Delek US Holdings, Inc. (DK) Q4 2023 Earnings Report, Transcript and Summary

Good morning ladies and gentlemen and welcome to the Delek US Fourth Quarter Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Tuesday, February 27th, 2024. I would now like to turn the conference over to Rosy Zuklic, VP Investor Relations. Please go ahead.

Good morning and welcome to the Delek US fourth quarter earnings conference call. Participants on today's call will include Avigal Soreq, President and CEO; Joseph Israel, EVP Operations; Reuven Spiegel, EVP and Chief Financial Officer; Mark Hobbs, EVP Corporate Development. Today's presentation material can be found on the Investor Relations' section of the Delek US website. Slide 2 contains our Safe Harbor statement regarding forward-looking statements. We'll be making forward-looking statements during today's call. These statements involve risks and uncertainties that may cause actual results to differ materially from today's comments. Factors that could cause actual results to differ are included here as well as in our SEC filings. The company assumes no obligation to update any forward-looking statements. I will now turn the call over to Avigal for opening remarks.

Thank you, Rosy. Good morning and thank you for joining us today. During the fourth quarter, our operation ran well at the higher end of our guidance. We did a good job of focusing on what we could control. With that, I would like to thank each member of the Delek team. From a market perspective, during the quarter, we saw a weakness in product demand, consistent with the seasonal trends. In refining, we achieved record total throughput in the quarter, but still see opportunities for further operational improvement. Joseph will provide the details of our refinery operation and progress at Big Spring. We delivered another record quarter in our logistics segment. The consistent strong performance from our logistics segment validates our favorable position in the Permian Basin. Our [indiscernible] segment reported its best Q4 outside of COVID year 2020. Turning to the full year, 2023 was a strong year for Delek. We achieved $950 million of adjusted EBITDA. We made significant progress on our key objectives. As a reminder, they are operational excellence, financial strength and shareholder return, and executing our strategic initiatives. In terms of operational excellence, our team delivered a solid performance across all businesses this year. We made strategic investment in our people and us. This improved our foundation for profitable and sustainable growth. Our planned major turnaround of the Tyler refinery was completed on time, on budget, and with no recordable incidents The result was improved reliability, yield recovery, and stronger capture rate. We are very focused on our safety practices and pushing for constant improvement. I'm pleased to report that 2023 was our best year on record for safety performance. This includes personnel and processes. Turning to financial strength and shareholder return. We continue to be shareholder friendly. In 2023, we returned $146 million of shareholders through dividends and share buybacks. We also improved our financial position by using our strong cash flow to reduce debt by $454 million. We made progress on our strategic initiatives. As a result of our cost reduction effort, we find more efficient ways of working. This has delivered tangible results. For example, our inventory management has resulted in improvement in both earnings and debt levels. We are making progress to reach our goal of $100 million run rate cost reduction. Lastly, significant headway was made towards unlocking value intrinsic in our business. Now, turning to Slide 24. our key priorities have not wavered. We'll continue our drive towards operational excellence, staying focused in safe and reliable operations. We have turnaround of our Krotz Springs Refinery in Q4 of 2024. Joseph will give context on the improvement we expect Post turnaround. We'll also talk about additional initiatives we are undertaking in the refining segment. Financial strength and shareholder returns, will remain key. We believe we are well positioned to capture opportunities. We'll continue our disciplined capital allocation with the best interest of our stakeholders in mind. We look to deliver strong portfolio performance and results. We'll continue to optimize the balance sheet and remain committed to sustainable and competitive shareholder returns. In 2023, we returned $146 million to shareholders, $85 million of this was share buybacks. As we demonstrate in 2023, we are committed to shareholder returns, based upon free cash flow. If we execute 2024, we'll remain and maintain this approach. And we'll keep a balanced approach between improving our financial strength and shareholder return. On our strategic initiatives, we'll remain focused in advance. For 2024m we estimate our CapEx to be approximately $330 million, which reflects a reduction from 2023 levels. The capital program show our dedication to maintaining safe reliable operation, enhancing our portfolio with strategic growth projects and delivering shareholder value while maintaining our financial strength and flexibility. In 2024, we will continue to explore opportunities in the energy transition space, this meet our return to capital objectives. We announced earlier this month at our Big Spring Refinery was selected by the Department of Energy for a project that will advance carbon capture technology, safe environmentally responsible manner. This project will serve our industry well, into the decades to come. Now, I would like to turn the call over to Joseph, who will provide additional detail on our operations.

