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Alon USA Energy's (NYSE:ALJ)

Q4 2013 Results Earnings Conference Call

March 07, 2014 11:30 AM ET

Executives

Stacey Hudson - IR Manager

Paul Eisman - President and CEO

Shai Even - Chief Financial Officer

Alan Moret - SVP of Supply

Analysts

Jeff Dietert - Simmons

Ed Westlake - Credit Suisse

Chi Chow - Macquarie Capital

Roger Read - Wells Fargo

Paul Cheng - Barclays

Clay Rynd - Tudor, Pickering & Holt

Operator

Good day, ladies and gentlemen, thank you for standing by. Welcome to the Alon USA Energy Fourth Quarter Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, March 7, 2014. I would now like to turn the call over to Ms. Stacey Hudson, Investor Relations Manager. Please go ahead.

Stacey Hudson

Thank you, Camille. Good morning, everyone, and welcome to Alon USA Energy’s fourth quarter 2013 earnings conference call. With me are Paul Eisman, President and Chief Executive Officer; Shai Even, Chief Financial Officer; along with other members of our senior management team.

During the course of this call, we may make forward-looking statements based on our current expectation. These forward-looking statements are subject to a number of significant risks and uncertainties and our actual results may differ materially. For a discussion of factors that could affect our future financial results and businesses, please refer to the disclosure and risk factors disclosed by the company from time-to-time in its filings with the SEC.

Furthermore, please also refer to statement regarding forward-looking statements incorporated in our news release issued yesterday. And note that the contents of our conference call today are covered by these statements.

On this call, we will discuss non-GAAP financial measures. You can find the reconciliation of the non-GAAP financial measures to GAAP in our financial release, which is posted on our website. Finally, please be aware that all of our statements are made as of today, March 7, 2014, based on information available to us as of today and except as required by law, we assume no obligation to update any such statements.

With that, I’ll turn the call over to Paul.

Paul Eisman

Thank you, Stacey, and good morning, everyone. 2013 was a year where we continued to make significant progress towards our long-term goals. Our adjusted EBITDA of $271 million for the year was achieved even though discounts for crude in West Texas were not as great as they were in 2012. The profitability of our Krotz Springs refinery improved as increasing supplies of light sweet crude on the Gulf Coast resulted in lower prices for LLS price crude oils as compared to both WTI and Brent.

We made good progress towards getting our permits in California in developing a significant logistics business there. We increased direct returns to shareholders as we raised our regular dividend by 50% and also paid a special dividend of $0.16 per share during the year. We also continued to reduce debt, reducing debt net of cash during the year by $83 million.

Excluding special items, we recorded net income available to stockholders of $0.51 per share for the year as compared to $2.13 per share in 2012. For the fourth quarter, excluding special items, we recorded a net loss of $0.12 per share as compared to a profit of $0.58 per share in the same quarter last year. Adjusted EBITDA in the fourth quarter was almost $53 million. The Big Spring refinery had an excellent operating quarter setting a record quarterly throughput of 73,600 barrels per day.

Direct operating expenses during the quarter were good at $3.98 per barrel. Crude differentials in the resulting crack spreads were volatile in the fourth quarter, differentials were very narrow early in the quarter but they widened as the quarter progressed.

For the quarter, we averaged refining operating margin of $9.96 per barrel as compared to $25, $26 per barrel in the same quarter last year. The reduction was driven primarily by price weakness for gasoline in the Mid-Continent compared to the Gulf Coast along with lower crude differentials at Cushing in Midland. While crude differentials have narrowed from the highs, they are still healthy and we feel they are structural, sustainable and supportive of good profitability in Big Spring going forward.

By way of illustrations, discounts for Midland crudes versus Cushing now are under particular pressure, which favors refineries that process crude in West Texas, including the Big Spring refinery. Crude oil production in the Permian Basin continues to increase and having a refinery in the middle of all that production provides us a competitive advantage. In this environment, we continue to optimize our crude mix of refining operations to capitalize on changing crude and product differentials.

As the production of sweet crude in the Permian has grown, we have seen that we can improve our margins by running more WTI and less WTS, which improves our yield, essentially making more gasoline and less asphalt. In the quarter, we ran almost 29,000 barrels per day at WTI compared to 19,000 barrels per day a year ago and did so while achieving record quarterly throughputs.

