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Delek US Holdings (NYSE:DK)
Q4 2019 Earnings Call
Feb 26, 2020, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Thank you for standing by. And welcome to the Delek US 4Q earnings call. [Operator instructions] I would like to hand the conference over to your speaker today, Blake Fernandez. Thank you.

Please go ahead.

Blake Fernandez -- Senior Vice President of Investor Relations and Market Intelligence

Thank you and good morning. I would like to thank everyone for joining us on today's conference call and webcast to discuss Delek US Holdings' fourth-quarter 2019 financial results. Joining me on today's call is Uzi Yemin, our chairman, president, and CEO; Assi Ginzburg, EVP and CFO; and Louis Labella, EVP and president of Refining; as well as other members of our management team. The presentation materials used during today's call can be found on our investor relations section of the Delek US website.

As a reminder, this conference call may contain forward-looking statements as the term is defined under federal securities laws. Please see Slide 2 for the safe harbor statement. In addition to reporting financial results in accordance with generally accepted accounting principles or GAAP, we report certain non-GAAP financial results. investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results which can be found in the press release which is posted on the investor relations section of our website.

Our prepared remarks are being made assuming that the earnings press release has been reviewed, and we are covering less segment and market information that is incorporated into the fourth-quarter press release. On today's call, Assi will review financial performance, Louis will cover operations for the quarter and then Uzi will offer a few closing strategic comments. With that, I'll turn the call over to Assi.

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

Thank you Blake. Financial results were enhanced by the biodiesel tax credit that was approved by Congress retroactively for 2018 and 2019. You can see on Slide 3, on an adjusted basis for the fourth-quarter 2019, Delek US reported a net loss of $8.5 million or $0.11 per share compared to net income of $165.7 million or $2.03 per diluted share in the prior-year period. Our adjusted EBITDA was $66 million in the fourth quarter of 2018 compared to $287.4 million in the prior-year period.

I would like to point out that the 2018 portion of the BTC is reflected in adjusted results for 2018. Adjusted results this quarter included a $31.1 million benefit from the BTC for the first three quarters of 2019. However, this was partially offset by $23.9 million of after-tax headwind. These include environmental and employee expenses and operational factors, such as accelerated maintenance and the product inventory build, along with unplanned expense and repairs.

We expect many of these items to normalize in the future. Finally, we had $39 million of hedging losses in the quarter, of which approximately $17 million was unrealized. On Slide 4, we provided a cash flow waterfall. In the fourth-quarter 2019, we generated cash flow of approximately $127 million from continuing operations which includes a working capital detriment of $10 million.

Cash capital expenditure were $107 million excluding a $51.5 million contribution to Wink to Webster. In February, we contribute our 15% Wink to Webster investment totaling $145.6 million to a new JV with a Wink to Webster partner. With the strength of our combined investment, the JV successfully secured project financing. The new JV structure will benefit our financial position and results in an immediate $69 million cash distribution of previously invested capital with future expected Wink to Webster capital requirement financed at 100%.

As a reminder, we expect total capital requirement for Wink to Webster of $340 million to $380 million. Slide 5 highlights our capitalization. We ended the fourth quarter with $955 million of cash on a consolidated basis and $1.1 billion of net long-term debt. Excluding net debt to Delek Logistics of $828 million, we had a net long-term debt of approximately $284 million as of December 31, 2019.

On Slide 6, we provide first-quarter guidance. It may be helpful in modeling the company. With that, I will turn now the call over to Louis to discuss our operations.

Louis Labella -- Executive Vice President and President of Refining

Thanks Assi. During the fourth quarter, our total refining system crude oil throughput was approximately 272,000 barrels per day which reflects downtime at Krotz Springs where we elected to accelerate maintenance on the reformer. I would also point out that Big Spring sales volumes were reduced to build product inventory in advance of the turnaround in January. As shown on Slide 6, for the first-quarter 2020, we expect crude throughput to average between 245,000 and 255,000 barrels per day.

This reflects a major turnaround at Big Springs refinery. On Slide 7, I want to highlight our capital spending. Capital expenditures during the fourth quarter were $103 million compared to $106 million in the fourth quarter of 2018. Our full-year 2019 capital program was $428 million.

