Earnings Call: Q3 2020

Oct 29, 2020

Good day, everyone, and welcome to the PBF Energy Third Quarter 2020 Earnings Conference Call and Webcast. Please note this call may be recorded. I'll be standing by should you need any assistance. It is now my pleasure to turn the floor to Colin Murray of Investor Relations. Sir, you may begin. Thank you, Reed. Good morning, and welcome to today's call. With me today are Tom Nimbley, our CEO Matt Lucey, our President Eric Young, our CFO and several other members of our management team. A copy of today's release, including supplemental information is available on our website. Before getting started, I'd like to direct your attention to the Safe Harbor statement contained in today's press release. In summary, it outlines that statements contained in the press release and on this call, which express the company's or management's expectations or predictions of the future, are forward looking statements intended to be covered by the Safe Harbor provisions under federal securities laws. There are many factors that could cause actual results to differ from our expectations, including those we describe in our filings with the SEC. Consistent with our prior quarters, we will discuss our results excluding special items. Non cash special items including in the Q3 2020 results, which decreased net income by a net after tax charge of $73,000,000 or $0.62 per share consisted of a net tax expense on remeasurement of deferred tax assets and impairment expense related to the PBF Logistics write down of certain long lived assets, offset by a lower of cost or market inventory adjustment, change in fair value of the contingent consideration associated with the earn out provisions related to both the Martinez acquisition and the PBF Logistics CPI acquisition and a benefit related to the change in our tax receivable agreement liability. As noted in our press release, we will be using certain non GAAP measures while describing PVF's operating performance and financial results. For reconciliations of non GAAP measures to the appropriate GAAP figure, please refer to the supplemental tables provided in today's release. I will now turn the call over to Tom Nimbley. Thanks, Colin. Good morning, everyone, and thank you for joining our call today. The challenges brought on by the global pandemic refining margins as a result of demand destruction. Crude oil differentials remain tight as refineries are processing less crude. A return in demand across all products and in turn our higher call on crude will result in improved market conditions. Through these challenging times, PBS focus has been on managing the aspects of our business that we can control. We remain focused on safety, both personal and operational. As you will have noted in today's press release, we continue taking a close look at our refining portfolio and are determined to emerge from the current crisis as a stronger company with increased efficiency and lower cost at all of our assets. In tandem with our ongoing system wide cost reductions, East Coast reconfiguration is another important step on the path to increasing our long term competitiveness. We are putting all of our operations across the country under a microscope and committed to find additional efficiencies. We saw the largest opportunity in a rapid path to execution on the East Coast. We identified a significant opportunities for further integration through preserving the greatest strengths of both Paulsboro and Delaware City refineries, while significantly reducing costs going forward. Unfortunately, the positive effects of East Coast configuration will have an offset on a business will come with a burden. It will directly impact the livelihoods of many of our employees here in New Jersey. The current crisis has necessitated this difficult decisions for the company and those decisions have consequences, which I do not take lightly. We are committed to assisting those impacted with their transitions and hopeful for better times ahead. With our stated goal of increasing competitiveness, we continue to actively review all of our assets and all of our options. While the urgency of this is heightened given the current market conditions, the decisions will result in a stronger base business. On the positive side, we have seen demand incrementally increase over the last several months and inventory levels have been trending down favorably. Product inventories continue to moderate with gasoline well within the 5 year average range, distillate inventory levels have come down and while demand is still anemic, jet inventory levels are below the 5 year average. We think this is a positive backdrop for demand ultimately recovering. Maintaining operational discipline is key in preserving this tenuous path to improving fundamentals. We are seeing very few signals, which would necessitate increased utilization rates. The market is rebalancing and will continue to do so until there is a widely available medical solution that allows greater freedom of movement, increased business and personal travel, resulting in a return of demand. Lastly, I would like to thank all of our employees for continuing to unflinchingly rise above the current challenges and maintaining the safety and integrity of our operations as well as for following our COVID-nineteen protocols. With that, I will turn the call over to Matt to provide an update on our operations during the quarter and the current market reality requires us to take aggressive action to navigate the near term, but more importantly to strengthen our position and maximize cash flow in the long term. In regards to the East Coast reconfiguration, which was highlighted in our press release this morning, I want to make 3 important points. 