Delek US Holdings Inc
NYSE:DK
Earnings Call Analysis
Q4-2023 Analysis
Delek US Holdings Inc
Delving into the company's performance, refining operations faced a challenging quarter due to significantly lower cracks compared to the previous quarter, which was the primary driver behind the subdued results. Despite this, the Logistics division achieved a record high with earnings exceeding $99 million. Retail performance dipped, attributed mostly to seasonal trends, but managed to sustain robust sales volumes across its outlets. From a corporate perspective, costs saw improvement largely owing to decreased employee benefit expenses.
The company focused on efficient cash flow management, drawing $80 million during the period and closing the quarter with a sturdy cash balance of $822 million. Notably, operating cash flow stood at $91 million, bolstered by a commendable $223 million of positive working capital adjustments mainly from refined inventory management and a reflection of lower product prices impacting receivables. Capital expenditures were mainly concentrated on strategic capital investments, amounting to $69 million. Meanwhile, financing activities accounted for a total of $101 million, signifying a combination of strategic debt repayment, share buybacks, dividend payouts, and distribution payments.
Looking ahead, the company outlines its 2023 capital commitment to $372 million, predominantly concentrated on critical sustaining and regulatory projects, including major overhauls at the Tyler and Big Spring refineries. Equally important, the projected capital program for 2024 amounts to $330 million, with a significant portion allocated towards sustaining and growth initiatives. This encompasses a substantial turnaround at the Krotz Springs refinery and investments aimed at enhancing capture rates at the Big Spring refinery. The Logistics division earmarks roughly $70 million towards growth projects to bolster its Midland and Delaware gathering systems. The Retail segment, supporting a network of 250 convenience stores, anticipates approximately $15 million in capital expenditures focused on refreshing store interiors and branding initiatives. Meanwhile, Corporate and Other segment is set to invest around $25 million, predominantly in IT improvements.
Maintaining a moderate leverage position, the company paid down $41 million of its debt, leaving it with a net debt standing of $78 million at the end of the quarter.
The management has provided clear expense guidance for the forthcoming year. They forecast operating expenses to lie between $215 million and $225 million; general and administrative expenses to be in the range of $60 million to $65 million; depreciation and amortization costs anticipated to be around $90 million to $95 million, and net interest expenses expected to be between $80 million and $85 million.
Executives expressed confidence in the company's ability to execute its business model with fewer surprises as time progresses. This suggests an improved predictability in operational performance, signaling a potentially more stable environment for investors to anticipate future results.
The management team conveyed a willingness to explore various strategic options, indicating that everything is on the table, including a potential sale of retail assets. This flexibility hints at an active approach to value creation and adaptability to changing market conditions.
Although the company refrains from providing explicit guidance on trading and supply EBITDA, they emphasize a composition of stable businesses within the segment. Noteworthy is the supply component, which is a bit more variable and driven by operational disruptions throughout the system. The asphalt marketing business is cited as being relatively stable with predictable seasonality, providing insight into the cyclical nature of parts of the company's revenue streams.
Management remains committed to returning capital to shareholders, a philosophy exemplified by the over $146 million returned in the current year, which included $85 million in buybacks and $61 million in dividends. Looking forward, this commitment is set to continue into 2024, portraying a clear stance on shareholder value appreciation.
