PBF Energy Inc.

¶¶ Good day everyone and welcome to the PBF Energy fourth quarter 2025 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, Angeline. Good morning and welcome to today's call. With me today are Matt Lucey, our President and CEO, Mike Bukowski, our Senior Vice President and Head of Refining, Joe Marino, our CFO, and several other members of our management team. Copies of today's earnings release and our 10-K 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 laws. 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 forward-looking guidance information. For any questions on these items or other follow-up questions, please contact Investor Relations after today's call. I'll now turn the call over to Matt Lucie.

Thanks, Colin. Good morning, everyone, and thanks for joining our call. I want to address three key topics. One, status of Martinez. Two, our fourth quarter performance. And three, the near-term outlook for the market and our company. First, the status of Martinez. Bottom line is we're on the cusp of restarting the refinery. All the construction work will be done this weekend. Next week, the plant will be turned over to operations and will commence a safe and methodical restart. We expect to be fully operational in early March. We set a high bar for the team that we would not be where we are today without the efforts and ingenuity of all involved. Martina's team, our representative workforce, our suppliers, and many others who worked collaboratively along the way. Our team overcame numerous challenges to get us to this point, and a safe, successful startup will be the culmination of their efforts. We eagerly look forward to getting back to full operations this quarter and supplying the California market with much-needed fuels. Point two, Q4 performance. PBF exited 25 on a strong trajectory. Our fourth quarter results were a sequential improvement over prior quarters and demonstrate the exposure of our system to torque with improving crew differentials. Even with expected seasonality, product cracks remained relatively strong as the quarter progressed. We directly benefited from improving crew dynamics, Increasing supply of heavy and medium crudes improved the light heavy spreads and our predominantly coastal, highly complex refining system directly benefited. Point three, outlook. The market landscape taking shape in 26 is looking very good. Refining fundamentals should remain supported by tight refining balances with demand growth lining up well compared to transportation fuel capacity additions. Most of the refinery additions are in Asia and have a very high petrochemical yield. Sour crude differentials began widening in the middle of last year with OPEC plus taper and now have additional tailwind in 26 of Venezuela barrels entering the open market. PBF is particularly well suited and highly leveraged to this improving market dynamics. And in California, with Martinez almost behind us, we look forward to participating in a market that is tighter on products and looser on crude. The near-term outlook for the company is certainly buttressed by the $230 million in achieved efficiencies that we reached in 2025 and are now firmly in place. Incidentally, our RBI effort is not complete. We have identified an additional $120 million of run rate savings for a total of $350 million that we expect to achieve by the end of this year. PBF remains focused on controlling the aspects of our business that we can control. To be successful and enhance value for our investors, we must operate safely, reliably, and responsibly, and we must do it as efficiently as possible. With a fully restarted Martinez, constructive market dynamics, and $230 million of achieved efficiencies, we should have the company set up to be clicking on all cylinders and drive positive results for our shareholders.

