Delek US - Q4 2023

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the Delek US fourth-quarter earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, February 27, 2024. I would now like to turn the conference over to Rosy Zuklic, VP Investor Relations. Please go ahead.

Rosy Zuklic (VP of Investor Relations and Market Intelligence)

Good morning and welcome to the Delek US fourth-quarter earnings conference call. Participants on today's call will include Avigal Soreq, President and CEO; Joseph Israel, EVP Operations; Reuven Spiegel, EVP and Chief Financial Officer; Mark Hobbs, EVP, Corporate Development. Today's presentation material can be found on the Investor Relations section of the Delek US website. Slide 2 contains our Safe Harbor Statement regarding forward-looking statements. We'll be making forward-looking statements during today's call. These statements involve risks and uncertainties that may cause actual results to differ materially from today's comments. Factors that could cause actual results to differ are included here as well as in our SEC filings. The company assumes no obligation to update any forward-looking statements. I will now turn the call over to Avigal for opening remarks.

Avigal Soreq (President and CEO)

Thank you, Rosy. Good morning and thank you for joining us today. During the fourth quarter, our operation ran well at the higher end of our guidance. We did a good job of focusing on what we could control. With that, I would like to thank each member of the Delek team. From a market perspective, during the quarter, we saw a weakness in product demand consistent with the seasonal trend. In refining, we achieved a record total throughput in the quarter, but still see opportunities for further operational improvements. Joseph will provide the details of our refinery operation and progress at Big Spring. We delivered another record quarter in our logistics segment. The consistent strong performance from our logistics segment validates our favorable position in the Permian Basin. Our renewables segment reported its best Q4 outside of COVID year 2020.

Turning to the full year, 2023 was a strong year for Delek. We achieved $950 million of Adjusted EBITDA. We made significant progress on our key objectives. As a reminder, they are operational excellence, financial strength and shareholder return, and executing our strategic initiatives. In terms of operational excellence, our team delivered a solid performance across all businesses this year. We made strategic investment in our people and assets. This improved our foundation for profitable and sustainable growth. Our planned major turnaround of the Tyler refinery was completed on time, on budget, and with no recordable incidents. The result was improved reliability, yield recovery, and stronger capture rates. We are very focused on our safety practices and pushing for constant improvement. I'm pleased to report that 2023 was our best year on record for safety performance. This includes personal and process safety.

Turning to financial strength and shareholder return, we continue to be shareholder-friendly. In 2023, we returned $146 million of shareholders through dividend and share buyback. We also improved our financial position by using our strong cash flow to reduce debt by $454 million. We made progress on our strategic initiatives. As a result of our cost reduction effort, we found more efficient ways of working. This has delivered tangible results. For example, our inventory management has resulted in improvement in both earning and debt levels. We are making progress to reach our goal of $100 million run rate cost reduction. Lastly, significant headway was made towards unlocking value in transit in our business. Now, turning to 2024, our key priorities have not wavered. We'll continue our drive towards operational excellence, staying focused, and safe and reliable operation. We have a turnaround of our Krotz Springs refinery in Q4 of 2024.

Joseph will give context on the improvement we expect post-turnaround. We'll also talk about additional initiatives we are undertaking in the refining segment. Financial strength and shareholder return will remain key. We believe we are well positioned to capture opportunities. We'll continue our disciplined capital allocation with the best interest of our stakeholder in mind. We look to deliver strong portfolio performance and results. We'll continue to optimize the balance sheet and remain committed to sustainable and competitive shareholder returns. In 2023, we returned $146 million to shareholders. $85 million of this was share buyback. As we demonstrate in 2023, we are committed to shareholder returns based upon free cash flow. As we execute 2024, we'll remain and maintain this approach, and we'll keep a balanced approach between improving our financial strength and shareholder returns. On our strategic initiatives, we'll remain focused and advanced.

For 2024, we estimate our CapEx to be approximately $330 million, which reflects a reduction from 2023 levels. The capital program shows our dedication to maintaining safe, reliable operation, enhancing our portfolio with strategic growth projects, and delivering shareholder value while maintaining our financial strength and flexibility. In 2024, we will continue to explore opportunities in the energy transition space that meet our return to capital objectives. We announced earlier this month that our Big Spring refinery was selected by the Department of Energy for a project that will advance carbon capture technology in a safe, environmentally responsible manner. This project will serve our industry well into the decades to come. Now, I would like to turn the call over to Joseph, who will provide additional detail on our operations.

