Welcome to HollyFrontier's first quarter 2018 conference call and webcast. Hosting the call today from HollyFrontier is George Damiris, President and Chief Executive Officer. He is joined by Rich Voliva, Executive Vice President and Chief Financial Officer, Jim Stump, Senior Vice President of Refinery Operations, and Tom Creery, President, Refining and Marketing. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press * one on your touch-tone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. If you should require operator assistance, please press * zero. We ask that you please limit yourself to one question and one follow-up.
Additionally, we ask that you pick up your handsets to allow optimal sound quality. Please note that this conference is being recorded. It is now my pleasure to turn the floor over to Craig Biery, Investor Relations. Craig, you may begin.
Thank you, Luke. Good morning, everyone, and welcome to HollyFrontier's first quarter 2018 earnings call. I'm Craig Biery with Investor Relations for HollyFrontier. This morning we issued a press release announcing results for the quarter ending March 31st, 2018. If you'd like a copy of the press release, you may find one on our website at hollyfrontier.com. Before we proceed with prepared remarks, please note the safe harbor disclosure statement in today's press release. In summary, it says statements made regarding management expectations, judgments, or predictions are forward-looking statements. These statements are intended to be covered under the safe harbor provisions of federal securities laws. There are many factors that could cause results to differ from expectations, including those noted in our SEC filings. Today's statements are not guarantees of future outcomes.
The call also may include discussion of non-GAAP measures, please see the press release for reconciliation to GAAP financial measures. Also, please note that information presented on today's call speaks only as of today, May 2nd, 2018. Any time-sensitive information provided may no longer be accurate at the time of any webcast replay or reading of the transcript. With that, I'll turn the call over to George.
Thanks, Craig. Good morning, everyone. Today we reported first-quarter net income attributable to HollyFrontier shareholders of $268 million, or $1.50 per diluted share. Certain items detailed in our earnings release increased net income by $131 million on an after-tax basis. Excluding these items, net income was $137 million, or $0.77 per diluted share, versus a net loss of $33 million, or $0.19 per diluted share for the same period in 2017. Adjusted EBITDA for the period was $316 million, an increase of $230 million compared to the first quarter of last year. This increase was principally driven by our Refining and Marketing segment, where we were able to capitalize on favorable crude differentials and strong product crack spreads in our markets. Our Lubricants and Specialty Products business reported EBITDA of $41 million, driven by strong Rack Forward sales volumes and margins.
Rack Forward posted Adjusted EBITDA of $56 million, representing a 14% EBITDA margin and had operating costs of $36 million. HollyFrontier continues to expect Rack Forward EBITDA of $180 million to $200 million for 2018, with an EBITDA margin of 10%-15% of sales. Lower base oil cracks combined with the lingering impact of our feedstock supply issues hurt Rack Back earnings in the first quarter. With our feedstock supply issues behind us, we expect significant improvement in Rack Back as we enter the seasonally strong second and third quarters. We do have plant maintenance at our Mississauga facility in the second quarter, which will impact both Rack Forward and Rack Back volumes. Holly Energy Partners reported EBITDA of $89 million for the first quarter, compared to $70 million in the first quarter of last year.
This growth was driven by the acquisition of the Salt Lake City and Frontier Pipelines, as well as volume growth in HEP's crude gathering system. Distributable cash flow came in at $69 million, delivering a distribution coverage ratio of 1.04. During the quarter, we purchased $25 million worth of HFC shares. This demonstrates our disciplined capital allocation strategy of first maintaining our current assets and balance sheet strength. Second, sustaining a competitive dividend. Third, growing our business both organically and through transactions. Fourth, returning excess cash to shareholders. Going into the summer, we are optimistic about light products and lubricant markets, as well as the sustainability of crude differentials. Now I'll turn the call over to Jim for an update on our operations.
Thanks, George. For the first quarter, our crude throughput was 415,000 barrels per day, in line with our guidance of 410,000-420,000 barrels per day. While our crude throughput was impacted by our Tulsa turnaround and unplanned maintenance at Woods Cross, our refining system as a whole performed very well. Consolidated operating cost of $5.86 per throughput barrel, with a 16% improvement versus the $6.97 in the same period last year. The improvement was driven by increased throughputs, along with operating cost reductions across our refining system. In the Rockies, operating expenses were $9.62 per throughput barrel. A steady improvement over the $9.87 recorded in the first quarter of 2017. This was led by the continued focus on improving operational reliability and operating costs at our Cheyenne Refinery. Our Navajo plant ran approximately 106,000 barrels per day in the first quarter.
