使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Good morning.
My name is Christie and I will be your conference operator today.
At this time I would like to welcome everyone to the Valero Energy Corporation announce its fourth quarter 2007 results conference call.
All lines have been placed on mute to prevent any background noise.
After the speaker's remarks there will be a question-and-answer session.
(OPERATOR INSTRUCTIONS)
I would now like to turn the conference over to Ashley Smith.
Ashley Smith - IR
Thank you, Christie.
Good morning and welcome to Valero Energy Corporation's fourth quarter 2007 earnings conference call.
With me today are Bill Klesse, our Chairman and CEO.
Mike Ciskowski, our CFO and other members of our executive management team.
If you have not received the earnings release and would like a copy, you can find one on our website at valero.com.
There are also tables attached to the earnings release which provides additional financial information on our business segments.
If you have any questions after reviewing these tables, please feel free to contact investor relations after the call.
Before we get started, I would like to direct your attention to the forward looking statement disclaimer contained in the press release.
In summary, it says that statements in the press release and on this conference call that state 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 which could cause actual results to differ from our expectations, including those we described in our filings with the SEC.
Now, I'll turn the call over to Mike.
Michael Ciskowski - CFO EVP
Thanks, Ashley, and thank you all for joining us today.
As noted in the release, our fourth quarter earnings came in at $1.02 per share.
For the four year 2007 earnings were $7.72 per share from continuing operations and $1.16 from discontinued operations.
As discussed on the last call, the gain on the sale and the operations of the Lima, Ohio refineries are classified as discontinued operations in the financial tables that accompany the earnings release.
Fourth quarter 2007 operating income was $884 million compared to $1.4 billion reported in the same period of 2006.
The $540 million reduction in operating income was due in large part to the lower throughput margin per barrel of $9.20 which was down $1.46 per barrel versus the fourth quarter of 2006.
Margins for gasoline and many of the company's secondary products such as asphalt, fuel oils and petrochemical feed stocks were lower this quarter as the prices for those products did not increase in proportion to the costs of the feed stocks used to produce them.
Fourth quarter 2007 operating income was also affected by $123 million increase in refinery operating expenses, from the fourth quarter of '06 which was driven by higher maintenance expense and energy costs.
Going through some of the key numbers for the fourth quarter, refinery throughput volumes averaged 2.8 million barrels per day, or 38,000 barrels per day lower than the third quarter.
This reduction was mostly because of maintenance activities in the fourth quarter.
Refinery operating expenses excluding non-cash costs were $4.11 per barrel.
The $0.15 per barrel increase over the third quarter was primarily due to increased maintenance expense and energy costs and lower throughput volumes which were partially offset by a decrease in the sales tax accrual expense arising from charges in the third quarter.
General and administrative expenses excluding corporate depreciation were $164 million.
The $12 million increase from the third quarter was primarily due to an increase in equity based compensation expense and an increase in charitable contributions which were partially offset by a decrease in environmental reserves arising from the charge that was taken in the third quarter.
Total depreciation and amortization expense was $358 million.
And interest expense net of capitalized interest was $95 million.
The $28 million decrease in net interest expense versus the third quarter was primarily due to additional interest expense incurred in the prior quarter arising from the previously mentioned sales tax accruals.
Our effective tax rate on continuing operations was 29% in the fourth quarter, which was below guidance from the prior quarter due in large part to a favorable reduction in the Canadian tax rate, which was implemented in mid-December.
Regarding cashflows for the fourth quarter, capital spending was approximately $890 million dollars, which includes $180 million of turnaround expenditures.
For the full year 2007, capital spending came in at $2.8 billion, including approximately $520 million for turnaround.
For 2008, our capital expenditure forecast has come down a little, and we now expect our total capital spending to be around $4.5 billion dollars.
In the fourth quarter, we continued our stock buyback program by spending $1 billion dollars to purchase 15.4 million shares of our common stock.
For the full year 2007, we returned more than 6 billion to our shareholders through $270 million in dividends plus $5.8 billion to purchase over 84 million shares which represents 14% of our outstanding shares at the end of 2006.
So far during the first quarter of 2008 we have purchased 2.2 million shares, but we have had to be out of the market the past few weeks due to our quiet period prior to releasing fourth quarter earnings.
With respect to our debt position at the end of December, our total debt was $6.9 billion and we ended the quarter with a cash balance of $2.5 billion.
At the end of the year, our debt to cap ratio net of cash was 19.2%, which is an increase of 2.5% from the end of the third quarter, bringing us closer to our target ratio of 25%.
As to first quarter operations for modeling purposes, you should expect to see Gulf Coast refinery throughput of approximately 1.45 to 1.5 million barrels per day.
Gulf Coast throughputs will be affected by planned maintenance especially at our Port Arthur refinery, where work on the Coker dump drums will reduce throughputs for around 3 months, beginning in early February.
