PBF Energy Inc. (PBF) Q1 2025 Earnings Call Transcript

Good day, everyone, and welcome to the PBF Energy First 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 prepared remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that 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, John. 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, Karen Davis, our CFO, and several other members of our management team. Copies of today's earnings release and our 10Q filing, including supplemental information, are available on our website. Before getting started, I'd like to direct your attention to the Safe Harbor Statement contained in today's press release. Statements that express the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the Safe Harbor provisions under federal securities 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 Invest Relations. 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.

Thanks Colin. Good morning everyone and thank you for joining the call. To say the first quarter was tumultuous would be an understatement. Between the uncertain economic environment and our Martinez event, there's been a lot to digest. I'm happy to report that Phase 1 of our restart plans for Martinez were recently completed. Consistent with our March update, we safely restarted a number of the unaffected units including the crude unit hydrocracker and delayed coker the refinery will be running in this limited configuration in the 85 to 105,000 barrels per day range getting to this point was no small lift for the Martinez team especially given they were simultaneously continuing their initial work to rebuild the fire damaged areas conducting the planned fcc turnaround and prepare and preparing and successfully executing the startup in the current configuration we'll be supplying limited quantities of finished gasoline and jet fuel to the california markets we will also be producing intermediates which we intend to further process into finished products at torrance our business interruption waiting period ended on april 3rd and we expect that we from that date forward we will see the portion of our insurance program respond as well as mentioned our press release our insurance have agreed to pay a first installment of 250 million dollars which we expect to receive this quarter we are appreciative of the willingness of our insurance carriers to provide interim payments this goes directly to the quality of our program and the relationships that have been established in many cases more than a decade ago despite the broader concerns of the market the fundamentals are improving demand is resilient and showing signs of strength gasoline stocks are below the five-year average and distillate stocks are at the bottom of the range and cracks or preferred heavy and sour feed stocks are definitively a headwind these narrow differentials reduce capture rates for complex refiners such as PBF. We are encouraged, however, if the operation of incremental OPEs begin to loosen, PBF will be a direct beneficiary. We continue to see incremental product demand growth exceeding net refining capacity additions. This is a constructive setup for the global refining environment. We are seeing more rationalizations than expected in 2025 and 26, with new additions declining as we look for... pbf is focused on controlling the aspects of our business that we can control to best position ourselves going forward in this current cycle pbs balance sheet provides us with the flexibility of weather challenging markets and look ahead to the next market cycle to be successful and enhance value for our investors we must operate safely reliably and responsibly And we must do it as efficiently as we announce the $10 million. This process began last year, and we expect the transaction will close in the second half of this year. I'll now turn the call over to Mike Bukowski for comments on operations, cost savings program, which are tracking ahead.

Thank you, Matt. Good morning, everyone. before updating the progress we've made on a refining business improvement program or rbi for short i'll provide some additional commentary on first quarter operations on the west coast during a mid-march weather event a loss of steam occurred at torrance which shut down the majority of the refinery initial expectations were for five to seven days of downtime. After the initial repairs were completed within seven days, we began a sequence restart of the refining units in late March. Unfortunately, issues occurred during restart attempts, which primarily resulted from the initial rapid shutdown. The restart was completed in mid-April. In addition to the work on the West Coast, we executed turnarounds at the Chalmette and Delaware city refineries in shellmet the turnaround was completed on time and on budget i'd like to i would also like to congratulate and thank the shellmet refinery for successfully and safely managing operations through a record-breaking snowstorm and freezing temperatures in january at delaware city the turnaround of the hydrocracker was performed according to plan the work was completed in the first week of April. Shifting topics to RBI. Earlier in 2025, we announced the initiative as part of our ongoing strategic process to extract incremental value across our business. Since then, we have generated over 500 cost-saving ideas through more than 40 idea generation sessions. Our teams are building out these ideas with actionable, quantifiable, and measurable plans. Initially, we are focused on five main areas, including projects and turnarounds, strategic procurement opportunities, the East Coast refining system, the Torrance refinery, and the refining organizational structure. Our stated goal is to generate and deliver more than $200 million of annualized run rate sustainable cost savings by year-end 2025. This effort will ultimately touch all our locations, including some centralized functions. That said, in the four months since our initial announcement, we've had teams at Torrance and on the East Coast, and we are looking at various centralized groups such as capital turnarounds and procurement. We are currently on track to exceed our stated goal of $200 million of run rate savings by year-end 2025. As a reminder, we will realize the full value of these savings in 2026 and a prorated portion in 2025 as we move through implementation. In terms of next steps, we will continue implementing initiatives and tracking success while progressing the program through our remaining locations and functions to generate additional actionable ideas that will translate to real cost savings. Lastly, we've reviewed our 2025 capital program and have elected to eliminate a number of discretionary and small strategic projects from the 2025 plan without affecting our maintenance, environmental, or safety-related programs. Our revised total capital budget for 2025 is now in the $750 to $775 million range. Capital expenditures to rebuild Martinez and bring it back to full operations are separate as these costs will be covered by insurance. We will continue to look at our capital going forward and make adjustments as needed depending on operations and market conditions. We have a number of positive initiatives going on across our organizations, But our main priority will always be the focus on safe, reliable, and responsible operations. I'll now turn the call over to Karen Davis for our financial overview.

