CVR Refining's (CVRR) CEO Jack Lipinski on Q1 2016 Results - Earnings Call Transcript

| About: CVR Refining, (CVRR)

CVR Refining, LP (NYSE:CVRR)

Q1 2016 Earnings Conference Call

April 28, 2016 01:00 PM ET

Executives

Jay Finks - VP of Finance

Jack Lipinski - CEO

Susan Ball - CFO

Analysts

Johannes Van Der Tuin - Credit Suisse

Neal Matta - Goldman Sachs

Jeff Dietert - Simmons

Chi Chow - Tudor Pickering Holt

Operator

Greetings, and welcome to the CVR Refining First Quarter 2016 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jay Finks, Vice President of Finance for CVR Refining. Please go ahead, sir.

Jay Finks

Thank you, Kevin, and good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR Refining first quarter 2016 earnings call. With me are Jack Lipinski, our Chief Executive Officer, and Susan Ball, our Chief Financial Officer. Prior to discussing our 2016 first quarter results, let me remind you that this conference call may contain forward-looking statements as that term is defined under federal securities laws. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words outlook, believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements.

You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

This call also includes various non-GAAP financial measures. The disclosures related to such non-GAAP measures, including reconciliations to the most directly comparable GAAP financial measures, are included in our 2016 first quarter earnings release that we filed with the SEC this morning before the opening of the market.

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

Jack Lipinski

Thank you, Jay. Good afternoon everyone and thank you for joining our earnings call. This morning we reported a net loss of $68 million in the first quarter of 2016 as compared to a net income of $46.7 million in the first quarter of 2015. Our first quarter 2016 adjusted EBITDA was $35.1 million compared to $161.7 million in the same period a year ago.

Operationally, Coffeyville completed the second phase of its bifurcated turnaround on schedule and ran 106,000 barrels a day of crude for the quarter. Wynnewood ran 78,000 barrels a day of crude, resulting in a combined crude throughput for the first quarter of 184,000 barrels a day. This overall crude rate was slightly above our guidance of 170,000 to 180,000 barrels a day in our last earnings call.

We had anticipated – in our last call, we had anticipated running Wynnewood at reduced crude rates for the remainder of the first quarter. However, we did increase crude rates at Wynnewood as margins improve from the lows of early February. During the first quarter, we gathered 67,700 barrels a day, which compares to 67,500 barrels a day in the same period a year ago. We continue to be focused on expanding as we have increased our gathering footprint into the front range of the Rockies.

As I discussed on our last earnings call, we witnessed continued weakness in Group cracks through January and early February. Cracks hit their lows on February 9, and began to rebound until they peaked in mid-March. They have moderated somewhat since.

The NYMEX 2-1-1 Crack Spread averaged $13.88 per barrel in Q1 and that compares to $22.80 per barrel in the first quarter of 2015. The Group 3 2-1-1 product basis averaged a negative $3.45 per barrel as compared to a negative $4.01 per barrel in the first quarter of 2015. The negative product basis was primarily driven by gasoline. The Group 3 gasoline basis averaged a negative $5.88 per barrel, and the distillate basis averaged negative $1.01 per barrel during the first quarter of 2016. The Group 3 2-1-1 Crack Spread averaged $10.43 a barrel in the first quarter as compared to $18.79 in the same period of 2015.

In addition to lower crack spreads, our margin capture was negatively impacted by the turnaround. As a reminder, the impact of the turnaround is two-fold. While costs we incur are reserved for purposes of available cash, the lost earnings while the plant is down, are not reserved and results in lower available cash for distribution. As a result of weak margins in the turnaround, we will not have a distribution this quarter.

I will turn the call over to Susan to discuss the financials. Susan?

Susan Ball

Thank you, Jack, and good afternoon, everyone. As Jack previously mentioned, in the 2016 first quarter, our adjusted EBITDA was $35.1 million as compared to $161.7 million in the same quarter of 2015. The decrease was primarily driven by lower realized margins and the second phase of Coffeyville’s bifurcated turnaround.

In the first quarter of 2016, the more significant adjustments to our net loss of $68 million that are utilized to derive adjusted EBITDA were adjustments related to the major scheduled turnaround expenses of $29.4 million, a loss on derivatives not settled during the period of $22.6 million, and unfavorable impacts under the first in, first out, or FIFO, inventory accounting method of $8.8 million.