And also at Aruba due to last week's fire near the vacuum tower that will reduce throughput for approximately 3 months.
Mid-continent throughput should be around 410,000 barrels per day.
West Coast throughput should average between 240 and 250,000 barrels per day.
The northeast system should average in the range of 550 to 560,000 barrels per day.
Refinery cash operating expenses are expected to be about $4.40 per barrel.
An increase of about $0.30 cents per barrel from the fourth quarter, due to higher maintenance expense and lower throughput.
With respect to some of the other items for the first quarter, we anticipate G & A expense to be around $160 million.
Net interest expense should be around $95 million.
Total depreciation and amortization expense around $360 million.
And finally for the first quarter, you should be using a 34% tax rate for modeling purposes.
The increase in the tax rate from the fourth quarter is due to the nonrecurring deferred tax benefit in the Canadian tax rate change implemented in the fourth quarter of 2007.
And now I'll turn the call over to Bill.
William Klesse - Chairman CEO
Thank you, Mike.
Good morning.
As Mike said, our financial results were excellent in 2007.
We have strong earnings and many parts of our operations contributed to the success.
For example, our retail group had their best results ever, with nearly $250 million in annual operating income.
Our retail restructuring activities last year contributed to this success.
We also increased our dividend by 50%, sold the Lima refinery, and purchased more than 84 million shares of our stock.
Basically honoring our commitment to you for our $6 billion buyback.
If you combine our purchases in 2006 and 2007, we have purchased nearly 120 million shares or 20% of our common stock that was outstanding at the end of 2005.
We continue to return cash to the shareholder.
With regard to optimizing our refining portfolio, we continue to look at strategic alternatives for Aruba, Memphis and Krotz Springs.
Going-forward, we will continue to review our assets, identifying ways to optimize our operations, and increase our shareholder returns as we invest in our core refineries.
Unfortunately, we continue to experience operating issues at our refineries, the most recent being the fire at our Aruba refinery.
This fire resulted from a maintenance repair effort on a control valve, which resulted in a leak of a very hot vacuum tower [bottles].
The material when it leaked, auto-ignited, resulting in the fire.
This fire has shut down the refinery and we expect to resume partial operations in about 2 weeks with full operations expected in about 3 months.
For 2008, current industry conditions are setting the stage for rebounding gasoline margins, we are experiencing the usual build in winter grade gasoline inventory, ahead of the industry wide maintenance that typically begins in late January.
These inventories will be worked down during the first quarter maintenance period as the industry transitions in the making of summer grade gasoline.
It is also important to remember that it is more difficult to produce the summer grade gasoline because of the tighter specifications and ethanol use.
Placing a premium on key blending components such as alcoate and raffinates.
We also continue to see strong diesel margins which create an incentive to maximize diesel production at the expense of gasoline.
With total gasoline and diesel inventories in the U.S.
and Europe, less than at this time last year and with the seasonal increase in demand, we expect more favorable gasoline margins this spring and summer as reflected by the forward curve.
However, there is no debate that the west coast margins have been very low, causing run cuts and further optimization.
For Valero, we have completed and started up our Wilmington Alky expansion that will allow us to better blend summer gasoline.
As we await spring and summer demands, we have reduced operating rates at our Benicia refinery to contain inventories.
Also, as this has happened, California gasoline cracks have improved from the recent lows.
We continue to see wide discounts for heavy sour crude oils that we processed.
For example, the heavy sour crude oil discounts to WTI, average for December was over $14 per barrel.
The [large] medium sour crude oil discount to WTI averaged over $6 a barrel.
And these discounts are holding up well.
We also feel that sour crude discounts should remain wide in 2008 due to the new Gulf of Mexico medium sour crude production coming online and because of the value of residual oils not keeping pace with crude oil prices.
East of the Rockies, light sweet crudes like Brent LLS have been selling at a premium to WTI due to the strong global demand for distillates.
These high crude oil prices have been pressuring margins at our non-WTI sweet crude refineries.
We also expect prices for products like petroleum coke, petrochemical feed stocks, sulfur and others to increase as they catch up with the higher price of crude oil.
In our business, it is always about supply and demand, and we expect good refined product demand this year.
If we have a recession, lower demand will likely have some adverse effect on margins.
But actions by the federal reserve and congress are attempting to head off a slowdown.
As we look at several consultants margin forecasts for the year, the forward currents for gasoline and diesel remain in line with all of these expectations and economic forecasts for the U.S.
and the world continue to show economic growth.
Also note that imports of gasoline to Mexico and imports of distillates to China continue to grow.
So we continue to have growing global petroleum demand with most forecasts in the 1.2 to 1.6 million barrel per day range.
We expect an excellent spring/summer gasoline season and a continuation of higher distillate margins.
With that, we'll open the call to questions.
Operator
(OPERATOR INSTRUCTIONS) We'll pause for just a moment to compile the q-and-a roster.
