Phillips 66 — Call Transcript 2026

All right. Thanks everybody. We're gonna continue now shifting to the integrated downstream company with Phillips 66. We're excited to have Kevin Mitchell, the EVP and CFO, and Rich Harbison, EVP of Refining, here with us. So maybe let's just jump in and start with the first question for everybody, which is that we might as well start with what's happening in the Middle East right now. You know, it has ripple effects that are having significant impacts across multiple parts of your portfolio. Maybe at a high level, and we can touch in more detail later on, but at a high level, how is what's going on right now? How is it impacting your businesses across refining, across petrochemicals? Can you talk about maybe expectations in the near term and what the possibility might be for lingering impacts going forward? Yeah. Ryan, let me talk to that a little bit, and thanks for being here. Always a great conference. You know, first off, I would say that as a primarily U.S.-based company with mostly U.S. assets and access to hydrocarbon resources in the U.S., we are relatively well-positioned as both a country and as a company, given the extreme turmoil that's going on in the global markets, whether it's crude oil, LNG, refined products, petrochemicals. From that sort of big picture, while we see a lot of that volatility and turmoil out there, we're relatively well-positioned, because you look from a crude standpoint, we are running primarily U.S. crude oil and Canadian heavy crude, our primary sources. We are exposed to some import barrels, but that is much a smaller component of the total. Then likewise, when you look at the refined product markets and pretty significant implications in other parts of the world, in Asia, in Europe, in part because their access to crude has been significantly restricted given what's going on in the Middle East, and we're able to continue to produce and supply product to our customers. In chemicals, it's an interesting dynamic where we've come through this period of quite a long downcycle, a trough. For the last two years, we thought the trough was about to end, and it's just continued. We see some light at the end of that tunnel from that perspective, given reduced petchems production in the Middle East, and it's also coming off in Asia because of restricted access to feedstocks. U.S. producers stand to see some benefit there. From our portfolio standpoint, about 15-20% of CPChem's production is Middle East-based, and so certainly that's impacted. But the majority of the production is U.S. Gulf Coast with ethane feedstock. And so, we're seeing some uptick there. Too soon to say what the long-term impacts of that are, but certainly see some benefit from that standpoint. I think as you look ahead as to, you know, what is the longer-term, outlook around this, it's a very tough decision to answer because it really comes down to when does the military activity cease, and when do Middle East, operations return to normal in the context of the Strait of Hormuz, being back to fully functioning. So that's a tough one to answer. The other longer-term dynamic that's out there, and again, we don't know how this plays out, but we do run the risk that with elevated commodity prices, significantly elevated commodity crude oil prices, on a global basis, that translates into a significant economic downturn, which could ultimately have a pretty detrimental impact on the business. Because as you know, in a business like ours, we rise and fall with the state of the economies, and a sort of global recession would be, you know, a pretty ugly situation to be in, even though on a relative basis, in the U.S., we would stand to position ourselves better than most. Great. That's helpful. Maybe I wanna follow up on the chemical side because I feel like there's probably been, you know, a lot of discussion around the impact on crude, maybe a little bit less on refining and probably, you know, even less on the petchems side, even though the impacts are pretty material, what's going on right now. We've been stuck in the midst of what felt like a cycle that felt like the cyclical recovery was taking longer and longer and longer. We've been bouncing along a trough for a while. The near-term aspects or benefits are pretty significant, as you mentioned some of them. You know, what does this potentially mean for the cyclical recovery? Is there, you know, is there a possibility that this accelerates the cyclical recovery in any way? Or does it change how you think about, you know, the impacts on Asian petrochemicals? You know, does it do something to lift how you think about the margin over the medium term and how we get out of this eventually? Yeah. I do think it will provide some benefit relative to where we were. Just for context, the situation we've been in for the last two, three, four years, which is one of global oversupply of capacity relative to demand. Demand has not been the problem. It's just there's been so much new supply come on, primarily in China. China has also benefited by having access to discounted feedstocks. What I mean by that is over the last few years they've been buying discounted crude oil from Venezuela, discounted crude oil from Iran, and discounted crude oil from Russia. They're primarily naphtha-based cracking, and so their input cost is lower than any of the other sort of traditional market players, and that's setting that price level. If coming out of this at a base case, they're paying market price, true market price for feedstock, that will raise the level of the commodity pricing just because that floor has been raised because they're paying market price for feedstock and no longer benefiting from discounted feedstocks. We still need to fundamentally get global supply and demand back into balance, and some of that will materialize as demand increases incrementally as a percent of GDP. We'll see that. We still think there's capacity that needs to rationalize because it's uneconomic for the long term. The light feed cracking, the U.S. Gulf Coast crackers on ethane supply are extremely competitive from a cost curve, cost positioning standpoint. We'll see some benefit. I don't think we're. It solves the problem permanently, but I do think it probably gives us a step change improvement toward a more mid-cycle environment relative to where we were previously. Perfect. Before we get into some of the maybe deeper into some of the impacts on refining, I want to take a step back a little bit and for a high-level view of the company, which is you've been in the midst of kind of a multi-year process over the last few years to kind of drive improvements across particularly like refining profitability, but also capital allocation, cost structure, balance sheet, a number of these things. You've both been at the company for quite a while. At your level, like what has changed over the last three, four, five years or a few years? What's changed in terms of, you know, the approach to the business or the allocation of capital, that, you know, that's helped drive some of the improvements that we've seen, and where do we go from here? Maybe I'll give Kevin a break for a second, and then you can come in on the macro side of that. I've been in the business for 37 years now associated with the company. When I step back and see the transformational change that's occurred in the company, it's really fundamental around this concept of integration. It's not just at the, you know, molecule level, but it's also at the business operational level. We used to run the company as really a separate entities. You had the refining business, you had the midstream business, and you had the commercial