Jason Gabelman

Jason Gabelman asked about Chevron's approach to funding M&A (cash versus equity) for deals of varying sizes, and if 'debt to cash flow' is now the preferred debt metric, and why.

Answer

Chairman and CEO Mike Wirth explained that M&A consideration (cash, equity, or mix) is part of negotiation, noting that equity is often preferred for large, long-cycle deals to hedge commodity price risk. CFO Eimear Bonner stated that 'debt to cash flow' is now used to align with rating agencies and investor preferences, while still monitoring other metrics, emphasizing the strong balance sheet.

Jason Gabelman asked about Chevron's balance sheet strategy for M&A funding (cash versus equity) and whether 'debt to cash flow' is now the preferred debt metric over 'net debt to capital'.

Answer

Chairman and CEO Mike Wirth explained that M&A consideration (cash, equity, or mix) is part of negotiation, noting that equity is often preferred for large, long-cycle deals to hedge commodity price risk. CFO Eimear Bonner clarified that Chevron has moved towards using 'debt to cash flow' to align with rating agencies and common investor metrics, while still monitoring 'net debt to capital', emphasizing the balance sheet's strong position.

Jason Gabelman asked about the drivers behind equity affiliate distributions running significantly higher than guidance year-to-date, specifically inquiring if TCO outperformance or higher LNG prices were factors, and what to expect for Q4 and next year.

Answer

Vice President and CFO Eimear Bonner attributed the outperformance primarily to TCO's safe and reliable operations since its startup. She clarified that despite the strong performance, full-year guidance remains unchanged due to a planned TCO pit stop in Q4 and the need for TCO to conserve cash for two loan repayments scheduled for Q1 and Q3 of next year, which will impact distributions in Q4 and next year.

Jason Gabelman inquired about the consistently higher-than-guided equity affiliate distributions year-to-date, asking what is driving this beat, specifically if it's TCO outperformance or higher LNG prices, and whether this trend is expected to continue into Q4 and next year.

Answer

Vice President and CFO Eimear Bonner attributed the outperformance primarily to TCO's safe and reliable operation since its startup. She clarified that despite the strong performance, guidance remains unchanged due to a planned TCO pit stop in Q4, which will reduce production, and TCO's need to conserve cash for two loan repayments scheduled for Q1 and Q3 of next year.

Jason Gabelman from TD Cowen sought clarification on the share buyback outlook for 2026, asking if the company still plans a $2.5 billion step-up as guided when the Hess deal was announced, or if the current rate is the new baseline.

Answer

Chairman & CEO Michael Wirth explained that the original guidance assumed a prompt deal closure. Due to the delay, Chevron has already repurchased over 50% of the shares issued for the transaction during the interim period, effectively accomplishing the goal of the accelerated buyback. He directed investors to the November Investor Day for an updated forward outlook on share repurchases.

Jason Gabelman revisited the topic of share buyback guidance, asking for more clarity on the pace of repurchases throughout the year and for an update on the buyback rate following the Hess acquisition.

Answer

CEO Mike Wirth reiterated that Chevron will not use a fixed formula, preferring a steady, through-cycle approach rather than one that 'yo-yos' with market volatility. He emphasized that the current $10-$20 billion annual range is historically robust. CFO Eimear Bonner added that the current pace still represents a very strong program.

Jason Gabelman questioned the TCO distribution guidance for 2025-2026, asking if it reflected a higher price deck and whether an increase in TCO's operating expenses was factored into the free cash flow outlook.

Answer

CFO Eimear Bonner clarified the free cash flow inflection is driven by higher production and a significant reduction in affiliate CapEx as the FGP project completes. She added that they anticipate operating expenses will be optimized and reduced as the new, larger asset base stabilizes.

Jason Gabelman asked for a replay of Manav Gupta's question regarding the drivers of the natural gas segment's 4Q earnings upside, specifically if LNG plants started up earlier than expected. He also inquired about the potential global LNG supply glut, a slowdown in US Gulf Coast liquefaction project sanctions, and how much of Kinder Morgan's shadow project backlog is tied to incremental LNG projects.

Answer

CEO Kimberly Dang reiterated that 4Q upside was across the gas business (Texas intrastate, Eagle Ford, Haynesville, Northeast interstate), driven by a tight network and supply/demand dislocations, with potential for similar volatility in 2026. On LNG, she emphasized KMI's long-term take-or-pay contracts, noted only 12% of the shadow backlog is LNG-related (more power-focused), and highlighted that incremental projects can come from existing facilities needing more competitive supply, not just new facilities.

Jason Gabelman asked for a replay of Manav Gupta's question regarding the drivers of the Q4 earnings upside in the natural gas segment, specifically if LNG plant startups occurred earlier than expected. He also inquired about the potential impact of a global LNG supply glut on Kinder Morgan's project backlog and shadow backlog, particularly concerning incremental liquefaction projects.

Answer

CEO Kimberly Dang reiterated that Q4 upside was broad-based across the gas business (Texas intrastate, Eagle Ford, Haynesville, Northeast interstate), driven by a tight network and opportunities from supply/demand dislocations and volatility, which could recur in 2026. Regarding LNG, she emphasized long-term take-or-pay contracts for existing facilities. She noted that only about 12% of the shadow backlog is tied to LNG, with more focus on power, and that incremental projects can also arise from existing facilities seeking more competitive supply, not just new terminals.

Jason Gabelman asked for more color on the larger projects within the shadow backlog, specifically if they serve similar markets (Texas, Southeast) and if Mexico is a focus. He also inquired about M&A opportunities, potential portfolio gaps, and interest in acquisitions if crude oil prices fall.

Answer

Kim Dang (CEO) stated that due to competitive reasons, descriptions of larger projects are broad, but they generally support LNG exports and power. Regarding M&A, Ms. Dang explained it is opportunistic, focusing on fee-based energy infrastructure assets that fit their strategy, offer appropriate returns, and maintain balance sheet metrics. She noted confidence in capital availability for such opportunities, referencing the Outrigger acquisition earlier this year and another last year.

Jason Gabelman sought more color on the larger projects within the shadow backlog, asking if they serve similar markets to current execution projects (Texas and Southeast) and if Mexico-related projects are among the larger ones. He also inquired about M&A opportunities, considering the multiple dispersion between natural gas and liquids, and potential portfolio holes, especially if crude oil prices decline.

Answer

Kim Dang, CEO of Kinder Morgan, stated that while all projects are competitive, the larger ones in the backlog generally align with supporting LNG exports and power generation. Regarding M&A, Ms. Dang described it as opportunistic, with Kinder Morgan seeking assets that fit its strategy (energy infrastructure, fee-based) and meet appropriate risk-return criteria while maintaining balance sheet metrics (3.5x-4.5x debt to EBITDA). She noted that KMI has the capital or can find it for such opportunities, referencing recent smaller acquisitions like Outrigger.

Jason Gabelman of TD Cowen asked about KMI's strategy for gaining volumes in the Bakken following the Outrigger acquisition. He also questioned if KMI is hearing concerns from LNG customers about a potential market oversupply and a slowdown in future projects.

Answer

Sital Mody, President of Natural Gas Pipelines, stated the Outrigger integration is going well but had no new updates on the Highland Express project. CEO Kimberly Dang said they are not seeing any slowdown in LNG project development. President Tom Martin added that global gas demand is projected to grow 25% by 2050, with the U.S. well-positioned to increase its market share of LNG supply due to its reliable resources and infrastructure.