Your first question comes from the line of Doug Leggate of CitiGroup.
Doug Leggate - Analyst
Thanks, good morning guys.
A couple of questions, I guess the first one, one off items in the quarter.
Could you just kind of quantify what the total impact was of LIFO effects and I think there was an issue in the mid-continent as well relating to insurance.
Mike, if you could take that one?
Michael Ciskowski - CFO EVP
Okay, yes, we did have a small LIFO detriment due to some reduced inventories -- that was worth only about $20 million in our operating income.
But we did have also an advanced payment that we received in regard to the McKey insurance claim.
That was worth about $44 million dollars.
Doug Leggate - Analyst
They're both pretax numbers, Mike?
Michael Ciskowski - CFO EVP
Those are pretax numbers.
So when you add those two together, you're talking about $0.09 per share.
Doug Leggate - Analyst
Okay, so pretty small, I guess.
Michael Ciskowski - CFO EVP
Pretty small.
Doug Leggate - Analyst
Okay.
The second thing is what you mentioned about the West Coast.
You said yourself that you guys have been cutting runs.
I think DeSoto came out and said the same thing.
Do you see any evidence that maybe others that haven't made that kind of disclosure our are also cutting runs to tighten up that market?
Michael Ciskowski - CFO EVP
We wouldn't know what the other people are doing.
Doug Leggate - Analyst
Okay, I guess the final one then is, you mention in your release about inventory management and what you expect to happen in terms of winter gas and so on.
I think there's been some speculation that summer grade gasoline is building pretty heavily, is -- can you just give your commentary on how you're dealing with that situation?
Whether you're doing anything different this year than, for example, you did last year, particularly related to blending components like alchoates and so on.
Michael Ciskowski - CFO EVP
Joe Gorder is going to answer you.
Joe Gorder - EVP
We're not doing anything different.
Yes, I mean, we're not doing anything different.
I mean, we are continually focused on inventory management throughout the year, particularly focused at this point in time as we get ready for the transition.
But we're not doing anything different.
Doug Leggate - Analyst
That's great.
That's it for me.
Thanks very much.
Michael Ciskowski - CFO EVP
Thank you Doug.
Operator
Your next question comes from the line of Doug Tarrenson of Morgan Stanley.
Doug Tarrenson - Analyst
Congratulations on your results, guys.
Michael Ciskowski - CFO EVP
Thanks Doug.
Doug Tarrenson - Analyst
Mike mentioned a reduction in capital expenditures to $4.5 billion.
So for clarification, is that an all inclusive number, that is, does it include turnarounds and catalysts.
And second, why did that projection decline, that is, was it related to deficiencies in the capital program, delays, or what have you.
So if you could just elaborate on that, that would be helpful.
Richard Marcogliese - COO EVP
Sure, I'll make some -- I'll make comments on it, Doug.
This is Richard Marcogliese.
Doug Tarrenson - Analyst
Hi Rich.
Richard Marcogliese - COO EVP
One, it is an all end number on our capital outlook, and then, I would say, we're just seeing a general situation that as we identify projects, we put together implementation time lines and the times we find that the actual implementation including engineering deliverables and equipment procurement is a little slower than we anticipated.
But there isn't anything consciously being done to slow the expenditures, it's just the actual play out of how the projects are being developed.
Doug Tarrenson - Analyst
Okay.
William Klesse - Chairman CEO
I would also add, Doug, last year we told you many times our capital budget was $3.5 billion.
And we spent $2.8.
So beyond the reasons that Rich just gave you, we are very careful in how we're spending our money, and we go through the economics of our discretionary capital very closely.
Doug Tarrenson - Analyst
Good point.
And second, Valero was one of the first companies to implement initiatives to enhance returns, I think you called it your key initiatives plan.
The billion dollar income improvement plan that you've talked about.
And so my question regards this plan and specifically progress that was made in 2007 in the four areas -- that is gross margin capture, energy efficiency, mechanical availability in non-energy operating costs and if you don't have the numbers nearby, are you where you thought you would be at this time or have there been surprises and if so, where.
Richard Marcogliese - COO EVP
Sure, I can make some general comments on that.
As a background comment.
We had always said that of that billion dollar program, it was not ratable in terms of 20% every year for the next five-years, that it was going to be more back end loaded because it does relate to certain major retrofits that we have got to do the certain of our refineries, but what I would say is we did not make significant progress in 2007.
Doug Tarrenson - Analyst
Okay.
Richard Marcogliese - COO EVP
I can point to the energy area where through operational improvements in energy efficiency, we've got a gain of about $50 million dollars on an annual basis as part of the $1 billion effort.
But we did not make the anticipated improvements in operational reliability and so we can report some positive progress on energy, but not in the other areas.
Doug Tarrenson - Analyst
Okay, great, thanks a lot, guys.
Richard Marcogliese - COO EVP
Thank you, Doug.