Joseph Israel (EVP Operations)

Thank you, Avigal. Moving to slide 5 through 7. In the fourth quarter, our team processed a back-to-back record high of 306,000 barrels per day of total throughput. In Tyler, total throughput in the fourth quarter was approximately 79,000 barrels per day. Production margin in the quarter was $11.54 per barrel, and operating expenses were $5.13 per barrel, which reflects approximately $0.55 per barrel of an employee benefit accrual and accelerated tank farm work. In the first quarter, the estimated total throughput in Tyler is in the 71,000-74,000 barrels per day range. In El Dorado, total throughput in the quarter was approximately 88,000 barrels per day, a record high throughput for the plant. Our production margin was $4.94 per barrel, and operating expenses were $4.58 per barrel. Estimated throughput for the first quarter is in the 82,000-85,000 barrels per day range.

After working the El Dorado fundamentals in the past several years and improving reliability, the team is focused on profit improvement opportunities, mainly in the crude sourcing, asphalt, and wholesale areas. By accessing heavier grades in El Dorado, we will use existing refinery configuration to improve asphalt capabilities and optimize margins. By increasing regional sales over pipeline on the light product side, we will improve commercial optionalities. In Big Spring, total throughput for the quarter was approximately 58,000 barrels per day, driven by maintenance work, mostly reflected in our guidance but with additional discoveries that were addressed. Our production margin was $6.05 per barrel, including an estimated unfavorable $3.40 per barrel impact from the maintenance activities.

Operating expenses in Big Spring were $8.98 per barrel, including approximately $1.90 per barrel related to the additional maintenance, $1.40 per barrel for the integrity program, and $0.40 per barrel related to employee benefit accrual. Estimated throughput for the first quarter is in the 63,000-66,000 barrels per day range. In Krotz Springs, total throughput was approximately 81,000 barrels per day. Our production margin was $4.93 per barrel, and operating expenses were $4.83 per barrel. Krotz Springs' team is preparing for the fourth quarter turnaround, which will include regular maintenance as well as major upgrades to our FCC and coker unit. Execution cost is estimated at $115 million, and expected return from the upgrades is approximately $30 million per year, coming mainly from yield and rate flexibility improvement and energy efficiency.

Plant's throughput for the first quarter is in the 73,000-76,000 barrels per day range, and for our entire refining system, implied throughput target is in the 289,000-301,000 barrels per day range as we position ourselves for the gasoline season. In the fourth quarter, wholesale marketing contributed a loss of approximately $20 million. This is a $40 million negative variance to the third quarter. The decrease reflects seasonal trends along with challenging Mid-Con supply-demand dynamics and lower RINs prices. We are expecting our commercial initiatives to provide us with better optionality in the future. Asphalt marketing contributed approximately $5 million compared with $15 million in the third quarter and consistent with our seasonal trends. In summary, 2023 was an important and successful year for our system in many ways.

Our focus on people, process, and equipment is giving us a strong foundation to optimize what we have and position our system for growth. While Tyler, Krotz Springs, and El Dorado have optimized operations over the years, we remain confident about our progress in Big Spring's reliability ahead of the coming gasoline season. U.S. refining market dynamics for 2024 are constructive, and we are well positioned to capture these opportunities. I will now turn the call over to Reuven for the financial variance.

Reuven Spiegel (EVP and CFO)

Thanks, Joseph. Starting on slide 8, for the fourth quarter of 2023, Delek US had a loss of $165 million or $2.57 per share. Adjusted net loss was $93 million or $1.46 per share, and Adjusted EBITDA was $61 million. Cash flow from operations was $91 million. On slide 9, the waterfall of Adjusted EBITDA from the third quarter to the fourth quarter of 2023 shows that the primary driver for the lower results was from refining. This reflects the significantly lower cracks in the fourth quarter relative to the third quarter. Logistics set a new record quarter at over $99 million. Retail was down largely due to seasonal trends. Although we were in a falling crude environment, we saw lower margins but maintained strong volumes at our stores. Corporate segment cost improved compared with last quarter, largely due to lower employee benefit expenses.

Moving on to slide 10 to discuss the cash flow. We drew $80 million in cash during the quarter, ending the fourth quarter with a balance of $822 million. Cash flow from operations, as I said, was $91 million. Included in this amount is a positive $223 million of working capital. This was largely from improved inventory management and lower product prices reflected in receivables. Investing activities of $69 million is mainly for capital expenditures. Financing activities of $101 million primarily reflects paydown of debt and return to shareholders. This includes $41 million debt repayment, $20 million in buybacks, $15 million in dividends, and $10 million in distribution payments. On slide 11, we have the breakout of the 2023 capital program and guidance for 2024. Full year 2023 was $372 million.