This is expected to decline 24% to approximately $325 million this year. This amount excludes the Wink to Webster connector where financing will be provided by the joint venture. The 2020 capital program is broken down by segments as follows: $235 million is our refining segment; $23 million is our logistics segment; $26 million is our retail segment; and $72 million at the corporate level. The Big Spring gathering system is included at the corporate level and will comprise approximately $52 million this year.

As a reminder, capex excludes JV investments like Red River and Wink to Webster. Finally, I would like to highlight that we are increasing our EBITDA forecast for the Big Spring gathering system in 2022 by $5 million to a range of $45 million to $55 million. Next, I will turn the call over to Uzi for closing comments.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Thank you Louis. And good morning everybody. Our company had strong financial performance in 2019, delivering $696 million of EBITDA and $659 million of adjusted EBITDA in an environment that -- where Midland discounts have operated. During the year, in refining, we brought online the alkylation unit at Krotz Springs.

We performed the turnaround and completed vacuum tower work at El Dorado. This facility is now positioned to run higher utilization rates with improved distillate yield and has bear crude optionality. In retail, we continue to high grade our portfolio through select asset sales while adding new stores to the market. Renewable continues to be a growth area where we acquired our third biodiesel plant in October.

This business tends to benefit from the recent passage of the biodiesel tax credit which was extended through 2022. Moving to our core focus. The midstream growth projects including Wink to Webster, Red River expansion and Big Spring gathering system, should enhance performance over the coming years which -- while providing more stability to our earnings system -- I'm sorry, earnings stream. Over time, we feel this should be rewarded through a higher valuation multiple.

As we grow the midstream, we're looking to simplify the capital structure of DKL, along with potential asset drop-down opportunities from the sponsor, DK. As shown on Slide 8, cash return to shareholders remain a priority. In 2019, we repurchased $178 million of our stock. Our share count has been reduced by 17% from the peak in the second quarter of 2018.

Our board of directors has approved a 3.3% increase in our regular quarterly dividend from the third-quarter 2019 level. This marks our seventh consecutive increase since the fiscal of 2018. Finally, I'd like to be a little personal here and thank my dear friend Assi for serving the company for the last 15 years as he has been a huge asset to the company and to myself, as he has elected to move back to Israel to be with his family. As we all know, they are already in Israel.

And the company couldn't be what it is without Assi. So I'd like to wish him good luck. With that, I'd like to open the call for questions.

Questions & Answers:


Operator

[Operator instructions] Your first question comes from the line of Silvio Micheloto of Mizuho. Your line is open.

Paul Sankey -- Mizuho Securities -- Analyst

Hi. It's Paul Sankey here from Mizuho. We bid you, not for the first time, Assi all the best and many thanks for everything you've done over the years. Uzi, can you talk a bit about the retail sector and the plans that you have there? You mentioned that you sold some stations and added some.

But I think in the current environment, people are very interested by your exposure to retail. Could you talk a little bit more about that and where we go from here? Thanks.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Yeah. Absolutely, yes. Good morning Paul.

Paul Sankey -- Mizuho Securities -- Analyst

Hi.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

I guess obviously, retail for us is something that we have done for years. At the same time, we weren't shy to extract value out of retail. As we all know, our EBITDA from retail is around $40 million. And what we are doing is that we divest some stores here and there, collect the cash and then take that cash and build the future stores.

As we speak, we are -- we have two stores under construction and two more are coming later next year. Our plan to convert the old stores and divest them and make them -- and invest in the big stores which is obviously part of our cash flow. So I wouldn't be surprised to see that EBITDA continue to grow as the stores that we are building are showing probably return -- then only few of them return of between 25% to 30%. So if we look at the history, don't be surprised that over the next two, three years, the EBITDA of these -- of the retail will grow to $50 million, $60 million, $70 million.

Paul Sankey -- Mizuho Securities -- Analyst

That's helpful. Thanks Uzi. Secondly, you had some -- well, you had some hedging losses in the quarter. Can you talk about the current market environment as you see it? And anything that you might be thinking about in terms of hedging one way or the other? Thanks a lot Uzi.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Yes. Hedging obviously is a part of our mark tool. If you look at -- we had a hedging loss last quarter. The -- some of it will reverse itself in the first quarter, that's perfectly fine.