Operator
Your next question comes from Chi Chow of Tristone Capital.
Chi Chow - Analyst
Good morning, thanks.
Hey Mike, you mentioned the insurance payment in the mid con, was that a one-time event or are there more payments coming?
Michael Ciskowski - CFO EVP
Well, that -- we are still in the process of adjusting the claim.
That was just an advanced payment.
So, the total claim which I can't disclose is larger, obviously larger than the $44 million advanced payment.
Chi Chow - Analyst
So we'll see more coming down the road.
Is there any timing on when that might flow through?
Michael Ciskowski - CFO EVP
I do not -- I don't have a good feel for on the timing, sometime probably in the first half of the year.
Chi Chow - Analyst
And this is flowing through gross margins, is that correct?
Michael Ciskowski - CFO EVP
Yes.
And why is that?
It seems like that's out of period extraordinary type items.
Just the adjustment that we roll through our cost of sales for BI.
The BI adjustment.
Chi Chow - Analyst
And then Bill, you mentioned the situation out in California.
Can you give us your best explanation on what exactly has happened with supply and demand fundamentals out there in the early part of January?
William Klesse - Chairman CEO
I can give you a couple of comments.
If you look at last year in the first half of the year, imports were very high into the West Coast and California's 65%, 70% of the West Coast.
So imports were very high.
As you got into the second half, imports were really just about in line with previous years.
Then, they had very high prices out in California.
And so we have actually seen a decline in gasoline demand in California.
Now, whether that's attributable totally to the high price or because of some of the housing issues, where people don't drive to build houses.
We also understand that some of the light rail usage has increased where it's available.
But we believe -- and also the Prius has made some impact in California.
So, when we add it all up, we actually believe there was a decline in demand in California last year.
Now, you get to the first couple of weeks of January and prices are still in the $3 range.
People's habits have changed some.
And, of course, refineries were operating pretty darn well.
And remember in California, there is a dramatic shift here in vapor pressure [regs] as we go into February in Southern California and March in Northern California.
So there's a lot of supply that is in the market in January.
Chi Chow - Analyst
Do you see any increase in supply getting backed up into California from Kinder Morgan expanding the east lines?
Michael Ciskowski - CFO EVP
No, I -- we haven't seen that yet.
William Klesse - Chairman CEO
But I would not -- I would say to you, yes, as movements increase in Arizona, at least in there would be -- there is always some balancing here, but we're dealing with very small numbers too.
But over time, more supplies coming from the east and Arizona.
Chi Chow - Analyst
Okay.
Great, thanks for your comments.
Operator
Your next question comes from the line of Jeff Dietert of Simmons & Company.
Jeff Dietert - Analyst
Hey, it's Jeff Dietert.
I want to follow up on Chi's question on California.
It appears that there's a big difference between winter grade low vapor pressure margins and summer grade -- excuse me, I said that wrong.
There's a big difference between winter grade gasoline cracks and summer grade gasoline cracks, there's a lot of contango in the forward curve.
It would seem to provide an incentive to produce summer grade gasoline early and avoid winter grade gasoline.
Is that something you've already started?
Or when do you plan to start?
William Klesse - Chairman CEO
Well, the answer would be sure, there's an incentive, but you have to be able to hold it.
And if you'll -- I'm looking at the stats today and PAD 5 gasoline inventories are at 35 million barrels which is as high as we have seen.
It's 3.9 million barrels over last year.
And I guess this is last week's stats.
And so, it's just the ability to hold the gasoline.
But, yes, we would, you know, if we have a spot, we would hold low vapor pressure, high octane blending components.
You're exactly right, Jeff.
Jeff Dietert - Analyst
Shifting to some of your major growth projects, could you give us an update on timing and cost estimates?
Any changes to the Port Arthur, St.
Charles and Quebec projects?
I think St.
Charles is the only one that's board approved.
And what do you think for board approval on Port Arthur and Quebec.
Richard Marcogliese - COO EVP
Sure.
Jeff, I'll give you some specifics on it.
As you observed, our St.
Charles project was approved at $1.4 billion, we haven't identified any change in the cost outlook associated with that.
That project by the way would be targeted for completion sometime in 2010.
We are in the final stages of development of our proposal on the Port Arthur project, that will include an identical gas oil hydrocracker to the one that we approved for St.
Charles.
It will also include a grassroots delay coker which will be a clone of the project that we built in Texas City in 2003.
That project is going to be in the vicinity of $2 billion.
We are hopeful that we can develop that for board review sometime before the end of the first quarter.
And that project would be set for 2011 implementation.
For the Quebec refinery, we are looking at a combination of a gas faulting unit and gas oil hydrocracker.
For that refinery, it is much earlier in the developmental phase.
That project, the current cost assessment is below $2 billion, but I don't have a good number that I would feel comfortable in divulging at this point because we're still in the process of finalizing our cost estimates.