marketing business. Yeah, was there a little bit of interface here and there? Absolutely. We have taken that culture and completely changed that to one that now is looking for ways to be better at what we do each and every day, and it's driving efficiencies into our business decision-making at the corporate level, the enterprise level. We're really seeing a shift to general interest decision-making, which is benefiting the overall bottom line of the company. One of the fundamental structural changes that is helping support that was a shift that we made a few years ago to a single bonus structure for the company. We used to have individual bonuses for each of the business units and then even subdivided underneath that. Now it's one for all for one type bonus structure, which has fundamentally, again, changed the decision-making process and really pushed us to general interest decision-making. Now, one of my, I'll call my career successes is, you know, when we were talking about refining and there was a lot of pressure when I came into the role about, you gotta fix refining. Well, it became very clear to me very early that to fix refining wasn't just a refining issue. Certainly, there were some challenges there, and we needed to absolutely improve our performance. This is really an enterprise-wide effort that needed to occur. Refining relies on the midstream. Refining relies on the marketing and commercial organization. It also absorbs a lot of the overhead that comes in from the corporate office. We needed to be more efficient at the corporate level. We needed to be better integrated in decision-making across all of these. That cultural shift has completed. I mean, we're certainly not done with all the efforts that we got to do on this, but we have improved the way we're making decisions and, as a result, getting better general interest decisions. Refining ourselves is a bit of a microcosm associated with that. We used to run each refinery as an individual business unit. We now run it as a fleet. We have centralized a lot of the functional support around the system, which has driven efficiencies into the business. Then we have also that indirect effect or direct effect of that has also allowed the management teams that are running the sites to be more focused on operating safely and reliably. We've seen that come through in our performance. That's also showing through on all the financial components of the business that we're working on, and you can see it in there. You see that our cost per barrel has been creeping down. We've seen our utilization numbers creeping up. We've seen our earnings per barrel also showing nice progress. Market capture's been very good, steady progress as it goes. We're not done yet. That's the most exciting part about all of this, is that we've got plenty of opportunity to continue to capture additional market opportunities and integration value for that matter as well. Kevin, you wanna add anything else there? I think you've covered a lot. Yeah. On the integration side, I appreciated that you talked about the integrated nature of the decision-making because having covered the company for a long time, I would say there certainly seems to be a greater coherence in terms of the capital allocation across the entire company. Maybe one example of that is something like the Western Gateway Pipeline project that you're doing, which has benefits across midstream and marketing and refining. Can you talk about the example of that? Like, you know, how is that an example of- Yeah ... maybe how the approach has changed a little bit and what the opportunity set is there? Yeah. I guess it's. You love it when a plan starts to come together, and this Western Gateway project is really a result of some other critical moves that we were making on the portfolio. First, we were, you know, basically pulling out of the California market, right? We found that we were not competitive in that market. It was a drag on our earnings portfolio. So it was the best move for us to withdraw from that market. Still committed to supply the market with the barrels coming in because we had a very strong marketing organization and portfolio in that area. The other second component of that was to really take over the full operation of our Wood River and Borger operations, and we bought out that JV and moved to 100% operation of those assets, and integrating that with our third refinery in that area, which was Ponca City Refinery. Now we have this nice portfolio of very strong refining presence in an area of the country that we are very competitive. We've created a sort, essentially, in the area on the West Coast. The natural next step is let's fill that void, and let's do it on an integrated basis. A small team of folks got together, they put a lot of thought to it, and they came up with this concept of this pipeline operation into the West Coast from the Midcontinent area. You're now connecting the energy corridor, and even in a market that can be long at times, with the energy island of the West Coast. You know, we're currently working through that process right now. We're in the second open season for this project. We've opened up the aperture on it a little bit. It was originally a pipeline from St. Louis to Phoenix, and then from Phoenix to Colton, which is Southern California. There was a lot of interest in that, but there was more interest from folks to see if we could get actually into the heart of Los Angeles distribution system. We opened up a second season to extend the delivery into Central L.A., the Watson area, if you're familiar with that, and also opened up origination location from the Gulf Coast, which was also a lot of feedback we got on the first open season. That second open season's in progress right now and should close here March, April, early April timeframe. We're very hopeful. We've got a lot of positive interest in this, and we're very hopeful that this then eventually moves to a final investment decision somewhere second, third quarter of this year. We will be in a position now to supply from our core assets in the MidCon to the West Coast. I would just add that the way the company was run previously, I'm not sure we could have come up with this project and gotten it to where it is because by its nature, this is an integrated project. We'll see ultimately we'll see benefits in refining, in midstream, and in marketing. All of our primary operating segments will be beneficiaries of a project that I'm not sure we could have done it in the old world when we were very much silo-focused and nobody was incentivized to come up with integration opportunities. Thank you. I wanna touch on a couple other quick things on refining. We came into the year, at the start of the year, and it was all Venezuela all the time, right? It was, you know, one of the biggest themes in refining was widening of crude differentials, right? There's gonna be crude diff, more Venezuelan barrels. Heavy, medium sour differentials are gonna widen out. The current issues in the Middle East probably have, you know, somewhat of a opposite effect on crude diffs. How do you think about these balancing factors? Where are we going in terms of crude differentials from here, and how do you think about how that impacts your system and your portfolio? Yeah. Maybe what I'll do is let me start. There's a lot going on right now. Let's set the Middle East activity aside for a moment, and I'll talk a little bit about how we saw the supply and demand balances working out here over this year and next year. With the Middle East activity set aside, we saw strong crude deliveries, strong crude supply into the marketplace. We also saw strong distillate and jet