Par Pacific (PARR) Q2 2025 Earnings Transcript

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Date

Wednesday, Aug. 6, 2025 at 2 p.m. ET

Call participants

President and Chief Executive Officer — Will Monteleone

Chief Financial Officer — Shawn Flores

Chief Operating Officer — Richard Creamer

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Takeaways

Adjusted EBITDA-- Adjusted EBITDA totaled $138 million in Q2 2025 and by-segment disclosure: $108 million from Refining, $30 million from Logistics, and $23 million from Retail (adjusted EBITDA, Q2 2025) (segment components do not sum to consolidated due to eliminations and corporate expense).

Adjusted net income-- Adjusted net income reached $1.54 per share in Q2 2025.

Operational throughput record-- The Hawaii refinery achieved 88,000 barrels per day in Q2 2025, described as record quarterly throughput, with production costs of $4.18 per barrel.

System-wide throughput-- System-wide throughput was 187,000 barrels per day in Q2 2025, with guidance for Q3 2025 of 190,000-205,000 barrels per day; site-level Q3 2025 throughput guidance is 78,000-81,000 barrels per day in Hawaii, 39,000-41,000 in Washington, 18,000-19,000 in Wyoming, and 54,000-56,000 in Montana.

Retail same-store growth-- Same-store fuel and in-store revenue increased 1.83% year-over-year.

Share repurchases-- $28 million of common stock was repurchased in Q2 2025 (1.6 million shares), with year-to-date buybacks totaling 5.2 million shares as of Q2 2025, reducing the basic share count by 8%, to nearly 50 million shares outstanding as of June 30, 2025.

Liquidity-- Ending liquidity was reported at nearly $650 million (management cited $647 million) in Q2 2025. Total liquidity increased 23% in the second quarter to $647 million.

Gross term debt-- Gross term debt was $641 million as of June 30, 2025, equating to three times trailing twelve-month retail and logistics EBITDA at June 30, 2025, which management frames as the low end of their 3x-4x target range.

Montana turnaround completion-- The site's largest turnaround in its history was completed, with management stating the Montana acquisition's two-year anniversary has been reached and most higher-risk reliability items addressed.

Strategic joint venture on renewables-- Announced joint venture with Mitsubishi and INEOS Corporations; Mitsubishi and INEOS will together contribute $100 million for a 36.5% equity interest in the joint venture, withPar Pacific Holdings(NYSE:PARR) retaining a 63.5% controlling interest; The $100 million investment will be received after regulatory clearance from Mitsubishi and INEOS for a 36.5% equity interest in the joint venture and expected to fund the renewables project cost.

Renewables project timeline and economics-- Hawaii SAF project remains on track for second-half 2025 startup; mechanical completion and commissioning of the pretreatment unit are nearing, but JV financial contribution is expected starting in 2026 after commissioning and credit pathway establishment.

Margin capture and market metrics-- Hawaii achieved 119% margin capture (125% excluding a $4 million adverse impact from price lag and hedging) in Q2 2025, versus a segment index of $13.6 per barrel in Q2 2025; Montana margin capture was 110% on a $20.29 per barrel index in Q2 2025; Margin captures in Wyoming and Washington were 87% and 75%, respectively, in Q2 2025.

Cost reduction progress-- Consolidated year-to-date operating expenses were $412 million in the first half of 2025, a $24 million reduction in year-to-date consolidated operating expenses compared to the prior-year period, with an ongoing annual savings target of $30 million to $40 million.

CapEx and turnaround expense guidance-- Through June 30, 2025, accrued capital expenditures and turnaround costs reached $173 million, trending toward the upper end of the full-year $240 million guidance; management expects a meaningful decline in CapEx during the second half of the year.

Cash from operations-- Cash from operations was $83 million in Q2 2025, excluding working capital inflows of $123 million and deferred turnaround expenditures of $72 million; management anticipates working capital inflow will partly reverse in Q3 due to derivatives and accounts payable normalization.

RIN and SRE exposure-- Management stated, "our obligations going back to 2019 through 2024."; any retroactive receipt of a small refinery exemption would provide direct cash proceeds, with gross RIN unit exposure of 140 million units across the three eligible Mainland refineries on a go-forward basis.

