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PBF Energy Inc  (NYSE:PBF)
Q4 2018 Earnings Conference Call
Feb. 14, 2019, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone. And welcome to the PBF Energy Fourth Quarter and Full Year 2018 Earnings Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode, and the floor will be opened for your questions following manager's prepared remarks. [Operator Instructions]

Please note, today's call may be recorded. It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

Colin Murray -- Investor Relations

Thank you, David. Good morning and welcome to today's call. With me today are Tom Nimbley, our CEO; Matt Lucey, our President; Erik Young, our CFO; and several other members of our management team. A copy of today's earnings 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 quarterly and annual results, excluding certain after-tax special item charges of approximately $483 million and $256 million, respectively, which are primarily comprised of a non-cash lower of cost to market or LCM adjustment.

As noted in our press release, we will begin -- we will be using certain non-GAAP measures of describing PBFs operating performance and financial results. For reconciliations of non-GAAP measures to appropriate GAAP figures, please refer to the supplemental tables provided in today's press release.

I will now turn the call over to Tom Nimbley.

Thomas Nimbley -- Chief Executive Officer

Thanks, Colin. Good morning, everyone, and thank you for joining our call today. This morning we reported the results of another good quarter, where we ran our assets well and delivered a solid financial performance.

Adjusted earnings for the fourth quarter were $126 million or $1.03 per diluted share. Our strong fourth quarter results highlight the benefit of having a geographically diverse high complexity multi-asset refining system.

During the quarter of Mid-Continent and East Coast refineries were able to benefit from lower cost Canadian crudes. The wider Canadian differentials were largely driven by high inventory levels, takeaway capacity constraints and high paid to maintenance activities.

The differentials have since narrowed, in large part due to the mandated production cuts by the Alberta Government, but are expected to widen back out as the underlying takeaway capacity issues have yet to be solved.

Globally refineries ran at very high utilization during the fourth quarter, taking advantage of a well supplied crude market and strong distillate margins to maximize outputs, high utilization through the quarter set the table for above normal seasonal builds in gasoline.

On top of this, currently the market is experienced an extraordinarily narrow differential between light and heavy crude oil. This is due to a well supplied market for light crude oil and a significant number of heavy crude supply constraints starting with opaque, non-opaque, supply cuts, the Alberta containment, an Iranian and Venezuelan sanctions. Any one of these issues is digestible by the market, but the complements of the constraints had led us to where we are today.

I've been around this business for a long time and I will say that both gasoline margins and crude differentials this narrow are not sustainable. We have a weak margin environment that is primarily driven by neat narrow feedstock differentials. Demand remains good and as history has demonstrated the supply constraints will get solved.

We are anchoring maintenance season with planned maintenance globally projected to peak in March and a challenging crack environment, high levels of maintenance combined with a series of weather related disruptions across the industry should translate into lower utilization. We believe this will improve the market for refining margins and particularly gasoline going forward.

Fundamentals are strong with global demand continuing to support product markets, distillate inventories are down globally as days of cover is tracking well below the five-year average and that is with the global refining system in a max desolate mode.

Gasoline economics on the other hand are effectively at breakeven levels at the moment. While it may seem unusual a large part of this movement is seasonal. We seem to frequently have conversations in the beginning of the year about the weakness in gasoline markets. We believe this situation as in the past will correct itself. Lower gasoline prices should also have a positive impact on demand.

On the supply side as we enter spring, we will see increased maintenance activity, which should further decrease the amount of gasoline being supplied. The switch to some great gasoline will also help in this regard as the amount of butane blending decreases. We will continue to watch both the crude oil and product markets going forward and adjust our operations accordingly.

Looking forward toward the latter half of the year and beyond, as Matt will discuss in a moment, we are making some changes to our plans for 2019 in order to put our high complexity refining system in the best possible position for the upcoming marine diesel fuel standards ship with IMO 2020.

We believe that there will be an increased demand pull on the desolate markets as the move toward cleaner fuels continues and that higher sulfur feedstocks will see differentials as a result of high IMO.

In closing, the economy is still growing and we are encouraged by the environment we see for 2019 and beyond. Our strategy in this environment as always is to put our assets in a position to succeed by running them well and being a safe, reliable and environmentally responsible operator. By executing this strategy, our assets will be profitable and our employees and shareholders will benefit.

I'll now turn the call over to Erik to go over our financial results for the quarter.

C. Erik Young -- Chief Financial Officer

Thanks, Tom. As previously mentioned, PBF reported fourth quarter earnings of $1.03 per share and $3.26 per share for the full year, fourth quarter EBITDA comparable to consensus estimates was approximately $311 million and $1.1 billion for the year. PBF's effective tax rate for the quarter was approximately 27.5%, which was impacted by state tax rates and certain discrete items. For modeling purposes please continue to use an effective tax rate of 27%.

Included in our fourth quarter results was $27 million of rent expense which resulted in a full year total of approximately $144 million. At the current price we expect full year 2019 rent expenses in the $175 million to $200 million range.

Consolidated CapEx for the quarter was approximately $265 million, which includes $177 million for refining in corporate CapEx and $89 million incurred by PBF Logistics including the acquisition of the East Coast terminals.

Our quarter ending liquidity was more than $1.9 billion, with approximately $1.6 billion at PBF Energy and $360 million at PBF Logistics. The year-end consolidated cash balance was approximately $600 million and our net debt to cap was 27%. Importantly, we repaid one 100% or $350 million of the outstanding balance on our ABL credit facility. We're pleased to announce that our Board has approved a quarterly dividend of $0.30 per share.

Finally, we're pleased to announce that PBF Logistics and PBF Energy reached an agreement to eliminate the IDR's currently held by PBF Energy in exchange for 10 million PBF ex-common units.

This is an important transaction for the companies because it strengthens the alignment between the GP and the LP, simplifies the structure and improves the cost of capital at PBF Logistics. This transaction demonstrates our commitment to the partnership, while positioning both companies for growth. I encourage you to listen to the PBFX earnings call later this morning.

Now I'll turn the call over to Matt.

Matthew Lucey -- Vice President

Thank you, Erik. Despite a declining market over the quarter, our assets ran well with total throughput averaging over 847 barrels per day. As Tom mentioned, we will adjust our system in response to the market.

Our East Coast and Mid-Con systems benefit from advance barrels and delivered very strong results. In other areas, we adjusted operations to account for weaker product margins and other variables outside of our control. We remain intently focused on the aspects of our business that we can control.

