Q4 2023 PBF Energy Inc Earnings Call
Participants
Colin Murray; IR; PBF Energy Inc.
Matthew C. Lucey; President, CEO & Director; PBF Energy Inc.
Karen Berriman Davis; Senior VP & CFO; PBF Energy Inc.
Timothy Paul Davis; SVP of Supply, Trading & Optimization; PBF Energy Inc.
Thomas J. Nimbley; Executive Chairman; PBF Energy Inc.
Roger Read; Analyst; Wells Fargo
John Royall; Analyst; JP Morgan
Doug Leggate; Analyst; BofA Securities
Ryan Todd; Analyst; Piper Sandler & Co
Manav Gupta; Analyst; UBS
Neil Mehta; Analyst; Goldman Sachs
Paul Cheng; Analyst; Scotiabank
Jason Gabelman; Analyst; Cowen
Presentation
Operator
Good day, everyone, and welcome to the PBF Energy fourth quarter and Full Year 2023 earnings conference call. At this time, all participants are placed in a listen-only mode and the floor will be open for your question following management's prepared remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.
Colin Murray
Thank you, Ted. Good morning and welcome to today's call. With me today are Matthew C. Lucey, our President and CEO, Karen Berriman Davis, our CFO, and several other members of our management team. Copies of today's earnings release and our 10 K filing, including supplemental information, are available on our website for getting started, I'd like to direct your attention to the safe harbor statements contained in today's press release, statements in our press release and those made on this call that express the Company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the Safe Harbor provisions under federal securities laws.
There are many factors that could cause actual results to differ from our expectations, including those described in our filings with the SEC. Consistent with our prior periods, we will discuss our results today, excluding special items. In today's press release, we describe the special items included in our quarterly results. The cumulative impact of the special items increased fourth quarter results by an after-tax amount of approximately $700,000 or $0.01 per share primarily relates to a change in the fair value of contingent consideration associated with the Martinez acquisition and a benefit related to a change in the tax receivable agreement liability offset by a decrease to our gain on the formation of SPR and our share of the SBR.
lower cost of market inventory adjustments. Also included in today's press release is further guidance information related to our expectations for the first quarter of 2024 for any questions on these items or follow-up questions, please contact Investor Relations after the call. For reconciliations of any non-GAAP measures mentioned on today's call, please refer to the supplemental tables provided in the press release.
To now turn the call over to Matt Lucey.
Matthew C. Lucey
Good Hope, but good morning, everyone, and thank you for joining our call. As we close the books on last year, PBF achieved its second best financial year in 2023. Over the course of the year, we further enhanced equity value by reducing our debt by over $700 million, and we returned $640 million directly to shareholders through dividends and share buybacks. The Company was able to purchase $150 million of our shares in the fourth quarter. I'm pleased to announce that our Board of Directors has approved an incremental $750 million share repurchase authorization. This resets our program to just over $1 billion of remaining capacity. We ended the year with our balance sheet transformation complete and our strongest financial position ever.
As we look at the quarter, the West Coast operations had clear challenges, operations outside of the West Coast were reasonable. Our East Coast and Gulf Coast systems performed well in their respective markets with capture rates broadly in line with prior quarters, while Toledo operated well the Mid-Con market was certainly challenging at times. Gasoline cracks were at or near negative numbers. This phenomenon in the Mid-Con during the fourth quarter is not new and somewhat of a return to normal seasonality. Importantly, we've seen a recovery in the Mid-Con product cracks.
As February began. Our West Coast system underperformed largely to our overlapping planned and unplanned maintenance activities. This was unfortunate convergence of circumstances where we had both assets undergoing maintenance, while not the plan. It was the reality. In Q4, we completed the major FCC turnaround at Torrens and as mentioned last quarter, we experienced unplanned Flexi coker downtime at Martinez.
The SEC was delayed, getting restarted and the coker work ripple through Martinez operations, the delayed restart Torrance and the unplanned Martinez work cost us approximately $100 million of lost profit and an additional $32 million and operating expenses. And looking at our tariff sheet, you'll see the West Coast we consume less heavy crude as a percentage of input, which increased costs, our production yield and less high-value products, notably gasoline. As a result of the delays and downtime, we did build high-priced crude inventory, which will be consumed in the first quarter. Again, while Q4 was clearly disappointing in California, I believe our West Coast system will be significant contributors to our results in 24 as it has demonstrated over the last few years.