More to the point, recently we said [first] we ran up to 40,000 barrels per day of WTI. We announced earlier this year that we were delaying our plan of first quarter turnaround at Big Spring into the second quarter. This decision was based on our desire to optimize the turnaround and our vacuum tower revamp project.

This project will allow us to increase distillate recovery at the plant by 2,000 barrels per day while increasing our ability to better utilize the equipment and approve the energy efficiency at Big Spring. The capital cost of this project is $25 million and generates benefits of nearly $20 million per year at expected margins.

The turnaround is now expected to start in early May and finish in the last half of June. Our estimate of throughput in the second quarter is 46,000 barrels per day as a result of the turnaround in the vacuum tower revamp project. We expect throughput at Big Spring to average 67,000 barrels per day for the entire year.

In our wholesale and marketing business, both branded and unbranded fuel sales during the quarter were very strong, versus the same quarter last year branded sales were up over 11% while unbranded sales were up 22%. In our retail marketing business, fuel sales were strong with volume up 10% for the full year 2013 over 2012.

Fuel margins decreased slightly during the quarter at $0.182 per gallon as compared to $0.186 per gallon in the third quarter.

Merchandise sales were down slightly versus the same quarter last year as severe winter weather impacted traffic in our stores. The merchandise margin during the fourth quarter was 31.9%. We are continuing our remodeling investments and expect to accelerate construction of the new site in 2014.

The Krotz Springs refinery also operated well during the quarter with the highest quarterly throughput since we acquired the refinery at 72,300 barrels per day. Direct operating expenses were $3.56 per barrel in the quarter. We continue to benefit from bringing 30,000 barrels per day of Midland price WTI to the refinery, but also saw developing discounts during the quarter for the LLS-priced crudes while we run at higher volumes of light sweet crude made their way to the Gulf Coast.

The discount for LLS versus Brent in the fourth quarter averaged $8.84 per barrel, which positively impacted Krotz Springs’ margins. For the quarter, we averaged the refining operating margin of $8.72 per barrel, as compared to $10.36 per barrel in the same quarter last year, with the reduction caused by weaker Gulf Coast WTI crack spreads.

We do not have any major maintenance plans for Krotz Springs this year, but are completing some minor maintenance during the first quarter. As a result we expect to operate the refinery at 64,000 barrels per day in the first quarter and 71,000 barrels per day for the entire year. We expect to complete the turnaround at Krotz Springs early in 2015.

In California, we made significant progress in 2013 towards moving the operations back to profitability. We are continuing to cut costs and develop alternative uses for our West Coast assets. In addition, our permit application for the development of our rail unloading facility at Bakersfield continues to move forward. We are using our Long Beach assets to unload rail crude for third-parties and recently received permits to do the same at a Paramount. The market value potential of this activity was recently demonstrated by our Willbridge terminal. We are likely to repurpose Willbridge from an asphalt terminal to a rail crude unloading terminal and we were able to get a contract with a third-party to provide them these services.

The income generated from this activity attracted an MLP buyer and we recently completed the sale of Willbridge for $40 million. This demonstrates the tremendous opportunity to unlock value in these assets.

Our alternate renewable fuels joint venture is also proceeding. Just last month, we received the final permit, which allow us to proceed with the project. We are moving forward and expect to start operations late in the third quarter of this year. This project utilizes shutdown equipment in Paramount, which allow this project to be completed at a lower cost, while also unlocking value at the facility.

We are moving forward on a number of fronts to generate value in our West Coast assets and see a path forward to become operating cash flow neutral by the end of the year with significant upside going forward.

Our asphalt marketing business continues to be impacted by weak demand. Blended asphalt sales tonnage in 2013 was 17% below the sales volume in 2012. We did see improved margins in 2013, but this was offset by higher per ton operating cost due to the lower sales level.

Most of our costs in this business are fixed, and our operating cost per ton is negatively impacted by lower sales volumes. However, we believe that we've reached the [top] in this business and expect the asphalt sales to increase going forward.

As the economy improves and we see stronger state and local budgets, we expect that one of the first investments governments will make will be to repair the roads. Given that this is primarily a fixed cost business, most of the incremental gross margin goes directly to the bottom line. And in addition, we’re continuing to work the cost side of the business to find opportunities to lower our cost structure.