Company-wide minimum liquidity target-- Management maintained a target minimum liquidity range of $250 million to $300 million.

Market outlook commentary-- The Singapore 3-2-1 index averaged $13.6 per barrel in Q2 2025, and remains well supported due to steady demand and contained Chinese exports; management described current business conditions as entering the third quarter with favorable momentum in distillates, capturing higher margins in line with their operational strengths.

Summary

Par Pacific Holdings delivered adjusted EBITDA of $138 million in Q2 2025 and reduced its share count by 8% through year-to-date buybacks as of Q2 2025, reporting liquidity of $647 million in Q2 2025 and gross term debt of $641 million as of June 30, 2025. Management introduced a $100 million joint venture with Mitsubishi and INEOS in Q2 2025, which will support the Hawaii SAF renewables project and expand the company’s renewable distribution reach. Site-level throughput records were set in Hawaii, and the Montana refinery completed its largest turnaround, advancing reliability improvements at the location.

The retail segment recorded last-twelve-month adjusted EBITDA of $85 million, and same-store fuel and in-store revenue increased 1.83% year-over-year.

Hawaii’s margin capture exceeded guidance in Q2 2025, reported at 119% (or 125% adjusted), attributed to higher throughput and elevated clean product freight rates.

Adjusted EBITDA for the Refining segment rebounded from a $14 million loss in Q1 to $108 million in Q2 2025, reflecting stable operating conditions and improved market fundamentals.

Excluding nonrecurring effects, management expects capex to trend lower in the second half of the year, as major projects conclude and JV funding is received after regulatory clearance.

Management forecasted consolidated throughput growth to 190,000-205,000 barrels per day for Q3 2025, noting continued utilization of conversion units despite transient crude delivery delays in Hawaii.

Industry glossary

Throughput: The average volume of crude or feedstock processed per unit of time, commonly expressed in barrels per day, at a refinery or system of refineries.

Margin capture: A company-specific metric expressing the percentage of a benchmark refining margin index that the company converts into realized gross margin, after adjustments for book and nonrecurring items.

Small refinery exemption (SRE): A provision under the U.S. Renewable Fuel Standard that exempts qualifying small refineries from compliance with annual blending obligations if they demonstrate economic hardship.

RIN (Renewable Identification Number): A serial number assigned to each gallon of renewable fuel produced or imported in the U.S., representing compliance with the Renewable Fuel Standard mandates.

Singapore 3-2-1: An industry standard benchmark representing the notional margin for refining three barrels of crude oil into two barrels of gasoline and one barrel of distillates in Singapore.

SAF (Sustainable Aviation Fuel): Low-carbon fuel produced for use in aviation, meeting sustainability criteria and reducing lifecycle greenhouse gas emissions compared to conventional jet fuel.

Full Conference Call Transcript

Will Monteleone: Thank you, Ashimi, and good morning, everyone. Second quarter adjusted EBITDA was $138 million, and adjusted net income was $1.54 per share. Strong operations combined with improving market conditions enabled us to generate solid profits during the quarter. We set a quarterly operational throughput record in Hawaii, and the commercial organization was well-positioned to capture improving market conditions during the Montana turnaround. Product margins remained firm, with a combined index of approximately $13 per barrel so far in the third quarter, especially favoring our distillate-oriented yield profile. The Asian market outlook remains favorable with minimal increases in Chinese exports despite arbitrage opportunities to Europe. Each of our businesses is well-positioned to maximize rates as we enter the third quarter.

Our retail business continues to shine. Quarterly same-store fuel and in-store revenue increased by 1.83% compared to 2024. Underlying profitability also improved, as demonstrated by our last twelve months, total adjusted EBITDA climbing to $85 million. We also made considerable progress on key objectives during the quarter, and we are well on our way towards achieving our strategic priorities for the year. The Montana team delivered solid results executing the largest turnaround in the site's history. The completion of this event marks the approximate two-year anniversary of the Montana acquisition. During this time, we addressed many of the higher-risk reliability items.

