CVR Vitality, Inc. (NYSE:CVI) This autumn 2023 Earnings Convention Name February 21, 2024 1:00 PM ET
Firm Members
Richard Roberts – Vice President, Monetary Planning and Evaluation, and Investor Relations
David Lamp – President and Chief Govt Officer
Dane Neumann – Chief Monetary Officer
Convention Name Members
Neil Mehta – Goldman Sachs
Matthew Blair – Tudor, Pickering, Holt & Co.
John Royall – JPMorgan Chase & Co.
Manav Gupta – UBS Group AG
Paul Cheng – Scotiabank
Operator
Greetings, and welcome to the CVR Vitality Fourth Quarter 2023 Convention Name. Presently, all contributors are in a listen-only mode. A quick question-and-answer session will comply with the formal presentation. [Operator Instructions] As a reminder, this convention is being recorded.
It’s now my pleasure to introduce your host, Richard Roberts, Vice President of Monetary Planning and Evaluation and Investor Relations. Thanks, sir. Chances are you’ll start.
Richard Roberts
Thanks, Christine. Good afternoon, everybody. We very a lot respect you becoming a member of us this afternoon for our CVR Vitality fourth quarter 2023 earnings name. With me right this moment are Dave Lamp, our Chief Govt Officer; Dane Neumann, our Chief Monetary Officer; and different members of administration.
Previous to discussing our 2023 fourth quarter and full yr outcomes, let me remind you that this convention name could comprise forward-looking statements, as that time period is outlined below federal securities legal guidelines. For this objective, any statements made throughout this name that aren’t statements of historic details could also be deemed to be forward-looking statements. You’re cautioned that these statements could also be affected by essential elements set forth in our filings from Securities and Change Fee and in our newest earnings launch. In consequence, precise operations or outcomes could differ materially from the outcomes mentioned within the forward-looking statements. We undertake no obligation to publicly replace any forward-looking statements, whether or not because of new info, future occasions or in any other case, besides to the extent required by regulation.
This name additionally consists of varied non-GAAP monetary measures. The disclosures associated to such non-GAAP measures, together with reconciliation and essentially the most straight comparable GAAP monetary measures, are included in our 2023 fourth quarter earnings launch that we filed with the SEC and Type 10-Okay for the interval and will likely be mentioned through the name.
With that mentioned, I’ll flip the decision over to Dave.
David Lamp
Thanks, Richard. Good afternoon, everybody, and thanks for becoming a member of our earnings name. For the total yr of 2023, we reported a consolidated internet revenue of $878 million, earnings per share of $7.65 and an EBITDA of $1.4 billion. On the phase stage, we generated $1.2 billion of EBITDA within the Petroleum phase and $281 million of EBITDA within the Fertilizer phase.
Fourth quarter consolidated revenue was $97 million and earnings per share have been $0.91. EBITDA for the quarter was $204 million. Regardless of year-over-year declines in cracks, crack spreads and fertilizer costs within the fourth quarter we posted one other quarter of strong outcomes pushed by decrease RIN bills, greater utilization of our belongings and decreased working prices primarily attributable to decrease pure fuel and electrical energy costs.
We’re happy to announce the Board of Administrators has approved a fourth quarter common dividend of $0.50 per share, which will likely be paid on March 11 of 2024 to shareholders of file on the shut of the market on March 4. For the total yr of 2023, the Board approved common and particular dividends of $4.50 per share for a complete payout ratio of roughly 64% of free money stream generated for the yr.
Within the Petroleum phase, mixed complete throughput for the fourth quarter of 2023 was roughly 223,000 barrels per day of crude. Crude utilization for the quarter was roughly 97% of nameplate capability and lightweight product yield was 103% on crude oil course of.
Benchmark cracks softened through the fourth quarter with Group 2-1-1 averaging $23.66 per barrel. The majority of the lower was from the third quarter got here from the decline in distillate crack, which was pushed partially by elevated inventories because the U.S. refining fleet run exhausting by means of the winter.