Jason Gabelman inquired about the competitive dynamics in the Permian Basin, specifically regarding acreage dedications and fee structures, and how Targa Resources Corporation leverages its advantages. He also asked about the confidence in the $1.6 billion cost estimate for the Speedway Pipeline, considering potential tariff impacts and contingency.

Answer

President Jen Kneale emphasized that the Permian is always competitive, but Targa differentiates itself through its asset base, integrated wellhead-to-water value proposition, and strong commercial team. She highlighted Targa's sour gas strategy, extensive system fungibility, and redundancy as key advantages. Regarding Speedway, Jen expressed high confidence in the $1.6 billion budget, noting that the engineering and supply teams procured pipe well in advance, and that contingency is built into all projects with a goal to outperform.

Jason Gabelman asked about the competitive dynamics in the Permian basin for acreage dedications, inquiring if the landscape is becoming more competitive, impacting fees, or if Targa Resources Corporation's competitive advantages allow it to maintain premium fees. He also asked about the confidence in the $1.6 billion cost for the Speedway pipeline, potential for tariffs to increase costs, and any baked-in contingency.

Answer

Jen Kneale, President, stated that the market is always competitive, but Targa differentiates itself through its execution of complex G&P elements, providing fungibility, redundancy, and reliability, especially with its sour gas strategy (2.5 BCF/day capacity, 7 AGI wells). She also cited the vastness of Targa's system and strong commercial team. Regarding Speedway, Jen expressed confidence in the budget, noting early pipe procurement by the engineering and supply teams, and confirmed that contingency is always included, with the team aiming to outperform expectations.

Jason Gabelman asked about the direction of fixed G&P fees in the Permian given competing factors, and about the risks to the high and low ends of the 2025 EBITDA guidance.

Answer

CEO Matthew Meloy stated that Targa's scale and reliability allow it to compete effectively. President Jennifer Kneale added their commercial team is creative in structuring long-term deals. Regarding guidance, she said strong volume growth supports the outlook, with potential upside from commodity prices and marketing, which typically strengthens in Q4.

Jason Gabelman asked about the direction of fixed G&P fees in the Permian given various market pressures and sought clarity on the risks to the high and low ends of the full-year EBITDA guidance.

Answer

CEO Matthew Meloy and President Jennifer Kneale emphasized that Targa's scale, reliability, and creative commercial approach allow it to compete effectively on fees. Regarding guidance, Kneale stated that strong, materializing volume growth underpins their confidence. Potential upside could come from commodity price tailwinds or stronger-than-forecasted marketing margins in the second half of the year.

Jason Gabelman asked if Par Pacific plans to pursue additional small refinery exemptions for other periods or refineries beyond those already granted. He also inquired about potential changes to RIN liability management, specifically purchasing fewer RINs, and the sustainability of Montana's lower operating costs post-turnaround, questioning if they would remain below base case assumptions or revert above $9 per barrel.

Answer

Will Monteleone, President and CEO, stated that Par Pacific would pursue all opportunities consistent with the law regarding SREs but did not highlight any material new initiatives. Shawn Flores, SVP and CFO, declined to detail commercial RIN strategy but emphasized managing positions for tail risks and consistency with the law. Regarding Montana, Shawn Flores confirmed strong Q3 performance and seasonal OpEx improvements but reiterated the $10 per barrel annual target as the right long-term number, indicating confidence in moving towards it.

Jason Gabelman of TD Cowen asked about the company's margin profile in a declining oil price environment and requested an update on the Sustainable Aviation Fuel (SAF) project, including market development and its potential earnings profile.

Answer

SVP and CFO Shawn Flores stated that a falling price environment presents more tailwinds than headwinds, citing lower fuel costs and better asphalt netbacks, with inventory well-hedged. President and CEO Will Monteleone expressed a constructive outlook on the Hawaii SAF project due to its competitive cost structure, efficient logistics, and encouraging commercial interest from international airlines in the Asia Pacific region.

Jason Gabelman from TD Cowen inquired about the extent of insurance coverage for the Wyoming outage, covering both lost profits and repair costs, and asked if the company would need to purchase products to meet contractual obligations. He also questioned the diverging capture rate trends between the strong performance in Hawaii and weaker results in Washington, and asked for an update on the M&A environment.

Answer

SVP and CFO Shawn Flores confirmed Par Pacific has adequate property and business interruption insurance and intends to manage repair costs within existing CapEx guidance. President and CEO William Monteleone added they are comfortable meeting all contractual obligations. Mr. Flores attributed Hawaii's strong capture rate to high clean product freight costs and Washington's weakness to seasonal asphalt demand, noting the company is well-positioned for volatility. On M&A, Mr. Monteleone stated the focus is internal execution and the bar for acquisitions is currently very high.

Jason Gabelman of TD Cowen asked about the 2024 CapEx trajectory and the outlook for 2025 spending, the rationale for the new on-balance sheet inventory financing structure, and the current trends in the Pacific product tanker market affecting the Hawaii business.

Answer

SVP and CFO Shawn Flores confirmed 2024 CapEx would be at the low end of guidance, with a Q4 increase due to the Hawaii renewables project. For 2025, he guided directionally to significant turnaround and renewables spending. Flores also clarified that the new ABL financing is viewed separately from term debt and that total working capital financing has materially decreased year-over-year. President and CEO William Monteleone added that Q4 product tanker rates have softened but remain elevated compared to historical levels.

Jason Gabelman asked about the reasons behind the heavier turnaround year in the West Coast, which is expected to continue into Q4, and whether this activity is contributing to the higher-than-previously-guided turnaround spend. He then followed up on Marathon Petroleum's ability to capture strength in the Pacific Northwest and Rockies, and if this has driven higher distribution costs.

Answer

EVP of Refining Michael Henschen explained that West Coast turnarounds include the FCC and ALCI at LAR, with the intertie project coming online soon, positioning the refinery for strong performance. He noted that increased turnaround costs, particularly at LAR and GBR, were due to growth and reliability projects aimed at improving capture. CFO John Quaid added that turnaround spend is expected to decrease in 2026 and beyond. On distribution costs, John Quaid clarified that higher costs reflect commercial decisions to pursue higher-margin markets, even if they incur greater distribution expenses, noting that on a barrel-sold basis, year-to-date costs are consistent. CCO Rick Hessling described the dynamic nature of PNW and California cracks, explaining that PNW sometimes trailed parts of California in Q3, impacting margin pull-through.

Jason Gabelman asked about the heavier turnaround year on the West Coast, its continuation into Q4, and the driving factors. He also inquired if the higher-than-guided turnaround spend was related to West Coast activities. Additionally, he questioned Marathon Petroleum's margin capture in strong regions like the Pacific Northwest and Rockies, and if higher distribution costs were a result of capturing market dislocations.

Answer

EVP of Refining Michael Henschen explained that West Coast turnarounds include FCC and ALCI downtime, with the intertie project coming online soon, positioning LAR for better capture. CFO John Quaid added that higher turnaround costs were partly due to growth and reliability projects, with 2026 capital expected to decrease. John Quaid clarified that higher distribution costs reflect commercial decisions to pursue higher margin opportunities, while CCO Rick Hessling noted that PNW margins sometimes trailed parts of California in Q3, making regional optimization dynamic.

Jason Gabelman asked about the balance sheet, noting net debt appeared above target, and requested updates on strategic initiatives like moving Mid-Con barrels and petchem bolt-ons.