We continue to see the benefits of higher crude throughputs since the completion of our debottleneck project in the first quarter of 2017. In the MidCon, despite the turnaround at Tulsa, our operating expenses per throughput barrel of $5.28 improved by $0.52 per barrel versus the first quarter of last year. We have completed all the turnaround work at Tulsa safely, and we have resumed normal operating rates there. Our Woods Cross Refinery experienced a fire in mid-March. We are still in the process of repairing the number 1 crude unit and expect Woods Cross to run at reduced rates for the balance of the quarter. During the quarter, we also have planned maintenance scheduled at our El Dorado Refinery that will slightly impact our sales volumes. For the second quarter of 2018, we expect to run between 440,000 and 450,000 barrels per day of crude oil.
I will now turn the call over to Tom for an update on our commercial operations.
Thanks, Jim, and good morning, everyone. For the first quarter of 2018, the 415,000 barrels a day of crude throughput was composed of 32% sour and 22% WCS and black wax crude oil. Our average laid-in crude cost was under WTI by $8.47 in the Rockies, $2.80 in the MidCon, and flat versus WTI in the Southwest. In the first quarter of 2018, we witnessed global and U.S. product inventories to continue to be rebalanced, signaling global economies are continuing to grow and increasing the demand for refined products. Gasoline inventories in the Magellan system ended the quarter at 9.8 million barrels, which was similar to last year's first quarter ending inventories. Diesel inventories remained static as compared to the fourth quarter of 2017, and approximately half a million barrels lower than last year levels.
First quarter cracks in the MidCon were $15.56, $13.70 in the Southwest, and $15.66 in the Rockies. When compared to 2017, first quarter cracks were higher in the MidCon and lower in both the Rockies and Southwest. Crude differentials widened across heavy and sour slates during the first quarter. In the Canadian heavy market, first quarter crude differentials in Hardisty averaged over $24.25 per barrel compared to a fourth-quarter differential of $12.25 per barrel. HFC, with its firm space commitments on various pipelines, was able to purchase and deliver adequate volumes of price-advantaged heavy crude from Canada to meet our refining needs. Our Canadian heavy and sour runs averaged 86,000 barrels per day at our plants in the MidCon and Rocky regions.
We also refined approximately 174,000 barrels a day of Permian crude in our refining system, composed of 106,000 barrels per day at our Navajo complex and 68,000 barrels a day at our El Dorado Refinery, delivered via the Centurion Pipeline. Increase to Permian-based crudes will allow us to take advantage of the widening differentials for Midland price-based oils. First quarter consolidated gross margin was $12.83 produced barrels sold. This was a 70% increase over the $7.54 recorded in the first quarter of 2017. This increase was driven by improved laid-in crude costs in the MidCon and Rocky regions and the Small Refinery Exemptions at our Cheyenne Refinery. With widening Permian differentials and consistent discounts for WCS and black wax crude oils, we anticipate continued margins across our refining system in the second quarter.
RINs expense in the quarter was $6 million, which is net of the $72 million cost reduction resulting from the Cheyenne 2015 and 2017 Small Refinery Exemptions received during the quarter. With that, let me turn the call over to Rich.
Thanks, Tom. As George mentioned, the first quarter included a few unusual items. Pre-tax earnings were positively impacted by a $104 million lower of cost to market benefit, as well as a $72 million reduction in RINs costs as a result of our Cheyenne Refinery's Small Refinery Exemptions. These positives were partially offset by $4 million of PCLI integration-related charges. A table detailing these items can be found in our press release. I'm pleased to report we completed the integration of PCLI in the first quarter. For the first quarter of 2018, cash flow provided by operations was $334 million, including turnaround spending of $57 million. HollyFrontier standalone capital expenditures totaled $57 million. As of March 31st, our total cash and marketable securities balance stood at $782 million.
An increase of $151 million over the balance on December 31st of 2017. This increase was driven by our strong earnings and supplemented by a drawdown of inventory we had built in preparation for the first quarter turnaround at our Tulsa refinery. During the quarter, we returned a total of $84 million of cash to shareholders, comprised of a $0.33 regular dividend totaling $59 million, as well as the repurchase of approximately 550,000 shares of common stock totaling $25 million. As of March 31st, we had $152 million remaining on our existing stock repurchase authorization. As of March 31st, HollyFrontier has $1 billion of standalone debt outstanding and no drawings on our $1.35 billion credit facility. This puts our liquidity at a healthy $2.1 billion and sets the capital at a modest 15%.
