morning. My name is Laura, and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek U. S. First Quarter Earnings Call.
Thank you. I would now like to turn the call over to Mr. Keith Johnson of Investor Relations. Sir, please go ahead.
Thank you, Laura. Good morning. I would like to thank everyone for joining us on today's conference call and webcast to discuss Delek US' Q1 2018 financial results. Joining me on today's call is Uzi Yemin, our Chairman, President and CEO Kevin Kremke, EVP and CFO as well as other members of our management team. As a reminder, this call may contain forward looking statements as that term is defined under federal securities laws.
For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward looking statements.
You are
cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward looking statements. We undertake no obligation to publicly update any forward looking statements whether as a result of new information, future events or otherwise. In addition to reporting financial results in accordance with generally accepted accounting principles or GAAP, we report certain non GAAP financial results. Investors are encouraged to review the reconciliation of these non GAAP financial measures to the comparable GAAP results, which can be found in the press release, which is posted on the Investor Relations section of our website.
On today's call, Kevin will begin with a review of the financial performance of the quarter before turning it over to Uzi, who will offer a few closing strategic comments. With that, I'll turn the call over to Kevin.
Thanks, Keith. For the Q1 of 2018, Delek U. S. Reported a net loss of $34,900,000 or $0.43 per basic share compared to net income of $11,200,000 or $0.18 per diluted share in the Q1 of 2017. On an adjusted basis for the Q1 of 2018, Delek US reported net income of $28,000,000 or $0.33 per basic share compared to an adjusted net income of $10,100,000 or $0.16 per diluted share in the prior year period.
Our adjusted EBITDA was $113,100,000 in the Q1 of this year compared to $60,100,000 in the prior year period. A reconciliation of reported results to adjusted results is included in the financial tables of our press release. During the Q1 of 2018, results included a net benefit of approximately $79,800,000 related to the net effect of a RINs waiver and mark to market adjustments due to a declining RINs price environment. This benefit was partially offset by $34,600,000 related to operating performance in the Q1 of 2018. That amount includes approximately $25,600,000 of estimated lost profit opportunity relative to the Q1 of 2018 crude oil throughput guidance we gave you during the Q4 earnings call.
In addition, there was a $9,000,000 operating loss primarily from West Coast asphalt operations, which are expected to be sold to a third party in the 2nd quarter and a West Coast supply and offtake agreement that is expiring in May. The combination of these items was approximately $45,200,000 before tax benefit or approximately $0.42 per share after tax. On a consolidated basis, line items such as operating expenses, G and A and interest increased on a year over year basis primarily due to the addition of Elan. I would like to note that G and A expense included approximately $10,500,000 of transactions costs this quarter. Our income tax rate, excluding the noncontrolling interest income of $14,900,000 was 38.9% in the 1st quarter.
This rate included a $7,400,000 income tax related benefit from remeasuring certain net deferred tax liabilities as a result of the 2017 Tax Cuts and Jobs Act, the effect from the biodiesel tax credit and goodwill impairment. Excluding these items, the income tax rate was approximately 18%. For full year 2018, we expect the combined annual effective tax rate to be in a range of approximately 21% to 23%. Turning now to capital spending. Our capital expenditures during the period were approximately $70,100,000 compared to $15,200,000 in the Q1 of last year.
During the Q1 of 2018, we spent $51,500,000 in our Refining segment, $2,200,000 in our Logistics segment, dollars 2,000,000 in our Retail segment and $14,400,000 at Corporate. Our 2018 CapEx forecast is $232,300,000 This amount includes 182 $6,000,000 in our Refining segment, dollars 19,900,000 in our Logistics segment, dollars 17,400,000 in our Retail segment and $12,400,000 at the corporate level. This amount for 2018 does not include approximately $80,000,000 of midstream projects to enhance our position in the Permian Basin. On March 30, we completed a series of steps to reduce our interest costs and simplify our debt structure. We closed on a $1,000,000,000 senior secured revolving ABL credit facility and a $700,000,000 senior secured term loan B.