Answer

CFO John Quaid clarified that net debt was influenced by timing, as cash from the ethanol JV sale was received post-quarter-end, and cash levels have since returned to the ~$1B target. CCO Rick Hessling added that a new third-party pipeline expected in Q4 will help clear more Mid-Con barrels to the East.

Jason Gabelman asked about the company's willingness to exceed its $7 billion debt target to manage working capital or support buybacks. He also inquired about the appetite for larger midstream M&A deals versus smaller bolt-on acquisitions.

Answer

CFO John Quaid stated they are not looking to increase debt to fund repurchases, which are driven by operating cash flow, but will use revolvers to manage working capital swings. CEO Maryann Mannen responded that all M&A opportunities, regardless of size, are evaluated through a strict capital discipline lens, focusing on mid-teens returns and strategic fit, as demonstrated by their recent deals.

Jason Gabelman asked if cash from a planned debt refinancing could be used for share buybacks and whether asset drop-downs to MPLX are still a possibility. He also questioned why the company excluded the quarter-to-date buyback figure from its Q4 press release, a change from recent practice.

Answer

CFO John Quaid confirmed the $750 million from the refinancing would be available for allocation. CEO Maryann Mannen added that while some assets could be dropped down to MPLX, the resulting cash to MPC would be used for shareholder returns but the associated EBITDA would not count toward MPLX's growth targets. Quaid explained the quarter-to-date buyback figure was omitted because as the company normalizes its capital returns, a single month's activity is no longer considered as indicative or useful as it was in the past.

Jason Gabelman questioned the timing of drawing down the cash balance to the stated $1 billion minimum, especially heading into a weaker environment. He also asked for specific drivers behind the company's capture rate outperformance relative to peers in the third quarter.

Answer

CFO John Quaid affirmed the company's comfort with the $1 billion minimum cash target even through a down cycle, citing the competitiveness of operations and the durable $2.5 billion annual distribution from MPLX. Executive Rick Hessling attributed the strong Q3 capture rate primarily to excellent execution by the Specialty Products teams, who capitalized on favorable market turns in asphalt, pet chems, butane, and propane.

Jason Gabelman asked about the net contribution of equity affiliates to BP's cash flow, considering changes from the JERA Nex BP joint venture (Beacon Wind cancellation) and Azule (Namibia exploration success potentially reducing near-term distributions).

Answer

Kate Thomson (CFO, BP) explained that JERA Nex offers future optionality in a capital-light way, with projects needing to compete with high internal hurdles. For Azule, she noted it's a high-quality joint venture with approximately EUR 7 billion in distributions since inception, now self-funded and not expected to be a capital drain. Murray Auchincloss (CEO, BP) added that Azule has seen tremendous success, including Agogo coming online eight months early and a significant exploration discovery near an LNG plant, and is doing very well for BP.

Jason Gabelman asked how the net cash flow contribution from BP's equity affiliates has changed, specifically considering the impact of the Jaran X joint venture's Beacon Wind cancellation and the Azul joint venture's success in Namibia potentially reducing near-term distributions.

Answer

Kate Thomson (CFO, BP) clarified that Jaran X is designed to be capital-light, while Murray Auchincloss (CEO, BP) explained that the Azul joint venture, a high-quality partnership with Eni, is now self-funded and financing its growth externally, including Namibia, which may lead to reduced dividends as cash is recycled for investment.

Jason Gabelman from TD Cowen asked about the high tax rate in the Gas and Low Carbon Energy segment and across the company, seeking expectations for the future. He also inquired about BP's gas hedging program for its Lower 48 assets and the pricing locked in for the year.

Answer

Executive Katherine Thomson explained the group's high Q1 effective tax rate of 50% was driven by the composition of profits, with higher-taxed oil production being a larger contributor. She reiterated the full-year guidance remains around 40%. Executive Murray Auchincloss addressed gas hedging, stating that while specific details are commercially sensitive, the majority of BPX's gas production profile for the year is locked in at around $4.

Jason Gabelman asked about the industry trend of increased exploration, the growing competition for new blocks, and how ExxonMobil's view on the future of shale production influences this industry shift.

Answer

Darren Woods, Chairman and CEO, noted that the industry is now recognizing the need for long-term investment due to depletion, a point ExxonMobil maintained even when others pulled back in 2020. He explained that while shale has a finite life, ExxonMobil's technology allows for continued Permian growth, differentiating them from competitors. He stated that the industry is shifting to longer-cycle projects, and ExxonMobil maintains a competitive edge in this environment through unique capabilities in cost-efficient and quick resource development, coupled with a steadfast focus.

Jason Gabelman discussed ExxonMobil's increased exploration activity and the broader industry trend. He asked what is driving this industry shift, if competition for new blocks is intensifying, and if the company's view on shale's future plays a role in this renewed focus on exploration.

Answer

Darren Woods, Chairman and Chief Executive Officer, stated that the industry is now recognizing the need for long-term investment to offset depletion, especially as unconventional resources mature. He emphasized ExxonMobil's consistent focus on long-term investment and its competitive advantage in cost-efficient, rapid resource development, which appeals to resource owners.

Jason Gabelman of TD Cowen inquired about Guyana production, asking when to expect output to come off its plateau and what activities are underway to mitigate declines.

Answer

Chairman and CEO Darren Woods reiterated the 2030 plan for 1.7 million barrels per day of gross capacity with production around 1.3 million, which accounts for natural declines. While he did not provide a specific timeline for the plateau ending, he expressed high confidence in the local team's ability to 'keep our boats full' through optimization and infill drilling, suggesting they are working to outperform the official plan.

Jason Gabelman questioned why certain projects like TCO and the Permian pipeline were excluded from the slide detailing $3 billion in earnings potential, and asked about the difference between earnings and cash flow contributions.

Answer

CFO Kathy Mikells clarified that the slide focused specifically on new, operated projects starting up in 2025, excluding non-operated assets like TCO or projects already underway. CEO Darren Woods confirmed the contributions from those other projects are included in the broader corporate plan. Mikells also noted that for new projects, cash flow generation typically leads earnings recognition slightly.

Jason Gabelman questioned why certain projects like TCO and the Permian pipeline were excluded from a slide detailing earnings potential, and asked about the difference between earnings and cash flow contributions.

Answer

CFO Kathy Mikells clarified that the slide focused on newly starting, ExxonMobil-operated projects, excluding non-operated assets like TCO and projects already underway. CEO Darren Woods confirmed the contributions from these other projects are included in the overall corporate plan. Mikells also noted that for new projects, there is typically a slight lag in earnings relative to cash flow.

Jason Gabelman asked about the expected uplift from LNG Canada and Pavilion in Q4 and 2026, and the shaping of Shell's organic and inorganic resource hopper for long-cycle liquids.

Answer

CFO Sinead Gorman stated that significant uplift from LNG Canada (Train 2 ramp-up) and Pavilion (contract freedom) is expected in the second half of 2026. CEO Wael Sawan discussed a strong organic funnel targeting 1 million boe/day by 2030 at sub-$35 breakevens, alongside strategic bolt-on inorganic moves, maintaining a high bar for capital allocation.

Jason Gabelman inquired about the outlook for Shell's LNG segment, specifically the expected uplift from LNG Canada and Pavilion in Q4 and 2026. He also asked about the shaping of organic versus inorganic opportunities to fill the long-cycle liquids resource hopper since the investor day.

Answer

Shell CEO Wael Sawan discussed the strong organic funnel for oil equivalent production by 2030 and focused exploration efforts, alongside bolt-on inorganic moves in Brazil, Nigeria, and Ursa. CFO Sinead Gorman stated that while LNG Canada's Train 1 delivered cargoes, the full ramp-up of Train 2 and Pavilion's contract flexibility will contribute more significantly in the second half of 2026.

