Doug Haugh: Yes. I would say — I don’t know, I’d say that there’s any one specific criteria that makes it a perfect match. But we are exploring both of those groups of potential partners, one being financials that bring a unique set of strengths and capabilities that could help us that are more purely balance sheet oriented. And then, there is another group of potential partners on the strategic side that could bring not only financial capacity but tremendous support around feedstocks and/or finished product marketing or both in some cases. So, we’re pleased with what the Bank of America team has provided and brought forward so far. We’re going to run a very robust process. And I think we’ll see substantial participation from both of those categories of potential partners and that’s been our indication thus far. So it’s an exciting development overall. But we’re very open and thoughtful about the advantages that either type of partner could provide us.
Eric Stine: Yes. And then, I don’t know if you’ve disclosed it or not, but I mean do you have a — in your mind do you all have a target for timing whether it’s first half of 2024 or something more specific?
Doug Haugh: I’d say that’s a reasonable estimate. We’re in the early stages of the process now lots of trading of NDAs and the like typical for a process of this type. And it, certainly, expect that by first half of 2024m we’ve kind of gained a clear understanding of the path forward.
Eric Stine: Okay. Thanks, everyone.
Operator: Manav Gupta with UBS. Your line is open.
Manav Gupta: Guys, first of all thank you for breaking up the RD versus conventional EBITDA. A number of your peers who have been doing it much longer than you still refuse to break it. So it helps with the disclosures. So thank you for that. My first question here is a material improvement in conventional refining from Mobile. You are not providing the capture, and I’m sure it’s a very good reason you stopped doing it. So I’m not going to press you on that. But help us understand some of the factors that help you deliver a much stronger EBITDA on the conventional side of the Mobile refinery versus the second quarter?
James Rhame: Yes. Thanks, Manav. Good question. Really, if you look at the second quarter to third quarter, we saw a significant improvement in the overall market. And with that because we were running reliably and really focusing on those higher-value products we are able to capture what the market gave us versus the second quarter. And so, it was a clean quarter from reliability, from yields. In fact, this is very, very good results with the yield profile that we saw. But it was really the market gave it to us and we were there available to capture it. And with that we had significant rate increase across the — as you can see from the rates and that was all reliability driven. That’s continued to be our focus on operational excellence.
Manav Gupta: Perfect, guys. I want to press you a little bit on the path to profitability for renewables. I think you mentioned, LCFS will help absolutely, I mean I’m just saying one of your peers had similar issues struggled a little in the past on profitability but they had a clear path to profitability. And if you look at DINO now they are actually profitable on the RD side. So, help us understand your path to profitability as it relates to the renewables diesel business.
Doug Haugh: Thanks Manav. Good question. Doug here. Yes, it’s — we’re very pleased with our progress thus far. We’re in no way concerned about the start-up costs and the additional expenses to get the unit up and running. What we’re pleased with is the reliability of the unit the yields are fantastic and our ability to flex our supply chain has been much greater than we anticipated. So, one of the problems with the run rate losses coming into the start-up period was we had built up almost 500,000 barrels of inventory because we just — we didn’t we weren’t experienced in the supply chains we weren’t — we didn’t know how reliable they would be. The last thing we wanted to do is build a big brand new unit and not have the feeds to run it.
So, we kind of over inventoried the business if you would but we felt that was prudent coming in. We’ve had to run off those high-cost feedstocks to get back to normalized inventory levels, which we’re at now. And we’ve been able to really gain an appreciation for the reliability of our supply base in that sector. We’ve continued to expand the number of suppliers and continued to qualify new feeds. We found that feedstocks have been plentiful and available which we weren’t certain of when we started up because we weren’t out in the market buying every day. So, we’re quite pleased with where we’re at. And yes you’re right. I mean the path to profitability from here is to continue to drive down carbon intensity continue to maximize the LCFS contribution now that we’re in the system to continue to optimize our logistics that we that were brand-new assets for us there in the second quarter third quarter.
So, there is a lot of opportunity ahead but we’re very confident in the business very pleased with how it’s run. The team has done excellent work at the plant in terms of really running the unit well and being able to accommodate tremendous flexibility on our feedstocks, right? So, that’s — you don’t you plan for those but you don’t know how it’s exactly going to work until you do it and we’re very, very pleased with how it’s turned out.
Manav Gupta: Congrats guys. Based on what you said I’m optimistic that you’ll start reporting a positive EBITDA from your RD business somewhere in 2024. So, I’ll leave it there. Thank you.
Operator: Noah Kaye with Oppenheimer. Your line is open.
Noah Kaye: Good morning. Thanks for taking the questions. Nice quarter. I wanted to first ask about the process around hedging as it stands today. You’re kind of dipping a toe in here opportunistically. It seems hedging a portion of the gasoline production and it’s less than 10% of the output. How should we think about your approach to hedging now? Will it continue to be opportunistic? Will you look to make it a bit more programmatic? Help us understand how your thinking on the output has evolved?
Doug Haugh: Yes, great question. I think the I do think we will continue to evolve our risk management strategy to be a bit more programmatic. The team has done made tremendous progress this year as we put the trading and supply teams in place advanced our risk management policies and practices and governance internally and has now a much more structured process to look at the markets forward particularly in the front quarters. We’re not yet at the point where we’re looking to go put on a full annual strip and hedge out our production at that level, but we certainly are in a position to proactively take advantage of attractive cracks in the front quarter ahead of us. So, we’ll continue to do that. We’ll continue to evaluate distillates as we speak.
Those are in a pretty favorable position at the moment, but also at very, very low inventories as an industry. So, there’s a balance there that has kept us from striking those hedges yet. But again just like we did with gasoline, we’ll be opportunistic for the front quarter and continue to improve our capabilities and governance around that process as we go forward. And I do think you’ll see us start to use that more programmatically in the years forward.