Looking ahead to Q1 across the system, we have a hydrocracker turnaround in Toledo beginning this month. SEC. turnaround on the East Coast beginning in March, with industry maintenance across the refined space increasing, we have seen significant improvements in our market cracks in February. Indeed, the outlook for 24 is constructive, and we are focused on positioning our assets to perform to their potential global refining capacity, including new additions and refined product demand remain tightly balanced.
The refining industry has not been able to sustain product inventory builds and balances remain tight to historical levels with growing demand. Disruptions in historic trade flows and patterns are creating tension in the market that is accruing G accruing to US refiners, specifically coastal U.S. providers such as PBM. With this favorable market market backdrop, PBF should continue delivering strong earnings and free cash flow and generating long-term value for our shareholders.
On the regulatory front, we are pleased to report that we have reached an agreement with the Barrick Bay Area Air Quality Management District on a path forward with regards to regulation six, five, which would which will achieve the mutual goal of lowering particulate emissions. Consistent with expectations, we're able to reach a settlement where we will comply with Rule six five without any mandated incremental investment when the rule goes into effect in July of 2026.
Additionally, we do not expect any material changes to our operations or product yield as a result of the regulation. As we saw promoted activity earlier in the quarter, combined markets will continue to be volatile. The global refining system and PBF in particular will be nimble, adapting to market conditions. The focus will be, as always on maintaining consistent operations, coupled with disciplined, rigorous capital allocation.
Before turning the call over to Karen I want to take a moment to publicly thank all CBS employees for operating safely. Last year, PBF reported its best year in our history from a personal safety perspective across all segments of our business, including our employees and the contractors who work in our facilities on a daily basis. The achievement of the lowest lost-time incident rate in our history is a testament to the focus of each and every person in the Company in executing their daily routines with the utmost professionalism and care.
With that, I'll turn it over to Claire.
Karen Berriman Davis
Thank you, Matt. For the fourth quarter, we reported an adjusted net loss of $0.41 per share and adjusted EBITDA of $117.2 million for the full year 2023, PBF reported adjusted net income of $11.32 per share and adjusted EBITDA of more than $2.6 billion. Cash flow from operations for the quarter was just under [$306 million], including a working capital benefit of $59 million. Consolidated CapEx for the fourth quarter was approximately $233 million, which includes $221 million for refining, corporate and logistics, and approximately $12 million in final payments related to SVR construction costs for full year 2023. Consolidated CapEx was approximately $1.2 billion, which includes approximately $312 million to complete the FBR facility on a go forward basis.
Capital expenditures for SDR will not be reflected in PBF. consolidated numbers. We continue to demonstrate our commitment to shareholder returns through our quarterly dividends and share repurchase program in 2023 we paid over $105 million in dividends and repurchased approximately $533 million of PDL shares. Dividends paid in the fourth quarter totaled more than $30 million, reflecting the 25% increase in the quarterly dividend rate announced last quarter. In the fourth quarter, we repurchased $150 million of PBF. stock, more than $3.3 million shares since the program was introduced in December of 2022 through yesterday or in just over a little year's time, we have completed approximately $740 million in total share repurchases, more than $17.6 million shares. We have reduced our total share count to just under $120 million shares.
During our third quarter call, we commented that our work to fortify our balance sheet was largely complete over the past three years. We have reduced debt by over $3.4 billion, which in turn reduced our annual interest expense by over$ 200 million. In addition, we eliminated the overhang of our environmental credit payables by reducing the liability by $900 million, and we retired our inventory intermediation agreement at a cost of $268 million. These efforts, which totaled nearly $4.8 billion, had enhanced our equity value and produced a balance sheet with investment grade level credit metrics.
One comment on our outstanding environmental payables. At year end, our rental liability was fully committed with the reduction achieved in 2023, we have brought down the balance to near what we would consider the upper range of normal. As a reminder, the current balance represents PDF’s commitments across a number of environmental credit programs, not just trends now that we are in the business of generating credits through SVR, we are going to actively manage our consolidated positions in order to take advantage of market pricing and structure and to reduce our overall costs. Individual comp components may shift based on our commercial strategy. And we expect that Maintaining this balance in the $200 million to $400 million range is appropriate over the long term over the course of 2024. You can expect the $430 million that was outstanding at year end to be reduced to this range over the coming quarters.