Jason Gabelman asked about the year-to-date build-up of excess cash and whether a catch-up in returns is expected or if cash is being stockpiled. He also asked for a breakdown of the SRE margin benefit by region and details on any excess RINs on the balance sheet.

Answer

Atanas Atanasov, CFO, stated they are not stockpiling cash, attributing the build to a strong Q3, and indicated more capital returns are expected without specific timing. Tim Go, CEO, declined to provide a regional SRE breakdown or details on their RINs position, citing past practice and best interests.

Jason Gabelman asked about the year-to-date cash build and stable debt, questioning if a catch-up in cash return is expected or if cash is being stockpiled. He also sought more detail on SRE margin benefits by region and HF Sinclair's RINs balance sheet position.

Answer

Atanas Atanasov, CFO, stated HF Sinclair is not stockpiling cash, with the build largely from a strong Q3, and more capital returns are expected. Tim Go, CEO, declined to provide regional SRE breakdowns or disclose the company's RINs position, citing past practice and best interests.

Jason Gabelman inquired about the turnaround cadence for the remainder of the year and its impact on cash management and share buybacks. He also asked about potential headwinds or tailwinds for the Lubricants business from trade tariffs.

Answer

Executive Valeria Pompa stated that Q1 was a heavy turnaround quarter, with one more planned for Q3, and expects workloads to decrease in future years. CFO Atanas Atanasov affirmed that excess cash flow generated for the rest of the year would be returned to shareholders. Regarding tariffs, executive Matt Joyce and CEO Timothy Go explained the Lubricants business is largely 'tariff-proofed,' with over 95% of its activity being USMCA compliant, mitigating significant impacts.

Jason Gabelman asked if there was an appetite for a large, transformative acquisition in the lubricants space or if the current scale is appropriate. He also inquired about the potential impact of Canadian crude oil tariffs on the company's inland refineries and their operational flexibility.

Answer

CEO Timothy Go confirmed the primary focus is organic growth, stating any M&A in lubricants would likely be smaller, bolt-on acquisitions to accelerate strategy, not a transformational deal. EVP, Commercial Steven Ledbetter addressed tariffs by explaining that the company has significant flexibility to lighten its crude slate by sourcing from various hubs and believes a large portion of any tariff cost would be borne by the producer.

Jason Gabelman asked for clarification on the strong cash flow from operations, questioning if it was due to a working capital benefit. He also inquired about HF Sinclair's strategic positioning to supply western markets following recent refinery shutdown announcements in California.

Answer

CFO Atanas Atanasov confirmed that the strong cash flow included a working capital tailwind from reducing inventory levels. CEO Timothy Go stated that the California shutdowns align with their long-term strategy. He explained that the Puget Sound refinery can produce CARB-compliant gasoline for California, while the Woods Cross and New Mexico refineries are well-positioned to capture increased market share in Las Vegas and Phoenix, respectively, as those markets lose supply from California.

Jason Gabelman inquired about the volatility of TotalEnergies' organic CapEx trajectory quarter-to-quarter versus its annual budget, and the expected arc of production and cash flow ramp-up for 2026 and 2027, particularly regarding reinvestment rates.

Answer

Patrick Pouyanné, Chairman and CEO, clarified that TotalEnergies focuses on annual net CapEx budgets ($17-17.5 billion for 2025), not quarterly organic CapEx stability, which fluctuates due to project phases. He reiterated the commitment to the annual budget. For 2026/2027, he referred to the New York presentation, indicating a reduction in reinvestment rate from 70% to around 50% by the end of 2027, driven by higher cash flows and disciplined CapEx ($16 billion guidance), leading to increased free cash flow per share.

Jason Gabelman of TD Cowen asked how recent changes to U.S. tax credits affect the Integrated Power business and where CapEx would slow to meet the annual target. He also questioned if a potential Mozambique LNG FID was included in the budget.

Answer

Patrick Pouyanné, Chairman & CEO, explained that U.S. tax credit changes have had minimal impact on their project portfolio, with the main challenge being tariffs on imported components. He noted strong investor appetite for farm-downs continues. He reiterated the commitment to the annual CapEx guidance, citing project financing timing as one reason for a slower H2 spend. He also confirmed that a Mozambique LNG project would be externally financed, limiting its direct impact on the CapEx budget.

Jason Gabelman asked about the earnings contribution from the SapuraOMV acquisition, which was not apparent in Q1 results. He also inquired if the trading environment has become more difficult due to new macroeconomic risks.

Answer

CEO Patrick Pouyanné acknowledged he didn't have the specific contribution figure for SapuraOMV but confirmed it is contributive and part of a larger strategy in Malaysia. He agreed that the trading environment is more complex due to unpredictable geopolitical events. However, he noted that TotalEnergies' trading is focused on valorizing its physical assets. While gas trading was hit by an unexpected market reversal, oil trading and LNG trading performed well, and the overall trading contribution remains in line with full-year guidance.

Jason Gabelman of TD Cowen asked if the company's gearing level could impact shareholder distribution decisions and questioned the reason for the quarterly increase in E&P operating expenses.

Answer

CEO Patrick Pouyanné stated that the gearing level, whether at 10% or a target of 8%, does not impact decisions on the buyback, which is driven by the policy of returning more than 40% of CFFO. He explained the E&P OpEx increase was due to seasonal maintenance and work programs in the North Sea (U.K. and Denmark) and affirmed the company's ability to maintain its cost leadership below $5 per barrel.

Jason Gabelman asked about the core status of Phillips 66's East Coast and West Coast refining footprints, given the company's concentration and integration efforts in the Central Corridor. He also followed up on the meaningful improvement in the renewable fuels segment's results, seeking clarification on the drivers, including the impact of selling credits and product from inventory, and distinguishing underlying improvements from timing impacts.

Answer

Chairman and CEO Mark Lashier clarified that while the Central Corridor is a core strategic focus due to integration opportunities, coastal refineries like Ferndale (transitioning to CARBOP production) and Bayway (with Atlantic Basin integration opportunities with Humber) are still valued for creating good value. Marketing and Commercial executive Brian Mandell explained that Q3 renewable fuels improvement was due to 'self-help' efforts: reduced costs, improved logistics for domestic feedstock, directing products to stronger markets (Pacific Northwest), new pathways, and doubled SAF production, along with timing of European credits. EVP and CFO Kevin Mitchell clarified that the inventory comment was a variance relative to Q2, not a net benefit in Q3.

Jason Gabelman asked about the core status of Phillips 66's East Coast and West Coast refining footprints, given the focus on the Central Corridor, and sought clarification on the drivers behind the meaningful improvement in the renewable fuels segment's quarter-over-quarter results.

Answer

Mark Lashier, Chairman and CEO, clarified that while the Central Corridor is a core strategic focus, coastal refineries like Ferndale and Bayway are still valued for their contributions. Brian Mandell, EVP of Marketing and Commercial, attributed the Q3 renewable fuels improvement to self-help measures, new pathways, doubled SAF production, and timing of European credits. Kevin Mitchell, EVP and CFO, clarified that the inventory comment was a variance to Q2, not a net Q3 benefit.

Jason Gabelman of TD Cowen asked if Phillips 66 is conducting a special deep-dive review of its Midstream business structure following the activist campaign. He also inquired about the outlook for the Chemicals cycle and whether Renewable Fuels production would be reduced due to weak margins.