That would be a project that if we continue to develop it at the pace that we're on, it would be more of a 2012 type of delivery in the field.
Lastly I want to mention that we are looking at a major project to make a significant move into aromatics production; benzene, toluene and xylene including going all the way into peraxylene production.
This is a project that we are looking at for our St.
Charles refinery.
It would also be part of our strategy to comply with the so-called MSAT regulations on Benzene.
This is the Mobil source air toxics, which would be an investment that we are targeting for 2011.
So those are the comments I would make by way of an update.
Jeff Dietert - Analyst
Very good.
Thanks for your comments.
Operator
Your next question comes from the line of Daniel Vetter of JPMorgan.
Daniel Vetter - Analyst
Morning.
William Klesse - Chairman CEO
Morning.
Daniel Vetter - Analyst
I was hoping you could comment on the implementation of the renewable fuel standards, do you anticipate us meeting the targets set forth by that standard and how is Valero in its progress and making sure that it blends the required amounts of ethanol that fall under your, that you're responsible for.
Richard Marcogliese - COO EVP
We're very comfortable with 2007.
As we look forward to 2008, I mean, bottom line is we'd like to blend ethanol into the fuel wherever it's economic to do that.
And the real issue becomes where is it viable to do that.
As you know, there's significant logistical constraints, not only on the moving of ethanol on the markets, but in converting terminals to be able to blend the ethanol.
And so, we're very focused on our obligation and we want to do it where we can.
And we're doing everything we can to try to make that happen.
Daniel Vetter - Analyst
Okay, thank you.
Operator
(OPERATOR INSTRUCTIONS) Your next question comes from the line of Paul Cheng of Lehman Brothers.
Paul Cheng - Analyst
Hey, good morning, gentlemen.
Mike, I think this is for you.
We talk about two one of item or three inventory gains, the Canadian tax, and also the insurance.
Is there any meaningful trading profit whether it's from hatching or just purely trading?
Michael Ciskowski - CFO EVP
No, there's no meaningful number there.
Paul Cheng - Analyst
There's no meaningful number, okay.
On the -- Bill, I think that's maybe several months, maybe two or three months ago, you're talking about how you're breaking down the company [assets] into coal and non-coal.
We're finding out that about 10 of them is in the coal.
How should we look at the coal.
Does that suggest that orders on coal may ultimately, may not have a place in the company, or should we look at it somewhat differently.
How should we view that?
William Klesse - Chairman CEO
Well, we have on -- looking today for strategic alternatives for Aruba, Krotz Springs and Memphis, and we're working those actively.
Gean Edwards is doing that.
And for the other plants such as Houston, Three Rivers, they're not necessarily core, but they're integrated with our operations.
For instance, Houston is integrated with Texas City, even though they're about 45, 50 miles apart.
We have pipelines connecting them.
The same is true for Three Rivers.
What I was getting at in those comments is as we go forward any discretionary capital would be spent at the core plant; in this case, Corpus Christi or Texas City.
Delaware City is a key refinery for us, so we're trying very hard to improve it.
The assets there have lots and lots of potential and our people are doing a good job.
However, at the Paulsboro refinery, we're trying to decide what the long term future is.
Paul Cheng - Analyst
Okay.
And those decisions will come after you the finish with what you're going to do with Aruba and Memphis and Krotz Springs, or you could go concurrently?
William Klesse - Chairman CEO
No, I think this is a process that we're going through as we continue to plan our business.
As Rich mentioned, this entry into the aromatics business, and so the organization is only capable of doing so many things and so we would tend to move forward with the three that I've mentioned while we try to figure out what our true options are on the other plants.
Paul Cheng - Analyst
Bill, is there any update about Aruba?
William Klesse - Chairman CEO
You mean as far as where we are?
Paul Cheng - Analyst
Yes.
William Klesse - Chairman CEO
On the fire we had?
Paul Cheng - Analyst
No, no, not the fire, but in terms of the potential sales?
William Klesse - Chairman CEO
Well, it's looking at strategic alternatives, Gene?
Eugene Edwards - EVP
Yes, we continue to work the process, we have to work through the issue we had last week with the fire, but we're continuing to do [before our] opportunity there.
We don't have anything imminent, but --
Paul Cheng - Analyst
Gene, have you guys opened the data room and invite people in already or that is still in the process?
Eugene Edwards - EVP
We have not opened the data room yet.
Paul Cheng - Analyst
You haven't opened the data room yet.
Any date being set?
Eugene Edwards - EVP
No.
Paul Cheng - Analyst
And the final one, maybe this is for Gene or maybe not.
For ethanol branding, I think this is a question asked before.
Bill, currently what is the percent of your gasoline branded with ethanol already?
And that are you emitting -- because I think with the new RSS (inaudible) each refiner, I believe, that get it [coded], I don't know how that works, and if you test -- where are you in that, are you 90% comprised, or 70%, or what's that number maybe.
