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 on a listen-only mode and the floor will be open for questions following management's prepared remarks. 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 10-Q 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. 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 fourth quarter 2024 operations. For any questions on these items or follow up questions, please contact Investor Relations after today's call. For reconciliations of any non-GAAP 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 Lucey.

Good morning, everyone and thank you for joining our call. Our third quarter results reflect market conditions, a combination of weaker margin environment and poor crude 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 work 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 continues to grow globally. 2024 has had a number of factors negatively impacting the year. While demand for refined products in the U.S. has improved year-over-year in the third 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 ahead of planned and announced shutdowns that are scheduled for 2025. 2025 is trying to be a more balanced year. 2024 has seen net additions of approximately 1 million barrels per day. For 2025, the list of closures or announced shutdowns across North America, Europe and Asia is approximately 1 million barrels per day. As stated, crude oil was particularly strong in 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, PBF's balance sheet provides us with greater flexibility to weather challenging markets. With our financial position 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 alone. 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 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 at Chalmette. The prework 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 to efficiency remain our primary focus. We will continue to prioritize capital allocation toward the opportunities to 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 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 and 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 renewable diesel during the quarter. SBR produced an average of 13,000 barrels per day of renewable diesel in the third quarter. Fourth quarter, renewable diesel production is expected to be 16,000 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 million. You should note that our CapEx guidance and reported CapEx are on an incurred basis, but our cash flow statement will reflect actual cash spent for capital expenditures and turnarounds. Our year-to-date 2024 capital expenditures for the cash flow statement include 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.

And we will take our first question from Roger Read with Wells Fargo. Your line is now open.

Yeah. Thank you. Good morning.

Good morning.

I 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 of weeks ago. He essentially vilified, attacked our integrity, 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's regulatory regime. We, along with all the other market participants, submit monthly statements. So, I think it's important to note just the reality. It's important to note that the industry in California this quarter, like I said, 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. Approximately, I think it's close to $0.70 more than any other state, and that's set to potentially go up by 50%. And those are impositions they're putting on the people. And so, 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 exacerbates it. The old Reagan joke of, 'We're here for the government and we're here to help.' That's multiplied by a factor of 1,000 when you're talking about 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 on the West Coast. The supply/demand situation is seemingly getting worse with a major refinery on the heels of the governor's latest salvo announcing its 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 both in terms of our refineries being competitive and well-positioned.

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%, you mentioned the cost-saving targets. Maybe there's something also that will happen on the CapEx side in terms of trying to just look for ways to curb spending. But given that a smaller company slashed their dividend, I got to say it was one of those things I wasn't really anticipating. So, maybe you can help us understand what goes into the thought process. Maybe it's the strength of the balance sheet, your outlook, etc., to give you the confidence to raise a dividend here.

Two years ago, we reinstated the dividend and committed to reviewing it annually. We aim for a conservative, reliable, and stable dividend rather than making quarterly adjustments. Last year, we increased it from $0.20 to $0.25, and this year, despite challenging market conditions, we believe the medium to long-term outlook is positive. We are comfortable with maintaining the dividend at $0.275 based on our expectations for mid-cycle free cash flow. It's important to note that in our industry, performance can fluctuate around mid-cycle expectations. We take a long-term view and establish what we feel is a strong, defendable, and conservative dividend, which we will continue to assess on an annual basis.

Great. Thank you.

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

Hi. Good morning, everyone. I guess, Matt, I want to also go back to California. Not so much on the press conference and the ask of the industry, but more the dynamics of what's going on out there. As we see it, about 70% 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 three major products on the diesel side. We'll invite Paul Davis, who is our resident expert on everything California, to comment. But obviously, the gasoline side is shorter and 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 in 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 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. 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, I think, broadly speaking, it's going to rely on significantly more imports. 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 a surprise to us. We've been set up for that. Paul, any other comments?

Well, on the diesel side, you're seeing some of the balancing happening as we speak. The plant that's going to be shutting down at the end of 2025 makes a predominant amount of CARB diesel and it's going to be balanced by when they shut down. 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 wrangling going on in the distillate balances on the West Coast. From a PBF standpoint, Matt said it correctly. We're primarily a jet-maker on the West Coast. We make gasoline and 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 side.