HEP distributions received by HFC during the first quarter totaled $36 million, a 20% increase over the same period in 2017. HollyFrontier now owns 59.6 million HEP limited partner units, representing 57% of HEP's LP units with a market value of $1.7 billion as of last night's close. For the full year of 2018, we've slightly increased our CapEx guidance, driven by higher turnaround scope and costs. We now expect to spend between $380 million-$440 million for both standalone capital and turnarounds at HollyFrontier Refining and Marketing, $70 million-$90 million at HollyFrontier Lubes and Specialties. This includes our scheduled turnarounds at Mississauga base oil plant and $50 million-$60 million of capital for HEP. With that, Luke, we're ready to take questions.
The floor is now open for questions. At this time, if you have questions or comments, please press *1 on your touch tone phone. We ask that you please limit to one question and one follow-up. If you have additional questions, we welcome you to rejoin the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. Thank you. Our first question comes from the line of Doug Leggate from Bank of America. Your line is open.
Thanks, guys. Good morning, everybody, and congrats on a really terrific quarter. George, I wonder if you could just give some prognosis as to how you see the spread outlook. Obviously, you are probably the primary beneficiary both from Canadian heavy and inland discounts. I'm just curious, at your Analyst Day, you laid out what now looks like a relatively conservative view about a $4 run rate for TI or for your realized crude under TI. I'm just curious if that's changed, I've got a quick follow-up, please.
I think, Doug, the best way to answer that question, those differentials we covered in the Analyst Day, we view as the long-term trend. It's going to bounce around above and below that, depending on the timing of crude production and pipeline capacity. Right now, obviously things are getting tight out of the Permian from a pipeline perspective, you're seeing the dips in the $6-$7 per barrel range and perhaps even spiking up a little bit above that recently. In Canada, we saw dips blow out as wide as 25-ish and now settled back into the $16, $17 range. That's going to be a function of how much crude can be taken out by rail in the interim here until the next increment of pipeline capacity is added.
Well, better operations obviously done a great job of capturing our margins, so congrats on turning that around, George. I guess my follow-up is, also at your Analyst Day. Again, there's a lot of moving parts in the assumptions. You laid out what your view was of mid-cycle value for Holly. You're pretty much there. I'm just wondering how that alters your view of share buybacks relative to other uses of cash, specifically stepping up the dividend on a more sustainable basis, and I'll leave it there. Thanks.
Yeah. Doug, I don't think our current stock price impacts our capital allocation strategy. We're going to get money back to shareholders to the extent that we have excess cash above our other priorities, as I laid out in my prepared remarks.
You're pretty agnostic to the share price on buybacks?
Again, I just view it as a way of getting money back to shareholders.
Got it. Okay. Thanks, guys. Appreciate it.
Your next question comes from the line of Brad Heffern from RBC Capital Markets. Your line is open.
Hey, good morning, everyone.
Morning, Brad.
Morning. A couple questions on the RFS. Obviously, you've gotten the Cheyenne waivers for 2015 and 2017 here. No mention of Woods Cross. Is that application still outstanding? Additionally, is there a chance that you could get a retroactive 2015 exemption as well for Woods Cross?
Yeah, I would say that we're in the process of working through all that, Brad. We haven't heard anything back yet, otherwise we'd have reported it.
I guess on the RFS in general, any thoughts you have, George, about the tack that the EPA seems to be taking of giving out a lot more Small Refinery Exemptions and how that impacts the potential for broader reform?
Yeah. I think the D.C. appellate court finding late last year, they found that the previous EPA had erred in their review of applications for Small Refinery Exemptions. I think that was the key change from previous that opened up the door for what's provided for in the Clean Air Act to allow the EPA to exempt small refiners from the RFS from disproportionate economic harm. Obviously we view a high-rent cost market as disproportionate economic harm. Longer term, we're pleased by what we're seeing coming out of Washington. We applaud both of our senators from the great state of Texas for their efforts in this area. Senator Cruz has gotten very involved in this effort, and has been very involved through the Philadelphia Energy Solutions bankruptcy. Senator Cornyn is working on a legislative fix.
We're also encouraged by what we're hearing from Congressman Flores and Shimkus working similar legislative action on the House side. You never know what's going to come out of Washington, but we're pleased with the direction things are going and fully recognize there's still a lot of work to be done here.
Okay. Appreciate all the color. Thanks.
Thanks, Brad.
Your next question comes from the line of Manav Gupta from Credit Suisse. Your line is open.