Answer

Chairman & CEO Mark Lashier confirmed they continuously evaluate the Midstream business with expert input, stating nothing is off the table for value creation. He noted the Chemicals cycle is expected to firm up in 2026-27. Both Lashier and EVP of Marketing & Commercial Brian Mandell confirmed that Renewable Fuels are running at reduced rates due to unacceptable losses and that they are actively engaged with regulators to improve the asset's profitability.

Jason Gabelman asked if further refining asset rationalization is possible to optimize the system and support the Midstream multiple, or if the asset base is now competitive post-L.A. shutdown. He also asked for an explanation for the larger-than-seasonal decline in the Marketing business in Q4.

Answer

CEO Mark Lashier stated that while they continuously evaluate all assets, no other shutdowns are imminent, though they would entertain offers. Brian Mandell (Marketing and Commercial) explained the Q4 Marketing decline was primarily due to a $100 million negative sequential impact from the reversal of a Q3 inventory hedging gain. He expects Q1 to follow historical seasonal trends.

Jason Gabelman from TD Cowen questioned the progress on the 5% margin capture improvement target and asked for the preferred debt metric for investors to monitor.

Answer

Rich Harbison of Refining confirmed they are on track to meet the 5% capture improvement target by 2025 through a series of small, high-return capital projects. CFO Kevin Mitchell identified the 25%-30% net debt-to-capital ratio as the primary leverage target, while also aiming for absolute net debt below $18 billion.

Jason Gabelman requested elaboration on how ONEOK's NGL segment benefited from selling product out of inventory and the refined products segment from the timing of operational gains and losses, to better understand underlying quarterly earnings. Jason Gabelman also posed a strategic question regarding the importance of maintaining a competitive growth rate to attract equity capital, given the anticipated slowing of ONEOK's EBITDA growth rate.

Answer

Sheridan Swords, Executive Vice President and Chief Commercial Officer, explained that the NGL segment's uplift was due to the timing of sales within its marketing business. For refined products, opportunistic sales of overages and shorts occurred in the second and third quarters. Walt Hulse, Chief Financial Officer, Treasurer, and Executive Vice President, and Pierce Norton, President and Chief Executive Officer, emphasized ONEOK's consistent positive EBITDA growth since 2014, highlighting business resilience and a focus on high-quality projects. They also noted the potential for stock buybacks to positively impact shareholder value and expressed confidence in managing through market cycles.

Jason Gabelman asked for elaboration on how the NGL segment benefited from selling product out of inventory and how refined products benefited from the timing of operational gains and losses, seeking to understand the underlying earnings in the quarter. Gabelman also posed a strategic question about the importance of maintaining a competitive EBITDA growth rate to attract equity capital, or if other avenues exist.

Answer

Sheridan Swords, Executive Vice President and Chief Commercial Officer, explained that the NGL uplift was due to the timing of sales in their marketing business, shifting earnings across quarters. For refined products, ONEOK opportunistically sells overages and shorts, which occurred in Q2 and Q3. Walt Hulse, Chief Financial Officer, Treasurer, and Executive Vice President, Investor Relations and Corporate Development, and Pierce Norton, President and Chief Executive Officer, emphasized that a positive growth rate attracts capital, highlighting ONEOK's history of positive EBITDA growth since 2014 through various cycles, and expressed confidence in continued growth for 2026, supported by high-quality projects and potential stock buybacks.

Jason Gabelman from TD Cowen asked about the equity capital spent and remaining for Equinor's three offshore wind projects (Dogger Bank, Empire Wind, Baltic) in the context of potential joint ventures with Ørsted. He also sought Equinor's updated outlook for the global gas market, considering recent LNG project sanctions, China demand, Power of Siberia 2, and U.S. domestic gas politics.

Answer

Torgrim Reitan, CFO, declined to speculate on Ørsted JV outcomes but outlined Equinor's drivers: improving free cash flow, clarifying offshore activity valuation, and caution on new capital commitments. He detailed that Dogger Bank is well underway with some remaining equity, Empire Wind has a significant $2 billion equity injection in 2026 (offset by tax credits in 2027), and Baltic projects require limited equity. For gas, Mr. Reitan noted a tighter short-term market, acknowledged new LNG supply but highlighted healthy Asian demand, rising U.S. domestic political focus on gas prices, and potential sanctions on Russian LNG.

Jason Gabelman asked about the equity capital spent and remaining for Equinor's three main offshore wind projects (Dogger Bank, Empire Wind, Baltic) in the context of a potential joint venture with Ørsted. He also sought Equinor's updated outlook on the global gas market, considering recent LNG project sanctions, slowing China demand, and the potential for Power of Siberia 2.

Answer

CFO Torgrim Reitan declined to speculate on Ørsted joint venture outcomes but outlined Equinor's drivers: improving free cash flow, clarifying offshore activity valuation, and caution with new capital commitments. He detailed equity injections: Dogger Bank is well underway with some remaining equity, Empire Wind has a significant ~$2 billion injection in 2026 (offset by ITC in 2027), and Baltic 2/3 require limited equity due to high leverage. On global gas, he noted a tighter short-term winter market (storage 12% below last year). For the longer term, he acknowledged new LNG supply but highlighted healthy Asia demand (~3% growth), increasing political influence on U.S. gas prices (potential export limitations), and the robustness of Equinor's gas position ($2/MBTU cost into an $11 market). He also mentioned potential sanctions on Russian LNG.

Jason Gabelman asked about Equinor's engagement with U.S. authorities regarding the Empire Wind stop order and who is controlling the timeline. He also questioned the drivers behind strong U.S. gas price realizations and the company's appetite for further U.S. gas acquisitions.

Answer

Torgrim Reitan, an Equinor executive, stated the government has not provided a reason for the stop order, which Equinor considers "unlawful," and that the company is engaging on all levels with urgency. He attributed the strong U.S. gas realizations to a marketing strategy that captures price volatility from events like cold spells, rather than hedging. He did not comment on future M&A appetite.

Jason Gabelman from TD Cowen inquired about the key factors that will determine whether next year's shareholder distributions fall at the low or high end of the guided $4 billion to $6 billion share buyback range.

Answer

Executive Torgrim Reitan clarified that the decision is not linked to specific events like the Empire Wind farm-down. Instead, he stated that the primary factors considered will be the strength of the balance sheet and the macroeconomic outlook at the time the decision is made. The final determination will be communicated at the next Capital Markets Day.

Jason Gabelman of TD Cowen asked for Calumet's view on the proposed RVO rule that would grant only half a RIN for imported feedstocks, and whether this is likely to be in the final rule. He also sought clarification on the PTC monetization, asking if any regulatory hurdles remain before the signed term sheets can be finalized.

Answer

CEO Todd Borgmann responded that Calumet believes imported feedstock is not necessary to meet the proposed RVO, given the nearly 7 billion gallons of domestic feedstock capacity. However, if imports were needed, he agreed that RIN prices would likely have to increase to incentivize that production. On the PTCs, Borgmann confirmed that no regulatory hurdles remain; the process is now just normal-course paperwork, and he expects the deals to be completed soon.

Jason Gabelman of TD Cowen asked for clarification on the Production Tax Credit (PTC) amount booked in Q1, its potential future trajectory with feedstock changes, the use of capital freed up by the lower SAF expansion cost, and the gap between Q1 results and the company's mid-cycle EBITDA guidance.