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Good morning, ladies and gentlemen, and welcome to the Delek U.S. Fourth Quarter Earnings Conference Call. [Operator Instructions] This call is being recorded on Tuesday, February 27, 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 U.S. 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 U.S. website.Slide 2 contains our safe harbor statements 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 operations 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 [indiscernible]. In Refining, we achieved a record total throughput in the quarter, but still see opportunities for further operational improvement.Joseph will provide the details of our refinery operations 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 Retail 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 investments in our people and assets. 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 in recovery and stronger capturing. 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 personal and process safety. Turning to financial strength and shareholder return; we continue to be shareholder-friendly. In 2023, we returned $146 million of shareholders through dividend and share buyback. 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 efforts we found more efficient ways of working. This has delivered tangible results. For example, our inventory management has resulted in improvement in both earnings and debt level.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 2024; our key priorities have not wavered. We'll continue our drive towards operational excellence, [indiscernible] focus and 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 return 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 will 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 buyback.As we demonstrate in 2023, we are committed to shareholder returns based upon free cash flow. As we execute 2024, we'll remain and maintain this approach, and we'll keep a balanced approach between improving our financial strength and shareholder returns. On our strategic initiatives, we remain focused [ in advance ]. For 2024, we estimate our CapEx to be approximately $330 million, which reflects a reduction from 2023 levels.The capital program show our dedication to maintain a 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 that meet our return to capital objectives. We announced earlier this month that our Big Spring refinery was selected by the Department of Energy for a project that will advance carbon capture technology, a safe environmental 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 throughput 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 barrels per day 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 plant. Our production margin was $4.94 per barrel and operating expenses were $4.58 per barrel. Estimated throughput for the first quarter is in the 82,000 barrels per day 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 El Dorado, we will use existing refinery configuration to improve asphalt capabilities and optimize margins. By increasing regional sales of the pipeline on the light product 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 additional discoveries that were addressed. Our production margin was $6.05 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 barrels per day 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 crude units.Execution cost is estimated at $115 million and expected return from the upgrades is approximately $30 million per year, coming mainly from yield and rate flexibility improvement and energy efficiency. Plant throughput for the first quarter is in the 73,000 barrels per day to 76,000 barrels per day range. And for our entire refining system implied throughput target is in the 289,000 barrels per day to 301,000 barrels per day range as we position ourselves for the gasoline season. In the fourth quarter, wholesale marketing contributed a loss of approximately $20 million.This is a $40 million negative variance to the third quarter. The decrease reflects seasonal trends along with challenging Mid-Con supply-demand dynamics and lower RINs prices. We are expecting our commercial initiatives to provide us with 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 position 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's reliability ahead of the coming gasoline season. U.S. refining market dynamics for 2024 are constructive, and we are well-positioned to capture these opportunities.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 U.S. 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 shows 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 drew $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 include $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, and as well as projects at the Big Spring refinery to improve capture rate.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 reimaging 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 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.
[Operator Instructions] Your first question comes from Neil Mehta with Goldman Sachs.
Yeah. 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 and your latest thinking around that in the milestones we should be watching on?
Hey Neil, how are you? Neal, you know how much energy we have around the topic [Technical Difficulty] significant headway and some of the parts going to happen. I want to assure you that -- Mark, do you want to add more?
Yeah, Neil. Look, at this point, I would say, like, although we don't have anything specific to update or say at this time, but we remain committed to highlighting the value that's intrinsic in our business. And look, we're working hard towards that. But what I would say is that in anything that we may do, we are very focused on enhancing not only our balance sheet across all of our businesses, but positioning our company to generate and deliver attractive shareholder returns for the foreseeable future. So we're taking all of those things into consideration. I 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 one-time 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 bit through the quarter. Do you -- anything that you would want us to keep in mind as we think about incrementals and decrementals.
Yeah. So surely, you can see it's very easy to see that we had a record throughput during the quarter. And we actually meet all the guidance to give in terms of G&A, OpEx, very strong cash flow. Supply marketing obviously had a weaker, which is in line with the seasonal trend and we've seen that line of supply marketing flat at 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 have anything to add [ into that ]?
Yes, the wholesale marketing contributed a negative $20 million in asphalt to positive $5 million, consistent with the seasonal trend. Wholesale marketing was challenged, and I think you heard it from the most refineries beyond seasonal trends, driven by incremental in the Mid-Con, [indiscernible] demand in margins, especially in December and going through generally [ freeze ]. The other element in 4Q was the normal reprice, which has helped the refining capture that hurt the rate value really generated by wholesale marketing -- the blended at this point. So in the past several weeks, to your point, Neil, the [indiscernible] situation in the Mid-Con has resolved through most of supply and demand fronts, 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.
Your next question comes from John Royall with J. P. Morgan.
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 ask 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 where capital were really the fruition of some of the initiatives that we had all along. 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 a year, of which $57 million were realized in the -- in 2023, mostly in the third and fourth quarter. Our focus was debt reduction, so reduced debt by roughly $450 million. And that, along with the safety and reliability efforts kind of contributed to the end result of the working capital. I think with regard to going forward, we kind of reached that will be 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.
That's really helpful detail. 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 '24 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?