RIN costs declined from extraordinarily elevated ranges we’ve seen over the previous few years averaging $4.67 per barrel for the fourth quarter, though they’re nonetheless too excessive. We have been happy with our favorable ruling from the Fifth Circuit Court docket of Appeals in November holding that EPA’s denial of the Wynnewood Refinery firm’s small refinery exemptions for 2017 by means of 2021 have been permissibly retroactive opposite to the regulation and arbitrary and capricious. The Fifth Circuit vacated these denials and remanded our small refinery exemptions again to EPA which has but to behave.
Along with our lawsuits in opposition to EPA, we lately despatched EPA a petition for rulemaking demanding they treatment the violation of the renewable gasoline normal, which we consider clearly requires that solely obligated events who over adjust to their RFS obligations can promote these extra RINs to different obligated events. As an alternative, in contrast to each different credit score program in EPA historical past, EPA permits anybody to purchase, generate, and promote RINs, together with non-obligated events who exploit the RIN marketplace for revenue.
Permitting this exercise harms not solely small and service provider refiners, but additionally the American shopper, who by EPA’s personal admission paid the last word value of the RFS by means of greater costs on the pump. EPA has not responded but to our petition, and in the event that they don’t, we’ll see them, as soon as once more, in court docket.
For the fourth quarter of 2023, we processed roughly 18 million gallons of vegetable oil feedstock in our renewable diesel unit at Wynnewood. The HOBO unfold improved from the third quarter, primarily attributable to declines in soybean oil costs. Nevertheless, this was greater than offset by the decline in D4 RIN costs and a weaker foundation for California diesel.
Within the Fertilizer phase, each amenities ran effectively through the quarter with a consolidated ammonia utilization of 94%. Relative to our prior yr interval, fertilizer costs have been decrease, primarily attributable to decrease pure fuel costs and the return of some European nitrogen facility manufacturing capability that had been curtailed. Demand was robust for the autumn ammonia utility, and regardless of softening in grain costs, we consider farmer economics remained favorable at these fertilizer costs.
Now, let me flip the decision over to Dave to debate our monetary highlights.
Dane Neumann
Thanks, Dave, and good afternoon, everybody. For the fourth quarter of 2023, our internet revenue attributable to CVI shareholders was $91 million, earnings per share was $0.91, and EBITDA was $204 million. Our fourth quarter outcomes embody an unfavorable stock valuation influence of $90 million, unrealized by-product good points of $67 million, and a discount to quarterly RINs expense attributable to a mark-to-market influence on our estimated excellent RFS obligation of $57 million.
Excluding the above talked about objects, adjusted EBITDA for the quarter was $170 million, and adjusted earnings per share was $0.65. Adjusted EBITDA on the Petroleum phase was $153 million for the fourth quarter with decrease RINs prices, excessive utilization charges, and decreased working bills, considerably offsetting the year-over-year decline in crack spreads.
Our fourth quarter realized margin, adjusted for stock valuation, unrealized by-product losses, and RIN mark-to-market impacts was $12.91 per barrel, representing a 55% seize charge on the Group 3 2-1-1 benchmark. RINs expense for the quarter, excluding the mark-to-market influence, was $65 million, or $3.19 per barrel, which negatively impacted our seize charge for the quarter by roughly 14%.
The estimated accrued RFS obligation on the stability sheet was $329 million at December 31, representing 362 million RINs mark-to-market at a median worth of $0.91. This was down considerably from the RFS obligation on the stability sheet on the finish of 2022, of 692 million, comprised of 397 million RINs marked at a median worth of $1.74. Along with the decline within the worth of RINs, we additionally decreased the excellent stability by means of RIN purchases, mixing actions, and extra RIN technology from the renewable diesel unit.
As a reminder, our estimated excellent RIN obligation excludes the influence of any small refinery exemptions. Direct working bills within the Petroleum phase have been $4.69 per barrel for the fourth quarter in comparison with $5.52 per barrel within the fourth quarter of 2022. The lower in direct working bills was primarily attributable to decrease pure fuel and electrical energy prices.
Adjusted EBITDA on the Fertilizer phase was $38 million for the fourth quarter with elevated gross sales volumes and decrease pure fuel and electrical energy prices considerably upsetting the decline in costs relative to the prior yr interval.