1, rationalization is necessary 2, the move creates significant savings in the current market without a decrement in a normalized market And 3, the reconfiguration creates a stronger East Coast system. As to the first point, in light of the current environment, PBF recognizes the need for rationalization across the industry. The net result of the East Coast reconfiguration is effectively removing 85,000 barrels per day of refining capacity. Going to the second point, the reconfigured East Coast improves cash flow by about approximately $75,000,000 to $100,000,000 per annum based on today's market through reduced operating and capital expenses, which are offset by a reduction in gross margin associated with the lower throughput. Importantly, once the market normalizes, we do not believe there will be an economic debit to the historical earnings power with the new configuration. On number 3, we believe we have strengthened our East Coast system as we have isolated Paulsboro's most profitable businesses, and at the same time, we'll increase utilization on Delaware City secondary units. For the Paulsboro refinery, we are maintaining our lubes and asphalt operations, while significantly reducing fuel production. We will be increasing the interdependence of the 2 refineries and promoting higher utilization and efficiency from the remaining units. Delaware City will produce will process the intermediate feedstocks that Paulsboro will continue to produce. Essentially, the East Coast will be shedding its least economic crude and its lowest netbacks products. Historically, we have purchased intermediates on the East Coast, which will no longer be required post reconfiguration. Specifically, we'll be shutting down the smaller 2 crude units, the FCC, the Reformer, the alkylation unit and the coker. We will be lowering our East Coast operating expenses by over $100,000,000 annually and reducing our capital requirements by approximately $50,000,000 per year versus historical averages. Again, the East Coast reconfiguration will result in a refining system that will be stronger by isolating Paulsboro's strengths and increasing Del City's utilization. We are beginning to reconfiguration work as we speak and expect to be complete by the end of 2020. With regards to our refining operations in the Q3, we ran our refining system at approximately 70% of capacity approximately 706,000 barrels per day in total. Until demand picks up and inventory levels come down, we will likely continue to operate at reduced rates. We are on track to exceed our previously announced expense reduction targets for 2020. Operating expenses have come down in part as a result of lower throughput, but also through a meaningful and targeted reductions we plan to convert to long term savings. In July, we guided towards $140,000,000 of operating expenses for the year, which breaks down to $40,000,000 related to lower throughput and $100,000,000 of expense reductions. Our current estimates are to achieve $280,000,000 for the year or twice our previous guidance. The $280,000,000 consists of $125,000,000 associated with the reduced throughput and deferrals and $155,000,000 of expense reductions. Going forward, assuming normal throughput, we expect to maintain $115,000,000 to $130,000,000 of expense savings, excluding the changes at Paulsboro, Then and in addition to, the East Coast reconfiguration provides an incremental $100,000,000 of operating expense savings, which brings the total OpEx savings on a run rate basis as of January 1, 2021 to $215,000,000 to $230,000,000 We continue to be focused on the items within our control. In the months ahead, we are committed to crystallizing our current operating cost reductions into permanent savings and generate incremental margin through unit level optimization. Now I'll turn the call over to Eric. Thanks, Matt. Today, PBF reported an adjusted loss of 2.8 $7 per share for the 3rd quarter and adjusted EBITDA of negative $229,700,000 As Tom and Matt outlined, we are taking aggressive steps to reduce our cost structure and continue to focus on shoring up our balance sheet. Our current liquidity is approximately $2,000,000,000 based on a cash balance of $1,300,000,000 and available borrowing capacity under our ABL. As a result of commodity market volatility, we have seen significant working capital swings since the beginning of the year. Assuming no material change to current commodity prices, we expect our working capital to continue to normalize and generate incremental cash in the Q4. Additionally, as we complete our East Coast reconfiguration, we expect to see a one time cash benefit of approximately $35,000,000 as a result of a reduction in inventory. This is partially offset by roughly $15,000,000 in expected legal and severance costs associated with the reconfiguration. Consolidated CapEx