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Executives

Jay Finks – Director, Finance

John Lipinski – CEO and President

Susan Ball – CFO and Treasurer

Analysts

Arjun Murti – Goldman Sachs

Chi Chow – Macquarie Capital Markets

Gregg Brody – JPMorgan

CVR Energy, Inc. (CVI) Q4 2012 Earnings Call March 12, 2013 4:30 PM ET

Operator

Greetings and welcome to the CVR Energy Fourth Quarter 2012 Earnings 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, Director of Finance of CVR Energy. Thank you, sir. Please begin.

Jay Finks

Thanks, Dan. Good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR Energy year end 2012 earnings call. With me are Jack Lipinski, our Chief Executive Officer; Susan Ball, our Chief Financial Officer; and Stan Riemann, our Chief Operating Officer.

Prior to discussing our 2012 fourth quarter and full year 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 believes, anticipates, plans, expects and similar expressions are identified – are intended to identify forward-looking statements. You’re 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.

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 2012 fourth quarter and full year earnings release that we filed with the SEC this morning prior to the open of the market.

With that said, I’ll turn the call over to Jack Lipinski, our Chief Executive Officer. Jack?

John Lipinski

Jay, thank you, and good afternoon, everyone and thanks for joining our earnings call. Hopefully, you’ve had the opportunity to hear the UAN CVR Partners fertilizer call back on the 28th, hosted by Byron Kelley, and our earlier call this morning on CVR Refining, LP. For those of you that have heard those two calls, right now you’re going to hear a lot of the same information we both spoke about, but here we’re discussing CVR Energy now, the holding company that owns both LPs.

I’ll provide a brief recap of the fourth quarter and full year results and some operational impacts. Susan Ball, our Chief Financial Officer, will then provide more detail around the numbers reported this morning, and I’ll finish with some closing remarks.

Before I get to the results, I’d like to talk about a few key milestones we’ve achieved. In October, we issued $500 million of new notes to refinance our first lien senior secured notes, which were fully regained in November. In December, we entered into an amended and restated ABL credit facility for the company. On January 23, we closed on our initial public offering of CVR Refining, LP. This was the largest IPO of the master limited partnership to date.

I’d like to take the time to thank all our employees for the countless hours and tremendous effort they spent and – in the months prior to our IPO. In connection with the closing of CVR Refining, LP IPO, we regained our second lien senior secured notes.

I’m proud to report strong earnings in both the quarter and the full year. For the fourth quarter, consolidated adjusted net income was $103.8 million or $1.20 per diluted share as compared to $29.5 million or $0.34 per diluted share in the fourth quarter of 2011. For the full year 2012, our adjusted net income was $660.1 million or $7.55 per diluted share as compared to $345.7 million or $3.94 diluted share during the full year 2011. Like prior quarters, we adjust net income for the impacts of FIFO, major turnaround expenses, the impact of unrealized derivative gains or losses and other one-time expenses. I’ll let Susan more broadly discuss the adjustments to net income in her remarks.

Let me talk to each of our business segments. First, the petroleum business. In the fourth quarter 2012, the NYMEX 2-1-1 crack spread averaged $33.32 a barrel with the Brent WTI differential averaging $22.09 over the quarter. For the year, the NYMEX 2-1-1 crack spread averaged $30.75 per barrel with the Brent WTI spread averaging $17.35.

In the fourth quarter, we recognized weaker seasonal product basis in our area. Our area is Group 3 of PADD II. The product basis in the group was negative $1.13 per barrel as compared to a positive $0.05 per barrel in the same quarter last year. Our overall realized refining margin adjusted for FIFO was $25.93 per barrel as compared to $11.05 in the same quarter last year. We completed a major scheduled turnaround at our Wynnewood refinery in December. During the quarter, our turnaround expenses totaled approximately $89 million. The total cost of the turnaround at Wynnewood was $102.5 million.

Overall our Petroleum segment incurred approximately $124 million in turnaround expenses for the entire year, which include – which included the completion of the Coffeyville bifurcated turnaround in the first quarter of 2012. In the fourth quarter, we ran 147,815 barrels a day of crude. It was a little over a 124,500 barrels a day at Coffeyville and approximately 23,250 barrels a day at Wynnewood. Our actual results were just below the low end of the guidance I provided in on – in my last earnings call.

