Delek US Holdings Inc (DK) 2023 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Delek US fourth quarter earnings conference call. (Operator Instructions) This call is being recorded on Tuesday, February 27, 2024. I would now like to turn the conference over to Rosy Zuklic, VP, Investor Relations. Please go ahead.

Good morning and welcome to the Delek US fourth quarter earnings conference call. Participants on today's call will include Avigal Soreq, President and CEO, Joseph Israel, EVP, Operations; Reuven Spiegel, EVP and Chief Financial Officer; Mark Hobbs, EVP, Corporate Development.

Today's presentation material can be found on the Investor Relations section of the Delek US website. Slide 2 contains our Safe Harbor statement regarding forward-looking statements. We'll be making forward-looking statements during today's call. These statements involve risks and uncertainties that may cause actual results to differ materially from today's comments. Factors that could cause actual results to differ are included here as well as in our SEC filings. The company assumes no obligation to update any forward-looking statements.

I will now turn the call over to Avigal for opening remarks.

Thank you Rosy. Good morning, and thank you for joining us today. During the fourth quarter, our operation ran well. At the higher end of our guidance, we did a good job of focusing on what we could control. With that, I would like to thank each member of the Delek's team. From a market perspective, during the quarter, we saw a weakness in product demand consistent with the seasonal trends.

In refining, we achieved record total throughput in the quarter but still the opportunities for further operational improvement. Joseph will provide the details of our refinery operation and progress at Big Spring.

We delivered another record quarter in our logistics segment. The consistent strong performance from our logistics segment validates our favorable position in the Permian Basin. Our retail segment reported its best Q4 outside of COVID year 2020.

Turning to the full year, 2023 was a strong year for Delek. We achieved $950 million of adjusted EBITDA. We made significant progress on our key objectives. As a reminder, they are operational excellence, financial strength and shareholder return and executing our strategic initiatives.

In terms of operational excellence, our team delivered a solid performance across all businesses this year. We made strategic investment in our people and us. This improved our foundation for profitable and sustainable growth.

Our planned major turnaround of the Tyler Refinery was completed on time, on budget and with no recordable incidents. The result was improved reliability, yield recovery and stronger capital. We are very focused on our safety practices and pushing for constant improvement. I'm pleased to report that 2023 was our best year on record for safety performance. This includes personnel and processes.

Turning to financial strength and shareholder return, we continue to be shareholder friendly. In 2023, we returned $146 million of shareholders through dividends and share buybacks. We also improved our financial position by using our strong cash flow to reduce debt by $454 million.

We made progress on our strategic initiatives. As a result of our cost reduction effort, we find more efficient ways of working. This has delivered a tangible results. For example, our inventory management has resulted in improvement in both earning and debt levels. We are making progress to reach our goal of $100 million run rate cost reduction. Lastly, significant headway was made towards unlocking value intrinsic in our business.

Now turning to slide 24, our key priorities have not wavered. We'll continue our drive towards operational excellence, staying focused and safe and reliable operations. We have turnaround of our Krotz Springs refinery in Q4 of 2024.

Joseph will give context on the improvement we expect post turnaround. We'll also talk about additional initiatives we are undertaking in the refining segment. Financial strength and shareholder returns will remain key. We believe we are well positioned to capture opportunities. We'll continue our disciplined capital allocation with the best interest of our stakeholders in mind.

We look to deliver strong portfolio performance and results. We'll continue to optimize the balance sheet and remain committed to sustainable and competitive shareholder returns. In 2023, we returned $146 million to shareholders. $85 million of this was share buybacks.

As we demonstrate in 2023, we are committed to shareholder returns based upon free cash flow. If we execute 2024 will remain and maintain this approach, and we'll keep a balanced approach between improving our financial strength and shareholder return.

On our strategic initiatives, we'll remain focused in advance. For 2024, we estimate our CapEx to be approximately $330 million, which reflects a reduction from 2023 levels. The capital program show our dedication to maintaining and safe reliable operation, enhancing our portfolio with strategic growth projects and delivering shareholder value while maintaining our financial strength and flexibility.

In 2024, we will continue to explore opportunities in the energy transition space. That meet our return to capital objectives. We announced earlier this month at our Big Spring refinery was selected by the Department of Energy for a project that will advance carbon capture technology, safe, environmentally responsible manner. This project will serve our indirectly well into the decades to come.

Now I would like to turn the call over to Joseph, who will provide additional detail on our operations.