And with that, I'll turn the call over to Mike Bukowski. Thank you, Matt. Good morning, everyone. Before updating on the progress of RBI, provide a few comments on fourth quarter operations in our Martinez refinery. On the West Coast, I commend the Martinez team and all who have been involved in the rebuild effort. The unplanned nature of the project created a host of challenges that the organization met through creative problem solving, ingenuity, and above all, excellent teamwork. The team has not only overcome these challenges, but they have executed the work so far in an industry top quartile safety performance. My thanks to all involved in the project and all the safe work that has been completed to date. Outside of Martinez, aside from a few minor issues, our refineries operated reasonably well in the corner. We kicked off a robust 2026 capital program in January, beginning with a turnaround in Torrance. I'm happy to report that the mechanical portion of the turnaround has been completed per plan and the units are in the startup phase. We have a busy year on the turnaround front in 2026. We previously provided guidance on the locations and total anticipated expenditure for the year. These activities are weighted to the beginning and end of the year, leaving Q2 and Q3 relatively light from a planned maintenance perspective. I'm also happy to report that we are seeing results from our RBI program. By the end of 2025, we achieved our goal of $230 million of annualized rent rate savings. This goal represents 50 cents a barrel or approximately $160 million reduction in operating expenses against our 2024 benchmark and is incorporated in our 2026 budget. Additionally, we've reduced capital and turnaround expenditures by $70 million. why our 2026 total capital guidance is higher than 2025 on an absolute basis. This is driven by an increased level of turnaround activity. The savings reflect comparison against the year with similar scope. We view our system-wide turnaround cycle as being in the five to seven year range, and over time, the savings and efficiencies gained on the capital program will become evident. As you may recall, we started this program with centralized efforts in procurement, capital projects, organizational design, turnarounds, and site efforts at our Torrance and Delaware Valley refineries. As of today, all refineries are engaged in RBI and are contributing to the savings goals, and we are also working on a secondary cost initiative. As part of the overall RBI program, we have identified over 1,300 initiatives focused on improving operational and organizational efficiency. Some of these initiatives are small, and some are in the millions of dollars in terms of benefits, but they all sum up to a more competitive and improved cost structure. The average value per initiative is in the half a million dollar range, and we've implemented over 500 initiatives to date. Outside of our capital and energy initiatives, the biggest opportunity we identified is our procurement practices. We are implementing a centrally-led procurement team, which brings value by leveraging our purchasing power across our refineries. Through this initiative alone, we expect to realize over $35 million in annual savings by revamping our procurement model. While we are improving our maintenance efficiency, reducing energy consumption, our main priority will always be to focus on safe, reliable, and responsible operations across our system. With that, I'll now turn the call over to Joe Marino for our financial overview.

Thanks, Mike. For the fourth quarter, excluding special items, we reported adjusted net income of 49 cents per share and adjusted EBITDA of $258 million. Our discussion of fourth quarter results excludes the net effect of special items, including $41 million in incremental OPEX related to the Martinez refinery incident, a $394 million gain on insurance recoveries, a $313 million LCM inventory adjustment, a $2 million loss related to PBS 50% share of SBR's LCM adjustment for the quarter, and approximately $8 million of charges associated with the RBI initiative, as well as other items detailed in the reconciling tables in today's press release. The $394 million gain on insurance recoveries related to the Martinez fire is a result of a third unallocated payment agreed to and received in the fourth quarter. This brings our total insurance recoveries in 2025 to $894 million net of our deductibles and retention. Going forward, we will continue to work with our insurance providers for potential additional interim payments. However, the timing and amount of any agreed upon future payments will be dependent on the amount of incurred covered expenditures plus calculated business interruption losses. Our Q4 P&L reflects incremental OPEX at Martinez of $41 million, $164 million in total year to date, that we are reflecting as a special item because it relates to the construction of temporary equipment to restart undamaged units and other fire-related non-capital expenses. While we anticipate recovering a portion of this amount through insurance, the specific amount will be determined as we finalize the claims process. Shifting back to our normal quarterly results discussion, also included in our results is a $21 million loss related to PBS equity investment in St. Bernard Renewables. SBR produced an average of 16,700 barrels per day of renewable diesel in the fourth quarter. SBR's production was as expected, but results reflect the impact of broader market conditions in the renewable fuel space. While we saw improved pricing on the credit side, much of this was offset by higher feedstock costs. Throughout the year, we've seen impacts in tariffs and regulatory uncertainty cascade through the feed markets, and the policy landscape continues to shift, adding volatility to the business. TBS cash flow from operations for the quarter was $367 million, which includes a working capital draw of approximately $80 million, mainly due to movements in inventory and falling commodity prices. As a preview, we expect first quarter capex and working capital outflows primarily related to the Martinez restart and normal seasonal inventory patterns. Our Board of Directors approved a regular quarterly dividend of $0.275 per share. Cash dividends paid totaled $126 million in 2025. Cash invested in consolidated CapEx in the fourth quarter was $124 million, which includes refining, corporate, and logistics. This amount excludes fourth quarter capital expenditures of approximately $273 million related to the Martinez incident. 2025 CapEx, excluding Martinez, was approximately $629 million. On the surface, this figure is lower than expected due primarily to CapEx pools that have not yet been cash settled as of year-end that will flow through this year. Given that and the noise related to the Martinez rebuild, 2025 and 2026 capital programs should be more broadly considered over a two-year period. Once the Martinez insurance claim is settled, we will be able to provide additional clarity. We ended the quarter with $528 million in cash and approximately $1.6 billion of net debt. At quarter end, our net deficit cap was 28%, and our current liquidity is approximately $2.3 billion based on current commodity prices, cash, and borrowing capacity under our ABL. Maintaining our firm financial footing and a resilient balance sheet remain priorities. As we look ahead, we expect to use periods of strength to focus on reducing both our gross and net debt. Operator, we've completed our opening remarks, and we'd be pleased to take any questions.