We look at it on a regular basis. If you look at what happened last year, second quarter, we had a big hedging gain. And this time, we had a hedging loss because of different things that we did including inventory. I want to be clear, Paul.

I read many notes that's saying that Delek has a miss and we had anywhere between $0.08 to $0.38. However, the actual number, the GAAP number of Delek in the fourth quarter was $0.44 positive. And when you look at GAAP, by the end of the day, it all reflects itself in the cash. And I saw a couple of notes asking about the cash situation.

Well, we can call it onetime. We can call it nonrecurring. We can call it whatever we want, but cash is cash. And that -- the $0.44 actual GAAP number in the fourth quarter reflects itself in the cash situation including the hedging.

Paul Sankey -- Mizuho Securities -- Analyst

OK. And then the thing finally for me on the market. Well, I thought that was part of the question, essentially. But how do you see the market developing over the course of 2020? Thanks.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Well, I wasn't in the camp or we weren't in the camp of IMO -- would be a great benefit. We -- I don't think that -- we don't think that IMO is here to stay. And at the same time, we see several incidents in several refineries and gasoline market is pretty strong so far for the year. So it depends on how quickly these facilities can come back to play.

And also, if the VGO blending continues, then we may have a good summer ahead of us in terms of gasoline.

Paul Sankey -- Mizuho Securities -- Analyst

Thank you.

Operator

Your next question comes from the line of Manav Gupta of Credit Suisse. Your line is open.

Manav Gupta -- Credit Suisse -- Analyst

Hey. First of all, congrats Assi for all that you've done for Delek. My question relates to Slide 7. Uzi or Assi, whoever wants to address this, your capex expenditure is showing us $428 million in '19 versus $325 million in 2020 which is about a 24% decline, but this doesn't include the JV spending.

Can you give us the numbers with the JV spending because a major portion of the decline will happen in the JV spending? So I'm trying to understand apples to apples, '19 versus '20 included with JV spending, what are the numbers?

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

So if you look at 2019, we have spent $428 million. In addition to that, to Wink to Webster, roughly $75 million in that period. When you look at 2020, we have $325 million. But at this time, we will have seen $50 million from Wink to Webster.

So that $325 million is actually going to be $275 million because we are receiving $50 million because we closed the project financing. So from a cash flow perspective, this year is a much I would say lighter on money going out the door.

Manav Gupta -- Credit Suisse -- Analyst

Perfect. So that's what I want to make sure. I understand that point. The second point, Assi and Uzi -- Uzi more, you talked about El Dorado.

Last quarter, we understood there was a turnaround. Slightly disappointed to see the gross margin this quarter. El Dorado is a much better asset than a subpar $5 gross margin. Can you help us understand what happened at El Dorado and why it won't happen going ahead?

Louis Labella -- Executive Vice President and President of Refining

Yes. So in El Dorado, we were still ramping up on during the fourth quarter and getting -- coming out of that work on the vacuum tower. That is running on some net debt inventory. So we are in shape.

The tower is still performing well, where our diesel yield is still where as expected and what we predicted and we're ready to run the barrels in 2020.

Manav Gupta -- Credit Suisse -- Analyst

Thanks guys. Thanks for taking my questions.

Louis Labella -- Executive Vice President and President of Refining

Thank you Manav.

Operator

Your next question comes from the line of Brad Heffern of RBC. Your line is open.

Brad Heffern -- RBC Capital Markets -- Analyst

Hey. Good morning everyone. I guess in the release and the prepared comments, you talked about simplifying the capital structure of the MLP. I assume that means some sort of IER conversion.

But can you put any more color around that and then also talk about any time line for the drops?

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

So as you know, we've been building at Delek, a large gathering system that we feel that as it mature, the right place for that system, it needs to be at the DKL -- part of the DKL business model. We wanted to achieve that, together with a potential idea of simplification. And the idea was to do it throughout 2020. And we are looking at the market, making sure that they will support the transaction.

And we are also preparing the DKL balance sheet to do it. So I would say it's a 2020 target date.

Brad Heffern -- RBC Capital Markets -- Analyst

OK. Thank you. And then I guess just on cash returns to the shareholders. Obviously, you've increased the dividend I think seven out of eight quarters now.