Thank you, Avigal. Moving to slide 5 through 7. In the fourth quarter our team processed a back to back record high 306,000 barrels per day of total throughput. In Tyler total throughputs in the fourth quarter was approximately 79,000 barrels per day. Production margin in the quarter was $11.54 per barrel and operating expenses were $5.13 per barrel, which reflects approximately $0.55 per barrel of an employee benefit accrual and accelerated Tank Farm work. In the first quarter, the estimated total throughput in Tyler is in the 71,000 to 74,000 barrels per day range. In El Dorado, total throughput in the quarter was approximately 88,000 barrels per day, a record high throughput from the plants. Our production margin was $4.94 per barrel and operating expenses of $4.58 per barrel. Estimated throughput for the first quarter is in the 82,000 to 85,000 barrels per day range. After working the El Dorado fundamentals, in the past several years and improving reliability, the team is focused on profit improvement opportunities mainly in the crude sourcing, asphalt and wholesale areas. By accessing heavier grades in Eldorado, we will use existing refinery configuration to improve asphalt capabilities and optimize margins, by increasing regional sales of our pipeline on the light products side, we will improve commercial optionality. In Big Spring, total throughput for the quarter was approximately 58,000 barrels per day, driven by maintenance work mostly reflected in our guidance, but with the additional discoveries that we have addressed. Our production margin was $6.5 per barrel, including an estimated unfavorable $3.40 per barrel impact from the maintenance activities. Operating expenses in Big Spring were $8.98 per barrel, including approximately $1.90 per barrel related to the additional maintenance. $1.40 per barrel for the integrity program and $0.40 per barrel related to employee benefit accrual. Estimated throughput for the first quarter is in the 63,000 to 66,000 barrels per day range. In Krotz Springs, total throughput was approximately 81,000 barrels per day. Our production margin was $4.93 per barrel and operating expenses were $4.83 per barrel. Krotz Springs team is preparing for the fourth quarter turnaround, which will include regular maintenance as well as major upgrades to our FCC and [indiscernible]. Execution cost is estimated at $115 million and expectedly term from the upgrades is approximately $30 million per year coming mainly from yield and rate flexibility improvement and energy efficiency. Plant's throughput for the first quarter is in the 73,000 to 76,000 barrels per day range and for our entire refining system implied throughput target is in the 289,000 to 301,000 barrels per day range as we position our oil sales for the gasoline season. In the fourth quarter, wholesale marketing contributed a loss of approximately $20 million. This is a $40 million negative variance for the third quarter. The decrease reflects seasonal trends along with challenging Mid-Con supply/demand dynamics and lowering prices. We are expecting our commercial initiatives to provide us with a better optionality in the future. Asphalt marketing contributed approximately $5 million compared with $15 million in the third quarter and consistent with our seasonal trends. In summary, 2023 was an important and successful year for our system in many ways. Our focus on people, process and equipment is giving us a strong foundation to optimize what we have and positioned our system for growth while Tyler, Krotz Springs and El Dorado have optimized operations over the years. We remain confident about our progress in Big Spring for reliability ahead of the coming gasoline season. US refining market dynamics for 2024 are constructed and we are well-positioned to capture this opportunity. I will now turn the call over to Rosy for the financial variance.