The balance may fluctuate depending on market conditions and commercial strategy. We ended the quarter with almost $1.8 billion in cash and approximately $1.3 billion of debt. Also of note, the final payment of the Martinez earnout, which we expect to play in April now stands at approximately $21 million, down from last quarter's estimate of nearly $95 million. Sustainable dividends and share repurchases are important components of our overall long-term capital allocation and shareholder return objectives.
Maintaining our firm financial footing and strong balance sheet remain priorities to the extent our operations continue to generate cash beyond the needs of the business and the requirement to continuously invest in our assets. A greater percentage of that cash should be available for shareholder return. As always, though, we will look at all opportunities to allocate capital through the lens that directs cash to the option that generates the greatest long-term value for our shareholders.
Operator, we've completed our opening Mark's, and we'll be pleased to take any questions in a moment, we will open the call to questions.
Question and Answer Session
Operator
The Company requests that all callers limit their turn to one question and one follow-up. You may rejoin the queue with additional questions. If you would like to ask a question, please press star one on your telephone keypad. Confirmation tone will indicate your line is in the question queue. You may press star two. If you would like to remove your question from the queue participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys One moment, please while we poll for questions. Two.
Your first question comes from Roger Read with Wells Fargo. Please proceed.
Roger Read
Thank you and good morning. I guess, Matt, you kind of hit on it and some of your opening comments, the IEA out today with a bucket of cold water over the oil and gas industry. But I was just curious how you see demand as you look across your your nationwide approach, obviously, you've had some pretty rainy weather in California. We've had the snowstorms in the East Coast, but looking through those items How do things look on the demand side in terms of reasonable?
Matthew C. Lucey
Obviously, you touched on it in regards to the seasonality and weather. It was really wet in California. People generally don't go out as it's really cold in the Gulf Coast people a lot of drive. And indeed, we just had some weather here in the Northeast that certainly impacts it. But that seasonal, I think going in to the remainder of the year, um, I'm fairly pleased where I was much more cautious on the soft landing going back over the last couple of years and overall GDP and the economy were very constructive.
Roger Read
Okay. And then a follow up on the share, let's call it cash cash returns to shareholders. Whichever method takes a comment made about having an IG quality balance sheet. Is there anything you're doing different than till you?
Would you receive an IG rating or you have what you have and we should look at it as that will be a well, I don't know, let's call it a nice feather in your cap or something like that, but doesn't really alter the way you think about things or will will help you down the road and the way we should think about total returns for the Company?
Matthew C. Lucey
I'll make a couple of comments and then ask Karen to comment in terms of doing anything differently. I don't think so. I and we would maintain the balance sheet that we're having today because it's the right thing to do and there are a number of benefits, some of which we've already gotten to in terms of trade credit. We have market participants that can see through the rating agencies. I was born of the credit world. That's where began like in my career in banking and the credit agencies are going to be slower. And that's just a reality. That's that's not news to us. We have good relationship with each of them. I think we're going to continue to demonstrate that. Indeed, we have a market leading balance sheet on any credit metric someone wants to pull off. So we're operating our business as we would have the credit rating agencies didn't exist. We do want recognition for what the reality is, but that that will take some time.
Karen, I don't know if you had any other comments.
Karen Berriman Davis
I just would add that our goal of achieving investment grade rating is based not only on the benefit of the obvious benefits of reducing our weighted average cost of capital and certain other expenses that we also think it might give us access to a greater or broader base of shareholders, you know, those that are non-investment grade rating is sort of confirms that the underlying fundamentals are strong and that it will be an appealing leasing to longer-term investors.
Roger Read
I would agree with that. Sorry, great. Help tie back. Thanks.
Operator
Your next question comes from John Royall from JPMorgan. Please proceed.
John Royall
Morning. Thanks for taking my question. So my first question is just a clarification, I think on the marine liability, and I appreciate that it's very much dwindling at this point, but I think Karen mentioned to $200 million to $400 million target range. Is that apples to apples with the $50 million to $100 million you gave on the last call? And if so, could you just bridge us from one range that an exit. I feel like I may be missing something there, but if you could just help us with that change in the number of things
Karen Berriman Davis
it last year or last quarter and the guidance we gave, we talked in terms of number of reasons that we thought would be represented in that liability. I think now we're viewing the environmental credits liability more holistically and including it seems like cap and trade and whatnot. So on that is a of our range now we're expressing in terms of dollars, inclusive of all of our credit programs.