We are committed to our efforts to reducing operating cost across the system. There were some seasonal spikes in energy cost during the quarter, particularly in natural gas in Torrance, but overall expenses were in line with our annual guidance. In our press release this morning, we lowered throughput guidance for the first quarter. The reduced run rates are reflective of both the current market as well as ongoing maintenance and turnaround activities.

Additionally, in order to strategically position the company for the later part of 2019, we have elected to accelerate the previously announced 2019 turnarounds at Delaware City and Paulsboro. The Delaware City coker turnaround will now occur in the March to April timeframe and the Paulsboro crude unit turnaround originally planned for the third quarter of 2019 will now occur in the second quarter. By moving the turnarounds forward, we will complete approximately 65% of our turnaround work by the end of Q1 and 90% by the end of Q2.

In addition to the turnaround work, we are also conducting repairs on piping and instrumentation associated with the pre-flash tower over located at Del City. The equipment was damaged during its last week. It is important to note that the refinery's crew unit was not damaged and has been returned to service.

As previously disclosed, PBF Energy is continuing to invest its assets to improve the strategic flexibility of our system going forward. We are progressing with the restart of the idle 12000 barrel a day coker at Chalmette Refinery and the installation of a new hydrogen plant at Del City. Both projects are on schedule. We expect that the coker will be in service in late fourth quarter and the new hydrogen plant, which is being built and will be owned and operate by Linde will be in service during the first quarter of next year. We plan to continue to put our refineries in position to benefit from the tailwinds that we see driving the refining sector and PBF.

Operator, that concludes our remarks. So we'll be happy to take questions.

Questions and Answers:

Operator

(Operator Instructions) And your first question comes from Roger Read with Wells Fargo. Please go ahead. Your line is open.

Roger D. Read -- Wells Fargo Securities LLC -- Analyst

Hey. Good morning.

Thomas Nimbley -- Chief Executive Officer

Good morning.

Roger D. Read -- Wells Fargo Securities LLC -- Analyst

I guess Tom, let's dig in a little deeper on the guidance and on gasoline. I mean seasonally I think everybody agrees what you think should get better, as you could expect markets are little bit nervous that it want. I was just wondering if you could maybe give us an idea of some of the other things you're seeing either on the demand side or some of the supply changes that always occur and maybe put some numbers on that in terms of thinking about your system alone, just how much easier it is to make gasoline say in February than it is in May?

Matthew Lucey -- Vice President

Well yes, a great question and Tom eluded this in his prepared remarks, but let me really dive a little deeper. If you look at the one week does not make a trend, but if you look at the EIA data, yesterday DOE data, utilization dropped almost 5% week-over-week, 85.8% refining utilization. That is a combination of a number of things and make no mistake about it, it's a combination of number of things. As economic run cuts, PBF actually took some economic run cuts because of the poor gas crack in the quarter, particularly running our CAT units -- not running our CAT units follow.

But in addition, there were unplanned outages as I alluded to because of the polar vortex and the significant extreme weather conditions that we had in the Midwest and there were still some refineries struggling as a result of that in the Midwest and even in the Northeast and frankly the incident that we had at Delaware City, which we were fortunate did not have severe damage was a weather-related event.

When you add to those things and talk about the accelerated turnarounds and we are not the only ones doing that. It just makes common sense. You don't really -- you don't have good coking economics right now. So why not move your turnarounds up and that's what we're doing as Matt mentioned in the Delaware coker and we're also moving up the crude unit, the bigger crude unit, the little crude unit in Paulsboro but that we're also doing because we're going to fix a problem that is impacting our ability to produce loops. So it's margin play for us as well.

We are entering this heavy turnaround season. We have a continued incentive to crack this split and if you believe the projections for IMO, that trend will continue throughout the year. And it will be interesting to see what happens with the product yield shift if indeed that is the case, Butane is coming out of gasoline, they've already come out of gasoline. We made the transitional, We're in process of making a transition in California. The rest of the country will sequentially come behind it. And frankly you can buy gasoline in Morristown, New Jersey for $2.10 a gallon and then a large portion of the country for below $2 a gallon.

I actually think that we're going to see a bounce in demand as a result of that elasticity. Of course when the prices come back, that there may be a pushback and the final comment I'll make about the data yesterday. It was interesting to me that gasoline built 200,000 but PADD 1, PADD 2 and PADD 5 drew gasoline. The main build was in the Gulf Coast and the United States and some of that was impacted by fog-related difficulties and shipping material out. Time will tell, but I believe we are in the process of turning the corner.

Roger D. Read -- Wells Fargo Securities LLC -- Analyst

Great. Thanks. And I can confirm we've had a lot of fog down here on the Gulf Coast. Change in direction a little bit here, Erik, the cash flows in Q4 had a big CapEx number come through. Can you give us an idea of maybe the change by accelerating the turnarounds, how you think about managing cash flow, I guess first half of the year versus may be full year?

C. Erik Young -- Chief Financial Officer

Quite honestly I think it's probably going to be very similar to the trajectory we saw in 2018, where a lot of our work was going to be frontend loaded during the first half of the year. So cash management as we've always said is one of our top priorities here and ultimately between the turnarounds, some maintenance as well as the strategic projects where the coker and hydrogen plant at Chalmette and Delaware City, ultimately we should see probably close to three quarters of our CapEx spent during the first half of this year.

Roger D. Read -- Wells Fargo Securities LLC -- Analyst

Great. Thank you.

Operator

Our next question comes from Brad Heffern with RBC Capital Markets. Please go ahead. Your line is open.

Brad Heffern -- RBC Capital Markets LLC -- Analyst

Hey. Good morning, everyone. Tom I'll also ask you to dig in a little more on your opening remarks, just around the mediums and heavy being so tight. Can you just talk about how crude sourcing looks sort of in the short-term and the medium-term? Is there difficulty just finding barrels? Where you getting them from and so on?

Thomas Nimbley -- Chief Executive Officer

We've been able -- well let's deal with Delaware since that's obviously living, breathing, moving target right now. We'll continue to be able to get some cargoes to third parties, but basically we are not worried about Delaware's ability. We can source other crudes and have been successful in doing that. So it's not the problem, it's not getting the crudes. Of course the problem is that those crudes have tightened up and the spreads are narrow. So as others, we have the ability to basically swing probably 50% of our system to lights. We'll do some of that, but we don't believe that this is going to be a sustained event.