demand through the system. We saw gasoline flat in the U.S., maybe slightly growing worldwide. There was a little bit of growth on the gasoline front. In refining, we saw refining capacity that was tight, but new plants on, still, you know, still going through some startup, and some additional capacity in Asia coming on in the back half of 2007. When we looked at all of those, very bullish on refining because refining was a bit of the bottleneck in that whole supply chain for transportation fuels. Now let's layer in the current activity. This year's been really a tale of two tapes. Originally started with the Venezuela action, which, for us, increased the heavy crude supply to the market in North America. That put pressure on the heavy crude price. It opened up the light-heavy spread on crude. We saw that. It was starting to move from $20 or $25. It was running around $12-13, and it started moving up into the $13-14 dollar range and maybe even bouncing off the $15 dollar range when the Venezuelan crude came on the market. Now the activity occurs in Iran, the Middle East, that closes off the Saudi barrels coming into the market with the medium sours and heavies. That basically reversed that activity with Venezuela, and we saw the light-heavy spread then move back to essentially where it was last year, $20-25 in that $12 dollar range. Hopefully, this is short-lived, right? This activity eventually solves itself out. The strait gets reopened here in the not too distant future. There's been no significant impact to the global GDP, and things start to iron out to back to where we were projecting them, where these barrels start coming onto the market. We see the light-heavy spread open up a little bit more, which is very favorable for our kit that we operate, puts some pressure on the Western Canadian Select crude, which we think the incremental barrel clears through the Gulf Coast because the TMX to the West pipeline is essentially full. Those barrels are clearing through the West Coast with the Venezuelan oil barrels coming in and the Saudi barrels coming in. We see pressure on that light-heavy spread, which is favorable to our refining kit, which also plays into the heavy distillate and jet demand because this crude definitely shifts your profile, your yield profile to distillate and jet as well. It all comes together nicely for us with the way we see it over the next two years. Maybe one last thing before we leave refining. There's been, you know, chatter in the news over the, you know, on and off over the last week about possible export bans or lifting of the Jones Act. What are you seeing? What do you, what do you think about the possibility there? Are these real possibilities? If so, what would be the impact? Yeah. Well, who knows what's possible. I don't want to predict politics, that's for sure. There's a reason I'm not in politics. But you know, we've been through the no export scenario just not too terribly long ago. Under the previous administration, there was a lot of talk about no more exporting products or. I think we were successful in educating the administration on the total impacts of that. We will do the same thing with the current administration if that's one of the proposals. The Jones Act, it's a real possibility, right? That is one that essentially opens up more marine equipment available to ship supplies around in the U.S. The markets that will benefit from that will be the ones that are generally short product, right? You got the West Coast, and then you've got the East Coast. The barrels would move into those markets, likely out of the Gulf Coast, is where that would come. It makes a lot of sense to move that around. However, there's always been traditionally very strong resistance to any significant Jones Act waivers because of the underlying I guess points of view on that particular act. You know, there's also been some talk around, you know, RVP waivers and things like that. We'll see how that all plays out. when you have to rack and stack the options that are in front of the administration, you're likely gonna see the ones that administrative executive orders can take the action first, and that would be the Jones Act or the RVP activity. It gets increasingly more difficult because you have congressional action required for some of the other things that are on the list, and that is more and more unlikely that would occur. Shifting to midstream real quickly. You've got a target to hit 4.5 billion in EBITDA by the end of 2027. Can you talk about how you think about the, you know, the drivers and the risk of hitting that number? You haven't talked a lot. You certainly haven't provided targets, but you've got a decent amount of organic growth opportunities that should provide, you know, continued growth in the midstream business even well beyond 2027. Maybe, you know, how confident should we feel in hitting the $4.5 billion number? And how do you think about the opportunity set post-2027? Yeah, we feel very good about the $4.5 billion target. That's an end of 2027 run rate, adjusted EBITDA for midstream. We were at essentially $4 billion end of 2025, and we have organic projects in place that will get us to that number. We brought a new gas plant on last year. The Dos Picos II plant will be up to full year contribution of that facility in 2026. We have another gas plant under construction, the Iron Mesa plant, that comes online early 2027. We're expanding the Coastal Bend pipeline. We acquired the Coastal Bend system, formerly known as EPIC NGL, that NGL system in early 2025. We've completed a first phase expansion of the NGL pipeline at the end of last year. We're undergoing the second phase of expansion that we'll complete by the end of this year, early next year. We continue to evaluate additional gas plant opportunities as well as additional frac capacity. Our most likely next frac expansion project would be on the Coastal Bend system at Corpus Christi. That will be the most capital efficient frac expansion that we can do. Now, to be clear, that wouldn't be part of the 4.5. That would go beyond that. I'm kind of blending into some of the opportunities that we see as we go beyond 2027. With the capital budget we have this year of growth capital for midstream, $700 million budget, we expect it to be about that level for the next couple of years at least. That will get us to the 4.5 as we continue to also, from a commercial standpoint, optimize the flow of molecules around the system and maximize the margin uplift and capture that we can across that full NGL value chain. Then as you look beyond 2027, post the $4.5 billion, if you assume about similar level of capital spend. To be clear, it's not a given that that amount of capital is available to midstream, but if they have the right projects, the right opportunities, that. Remember, our priority here is not growing for the sake of scale, it's growing to increase the Return on Capital Employed in that business. All of these projects we do, the ultimate benchmark is this consistent with our objective to grow Return on Capital Employed? With the opportunities we see, you look at projects like Western Gateway, that is further out. That would be a sort of 2029 completion on the assumption that project goes ahead. We feel very good that there's line of sight to continued ratable growth in midstream earnings. Not anything dramatic in terms of significant increases in capital, but just continuing to work away on additional gas plants, pipeline expansion, frac capacity, Western Gateway, and then optimizing around the entire system. Right. Thank you. I think that that's all the time we have. Rich, Kevin, thanks so much for being here. Thank you. Thank you.