Hey, guys. Thanks for taking my question. My first question is, can you talk about HFC's role in the Delaware diesel project?
It's a little bit premature to talk too much about it, what we can tell you is we expect HFC to be the major customer for that facility, and we view it as a great opportunity to sell more diesel into the growing Delaware Basin market that improved net backs to HollyFrontier versus our other alternatives for that product.
Going ahead, do you envision HEP growing such businesses like HFC is growing the lubes business? Is this the kind of growth that you have in plan for HEP going ahead, projects like this?
Absolutely. These are exactly the type of projects that we view HEP as being a key part of our overall strategy.
Okay. Second question is more on spreads. When I'm looking at the forward spreads on Midland Cushing, I'm seeing a $12 discount for November 2018. I just wanted to know your view on the spread and if anything, if you know what you're seeing on the ground in terms of trucking economics from the region. Anything, any color you could add.
Yeah, this is Tom Creery. We look at the forward markets as well on the Midland. As George mentioned earlier, that's just an indication of the imbalance of takeaway capacity versus drilling activity, which we believe is going to continue well into 2019. We're well-poised to take advantage of those conditions. On the ground levels, we don't really see anything that's happening. There are some previously announced pipelines production projects that will be completed later this year that'll help remedy it, those are already built into the price.
Thank you so much, guys, congrats on a great quarter and restarting buybacks.
Thanks, Manav.
Your next question comes from the line of Roger Read from Wells Fargo. Your line is open.
Yeah, thanks. Good morning, I'll echo the good quarter comments. Well done, also on the share repos. It's always good to see that kick back around a little bit. If I could, though, jump into maybe operationally thinking about some things. On the PCLI side, remind me if I'm off here, but I think this will be the third out of five quarters where we've seen some level of maintenance at PCLI. I was wondering, is this a function of a lot of different units that need constant maintenance, or that you're just getting familiar with the units and so it makes sense to call out the specific turnarounds as well as just sort of fine-tuning them for better product yields?
Roger, it's a fair question. I'd say the maintenance we have this quarter as well as the fourth quarter was always planned. The maintenance we had last year was really not to your point. There's room for improvement, absolutely, but really looking into 2019, we had always expected a turnaround at that facility in the fourth quarter. We have some minor maintenance here in the second quarter.
Okay. Just, I guess that's what I'm trying to figure out is how much of it is normal. What we should consider as normal levels of maintenance going forward, I guess a little bit each year?
Yeah, it should be better. 2019 is a turnaround year, so fairly typical in that sense. Then we'd expect a cleaner run, obviously 2020 and going forward.
Okay. That's helpful.
At a high level here, Roger, we have two major process units at Mississauga. Those units go down every three or four years on average. This just happens to be the years Rich laid out, that we're taking both those units down this year.
Okay. Perfect. Then my follow-up question, looking at your southwest region, obviously, and following up on Manav's question about the diffs, what is your flexibility there between running the light sweet and the sour barrels out there? While we haven't seen a real separation, I think, between the price of the two, thinking about how you're set up for your yield by barrel, what's the swing factor there of sweet versus sour?
We can swing 100% sweet to sour. A little bit of that depends on what you mean by light sweet. When you start getting too much above say 45 gravity, we can't process a lot of that material. As you know, that type of crude has a lot of light ends, and we're constrained in our saturated gas plant. As far as the swing from sweet to sour, we have 100% flexibility.
Okay, great. Thank you.
Roger, this is Tom. That's where the Centurion Pipeline comes in, too. That's a huge advantage in being able to bifurcate those crudes and move them around within the system.
Absolutely. Good to own infrastructure. Thanks.
Your next question comes from the line of Ryan Todd with Deutsche Bank. Your line is open.
Thanks. Good morning, guys. Maybe a quick follow-up on those last comments. As you think about the flexibility in your system to segregate crudes and swing between things, how do you think about your positioning into the IMO switch in 2020? How it's likely to impact the way that you run your system and the kind of flexibility that you see to adjust to changing environment?
Yeah. Obviously, IMO is going to help us from a crude differential perspective with the Canadian heavy. I don't see it impacting the rate of Canadian heavy we run because even at the recent or past differentials, we tend to run as much Canadian heavy as we can. Net net, as Tom said in his prepared remarks, we run about 85,000, 90,000 barrels a day of Canadian heavy, and we'll run about those type of levels even in an IMO 2020 scenario.
Does it change much the type of crudes laid on the light side that you would look to run?
I don't think so.