The yields at close to 5%. Are you at the point where you think it's competitive and the dividend's in the right place or should we expect to continue increases? And then I noticed that you didn't give a guidance for repurchases in the first quarter, so is that program becoming more -- less formalized at this point?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Well, we obviously want to continue to return the excess cash flow to shareholders. And in the upcoming quarters, we have a big amount of cash coming between the BTC refund which is $80-something million. The money that we already got that is not the balance sheet from the refinance of the -- all the project financing and also the tax refund that is showing up. So we will see how the cash shape -- shapes up.

But I don't see any reason why your dividend, we won't continue to be very competitive.

Brad Heffern -- RBC Capital Markets -- Analyst

Thank you.

Operator

Your next question comes from the line of Benny Wong of Morgan Stanley. Your line is open.

Benny Wong -- Morgan Stanley -- Analyst

Hey. Good morning guys. Thanks for taking my question. My first question is around Big Spring.

Obviously, you guys took out the guidance there of your outlook, and you guys are spending about $50 million there. Just wondering how much more runway is there to grow that business and what are the factors you're thinking are balancing to regulate the potential for growing faster there?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Well, it's just a matter of returns. We have a hurdle of around 20% for the -- for this type of business. And there is -- if you look at -- Ben, if you look at the stats from a rig standpoint, you see that Howard County and Martin County continued to grow despite the fact that other counties are declining. And as you know, we are in Howard County and Martin County.

So if we meet the 20% threshold which you will start seeing the benefit this quarter, but mainly next year, then we will continue to look into that. Our situation is that we continue to produce cash, and we are -- despite what market calls miss, cash is coming in. So for us, it's just meeting the hurdle of at least 20% in that area and also balancing it with other needs.

Benny Wong -- Morgan Stanley -- Analyst

Understood. Appreciate those thoughts, Uzi. And my next question is more for you, if I may. I was just wondering if you're able to share some thoughts in terms of your potential role with Delek going forward.

As I understand, it looks like your contract might be coming up later this year. I think there's many of us in the investment community that obviously don't want to see you go anywhere, but just curious in terms of how you're thinking about the future and if there's been any preliminary conversations or understanding between you and the company.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Not only prem, we are in discussions. And the company has -- or the board has expressed desire for me to stay. Obviously, I'm still young and enjoy what I do. So I don't see any reason to believe that we won't extend that agreement.

We usually do it for three years, and I don't see any reason why it won't happen this time again.

Benny Wong -- Morgan Stanley -- Analyst

That's great to hear. Thanks Uzi.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Thanks Benny.

Operator

Your next question comes from the line of Neil Mehta of Goldman Sachs. Your line is open. Neil Mehta your line is open.

Neil Mehta -- Goldman Sachs -- Analyst

Hey. Thanks. Thanks so much. Appreciate you guys taking the time.

Assi, I guess the first question is for you which is, can you talk a little bit about the CFO transition? We're going to miss you a ton here. And the decision behind that? And then, Uzi, as you think about backfilling the CFO role and an important lieutenant for you, how do you think about the characteristics we'll want in that seat?

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

Sure. So after 15 years with Delek, I have made a decision to go back and be with my family in Israel. As you know, I tried it before, but then I always -- Uzi always was able to convince me to come here and support the company. But as I see my family grow up and I'm away from them, I decided that I want to be close to home.

And this was the only driver for me doing it. And I will let Uzi discuss the -- what's the capabilities and what -- how the overall will look like.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Well obviously Assi has been with us for a long time, and it's painful for me on one hand, but I'm very happy for him that he's joining his family. I know it's hard to commute. And for me, it's something that is sad, personally, because I'll miss him, but I'm glad for his decision. In terms of the role, as we all know, we -- CFO is a very important role.

We have several very, very, very good candidates that we are going to finalize it over hopefully over the next three, four weeks, and we'll notify the market. But these candidates, some of them are very well-known to you guys.

Neil Mehta -- Goldman Sachs -- Analyst

Great. Well, congratulations Assi. I'm looking forward to that update, Uzi. The follow-up question is just on the macro.

