PBF Energy Inc. (PBF) Q4 2022 Earnings Call Transcript

PBF Energy Inc. (NYSE:PBF) Q4 2022 Earnings Conference Call February 16, 2023 8:30 AM ET

Company Participants

Colin Murray - Senior Director of Investor Relations

Tom Nimbley - Chief Executive Officer

Matt Lucey - President

Karen Davis - Chief Financial Officer

Tom O’Connor - Senior Vice President of Commodity Risk & Strategy

Conference Call Participants

Roger Read - Wells Fargo

Neil Mehta - Goldman Sachs

Doug Leggate - Bank of America

John Royall - JPMorgan

Operator

Good day, everyone, and invited to nan PBF Energy Fourth Quarter 2022 Earnings Conference Call and Webcast. [Operator Instructions] Please statement this convention is being recorded.

It's now my pleasance to move nan level complete to Colin Murray of Investor Relations. Sir, you whitethorn begin.

Colin Murray

Thank you, Kevin. Good morning, and invited to today's call. With maine coming are Tom Nimbley, our CEO; Matt Lucey, our President; Karen Davis, our CFO; and respective different members of our guidance team. Copies of today's net merchandise and our 10-K filing, including supplemental accusation are disposable connected our website.

Before getting started, I'd for illustration to nonstop your attraction to nan Safe Harbor connection contained successful today's property release. Statements successful our property merchandise and those made connected this telephone that definitive nan company's aliases management's expectations aliases predictions of nan early are forward-looking statements intended to beryllium covered by nan safe harbor provisions nether national securities laws. There are galore factors that could origin existent results to disagree from our expectations, including those we described successful our filings pinch nan SEC. Consistent pinch our anterior periods, we will talk our results today, excluding typical items.

In today's property release, we described nan noncash typical items included successful our quarterly results. The cumulative effect of nan typical items accrued 4th fourth nett income by an after-tax magnitude of astir $60 cardinal aliases $0.45 per stock related chiefly to nett changes successful adjacent worth of contingent consideration. Additionally, please statement that our 4th fourth taxation complaint was elevated comparative to anterior quarters arsenic a consequence of nan activities successful nan 4th and fiscal twelvemonth adjustments. For modeling purposes, please usage 26% arsenic an effective taxation complaint for 2023.

Also included successful today's property merchandise is guidance accusation related to our operations for nan year. For immoderate questions connected these items aliases follow-up questions aft today's call, please interaction Investor Relations. For reconciliations of immoderate non-GAAP measures mentioned connected today's call, please mention to nan supplemental tables provided successful today's property release.

I'll now move nan telephone complete to Tom.

Tom Nimbley

Thanks, Colin. Good morning, everyone, and convey you for joining our call. Fourth 4th capped disconnected a transformative twelvemonth for PBF. In 2022, our assets generated almost $3 cardinal [ph] of income and earned complete $22 per share. PBF ended nan twelvemonth pinch rate successful excess of debt. The marketplace pinch its tight proviso and request balance, provided tailwinds and nan operations of our refineries enabled america to capitalize connected nan opportunity. Our operations and nan attraction connected strengthening our equilibrium expanse complete nan people of 2022, allowed america to statesman to make incremental returns for our investors. In summation to renewing our dividend astatine $0.20 per stock for nan 3rd 4th of 2022, we announced a $500 cardinal stock repurchase program. Under that program, we person purchased conscionable complete 5 cardinal shares for astir $189 million.

With favorable marketplace conditions and a coagulated operating performance, we expect to beryllium positioned to further reward shareholders pinch expanding returns. To present connected these commitments, PBF remains focused connected our operations and strengthening our financial position. Our assets require continual reinvestment to prolong precocious levels of safe, reliable operations to meet request for our basal products. While remaining committed to our halfway refining business, we are besides investing successful and exploring caller opportunities to nutrient debased c fuels. Refiners travel nan markets and responds to demands of nan user because we are value takers alternatively than value makers. In 2022, nan marketplace was telling america to supply arsenic overmuch refined products arsenic possible. We did. 2023 has picked up wherever 2022 near off. We are going done normal seasonal gyrations erstwhile it comes to circumstantial merchandise request crossed our regions. But overall, nan marketplace is continuing to telephone for refined products, and arsenic a result, requires precocious utilization rates from refiners.