Approximately 80% of the spend was for sustaining and regulatory projects, which include the major turnaround at the Tyler refinery and reliability work at the Big Spring refinery. Our forecasted 2024 capital program is $330 million, which includes $255 million for sustaining and regulatory projects and $75 million for growth projects. In refining, we plan to invest $220 million, with 93% of the capital dedicated towards sustaining and regulatory projects, most of which is for the Krotz Springs refinery major turnaround scheduled during the fourth quarter of 2024, as well as projects at the Big Spring refinery to improve capture rates. In logistics, the company expects the capital program to be approximately $70 million, with $50 million for growth projects. Growth projects will advance new connections in both the Midland and Delaware gathering systems, enabling continued volume growth at the partnership.

The retail segment capital expenditures are expected to be approximately $15 million. Funds are dedicated to maintaining Delek's 250 convenience stores, including interior rebranding and re-imaging initiatives. The corporate and other segment includes approximately $25 million of capital expenditures, which is primarily to fund IT improvements. Net debt is broken out between Delek and Delek Logistics on slide 12. During the quarter, we drew $80 million of cash and paid down $41 million of debt, ending the quarter with a net debt position of $78 million. Finally, slide 13 covers outlook items. In addition to the guidance Joseph provided, for the first quarter of 2024, we expect operating expenses to be between $215 million-$225 million, G&A to be between $60 million-$65 million, D&A to be between $90 million-$95 million, and net interest expense to be between $80 million-$85 million.

We will now open the line for questions.

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear a three-tone prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Neil Mehta (Managing Director and Head of Americas Natural Resources Equity Research)

Yeah, thank you so much, team. I guess the first question is just an update on the Sum of the Parts unlock. I know, Avigal, it's something you've talked about over the last couple of years and your latest thinking around that and the milestones we should be watching on that.

Avigal Soreq (President and CEO)

Hey, Neil. How are you? Yeah, Neil, you know how much energy we have around the topic and the way they're doing the call. A significant headway, and some of the parts are going to happen. I want to assure you that. Mark, you want to add more?

Mark Hobbs (EVP and Corporate Development)

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

Neil Mehta (Managing Director and Head of Americas Natural Resources Equity Research)

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

Avigal Soreq (President and CEO)

Yeah. So sure, Neil. You can see it. Very easy to see that we had a record drop during the quarter, and we actually met all the guidance you gave in terms of G&A, OpEx, very strong cash flow. Supply and marketing, obviously, had a weaker, which is in line with the seasonal trend. We've seen the decline of supply and marketing flat the previous quarter and a big positive in Q2. So there is some seasonality into decline, which is more market-driven. But listen, we are focusing on what we can control, and we did a good job during the quarter. Joseph, I don't know if you have anything to add to that.

Joseph Israel (EVP Operations)

Yeah, the wholesale marketing contributed a negative $20 million and asphalt a positive $5 million, consistent with the seasonal trends. Wholesale marketing was challenged, and I think you heard it from most refiners, beyond seasonal trends driven by inclement weather in the Mid-Con. The weather kept demand and margins low, especially in December, and going through the general freeze. The other element in 4Q was the lower RIN price, which helped the refining capture but hurt the RINs value really generated by wholesale marketing, the blender at this point. So in the past several weeks, to your point, Neil, the high inventory situation in the Mid-Con have resolved through both supply and demand fronts. The commercial optionality focus in El Dorado, which we discussed in the prepared remarks, will help us in the future to navigate through this type of volatility.

Neil Mehta (Managing Director and Head of Americas Natural Resources Equity Research)

Thanks, Joseph. Thanks, team.

Reuven Spiegel (EVP and CFO)

Thank you.

Joseph Israel (EVP Operations)

Thank you.

Reuven Spiegel (EVP and CFO)

Your next question comes from John Royall with JPMorgan. Please go ahead.

John Royall (Executive Director)

Hi, good morning. Thanks for taking my question. My first one's on working capital. You've talked about the inventory management side, and you mentioned there wouldn't be a reversal of 3Q's tailwind. It looks like not only did it not reverse, but you had an even bigger tailwind in 4Q despite the falling crude price. Can you speak a little bit more to your efforts around working capital and inventory management? And is there more to go there? Should we expect further working capital tailwinds going forward, all other things equal?