Yeah, absolutely, John. So at this point, we will elect to negotiate with the DOE so there is no material capital for 2024, and we're going to do everything we will do under the [indiscernible] benchmark that we put on ourselves on a cost of capital return from IRR standpoint. So we are not going to break that metric. But John, from a holistic standpoint, you can see a very nice testimony that Big Spring and Delek are marketing leader in this area, and we elected the first refinery to elect a 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'll make it a capital advantage or capital -- to meet our capital benchmark. The other option we have on the renewable diesel, we are looking on that carefully. Obviously it's a cheap way to get a look into renewable diesel. As you can see [indiscernible] doesn't have renewable diesel lately. So we are fortunate not to commit that $200 million, $300 million and then no benefit from that. So we were fortunate [indiscernible] but the market is very close to that. I don't know, Mark, if you want to add anything around the option?
Yeah, sure. Around the option, John, we were obviously monitoring it very closely. Our understanding based on publicly available information is that they're intending to start commission 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 that 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 Avigal said, it's a -- it could be potentially an attractive and low-cost opportunity for us to acquire a meaningful position in a well-located renewable diesel facility. So we're watching it closely.
Your next question comes from Roger Read with Wells Fargo.
Yeah. I guess two questions for 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 Q1, it says that does 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.
Yes. So we are not going to give the guidance for that line. It's going to be fit with market what the market usually gives. So we'll be consistent with our build around that. Overall, there is a positive trend correlated to seasonal -- driving seasonal. We've all seen the information around -- from a macro standpoint around gasoline and diesel. Gasoline we are looking at around a 5-year average, a bit below. And on diesel, we are at the lower end of the 5-year average, so both look constructive. But beyond general market information, we are not going to give guidance for supply and marketing.
Yeah, nothing to add.
Can I just add one thing? I think the only thing I would maybe add, Roger, is the fact that some of the weather impacts that Joseph referred to, and he said it 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 that weather is more benign here as we are two-thirds of the way through, so maybe you'll 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 challenged here recently. You've got the reliability improvement, the $100 million, two-thirds of roughly this year, a third next year.What would you point to as we get let's call it, progress the first two quarters of the year that are 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 ] a change in 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 '24?
Yeah, for sure. And Joseph will give a complete answer, but I will say just from a [indiscernible] standpoint, Big Spring is a refinery that [indiscernible] consistent 70,000 barrels a day of throughput and more and with [ $25 ] OpEx and less. You can see that what the trend year 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 million. So if we write consistent, as that refinery used to one in the past, there is no reason we cannot get to what it used [indiscernible] years ago. Joseph, please?
Yeah. So as we mentioned in the prepared remarks we are positioning Big Spring's ability to service well already from the coming gasoline season. We have been on clear execution path addressing vision, people, process, equipment, [ gas ]. And as we mitigate the different risks we should see improved reliability meaning [indiscernible] capture on cost structure. So as we communicated in past, we are expecting the throughput to stabilize in north of 70,000 and capture around 17% [Technical Difficulty] mid-cycle basis.OpEx run rate should stabilize around [ $5.60 ] probably a barrel by end of the year and the linear reduction maybe of [Technical Difficulty] barrel reduction every quarter until the end of the year would probably be a good assumption. So -- bottom line it will take all of these people, process, equipment to get to where we want to get it. And we are very encouraged by the process. We have less and less surprises as the time goes by and we are very confident about our capabilities already this coming spring.
Your next question comes from Matthew Blair with TPH.
I wanted to follow up on some of the parts efforts, and I appreciate your 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?
Matthew, that's a great question. Everything is on the table, and we are active more than one frontline 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?
Matthew, we don't give guidance for that line and we will remain consistent with that with the best practice among our deals. And Rosy, I think you have a lot of energy around that topic so.
Yeah. And 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 line is no longer trading and supply. It's supply and marketing. 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 the wholesale marketing and the asphalt business tend to have a little bit more stability. Now they do have fluctuations based on market conditions.Case in point, what 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 relative to third and then obviously the movement in the RIN prices. Asphalt tends to be a little bit more stable. You've got seasonality with the fact that the month -- the quarters during the summer months seem to be more stable and stronger. And you've got the first quarter and 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 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 the supply business handles both supplying our refineries from a crude perspective and also unloading the refineries and also supplying our DKL system, right? And so depending on disruption throughout the entire system, you may have a little bit of fluctuation, right? But the other two pieces are a little bit easier to [indiscernible].