Many of nan cardinal themes that emerged passim 2022 are continuing to group nan shape for 2023. Global inventories of lipid remained low, but are gradually building disconnected a very debased base. The marketplace needs this to happen, but it has been proven difficult for inventories to emergence to normal levels successful nan look of request keeping gait pinch supply. This is existent connected nan refining merchandise broadside arsenic well. Refineries are being called to tally astatine precocious utilization to meet demand. And successful 2023, this will beryllium much of a situation pinch higher-than-average industry-wide attraction activity. Global waste and acquisition patterns are continuing to set to nan sanctions successful embargoes of Russian crude lipid and products. We are seeing nan impacts of this connected nan crude broadside but person yet to witnesser really nan marketplace will accommodate disruptions connected nan merchandise side. The imaginable of China reopening has led to projections of expanding request successful nan Asia Pacific region that will person a knock-on effect globally. We stay constructive connected merchandise balances successful nan Atlantic Basin, particularly arsenic we look up to highest driving season.

Global capacity additions are expected to commence operations passim 2023, which should thief meet rising demand. The cumulative effect of each this is that we are constructive connected nan refining situation successful 2023, notwithstanding nan magnitude of activity to beryllium completed successful our refining system. With safe and reliable operations, we expect to proceed nan betterment successful our financial position and beryllium successful a position to perchance summation shareholder returns. PBF is besides pleased to denote a business pinch Eni sustainable mobility and nan St. Bernard renewables project. We person been committed to nan task from nan plus and are proud to person a world-class partner joining america successful this venture.

Lastly, I want to convey each of our employees. The marketplace demanded a batch from PBF successful 2022. In turn, PBF asked a batch from our employees, and they delivered. The efforts of our labor to support our assets moving safely and tanks for nan products perpetually connected nan move to our customers. enabled america to execute this singular transformation. Thank you.

And pinch that, I will move nan telephone complete to Matt.

Matt Lucey

Thanks, Tom, and Tom is correct. Our operating and financial results for 2022 successful nan 4th fourth are a nonstop reflection of nan tireless activity of our employees.

In 2022, we produced much than 340 cardinal barrels of full products, nan highest level of accumulation our strategy has achieved pinch a utilization of complete 92%. Again, a testament to nan investments we made and proceed making our refineries and nan dedicated workers who make it hap each day. In 2023, accordant pinch manufacture peers, we person an above-average attraction rhythm to execute. That activity has already started successful Toledo, Chalmette and Martinez. The heavy frost successful December straight impacted Toledo and Chalmette. But fortuitously, we were capable to beforehand attraction that had been planned for nan first quarter, which will thief mitigate nan effect of nan downtime. We will person these turnaround activities completed astatine Toledo and Chalmette successful nan coming weeks. We are presently conducting scheme activity astatine Martinez, which will beryllium vanished by nan extremity of this period and person a turnaround starting soon connected nan East Coast. We person further activity astatine Torrance and Toledo successful nan fall.

One of nan benefits of our geographically diverse, highly analyzable refining strategy is that we're capable to strategically scheme our attraction to guarantee we stay progressive successful each markets and proceed to supply needed products to our customers. Supplying nan markets pinch our basal products is what we do and it was demanded of america by our consumers. Over 80% of nan world's power presently comes from fossil fuels. The power proviso cannot beryllium quickly changed done policies attempting to unit premature modulation without important costs and proviso disruptions. It is nan impacts of changing laws, policies and authorities that are mandating aliases incentivizing scarcity successful parts of power stack. Innovation and modulation are bully for nine pinch -- erstwhile approached deliberately.

We should beryllium looking astatine power summation alternatively than a forced transition. All stakeholders request to prosecute constructively to attraction connected nan extremity of providing cleaner fuels while maintaining reliable and affordable power sources that are nan cornerstone of our precocious value of life while elevating group into nan mediate people successful processing regions. With that, we are much than pleased to person entered a business pinch Eni successful our St. Bernard renewable project. This strategical business leverages nan complementary acquisition and expertise of PBF and Eni. PBF brings acquisition successful ample superior task execution and fuels manufacturing arsenic good arsenic entree to nan California renewables marketplace done our existing logistics footprint. Eni brings acquisition successful sustainable feedstock sourcing and renewable fuels manufacturing, coupled pinch entree to world markets beyond PBS' home footprint.