Thank you. In a moment, we will open the call to questions. If you would like to ask a question, please press star 1 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, please, while we poll for questions. Your first question comes from the line of Manav Gupta from UVS Financial. Please go ahead.

Good morning. Congrats on a strong result. My first question is, when we look at PBF, As a percentage of total feedstock, you probably use more medium and heavy sours than anybody else out there in the U.S. refining system. Now, we are already seeing those dips widen out, could be a function of additional Venezuela barrels coming in, other stuff. But I'm basically trying to understand, Chevron has said they can increase production by 50% from Venezuela. As these additional crude barrels come to U.S. and maybe hit the global markets, Can you help us understand the tailwind it will create from PBF from this point on?

Manav, thanks for the question. And you're right on point in regards to PBF's ability, and everyone will tout their own numbers as such, but no one on a relative basis consumes or has the ability to consume as much heavy and sour material as PBF, upwards of 55 or 60% of our total throughput capacity. So the famous, who's the best boxer? Well, who's pound for pound the best boxer in regards to relative ability? So you have, in our system, it's 200 million barrels a year that we process medium sour or heavy sour barrels. That packs a punch, going back to my boxing analogy, in terms of every dollar you get on crew diff equates to a $200 million improvement for our business. And as you say, I'm not sure anyone is as levered as we are in that regard. And so as we see incremental barrels come on, and this started back in the spring, OPEC, OPEC Plus started TAPER. And there's going to be a lag to that. We saw that, and even over the fourth quarter, even before the news on Maduro hit. And then a number of weeks ago, with Venezuela coming online, that just is more supply into our marketplace. And the reality is the impact to the U.S. refining system with those sanctions being lifted is is instantaneous. Yes, there will be many, many years of investment and potential growth in Venezuela, but overnight, essentially, the market has been opened up from where it was fairly curtailed under the Chevron program prior to it essentially all being available into the U.S. Gulf Coast and into the U.S. market. So that's very, very positive for the industry and PBF in particular.

Perfect, sir. My follow-up quickly is on Martinez. I think we have actually listed 16th February is the day when all the construction comes to an end, which is just four days. So not much can go wrong there, but I'm just trying to understand, to make an airtight case, what should we be watching between 16th February and probably March 7th to make sure that the refinery actually is able to fully restart by the first week of March. I mean, your competitor, which was looking to close the refinery in April, looks like he's closing now. And then the pipelines, they may get there in three years. So you could see much above mid-cycle earnings for three and a half to four years if you can get this project fully up and running, if you could talk a little bit about that. Thank you.