Eugene Edwards - EVP
Paul, listen, we're -- as I mentioned, we're in good shape in 2007.
We're blending in 25 to 30,000 barrels a day.
You accommodate your obligation through probably a combination of the barrels you're actually able to blend yourself, and then the credits that you can buy in the open market.
And the market for these RIN credits, as they're called, is now becoming more active.
And so here again, we have got a plan to try to accommodate our obligations in 2008, and we're going to try to do it to the extent possible with blended barrels.
Paul Cheng - Analyst
Can you share with us that what is your quota for 2008 or your obligation?
Eugene Edwards - EVP
Why don't we -- would you mind if we calculated that, we'll let Ash and Eric get back with you on that?
Paul Cheng - Analyst
Certainly, thank you.
Thank you, guys.
Eugene Edwards - EVP
Thanks, Paul.
Operator
Your next question comes from the line of Arjun Murti with Goldman Sachs.
Arjun Murti - Analyst
Thank you, just a follow up regarding the strategic reviews of the various refineries.
I realize you're considering a host of options, but one of them would obviously be to sell the refineries.
And just given the general concern that's out there about whether we're in a recession or not and given some of the credit problems faced by many of the banks and other sources of financing.
Can you characterize how you think the level of interest is out there to get what would for you be adequate sales prices on any assets?
Obviously, the government and no one else is forcing you to sell these assets, so presumably you don't have to sell them at what would be an inadequate price.
But most of the most logical buyers do seem to be smaller companies that would require some measure of external financing that may not be as easy to come by as it would have been six months ago.
Michael Ciskowski - CFO EVP
I would characterize the level of interest as being extremely high.
There's a lot of interest from operating companies and financial players still as well.
Arjun Murti - Analyst
But you still see that as a very viable option?
Michael Ciskowski - CFO EVP
Yes.
Arjun Murti - Analyst
That's great.
You alluded to the stock buy back where you had bought a couple million shares in January.
You're below your debt-to-cap target.
Is meaningful additional stock buyback dependent on receiving proceeds from any refinery sales or are you willing to get up to or close to your debt-to-cap targets absent actually selling refineries through stock buybacks.
Michael Ciskowski - CFO EVP
Arjun, right now we still have $1.1 billion of capacity on the board approved authorization of $6 billion and we intend to go ahead and use that up here in the near term.
We also have our anti-dilution program which will get us closer to the 25% target.
Arjun Murti - Analyst
And you evaluate things at that point?
In terms of what you may want to do subsequently?
Michael Ciskowski - CFO EVP
Absolutely.
Arjun Murti - Analyst
That's great, thank you very much.
Operator
Your next question comes from the line of Neil McMahon of Sanford Bernstein.
Neil McMahon - Analyst
Hi, just a few questions.
The first is really looking at what you think planned down time for the industry and your main operating areas looks like over the coming months.
Those seem to have been a bit delayed in terms of planned down time versus last year.
And are you seeing as still the issues in the labor market in terms of constraining the timing of the down time from construction personnel.
And then I have got a follow-up as well.
Richard Marcogliese - COO EVP
Neil, I'll make a couple comments about that.
I mean, we can only really speak to our own turnaround schedule.
And 2008 will be a low workload period for us considering the next few years.
We actually significantly increase turnaround activity in 2009 and 2010 where we have a couple of plant-wide turnarounds and major cat cracker retrofits plans.
So 2008 is an off-cycle year for us, but I really can't comment on the rest of the industry.
William Klesse - Chairman CEO
I can.
Using an industry consultant's report, the first quarter, this would be planned.
So last year there was a lot of unplanned too.
But if you look at planned, it is higher in the first quarter this year on crude, than planned last year.
It's lower in the second quarter than planned for last year.
And upgrading or conversion units versus planned for last year, the plan this year is actually higher both in the first and second quarter.
That's using an industry survey.
Richard Marcogliese - COO EVP
Now, Neil you also asked about costs and productivity and I would tell you that we continue to see issues in turn around execution, particularly, when you've got retrofit work planned as part of the turnarounds.
Our most recent example of that was out on the west coast, where we implemented an Alky expansion project as part of a planned turnaround, and we did see work quality and productivity issues in that turnaround, I think that is still with us as an industry.
Neil McMahon - Analyst
And are you still seeing the same cost inflation trends that you saw last year, or are they starting to flatten off in terms of unit sized pieces of work that you need to do?
Either in turnarounds or new construction activity?
Richard Marcogliese - COO EVP
I would say on the new construction side, we continue to be observing increases in our construction estimates for the projects that we are looking at.
So I would not say that the escalation trend in the industry has abated yet.
I don't personally see any plateauing.
From a turnaround execution point of view, I don't see a lot of labor rate direct pressure, it is more of the ability to do the work and get it completed.
Neil McMahon - Analyst
Great.
Thank you very much.
Operator
Your next question comes from the line of Mark Gilman of The Benchmark company.
