PBF Energy Inc (PBF) 2023 Q4 法說會逐字稿

Good day, everyone, and welcome to the PBF Energy fourth quarter and full year 2023 earnings conference call and webcast. (Operator Instructions) Please note this conference is being recorded.

It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

Thank you, Kat. Good morning and welcome to today's call. With me today are Matt Lucey, our President and CEO; Karen Davis, our CFO, and several other members of our management team.

Copies of today's earnings release and our 10-K filing, including supplemental information, are available on our website. Before getting started, I'd like to direct your attention to the safe harbor statements contained in today's press release.

Statements in our press release and those made on this call that express the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the Safe Harbor provisions under federal securities laws.

There are many factors that could cause actual results to differ from our expectations, including those described in our filings with the SEC. Consistent with our prior periods, we will discuss our results today, excluding special items. In today's press release, we describe the special items included in our quarterly results.

The cumulative impact of the special items increased fourth quarter results by an after-tax amount of approximately $700,000 or $0.01 per share, primarily relates to a change in the fair value of contingent consideration associated with the Martinez acquisition and a benefit related to a change in the tax receivable agreement liability, offset by a decrease to our gain on the formation of SBR and our share of the SBR lower cost of market inventory adjustments.

Also included in today's press release is further guidance information related to our expectations for the first quarter of 2024. For any questions on these items or follow-up questions, please contact Investor Relations after the call. For reconciliations of any non-GAAP measures mentioned on today's call, please refer to the supplemental tables provided in the press release.

And now I turn the call over to Matt Lucey.

Good morning, everyone, and thank you for joining our call. As we close the books on last year, PBF achieved its second-best financial year in 2023. Over the course of the year, we further enhanced equity value by reducing our debt by over $700 million, and we returned $640 million directly to shareholders through dividends and share buybacks.

The company was able to purchase $150 million of our shares in the fourth quarter. I'm pleased to announce that our Board of Directors has approved an incremental $750 million share repurchase authorization. This resets our program to just over $1 billion of remaining capacity. We ended the year with our balance sheet transformation complete and our strongest financial position ever.

As we look at the quarter, the West Coast operations had clear challenges. Operations outside of the West Coast were reasonable. Our East Coast and Gulf Coast systems performed well in their respective markets with capture rates broadly in line with prior quarters.

While Toledo operated well, the Mid-Con market was certainly challenging. At times, gasoline cracks were at or near negative numbers. This phenomenon in the Mid-Con during the fourth quarter is not new and somewhat of a return to normal seasonality. Importantly, we've seen a recovery in the Mid-Con product cracks as February began.

Our West Coast system underperformed largely to our overlapping planned and unplanned maintenance activities. This was unfortunate convergence of circumstances where we had both assets undergoing maintenance, while not the plan, it was the reality. In Q4, we completed the major FCC turnaround at Torrance and as mentioned last quarter, we experienced unplanned Flexi coker downtime at Martinez.

The SEC was delayed getting restarted and the coker work rippled through Martinez operations. The delayed restart Torrance and the unplanned Martinez work, cost us approximately $100 million of lost profit and an additional $32 million in operating expenses.

And looking at our tariff sheet, you'll see the West Coast we consume less heavy crude as a percentage of input, which increased costs, our production yield and less high-value products, notably gasoline. As a result of the delays and downtime, we did build high-priced crude inventory, which will be consumed in the first quarter.

Again, while Q4 was clearly disappointing in California, I believe our West Coast system will be significant contributors to our results in '24 as it has demonstrated over the last few years.

Looking ahead to Q1 across the system, we have a hydrocracker turnaround in Toledo beginning this month and FCC turnaround on the East Coast beginning in March. With industry maintenance across the refined space increasing, we have seen significant improvements in our market cracks in February.

Indeed, the outlook for '24 is constructive, and we are focused on positioning our assets to perform to their potential. Global refining capacity, including new additions and refined product demand remain tightly balanced. The refining industry has not been able to sustain product inventory builds and balances remain tight to historical levels with growing demand.