Thanks, Mike. For the first quarter, we reported an adjusted net loss of $3.09 per share and adjusted EBITDA loss of $258.8 million. Our discussion of first quarter results excludes a $78.1 million special item related to expenses resulting from the Martinez refinery incident and an $8.7 million gain relating to PBF's 50% share of SBR's lower of cost or market adjustment. As Matt said earlier, we received notice that our insurers have agreed to pay an unallocated first installment of insurance proceeds of $250 million, which we should receive in the second quarter. We expect that we will negotiate additional interim payments, most likely on a quarterly basis. However, the timing and amount of any agreed-upon future payments will be dependent on the amount of covered expenditures that we actually incur plus calculated business interruption losses. We are very early in the recovery and claim process and we expect that cash recoveries could lag to a certain extent, our expenses incurred and covered losses. Our Q1 P&L reflects incremental OpEx at Martinez of $78.1 million related to fire response, recovery, and cleanup up efforts, which are reflected as a Q1 special item. We anticipate recovering a portion of this amount through insurance, but the specific amount of the recovery will be determined as we progress further into the claims process. We also wrote down the net book value of the fire-damaged assets by $56 million and recorded a corresponding insurance receivable for the same amount, plus an additional fee. Generally speaking, any insurance proceeds that we receive in future periods, including the $250 million upfront payment expected this quarter, that is in excess of the $61 million insurance receivable, will be reflected as other operating income on our income statement. It is our intent to present insurance proceeds that we report in other operating income as a special item going forward. Shifting back to our normal quarterly results discussion, also included in our results is a $17 million loss related to PBF's equity investment in St. Bernard's renewables. SBR produced an average of 10,000 barrels per day of renewable diesel in the first quarter. Second quarter RD production is expected to be 12 to 14,000 barrels per day as a result of plant catalyst change that began in March and ended in April. Cash flow used in operations for the quarter was $661.4 million, which includes a working capital headwind of approximately $330 million, primarily related to the January 2025 tax receivable agreement payment of $131 million and a temporary increase in hydrocarbon inventory levels related to the Martinez and Torrance downtime. time. We expect inventory levels to be reduced by approximately 2 million barrels by the end of the second quarter as compared to March 31st. Cash invested in consolidated CapEx for the first quarter was $218.3 million, which includes refining, corporate, and logistics. This amount also includes approximately $28 million of CapEx related to the Martinez incident. Additionally, our Board of Directors approved a regular quarterly dividend of $0.27.5 per share. We ended the quarter with approximately $469 million in cash and approximately $1.77 billion of net debt. Maintaining our firm financial footing and a resilient balance sheet remained priorities. In the first quarter, we accessed the capital markets through our $800 million upsized senior notes offering. This issuance bolsters our balance sheet and ensures that we have sufficient liquidity as we navigate the turbulent commodities markets and rebuild from the Martinez incident. At quarter end, our net debt to cap was 29%, and our current liquidity is approximately only $2.4 billion based on a cash balance of $469 million and $2 billion of available borrowing capacity under our ABL. Our liquidity position is ample, and our plans to reduce inventory, receipt of the first Martinez insurance payment, and receipt of the proceeds from the pending sale of the terminal should bolster this further. As we look ahead, we expect to use periods of strength to focus on delevering and preserving the balance sheet. Operator, we've completed our opening remarks, and we'd be pleased to take questions.

