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CVR Energy Inc (NYSE:CVI)
Q4 2019 Earnings Call
Feb 20, 2020, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the CVR Energy, Inc. Fourth Quarter 2019 Conference Call. At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jay Finks, Vice President of Finance and Treasurer. Thank you. You may begin.

Jay Finks -- Vice President of Finance & Treasurer

Thank you, Michelle. Good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR Energy fourth quarter 2019 earnings call. With me today are Dave Lamp, our Chief Executive Officer; Tracy Jackson, our Chief Financial Officer; David Landreth, our Chief Commercial Officer and other members of management.

Prior to discussing our 2019 full year and fourth quarter results, let me remind you that this conference call may contain forward-looking statements, as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. Without limiting the foregoing, the words outlook, believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release.

As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

This call also includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures are included in our 2019 fourth quarter earnings release that we filed with the SEC yesterday after closing the market.

With that said, I'll turn the call over to Dave, our Chief Executive Officer. Dave?

David L. Lamp -- Chief Executive Officer and President

Thank you, Jay. Good afternoon, everyone, and thank you for joining our earnings call. Hopefully, you had an opportunity to listen to the CVR Partners earnings call earlier today. I'd like to begin the call today with a brief discussion of our accomplishments in 2019, and then discuss our operating performance for the quarter, as well as for the year.

2019 was another successful year for CVR Energy. Last year, I outlined a handful of strategic initiatives for 2019 and I'm happy to report several accomplishments for the company, including significant year-over-year improvements in environmental health and safety performance at all plants. Total recordable incident rate declined by 11% in 2019, followed by a reduction of 50% in 2018.

Tier 1 process safety occurrences declined by 50% and environmental events declined by 14% after a reduction of 35% in 2018. We maintained our commitment to return cash to shareholders with a 7% increase in our quarterly cash dividend. The Board authorized a share repurchase program of $300 million and we closed on our sale of our underutilized Cushing tank farm assets as planned for a consideration of $44 million, including inventory, for a gain of $9 million.

Some specific -- accomplishments specific to our Petroleum segment include an increase in our throughput of regional crudes and shale oil by 20% while reducing our reliance on Cushing and Midland WTI crude oils. The quality adjusted advantage of the gathering crude oil versus Cushing common typically averaged approximately $0.50 to $1.00 [Phonetic] per barrel. As a result of the benzene repositioning project completed in March, as well as a replacement of reformer catalyst at both refineries, we have increased our production of premium gasoline by more than 25% in 2019 compared to 2018.

Our premium gasoline production approached 17,000 barrels per day in December, an increase of over 85% compared to our 2018 average. The Group 3 premium gasoline averaged $0.26 per gallon over subgrade in 2019. We further increased our internal RINs generation by approximately 12% by blending biodiesel across both refinery racks for the full year.

And, the Board approved the Wynnewood Isomerization project, which we expect will further improve our capture rates. Earlier today, CVR Partners' CEO, Mark Pytosh announced the following accomplishments for the Fertilizer segment in 2019. The planned turnaround at East Dubuque in the fall was completed safely and -- we achieved a record ammonia production levels at that facility in December. Total cash distributions of $0.40 per unit were paid during the year and the Board approved the urea, reliability and expansion project at our Coffeyville plant.

Yesterday, we reported CVR Energy's full year and fourth quarter results. For the full year of 2019, consolidated net income was $362 million and diluted earnings per share were $3.78. Fourth quarter consolidated net income was $28 million and diluted earnings per share were $0.44. EBITDA for the year was $880 million and for the quarter was $142 million. We posted improved results in both of our business segments on a year-over-year basis.

In the Petroleum segment, the EBITDA improvement was driven by increased throughputs, higher capture rates and higher refining margins despite lower crack spreads achieved through fewer lost profit opportunities. Higher fertilizer sales and the sales volumes and prices drove improvement in the Fertilizer segment. We announced the fourth quarter dividend of $0.80 per share, which will be paid on March 9 to shareholders of record March 2. We paid total cash dividends for the year 2019 of $3.05, bringing our total cash return to shareholders for the year to approximately $306 million. Our current annualized dividend of $3.20 per share represents an industry-leading dividend yield of over 9% based on yesterday's close.