for the quarter was approximately $56,700,000 The consolidated CapEx includes $55,000,000 for refining and corporate CapEx and $1,700,000 for PBF Logistics. Consistent with our prior outlook and guidance, we expect to incur $60,000,000 We are still finalizing our 2021 capital program and expect to have a flexible plan that will be responsive to market conditions. Importantly, we have no planned turnarounds or significant major maintenance activity scheduled for the first half of twenty twenty one. Our initial CapEx estimate for this period is $125,000,000 to $150,000,000 We will be adjusting our plan as we go depending on market conditions similar to the flexibility we've demonstrated thus far in 2020. Operator, we've completed our opening remarks and we'd be pleased to take any questions. We'll go first to Roger Read with Wells Fargo. Yes. Thank you. Good morning. Good morning, Roger. I understand the tough decisions being made here. I guess along those lines as we think about the East Coast reconfiguration, how long did you have something like this planned? I mean, it's not like a secret the East Coast has been one of the more competitive markets out there. So I was just curious, as we think about the savings and the reconfiguration here, is this the step? Is there more that can be done? Is it the kind of thing that improves as you go along? And typical with this, as you kind of learn the processes, you see additional opportunities for improvement? It's a great question, Roger. The kind of the answer is all of the above, to be honest. We've contemplated this in the past. We actually did obviously interact or put Delaware City and Paulsboro together earlier in our formation of the company. And we did that in order to be able to use the assets in a way that allowed us to get the Paulsboro to produce ultra low sulfur diesel, 15,500,000 diesel without a significant capital investment. And that's by moving some intermediate stocks from Paulsboro over to Delaware and vice versa. As we got into this situation, we realized, hey, there's an opportunity for us to step that up. The physical distance of 30 miles between the two locations is an opportunity. As Matt alluded to, we then put everything under the portfolio. By the way, that is a true statement for the entire logistics and refining system. So this is the first step, but we will look at everything. But what we did in Delaware and Paulsboro, I'd love to say it's 1 plus make 1 +1equal3. I don't think that's the case. But I do think it's 1 +1 equals2.5. What we set up is a smaller footprint clearly, 80,000 barrels a equivalent refinery, but it is a refining complex that has lubes production capability, asphalt, which has been a high margin product and probably will be in the future because of stimulus. Delaware produces chemicals and Delaware has the strongest fuels capability of the 2 refineries because of its hydro treating, hydroprocessing and hydrocracking. So it was the obvious first step for us to go. To your last point, I want to make this because I absolutely believe this. While we have looked at this thoroughly and we know we're doing the right thing, I personally believe that there will be more opportunities to improve the market as we get the operation, as we get into the position where we're looking at the sites running this way. So think it's absolutely the right thing to do, but I think there's upside potential over what we've advertised. Okay, great. Thanks. And I guess a follow on question kind of open ended to whichever you all want to take it. As we think about further cost reductions, I mean, obviously, we've got the highlight here of the up to 230 as we think about kind of 'twenty one versus 'nineteen, I guess. But where else as you're looking across do you think you can eke out some additional savings? Or are we looking at a situation where there's only so much that can come out and at this point, it's hang on and wait for, let's call it, the turn in demand and turn in the market here? Yes. Absolutely, it's not the latter, it's the former. Obviously, we're looking forward to the turn of the market and if we get it some continued progress in the medical front, we would certainly be happy to see that. But I want to go back to your point. We have multiple initiatives that we've had underway, which Matt has spoken to, that we did right off the bat when we saw that we were in the throes of demand destruction we had. Major effort on OpEx, major effort on CapEx. We put together a turnaround best practices team that are looking at ways to go ahead and reduce our turnaround costs by extending runs, taking squats on units to repair certain things to allow us to run longer. And importantly, we have every refinery looking at inside defense line for smaller margin initiatives, which we think I think is going to also pay dividends that is going to be north of the $100,000,000 outside of what we've already talked about before. So there's a lot of things we're doing in the base business, the blocking and tackling of this business that are now giving us good results, but there's more that can be achieved. That being said, we go back to other opportunities to consolidate or look at the synergies between Torrance and Martinez in a different way? Yes, there may well be. Nothing is off the