Thank you. In a moment, we'll open the call for questions. The company requests that all callers limit each turn to one question and one follow-up. You may rejoin the queue with additional questions. And if you'd like to ask a question, please press star 1 on your telephone keypad a confirmation tone will indicate your line is in the Q&A queue you may press star 2 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 with Paul for questions. Thank you. We now have our first question. It comes from the line of Roger Reed from Wells Fargo. Your line is now open. Please go ahead.

Thank you. Good morning, everybody. Good morning, Roger. Good morning, Matt. I guess let's hit Martinez, right? Right. You've been in there enough now to get a feel for what the damage was, what the repair process ought to be. I think the expectation at the time, or at least the initial expectation on the last time we talked about this, was beginning of Q4 or in Q4, you could get back up and running. so i'm just curious as you look at the unit the repair process uh permitting california all that stuff how is it uh how's it looking on that front no change at this point uh long lead items have been ordered um and so you know once you get into the execution of of some of the rebuild You know, when that equipment arrives, the schedule will, you know, tighten or stress will be put on the schedule.

But at this point, there's no change.

Okay. And then in terms of moving the product, like you said, the intermediates down from Martinez to Torrance, Has that actually occurred yet, like you're comfortable with the way the system will be integrated for the interim period?

It's happening today. Lawrence is fully up and running and fully operational.

And then, Karen, since you gave this guidance, I'm just sort of curious, volume guidance on renewable diesel, but how should we think about this whole confusing status with rent and other sort of, you know, BTC to PTC change and other parts of how that's operating?

I know you said, Karen, and you hit a hot button with me. Okay, I don't care. Here you go. The current market is the D4 RIN price has surged 75% since the beginning of the year. And this is the D4 RIN. You've got the PTC questions. There's no clarity. Fine. There's now tariffs imposed on some of the feedstocks, so that increases costs and reduces supply. And then you have the elimination for much less RD supply, so the D4 ran. The problem is, maybe the two is commitment to low energy prices and an intent to incentivize domestic manufacturing. In this situation, you know, the American consumer quences the D6 rim through before. What's crazy about it is it can just so easily be rectified a number of ways in an infant. It's a right-sized ethanol mandate that reflects reality, you know, as opposed to setting it above the blend wall, which, you know, simply decouples the D6 with the D4, which is the The original intent, the D4 should be incenting new manufacturing of renewable diesel because you need those government support to do nothing all in the fuel driven by rent prices. So the D6 being connected to the D4 accomplishes two things. It raises the price of gasoline. So to get that method, they understand the contradictions that exist.

Well, maybe if we could hone in just a little bit on SBR there though, like understand catalyst change outs and stuff like that but if we were to look at sbr and isolation i mean how do you think it's performing in this you know we're still waiting for as you mentioned you know clarity on some of the the new rules um just how are you with with that just i i think that in isolation the the net net is actually the landscape has improved for us you know on the blunders tell but the d4

RIN, which, by the way, we are. So the outlook for us.

Thank you. I'll turn it back.

Thank you. And the next question comes from Manav Gupta from UBS. Your line is now open. Please go ahead.

Good morning, guys. I wanted to get your view on the crude quality discounts. Looks like OPEC is raising volumes. We've also seen some rebound in refining cracks, But the reason refining estimates are not moving up or probably even slightly moving down is because these crude quality discounts are very low. And so, in your opinion, as OPEC brings back these barrels, what do you expect to happen for the heavy light spreads on the Gulf Coast or all coasts right now?

Tom O'Connor?