Used proceeds to pay off other high interest rate borrowings and consolidated the number of debt instruments on the balance sheet. The expected interest expense savings from this step is approximately $20,000,000 on an annualized basis, which is in addition to the cost of capital synergies already captured through Q1 of 2018. We ended the first quarter approximately $1,000,000,000 of cash on a consolidated basis and $942,000,000 of net debt. Excluding net debt at Delek Logistics of $733,000,000 we had net debt of $209,000,000 at March 31, 2018. Now I would like to discuss our results by segment.
In our Refining segment, we reported contribution margin of $133,600,000 compared to a contribution margin of $64,400,000 in the Q1 of last year. This year over year increase in contribution margin is primarily due to the addition of the Big Spring and Krotz Springs refineries from the Elan transaction, improved market conditions and the benefit from the Windsaver biodiesel tax credit. Q1 2018 results were reduced by a series of operating factors that I mentioned earlier. Market conditions as measured by the Gulf Coast 5.32 crack spread increased on a year over year basis to $11.53 per barrel for the Q1 of this year compared to $10.58 per barrel for the same period last year. In addition, the refining system benefited from the Midland WTI crude differential to Brent crude that was an average discount of $4.70 per barrel compared to 2.81 dollars per barrel in Q1 of last year.
In March of 2018, the El Dorado and Krotz Springs refineries received approval from the Environmental Protection Agency for a small refinery exemption from the requirements of the renewable fuel standard for calendar year 2017. This waiver, valued based on market prices, resulted in approximately $59,300,000 of RINs expense reduction at El Dorado and additional $31,600,000 at Krotz Springs. In the Q1 of 2017, El Dorado received a waiver that resulted in approximately $47,500,000 of RINs expense reduction. During the Q1 of approximately $24,600,000 of income was recognized in the Renewable business as part of the Refining segment from a $1 per gallon biodiesel blenders federal tax credit that was approved in February 2018 on a retroactive basis for calendar year 2017. Our Logistics segment contribution margin was $36,300,000 in the Q1 of this year compared to $26,600,000 in the prior year period.
On a year over year basis, improved performance was primarily due to the West Texas wholesale business, the Payline pipeline and 1 month of benefit from the Big Spring dropdown. Contribution margin in the Retail segment was $11,900,000 Merchandise sales were approximately $80,500,000 with an average margin of 30.2 percent and approximately 53,700,000 retail fuel gallons that were sold in an average margin of $0.19 per gallon. There is no year over year comparison for the retail segment as it was acquired in the Elan transaction on July 1, 2017. Contribution margin for the CorporateOther segment was negative $29,500,000 in the Q1 of 20 18 compared to negative $5,700,000 in the prior year period. Included in these results was a net hedging loss of $17,900,000 for the Q1 of this year compared to a loss of $3,500,000 in the prior year period.
This hedging amount represents system wide hedges that are not applicable to a specific refinery. Now I will turn the call over to Uzi.
Thank you, Kevin, and good morning. As you can imagine, we're very excited about the activity in the Permian Basin. Delek's operating model has been built around access to the premium basin crude oil, and we are well positioned to take advantage of the wider discount between Midland and Cushing. Based on the forward curve as of May 4, 2018, Midland crude oil is at a discount of $5.86 per barrel in the 2nd quarter. The discount is widened to $14 per barrel in the second half of twenty eighteen and is currently averaging $10 per barrel for 2019.
As a reminder, we have access to approximately 75,000,000 barrels annually or little more than 200,000 barrels per day of Midland crude oil, which accounts for approximately 70% of our crude slate. Our team continues to make substantial progress on the integration of Alon. As of March, we have captured $104,000,000 of synergies on an annualized basis since July 1, 2017, when we closed the Alon transaction. This reaches the low end of our previously targeted range of $105,000,000 to $120,000,000 range. We now believe that we can capture $115,000,000 to $130,000,000 of synergies on an annualized basis in 2018.
We ended March with cash balance of approximately $1,000,000,000 During the Q1, we purchased $95,000,000 of our stock and have a total remaining authorization of approximately $180,000,000 To further support our ability to return cash to shareholders, our Board of Directors approved 25% increase in our quarterly dividend. This follows the 33% increase that was approved in February 2018. We remain focused on creating long term value for our shareholders as we balance returning cash to our shareholders, investing in our business and exploring opportunities to develop the next stage of our growth. With that, Laura, would you open the call for questions?