Mark Gilman - Analyst
Alright guys, good morning.
I had a couple things.
Rich, that aromatics project you're talking about, is that a standard BTX type thing plus peraxylene and us moving molecules from the gasoline pool into the petrochemical pool?
Richard Marcogliese - COO EVP
Yes, that's a good question Mark.
As we are looking at our mix of projects going forward, what you're seeing from us is first an emphasis on diesel production over gasoline production.
These hydrocrackers that we are building will be designed such that they maximize yield of ultralow sulfur distillate.
But then also, kind of looking at the gasoline that could come along with these projects rather than just stop at the gasoline level, we're trying to maximize our uplift into petrochemicals.
So in this case we will have a -- we anticipate a rather large investment in a high severity reformer and then a BTX extraction complex, but then taking it all the way through to peraxylene.
Mark Gilman - Analyst
Okay.
Can you give me a rough idea for the fourth quarter, how much Saudi and how much Mars crude you ran?
Joe Gorder - EVP
We ran about 250,000 barrels a day of Saudi crude.
Let me look on the Mars.
We ran about 10 a day of Mars.
Mark Gilman - Analyst
All right.
Thanks, Joe.
I noticed that there's some pretty pronounced changes in the fourth quarter in both the feed stock lineup for the system as a whole, as well as the product yield.
On the feed stock side, the other fees are up substantially as a percentage, and on the product side, the other products are up significantly.
Can one of you guys, Rich, Joe, Bill talk about what that was all about?
Whether it's something that's likely to remain in place going forward?
Richard Marcogliese - COO EVP
Rich, I'll start.
I don't think it will remain in place going forward, I mean, we -- if you look at the situation in the fourth quarter, we had a few operating issues we had to work around.
We ended up running VGO's in a lot of cases to fill conversion units because it didn't pay to run crude.
That's why your other feed stocks are up.
You know the other yields, I mean, a lot of that I think, if you look at the same reasons essentially that if you have some operating issues, you increased your output of the other products.
Joe Gorder - EVP
Yeah, Mark, I can get a little more color on the subject.
You know, you asked about the Saudi runs, we did have our large crude unit down in Paulsboro.
It's the LUG still in the Paulsboro refinery.
So the Saudi runs were off as a consequence of that turnaround.
And it was about a 3-week turnaround large crude unit in the lug block.
Also it was a general period of increased turnaround activity in the fourth quarter, relative to the third quarter, that was very prominent on the West Coast, both in Wilmington where we had a cat and Alky outage and in Benicia where we had the fluid coker down for a planned turnaround.
Then we had a number of unplanned events which impacts some of the mix of input.
We had a power outage on Aruba in October.
We have had continuing issues with coke drums in Port Arthur and then we also had a power disruption that affected our Texas City refinery in December.
A lot of these impacts did reflect themselves in the amount of heavy crude that we run directly and then you compensate for that with more purchases of intermediates.
Mark Gilman - Analyst
So all things being equal, this was a pretty anomalous set of numbers both on the yield and the feed stock side.
Joe Gorder - EVP
I would say so.
Richard Marcogliese - COO EVP
I don't think you're seeing a fundamental shift here.
Mark Gilman - Analyst
One more, if I could.
Rough percentage of ULSD as a percentage of your total distilate pool?
Richard Marcogliese - COO EVP
98?
We're almost completely there, Mark.
Mark Gilman - Analyst
Do you expect the shrinkage in ULSD premiums versus to oil to remain or is this something that in your mind has a seasonal element to it?
Richard Marcogliese - COO EVP
Well, I mean, the differentials were wider in the beginning and we had always anticipated as we got further into the program and commissioned new facilities that we would see some shrinkage in those differentials than we have.
Most recently we commissioned the brand new distilate hydrotreater in Corpus Christi in December and most of our production is at the ULSD level.
Michael Ciskowski - CFO EVP
I think you'll see some seasonality though when you hot sulphur (inaudible) summertime you probably will see wider discounts than do in the winter, but I don't think you'll see $0.20 like we had last year though.
Mark Gilman - Analyst
Okay, guys, thanks a lot.
Operator
(OPERATOR INSTRUCTIONS) Your next question comes from the line of Mark Flannery of Credit Suisse.
Mark Flannery - Analyst
Good morning, I have a question on CapEx.
I know last year you indicated that we should be expecting multiple years of -- at that point $5 billion-ish of CapEx.
From what you've mentioned today with some of these bigger projects, I assume that's what we should still be expecting today beyond 2008?
William Klesse - Chairman CEO
Beyond 2008, I think you should anticipate we'll be between $5 billion and $6 billion for '09-- '09 is a high cap, high turnaround year for us too.
So we're only four weeks into 2008.
But as guidance here, will be between 5 and 6 billion.
Mark Flannery - Analyst
Great.
And just switching back to the fourth quarter results, and parts of this question have already been asked.
