HF Sinclair Corp Q3 FY2020 Earnings Call

Welcome to HollyFrontier Corporation's Third Quarter 2020 Conference Call and Webcast. Hosting the call today from HollyFrontier is Mike Jennings, President and Chief Executive Officer. He is joined by Rich Voliva, Executive Vice President and Chief Financial Officer; Tim Go, Executive Vice President and Chief Operating Officer; Tom Creery, President, Refining and Marketing; and Bruce Lerner, President, HollyFrontier Lubricants & Specialties. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Biery, Vice President, Investor Relations. Craig, you may begin.

Thank you, Rob. Good morning, everyone, and welcome to HollyFrontier Corporation's third quarter 2020 earnings call. This morning, we issued a press release announcing results for the quarter ending September 30, 2020. If you would like a copy of the press release, you may find one on our website at hollyfrontier.com. Before we proceed with remarks, please note the safe harbor disclosure statement in today's press release. In summary, it says statements made regarding management's expectations, judgments or predictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal securities laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. The call also may include discussion of non-GAAP measures. Please see the press release for reconciliations to GAAP financial measures. Also, please note any time-sensitive information provided on today's call may no longer be accurate at the time of any webcast replay or rereading of the transcript. And with that, I'll turn the call over to Mike Jennings.

Thank you, Craig. Good morning, everyone. We're pleased to report solid third quarter results in the face of the economic down cycle caused by the COVID-19 pandemic. We remain focused on the health and safety of our employees, and I'm pleased to report we’ve had both safe and reliable operations across our three operating businesses during the third quarter. As we work through this last quarter of 2020, I remain confident in both the long-term market for our products and the ability of our talented employees. Turning to our third quarter results, we reported a net loss attributable to HollyFrontier shareholders of $2 million or $0.01 per diluted share. These results reflect special items that collectively increased net income by $65 million. Excluding these items, the net loss for the third quarter was $67 million or negative $0.41 per diluted share versus adjusted net income of $278 million or $1.68 per diluted share for the same period in 2019. Adjusted EBITDA for the period was $66 million, a decrease of $457 million compared to the third quarter of 2019. The Refining segment reported adjusted EBITDA of negative $54 million compared to $425 million for the third quarter of 2019 and consolidated Refinery gross margin was $4.93 per produced barrel, a 71% decrease compared to the prior period. This decrease was primarily due to continued weak demand for gasoline and distillates, coupled with compressed crude differentials. Third quarter crude throughput was approximately 391,000 barrels per day, above our guidance of 340,000 to 370,000. Our plants operated well and we saw somewhat better product demands than expected in our markets, particularly in the Southwest and Rockies. In August, we ran the last barrel of crude oil at Cheyenne and we began the conversion to renewable diesel. Our Lubricants & Specialties Products business reported EBITDA of $61 million compared to $38 million in the third quarter of 2019. Rack Forward EBITDA was $79 million, representing a 19% EBITDA margin. The Rack Forward segment saw improvement in industrial and transportation-related end markets, which drove higher demand and unit margins during the third quarter of 2020. Sales volumes improved 24% compared to the second quarter and were down 7% versus the prior year. Within the Rack Back portion, demand for base oils increased to fourth quarter 2019 levels, while supply was limited due to a number of factors, including plant closures, reduced run rates at base oil plants co-located with fuels refineries, and hurricane impacts on the U.S. Gulf Coast. This combination of factors drove higher margins and utilization at our facilities during the third quarter. In terms of maintenance, we successfully completed the planned turnaround on our white oils unit at Mississauga that began in late September and we’re back to running at full rates. Holly Energy Partners reported EBITDA of $55 million for the third quarter compared to $123 million in the third quarter of last year. Reported EBITDA for the third quarter of 2020 included a $36 million goodwill impairment charge, and reported EBITDA for the third quarter of 2019 included a $35 million gain on sales-type leases, both of which eliminated in the consolidated company's financial results. At HEP, we’re continuing to see incremental improvement in demand for transportation and terminal services during the third quarter of 2020, particularly in the assets around the Salt Lake area, and we expect this trend to continue through the fourth quarter of this year. Although the current refining outlook remains challenged, we’re encouraged by the resilient financial performance from our lubricants and our midstream businesses in the third quarter. We’re making progress on all three of our renewable projects, which currently remain on time and on budget. We’re confident that demand for transportation fuels will return and we will be well-positioned for the next upcycle. And with that, let me turn the call to Rich.

