how you're thinking about the outlook in California.

Thanks, Roger. Look, in some respects, I don't have a lot of interest in throwing sand or, quite frankly, inviting scrutiny. But the assault on the industry continues from the regulators and the politicians in California. I don't know if you saw it. The governor held a press conference a couple weeks ago where he essentially vilified and attacked our integrity. He called me, all my colleagues and everyone else in the industry liars and accused us of stealing from people in California. All the while, they can't plead ignorance on the fact that the industry swallowed significant losses. They knew that because that's part of California regulatory regime. So we, along with all the other market participants, submit monthly statements. So I think it's important to know just the reality. It's important to know even currently, the industry in California this quarter, like I said, the industry swallowed down significant losses, and it's still the highest price of gasoline in the country. And that's primarily because of the state's involvement. The state charges, either tax or through other mechanisms, other costs, are approximately, I think it's close to 70 cents more than any other state. And that's set to potentially go up 50%. And those are impositions they're putting on the people. And so it's sort of, I sort of chalk it up to maybe my cynical view of every other statement that politicians seem to make where every accusation, I guess, may be a confession. I was certainly offended by the press conference, but it is what it is. The reality is the state doesn't address the root cause of the problem. It only exasperates it. The old Reagan joke of, you know, we're here from government and we're here to help, that's multiplied by a factor of 1,000 when you're talking about, you know, the state of California. And every bit of involvement they make, the market becomes less efficient. Now, we believe we have two of the most complex refineries out in the West Coast. The supply-demand situation is seemingly getting worse with a major refinery on the heels of the governor's latest salvo, as announced, is closing. And the state desperately will need refined products going forward, and we intend to provide it to them provided that there's a landscape for us to operate. In terms of our refineries being competitive and well positioned, we do think that, and I think this can be critical for the state. I don't know if there's much more to say in that regard. I could go on.

Yeah, yeah, I understand. It's hard to know where to stop, things like that. Let me change direction a little bit. The increase in the dividend by 10 percent, you mentioned the, you know, cost-saving targets. Maybe there's something also that'll happen on the capex side in terms of trying to, you know, just look for ways to turn spending. Given that a smaller company slashed their dividend, I've got to say it was one of those things I wasn't really anticipating. So maybe you could help us understand what goes into the thought process. You know, maybe it's the strength of the balance sheet, your outlook, et cetera, to, you know, give you the confidence to raise a dividend here.

So two years ago we reimposed the dividend. And what we said at that time, and we very much like to follow through on everything that we say and mean what we say and say what we mean. Two years ago we reinstituted it, and we said we were going to look at annually. And I have no interest in, you know, gyrating our dividend quarter to quarter. We've tried to design a dividend that is conservative, reliable, and stable through cycles. And as we look at it, we look at it on an annual basis. So a year ago we raised it, a year ago on this call. We raised it from 20 to 25 cents. And this year we looked at it, and based on, you know, the current market, which is challenging, but the cycle, the market place in the medium to long term looks very constructive. And when we look at the cost of 27.5 cents and we compare that to our expectations of mid-cycle, pre-cash flow, we're very, very comfortable with the 27.5 cents, and we're happy to give it to shareholders. It's just the reality in our industry. When you look at a mid-cycle number, there are going to be periods where you're going to be below that, and there's going to be periods where you're going to be above it. The reality is you may not even have a cup of coffee when the market's actually at mid-cycle, but we look through the cycles and, you know, come up with what we think is a good, solid, defendable, conservative dividend. And again, we intend to look at it on an annual basis.

Great. Thank you.

Thank you. We'll take our next question from Doug Legate with Wolf Research. Your line is open.

Hi. Good morning, everyone. I guess, Matt, there's – I want to also go back to California, not so much on the press conference and the ask of the industry, but more of the dynamics of what's going on out there. As we see it, about 70 percent of diesel demand in California is now covered by renewable diesel. And even though we're getting another refinery shut at the end of next year, potentially, it looks like imports to meet the retail obligation of Phillips 66 in particular means that the market is probably going to remain pretty well oversupplied. So I guess, leaving aside the regulatory issues, how do you see the actual fundamental supply-demand dynamics playing out in that market, especially on the diesel side?