Now, I'll speak to some of the fourth quarter highlights for each of our business segments. For the fourth quarter, the Petroleum segment, the combined total throughput for the fourth quarter of '19 was approximately 213,000 barrels per day as compared to 221,000 barrels per day in the fourth quarter of 2018.

The Group 2:1:1 crack spread averaged $16.65 in the fourth quarter of '19, compared to $18.48 for the fourth quarter of 2018. Domestic crude differentials have tightened compared to a year ago levels, primarily due to the start-up and line fill of new pipelines from Midland to Cushing to the Gulf Coast. The Brent-TI crude differential averaged $5.55 per barrel in the fourth quarter of 2019, compared to $9.26 per barrel in the fourth quarter of 2018.

The Midland Cushing differential turned negative for the quarter with Midland averaging $0.94 per barrel premium over Cushing compared to a discount of $5.96 per barrel in the fourth quarter of '18. The WCS to WTI differential was $18.98 per barrel compared to $33.86 per barrel in the same period last year. The tightening of the WCS differential is largely result of continued production curtailment imposed by the Alberta government.

Light product yield for the quarter was 101% on crude processed. Our distillate yield as a percentage of total crude oil throughputs was 44% in the fourth quarter for 2019, compared to 45% in the prior year. Our distillate yield continues to rank as one of the highest among the independent refiners.

In total, we gathered approximately 148,000 barrels per day during the fourth quarter, compared to 113,000 barrels per day in the fourth quarter of '18. During the quarter, we reached new records for -- crude oil gathered volumes of approximately 154,000 barrels per day in November.

The Fertilizer segment finished the quarter with strong operating performance at both facilities after completing planned turnaround at the East Dubuque facility. Coffeyville's ammonia unit operated at 90% compared to 96% in the fourth quarter of '18. And East Dubuque, its ammonia unit operated at 88% utilization, adjusted for the planned turnaround, compared to 95% in the fourth quarter of '18. CVR Partners did not generate cash available for distribution for the fourth quarter of 2019.

Now, let me turn the call over to Tracy, to discuss our financial highlights.

Tracy D. Jackson -- Executive Vice President and Chief Financial Officer

Thank you, Dave, and good afternoon, everyone. As Dave mentioned, for the fourth quarter of 2019, we reported net income of $28 million, diluted earnings per share of $0.44 and EBITDA of $142 million. This compares to net income of $95 million, diluted earnings per share of $0.73 and EBITDA of $202 million in the fourth quarter of 2018.

The effective tax rate for the fourth quarter of 2019 was 40% compared to 13% for the prior year. For the full year 2019, our effective tax rate was 26% compared to 18% for the prior year period. The increase in our fourth quarter and full year 2019 effective tax rate was primarily due to the reduction of non-controlling interest as a result of the equity transaction completed in January of 2019.

The effective tax rate was also elevated in the fourth quarter 2019 due to an increase in income subject to tax, as well as losses in CVR Partners and changes in certain state income tax items. We currently estimate our full year 2020 effective tax rate to be approximately 25%.

The Petroleum segment's EBITDA for the fourth quarter of 2019 was $135 million compared to $172 million in the same period in 2018. The decrease in EBITDA year-over-year was mainly the result of lower Group 3 crack spreads and narrower crude oil differentials. In the fourth quarter of 2019, our Petroleum segment's refining margin excluding inventory valuation impacts was $1.86 for total throughput barrel compared to $17.47 in the same quarter of 2018.

The increase in crude oil flat price through the quarter generated a positive inventory valuation impact of $0.61 per barrel during the fourth quarter of 2019. This compares to a $3.80 per barrel negative impact during the same period last year. Excluding inventory valuation impacts and unrealized derivative gains and losses, the capture rate for the fourth quarter of 2019 is approximately 79% compared to 85% in the prior year period.

We estimate lost profit opportunities negatively impacted our capture rate by approximately 7% in the fourth quarter of 2019. Total derivative losses for the fourth quarter of 2019 totaled $19 million, which includes unrealized losses of $24 million associated with open commodity derivative instruments and open purchases of crude oil, Canadian crude oil that are scheduled for future delivery.