The Board of Administrators of CVR Companions’ normal companion declared a distribution of $1.68 per widespread unit for the fourth quarter of 2023. As CVR Vitality owns roughly 37% of CVR Companions widespread models, we’ll obtain a proportionate money distribution of roughly $7 million.
Money utilized in operations for the fourth quarter of 2023 was $36 million and free money stream was a use of $94 million. Important makes use of of money within the quarter included $201 million for the CPI third quarter common and particular dividends, $70 million of RIN purchases, $58 million of capital and turnaround spending, and $22 million of money taxes and curiosity.
Whole consolidated capital spending for the total yr of 2023 was $197 million, which included $108 million within the Petroleum phase, $29 million within the Fertilizer phase, and $56 million on the pretreatment unit for the RDU.
Turnaround spending was roughly $60 million in 2023. For the total yr 2024, we estimate complete consolidated capital spending to be roughly $225 million to $250 million and turnaround spending be roughly $60 million to $70 million.
Turning to the stability sheet, we ended the quarter with a consolidated money stability of $581 million, which incorporates $45 million of money within the Fertilizer phase and excludes the funds reserved for redemption of our 2025 notes.
Through the quarter, we accomplished a $600 million senior unsecured notes providing with a 5-year time period and an 8.5% coupon. The proceeds of which have been lately used to redeem the $600 million of senior unsecured notes due in 2025 at par.
Whole liquidity as of December 31, excluding CVR Companions was roughly $784 million, which was comprised primarily of $535 million of money and availability below the ABL facility of $249 million.
Waiting for the primary quarter of 2024, for our Petroleum phase, we estimate complete throughput to be roughly 190,000 to 205,000 barrels per day, which will likely be impacted by the deliberate turnaround at Wynnewood within the quarter. We estimate direct working bills to vary between $100 million and $110 million, complete capital spending to be between $40 million and $45 million, and turnaround spending to be between $35 million and $40 million.
For the Fertilizer phase, we estimate our first quarter 2024 ammonia utilization charge to be between 86% and 91%, which will likely be impacted by some deliberate downtime at Coffeyville within the quarter. We estimate direct working bills to be roughly $52 million to $57 million, excluding stock impacts, and complete capital spending to be between $9 million and $13 million.
For the renewable diesel unit, we estimate first quarter 2024 complete throughput to be roughly 6 to 10 million gallons, which will likely be impacted by a catalyst change within the quarter. We estimate direct working bills to be between $8 million and $12 million, and complete capital spending to be between $10 million and $14 million.
With that, I’ll flip it again over to Dave.
David Lamp
Thanks, Dane. In abstract, CVR Vitality had one other robust yr with robust contributions from our petroleum and fertilizer companies. Whereas the refining market was very robust for many of the yr, we noticed circumstances soften in the direction of the top of the yr, and we stay cautiously optimistic concerning the near-term outlook.
Beginning with refining, total refining product demand within the U.S. is down to start out 2024 in comparison with pre-COVID ranges and 5-year averages. Yr-to-date gasoline demand is down roughly 7%, and distillate demand down nearly 12% in comparison with the identical interval of 2019. In the meantime, inventories of refined merchandise have elevated, with gasoline inventories up 2% and distillate inventories up 5% in comparison with a year-ago ranges.
In Group 3, the demand tendencies are a little bit higher, with year-to-date gasoline demand down about 5% in comparison with 2019, and distillate demand up nearly 8%. Nevertheless, gasoline and diesel inventories in Group 3 have elevated over 30% from a year-ago ranges. Regardless of the weak spot in fuel cracks within the fourth quarter, the motivation to mix butane over the winter drove the refining fleet to run exhausting and led to a swell in stock ranges.
As we strategy the change in RBP season within the spring, elevated turnaround exercise throughout the fleet and low inventories of summer season grade gasoline may drive a normalization of stock ranges and provide some upside for summertime fuel cracks. Though car miles traveled in 2023 elevated year-over-year, that is considerably offset by will increase in gasoline effectivity as the brand new car fleet miles per gallon has additionally elevated.