Disruptions in historic trade flows and patterns are creating tension in the market that is accruing to US refiners, specifically coastal US refiners such as PBF. With this favorable market backdrop, PBF should continue delivering strong earnings and free cash flow and generating long-term value for our shareholders.

On the regulatory front, we are pleased to report that we have reached an agreement with the Bay Area Air Quality Management District on a path forward with regards to regulation 6-5 which will achieve the mutual goal of lowering particulate emissions.

Consistent with expectations, we're able to reach a settlement where we will comply with Rule 6-5 without any mandated incremental investment when the rule goes into effect in July of 2026. Additionally, we do not expect any material changes to our operations or product yield as a result of the regulation.

As we saw from the activity earlier in the quarter, combined markets will continue to be volatile. The global refining system and PBF in particular will be nimble adapting to market conditions. The focus will be as always on maintaining consistent operations, coupled with disciplined, rigorous capital allocation.

Before turning the call over to Karen I want to take a moment to publicly thank all PBF employees for operating safely. Last year, PBF reported its best year in our history from a personal safety perspective. This is across all segments of our business, including our employees and the contractors who work in our facilities on a daily basis.

The achievement of the lowest lost-time incident rate in our history is a testament to the focus of each and every person in the company in executing their daily routines with the utmost professionalism and care.

With that, I'll turn it over to Karen.

Thank you, Matt. For the fourth quarter, we reported an adjusted net loss of $0.41 per share and adjusted EBITDA of $117.2 million. For the full year 2023, PBF reported adjusted net income of $11.32 per share and adjusted EBITDA of more than $2.6 billion. Cash flow from operations for the quarter was just under $306 million, including a working capital benefit of $59 million.

Consolidated CapEx for the fourth quarter was approximately $233 million, which includes $221 million for refining, corporate and logistics, and approximately $12 million in final payments related to SBR construction costs. For full year 2023, consolidated CapEx was approximately $1.2 billion, which includes approximately $312 million to complete the FBR facility.

On a go forward basis, capital expenditures for SBR will not be reflected in PBF consolidated numbers. We continue to demonstrate our commitment to shareholder returns through our quarterly dividends and share repurchase program. In 2023, we paid over $105 million in dividends and repurchased approximately [$533 million] of PBF shares.

Dividends paid in the fourth quarter totaled more than $30 million, reflecting the 25% increase in the quarterly dividend rate announced last quarter. In the fourth quarter, we repurchased $150 million of PBF stock, more than 3.3 million shares.

Since the program was introduced in December of 2022 through yesterday or in just over a little year's time, we have completed approximately $740 million in total share repurchases, more than 17.6 million shares. We have reduced our total share count to just under 120 million shares.

During our third quarter call, we commented that our work to fortify our balance sheet was largely complete. Over the past three years, we have reduced debt by over $3.4 billion, which in turn reduced our annual interest expense by over $200 million.

In addition, we eliminated the overhang of our environmental credit payables by reducing the liability by $900 million, and we retired our inventory intermediation agreement at a cost of $268 million. These efforts, which totaled nearly $4.8 billion had enhanced our equity value and produced a balance sheet with investment grade level credit metrics.

One comment on our outstanding environmental payables. At year end, our RINs liability was fully committed. With the reduction achieved in 2023, we have brought down the balance to near what we would consider the upper range of normal. As a reminder, the current balance represents PBF’s commitments across a number of environmental credit programs, not just RINs.

Now that we are in the business of generating credits through SBR, we are going to actively manage our consolidated positions in order to take advantage of market pricing and structure and to reduce our overall costs.

Individual components may shift based on our commercial strategy and we expect that maintaining this balance in the $200 million to $400 million range is appropriate over the long-term. Over the course of 2024, you can expect the $430 million that was outstanding at year-end to be reduced to this range over the coming quarters.