In the fourth quarter of 2018, we had total derivative gains of $70 million, which included unrealized gains of $37 million. RINs expense in the fourth quarter of 2019 was $13 million or $0.63 per barrel of total throughput, in line with the same period last year. The full year 2019 RINs expense was $43 million as compared to $60 million in 2018.

The recent ruling by the Tenth Circuit Court has caused a significant increase in the price of ethanol RINs although biodiesel RINs have been less affected to the extension of the biodiesel blender's tax credit. Based upon recent market prices of RINs and current estimates of production rates, we estimate that our RINs expense for 2020 will be $100 million to $110 million.

The Petroleum segment's direct operating expenses were $4.63 per barrel of total throughput in the fourth quarter of 2019 as compared to $4.41 per barrel in the fourth quarter of 2018. The increase was primarily associated with higher personnel expenses and increased material spending for maintenance activities, offset somewhat by lower expenses for utilities and outside services.

For the full year 2019, CVR Partners reported operating income of $27 million and a net loss of $35 million or $0.31 per common unit. This is compared to full year 2018 operating income of $6 million and a net loss of $50 million or $0.44 per common unit.

EBITDA was $107 million for the full year 2019, compared to $84 million for the prior year. The approximate 27% year-over-year increase in EBITDA was primarily due to the improved netback pricing of 20% and 15% for both ammonia and UAN respectively, along with increased ammonia sales volumes.

For the fourth quarter of 2019, CVR Partners reported operating losses of $9 million and a net loss of $25 million or $0.22 per common unit. This is compared to operating income of $8 million and a net loss of $1 million or $0.01 per common unit for the fourth quarter of 2018. EBITDA was $11 million in the fourth quarter of 2019, compared to $33 million for the prior year period.

Year-over-year decline in EBITDA was driven by turnaround expenses incurred in the fourth quarter, as well as lower UAN sales volumes and pricing in the quarter as a result of challenging weather conditions.

Total consolidated capital spending for the full year of 2019 was $114 million, which included $89 million from the Petroleum segment and $20 million from the Fertilizer segment. Of this total, environmental and maintenance capital spending comprised $102 million, including $79 million in the Petroleum segment and $80 million in the Fertilizer segment.

Actual spending for the year came in below expectations as a result of certain capital project shifting in the subsequent years. We estimate the total consolidated capital spending for 2020 to be $130 million to $150 million, of which $80 million to $90 million is expected to be environmental and maintenance capital.

This excludes planned turnaround spending, which we estimate will be $145 million to $155 million for the year. Expected turnaround spending for 2020 includes some spending ahead of the planned turnaround at the Wynnewood refinery in 2021.

Our cash position remained strong as we ended the quarter with cash of approximately $652 million on a consolidated basis, which includes $37 million in the Fertilizer segment. Subsequent to year end, we completed $1 billion senior unsecured notes offering in January at a blended interest rate of 5.45%. After repaying the existing $500 million of 6.5 senior notes due 2022, we added approximately $500 million of additional cash to the balance sheet, further improving our liquidity position. Looking ahead for our Petroleum segment, we estimate total throughput for the first quarter of 2020 to be 155,000 to 165,000 barrels per day, reflecting the impact of the planned turnaround at Coffeyville. We expect total direct operating expenses for the first quarter to be $85 million to $95 million and total capital spending in range between $45 million and $55 million. Turnaround spending is expected to be between $115 million and $125 million.

For the Fertilizer segment, we estimate our ammonia utilization rate to be between 95% and 100%. We expect direct operating expenses to be $35 million to $40 million, excluding inventory impact and total capital spending to be between $4 million and $7 million.

With that Dave, I'll turn the call back to you.

David L. Lamp -- Chief Executive Officer and President

Thank you, Tracy. In summary, 2019 was a successful year for CVR Energy. For 2020, our mission remains to be a top-tier North American petroleum refining and fertilizer company, as measured by safe and reliable operations, superior financial performance and profitable growth.

Looking at 2020, cracks have -- are having a typical soft start to the New Year. On top of that, the weather has been warm and the coronavirus has reduced worldwide demand.

The industry's response has been to cut runs. Despite these factors, we see a number of positive market trends that drive our constructive outlook for the year. GDP growth, low unemployment increases in the workforce participation rates and low gasoline prices are driving refined product demand with vehicle miles traveled, up 1% in 2019.