Thank you, Mike. As previously mentioned, the third quarter included a few unusual items. Pre-tax earnings were positively impacted by a $77 million gain recognized upon the settlement of the company’s business interruption claim related to a loss at the Woods Cross Refinery, which occurred in 2018, along with a lower of cost or market inventory gain of $63 million. These items were partially offset by charges related to the Cheyenne Refinery conversion to renewable diesel production, including LIFO inventory liquidation costs of $34 million, decommissioning charges of $12 million and severance charges totaling $2 million. A table of these items can be found in our press release. Cash flow from operations was $82 million in the third quarter, which included $25 million of turnaround spending and $53 million of working capital gains. HollyFrontier’s standalone capital expenditures totaled $75 million for the quarter. In September, we reinforced our robust liquidity position through a successful $750 million bond offering. The offering consisted of two tranches of senior unsecured notes, a $350 million three-year bond with a coupon of 2.625% and a $400 million 10-year bond with a coupon of 4.5%. This opportunistic financing provides HollyFrontier with enhanced liquidity and ensures the necessary capital to fully fund the previously announced renewable diesel units located in Artesia and Cheyenne, as well as the pre-treatment unit in Artesia. As of September 30, our total liquidity stood at approximately $2.9 billion, comprised of a standalone cash balance of $1.5 billion, along with our undrawn $1.35 billion unsecured credit facility. As of September 30, we have $1.75 billion of standalone debt outstanding with a debt-to-cap ratio of 25% and net debt-to-cap ratio of 3%. During the third quarter, we declared and paid a dividend of $0.35 per share totaling $57 million. We did not repurchase any shares in the third quarter and do not intend to repurchase equity until demand for our products normalizes and visibility improves. HEP distributions received by HFC during the third quarter totaled $18 million. HollyFrontier owns 59.6 million HEP Limited Partner units, representing 57% of HEP’s LP units at a market value of approximately $650 million as of last night’s close. We have reduced the range of our full year 2020 consolidated capital budget to $475 million to $550 million from $525 million to $625 million. For the full year of 2020, we now expect to spend between $187 million and $212 million of capital in HollyFrontier Refining, $130 million to $145 million in Renewables, $30 million to $35 million in Lubes & Specialties and $85 million to $100 million for turnaround in Catalyst. At HEP, our capital budget has reduced to a range of $43 million to $58 million from $58 million to $69 million. For the fourth quarter of 2020, we expect to run between 360,000 and 380,000 barrels per day of crude oil. And we expect to adjust refinery production levels commensurate with market demand and economic drivers. Looking to next year, we are currently finalizing our future operating and capital budget and plan to release guidance later in the fourth quarter. And with that, we’re going to take questions.

Our first question is coming from Paul Cheng. Please state your company. Your line is open.

Scotiabank. Hey guys. Good morning.

Hey, Paul.

Thank you. Two questions, on the cost reduction side, I mean looking at your unit cost in the refining, there still seems high. Are there any opportunities for us to further reduce your unit cost? Secondly, lubricant has been very strong in the third quarter report by everyone basically. Can you discuss what the trend line looks like? Have we seen that strong margin and also improved demand extend into the fourth quarter? Thank you.

Good morning, Paul, this is Tim Go. I’ll take the first question on refining OpEx. As you know, last quarter we announced some strategic decisions to take costs out of our refining business, that consisted of converting the Cheyenne refinery from refining into the renewable diesel plant, which will significantly reduce our OpEx load as well as CapEx and turnaround burdens, especially looking into 2021. The other thing we announced was a restructuring, particularly around our SG&A costs. As you recall, that was $30 million, with $20 million of which will show up in SG&A, while $10 million will show up in OpEx. We believe both of those steps are not only going to help us here in 2020, but will carry over into 2021 and continue to reduce our overall refinery costs. The other thing you’ll notice though is we are driving structural reductions in our refining costs. If you compare year-over-year, refining is down $20 million in the third quarter, roughly 8% versus what we saw in the last year. Year-to-date, it's about $40 million or 5% year-over-year. We believe those reductions will continue into 2021 as we keep working to drive further reductions.