We will now shift our focus towards improving the profitability of the site through a series of low capital, high return projects. The Hawaii and renewables team progressed the SAF project and remained scheduled for start-up in the second half of the year. We are nearing mechanical completion and commissioning of the pretreatment unit. We are also pleased to announce the joint venture with Mitsubishi and INEOS Corporations. Together, Mitsubishi and INEOS will contribute $100 million for a 36.5% equity interest in the joint venture, while Par Pacific Holdings, Inc. will remain with a 63.5% controlling interest. This strategic partnership will strengthen our renewable fuels capabilities, including our partners' expertise in global feedstock procurement and product uptake.

Following regulatory clearance, we expect to receive the $100 million investment, which will cover the cost of our project. Despite policy uncertainty, our outlook remains constructive due to the flexibility and structural cost advantages of the project. Amidst this solid operational and strategic execution, we repurchased an additional $28 million of stock at a weighted average price of $17.63, bringing the year-to-date share count down by nearly 8%. Our current share count is approaching 50 million shares, and we continue to measure our financial performance by evaluating our free cash flow on a per-share basis. Our balance sheet is in good shape, with ending liquidity of nearly $650 million, providing flexibility to pursue our strategic objectives and opportunistically repurchase shares.

Looking forward, strong market conditions, reduced capital spending requirements, and the expected receipt of the JV proceeds position us to drive strong cash generation. I'll now turn the call over to Richard Creamer to discuss our refining and logistics operations.

Richard Creamer: Second quarter combined throughput was 187,000 barrels per day. In Hawaii, throughput was a record 88,000 barrels per day, and production costs were $4.18 per barrel. Hawaii delivered strong results due to reliable operations, which enabled the site to run near nameplate capacity throughout the quarter. This record is a result of focus and effort by our team to sustainably deconstrain Hawaiian operations over the last eighteen months. Washington throughput was 41,000 barrels per day, and production costs were $3.73 per barrel, which highlights the site's low cost and efficient refining structure.

Shifting to Wyoming, throughput was 13,000 barrels per day, and production costs were $14.5 per barrel, impacted by lower throughput and an incremental $4 million due to the crude heater outage. The refinery returned to full production capacity in April, and we expect to return to our normal OpEx run rate in the third quarter. Finally, in Montana, second quarter throughput was 44,000 barrels per day, and production costs were $14.18 per barrel, reflecting lower throughput related to the successful completion of the FCC and alkylation unit turnaround. As Will said, we are pleased with the team's performance and their solid execution of the site's largest turnaround ever.

Looking ahead to the third quarter, we expect Hawaii throughput between 78,000 and 81,000 barrels per day, with July runs impacted by weather-driven crude delivery delays. Despite this, Hawaii downstream conversion units remain fully utilized through the consumption of intermediate inventory. Shifting to the Mainland, we expect Washington throughput to be 39,000 to 41,000 barrels per day, Wyoming between 18,000 and 19,000, and Montana between 54,000 and 56,000. Resulting in a system-wide throughput between 190,000 and 205,000 barrels per day.

Shawn Flores: Our Refining segment reported adjusted EBITDA of $108 million in the second quarter compared to a loss of $14 million in the first quarter. Starting in Hawaii, the Singapore 3-2-1 averaged $13.6 per barrel. Hawaii margin capture was 119%, including a combined $4 million headwind from price lag and product crack hedging. Excluding these items, margin capture was 125%, reflecting favorable yield and reduced product imports driven by record quarterly throughput rates. Looking ahead to the third quarter, we expect our Hawaii crude differential to land between $5.75 and $6.25 per barrel.

In Montana, our index averaged $20.29 per barrel, and margin capture was 110%, highlighting our ability to maintain strong clean product sales through strategic inventory drawdowns despite lower throughput rates during the turnaround. Looking ahead, our Montana indicator averaged $15.13 per barrel in July, supported by strong distillate margins across the Northern Rockies, offset by tighter heavy crude differentials. In Wyoming, our index averaged $21.41 per barrel, and margin capture was 87%, impacted by the recent outage as we resumed full throughput rates in late April. Under FIFO accounting, we continued to expense high-cost purchase products into May, which reduced second quarter gross margin by approximately $8 million.