And in particular, Midland has traded decently above WTI now for a sustained period of time, and that's with Big Spring currently down for turnaround. And I guess, Uzi, the concern would be as Big Spring comes up, does that continue to create a further bid and inversion of that Midland differential? So just if you could talk through the crude flows and the different moving pieces of supply demand as we think about that Midland TI differential. And then if you want to layer onto that, your views on your ability to access different types of crude given the investments that you have made in projects like Red River to play different arbitrages against each other.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

That's a great question. It has several components. I'll let Avigal, who deals with that every day, to take it.

Avigal Soreq -- Executive Vice President, Chief Commercial Officer

Hey Neil. Good morning. How are you?

Neil Mehta -- Goldman Sachs -- Analyst

Good. Thank you.

Avigal Soreq -- Executive Vice President, Chief Commercial Officer

So we've all seen Midland at premium to WTI. And over time, we find it hard to believe that the source of the build is going to be more expensive than the clearing point. So we believe that at some point, something fundamental going to make the market change. Obviously, we have all seen that coming.

We saw the announcement of the new pipe. It's not supplied to anyone that Midland is being credit premium, and we were ready for that with the Red River investment exactly to diversify our crude. So we -- all of that was well-known since we all saw gear coming, we all saw EPIC and also W to W and that premium is well expected. And we have lined up other alternatives for the second half of 2020.

Louis Labella -- Executive Vice President and President of Refining

Neil, just to remind you the expansion in the second half of the year is about 65,000 barrels a day. So that will be incremental access in the second half through Red River.

Neil Mehta -- Goldman Sachs -- Analyst

Great.

Operator

Your next question comes from the line of Theresa Chen of Barclays. Your line is open.

Theresa Chen -- Barclays -- Analyst

Good morning. Also like to offer my congratulations to Assi on your retirement, second time around. Thank you for all of your effort and support over the years. Maybe a follow-up on Neil's question around the Midland diff first.

So I believe some of this pressure has been a result of line fill on Gray Oak and EPIC has been reported in the news. How long do you think this is going to go on for? And when do you think we might see some easing in terms just from that alone?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Well, I guess pinning down the exact timing, I'm not sure I'm smart enough to give you that. However, I want to be clear. We see that $1.10, $1.20 and we, as a company, are already doing -- taking steps to change our crude fleet. So if we are doing that, I'm sure others do the same thing, especially in light of the fact that there's a lot of -- there are a lot of barrels still flowing between Midland and Cushing on several pipelines.

So while I don't know how long this can stay, I don't believe that the source of the barrel can be more expensive than the destination for an extensive period of time. They're just not economic. Something would happen, and somebody will do something different, similar to what we are talking about converting these wells. Also, some people will do what we basically did.

We canceled. We had a pipeline, we handle pipeline, 35,000 barrels. We canceled that T&D. So more and more people will just don't ship what they used to ship if this stays for a while.

Though, if I need to guess, this is a few months situation, but I'm not smart enough to pin down the exact time.

Theresa Chen -- Barclays -- Analyst

Got it. And then switching gears a bit. Touching on the earlier comments about the detailed drop down and looking at the markets to support the transaction. Just with the AMZ at 1.84 today, what are your financing options and assumptions, Uzi? And would you be open to go into the private markets perhaps for more economic financing?

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

First, I will start by saying that a few days ago, the transaction looked much better for both companies. And the changes in the MLP market, last few days, impacting some of the economics in this transaction. With that being said, the Delek Logistics' high-yield bond is trading very well, above par. In addition to that, our revolver is still unfunded by over $250 million.

So we have basically, just for a drop, we have the capacity on hand to do it without utilizing the market. And as Delek, we are always happy to accept Delek Logistics stocks as a mean of a funding, especially when you look at the 12% yield that they are currently providing. And we like those returns. If the market will improve, I see less likelihood of us going to the private market.

But as I mentioned, more -- probably Delek would accept those shares as a mean of payment.

Theresa Chen -- Barclays -- Analyst

Got it. And with the cash portion of the proceeds, since it sounds like a portion or all of this could be done with debt, what are the parents' plans for that cash?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Well, we think that we want to maintain the cash level of our company. We feel comfortable. I know that you guys need to look at the stock price. The No.

1 thing for us is to continue to provide cash so we can continue to implement our strategic plan. So we will take the cash and then look at the different ways to invest that, either through places to generate more EBITDA or return cash to shareholders.

Theresa Chen -- Barclays -- Analyst

Thank you.