Looking forward to the first quarter, crude differentials and refining margins are generally healthy but volatile. We are seeing the narrowing of the LLS to Cushing WTI differential to a level that roughly track transportation economics was LLS [to current] pricing under brand. Longer-term, we expect to see all differentials transportation economics which will provide us healthy differentials and margins at both Big Spring and Krotz Springs.

At the same time, we also expect to see volatility in these differentials when supply transportation or refining disruptions occur resulting in increased differentials. A good example of this is the recent widening of the Midland versus Cushing differential which benefits both Big Spring and Krotz Springs. We will also benefit from our strength and balance sheet. As I mentioned before in 2013, we reduced net debt by $83 million and in the last 2 years have reduced net debt by more than $500 million.

In 2014, we will redeem the remaining $70 million in Krotz Springs bonds and will then be carrying a level of debt that we’re comfortable with. The exciting result of this is that it allowed us to begin using cash from operations to either increase direct returns to shareholders or to make additional investments in our businesses. Our Board has approved capital spending for the year of 2014 of approximately $150 million on a consolidated basis. This is higher than the capital budgets over the last several years and the increase is driven primarily by increased spending as Big Spring for the turnaround and the vacuum tower project along with increased spending for growth in our retail marketing business.

As I started this call by saying 2013 was an important year for the company as we made significant progress towards our long-term goals. We’re optimistic about the short and long-term prospects for our industry in general and for our position in the industry in particular.

With that we’re glad to answer any questions that you might have.

Question-and-Answer Session

Operator

Ladies and gentlemen, we’ll now begin the question-and-answer session. (Operator Instructions). Our first question is from the line of Jeff Dietert with Simmons. Please go ahead.

Jeff Dietert - Simmons

Good morning.

Paul Eisman

Good morning, Jeff.

Jeff Dietert - Simmons

You commented on your press release that progressing with the permitting at Bakersfield for the rail terminal and you mentioned the Paramount facility as well that you had received the permits there. Could you talk a little bit about what you are doing at Paramount, how much capacity there is there to load and unload and kind of your plans for developing that facility?

Paul Eisman

Yes. We are in commercial discussions with third parties for the use of those assets, we do have to spend a little bit of money to put that into service. We think it will take about three months once we have commercial agreement to do so and we think the capacity of that facility is in the range of 14,000 barrels per day.

Jeff Dietert - Simmons

Okay, great. And then I believe you have got facility also at Long Beach, a separate rail unloading facility at Long Beach and I believe that’s 20,000 barrels a day and I believe you have got that permitted as well what’s the status there?

Paul Eisman

Yes actually the capacity of that’s a little bit lower. We are using that facility today to supply or to provide the services to third parties. Our capacity to unload in that facility is about 12,000 barrels per day. And I don’t know, Alan do you have a feel for what the volumes have been?

Alan Moret

Yes, around, 5,000 barrels a day of that.

Paul Eisman

Yes so we’ve got additional opportunity there I think to increase the throughput at Long Beach. And the last thing I will mention is because I don’t think it’s necessarily being clear as we do have existing permit capacity at Bakersfield and the permit we have asked for, will increase our ability to do this, but we have existing capacity in Bakersfield to unload crude oil for third parties. And the permitted capacity is about 13,000 barrels per day there at Bakersfield.

Jeff Dietert - Simmons

Okay. And you are looking to permit for two trains up to 140,000 barrels a day at Bakersfield, correct?

Paul Eisman

That is correct.

Jeff Dietert - Simmons

All right. Thank you, [kindly].

Paul Eisman

Yes, thank you.

Operator

The next question is from the line of Ed Westlake with Credit Suisse. Please go ahead.

Ed Westlake - Credit Suisse

Yes, a couple of questions. And thanks for taking the time. On those crude unloading facilities, I mean just to follow on Jeff’s questions. I mean any idea of the actual volumes in the fourth quarter just so that we can sort of think about how they will ramp up over time?

Paul Eisman

Yes, at Long Beach, we did about 5,000 barrels a day.

Ed Westlake - Credit Suisse

And then nothing anywhere else?