Like most mid-continent refiners, we continue to benefit from attractively priced crudes. At Coffeyville, the purchased crude discounted WTI for the fourth quarter was $1.74 per barrel as compared to a $1.92 a barrel in the fourth quarter of 2011. For the full year 2012, Coffeyville purchased crude discounted WTI was $2.56 per barrel as compared to $3.95 a barrel in 2011.

And our Wynnewood refinery our purchased crude – we experienced a purchased crude premium in the fourth quarter of $4.05 per barrel. That’s somewhat of an aberration because of the low crude rates and the turnaround. For the entire year, Wynnewood’s purchased crude discount was $1.38 per barrel.

Our gathering system continues to perform very well. We gathered over 50,000 barrels per day into the quarter, and average 46,000 barrels a day for the entire year. Let me talk a little bit about our Nitrogen Fertilizer business. On January 24, 2013, CVR Partners declared a fourth quarter distribution of 19.2 cents per common unit. CVR Energy owns approximately 70% of the common units of CVR Partners and therefore receives a proportional amount of distributions from CVR Partners.

The CVR Partners fourth quarter adjusted EBITDA was $27.1 million as compared to $48.4 million in the prior year. During the fourth quarter, CVR Partners completed their scheduled turnaround, which included installation of critical assets and tie-ins related to the UAN expansion project. The UAN expansion project was completed in the first quarter this year and is currently operating within targeted operating rates, we’re actually running over 2,800 tons a day. So it’s pretty much come on line and is operating pretty much as we expected.

Now, let me turn the call over to Susan to talk about the financials, and then I’ll have some closing remarks. Susan?

Susan Ball

Thank you, Jack, and good afternoon to everyone. As Jack previously mentioned, we posted strong quarterly and annual financial results. Our net income was $40.2 million in the fourth quarter of 2012 as compared to net income of $65.9 million in the fourth quarter of last year. For the full year 2012, our net income was $378.6 million as compared to $345.8 million in 2011.

Adjusted net income for the quarter was $103.8 million as compared to $29.5 million in the fourth quarter 2011. For the full year 2012, adjusted net income was $660.1 million as compared to $345.7 million in 2011.

As mentioned on our previous calls, we believe that adjusted net income is a meaningful metric for analyzing our performance, as it eliminates the impact of unusual accounting impact inherent in our business and in unique events, provides more transparency for a better comparison to market expectations. Our adjustments in calculating adjusted net income are the impact of the FIFO inventory accounting adjustment, unrealized gains or losses on derivatives, turnaround expenses, share-based compensation, loss on extinguishment of debt, expenses associated with certain proxy matters and integration expenses associated with our December 2011 acquisition of the Wynnewood refinery.

Briefly, I’ll walk you through the adjustments to adjusted net income for the fourth quarter of 2012. The first adjustment is related to the increase – decrease in the inventory values that’s realized under our FIFO inventory accounting method. In the fourth quarter 2012, we realized an unfavorable FIFO impact of $7.9 million after-tax or $0.09 per share. Secondly, we had an adjustment to net income on an unrealized derivative gain of $29.8 million after-tax or $0.34 per diluted share.

Third, we had an adjustment for the turnaround expenses, net of tax of $56.1 million or $0.65 per share. We also had other adjustments including share-based compensation expense of $6.2 million after-tax or $0.07 per share and adjustment per loss on extinguishment of debt associated with the redemption of our first lien notes of $22.8 million or $0.26 per share and an adjustment for expenses associated with the acquisition of the Wynnewood refinery of $0.4 million after-tax equating to $0.01 per share. This represents continued integration costs.

Turning specifically to the Petroleum segment, crude throughputs for both refineries were 169,000, 356 barrels per day in 2012 versus 103,000 to 102 barrels per day in 2011. In the fourth quarter of 2012, crude throughputs were 147,815 barrels per day as compared to 93,705 barrels per day in 2011. On a realized refining margin basis, we posted a strong quarterly result of $25.93 per crude oil throughput barrel, which is adjusted for the unfavorable FIFO impact as compared to $11.05 per barrel in the fourth quarter of 2011, which also is adjusted.