The associated task reflects some partners committedness to present sustainable proscription fuels utilizing low-carbon strength feedstocks. As we person stated previously, we were intent connected uncovering a partner that would adhd strategical worth to nan enterprise, and we judge we person done conscionable that. We perfectly judge SBR will beryllium moreover much successful pinch PBF and Eni moving successful concert. We person gone to awesome lengths successful structuring nan business to guarantee a due alignment of liking betwixt nan partners.

As I've stated, we could not beryllium much pleased successful forming this business pinch Eni. In further pursuit of expanding nan imaginable power options provided by PBF, we are besides and separately portion of a ample consortium referred to arsenic Mach 2, that's Mach 2, referring to nan 2 Hs. We guidelines -- which stands for Mid-Atlantic cleanable hydrogen hub that is pursuing nan improvement of a cleanable hydrogen hub successful Delaware, Southeastern Pennsylvania and South Jersey. Our footprint successful Delaware pinch established manufacturing and proscription infrastructure, provides an opportunity to make incremental worth for diversifying our merchandise statement pinch different substance of nan future, successful this case, hydrogen.

While this task is successful very early shape development, Mach 2 has received nan encouraged nickname from nan Department of Energy and will proceed to move nan task forward. While nan Mach 2 consortium has passed 1 hurdle, we are now successful nan process of submitting nan exertion for backing pinch nan DOE. The acceptance of that exertion will find immoderate backing allocation from nan authorities and subsequently, nan grade of early superior expenses successful narration to immoderate imaginable hydrogen business. While we proceed to grow our alternatives, nan guardant refining marketplace looks very favorable. We expect existent volatility to persist but expanding user request will proceed to support precocious refinery utilization.

Now for nan financial overview, I'd for illustration to present and invited our caller full-time CFO, Karen Davis, No, I said afloat clip arsenic opposed to interim. The modulation pinch Karen has been seamless, and we are thrilled she has agreed to return connected nan role. Karen brings connected a wealthiness of manufacture acquisition arsenic good arsenic heavy familiarity pinch PBF.

Karen?

Karen Davis

Thanks, Matt.

As Tom mentioned, 2022 was a transformative year. PBF entered nan twelvemonth looking guardant to an supra mid-cycle situation and pinch plans to instrumentality a multiyear process station pandemic strengthening of nan equilibrium sheet. We repaid $2.3 cardinal of indebtedness successful 2022 and person now reduced our indebtedness by much than $3 cardinal since nan pandemic aft including our caller redemption of nan 525 cardinal notes of PBF Logistics. During nan 4th quarter, we besides completed nan buy-in of PBF Logistics which will seizure astir $40 cardinal of rate that was starring our strategy annually arsenic distribution while redeeming astir $10 cardinal successful yearly expenses. Additionally, PBF will now admit 100% of nan net owed to nan elimination of nan noncontrolling liking related to PBF Logistics.

For nan 4th quarter, we reported adjusted nett income of $4.41 per stock and adjusted EBITDA of complete $1 billion. Our afloat twelvemonth 2022 adjusted EBITDA was $4.7 billion. You should statement that our 4th fourth EPS was impacted by a higher taxation complaint driven by respective items. The largest of which related to unwinding nan taxation valuation allowance and adjustments related to nan buy-in of PBF Logistics. We afloat released our deferred taxation valuation allowance during nan first 3 quarters of nan year, which had reduced our effective taxation complaint for those quarters beneath our normalized complaint of 26%. Going forward, we expect our taxation complaint to return to a much normalized level arsenic provided successful our guidance.

Consolidated CapEx for nan 4th fourth was astir $327 million, which includes $184 cardinal for refining and firm and conscionable complete $140 cardinal related to nan continuing improvement of nan St. Bernard renewables installation and $3 cardinal for PBF Logistics. Over nan past 3 years, we utilized each disposable levers to support liquidity and show our committedness to prudent equilibrium expanse management. As we beryllium present today, PBF's equilibrium expanse is its strongest ever, and we are committed to maintaining that position. We person excess rate successful excess of indebtedness pinch capable liquidity to service nan needs of nan business. Through nan pandemic to nan present, PBF maintained a level of rate supra what is needed to run nan business and guarantee capable liquidity.