Thanks, Joseph. Starting on slide 8. For the fourth quarter of 2023 Delek US had a loss of $165 million or $2.57 per share. Adjusted net loss was $93 million or $1.46 per share and adjusted EBITDA was $61 million. Cash flow from operations was $91 million. On slide 9, the waterfall of adjusted EBITDA from the third quarter to the fourth quarter of 2023 showed that the primary driver for the lower results was from refining. This reflects the significantly lower cracks in the fourth quarter relative to the third quarter. Logistics set a new record quarter at over $99 million. Retail was down largely due to seasonal trends, although we were in a falling crude environment. We saw lower margins but maintained strong volumes at our stores. Corporate segment costs improved compared with last quarter largely due to lower employee benefit expenses. Moving on to slide 10 to discuss the cash flow. We do $80 million in cash during the quarter, ending the fourth quarter with a balance of $822 million. Cash flow from operations as I said was $91 million. Included in this amount is a positive $223 million of working capital. This was largely from improved inventory management and lower product prices, reflected in receivables. Investing activities of $69 million is mainly for capital expenditures. Financing activities of $101 million primarily reflects paydown of debt and return to shareholders. This includes $41 million debt repayment, $20 million in buybacks, $15 million in dividends and $10 million in distribution payments. On slide 11, we have the breakout of the 2023 capital program and guidance for 2024. Full year 2023 was $372 million. Approximately 80% of the spend was for sustaining and regulatory projects, which include the major turnaround at the Tyler refinery and reliability work at the Big Spring refinery. Our forecasted 2024 capital program is $330 million, which included $255 million for sustaining and regulatory projects and $75 million for growth projects. In refining, we plan to invest $220 million with 93% of the capital dedicated towards sustaining and regulatory projects, most of which is for the Krotz Springs refinery major turnaround scheduled during the fourth quarter of 2024, as well as projects at the Big Spring refinery to improve capture rates. In logistics, the Company expects the capital program to be approximately $70 million, with $50 million for growth projects. Growth projects will advance new connections in both the Midland and Delaware gathering systems, enabling continued volume growth at the partnership. The retail segment capital expenditures are expected to be approximately $15 million. Funds are dedicated to maintaining Delek's 250 convenience stores including interior, rebranding and reimage imaging initiatives. The corporate and other segment includes approximately $25 million of capital expenditures, which is primarily to fund IT improvements. Net debt is broken out between Delek and Delek's logistics on slide 12. During the quarter, we drew $80 million of cash and paid down $41 million of debt, ending the quarter with a net debt position of $78 million. Finally, slide 13 covers outlook items. In addition to the guidance Joseph provided, for the first quarter of 2024, we expect operating expenses to be between $215 million and $225 million, G&A to be between $60 million and $65 million, D&A to be between $90 million and $95 million and net interest expense to be between $80 million and $85 million. We will now open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] One moment please for your first question. Your first question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Yes. Thank you so much, team. I guess the first question is just an update on the sum-of-the-parts unlock. I know Avigal, it's something you've talked about over the last couple of years since your latest thinking around that and the milestones we should be watching.

Hey Neil, how are you. Maybe you know how much energy we have on topic in the beta during the content significant headway in there some of the funds going to happen. One issue that Mark, you want to add more?

Yes, Neil. At this point, I would say like although we don't have anything specific to update or per se at this time, but we remain committed to highlighting the value that's intrinsic in our business and we're working hard towards that. But what I would say that anything that we may do, we are very focused on enhancing, not only our balance sheet across all of our businesses, but we are positioning our company to generate and deliver attractive shareholder returns for the foreseeable future. So we're taking all of those things into consideration.

Okay.

Just sort of little out, I might appreciate it.

Yeah, we'll stay tuned. The follow-up is just on the quarter was a little bit softer than what we expected. I guess, I just love your perspective on maybe some onetime impact, sounds like marketing could be a dynamic there. And as we think about the sequential build from 4Q to 1Q, as Mid-Con margins have strengthened a little debt through the quarter, do you -- anything that you would want us to keep in mind as we think about incrementals and decrementals.

Yeah. So Neil, you can see it very easy to see that we had a record during the quarter and the investment needs all the guidance to give in terms of G&A, OpEx, very strong cash flow. Supply and marketing obviously had a weaker, which is in line with the seasonal trend -- and we've seen that line of supply marketing that the previous quarter and a big positive in Q2. So there is some seasonality into that line, which is more market-driven. But listen, we are focusing on what we can control, and we did a good job during the quarter, Joseph, I don't know if you are an that visible.

Yeah, the wholesale marketing contributed a negative $20 million in at to positive $5 million consistent with the seasonal trend. Wholesale marketing was challenged, and I think you heard it from the close finals beyond seasonal trends, driven by incremental in the Mid-Con. Whether it kept the demand in margins, especially in December and going through generally freeze. The other element in 4Q was the normal reproduce, which help filing capture were the rate value really generated by wholesale marketing -- blended at this point. So in the past several weeks, we don't point the inventory situation in the Mid-Con have result through most of supply and demand products, the commercial optionality focus in El Dorado, which we discussed in the prepared remarks would help us in the future to navigate through this type of sales volatility.

Thanks, Joseph. Thanks, Team.

Thank you.

Thank you.

Your next question comes from John Royall with JPMorgan. Please go ahead.

Hi. Good morning. Thanks for taking my question. So my first one is on working capital. You've talked about the inventory management side, and you mentioned there wouldn't be a reversal of 3Q's tailwind. It looks like not only did it not reverse, but you had an even bigger tailwind in 4Q despite the falling crude price. Can you speak a little bit more to your efforts around working capital and inventory management? And is there more to go there? Should we expect further working capital tailwinds going forward, all other things equal?