Shale oil production and exports from the U.S. continue to grow. Crude oil production from major U.S. shale oil basins increased by over 1.2 million barrels per day in 2019 and is expected to increase another 400,000 to 500,000 barrels per day in 2020. As the domestic production volumes have increased, crude oil exports from the U.S. have increased over 1 million barrels a day in 2019, averaging nearly 3 million barrels per day for the year.

Although crude differentials have narrowed with the addition of the new Midland to Gulf Coast pipeline capacity, we continue to believe the need to export incremental light shale oil, drives a sustained differential between Brent and WTI. The abundance of natural gas production in the U.S. has driven prices to a new low even in the winter. Cheap natural gas is a key advantage for our refining and fertilizer businesses and the industry and activity in general.

Corn plantings are expected to increase to 92 million to 95 million acres this year, above the 2019 level of less than 90 million acres. And although product inventories are currently elevated, they're not alarming for this time of the year, and the upcoming RVP spec change and heavy global spring maintenance should clean up the inventory picture.

The impacts of Tier 3 gasoline are showing up in the marketplace with octane spreads averaging $0.25 a gallon so far in 2020, as well as above the same period last year. Prices for Tier 3 gasoline credits were over $3,000 recently, a 70% increase from a year ago. We are currently producing below 10 PM gasoline and generating sulfur credits at both our refineries.

As expected with the implementation of the IMO 2020, VGO is being diverted away from cat crackers into the marine fuel market. This should reduce gasoline and further tighten product inventories.

And finally, Western Canadian crudes continue to be constrained by pipeline takeaway capacity, although some progress has been made on future pipeline capacity additions.

We believe we are well positioned in regard to all of these market forces and we continue to make progress on our suite of income improving projects that are intended to capitalize on these dynamics. Our focus remains on further increasing our ability to make premium gasoline, increase our liquid yields and expand our feedstock optionality.

Our Board gave final approval to the new C5/C6 Isom unit at our Wynnewood refinery. Total capital spending is estimated at $117 million for this project and we expect the project to complete in an operation by the end of 2022. This project will improve our ability to efficiently process more light shale oils and improve our capture rates. We're developing a similar project at our Coffeyville refinery, which leverages the Wynnewood Isom project. If approved, this project will increase Coffeyville's capability to run natural gasoline and efficiently process light shale oil crudes.

And finally, we continue to evaluate the replacement of HF acid catalyst at our new -- at the Wynnewood alkylation unit. If approved, this project would eliminate the use of HF acid catalyst and in addition to increase in octane and premium gasoline production capability.

We expect to complete schedule A engineering in the second half of this year and make a technology selection by the end of the year. We currently expect each of these projects should generate returns of greater than 40%. We also believe this runway of attractive high return projects not only improves our competitive position, but could also create potential for future shareholder returns.

Our recent bond offering could provide the funding required for these capital projects in addition to providing additional financial flexibility to fund potential acquisitions, share repurchases and other distributions to our shareholders.

As we look at the fourth quarter of 2020, the Coffeyville refineries turnaround is on schedule and is expected to start next week. The turnaround is currently expected to last approximately 40 to 50 days.

Looking at the market, quarter-to-month, quarter-to-date metrics are as follows. Group 3 cracks have averaged $12.91 per barrel. The Brent TI spread has averaged $5.54 per barrel. The Midland over Cushing by $0.70 per barrel and WTL has averaged $0.05 per barrel under Cushing WTI. WCS differentials averaged $21.02 per barrel under WTI. Prompt crack -- Prompt Group 3 cracks were at $16.09 per barrel yesterday. Brent TI spread was $5.83 per barrel and the WCS differential was $17.58 under WTI.

Quarter-to-date ethanol RINs have averaged $0.20 and biodiesel RINs have averaged $0.43. Recent developments have resulted in mixed direction of prices. The approval of the biodiesel blenders' credit retroactive to 2018, produced a windfall for some refineries in the fourth quarter and biodiesel RINs declined by nearly 20% from the beginning to the end of the quarter.