Answer

EVP & CFO David Lunin confirmed the full $20 million PTC value was booked, reflecting higher SAF production, and stated future feedstock decisions will be driven by maximizing margin, not just the PTC. EVP Bruce Fleming explained that the DOE loan is for capital improvements, not working capital, and that the Q1 performance gap to the mid-cycle target is primarily due to seasonality, with stronger results expected in the summer quarters for fuels and asphalt.

Jason Gabelman of TD Cowen asked about the Montana Renewables (MRL) margin outlook, focusing on the impact of PTC rules on canola oil feedstock, new renewable diesel restrictions in British Columbia, and alternative funding plans for MRL's equity component if cash flow proves insufficient.

Answer

EVP Bruce Fleming explained that MRL is feedstock-agnostic and views the PTC's complexity as an optimization opportunity, noting Canadian canola can still be used for Canadian renewable diesel. He sees the British Columbia rule as margin-accretive, creating backfill opportunities for MRL in other Canadian provinces. CEO Todd Borgmann addressed funding concerns by highlighting the $190 million cash on MRL's balance sheet and its ability to generate sufficient EBITDA, making alternative funding from Calumet unnecessary.

Jason Gabelman inquired about the specific use of proceeds from the DOE loan, how renewable diesel margins might perform if the 45Z tax credit rules are delayed, and how the company could book revenue for the credit before rules are finalized.

Answer

CEO Todd Borgmann clarified the loan's purpose is to fund the MaxSAF expansion and clean up the existing balance sheet, with approximately $500 million allocated to debt cleanup. EVP Bruce Fleming added that the company plans to book the 45Z receivable from January 1, anticipating a secondary market to manage any timing delays, and noted that their lack of international feedstock use simplifies the credit computation.

Jason Gabelman of TD Cowen sought to clarify the Enterprise Optimization Plan (EOP), asking how much was realized in Q2 and how the benefits are split between the supply line and refinery margins. He also asked for an explanation of the net inflow from financing activities on the cash flow statement.

Answer

EVP Mohit Bhardwaj confirmed that $30 million in EOP benefits flowed through the Q2 financials, specifying that $10 million was at the El Dorado refinery and the rest was distributed between DK Trading and Supply and cost improvements. In response to the financing cash flow question, EVP and CFO Mark Hobbs explained that the inflow was driven by a successful high-yield offering at DKL, which provided liquidity to pay down its revolver and fund growth projects like the Libbey II plant.

Jason Gabelman sought to clarify the EOP program's impact, asking how much was realized in Q2 results and how the margin uplift is allocated between the supply line and refinery site margins. He also asked for an explanation of the net inflow from financing activities on the cash flow statement.

Answer

EVP Mohit Bhardwaj confirmed that the full $30 million of EOP benefits flowed through the Q2 financials, with $10 million from the El Dorado refinery and the remainder from the trading and supply segment and cost improvements. EVP and CFO Mark Hobbs addressed the financing cash flow, explaining that the inflow was driven by a successful high-yield offering at DKL. This provided liquidity to pay down its revolver following significant growth capital expenditures, including the Libbey II gas plant.

Jason Gabelman of TD Cowen sought clarification on the EOP program, asking how much was realized in Q2 results and how the margin uplift is allocated between the supply line and individual site margins. He also asked for an explanation of the net inflow from financing activities on the cash flow statement.

Answer

Mohit Bhardwaj, EVP of Strategy, Business Development & IR, clarified that $30 million in EOP benefits were realized in Q2, with $10 million from the El Dorado refinery and the remainder from the trading and supply segment and other cost improvements. Mark Hobbs, EVP and CFO, explained that the positive financing cash flow was driven by balance sheet enhancements, including a successful high-yield offering at DKL that provided liquidity to pay down its revolver following recent growth investments.

Jason Gabelman of TD Cowen sought clarification on the EOP program, asking how much was realized in Q2 results versus the run-rate and how margin uplift is split between the supply line and refinery margins. He also asked what contributed to the net inflow from financing cash flows during the quarter.

Answer

EVP Mohit Bhardwaj confirmed that $30 million of EOP benefits were fully realized in Q2 financials, distributed across the El Dorado refinery, the trading and supply segment, and general cost improvements. EVP and CFO Mark Hobbs explained that the positive financing cash flow was driven by a successful high-yield offering at DKL. This provided liquidity to pay down its revolver following recent growth investments, including the Gravity acquisition and the Libbey II plant.

Jason Gabelman sought to quantify the EOP program's impact, asking how much was realized in Q2 results and how the margin uplift is allocated between the supply line and individual refinery margins. He also asked for an explanation of the net inflow from financing activities on the cash flow statement.

Answer

EVP Mohit Bhardwaj confirmed that the full $30 million of EOP benefits flowed through the Q2 financials, with $10 million from El Dorado and the remainder from the trading and supply business and cost improvements. EVP and CFO Mark Hobbs addressed the financing cash flow, explaining that a successful high-yield offering at DKL provided liquidity to pay down its revolver, which had been used for acquisitions and growth projects like the Libbey II plant, thus strengthening the balance sheet.

Jason Gabelman from TD Cowen questioned the Q2 operating expense guidance, noting it seemed high compared to prior periods with similar throughput, and asked for an outlook on OpEx trends for the second half of the year.

Answer

President and CEO Avigal Soreq explained that the higher Q2 OpEx guidance is driven by the addition of a new natural gas plant and a significant planned increase in system throughput of over 30,000 barrels per day. He also stated that further OpEx improvements are expected in Q3 and Q4 but declined to provide specific guidance for the second half of the year, while expressing optimism.

Jason Gabelman inquired about the timeline and use of proceeds for the new DKL unit repurchase program and asked if the recent weakness in the supply and marketing segment represents a new seasonal norm.

Answer

Avigal Soreq, President and CEO, explained the DKL repurchase program is a flexible, tax-efficient tool running through 2026. He stated that proceeds at the DK level will support a balanced capital allocation strategy of dividends, balance sheet management, and share buybacks, which are active in Q1 2025. He declined to provide specific guidance on supply segment seasonality but highlighted progress on controllable optimization efforts.

Jason Gabelman asked for an updated view on Delek's target net debt and cash balance at the parent company level following recent transactions. He also sought to clarify if the full-year 2024 CapEx guidance of $330 million excludes spending on the new gas processing plant.

Answer

President and CEO Avigal Soreq reiterated the company's capital strategy and a long-term net debt target of around $600 million, stating the retail sale's EBITDA was not significant enough to alter this target. An executive confirmed that the $330 million CapEx guidance for 2024 does not include the separate $90 million to $100 million of spending on the gas processing plant for the year.

Jason Gabelman of TD Cowen questioned the impact of steel tariffs on CapEx and project multiples for builds like NESE. He also asked how an increased LNG export forecast affects the outlook for Gulf Coast projects and storage opportunities.

Answer

EVP & COO Larry Larsen stated that steel tariff impacts are manageable at 1-3% of total project costs. President & CEO Chad Zamarin added that permitting reform offers far greater cost-saving opportunities. On LNG, Zamarin confirmed the demand upside is driving projects like the Haynesville gathering expansion, while Larsen noted the Pine Prairie storage expansion is seeing demand beyond its capacity, prompting work on future expansions.

Jason Gabelman of TD Cowen inquired about the impact of steel tariffs on project CapEx and returns for projects like NESE. He also asked how the rising LNG export forecast affects Williams' project outlook and storage opportunities.