table. Everything is going to be looked at and put under a microscope. Yes. I guess, just as a quick follow-up on that, I mean, I was sort of looking here, and I know some of these quarters aren't totally comparable because of work that's been done like turnaround work and stuff. But I mean, you go back to Q1 of 2019, you had cash OpEx expenses $453,000,000 this quarter $458,000,000 and that's obviously the addition of Martinez is in there. So I mean there's an ability to bring costs down. I guess I really was just trying to get at, is there anything else you expect you'll identify in terms of cash OpEx savings for us as we think about the other 4 units across the country? Roger, it's Matt. Look, we have not gone pencils down. We have taken concrete steps already where we've reduced the amount of people within the refinery that includes our employees as well as significantly reducing contractors. Those steps have been taken. But in addition to that, there are over 25 major initiatives within the refining operations team looking at reducing expenses. I've highlighted what we've captured so far. We think it's a positive step, but by no means is it complete and we'll continue to work it. With regards to managing the business that is within our control, it's pretty simple. It's managing expenses, managing capital as Eric laid out. The turnaround team has done an exceptional job of managing its business, taking squats where otherwise turnarounds were necessary, elongating turnaround cycles, which has a major increasing the optimization of each of your refineries, which Tom alluded to, which we're doing actively as well. And we can go next to Theresa Chen with Barclays. Good morning. I wanted to touch upon what the outlook for the East Coast is in a more normalized environment as we haven't had a real summer driving season since PES closed last year and with the come by chance refinery also down, which seems to be more permanent, given that it's not going to be sold for now at least and the reconfiguration of your assets. How do you think these dynamics play out in the path to normalization and what can happen as far as margin and demand goes? I think we've given that a lot of thought. Obviously, if come by chances permanently off the line, They are a refinery that sold their products into the harbor, moved it down here. Obviously, us taking capacity off, which really is in the Philadelphia area, would perhaps give us a benefit at Laurel or in the Philadelphia area. But the other thing that we're actively looking at and watching and I believe it will happen is the rationalization is underway. And as bad as the margins are in the United States, they're better in the United States than they are in many parts of Asia, Singapore and in Northwest Europe or the Mid. Those refineries are under significant pressure. We've seen indications of rationalization starting and I think that will continue. Obviously, Europe has got a different mindset and how they want to transfer from traditional fossil fuels at the pace that they're doing. That's been well announced by BP, Total, Shell, etcetera. So we would expect that there will be less product being produced. Europe, as you know is typically one of the major sources of imported products into the U. S. East Coast or Northeast. So we watching that very closely and we do realize, everybody realizes there's a huge short in this part of the country. We are where the people eat this stuff. And so there's a need for imported gasoline, but the fact that you're going to have this rationalization, there's no economics really for them to run barrels and then have to pay the freight to move here. So we're going to watch that pretty closely, but we're somewhat optimistic that we'll see some benefit. Tom, do you have anything you would add? No, I mean, I think just be looked well, I will add just we are talking about as you mentioned the higher cost of conveyance to replace the barrels that have been lost. Got it. And Eric, if I can ask you about the liquidity options from here and clearly there's no imminent concern in the very near term, but if it is a lower for longer period of uncertainty, how much more can you do in the secured market? How much assets can you sell as far as MLP able assets sell? And is there more room in terms of inventory remediation? So just going in kind of reverse order there. On the inventory intermediation side, that's always an option that I think we've laid out for investors. We do have, call it, free and clear anywhere from 25,000,000 to 30,000,000 barrels of inventory. So that could potentially free up cash. There are assets for both the MLP that I think in a normal way environment you could say you could sell, but ultimately for PBF Logistics to suddenly do some type of drop down more than likely would require equity. I don't think that's something that near term seems to be a viable option. I believe we did lay out back in the summer something similar to and I think we're going to continue to explore this. However, we don't have anything that's imminent. But similar to what we did with the hydrogen plants, we do have assets that are part of our refining system throughout the United States that ultimately you could do some type of sale lease system or structure that would free up cash. But as