Paul Eisman

As I mentioned Ed, at Paramount, we’ve got little bit of investment to make, to be able to use that facility about three months out, once we have agreement. And basically about the same thing at Bakersfield, we’ve got to make some repairs to align, but we can do that very quickly, and once we have commercial arrangement to utilize those services.

Ed Westlake - Credit Suisse

Right, and then on the moving forward of the expansion of the permits at Bakersfield, I mean any sort of a drop dates that we should be focused for this year in terms of when you expect to get those down, I mean I know some other people in the industry are getting quite close to permitting in the California as well?

Paul Eisman

Yes, I think we are continuing to work, it is as you might imagine a complex process that you wish you had more control over, but that’s the nature of that. I think we are doing a good job working in and we are confident, we are going to get the permit. We expect to get the permit in the next several months and certainly by the end of the year and beyond that, I mean that is as much as we have been willing to guess at this point. I think the advantage we have is being in Kern County where there is already a lot of oil production, a lot of oil facilities, we’re pretty confident we’ll eventually get the permit, but the timing of that is always a challenge.

Ed Westlake - Credit Suisse

Okay. And then obviously you mentioned the sale of the Willbridge asphalt, repurposing of it in I think perhaps Oregon. You’ve got other asphalt terminals in California, maybe talk a little bit about your plans for Fernley, Grove, Mojave or even Richmond Beach in terms of which ones are absolutely vital to be asphalt business and which would have some flexibility to do other things, if there was demand for that?

Paul Eisman

Yes. I think Richmond Beach, we are doing some logistics up there today, and we’ve not really kind of quantified the value of that but are doing some logistics and also we’ll sell asphalt in that terminal. In terms of repurposing or doing something differently to significant volume, I don’t know if there is a significant opportunity to do that. Our Elk Grove facility is a high volume asphalt facility, it’s been very profitable, don’t really see that being repurposed in any way. And then lastly, Mojave might have some potential. We’ve got really not using that very much for asphalt and we’ve got good rail facilities in that facility. So that is a facility that we’re investigating in terms of repurposing.

Ed Westlake - Credit Suisse

That’s great. And then my final question is totally -- we should talk about refining I guess but Krotz Springs, you’re still producing a lot of other products other than gasoline, diesel and jet and just wondering if there is any sort of work I guess in the turnaround next year to sort of improve the yields to maximize the margins?

Paul Eisman

Yes, I think the other products are predominantly black oil products. And we have a [resin] cracker there. So that number is actually pretty low, but I think LPG is the other -- the biggest part of that. And we do have a project that we’re going to complete this year to improve the purity of our isobutane stream and get more value from that. And it’s a small project, so we didn't really talk about it. But it’s in the range of $3 million of capital, will generate $5 million to $6 million of benefit. So, it’s a very attractive project.

We are looking at for the turnaround 2015, what projects we might do to improve the yields at the refinery and the focus right now is increase distillate yield.

Ed Westlake - Credit Suisse

Yes.

Paul Eisman

We do think, we can get about 2,000 barrels per day of increased distillate out at refinery by making some revisions to the facility. So, we are looking -- we’re in the middle of looking at that project and other projects that might do kind of exactly what you’re talking about.

Ed Westlake - Credit Suisse

Okay. Thank you very much.

Paul Eisman

You bet. Thank you.

Operator

Our next question is from the line of Chi Chow with Macquarie Capital. Please go ahead.

Chi Chow - Macquarie Capital

Okay. Thanks, good morning

Paul Eisman

Hi Chi.

Chi Chow - Macquarie Capital

Hi. So, back on Bakersfield, could you walk through kind of what you’re thinking on the timeline? Or once you receive the rail permits, what happens on the refining side? Is the Bakersfield plant ready to start up right away? Is there some delays beyond after getting crude in there? Just anything on what you’re thinking on the refining start up there?

Paul Eisman

Yes, the Bakersfield permit really provides us two things: One, it allows us to put in the rail infrastructure to be able to receive and deliver to somebody, a 140,000 barrels per day of oil. It’s designed with the flexibility to deliver either light or heavy oil. So, that’s one half of the permit. The second half of the permit is to make the revisions but potentially make the revisions at the Bakersfield refinery to run the light crudes. And the configuration is better suited for light crude than the heavy crude. So, that’s why we’re doing that.