As we advancement done our punch database of nan remaining items we scheme to reside we expect that complete time, our rate should return to much normalized levels successful nan $750 cardinal to $1 cardinal range. Our gross indebtedness is now beneath pre-pandemic levels and astatine a level that we judge is presently due and sustainable for our business.

Our financial capacity complete nan past 1.5 years sets nan shape for a re-rating of our early prospects. Quantitatively, we meet aliases transcend galore investment-grade metrics. Our refinery should proceed to show done rhythm net power, and we are adding diversified net streams arsenic we participate nan debased c substance space. We will proceed to workout equilibrium expanse subject targeting standing agency-driven metrics. With our equilibrium expanse 4 to 5 during nan 4th quarter, we reinstated our quarterly dividend and implemented an progressive stock repurchase program, returning complete $180 cardinal to our shareholders. With nan macro backdrop for refining translating successful higher mid-cycle financial performance, our highly analyzable and geographically divers refining and logistics systems are good positioned to make important worth and supply accrued shareholder returns.

Operator, we completed our opening remarks, and we'd beryllium pleased to return questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first mobility coming is coming from Roger Read from Wells Fargo.

Roger Read

Karen, invited back, I deliberation we get to opportunity to PBF, not conscionable invited to. Question I'd emotion to dive into present is nan astir evident one, which is this associated task statement pinch Eni, recognizing that it's a definitive statement it hasn't closed I'm conscionable funny erstwhile you expect it to close, is it an all-cash transaction up front? And wherever do you deliberation nan merchandise goes? Does this mean it's much apt to spell to Europe than to California, which I deliberation astir of america person assumed from nan get-go?

Tom Nimbley

Thank you, Roger. I'm going to move that complete to Matt. He and his squad person done unbelievable activity successful bringing this to fruition, but I do want to reaffirm really pleased we are because each along, we had -- pinch nan bully twelvemonth we had financially, we knew we could money this task ourselves if we had to, but we had a strategical nonsubjective of uncovering a partner that would bring worth to nan JV. And arsenic Matt mentioned, that's precisely what we did. So we person nan correct business going forward.

Matt Lucey

So Roger, I deliberation you asked possibly 3 different questions, and consciousness free to travel up if there's thing else. But erstwhile -- look, we person to spell done customary support processes. We signed nan statement conscionable complete nan past 24 hours. And truthful there's customary support processes wrong our country, whether it's HSR/CFIUS [ph], location whitethorn beryllium 1 aliases 2 different jurisdictions extracurricular nan U.S. that immoderate needs to activity through. So I expect it will beryllium a mates of months earlier closing. It could beryllium a small spot faster, it could beryllium a small spot slower, but we do person to spell done those benignant of approval, regulatory processes. It is each rate -- nan rate will beryllium paid to PBF -- benignant of divided half and half betwixt signing and -- I'm sorry, betwixt closing and erstwhile nan pretreatment portion becomes operable and truthful astatine closing, immoderate will lend to PBF astir half of nan acquisition price. And past erstwhile nan renewable diesel unit, which we expect to travel online complete nan adjacent month. And past erstwhile nan pretreatment installation comes online, successful some our operating successful concert, nan 2nd costs will beryllium made.

In regards to wherever nan products go, this is very important, and it was very important successful uncovering a partner wherever there's alignment of interest, arsenic I mentioned, nan products will spell to immoderate nan highest netbacks wherever nan markets are calling for nan products nan most. And truthful complete nan people of past year, that's been California. But it's very imaginable complete nan people of adjacent year. It could beryllium successful Europe, sloppy of wherever it is, nan 2 partners are committed to delivering nan products to what will beryllium nan highest economical use for nan entity. And clearly, to nan grade that Europe is going for nan product, there's nary mobility that Eni will beryllium capable to adhd important worth connected our execution of that.

Roger Read

Appreciate that. And yes, I mean we're each benignant of skilled and managed to put 3 parts successful 1 question. My only follow-up is, Tom, I deliberation you mentioned Atlantic Basin looks still beautiful tight connected nan merchandise side. Just what are your thoughts arsenic we caput towards outpouring and gasoline season, outpouring and early summertime successful position of what whitethorn beryllium competing product-wise imports from Europe, things for illustration that.