Yeah. So there's, you know, three major products. On the diesel side, I'll let Paul – I'll invite Paul Davis, who is a resident expert on everything California, comment. But obviously, the gasoline side is shorter and it gets significantly shorter still with the announced shutdown. We're insulated a bit on carb diesel because that's never been a significant part of our business, of Torrance or Martinez. We export a little bit out of California. And then Jet, we're obviously a major producer of Jet. And so, you know, you want to isolate one product, you can, but you have to look at the suite of products and see what's going to happen. And there is a limitation on logistics. The state was designed around its refining system. It was well supplied and that supply is declining. And the resupply is just more difficult. It's more difficult from a logistics standpoint and it's more difficult from a cost standpoint. Your resupply into California from imports is three weeks to a month of travel time. So, you know, I think broadly speaking, it's going to rely on significantly more imports. And on the diesel side, we understand that renewable diesel is being called to California and that will continue with the programs they have in place. And that's not surprised us. We've been set up for that. Paul, any other comments?

Well, on the diesel side, I mean, you're seeing some of the balancing happening as we speak. I mean, the plant that's going to be shutting down at the end of 25 makes a predominant amount of carb diesel. And it's going to be balanced by when they shut in that the balancing act is going to be the renewable diesel they're producing up in the bay. There's going to be a lot less imports of renewable diesel coming in from Asia and other parts when the blender tax credit goes away. So there's still some some wrangling going on in the distillate balances on the coast. From a PBS standpoint, Matt said it correctly. We're primarily a jet maker on the West Coast. We make gasoline jets and we make just a de minimis amount of carb diesel and we make some export diesel that goes into Arizona and Nevada. So from an outright distillate crack standpoint, our primary capture is always on the jet.

OK, thank you for that matter. Karen, my follow up is kind of a philosophical question on your decision on the dividend and buybacks and so on. If you can give me a minute, I think this is a really key issue as folks look at how you've managed to de-lever your business over the last several years with the windfall cash flows we had after COVID. But at the end of the day, you're basically an annuity business. And if you know, it's not clear how long it's going to take for the market to clean up in terms of refinery closures and so on. And I put it to you that in an annuity business, your equity values are what's left after net debt. And raising your dividend and buying back stock is essentially building net debt at the expense of equity value. So I'm just curious, when you think about it like that, how long or to what extent have you prepared to continue with buybacks and dividends if the cycle remains as depressed? So at some point, do you pause and wait until you have a play chat?

I think OK, so nothing is static, obviously, Doug. And there's going to be periods of weakness. And there are reactions to that. We're seeing that now in terms of capacity coming off. And so we spent a lot of time this year devising and analyzing what the medium to long term outlook for our business looks like. And to be frank, we think it looks very constructive. We've had some timing issues over 24 as the net addition certainly outstripped shutdowns in 24. And they continue to pile up. And my suspicion is that they will continue to grow for those refineries that have structural weaknesses or in markets that are structurally weaker than the market in which we operate. So your thesis of it's going to be lower for longer, we'll see. Now, it's if this persists for many years, we can certainly reevaluate it. But the marketplace is a function of supply and demand. And we certainly like our competitive positioning within the marketplace.

I don't know how to say many years, but I appreciate the appreciate the color. Thanks so much.

Thank you. We'll take our next question from a new group with UBS. Your mind is open.

Good morning. You always have a very informed view of the global heavy light spreads. And what are you looking over there? And then even if you could help us understand what your view on on the Canada side is, looks like the production is rising. But then the DMX is on, which can technically benefit you on the West Coast. So help us walk through what you're seeing out there in terms of global heavy light spreads and can they improve in 2025?

Thanks, Manav. It's Tom. When looking at the heavy market right now, we're certainly going through the very high run environment in the third quarter for the reasons that Matt described earlier in the call, plus also the seasonal crude burn. I think we're obviously on the precipice at this point and we'll have certainly some direction next week further from OPEC, OPEC plus in terms of the taper and the expectations there. I mean, obviously there was discussion or, you know, sources, you know, in the press yesterday referring to that OPEC plus may be deferring that another month. I think we're certainly in the expectations that the heavy side of the barrel sort of peak in terms of its strength seasonally in the base case, you know, and then secondarily OPEC plus introducing some more oil, whether it's in December or whether it's in the first quarter. But I think it's really important to sort of really look at that in the fourth quarter of this year, the PAD 3 turnarounds were particularly light and then there is quite an active turnaround, you know, plan meeting and schedule for the first quarter, which would certainly introduce more oil to the market for those that are operating to sort of put the market back into better balance. Regarding TMX, I mean, in terms of the production side, we're seeing the same thing in terms of, you know, from the production side of the equation.