a result of the freeing up cash, you would have incremental burden that has been put on your refining system on a go forward basis. And then from a financing standpoint, we've got $250,000,000 carve out available for incremental 1st lien secured debt. We have another basket circa $500,000,000 roughly term issue for us in terms of liquidity. We feel very firmly, very strongly that we are on firm ground right now. What we are dealing with ultimately is what's going to happen in the future. And I think liquidity for us, we just go back to cash is king, liquidity is the most important thing that we're trying to manage right now. Thank you. Good. And we can take our next question from Brad Heffern. Brad, your line is open. Brad, if you're asking a question, we cannot hear you. Operator, let's move to the next. We'll go next to Neil Mehta with Goldman Sachs. Good morning, guys. Can you hear me okay? Yes. Yes, Neil. All right, great. The first question is just on capital spending. You've done a good job getting CapEx lower in 2020. Sure you're doing a lot of planning here for 2021. What do you view as sort of sustaining CapEx levels? And if we are in a tougher environment as the curve implies for next year, how low can you drive capital spending without compromising the quality of your assets or reliability? I think excluding any major planned turnaround and planned downtime, if you took kind of an LTM look from the second half of twenty twenty one, so what we've laid out for you in terms of $150,000,000 for the 1st 6 months of next year, combined with the roughly $150 ish million for the second half of twenty twenty, $300,000,000 is probably a reasonable sustaining number when we think through general maintenance. We do have regulatory spend that we are obligated to incur. There's clearly an element of safety that needs to be incurred as well. So that's probably a pretty good number and then we layer on top of that turnarounds and major maintenance. And I think to Matt's point earlier in terms of flexibility that is something that we have really been working behind the scenes. And I think we've now seen all of the hard work kind of pay off as these refiners have each been able to come back to us at corporate and say, we have the capability to essentially extend run life and be very flexible from a capital plan standpoint. All right, great. And Eric, just follow-up this for you. As you know, I'm no credit analyst, but we've spent a lot of time with your credit investors about the pressure the bonds have been under here really over the last 2 weeks. Can you help unpack that for us a little bit? What's going on the credit markets? And then what do you think is being misunderstood? To be completely honest with you, ton of attention to what goes on in the market and try to talk to as many people as possible to get some color on what's going on. We do spend time our fixed income investors. What at least we can see based on hearing different things is that we still have very strong support from our large long only holders in the fixed income structure. And ultimately, the fixed income market is very across our structure, all of the bond price reductions over the past, call it, 4 across our structure all of the bond price reductions over the past, call it, 4 to 6 weeks. Clearly, the trajectory has accelerated here of late. Don't have any real tidbits for you. I think we would probably push back on back to the market and ask them what exactly is going on since they are the market experts. But ultimately, we are paying attention. I think our message is very firmly rooted in liquidity is the number one priority for this business. We took some steps back in the spring. We were in triage mode. We did exactly what we were supposed to do, raising $1,500,000,000 of capital. As we sit here today, we've got $1,300,000,000 of cash, ample liquidity under our ABL. We are focused on operating these assets, reducing and optimizing our cost structure and making sure that we do all the right things that are ultimately in our control. And I hate to say it, but the bond price is somewhat out of our control right now. Yes, very clear. Thanks guys. Appreciate the time. We'll go next to Phil Gresh with JPMorgan. Please go ahead. Yes. Hi, good morning. Just a follow-up on the 2021 CapEx. Eric, on the last call, I think you said $500,000,000 to $600,000,000 is a good starting point for next year. But now you've referenced the ability to kind of extend the run life and the $300,000,000 of sustaining and the incremental cost out for the East Coast. So are you at this point thinking roughly that it might even be below that $500,000,000 to $600,000,000 at this point? I believe the 500 to 600 that we gave was assuming that everything returns to normal, whatever the new normal will be, but let's just say in a better refining macro environment than what we see today. So I think that goes back to regular way throughput. It sure doesn't feel like we're going to be there effective on a run rate basis January 1, 2021. So we really have tried to approach this from a monthly, quarterly, 6 month, 9 month view on a go forward basis. And we're trying to respond to different things that we see in the market. I think our message right now is we don't have the final capital budget approved by our