Yeah, absolutely, John. I would -- asked Reuven maybe to give you some more color around it.

Sure. Good morning and thank you for the question. I mean, we took a more holistic view around our balance sheet health from the beginning of the year. So the third and fourth quarter were capital were really the fruition of some of the initiatives that we have on, obviously, managing and optimizing inventory was one of them. We did a big chunk of it in the third quarter, but the -- we completed the work in the fourth quarter and that contributed roughly €190 million to working capital. In addition to that, we had the ZBB effort, which we already accomplished on a run rate $80 million saving the year, of which $57 million were realized in 2023, mostly in the third and fourth quarter. Our focus was debt reduction. So reduce debt by roughly $450 million and that, along with the safety and reliability efforts kind of contributed to the end results of the working capital. I think with regard to going forward, we kind of reached an equilibrium at the level of inventory we want to manage. So it will be more a result of quarterly events that will impact the working capital in the future.

Okay. That's really helpful detail. Thank you. And then could you talk about some of the opportunities you mentioned around energy transition. I think you mentioned carbon capture at Big Spring. Is this committed at this point? And is there any capital in the 2024 budget for this? And can you also remind us just on the status of the option you've had on the renewable side that you've spoken to in the past?

Yes, absolutely, John. So, at this point, we've elected to negotiate with the DOE, but there is no material CapEx -- capital for 2024. And we're going to do everything we will do under this FICC benchmark that we put on ourselves on the cost of capital return or from IRR standpoint. So, they are not going to break that metrics. But just from a holistic standpoint, you can see a very nice system running, the big spleen and they look at our marketing to read them in this area and were elected the Tulsa refinery to elect -- to electric energy transition by the DOE, which is a very big deal. And we believe that those projects will be further in the future and we will make -- will make a capital advantage or capital -- to meet our capital benchmark. Another option we have on the renewable diesel. We are looking at that very carefully. Obviously, it's a cheap way to get the look into renewable diesel has to consider a 5,000 have renewed -- renewable diesel later, so we are fortunate not to commit to $200 million, $300 million and then there is a benefit from that. So we were fortune around that but the margin is very close to that. I don't know Mark, if you want to add anything around the option.

Yes, sure. Around the option, John, what we we're obviously monitoring it very closely. Our understanding based on publicly available information that they're intending to start commissioned the facility in the first quarter. And then we will watch it as it runs through the first quarter and the second quarter. And once they hit a run rate for 90 days at 80% utilization. And that's when we would have the opportunity to take a look at it, but we're monitoring it closely as it is. I would also say, it could be a potentially an attractive and low cost opportunity for us to acquire a meaningful position in a well located in a renewable diesel facility. So, we're watching it closely.

Thank you.

Thank you, John. Appreciate it.

Your next question comes from Roger Read with Wells Fargo. Please go ahead.

Yes, thank you. Good morning.

Good morning, Roger.

Just two questions from me, both on the operational side. Just again, to follow-up on the supply and marketing, sort of let's call it, headwinds in Q4. Is there anything as you look at Q, it says does it reverse, right? I mean I know, it's market conditions. There's a limit to what you can, -- let's say, the buttons you can push to change that but maybe just give us an idea of how that's kind of evolved the first couple of months of this year.

So, we are not going to give guidance to this line in some -- this is markets there was a market usually give. So, we'll be consistent with our builds around that. Overall, there is a positive trend, correlated to seasonal -- driving seasonal. We all are seeing the information around -- from a macro standpoint around gasoline and diesel. We are -- gasoline we are looking at around a five-year average below and in diesel we are at the lower end of the five-year average. So both the nuclear constructive but beyond the general market information, we are not going to give a guidance for the supply and marketing. You have something to end.

I can add beside that one thing. I think that the only thing I would maybe add, Roger, is the fact that some of the weather impacts that Joseph referred to and he said in his prepared remarks were persistent through January, and I think others saw that. And so, that would be the one thing that I would just be mindful of that that obviously will be reflected in that line.

Okay. Fair enough. Although I guess it seems the weather is more benign here as we are two-thirds of the way through, so if you get a tailwind. The other question I have and this is on slide 7. Big Spring refinery has been -- typically we think of it as one of the better units overall in the Company. But it's been a challenge here recently. You've got the reliability improvement the $100 million, two-thirds roughly this year, third next year. What would you point to as we look at, let's call it progress. The first two quarters of the year that you're going to get capture rate above 70. I mean, is it just that the unit should run more consistently, is there some actual changes in the facilities that would affect yield, or changing crude you're going to put in there something along those lines. Maybe just kind of help us understand what we should look for as the favorable road signs as we go through 2024?