Okay. Thank you for that. Matt or Karen, my follow up is 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 deleverage 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. 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 value is what's left after net debt. 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 are you prepared to continue with buybacks and dividends if the cycle remains depressed or at some point do you pause and wait and see how it plays out?

I think nothing is static, Doug. There will always be periods of weakness in the industry that lead to certain reactions. We are currently observing a reduction in capacity. This year, we've focused a lot on analyzing the medium to long-term outlook for our business, and honestly, we believe it looks quite positive. We have encountered some timing issues in 2024, as net additions have exceeded shutdowns, but these will likely continue to accumulate, especially in refineries with structural weaknesses or in markets that are weaker than our own. Regarding your point about whether it will remain lower for longer, we will have to see if this trend persists; if it does, we can reassess our position. The marketplace operates on supply and demand dynamics, and we feel confident about our competitive standing within it.

I don't know that we say many years, but I appreciate the color, Matt. Thanks so much.

Thank you. We'll take our next question from Manav Gupta with UBS. Your line 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 the Canada side is, looks like the production is rising, but then the TMX 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. Currently, we are navigating through a very strong market environment in the third quarter due to the factors Matt mentioned earlier, along with the seasonal crude burn. We are at a critical point now and expect some guidance next week from OPEC regarding the tapering and their expectations. There were reports suggesting that OPEC+ might defer adjustments for another month. However, we believe that the strength of the heavy side of the barrel has peaked seasonally, and we anticipate OPEC+ may introduce more oil in December or by the first quarter. It’s also crucial to note that turnarounds in PADD 3 during this year’s fourth quarter were relatively light, while the first quarter has a busy maintenance schedule planned, which should add more oil to the market and help rebalance it. Regarding TMX, we are observing similar trends on the production side.

Perfect. My quick follow-up here is quarter-over-quarter, Mid-Con results did show an improvement on a relatively flattish crack and help us understand whether you ran better. What helped you drive an improvement in Mid-Con earnings quarter-over-quarter?

Manav, I don't know that I would point to anyone saying the refinery of Toledo has run well, and they've actually performed well all year. And 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. To start, can you discuss the $200 million cost savings target you aim to achieve by the end of 2025? Could you outline the main areas driving that savings and provide any details you can?

I'm going to hand that over to Mike Bukowski.

Sure, Ryan. Thanks for the question. So, over the past month or so, we've put together a task force that we looked at internal and external benchmarking and looked at some best practices across the system to see where we can identify opportunities. Again, with any maintenance budget, your biggest category of expense is going to be energy. So, of that $200 million we think about 30% to 40% of it we could get in energy reduction. And then the other categories run the gamut in terms of our maintenance, our third-party spend. So, look at that in terms of catalyst and chemicals and some of our operating supplies. There are two capital categories in there, and those are turnarounds in capital projects. We think that there is 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. I would say, as I said before, the energy piece is about 30% to 40% and the balance of those other buckets are roughly evenly distributed across.

Thank you. That's very helpful. Maybe a follow-up on, as you think about capturing, I know it can be a tough topic, but we've generally seen that across much of the industry kind of decline over the last 18 months. There have been headwinds to capture. As we look into maybe end of 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 that where we might see an improvement, anything encouraging on the capture side as we look going forward?

The biggest factor is related to crude. In the third quarter, as Tom mentioned in his comments, there was notable strength in the crude market, particularly concerning products. Several reasons contributed to this, including new plants coming online that required more crude. It was also a time when our plants around the world were operating ahead of scheduled turnarounds in the Northern Hemisphere. Additionally, the seasonal crude use in the Middle East played a role, alongside ongoing geopolitical uncertainties. We hope for a more stable environment in that region. OPEC's actions also significantly influence the market. While I'm unsure if it will be in December, January, or later, there is strong belief that they will eventually release their oil, which could lead to a loosening market. We are already witnessing this, especially as we enter turnaround season. The main factor affecting capture rates is how well we run, and we have been performing well, with plans to maintain that. It's crucial to have favorable feedstock discounts, and I remain hopeful that the most challenging times are behind us.