Now in terms of how the project progresses, I think that once we have the permit to do -- to move forward that it’s more likely that we’ll start with the logistics project and get that up and going and provide those services to people, facilities in California. And then we’ve got to make a decision about what we do with respect to the Bakersfield refinery. We do have to make investments to convert it to be able to run lighter crude. And so we’ve got to make sure we justify those investments. So, we’re in the process of determining the feasibility of that and whether or not we move forward with that part of the project once we get the permits.

Chi Chow - Macquarie Capital

Paul, any estimate at this point on the CapEx requirements to get the refinery sorted out toward light?

Paul Eisman

We really not divulge that. And I think we’re still doing work around that. So I’d rather leave that for a later discussion.

Chi Chow - Macquarie Capital

Okay. Shai I think the Krotz Springs notes, the remaining $70 million on the senior notes are due in October this year if that’s correct.

Shai Even

Yes.

Chi Chow - Macquarie Capital

Yes, what’s the strategy on repaying that, is it just through cash, are you going to refinance that, any thoughts there?

Shai Even

Our plan is that we pay the notes during the second quarter of 2014. The notes are callable at par from April 2014.

Chi Chow - Macquarie Capital

Okay.

Shai Even

Yes. We’re planning to use cash on hand and we’re now planning to incur additional debt at Krotz Springs waiver…

Chi Chow - Macquarie Capital

Okay, very good. And I guess final question on RINs. Any sort of RIN cost estimate here for 2014? And I know, I think the Krotz Springs waiver was just for last year, is that correct? So, you’re going to incur additional RIN expenses at Krotz, if that’s accurate may be confirm that.

Alan Moret

Yes, this is Alan. Yes, with the absence of a waiver, without a waiver the RINs cost for the company would look to be somewhere around $35 million at current price of RINs and that includes both Big Spring and Krotz Springs.

Chi Chow - Macquarie Capital

Okay, great. Thanks Alan, I appreciate it.

Operator

Our next question is from the line of Roger Read with Wells Fargo. Please go ahead.

Roger Read - Wells Fargo

Hi, good morning.

Paul Eisman

Good morning.

Roger Read - Wells Fargo

I guess let’s continue with the logistics theme here. So specifically for Krotz Springs, I believe you said -- it was in the press release actually, it’s 40,000 barrels a day of WTI Midland; was that the correct number?

Paul Eisman

No it’s 30,000.

Roger Read - Wells Fargo

I am sorry, 30,000 here; 40,000 at Big Spring. Where else can you -- is that as far as we are going to go with Krotz Springs at this point or are there other alternatives in terms of price advantage crudes you can get in there?

Alan Moret

We continue to -- this is Alan again, we continue to look at ways to bring more price advantage crudes in whether it’s from West Texas. There are pipeline systems that are -- will be growing out of the Midland area. And I think those will give us some opportunities to augment that kind of supply. And we do have a rail capability system at the refinery too. This time we’ve had -- as LLS prices have come relative to WTI, we’ve also found that the Louisiana crudes give us a lot more earnings than we had in the past. So we’ve got in my mind, more things to choose from than we did in the past.

Roger Read - Wells Fargo

And any Eagle Ford barrels going through there?

Alan Moret

It’s something we look at, but typically we don’t find the value for Eagle Ford crude being -- tending to be very light.

Roger Read - Wells Fargo

Okay. And then looking back at California, obviously waiting on the permits before we can get I guess too aggressive on our assumptions, but in terms of railing in sample loads or the smaller barrels that you’re able to deliver today relative to the future. How comfortable are you in terms of running whether it’s a Permian crude or potentially down the road maybe a Niobrara area crude through there, and the yields you’re going to get is what we have talked about before, it will be more of the gasoline, a little bit of distillate cut, less asphalt, I mean kind of help us out where we are in understanding that, maybe how much more there is to learn and kind of how that ties into the Bakersfield future investments if you decide to make them?

Alan Moret

Yes. I think the configuration of Bakersfield is that we will get yields on the crude unit; they are very similar to anyone else. So in terms of Niobrara, West Texas, Bakken, I think that we were set up to get pretty standard yields out of those different crudes. I think one of the advantages we do have at Bakersfield since it is a hydrocracking refinery, and so we’re designed to produce higher amount of diesel than perhaps some other refineries can do. But we don’t see any technical issues related to our ability to make commercially competitive yield structures out of that facility.