Yeah for sure. And Joseph will give a complete answer. But I would just say from a big picture standpoint, Big Spring is a refinery that's new to us, consisting 70,000 barrels a day of throughput in all and it is $525 OpEx, you can see the trend yield before, and there is no reason we cannot bring it back to where it used to be. And that's the highlight of the $100 billion. So if we realized consistent as that refinery used while in the past there is no reason we cannot get to what it used to be in 2023.

As we mentioned in the remarks, positioning Big Spring’s ability to serve us well for LNG through the coming gasoline season, we have been on clear execution path under litigation, people, process and equipment and gaps. And it would mitigate the different rates. We should see improvement in our ability, meaning knowledge and capture, cost structure. So as we've communicated in the past, we are expecting throughput to stabilize north of 70,000 and it comes from a 17%. Clearly, Roger, on mid-cycle basis OpEx run rate should stabilize around [indiscernible] barrel by end of the year, and the linear reduction maybe you'll say load off the barrel reduction is linked quarter until end of year probably be on a good assumptions. So bottom line, it will take all of these, I mean, people and process equipment to get to where we want to get. And we are very encouraged by the closeness we have commenced and this surprises as the time goes by and we are very confident about total capabilities already in Big Spring.

All right. Appreciate that. Thanks.

Your next question comes from Matthew Blair with TPH. Please go ahead.

Thank you and good morning. I wanted to follow-up on the sum of the parts efforts and appreciate you're hard at work here. My question is could you talk about your openness to a sale of your retail assets and how attractive would a retail sale be relative to some other options that you might have?

Yeah. Matthew, it's a great question. Everything is on the table and we are active. They have more than one fortnight [ph], so absolutely.

Okay. And then my follow-up is on your trading and supply activities, what do you think normalized annual EBITDA for this line item should be? I have an old note in here that says roughly $130 million to $210 million as an annual ballpark figure. And I think that compares to roughly $50 million in 2023. So what do you think going forward trading and supply should contribute on an annual basis?

We don't give guidance for that line, and we will remain consistent with debt with the partners, amount of deals, and Rosy, I think you have a lot of energy around that topic.

Yeah, the thing I would say, you may have an old note based on what previously we would have in there as you said trading and supply, the lines no longer trading and supply its supply and market again. And again what we have in there is three components. There's the wholesale marketing, there's the asphalt marketing, and then we have the supply business and you know the wholesale marketing and the asphalt business, you can have a little bit more stability. Now they do have fluctuations based on market conditions, case in point with Joseph spoke about the fact that we had a $40 million variance between the third quarter and the fourth quarter because of the Mid-Con environment that we saw in the fourth row the constant parity. And then obviously, the movement in the rand prices. And fall tends to be a little bit more and more stable. You've got seasonality with the fact that the months the quarters during the summer months tend to be more stable and stronger. And you got the first quarter in the fourth quarter being a little bit on the weaker side. So I think the fourth quarter is a good indicator of what a first fourth quarter tend to look like and then you've got stronger quarters in the middle. The third component being the supply. That was the one that's a little bit harder to model because you did -- the supply business handled both supplying our refineries from a crude perspective and also unloading the refineries and also supplying our DKL system, right? And so depending on disruptions throughout the entire system, you may have a little bit of fluctuation right? So but the other two pieces are a little bit easier to model.

Great. Thank you.

Your next question comes from Kelly Ackerman [ph] with Bank of America. Please go ahead.

Hey, guys. Doug sends his regards from the West Coast. I've just got a couple also on slide number 6 here. I guess the first question is on the crop turnaround. Just hoping that you can give us some idea of the scope of the work that you're performing, and how that could potentially drive better commercial performance on the back end, whether that's reliability or whether that's in yield. And I guess same question for Eldorado, as you're thinking about the commercial opportunity there?

To step in if we start with the uncertainty about the UK towards things and I will give some more color on the oil fields.

Yeah. First, I'd like to remind everyone that we titled an annualized $18 million improvement ahead of the final turnaround, which we achieved when apples to apples and multi-execution assumptions. We actually achieved 24, but the margins were better. So it's exactly what we expected. Back to Kaylee and Sal, we are expecting $30 million to the year coming from maybe three things. One is a code unit piping scope that will help our yield and rate flexibility. In other words, we will make more jet fuel and have more catch-up capacity. Second is LCCU. We're going to put a new reactor in there. We're going to make some regenerative upgrades that will provide us with improved conversion and yields. And in addition, we are expecting better energy efficiency with coupled turbines that we're replacing and higher reform and catalyst activity post-turnaround.