However, the recent Tenth Circuit Court ruling has caused RIN prices to increase, particularly ethanol RINs. The court ruled in favor of four trade associations related to exemptions from obligations under the renewable fuel standard that were properly granted to a few small refiners under the Clean Air Act.

Let me be clear. We believe the Tenth Circuit got it all wrong. Starting with granting standing to these trade associations, not to mention misreading the most important part of the renewable fuel standard regulation, protecting small refineries from disproportionate harm caused by the compliance with the renewable fuel standard.

To quote directly from the RFS regulation, "A refinery may at any time petition the administrator for an extension of its small refinery exemption for the reason of disproportionate economic hardship." We think there is positively no proof that these trade associations have been harmed by these small refinery exemptions. In fact, the blended volume of ethanol has increased every year despite the issuance of exemptions.

We intend to fight this ruling with all the necessary resources going forward and believe this ruling conflicts with both the regulations, as well as other rulings and sets national policy, which exceeds the Tenth Circuit authority.

With that, operator, we're ready for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Prashant Rao with Citigroup. Please proceed with your question.

Unidentified Participant

Hi, this is Joe on for Prashant, now that we're past January 2020 and the IMO tailwind haven't shown up as you expected for the M&A market. Are you seeing more attractive bid-ask spreads? Would acquiring an asset in the Rockies make sense given your capital structure?

David L. Lamp -- Chief Executive Officer and President

I don't know that. I'd say we see more attractive spread bid-ask spreads. But I think they are coming in a bit. Most of the assets that are available out there are what I'd call full valued. So, we really have to have some synergies or something that -- an angle to which you could add value to your existing business with to make any of them work.

Unidentified Participant

Okay, got it. And my second question is, the Fertilizer segment seems a bit weak. Can you speak a little bit about the market dynamic and how should we think about the long-term profitability in that segment?

David L. Lamp -- Chief Executive Officer and President

Well, I consider the Fertilizer segment to be sort of like a chemical business. It's typical boom bust cycle. It's still, I would say, in a recovery phase of that boom bust cycle that happened in the '14-'15 timeframe. Demand is strong however and -- but there's plenty of material out there to be sold worldwide and some of that still needs to be soaked up before you really see a return to margins that we have had in the past.

On the other side of it, it's a pretty relatively steady business for us and it is being benefiting by the low natural gas prices, and we expect that to continue going forward.

Unidentified Participant

Thank you.

Operator

Thank you. Our next question comes from the line of Neil Mehta with Goldman Sachs. Please proceed with your question.

Neil Mehta -- Goldman Sachs -- Analyst

Yes, good afternoon team. I wanted to stay on the topic here of RINs extending, from your prepared remarks. And Dave, the 100 to 110 number is probably a little higher than what we had modeled in. Can you just walk us through the assumptions that are embedded in there with the D6 price? And then, is there a small refinery exemption that's built into the number?

David L. Lamp -- Chief Executive Officer and President

Yes. We project forward without any potential waiver, but what we tend to do Neil is take the current price and look at that for the full year. So, that's where that number comes from.

Neil Mehta -- Goldman Sachs -- Analyst

The spot price is where?

David L. Lamp -- Chief Executive Officer and President

Spot price today is about 30 -- 33.5 roughly on a blended basis.

Neil Mehta -- Goldman Sachs -- Analyst

And that's what's embedded in through the balance of the year?

David L. Lamp -- Chief Executive Officer and President

That's right.

Neil Mehta -- Goldman Sachs -- Analyst

Okay. And then --

David L. Lamp -- Chief Executive Officer and President

Of course, you take off of that what we generate internally, which is -- has moved up in the past years. But that's still -- our basic RVO is somewhere around the $320 million range. Take off the internally generated of about -- today about $72 million to $75 million RINs and you can -- should be able to do the math.

Neil Mehta -- Goldman Sachs -- Analyst

Perfect. And that -- is that pretty ratable across the quarters?

David L. Lamp -- Chief Executive Officer and President

Yes, generally.

Neil Mehta -- Goldman Sachs -- Analyst

Okay. And then, can you just expand a little bit more on your comments, how you feel that the decision, the court decision was not consistent with the letter of the law? And how concerned are you that this is going to ultimately be the catalyst that sends RINs prices higher over the next couple of years?