Looking to the third quarter, we have returned to normal operations and expect OpEx to revert to prior run rate levels. Lastly, our Washington Index averaged $15.37 per barrel, an improvement of approximately $11 from the prior quarter, driven by tight distillate supplies in the PNW. Margin capture was 75%, below our guidance range of 85% to 95%, primarily due to a higher sales mix of asphalt and intermediate products during the summer demand season. In July, our Washington indicator averaged $13.74 per barrel, remaining well supported by strong clean product margins. Turning to the Logistics segment, second quarter adjusted EBITDA came in at $30 million, consistent with our mid-cycle run rate guidance.

In Wyoming, logistics volumes began to recover following the restart of the refinery in April, and across the rest of our logistics system, we saw strong utilization on our pipelines and truck racks supported by seasonal strength in sales volumes. In the retail segment, we reported second quarter adjusted EBITDA of $23 million, up from $19 million in the first quarter. The improvement was driven by higher fuel margins, same-store sales growth, and lower operating costs. Corporate expenses and adjusted EBITDA totaled $24 million for the second quarter. We remain on track to achieve our company-wide cost reduction initiatives, targeting $30 million to $40 million in annual savings relative to last year.

Including the Wyoming repair costs, year-to-date consolidated operating expenses were $412 million, reflecting a $24 million reduction compared to the prior year period. Moving to cash flows, cash from operations during the second quarter totaled $83 million, excluding working capital inflows of $123 million and deferred turnaround expenditures of $72 million. We expect a partial reversal of the working capital inflow in the third quarter, primarily driven by the timing of derivative cash settlements and a return to typical accounts payable levels. Cash used in investing activities totaled $46 million, driven by capital expenditures. As Will noted, we expect CapEx to decline meaningfully in the second half of the year.

Through June 30, accrued CapEx and turnaround costs totaled $173 million, with our full-year outlook trending toward the upper end of our guidance of $240 million. Turning to capital allocation, we repurchased $28 million, or 1.6 million shares of common stock during the second quarter. Year-to-date, we bought back 5.2 million shares at an average price of $15, reducing our basic shares outstanding by 8%. Moving to the balance sheet, gross term debt as of June 30 was $641 million, or three times our trailing twelve-month retail and logistics EBITDA, at the low end of our three to four times leverage target.

With record LTM EBITDA of $211 million, our growing retail and logistics cash flow comfortably supports our leverage profile. Total liquidity increased 23% during the second quarter to $647 million, supported by strong operating cash flows and expanding capacity under our ABL facility. This positions us well to advance our strategic priorities moving forward. This concludes our prepared remarks. Operator, we'll turn it back to you for Q&A.

Operator: Thank you. We will now begin the question and answer session. Our first question comes from Matthew Blair from TPH. Please go ahead.

Matthew Blair: Thank you, and good morning. Could you talk a little bit about the drivers behind the strong capture rates in Hawaii in the second quarter? I believe your overall capture was 119% of your indicator. And I think you mentioned that areas like price lag and the hedging were actually headwinds in the quarter. So what was on the other side that provided tailwinds and enabled such a strong capture figure?

Shawn Flores: Yes, Matt, this is Shawn. You're correct. Our reported cash flow was 119%, and excluding the nonrecurring events of the price lag and crack hedging, it was 125%. I think over the last two or three years, our average capture in Hawaii has been 120%. So I think we've shown that we can outperform our steady guidance of 110% capture. And that's primarily driven by elevated clean product freight rates, which is included in our sales contracts. And then as you see throughput rates move higher, closer to nameplate capacity, our yield expense improves materially on a barrel-for-barrel basis.

So I think as long as we sustain throughput rates in the mid-eighties and continue to see elevated clean product freight, I fully expect capture rates to continue to outperform our guidance.

Will Monteleone: Yes, Matt. This is Will. I think what I would point out here is just that 88,000 barrel per day throughput rate. Again, this reflects, I would say, over eighteen months of work by the Hawaii team in really deconstraining and just improving overall heater efficiency inside the plant. And so again, I think the yield profile on those last barrels produced is very attractive.