The EPA estimates new car gasoline effectivity elevated by roughly 1.5 miles per gallon in 2023 with further will increase anticipated in 2024 and 2025. Actual world good points will most likely be decrease, however because the fleet turns over, we anticipate the will increase in miles per gallon could additional improve offsets in car miles traveled.
On the diesel facet of the equation, the discount in provide that was anticipated from Russian export ban by no means materialized as commerce flows adjusted and Russian volumes discovered properties in different international locations. The gentle winter in Europe additionally led to a decline in pure fuel costs, which contributed to an total decline in fuel cracks as effectively.
We proceed to watch the deliberate start-up of a number of large-scale refineries all over the world anticipated this yr, though traditionally these kind of initiatives are likely to begin decrease and later than anticipated. Additional delays in start-ups and a pick-up in financial and industrial exercise, particularly enchancment of the Cass Freight Index, may present upsides for diesel cracks this yr.
Taking a look at crude oil, industrial crude inventories are close to the underside of the 5-year vary. Though if you happen to embody the Strategic Petroleum Reserve, inventories proceed to set new 5-year lows. Crude oil manufacturing within the U.S. continues to extend with the typical manufacturing volumes for 2023 rising over 600,000 barrels per day in comparison with 2022. Crude oil exports stay regular round 4 million barrels per day, and we proceed to consider the incremental barrel produced in the USA might want to clear the market by way of exports. We predict this dynamic, together with elevated freight charges amid the continued conflicts within the Center East, is supportive of a wider breadth TI differential, which has averaged over $4.50 per barrel for 2023.
Volumes in our gathering programs averaged over 140,000 barrels per day in 2023, a rise of 18,000 barrels per day in comparison with 2022. We proceed to see significant advantages on value and seize charges in our system by shopping for crude on the wellhead and we proceed to work to extend the volumes of our gathering programs and scale back our purchases of Cushing WTI.
All that mentioned, the U.S. refining fleet has the best common complexity, lowest pure fuel value, and for inland refineries, the bottom crude value relative to different refiners all over the world. As demand moderates for refined merchandise within the U.S., we consider product exports will develop and crude exports will proceed to extend from the harvesting of shale oil formations. In fact, all of this requires the federal government to permit free markets to work.
In our Fertilizer phase, manufacturing was robust at each amenities in 2023 because of the turnarounds accomplished in 2022, and we set a number of new manufacturing and delivery information at each amenities. Full demand for ammonia utility was the strongest we’ve seen lately. Though grain costs have pulled again with the latest decline in fertilizer pricing, we consider farmer economics stay enticing. And we presently anticipate one other interval of robust demand within the upcoming spring planting season.
At our Coffeyville Fertilizer Facility, we’ve been conducting engineering research on the potential to make the most of pure fuel in its place feedstock, which would cut back our purchases of third-party coke. We consider by guaranteeing modifications to the plant, we may make the most of both feedstock to supply nitrogen fertilizer. If the challenge is authorised by the Board and efficiently carried out, it provides the flexibility to decide on the optimum feedstock combine and would be the solely nitrogen fertilizer plant in the USA with that flexibility.
Our new pretreatment unit at our renewable diesel unit was mechanically accomplished on the finish of the primary quarter, and we must always start processing feed by means of the unit within the coming days. We plan to finish the following catalyst change on the renewable diesel unit over the following few weeks, whereas we undertake deliberate turnaround work on the Wynnewood Refinery.
Our present plan for the stability of the yr is to run at a barely decreased throughput charge of the RDU in an effort to optimize catalyst life and improve product yields. As we’ve talked in earlier name, we’re persevering with to judge alternatives for renewables expansions, notably into the SAF manufacturing at each Wynnewood and Coffeyville.
On the potential Wynnewood challenge, we plan to start soliciting bids over the following few months for offtake agreements that may assist the potential conversion of the prevailing RDU to 100% SAF. On a possible bigger challenge, we’re evaluating at Coffeyville, we presently anticipate to have preliminary engineering and price estimating work full by the top of the primary quarter.