David L. Lamp -- Chief Executive Officer and President

Well, there's two factors there. I don't know, I'm sure you're up on that. The EPA has elected to try to phase in a reallocation of small refinery waivers to the large refiners, which is not in the law, number one. It's frankly unfair. It was never intended in the RFS regulation. But I think more importantly, this Tenth Circuit ruling, if you took it at face value and put it in, it goes directly against the renewable fuel standard from the standpoint that the small refinery waivers exemption was put in there to save small refineries from going out of business.

And if you, there is a point there where if you -- if RINs go to a certain value, I don't know where it is, may be between $1 and $2, you start putting a lot of these smaller refineries right out of business. They just can't afford it. The free cash flow goes to zero after turnarounds and sustaining capital and all the other things you have to do to run this business. So, the bottom line is that was a safety relief that I'll put in by the legislators to protect the small refiners and this ruling just goes against it in every way.

Neil Mehta -- Goldman Sachs -- Analyst

And the decision to not embed the small refinery exemption into your guidance, is that an element of conservatism or is that just what we should base case from now on?

David L. Lamp -- Chief Executive Officer and President

We've always run our business that way is that we don't assume that it's a given to get an exemption. And we tend to -- this is what hurts us in a lot of cases. We actually incur pain because the EPA is so late in issuing these waivers, like last year that was after the compliance period was over and we ended up with stranded RINs that were of the '17 vintage that were useless in '19.

And we actually have litigation going on that with the EPA now because of that fact. We're suing for harm. So, I think you really can't plan your business around these RINs -- these exemption without some risk that you're going to put yourself in the net short position and have to do a lot of cover. And in some cases it's infeasible to even cover because they've expired by the time they even issue the waivers.

But it just creates a whole bunch of uncertainty in the business that is -- it's no way to run the business is bottom line. And Washington needs to do something to fix it.

Neil Mehta -- Goldman Sachs -- Analyst

I appreciate the comments. I think we were all hoping that we could put this topic of RINs behind us. It seems like it's reemerging.

David L. Lamp -- Chief Executive Officer and President

It's just come right back now with vengeance.

Neil Mehta -- Goldman Sachs -- Analyst

Thanks, Dave.

David L. Lamp -- Chief Executive Officer and President

Yes.

Operator

Thank you. Our next question comes from the line of Manav Gupta with Credit Suisse. Please proceed with your question.

Manav Gupta -- Credit Suisse -- Analyst

Can you elaborate a little more on the Coffeyville turnaround, what will be the expenses incurred during this timeframe and which units are you actually digging down for the turnaround?

David L. Lamp -- Chief Executive Officer and President

Well, this is a major turnaround for Coffeeville. It's 4.5 years run, after 4.5-year run. So, we're basically working on every unit in the refinery. So, we'll lose full production for at least 40 of those days. And we'll have partial start-ups in the last 10 days of various units as we ramp back up.

Manav Gupta -- Credit Suisse -- Analyst

And what's the expense you expect to incur during this downtime?

David L. Lamp -- Chief Executive Officer and President

Well -- we've already spent some money on the turnaround, but we're estimating between $115 million and $125 million.

Manav Gupta -- Credit Suisse -- Analyst

Okay. A quick follow-up question on your Wynnewood isomerization unit. You have indicated that the capex is close to $117 million, should we split it between '20 and '21, or is it going to be more '22 -- sorry '21 versus '20? If you can give us some idea how do you plan to spend that $117 million over the next two years?

David L. Lamp -- Chief Executive Officer and President

Well, we're planning to heavily modulize this design, which means our spend will be slow this year and then it will be fairly split between the next two years. So, '21 and '22 will be heavy spend periods.

Manav Gupta -- Credit Suisse -- Analyst

And the return is about $35 million. Can you help us understand some things around the sensitivity of that? Like, what could drive those numbers more toward $40 million and $45 million. At the same time, what could go against you and put the number more into $30 million, lower 30s, if you could give us some idea of the sensitivity of those numbers?

David L. Lamp -- Chief Executive Officer and President

Yes. The key driver for this is basically liquid -- not only liquid volume yield, but its distillate yield and it's also the amount of premium we can make. And you get -- you can use premium in two ways. You can either make more premium or you can cut the severe area in your existing reformer which improves your liquid yield and improves your capture rate. So, those are the real -- those are the things that could go wrong.