Matthew Blair: Sounds good. And then the SAF JV looks like a total home run for Par. Could you talk a little bit about how that deal came about, the benefits to Par from that deal? And then is there an update on the startup timing and when you would expect EBITDA contribution to begin to flow through the Par Financials?

Will Monteleone: Sure, Matt. Yes, I think these discussions have been ongoing for an extended period of time. And I think the key thing that's driven really the partnership here is the, I'll just say, relatively attractive elements of our project. And so I think we've been mentioning this, but I'll reiterate, but I think at the end of the day, we see our SAF project as very attractive relative to the industry, and it's driven really by, I think, our operating expense given that it's inside the fence line of the plant. On a per-gallon basis, we'd expect it to be very attractive and highly competitive. Second really is logistics.

I think we expect over time to sell the vast majority of our products locally in Hawaii. And I think that allows us to leverage our existing proprietary distribution system. And then I think the capital efficiency of the project is the other piece that we've been touting. And so I think when you look at all those factors, it's kind of the key ingredients for bringing in a partner of the quality of Mitsubishi and INEOS. And then I think ultimately, it was definitely not a two plus two equals four, but I think it's a great opportunity for us to expand our distribution capabilities on the West Coast.

Mitsubishi and others have access into the California market, which complements our position in Washington and just expands the flexibility that we're going to have in the overall renewable fuels business. So I think long story short, I'd see this being an attractive long-term partnership that unlocks the value of the renewables business and then also brings to bear a larger global scale that Mitsubishi and INEOS have. So again, very pleased with this, and I think it helps shine a light on the attractive elements of the project that we've been working on. And in terms of startup, I think we're targeting the second half of this year.

We're intending to bring online the pretreatment unit first, as I referenced, and go through the commissioning process there. And I wouldn't expect to start to see financial contributions from the JV until really 2026. And just keep in mind, we'll be in commissioning and really getting through, I'll call it, credit pathway establishment. And so I think it's going to take us a quarter or two before we get to kind of the right CI scores and ultimately to the run rate contributions for that business.

Matthew Blair: Great. Thanks for your comments.

Operator: The next question comes from Ryan Todd from Piper Sandler. Please go ahead.

Ryan Todd: I wanted to talk a little bit about the Rockies. Obviously, really strong performance in Montana and Wyoming in the quarter, some of that due to excess inventory sales. Can you talk about maybe how much is due to the excess inventory sales and what you're seeing on broader dynamics in the region as you look forward from here?

Shawn Flores: Yeah, Ryan, I'll take the excess inventory sort of impacts on capture, and we'll turn it to Will to talk about the PADD 4 market in general. But I think the market environment that we're operating in the second quarter supported our capture guidance range of 90% to 100%. I think what drove capture closer to the 110% was our ability to draw down diesel and gasoline inventories. And so then it's just a function of sales volumes versus throughput. I think looking ahead, I'd just reiterate our guidance of 90 to 100 in Q3.

Will Monteleone: And then, Ryan, on the broader market, I think the kind of PADD 5 and PADD 4 distillate markets are particularly tight. Big picture, I think we saw the export market open up in the PADD 5 market as we saw global distillate inventory start to draw down well below historical averages, and that opened up, I think, netbacks for exporting diesel. On top of that, I think you've seen production of biodiesel and renewable diesel come off materially, and I should also say imports of biodiesel and renewable diesel come off materially as you saw the blenders tax credit expire.

And so you've had both export of conventional diesel and then reduction in renewable barrels available as we kind of work into the second quarter. So I think the market and supply position there is tight, and I think that's really reflective of a globally tight distillate market. So those are the key drivers. And I'd broadly say a pretty typical driving season in terms of demand and fundamentals on the gasoline side is what we've seen so far.

Ryan Todd: Great. Thank you. And then maybe turning one on kind of use of cash and shareholder returns. You've been pretty active in the first half of the year in terms of share buyback. Got $100 million coming in the door from, you know, kind of proceeds from the JV. CapEx budget that's rolling off pretty materially as you highlighted here in the second half of the year. But you've also talked in the past about being opportunistic in shareholder return. So how do you think about those dynamics as you look at the second half of the year?