Answer

EVP & COO Larry Larsen stated that steel tariffs would have a manageable 1-3% impact on total project costs. President & CEO Chad Zamarin added that permitting reform presents a much larger opportunity for cost savings. Regarding LNG, Zamarin confirmed the demand is driving new projects, like expansions in the Haynesville, while Larsen noted that the Pine Prairie storage expansion is already seeing demand exceed its initial capacity.

Jason Gabelman asked for clarification on the sequencing of insurance proceeds related to the Martinez incident, particularly how they cover both capital costs and lost profits.

Answer

President & CEO Matthew Lucey explained that it is a 'fool's errand' to forensically separate proceeds between property damage and business interruption, as it is a single policy. He stated that, to date, insurance collections have roughly matched the economic impact of the incident and that PBF expects to receive further interim payments, similar to the one received in Q2.

Jason Gabelman of TD Cowen sought clarification on the Martinez outage, including the total repair cost, the payment schedule for business interruption insurance, and the critical path for restart. He also asked about the amount of non-core EBITDA in the logistics segment.

Answer

President and CEO Matthew Lucey reiterated the restart target is around the end of September and did not provide a total rebuild cost, noting it will be covered by insurance. He explained insurance payments will be part of a collaborative process, not a fixed schedule. Regarding logistics, Lucey did not quantify non-core EBITDA but confirmed the company continually evaluates its asset portfolio for value creation.

Jason Gabelman of TD Cowen sought clarity on the Martinez incident, asking if the entire facility was shut down, which unit was affected, and if PBF needed to source third-party products. He also questioned a guided increase in the Q1 share count.

Answer

President and CEO Matthew Lucey confirmed the entire Martinez refinery was taken down as a result of the fire, which occurred near the PADD 3 hydrotreater during preparations for a turnaround. He stated PBF can manage its commercial obligations without issue. CFO Karen Davis attributed the guided share count increase to potential dilution from incentive compensation.

Jason Gabelman questioned whether the $200 million in cost savings is an absolute reduction or intended to offset inflation. He also asked for an approximation of the headwinds from crude backwardation and co-products on margin capture in a more normalized environment.

Answer

Executive Michael A. Bukowski clarified that the $200 million savings target is an absolute reduction based on 2023 actual expenses, focused on efficiency initiatives rather than just offsetting inflation. Executive Thomas O'Connor addressed capture headwinds, explaining that Q3 was impacted by a confluence of events creating an unusually tight and expensive cash crude market. He noted that looking forward, the loosening of crude supply should be the primary benefit to refiners, more so than changes in co-product markets like pet coke or asphalt.

Jason Gabelman of TD Cowen questioned the strategic rationale for the LPG export build-out, asking if it's driven by upstream customer needs. He also asked how the need for a robust growth backlog to attract investors frames capital allocation decisions.

Answer

SVP Tug Hanley and Co-CEO A.J. Teague emphasized that their competitive position is based on brownfield economics and long-standing, sticky customer relationships. Co-CEO Randall Fowler explained that they are well-positioned for organic growth and that as capital needs moderate in 2026-2027, a step-up in free cash flow will allow for greater capital returns to investors.

Jason Gabelman of TD Cowen asked about the strategic drivers behind the LPG export build-out, questioning if it's necessary to compete for upstream volumes. He also asked how important maintaining a robust growth backlog is for attracting equity investment and framing capital allocation decisions.

Answer

SVP Tug Hanley and Co-CEO A.J. Teague highlighted their competitive advantages, including brownfield economics, the Mont Belvieu pricing hub, and long-standing international relationships. Co-CEO Randall Fowler stated the company is well-positioned in key basins and expects discretionary free cash flow to increase significantly in 2026-2027, allowing for greater capital return to investors.

Jason Gabelman of TD Cowen asked for Valero's perspective on the global distillate outlook, specifically whether lower exports from regions like Spain and the Middle East are transitory. He also inquired how many incremental OPEC barrels are expected to flow to North America, considering potential stockpiling by China.

Answer

EVP & COO Gary Simmons detailed that low global distillate inventories are due to multiple factors, including weak prior-year margins, a cold winter, and lower biofuel production. Regarding crude flows, Simmons stated that while he lacks insight into China's plans, Valero has recently re-engaged with Middle Eastern suppliers, indicating an expectation that some of their increased production will make its way to the U.S. market.

Jason Gabelman of TD Cowen asked for Valero's view on whether lower distillate exports from other global regions are transitory and how much new OPEC supply might reach North America given potential Chinese stockpiling.

Answer

EVP & COO Gary Simmons detailed a confluence of factors tightening the global distillate market, including low utilization, weather, and lighter crude slates, suggesting a complex situation. He also expressed confidence that some increased Middle Eastern crude production will flow to the U.S., noting that Valero has re-engaged with historic suppliers in the region.

Jason Gabelman from Cowen inquired about the impact of U.S. natural gas price volatility on operating expenses and whether lower European gas prices were enabling higher refinery runs in that region.

Answer

An executive identified as Greg explained that due to U.S. natural gas volatility, Valero is buying on an as-needed basis rather than hedging. He noted that in Europe, current gas prices are not altering their operational mode, and they continue to maximize throughput with typical fuel source optimization.

Jason Gabelman asked a two-part question about natural gas dynamics: whether rising U.S. prices are impacting operating expenses and if lower European prices are enabling higher secondary unit rates at its Pembroke refinery.

Answer

An executive named Greg explained that due to regional volatility driven by LNG facility performance, Valero is cautiously buying U.S. natural gas on an as-needed basis. For the Pembroke refinery in Europe, he stated that current natural gas prices are not causing a change in operations, and the refinery continues to run to maximize throughput and production, with typical optimization between fuel sources.

Jason Gabelman asked why the 2025 sustaining CapEx budget of $1.6 billion is higher than average and if it signals increased turnaround activity. He also sought clarification on whether Valero's Foreign Trade Zones (FTZs) would offer protection from potential tariffs.

Answer

Lane Riggs, CEO, confirmed that the higher sustaining capital budget is due to the lumpy nature of spending, with 2025 having additional turnaround work. Rich Walsh, an executive, explained that the impact of FTZs on tariffs is uncertain until a program is structured, noting their primary benefit is for managing import/export operations.

Jason Gabelman of TD Cowen asked if Valero's target cash balance is designed to support buybacks in a downturn and whether weak cracks are forcing the U.S. to 'push' exports.

Answer

EVP and CFO Jason Fraser confirmed that the $4-5 billion target cash balance provides flexibility to maintain their buyback approach during a downturn. EVP and COO Gary Simmons refuted the 'push' theory for exports, arguing that very low gasoline inventories indicate a market 'pull,' and noted that Valero is currently receiving an export premium for its barrels.

Jason Gabelman of TD Securities asked for insight into which elements of the RVO proposal are considered firm versus negotiable by the administration and requested an update on the status of monetizing the 45Z tax credits.

Answer

COO Matt Jansen and CFO Robert Day conveyed that the administration's priorities for the RVO appear to be supporting U.S. farm prices and the domestic biofuel industry while minimizing federal costs. CEO Randall Stuewe addressed the 45Z question, stating that the company is 'very close' to finalizing a monetization plan and that an update should be expected shortly.

Jason Gabelman of TD Securities asked about the process for monetizing the Producer's Tax Credit (PTC) and the drivers behind the price strength of waste oils compared to vegetable oils.

Answer

CFO Bob Day explained that the PTC monetization process is moving forward efficiently, with plans for an auction in late Q2. COO Matt Jansen attributed the waste fat price premium to its inherently lower carbon intensity score and limited supply. Day added that the versatility of used cooking oil, which is eligible for more biofuel types and destinations than crop oils, also contributes to its higher value.