John Royall
Okay, that's helpful. Thank you. And then just on SBR., on an adjusted basis, I think you asked about $20 million.
If we did those adjustments correctly, that's coming off a nicely positive result in 3Q. I know you had a catalyst change, but anything else to call out there? I mean, how should we think about the first quarter for DI
Matthew C. Lucey
as the loving shake, a couple of positive developments have come down the path in regards to as we've got into Q1, we expect for all of Q1 that we'll get our actual on the low carbon score in regards to our feedstocks, we expect that will come in in Q1 and actually apply to the whole quarter. So that that's positive development on. We are also expecting to in Q1 be able to be specked into Europe that requires proved feedstock. So that's not only a regulatory a check-the-box, but also requires that you have approved feedstocks go into that. That will take a little bit longer to get into our system where we'll be able to fully our into Europe. But both those are very positive developments in looking forward.
Looking back, obviously, the catalyst change was impactful in Q4 as we talked about on our last call, and there was noise around some LCM charges and other things in there in the financials.
John Royall
Thank you.
Operator
Your next question comes from Doug Leggate from Bank of America. Please proceed.
Doug Leggate
Good morning, everybody, and thanks for taking my questions. Our attorneys are both probably or maybe for you on let me let me start with working capital. Even if we took a turn of the J. Aron buyout earlier this year, you still had a net a fairly sizable net working capital impact for the whole year that was negative, or was that related to Mike's comment about crude inventory building or is there something going on there that we should expect to reverse?
Karen Berriman Davis
Yes, Doug, I think the main impact there is the $900 million that we spent to reduce the environmental credit liabilities. That's all that's all within there and quite outsized in onetime. So I think you will see that less of an impact in working capital going forward.
Doug Leggate
Christoph So shouldn't reverse. They shouldn't repeat either for direct.
Karen Berriman Davis
Yes, that's the right way to think about it.
Doug Leggate
All right. Thank you so much. The East Coast on a bit in the weeds, I guess, but these courses where we saw your earnings miss this quarter relative to your normal kind of capture, if you like, or at least how we think about your LP on that side of the business. And what we're trying to figure out if this is something to do with freight costs, crude or maybe the two as time goes, he gets started. Is there anything going on that you can point to that says why the East Coast with better with better throughput by that a little bit was perhaps a new platform?
Matthew C. Lucey
No, I had in regards to refinery startups. Paul, would you make any comments?
Timothy Paul Davis
I'll discuss now. I mean I don't I didn't see anything out of the out of the ordinary on the East Coast. To be honest with you, you have what we had over the quarter as crude differentials began to widen. That takes a while to get into the plant. So you see the market indicators on the cost of crude. There's a lag to that, and I expect you'll see the benefit in the first quarter on that side of it, but another quite honestly,
Doug, the freight realities of being out there having to navigate around the Cape of Good Hope it means more more materials around the water, which obviously increases demands on shipping and freight rates have gone up. As a result. I think the net result of that resides in a higher crack on the East Coast. So I think it is resilient to our markets, but there's nothing extraordinary on the East Coast that was negatively impacting us.
Doug Leggate
That's great color. Thanks. Thanks very much.
Operator
Your next question comes from Ryan Todd with Piper Sandler. Please proceed.
Ryan Todd
We think maybe, Tom, you mentioned a few things on SBR., but I guess as you're a little over six months, seven months and operations there. Can you maybe talk about high-level about what you learned so far? What's gone? Well, what's been challenging and how often do you expect to perform catalyst changes there? And maybe how you how your feedstock mixes has evolved over the last over the last six to eight months of operations?
Matthew C. Lucey
I'll make some final comments on us than it is in charge of the operation and make some comments directionally, I think it's been an extraordinary experience so far in getting the plant up on time. Yes, there's you're always going to work out some Gremlins coming out of that. I think we did that better than most from our relationship with it with he and I think he's off to a terrific start. I was over there with some of their executives back in December.
And indeed, their stateside similar executives are stateside and working with our team this week. And so the partnership, I think is going as well as we could expect. And I think our interests are very, very well aligned and focused on on maximizing all of SVRs capabilities. We still view it as absolutely a Tier one asset in the right geographic location, which gives great options on feedstocks and disposing of products as opposed to being tied into California. We'll have the wherewithal to go wherever the market is best on and obviously we get some benefits connected to show.