At the refinery level, Coffeyville’s refining margin adjusted for FIFO impact was $28.08 per barrel in the fourth quarter of 2012 as compared to $12.19 per barrel in the same period a year ago. Wynnewood’s refining margin adjusted for FIFO impact was $14.67 per barrel in the fourth quarter of this year. For the fourth quarter, we had approximately 5.9 million barrels hedged, which comprised – which was comprised of gasoline, heating oil and 2-1-1 hedges. A realized hedge loss for the quarter on these hedges was $57.1 million as compared to a gain a year ago of $11.01 million.

Turning now to the Fertilizer segment, our Fertilizer segment reported another solid quarter and full year results. Adjusted EBITDA for the quarter was $27.1 million as compared to $48.4 million in the fourth quarter of 2011. The full year 2012 adjusted EBITDA was $148.2 million versus $162.6 million in 2011. As Jack mentioned earlier, the fertilizer business completed – the fertilizer facility completed their major scheduled turnaround in the fourth quarter, which severely impacted Q4 results for 2012.

Moving to capital expenditures, the fourth quarter 2012 totaled $67.1 million consolidated CapEx versus $44.6 million for the same period in 2011. Total 2012 capital spending was $212.2 million, as compared to $91.2 million in 2011. The majority of increase year-over-year was the impact of the UAN expansion project. Our total 2013 capital spending forecast is expected to be approximately $285 million, of which $232 million is estimated for the petroleum business and 45 – $49 million estimated for the fertilizer business. Petroleum business and the nitrogen business estimated capital expenditures are subject to change due to unanticipated increases in the costs of – and completion time of our capital projects.

We ended the year with cash and cash equivalents of $896 million or $768.2 million excluding $127.8 million at CVR Partners. Under our $400 million ABL facility, we had $28 million issued letters of credit. No short-term borrowings and availability of $372 million. Total debt at year end was $898.2 million.

On December 20, 2012, we entered into an amended and restated ABL credit facility agreement, which provides CVR Refining, LP with borrowing capacity of up to $400 million. It also permits an increase in borrowings of up to $200 million, subject to additional lender commitments and other conditions.

As Jack mentioned earlier, we completed the initial public offering with CVR Refining, LP on January 23, 2013, as the variable rate distribution MLP. The distribution policy of CVR Refining is to generally pay its distributions within 60 days after each quarter end beginning with the first quarter ending March 31, 2013. The first quarter will be adjusted to exclude the period prior to the IPO date of January 23. In connection with the IPO of CVR Refining, we also redeemed our outstanding second lien notes in the first quarter of 2013 with a combination of proceeds from the IPO and cash on hand.

With that, I will turn the call back to you, Jack.

John Lipinski

Thank you, Susan. And again, with the recent IPO of CVR Refining, CVR Energy is now effectively a holding company. What CVR Energy owns are the GPs of CVR Partners, LP and CVR Refining, LP, the 2GPs associated with those entities. CVR Energy also owns approximately 70% of the LP units of CVR Partners and approximately 81% of the LP units associated with CVR Refining.

On this morning’s call, we gave guidance on what we believe will be the range for 2013. You may recall at our IPO and our prospectus we had indicated a full year distribution of approximately $4.72 per unit. We increased that guidance today to $5.50 to $6.50 per unit and that’s as a result of higher crack spreads than were in our initial forecast, some wider crude discounts than we had in our initial forecast and certainly really good operations in both plants. So hopefully, you will have an opportunity to go back over my calls online or otherwise you can dial-in and hear it.

So a little bit about CVR Energy and this is made public in a press release a few weeks ago on January 24, CVR Energy declared a $5.50 special dividend per share, which was paid on February 19 to shareholders on record of February the 5th. Our Board of Directors also adopted a quarterly cash dividend policy. And subject to declaration by the board, CVR Energy’s initial quarterly dividend is expected to be $0.75 a share or $3 a share on an annualized basis.

And the plan is to begin paying that in the second quarter. Again, it has to be declared by the board. CVR Energy in the form within has no debt. We’ll receive cash from its underlying assets. It does provide some support for CVR Refining, LP and it’s really good structure that we have with the parent, but CVR Energy by and of itself is now becoming a yield vehicle of its own.

So with that, thank you for joining me and, operator, I’d like to turn it over for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from Arjun Murti of Goldman Sachs. Caller, please proceed.