Speaker 3: All right. Thanks everybody. We're gonna continue now shifting to the integrated downstream company with Phillips 66. We're excited to have Kevin Mitchell, the EVP and CFO, and Rich Harbison, EVP of Refining, here with us. So maybe let's just jump in and start with the first question for everybody, which is that we might as well start with what's happening in the Middle East right now. You know, it has ripple effects that are having significant impacts across multiple parts of your portfolio. Maybe at a high level, and we can touch in more detail later on, but at a high level, how is what's going on right now? How is it impacting your businesses across refining, across petrochemicals? All right. all right Thanks everybody. thanks everybody We're gonna continue now shifting to the integrated downstream company with Phillips 66. we're gonna continue now shifting to the integrated downstream company with phillips 66 We're excited to have Kevin Mitchell, the EVP and CFO, and Rich Harbison, EVP of Refining, here with us. we're excited to have kevin mitchell the evp and cfo and rich harbison evp of refining here with us So maybe let's just jump in and start with the first question for everybody, which is that we might as well start with what's happening in the Middle East right now. so maybe let's just jump in and start with the first question for everybody which is that we might as well start with what's happening in the middle east right now You know, it has ripple effects that are having significant impacts across multiple parts of your portfolio. you know it has ripple effects that are having significant impacts across multiple parts of your portfolio Maybe at a high level, and we can touch in more detail later on, but at a high level, how is what's going on right now? maybe at a high level and we can touch in more detail later on but at a high level how is what's going on right now How is it impacting your businesses across refining, across petrochemicals? how is it impacting your businesses across refining across petrochemicals Can you talk about maybe expectations in the near term and what the possibility might be for lingering impacts going forward? Can you talk about maybe expectations in the near term and what the possibility might be for lingering impacts going forward? can you talk about maybe expectations in the near term and what the possibility might be for lingering impacts going forward

Speaker 1: Yeah. Ryan, let me talk to that a little bit, and thanks for being here. Always a great conference. You know, first off, I would say that as a primarily U.S.-based company with mostly U.S. assets and access to hydrocarbon resources in the U.S., we are relatively well-positioned as both a country and as a company, given the extreme turmoil that's going on in the global markets, whether it's crude oil, LNG, refined products, petrochemicals. From that sort of big picture, while we see a lot of that volatility and turmoil out there, we're relatively well-positioned, because you look from a crude standpoint, we are running primarily U.S. crude oil and Canadian heavy crude, our primary sources. We are exposed to some import barrels, but that is much a smaller component of the total. Yeah. yeah Ryan, let me talk to that a little bit, and thanks for being here. ryan let me talk to that a little bit and thanks for being here Always a great conference. always a great conference You know, first off, I would say that as a primarily U.S.-based company with mostly U.S. assets and access to hydrocarbon resources in the U.S., we are relatively well-positioned as both a country and as a company, given the extreme turmoil that's going on in the global markets, whether it's crude oil, LNG, refined products, petrochemicals. you know first off i would say that as a primarily u.s.-based company with mostly u.s assets and access to hydrocarbon resources in the u.s we are relatively well-positioned as both a country and as a company given the extreme turmoil that's going on in the global markets whether it's crude oil lng refined products petrochemicals From that sort of big picture, while we see a lot of that volatility and turmoil out there, we're relatively well-positioned, because you look from a crude standpoint, we are running primarily U.S. crude oil and Canadian heavy crude, our primary sources. from that sort of big picture while we see a lot of that volatility and turmoil out there we're relatively well-positioned because you look from a crude standpoint we are running primarily u.s crude oil and canadian heavy crude our primary sources We are exposed to some import barrels, but that is much a smaller component of the total. we are exposed to some import barrels but that is much a smaller component of the total Then likewise, when you look at the refined product markets and pretty significant implications in other parts of the world, in Asia, in Europe, in part because their access to crude has been significantly restricted given what's going on in the Middle East, and we're able to continue to produce and supply product to our customers. In chemicals, it's an interesting dynamic where we've come through this period of quite a long downcycle, a trough. For the last two years, we thought the trough was about to end, and it's just continued. We see some light at the end of that tunnel from that perspective, given reduced petchems production in the Middle East, and it's also coming off in Asia because of restricted access to feedstocks. Then likewise, when you look at the refined product markets and pretty significant implications in other parts of the world, in Asia, in Europe, in part because their access to crude has been significantly restricted given what's going on in the Middle East, and we're able to continue to produce and supply product to our customers. then likewise when you look at the refined product markets and pretty significant implications in other parts of the world in asia in europe in part because their access to crude has been significantly restricted given what's going on in the middle east and we're able to continue to produce and supply product to our customers In chemicals, it's an interesting dynamic where we've come through this period of quite a long downcycle, a trough. in chemicals it's an interesting dynamic where we've come through this period of quite a long downcycle a trough For the last two years, we thought the trough was about to end, and it's just continued. for the last two years we thought the trough was about to end and it's just continued We see some light at the end of that tunnel from that perspective, given reduced petchems production in the Middle East, and it's also coming off in Asia because of restricted access to feedstocks. we see some light at the end of that tunnel from that perspective given reduced petchems production in the middle east and it's also coming off in asia because of restricted access to feedstocks U.S. producers stand to see some benefit there. From our portfolio standpoint, about 15-20% of CPChem's production is Middle East-based, and so certainly that's impacted. But the majority of the production is U.S. Gulf Coast with ethane feedstock. And so, we're seeing some uptick there. Too soon to say what the long-term impacts of that are, but certainly see some benefit from that standpoint. I think as you look ahead as to, you know, what is the longer-term, outlook around this, it's a very tough decision to answer because it really comes down to when does the military activity cease, and when do Middle East, operations return to normal in the context of the Strait of Hormuz, being back to fully functioning. So that's a tough one to answer. U.S. producers stand to see some benefit there. u.s producers stand to see some benefit there From our portfolio standpoint, about 15-20% of CP Chem's production is Middle East-based, and so certainly that's impacted. from our