Board of Directors, we do feel very firmly that the refineries that we have and the teams at the refineries have all done a pretty good job. And we feel very strongly that 100 and $50,000,000 is ample CapEx to incur during the 1st 6 months of the year. We're going to have to be responsive. I do believe we will have an update, a more fulsome update for you on our February Q4 call. We'll also have a lot more clarity on what 2021 kind of looks like and the medical advances that sort of thing in response to this pandemic. Got it. Okay, that's fair. I understand. My second question would be, I guess, for Tom. With the actions that have been taken by the industry on the West Coast, your actions here in the East Coast and some other smaller things. I mean, how are you viewing what amount of capacity you think needs to be rationalized in the United States moving forward recognizing it's a global challenge and the U. S. Gulf Coast is lower end of the cost curve. Do you think the United States needs to contribute a lot more in terms of refining capacity out specifically on the Gulf Coast? First of all, we've said I think before that we're looking a need for somewhere in the area of probably 5,000,000 barrels a day of rationalization across the globe and perhaps $2,500,000 from North America. There has been a fair amount that is even been shut down already. And I include PES in that because obviously that tragic situation or could have been a tragic situation, took 340,000 barrels a day capacity out of the East Coast. So I think we're going to see more rationalization. I think we will see rationalization. Obviously, we have Martinez in the West Coast. We'll see what happens when P66 is announced, they're going to do a renewable plant. There may be more rationalization on the West Coast. There are some refineries out there that are not that strong, especially if we get that when we get back to a more normalized market condition. I think we'll see rationalization in the Gulf Coast. Obviously, you're not going to see it in the guerilla refineries. You're not going to see it from Beaumont or Baton Rouge, but there's a lot of smaller refineries, TI based refineries. And again, you've got some majors who have announced that they want to get out of this business, the European majors who may in fact take some steps. So 3,000,000 to 5,000,000 barrels maybe north of that and that includes some of the Chinese teapots and 2,000,000, 2,500,000 in North America, not that that's probably realistic. Got it. So in North America accounting for what's already been announced, it still sounds like you think we need another $1,000,000 to $1,500,000 perhaps? Maybe $1,000,000 Yes. There's been in North America, we've come by chance. And again, I used if you just take a look at what I said and I did have PES in it, you got 340 for PES, you got 160 from Martinez, you've got 130 from come by chance, you've got the Holly refineries, you're already up around Calcasieu, I can't say that. So we're pretty high up there already. Now Calcasieu may not be permanent, but they did issue a one notice. So they're obviously contemplating that and you take our 80 and you're already up north of 1,000,000 I think and maybe is another 1,000,000. Very helpful. Thank you. Matthew Blair with Tudor, Pickering, Holt. Please go ahead. Hey, good morning, everyone. I was hoping you could talk about RINs. Do you think the recent move up in D6 RINs is due to lower ethanol inventories? How much RIN expense are you projecting for 2020? And do you feel that just the overall looser environment, does that make it tougher to pass through any RIN costs to the end consumer? As far as RINs, I would truncate the discussion analysis too. There's again be election in 5, 6 days, whatever it is. And that so dramatically influences the dynamics RINs program. And you have a number of different outcomes depending on who wins, is there a lame duck period, what happens after the like. So to get into what's driving it, I think there were some concessions that were I think there'll be some more movements after the election. And it's really as simple as that at this point. And I don't think anything has changed between the whipsaw that the RIN market has been lying between. And so it's not in one direction can go one way. What goes up goes down, what goes down goes up, but it's a continual. But the biggest thing is the election next week and nothing that's going to happen. The EPA is essentially frozen until we know which direction the country is going to go. And from an expense standpoint for the year, I think a reasonable number is probably in the $250,000,000 to $300,000,000 range. We still have a couple of months to go for the 4th quarter, but ultimately we've incurred year to date about $185,000,000 of expense hitting the P and L, roughly $85,000,000 of that was expensed during the Q3. So we'll just have to see how things unfold from that point. And our rent obligation will go down in 'twenty one with the reduction on the East Coast. Right, right. Okay, thanks. And then, it seems like there could be a lot of renewable diesel entering the California market, so much so the potential for existing petroleum diesel to get pushed out. I was wondering if you'd looked at that. And if that were the case, what are the options for