Matt, on the operating expense side, Jim, you would you give any other particulars in terms of operations.
The only thing I'll add from a catalyst change out perspective is on an annual basis, the change the guard bed catalyst and about every 24 months or so you change out the iSOFT catalysts in the back end of the unit.
The other just more macro thing is much less in regards to PBF is obviously on the market for RE. is down as credits have come down, supply of RD. is reduced rents and California credit prices as well come down, and that's no surprise to us. We were expecting. And I indeed I think that will continue for a bit and where it's going to put pressure is on more marginal players aware of what they ultimately do. That will certainly impact the market, but we're clearly advantage to those of those marginal players. And I think on the supply side will shuffle out here over 24.
Ryan Todd
Great. Thank you. That's helpful. And then maybe just shifting to the West Coast, not on a nonrenewal, but on the other, the rest of the refining business, you've seen a big bounce in margin there over the last couple of weeks. Can you talk about what you're seeing in terms of, you know, kind of overall supply-demand dynamics and product market dynamic there on the West Coast though within your operations? And then just to clarify, I think did you say in your opening comments that there is you're still going to be working your way through higher priced crude inventories there and California and that is that going to be a headwind to kind of margin capture in the first quarter there?
Matthew C. Lucey
It will look, there's no question that extensive comments around it, Q4 operations, the poor and that that will that inventory that we carry over will will carry over into the first quarter. But that will then be behind us Paul, why don't you give direct comments in regards to what you see every day in the ground in California
Timothy Paul Davis
and the big move in California markets really as the seasonal change out from winter gas to summer gas in Los Angeles. So that's the big pop you're seeing on the cracks that you guys look at it every day. In addition to that, jet fuel is well bid in the LA market and San Francisco markets with the arbitrage from Asia pretty much shut down. You're seeing the impacts of a short market moving into the seasonal high seasonal demand period.
Ryan Todd
Yes. Thank you.
Operator
Your next question comes from Manav Gupta from UBS. Please proceed.
Manav Gupta
Good morning. I wanted to ask about the renewable diesel market. A little, and I fully appreciate that these are developments which happened a couple of days ago. So but I'm hoping you have more information than we do a few days ago. It looks like New Mexico passed the Senate passed the low-carbon fuel standard bills, and this could go into effect in 2026. And it's a very aggressive program. It goes from 0% to 20% in like four to five years. You haven't seen that before. And so I'm just trying to understand if this all works out given your location, could this be a new market for you besides California. Can you move the product to New Mexico if things work out in this direction?
Matthew C. Lucey
Yes, one, I think the point of what happened in New Mexico stage to the investment thesis in RD., and that is over the course of time, governments, again, price carbon to incentivize the manufacture of renewable diesel, specifically to our ability to competitively and deliver product is New Mexico. It's too premature to say that. But I would also say the market is a bathtub. And to the degree in Mexico New Mexico draws other barrels, it opens up other markets. So I'm not so focused on our direct ability to impact the New Mexico market in particular. But all these things Cascade with each other and fill free up a demand in other markets. But it's certainly constructive and consistent with it. Our investment team, as I said.
Manav Gupta
Perfect. My quick follow-up is and you kind of mentioned this also in the earlier part of the call, you saw this mid big MidCon weakness. It looks like it's abating. The cracks are rebounding and just staying on like you gave an outlook on West Coast. What are you seeing in the Mid-Con market? Is this was this weakness seasonal? And should we expect a strong 2024 as it goes to overall the Mid-Con region in terms of cracks. Thank you.
Matthew C. Lucey
And in the Mid-Con, the Mid-Con economics in the fourth quarter were seasonal and it's something we normally see on a on annualized basis as we move into the first quarter, Whiting bond falling over was definitively beneficial to the cracks and you're seeing. So that's been the catalyst to move move the cracks forward. There's been some crude advantages out of Canada for Pad two. Those are going to come to an end as we as we get into Q2 and Q3. I think we're expecting normalized cracks in pad two going forward.
Manav Gupta
Thank you.
Operator
Your next question comes from Neil Mehta from Goldman Sachs. Please proceed.