Avigal Soreq (President and CEO)

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

Reuven Spiegel (EVP and CFO)

Sure. Good morning, and thank you for the question. I mean, we took a more holistic view around our balance sheet health from the beginning of the year. So the third and fourth quarter were really the fruition of some of the initiatives that we had all along. Obviously, managing and optimizing inventory was one of them. We did a big chunk of it in the third quarter, but we completed the work in the fourth quarter, and that contributed roughly $190 million to working capital. In addition to that, we had the ZBB effort, which we already accomplished on a run rate, $80 million saving a year, of which $57 million were realized in 2023, mostly in the third and fourth quarter. Our focus was debt reduction, so we reduced debt by roughly $450 million.

And that, along with the safety and reliability efforts, kind of contributed to the end result of the working capital. I think with regard to going forward, we kind of reached an equilibrium at the level of inventory we want to manage. So it will be more a result of quarterly events that will impact the working capital in the future.

John Royall (Executive Director)

Great. That's really helpful detail. Thank you. And then could you talk about some of the opportunities you mentioned around energy transition? I think you mentioned carbon capture at Big Spring. Is this committed at this point, and is there any capital in the 2024 budget for this? And can you also remind us just on the status of the option you've had on the renewable side that you've spoken to in the past?

Avigal Soreq (President and CEO)

Yeah, absolutely, John. So at this point, we were elected to negotiate with the DOE. So there is no material capital for 2024, and we're going to do everything we're going to do under the strict benchmark that we put on ourselves from a cost of capital return or from IRR standpoint. So we are not going to break that metrics. But John, from a holistic standpoint, you can see a very nice testimony that Big Spring and Delek are market leaders in this area, and we're elected, the first refinery to elect to elect as energy transition by the DOE, which is a very big deal. And we believe that those projects will be further in the future, and we will make it a capital advantage or capital to meet our capital benchmark. Around the option we have on the renewable diesel, we are looking on that carefully.

Obviously, it's a cheap way to get a look into renewable diesel. As you can see, RIN prices don't help renewable diesel lately, so we are fortunate not to commit $200 million, $300 million, and then not benefit from that. So we were fortunate around that. But Mark is very close to that. I don't know, Mark, if you want to add anything around the option.

Mark Hobbs (EVP and Corporate Development)

Yeah, sure. Around the option, John, we're obviously monitoring it very closely. Our understanding based on publicly available information is that they're intending to start commissioning the facility in the first quarter, and then we will watch it as it runs through the first quarter and the second quarter. Once they hit a run rate for 90 days at 80% utilization, then that's when we would have the opportunity to take a look at it. But we're monitoring it closely. As Avigal said, it could be potentially an attractive and low-cost opportunity for us to acquire a meaningful position in a well-located renewable diesel facility. So we're watching it closely.

John Royall (Executive Director)

Thank you.

Reuven Spiegel (EVP and CFO)

Thank you, John. Appreciate it.

Operator (participant)

Your next question comes from Roger Read with Wells Fargo. Please go ahead.

Roger Read (Managing Director and Senior Equity Research Analyst)

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

Avigal Soreq (President and CEO)

Yeah, so we are not going to give the guidance for deadline. It's going to be. It's not fit with what the market usually gives, so we'll be consistent with our build around it. Overall, there is a positive trend correlated to driving seasonal. We all seen the information around from a macro standpoint around gasoline and diesel. At gasoline, we are looking at around the five-year average a bit below, and on diesel, we are at the lower end of the five-year average. So both look constructive. But beyond general market information, we are not going to give guidance for supply and marketing.

Joseph Israel (EVP Operations)

Yeah, nothing to add.

Avigal Soreq (President and CEO)

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

Roger Read (Managing Director and Senior Equity Research Analyst)

Okay, fair enough. Although I guess it seems the weather's more benign here as we are two-thirds of the way through, so maybe we'll get a tailwind. The other question I have, and this is on slide 7, Big Spring refinery has been typically, we think of it as one of the better units overall in the company, but it's been challenged here recently. You've got the reliability improvement, the $100 million, two-thirds roughly this year, a third next year. What would you point to as we look at, let's call it, progress the first two quarters of the year that are going to get capture rate above 70%? I mean, is it just that the unit should run more consistently? Is there some actual changes in the facilities that would affect yield, a change in crude you're going to put in there, something along those lines?

