As far as you mentioned a little bit of capital reserve for the Coffeyville project. We do not plan on putting any capital in that project. If we can’t find partners that are willing to fund the construction with us donating or basically to not donating, but as part of the transaction would put our renewable diesel business at Wynnewood into a joint venture.
Matthew Blair: Sounds good. Thanks for the color.
David Lamp: You’re welcome.
Operator: Our next question comes from the line of John Royall with JPMorgan. Please proceed with your question.
John Royall: Hi, good afternoon. Thanks for taking my question. So my first question is on the hedge program for 2024. I think you had previously said, you were about 15% hedged throughout the year. Any more details you can provide on that that’s still the right number and is it more front-half loaded, more loaded towards one product or another just any color you can give them the 2024 hedges would be helpful?
Dane Neumann: Yes, you got, John, this is Dane. Yeah, in terms of volume, we’re still around that 15% level as you indicated how much has changed on that front since last quarter. It is a little more front loaded and more weighted towards distillate.
David Lamp: We are adding some in 2025, too, John. So, I think we’re below 3%, 4%.
Dane Neumann: Yeah, very small number.
David Lamp: But we still have the view that as these large merchant refiners come on around the world that the diesel cracks are going to be pressured, and so most of what we’re doing is around diesel.
John Royall: Understood. Thank you. And then, maybe just a housekeeping question for Dane, given we don’t have the 10-K at this point. We see your CFO is negative, but looking at the working capital number, I think it’s down from 3Q. So what should we think of as a driver of that cash flow flipping negative and what was pretty solid from an earnings perspective in the quarter, not sure if it’s deferred tax or for some other items we may be missing, but any color there would be helpful?
Dane Neumann: Yeah, I’ll give you a couple items there. There are a lot of movers in the quarter. We were kind of expecting this type of free cash flow draw. In our fourth quarter, we do typically, we always settle our sock-based compensation payments in cash. We prepay insurance expenses in cash, so we’ll build those back up over the course of the next year. One of the other bigger moving items, as you recall, we had some record crude gathering at the wellhead in the third quarter as well at higher crude prices. As the winter months came on that slowed a little bit, and as the prices fell, liability dropped pretty dramatically quarter-over-quarter. And then also buried in that number, of course, is the crack spread swap unrealized gain, pull that liability down, which is, if the market stays where it is, is a future cash savings or gain, depending on the settlement of those hedges.
Lastly, on the Fertilizer business, we had a pretty good deferred revenue in cash sitting on the books at the end of the third quarter. Subsequent to that, the customer buying pattern really started to change, and we’re attributing that to the higher cost of carrying inventory. Our prepay value dropped pretty dramatically down to like $3 million, so more headwinds, but all relatively expected from our perspective.
John Royall: Thank you.
Operator: Our next question comes from the line of Manav Gupta with UBS. Please proceed with your question.
Manav Gupta: Hi, guys, quick question. Looks like you are doing projects at both locations which will give you a higher diesel yield. So help us understand how much more diesel will you be producing on a combined basis from these value-enhancing projects? And I’m assuming these are high-return projects, but if you have a rate of return for these 2 projects that you are pursuing, which give you higher diesel yield?
David Lamp: Yeah, Manav, between the 2 plants, we’re targeting about 6,000 barrels a day for additional production, which would come from cat feed, in essence, which, as you know, typically a cat cracker does 70%-30%, 70% gasoline, 30% diesel. So the ultimate target there is really improving capture, and that’s all in that 4% number I kind of talked about earlier.
Manav Gupta: Okay, perfect. And a second question we ask all other refiners, there is an asset package out there, now it doesn’t make sense for many people, but it kind of makes a little bit of sense for you. You could get to a 1 million barrels of refining capacity, you have more product terminals, pipelines. Would there be any scenario in which you might look at CITGO assets for the right valuation?
David Lamp: Well, Manav, we look at everything, so I think I’ll just leave it at that.
Manav Gupta: Thank you, sir.
David Lamp: You’re welcome.
Operator: Our next question comes from the line of Paul Cheng with Scotiabank. Please proceed with your question.
Paul Cheng: Hi. Good morning.
David Lamp: Hi, Paul.
Paul Cheng: I think it’s still morning for you guys, or maybe afternoon already. Dave, when you’re looking at your gathering system, have you sensed that or have you seen the activity level of your customer there? Are they increasing or above flat or decreasing in the recent months? I mean, anything that you can tell us in terms of, say, do you think that you are going to be able to gather more or that there’s going to be something at this level?
David Lamp: Well, Paul, as evident by our numbers, we’ve seen an increase in volume, and that’s mainly due to a couple of big plays in the Anadarko Basin. Will they continue? I mean, as far as we know, what we hear from producers is there’s probably a slight gain going through 2025, 2026. After that, we don’t have much visibility on what might occur. A lot of the Anadarko Basin is fed by not only share oils, but just legacy conventional wells that just kind of sit there and produce. So as we gain market share, we’ll get more and more of those, but the bigger volumes of new stuff is really is the shale oil plays in the frack zones, and there’s several big projects that are in development now.