I do think it was exacerbated significantly by an ill-advised move by the Alberta government to go ahead and force mandated cuts. The law of unintended consequences has played out perfectly here. There was a time as you all well know, not only because you no longer economically rail crude to either the East Coast, West Coast or the Gulf Coast, you couldn't have pipeline economics in the money when WCS moved to below $10 versus WTI.

We see indications now, some of that with some other things going on, obviously we met now about $20 on to Brent and it appears as though that is starting to unwind and move in the right direction and at least this chatter that perhaps those cuts will be undone quicker.

The last comment I'd make and it's going to be a question of time. The Saudis, the Russians, all the people who are cutting back right now and cutting back medium and heavier crudes, which is exacerbating this problem. Production E&P companies get paid to produce oil. And again I just don't think that they're going to be able to sustain this and you can actually make an argument and I've made this argument, but a lot of work we're seeing right now is simply due to the fact that there's too much crude out there. And that's shell crude from North America and the United States as well as, we've had some companies in from Canada here recently who have told us their growth projections for the next three or four years, there's a lot of reserves, there's a lot of crude and there's going to be a lot of crude on the marketplace.

At the end of the day, if you're a refining company and there's a surplus of crude that's a good thing, but I do think we're going to have some time here that we're going to have to work through the Iranian sanctions, the Venezuelan situation and even there ultimately it may take a year, it may take 18 months, I have no idea, but there's perhaps promise for the Venezuelan people.

And there's ability to then rebuild that industry, it's going to take some time. So longer term, certainly I am bullish and with IMO coming in the second half of the year and I do believe it's going to come. We're going to see again a $3.5 million barrel stream that disappears and there's going to be some stranded feed-stocks associated with that. So next couple of months, you're bet is a little bit as good as mine, but it could well be like it was last year tale of two halves.

Brad Heffern -- RBC Capital Markets LLC -- Analyst

Okay. Thanks for the detailed answer. I guess maybe for Matt, on the Ace pipeline that PBFX is participating in, can you talk about the potential benefits for (inaudibl

e)?

Matthew Lucey -- Vice President

Yes. We for the benefit of everyone else we announced an open season with our partners at Phillip 66 and Harvest, it is interesting project, not only on its own, but you obviously have captive refineries are part of the sponsors of the project. So it opens up St. James. We believe it is economic in -- there's not too much I can say about it other than (inaudible) will be a shipper on the pipeline and we think it will bring more advanced crudes to Torrance and we think the project is a good project for PBFX and is in line with what PBFX announced a year ago in developing organic projects. This is one of many projects that they been working on.

Brad Heffern -- RBC Capital Markets LLC -- Analyst

Okay. Thanks all.

Operator

Our next question comes from Manav Gupta with Credit Suisse. Please go ahead. Your line is open.

Manav Gupta -- Credit Suisse -- Analyst

Hi Erik, can you comment on this line item early return of railcars which was expensed? Are you actually cutting back on your crude by rail runs from Canada?

C. Erik Young -- Chief Financial Officer

Ultimately that if you go back to Q3, we experience probably close to $40 million hit in terms of expense associated with early return of railcars at simply rationalizing the fleet to make sure that reusing all the latest and greatest cars and that ultimately we had some idled cars that didn't make sense to use anymore.

I think ultimately what we've seen is absolutely we'll see a decline in some crude by rail through part of the first quarter, just simply driven by economics as we shift back to more water-board economics that are better for the refinery on the East Coast, but longer term, I think I'll probably echo what Tom mentioned in response to a previous question that ultimately we think that crude by rail is a long term via viable strategy for heavy crude out of Canada.

Manav Gupta -- Credit Suisse -- Analyst

And a quick follow-up, what was the working capital headwind in the fourth quarter?

C. Erik Young -- Chief Financial Officer

We probably overall used about $125 million, nominally of working capital during the fourth quarter.

Manav Gupta -- Credit Suisse -- Analyst

Thank you, guys. Thanks for taking my questions.

Operator

Our next question comes from Blake Fernandez with Simmons Energy. Please go ahead. Your line is open.

Blake Fernandez -- Simmons Energy -- Analyst

Hey guys. Good morning. Erik, just going back on CapEx, I know you said about three quarters or so may be two thirds to be spend in the first half. I think on previous call, you had gone through some general ranges, which if we did our math right, would kind of land for full year spending around $600 million to $750 million. I didn't know if you could maybe help narrow that or just kind of confirm if that's a good number for this year?

C. Erik Young -- Chief Financial Officer

Absolutely Blake. Those are still good numbers, just high levels what we would say is order of magnitude, turnarounds are about $300 million for the year. I think Matt commented on when we're going to have maintenance downtime and ultimately that we're going to be through the bulk of that during the first half of the year. Then we've got another call it between $200 million $250 million of maintenance-related expense. That's going to be a combination of regulatory spend, environmental spend and just general maintenance.

And then we obviously have about $150 million of call it strategic projects, discretionary CapEx related to the coker and ultimately the hydrogen plant. That's probably got a longer runway in terms of overall CapEx outlay through the course of the year. The coker is expected to be up and running by the fourth quarter of 2019 and the hydrogen plant during the first quarter of 2020.

So that CapEx outlay is going to be spread over call it through the remainder of the remaining 3.5 quarters of the year, but ultimately the bulk of the turnaround in maintenance, that 75% is probably going to be call it between $500 million and $600 million during the first half.

Blake Fernandez -- Simmons Energy -- Analyst

Perfect. Thank you so much.

C. Erik Young -- Chief Financial Officer

I think the key message here is that ultimately we understand the decisions made to accelerate a few of these turnarounds that bring maintenance forward ultimately, yes. There will be use of cash, but ultimately we will have a very clean runway as we look toward the back half of the year.

Blake Fernandez -- Simmons Energy -- Analyst

Understood. If you could maybe just spend a quick minute on the IDR simplification. I think this should be viewed as a positive step, but just dose this change anything? Is there anything eminent may be drop down potential self funding just any kind of general comments you might offer?

C. Erik Young -- Chief Financial Officer

I'll think ultimately our view for both PBF Energy and PBF Logistics is this is a transaction that they work for both parties. We've shown pretty significant sponsor-related partnership in growth here associated with support that ultimately comes through in the form of we still have the dropdowns that are out there, but our real focus is on organic projects and third-party acquisitions at PBF Logistics. This was clearly something that the investment community was pushing for. We are all for and very supportive of a lower cost of equity at PBF Logistics.