What could make it really, really good is high premium spreads, which we're predicting because of the Tier 3 gasoline and the octane shortages that's there and/or higher crude prices which improve the liquid yield benefit of it. Of course, distillate prices are always there.

Manav Gupta -- Credit Suisse -- Analyst

Thank you for taking my questions.

David L. Lamp -- Chief Executive Officer and President

You're welcome.

Operator

Thank you. Our next question comes from the line of Paul Chang with Scotiabank. Please proceed with your question.

Paul Chang -- Scotiabank -- Analyst

Hey guys, good afternoon.

David L. Lamp -- Chief Executive Officer and President

Hey, Paul.

Paul Chang -- Scotiabank -- Analyst

Dave, one of your competitor, the last several months that they did something quite interesting. They formed a JV -- joint venture in the retail that could help them, I think, in terms of maybe some margin capture in their refinery -- local refinery and also that maybe on the RIN side. Do you see any opportunity for you guys to do that?

David L. Lamp -- Chief Executive Officer and President

Well, Paul, as I think you've heard me say before, we've been evaluating investments in retail, wholesale marketing and everything. And frankly, we had -- we were close on a deal this year that we ended up not being the successful bidder on it. It would have really jump-started us into that activity. An alternative to that is some kind of joint ventures, like you mentioned. And we continue to pursue those in every direction we can find.

It really makes a lot of sense for us in the Mid-Con because of -- a lot of our material -- what we produce goes directly to Oklahoma City, Kansas City, Tulsa, all those markets are big markets for us. And we have a big penetration in each of those and we continue to look for those type of deals. That just haven't been successful yet.

Paul Chang -- Scotiabank -- Analyst

Dave, when you say that it's not successful, can you say what's the hurdle? Is it just the price or the control or what kind of issue is that?

David L. Lamp -- Chief Executive Officer and President

Well, it's a number of factors, Paul. As you know -- and it's difficult deals to do because you're combining a business that is typically a 12 to 14 multiple compared to -- we traded at what, 6.5 somewhere in that neighborhood. So, any -- the numbers that these retail businesses are going for are very high compared to our base business. So, I imagine if we did one or two of them, you'd be quickly asking why don't you spin those off because you get a higher multiple.

So, there's your circular argument and to us, if we can enhance our margin and the capture rates and capture RINs, whether -- it's not really something that's very strategic to us.

Paul Chang -- Scotiabank -- Analyst

Right, OK. And for your Fertilizer business, the current structure on the long haul do you think that this is a sustainable or desirable structure or that is better off for you to be fully consolidate and just bought back the minority interest?

David L. Lamp -- Chief Executive Officer and President

Well, personally, from running the company, it would be better to be consolidated. But it has to be accretive to our shareholders and at the current valuation that's just not the case. There is a lot of synergy.

Paul Chang -- Scotiabank -- Analyst

Let me ask in another way then. Is there any strategic reason, the current structure, I mean for forget about -- in a minute about the valuation whether it's accretive, assume that it will be. Is there any strategic reason for them to keep it as a separate entity like where they are today?

David L. Lamp -- Chief Executive Officer and President

No, I don't think so. In fact, the MLP structure has fallen out of favor. It's probably disincentive for them to be the way they are. But the GP has to make that decision and it has to be accretive to CVI for anything -- for that to occur. We saw -- I think we're in the right point of the cycle to do that right now.

Paul Chang -- Scotiabank -- Analyst

Final question from me. You gave the first quarter, the perfect guidance and also the capex number. Do you have a rough number for the full year?

David L. Lamp -- Chief Executive Officer and President

We probably have that somewhere, but Tracy has them.

Tracy D. Jackson -- Executive Vice President and Chief Financial Officer

For capex, I think I read it, 130 to 150.

David L. Lamp -- Chief Executive Officer and President

I thought he was saying the rate.

Tracy D. Jackson -- Executive Vice President and Chief Financial Officer

A rate, no. We don't do it --

Paul Chang -- Scotiabank -- Analyst

Yes, the throughput rate for the year and also your capex for the year?