Absolutely, Manav. And you're right. We are... We're essentially right up against the finish line here. It's been an incredible process to go through, and I must commend the team out there. And it's not only just the Volker Martinez team. You had a large number of PBF employees that even weren't in San Francisco that have dedicated the better part of a year in bringing this facility up much faster, mind you, than outside consultants were saying. But the marketplace in California, I think, is going to be particularly interesting. You have a much tighter product market. We've talked a lot about that. And that, you know, what we've talked about prospectively is now upon us. The competitor in San Francisco that you alluded to by press reports, that has now been shut down or ceased operations. And so you've got a very, very tight product market, upwards of 250,000 barrels a day of gasoline that needs to be imported. You've got a significant amount of jet fuel, over 50,000 barrels a day of jet fuel. And indeed, the state imports additional 50,000 barrels a day of RD into the state. And so the logistics constraints just associated with that amount every day, putting aside the floor that is in place that needs to attract those barrels into the market. We think it's set up attractively on the product side, but you can't ignore the crude side as well, where you've got less buyers of California crudes. As such, we're seeing our pipeline and all the infrastructure that we have in place, more utilization going through that, which is Very, very good news. And so we've talked a lot about it. We think California is going to be particularly interesting with the new dynamics, and there's been a lot of shifting dynamics. But in regards to Martinez, as we said, over the next couple of days, we'll wrap up the work. There'll be a methodical restart. We haven't run that catcracker in a year, and we're going to take our time and do it right. And like I said, our full expectation by very early March, we're up and producing products.

Thank you for a detailed response. Looks like 2026 is going to be a much stronger year for you than 2025. Thank you so much.

Thanks, Manav.

Thank you. The next question comes from the line of Ryan Todd from Piper Sandler. Please go ahead.

Thanks. Good morning. Maybe start on the refining side on margin capture improves significantly in the fourth quarter. Can you talk about some of the drivers of the improvement and how some of these trends, including things like crude differentials, might remain a tailwind for the first quarter of 26 and beyond?

Crude differentials is the big story. First of all, it's rising reliably. Nothing beats reliable operations. But in terms of impacts, widening crew differentials, you will simply see our capture rate go up. And I think I said before, to the degree that crew differentials widen, we get 100% of that. And that's where we get paid for the complexity that we have. It's across our system. Obviously, Toledo has its own dynamics, being a mid-town refiner. But all of our other refineries, being coastal complex refiners, as the cost accrued, improves on a relative basis to other benchmarks. Our capture rate is set to increase. And as I said before, every dollar of improvement equates to $200 million on an annual basis.

Thanks. Maybe a follow-up on the Refinery Business Improvement Initiative, the RBI as well. Can you maybe provide a little more color granularity? Of the 230 million that, Ron, that you've captured to date, can you bucket kind of where you've seen those improvements? What have been the biggest drivers? And as we look forward to the incremental improvements expected over the course of this year, You know, kind of where should those improvements show up and how should we see them flow through the results?

Okay. This is Mike. Thanks for the question. For the $230 million, as we said, $160 million of that is in OPEX. Of that OPEX breakdown, it's largely driven by what we call third-party spend. And so things like our procurement practices, how we interact with our vendors or suppliers, service providers and material suppliers. That's a big piece of it. The other piece is in the area of energy consumption. We've made a lot of strides in being able to prove our efficiency across our refineries. On the capital side, it's largely driven by turnaround performance. And this is something that actually started prior to RBI, where we've implemented rigor and discipline in our turnaround planning and scope development practices. We've been on this journey, as I said, for over two years where we focused on getting very predictive in our results, but now we're morphing into a phase where we're driving competitiveness and we're seeing our improvement, our expected improvement as we move through different benchmark quartiles. We are also working on our sustaining capital, which is essentially any capital that's required for regulatory requirements and or capacity maintenance. and to be as efficient as possible in how that spend is allocated. When I think about the $120 million going forward in the future, I think you probably will see most of that in the area of energy and continued improvement in the third party spend area. Not so much on the capital side, mainly because I think from a turnaround perspective, We are pushing towards the boundaries there in terms of first quartile performance. We don't want to be very, very top quartile. We want to make sure we're spending appropriately and maintaining our units, but we also want to maintain competitiveness with those others in the industry.

Thank you. Thank you.

The next question comes from . from Goldman Sachs. Please go ahead, sir.