We've always said that logistics and energy should work in tandem and that ultimately the plan would be the streamlining of the structure should ultimately help both companies continue to grow. We have not provided guidance in terms of what's coming next in terms of drops or anything else. There's clearly been significant strain and stress in the MLP equity market although we are starting to see pretty significant movements there.

There obviously is a new fund that was raised earlier this year. We have been successful and essentially self funding over the past couple of years. We brought in a strategic equity partner in Tortoise during the middle part of 2018. So our long-term view is this is a viable strategy. It's a way for both of these companies to grow and we still firmly believe that for discrete projects, accretive transactions there will ultimately be access to capital. It may just come in a form that's slightly different than what we've seen in terms of the old regular way MLP equity fundraising from the 2014, 2015 timeline.

Blake Fernandez -- Simmons Energy -- Analyst

That's great. Thank you, guys.

Operator

We'll take our next question from Neil Mehta with Goldman Sachs. Please go ahead. Your line is open.

Neil Mehta -- Goldman Sachs & Co. LLC -- Analyst

Hey. Thank you very much. Appreciate you taking the question guys. So I guess my questions are a little bit more tactical in nature. I guess the first one is at the forward curve, do you see PBF generating cash flow from operations that exceed the capital spending levels and the dividend? And the reason I ask that is if there is a funding gap, we're just trying to figure out is there a risk of incremental debt issuance, do you work down cash balances? Or how do you think about the need for incremental equity? You guys really effectively time the last equity issuance so I just wanted to see if any thoughts on whether you'd be willing to tap the equity market again if there is a funding gap?

Thomas Nimbley -- Chief Executive Officer

As we sit here today Neil, quite honestly, I don't think we'll have any comments around potential equity raises. We feel very confident with -- we just repaid $350 million on the ABL. That is exactly what that ABL credit facility is. Therefore, in terms of if we're going to be building some inventory during the course of turnarounds to then run it as we're coming out of turnaround or if we have some strategic opportunities related to crude and we want to store crude for a period of time and then as we're coming out ramp up runs, I think we'll do that.

As we sit here with the forward curve, Tom provided a lot of color on the distress in the gasoline market and while we think that ultimately things will rebound near-term and I think this is consistent with what we heard from our peers over the past couple weeks ultimately, this is unsustainable, but it's not very much fun at the current point in time. And so ultimately yeah we'll probably burn some cash throughout the first quarter and potentially into the second quarter. But we feel very good with the liquidity position that we have today. So don't anticipate any type of equity fundraising related to needing to fund anything at PBF.

Neil Mehta -- Goldman Sachs & Co. LLC -- Analyst

Okay that's helpful and then the follow-up on PBFX, you guys have taken a different approach to some of your peers with MLPs and since that you're leaning into the business this morning and it feels like if anything you're saying is very core part of your strategy, when we look at the MLP eligible EBITDA that sits at the PBF level, what is the best way to monetize that given the challenges in the drop down markets right now from a capital markets perspective? How do you best get credit for the midstream and logistics assets that sit up here?

Thomas Nimbley -- Chief Executive Officer

I think it all depends on what the prevailing market is. When you say, we leaning into the MLP, we work very, very hard internally here to strike the right balance. Clearly IDR's we're going by the way as the buggy vapor other things have left and so there's clearly a trend and certainly we talked quite a bit about. If the MLP works, it is a sort of perfect sidecar for our refining business because there is certainly a crossover between midstream assets within the assets that we own and then you have a cost of capital differential that you can provide investors with different investment classes that work for both. But it's all a function of the MLP market working and being open.

And one think that PBF is not interested in is simply dropping down assets if the markets aren't open and taking back equity. So to the extent the markets are open, we firmly believe we can grow the business and are quite comfortable with the growth projections we've put out there. That's not only from drop-down assets to which we have a large inventory of drop-down assets, but all the different projects that we're working on and as you saw in the fourth quarter, we also brought a thermal from Lindsay Goldberg. So our growth strategy is there and ready, willing and able. It's going to require the markets to be open and only time will tell on that.

Neil Mehta -- Goldman Sachs & Co. LLC -- Analyst

Perfect. Thank you, guys.

Operator

We'll take our next question from Paul Sankey with Mizuho. Please go ahead. Your line is open.

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

Good morning, all. On the accident, the initial headlines read pretty bad, it seems like it wasn't that bad. Could you just talk a bit more about what happened with the understanding that there wasn't injury? Thank you.

Thomas Nimbley -- Chief Executive Officer

I'll just make a couple of comments, Paul. We still have an investigation under way and as always the case in this thing, one of the things I've learned from my career is don't believe the first hand things you hear when you have an incident like this.

But we can, say I absolutely have to give a tremendous thanks to emergency responders, firefighters inside and the mutual laypeople who responded because we had a pretty good fire there. We are honing in now exactly at what happened, but we're not quite done. But because they were able to get water and phone on to the area that the fire was burning and because there wasn't that much equipment in that area, it was really just a fair amount of instrumentation damage that occurred and as we mentioned, we were effectively able to get that unit back up seven days after the fire occurred. Again I think it was testimony to how well the emergency responders handled that situation.

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

Sure. Tom, thank you. It's tough as you mentioned the current environment looks like it'll eventually recover given the shortage essentially of heavy crude. From a planning point of view, how are you thinking about timings and how to respond? And as far as it's extremely difficult to now I guess we can say that the Canadian crudes will come back in due course logically, but it seems the Saudis may have stepped down to a structurally lower level of production with a view to $70 oil. And it seems like Venezuela isn't going to recover anytime soon. Are you sort of planning on an outlook of right sight of what timeframe because your comments suggested you expect to rewidening in due course. Thanks.

Thomas Nimbley -- Chief Executive Officer

Certainly we do expect to rewidening and of course this is in due course. We do believe that Canada will lead the pack, that there is a -- this curtailment simply did not work, it worked in terms of narrowing the spread, but you may have seen that one very large company which railing in north of 100,000 barrels a day of crude has indicated there will be railings zero. So when you're transportation limited, that perhaps becomes more of a problem. So we believe that we are already starting to see the Canadian differentials widen up, but then I think you hit the wildcard, to me some of this is circular. We've seen this movie before.

The price gets too low Permian growth is high. OPEC, non-OPEC say we've got to come in and balance the market. They cut back their crudes, effectively head then to get pace with the pace maker but their market share may be yet diminished. At the end of the day I'll go back to what I said. I actually think there's plenty of crude out there, plenty of heavy crude, medium crude and light crude and that will ultimately play out in our favor, but it certainly is going to take a little bit more time to get the Venezuelan situation and the Iranian situation behind us and then it is going to be a function of what the Saudis and frankly the Iraqis there's a lot of crude in Iraq that could solve this problem if they will open it up.