Operator

Your next question comes from the line of Phil Gresh of JP Morgan. Your line is open.

Phil Gresh -- J.P. Morgan -- Analyst

Yes. Hi good morning. Just a follow up to the previous question and thinking about the cash you'd be getting from the drops. How do you think about consolidated and parent financial leverage in the current environment with cracks where they are, tight Midland differential? And what level of kind of net leverage especially on a consolidated basis you're comfortable with?

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

So on a consolidated basis, we have roughly $1.1 billion of debt, as you know. And we finished the year with $700 million of EBITDA, so it's a one and a half times leverage. I think -- and we saw other companies in the past -- energy companies at even two, two and a half times leverage. If you look at the -- at our bond, it's trading very, very well.

And we think that at these levels of two, two and a half times leverage, the company is in a very good shape financially. I would like to mention that we need to remember one thing, Delek invested hundreds of millions of dollars in Wink to Webster's end gathering businesses over the last two and a half years. All of the debt is sitting on our books, and none of the EBITDA is there yet. So when we think about Delek's ability to produce EBITDA, when we look at 2021, we expect additional of over $100 million of EBITDA coming from those assets.

So I think right now, we're in the transition year that we have been penalized for making the investment, but we don't see the EBITDA. In addition to that, as Uzi mentioned, during Q1, we received already back net $50 million from the project financing because we overinvested. And between Q1 and Q2, we expect a BTC and tax refund of additionally $150 million. Those three together will take Delek US at the sole -- at the parent level to be in a net cash position and that's the position we really like to be.

Phil Gresh -- J.P. Morgan -- Analyst

Thanks for all those details. Actually, that's my follow-up question. With this JV financing structure, how do we think about -- you've given a very clear color on kind of the cash in, cash out in 2020. But once this project comes on stream, without getting too detailed in the modeling, maybe you could just give us some color about how that financing structure impacts what we actually see in the financial statement.

Thanks.

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

So as you know, we closed the project financing. The interest on the project financing is extremely low. It's a LIBOR plus one and a half, and we have good opportunity to lock the LIBOR and the treasuries at a very low level at this point. We're probably going to hedge 75% of it.

The way it's going to show up on the financials, they will be exactly like Red River. So it will be net of the interest cost at the project level. So if net-net, we expect, so let's say, 20% return on the projects which is a $70 million EBITDA from the project, we will have to pay roughly $10 million a year of interest costs. So the distribution will be around $60 million a year, assuming a 20% return.

So that's what -- the way we see it on the P&L. And then the debt will not be on the balance sheet and what you'll see is investment in the equity method similar to Red River. I will say one more thing. We are not anticipating any amortization of debt in the first few years of the project.

So all of the cash flow will go to Delek.

Phil Gresh -- J.P. Morgan -- Analyst

OK. Great. Thanks.

Operator

Your next question comes from the line of Roger Read of Wells Fargo. Your line is open.

Roger Read -- Wells Fargo Securities -- Analyst

Yeah. Thanks good morning. And Assi, let me say thanks for everything over the years. Congratulations to you for moving on and all the best in -- back in Israel.

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

Thank you Roger.

Roger Read -- Wells Fargo Securities -- Analyst

A couple of questions. One, just to follow up on what was a pretty major topic on the last call, the upgrades at El Dorado. Just curious now that you've had I guess probably by this point, a full quarter to run it, if not a calendar quarter, how that's performing. Is it in line with your expectations, better than? And are there some other opportunities we should be thinking about across the rest of the units where you might be able to tweak some things this year?

Louis Labella -- Executive Vice President and President of Refining

Yes, Roger. So looking at the unit, and you're exactly right, looking at the unit, it is still producing as we expected with the diesel yield as well as making spec asphalt product right off the bottom of the tower. We look for all opportunities now of a variety of different crews to try to optimize the unit to make the most money that we can going forward. So we've been working really strong with commercial and seeing what's out there available that's around us that we can bring into the refinery and capture that.

Blake Fernandez -- Senior Vice President of Investor Relations and Market Intelligence

And Roger, I would just add. I think Louis mentioned it earlier. But in the fourth quarter, in particular, the facility was ramping back up in October which is when crack spreads were strongest during the quarter. So we weren't able to really capture the benefit of that.