I'll just be honest with you, Paul. I came to HollyFrontier to drive operational excellence. That involves EHS performance. It involves reliability improvements and operating efficiencies and operating costs. We are looking at what we consider to be high relative operating costs per barrel, and we are working through the process to try to continue to drive those costs lower. We’re assessing gaps, prioritizing those gap closure effectiveness, and in some cases we brought in some outside help to assist us in evaluating our overall cost structures at some of our plants. We’re not ready to announce or disclose anything further at this point, Paul, but I just want you to know we’re working hard on continuing to make our operating cost structure more competitive.

Hey, Tim. The $14 million of the lower OpEx, how much of that is related to the lower throughput?

Yes, there are some variable costs associated with that, but I would tell you that the majority is fixed costs that were reduced either through deferred maintenance or overall efficiency improvements. We've made some structural cuts in our refining business, and we believe this will carry on into 2021.

Thank you. And how about lubricant?

Okay. Thank you for the question regarding our quarter-end and past quarter demand performance. What I particularly enjoy about this business is that it has a wide breadth of products serving a diversified portfolio of markets, many of which are inherently more resistant to economic downturns, such as food, pharma, personal care, and cosmetic applications. Other areas that performed strongly throughout the COVID-19 environment are forestry, mining, construction, and heavy industrial, all of which we serve. Passenger car motor oil and other auto-related product lines began recovering strongly in the mid-third quarter and have continued to perform. While volume is down year-over-year for the same quarter slightly, we’ve enjoyed higher volumes than expected. We’ve also seen lower cost of goods, which leads to a higher gross margin, further benefiting from effectively managing reduced SG&A, leading to our strong EBITDA. Our order book remains robust, along with stable cost of spending trends, and strong demand side recovery remains evident as we look towards the fourth quarter, subject to the usual seasonality and potential for further COVID-19 restrictions.

How about margin?

Margin should flow accordingly. I’m not certain that given some of the seasonality it will be as robust as the third quarter, but it should certainly be elevated when compared to the earlier part of the year.

Thank you.

Your next question comes from the line of Brad Heffern from RBC Capital Markets. Your line is open.

Hey, good morning, everyone.

Hi, Brad.

Starting with a question on renewables. Can you give the CapEx spending to date so far and confirm that the trajectory provided of $150 million to $180 million for this year and $450 million to $500 million for next year is still accurate?

Hey, Brad, it’s Rich. The incurred-to-date number I don’t have right in front of me. What I can tell you is that we guided the range down for 2020 to $130 million to $145 million from the $150 million to $180 million range. What's happening here is really timing of invoices sliding a little bit into the first quarter. As Mike mentioned, the projects are still on schedule and on budget. So you're likely seeing a shift of spending dollars from 2020 to 2021, but no overall impact.

Okay. Got it. Thanks for that. And then sticking with you, Rich. On working capital, can you talk about whether we are level on that at this point or do you see any fluctuations in the fourth quarter? Additionally, many of your peers have noted sizable tax receivables potentially in the second quarter or the third quarter of 2021; do you have a balance like that that you can mention?

So Brad, on working capital, I think we're probably going to be neutral to maybe slightly positive here in the fourth quarter from an inventory perspective. We're pretty much where we need to be. This will largely depend on what the flat price does primarily. The curve looks pretty flat, so you wouldn’t expect a huge move in working capital either way. As for your second question on taxes, we are now forecasting a taxable loss for 2020, so we'd expect to see a refund in the second quarter. But I’m not in a position to provide a number yet. The good news is this is one of those good news, bad news situations, where you would prefer not to have a loss, but we’re crossing the line we’re forecasting at. We do expect to see a refund next year, but I don’t have any guidance for you at this point.

Okay. Thank you.

Your next question comes from the line of Manav Gupta from Credit Suisse. Your line is open.

Hey, this is probably for Tom. Your renewable diesel production would hit about 200 million gallons. So you get about 1.7 times diesel rates, which technically reduces your ren obligations by 314 million gallons, once both facilities are up and running. I’m trying to understand what the current rent obligation in terms of volume is net after blending, and when the 314 million additional gallons come in, how much do you lower your volume obligation?