Okay. Thank you.

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

Yeah. Good morning, Matt and 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. Just curious on your perspective of, as you think about your portfolio, does that make sense? And where do you stand in that process?

Thank you. I don't have a specific update. It makes complete sense. We have teams focused on what you just mentioned, particularly in terms of capitalizing on value from underutilized assets like real estate. We are actively working on developing and creating value in that area. There are constructive possibilities, which is why we've allocated resources to it and will continue to do so. Regarding other underutilized assets, we are consistently evaluating them to see if they should be held by us or transferred to other parties that could derive more value from them. This is an important part of our responsibilities that we take seriously and assess regularly. We will certainly inform you if there's progress in this area.

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

Yeah. No. The obvious one on the real estate side is because we have incremental value. It's not a substitution of. We have excess land in Delaware. That land is being utilized in agriculture today. We rent it to farmers. There is no question that 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 then the follow-up is around environmental payables, which I know has been a big focus for you guys 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, Neil. Thanks. The environmental liability, which includes not only rents but also LCFS and cap and trade, has increased from $429 million to $474 million at the end of this quarter. This figure is slightly above our guidance range for the quarter, primarily due to extended payment terms for cap and trade payables. Typically, we anticipate that this amount ranges between $200 million to $400 million.

Thank you. We'll take our next question from John Royall with JPMorgan. Your line is open.

Hi, good morning. Thanks for taking my questions. I wanted to follow up on Doug's question and dive a bit deeper into the balance sheet. You've been in a negative net debt position for almost two years, and now leverage has increased slightly, though not significantly. You continue to be aggressive with your buybacks and dividend increases, despite the decrease in cracks. Do you still anticipate maintaining that close to net zero range for net debt, especially at the low point of the cycle? Are you open to increasing leverage a bit? Is that more of a target you are aiming for over the long term, aiming for zero net debt?

I think it's 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 a very, very conservative balance sheet. 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. We have confidence in our business and where we stand within the industry in that regard. So, 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 KBD 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?

I'll make a few comments, and then I'll let Paul expand. In the third quarter, we processed 20,000 barrels a day. In the fourth quarter, I expect that number to be lower. This is partly due to maintenance on some sulfur equipment, as those crudes have a higher sulfur content compared to other options. However, this isn't the main factor; the key issue is the pricing of those barrels. We analyze the market and assess the available crudes based on economic viability. We're ready to process up to 50,000 barrels a day of Trans Mountain and Western Canadian crudes if they are cost-effective. We have the capacity, but it depends on the delivery costs. Due to various factors, including the tight crude market and developments in Asia, prices for those barrels have increased. I don't believe this trend will last long-term, as I think we are still in the early stages. California refineries will have lower logistics costs for bringing in that crude. Over a longer timeframe, I suspect we will significantly increase our processing of it. Any additional comments?

No, 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 markets fitted very aggressively and it wound up going Transpacific. I think the West Coast systems can run a fair amount of TMX type barrels, whether they're sands, suites, or WCS's. It's 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 Cheng with Scotiabank. Your line is open.

Good morning, everyone. Matt, or perhaps Karen, do you have an estimate for the 2025 capital expenditures? If market conditions remain tough next year, what is the least amount you anticipate needing to spend? That's my first question.

Well, with respect to '25 CapEx, we're still in the process of finalizing our 2025 capital budget. I would just point you in terms of a range we've often talked about a typical range of between 750 to 800. In some years, it's going to be higher based on turnaround activity and the magnitude of margin improvement projects, etc. On the other hand, if weaker refining margins materialize, we'll look to reduce capital spend where we can. But while as is our custom, we expect to release the guidance in early January along with our turnaround schedule.

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

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

Okay. Matt, I apologize for asking this question. If we consider the dividend alongside your annual CapEx spending of $750 to $800 million, what crack spread environment do you need to achieve cash flow breakeven? Compared to the last 12 months, do you think you need to be $5 better or is there a specific number you can share?