I guess switching to use of excess cash again, it was good to see a restart of the buyback. I appreciate the comments earlier on buyback versus dividend. You're generating a lot of excess cash. Can you talk a little bit about how you think about priorities for the use of excess cash and how much cash that you'd like to keep on the balance sheet? What's the appropriate level there and how we should think about the excess?
Sure, Ryan. It really starts with keeping the balance sheet healthy, which we've laid out. We think given where we are today with debt levels and the credit facility, we feel like $500 million of cash on a balance sheet is a good number, and above that, we would consider it to be excess. First it's maintaining the facilities. Second would be to keep the dividend competitive. Third would be to grow, whether that's organic capital or whether that's acquisition. Beyond that, and we've hit that $500 million threshold, we'll look to buy back stock.
Okay. The pace of buyback that we saw during the first quarter, is there anything to read in terms of how we should think about that pace going forward? Is it just going to, as we look over the near term, will that just change based on the level of cash flow?
I don't think it was done at a reasonable pace. It'll move around a little bit based on what else we have going on. Obviously, we've got a higher level of capital spend in the, call it last three quarters of the year than the first quarter of the year. It also depends on how cash flow is going here. We're all very optimistic about the rest of the year. Until the dollars are in the door, we're not going to spend them either.
Most of our purchases were back-half loaded.
Correct.
Okay. Thanks, Rich and George.
Thanks, man.
Your next question comes from the line of Paul Cheng from Barclays. Your line is open.
Hey, guys. Good morning.
Good morning.
Two questions, if I may. In the first quarter, George, should we assume your WCS run and the Permian run is the maximum that you can go unless that there's new pipeline is being installed, or that there's some additional room that you would be able to squeeze more?
I think on the Permian, we did a really good job in the first quarter moving volume through our Centurion leased space. As Tom said in his prepared remarks, we ran, what, 68,000 barrels per day through that lease capacity. That's really good. We want to be able to squeeze a little bit more, but I would view that as being near the top of the end. I think similarly on the WCS, Tom mentioned at 86,000 barrels per day of WCS runs between Cheyenne and El Dorado.
We might be able to squeeze a little bit more, but I wouldn't view it as being significantly more than that.
Okay. If I'm looking at your margin capture, it seems like you have, at least versus your own HollyFrontier index, you bottomed in the first quarter 2017. Since then, you've been steadily improved up and down, but on a rolling four-quarter basis, steadily improved. In the first quarter, you reach on a four-quarter basis average about 64% versus 56%. Yes, a big improvement over the last several quarters. Is there any particular things that you can cite why the improvement has been so sharp, and that the recent performance, could we use it as a baseline to go forward, or that you think those are not necessarily sustainable?
Paul, this is Rich. There's a couple things going on there. Capture trend, just the way the math works, capture tends to be better at higher cracks, which they've definitely been better in the last, call it, 6 months than they were early 2017 and certainly in 2016. Second, honestly, our benchmark cracks are based on WTI at Cushing. Inasmuch as crude differentials are widening, that's a big boon to capture rates per se. We've obviously had a pretty good discussion on that. Last, then, will be RIN costs. Again, that gets back to that at the higher level. The RINs are roughly the same, but cracks are higher, capture's going to look better. That's the other big factor that comes in here. To your point, Paul, look, we've been running well.
We expect to continue to run well at higher differentials, one, and we'd expect to see higher capture rates going forward.
Right. I guess my question is that, Rich, I understand everything that you just said earlier. From operational standpoint, is there any one-off issue that make the operation to be better or that some benefit, whether it's your wholesale margin price realization, that we should take into consideration may not be repeatable? I guess those are my question.
I don't really believe so, no, Paul.
Okay. Very good. Thank you.
Thank you.
Your next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open.
Hey, good morning, guys. Congrats again on a good quarter here. Just wanted to start off on the lubricants business, PCLI. As the crude price has ticked up, we've been watching your index here. How do you see a higher crude price impacting the profitability of that business? Can pricing increases keep up with input costs?
Hey, Neil. This is where, frankly, having an integrated business is really helpful. Obviously, we saw some compression on the rack backside. To your point, we saw base oil benchmark cracks compress in the first quarter. Some of that seasonality, some of it was just where we are in the cycle on the Group 3 side. We expect it to get better seasonally in the second and third quarter. What we've seen, frankly, is base oil postings have started moving up. On the flip side, there is going to be a lag on the rack forward side going through and passing through pricing. It's slower to move. Again, this is where we're optimistic on the business in general, and having that integrated business model is really helpful.