Yeah, good morning, Matt, and good morning, team. I just wanted to build on the balance sheet comments from the opening remarks. I think you said you're at $1.6 billion in net debt. Matt, as you think about the optimal balance sheet, what's the right level of net debt as you think about it, either as a percentage of your capital structure or on an absolute basis? And talk about the path to get there.

Well, you know, what's optimal is a funny question. It sort of depends on the market in which you're operating in. And to the degree you're in a very, very strong market, you need to take that opportunity to not only de-lever, but somewhat get under-levered just because of the cyclicality of our business. And, you know, you saw that over the last couple cycles when, you know, coming out of 22, We got ourselves under levered, and even in the difficult part of 24 and part of 25 where we certainly had headwinds from a crude perspective, we never got to an uncomfortable place in regards to leverage as we took on some net debt as a result of that marketplace. So, you know, the capital structure and debt is my personal view. You know, where are you going to allocate capital as you're entering what looks like a very, very constructive marketplace? You start to blend debt repayment with returning cash to shareholders because as we reduce net debt, we should see a dollar for dollar essentially return for shareholder as you move value, your enterprise value, from debt to equity. So our near-term focus, for sure, as we generate cash, will be to reduce debt. And then we don't spend a lot of time talking about money that we don't have in hand yet. So as we go through that, we'll value it step by step. But there's a huge value for us in paying down debt as we enter a cyclically strong period.

Yeah, Matt, and that's the follow-up, which is, as I think about the product markets going into this year, we have really good strength in the curve on the distillate heating oil side, and then you've got relative weakness in gasoline, and there's some seasonality to that as well. But just as you think about the spread between those two products, do you see a scenario where gasoline catches up through the year and just your thoughts on the fundamentals of the underlying products.

Hey, Neil, it's Tom. In terms of addressing that comment sort of really around gasoline, I think starting there is, you know, Mike Nygren, Obviously there's you know seasonal swoon sort of coming out of the fourth quarter with you know gasoline stocks rising with a very high utilization. Mike Nygren, You know we've now entered you know the maintenance period, you know pat three stocks which you don't wear them area. Mike Nygren, Probably have the greatest you know bloating that took place of you know started their draw we're into the seasonality and. TAB, Mark McIntyre:" I think it's really kind of coming around the changing dynamic which has been taking place for the last year or so in the Atlantic basin, and you know, obviously now the effects of what we'll see. TAB, Mark McIntyre:" On the West Coast, you know which will as matt you know was talking about in terms of the 250 a day of gasoline which needs to be imported there so. That sort of changes a little bit of the dynamic or not a little bit changes the dynamic in the Atlantic basin, um, where obviously there are flows leaving the Atlantic basin heading to, uh, California. Um, so that will be, you know, sort of continue to sort of drive the bus in terms of, you know, that, that, that tighter market, you know, and, and probably be also a little bit underreported, right. Just kind of continuous B2B is, is that. TAB, Mark McIntyre:" You know we've seen constant revisions basically to the do we you know demand side of the equation from the weeklies. TAB, Mark McIntyre:" A little bit more on obviously focused more on diesel than on a gasoline and on the diesel equation um you know I think it's a bit of the same kind of story is gas that we we saw on gasoline you saw you know inventories rise towards the end of the fourth quarter, but. You know, pad one over the last two weeks has gone from sort of, you know, sort of looking at a moderating space to now we're, you know, basically, you know, at or below the five year in quite some time, in a very short amount of time, excuse me. So, you know, the incentives are going to continue to be there. I mean, we see the refining balances, you know, tight. And, you know, the additions which are coming this year are more in the second half of the year and very high in the petrochemical side. So,

you know the outlook for products um you know were certainly constructive thank you thank you the next question comes from doug legate with wolf research please go ahead oh thanks good morning everybody um matt great to see uh martinez coming back it's been a long time coming but um

I wonder if I could turn my questions to the insurance part of that. What we're trying to figure out is how much of the insurance proceeds that have come in so far have still to be paid out in terms of repairs. And I guess related, how do you even begin to quantify the lost opportunity cost given that Martins were obviously distorted by the fact that Martinez was offline? kind of get an idea how the net cash balance normalizes when you've paid out everything and received everything you expect to get. That's my first one. I've got a follow-up, please.