portfolio standpoint about 15-20% of cp chem's production is middle east-based and so certainly that's impacted But the majority of the production is U.S. but the majority of the production is u.s Gulf Coast with ethane feedstock. gulf coast with ethane feedstock And so, we're seeing some uptick there. and so we're seeing some uptick there Too soon to say what the long-term impacts of that are, but certainly see some benefit from that standpoint. too soon to say what the long-term impacts of that are but certainly see some benefit from that standpoint I think as you look ahead as to, you know, what is the longer-term, outlook around this, it's a very tough decision to answer because it really comes down to when does the military activity cease, and when do Middle East, operations return to normal in the context of the Strait of Hormuz, being back to fully functioning. i think as you look ahead as to you know what is the longer-term outlook around this it's a very tough decision to answer because it really comes down to when does the military activity cease and when do middle east operations return to normal in the context of the strait of hormuz being back to fully functioning So that's a tough one to answer. so that's a tough one to answer The other longer-term dynamic that's out there, and again, we don't know how this plays out, but we do run the risk that with elevated commodity prices, significantly elevated commodity crude oil prices, on a global basis, that translates into a significant economic downturn, which could ultimately have a pretty detrimental impact on the business. Because as you know, in a business like ours, we rise and fall with the state of the economies, and a sort of global recession would be, you know, a pretty ugly situation to be in, even though on a relative basis, in the U.S., we would stand to position ourselves better than most. The other longer-term dynamic that's out there, and again, we don't know how this plays out, but we do run the risk that with elevated commodity prices, significantly elevated commodity crude oil prices, on a global basis, that translates into a significant economic downturn, which could ultimately have a pretty detrimental impact on the business. the other longer-term dynamic that's out there and again we don't know how this plays out but we do run the risk that with elevated commodity prices significantly elevated commodity crude oil prices on a global basis that translates into a significant economic downturn which could ultimately have a pretty detrimental impact on the business Because as you know, in a business like ours, we rise and fall with the state of the economies, and a sort of global recession would be, you know, a pretty ugly situation to be in, even though on a relative basis, in the U.S., we would stand to position ourselves better than most. because as you know in a business like ours we rise and fall with the state of the economies and a sort of global recession would be you know, a pretty ugly situation to be in even though on a relative basis in the u.s we would stand to position ourselves better than most

Speaker 3: Great. That's helpful. Maybe I wanna follow up on the chemical side because I feel like there's probably been, you know, a lot of discussion around the impact on crude, maybe a little bit less on refining and probably, you know, even less on the petchems side, even though the impacts are pretty material, what's going on right now. We've been stuck in the midst of what felt like a cycle that felt like the cyclical recovery was taking longer and longer and longer. We've been bouncing along a trough for a while. The near-term aspects or benefits are pretty significant, as you mentioned some of them. You know, what does this potentially mean for the cyclical recovery? Great. great That's helpful. that's helpful Maybe I wanna follow up on the chemical side because I feel like there's probably been, you know, a lot of discussion around the impact on crude, maybe a little bit less on refining and probably, you know, even less on the petchems side, even though the impacts are pretty material, what's going on right now. maybe i wanna follow up on the chemical side because i feel like there's probably been you know a lot of discussion around the impact on crude maybe a little bit less on refining and probably you know even less on the petchems side even though the impacts are pretty material what's going on right now We've been stuck in the midst of what felt like a cycle that felt like the cyclical recovery was taking longer and longer and longer. we've been stuck in the midst of what felt like a cycle that felt like the cyclical recovery was taking longer and longer and longer We've been bouncing along a trough for a while. we've been bouncing along a trough for a while The near-term aspects or benefits are pretty significant, as you mentioned some of them. the near-term aspects or benefits are pretty significant as you mentioned some of them You know, what does this potentially mean for the cyclical recovery? you know what does this potentially mean for the cyclical recovery Is there, you know, is there a possibility that this accelerates the cyclical recovery in any way? Or does it change how you think about, you know, the impacts on Asian petrochemicals? You know, does it do something to lift how you think about the margin over the medium term and how we get out of this eventually? Is there, you know, is there a possibility that this accelerates the cyclical recovery in any way? is there you know is there a possibility that this accelerates the cyclical recovery in any way Or does it change how you think about, you know, the impacts on Asian petrochemicals? or does it change how you think about you know the impacts on asian petrochemicals You know, does it do something to lift how you think about the margin over the medium term and how we get out of this eventually? you know does it do something to lift how you think about the margin over the medium term and how we get out of this eventually

Speaker 1: Yeah. I do think it will provide some benefit relative to where we were. Just for context, the situation we've been in for the last two, three, four years, which is one of global oversupply of capacity relative to demand. Demand has not been the problem. It's just there's been so much new supply come on, primarily in China. China has also benefited by having access to discounted feedstocks. What I mean by that is over the last few years they've been buying discounted crude oil from Venezuela, discounted crude oil from Iran, and discounted crude oil from Russia. They're primarily naphtha-based cracking, and so their input cost is lower than any of the other sort of traditional market players, and that's setting that price level. Yeah. yeah I do think it will provide some benefit relative to where we were. i do think it will provide some benefit relative to where we were Just for context, the situation we've been in for the last two, three, four years, which is one of global oversupply of capacity relative to demand. just for context the situation we've been in for the last two three four years which is one of global oversupply of capacity relative to demand Demand has not been the problem. demand has not been the problem It's just there's been so much new supply come on, primarily in China. China has also benefited by having access to discounted feedstocks. it's just there's been so much new supply come on primarily in china. china has also benefited by having access to discounted feedstocks What I mean by that is over the last few years they've been buying discounted crude oil from Venezuela, discounted crude oil from Iran, and discounted crude oil from Russia. what i mean by that is over the last few years they've been buying discounted crude oil from venezuela discounted crude oil from iran and discounted crude oil from russia They're primarily