The balance may fluctuate depending on market conditions and commercial strategy. We ended the quarter with almost $1.8 billion in cash and approximately $1.3 billion of debt. Also of note, the final payment of the Martinez earnout, which we expect to play in April now stands at approximately $21 million, down from last quarter's estimate of nearly $95 million.

Sustainable dividends and share repurchases are important components of our overall long-term capital allocation and shareholder return objectives. Maintaining our firm financial footing and strong balance sheet remain priorities.

To the extent our operations continue to generate cash beyond the needs of the business and the requirement to continuously invest in our assets, a greater percentage of that cash should be available for shareholder return. As always, though, we will look at all opportunities to allocate capital through the lens that directs cash to the option that generates the greatest long-term value for our shareholders.

Operator, we've completed our opening remarks, and we'll be pleased to take any questions.

(Operator Instructions) Roger Read, Wells Fargo.

Thank you and good morning. I guess, Matt, you hit on it in some of your opening comments with the IEA out today with a bucket of cold water over the oil and gas industry. But I was just curious how you see demand as you look across your nationwide approach.

Obviously, you've had some pretty rainy weather in California. We've had the snowstorms in the East Coast, but looking through those items how do things look on the demand side?

I think they look reasonable. Obviously, you touched on it in regards to the seasonality and weather when it's really wet in California. People generally don't go out as it's really cold in the Gulf Coast people a lot of drive. And indeed, we just had some weather here in the Northeast that certainly impacts it.

But that's seasonal. I think going in to the remainder of the year, I'm fairly pleased where I was much more cautious on the soft landing going back over the last couple of years overall GDP and the economy look very constructive.

Okay. And then as a follow up on the share -- let's call it cash returns to shareholders, whichever method takes. A comment made about having an IG quality balance sheet, is there anything you're doing different until you would you receive an IG rating or you have what you have and we should look at it as that will be a well, I don't know, let's call it a nice feather in your cap or something like that, but doesn't really alter the way you think about things or will help you down the road and the way we should think about total returns for the company?

I'll make a couple of comments and then ask Karen to comment in terms of doing anything differently. I don't think so. We would maintain the balance sheet that we're having today because it's the right thing to do and there are a number of benefits. Some of which we've already gotten in terms of trade credit.

We have market participants that can see through the rating agencies. I was born of the credit world. I mean, that's where I began my career in banking and the credit agencies are going to be slower. And that's just a reality. That's not news to us. We have good relationship with each of them.

I think we're going to continue to demonstrate that, indeed, we have a market leading balance sheet on any credit metric someone wants to pull off. So we're operating our business as we would if the credit rating agencies didn't exist. We do want recognition for what the reality is, but that will take some time.

Karen, I don't know if you had any other comments.

I just would add that our goal of achieving investment grade rating is based not only on the benefit of -- the obvious benefits of reducing our weighted average cost of capital and certain other expenses.

But we also think it might give us access to a greater or broader base of shareholders, those that are non-investment grade rating is sort of confirms that the underlying fundamentals are strong and that it will be an appealing leasing to longer-term investors.

I would agree with that. Great. I'll turn it back. Thanks.

John Royall, JPMorgan.

Morning. Thanks for taking my question. So my first question is just a clarification, I think on the marine liability, and I appreciate that it's very much dwindling at this point. But I think Karen mentioned to $200 million to $400 million target range.

Is that apples to apples with the $50 million to $100 million you gave on the last call? And if so, could you just bridge us from one range to the next. I feel like I may be missing something there, but if you could just help us with that change in the number of things?

Last year or last quarter in the guidance we gave, we talked in terms of number of RINs that we thought would be represented in that liability. I think now we're viewing environmental credits liability more holistically and including things like cap and trade and whatnot. So that is a -- of our range now, we're expressing in terms of dollars, inclusive of all of our credit programs.