Hi, Manav. Good morning, it’s Tom speaking. We look at the rent coverage a bit differently than just on the volume metrics. Let me explain. We assess it on a value basis, and we perform the same math as you’ve outlined. Then we look at the price difference between D4s and D6s, assuming we would sell all the D4s and use that revenue to buy back the D6 while complying with RVOs. Under that method, we anticipate being balanced when the renewable diesel plants are operational.

So your rent obligation technically goes away once you're up and running in these facilities?

Based on the numbers we see right now, the answer is yes. A lot can happen between now and then, but directionally, that is accurate. That was one of the main justifications for our investment in renewable diesel.

Perfect. Second quick question. The pre-treatment unit, should we assume given its location that you will be targeting distillers corn oil and possibly some animal fat, or is it a 50-50 split? Can you provide some guidance on the lower carbon intensity feedstock you're targeting with your pre-treatment unit?

The PTU located at Artesia will be able to run a variety of low CI feedstocks, including DCO, tallow, and UCO. We will focus on sourcing and running those feedstocks that provide the best yield and return on investment. This could also include running 100% soybean. We are monitoring the DCO amounts across the country, as they are limited in supply and their prices have been rising year-over-year. Hence, we are considering soy as well due to its relatively stable pricing.

Thank you for answering my questions.

Thank you.

Your next question comes from the line of Ryan Todd from Simmons Energy. Your line is open.

Good, thanks. I don’t ask this as a suggestion, but what are your thoughts on using the excess cash to buy back undervalued stock as opposed to paying the dividend right now? How do you view the relative benefits of these options given the steep discount to equities?

Good morning, Ryan. It's Rich. We see a tremendous opportunity in our equity. That said, we’re committed to creating long-term value through our focus on the renewables business in particular. The dividend is treated seriously and viewed as the primary source of cash return to shareholders. The cash return is fundamental in a mature low-growth industry like ours. We’ve consistently maintained industry-leading cash returns over the last 10 years. However, in these unusual times, visibility is poor. We need to balance cash returns, maintaining investment-grade ratings, and financing the company. We see strong potential in our shares, but we have immediate cash needs in the next 12 to 15 months.

Correct. I appreciate that Rich. Maybe as a follow-up, there’s been a lot of recent discussion on capacity rationalization in refining. You have already taken action there with the conversion at Cheyenne and other efforts at Artesia. Can you discuss how you view the resilience across your portfolio if market weakness persists into 2021?

Ryan, this is Mike. I’ll address our portfolio with regard to the industry. We have our views, but they may not be better than others. Within HollyFrontier, we feel that we have recently acted on our least competitive refining asset to create a more competitive renewable diesel business. That includes the pre-treatment unit that Tom mentioned, which allows us to optimize feedstocks. Each asset in our refining portfolio possesses unique advantages regarding geography, feedstock, served markets, etc. We believe our asset portfolio holds strength and durability. For instance, the Tulsa asset’s Group I lubricants production provides a competitive edge as Group I lubes is in short supply. We're continually working to enhance our competitive positions across our portfolio. The fuel segment is indeed seeing compressed demand. The question is how quickly and at what level it will recover.

Okay. Thanks, Mike.

Your next question comes from the line of Matthew Blair from Tudor Pickering Holt. Your line is open.

Hey, good morning, everyone. I had a question on the Salt Lake City refining market; it looks like cracks – especially diesel cracks, are actually pretty strong for this time of year. Could you discuss the dynamics here? Are there supply issues pushing things up, and could you also address whether the Salt Lake City to Las Vegas route is currently operational?

Yes. Good morning, Matthew, it’s Tom. Regarding Wood Cross, we have been very pleased with the high and consistent crack spreads observed compared to other markets. We expect this to continue. Recently, the strength in the distillate market has been driven by the harvest in Idaho with strong activity in sugar, beets, potatoes, and wheat. There continues to be considerable growth in demographics in the Salt Lake City Valley with limited options to bring product into that market. Thus, we expect to see strong margins moving forward. Regarding the Las Vegas-Salt Lake arbitrage, it's volatile and heavily depends on U.S. West Coast supply and pricing, given the pipelines' ability to rapidly deliver product. Additionally, COVID-19 has significantly affected the Las Vegas market, which remains weak due to casinos closing. As the market recovers and more people return to Las Vegas, we expect demand to increase. Our opportunity is to capture the highest margin by strategically placing our barrels in the right market at the right time.