I appreciate that. I guess the next -- go ahead.

If you want some highlights around Eldorado, Joseph prepared in his prepared remark that we are planning to run a bit more heavy slate in Eldorado and take advantage of the weakness that we have been seeing of Canadian grades, heavier grades. And we're also addressing wholesale opportunity in the area. So Eldorado is a refinery that was built to run heavier than we were running, versus what we were running it, and we are trying to capture that opportunity.

And it's really kind of the limit when you think about Eldorado because of its configuration. In order to have heavy benefits from optionality, make asphalt improvement or asphalt quality and impacts, and also wanted to really contribute to that system capture.

I'm so sorry for interrupting, guys. My follow-up question is just trying to understand the scope of the work. The scope of the work plan seems like it goes through 2025. So I'm trying to understand if that suggests that 2025 CapEx is going to be very similar to 2024, and I'll leave it there.

Are you asking about the 2025 scope for Eldorado?

Well, you lay out this capital commitment or these accomplishments for 2023 through 2025, I think, on slide number 7. So given that the work plan is basically known for 2025, I'm trying to get a handle on what 2025 capital looks like, if you've already defined the work. So I'm trying to figure out if that's similar to 2024?

Yeah. So the entire scope for Cape South is 24, with the 115 that we mentioned, and it's a part of our capital program for the year. With regards to Eldorado, there is no cost estimate to this point. It's mostly commercial excellence and non-home and blending. And we will come back later in the future [indiscernible] like you know, talent providing upgrades with [indiscernible]. I know that a year from now.

And that is the -- slides 24 to 25. As you can see big spleen which is not related to capital. Some of the upside is coming 2025. This release and the slide says 24 to 25 don't seem to get it to a format -- to a capital commitment for commitment to 2025, just to make it very clear. That was not the intent of the slide. The slide will say that the benefit is going to come over time, but the turnaround which is the heavy capital during 2024 going to be completed in 2024

I got it. That's very clear. Thank you.

Your next question comes from Jason Gabelman with TD Cowen. Please go ahead.

Yes. It's Jason Gabelman. Thanks for taking my questions. I wanted to ask about shareholder returns that wasn't discussed yet. I think the past few press releases you had disclosed buybacks quarter to-date at the time the press release came out for earnings. You didn't do that this quarter. So wondering if you have made any buybacks quarter to-date and the outlook for repurchases through 2024.

Hey, thanks for the question. I will give an overview about what we are thinking and how we think about the capital return to investor. So first of all will be -- we are very committed to shareholder return. We had a from free cash flow this year over $146 million of return, $85 million of the buyback and $61 million of dividends. We are committed to maintain the same philosophy going into 2024. And there you can probably appreciate that we've bought 8% -- 8% of our sales of 2023. So nothing of what we are disclosing is the way to suggest any waiver of our boat. We are very committed to shareholder return. We want to see as I said market leader around it and we are pointing us to the path to that standard.

Okay. So sorry it's a bit difficult to hear you. Does that 8% level kind of something you feel like that's achievable either in 2024 and or in a mid-cycle environment?

So in fact it was not a midcycle environment. We want to do it from free cash flow. So we are committed to this and the find -- do you have in finding more will depend on market condition as opposed to project market condition. And I'm optimistic about market condition, but you will hold me to that number and I don't want to be held to a number that the market conditions driven. You need to understand the state of mind is find ways to bring return to shareholder. On the short term, medium term and long term and we are committed to all of them. And you have seen that as you have seen us demonstrate that Jason last year very nicely. We did. We did exactly what we said we're going to do and we will keep doing what we say it was going to do.

Okay. Understood. And maybe just your comment on demand that you're seeing in the niche markets that you operate in?

And so I think there's there was enough discussion by the weather in everyone of course -- we are not going to talk about weather. Other than weather we have a very good niche market and we are very blessed and optimistic on that.

Okay. Thanks.

You bet.

[Operator Instructions] There are no further questions at this time. I would now like to turn the conference over to Avigal. Please proceed.

Thank you. I would like to thank my colleagues around the table for great quarter, to thank the Board of Directors, our investors who joined us for this call. And most importantly to our employees that make this company what it is and we'll talk to you again in the next call. Thank you, operator.

Thank you. Ladies and gentlemen this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.