And so we believe, for example, in the New Mexico case that our facilities are advantaged. We have our largest renewable diesel facility in New Mexico. The transportation savings alone are going to be significant boost to our improvements. And so we’re feeling positive about our future as we get our operating performance under our belt.
Neal Mehta: Thanks, Tim.
Operator: Our next question comes from Paul Cheng of Scotiabank. Your line is open.
Paul Cheng: Hey, guys. Good morning. Maybe that — this is for Tim. You have rolled up HEP. Can you give us some example with that? Does it — how does it impact your operation? I mean, is there any synergy or is it just simply that you are reducing some G&A because you don’t have to file the regulatory data to the government as a separate entity? That’s the first question. And maybe after that then I ask my second question.
Tim Go: Okay, Paul. Yeah. Thanks for the question. I’ll let Atanas provide a few comments on HEP and then I’ll mention a few things as well.
Atanas Atanasov: Yeah, Paul. Thanks for your question. HEP has provided with a number of benefits. When we look at on the operational and commercial side, we’ve seen meaningful opportunity for simplifying our business. Things like not having to negotiate intercompany contracts, for example, is something that’s meaningfully helpful to us. Another point to bring up is not having to worry about qualified versus non-qualified income because we don’t have the MLP anymore. Integrating some of our back office functions actually does bring a benefit and efficiency when it comes to how we deal on the commercial side as well. So that’s one thing. And the second thing is, just on a pure — from a pure economic point of view, we’ve been extremely pleased with how things have gone, as you can see from the operating performance in the business in the fourth quarter that just goes on to vindicate our view that this transaction has provided meaningful cash flow accretion and frankly better EPS accretion than what we had hoped in the beginning.
Tim Go: Yeah, Paul. And I would just say on top of what Atanas just mentioned, we are very pleased with the HEP transaction. We do think it’s turning out even better than what we saw in our planning economics, and that’s really a basis for the dividend increase that we just announced last week. We believe that not only is it EPS accretive, but it’s much — it’s very much cash flow accretive. We’ve seen maybe a little better than what we thought originally, and we’re passing that on to our shareholders through the dividend increase.
Paul Cheng: Tim and Atanas, is there a number you can share in terms of the operational synergy benefit to quantify it and how long you think you will be able to achieve it?
Tim Go: Paul, no, we haven’t put a number out on there. When we first talked, we limited our discussions to some of the very obvious and very hard synergies associated with back office consolidation, two public companies into one. We are seeing synergies for sure out there, but we’re not ready to talk about it out there.
Paul Cheng: Okay. The second question is on the longer-term. I know you are still in the journey trying to get yourself up to the operating standard you want and your utilization rate over time is going to be higher. And I think at that point you’re saying that your crude unit run could be at $6.40 on a sustainable basis and you could be an operating cost at $6, $6.50 per barrel. Can you help with that to maybe bridge the gap between where you are on your unit cost today? On your Mid-Con, you are around in the $6, $6.50. In your West, you are at about $9.50 to $10. So average for the company is like $8.50 to $9. Even if we assume a higher throughput and there’s no associated cost with the higher throughput, we can’t get close to the $6 to $6.50. So what are the steps or initiative that we should expect that will lead to that unit cost come down that much?
Tim Go: Yeah. Paul, we’ve taken big step forwards, as you’ve mentioned in reliability. I think Val and her team have really, really done a great job in progressing that effort. We’ve talked earlier about the turnarounds and how that’s setting us up for success. We believe reliability is the biggest knob we have to turn on op costs and op costs per barrel because it affects both the numerator and the denominator. I’ll let Val talk about some more examples of things that we’re working on to improve our OpEx per barrel.
Valerie Pompa: Sure. So, as we’ve talked before, our focus is on — so the gap that you mentioned is really about focusing on two things, reliability and efficient delivery of our work. And so we’re working both of those and turnaround is a big step in reliability, as we get our turnaround work processes, the right scope in every turnaround, our reliability improves and not just the barrels. When we’re running more throughput, we’re spending fewer dollars. And so that’s the main focus and the connection with reliability. And then secondarily to that is improvement of how we deliver the products, how we work or how we do work execution, whether it be maintenance, what suppliers we use. So there are a lot of initiatives around our work execution strategies, leveraging technology and then better workflow processes integrated across all of our businesses.
Tim Go: Yeah, Paul. What I would tell you is when we put that $6, $6.50 number out there, it was before we expanded our portfolio with both Puget Sound and with the Sinclair assets and before HEP for that. So now that we’ve got about a year under our belt, we are certainly looking — putting our long-term plans together and trying to put kind of a better outlook on what we think we’re going to be able to accomplish here in the near-term. Remember, these are long-term cycles. Reliability, as I mentioned, is measured in turnaround cycles, not in years. But we’re not prepared to say anything different today. But probably we’ll be in a position to do something later this year.