Thank you, Avigal. Moving to slide 5 through 7. In the fourth quarter, our team processed and back to back record high 306,000 barrels per day of total throughput. In Tyler, total throughputs in the fourth quarter was approximately 79,000 barrels per day. Production margin in the quarter was $11.54 per barrel and operating expenses were $5.13 per barrel, which reflects approximately $0.55 per barrel of an employee benefit accrual and accelerated tank farm work.

In the first quarter, we estimated total throughput in Tyler is in the 71,000 barrels to 74,000 barrels per day range. In El Dorado, total throughput in the quarter was approximately 88,000 barrels per day, a record high throughput for the plant. Our production margin was $4.94 per barrel and operating expenses of $4.58 per barrel.

Estimated throughput for the first quarter is in the 82,000 to 85,000 barrels per day range. After working the El Dorado fundamentals in the past several years and improving reliability, the team is focused on profit improvement opportunities mainly in the crude sourcing, asphalt and wholesale areas.

By accessing heavier grades, in El Dorado, we will use existing refinery configuration to improve asphalt capabilities and optimize margins. By increasing regional sales over pipeline on the light product side, we will improve commercial optionality.

In Big Spring, total throughput for the quarter was approximately 58,000 barrels per day, driven by maintenance work mostly reflected in our guidance, but with the additional discoveries that we have addressed.

Our production margin was $6.5 per barrel, including an estimated unfavorable $3.40 per barrel impact from the maintenance activities. Operating expenses in Big Spring for $8.98 per barrel, including approximately $1.90 per barrel related to the additional maintenance. $1.40 per barrel for the integrity program and $0.4 per barrel related to employee benefit accrual.

Estimated throughput for the first quarter is in the 63,000 barrels to 66,000 barrels per day range. In Krotz Springs, total throughput was approximately 81,000 barrels per day. Our production margin was $4.93 per barrel and operating expenses were $4.83 per barrel. Krotz Springs team is preparing for the fourth quarter turnaround, which will include regular maintenance, has one of the major upgrades to our FCC and crude units.

Execution cost is estimated at $115 million, and expectedly term from the upgrades is approximately $30 million per year, coming mainly from yield and rate flexibility improvement and energy efficiency. Plant's throughput for the first quarter is in the 73,000 barrels to 76,000 barrels per day range and for our entire refining system implied through to target is in the 289,000 barrels to 301,000 barrels per day range as we position our sales for the gasoline season.

In the fourth quarter, wholesale marketing contributed a loss of approximately $20 million. This is a $40 million negative variance to the third quarter. The decrease reflects seasonal trends along with challenging Mid-Con supply-demand dynamics and lowering prices.

We are expecting our commercial initiatives to provide us with a better optionality in the future. Asphalt marketing contributed approximately $5 million compared with $15 million in the third quarter and consistent with our seasonal trends.

In summary, 2023 was an important and successful year for our system in many ways. Our focus on people, process and equipment is giving us a strong foundation to optimize what we have and positioned our system for growth.

While Tyler, Krotz Springs and El Dorado have optimized operations over the years. We remain confident about our progress in Big Spring reliability ahead of the coming gasoline season. Us refining market dynamics for 2024 are constructed and we are well positioned to capture these opportunities.

I will now turn the call over to Rosy for the financial variance.

Thanks, Joseph. Starting on Slide 8. For the fourth quarter of 2023, Delek US had a loss of $165 million or $2.57 per share. Adjusted net loss was $93 million or $1.46 per share and adjusted EBITDA was $61 million. Cash flow from operations was $91 million.

On slide 9, the waterfall of adjusted EBITDA from the third quarter to the fourth quarter of 2023 showed that the primary driver for the lower results was from refining. This reflects the significantly lower cracks in the fourth quarter relative to the third quarter.

Logistics set a new record quarter at over $99 million. Retail was down largely due to seasonal trends, although we were in a falling crude environment. We saw lower margins but maintained strong volumes at our stores. Corporate segment costs improved compared with last quarter, largely due to lower employee benefit expenses.

Moving on to Slide 10 to discuss the cash flow. We do $80 million in cash during the quarter, ending the fourth quarter with a balance of $822 million. Cash flow from operations, as I said, was $91 million. Included in this amount is a positive $223 million of working capital. This was largely from improved inventory management and lower product prices reflected in receivables.

Investing activities of $69 million is mainly for capital expenditures. Financing activities of $101 million primarily reflects paydown of debt and return to shareholders. This includes $41 million debt repayment, $20 million in buybacks, $15 million in dividends and $10 million in distribution payments.