Roger Read - Wells Fargo

So what would the alterations likely be if you decide to go forward with that at Bakersfield? I mean what is it you would want to accomplish I guess?

Alan Moret

Yes. So historically that refinery has run heavy crudes, and a lot of facilities are set up to deal with heavy crudes. We’re running light crudes; we will make a little more light product. So the revisions we have to make are more on the light end, and naphtha and lighter I think are the bigger revisions we need to make. Increases in our naphtha hydrotreater reformers and also our ability to handle light end, that’s where the majority of the investment would be.

Roger Read - Wells Fargo

Okay. So I guess I am trying to understand, do you think that means more impacts at the front-end of the crude unit or more so in the refining units itself?

Alan Moret

Yes. I don’t think it’s a crude unit so much that would be impacted, I think it’s the units downstream of that.

Roger Read - Wells Fargo

Okay. All right, that’s it from me. Thank you.

Alan Moret

Thank you.

Operator

Our next question is from the line of Paul Cheng with Barclays. Please go ahead.

Paul Cheng - Barclays

Hey guys.

Paul Eisman

Hey.

Paul Cheng - Barclays

Paul, I just want to make sure I fully understand or understand it correctly. The permitting process right now is also including the permit for the Bakersfield reconfiguration, is it?

Paul Eisman

That’s correct.

Paul Cheng - Barclays

Okay. And once that you receive all the needed permit, any kind of rough estimate how long it take for you to go for the front-end engineering, I presume you haven’t done it yet…?

Paul Eisman

We’ve done lot of engineering. I think -- and these are real rough estimates, Paul, but I think if we really hit it hard that we can get the rail facilities done in nine months. If we elect to go forward with the refining investment, that would be somewhat longer, I don’t really have in number for that.

Paul Cheng - Barclays

But you are saying that you’ve already done most of the front-end engineering? We’re just purely talking about your sense on why around the same time as you go [sanction the route] and we’re probably talking more about in the 15 months kind of the time?

Paul Eisman

You mean on the refining side?

Paul Cheng - Barclays

Yes.

Paul Eisman

I’d like to give you a number on that; I just don’t have it right now. It depends what long lead equipment would be required, and because the modification for [that extensor] but there are investments and a lot of times you can get hung-up by one or two pieces of equipment which we’ll have to work and optimize. But I just don’t have that right now.

Paul Cheng - Barclays

Sure, because I think previously that the company had that one point thinking it will -- if everything go according to plan and then we get the permit over the next couple of months, we will be able to have the biggest fuel operations probably in 2015, it sounds like [the earliest] that would be more likely in the 2016, is it?

Paul Eisman

Again, I can’t really give you a date for that at this point.

Paul Cheng - Barclays

Okay. On the well operation, do you currently plan that you’re going to bring in primarily on the Permian or you’re just looking for the other region also? It sounds like the (inaudible) you're going to bring it in?

Paul Eisman

Are you talking about in Bakersfield?

Paul Cheng - Barclays

In Bakersfield and also in Long Beach I suppose.

Paul Eisman

Yes. We’re not bringing oil; we’re providing services to third parties in Long Beach.

Paul Cheng - Barclays

Right.

Paul Eisman

So we're not -- we don't have a comment on that. In Bakersfield, if we like to run the refinery, then we would typically bring a light crude, you can say Bakken and Niobrara would be good examples of that.

Paul Cheng - Barclays

So it is not going to be Permian, actually it’s going to be Bakken?

Paul Eisman

Well, we think that the differentials will be somewhat higher for the Bakken because in order to clear the Bakken today, it is cleared by rail, which is a higher cost way to deal with the production in that area. So we can be competitive with that.

Paul Cheng - Barclays

Paul, maybe you have mentioned that in the past and I just forgot. Do you have a rough cost estimate on the [railing cost] all-in from let's say Bakken to Bakersfield?

Paul Eisman

I think if we look at all-in cost from Bakken to Bakersfield, railcars, everything, you look in the range of about $14 a barrel. I mean it's -- if there is variability on how that can be put together?

Paul Cheng - Barclays

Okay. And then a final one on Krotz Spring, this quarter I think is a record, 173, is that as high as you can run?