Adjusted EBITDA is further adjusted for cash needed debt service and reserves for environmental maintenance and capital expenditures and for major scheduled turnaround expenses as well as other future operating needs as determined by the Board of Directors of our General Partner to derive available cash for distribution.

Moving forward each quarter, we will continue to review remaining previously established reserves and evaluate future anticipated needs under our capital plans and future major schedule turnaround plans to determine additional reserves need to ensure adequate levels are maintained. We may also reserve amounts for other future operating or capital needs as determined by the Board.

After consideration of the reserves for the quarter, as Jack mentioned, there was no available cash for distribution. We are a variable distribution master limited partnership, and as a result, our quarterly distributions, if any, will vary from quarter-to-quarter due to several factors. For example, crude oil and feedstock prices, refined product prices, crude throughput rates, RINs expense, capital needs and other reserves deemed necessary by the Board of Directors.

In the first quarter 2016, our realized refining margin, adjusted for FIFO, was 120.5 million or $7.19 per barrel as compared to 272.8 million, or $15.03 per barrel in the same quarter of 2015. This decrease is primarily driven by lower Group 3 crack spreads, increased RINs expense and again, the impact of the second phase of Coffeyville turnaround.

The PADD II Group 3 2-1-1 crack spread averaged $10.43 per barrel in the 2016 first quarter as compared to $18.79 in the same period of 2015. Our first quarter 2016 RINs expense was $43.1 million as compared to $36.6 million in the first quarter of 2015.

Our consumed crude oil discount to WTI for the 2016 first quarter was $1.53 per barrel as compared to a $1.10 per barrel in 2015. The Coffeyville refinery reported a refining margin, adjusted for FIFO impact, of 69.2 million in the first quarter 2016, or $7.15 per crude throughput barrel, as compared to 169.2 million, or $14.82 per crude throughput barrel in 2015. The decrease was primarily associated with lower Group 3 crack spreads and again the impacts of the second phase of the turnaround during the first quarter.

In the first quarter of 2016, the Wynnewood refinery reported a refining margin, adjusted for FIFO impact, of $50.2 million, or $7.09 per crude throughput barrel, as compared to $102.2 million, or $15.18 per crude throughput barrel in the first quarter of 2015. The decrease was primarily due to lower Group 3 crack spreads during the 2016 first quarter.

Consolidated direct operating expenses, excluding turnaround expenses, were $5.27 per barrel of crude oil throughput in the first quarter of 2016 as compared to $4.79 in the first quarter of 2015. The increase on a per barrel basis was primarily associated with higher personnel costs and lower crude throughput during the second phase of Coffeyville’s turnaround. Partially offsetting these increases were lower natural gas costs.

At the refinery level, Coffeyville’s direct operating expenses excluding turnaround expenses were $4.92 per barrel of crude throughput in the first quarter of 2016 as compared to $4.42 per barrel in the 2015 first quarter. Wynnewood’s direct operating expenses excluding turnaround expenses were $5.74 per barrel of crude oil throughput for the first quarter of 2016 as compared to $5.43 per barrel in the first quarter of 2015. The increase was primarily associated with higher repairs and maintenance expenses and personnel costs. Partially offsetting these increases were lower natural gas costs and higher crude throughput.

We ended the 2016 first quarter with cash and cash equivalents of $145.9 million and we had availability under the AVL facility of $245.3 million. Our total long-term debt outstanding including the current portion was approximately $579.6 million which was comprised of $500 million, 6.5% unsecured notes, approximately $48.1 million of capital leases and $31.5 million drawn against the intercompany revolver provided by our parent CVR Energy. At March 31, 2016, we had availability under this revolver of $218.5 million.

First quarter 2016 capital expenditures totaled $44 million. Of the total capital expenditures in the first quarter, $25.3 million was related to environmental and maintenance capital and $18.7 million was related to growth capital. In 2016, we estimate total capital spending will approximate $180 million of which approximately $124 million is estimated to be environmental and maintenance capital spend with the remaining being growth capital primarily associated with the hydrogen plant project at the Coffeyville refinery.