Yes, sir. And our first question comes from Manav Gupta of Credit Suisse.
Uzi, congrats on back to back dividend hikes. They are very rare in the energy universe. So Uzi, no one does a better job of acquiring assets using the downturn and then turning them around than you do. You have mastered that art. My question is, if margins are going to remain above mid cycle given IMO tailwinds, does that mean DK will primarily stay out of the M and A market or you can change strategy if there is a good deal out there?
Good morning, Manav. Thanks for your kind words. I'd like to say that as we said, we have $1,000,000,000 on our balance sheet. And with the Midland differential the way they are, first, we believe that everybody's models are too low and that the cash will be continue to pile at a rapid way. So our goal is to make sure that if we make an acquisition, we need to be accretive day 1.
And there are other areas, other aspects of our company that are that can enjoy this Midland situation. Let's call it the midstream side, logistics side, I think Kevin mentioned $80,000,000 more or we are now investing $80,000,000 in gathering or midstream assets in the premium. So all these are now trying to attract investments in other areas that are not as attractive. It doesn't mean that we will stay out of the M and A arena for refining. If we see an opportunity and we see a situation that we can improve the operation day 1, then we'll look at it.
But we think that there's a huge opportunity now on the midstream side as the MLP market is out of favor.
Thanks for those. And my quick follow-up is, you are very well positioned to benefit from the Midland discount and Cushing discount. I mean, what we are seeing is also that Cushing is building and now with Keystone pressure restrictions gone, there's more crude into Cushing. So I'm trying to understand, is there a possibility that Brent WTI itself widens to $8 or $9 on top of the $10,000,000 $12 that you're seeing in the Midland area, which would be an added tailwind, if you have any color on that?
The Bren TI is actually I'm a little surprised that the combination, we are a little surprised. The combination is getting to $15 now almost $20 I think that the pressure will mountain over the next few months for export to accelerate. If it does, then the Brent TI will close a little bit. I think that our refineries outside the United States see the Fed margins we have, and they are looking at ways to get some of that margins. So while temporary, it may go higher, eventually, I don't think that it can hold when Midland is at today $13 Q4 $15
Our next question comes from Neil Mehta of Goldman Sachs.
Hey, good morning, Uzi, Kevin.
Hey, Neil. Good morning. Good morning, Neil. Good
morning. Yes. Uzi, can you remind us again here, Kevin, the sensitivity for every dollar change in spread between Brent and Midland on an EBITDA basis for your company?
Brent and Midland or WTI and Midland?
Either, whatever it is.
I'll give you both. So you'll be for every barrel between Cushion and Midland, we are talking about $70 every dollar, we're talking about $75,000,000 And for every dollar between Brent and Cushion, we're talking about $100,000,000
That's annualized EBITDA?
That is correct. That's actually going directly to the bottom line, not even EBITDA because there's no depreciation and no charges to that. By the way, mainly the and you will see it, obviously, it's hard to model that. You will see that our capture rate will improve because of Midland, just because of the fact that this dollar goes directly to the bottom line. It doesn't go through the crack spread.
So you play that out at TI Midland's $10 a barrel higher than
it was in the Q1. You could
have $1,000,000,000 of annualized excess cash flow or at least pretax. So I guess the question is how do we think about what you do with that excess cash flow, Recognizing that coming at the end of 2019, early 2020, there's a lot of pipes coming online. Is that where you double down on the share repurchase program?
That's certainly an option to we just hiked the dividend again. That's certainly an option to do. We know we have excess cash and we want to put it to work. And the combination between dividend, buybacks and looking for assets to be accretive immediately as we buy them or build them. These are the combinations or this is the combination that we're looking at.
And then, Lizzie, one of the things we're spending a lot of time thinking about, but don't have a great answer is that what is WTI Midland or Brent WTI Midland or Brent versus Midland? And we keep on coming back to trucking being the And is there sufficient trucking capacity to do that? And is there sufficient trucking capacity to do that at this point?