Neil Mehta
Yes, good morning, team. First question is just how you're thinking about capital allocation in the context of M&A in what do you think the market is is I mean, then big part of the PPS story and how you've gotten to where you are today. We still think there are opportunities out there and what's the overall framework for thinking about why?
Matthew C. Lucey
I think the M&A, as I mentioned in the comments, a disciplined and rigorous capital allocation effort and M&A is no different than internal projects or or share buybacks. We'll evaluate everything in the market as we always have judged against each other and allocate the capital as best we can. And albeit it's worth speculating on M&A activity at the moment, there's nothing of immediate sort of action. We don't comment on in the base case anyway.
But you know, it's consistent what we've been talking about on over 2023, the full year 2023, we are so focused on transforming our balance sheet. And we've done that. It's complete. We mentioned last quarter, we're matching against say there's nothing left to address there. And so now we're a company as any company should be focused on generating cash as we generate cash, how do we get allocated and whether it's external opportunities, internal opportunities or simply returning cash to shareholders We've got dedicated team analyzing all alternatives as we go forward.
Neil Mehta
And that's helpful. And just a follow-up is just the just love your perspective on on how you're seeing refining balances, particularly in the context of global refining, which was alluded to earlier, just that we've had two to three extraordinary years of margin. You see see margins mean reverting or do you believe that this is a new structural normal.
Matthew C. Lucey
Well, it's interesting, and I'll ask Tom O'Connor to make some comments as I sit here today. Looking at it, yes, if you look at 24 for cracks, you know, the market for calendar 2014, it actually looks very comparable to 23. I think there's been a home. There's been discussions of reverting to the mean, and I'm not so sure that we're going to revert to the mean as quickly as some maybe we're predicting. And obviously, there's a very, very big difference from where we were in 22 and even 23 to what the historical leanness. But the market is set up very constructively, as I said, and over the last couple of years, I mean a big thing. It's been the industry has been incented to build inventory has really struggled in that regard. And so here we said 2023 and inventories are very very tight.
Yes, there's going to be capacity that's going to be coming on, but quite frankly, it's needed as demand growth for products worldwide will continue to grow. I would personally take the over on on that equipment coming on time or, you know, as expected, these are incredibly complex, very large additions in their own, right. As you know, both in Mexico and Nigeria, and you've got that my experience perspective is I think that probably takes longer.
Tom O'Connor when you're making the comment.
Thomas J. Nimbley
Yes, Neil, I'm missing in terms of what Matt was saying with the one thing I would add certainly is a big change in rate adjusted cracks year-over-year, right for cracks were lower, but we've got a rand basket that is you know, $4 to $5 lower if we start looking at year over year. So in terms of product realizations, that's a that's meaningful as Matt was talking about with the refinery additions that are coming on stream. And this year, probably part of it lends itself to being next year. A lot of that is coming in the form of you know, the CDU.s are starting up and the secondary units are really much further out, right?
I mean, in terms of when the VLCCs and the cokers and all those other nice secondary units amount that actually can be quite helpful for the market, right? I mean, the market is tight in terms of secondary feeds on meal feedstocks for the FCCs and for the coker. So I think you'll see that it will be sort of similar to things that we've seen in the past when there's been refinery expansions and the secondary units come afterwards, right. I mean, you know, the VGO market in particular for 2023 was certainly a bit lower than what expectations were. And a lot of that was coming from some increases the CDU that took place in the Gulf Coast without increases to our secondary units.
Neil Mehta
Yes. Thanks, Tom.
Operator
Your next question comes from Paul Cheng from Scotiabank. Please proceed.
Paul Cheng
Thank you. Good morning, Matt. If I look at on the I mean, since the pandemic, I mean, the market condition is up and down. And so a lot of volatility still is difficult for us that from the outside to look at what is the sustaining CapEx and also including of run for the Company now? And also, that seems 2019 looks like the unit costs gone up in each of the region, maybe about 20% or so, the new baseline that we should use or that you think on that initiative that the Company would be able to bring it down over the next couple of years? That's the first question.
And secondly, debt. If we look at operational data, digital has been struggling for a number of years? And what's the plan in terms of improving the operating performance over there and also our cycle, ditto, is there any at the refinery in your system that you
Thomas J. Nimbley
think of we could do better and may have more it to be done. You look, it's our job to continually improve. It's our job to offset inflation with efficiencies in regards to Toledo in particular, if you go back to the first part of 2023, that had some operational upsets, much of due to the weather and some of the storms from last year.