Okay, that's helpful. Thank you. And then just on SBR on an adjusted basis, I think you asked about $20 million, if we did those adjustments correctly. That's coming off a nicely positive result in 3Q. I know you had a catalyst change, but anything else to call out there? May be how should we think about the first quarter for RD?

Nothing has changed. A couple of positive developments have come down the path in regards to -- as we've got into Q1, we expect for all of Q1 that we'll get our actual low carbon score in regards to our feedstocks. We expect that will come in Q1 and actually apply to the whole quarter. So that's positive development.

We are also expecting to in Q1 be able to be specked into Europe that requires a proved feedstock. So that's not only a regulatory check-the-box, but it also requires that you have approved feedstocks go into that. That will take a little bit longer to get into our system where we'll be able to fully arb into Europe.

But both those are very positive developments in looking forward. Looking back, obviously, the catalyst change was impactful in Q4 as we talked about on our last call, and there was noise around some LCM charges and other things in the financials.

Thank you.

Doug Leggate, Bank of America.

Good morning, everybody. Thanks for taking my questions. Karen, these are both probably or maybe for you. Let me start with working capital. Even if we took turn of the J. Aron buyout earlier this year, you still had a net -- fairly sizable net working capital impact for the whole year that was negative, was that related to Matt's comment about crude inventory building or is there something going on there that we should expect to reverse?

Doug, I think the main impact there is the $900 million that we spent to reduce the environmental credit liabilities. That's all within there and quite outsized in onetime. So I think you will see that less of an impact in working capital going forward.

Great. So it shouldn't reverse. They shouldn't repeat either, fair?

Correct. Yeah, that's the right way to think about it.

All right. Thank you. Now the East Coast, [on a bit in the weeds], I guess, but the East Coast where we saw your earnings miss this quarter relative to your normal capture rate, if you like or at least how we think about your LP on that side of the business.

What we're trying to figure out if this is something to do with freight costs, crude or maybe the two as Dangote started. Is there anything going on that you can point to that says why the East Coast with better throughput by that a little bit was perhaps than you might have thought?

No, in regards to refinery startups, Paul, would you make any comments on East Coast?

No. I don't -- I didn't see anything out of the ordinary on the East Coast to be honest with you.

You have -- what we had over the quarter as crude differentials began to widen, that takes a while to get into the plant. So you see the market indicators on the cost of crude, there's a lag to that. And I expect you'll see the benefit in the first quarter on that side of it.

But another -- quite honestly, Doug, the freight realities of having to navigate around the Cape of Good Hope it means more materials around the water, which obviously increases demands on shipping and freight rates have gone up as a result.

I think the net result of that resides in a higher crack on the East Coast. So I think it is resilient to our markets, but there's nothing extraordinary on the East Coast that was negatively impacting us.

That's great color. Thanks very much.

Ryan Todd, Piper Sandler.

Thanks. Maybe, you mentioned a few things on SBR, but I guess as you're a little over six months -- six, seven, eight months in operations there, can you maybe talk about high-level about what you learned so far? What's gone well? What's been challenging?

How often do you expect to perform catalyst changes there? And maybe how your feedstock mixes has evolved over the last six to eight months of operations?

I'll make some high-level comments and I'll as Jim Fedena who's in charge of the operation and make some comments. Directionally, I think it's been an extraordinary experience so far in getting the plant up on time. Yeah, there's -- you're always going to work out some gremlins coming out of that. I think we did that better than most.

Our relationship with ENI, I think is off to a terrific start. I was over there with some of their executives back in December. Indeed, their stateside similar executives are stateside and working with our team this week. So the partnership, I think is going as well as we could expect. And I think our interests are very, very well aligned and focused on maximizing all of SBRs capabilities.

We still view it as absolutely a Tier 1 asset in the right geographic location, which gives great options on feedstocks and disposing of products as opposed to being tied into California where we'll have the wherewithal to go wherever the market is best and obviously, we get some benefits connected to Chalmette on the operating expense side.

Jim, would you give any other particulars in terms of operations?