Well, let me use an example that happened few days ago. We had a blip in our Big Spring refinery. And obviously, we filed that with the TCEQ, the FCC malfunctioning. That impact was 100,000 barrels 100,000 barrels for the entire event, not 100,000 barrels a day, everything all in 100,000 barrels. That's booked the market $2 That's how the how tight the market is there how tight the market is.
And if 100,000 barrels, which it's a temporary thing, because we'll run it going forward. If this is the case, then you know the market is very tight. Then you go to the portion of the question that you asked about trucking and also rail. So we know about couple of companies that are trying to rail to use railroad. However, it's not as easy as it used to be 4, 5 years ago.
Some of the railroad companies are not as attuned or as receptive to this idea like they were 4, 5 years ago. So now we are talking about trucking. And that's a long shot. Not only, okay, it costs money to haul it, but you need to get the truck and more importantly, you need to get the drivers. We have a huge trucking operation in the area and trucking as well as drivers is a challenge.
So what happens then if you is your view that there isn't sufficient trucking capacity then to ultimately clear the basin over the
2 years? I really don't know what we have in 2 years, but right now there's shortage of trucking and drivers in the area.
All
right. Thanks, Susie. Appreciate it.
Thanks, Neil.
Our next question comes from Brad Heffern of RBC Capital Markets.
Hey, good morning everyone.
Hey Brad.
Just on the quarter, I was wondering if you could talk through some of the moving pieces on capture. Obviously, you gave the big LPO figure and you had some downtime in the quarter, but the capture was particularly low. So anything else that I should be thinking about in terms of why that was?
Absolutely. Assi will take you through some of the technology. And if needed, if we need some more color, we'll obviously give some more color.
Sure, Brett. As we mentioned, most of the LPO wasn't related to volume we didn't run, but the majority was actually because of the freeze that we had in January in Texas and in some parts of Arkansas, we had some yield loss across the system. So when you look at the capture rate, when you add to that the fact that the urine prices went sharply down between the day we got the waiver until we reported the earnings, all those together impact materially the refineries. And we think that the capture rate in El Dorado was actually closer to $5 to $5.5 a barrel compared to the reported margin that we've seen. The Big Spring was closer to $11 a barrel.
When you look at Tyler, close to $7 a barrel. And when you look at Krotz Springs, dollars 3 to $3.5 a barrel. So across the system, almost every refinery negatively impact between $1 to $2.5 a barrel, combination of the reduction in wheels prices, plus the fact that the yield loss or the LPO that impacted the refineries. We do not expect this to be as impactful in the next few quarters as we don't have anything to right now point out beside a small decline in ethanol in RIN prices that we've seen since the end of the quarter.
Okay. That's great color. Thanks for that. And then I guess on the RINs front, can you give any thoughts around the potential to get waivers at Tyler or Big Spring? And also some of your peers have gotten rulings from 2015 overturned and have gotten retroactive waivers for that year.
Is there any chance for that at any of the refineries?
We'll obviously look at that very carefully, Brad. Just as a reminder, and that was something that we all need to remember. We've been doing the ring waivers from El Dorado and Alon at the time and now us did it for Crocs since that mechanism existed 8, 9 years ago. And every year, when we submitted that, we got it with one exception, I think that was there was 1 year that Eldor didn't get there were special circumstances and I won't get into that on this call. So we think the waiver is pretty much the mechanism of this administration to control the RINs cost.
However, we never submitted Big Spring or Tyler. And that's something that we will need to look at it carefully. It looks like that's the new administration willingness to look at that. And obviously, we'll update you when we if something happens in that area.
Okay. Thanks all.
Our next question comes from Prashant Rao of Citigroup.
Hi, good morning. Thanks for taking the question. I guess my first question, I wanted to touch back on the M and A topic that was discussed earlier, but ask it a different way, not necessarily specific to you, Uzi Adelik, but just the environment and the landscape in general. It seems like obviously we've had one big merger announced last week. There's rumors of other things going on.
I just wanted to get a sense of where are the where is the opportunity set? What seems to be more active? Where is the inquiry level in terms of either by region or by what ownership, any thoughts around how this might play out? Because it seems like given the cash that's building up not just the Delek, but at some of the other refiners, this could start off another consolidation cycle. So I just wanted to get your thoughts more broadly speaking about the market.