Arjun Murti – Goldman Sachs

Thanks, Jack. Thanks for the call, and I’m sorry, I missed the one this morning, so if I’m repeating the question, please let me know, but – you guys have obviously done a lot on the MLP side between the fertilizer and now CVR Refining, LP. Can you remind me are the midstream assets within CVR Refining, LP, is that still at CVR Energy? And again, fully recognizing you guys have done a lot, would it logistics MLP be something else you’d consider or is that really part of the Refining, LP?

John Lipinski

That has actually remained within our refining – CVR Refining, LP. We did that for two reasons. Number one was to give some surety of cash flow, not that the business clearly is getting exceeding well, but it’s a business that we can grow and potentially spin off into a separate MLP in a more conventional sense, but that MLP if we’d ever get to that point, would be owned by CVR Refining, LP, not CVR Energy.

Arjun Murti – Goldman Sachs

Got it. Indirectly owned by CVR Energy, but...

John Lipinski

Yeah that’s right but it’d be directly owned at CVR Refining, LP.

Arjun Murti – Goldman Sachs

And I know it’s been a pretty meaningful midstream business you’ve had, can you put any EBITDA color around what that generates?

John Lipinski

It’s very competitive business, it moves up and down, but we’ve said it before, like I said on the net road show, we’re somewhere in the $30 million range. If you were to look at it as current EBITDA, and that is basically just being able to buy crude at differentials to WTI and it does not include any leases that many MLPs do with their parents, for example, tank leases, pipeline leases, and the like.

Arjun Murti – Goldman Sachs

Yeah. Actually, I see the transcript from the earlier call, I think you’re not looking to provide tons of color on your RINs exposure, but can you comment on how much blending capacity you may have within your midstream relative to kind of your RINs obligation? Can you provide any color around that?

John Lipinski

Our midstream is purely crude.

Arjun Murti – Goldman Sachs

Purely crude?

John Lipinski

Purely crude. We are – on the product side, we do ethanol blending at Wynnewood and at Coffeyville, which is not insubstantial, but the majority of our product goes out on the Magellan and NuStar pipelines and at that point, no control of blending. And I said earlier I think this is – we believe this is already being priced into the RBOB contract on the NYMEX.

Arjun Murti – Goldman Sachs

Yeah.

John Lipinski

And it’s somewhat frightening the unintended consequences of that law that was passed in 2007. I don’t think anybody intended for our consumers to be paying this. There is no way that the RINs cost will not get passed on...

Arjun Murti – Goldman Sachs

Yeah.

John Lipinski

Eventually somebody has to pay it

Arjun Murti – Goldman Sachs

I think at the time people thought gasoline demand could only go up and I guess unfortunately that didn’t happen. Just lastly, Jack, in terms of your ability to access WCS and Canadian crudes. Can you just remind me of that volume and then how the various pipeline proposals whether it’s Keystone XL or some of the newer ones that have been proposed would, I guess, presumably increase your ability to run WCS?

John Lipinski

Okay. Well, right now, we have two Canadians – access to two Canadian pipes that begin in Canada. One is the original Keystone pipeline.

Arjun Murti – Goldman Sachs

Yeah.

John Lipinski

We have a 25,000 barrel a day commitment on that pipeline. Last year, we increased it from a 10-year contract to a 20-year contract, which gives us the benefit of lower transportation rates but we will bring down all our heavy Canadian requirements unless we have better options and at different times of the year sometimes we have better options and then we will fill it out with lights hours. But pretty much 20,000 to 25,000 barrels a day is our targeted rate for heavy Canadian runs at Coffeyville. We do not run heavy Canadian at Wynnewood. Wynnewood runs light sweets and light sours. Typically, about 70/30 is the targeted plan, 70% light sweet, 30% light sour.

Arjun Murti – Goldman Sachs

And that’s freely float, I do not believe you have a contracted differential of any sort?

John Lipinski

No, no, we don’t.

Arjun Murti – Goldman Sachs

Yeah.

John Lipinski

And then the other pipe that we have is the Spearhead pipeline and we have 10,000 barrels of contracted space, but we do have shipper status because we’ve actually delivered many, many more barrels. So typically, we’ll get anywhere from 15,000 to 18,000 barrels a day, down Spearhead. And we typically target our light sours coming down from Canada. We can also access Bakken but Bakken is after tariff essentially the same as what we could buy WTI at in Cushing.