Yeah, thanks, Manav. I mean, I think it's certainly taken us as sort of a positive note from the words we've seen from OPEC-plus over the last couple of weeks for sort of the official reactions for the increases for May. And then, you know, we should be receiving more news next week. You know, as the JMCC moves through, clearly there's a lot of, you know, commentary and information that's in the market that is talking about an increased taper. but next week also we should receive OSPs and all those other nice things that come along there. Broadly speaking, as you mentioned, yes, we've been in a very narrow range, but certainly our expectation with the changes that are coming to the market with OPEC policy that we should see the differential start to widen out.

From a 100,000-foot view, I mean, Tom covers it sort of down to the real high-level view. marketplace now and admittedly some speculate a lot of the headwinds that we perfect sir so i'm

going to repeat this question which i had asked you i think three or four quarter calls again ago which was basically that it looks like the state of california is trying to push out refineries and i think matt your response was whether they are trying to do this or not we are needed if you push keep pushing us out it will create a lot more volatility for product prices and consumers will suffer i'm just trying to understand the way things have gone in the last three or four quarters it's becoming increasingly clear from your peers that this is a relentless push to get rid of refineries in the state of california and i just wanted your comments on it are you also feeling the same way that or do you think

you know something might change here and they might realize they're doing the wrong thing here I appreciate the question, and I'd say, Manav, to call the situation California dynamic would be a huge understatement. And maybe, just maybe it's a case of, you know, nothing focuses mind like a pending hanging or a looming energy crisis. The recognition of the state, critical our products are for the well-being of the people in the state. And indeed, not only how important they are, but indeed the recognition that they're going to be in demand for many decades to come. And if you go and look at the state's numbers, by next year, we see the market short 250,000 barrels a day of gasoline or over 250,000 barrels a day of gasoline, which will force the market to attract higher cost imports. So we believed in, as I said three or four quarters ago, whenever it was, that our system of two refineries between Torrance and Martinez and is today one of the best systems out there in California. But whatever I said three or four quarters ago to the state today, there must be recognition by the stakeholders. There has to be a level playing field for the participants in the market. it. So I will tell you, by the recent conversations we've had, that word's like, we need to work collaboratively, unthinkable. But the refineries, look, at the end of the day, they need to execute a business plan that makes sense. We believe, I think I said this probably some time ago, that the high and best use for our assets are in refining. But that absolute requirement, that allows us to succeed. I've gotten some indications that that is well understood within the state so um there's because the other reality is the alternative values in california are compelling it's not like many other situations the underlying value of these areas so that creates a high bar of what must be made in refining so i've been encouraged uh by the state i've had uh we are we have a team embedded there uh people uh focused on it for 100 of what they do and indeed I've had a number of conversations with them. And so, you know, at the moment, I believe our refineries are well-positioned to not only deliver the low-cost products that the state is desperately going to need going forward, but just to provide strong returns and results for our show.

Thank you so much.

Thank you. And the next question comes from the line of Doug Legate from Wolf Research. Your line is now open. Please go ahead. Doug, your line is now open. and you will go ahead and ask your question.

Hey, good morning. This is John Abaddon for Doug Leggett. Our first question is on your net debt trajectory. Could you walk us through on how that plays out and whether or not you may think you may need additional financing?

Sure. Thanks, John. Thanks for the question. As we've said in the past, our capital allocation policy is to prioritize the balance sheet in supporting operations, CapEx, and maintaining our dividend. And our approach to the balance sheet has been to use up cycles like we saw in 2022 and 23 to reduce debt and to build a balance sheet, preserve our balance sheet so that we can be resilient through down cycles like we've experienced in the past three quarters, a few quarter. So going forward, as the market continues to improve, as we believe the macro suggests it will, and as cash generation correspondingly approves, and when we receive proceeds from the terminal sale, we expect that our focus will again pivot to de-levering and prioritizing the balance sheet. As you know, we did access the capital market, raised $800 million in an unsecured offering. That bolstered our liquidity to a level where we are comfortable. And at this point in time, we don't anticipate accessing capital markets.

Appreciate it. And then for our follow-up question. It's on the capital reduction. How much of that could be permanent, or is it all transitory?