Our present plan is to strategy the market within the second half of 2024 to solicit bids for companions to spend money on the development of a renewable diesel and sustainable aviation gasoline facility close to Coffeyville with a capability of as much as 500 million gallons per yr. We consider there’s curiosity out there for this initiatives like this, and in the end our Board approval of the challenge will depend upon our potential to seek out companions prepared to fund the price of development.
We’re additionally making progress on a number of margin enhancing initiatives on the refineries. Through the upcoming turnaround at Wynnewood, we deliberate to finish tie-in work for the diesel yield enchancment challenge with ultimate completion and start-up anticipated within the first half of 2025. For the diesel enchancment challenge at Coffeyville, we presently plan to finish tie-in work on one-half of the challenge in 2025 with completion and start-up presently anticipated in 2026.
We’re additionally working with a companion to make the most of a transload facility on the Coffeyville location that they’re developing to extend our capability to ship gasoline, diesel, and jet by way of rail attributable to greater costs in areas to the west.
And at last, the alkylation challenge at Wynnewood stays on monitor for completion in 2026. As soon as accomplished, this challenge is meant to extend gasoline manufacturing by 2,500 barrels per day, lowering the sale of propylene along with eliminating the usage of HF acid on the Wynnewood Refinery. If efficiently accomplished, we consider these initiatives mixed would improve our total margin seize by 4%.
Wanting on the first quarter of 2024 quarter-to-date metrics are as follows: Group 2-1-1 cracks have averaged $16.35, with the Brent TI unfold at $5.25 per barrel, and the WCS differential of $18.63 per barrel below WTI. Immediate fertilizer costs are $500 to $550 per ton for ammonia and $270 to $280 per ton for UAM. As of yesterday, Group 2-1-1 cracks have been $19.55 per barrel, Brent TI was $4.16 per barrel, and WCS was $17.35 below WTI. RINs have been roughly $2.93 per barrel.
With that, operator, we’re prepared for questions.
Query-and-Reply Session
Operator
Thanks. We are going to now be conducting a question-and-answer session. [Operator Instructions] Thanks. Our first query comes from the road of Neil Mehta with Goldman Sachs. Please proceed along with your query.
Neil Mehta
Hey, Dave. Hey, staff. Thanks for taking the time.
David Lamp
Positive, Neil.
Neil Mehta
The primary query I had is simply across the return of capital. Final yr you guys had an amazing yr when it comes to $4.50 when it comes to money dividends. How do you concentrate on the position of a particular dividend in 2024 within the context of the refining outlook that you just outlined on the decision?
David Lamp
Properly, it’s exhausting to foretell at this level, Neil. I feel our common might be protected with out a lot doubt. Specials, as we’ve mentioned earlier than, it’s actually – it takes extraordinary cracks for us to generate specials, and possibly they’ll come again, possibly they received’t. It’s exhausting to say at this level.
Neil Mehta
Yeah, understood. After which, just a bit little bit of your perspective on the crude markets. We’ve talked quite a bit concerning the cracks right here, particularly within the mid-continent during the last couple of weeks, however simply as you take a look at the underlying differentials, whether or not it’s TI Brent, whether or not it’s WCS, what are you spending time fascinated with because it pertains to crude spreads, and the way do you see these evolving over the yr?
David Lamp
Properly, I feel, I’ve mentioned this many occasions, the U.S. fleet might be saturated with mild crude. And I don’t see many investments to actually change that trajectory. There have been a few condensate splitters constructed that might assist a heavy oil refiner course of extra shale oil, however no new initiatives have been introduced that I do know of. And I feel that bodes effectively for exports, which bodes effectively for the Brent TI, particularly if you take a look at the freight charges have gone up considerably with the Purple Sea points which can be occurring within the Center East.
So far as WCS goes, after all, we’ve, little doubt, there’s a brand new pipeline approaching going west that’s considerably elevated. I don’t see that making an entire lot of influence on a minimum of our enterprise. It can permit extra, much less rail to go away Canada. However, the tariff out there’s actually massive, and there’s a whole lot of constraints on delivery and transloading going off the West Coast. So I nonetheless see it actually not impacting us an entire lot.