Arjun Murti – Goldman Sachs

Yeah. And on some of the newer lines, Jack, XL if it does happen or any of the other ones that’s been proposed.

John Lipinski

I mean the only thing we would probably look for is not heavy sours, but light sours. I believe XL is going to get filled up on heavy sour and find its way all the way to the Gulf.

Arjun Murti – Goldman Sachs

Yeah.

John Lipinski

And my belief then is that light sweets that are being produced and going to Gulf will back into the mid-continent again.

Arjun Murti – Goldman Sachs

That’s terrific. Thank you so much.

John Lipinski

Thank you.

Operator

Our next question comes from Chi Chow of Macquarie Capital Markets. Caller, please proceed.

Chi Chow – Macquarie Capital Markets

Great. Thank you. Hey, Jack, on the special dividends, are they going to be an ongoing part of your cash distribution strategy going forward?

John Lipinski

Well, actually, I have to talk to my board about it, but unless CVR Energy has an acquisition that we might want to do for a drop-down to the MLP, I would not foresee us holding a whole lot of cash up with the parent. There are – the only thing that the parent provides right now is a $150 million what I would call growth capital revolver. We can access for growth capital at CVR Refining.

We can access up to $150 million from the parent, which therefore means we’re not taking distributions from the unit holders to do growth capital. When it gets to be a big enough bucket, say, $100 million or $125 million we can use selling units or take on additional debt and resets a revolver. Beyond that, the parent has the ability to do drop-downs and just in the form it’s set up CVR Energy can do JVs with larger entities even Icahn Enterprises. So when you look at the balance sheet that CVR Energy can access, it’s actually quite large.

Chi Chow – Macquarie Capital Markets

Well, thanks for that. Do you – are you targeting some sort of minimum cash balance for – at the CVI level?

John Lipinski

Well, I would think we would want to keep the $150 million and probably just enough to make sure that between any volatility in the market that the dividend – we’d be able to maintain the dividend at $3 a year. At current rate – at current cash generation of CVR Refining, obviously, there’s going to be excess cash going up to the parent.

Chi Chow – Macquarie Capital Markets

Okay. And then back on the RINs, can you comment at all any carry forward RIN that you might have from last year?

John Lipinski

Well, we consume most of those. We did have some carry forward RINs and I think we consumed them pretty much all in January. And what we’ve seen is RINs costs go from a few cents to a dollar. We’re seeing a lot of volatility today in the market. It was a $1, then it was $0.65, then it was $0.90.

I think what we’re finding here is that there is a limited amount of blending that could go on. And what is – look, I’m on a soapbox I might as well speak, the obligated parties under the RINs program are the refiners and the importers. If the importers see this large RIN costs staring them in the face, we might actually see ourselves in a situation where there is less gasoline imported economically into the United States, which is going to exacerbate some problems of cost at the pump for the consumers.

Chi Chow – Macquarie Capital Markets

Yeah, it’s a real issue. How high do you think these RIN prices can go? Any sense for that or any thoughts from that?

John Lipinski

I mean if I knew I wouldn’t be on this phone call, I’d be trading RIN’s right now.

Chi Chow – Macquarie Capital Markets

Yeah, we all would. Okay. Well, thanks for your thoughts Jack.

John Lipinski

Thank you.

Operator

(Operator Instructions) It appears we have no further questions at this time. I would now like to pass the floor back to Jay for closing comments. Oh! Sorry, we have a question from Gregg Brody of JPMorgan. Caller, please proceed.

Gregg Brody – JPMorgan

Good afternoon, guys.

John Lipinski

Hey, Gregg.

Gregg Brody – JPMorgan

Just bigger picture. So what’s the C-Corp level CVR Energy and just the MLPs. Do you think you have an advantage when looking at buying other C-Corp refiners? And do you think that positions you to potentially be a little more aggressive on that front?

John Lipinski

Absolutely. If you just take a look at the multiple and with regardless of the multiple putting yourself into an MLP, gives you a tax advantage multiple. And yes, a C-Corp can generally – cannot acquire something that’s diluted to it. I mean so you have to take a look at the multiple of EBITDA that on other refinery we trade at. Certainly, we trade at a higher multiple because of the situation we’re in and, yes, the short answer is, we have a more valuable currency to go shopping than another C-Corp.