The only thing I'll add from a catalyst change out perspective is on an annual basis, you change the guard bed catalyst and about every 24 months or so you change out the ISOM catalysts in the back end of the unit.

The other just more macro thing is much less in regards to PBF is obviously the market for RD is down as credits have come down, supply of RD is reduced RINs and California credit prices as well come down, and that's no surprise to us. We were expecting.

And indeed, I think that will continue for a bit and where it's going to put pressure is on more marginal players where -- what they ultimately do. That will certainly impact the market, but we're clearly advantage to those marginal players. And I think the supply side will shuffle out here over '24.

Great. Thank you. That's helpful. And then maybe just shifting to the West Coast, not on a nonrenewal, but on the other the rest of the refining business. You've seen a big bounce in margin there over the last couple of weeks. Can you talk about what you're seeing in terms of overall supply-demand dynamics and product market dynamic there on the West Coast though within your operations?

And then just to clarify, I think do you say in your opening comments that there is -- you're still going to be working your way through higher priced crude inventories there in California, is that going to be a headwind to margin capture in the first quarter there?

It will. Look, there's no question that extensive comments around it of Q4 operations report. And that will that inventory that we carry over -- will carry over into the first quarter. But that will then be behind us. Paul, why don't you give direct comments in regards to what you see every day in the ground in California?

The big move in California markets really as the seasonal change out from winter gas to summer gas in Los Angeles. So that's the big pop you're seeing on the cracks that you guys look at it every day.

In addition to that, jet fuel is well bid in the LA market and San Francisco markets with the arbitrage from Asia pretty much shut down. You're seeing the impacts of a short market moving into the seasonal -- high seasonal demand period.

Thank you.

Manav Gupta, UBS.

Good morning. I wanted to ask about the renewable diesel market a little. And I fully appreciate that these are developments which happened a couple of days ago. So but I'm hoping you have more information than we do.

A few days ago, it looks like New Mexico passed, the Senate passed the low-carbon fuel standard bills, and this could go into effect in 2026. And it's a very aggressive program. It goes from 0% to 20% in like four to five years. You haven't seen that before.

And so. I'm just trying to understand if this all works out given your location, could this be a new market for you besides California. Can you move the product to New Mexico if things work out in this direction?

Yeah. One, I think the point of what happened in New Mexico speaks to the investment thesis in RD, and that is over the course of time, governments are going price carbon to incentivize the manufacture of renewable diesel. Specifically, to our ability to competitively deliver product is New Mexico, it's too premature to say that.

But I would also say the market is a bathtub and to the degree in New Mexico draws other barrels, it opens up other markets. So I'm not so focused on our direct ability to impact the New Mexico market in particular. But all these things cascade with each other, and it'll free up a demand in other markets. But it's certainly constructive and consistent with our investment team as I said.

Perfect. My quick follow-up is, and you mentioned this also in the earlier part of the call, you saw this mid big Mid-Con weakness. It looks like it's abating. The cracks are rebounding and just staying on like you gave an outlook on West Coast. What are you seeing in the Mid-Con market? Was this weakness seasonal? And should we expect a strong 2024 as it goes to overall the Mid-Con region in terms of cracks. Thank you.

The Mid-Con economics in the fourth quarter were seasonal and it's something we normally see on a annualized basis. As we move into the first quarter, whiting falling over was definitively beneficial to the cracks and you're seeing that. So that's been the catalyst to move the cracks forward.

There's been some crude advantages out of Canada for Pad two. Those are going to come to an end as we as we get into Q2 and Q3. I think we're expecting normalized cracks in PADD 2 going forward.

Thank you.

Neil Mehta, Goldman Sachs.

Good morning, team. First question is just how you're thinking about capital allocation in the context of M&A and what do you think the market is -- I mean, then big part of the PPS story and how you've gotten to where you are today. Do you still think there are opportunities out there and what's the overall framework for thinking about why?