Tom Nimbley

Very good, Roger. And erstwhile again, you've demonstrated your expertise to get a number of questions in. Congratulations. We are constructive. Obviously, each built connected nan truth that nan inventories while I've been building, and I can't make consciousness of nan stat numbers that came retired yesterday. I don't cognize really we built $16 cardinal accrued, but I'll time off that aside. The truth is inventories beautiful overmuch crossed nan committee crossed nan -- successful nan U.S. and crossed nan globe are tight. They stay good beneath nan 5-year averages successful astir cases. And successful PAD 1 [ph], moreover though location was a large build successful PAD 1 [ph] successful some gasoline and distillate yesterday, beneath nan 5-year averages connected gasoline and distillate. So we spot -- we are constructive.

We are besides constructive connected aliases judge that we're going to spot immoderate tailwinds down gasoline arsenic we move into nan driving season. We're going to evidently beryllium going to debased RVP gasoline. We're going to beryllium taking nan butanes retired of gasoline. We're going to beryllium taking octane distant erstwhile we do that. because butane has a precocious octane, truthful we're going to upwind up having immoderate spot apt a widening of nan ARPOB/PBOB [ph] spread. So overall, we deliberation that things are looking reasonably affirmative for products and possibly gasoline will beryllium starring nan measurement there.

Tom, would you person thing you would adhd to that?

Tom O’Connor

I mean I deliberation conscionable to reiterate your constituent there, I mean, arsenic gasoline's sewage a constructive setup arsenic we're heading into nan driving season. distillate has intelligibly been nan marketplace leader. It's gone done a small spot of a wobble pinch a mild wintertime and arsenic we're really trying to activity done pinch nan Russian balances of state lipid is going, but surely activity astatine this constituent is -- could beryllium moving towards gasoline, but nan distillate balances still stay constructive arsenic well.

Operator

Our adjacent mobility is coming from Neil Mehta from Goldman Sachs.

Neil Mehta

Congrats, Karen and congrats connected nan associated venture. Maybe I'll commencement connected nan associated task I deliberation connected nan past call, nan squad indicated you deliberation of nan task is $400 cardinal of normalized EBITDA. Just wanted to get a now formed of that number and punctual america really overmuch superior is near to beryllium spent connected nan task astatine this point?

Matt Lucey

So if you look complete nan past year, EBITDA has ranged betwixt $1 and $1.50 a gallon EBITDA margin. And we're going to beryllium generating aliases producing conscionable complete 300 cardinal gallons a year. So that being said, markets will tighten and loosen astatine different times. But that's what's happened complete nan past year, and that's benignant of what it looks for illustration currently. So we'll instrumentality pinch that. In regards to really overmuch of nan task has been spent on, we person astir $200 cardinal near to spend, thereabouts. And past obviously, Andy will travel successful benignant of erstwhile we adjacent and erstwhile we go operable, that will offset nan spending for PBF clearly.

Neil Mehta

Yes, that's really clear. Okay. And past connected rate balances, you're astatine $2.2 billion. Karen, you had indicated you want to get to $750 cardinal to $1 cardinal of rate complete time. Do you person -- really should we deliberation astir nan cadence of really agelong it takes to get to your normalized rate balance, particularly because you sewage incremental rate coming successful associated pinch nan associated venture? And past what is your preferred measurement of getting that rate down? Is it done buybacks?

Karen Davis

Again, aggregate questions. But first, a reminder that though we did decorativeness nan twelvemonth pinch a beautiful precocious rate equilibrium astatine $2.2 billion, location are a number of calls connected that rate First of all, a reminder that we did redeem $525 cardinal successful further indebtedness conscionable a fewer weeks ago. Matt mentioned completion of nan task astir $200 million, and we person a very dense turnaround schedule successful summation to repurchasing shares. So location will beryllium a very disproportionate usage of rate successful nan first half year. With respect to return of capital, financial resilience successful nan equilibrium expanse are ever going to travel first. We're going to guarantee that nan guidelines business is sufficiently funded and prepared to upwind adverse trading marketplace conditions. And you should besides beryllium reasoning that included successful that we'll beryllium backing our yearly superior program, which should mean successful nan $600 cardinal to $650 cardinal [ph] scope complete nan agelong term.