And then I think there are 2 or 3 questions here. So let me try to answer all of them. And then if there is a follow-up question, I'll be more than happy to take that one. The first one is cash is filing within all the refineries. That is correct.
And it's not going to well, it may change, but the outlook that is 2020 and even 2021 with the IMO and the Midland situation, we will be pretty much situated with great cash. So that elevate that cash situation brings different dimension of pressure, what are you going to do with all that cash? And I think some of our peers did great job trying to diversify and try to buy other assets that are adjacent, if you will, to the refining assets. Our core market for us is Midland and the premium. That's where we many years ago when nobody believed in that, that's what we did.
And we want to continue doing that. But at the same time, we want to look at other opportunities, basically to create some hedge to the exposure we have at the premium. And so that's one component of your question, I think. The second one, the overall market. I think that and we saw an example of Marathon with Endeavor last week, I think more and more people will look at other companies and try to see if it makes sense to them.
Now remember, there's no pressure and some people were surprised that the premium that Meritome paid is little high, but there was no pressure on Endeavor to do anything. So it's basically a buyer's market in the M and A within the I'm sorry, seller market, within the refining space. That will bring in my mind refining trying to get into other spaces in order to diversify their earnings. And I hope that was comprehensive enough.
That was very comprehensive. Thank you very much. And I had one very quick follow-up, not on refining, but on retail. The margin performance was, I think impressive this quarter and just sort of wanted to get a sense of some of the peers out there in retail have had margins maybe missed expectations, there was weather impact and other things. Just wanted to get a sense of sort of margin cadence from here out, how we should be thinking about that in case that might be some place that there may be some mismodeling or underestimation?
Well, lucky enough, or we are exactly with our retail in Midland or in that area in the Permian. So our retail exceeds our budget almost every month, both on sales and margins, just because of the traffic that is happening in the market. I'll just give you an example. I was in Midland last Thursday. Obviously, if you can imagine, we have big operation over there.
Some of our stores are 50%, 60%, 70% same store sales compared to last year. And it's really amazing what's going on in the area.
Excellent. Well, thank you so much for the time and the answers. I'll turn it over.
Thank you.
Our next question comes from Paul Cheng of Barclays.
Hey, guys. Good morning. Several questions. Yousie, is there any reason or Kevin that not to submit the BrickSpring and China for a wafer at all? No.
And that when you do apply it, is there a statutory limitation that can you apply for more than just 2017 or that it's now too late that you apply for 2016, 2015?
I need to check it. To my knowledge, I need to check it. To my knowledge, it's a 3 year thing.
Okay. Can you tell us that how much is the Brix, Spain and time the wind cost was in 2017, 2016, 2015?
It's not cost, Paul. It's the number of rings that we use. And it depends on the price of rings. But if you take as a ballpark, forget about the price of rings. If you take the number of RINs to run each refinery, I'm going by memory, it's around 60
El Dorado?
Yes, similar to El Dorado. So something like $60,000,000 ethanol $15,000,000 of biodiesel. I'm going by memory, but it's in the ballpark.
Okay. So you said combined or each one when you're talking about Each one.
Each one.
60,000,000 ethanol.
60, 60,000.
60, 60, 60, 60,000,000.
And 15
of biodiesel. So 1.6 for biodiesel?
1.5, yes.
1.5, 15, okay. And in terms of the Permian, we heard the challenge that as you mentioned about well oil out from the basin that a lot of the terminal and capacity seems to be used up for other things like the sand and all that. Have you looked at it and saying that realistically, what is your best guess over the next, say, several months that how much is the well oil could the volume could get up to, if any?
I want to clarify the question, Paul. What volume? Right.
That you may be able to weigh it out from
Oh, read out. We heard
similarly as what you have mentioned from other people that a lot of those terminal capacity and usage has been locked in for the shipment of sand and other things. So I'm just curious that while there's terminal, there's clearly capacity, but how much is actually available even if we want to that to really trying to ship oil?
I would say that we have our own analysis with every terminal. We talk about that quite a lot. It's between 101,000 and 120,000 barrels a day.
And do you know how much that is currently shipping? I
don't know. Probably not too much because all this just started few weeks ago. It takes time to clean their railcars, ship them to Midland, get the facility running probably very little.