On Slide 11, we have the breakout of the 2023 capital program and guidance for 2024. Full year 2023 was $372 million, approximately 80% of the spend was for sustaining and regulatory projects, which include the major turnaround at the Tyler refinery and reliability work at the Big Spring refinery. Our forecasted 2024 capital program is $330 million, which included $255 million for sustaining and regulatory projects and $75 million for growth projects.

In refining, we plan to invest $220 million, with 93% of the capital dedicated towards sustaining and regulatory projects. Most of which is for the Krotz Springs refinery, major turnaround scheduled during the fourth quarter of 2024, as well as projects at the Big Spring refinery to improve capture rates.

In logistics, the company expects the capital program to be approximately $70 million with $50 million for growth projects. Growth projects will advance new connections in both the Midland and Delaware gathering systems, enabling continued volume growth at the partnership.

The retail segment capital expenditures are expected to be approximately $15 million. Funds are dedicated to maintaining Delek's 250 convenience stores, including interior, rebranding and re-imaging initiatives. The corporate and other segment includes approximately $25 million of capital expenditures, which is primarily to fund IT improvements. Net debt is broken out between Delek and Delek logistics on Slide 12. During the quarter, we drew $80 million of cash and paid down $41 million of debt, ending the quarter with a net debt position of $78 million.

Finally, Slide 13 covers outlook items. In addition to the guidance Joseph provided, for the first quarter of 2024, we expect operating expenses to be between $215 million and $225 million. G&A to be between $60 million and $65 million, D&A to be between $90 million and $95 million and net interest expense to be between $80 million and $85 million. We will now open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. (Operator Instructions)

Neil Mehta, Goldman Sachs.

Yeah. Thank you so much team. I guess the first question is just an update on the sum-of-the-parts unlock. I know of a goal. It's something you've talked about over the last couple of years since your latest thinking around that and the milestones we should be watching on?

Hey, Neil. How are you? And maybe you know how much energy we have on topic in the fact during the content, significant headway and sum of the funds going to happen, I want to assure you that. Mark, you want add more to it?

Yeah, Neil. Okay. At this point, I would say like, although we don't have anything specific to update or say at this time, but we remain committed to highlighting the value that's intrinsic in our business and we're working hard towards that. But what I would say that anything that we may do, we are very focused on enhancing not only our balance sheet across all of our businesses, but positioning our company to generate and deliver attractive shareholder returns for the foreseeable future. So we're taking all of those things into consideration.

Okay.

I'll just sort of leave it at that. Appreciate it.

Yeah, we'll stay tuned. The follow-up is just on the quarter was a little bit softer than what we expected. I guess I just love your perspective on maybe some one-time impacts, something marketing could be a dynamic there. And as we think about the sequential build from 4Q to 1Q, as Mid-Con margins have strengthened a little bit through the quarter. Did the -- anything that you would want us to keep in mind as we think about incrementals and decrementals?

Yeah. So you can see it, very easy to see that. We had record throughput during the call Investment needs on the guidance you gave in terms of G&A, OpEx, a very strong cash flow. Supply and marketing, obviously, had that we care, which is in line with seasonal trends. Then we've seen the plan of buy marketing in the slide deck the previous quarter and a big positive in Q2. So there is some seasonality into that line, which is more market-driven, but the reason we're focusing on what we can control, and we do the good, the good job during the quarter.

Joseph, I don't know if you have anything to add, please go ahead.

Yeah, The wholesale marketing contributed a negative $22 million and asphalt the positive $5 million, consistent with the seasonal trends. Wholesale marketing was challenged. And I think you heard it from the most refiners beyond seasonal trends driven by incremental weather in the Mid-Con, no wonder we kept dmanad-known tenant demand and housing loans, especially in December and going through a general freeze.

The other element in 4Q was normally a rate probably which is help fill deciding the catheter. But first the range of our new revenue generated by a market phenomenon, the blended at this point. So in the past several weeks to your point, Neil, the high inventory situation in the Mid-Con has resolved through both supply and demand front, the commercial optionality from posts in El Dorado, which we discussed in the prepared remarks will help us in the future to navigate through this type of volatility.

Thanks, Joseph. Thanks, team.

Thank you.

Thank you.

John Royall, JPMorgan.

HI. Good morning. Thanks for taking my questions. So my first one is on working capital. You've talked about the inventory management side, and you mentioned there wouldn't be a reversal of 3Q's tailwind. So it looks like not only did it not reverse, but you had an even bigger tailwind in 4Q despite the falling crude price.