Like 2023, wherever we person a dense turnaround schedule, it will beryllium much different years it will beryllium less. And arsenic nan rate generates rate aliases arsenic nan business generates rate beyond that, past we'll expect to beryllium successful a position to proceed and perchance summation shareholder returns. But fixed that we conscionable restarted our dividend and approved our first buyback program. We're not successful a position to comfortably supply an further guidance connected nan gait of returns. Having said that, we judge it's important to support a competitory dividend pinch room to turn and to money buyback programs erstwhile it's appropriate.

Operator

Your adjacent mobility is coming from Doug Leggate from Bank of America.

Doug Leggate

Karen, congrats connected nan imperishable seat. Now you person to woody pinch each of us. Forgive maine for beating connected Neil's question, but fto maine possibly conscionable inquire it differently. Why should we not deliberation astir nan proceeds from nan associated task translating straight to stock buybacks? Because your operating rate travel takes attraction of each nan different things you talked about. So are we looking astatine a 15% buyback pinch nan rate inflow from nan JV?

Karen Davis

Well, first of all, I'd opportunity we are conscionable delighted to beryllium partnering pinch Eni and astatine nan moment, conscionable focused connected closing nan deal.

Doug Leggate

You're not discouraging maine from reasoning that way?

Matt Lucey

We would ne'er discourage you to deliberation immoderate measurement you want. It's a futile -- immoderate effort would beryllium futile. But look, we've been very, very focused connected getting nan transaction to nan constituent wherever we are today. The transaction hasn't closed yet, and I learned a long, agelong clip agone not to fig retired ways to walk money that you don't person successful your pouch yet. Clearly, nan institution will put guardant policies that are due astatine nan due time, but we person thing other to adhd astatine nan moment.

Doug Leggate

Terrific result regardless. Guys, my 2nd mobility is benignant of a micro question, but a small nuanced. At nan extremity of past year, folks were getting beautiful agitated astir nan heating lipid position successful nan Northeast. And it seemed to america that was for illustration nan first normal wintertime without -- since COVID without Philadelphia Energy Solutions refinery successful place, which there's intelligibly a alteration successful dynamics of nan East Coast market. So I conjecture my mobility is, what are your expectations for wherever I opportunity nan first normal driving play successful nan Northeast, which is evidently your backyard. Do you deliberation nan dynamics of that marketplace of permanently shifted but possibly not go afloat evident yet fixed we've had 3 years of COVID since that refinery shop. I'm conscionable funny for your opinion.

Tom Nimbley

That's a awesome question, Roger. I'll show you my view.

Doug Leggate

It's Doug, Roger is nan different guy.

Tom Nimbley

I americium sorry. Roger has already had his turn. I'm sorry, he does. Actually, I judge what you said is correct. We should spell backmost to nan truth that there's a mates of things that activity successful each benefit. But PES going down, it was a large deal. We -- that was evidently nan largest refinery successful PAD 1 [ph]. The pipelines are beautiful overmuch coming up from nan Gulf Coast. So erstwhile you get -- and that was surely nan lawsuit pinch nan distillate situation, arsenic group were concerned that we would not beryllium capable to capable successful nan market. In summation to PES, we had travel by chance spell off-line arsenic a consequence of nan pandemic. So PAD 1 [ph] has gone into a business wherever chronically, it was ever been you each cognize this. It's a dumping crushed for Europe to move gasoline in. Now we've sewage a different business successful Europe, and we person a importantly different business successful PAD 1 [ph] and successful fact, successful nan U.S. and of course, nan golden because of nan magnitude of capacity that's been rationalized. So, I deliberation it's sewage nan imaginable to beryllium a structurally short market.

And erstwhile you spot -- we'll see, we're going to show it correct now. Bayway FCC [ph] is going done a turnaround. That's a large gasoline producer, obviously, very ample feline cracker. But we saw that manifest itself. We've seen it manifest itself successful spiking pitchy prices and distillate prices wherever location was a interest astir supplying nan market. We're not going to spot what we had past year, I don't believe. But successful fact, I do deliberation that is simply a strategical displacement successful capacity utilization. And we're going to person to tally disconnected aliases difficult to meet nan merchandise request successful nan country, successful nan world and successful PAD 1 [ph].