C. Erik Young -- Chief Financial Officer

Paul also just low prices affects low prices and so as the U.S. complex refining system pushes back, heavy and sours and starts running late some crude, that will have impact on to itself.

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

Yeah true. And just Tom it seems like you are pretty much expecting Iranian sanctions?

Thomas Nimbley -- Chief Executive Officer

Well I wouldn't rule it out. Certainly the administration is very aggressive. So I'm not in Washington D.C. and I try not to be in Washington D.C. but the fact is there's a high probability that he is going to continue to do some of these things. I just want to amplify what Matt said. And this simply you all know this, when you have the type of heavy, medium crude differentials that we have, that tight differential.

When you have six oil, 3% six oil in New York arbitrating at higher price than gasoline, mostly we call it breakeven will Brent and you've got a $15 diesel to $16 diesel crack, so you don't have good coking economics. Clean, dirty spread is not wide enough. So then what happens, people will start pushing back those crudes and try to lighten up to the extent you can and it will fix itself over time.

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

Great. Thanks. Look forward to seeing you all in Napa in April. Thank you.

Thomas Nimbley -- Chief Executive Officer

Indeed.

Operator

We'll take our next question from Doug Leggate with Bank of America Merrill Lynch. Please go ahead. Your line is open.

Doug Leggate -- Bank of America Merrill Lynch. -- Analyst

Thank you. Good morning, everybody. And I'll plug our refinery conference as well Tom. I'm looking forward to seeing you guys in a few weeks. Tom I wonder if I could just get your updated thoughts on IMO and it's really more high level, given the timing of everything that's going on with heavy oil because it seems that it does role through, I'll say the next year or so, which kind of coincides with the timing of when it one was anticipating otherwise weakness on sour crude. So any updated perspective please and I've got a question on gasoline. Thanks.

Thomas Nimbley -- Chief Executive Officer

Yes I think our view is a lot of the concerns about IMO was predictably on the supply side for the compliant fuel. We've come down or I've come down to state that is not going to be an issue. And the reason I say that is everybody assume that it was going to be ultra low sulphur, diesel and it may be ultra low sulphur diesel along the margin, that meets that new demand to this 3.5 million barrels a day, or 300 million barrels a day picky number of a 0.5 fuel.

But a lot of that can be supplied by just frankly Hydro treated gas oil in a refinery and if you add a situation and you're going to talk about gasoline next but a gasoline remained under pressure frankly, you could just take gasoline out of the cat cracker that's already compliant fuel. It's below 0.5 in many of our refineries because we take sulphur out before it goes into the cat unit. So I think the ability to supply the fuel is going to be there for the industry.

The industry is ready to do that. Obviously you might be on a margin doing that with higher light sweet crudes or whatever and that will impact price structure. Personally what I am more interested in or I'm waiting to see how it plays out is there's a significant amount of distillation capacity and crude capacity in this industry mostly in other parts of the world that run medium and medium sour crudes and that where they go with it, is into the international bunker fuel market and that market is going away. So that becomes a three million barrels of stuff that if you continue to run the crudes you got to figure out where they're going to go where's the hone?

You can try put it in asphalt, there's not enough coking and conversion capability, so than does it go on to margin into the power the generation system. Can you lighten up sweeten up. I will tell you United States is probably darn close to being able to process oil as much light crude as it can until you get some of these investments that are being talked about. So our view is IMO is going to come and in fact that it's going to be good for companies like PBF who basically run a kit that is very high complexity and that's why we bought the refineries in the first place.

Doug Leggate -- Bank of America Merrill Lynch. -- Analyst

I appreciate the long answer. I'm afraid my second one is also kind of a micro issue given how much time you spend talking about gasoline weakness and surely just to get your perspective on some structural changes or whether you agree with this or not, I'm just trying to get our head around what happens next. I remember the good old days of seasonal strength in gasoline and I'm trying to figure out if with all the windfalls behind us, we're just going to get imbibed very simplistic view of the world. What I'm also referring to is the fact that the US is running the highest API slate in its history currently and obviously storms aside when you don't have a storm it seems that we end up with very weak gasoline in the winter. Do see that as a structure repeating cycle now or do you think there is a little bit more to it than that?

Thomas Nimbley -- Chief Executive Officer

No I think it's a little bit more than that. I will agree with you that certainly worldwide -- the gravity of the crude inputs worldwide has increased. And it certainly increased in the U.S. and I suspect that, I did say that I think absent additional capacity coming on you're going to get pretty close to being able to absorb all of the -- as much of the shale that is being produced in the U.S. before you start running into production cuts or operational problems.

I think that you will see -- seasonality will continue. You also have some knock on effects. One of the things about some of those shallow oil crude is it's got a higher cut of straight line. Therefore there is more gasoline yield at the same time the octane component of that stream is lower than normal and frankly you have pretty good octane spreads in the harbor that will probably benefit as we move forward into summer.

Doug Leggate -- Bank of America Merrill Lynch. -- Analyst

You guys are responding and we like that Tom. So thanks. We'll see you in March.

Operator

We'll take our next question from Prashant Rao with Citigroup. Please go ahead. Your line is open.

Prashant Rao -- Citigroup Global Markets, Inc -- Analyst

All right. Thanks. Good morning. And thanks for taking the question. I wanted to ask specifically on some IMO 2020 preparations and certainly the opportunity pipeline of it we are getting closer toward implementation. There is some recent news about your contract with Mercs in the East Coast for providing the Marine fields a compliant IMO 2020 Marine fields for I think it was 10% of their fuel needs coming out of the East Coast.

I'm wondering if we can get a little comment on that and then certainly the greater opportunity set and storage and providing those fields. What does that pipeline feel like and in a next few months should we expect to see more of these deals with the size of those and then what does it say about how close we are to in terms of progress of putting our standardization of a new (inaudible) fuel blend?

Matthew Lucey -- Vice President

So on the Mercs announcement that that came out this morning of course that is a PBFX announcement. PBFX bought the old crown point term roles where I think we refer to them as the East Coast storage assets. And we bought the assets with this transaction sort of being worked as we did. It is a total processing deal for the MLP. It is a direct result of IMO and its good business that's for sure for PBFX, but a big reason why we are going to be able to create synergies with those East Coast assets in our PBF refining assets is you have millions of barrels of heated dirty storage and so we believe the opportunities are going to be many.