That’s helpful. Thanks. And what’s going to happen to your WCS pipeline capacity to Cheyenne? Are you still going to take WCS on those pipes and just resell them into other markets, or are you giving up that capacity? Could you also discuss your outlook for WCS differentials?

We are maintaining our express base. We view it as a valuable means to move barrels out of Hardisty in the foreseeable future. We do not anticipate the XL pipeline to be built any time soon, nor the Trans Mountain express. Consequently, we will continue to face the same challenges of system apportionment and full capacity on the Keystone pipeline. The express pipeline provides us access to various markets, including moving crude to the St. Louis market and the potential to connect to get to Cushing. We might use that space to supply our Woods Cross refinery with synthetic crude, as it is a good fit for us. There’s also the opportunity to blend and sell mixed sweet blend crude if the differentials are favorable. Looking ahead, we know that production restrictions will be lifted in December, but the Alberta government retains the option to reapply those restrictions until late 2022. The production figures have not been consistent and we are currently facing around 22% apportionment. Therefore, we expect WCS differentials to stay around the $10 mark currently observed, with an expectation of widening to more historic levels as production resumes.

Great. Thank you.

Your next question comes from the line of Neal Mehta from Goldman Sachs.

Hey, good morning guys. First question is just on the quarter; there's considerable noise in the refining margins per barrel because of some of the one-time items. Can you provide a regional breakdown of the adjusted gross margins?

And Neal, this is Tim. Let me try to address that. The Rockies region was the messiest due to the Cheyenne situation that we had, as Mike mentioned at the beginning of the call. We pulled oil on August 3rd in Cheyenne, but the index we publish does not take that into account. You need to adjust the index for just one month instead of three. Furthermore, the decommissioning and severance costs also affected our numbers in the Rockies. After considering these two aspects, we captured approximately 70% of what we published in our index for that region. For the mid-continent region, the performance was significantly lower than past quarters, primarily due to compressed crude differentials, especiallyBrent/TI. Lastly, the Southwest region was the cleanest with no specific anomalies.

Thanks, Tim. Sticking with the HollyFrontier Index you published, the Group II VGO margin for October appears very robust. I know we’ve previously discussed the third quarter lubricant spending. Was there something one-time in nature there due to hurricanes or storms disrupting supply, or do you see this as potentially a new normal with a higher run rate on Rack Back in lubes?

We certainly experienced supply disruptions due to hurricanes affecting Louisiana. It’s important to note this short-term disruption has positively impacted the Rack Back business at both Tulsa and Mississauga. Over the past year, we have anticipated that supply-demand ratios would return to normal. These were depressed over the past 12 to 18 months, and we believe we are witnessing some recovery. While we had one-time corrections due to weather disruptions, we feel that the secular trend is improving in the Rack Back business.

All right guys. Thank you.

Your next question comes from the line of Theresa Chen from Barclays. Please state your company. Your line is open.

Hi. Barclays. First, I wanted to discuss the demand picture concerning your markets. Given the rise in COVID-19 cases in many Mid-Continent areas, what do you see in terms of live demand data points for gasoline and diesel?

Hey, Theresa, it’s Tom. I’ll attempt to respond to this nuanced question as COVID continues to fluctuate. I'll cover all three regions as their dynamics differ. First, Woods Cross or Salt Lake City has enjoyed solid demand for both gasoline and diesel, and we expect that to persist. The Southwest has also performed well, somewhat exceeding expectations due in part to the shutdown of the Marathon refinery in the Four Corners area, which has positively impacted our markets. Some Northern Arizona regions are additionally better for us, resulting in upward pricing. The Mid-Continent group witnesses supply-demand ratios aligning with national averages; gasoline demand via the Magellan system is down approximately 11% year-on-year, while distillate is seeing a lesser decline. Currently, the harvest activity in the Mid-Continent is ahead of last year, suggesting that distillate demand may decrease as winter approaches. Fluctuations in gasoline demand are also influenced by school reopening schedules. Enhanced commuting is likely to lift gasoline demand, but we anticipate considerable volatility due to COVID-19.

Thank you. Rich, could you provide an update on your conversations with the rating agencies? What kind of metrics or timeline are they looking for to change ratings in either direction?