Maybe just kind of help us understand what we should look for as the favorable road signs as we go through 2024.

Avigal Soreq (President and CEO)

Yeah, for sure. Joseph, we give a complete answer, but I will say just from a big picture standpoint, Big Spring is a refinery that's new to run consistent $70,000 a day of throughput and more, and with $25 OpEx and less, you can see that what the trend years before. There is no reason we cannot bring it back to where it used to be. That's the highlight of the $100 million. So if we run it consistent as that refinery used to run in the past, there is no reason we cannot get to what it used to run years ago. Joseph, please.

Joseph Israel (EVP Operations)

Yeah, so as we mentioned in the preparatory remarks, positioning Big Spring's ability to service well already through the coming gasoline season. We have been on a clear execution path addressing people, process, equipment gaps. And as we mitigate the different risks, we should see improved reliability, meaning lower LPO, better capture, lower cost structure. So as we communicated in the past, we are expecting throughput to stabilize north of 70,000 and capture around 70%, to tell you, Roger, on mid-cycle basis. OpEx run rate should stabilize around $550, probably, per barrel by end of the year. And a linear reduction, maybe of $1 per barrel reduction every quarter until end of the year, would probably be a good assumption. So bottom line, it will take all of the above, people, process, equipment, to get where we want to get. And we are very encouraged by the process.

We have less and less surprises as the time goes by, and we are very confident about our capabilities already this coming spring.

Roger Read (Managing Director and Senior Equity Research Analyst)

All right. Appreciate that. Thanks.

Operator (participant)

Your next question comes from Matthew Blair with TPH. Please go ahead.

Matthew Blair (Managing Director)

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

Avigal Soreq (President and CEO)

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

Matthew Blair (Managing Director)

Okay.

Avigal Soreq (President and CEO)

Clear short run.

Matthew Blair (Managing Director)

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

Avigal Soreq (President and CEO)

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

Yeah. And the thing I would say is you may have an old note based on what previously we would have in there. And as you said, trading and supply, the line's no longer trading and supply. It's supply and marketing. And again, what we have in there is three components. There's the wholesale marketing, there's the asphalt marketing, and then we have the supply business. And the wholesale marketing and the asphalt business tend to have a little bit more stability. Now, they do have fluctuations based on market conditions. Case in point, what Joseph spoke about, the fact that we had a $40 million variance between the third quarter and the fourth quarter because of the Mid-Con environment that we saw in the fourth relative to the third, and then obviously the movement in the Brent prices. Asphalt tends to be a little bit more stable.

You've got seasonality with the fact that the quarters during the summer months tend to be more stable and stronger. And you've got the first quarter and the fourth quarter being a little bit on the weaker side. So I think the fourth quarter is a good indicator of what a first fourth quarter tends to look like. And then you've got stronger quarters in the middle. The third component being the supply, that one's the one that's a little bit harder to model because the supply business handles both supplying our refineries from a crude perspective and also unloading the refineries and also supplying our DKL system, right? And so depending on disruptions throughout the entire system, you may have a little bit of fluctuation, right? But the other two pieces are a little bit easier to model.

Matthew Blair (Managing Director)

Great. Thank you.

Operator (participant)

Your next question comes from Kalei Akamine with Bank of America. Please go ahead.

Kalei Akamine (Senior Equity Research Analyst)

Hey, guys. Doug sends his with regards from the West Coast. I've just got a couple also on slide number 6 here. I guess the first question is on the Krotz turnaround, just hoping that you can give us an idea of the scope of the work that you're performing and how that could potentially drive better commercial performance on the back end, whether that's reliability or whether that's in yield. And I guess same question for El Dorado as you're thinking about the commercial opportunities there.

Avigal Soreq (President and CEO)

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

Joseph Israel (EVP Operations)

Yes. First, I'd like to remind everyone that we guided an annualized $18 million improvement ahead of the pilot turnaround, which we achieved on apples to apples market condition assumptions. We actually achieved $24 million, but the margins were better, so it's exactly what we expected. Now, back to KSR, we are expecting $30 million per year coming from maybe three things. One is a crude unit piping scope that will help our yield and rate flexibility. In other words, we will make more jet fuel and have more catch-up capacity. Second is FCCU. We're going to put a new reactor, and we're going to make some regenerator upgrades that will provide us with improved conversion and yields. And in addition, we are expecting better energy efficiency with a couple of turbines that we are replacing and higher reformer and catalyst activity post-turnaround.