Perfect. My quick follow up here is quarter over quarter, MITCON results did show an improvement on a relatively flatish crack and help us understand whether you ran better, what helped you drive an improvement in MITCON earnings quarter over quarter.

I don't know that I would point to any one thing. The refinery of Toledo has run well and they actually performed well all year. So we've been pleased with that. Obviously, there can be gyrations quarter to quarter on different aspects of products or on the crude side that can play with capture rate a bit. But nothing to call out for Toledo, other than the fact that they've been operating well.

Thank you for taking my questions.

Thank you. We'll take our next question from Ryan Todd with Piper Sandler. Your line is open.

Thanks. Maybe starting out the $200 million cost savings target that you're targeting by the end of 2025. Can you maybe walk through some of the bigger, the primary buckets that you see in terms of driving that savings? Any sort of details you might be able to provide there?

I'm

going to hand

that over to Mike Bukowski. Sure, Ryan. Thanks for the question. So over the past month or so, we put together a task force. So we looked at internal and external benchmarking and looked at some best practices across the system to see where we can identify opportunities. And again, with any maintenance budget, your biggest category of expense is going to be energy. So of that $200 million, we think there's about 30 to 40 percent of it we could get in energy reduction. And then the other categories run the game in terms of our maintenance, our third party spend. So look at that in terms of catalysts and chemicals and some of our operating supplies. There are two capital categories in there, and those are turnarounds and capital projects. So we think that there's an opportunity on the maintenance and turnarounds. For instance, it's really about driving better efficiency on turnarounds. It's also some scope optimization, some interval optimization. And I would say, as I said before, the energy piece is about 30 to 40 percent. And then the balance of that, of those other buckets, are roughly evenly distributed across.

Thank you. That's very helpful. Maybe a follow up on, as you think about capture, and I know it can be a tough topic, but we've generally seen it across much of the industry kind of decline over the last 18 months. There have been headwinds to capture. As we look into maybe into the fourth quarter or into the early part of 2025, anything you can point to in terms of some of the moving pieces, whether it's crude backwardation or secondary products or differentials where we might see an improvement, anything encouraging on the capture side as we look going forward?

Yeah. The biggest driver is, and you sort of alluded to it, and so a couple things you mentioned, is on the crude side. And in the third quarter, as Tom went through, and some of the comments in the transcript, there was particular strength on the crude side. The crude market was significantly stronger than on the product side. And we went through those reasons why, in terms of new plants coming on, drawing more crude. It was Q3 when all our plants around the world are trying to run in front, certainly turnarounds, in the northern hemisphere. You have seasonal crude burning in the Middle East, which draws on. And then all the while you've had, and then you had geopolitical sort of noise, which was adding to it. And hopefully on the geopolitical side, we can all pray for a more stable environment there. But also a big flywheel here is OPEC, and whether it's in December or January or some month thereafter, I'm not sure, but there's certainly conviction that they're eventually going to sell their oil. And it becomes a self-fulfilling prophecy that that market should loosen up. And indeed we're seeing it. We're seeing it today just on the backs of entering turnaround season. So the biggest driver on capture rates, if you're running well and we ran well and we intend to continue to run well, is on your discount on the feed sacks you're running. And I'm hopeful that the worst is behind us in that regard.

Thank you.

Thank you. We'll take our next question from Neil Mehta with Coleman Sacks. Your line is open.

Yeah. Good morning, Madden team. I guess the first question is you've talked in the past about the potential for asset monetization, specifically underutilized assets like the development of available real estate. I'm just curious on your perspective of, you know, as you think about your portfolio, does that make sense? And where do you stand in that process?