We have been reached out to with -- by counterparties that don't have the complexity or the coking capacity that we do and I think there are a number of companies that are running more simple kit that quite frankly are making money today because of some of the perverse differentials that are in the marketplace, but are staring down the barrel of what could be a very challenging time. So I think we are well positioned for it. The deal with Merck's is -- just enhances our returns on the Crown Point acquisition and so we think it certainly makes a lot of sense and we're excited about the transaction and working with them over the next number of years.

Jeffrey Dill -- Senior Key Executive

I'll just add very quickly that package that Matt referred to, obviously we have large Coking operation in our East Coast facilities. We do believe there's going to be opportunities with people not running the crude, or heavy crude but people who were saying we have this stranded -- potentially stranded stream call high sulphur resin and that's three million barrels of tankage who can allow us to bring that in and move it into the Delaware or the Paulsboro.

Prashant Rao -- Citigroup Global Markets, Inc -- Analyst

Okay. Thanks very much for that. I guess stepping back the next question I had was on broader macro. Tom, we've seen numbers out there in the IA on what was out yesterday within repeating the 2.6 million barrels per of incremental capacity adds 2019 and we've just got around that number, the back cash loaded with some of those projects remains to be seen what the progress is. I was wondering if you could get your big picture thoughts on what seems more likely if we were to haircut that and what are some of the risks that would, to the downside that might help us may be come to a more balanced market versus incremental products demand maybe sort of a check on that would be great.

Thomas Nimbley -- Chief Executive Officer

Yeah. I think 2019 I wouldn't expect to see none of that high may be 0.5 million less than that, at least that's what I've read and that's not -- I am just reading the same some of the information that's put out there, hiring others who say that that's probably overstated. When you look at a 3-year look-ahead, frankly many people say you're going to have a, assuming there is no recession with 1.3% $1.3 million their growth numbers in demand or north of that, almost a balanced situation. Now longer term when you see things like Exxon in capacity in the U.S. because of the integrated model that they're going to have with the Permian, that's going to be something that the whole industry is going to be looking at and factoring in. I'll leave it at that.

Prashant Rao -- Citigroup Global Markets, Inc -- Analyst

Thanks Tom. And just one very quick, sort of detail question if I would before I turn it over, we've gotten a few questions given the sort of cyclical industrials are kind of slowing a little bit in terms of transportation, not necessarily hitting contraction, but just maturation in the industrial cycle, some questions on demands, which I feel like cracks have been great for the last couple of years.

With IMO coming up, it's asked about a little bit less, but seems like there'll definitely be some support for wider jet cracks on balance though you could see a little bit of fracking in demand or maybe little bit slowing down the demand growth. Wondering how you're thinking about the knock on effect to jet fuel specifically for IMO 2020 as we get closer and you're thinking about how you're going to run your kit and configuration and options once as you get closer to Jan 1 and will that be sort of a dislocation that's similar to other middle distillates, more pronounced or less pronounced? Any thoughts there would be great.

Thomas Nimbley -- Chief Executive Officer

Yes. It's really a very great question because when I said, our views or my views are morphed a little bit on what might happen with on a product side, it is really everybody assumed that it was going to be a 3 million-barrel poll on ultra low sulphur diesel or very high component of that. I think its 3 million barrels, $3.5 million barrels a day of light products. And that even could be unveiled gasoline by taking gas oil out of the cat crackers I mentioned earlier. We convert -- take jet fuel and put jet fuel, it's a compliant fuel. So I think the reality is IMO on a product side will give some underpinning and support to all light products; jet gasoline and diesel and so we'll see that maybe a drag certainly economically where we are mature in a cycle but IMO should be a nice boost.

Okay. Thanks very much for the time guys. I'll turn it over.

Operator

We'll take our next question from Benny Wong with Morgan Stanley. Please go ahead. Your line is open.

Benny Wong -- Morgan Stanley -- Analyst

Yeah thanks guys. Just wondering if you can give us your outlook of product exports for you and as well as the industry. Just wondering what's happening in Mexico? How much of that is going to get affect it and the second part of the question as it relates to IMO is as it approaches and refinery start changing behavior slightly, do you have any early thoughts on how product slows or even crude flows will change or evolve?

Matthew Lucey -- Vice President

So just on exports, we made some investments down in Torrance over a year ago and our exports out of that facility have been fairly consistent. Actually in the fourth quarter there were some opportunities to make some aspect exports out of the East Coast, which we did and it just speaks to our optionality of being able to deliver products at different refineries on the coast and then we're developing project that is about to take hold in Toledo where we're going to be exporting finished products into Canada starting almost as we speak over the next couple weeks.

So there's -- we have as a company a base level of exports that are not dependent on Mexico per se, but it is a big driver in the U.S. refining bull case in that the U.S. refiners are providing fuels to the rest of the world because we have the most complex kits. We have access to attractive crude. We have cheap natural gas and we have the best workers in the world. So it's a good combination and it certainly makes our market more buoyant because the U.S. is competing with products with the rest of the world.

Thomas Nimbley -- Chief Executive Officer

On the feedstock side if you will and what might happen with flows and trade patterns etcetera, I'm going to be fascinated by how this all plays out. As I say this is over four million barrels a day of distillation capacity that doesn't have any -- has low complexity and is significantly more than that, that doesn't have coking capacity. So on paper, if you lose the outlet for your high sulfur fuel bunker model and that stream is still there, personally I think you're going to see an opportunity or a shift away perhaps from filling your coker on the margins from crude and filling your coker on the margin from somebody else's stranded feed stream. So we'll have to see how it all plays out, but certainly we're positioning ourselves as a company with the tankage in the East Coast that we've got to be ready to be able to have the catches to take somebody stranded oil and not necessarily just still the cokers recruit.

Benny Wong -- Morgan Stanley -- Analyst

That's helpful thoughts, guys. Thanks.

Operator

We'll take our next question from Phil Gresh with JPMorgan. Please go ahead. Your line is open.

Joan Roa -- JP Morgan -- Analyst

Hey. Good morning, guys. This is Joan Roa filling in for Phil. So I know you've spoken about wanting to get bigger on the Gulf Coast and the West Coast, but would you ever consider expanding your refining footprint in the Eastern Canada? And how do you think about that market from a competitive advantage perspective?