Torrance and Martinez? Could you export diesel to skepticism on the amount skepticism on the amount of renewable diesel coming on the market. Obviously, we'll react as things come online and even if we can see it coming online. But I think there's been a number of initiatives that are being studied and being analyzed, but I think we're a long way from coming to fruition. And obviously, with the reductions that Tom mentioned earlier on the West Coast, it's still a net reduction of distillate demand or distillate supply once you get to that point. So there's a number of initiatives that have been mentioned, but there's also a number of headwinds that stand in the way. So we'll see how that develops over the next couple of years. Sounds good. Thanks, guys. We'll go next to Doug Leggate with Bank of America. Sorry guys, I was on mute. Good morning. Good morning. Thanks for taking my questions. Fellas, I hate to beat on this issue, but when you wrap everything together, the working the potential working capital release, the lower maintenance level, lower capital and so on. When you look at the current future strip, what do you think your rate of expected cash burn would be on a manual basis looking at the 2021? I think directionally, obviously, depending on what you're actually looking at and then break it down by region, you're probably including interest in CapEx. We're in the for the next call it 6 to 9 months, we're probably in the 50 to 75 at times. Again, things are kind of moving around with curve, but up to $100,000,000 a month. I think we'll start to see the benefit of the East Coast reconfiguration really hit in the Q1. So I think our target is in that $50,000,000 to $75,000,000 a month range assuming no change and assuming that nothing else that we are doing and that we've kind of tried to outline for you in terms of things behind the curtain that our team is really working on, assuming none of that is actually coming to fruition. Okay. That's really helpful. Go on, Tom. Just on the side, while we are obviously preparing for the worst and the activities we've laid out are with that in mind, there are some green shoots, if you will, in that obviously the margins have been terrible and they were terrible because there was too damn much inventory. And particularly first it was gas rain and then it was diesel. And I don't expect to see significant improvements in margins until that inventory overhang has been cleared, but there is evidence that it's being cleared. Since the end of July to yesterday's EIA numbers, 50,000,000 barrels of distillate gasoline and jet has been drawn down in that 3 month period. And we have gasoline right around the 5 year average. This was still got another 20,000,000, 22,000,000 barrels to go. Jet demand is going to stay low because people aren't flying, but the refiners have done a good job with lower utilization in keeping jet production such that we're actually below year's level on jet inventories. I think once we get the inventories cleared and you're not sitting there supplying your sales out of inventory and you actually have to increase production in order to meet your sales commitments, we will get some support in the marketplace. We won't get full support until we can get the demand all the way back, but we will start to see some improvement, at least that's my view. From your mouse to God's ears Tom. Yes, to be done. So let me just ask one quick follow-up fellas. I know it's something of a sensitive topic, but I just want to make sure we're clear on this. What, if any, are the covenant issues you have on debt? And I'll leave it there please. We don't have any covenant issues at all. We are very much covenant light across the board both including our ABL as well as obviously each of the indentures has its own set of related restrictions. But I think at this point, we are well clear of all covenants both at PBF as well as at PBF Logistics. That's what I thought. I just wanted to check. Thanks again. Good luck, guys. Thank you. We'll go next to Paul Cheng with Scotiabank. Hey, guys. Good morning. Good morning. Tom or Matt, you're saying that there's no time turnaround for the first half of the year. In the second half, is there any major turnaround you have to do? I'll ask Paul Davis who runs West Coast. We have a turnaround in the second half planned for the West Coast. We have some turnaround working on the West Coast, but it's not major. Not major. And previous question, Herman Seedorf who runs the refining system for us, we had some sessions earlier as we're getting ready to do our business plan. The 2021 capital plan, as Eric laid it out, it's back ended if it's $500,000,000 to $600,000,000 because we got to return to normalcy, it's back ended into the second half. No major turnarounds really period in the first half and really no major turnarounds, but there is some incremental smaller units. But this is a flexible plant. We will respond to the market and if the market continues to be in this type of situation, the $500,000,000 to $600,000,000 is going to go down. Okay. Maybe that this is for Eric that for the $100,000,000 of the cost savings you expect from the reconfiguration of the East Coast, can you break down for us that between the personnel costs and other benefit? I don't think we're