Operator

[Operator Instructions] Our adjacent mobility is coming from John Royall from JPMorgan.

John Royall

I conscionable had a mobility connected nan $8 to $8.50 per tube OpEx guidance successful 2023. It looks for illustration a apical adjacent magnitude from '22, which is already elevated contempt little earthy gas. So has this summation each connected maintenance? Or are location different drivers you should beryllium reasoning about?

Tom Nimbley

Certainly, location are different drivers. And that correct now, obviously, Henry Hub [ph] connected state prices, but that's not needfully nan existent for nan different regions successful nan country. So we've sewage immoderate increases successful power cost, but we besides are seeing inflationary pressures successful a batch of nan business that person resulted from nan truth that ostentation is high. So -- and nan different point we've sewage is nan summation successful turnarounds that evidently there's -- that's superior cost, but location were immoderate different further attraction costs that spell on pinch that.

John Royall

Great. That's helpful. And past I think, Tom, you mentioned successful nan opener, you've spoken astir nan Europe sanctions nan February 5 day is travel and gone truthful far, it felt for illustration a nonevent, but still very early days. And truthful really do you expect those actions to effect nan marketplace arsenic we get deeper into nan year?

Tom Nimbley

Well, it's going to beryllium -- I'll inquire Tom O'Connor tin to adhd worth connected this, but it's a activity successful advancement correct now. Obviously, Russia came retired past whether is simply a Friday, and said to Thursday, that they are going to alteration crude accumulation by 500,000 barrels a day. And they said that was because their payback connected nan sanctions that person been put connected them. Some group person said that they deliberation that's because nan truth that nan export prohibition connected products went into spot aliases nan caps that successful fact, they person to commencement to shed runs because they're starting to build inventory. Recognize that Russia pumped a bunch of diesel into Europe successful January successful beforehand of nan February 5 date. And successful fact, that has had an effect connected nan marketplace. It's conscionable simply excessively early successful my mind for america to spot whether aliases not which measurement this is going to go. I deliberation there's immoderate chance that it could beryllium for illustration crude. They're going to find ways to get waste and acquisition flows done they are going to waste much barrels to Africa, that's clear. But whether aliases not they tin waste each of nan barrels that are being displaced because they tin proviso nan European marketplace is thing that remains to beryllium seen. Tom [ph]?

Tom O’Connor

Yes. I mean I deliberation what adds to that is nan front-loading, arsenic you Tom described, is really important to talk astir astatine this point. I mean Europe really did front-load an atrocious batch of request successful December and January. And now we sewage to find a location for nan marketplace needs to find a location for, conscionable telephone it, 600,000 barrels a time of diesel that had been going into Europe. We've seen truthful far, astir half of that seems to person recovered immoderate homes, whether it's been successful South America aliases successful West Africa. The different half is little observant astatine this point. So I mean, to telephone it a nonevent. I deliberation we don't really cognize nan result of nan event. I deliberation what we tin opportunity is prices person travel off, but I deliberation that's benignant of nan operation of nan buildup and successful beforehand of it. And past besides erstwhile again getting backmost to nan mild winter. But I think, arsenic Tom said, really benignant of complete nan adjacent respective months, we'll person a small spot much transparency successful position of nan information that we tin spot wherever those waste and acquisition patterns person adjusted, which would see Europe astatine that point, taking much merchandise from nan U.S. aliases from eastbound of Suez to fulfill nan proviso that they've lost.

Tom Nimbley

One point we tin definitively opportunity is arsenic a result, some connected nan crude broadside and connected nan merchandise broadside arsenic a consequence of nan waste and acquisition patterns being dislocated. The costs of proscription to get to nan marketplace is going up. Freight is going on. And that will yet put a instauration astir -- arsenic an advantage if you are successful a travel area wherever you are producing your products and not having to put them connected a vessel and trading them into a marketplace.

Operator

We've reached extremity of our question-and-answer session. I'd for illustration to move nan level backmost complete to Tom Nimbley for closing remarks.

Tom Nimbley

Thank you very much, everyone, for joining nan call. We look guardant to updating you further astatine nan extremity of nan -- erstwhile we do nan first 4th call. Have a awesome day.

Operator

Thank you. This concludes today's conference. You whitethorn disconnect your lines astatine this time. We convey you for your information today.