I think the M&A, as I mentioned in the comments, a disciplined and rigorous capital allocation effort and M&A is no different than internal projects or share buybacks. We'll evaluate everything in the market as we always have, judge them against each other and allocate the capital as best we can.

I don't think it's worth speculating on M&A activity at the moment. There's nothing immediate sort of action. We don't comment on it in the base case anyway. But you know, it's consistent what we've been talking about over 2023, the full year 2023, we are so focused on transforming our balance sheet. And we've done that. It's complete.

We mentioned last quarter, we're mentioning again today. There's nothing left to address there. And so, now we're a company as any company should be focused on generating cash as we generate cash, how do we can allocate it whether it's external opportunities, internal opportunities or simply returning cash to shareholders. We've got dedicated team analyzing all alternatives as we go forward.

And that's helpful. And just a follow-up is just what are your perspective on how you're seeing refining balances, particularly in the context of global refining which was alluded to earlier. We've had two to three extraordinary years of margin. You see margins mean reverting or do you believe that this is a new structural normal?

Well, it's interesting, and I'll ask Thomas O'Connor to make some comments. As I sit here today as looking at it as of yesterday, if you look at '24 core cracks, the market for calendar 2014, it actually looks very comparable to '23. I think there's been a -- there's been discussions of reverting to the mean, and I'm not so sure that we're going to revert to the mean as quickly as some maybe we're predicting.

And obviously, there's a very, very big difference from where we were in '22 and even '23 to what the historical leanness. But the market is set up very constructively, as I said, and over the last couple of years, I mean a big thing. It's been the industry has been incented to build inventory has really struggled in that regard. And so, here we said 2023 and inventories are very, very tight.

Yes, there's going to be capacity that's going to be coming on. But quite frankly, it's needed as demand growth for products worldwide will continue to grow. I would personally take the over on that equipment coming on time or as expected, these are incredibly complex, very large additions in their own right both in Mexico and Nigeria, and you've got -- my experience perspective is I think that probably takes longer.

Tom O'Connor, would you make any comment?

Yeah. Neil, I mean, I think in terms of what Matt was saying. One thing I would add certainly is a big change in rate adjusted cracks year-over-year, right. Board cracks were lower, but we've got a RIN basket that is you know, $4 to $5 lower if we start looking at year over year. So in terms of product realizations that's meaningful.

As Matt was talking about with the refinery additions that are coming on stream. And this year, probably part of it lends itself to being next year. A lot of that is coming in the form of the CDUs are starting up and the secondary units are really much further out, right. I mean, in terms of the FCCs and the cokers and all those other nice secondary units come out.

That actually can be quite helpful for the market, right? I mean, the market is tight in terms of secondary feeds on feedstocks for the FCCs and for the coker. So I think you'll see that. It will be sort of similar to things that we've seen in the past when there's been refinery expansions and the secondary units come afterwards, right.

I mean, the VGO market in particular for 2023 was certainly a bit lower than what expectations were and a lot of that was coming from some increases the CDU that took place in the Gulf Coast without increases to our secondary units.

Thanks, Tom. Thanks, Matt.

Paul Cheng, Scotiabank.

Thank you. Good morning, Matt, If I look at on the -- I mean, since the pandemic, I mean, the market condition is up and down. And so, a lot of volatility. So it's difficult for us that from the outside to look at what is the sustaining CapEx and also including turnaround for the company now?

And also, that seems 2019 looks like the unit costs have gone up in each of the region, maybe about 20% or so. Is this the new baseline that we should use or that you think that initiative that the company would be able to bring it down over the next couple of years? That's the first question.

Secondly, if we look at operationally, Toledo has been struggling for a number of years? What's the plan in terms of improving the operating performance over there and also outside Toledo, is there any other refinery in your system that you think of we could do better and may have work to be done? Thank you.

Look, it's our job to continually improve. It's our job to offset inflation with efficiencies. In regards to Toledo in particular, if you go back to the first part of 2023, they had some operational upsets, much of due to the weather and some of the storms from last year.