Operationally, Toledo has run pretty reasonable and pretty consistently for quarters two through four on in regards to OpEx, the single biggest thing that will drive OpEx will be running reliably and increasing throughput. And obviously, California didn't do that last quarter. And so you'll see and yes, putting aside incremental expenses because of some of the downtime, your OpEx is getting go up on a per-barrel basis when you don't operate
Well, I'm encouraged is obviously out of our control, but we're heading into 2024 with natural gas prices that are certainly better than they have been over the last couple of years. That should be a bit of a tailwind in regards to capital, we've put out a guidance over the deal, I think earlier in the year and that guidance included about $50 million of discretionary projects, return projects at each of the refineries. That's the full extent of our that we don't have any other big projects at the moment.
So I believe we put out a number of $800 to $850 for the full year on and that's what it is this year in regards to higher capital going forward, I still think and we may yet still have it next year as well. You had a three year period, which was just very, very odd, were of incredible lows and incredible highs and capital programs. We're tweaked as a result appropriately. So but the net result is and you have to end up paying the piper at some point and the this year, we see higher than normal turnaround activity. And I think to a great degree that was impacted by the previous three or four years.
Karen, would you make any other comments on capital?
Karen Berriman Davis
No, I just other than to point out, when we look at history and view Martinez is new to the system. And this is really kind of the 1st year we've had a full complement of.
Paul Cheng
Yes, Karen, do you have a number over the long haul? What is there Malmö as well as cycle average CapEx spending for the company based on your current one,
Karen Berriman Davis
and I think it's probably in that 750 to 800 range and again, remembering that looking back in history, we used to talk about a normalized range of 600 to 6 50, but that was pre Martinez.
Paul Cheng
Thank you.
Operator
Our final question comes from Jason Gabelman from TD Cowen. Please proceed.
Jason Gabelman
Yes, thanks for taking my questions on. First, I wanted to ask one of your one of your peers discussed a large project on the West Coast related to compliance with South rule one one zero 9.1 in the South Coast Air Quality Management District in Southern California. And I'm wondering, is that something that you have to spend money on to comply with or are you already in compliance with that?
Matthew C. Lucey
I would not project any capital of the numbers that Karen just shared, but we're always spending some money to comply with rules, but there's nothing extraordinary from PBM.
Okay. So your end, I mean, whatever you're spending this year addresses that NOx emissions that you need to comply with and and I guess Southern California.
Jason Gabelman
Okay. And then my second one is just there was it looked like there was a proposal in California to require refiners to stockpile gasoline in order to address some of the market volatility. I believe on the commission out there was having a hearing on that either yesterday or today on and I'm wondering if you have any any comments around that? And then more broadly on any other liabilities we should be thinking on about in terms of cash calls beyond the environmental liabilities that you mentioned.
Matthew C. Lucey
I'd just add in regards to California, I think it's way too early to speculate that paper was written, which was essentially a concept. I don't think it's particularly thought through at this point, I think there's a regulatory agency that can dictate or make demands on yield a private company on how much inventory hold the concept is. I don't think flushed out to any great degree. And I think regulators in the state government of California can evaluate any number of things. Obviously, they have to do with the laws on and you know, in terms of impacting the market, I don't think there's a supply and demand problem in California as supply has gone down. So the market is tight. The steps they've taken so far seemingly have not improved that. The concept that that was put to the California Energy Commission was that, but it hasn't been flushed through and it's probably not we're speculating at this point.
Jason Gabelman
Got it. And then more broadly. Yes, thanks for the second question, Tom, just are there any other liabilities beyond the environmental ones that you mentioned that we should be thinking about in terms of Paul's on cash for 2024?
Matthew C. Lucey
No. I mean, the I joked earlier, and I think I might have used the term 10 years ago. It's something that looks like on the pig from the fourth quarter was the reduced payout to Shell. And so where we were expecting that to be a much larger number that declined to $20 million. So that's a net reduction on a capital call. But I don't see anything anything else major out of the ordinary power grid.
Jason Gabelman
Thanks.
Operator
We have reached the end of the question and answer session. I will now turn the call over to Matt Lucey for closing remarks
Matthew C. Lucey
that you everyone for participating in today's call. We look forward to speaking with you again next quarter, and we look forward to a prosperous 24. Have a great day.
Operator
Concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