Will Monteleone: Sure. Yeah, I mean, what I would say is really our historical framework still holds today. And what I'd say is when we're in an excess capital position, like we are today and like we expect to improve, and we get the chance to repurchase our shares at full intrinsic value, you know, we see that opportunity. And I think that opportunity is going to come and go based on, you know, the many variables that impact our business and markets as a whole. And really, I think a nimble approach is critical. We live in a volatile world, and things are changing quickly.

And what I would say is, you know, as a management team, what we're focused on is really actively weighing our growth prospects. That's both the internal growth capital projects that we're generating as well as, you know, any M&A opportunities against those opportunities to repurchase stock and other capital allocation alternatives. And I think I'll just say it a little differently. I think we really would just want the most options on the table that we can execute at any point in time so that we can adapt quickly to how quickly the world is changing.

Ryan Todd: Great. Thank you.

Operator: And our next question comes from Neil Mehta from Goldman Sachs. Please go ahead.

Neil Mehta: Hey, good morning, Will and team. Just wonder perspective on small refinery exemptions. Where do you think we are in terms of the timeline? And then any advice in helping us to size what this could mean for Par's cash flow?

Will Monteleone: Sure. Hey, Neil. Good morning. So, you know, I think broadly on small refinery exemptions, our expectation is that, you know, the EPA will, I would say, follow the law. And from our perspective, that means that they go through a rigorous kind of refinery-by-refinery DOE scoring process to assess, you know, each plant. And so to give you some context, in the past, you know, I would say all three of our Mainland refineries have qualified and received small refinery exemptions in the past. And so I think that's really our expectation of the process. In terms of the timing, I won't even hazard a guess, Neil. I think this is a highly politicized effort on all sides.

And, unfortunately, there would just be speculation to try and say that we know what the timeline is because it's been difficult for them to maintain a schedule. In terms of sizing of the opportunity, maybe I'll turn it to Shawn just to talk about the overall RIN positioning for us as a whole and what it means. Before I do that, I just want to clarify, any exemptions and return of RINs would be upside to us, right? We have really a balanced RIN asset and liability position today.

Shawn Flores: Yes, Neil, this is Shawn. To Will's point there, we've covered our obligations going back to 2019 through 2024. So any retroactive receipt of a small refinery exemption would be sort of direct cash proceeds in terms of getting RINs back and selling those at market prices. I think you think about our exposure on a go-forward basis, the Mainland refineries have about 140 million RIN unit gross exposure. And so I think that's the best way to size up given that those three refineries received SREs in the past.

Neil Mehta: Okay. That makes sense. And then spend some time just talking about the Singapore market. Hawaii is characterized at or maybe even above mid-cycle. So that happened really quick. It's great to see. But just the sustainability of it, and there's some moving pieces here, right? Asia demand, Chinese oil demand is not that good. India, there's some debate around tariff impacts out there, and then we have this potential for the Chinese to ramp up product exports. So how do you think about some of those moving pieces and risks as you assess the path forward for Singapore margins?

Will Monteleone: Yes. I think we watch the Singapore market closely, and I think really have for the last twelve years. And I think the theme that we continue to see is that the overall Chinese refining fleet remains focused on meeting internal demand as sort of one theme that we see. And the second is really just deeper and deeper integration between the refining fleet and their petrochemical complex. And so I think really internalizing demand and then also shifting product yields to the lighter end products so that they can internalize their petchem complex. And so I think those are the kind of the key policy pieces that we watch.

And in terms of the, I'll call it, export relief valve, it seems like that's been relatively well contained. And I wouldn't say we see anything right now that suggests that there's a material change coming in the future on Chinese exports, given their stated policy objectives. So I think that's sort of the incremental supply point that we see. And I think big picture demand in the Asia Pacific market remains steady. And a fair amount of, I'll just say, arbitrage barrels are still needed to clear from the Middle East and India and even potentially from North Asia all the way into Europe to kind of keep the Atlantic Basin balanced on distillate.

So that's kind of the key thing we're watching, and I think we don't see a major shift there.

Operator: Thanks, Neil. The next question comes from Michael Lautheimer from TD Cowen. Please go ahead.