So I don't have a specific update. It absolutely makes sense. We absolutely have teams of people that are focused on exactly what you just laid out, whether it's capitalizing on value that's within the company on assets that are underutilized, i.e. real estate. We are actively working to sort of develop and create value in that regard. And, you know, I think there's actually very constructive possibilities there that, and that's the reason we've allocated the resources to it and will continue to do it in terms of other unutilized assets or non core strategic assets. Yes, we're constantly evaluating those and exploring whether they should be held by us or by other parties that will value them in a more constructive way. And so that is that's that's a significant part of our job that we take very seriously and evaluate on a real time basis. And we'll certainly communicate if there's something to be done on one of those items.

Yeah, Matt, is there a specific asset or region that you're specifically focused on if it relates to real estate or you don't want to comment? Well,

yeah, the obvious one on the real estate side is because we have incremental value. It's not in substitution of we have excess land in Delaware. And, you know, that land is being utilized in ag today. We rent it to farmers and there's no question there is going to be a higher and better use for that property. And we think it potentially holds a tremendous amount of

value. Thank you. And the follow up is around environmental payables, which I know has been a big focus for you guys to to reduce the outstanding levels. Can you just talk about where you are, how we should be thinking about that in 2025 and the moving pieces?

Sure, sure, Neil. Thanks. The environmental liability and I need to remind you that includes not just friends, but LCFS, cap and trade. It's the the entire bucket. It increased from four hundred twenty nine million to four seventy four at the end of this quarter. And we're just slightly above our guidance range this quarter, primarily because of it simply reflects some extended payment terms for cap and trade payable. Typically, we view that as ranging between two to four hundred million dollars.

Thanks, team.

Thank you. I'll take our next question from John Morial with JP Morgan. Your line is open.

Good morning. Thanks for taking my questions. So I just had a follow up on Doug's question and maybe just drilling in a little bit more on the balance sheet. You've spent almost two years at negative net debt and leverage is now picked up to be a little bit positive, not meaningfully so. But you are remaining aggressive on your buyback and hiking dividend and cracks have come down. Do you still expect to kind of live in that close to net zero type range on net debt or at the low point in the cycle? Are you comfortable levering up a little bit? Is that more of kind of a through the cycle target with zero net debt?

I think it's it's having having zero net debt positions you incredibly well for a cycle. There's a period of time where you have to lean into the balance sheet. You're still talking about the very, very conservative balance sheet. And so we take it very, very seriously. We monitor it very, very closely. But we also have an outlook that goes beyond the next number of weeks or the next couple of months. And so we have confidence in our business and where we stand within the industry in that regard. So, you know, as we go through difficult periods of time and we need to lean into the balance sheet,

that's what's there for.

Great, thank you. And then follow up is just operationally on the West Coast. Can you just give a feedstock update on the West Coast? I think you had mentioned previously that you were running about 25 KVD of TMX barrels and hoping to get to 50. Where are you on that today? And are there any challenges with running those barrels or any kind of learning curve you have to get up in general?

Yeah, I'll make a couple of comments and let Paul to follow up. In the third quarter, we ran 20,000 barrels a day. In actuality, in the fourth quarter, I expect we'll run less than that. But that is not, there's a little bit of, we're doing some maintenance on some sulfur equipment that, you know, that those crews are higher in sulfur than some other alternatives. But that's not really the driver. The driver is how those barrels price. And so we look at the marketplace and we look at the suite of crews that are available. They have, we've again picked the most economic. Now, what we've been focused on is, you know, we've been preparing our catchers mitt where to the extent those crews are available and economic, we can run up to 50,000 barrels a day of transbound, you know, Western Canadian crews. And so we have the capability, the optionality, but they have to be delivered in a cost competitive way. And I think for a whole host of reasons, some of which we were talking before in regard to the tightness of the crude market and some of the things that are going on in Asia, those barrels have been bid up a bit. That is not my long-term projection. I think we're in the very, very early innings. And at the end of the day, the California refineries are going to be, have the least amount of logistic cost to get that crude into those refineries. So I think, you know, over a span of a long period of time, my suspicion is that we will be running significantly more of it over time.

Any other comments? I think you kind of covered it. I mean, bottom line, it gets down to price. And right now, or going into the third and fourth quarter, the Asian market's bidded very aggressively and it wound up going trans-Pacific. I think the West Coast systems can run a fair amount of TMX-type barrels, whether they're CIN, SWEETs, or WCSs. It's all going to depend on price, and that's going to be for us and everybody else on the West

Coast. Very clear. Thank you.