And so the facility was really online contributing in November, December when cracks had gotten weaker. So we would expect a better contribution into 1Q, 2Q, etc.

Roger Read -- Wells Fargo Securities -- Analyst

Great. Thanks for that. And then coming back to some of the discussion earlier about switching crews that you're running backing off, maybe a mispriced Midland barrel toward something at Cushing or even local. We've heard previously that it's better to run a pure Cushing barrel than what's sometimes called a Franken barrel out of -- excuse me, pure barrel out of Midland versus the Franken barrel out of Cushing.

So I'm just curious as you changed the crudes in the units, do we have to think about any sort of impacts on yields that might be a little bit more on the negative side? In other words, we have to see an even wider shift in crude just to get a major change in crude feedstock.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

It depends on the -- Roger, it depends on the configuration of every unit. But there is -- to what you say, there is a merit, and we need to -- every LP, when we change crude slate, we look at the quality of the barrel at the same time. However, just remember that we -- because of some -- because of our gathering system and the way we are doing our stuff, we can maintain some of the quality of the barrel. So it depends on the specific refinery and the specific situation at the time.

I'm going to tell you though that under a scenario of $1, $1.20, there's already incentive for us to change to Cushing barrel versus Midland barrel.

Roger Read -- Wells Fargo Securities -- Analyst

Yeah. That's what I would have expected. One last follow up just because you mentioned in the opening remarks on the renewables. And I know you all have made some acquisitions as well as some investments.

How do you see -- as you mentioned earlier about retail EBITDA growth in the coming years, how do you see renewables growth, ex the tax credit because we'll never know if that's going to get renewed from time to time, but just the sort of underlying part of that business, maybe volumes as well as an EBITDA thought process?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Well, first, it was renewed until 2022, that's just the fact. Second, biodiesel is an opening for us to look at other opportunities. We don't want to be in a situation that we invest in returns of 10%, 12%. If you remember, we -- as we were controlling Alon, Alon did the renewable diesel, not biodiesel in California, and then we sold it.

So it depends on the market, it depends on the feedstock. This is an area that we need to look at. I want to be honest, though. We don't believe always in the food-based energy.

So that's something that we just need to remember.

Roger Read -- Wells Fargo Securities -- Analyst

That's fair. Thank you.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Thanks Roger.

Operator

Your next question comes from the line of Paul Cheng of Scotiabank. Your line is open.

Paul Cheng -- Scotiabank --Analyst

Hey guys. Good morning.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Good morning Paul.

Paul Cheng -- Scotiabank --Analyst

Thank you Uzi. Assi, I just want to say congratulations for your second retirement and wish you the best of luck and have fun in Israel. Thank you for all the help over the years. We'll miss you.

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

Thank you Paul.

Paul Cheng -- Scotiabank --Analyst

Just a couple of quick questions. On the financing side, if I get you correctly that the rest of the need for the Webster project is all going to be project financing, right? So you're saying that the first several years that you're not going to see any debt repayment, when the debt -- the principal is going to start to be repaid? And when that it will be fully paid off?

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

So as you mentioned, first, going forward, all of the investments will be coming from the -- paid by the, basically, the JV financing debt because we already put 100% of the equity needs. The way the project work, we put the first 20% of the equity -- of the need, and then the banks put all the rest. The deal that we have is basically a 3-year deal. And usually, after that, you're doing a bond that is also very likely amortized mostly with the balloon.

So as I mentioned, this will turn eventually into a bond, most likely investment grade bond and we will see very light amortization on it in the next few years.

Paul Cheng -- Scotiabank --Analyst

I see. So that if you don't turn into a bond, then after you come on stream after three years, that start to have the repayment, then you will turn it into bond most likely by then?

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

Yeah. It's a project finance. It doesn't -- it's not a permanent finance. It's there for the construction, that's another two years.

And then after that, look at the shippers of this pipeline, Exxon, Plains, Delek, MPLX. So with the quality shippers, we don't see an issue of turning it into a bond.

Paul Cheng -- Scotiabank --Analyst

OK. And that, with the hedging position, can you tell us that what product and what warning that you have hedged in the first quarter and the second quarter?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Paul, I don't think -- go ahead there, Blake.