Kalei Akamine (Senior Equity Research Analyst)

I appreciate that. I guess the next go ahead.

Avigal Soreq (President and CEO)

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

Joseph Israel (EVP Operations)

It's really kind of that's the limit when you think about El Dorado because of its configuration. Can load it with heavy, benefit from optionality, make asphalt, improve our asphalt quality, and netbacks. And overall, it will really contribute to that system capture.

Kalei Akamine (Senior Equity Research Analyst)

I'm so sorry for interrupting, guys. My follow-up question is just trying to understand the scope of the work. The scope of the work plan, it seems like it goes through 2025. So I'm trying to understand if that suggests that 2025 CapEx is going to be very similar to 2024. And I'll leave it there.

Joseph Israel (EVP Operations)

Are you asking about the 2025 scope for El Dorado?

Kalei Akamine (Senior Equity Research Analyst)

Well, you lay out this capital commitment or these accomplishments for 2023 through 2025, I think, on slide number 7. So given that the work plan is basically known for 2025, I'm trying to get a handle on what 2025 capital looks like if you've already defined the work. So I'm trying to figure out if that's similar to 2024.

Joseph Israel (EVP Operations)

Yeah. So the entire scope for KSR is 2024 with the $115 that we mentioned, and it's a part of our capital program for the year. With regards to El Dorado, there is no real cost estimate at this point. It's mostly commercial efforts and know-how and blending. We will come back later in the future if we feel like tanks or aggregate upgrades will be needed. But this is down the road, more than a year from now.

Avigal Soreq (President and CEO)

Yeah. And the reason that the slide says 2024 to 2025, as you can see, Big Spring, which is not related to capital, some of the upside is coming only in 2025. That's the reason the slide says 2024 to 2025. Don't read into that from a capital commitment to 2025, just to make it very clear. That was not the intent of the slide. The slide was saying that the benefit is going to come over time, but the turnaround, which is the heavy capital during 2024, is going to be completed in 2024.

Kalei Akamine (Senior Equity Research Analyst)

I got it. That's very clear. Thank you.

Operator (participant)

Your next question comes from Jason Gabelman with TD Cowen. Please go ahead.

Jason Gabelman (Managing Director and Energy Equity Research)

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

Avigal Soreq (President and CEO)

Hey, thanks for the question. I will give an overview around what we are thinking and how we think about capital return to investor. First of all, we are very committed to shareholder return. We had, from a free cash flow this year, over $146 million of return, $85 million of that buyback, and $61 million of dividend. We are committed to maintain the same philosophy going to 2024. You can probably appreciate that we bought 8% of our share in 2023. Nothing of what we are disclosing suggests any waiver of our approach. We are very committed to shareholder return. We want to see us as a market leader around it, and we are holding ourselves to that standard.

Jason Gabelman (Managing Director and Energy Equity Research)

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

Avigal Soreq (President and CEO)

So last year was not a mid-cycle environment. We want to do it from free cash flow. So we are committed to that. And it might be less. It might be more. It depends on market condition. I don't want to predict market condition. I'm optimistic about market condition, but you will hold me to that number, and I don't want to be held to a number that it's market condition-driven. You need to understand the state of mind is find ways to bring return to shareholder on the short term, mid term, and long term, and we are committed to all of them. And you have seen that us you have seen us demonstrate that. Jason, last year, very nicely, we did exactly what we said we're going to do, and we're going to keep doing what we say we're going to do.

Jason Gabelman (Managing Director and Energy Equity Research)

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

Avigal Soreq (President and CEO)

So, I think there was enough discussion about the weather in every call, so we are not going to talk about the weather. Other than the weather, other than the weather, we have a very good niche market, and we are very blessed and optimistic around it.

Jason Gabelman (Managing Director and Energy Equity Research)

Okay. Thanks.

Avigal Soreq (President and CEO)

You bet.

Operator (participant)

Ladies and gentlemen, as a reminder, should you have a question, please press star one. There are no further questions at this time. I would now like to turn the conference over to Avigal. Please proceed.

Avigal Soreq (President and CEO)

Thank you. I would like to thank my colleagues around the table for a great quarter, to thank the board of director, our investor, obviously, that joined us for this call, and most importantly, to our employees that make this company what it is. We'll talk again in the next quarter. Thank you, operator.

Operator (participant)

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and as I say, please disconnect your line.