Neil Mehta
Thanks, Dave. I respect the time.
David Lamp
You’re welcome.
Operator
Our subsequent query comes from the road of Matthew Blair with Tudor, Pickering. Please proceed along with your query.
Matthew Blair
Hey, good morning. Circling again to the return of capital query, it appears like you’ll begin 2024 with some extra money within the stability sheet. Do you suppose that that may assist increase the particular dividend outlook for 2024? Or do that you must save that money for different makes use of, whether or not it’s M&A or this potential Coffeyville RD and SAF challenge?
David Lamp
Properly, Matt, I feel our perspective is that we’ve a little bit bit additional cash on the stability sheet simply because we’ve a RIN brief that’s on the market prior to now. And our important technique has been as to maintain our ranking the place it’s with the ranking businesses. And that requires most likely a little bit additional cash simply to compensate for it. However as RIN costs drop that legal responsibility is dropping quickly. So, the Board will take a look at dividends each quarter. And, we’ve at all times set a minimal money of simply to mainly keep out of our revolver on crude days and different occasions that happen within the enterprise like turnarounds round $450 million, $500 million, and we plan to remain in that vary.
Matthew Blair
Sounds good. After which on the potential Wynnewood conversion to SAF, do you have got a price estimate for that challenge? I feel certainly one of your friends was in just like the $1.30 to $1.40 per gallon vary. Do you suppose you’d be in an identical ballpark on that? After which do you have got – I suppose, would you anticipate to have the ability to faucet non-U.S. SAF markets? Should you did undergo with that challenge, appears like European SAF premiums are quite a bit stronger than what we would see within the U.S. And so, would that be a chance for you?
David Lamp
Yeah, we’re all of the above. I imply, we’ve had a whole lot of curiosity on this, lots of people strategy us on this. And, it’s a conversion that may be finished slightly quickly, though it does require one other reactor to be added to the system. I’d say we’re in that ballpark, what you advised when it comes to capital, the greenback. I feel, ours could be most likely $1 to $1.40 vary someplace in there. And, yeah, there’s a whole lot of curiosity coming from Europe, Canada, and West Coast on SAF normally. What our strategy on that is possibly a little bit completely different than others. We’re type of insisting we would like offtake agreements that negate the uncertainty of presidency subsidies. So something we construction will likely be such that we just about assure a margin that can justify the capital we’d put in ought to we execute the challenge.
So far as you talked about a little bit little bit of capital reserve for the Coffeyville challenge. We don’t plan on placing any capital in that challenge. If we are able to’t discover companions which can be prepared to fund the development with us donating or mainly to not donating, however as a part of the transaction would put our renewable diesel enterprise at Wynnewood right into a three way partnership.
Matthew Blair
Sounds good. Thanks for the colour.
David Lamp
You’re welcome.
Operator
Our subsequent query comes from the road of John Royall with JPMorgan. Please proceed along with your query.
John Royall
Hello, good afternoon. Thanks for taking my query. So my first query is on the hedge program for 2024. I feel you had beforehand mentioned, you have been about 15% hedged all year long. Any extra particulars you’ll be able to present on that that’s nonetheless the appropriate quantity and is it extra front-half loaded, extra loaded in the direction of one product or one other simply any coloration you can provide them the 2024 hedges could be useful?
Dane Neumann
Sure, you bought, John, that is Dane. Yeah, when it comes to quantity, we’re nonetheless round that 15% stage as you indicated how a lot has modified on that entrance since final quarter. It is a bit more entrance loaded and extra weighted in the direction of distillate.
David Lamp
We’re including some in 2025, too, John. So, I feel we’re under 3%, 4%.
Dane Neumann
Yeah, very small quantity.
David Lamp
However we nonetheless have the view that as these massive service provider refiners come on all over the world that the diesel cracks are going to be pressured, and so most of what we’re doing is round diesel.