Operationally, Toledo has run pretty reasonable and pretty consistently for quarters two through four. In regards to OpEx, the single biggest thing that will drive OpEx will be running reliably and increasing throughput.

And obviously, California didn't do that last quarter. And so, you'll see that putting aside incremental expenses because of some of the downtime, your OpEx is getting go up on a per-barrel basis when you don't operate well.

I'm encouraged, it's obviously out of our control, but we're heading into 2024 with natural gas prices that are certainly better than they have been over the last couple of years, that should be a bit of a tailwind.

In regards to capital, we've put out a guidance over the -- I think earlier in the year and that guidance included about $50 million of discretionary projects, return projects at each of the refineries. That's the full extent of our -- we don't have any other big projects at the moment. So I believe we put out a number of [$800 to $850] for the full year and that's what it is this year.

In regards to higher capital going forward, I still think we may yet still have it next year as well. You had a three year period, which was just very, very odd where incredible lows and incredible highs and capital programs. We're tweaked as a result appropriately. So -- but the net result is you have to end up paying the piper at some point and this year, we see higher than normal turnaround activity. And I think to a great degree that was impacted by the previous three or four years.

Karen, would you make any other comments on capital?

No. Just other than to point out when we look at history, Martinez is new to the system. And this is really the first year we've had a full complement of CapEx there.

Hey, Karen, do you have a number over the long haul, what is there? (inaudible) as well as cycle average CapEx spending for the company based on your current mix?

I think it's probably in that [$750 to $800] range and again, remembering that looking back in history, we used to talk about a normalized range of [$600 to $650], but that was pre Martinez.

All right. Thank you.

Jason Gabelman, TD Cowen.

Yeah. Thanks for taking my questions. First, I wanted to ask one of your peers discussed a large project on the West Coast related to compliance with the Rule 1109.1 in the South Coast Air Quality Management District in Southern California. And I'm wondering, is that something that you have to spend money on to comply with or are you already in compliance with that?

I would not project any capital of the numbers that Karen just shared. We're always spending some money to comply with rules, but there's nothing extraordinary for PBF.

Okay. So I mean, whatever you're spending this year addresses that NOx emissions that you need to comply with in I guess Southern California?

Yes.

Okay. And then my second one is just there was -- it looked like there was a proposal in California to require refiners to stockpile gasoline in order to address some of the market volatility. I believe the commission out there was having a hearing on that either yesterday or today.

And I'm wondering if you have any comments around that? And then more broadly any other liabilities we should be thinking on about in terms of cash calls beyond the environmental liabilities that you mentioned?

Just in regards to California, I think it's way too early to speculate. The paper was written which was essentially a concept. I don't think it's particularly thought through at this point. I think there's a regulatory agency that can dictate or make demands on a private company on how much inventory to hold.

The concept is I don't think flushed out to any great degree. And I think regulators in the state government of California can evaluate any number of things. Obviously, they have to do with the laws and in terms of impacting the market, I don't think there's a supply and demand problem in California as supply has gone down. So the market is tight.

The steps they've taken so far seemingly have not improved that. The concept that was put to the California Energy Commission was that, but it hasn't been flushed through and it's probably not we're speculating at this point.

Got it. And then more broadly. Yeah, thanks.

What was the second question?

Just are there any other liabilities beyond the environmental ones that you mentioned that we should be thinking about in terms of falls on cash for 2024?

No. I mean, I joked earlier, and I think I might have used the term 10 years ago. It's something that looks like on the pig from the fourth quarter was the reduced payout to Shell. And so, where we were expecting that to be a much larger number that declined to $20 million. So that's a net reduction on a capital call. But I don't see anything else major out of there ordinary.

Great. Thanks.

We have reached the end of the question-and-answer session. I will now turn the call over to Matt Lucey for closing remarks.

Thank you everyone for participating in today's call. We look forward to speaking with you again next quarter, and we look forward to a prosperous '24. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.