Thank you. We'll take our next question from Paul Chang with Squashabank. Your line is open.

Hey, guys. Good morning. Matt, just, or maybe that's for Karen. Do you have a rough outlook for 2025 capex? And that if the market conditions really remain challenging, instead of improving next year, what is the minimum you need to spend? That's the first question.

Well, with respect to 2025 capex, we're still in the process of finalizing our 2025 capital budget. I would just point you, in terms of a range, we often talk about a typical range of between 750 to 800, and some years it's going to be higher based on turnaround activity and magnitude of margin improvement projects, et cetera. On the other hand, if we are refining margins materialized, we'll look to reduce capital spend where we can. But while this is our custom, we expect to release the guidance in early January along with our turnaround schedule.

That's 750 to 800. Is that including any growth capital in there or is it already, say, on a maintenance capital and with the turnaround basis?

Our capex budget always includes an element of discretionary growth projects. So yes, it would be included.

Matt, can I, sorry to ask this question. If we go back into the dividend, based on your dividend one way and your cap expanding like 750 to 800 a year, what is the crack spread environment you need in order for you to be cash flow-break even? I mean, comparing to the last 12 months that you said, you think you need to be $5 better or any kind of work number that you can share?

I think it would be too difficult to isolate to a specific crack. So I, because there's too

many other dynamics, there's operating costs, crew differentials, energy costs. But over the long span of time, as we've analyzed our business

through

multiple cycles, in a mid-cycle environment, which includes periods of low earnings and up cycles, we generate free cash flow, call it $300 to $500 million. And that can be in multiple markets where strong cracks and weak crew differentials or vice versa. So isolating one crack, I think, is too difficult or quite frankly, it's not an accurate assessment. But as we look forward, and all the advantages are the North American refiner has, but more specifically that PBF has of having the complexity that we have, the location that we have, the optionality that we have, we think we're well positioned not only within North America, but when you compare us globally.

All right. Very good. Thank you.

Thank you. We'll take our next question from Joe Letesh with Morgan Stanley. Your line is open.

Hey, good morning, team. And thanks for taking my questions. So I wanted to follow up on the $200 million in run rate cash savings. On the energy reduction side, should we think about that as being smaller, quick hit projects, or those be larger projects requiring more capital? I'm just trying to get a sense of and think through the capex needs to hit that $200 million reduction. Thank you.

Yeah, Joe. On the energy side, we expect these to be a combination of some small maintenance dollars that we need to spend and some small capital and then just increase governance, increase optimization at the plant. So I wouldn't expect large capital on these projects.

Great. Thank you. And then shifting gears, I wanted to ask on SBR. Now that that's been online for a little bit more than a year, can you just talk to the performance of that asset relative to expectations? Thank you.

Yeah. So you got to start with the market. The market clearly has been below market. And I think that's shaking itself out a bit. So I think that's a good question. Over the, again, sort of looking through any quarter or any month, my expectation, sort of like the highest level sort of investment summary, is that governments are going to incentivize renewable diesel. Now there's multiple players within renewable diesel. And I think we're positioned with our pretreatment capacity as well as our location and our ability to distribute our products to a whole host of markets. I think we're in the top quartile of manufacturers of renewable diesel. That is not translated into profits over 24. I'm not confused on that. But again, there's a little bit of a shaking out and there's been a number of players, whether it's on the biodiesel side or as some players morph into a sustainable aviation fuel. The market is dynamic and will continue to shake out. But with our partnership with the Italians, ENI, which has been very, very good, I'm highly confident that our offering of renewable diesel is as competitive as it needs to be. That being said, anytime you start a new business, there's pluses and minuses. And I think that the minuses for us, I think, quite frankly, have been shared by others in the industry. Catalysts underperformed sort of original expectations. There needs to be a bit more maintenance in terms of catalyst changes and shorter cycles. But we'll continue to line that out and make improvements on that. I can never underestimate engineers in that regard. I'm hoping for continued improvement on that side. And as far as our partnership, couldn't be more pleased. And the marketplace, we're starting to see some green shoots in terms of what it looks like. And certainly the fourth quarter looks better than the third quarter performed from a marketplace standpoint. And then a lot will rest on the new programs that the government's going to roll out once the wonder tax credit is retired at the end of this year. But like I said, for us, we like the asset. And quite frankly, it is no doubt a hedge for us against rent prices. And as it may have contributed to rent prices coming down, that's to the benefit of PBF as well.

