And so it’s all in that same framework. We do like our asset base. Clearly, California is a tough place to operate and probably getting tougher. So that’s really all I want to say about that part. But what I also want to say is, we’re not — again, we look at everything and we look at — we continue to look at refineries as well.
Operator: The next question is coming from Roger Read of Wells Fargo. Please go ahead.
Roger Read: Yes. Good morning. I’d like to follow up, Gary, with you on the summer grade gasoline? Like I know you said what’s in the inventories isn’t that much. But what are the incentives look like at this point? Or are we so close to the conversion in March that the seasonality of gasoline is already set up that way? I’m just trying to understand what — how the market is going to thread the needle between heavy maintenance and the current conditions in the market?
Gary Simmons: Yes. So our view, Roger, you look and there’s about $0.10 a carry to the March/April screen. We would tell you the cost to produce with butane being cheap is closer to $0.20, so certainly, no economic incentive at all the store gasoline. A lot of what we think happened in terms of the inventory build is that, you had a lot of things happened in December, especially in the Gulf Coast. Colonial was allocated the economics to ship on Explorer into the Mid-Continent, that arb was closed due to the Mid-Continent being weak. You had some Jones Act freight off the market in dry dock that limited some movements there. And then a lot of volatility in the freight markets really impacted exports late. And so what you saw is Gulf Coast inventories draw and in our mind, the Gulf Coast basis got weak enough that although there wasn’t carry on the screen to keep gasoline inventory, I think we saw a lot of refiners choosing to hold inventory just because the U.S. Gulf Coast basis was so weak and they choose to store barrels that they would go ahead and then consume during their own maintenance periods rather than going out and covering and saw better value to do that.
So if that’s the case, then you should see this inventory work off over the next couple of months.
Roger Read: Great. That’s helpful. And then the other thing, obviously, in renewable diesel, dealing with some feedstock issues this quarter, but also there’s a lot of new capacity coming in. Just curious how you look at or how you would ask us to think about margin potential in this business, sort of assuming either forward curve at this point or just where we are today in terms of market structure, if it holds, how we should think about the moving pieces here because it’s — it’s a little more opaque to us, the feedstocks coming in and the timing of that relative to just matching in the market on a daily basis?
Eric Fisher: Yes. I would say the outlook for renewable diesel, it is difficult to predict exactly how it will play out because you do have additional capacity coming online and into fixed credit banks for both RINs and LCFS that would naturally say that those credit value should come down with additional capacity, which would narrow RD margins. That being said, we also see that feedstock prices continue to come down, both waste oil and veg oil. So then you get into the waste oils will always structurally have a lower CI advantage over veg oil. So where veg oils will be long, they still won’t be competitive to waste oils into compliance markets. So it goes back to the core of the DGD business, which is a low-cost producer waste oils, access to markets besides California.
And so, we still see that we’ll be competitively advantaged, both from an OpEx and feedstock standpoint. But overall, the outlook, I would say, is we expect that credit prices will continue to narrow. And it’s a question of how feedstock prices we’ll keep up with that. And so — and then the last thing, besides diversifying sales away from California is obviously with our project, we’ll be diversifying into SAF, which takes some of our product out of this RD market. So we think both of those things make us still the most competitive and advantaged platform in R&D, even in a tightening market.
Roger Read: So is it fair to summarize that as there’s probably a lot more clarity on, let’s call it, the supply side of R&D this year and a lot less clarity on the feedstock side? In other words, where we should look for relative opportunity is probably on your feedstock rather than, say, the sales price of R&D?
Eric Fisher: Yes, I think that would be fair to say that most of that is still being a CI advantage in waste oils over vegetable oils.
Roger Read: Right, okay. Appreciate it. Thank you.
Operator: Thank you. The next question is coming from Ryan Todd of Piper Sandler. Please go ahead.
Ryan Todd: Thanks. Maybe a question on turnaround activity and your looks relatively heavy in the first quarter, is that indicative of what we should expect to be a higher level of overall maintenance for you in 2024, just front-end loaded? And then maybe any thoughts in terms of what you’re seeing for overall industry maintenance activity this year. Is this — should we expect this to be another relatively heavy year?
Greg Bram: Ryan, this is Greg. Normally, we don’t talk about our overall turnaround plans. You can tell from the guidance, a fair amount of activity for us in the first quarter. I think when we get out through the rest of the year, we’ll talk about those periods as we come up to the I think from an industry perspective, we are seeing a fair amount of turnaround activity across the industry in the first quarter. So in kind of to Gary’s point, it looks like it’s going to be a heavy season for the industry in general, a lot of it in the Gulf Coast to a lot of focus there. .
Gary Simmons: The only other thing we may add is although you can see the throughput guidance, we don’t really expect it to impact our capture rates. That’s right.
Ryan Todd: Great. Thank you. And then maybe just a follow-up question on capital spend and growth capital spend. I appreciate it, Homer, you gave a little bit of detail there in terms of some of the things that are competing for the wedge of growth capital within your budget. I mean most of your larger project-driven work is either finished recently or you’ve got the SAF project, which isn’t really all that large. But as you look forward on the horizon, are there any other meaningful environmental or regulatory-driven capital things that we should be keeping our eyes on over the next couple of years that could draw some more capital that way? Or what types of things make — or should we expect just more of these kind of small little netback-driven projects across the refining side over the next few years?
Lane Riggs: Hey Ryan, it’s Lane. The way I would think about this is if you go back when we — historically, we used to sort of spend, I would say, we said $1.5 billion sustainable capital. That would actually include regulatory capital. I mean that’s how we frame it. It sort of maintain our assets to generate the earnings we’re supposed to and try to work your sustain of your regulatory capital in that, albeit it would be lumpy. And so you’re going to average around that number. So that’s how we think about the regulatory side of it. I don’t really foresee at least right now that we have a large regulatory spend. Clearly, that could always change. In terms of our strategic capital, historically, we were around $1 billion. As an organization, we felt like — we feel like we can execute $1 billion pretty well.