naphtha-based cracking, and so their input cost is lower than any of the other sort of traditional market players, and that's setting that price level. they're primarily naphtha-based cracking and so their input cost is lower than any of the other sort of traditional market players and that's setting that price level If coming out of this at a base case, they're paying market price, true market price for feedstock, that will raise the level of the commodity pricing just because that floor has been raised because they're paying market price for feedstock and no longer benefiting from discounted feedstocks. We still need to fundamentally get global supply and demand back into balance, and some of that will materialize as demand increases incrementally as a percent of GDP. We'll see that. We still think there's capacity that needs to rationalize because it's uneconomic for the long term. The light feed cracking, the U.S. Gulf Coast crackers on ethane supply are extremely competitive from a cost curve, cost positioning standpoint. We'll see some benefit. I don't think we're. If coming out of this at a base case, they're paying market price, true market price for feedstock, that will raise the level of the commodity pricing just because that floor has been raised because they're paying market price for feedstock and no longer benefiting from discounted feedstocks. if coming out of this at a base case they're paying market price true market price for feedstock that will raise the level of the commodity pricing just because that floor has been raised because they're paying market price for feedstock and no longer benefiting from discounted feedstocks We still need to fundamentally get global supply and demand back into balance, and some of that will materialize as demand increases incrementally as a percent of GDP. we still need to fundamentally get global supply and demand back into balance and some of that will materialize as demand increases incrementally as a percent of gdp We'll see that. we'll see that We still think there's capacity that needs to rationalize because it's uneconomic for the long term. we still think there's capacity that needs to rationalize because it's uneconomic for the long term The light feed cracking, the U.S. the light feed cracking the u.s Gulf Coast crackers on ethane supply are extremely competitive from a cost curve, cost positioning standpoint. gulf coast crackers on ethane supply are extremely competitive from a cost curve cost positioning standpoint We'll see some benefit. we'll see some benefit I don't think we're. i don't think we're It solves the problem permanently, but I do think it probably gives us a step change improvement toward a more mid-cycle environment relative to where we were previously. It solves the problem permanently, but I do think it probably gives us a step change improvement toward a more mid-cycle environment relative to where we were previously. it solves the problem permanently but i do think it probably gives us a step change improvement toward a more mid-cycle environment relative to where we were previously

Speaker 3: Perfect. Before we get into some of the maybe deeper into some of the impacts on refining, I want to take a step back a little bit and for a high-level view of the company, which is you've been in the midst of kind of a multi-year process over the last few years to kind of drive improvements across particularly like refining profitability, but also capital allocation, cost structure, balance sheet, a number of these things. You've both been at the company for quite a while. At your level, like what has changed over the last three, four, five years or a few years? Perfect. perfect Before we get into some of the maybe deeper into some of the impacts on refining, I want to take a step back a little bit and for a high-level view of the company, which is you've been in the midst of kind of a multi-year process over the last few years to kind of drive improvements across particularly like refining profitability, but also capital allocation, cost structure, balance sheet, a number of these things. before we get into some of the maybe deeper into some of the impacts on refining i want to take a step back a little bit and for a high-level view of the company which is you've been in the midst of kind of a multi-year process over the last few years to kind of drive improvements across particularly like refining profitability but also capital allocation cost structure balance sheet a number of these things You've both been at the company for quite a while. you've both been at the company for quite a while At your level, like what has changed over the last three, four, five years or a few years? at your level like what has changed over the last three four five years or a few years What's changed in terms of, you know, the approach to the business or the allocation of capital, that, you know, that's helped drive some of the improvements that we've seen, and where do we go from here? What's changed in terms of, you know, the approach to the business or the allocation of capital, that, you know, that's helped drive some of the improvements that we've seen, and where do we go from here? what's changed in terms of you know the approach to the business or the allocation of capital that you know that's helped drive some of the improvements that we've seen and where do we go from here

Speaker 2: Maybe I'll give Kevin a break for a second, and then you can come in on the macro side of that. I've been in the business for 37 years now associated with the company. When I step back and see the transformational change that's occurred in the company, it's really fundamental around this concept of integration. It's not just at the, you know, molecule level, but it's also at the business operational level. We used to run the company as really a separate entities. You had the refining business, you had the midstream business, and you had the commercial marketing business. Yeah, was there a little bit of interface here and there? Absolutely. Maybe I'll give Kevin a break for a second, and then you can come in on the macro side of that. maybe i'll give kevin a break for a second and then you can come in on the macro side of that I've been in the business for 37 years now associated with the company. i've been in the business for 37 years now associated with the company When I step back and see the transformational change that's occurred in the company, it's really fundamental around this concept of integration. when i step back and see the transformational change that's occurred in the company it's really fundamental around this concept of integration It's not just at the, you know, molecule level, but it's also at the business operational level. it's not just at the you know molecule level but it's also at the business operational level We used to run the company as really a separate entities. we used to run the company as really a separate entities You had the refining business, you had the midstream business, and you had the commercial marketing business. you had the refining business you had the midstream business and you had the commercial marketing business Yeah, was there a little bit of interface here and there? yeah was there a little bit of interface here and there Absolutely. absolutely We have taken that culture and completely changed that to one that now is looking for ways to be better at what we do each and every day, and it's driving efficiencies into our business decision-making at the corporate level, the enterprise level. We're really seeing a shift to general interest decision-making, which is benefiting the overall bottom line of the company. One of the fundamental structural changes that is helping support that was a shift that we made a few years ago to a single bonus structure for the company. We used to have individual bonuses for each of the business units and