Your next question comes from Kalei Akamine with Bank of America.
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 Krotz 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 in El Dorado as you're thinking about the commercial opportunities there.
Yeah. Joseph will start with the answer about Krotz Springs, and I will give some more color around as well.
Yes. First, I'd like to remind you we want -- we guided an annualized $18 million improvement of the final turnaround, which we achieved on efforts to our positive [indiscernible] assumptions. We actually achieved $24 million but the margins were [indiscernible] so it's exactly what we expected. Back to [indiscernible] we are expecting $30 million per year coming from maybe three things. One is crude unit piping scope that will help our yield and rate flexibility.In other words, when we make more jet fuel and add more catch-up capacity. Second is FCCU when we put new reactor and we will make some [indiscernible] that would provide us with improved conversion and yields. And in addition, we are expecting to better energy efficiency with a couple of turbines that we are replacement and higher reform [indiscernible].
If you want some highlights around El Dorado, Joseph prepared his prepared remarks that we are planning to [ run a ] bit more heavy slate. El Dorado take advantage of weakness that we are seeing of Canadian grades, heavier grades. And we're also addressing the wholesale opportunity in the area. So El Dorado is a refinery that was built heavier than we're running versus what we were running, and we are trying to capture that opportunity.
I believe when you think about El Dorado because of its configuration [indiscernible] with heavy benefit from [indiscernible] make asphalt improvement or asphalt quality and netbacks and automatically will contribute to that system capture.
I'm so sorry to interrupt guys. My follow-up question is just trying to understand the scope of the work, the scope of the work plan. It seems like it goes through 2025. So I'm trying to understand if that suggests that '25 CapEx is going to be very similar to '24, and I'll leave it there.
Are you asking the '25 scope for El Dorado?
Well, you lay out this capital commitments or these accomplishments for '23 through '25, I think on slide number 7. So given that the work plan basically known for '25, 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.
Yes. So the entire scope for [indiscernible] '24, $115 million we mentioned and it's a part of our capital program for the year. With regards to El Dorado there is no real cost estimate at this point. It's mostly commercial efforts and know-how and lending, and we will come back later in the future if we feel like the [indiscernible] grades will be needed. So this is down the road, more than a year from now.
And the reason that the slide say '24 to '25, as you can see, Big Spring, which is not related to capital, some of the upside is coming only on 2025. That's the reason the slide says '24 to '25. Don't base into that to a capital commitment to 2025, just to make it very clear. That was not the intent of the slide. The slide was saying 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.
Your next question comes from Jason Gabelman with TD Cowen.
It's Jason Gabelman. I wanted to ask about shareholder returns. It 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?
Thanks for the question. I will give an overview around what we are thinking and how we think about the capital return to investors. First of all, we'll be -- we are very committed to shareholder return. We had -- from a free cash flow this year, over $146 million of return, $85 million of that buyback and $61 million of dividend. We are committed to maintain the same philosophy going to 2024. And you can probably appreciate that we bought 8% of our share in 2023. So nothing of what we are disclosing is -- suggest any waiver of our approach. We are very committed to shareholder return. We want to see us as a market leader around it, and we are holding our self to that standard.
Okay. So sorry, it's a bit difficult to hear you. Is that 8% level kind of something you feel like that's achievable either in 2024 and/or in a mid-cycle environment?
So last year was not a mid-cycle environment. We want to do it from free cash flow. So we are committed to that. And it might be less, it might be more. It depends on market conditions. I don't want to predict market conditions. I'm optimistic about market conditions, but you will hold me to that number, and I don't want to be held to a number that its market condition-driven. You need to understand the state of mind is find ways to bring return to shareholders on the short-term, mid-term and long-term, and we are committed to all of them. And you have seen that -- you have seen us demonstrate that. Jason, last year very nicely, we did exactly what we said we're going to do, and we're going to keep doing what we say we're going to do.
Okay. Understood. And then maybe just if you could comment on demand that you're seeing in the niche markets that you operate in?
So I think there was enough discussion about the weather in everyone calls so we're not going to talk about the weather. Other than weather we have a very good niche market, and we are very blessed and optimistic about that.
[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 a great quarter to thank the Board of Directors, our investor, obviously, they join us for this call and most importantly, to our employees that make this company what it is. And we'll talk about it again in the next quarter. 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.