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

Jack Lipinski

All right, thank you, Susan. I will spend a few minutes here talking about the second quarter. We find ourselves in another lower refining cycle, margin cycle and just based on my many years of experience this too shall pass. So far in April, crude cracks are averaging about $12 a barrel and unlike prior years, inventory in the group remain high. We would have expected the seasonal Q4, Q1 inventory build to drop by now.

Currently, Magellan gasoline inventories are approximately 700,000 barrels higher than last year and distillate is about 400,000 barrels higher than last year. I do remain optimistic as we continue to see strength in gasoline and distillate demand in the group. Low priced gasoline will help balance inventories where people are driving more and buying larger vehicles and we do expect margins to improve as we head into the driving season.

RINs have become a more significant drag on our earnings. Since the new volumetric announcement on November 30 last year, RINs prices have almost doubled. The RINs market is very opaque, it creates winners and losers and it’s doubtful that it incentivizes additional blending as the EPA has said on many of occasions.

Today ethanol is roughly $0.15 per gallon above gasoline in the group. Clearly this does not incentivize renewable energy due to the negative economics of blending and that doesn't even take into account the terrible mileage you get on ethanol and that's something that consumers should be focused on.

We believe renewable energy has its place in the market, but also believe the renewable fuel standard as it is today is clearly a broken program. We remain focused on gathering logistics assets and are looking to expand our footprint either organically or through strategic partnerships. Additionally we've increased the amount of heavy crude refined at Coffeyville due to the positive economics of processing heavier Canadian crude.

Today we're running roughly 24,000 barrels a day of heavy Canadian which is approximately 10,000 barrels a day higher than we averaged for all of 2015. We estimate our total crude throughput for the second quarter will range between 190,000 and 205,000 barrels a day for the combined refineries.

Operator, at this point we are ready for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question is coming from Ed Westlake from Credit Suisse. Please proceed with your question.

Johannes Van Der Tuin

Hi, it’s Johannes Van Der Tuin here actually. Hope you are all doing well.

Jack Lipinski

Thank you for calling and asking questions, appreciate it. Say hello to Ed for us.

Johannes Van Der Tuin

Will do. First question has to do with the quarter. It was no doubt a quarter that you had previously flagged would likely be impaired because of the turnaround. I think everybody expected that, but it was also as you noted a market environment that was very challenging I think for the industry as a whole and for your area specifically. If we're trying to read through the next winter do you expect an improvement or do you think that next winter is going to have to have a market environment which is going to be similar when it comes to winter grade gasoline just because there's a lot of winter grade capacity?

Jack Lipinski

Well, if you go back and look at margins in October and November, I don’t want to use the term inexplicably high, but they were higher than anyone would have expected going into a shoulder season. So if you're - if you have high margins, refiners as a group or individually make decisions daily about how much crude they want based on economics. And when you looked at the economics of October and November, it clearly incentivized running at higher than normal rates which then put more barrels into inventory and we continue to see the build of inventory and that’s an overhang that we're seeing right now. I don't believe that if you look forward curves or anything else, I think the forward curves are low simply because margins do tend to roll up the curve in these kind of environments, but I don't expect them to be nearly as robust as we – as they were in '15. So a long way of saying that I don't think we're going to see the kind of run rates that we did which is impacting Q1 and the early part of Q2.

Johannes Van Der Tuin

Okay. And then on the crude side of things, what are you seeing in terms of crude availability from the stack these days and if you were going to continue to maintain the heavy that you put into your system, is there way you can increase it and how does that affect your gasoline yields coming out the other end?

Jack Lipinski

Okay, in general just because Coffeyville - let me answer the second one first. Coffeyville has a -- it’s a mid-sour refinery so we blend heavy Canadian with lighter sweeter crudes to meet a sulfur limitation. At somewhere between 24,000 and 26,000 barrels a day, we hit that sulfur limitation. So we are running higher rates today, but they can't go much higher just simply because of metallurgical constraints and in times past it is like we always had a pretty good differential between Canadian and Midland or WTI, you pick what you want. The difference is that the margins realized margin on running a lighter sweet was greater than it is today. So we would then run more light sweet, because we could run more barrels than we could with Coffeeville at high rates of heavy Canadian, okay. At very, very high rates we might have to trim our overall throughput by a little Bit.

Go ahead. And then the first question was - I am sorry I lost in my own answer here.