Could you speak a little bit more to your efforts around working capital and inventory management? Is there more to go there? Should we expect further working capital tailwinds going forward? All other things equal?

Yeah, absolutely, John. I would ask Reuven maybe to give you some more color around it.

Sure. Good morning, and thank you for the question. We took a more holistic view around our balance sheet health from the beginning of the year. So the third and fourth quarter working captal were really deflation of some of the initiatives that we have going on.

Obviously, in managing and optimizing inventory was one that we did a big chunk of it in the third quarter, but the -- we completed the work in the fourth quarter and that contributed roughly $190 million to working capital.

In addition to that, we had our ZBB efforts, which we already accomplished on a run rate of $80 billion saving a year of which $57 million were realized and we in 2023, mostly in the third and fourth quarter. Our focus was debt reduction. So we do step by roughly $450 million. And that, along with the safety and reliability efforts kind of contributed to the end result of the working capital.

I think with regard to going forward, we've kind of reached an equilibrium at the level of inventory we want to manage. So it will be more a result of a quality events that will impact the working capital in the future.

That's really helpful detail. Thank you. And then can you talk about some of the opportunities you mentioned around energy transition? I think you mentioned carbon capture at Big Spring is this committed at this point? And is there any capital in the '24 budget for this? And can you also remind us just on the status of the option you've had on the renewable side that you've spoken to in the past?

Yeah, absolutely. So at this point, we've elected to negotiate with the DOE, but there is no material CapEx capital for 2024. And we're going to do everything we will do under this split benchmark that we put on ourselves on the cost of capital return or from our standpoint. So they are not going to break that metrics, but just from a holistic standpoint, you can see a very nice system running the big spleen and they look at our marketing to read them in this area and were elected the first refinery to elect to electric energy transition by the DOE, which is a very big deal.

And we believe that those projects will be further in the future, and we will make a capital advantage of capital to meet our capital benchmark. And the option we have on the renewable diesel, we are looking at that very carefully. Obviously, it's a cheap way to get the new into renewable diesel, as to current pipes that doesn't have renewable diesel later. So we are fortunate not to commit to $200 million, $300 million and then there is a benefit from that. So we were Fortune's around it, but the margin is very close to that. I don't know, Mark, if you want to add anything on the option.

Yeah, sure. Around the option, John, what we we're obviously monitoring it very closely. Our understanding based on publicly available information. That's what they're intending to start commissioned the facility in the first quarter. And then now we will watch it as it runs through the first quarter and the second quarter.

And once they hit a run rate for 90 days at 80% utilization then that's when we would have the opportunity to take a look at it, but we're monitoring it closely as it is. I would also say it could be a potentially an attractive and low cost opportunity for us to go acquire a meaningful position in a well located in a renewable diesel facility.

So we're watching it closely.

Thank you.

Thank you, John.

Roger Read, Wells Fargo.

Yeah, thank you. Good morning. Just two questions from me, both on the operational side, just again to follow up on the the Supply and Marketing sort of, let's call it headwinds in Q4. Is there anything as you look at Q1, it says, that it reverse, right? I mean, I know it's market conditions. There's a limit to what you can, let's say the buttons you can push to change that, but maybe just give us an idea of how that's kind of evolved the first couple of months of this year?

So we are not going to give guidance for that line. It's going to be consistent with markets, there was a market usually give. So we'll be consistent with our builds around that there is a positive trend correlated to seasonal driving season, and we are sending information around the -- from a macro standpoint on gasoline and diesel, we are definitely and we are looking at a five-year average below end of this, we are at the lower end of the five evidence. So both the nuclear constructive, but beyond that general market information, we are not going to give a guidance for the Supply and Marketing.

Yes nothing to add.

Can I just add one thing. I think that the only thing I would maybe add, Roger, it is the fact some of the facts that just referred to and he said in his prepared remarks, were persistent through January. And, I think others saw that. And so that would be the one thing that I would just be mindful of that, that obviously it will be reflected in that line.

Okay. Fair enough. Although I guess it seems the weather is more benign here as wella, about 2/3 of the way through, so if you get a tailwind. So the other question I have and is on Slide 7, Big Spring refinery has been typically we think of it as one of the better units overall in the company, but it's been a challenge here recently.

You've got the reliability improvement, the $100 million, 2/3 roughly this year, third next year. What would you point to as we look at, let's call it progress. The first two quarters of the year that you're going to get capture rate above 70.