And
hedging, I know you guys historically been quite active and you think you can make money. But in the whole scheme of things that, if that become just a noise and distraction and why we even bother to continue to do hedging?
Is that a great question? That's a great question.
At the same time, Paul, let's be honest. There are 2 things here that we need to remember. $10 for next year is a big number. And while we're all looking at that and amazed, at the same time, we had only we were in a positive territory 2 months ago. Now I was expecting and as you know, we spoke about that to get to the $3 $4 pretty quick, but I never thought $10 for the entire 2019 is even in the cards.
So not so soon. So we do need to think very carefully about taking some of that risk or some of that embedded profit into consideration and put it aside. Now it's not substantial, but it gives the opportunity to establish baseline for the cash flow.
And for the IMO 2020, is there any investment you guys going to do?
Not substantially. We do have opportunity to do both heavy, if we want to do that in we can run heavy both in Big Spring and at El Dorado, we have that flexibility. We will maintain that flexibility, but that doesn't require much investment. At Croats, we can actually blend everything we have over there and be in compliance. So very little regime exists in our system.
Curious, maybe this is for Fred. Fred, have you heard about a private company that make the claim? They have a proprietary technology, will be able to directly treat the high sulfur we see into the low sulfur bunker fuel standard without going through the cracking and that the capital cost may be only about, say, 25% of a hydrocracker. Have you looked at that technology and what do you think?
Paul, I have not. Just looking at the size of the bottom streams produced off of our units, it's for us it's probably the economy of scale wouldn't work. But I'll take another look at the technology if you think it's got some promise.
Okay. We do. Thank you.
Thanks, Paul. Nice to have you back.
Our next question comes from Roger Read of Wells Fargo.
Uzi, a lot of it's been hit, but I guess maybe coming back to the dividend increase versus share repos versus acquisitions, what's the method for making the decision which direction to go? Are you looking at return on capital employed? Is there is it an equal return hurdle for each of those options? I'm just trying to understand kind of everybody agrees you're going to have a big pile of cash. Well, heck, you already do have a big pile of cash.
Question is what happens with it next? So maybe if you can kind of help us understand your thought process as you look at the opportunities and maybe what some of those hurdle rates are?
Well, that's a great question. As we look at the numbers of Q1, the Q1 wasn't good. There was a lot of noise in the Q1 and still cash continued to pile. And sometimes we have some noise in the numbers that it's hard to explain, but our cash is cash. And as you said, we are going to have more cash coming in.
And for me, the number one thing is how to create more value to the shareholders. And if we think that cash we can't make investments that will be accretive day 1 to our company, then there's no reason to hold that cash and we need to give it back to the shareholders and that's the dividend that we just did. Obviously, if Q2, Q3, Q4 will continue the way we see them. There is no reason to believe that we will not deploy more cash through means of dividend hiking as well as buyback. So for me, that's by the end of the day, the cash is the most important thing.
Looking at the second quarter, we mentioned it earlier, the average for the 2nd quarter is a little less than $6 it's actually a little more than $6 now, whereas we calculate for the entire quarter. And so you can see the EBITDA coming in the 2nd quarter. And also the 3rd quarter, we're talking about now $13,000,000 $14 And I saw this morning that the 4th quarter is $15 So there's no way we cannot continue to deploy cash to our shareholders. By the way, that reminds me something that I neglected to not to say earlier. There will be because of the the way the accounting works with us and Kevin can explain that if needed, I don't think There will be some non cash adjustment to our inventory in the second quarter because of Midland differential coming down.
We will adjust to that differential, but that again will be non cash. So going back to your question earlier, I think that more of that too low, even for us, they are changing by the day and we just need to adjust to a new world that we can deploy all that cash to you guys.
Okay. Thanks. And so just as a follow-up on that, I guess, I mean, I could imagine you don't want to get too committed to a regular dividend because as we all know differentials come and differentials go. So special dividends as well as share repos, the regular dividend, the right way to think about potential cash returns to shareholders?
Well,
we're still paying $1 I don't want to commit to anything at this point. We've been doing it long enough to know that things can change in a hurry. The way they came, they can go. But right now, we it looks bright for future cash deployment.