Thomas Nimbley -- Chief Executive Officer

So let me answer it this way. We'll consider anything but our priority is going to be trying to get an asset obviously at a reasonable price and fix the model in PADD 3 and PADD 5 if there was a great opportunity to look out in Canada, but one of the things we very conscience of is going to a foreign company to become an operator has a little bit of a bandwidth issue with it in terms of management's attention span. So it would have to be very good opportunity, otherwise we're going to keep the strategy, which obviously regarded as a strategy but is always depending on the bid ask to try to grow. We intend to grow and to do it by having an additional asset in those two PADDs.

Joan Roa -- JP Morgan -- Analyst

Okay. And thank you and then it looks like one of your peers is in California shutting an FCC. What impact do you think this is going to have on the West Coast product market?

Thomas Nimbley -- Chief Executive Officer

Yes it's already shut and that was done that was Tesoro, now it's MPC. Obviously with the takeover endeavor, but when Tesoro was -- had acquired the two plants in Southern California, Carson, Wilmington, they undertook a project to try to hook those plants up and make a more synergistic between the two plants and they did ultimately get a permit to allow them to do that, but a condition of the permit was to shut down what's that cat 40,000? 42000 barrels a day FCC. Los Angeles is so short gasoline. By and large even when the California balanced, there's a net movement from the Bay Area or Pacific Northwest down to LA to supply that market. So there's going to have be more supply that gets down there because that's coming -- that is now shut down that unit.

Operator

We'll take our next question from Paul Cheng with Barclays. Please go ahead. Your line is open.

Paul Cheng -- Barclays. -- Analyst

Hey guys. Good morning. Just curious that Tom and Erik when you're looking at PBFX, does it really have a cost advantage on the capital cost or any other funding cost related to PBF and so from a strategic standpoint how important it is for you to have that as a subsidiary, which while -- and also that from an evaluation standpoint quite frankly I'm not sure that's you really have to really that much of to the C Corp. anyway it is pretty small.

Thomas Nimbley -- Chief Executive Officer

Yeah I think Paul we've obviously had a fairly strategic announcement this morning related to the idea or conversion into common units. We are believers in the MLP strategy as we go forward, but obviously we need to see how things unfold here over the next few years in the equity market because clearly for the MLPs to grow, we need that equity market to rebound in some, way, shape or form.

For us, we've run the math, a couple of different ways and obviously with the IDRs coming out, lower cost of equity should be a real benefit for PBF Logistics. We still have a couple different things in the market where there is enough arbitrage between where refining companies tend to trade and where MLPs trade that we think the math works. But ultimately today's announcement is extremely strategic for us and we're going to need how the market responds to what we think is overall a very positive message and we feel like PBF and PBFX came to a very reasonable agreement between the two parties that ultimately not mention that as a sidecar vehicle these two companies should be working in tandem to continue to help grow both the refining business as well as the logistics business.

C. Erik Young -- Chief Financial Officer

PBA by itself would not be able to have acquired these coal storage assets going back to plains assets but those are very good deals for PBFX and they bring with it synergies with the parent. So markets go up, markets go down and they've certainly been sideways in the MLP space and we've tried to position as well as we can and to the degree as well received in the markets opened we think it makes a lot of sense.

Paul Cheng -- Barclays. -- Analyst

Thomas, the fourth quarter margin realization seems to be a bit stronger than we would expect comparing to the market indicator any particular reason that why that may be the case?

Thomas Nimbley -- Chief Executive Officer

I think ultimately Paul it's just a combination of things over the past two years. We've clearly spent a lot of time, a decent amount of capital and the team has continued to develop combination of all those things. We think we'll continue to lead to performance coming out of Torrance

that's consistent with what we laid out on the front-end.

C. Erik Young -- Chief Financial Officer

When you run well, it saves a lot of discussion and the refinery is run well and they continue to make improvements and optimizations around the assets and I think the core performance I've ever seen.

Thomas Nimbley -- Chief Executive Officer

That operation in the refinery has improved, there is still work to be done there. OpEx has going down, but the commercial activity in torrents has been impressive. What I mean by that getting into new markets, getting into asphalt market running the marketing system at very high rack numbers. So I think the business unit and I mean the business unit, commercial, logistics and refining itself is continuing to make improvements in strives.

Paul Cheng -- Barclays. -- Analyst

Tom can you share how much is the marketing contribution in Torrance in the fourth quarter? Is it a big number?

Thomas Nimbley -- Chief Executive Officer

You know what, we really don't break that out Paul it's just we -- I can tell you (inaudible).

Paul Cheng -- Barclays. -- Analyst

A final question whether you guys will be willing to share what is the benefit in the fourth quarter from the different crew defenses? I mean that Exxon have said year-to-year from 4Q '17 to 4Q '18 the better crude defense so have captured about $1.2 billion after-tax. So if Exxon willing to share whether you guys willing to share?

Matthew Lucey -- Vice President

I'm sorry. What was the question?

Paul Cheng -- Barclays. -- Analyst

The question is that, how much is the crew benefit crew defense that you received in the fourth quarter? I'm saying that as to everyone's presence apply Exxon given the number saying that from the fourth quarter '17 to the fourth quarter '18, the much wider crew defense or what the capture in the downstream is $1.2 billion after-tax. So I was just saying that Exxon that the most ultimate that don't want to share information will be willing to share hope that you guys will be willing to share also.

Matthew Lucey -- Vice President

I commend Exxon for their willingness to share but that's not saying we spitting out today.

Paul Y. Cheng -- Barclays Capital, Inc -- Analyst

Okay. Thank you.

Operator

We'll take our next question from Matthew Blair with Tudor Pickering and Holt. Please go ahead. Your line is open.

Matthew Blair -- Tudor, Pickering, Holt & Co. Securities, Inc -- Analyst

Hey good morning, everyone. Thanks for squeezing me in here. I'm not sure if I missed this, but could you share your WCS crude by rail volumes in Q4 '18 as well as your outlook for Q1 '19? And do you feel -- are you receiving the full economic benefit of these barrels in Q4? Or are there any like fixed-price contracts or hedging that might have limited the upside?

Thomas Nimbley -- Chief Executive Officer

Basically we ran north of 70,000 barrels a day, I think through the fourth quarter by rail. And we've captured by and large all of the benefits from the distortions in the marketplace in the fourth quarter. That wasn't true throughout necessarily the whole year but in the fourth quarter. As we move into the first quarter, I think for the month of January we probably would've continued to move somewhere around 60,000 barrels a day by rail, but that is coming off.

As Erik said and others have said, right now we think that we are probably going to bottom out somewhere around 30,000 barrels a day in the March, April timeframe and then based on what we're seeing in the numbers there is a lag in the system. Based on what we're seeing now with the spreads widening out, there lot of $0.20 now versus spread we expect to be ramping up in the second quarter.