I mean, is it just if the unit should run more consistently, is there some actual changes in the facilities that would affect your changing crude, you're going to put in there something along those lines. Maybe just kind of help us understand what we should look for as the favorable road signs as we go through '24?

Yeah, for sure. And the -- basically, give a complete answer. But I would say is that is it on a big picture standpoint, Big Spring is a refinery business. The new to one consistent, 70,000 barrels a day of throughput and model and with the $525 OpEx and less. You can see that the payers have to yield before and there is no reason we cannot bring it back to where it used to be. And that's the highlight of the [$100 million]. So it will arise consistent as that refinery used one in the past, there is no reason we cannot get to what it used to one years ago. Joseph, please.

Yeah. So as we mentioned in the prepared remarks, we own positioning explaining about ability to serve us well for LNG through the coming the gasoline season. We have been on clear execution path under addressing the people, process, equipment and gaps.

And as we need to give the different rates, we should see improvement in our ability, meaning knowledge and payable metal culture from a cost structure. So as we've communicated in the past, we are expecting in throughput to stabilize north of 70,000 and it comes from a 17%.

Clearly, Roger, on Mid-Cycle basis, OpEx run rate should stabilize around [$5.50] probably per barrel by end of the year, and the linear reduction, maybe you'll say not per barrel reduction every quarter, until end of the year, would probably be a good assumptions.

So bottom line, it will take all of these people, process, equipment to get to what we want to, where we want to get it. And we are very encouraged with the process. We have less and less surprises as the time goes by, and we are really confident about our capabilities already this coming Sprint.

All right. Appreciate that. Thanks.

Matthew Blair, TPH.

Thank you and good morning. I wanted to follow up on the sum of the parts efforts and appreciate you're hard at work here. My question is, could you talk about your openness to a sale of your retail assets and how attractive would a retail sale be relative to some other options that you might have?

Yeah, Matthew, that's a great question. Everything is on the table and we are active on more than one front right now. So absolutely.

Okay. (multiple speakers) Okay. And then my follow-up is on your trading and supply activities. What do you think normalized annual EBITDA for this line item should be. I have an old note in here that says roughly $130 million to $210 million as an annual ballpark figure. And I think that compares to roughly $50 million in 2023. So what do you think going forward trading and supply should contribute on an annual basis?

Well, Matthew, we don't give guidance for that line. And we will remain consistent with that, with the best partners, among our bills. And Rosy, I think you have a lot of energy around that topic so.

Yeah, and the thing I would say, you may have an old note based on what previously we would have in there. And as you said, trading and supply. The line's no longer trading and supply. It's supply and marketing. And again, what we have in there is, is three components. There's the wholesale marketing, there's the asphalt marketing, And then we have the supply business.

And the wholesale marketing and the asphalt business tend to have a little bit more stability. Now they do have fluctuations based on market conditions case in point with Joseph spoke about the fact that we had a $40 million variance between the third quarter and the fourth quarter because of the Mid-Con environment that we saw in the fourth relative to the third. And then obviously the movement in the RINs prices.

Asphalt tends to be a little bit more and more stable. You've got seasonality with the fact that the months, the quarters during the summer months tend to be more stable and stronger. And you got the first quarter in the fourth quarter being a little bit on the weaker side. So I think the fourth quarter is a good indicator of what a first, fourth quarter tend to look like and you got stronger quarters in the middle.

The second component being the supply, that was the one that's a little bit harder to model because the supply business handled both supplying our refineries from a crude perspective and also unloading the refineries and also supplying our DKL system, right? And so depending on disruptions throughout the entire system, you may have a little bit of fluctuation, right? So but the other two pieces are a little bit easier to model.

Great. Thank you.

Kelly Ackerman, [Bank of America].

Hey, guys. Doug Sanchez regards from the West Coast. I've just got a couple also on slide number six here. I guess the first question is on the Krotz turnaround. Just hoping that you can give us some idea of the scope of the work that you're performing and how that could potentially drive better commercial performance on the back end, whether that's reliability or whether that's in yield.

And I guess same question for r El Dorado, as you're thinking about the commercial opportunity there.

Yeah. Joseph will start with the answer about the Krotz Springs, and I will give some more color on the El Dorado.

Yes. First, I'd like to remind that when we guided an annualized $18 million of improvement and will be Tyler turnaround. which we achieved on apples to apples with market condition assumptions.

We actually achieved $24 million, but the margins were better from, it's exactly what we expected. Now back to KSR, we are expecting $30 million through the year, coming from mainly three things. One is the crude unit piping scope and the rate flexibility. In other words, we will make more jet fuels, and have more catch up capacity.