John Royall
Understood. Thanks. After which, possibly only a housekeeping query for Dane, given we don’t have the 10-Okay at this level. We see your CFO is destructive, however trying on the working capital quantity, I feel it’s down from 3Q. So what ought to we consider as a driver of that money stream flipping destructive and what was fairly strong from an earnings perspective within the quarter, undecided if it’s deferred tax or for another objects we could also be lacking, however any coloration there could be useful?
Dane Neumann
Yeah, I’ll offer you a pair objects there. There are a whole lot of movers within the quarter. We have been type of anticipating this kind of free money stream draw. In our fourth quarter, we do sometimes, we at all times settle our sock-based compensation funds in money. We prepay insurance coverage bills in money, so we’ll construct these again up over the course of the following yr. One of many different greater shifting objects, as you recall, we had some file crude gathering on the wellhead within the third quarter as effectively at greater crude costs.
Because the winter months got here on that slowed a little bit bit, and because the costs fell, legal responsibility dropped fairly dramatically quarter-over-quarter. After which additionally buried in that quantity, after all, is the crack unfold swap unrealized achieve, pull that legal responsibility down, which is, if the market stays the place it’s, is a future money financial savings or achieve, relying on the settlement of these hedges.
Lastly, on the Fertilizer enterprise, we had a fairly good deferred income in money sitting on the books on the finish of the third quarter. Subsequent to that, the shopper shopping for sample actually began to vary, and we’re attributing that to the upper value of carrying stock. Our prepay worth dropped fairly dramatically down to love $3 million, so extra headwinds, however all comparatively anticipated from our perspective.
John Royall
Thanks.
Operator
Our subsequent query comes from the road of Manav Gupta with UBS. Please proceed along with your query.
Manav Gupta
Hello, guys, fast query. Seems like you might be doing initiatives at each places which gives you a better diesel yield. So assist us perceive how far more diesel will you be producing on a mixed foundation from these value-enhancing initiatives? And I’m assuming these are high-return initiatives, however when you have a charge of return for these 2 initiatives that you’re pursuing, which offer you greater diesel yield?
David Lamp
Yeah, Manav, between the two vegetation, we’re focusing on about 6,000 barrels a day for extra manufacturing, which might come from cat feed, in essence, which, as , sometimes a cat cracker does 70%-30%, 70% gasoline, 30% diesel. So the last word goal there’s actually bettering seize, and that’s all in that 4% quantity I type of talked about earlier.
Manav Gupta
Okay, excellent. And a second query we ask all different refiners, there’s an asset bundle on the market, now it doesn’t make sense for many individuals, however it type of makes a little bit little bit of sense for you. You would get to a 1 million barrels of refining capability, you have got extra product terminals, pipelines. Would there be any situation wherein you would possibly take a look at CITGO belongings for the appropriate valuation?
David Lamp
Properly, Manav, we take a look at the whole lot, so I feel I’ll simply depart it at that.
Manav Gupta
Thanks, sir.
David Lamp
You’re welcome.
Operator
Our subsequent query comes from the road of Paul Cheng with Scotiabank. Please proceed along with your query.
Paul Cheng
Hello. Good morning.
David Lamp
Hello, Paul.
Paul Cheng
I feel it’s nonetheless morning for you guys, or possibly afternoon already. Dave, if you’re your gathering system, have you ever sensed that or have you ever seen the exercise stage of your buyer there? Are they rising or above flat or reducing within the latest months? I imply, something that you may inform us when it comes to, say, do you suppose that you’re going to have the ability to collect extra or that there’s going to be one thing at this stage?
David Lamp
Properly, Paul, as evident by our numbers, we’ve seen a rise in quantity, and that’s primarily attributable to a few huge performs within the Anadarko Basin. Will they proceed? I imply, so far as we all know, what we hear from producers is there’s most likely a slight achieve going by means of 2025, 2026. After that, we don’t have a lot visibility on what would possibly happen. A variety of the Anadarko Basin is fed by not solely share oils, however simply legacy typical wells that simply type of sit there and produce.
In order we achieve market share, we’ll get an increasing number of of these, however the greater volumes of recent stuff is de facto is the shale oil performs within the frack zones, and there’s a number of huge initiatives which can be in improvement now.