I think it would be too difficult to isolate a specific crack due to the many other dynamics at play, such as operating costs, crude differentials, and energy costs. However, over the long term, as we've analyzed our business through various cycles, we generate free cash flow in a mid-cycle environment, which can range from $300 million to $500 million. This can occur in different markets with strong cracks and weak crude differentials or the other way around. Therefore, isolating one crack is challenging and may not provide an accurate assessment. Looking ahead, we believe we are well-positioned within North America, particularly due to our complexity, location, and optionality, which also makes us competitive on a global scale.

All right. Very good. Thank you.

Thank you. We'll take our next question from Joe Laetsch 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 run rate cash savings. On the energy reduction side, should we think about that as being smaller, quick-hit projects or larger projects requiring more capital? I'm just trying to get a sense of anything 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 increased governance and increased optimization at the plant. 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, could you just talk to the performance of that asset relative to expectations? Thank you.

To begin with, the market has been underperforming, but it is starting to stabilize. Overall, my expectation is that governments will promote renewable diesel. There are several players in this sector, and I believe we are well-positioned with our pretreatment capabilities, strategic location, and ability to distribute to various markets. I think we rank among the top manufacturers of renewable diesel, although this is not yielding profits for 2024, and I'm clear on that. The industry is going through some adjustments, with various players in biodiesel and others transitioning into sustainable aviation fuel. The market is dynamic and will continue to evolve. Our partnership with Eni has been effective, and I am confident that our renewable diesel offerings are competitive. However, starting a new business comes with its challenges. One of our issues has been common in the industry; catalysts have not performed as originally expected, requiring more maintenance and shorter change cycles. We will keep refining this process. I am optimistic about the improvements we can achieve. Regarding our partnership, I am very happy with our progress. We are beginning to see positive signs in the market, and the fourth quarter is shaping up better than the third quarter. Much will depend on the new government programs that will be introduced once the current tax credit ends this year. We appreciate the asset as it serves as a hedge against RIN prices, which may have contributed to their decline, benefiting PBF as well.

Thanks, Matt. I appreciate it.

Thank you. We'll take our final question from Jason Gabelman with TD Cowen. Your line is open.

Yeah. Hey, this is Jason Gabelman. I wanted to go back to this $200 million 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?

This is Mike. I'll address that question. The $200 million is based on our actual expenses from 2023. We made some adjustments for plant reliability when establishing our baseline, as we didn't want to take credit for improved reliability. We plan to implement bottom-up initiatives to effectively reduce energy consumption, rather than relying on price changes. Our focus will be on efficiency-based projects regarding maintenance. While there may be some adjustments as we optimize our preventive maintenance, our aim is to enhance efficiency. Naturally, we will need to account for the contractual raises of our maintenance employees, which will impact costs. Turnarounds are another area that will primarily focus on efficiency initiatives to perform the same work at a lower cost. Considering the timeline for these cost reductions, we don't anticipate inflation being a major factor, especially since it has been relatively subdued. I realize that others have faced challenges in demonstrating savings during periods of high inflation, but for our timeframe, I don't foresee inflation playing a significant role in offsetting costs.

Okay, great. And then my other one, just going back to Ryan's question on some of the headwinds to capture. I appreciate the comments on heavy/light dips. But it seems like this year there's also been impacts from backwardation and coproducts. 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 coproduct realizations and crude backwardation? Thanks.

Tom mentioned that when considering the crude market, one aspect that hasn't been addressed is the potential impact of the absence of hurricanes during the third quarter, particularly along the US Gulf Coast. While hurricanes affected the Eastern Gulf and caused damage to demand and communities in that region, refineries remained unaffected. Crude supply initially declined but later recovered, yet the strong crude prices remained a factor. In addition, cash crude was trading at higher prices compared to the data assessments, contributing to a tighter market, particularly for waterborne shipments. In early September, margins in Europe were unexpectedly lower than during the peak of the pandemic, not due to products but because of a different crude market dynamic. Several factors, including issues in Libya and OPEC+'s management of heavy crude production, have tightened the market. Looking ahead to 2025, the supply and demand balances appear to be loosening, which would benefit refiners. In terms of coproducts, markets like pet coke and asphalt have been weaker compared to previous years, so the focus is shifting back to the crude side rather than coproducts for future expectations.

Great. Thanks for that color.

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.