Sure. From an insurance standpoint, the proceeds we've received so far have been unallocated, and they will be unallocated likely through the end of the claim. So we don't have a definitive outline of how much we've received so far as relates to capital expenses or or BI or other operating costs that we incurred. But we do feel very good from an insurance standpoint that all the property-related capital rebuild costs will be fully covered. And then the BI, I think to answer your second part of the question, which covers part of that lost opportunity, that's a bit of a nuanced process where we work through with the insurance providers and We have developed a model indicating, you know, how we would have performed if no incident occurred and how, you know, compared to how the market performed and will be paid out accordingly, you know, to recover a good portion of the losses during that period.

The reality is on the BI side, and Doug, there's a whole cottage industry around your question, which is, There's a lot of nuances, a lot of gray. There is a lot of science and math as well, and it all sort of blends together. Bottom line is I believe we have an extraordinary relationship with the underwriters in terms of something that's been developed over many, many years. I think performance to date in regards to recovering insurance is far better than your sort of average events such as this in regards to how we're doing in regards to recovering. Once you get towards the end, there'll be haggling and negotiating around the edges. We've been able to cover a lot of ground over this year. The good news, and again, we'll come back to the good news, is the work is essentially complete here, and so the event should be behind us, which means and then short order thereafter, we should be able to clean up on the insurance side.

Okay, thank you for that. My follow-up, guys, Colin and I have gone backwards and forwards in this, and I'll tell you honestly, we've removed the liability for RINs from our assessment of your valuation after talking to him, but I wanted to ask the question about your RIN liability, and if you could articulate for everyone listening why you believe that would never have the equivalence of net debt. And how it might have been impacted by the fact that written costs have obviously ballooned significantly since the new RBO was proposed at the beginning of the year.

I'm sorry. You're going to make my negotiation with Collins. He's going to be requiring more money now. But what was your connection between RBO and net debt? I missed that. I'm sorry.

Okay, so you have a RIN obligation, a liability on your balance sheet. But my understanding is you never expect to pay that. I'm assuming that the liability will have gone up as a consequence of what's happened to RIN prices. And what I'm asking is, why should we assume that that is never an actual liability in terms of something you have to pay out and therefore it does not have the equivalence of net debt?

Well, maybe just to clarify a bit there, you know, we do ultimately have to settle on the written obligation, and that's an annual settlement process. But it's a rolling liability. In other words, we continue to incur it as we operate our business. So to the extent you settle one period, you're going to be incurring another. So from a cash flow perspective, it's essentially going to be neutral from that standpoint.

Think of it as working capital.

Exactly. It's just like any other working capital, you know, accrued obligation.

All right. I'll take it offline and pull them again. Thanks, guys.

I appreciate it. In regards to RINs going up, they have gone up. And the reality is they've gone up. They've essentially doubled since the beginning of last year. The RIN fight is... different than it was 10 years ago obviously we have sdr which which buttresses uh our exposure and the market has evolved uh it is not perfectly efficient and that so therefore there are still winners and losers so you have that aspect and you also have the potential for rising rent prices which go into the price of gasoline and so we've seen rent prices double over the last 13 months We're working very hard, obviously, in Washington, not only on the winners and losers part, but also to make sure they understand that if they're not careful, RINs can escalate even further and really impact the price of gasoline. So we've been pretty active on that front.

Appreciate it, guys. Thank you.

Thank you. The next question comes from Philip Junworth from BPO. capital markets. Please go ahead.

Thanks. Good morning. On the 1Q throughput guidance, East Coast is a bit light versus the annual numbers. There isn't any planned turnaround. So, is this just the winter storm impact that we're seeing? And then West Coast would be implied to run mid-90 percent utilization for the rest of the year after the Torrance turnaround and Martinez startup. What's the confidence in seeing the higher utilization after the first quarter on the coast to take advantage of what should be a higher margin environment?