Johannes Van Der Tuin

Availability of light sweet coming.

Jack Lipinski

Light sweet of out of the stack. We are continuing to get light sweet out of the stack the greatest amount oil that we're getting is really out of the SCOOP near Wynnewood, okay. We have availability to both. We see those as truly growth areas for us. But at a $50 market, we will see lots more as people drill as they complete their docks. We know that there has been drilling, we know that there is a lot of uncompleted wells, but we see steady, very steady production out of the SCOOP.

Johannes Van Der Tuin

And then if I may just a last question very quickly. I noticed that the CapEx for 2016 came down by about $20 million from the last projection to the current projection. Is that expected to come out of future quarters or did some of that come out of the past quarter?

Jack Lipinski

That will be for the year, we have about 50 some odd million dollars to spend on our hydrogen plant which will be complete by the end of Q2. The remainder is going to be pretty much split across all the quarters. In these kinds of environments what you do is you go back and review your capital plans and we go back and return them.

Operator

Your next question is coming from Neal Matta from Goldman Sachs. Please proceed with you question.

Neal Matta

Jack can you just speak to the M&A environment and just how you think about, are there assets on the market with the pressure on margins and the valuations of some of these companies and assets, is there an opportunity to take advantage of that in the foreseeable future?

Jack Lipinski

Well, we are always looking interestingly, if you are looking for let’s say refineries, there is really not much out there right now. I mean, there is people that you could look at but it hasn't gotten so bad that people are just looking at investing assets but we are looking at any potential in the refining sector. We are heavily focused on the midstream to see if there is anyone out there. A lot of the midstream players however are backed by private equity right now and they are not ready to capitulate. If you continue to see crude markets bounce up and down like they are its going to give people hope. But we now have another downturn and I’m not predicting one from $45 oil, it’s going to stress more people as you get closer to $50 oil it’s going to put a little bit of the faze on everybody earnings and people will not be willing to drop at reasonable prices.

Neal Matta

In terms of just the earnings loss in the fourth quarter and the first quarter, does that flow through in anyway the second quarter in a sense that, does it constrain the amount of dividend that you can distribute in the second quarter as you have to catch up for some of those previous quarters or it doesn’t work like that.

Jack Lipinski

If you see the way that we handle our reserves, obviously the company has significant cash reserves. And the first quarter I think I said it last quarter we were not going to go back and recapture, nor are we this quarter. So we are starting it, these have not been significant changes and so we're just going to start with a clean sheet of paper going forward.

Neal Matta

And last question from me Jack, just on derivatives, just where do you stand in terms of your hedging program right now and I didn't see that detail in the CVR release and so just a quick update there would be great?

Jack Lipinski

We have some carryover cracks that we put on about 18 months ago that is the only thing that we currently have hedged right now. We do have some pre bought midland and things like that but that was mentioned a couple of earnings calls ago. In today’s market with the market being backwardated there is, you will not see us going out and selling any of those numbers because we fully believe that the cracks will roll off the curve.

Operator

Your next question today is coming from Jeff Dietert from Simmons. Please proceed with your questions.

Jeff Dietert

You've talked about a Wynnewood turnaround that’s planned for I believe first quarter of ’17. Could you update us on those plans and maybe compare and contrast the level of the Coffeyville maintenance that you just completed versus what you're expecting in Wynnewood?

Jack Lipinski

Well interesting point is that Coffeyville is a mid-sour refinery that we run really, really hard and its turnaround schedule is pretty much four to four and half year on a go forward basis. The longer we look at Wynnewood we are doing maintenance as we go but Wynnewood has primarily run nothing but sweet crude for the last couple of years. And while we do online testing, we do everything that’s necessary but at this point, we will likely be moving that turnaround back to the end of ‘17 and maybe even bifurcate it just simply because sweet crude plants can go much longer 5,6, 7 years or more. So what we're seeing is we are not - we’re running a plant high on rate but not high on something that would cause for liability issues. So we're running it hard of rate but not hard on feedstock. So likely we will be moving the turnaround out.

Jeff Dietert

And just the sour crudes are more challenging for the equipment and require more regular maintenance than --.