going to get into that level of detail across the board, but you should start to see the benefits from the cost savings run through in Q1 of 2021 in the East Coast segment of our financials. We'll go next to Benny Wong with Morgan Stanley. Hey, good morning guys. Thanks for taking my question. My first one I think is for Eric and I apologize if this was covered already and I missed it. Just want to get a sense if you can give me a little more color of your current liquidity situation and the capacity of your ABL? Just trying to bridge your cash position quarter over quarter as well as your ABL capacity there. Thanks. So it's essentially it's slightly increased from our Q2 position. So we have as opposed to kind of 1 point $2,000,000,000 of cash, we've got closer to $1,300,000,000 of cash as we sit here today. And ultimately, we've got more than 700,000,000 available under our ABL, which is consistent with where we were at the end of the second quarter. Okay. Thank you. So just to confirm, total liquidity of roughly $2,000,000,000 as we are sitting here on the 29 October. Okay. Thank you. And just wanted to get your thoughts around Alberta curtailments, which are lifted by year end. Do you guys have any anticipation of that having any impact on crude differentials on the Canadian side? And if it affects your crude sourcing abilities or improves it for the Canadian barrels? Thanks, Benny. I mean, yes, I mean, the curtailment being going away is certainly a positive development. But I mean, Canada has had economic shut ins and then had maintenance or unplanned issues going throughout the Q2 and into the Q3. So while it's going away, it is certainly a positive development and we're starting to see the market not trading in quite as strong as the single digits discounts WTI that we had seen throughout the second and third quarter. And traditionally, you would probably would expect for production to increase in the Q4 and the Q1 and differentials to be a little bit wider. So we're consuming a little bit of WCS related stuff right now and we'll basically be assessing as the market changes. We'll go next to Jason Eblman with Cowen. Please go ahead. Hey, good morning. I wanted to circle back on the OpEx cuts that you've discussed. So I just wanted to clarify what the cuts are relative to your run rate right now. So if I'm looking kind of year over year, it looks like SG and A is down $20,000,000 so annualized 80,000,000 dollars and you're targeting underlying structural expense cuts of $155,000,000 So does that imply an additional $75,000,000 of annualized cuts? And then specifically on the East Coast, so it looks like OpEx in total is down about on an annualized basis $100,000,000 versus 3Q last year. So is there an additional $100,000,000 to go on an annualized go forward basis? And then just to round out on the expense guidance, are these cost reductions inclusive of the higher costs related to the hydrogen sale and leaseback? And then I have a follow-up. Thanks. So there's a lot there to unpack. In regards to the $100,000,000 that's above where we are today. So as the cost expenses that are in the Q3, we expect on a run rate basis for the Q4 to be similar to the Q3. And then we're getting the benefit of the incremental $100,000,000 on the East Coast. In regards to the overhead, my suspicion is what you're referring to is, obviously, there was bonus compensation previous years. We don't budget for that. That certainly that will certainly come down in the year 2020. What else did you have? Just if the hydrogen, it's a higher expense from the hydrogen sale and leaseback if that's incorporated into your expense reduction guidance or if that's an offset? No, that's built in. Okay. Great. That's really helpful. And then I just wanted to circle back on the liquidity, which was asked a couple of times because it's not clear. So liquidity was flat quarter over quarter, despite negative free cash flow. So can you just clarify what happened there? Did you take more cash down on the ABL, but then the ABL capacity expanded or was there something else going on? Thanks. Round numbers, Jason, we ultimately had $300,000,000 that went out of the system combined with PBF and PBF Logistics. PBF Logistics paid down some debt. We borrowed $300,000,000 which is what we paid down during the Q2 under our ABL. The overall value of the inventory sale leaseback transaction kind of regular way that we've done with all of our refineries. It's primarily the Martinez precious metals that we sold. So net net, if you think through $300,000,000 out the door, dollars 300,000,000 in the door from the ABL and $50,000,000 from the precious metals, that's your net increase in cash of about $50,000,000 quarter over quarter. Got it. Thanks a lot. We'll go to Jason Mandel with RBC Capital Markets. Please go ahead. Hi. My question was just asked and answered. Thank you very much. We've reached the end of today's call. And I'd now like to turn the call over to Tom Nimbley for closing remarks. Thank you everyone for joining the call today. We again are looking at our system relentlessly and we hope to show you further improvements and see a better market when we have our next call. Thank you. And this does conclude today's program. We appreciate your participation and you may now disconnect.