Paul Eisman

No, I think we can get higher than that. The capacity, the throughput capacity of the refinery we think is 74,000 barrels per day and then that number includes blend stock. So I think depending on optimization, we can give higher than that. One issue we’re facing like everyone is facing is crudes getting lighter. And so we are seeing some limits in the crude, our ability to get light crudes through that refinery. And we’ve been looking at ways -- and the same thing is in West Texas. And so, we’re looking at ways to -- we can invest money to get around those limits because I think at the end of the day crudes going to continue to be light, we won’t have the flexibility to be able to handle it.

Paul Cheng - Barclays

So I presume that you don’t have any number that you can share with us that what kind of investment we may be talking about, if you want to expand the throughput by another 5,000 barrel per day of the light oil…?

Paul Eisman

I mean you’ve got to look at everything in that and I don’t have that number. I think that if you’re just looking at pre-flash tower or something to help you with the light ends and get more light crude through that refinery. That’s not a big investment, that’s maybe a $15 million to $20 million investment. But in terms of getting to a specific crude level, I think there is a lot of things that you’ve got to look at.

Paul Cheng - Barclays

Okay. All right, very good. Thank you.

Paul Eisman

Thank you.

Operator

(Operator Instructions). The next question is from the line of Clay Rynd with Tudor, Pickering & Holt. Please go ahead.

Clay Rynd - Tudor, Pickering & Holt

How’s it going guys?

Paul Eisman

Good. How are you?

Clay Rynd - Tudor, Pickering & Holt

Doing well. So you guys had discussed on 3Q call talking about the turnaround upcoming at Big Spring, you talked about possibly doing some kind of funding from the parent ALJ and using some kind of dropdown type instrument to help fund that turnaround. Could you guys update us on that? And delaying it back to 2Q, is that no longer necessary or how are you guys going to fund that turnaround?

Shai Even

The turnaround is going to be funded from cash from operations, however we already from an ALDW perspective, we are calculating the cash available for distributions. We already reserved $23 million of cash available for the turnaround. So that $23 million for sure will not affect distribution for 2014.

And in regard to the vacuum tower for the Detroit recovery project as we are calling it, the total cost of $25 million we said is either going to be funded through third-parties or funded through related parties or parent company and that should diminish the effect on the cash available for distribution for 2014 because we are expecting that to be done over five year period.

Clay Rynd - Tudor, Pickering & Holt

Okay, great. Thanks.

Paul Eisman

Thank you.

Operator

Our next question is a follow-up from the line of Chi Chow with Macquarie Capital. Please go ahead.

Chi Chow - Macquarie Capital

Yes thanks. Just one more question on the logistics projects, Long Beach, Paramount, I suppose eventually Bakersfield. Is the strategy to sell these assets like you did at Willbridge to monetize the value or are you angling towards your own MLP, midstream MLP at some point?

Paul Eisman

Well, I think we are flexible. I mean we felt like we got the value MLP type multiples for the assets at Willbridge. So in that case, we were willing to sell the facility. I think our -- and we talked about this in prior earnings calls, one of our goals is to generate $40 million to $60 million of EBITDA related to infrastructure projects, and then we got flexibility. I mean you could do your own MLP, you could drop it down into somebody else’s MLP or you can consider other things. But the whole goal first of all is to develop the business and then in terms of optimizing the capital structure, we will do that later, but we’ve got optionally to get that done.

Chi Chow - Macquarie Capital

I suppose if you optimize the capacity on your existing, these projects or these assets, does it get you to that $40 million to $60 million range on EBITDA?

Paul Eisman

Well, I think so. I mean the big opportunity here of course is Bakersfield at 140,000 barrels per day, it should be able to generate significant amount of income.

Chi Chow - Macquarie Capital

All right, okay. Great, thanks Paul.

Paul Eisman

Okay. Thanks, Chi.

Operator

Thank you. I am showing no further questions at this time. I’d now like to turn the call back over to Mr. Eisman for closing remarks.

Paul Eisman

Okay. Well, thanks for taking the time to tune in the call and thanks for the questions. And we’ll look forward to talking to you next quarter. Thank you.

Operator

Ladies and gentlemen that does conclude our conference call for today. Thank you for your participation. You may now disconnect.

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