Jack Lipinski

Typically and again not to get too detailed, and I’ll leave this to the people that are closest to it but if you run a crude that has low corrosion and you run it through equipment you don't suffer net loss to the extent that you would if you are running higher asset or higher sulfur crudes. And so while metallurgy is different in everything else, the safety issues are constantly reviewed, we look at metal thicknesses, we look at different things and as units come down and up just for whatever reason and they do, units - you have unscheduled outages most of them tend to very short but we can go in and do some fixes that will keep us running longer but it's not unusual. When we first started the schedule we had Wynnewood at the Q4 of ‘16 on a four-year schedule. And again my comment that sweet crude plants can run five to seven years kind of puts Wynnewood in a different window than Coffeyville.

Jeff Dietert

Coffeyville refinery coming out of turnaround, where there any noticeable enhancements to the refinery, any feedstock in the yield enhancements anything that we should think about for Coffeyville going forward as opposed to how it's run historically?

Jack Lipinski

Well, on the margin we are – we’ve made some changes at the cap that had it been beneficial, we are - we've done some other things that may lower our future environmental costs. The short answer is yes we did a lot of quick little projects that are a few million dollars a year in benefit but nothing major don't forget Coffeyville had a $1 billion invested in it since - it's been our last acquisition in ’05. So there is not much left to do, the last unit that we are doing is this hydrogen plant and I don't see very much else as far as big equipment or even changes in crude rate, you might have heard me talk about it sometime ago that technically we can actually get Coffeyville running above 132. But we tend to run out of all the downstream equipment and then the other thing is just being able to get product out, I mean we are running very high 90% utilization on our outbound capacity. While talking about that just I mentioned it a long time ago that we had taken space on Magellan’s new line and into the Little Rock area and that's going to be coming on we're going to be moving product down that direction as well. But that's just a little sweetener in the coffee.

Jeff Dietert

With regard to cash distributions going forward, the cash on the balance sheet is down but you're not expecting to have to build that backup. What are kind of the major factors that you’re monitoring the coverage ratio as far as maintaining the balance sheet and making distributions?

Jack Lipinski

What we do is, the cash on our balance sheet is primarily what we need to cover our sustaining, our maintenance capital, our environmental capital and our turnarounds. And we don't run it to keep the cash balance for coverage ratio. So you know the reason we were able to pretty much ignore the small negative in Q4 and this nominal $15 million offset in Q1 is simply that we had reserved the fair amount on our balance sheet and with Wynnewood’s turnaround moving out, we don't really feel uncomfortable for a long-term reserve.

Operator

Thank you. Our next question today is coming from Chi Chow from Tudor Pickering Holt. Please proceed with your question.

Chi Chow

Thanks. Good afternoon. Jack, I guess just a full clarification on this reserve issues, so are you saying that you will not, there will not be any $15 million catchup on the CapEx reserve that was lower in the first quarter?

Jack Lipinski

Okay. Just understand that our reserves may change over time for a number of reasons. One of the reasons will not be a catch-up here, okay. But if we believe that our turnarounds are going to be more expensive, we have more debt service or we need more capital, we will change quarterly our reserve, so that we can meet our anticipated needs. Okay, because just think about it, the one thing when we went public, we said that we would not change our results for 24 months, two years and we actually went longer than that.

But we do understand that just even in turnarounds for example, you have a 3% to 4% annual escalation in cost if you do no more work. So, over time, these reserves will have to increase, but they will increase solely because we didn’t reserve and we left that money on the table in Q1 and Q4. So the takeaway is that while we have tried to keep it steady, we’re finding ourselves in a situation where we're probably going to have to make changes more often than to declare an annual type of number.

Chi Chow

Okay. So you've been running at 31 million a quarter on the CapEx reserve, 9 million roughly on the turnaround reserve, is there any guidance you can give us going forward what the changes might be?

Jack Lipinski

No, I mean, again moving Wynnewood back in a turnaround gives you more quarters to adjust for it, and then of course in the environmental reserve, that is something that we will review quarterly. It’s just our friends in the government are here to help us, so we just need to make sure that we help ourselves and don't find ourselves underspending in environmental health and safety. And then as you know, we're critically focused on sustaining capital. So things come up. Sometimes, you can go for a longer period and we did go for a very long period without having to increase our reserves.

Chi Chow

Okay, thanks. And then, on your working capital, it looks like it's been driven down in the first quarter to about 220 million, what's the normal working capital level that you are comfortable with and especially with both plants up and running at full rates now?