Second is the SSU, with total unit in there, we did make some regenerate laundries that would provide us with improved conversion and yields. And innovation for unexpected events and inventory efficiency, conference targets that we are replacing, now in the formal company's activity post turnaround.

I appreciate that. I guess the next --

If you want some highlights around El Dorado, Joseph prepared in his prepared remarks that we are planning to add a bit more heavy slate in El Dorado and take advantage of the weakness that we are seeing of Canadian grades, heavier grades. And we are also advancing the wholesale opportunity in the area. So El Dorado is a refinery that was still to run heavier than we are running versus what we were running it, and we are trying to capture that opportunity.

And it's really time, when we think about El Dorado, because of its configuration, and loaded with heavy benefit from optionality, make our site improvements with excellent quality and netbacks, and El Dorado, it's been really contributing to that system capture.

And so sorry to interrupt guys. My follow-up question is just trying to understand the scope of the work, the scope of the work plan seems like it goes through 2025. So I'm trying to understand if that suggests that '25 CapEx is going to be very similar to '24, and I'll leave it there.

Are you asking about the 2025 scope for El Dorado?

That well, you lay out this capital commitments or these accomplishments for '23 through '25, I think on slide number seven. So given that the workplan basically known for '25, I'm trying to get a handle on what 2025 capital looks like, if you've argued define the work. So I'm trying to figure out if that's similar to 2024.

Yes. So the entire scope for the KSR for 2024, the $115 million that we mentioned. And it's a part of our capital program for the year. With regards to El Dorado there is no, really cost estimate to this point. It's mostly commercial excellence and Know-how and blending. And we will come back later in the future if we feel like tanks or other upgrades would be needed. This is down the road, more than year from now.

And that reason that the slides say '24 to '25, as you can see, Big Spring, which is not related to capital. Some of the upside is coming only in 2025. That's the reason the slide says '24 to '25. Don't read into that to a -- from a capital commitment to 2025, just to make it very clear. That looks nothing the intent of the slide.

The slide was saying that the benefit is going to come over time, but the turnaround, which is the heavy capital during 2024 going to be going to be completed in 2024.

So I got it. That's very clear.

Thank you.

Jason Gabelman, Cowen.

Yeah. It's Jason Gabelman. Thanks for taking my questions. I wanted to ask about shareholder returns that wasn't discussed yet. I think the past few press releases you had disclosed buybacks quarter to date at the time the press release came out for earnings. You didn't do that this quarter. So wondering if you have made any buybacks quarter to date and the outlook for repurchases through 2024?

Hey. Thanks for the question. I will give an overview around what we are thinking and how we think about the capital return to invest. So first of all, we'll be -- we are very committed to shareholder return. We had a performance free cash flow this year over $146 million of return, $85 million of the buyback and $61 million of dividends.

We are committed to maintain the same philosophy going into 2024. And you can probably appreciate that we've bought 8%, 8% of our shares, in 2023. So nothing of what we are disclosing is the way to suggest any waiver of our approach. We are very committed to shareholder return. We want to see, as I said, market leader around it, and we are holding ourselves to that standard.

Okay. So sorry, it's a bit difficult to hear you. Is that 8% level kind of something you feel like that's achievable either in 2024 and or in a mid-cycle environment?

So last year was not a Mid-Cycle environment. We want to do it from free cash flow. So we are committed to the and it might be more. It depend on market condition. I don't want to predict market condition. I'm optimistic about market condition, but you will hold me to that number and I don't want to be held to a number that the market conditions driven.

You need to understand the state of mind is find ways to bring return to shareholder. On the short term, mid term and long term. And we are committed to all of them. And you have seen that as you have seen us demonstrate that, Jason, last year very nicely. We did exactly what we said we're going to do and we will keep doing what we say it was going to do.

Okay. Understood. And then, maybe just your comment on demand that you're seeing in the niche markets that you operate in?

And so I think there's -- there was enough discussion by the weather in everyone there at echoed. So we are not going to talk about whether -- are other than the weather, we have a very good niche market and we are very blessed and optimistic around that.

Okay. Thanks.

(Operator Instructions)

There are no further questions at this time. I would now like to turn the conference over to Avigal. Please proceed.

Thank you. I would like to thank my colleagues around the table for a great quarter, to thank the Board of Directors, our investors obviously that join us for this call. And most importantly, to our employees that make this company what it is, and we'll talk to you again in the next quarter. Thank you, operator.

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.