then even subdivided underneath that. Now it's one for all for one type bonus structure, which has fundamentally, again, changed the decision-making process and really pushed us to general interest decision-making. We have taken that culture and completely changed that to one that now is looking for ways to be better at what we do each and every day, and it's driving efficiencies into our business decision-making at the corporate level, the enterprise level. we have taken that culture and completely changed that to one that now is looking for ways to be better at what we do each and every day and it's driving efficiencies into our business decision-making at the corporate level the enterprise level We're really seeing a shift to general interest decision-making, which is benefiting the overall bottom line of the company. we're really seeing a shift to general interest decision-making which is benefiting the overall bottom line of the company One of the fundamental structural changes that is helping support that was a shift that we made a few years ago to a single bonus structure for the company. one of the fundamental structural changes that is helping support that was a shift that we made a few years ago to a single bonus structure for the company We used to have individual bonuses for each of the business units and then even subdivided underneath that. we used to have individual bonuses for each of the business units and then even subdivided underneath that Now it's one for all for one type bonus structure, which has fundamentally, again, changed the decision-making process and really pushed us to general interest decision-making. now it's one for all for one type bonus structure which has fundamentally again changed the decision-making process and really pushed us to general interest decision-making Now, one of my, I'll call my career successes is, you know, when we were talking about refining and there was a lot of pressure when I came into the role about, you gotta fix refining. Well, it became very clear to me very early that to fix refining wasn't just a refining issue. Certainly, there were some challenges there, and we needed to absolutely improve our performance. This is really an enterprise-wide effort that needed to occur. Refining relies on the midstream. Refining relies on the marketing and commercial organization. It also absorbs a lot of the overhead that comes in from the corporate office. We needed to be more efficient at the corporate level. We needed to be better integrated in decision-making across all of these. That cultural shift has completed. Now, one of my, I'll call my career successes is, you know, when we were talking about refining and there was a lot of pressure when I came into the role about, you gotta fix refining. now one of my i'll call my career successes is you know when we were talking about refining and there was a lot of pressure when i came into the role about you gotta fix refining Well, it became very clear to me very early that to fix refining wasn't just a refining issue. well it became very clear to me very early that to fix refining wasn't just a refining issue Certainly, there were some challenges there, and we needed to absolutely improve our performance. certainly there were some challenges there and we needed to absolutely improve our performance This is really an enterprise-wide effort that needed to occur. this is really an enterprise-wide effort that needed to occur Refining relies on the midstream. refining relies on the midstream Refining relies on the marketing and commercial organization. refining relies on the marketing and commercial organization It also absorbs a lot of the overhead that comes in from the corporate office. it also absorbs a lot of the overhead that comes in from the corporate office We needed to be more efficient at the corporate level. we needed to be more efficient at the corporate level We needed to be better integrated in decision-making across all of these. we needed to be better integrated in decision-making across all of these That cultural shift has completed. that cultural shift has completed I mean, we're certainly not done with all the efforts that we got to do on this, but we have improved the way we're making decisions and, as a result, getting better general interest decisions. Refining ourselves is a bit of a microcosm associated with that. We used to run each refinery as an individual business unit. We now run it as a fleet. We have centralized a lot of the functional support around the system, which has driven efficiencies into the business. Then we have also that indirect effect or direct effect of that has also allowed the management teams that are running the sites to be more focused on operating safely and reliably. We've seen that come through in our performance. I mean, we're certainly not done with all the efforts that we got to do on this, but we have improved the way we're making decisions and, as a result, getting better general interest decisions. i mean we're certainly not done with all the efforts that we got to do on this but we have improved the way we're making decisions and as a result getting better general interest decisions Refining ourselves is a bit of a microcosm associated with that. refining ourselves is a bit of a microcosm associated with that We used to run each refinery as an individual business unit. we used to run each refinery as an individual business unit We now run it as a fleet. we now run it as a fleet We have centralized a lot of the functional support around the system, which has driven efficiencies into the business. we have centralized a lot of the functional support around the system which has driven efficiencies into the business Then we have also that indirect effect or direct effect of that has also allowed the management teams that are running the sites to be more focused on operating safely and reliably. then we have also that indirect effect or direct effect of that has also allowed the management teams that are running the sites to be more focused on operating safely and reliably We've seen that come through in our performance. we've seen that come through in our performance That's also showing through on all the financial components of the business that we're working on, and you can see it in there. You see that our cost per barrel has been creeping down. We've seen our utilization numbers creeping up. We've seen our earnings per barrel also showing nice progress. Market capture's been very good, steady progress as it goes. We're not done yet. That's the most exciting part about all of this, is that we've got plenty of opportunity to continue to capture additional market opportunities and integration value for that matter as well. Kevin, you wanna add anything else there? That's also showing through on all the financial components of the business that we're working on, and you can see it in there. that's also showing through on all the financial components of the business that we're working on and you can see it in there You see that our cost per barrel has been creeping down. you see that our cost per barrel has been creeping down We've seen our utilization numbers creeping up. we've seen our utilization numbers creeping up We've seen our earnings per barrel also showing nice progress. we've seen our earnings per barrel also showing nice progress Market capture's been very good, steady progress as it goes. market capture's been very good steady progress as it goes We're not done yet. we're not done yet That's the most exciting part about all of this, is that we've got plenty of opportunity to continue to capture additional market opportunities and integration value for that matter as well. that's the most exciting part about all of this is that we've got plenty of opportunity to continue to capture additional market opportunities and integration value for that matter as well Kevin, you wanna add anything else there? kevin you wanna add anything else there