The markets are obviously surprised today by how much you beat benchmark margins by.
Some of this has to do with the runs that you're managing on the inputs but can you talk us through a little bit, let's say where the markets may have been under estimating your ability to outperform the benchmarks?
Joe Gorder - EVP
I think our margin realizations did benefit towards the end of the quarter as the lower average crude prices in the last half of December relative to the last half of November.
So this did result in lower costs of sales improving our margin realization.
Mark Flannery - Analyst
Would you say you were more aggressively managing your crude input slate today than say you would have been a year ago?
William Klesse - Chairman CEO
Gorder better not say yes to that.
Joe Gorder - EVP
Mark, the answer is no, absolutely no.
William Klesse - Chairman CEO
We managed that aggressively every day.
Mark Flannery - Analyst
Right, and do you -- I mean, do you think you have got more opportunity in '08 than say you would have had in '07 to bring that down into margin or is the outlook roughly the same?
Richard Marcogliese - COO EVP
I tell you, the biggest opportunity we have is to just run the throughput we're capable of, I mean, it's just running the barrels.
Michael Ciskowski - CFO EVP
I agree with Rich.
William Klesse - Chairman CEO
I don't know if you've noticed, but we're going to take a coker, the coker at Port Arthur is a three module, six drum coker.
We're going to take each module offline for about 25 days and do a complete repair on the drums from the inside out.
And that's going to cut our throughput at that refinery by 100,000 barrels a day or so -- get the right number here.
And, so what Rich just told you is, we've had trouble at some of our plants.
And if we could run these plants, get our reliability up, our profits would even be a lot better.
Because where we get hit most of the time is on the very heavy sour end.
Mark Flannery - Analyst
Do you have any targets that you would like to share with us for reliability improvements?
Richard Marcogliese - COO EVP
Well, you know, reliability improvement is really rolled up into this billion dollar improvement effort so it's a big component of that gap closure.
William Klesse - Chairman CEO
I can honestly tell you we fix these as we had these issues, like this example of Port Arthur, we're going to fix it correctly.
And we screwed around with it long enough and our team has elected to do this, where we'll have it repaired and now carry us then to the turnaround in '09 when we actually replaced the drums.
But this is an engineering design on these coke drums, it just doesn't hold up to the cycles.
Mark Flannery - Analyst
Right.
Okay, thanks a lot.
Operator
Your next question comes from the line of Ann Kohler of Caris.
Ann Kohler - Analyst
Good morning, gentlemen.
I'm not sure whether you covered this in your -- your earlier remarks.
But, could you kind of give a little bit of detail, I know you spoke about the demand in California, but what you're seeing in the rest of your retail system?
Sort of the same store basis for gasoline volumes, fourth quarter to fourth quarter and what you're seeing so far in the first?
Richard Marcogliese - COO EVP
Okay, in the U.S.
resale, this is on a per-store, per day basis, our fuel sales were down about 5% in the fourth quarter of '07 versus the fourth quarter of '06.
On a total year basis it was pretty flat comparing '07 versus '06.
And then in January, we're slightly down from the fourth quarter levels, but that's fairly typical for this time of year where demand is a little bit slower.
Ann Kohler - Analyst
And what do you attribute the 5% same store drop in the fourth quarter to?
Richard Marcogliese - COO EVP
Well, I think a lot of it has to do to the increasing gasoline prices that happened here toward the end of the year, and just the concerns about the economy and whether or not we're actually getting into a recession or not.
Ann Kohler - Analyst
Great, thank you, I appreciate that.
Richard Marcogliese - COO EVP
You're welcome.
Operator
Your next question comes from the line of Mark Gilman of the Benchmark Company.
Mark Gilman - Analyst
Hey, Mike, what region was the LIFO benefit taken in?
Michael Ciskowski - CFO EVP
It would have been across all of our regions east of the Rockies.
Mark Gilman - Analyst
And it looks to me like there was a major working capital liquidation or drawdown in the fourth quarter, is that accurate and do you expect it will be reversed in the first?
Michael Ciskowski - CFO EVP
You're right, we did have a little inventory sell down which resulted in about a $450 million dollar source of funds in the fourth quarter.
Going forward, we will continue to monitor our inventory levels and I don't anticipate it being reversed in a major way in the first quarter.
Richard Marcogliese - COO EVP
No Mark, we got them to levels that we were comfortable operating at at the end of the year.
It's a combination of the high cost and that leads to the working capital obligation, and then the market structure was backward and it didn't pay to carry.
So we managed it as aggressively as we could.
Mark Gilman - Analyst
Okay, guys, thank you.
Operator
There are no further questions at this time.
Michael Ciskowski - CFO EVP
Okay.
We'll conclude the call now.
Thank you for listening to today's call.
And please feel free to contact our investor relations department if you have any additional questions.
Operator
This does conclude today's conference call.
You may now disconnect.