Jason Gabelman asked about the potential risk of Europe imposing anti-dumping duties on SAF and how Darling would manage it. He also asked for the company's view on why LCFS credit prices have not recovered more significantly.

Answer

COO of North America Matt Jansen called the duty risk hypothetical and noted DGD has a balanced sales portfolio across the U.S. and Europe. CEO Randall Stuewe added that customer contracts with optional origin mitigate this risk. CFO Bob Day explained that the LCFS market is awaiting final CARB amendments and must first work through a large bank of existing credits, expecting a slow price recovery through 2025.

Jason Gabelman asked about the dynamic of Diamond Green Diesel's cash distribution outpacing its earnings and whether this indicated a change in the joint venture's distribution policy.

Answer

CFO Brad Phillips explained that the higher distribution was not a policy change but a result of a catch-up in Blender's Tax Credit (BTC) payments from the IRS. A slowdown in payouts from late 2023 was resolved during Q3, leading to multiple distributions being received in the quarter as the payment schedule returned to normal.

Jason Gabelman asked about the capital allocation strategy for the stock buyback program, including the source of funds and comfort level with the cash balance. He also requested details on the RNG Incentive Act being supported in Washington D.C.

Answer

President and CEO Andrew Littlefair affirmed the buyback was driven by the stock's undervalued price. Executive Robert Vreeland clarified they reinstated a pre-existing, board-approved program with about $26 million remaining. Andrew Littlefair described the RNG Incentive Act as a bipartisan bill that would provide a $1 per gallon tax credit for RNG at the nozzle, viewing it as a modern successor to the AFTC.

Jason Gabelman asked if the $104 million in 2025 upstream CapEx is funded by JVs or Clean Energy directly. He also questioned why Clean Energy is hesitant to book the 45Z credit when others are, and where the credit would be booked in the business segments.

Answer

Executive Robert Vreeland clarified that about 60% of the $104 million CapEx would be a contribution into a JV, with the remainder for a 100% company-owned project. He explained the company is not booking the 45Z credit yet due to uncertainty in the ongoing comment and finalization process. He confirmed that if booked, the credit would be recognized entirely within the upstream business segment.

Jason Gabelman asked for an update on the steady-state operating expenses and credit value capture for upstream RNG projects. He also inquired about the current trend in the company's project development backlog.

Answer

Executive Robert Vreeland stated that while a $3/gallon OpEx is an achievable target for upstream projects, they are not there yet as assets are still ramping up. He confirmed their credit share is generally in the 80% range. CEO Andrew Littlefair added that while the project backlog is not paused, the company is being prudent and disciplined with its capital, focusing on executing its current slate of projects.

Jason Gabelman asked about the remaining items needed for the mid-scale trains FID, the timeline for the Sabine Pass expansion FID, and whether the company's funding outlook for the year had shifted.

Answer

President and CEO Jack Fusco identified the finalization of FERC, DOE, and air permits as key remaining items. EVP and CFO Zach Davis added that the Sabine expansion is being optimized for a potential FID in late '26 or early '27. Davis confirmed no shift in funding strategy, stating strong cash flow allows them to fund growth and draw on their term loan later than initially forecast.

Jason Gabelman asked if Cheniere has a specific equity-to-debt funding target for the combined Stage 3 and mid-scale expansion projects.

Answer

EVP and CFO Zach Davis clarified that for current projects like Stage 3 and Mid-scale 8 & 9, the company plans to use its existing cash balance and undrawn term loan, avoiding the need for new incremental debt. For future projects like the Sabine Pass expansion, he stated the target funding mix is approximately 50/50 debt-to-equity, a structure that aligns with maintaining an investment-grade rating and keeping leverage under 4x during construction.

Jason Gabelman asked whether potential Q4 revenues would shift to Q1 2025 if delayed, what constitutes the '$10 million base business' and its growth drivers, and how the ArcelorMittal offtake revenue is calculated regarding ethanol prices and volume changes.

Answer

CEO Jennifer Holmgren confirmed that any delayed Q4 revenues are a matter of 'when, not if,' and would likely be recognized in early 2025. CFO Geoff Trukenbrod described the $10 million base business as recurring revenue from engineering services and JDA/contract research, which is expected to grow as more projects advance. Jennifer Holmgren explained the ArcelorMittal revenue figures are based on offtake volumes (5,000 then 10,000 tons) and approximate ethanol/CarbonSmart values, reflecting a strategy to secure long-term supply.

Jason Gabelman of TD Cowen inquired about the timing of the lumpy Q4 revenue drivers, the definition and growth prospects of the '$10 million base business', and the variability of the ArcelorMittal ethanol offtake agreement revenue.

Answer

CEO Jennifer Holmgren confirmed that potential Q4 revenues are a matter of 'when, not if,' and would likely shift to the next quarter if delayed. CFO Geoff Trukenbrod described the '$10 million base business' as recurring revenue from engineering services and JDA work. Holmgren explained the ArcelorMittal revenue figures are based on offtake volumes (5,000 then 10,000 tons) for the CarbonSmart business.

Asked for the key terms of the new $40 million convertible note financing and about the company's cash position and path to breakeven EBITDA following the investment.

Answer

The convertible note has an 8% paid-in-kind (PIK) coupon and a base conversion price of $1.52, with more details in the 8-K filing. The company stated the additional $40 million provides sufficient funding through 2025 and they are very pleased with the strategic partnership with Carbon Direct. While not providing guidance beyond 2024, they expect cash burn to decline and plan to raise additional capital.

Jason Gabelman of TD Cowen requested key terms for the newly announced $40 million convertible note financing and asked for an update on the company's liquidity position and its path to achieving breakeven EBITDA.

Answer

CFO Geoffrey Trukenbrod provided key terms for the convertible note, including an 8% paid-in-kind (PIK) coupon and a $1.52 base conversion price, directing to the 8-K filing for full details. He stated the new capital provides sufficient funding through 2025. CEO Jennifer Holmgren emphasized the strategic value of the new investor, Carbon Direct Capital, a specialist in the carbon management ecosystem.

Jason Gabelman of TD Cowen requested details on the key terms of the newly announced $40 million convertible note financing and asked for an update on the company's cash position and its path to achieving breakeven EBITDA.

Answer

CFO Geoffrey Trukenbrod provided the key terms for the convertible note, including an 8% paid-in-kind (PIK) coupon and a base conversion price of $1.52, noting it's part of a potential $150 million facility. He confirmed the additional capital provides sufficient funding through 2025. CEO Jennifer Holmgren emphasized the strategic value of partnering with Carbon Direct Capital, a specialist investor in the carbon management space.

Inquired about the nature of the 9 new projects added to the pipeline and whether the 2025 breakeven EBITDA target is still expected.

Answer

The new projects are varied and the addition rate will be lumpy; specific partners cannot be named yet. The company did not reaffirm the 2025 breakeven EBITDA target, stating that while significant growth is expected, they have not provided guidance beyond 2024.

Jason Gabelman inquired about the nature of the nine new projects added to the pipeline and asked for an update on the company's previously mentioned 2025 breakeven EBITDA target.

Answer

CEO Jennifer Holmgren described the project pipeline additions as inherently lumpy but noted growing interest from partners in replicating projects. CFO Geoffrey Trukenbrod stated that the company has not provided guidance beyond 2024 and reiterated that the path to profitability is a function of significant top-line growth.