Paul Cheng
Nice. On the renewable diesel, are you able to share that, what’s the EBITDA loss within the quarter, and what’s the expansion margin? And in addition, I imply, if we’re excluding the market situation, what sort of self-help on initiative that we may increase for that enterprise?
David Lamp
Properly, if you happen to take a look at 2023, Paul, going into the third quarter, we have been just about what I’d name within the revenue facet of the equation. The fourth quarter hit, and bean oil dropped like a rock. We have been unhedged on feedstock, in order that took away most of that positivity we had within the first 3 quarters for the fourth quarter. So, I feel we ended a yr barely destructive, however not too removed from breakeven. We actually anticipate that the pretreater goes to make an enormous distinction, as a result of more often than not on these catalyst beds that we’ve on untreated feed, and even bleached, refined and deodorized our bean oil. The particulates and the opposite stuff that’s in there simply plucked up the mattress.
So with the pretreater on, we’re going to repair a whole lot of that, we consider. That’s going to result in yield enhancements and decrease prices all the way in which throughout, however we’re nonetheless – our unit continues to be challenged with a scarcity of catalyst and the excessive area velocity within the reactor and that’s the rationale that we’re going to carry the charges again and attempt to enhance the yields and the run size by adjusting the speed till we are able to reply the query on SAF. As a result of if we did SAF that may clear up a whole lot of these issues and we again we’d be all the way in which to the nameplate at the moment.
Paul Cheng
Dave, are you able to assist us to grasp why the SAF will clear up that downside for you?
David Lamp
Properly, we’re a single reactor system right this moment, this will get type of technical, however I’m completely satisfied to let you know. At present, we’re a single reactor we’ve the ISON [ph] catalyst with the common complete water elimination amenities. If we add one other reactor we separate these two. So, we’ll have further catalyst within the entrance finish, which is de facto our constraint. After which the ISON [ph] catalyst life will likely be vastly improved, since you’re stripping all of the impurities away that are likely to poison that catalyst. In order that’s the way you do it.
Paul Cheng
I see. And ultimate one for me, you’re speaking concerning the – attempting to enhance the distillate yield and people initiatives. What’s the capital value could appear like and the way lengthy it takes for the challenge if you happen to do ship quickly but?
David Lamp
Properly, we’re nonetheless engaged on the numbers. However, preliminary it appears like when it was most likely drawn $10 million someplace in that neighborhood to do your entire challenge. Coffeyville will most likely be a little bit bit extra, however not an entire lot. I’m anticipating, as a result of there’s 2 models we’ve to do there, two on the vacuum towers and two on the hydrotreater facet. In order that one may cost a little bit bit extra, however it additionally creates much more quantity. So…
Paul Cheng
Yeah, I imply, the yield enchancment sounds so nice. So what’s the catch? I imply, it’s so nice. I imply, I’d think about you guys have finished it prior to now. So the truth that it has not been finished, is there any cause that why it has not been finished prior to now?
David Lamp
Properly, I don’t know that I’ve a strong cause why we didn’t do it. I suppose, brainstorming, cracks, I suppose, distillate cracks in 2022 and 2023, type of possibly awakened our inventive juices to seek out extra diesel. So we did some evaluation and did some sampling of what’s recoverable. After which we went to work to determine how. And we discovered it.
Paul Cheng
I see. Okay, nice. Thanks.
David Lamp
You’re welcome.
Operator
Thanks. Now we have reached the top of the question-and-answer session. I’d now like to show the ground again over to administration for closing feedback.
David Lamp
Sure. Properly, once more, I’d prefer to thanks all on your curiosity in CVR Vitality. Moreover, I’d prefer to thank our workers for his or her exhausting work, dedication in the direction of protected, dependable, and environmentally accountable operations. And we look ahead to reviewing our first quarter outcomes through the subsequent earnings name. Have an amazing day.
Operator
Women and gents, this does conclude right this moment’s teleconference. Chances are you’ll disconnect your strains presently. Thanks on your participation. And have a beautiful day.