Gregg Brody – JPMorgan

Is there a particular area that you’d like to add, is there – what sort of the criteria that you’re using to think about as you evaluate?

John Lipinski

Well, our view is in the group, there is really nothing. There are only seven refineries in the group and I’m not sure the FTC would look kindly on us if we tried to buy a third. The Chicago market is always something to look at, the Rockies, even the Gulf Coast now with the paradigm shift in crude differentials that I think is going to occur. The Gulf is going to be more advantaged going forward than it has for the last few years.

Now that said, you have to look at the asset itself to make sure it’s something you want. Can that – it has the earnings potential to be accretive to our unit holders. California, sorry, guys, there is no way on God’s green earth I’m going to look at a California refinery. I mean I think those refineries ultimately will become holes into the ground into which you pour money because of the environmental rules and all the structures in California.

So I have a pretty broad view. I don’t think there is anything on the East Coast that is attractive. I mean there is a few refineries there that have come back. I think they will struggle more than the Gulf Coast plants, but I don’t think there is anything there that’s attractively for sale right now. So basically the middle of the country the Gulf Coast.

Gregg Brody – JPMorgan

And then just at CVR Refining, how do you think about managing your cash balance there and balancing liquidity needs?

John Lipinski

Okay. Well, we have – the way we have structured ourselves is if you take, I’ll give you the quick map and it’s correct within a few million dollars. If you take our adjusted EBITDA and you subtract from it $200 million, you will get the distributable cash. We don’t keep excess cash at the MLP from operating cash and I’ll caveat that here in a second. That $200 million is broken down into a couple of buckets.

We will set aside $125 million a year for environmental and sustaining capital. That’s maintenance capital or environmental capital. So every year, we will set that aside. We will also set aside $35 million a year for our turnarounds, which occur every four years and by the way, the next turnaround that happens is (a) the first piece of two-part turnaround in Coffeyville in the fall of 2015. The second half will occur in the spring of 2015 and Wynnewood will be the fall of 2016, if I said 2015 fall – the spring of 2016, and the fall of 2016. Then the last piece is approximately $40 million, which covers all our debt service and some costs. So that’s what makes up to $200 million.

So we have a distribution policy of distributing all available cash. Now that said, when we went public, we had – our debt is basically $550 million, $500 million on the new notes that are 6.5% 10-year notes and then the remainder is from capital leases for another $50 million. The – so that’s our total debt.

We also left $160 million on the balance sheet on day one at the IPO to pre-fund certain known environmental and sustaining projects so that we would not have to draw down on distributable cash for roughly the next two years through the end of 2014.

And then we also left $125 million of unrestricted cash just for inter-month working capital swing. So if you really look at our net debt, our net debt on a long-term basis is $425 million which is $375 million of the net remaining on the notes in $50 million of capital leases. So there is no excess cash. We have the ability. We have on our ABL, we only have something on the order of $25 million or $28 million of drawn LC’s.

So we have virtually an undrawn ABL. We have a $150 million facility from the parent that is directed toward growth capital but can be used for any number of purposes as the company may need if there are any issues. We’re well ensured. So our intent is not to keep any excess cash beyond what I just spoke about at CVR Refining.

Gregg Brody – JPMorgan

And then it sounds like you have your capital and some of your fixed costs covered and you think about managing the volatility of the business, what do you think is the right amount of liquidity you need to have beyond what you’ve just spoken about, is the revolver, is that what you talked about?

John Lipinski

As I said the revolver is – look, in this business maybe I could say it a different way, my view is that refining companies not be levered roughly more than one times total EBITDA. At level we’re at right now, we are fraction to that 0.2 or 0.3 ex-EBITDA. So on that kind of basis, don’t forget there’s volatility in the business. We need to be able to cover the $200 million a year outright expenses. But I mean last year, we generated $1.2 billion in adjusted EBITDA. And so we think we are highly, highly liquid. We have no liquidity problems.

Operator

It appears we’ve reached the end of our Q&A session. I would now like to pass the floor back to our management for closing comments.

Jay Finks

I appreciate, everyone, for joining us today for our year end 2012 conference call. Thank you.

Operator

This concludes today’s teleconference. You may now disconnect your lines at this time and thank you for your participation.

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