A highly confident look. Martinez, we do have hydrocracker turnaround in Q2, but Torrance has finishing up work now and is essentially clean for the rest of the year. Martinez will be Thereafter, in regards to the East Coast, there's nothing extraordinary that stands out, that's for sure.

Okay, great. And then coming back to the wider crude dip conversation, is this something that you think can be sustained mid-year or into the second half, just as we see higher summer demand, Canadian turnaround, OPEC hitting the pause, new complex refinery startups at your end? Or do you think there's enough tailwinds here with Venezuela rising Canadian crude production where this can be the new normal? Just trying to understand what's seasonal versus structural here on crude diffs in your view.

Yeah, Philip, it's Tom. I mean, I think you raise a great question in terms of the sort of structural versus seasonal aspects. But I mean, I think the way that we're looking at this is that You know, in some aspects, you've had effectively a barrel which has not been able to trade freely. And that's something that's been going on in the marketplace for quite some time. You know, whether it's, you know, tied up by sanctions or different aspects of predominantly Russia, Iranian, Venezuelan, and you basically have distorted those markets and have, you know, effectively forced them and pushed them to the Pacific Basin for consumption. So I think in that aspect, from everything that we're seeing here today, from the Venezuela sort of liberation of their crude market, I think that takes that to putting it sort of in the structural camp as opposed to being seasonal. Because in some aspects, we're going to be in a scenario where if the US continues on its growth in terms of the imports that are coming from there, It's going to eventually start to tax the ability for. You know, coking capacity in the US and we'll start to fill that out. I do not think we're there yet, but I think the other thing that's important to note through this whole thing when we're talking about the crude differential situation is that what we are starting to see at this point is, you know, sort of persistent improvement in the light side of the barrel, right? I mean, you're we're not sitting here this year. talking about prolific growth in the U.S. market for shale. You know, we've gone through a situation over those showing from a little bit of a little bit more seasonal. But, you know, we've seen, you know, very, very strong strength and dated, dated Brent. And that's been coming from the disruptions that have been taking place in the Black Sea with CPC. You also had freeze offs in the United States. But you sort of have a little bit of a, you know, you got to push in a poll when it really kind of translates to the to the crude differentials and, you know, I certainly see from our seats that, you know, we're not sort of, I don't think we're missing anything that, you know, all of a sudden the U.S. is going to show up and having grown a million barrels year over year with enough of the information that we see in the marketplace.

Strong Canadian growth, strong Gulf of America growth that may be sort of under the radar. Then as well, barrels coming into the marketplace. These are dynamics and relatively flat. these are dynamics that we haven't seen in a long time.

Very helpful. Thanks, guys.

Thank you. The next question comes from Paul Chen from Scotia. Please go ahead.

Hey, guys. Good morning. The first question I think is maybe for Joe or Mai. With the RBI, the continual benefit and all that, it does look like 2025, your OPX is down about $100 million versus the 2024. So it does seem like you have shown up some benefit in here. Can you tell us that with the inflation, higher natural gas price, but continual benefit from the RBI, how should we expect in the 2026 Is 2020 that you think that you will have enough initiative that to offset the increase from the higher full put because Matinsa is coming back, the invasion, and also the higher natural gas price, or that may not be able to fully offset yet? So that's the first question. And the second question is that... Oh, okay. Please go ahead, Joe.

Sorry, I didn't mean to cut you off there, but just to answer the first question, yes, the RBI savings that we've put forth out there are net of inflation. And so if you're looking at the 2026 guidance on OPEX versus what we've done in 24, I think one of the key things to point out, because the RBI savings are embedded in that guidance, is that we are using a natural gas price assumption that if you look compared to what natural gas prices were back in 2024, that is going to be an increase. But if you normalize for that, you'd see that the savings for RBI are baked in for 2026.