Blake Fernandez -- Senior Vice President of Investor Relations and Market Intelligence

No. Paul, we have a lot of different positions, so we really don't disclose any of the details around it. So we -- unfortunately, we're just not going to get into that level of detail on it.

Paul Cheng -- Scotiabank --Analyst

OK. That's fine. And for the Big Spring, I assume that the turnaround is a full plant turnaround?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

That is correct, will be completed sometime early March.

Paul Cheng -- Scotiabank --Analyst

OK. And then for the renewable diesel, you say -- is the part that's being sold all in California?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

I'm sorry?

Paul Cheng -- Scotiabank --Analyst

Is the renewable diesel that you guys produce, is it all being sold in California?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

No. Nothing is being sold in California. Nothing.

Paul Cheng -- Scotiabank --Analyst

Is that a opportunity given that in California that that's another -- the low carbon tax credit?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Well, we are producing biodiesel and not renewable diesel. So what we are doing is we're blending all these gallons into our -- into the diesel that we sell, and that's the reason we are not splitting. We don't split the -- most people split the dollar, 50-50. We don't split it.

That's the reason you see the full benefit of $80 million in the quarter.

Paul Cheng -- Scotiabank --Analyst

I see. OK, will do. Thank you.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Jason Gabelman of Cowen. Your line is open.

Jason Gabelman -- Cowen and Company -- Analyst

Yeah. Hi. Morning. I just wanted to go back to the cash flow for a second.

I think you mentioned there was a $15 million inflow to offset the equity payments to Wink to Webster, then there's going to be an additional amount that comes in and then an additional call it $70 million from the blender's tax credit. So how much is that all together coming in, in terms of cash flow outside of normal operations?

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

So between Q1 and Q2, net, we will receive $50 million, 5, 0, from the Wink to Webster financing. We will receive $98 million of BTC, and we will receive $48 million of tax refunds. When you combine them all, it's $196 million that we expect to receive between Q1 and Q2. Most of it will be in Q2.

Jason Gabelman -- Cowen and Company -- Analyst

OK. All right. Was there any other onetime cash inflows in 4Q that you could call out?

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

You saw there were some tax benefits of over $30 million as a result of the fact that we put in service toward the end of the year, a big part of the gathering system that will start producing cash. So you'll see in the cash flow, when you look at it, there's I think $36 million of tax inflows in Q4.

Blake Fernandez -- Senior Vice President of Investor Relations and Market Intelligence

It's deferred tax Jason.

Jason Gabelman -- Cowen and Company -- Analyst

Got it. OK. And then just on this biodiesel acquisition that you made, is there any material earnings impact that you expect in 1Q as a result?

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Well, the biodiesel in general. We said that we were going to -- with the dollar now in place, the three plants are going to be between -- around $10 million, if you will, for the year.

Jason Gabelman -- Cowen and Company -- Analyst

Got it. Great. Thanks a lot.

Operator

Ladies and gentlemen, we have come to the end of our time, and I will turn it back to the management for closing remarks.

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Well, thank you everybody for listening to us this morning. I'd like to thank my friends around the table. I'd like to thank the board of directors for their supporting our -- their belief us. And also, I'd like to thank all investors for their interest in us.

But mainly, I'd like to thank our employees who make this company what it is. Have a great day. We'll talk to you soon.

Operator

[Operator signoff]

Duration: 49 minutes

Call participants:

Blake Fernandez -- Senior Vice President of Investor Relations and Market Intelligence

Assi Ginzburg -- Executive Vice President and Chief Financial Officer

Louis Labella -- Executive Vice President and President of Refining

Uzi Yemin -- Chairman, President, and Chief Executive Officer

Paul Sankey -- Mizuho Securities -- Analyst

Manav Gupta -- Credit Suisse -- Analyst

Brad Heffern -- RBC Capital Markets -- Analyst

Benny Wong -- Morgan Stanley -- Analyst

Neil Mehta -- Goldman Sachs -- Analyst

Avigal Soreq -- Executive Vice President, Chief Commercial Officer

Theresa Chen -- Barclays -- Analyst

Phil Gresh -- J.P. Morgan -- Analyst

Roger Read -- Wells Fargo Securities -- Analyst

Paul Cheng -- Scotiabank --Analyst

Jason Gabelman -- Cowen and Company -- Analyst

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