Well, let me say it's permanent in regards to lowering our capital program going forward. Our capital program and our turnaround spend is part of our RBI program, And so we are expecting to see, you know, again, within the confines of the scale that we provided it in regards to RBI, we expect to receive real benefits on reducing capital, you know, bending the cost curve.

Specific cuts that were made here, they were – Yeah, I mean, we went through a portfolio optimization process, and we did defer some spending. Some of them were cuts. as Matt mentioned, as part of the RBI program, we have developed longer-term initiatives to lower the capital spend going forward. I think it's probably premature at this point to say to what extent that's going to be relative to these cuts, but there are an expectation that going forward, we will have sustainable reductions in how we spend capital and end it more efficiently.

Appreciate it. Thank you.

Thank you. The next question comes from Paul Chang from Scotiabank. airline is not open. Please go ahead.

Thank you. Good morning. Matt and Karen, with the uncertainty in the economy because of the tech war and everything, in the event if the economy take a more sour note and correspondingly demand and margin will not improve the kind of way that we all think it may. At what point that the dividend would become a question on the table for the company? And I mean, what is the criteria? Or that you think that this is a sacred, then you will do everything else that and not touching the dividend. That's the first question. The second question is that in the second quarter, how should we look at the refining operating costs, particularly in California, and also that once we finish the business improvement plan by the end of the year, you get to that 200 million one way, what's the refining of that one way we should reasonably can expand? on the first one tough to uh tough to answer in a hypothetical situation obviously we're watching the economy very very closely and we always um you know hope for the best and prepare

for the worst uh you know over the last 15 years we've seen downturns in the economy that have come in different forms and fashion that were sort of unfathomable so i you know to To sort of hypothetically talk about a recessionary period is hard to do in a vacuum. That being said, we set our dividend, a major turndown in the marketplace. We're going to manage our business as conservatively and as appropriately as we possibly can in regards to how we run our refineries, how we invest the capital.

Yeah, relative to the RBI program, so our baseline is 2023 to set up how we're deviating or how we're using the differentiations on our OpEx savings. And I would look at the $200 million and consider about one-fourth of it's going to come from capital and turnarounds as well. So that's to give you some information on how you want to look at OpEx going forward. That being said, the program doesn't stop in 2025. we will continue driving additional reductions in OPEX going forward. I mean, our expectations are as high as $350 million of run rate savings by the end of 2026.

Yeah, because, you know, importantly, Mike's comment, the team is essentially to execute on those. And we haven't been to all our plans. The number of savings.

Mike, do you have a number you can share in terms of California optics in the second quarter?

We're not ready to share that. It would be very, very difficult to dissect, Paul.

Okay, we do. Thank you.

Thank you. The next question comes from Matthew Blair from TPH. Your line is now open. Please go ahead.

Thank you, and good morning. On the RBI program, you mentioned that you're on track to exceed the $200 million goal here, which seems quite encouraging. Do you have any examples you could share of areas where you're seeing more opportunity than you originally expected?

Actually, quite frankly, when we did the due diligence initially, from the category basis, where we wanted to be from each category, nothing's really standing out, is jumping out as a big surprise. We thought energy would be a big opportunity, and it is. We thought that our turnaround performance would be an opportunity, and we're seeing significant opportunity there as well. And then lastly, we have not in the past really leveraged our spend across the organization. And so the strategic procurement opportunities are a big focus for us as well. But it's roughly kind of evenly divided among those areas.

And then could I just clarify two points from your Q1 reporting? I guess first, First, do you have an EBITDA estimate associated with the logistics asset sale? And then second, could you also provide your share of the RD EBITDA in the first quarter? Thank you.

I'll take the first part and you turn the second part. So in regards to the asset PBF logistics, when we had an MLP acquired, the terminal that we agreed, and then subsequently PBF logistics, they made real sense.

And then with respect to SBR, SBR's standalone EBITDA was a $17 million loss. So our half of that would be half of that. And then also circling back to a question that Roger Reed asked, we did, like so many of our peers, we did record 45Z revenue based on the provisional guidance that's out there. But as Matt mentioned, whereas we were receiving about a dollar on BTC, it's less than half than that under the BTC.