Joe, you're saying that a lot of work has been done on the energy intensity. So what is now the sensitivity for every $1 move in natural gas price? What's the impact to your cost structure?

Generally, a dollar increase will equal about $100 million. I'm sorry, $100 and... $1 would equal $100 million increase.

$100 million? Okay.

$100 million.

All right, great. And the same question is that sequentially from the third to the fourth quarter, the West Coast margin jumped significantly. And that the industry margin actually gone down. um so trying to understand that and you're still in the process of fixing the tensor uh so what causing that the big improvement in the margin capture in the fourth quarter and is there any one-off benefit that we should be aware no not any anything one i mean it speaks to the same thing we've been talking about across the system which is um you know

running reliably, running more efficiently, and then lowered crude costs is the driver. Nothing more complex than that.

Yeah, but that the industry margin actually was down, but that your capture or that your actual realization up quite meaningfully. And your operation, is it really that much different with Matinsa is still under repair? So, I mean, yes, our operation, we need, I mean, can you tell us, give us some idea that how the operation have improved in the fourth quarter versus the third quarter that lead to such a big improvement in your capture?

Again, I draw you to the cost accrued now. I'm not sure the industry margin that you're looking at. I stick with my answer. Reliable. efficient operations, and the costs of crude are going to be the drivers. And indeed, I sort of view California as a microcosm of our broader business, where you've got a tight product market and a losing crude market. California is its own unique little market with its own dynamics, and obviously it's had closures there. which have made the product market much, much tighter. But you also have a dynamic crude market in California that you're unable to export California crude. So as refiners come off and there's less buyers of crude, your crude differentials are set to improve. Now, going forward in terms of getting out of the third quarter to the fourth quarter, prospectively, and clearly with Martina's sort of up and running, we view it as an incredibly dynamic and attractive market for us on the look at. Again, we're going to have a clean run right on torrents. Martinez does have a hydrocracker turnaround in Q2, but then it'll be a clean run there. And you're going to have a very tight market and a loosening crude market.

All right. Good. Thank you.

Thank you. The next question comes from Jason Giebelman with Diddy Cohen. Please go ahead.

Good morning. Thanks for taking my questions. I wanted to ask on CapEx because, you know, 25 and 26 turnarounds, as you mentioned, are a bit active. How do you see kind of the turnaround schedule trending after this? Should we take kind of last year and this year as a normalized cadence, or do you think it's more active and throughput should expand in future years?

I'll make a comment and hand it over to Mike. This year is particularly large. We have, I think, close to 30%, 28% I think was the number I saw, more man hours with all the work we're doing this year over last year. And by the way, I know it's hard to reconcile RBI. But you see a higher turnaround number for this year, but the man hours have gone up 30% and our costs went up 10%. So if you look closely and we can help you sort of dissect it, you'll see the benefits of our RBI program. This year is a particularly heavy turnaround year as this is what our business is. It's not rateable in that regard. But we absolutely, it will normalize going out over the years after.

Yeah, I would look at 27, 28, 29 to be more, in terms of the scope, more indicative of what we had in 24, 25 kind of averaged together. It's going to come down off of that high that we had in, well, we had in 2026.

Great. And my follow-up is just going back to the insurance proceeds. And I know you've tried to steer us away from trying to break out those proceeds from business interruption insurance and then the cost to fix Martinez. But I noticed in your financials, you do attribute part of it in cash flow from ops and then part of it in cash flow from investing. So is that split indicative of the interruption insurance versus the insurance to fix the equipment, or do we not look at it that way?

I think at the moment that's an accounting convention that we've elected to present that. That's not necessarily indicative of where it's going to end out and, you know, when the claim is settled. So, when the claim is settled, that's when the final kind of allocation will be, you know, available.

All right. Thanks. I'll leave it there.

Thank you. We have reached the end of the question and answer session. And we'll now turn the call over to Matt Luzzi for closing remarks. Please go ahead.

Thank you very much for participating. And as I said, we look forward to very positive results in the quarters to come. Have a pleasant weekend. Talk to you soon.

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