Matthew Lucey -- Vice President

Yes we absolutely believe as Tom said that that market has bottomed out. We did and we will be able to evidence that we responded with the differentials shifting from being the cheapest crew of the world to being the most expensive on an economic value and so we responded and that all goes to the markets fixing itself and then we'll decidedly ramp up as the crudes become more attractive.

Matthew Blair -- Tudor, Pickering, Holt & Co. Securities, Inc -- Analyst

Sounds good. Thanks. And then turning to your RIN guidance, so looks like guidance is up approximately 30% year-over-year for 2019. If I look at year-to-date ethanol RINs about $0.21 in 2018, ethanol RINs averaged about $0.30. However, biodiesel RINs are up year-to-date. So could you just talk about what's really driving the year-over-year increase in your RIN expense, does that have to do with the biodiesel side?

C. Erik Young -- Chief Financial Officer

Yeah, there is an element of the biodiesel side and quite frankly there's probably an element of conservatism in there just based on what we've seen in the market thus far where things have traded over the past few months. But I think that's something that we'll continue to kind of update as we go. Well, obviously as the year progresses we will have booked a certain amount related to RINs for both ethanol as well as the bio component, but ultimately there's probably some conservatism built in there.

Matthew Lucey -- Vice President

RINs will be what they will be although we're entering kabuki theater for I don't know what number this is, the acting secretary is going to try to get confirmed by the senate and I think he received a letter from five senators this past week, voicing their concerns over the wind market and the impact to the manufacturing base in this country. He no doubt is hearing from the powerful core lobby.

And so it's just again it's a snapshot of why big government can be a whole bunch of unintended consequences. But we -- I'm actually comfortable serving with the administration that they recognize high RIN prices, not only affects the consumer, but can absolutely damage manufacturing side and the refining side. They have done a reasonable job of keeping RIN prices in check and I expect that will continue.

Matthew Blair -- Tudor, Pickering, Holt & Co. Securities, Inc -- Analyst

Thank you.

Operator

We'll take our next question from Jason Gabelman with Cowen. Please go ahead. Your line is open.

Jason Gabelman -- Cowen -- Analyst

Yeah. Hey, guys. Thanks for taking my question. Firstly just on PB effects or organic growth, I know you have that $100 EBITDA target out there. How much of that was realized last year and is this Mercs deal that you announced today. It doesn't seem like it was embedded in East Coast acquisition EBITDA target. Is it part of this organic growth target? Thanks.

Matthew Lucey -- Vice President

No and I want to shy away from giving forensic accounting on $100 million. We invested a fair amount of money last year and we continue to invest money this year on projects. I mentioned that we don't export facility. That's part of it. I think by this year we'll have $10 million of run rate EBITDA as a result of those investments.

In regards to the mayors, I would not characterize that as an organic project. It is absolutely incremental to the economics that we shared when we acquired the facility. So that's been in the plans for some time. And so we identified its upside, but this is the first time that the market's learning of the upside and like I said, it is definitively incremental to the business.

Jason Gabelman -- Cowen -- Analyst

All right. Great. Thanks. And just a quick question on IMO 2020, I just want to go back to your comments about potentially blending vacuum gas oil into the marine fuel pool. There's been some industry chatter that there could be some issues with blending. I'm not sure if you guys are running tests to kind of sanity check that or what your expectations are on the vacuum gas oil blending. And just to follow from that, I understand you still expect IMO 2020 to be positive for PBF, but if the magnitude of the benefit that you're expecting in 2020, the same magnitude that you were expecting say six or eight months ago? Thanks.

Matthew Lucey -- Vice President

Second piece of that I think it will be frankly -- certainly on the feedstock side and the senate side, I don't see anything that's changed that outlook in terms of, proper penetration or people figuring out what they're going to do with these streams and the whole key there is if indeed you (inaudible) on the margin that you are going into the power sector, then you're going to wind up with these $30, $40, $50 clean dirty spreads, which will push coke and economics to be very attractive.

I think on the blending side, I'll make one other comment after that, we're going to leave that to the Exxon, BP's and Shells of the world. They are actively working through trying to do formulations and blending with a variety of different source -- what will be compliant from a self standpoint fuels. I can assure you every one of those companies has the ability to do a lot of hydro treating on their gas oils and turn that gas oil and it's a higher density fuel than diesel because obviously it's got more BTU's in it. So we're going to wait and see. We're not doing any of our own formulations.

Recognize though that we're burning 0.1% sulfur in all of the EPA zones around the world and there's not been real issues with that. Now guess we'll find out what they do. I would say I suspect that this industry on the product side will figure out how to solve this problem with less of a problem than was originally forecast. And it may be that you'll get an initial pop that will be the same as what we still have, but I suspect that on the product side and the availability of fuel that will be solved in a short to mid term and longer implications might be on the stranded feed stocks and wider for longer heavy crude, sweet sour crude differentials.

Operator

I'll now turn the call back to Tom Nimbley for closing remarks.

Thomas Nimbley -- Chief Executive Officer

Thank you everybody for joining us today. We look forward to talking to you in our next quarterly call.

Operator

This does conclude today's program. Thank you for your participation and you may disconnect at anytime.

Duration: 73 minutes

Call participants:

Colin Murray -- Investor Relations

Thomas Nimbley -- Chief Executive Officer

C. Erik Young -- Chief Financial Officer

Matthew Lucey -- Vice President

Roger D. Read -- Wells Fargo Securities LLC -- Analyst

Brad Heffern -- RBC Capital Markets LLC -- Analyst

Manav Gupta -- Credit Suisse -- Analyst

Blake Fernandez -- Simmons Energy -- Analyst

Neil Mehta -- Goldman Sachs & Co. LLC -- Analyst

Paul Sankey -- Mizuho Securities USA LLC -- Analyst

Doug Leggate -- Bank of America Merrill Lynch. -- Analyst

Prashant Rao -- Citigroup Global Markets, Inc -- Analyst

Jeffrey Dill -- Senior Key Executive

Benny Wong -- Morgan Stanley -- Analyst

Joan Roa -- JP Morgan -- Analyst

Paul Cheng -- Barclays. -- Analyst

Paul Y. Cheng -- Barclays Capital, Inc -- Analyst

Matthew Blair -- Tudor, Pickering, Holt & Co. Securities, Inc -- Analyst

Jason Gabelman -- Cowen -- Analyst

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