All right. I'll leave it there. Thank you, Uzi. Thanks.
Our next question comes from Matthew Blair of Tudor, Pickering, Holt.
Hey, good morning, Uzi and Kevin.
Hey, Matt. Good morning, Matt.
Good morning. I want to come back to the share repurchase issue. So and correct me if this is wrong, but it looks like in January February you spent $94,000,000 on share repurchases for the 2 months, but then in March, you only spent $1,000,000 I guess, should we read anything into this? How are you going to be on buybacks going forward? And can you also disclose how much you bought back in 2Q so far?
Yes. Matt, it's Kevin. So it's $95,000,000 total in Q1, and we ended the under a 10b5-1 program and we ended the share buybacks at the end of February. So I'm not sure we got the $94,000,000 versus $1,000,000 But there's $95,000,000 total on top of the $25,000,000 that we did in Q4. And once the window opens back up for us post earnings release, we'll be back in the market with another 10b5-1 program for the rest of the year.
Okay. And how sensitive are you to share price in terms of buybacks going forward? Is that much of a consideration or not really?
No. Zero sensitivity. We just do 10b5-1 1 and execute or the broker execute without our involvement. I don't even know what the price every day when he buys.
Sounds good. Then I was hoping a lot of talk here on the Southwest crude market with good reason, but I was hoping you could also talk about the Southwest products market. That's historically been one of the best products markets in the U. S. There's some projects out there to increase diesel pipeline capacity coming into the Southwest from the Gulf Coast.
Any concerns on your end that the product side might weaken in the Southwest going forward?
Well, let's be clear. That's not sustainable. We have days with $0.30 or $0.35 margin, especially now in the summer and especially with the activity. And I'm sure that somebody will come with some barrels. At the same time, we just need to remember, it's not easy to get to that part of the country.
And sometimes it costs $0.12 $0.13 $0.14 to get to something that would cost us 0. So we while we may suffer a little bit on the $0.30 We never more than $0.30 We are probably talking about $0.14, dollars0.15 going forward. Sounds good. Thanks.
Our next question comes from Kelly Ackerman of Bank of America.
Hey, guys. Good morning. Good morning. Just kind of looking at the diesel inventories here in PADD 1, it's fallen quite a bit. Gulf Coast refiners are sending more of their products to export markets rather than Colonial because of the more attractive economics.
You guys are a shipper on Colonial. So I just want to know what you guys are seeing as far as netbacks compared to the Gulf Coast?
Netback, a Colonial netback for a long time, Clay, got positive. And a lot of people ship to Mexico. We're actually doing the same thing from 2 refineries because of the netbacks being healthier in Mexico. And the colonial market is getting a little healthier. It's still not to the magnitude that we see with the TEPCO line or, of course, the Magellan line, but positive netbacks that should impact us during the summer.
Got it. And just kind of looking at the wide differential here in the Midland in both the spot and the forward markets, how long do you think this windfall will last? And when do you see this tightness fading if it does? And what does the sustainable differential for Mid Cush and Mid Houston look like once the next wave of pipelines are put into the ground?
Well, I think the component here that we all forget is once it gets to the Gulf, it needs to go somewhere. And while we are not export or expert for export export, we do have some knowledge around it. And we think our model all along was between $2.5 $4 between Midland and Cushing. And while we have a huge windfall now, I don't think that going forward come 2021, 2022, we will see these numbers and we never modeled them in our models.
What do you think the scope of your participation looks like in the export markets? How much crude can you currently get to the Gulf Coast?
How much crude can we get to the Gulf Coast?
Yes.
That's an area that I prefer to stay silent until we announce to the market our plans, but we do have plans around it.
Got it. Thanks for the answers guys.
And we have no further questions at this time. I would like to turn the call over to management for closing remarks.
Thank you, Laura. I'd like to thank my friends around the table here. I'd like to thank the Board of Directors for their leadership and help with the company. I obviously like to thank the analysts and the investment community in believing in us. That is huge support that we get from the market.
And overall, I'd like or above all, I'd like to thank our employees who make this company as great as it is. We'll talk to you next time. Thank you.