Great. Thanks for all the information.

Thank you. And the next question comes from the line of Neil Mehta from Goldman Sachs. Your line is now open. Please go ahead.

Yeah, thanks, Matt, Karen, and team. I guess the first question is just on working capital. It looked like it was a headwind this quarter. typically in a lower commodity price environment. You could see that headwind continues. So just your perspective on the Q2 setup for working capital, and then is that a reversal, the 300 from this quarter, oil price constant, would that reverse over the course of the year?

I mentioned that the headwind from inventory was around $200 million. As we reduce those two, and our plans are to reduce 2 million barrels, but as you rightly point out, it's in a lower price environment, so we might not get the full benefit of that reduction.

It could, in fact, even be a headwind, but at this point, based on our projections, it looks like there will be some a modest benefit and then um as karen maybe the follow-up is just on the credit side we have gotten a significant amount of incoming about liquidity i i think uh through the asset sales and some of the adjustments that you guys have talked about um we've seen you know these are steps to help allay some of the concerns uh that the credit market might have but maybe you could address that directly because the bonds have sold off here and why you have so much confidence in the liquidity picture?

Well, as we mentioned, working capital should be fairly stable going forward. We don't really see any, you know, unusual items impacting that area. It's really going to just be hydrocarbon prices.

Karen, I meant just broadly speaking about the credit picture.

Well, you know, as I said in my prepared remarks, you know, we believe that our current liquidity levels are sufficient, and that includes having the ability to pay our dividends. And we're really focused on everything that we can control. You know, we're normalizing our inventory levels. We've reduced our CapEx program by $100 million. We expect to begin seeing the benefits of the RBI initiative. Those should start feathering in over actually even starting in the second quarter. We've talked about the $250 million upfront insurance payment, and importantly, we have a dedicated team working on the Martinez insurance claim. It includes engineers, forensic accountants, insurance experts, so that we can very timely present the information to our carriers, so that they can make timely decisions on future payments.

That's great. Thanks so much, Stephen.

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

Thanks, maybe following up on your last comments there, Karen, on insurance proceeds. Congrats on the $250 million first installation payment that you have to receive. I guess it's safe to say, is it safe to assume this is largely associated with the capital cost for repair. And maybe any, I know it's really hard to, because it's very uncertain, but any color on how you think about potential size or cadence of additional proceeds as we look at over the remainder of the year?

Well, I think it's, I think it's important to note that the $250 million payment is actually seen by the insurance companies as an upfront payment of $280 less the $30 million deductible. So that is now behind us. It's also important to note that it's unallocated. So at this point, we can't tell you how much is for the property piece of it, how much of it is for BI. And future payments are going to be based on us demonstrating actual expenditures on the rebuild and whatnot in excess of that amount, plus whatever the BI calculation is. And BI, we should note, it covers fixed expenses and lost profit opportunity. And in terms of the cadence, as I mentioned, we have a dedicated team and we expect, we We have weekly meetings with the insurance companies, and we are very expectant that we'll be able to, or we will be seeking quarterly payments.

It's important to note that they're not two different policies. We're going to be working closely with them, and now here we are at the very end of April, and this is really the first month where the BI coverage is present. And so, you know, in a short period of time, we'll be sitting down with them and reviewing April and setting up a program for the success of months, April, May, June, July, going forward. And then at the same time, you're doing the rebuild and expending dollars, and that's being tracked. And dollars are going to blend together at some point. So there's not going to be sort of explicit this dollar is for that one. There's going to be one claim to our group of underwriters. We're working very, very closely with them. And I will tell you that from a working capital standpoint, it goes to Neil's point earlier, it's just very good news that we've got this collaborative arrangement with them where they're putting the dollars in. In some cases, you know, some of the dollars are in front of spend that the whole team is going to Great.

Thank you. And maybe one follow-up on the West Coast. I know, obviously, you've got your hands full right now with the Martinez refinery. But as we think about balances in general, right, I mean, I think expectations are that the market is very tight this year. You have two more refinery closures coming late this year and early next year scheduled to close there in California. And, again, the outlook looks increasingly tight. Can you maybe talk about how you view the outlook for product balances and whether you've seen anything in the behavior of imports over the last 12 months that would change how you think about what that might mean for margins and pricing going forward?