David L. Lamp -- Chief Executive Officer and President

We have no other turnarounds or any other things planned on a planned basis, Paul. So, I think you can probably ramp us up on that assumption.

Paul Chang -- Scotiabank -- Analyst

Right. So the cost of you turnaround is 40-50 days. So, this will extend a little bit into the second quarter, right?

David L. Lamp -- Chief Executive Officer and President

That's correct. It will be partially in the second quarter.

Paul Chang -- Scotiabank -- Analyst

And that -- in terms of, but that seems that you capitalize the turnaround now. So, your opex on the absolute level, that shouldn't be impacted?

David L. Lamp -- Chief Executive Officer and President

Yes, it shouldn't be at all much. Your denominator is changing. So, that will --

Paul Chang -- Scotiabank -- Analyst

Right. Your unit cost will change, but on an absolute dollar since you capitalize that.

David L. Lamp -- Chief Executive Officer and President

Sure, that's true.

Paul Chang -- Scotiabank -- Analyst

Unless the expense is higher than expected or that prolong longer than expected?

David L. Lamp -- Chief Executive Officer and President

That's correct.

Paul Chang -- Scotiabank -- Analyst

Okay, will do. Thank you.

David L. Lamp -- Chief Executive Officer and President

You're welcome.

Operator

Thank you. Our next question comes from the line of Matthew Blair with Tudor Pickering Holt & Company. Please proceed with your question.

Matthew Blair -- Tudor, Pickering, Holt & Company -- Analyst

Hey. Good morning, Dave.

David L. Lamp -- Chief Executive Officer and President

Good morning.

Matthew Blair -- Tudor, Pickering, Holt & Company -- Analyst

I noticed you ran a record amount of regional shale crude. It's now more than half your slate and it definitely picked up both quarter-over-quarter and year-over-year. Could you talk about the economic uplift you see on these regional shale barrels. And also, just keeping in mind the rig count in STACK/SCOOP has declined over the past year, is there any risk to these barrels coming down for you?

David L. Lamp -- Chief Executive Officer and President

Sure. Let me take the second one first. I think I mentioned in my prepared remarks that today -- in January, we actually gathered 140. The bulk of that is of any increase we get is in the STACK/SCOOP area, specifically the SCOOP. And we've still -- I don't know that we're projecting a large increases from here. But the people we're aligned with that are direct coupled to our pipes, their production continues to maintain or go up, taking out seasonal effects.

You do get a weather effect in the winter or it gets too muddy or too snowy or something to get to the wells if your trucking it, that will impact us. But in January, we gathered 140,000. We peaked at 156,000. So, in November, 153,000 in November. So, you can see there has been a slight decline, but I almost think that's as much seasonal as anything else, and our partners are really saying they're continuing to drill. They have active rigs going and continue to do their farming activities that we enjoy.

So, as far as the second part of the question, these crudes are right in our wheelhouse. They're WTL, light barrel, and they really blend well with the heavy that we could make a cocktail with the WCS at Coffeyville that really fits that refinery well. And Wynnewood is running a pure slate of it, so, and with the WTL as a trim.

So, our strategy remains to continue to pick this up $0.50 to $1, even to $1.50 sometimes. It moves with the dynamics of the market. But that's a typical advantage we see.

Matthew Blair -- Tudor, Pickering, Holt & Company -- Analyst

Very helpful. Thanks.

David L. Lamp -- Chief Executive Officer and President

You're welcome.

Operator

Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over to management, for any closing remarks.

David L. Lamp -- Chief Executive Officer and President

Again, I'd like to thank you all for your interest in CVR Energy. Additionally, we'd like to thank our employees for their hard work, their commitment toward safety, safe, reliable and environmentally responsible operations. We look forward to reviewing our first quarter 2020 results during our next earnings call. Thank you all very much.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

Jay Finks -- Vice President of Finance & Treasurer

David L. Lamp -- Chief Executive Officer and President

Tracy D. Jackson -- Executive Vice President and Chief Financial Officer

Unidentified Participant

Neil Mehta -- Goldman Sachs -- Analyst

Manav Gupta -- Credit Suisse -- Analyst

Paul Chang -- Scotiabank -- Analyst

Matthew Blair -- Tudor, Pickering, Holt & Company -- Analyst

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