All right. Thanks. The follow-up is just on the share repurchases and dividend growth. Again, recognize that you want to see the cash come in first. One of the constraints we've viewed historically about being overly aggressive for you guys around dividend growth has been the fact that you guys are BBB- and want to protect that investment-grade rating. Do you think there's the balance sheet capacity to become more aggressive around the buyback? Do you think the ratings agencies would give you the space to do that?
Hey, Neil. I think, again, we laid out the earlier how we think about cash return. We view excess cash above, call it, $500 million on the balance sheet with today's debt loads and revolver capacity. $500's sort of our walk-around number. Beyond that is excess. Keeping in mind that we've got an eye to growing the business both organically and inorganically. Where we are on those kind of opportunities will affect that pace and rate.
Okay. Thanks, guys.
Your next question comes from the line of Phil Gresh with J.P. Morgan. Your line is open.
Yes. Hi, good morning. Quick question on the cash flow in the quarter. Was there a working capital benefit?
Yeah, Phil, there was a small working capital benefit in the quarter. Thank you, Chad. About $80 million or so. I was just looking for the number exactly.
Okay, got it. I guess if we look at the ending cash balance, Rich, about $780 million or so, I think you mentioned on the last quarter call that you would not expect to be building cash on the balance sheet unless perhaps there were M&A opportunities that would be in the line of sight, I think was how you framed it, relative to the $500 million of cash that you want on the balance sheet. Is the build in cash in the quarter because of some working capital timing, or I guess this somewhat comes back to the buyback question. Just trying to understand how you think about managing the cash.
Sure, Phil. I think in this quarter, to your point, there was a little bit of a working capital build, which is good. Or excuse me, benefit. As I mentioned earlier, we've got just timing of CapEx for this year. We're a little bit back-end loaded, we've got to keep that in mind.
The reality is we can't predict necessarily a month or two out in our business given where crack spreads are. There's a lot of art to the speed of the buyback at the end of the day.
Okay. I guess maybe more broadly, obviously there was other news in the sector this week. We get a lot of questions from investors as to whether the sector more broadly might have an opportunity to consolidate. You guys have talked about looking for M&A opportunities, but really haven't been able to find anything. Do you think that the M&A environment in the sector has improved at all recently, or is it more status quo from your perspective?
Yeah, I think the way we view it's pretty much status quo. I think the macro read we have is consistent with what we shared at our Analyst Day, that we think the industry's going to continue to consolidate. I think scale is important, which is why we have our desire to double the size of each of our businesses in a disciplined manner. As far as the set of opportunities that we're seeing in the market right now, they really aren't impacted by the announcement earlier this week.
Okay. Just to clarify, building cash on the balance sheet here shouldn't necessarily be a read, Rich, that there are opportunities unfolding?
Yes. Phil, that's correct.
Okay. Thank you.
Thanks.
Once again, if you do have a question, you may press star one on your touchtone phone at this time. Your next question comes from the line of Matthew Blair with Tudor, Pickering, Holt & Co.. Your line is open.
Hey, good morning, everyone.
Morning, Matthew.
I was hoping you could talk about black wax availability. It looks like Utah crude production is above 100,000 barrels a day for the first time since 2015. On the screen at least, we're seeing some increasing discounts on black wax barrels. Are you getting all the black wax volumes that you want? Are you realizing some of these larger discounts that we're seeing?
Yeah, we're very encouraged by what we're seeing and hearing out of the Uinta Basin. To your specific question, we have been receiving all the wax crude that we need, especially prior to our incident at Woods Cross. I think the producers that are in that region now are very focused on that region. They've made some significant technology improvements in the way they're producing the oil. We think as long as crude is above the $60 per barrel range, we're pleased with what we're seeing out of the production in that region.
Sounds good. Then, I guess sticking in refining, if I look at the spread here between your sales of produced refined products and your crude charge, that spread seemed a little elevated in the quarter. Is that a good number to use going forward, or was it higher maybe due to selling inventory during the Tulsa turnaround?
I think you just hit it. I don't think using this quarter is representative for our business because as Rich said in his prepared remarks, we had built up inventory in advance of the Tulsa turnaround that we've liquidated through the quarter.
Got it. Thank you.
Sure.
There are no further questions at this time. I turn the call back to the presenters.
Thanks, everyone. We appreciate you taking the time to join us on today's call. If you have any follow-ups, as always, reach out to Investor Relations. Otherwise, we look forward to sharing our second quarter results in August.
Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.