Well, look, this is Adam Smith. This is what he said. I mean, the market is definitively short and is going to be definitively short in a major way, in a way that the state has never been before. And so on a gasoline, you know, the increase, the state of California is going to have to attract over $250,000. That is a big, not insignificant object on a daily basis. create a volatile market because I must just sell.

Perfect. Thanks, Matt.

Thank you. The next question comes from Connor Fitzpatrick from Bank of America. Your line is now open. Please go ahead.

Good morning. Thanks for taking my question.

This is a heavy repair and maintenance year for your West Coast footprint, but I was wondering if those activities could also improve those assets reliability going forward once they're completed should we expect martinez and torrents uptime to change over the next few years relative to the prior several years so for martinez uh yeah we're we're going through a major turnaround there on the fcc block um and a big piece of that is work that's being done on the regenerator of the fcc so we certainly look at every turnaround as an opportunity to improve the reliability of the facility. On the torrent side, we have a hydrocracker turnaround in the second half of the year. And it's not as big as the FCC at Martinez, but it certainly does provide an opportunity to improve the reliability. On top of that, we have several reliability initiatives that are occurring across the entire system. And as we stated last year in a call sometime over the summertime, that was one of our major goals is to drive continuous improvement mindset and operational excellence across the system.

Great. That's clear. And you mentioned earlier, and news reports agree, the state of California is, at least after these recent closures, becoming more open to working with refiners to maintain fuel supply. Which California regulations are, in your opinion, the most onerous financially that would be most impactful to be modified, you know, assuming that these conversations involve those regulations?

I think they go across the spectrum, you know, and you look at it, you know, some of the costs would have to be looked at in regards to is it creating an unlevel playing field for the refiners imported into the state? they've gotten themselves regulatorily, they're squeezing in-state participants, you know, proof will be in the pudding.

Thanks. That's all I have.

Thank you. And the final question comes from Jason Kadelman from PD Cowan. Your line is now open. Please go ahead.

Yeah. Hey, morning. Thanks for taking my questions. I had a few cleanup questions on the Martinez outage I was hoping you could help with. do you have an estimate of the total cost of repairs? And then can you also just, it's unclear if the business insurance proceeds are being negotiated and paid out monthly, or if that happens once the outage is over, if you could just confirm that. And then it seems like the The startup timing was pushed out slightly from by 4Q to during 4Q. So, if you just discuss what the critical path is to fully restarting Martinez.

All right. So, on the last point, my intention was not to do a sleight of hand. You know, we're circling the end of September as a time to bring the plan up, and that hasn't changed to the degree it does or it needs to. We'll certainly communicate that in a prompt fashion. but there's no indication at this point that that's changed. In regards to the total rebuild costs, we're not going to get into that at the moment. The numbers are somewhat fluid, but to a great degree, it's moot for our shareholders because, as Karen alluded to, the $30 million of deductible, so the cost going forward will be covered by our property program. So, you know, obviously those numbers are being BI claims.

Okay, great. And then my follow-up is just on non-core divestments and you announced the sale of those terminals. And I'm wondering within the logistics EBITDA bucket, how much you would consider kind of non-core to the refining business?

That number for you. it these were these were sort of offering more value for others than they were three terminals one is connected to our paul's world refinery uh we maintained that refinery that that terminal because again it's more intertwined not to say it could be sold um but the the non-core nature was different than the the assets that so you know it's it's something that we are continually looking at and to the degree that we feel like we can create value and we're having an opportunity where you can sell something for 10 times and trading or we historically trade, that should create...

Great. Thanks for the answers.

Thank you. We have reached the end of the question and answer session. I will now turn the call over to Matt Lusky for closing the remarks. Please go ahead, sir.

Well, thank you. Thank you for everyone participating. And we look forward to speaking to you again in July. Have a great day.

Thank you. This concludes our conference call for today. Thank you all for participating. You may now disconnect.