Yes, absolutely, Theresa. We stay in routine communication with the agencies, especially when we issued debt in September. I’ll note that all three agencies maintained their ratings and outlooks when we made that issuance. They generally assess our situation on both mid-cycle and trough basis, citing approximately 3 times mid-cycle debt-to-EBITDA as a threshold. We believe we will navigate through 2021 without issues on that front. Looking to the long-term, our growth in renewables will be credit positive, adding diversification and earnings stability.

Thank you.

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

Thank you.

Phil, we’re having a really hard time hearing you.

Phil, we’re having a really hard time hearing you.

Let me suggest you drop and dial back in?

Your next question comes from the line of Jason Gabelman from Cowen. Your line is open.

Hey, I wanted to ask two questions. First, on the Rockies region; given that Cheyenne is now being shut down for conversion, could you discuss Woods Cross' operating cost structure for our model moving forward? Additionally, what overhead costs will Cheyenne incur during its conversion?

Hey, Jason, it’s Rich. Let me address the costs question. In September, we provided an 8-K, where we clarified our refining regions with corresponding cost data and would point you to that for context. Generally, the Woods Cross plant is higher-cost due to its size and operational structure. Additionally, there’s approximately $3 per barrel of HEP Charges embedded in the Woods Cross operating expenses, making it appear slightly higher. We’ll provide future guidance for both 2021’s capital expenses and Cheyenne costs later this quarter.

Thanks.

And regarding the LCFS issues, we agree that substantial new market openings will not significantly expand until after several states implement their legislative frameworks. Our modeling is predicated on continued sales into the established California market for the next couple of years. While numerous renewable diesel plants won't likely commence operations due to permitting and COVID-related issues, we’ve secured most of our permits with expected approval aligned with our schedules. Consequently, we believe we will successfully enter the California market as anticipated. Accordingly, our outlook for LCFS credits remains fairly steady, projected between $180 million and $200 million, which is positive for us. Notably, we have not factored any benefit from the BTC beyond 2022 into our forecasts.

Great. Thanks for the color.

Okay. Thank you.

Your next question comes from Phil Gresh from JP Morgan. Your line is again open.

All right, let’s try this again. Is this better?

Much better. Thanks.

Better, Phil.

Sorry. My first question is on lubes; through the COVID situation, we've seen really strong results echoing from the second quarter. Looking ahead to 2021, are you getting comfortable with the idea of reinstating guidance? I know in the past you’ve provided guidance on Rack Forward, but is the $250 million to $275 million range still a normalized view for you, or what are your latest thoughts?

Hey, Phil, it’s Rich. We believe that range represents the long-term mid-cycle potential for that business segment. However, given the fluid nature of the COVID-19 situation, it might still be early to provide guidance for 2021. Nonetheless, we’re comfortable with Q4 performance and remain optimistic.

Great. Okay. And then on refining, I want to follow up on the Mid-Con performance. The capture rate was low, and you’re lapping the second quarter when you had contango benefits. So my understanding is low crack tight differentials equal limited capture. Was there anything unique in the quarter you would point out, or is this the run rate we can expect in this environment?

Yes, Phil, looking at numbers in the Mid-Con, it primarily revolved around the crude differentials. The compression in our crude differentials was roughly $3 per barrel, which explains the variance in capture rates between the second and third quarters.

Great. Okay. All right. Thank you.

There are no further questions. I will turn the floor back over to Craig for any closing remarks.

Great. Thanks, Rob. This is Mike Jennings. We appreciate you participating with us today and hearing through our third quarter. The economic environment we are operating in is definitely testing the refining sector, but HollyFrontier is well-capitalized with an investment-grade balance sheet, and we have approximately $2.9 billion of available liquidity. Our investments in enhancing the asset base continue to strengthen our four distinct business segments, providing diversification through the economic cycle and during down cycles in refining, as we are currently experiencing. We are encouraged by our lubricants and midstream business performances through this third quarter, which validates our investment thesis. Finally, we are well-positioned in premium niche markets for our products, with advantageous crude sourcing flexibility due to the logistics assets we have access to. We are confident that we will add value as we improve our capture and ultimately gross margins. We are excited about investing in our renewables business and its potential growth. Thank you again, and we look forward to speaking with you next quarter.

Thank you. This does conclude today’s teleconference. Please disconnect your lines at this time and have a wonderful day.