Susan Ball

I guess two things, the cash needed to maintain our working capital. We've always said that we like to maintain a level of 75 million for that purpose. The decrease that you’re seeing in the working capital is it’s relative to lower valuation of inventories. That's kind of driven that down, but generally at 200 million to 250 million type working capital we’re comfortable with.

Chi Chow

Okay, great. And maybe one final question, Jack, and maybe this is even, you were alluding to this earlier in your prepared comments, there's been a high number of your competitors in the mid-con and other regions that have executed expansion projects at their respective refineries over the years, what impact do you think that’s having on the supply demand balance in your region, and is this one potential cause of the high inventory levels that you referenced in the Magellan system?

Jack Lipinski

I kind of agree with you, people on the margins do continue to increase their throughputs. Obviously, that's an individual decision that people make. But ultimately, I mean today, we are still somewhat out of balance, we are a slight niche market, we’re an import market, but that has changed dramatically over the last five or eight years because we took ourselves from 95 to 132, others in the area have raised rates and it has impacted the amount of products, something like this line that Magellan is bringing in, into that.

I know that the are several shippers in the group that are going to avail themselves to that, so that will basically move product there and then we also expect further movement south overtime on the Magellan system towards El Paso and other locations. We see that more and more. We believe ultimately, the group will move product and start supplying not necessarily the Dallas market, but parts of Texas, as well as Arkansas, maybe even Mexico. I don't know if the exports would come out of the group to go down to Mexico, but I think what's happening is we see, in play, movement to take product east and south out of the group.

Chi Chow

Great. That’s helpful comments. Thanks, Jack. I appreciate it.

Jack Lipinski

And again, we still rely on explorer to provide barrels into Tulsa, but it's not as much as it was years ago.

Operator

Thank you. Our next question is a follow-up from Neal Matta from Goldman Sachs. Please proceed with your question

Neal Matta

Hi, Jack. Sorry for the follow-up here. But just want to ask you, so on the gasoline cut, do you think the industry broadly, US refining is maxed out in gasoline at this point, and if so, if we have a strong demand this summer and we can't run any more gasoline, that would be the bull case for gasoline, but to the extent you think that there is further room to go that could be an offset to that argument?

Jack Lipinski

I can't see it with the widespread between gasoline cracks and distiller cracks. I couldn't imagine why anybody would want to make this slip at the expense of gasoline today. I mean, so I'm just saying that I can't imagine that there is more gasoline sitting in somebody's pocket. If all the cats are running, you have couple of cats down right now, it doesn’t take very long to change the whole market dynamic, but I can't imagine, I know they are not, we are max gasoline every drop we can make. I can't imagine that anyone else who is running a good economics and planning shop would be doing anything different, unless they have some very special circumstances.

Operator

Thank you. Our next question is coming from Ed Westlake from Credit Suisse. Please proceed with your question

Johannes Van Der Tuin

Sorry, just another quick follow-up questions. I noticed that your debt metrics are just drifting up overtime. I was wondering if you have a target level that you target have in your heads or if you think that they are going to continue to go up or come down over time.

Jack Lipinski

I mean our target is generally no greater than two times, and that's a soft target, but that's pretty much what we have in the back of our heads. When we first started out the company, we were targeting to be one and just as things go on, you actually do overtime, we will need capital for expansions and things like that and hopefully that the EBITDA generated from that will pay for the increased debt service.

Johannes Van Der Tuin

And the move from one times to 2 times, is that with an eye of then ultimately bringing it back down or it just strategically seems more likely that you should stay at kind of closer to two times level?

Jack Lipinski

I think it's just to be cautious. You don't want to be over-levered, refiner don’t want to be over-levered. And it's like, I've been through this so many times, those folks that had decent balance sheets made it through the last downturn without issue and two times seems a comfortable level, if not a hard and fast level. You certainly have certain smaller companies that are above that and they are being punished.

Operator

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Jay Finks for any further or closing comments.

Jay Finks

Thank you, Kevin. I'd like to thank everyone again today for joining our conference call. As a reminder, the call will be available for replay over the next 14 days. You can get it on our website cvrrefining.com or contact Investor Relations for additional information. Thank you.

Operator

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

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