Thanks, Matt. I appreciate it.

Thank you. We'll take our final question from Jason Gobleman with TB Cow and your line is open.

Yeah, hey, this is Jason Gableman. I wanted to go back to this 200 million dollars in cost savings because we've seen others try to implement similar programs. And it's unclear to what extent these programs have offset cost inflation versus resulted in actual reductions in cash costs. So can you just kind of discuss what you've seen in the market from an inflation standpoint and what you expect going forward? And if you expect the 200 million to be kind of on an absolute basis or if you expect to offset continued inflation.

So this is this is Mike. I'll take that question. So the 200 million is the basis of that is on the two hundred twenty two twenty twenty three actual expenses. We did make some adjustments for the reliability of the of the plant when we set our baseline or the plants. We set our baseline. We want to do want to take credit for improved reliability. So we're going to do go out in the field, new bottoms up initiatives to actual drive reduction of energy consumption. It's not going to be driven by price. We're going to do efficiency based projects in terms of how we do our maintenance. So it's not going to be driven. There may be some scope adjustment as we optimize our PM's, but it's going to be done driving how we improve our efficiency. Of course, we're going to have to eat the the raises that are there. Maintenance employees get contractually. That's going to be a piece of that turnaround. That's another example where it's largely driven by initiatives to drive efficiency and doing the same work at a less cost. Given the time frame that we're talking about driving these costs reductions, we don't expect inflation to be that high. It's kind of came down. I know some of those other companies that have done that have done that in a real high period of inflation. So it's been difficult to show those savings. But given the time frame that we're talking about here, I don't expect to be a large piece of it to be inflationary offsets.

OK, great. And then my own just going back to Ryan's question on some of the headwinds to capture. Appreciate the comments on heavy light diffs, but it seems like this year there's also been impacts from backwardation and co-products. And I'm just wondering in a more normalized environment if you could kind of approximate what those headwinds would look like relative to what they've been like this year on the co-product realizations include backwardation.

Thanks. Jason, it's Tom. I mean, certainly in terms of the crude side of the equation, I think. So it's one element at that point that we haven't discussed at this point is really kind of be looking at the third quarter. I mean, you know, was the lack of hurricanes impacting anything in terms of the U.S. Gulf Coast? Clearly, obviously, the hurricanes were in the eastern Gulf and obviously through the things in terms of the damage that it did to demand and to communities certainly on the eastern side of the Gulf. But, you know, basically refineries weren't impacted and crude supply was gyrated down, you know, obviously subsequently came back, but was just another contributing factor at that point to strong crude. I think when you also have to think about it at this point is that when looking at basically the assessments in the markets is cash crude was even more expensive than just examining data, right? The grades were trading at a premium to the data market. So that really contributes to at that point really sort of like, you know, the waterborne markets were even tighter than expectations. I think at some point I think he could have looked at it and I think it was early September if you were just looking at sort of like simple margins in Europe were actually weaker that day than during the midst of the pandemic. And it wasn't because of products. It was because the crude market was just subsequently very different. I mean, that was a crude market to go back then that data was trading multiple dollars under ice rent. This time around was multiple dollars above. And I think that, you know, contributing factors right you had the Libyan issues and it was a confluence of events sort of really contributed to a tight market and it's also been the micro management of the heavy side of the barrel from Mopac Plus. And the S&Ds and certainly the balances for 2025 look a little bit looser in terms of, you know, crude supply, right? So that should obviously, you know, accrue to the benefit of the refiner. In terms of co-products, I mean, I think in terms of, you know, we're kind of really examining right, you know, that coke and other things have been trading on the weaker side of the equation. If we look at the asphalt market, certainly weaker, you know, sort of year over year. I think in terms of those expectations for us going forward, I think it's really just getting back to the crude side of the equation than it is about the co-products.

Great. Thanks for that, Coller.

Thank you. We have reached the end of our question and answer session. I will now turn the call over to Matt Lucey for closing remarks.

I greatly appreciate everyone's participation today and look forward to speaking with you again next quarter. Have a great day. Happy Halloween.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.