Michael Lautheimer: Hey, guys. It's Mike here on for Jason Gabelman. Thanks for taking my call. First, could you just talk about how your niche market in the Rockies and Pacific Northwest are shaping up quarter to date? Markets like Portland, for example, have been pretty elevated for quite some time now. Just trying to get a handle on the durability of those margins.

Will Monteleone: Sure. Yeah. I think I'd referenced this that our July combined index is about $13 so far, which kind of aggregates all of our markets, and, you know, that's pretty flat where we were in June. And so, I think the overall, you know, story there is probably very similar to what we saw in the back half of the second quarter in terms of the distillate market being strong. And I commented on this previously, which is, I think, principally driven by open export market and reduced supply of biodiesel and renewable diesel, both product, you know, domestically produced as well as imported, given the changes in the recent BTC, the production tax credit.

So I think those are the factors that are influencing the distillate side of the barrel. I think we see strong demand. I think, in particular, distillate demand is strong globally. And so all those pieces are kind of pulling on the distillate barrel. And the gas, you know, kind of side of the equation, I would call it broadly, probably a mid-cycle market condition. And then I think the biggest thing to watch in the future is really the changes in the California refining fleet and to the extent that we do see the two competitor refiners there in Los Angeles and San Francisco cease operations in the fourth quarter and the first quarter of next year.

I think it really further shifts the kind of import-export parity balance over time, which I think practically speaking, just puts you more into a position where you're deeply relying on renewables and biodiesel to balance the market.

Michael Lautheimer: Alright, great. And then my last one is just how you're thinking about your excess cash position. I think in the past, you've mentioned that the business is comfortable around $300 million of liquidity. So is that still the right range to think about? And then as the stock has run up a bit, just how your appetite for M&A would be with that excess cash? Thanks.

Shawn Flores: Yeah. I think we've stated that our minimum liquidity target is $250 to $300 million. So, we're certainly in an excess capital position today, and as Will sort of mentioned in the earlier Q&A, I think we're going to continue to think about capital allocation in the same light and measure our opportunistic buybacks with pursuing our strategic growth priorities.

Will Monteleone: And on the M&A front, I would just say it's a, I'd say, still a challenging market from a bid and ask perspective. And, I'd say we're today principally focused on trying to find and develop internal opportunities or sort of smaller scale bolt-on solutions that help advance really, you know, principally on the cost reduction side, but certainly on other elements of market access that could improve our business, particularly on the Mainland.

Operator: The next question comes from Manav Gupta from UBS. Please go ahead.

Manav Gupta: I apologize, guys. I was having some technical difficulties, so I couldn't join in time. So if this question has been asked, I apologize. But just wanted your views on global quality discounts out there. How do you see heavier sour and other kinds of barrels in the global markets trade versus the light sweet barrels? If you could talk a little bit about that.

Will Monteleone: Sure. I would say, big picture, I would say the, I'll say, the future incremental supply looks like it should, I would say, add pressure and expand the heavy-light differential as we head into the winter. I would tell you that we're not seeing signs of that in the prompt market. And that probably goes all the way out into the September, October time frame. So, you know, continue to see ANS and grades like that trade at, you know, some pretty elevated premiums to Brent. And so I would say, while incremental supply should help kind of bring quality differentials or expand quality differentials again, we have not seen that emerge at this point.

Manav Gupta: We are seeing some tightening on the WCS side. Any comments you would like to make on that? I think WCS has now dropped to like $13 to WTI, but if you could because do you use a lot of WCS in the system. So if you could talk about a little bit about the WCS market also.

Will Monteleone: Yeah. I mean, I think, certainly been tighter than we would expect. And in the, I'll say, almost in high single digits points in time here. And I think a little bit of incremental supply coming back on Latin America and probably some reduced runs here as you get the turnaround season in the fourth quarter. I think are setting the stage there for, you know, a bit wider differentials there. So those would be kind of the incremental changes that we've seen. Nothing earth-shattering there probably to what you've heard in the market from other parties.

Manav Gupta: Thank you so much for taking my questions.

Operator: There are no more questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Will Monteleone for any closing remarks.

Will Monteleone: Thank you. We're encouraged by the improving market backdrop and remain focused on executing on our key objectives as the key to driving our shareholder value. Thank you for joining us today.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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