Speaker 1: I think you've covered a lot. I think you've covered a lot. i think you've covered a lot

Speaker 2: Yeah. Yeah. yeah

Speaker 3: On the integration side, I appreciated that you talked about the integrated nature of the decision-making because having covered the company for a long time, I would say there certainly seems to be a greater coherence in terms of the capital allocation across the entire company. Maybe one example of that is something like the Western Gateway Pipeline project that you're doing, which has benefits across midstream and marketing and refining. Can you talk about the example of that? Like, you know, how is that an example of- On the integration side, I appreciated that you talked about the integrated nature of the decision-making because having covered the company for a long time, I would say there certainly seems to be a greater coherence in terms of the capital allocation across the entire company. on the integration side i appreciated that you talked about the integrated nature of the decision-making because having covered the company for a long time i would say there certainly seems to be a greater coherence in terms of the capital allocation across the entire company Maybe one example of that is something like the Western Gateway Pipeline project that you're doing, which has benefits across midstream and marketing and refining. maybe one example of that is something like the western gateway pipeline project that you're doing which has benefits across midstream and marketing and refining Can you talk about the example of that? can you talk about the example of that Like, you know, how is that an example of- like you know how is that an example of-

Speaker 2: Yeah Yeah yeah

Speaker 3: ... maybe how the approach has changed a little bit and what the opportunity set is there? ... maybe how the approach has changed a little bit and what the opportunity set is there? maybe how the approach has changed a little bit and what the opportunity set is there

Speaker 2: Yeah. I guess it's. You love it when a plan starts to come together, and this Western Gateway project is really a result of some other critical moves that we were making on the portfolio. First, we were, you know, basically pulling out of the California market, right? We found that we were not competitive in that market. It was a drag on our earnings portfolio. So it was the best move for us to withdraw from that market. Still committed to supply the market with the barrels coming in because we had a very strong marketing organization and portfolio in that area. Yeah. yeah I guess it's. i guess it's You love it when a plan starts to come together, and this Western Gateway project is really a result of some other critical moves that we were making on the portfolio. you love it when a plan starts to come together and this western gateway project is really a result of some other critical moves that we were making on the portfolio First, we were, you know, basically pulling out of the California market, right? first we were you know basically pulling out of the california market right We found that we were not competitive in that market. we found that we were not competitive in that market It was a drag on our earnings portfolio. it was a drag on our earnings portfolio So it was the best move for us to withdraw from that market. so it was the best move for us to withdraw from that market Still committed to supply the market with the barrels coming in because we had a very strong marketing organization and portfolio in that area. still committed to supply the market with the barrels coming in because we had a very strong marketing organization and portfolio in that area The other second component of that was to really take over the full operation of our Wood River and Borger operations, and we bought out that JV and moved to 100% operation of those assets, and integrating that with our third refinery in that area, which was Ponca City Refinery. Now we have this nice portfolio of very strong refining presence in an area of the country that we are very competitive. We've created a sort, essentially, in the area on the West Coast. The natural next step is let's fill that void, and let's do it on an integrated basis. The other second component of that was to really take over the full operation of our Wood River and Borger operations, and we bought out that JV and moved to 100% operation of those assets, and integrating that with our third refinery in that area, which was Ponca City Refinery. the other second component of that was to really take over the full operation of our wood river and borger operations and we bought out that jv and moved to 100% operation of those assets and integrating that with our third refinery in that area which was ponca city refinery Now we have this nice portfolio of very strong refining presence in an area of the country that we are very competitive. now we have this nice portfolio of very strong refining presence in an area of the country that we are very competitive We've created a sort, essentially, in the area on the West Coast. we've created a sort essentially in the area on the west coast The natural next step is let's fill that void, and let's do it on an integrated basis. the natural next step is let's fill that void and let's do it on an integrated basis A small team of folks got together, they put a lot of thought to it, and they came up with this concept of this pipeline operation into the West Coast from the Midcontinent area. You're now connecting the energy corridor, and even in a market that can be long at times, with the energy island of the West Coast. You know, we're currently working through that process right now. We're in the second open season for this project. We've opened up the aperture on it a little bit. It was originally a pipeline from St. Louis to Phoenix, and then from Phoenix to Colton, which is Southern California. A small team of folks got together, they put a lot of thought to it, and they came up with this concept of this pipeline operation into the West Coast from the Midcontinent area. a small team of folks got together they put a lot of thought to it and they came up with this concept of this pipeline operation into the west coast from the midcontinent area You're now connecting the energy corridor, and even in a market that can be long at times, with the energy island of the West Coast. you're now connecting the energy corridor and even in a market that can be long at times with the energy island of the west coast You know, we're currently working through that process right now. you know we're currently working through that process right now We're in the second open season for this project. we're in the second open season for this project We've opened up the aperture on it a little bit. we've opened up the aperture on it a little bit It was originally a pipeline from St. Louis to Phoenix, and then from Phoenix to Colton, which is Southern California. it was originally a pipeline from st louis to phoenix and then from phoenix to colton which is southern california There was a lot of interest in that, but there was more interest from folks to see if we could get actually into the heart of Los Angeles distribution system. We opened up a second season to extend the delivery into Central L.A., the Watson area, if you're familiar with that, and also opened up origination location from the Gulf Coast, which was also a lot of feedback we got on the first open season. That second open season's in progress right now and should close here March, April, early April timeframe. We're very hopeful. We've got a lot of positive interest in this, and we're very hopeful that this then eventually moves to a final investment decision somewhere second, third quarter of this year. There was a lot of interest in that, but there was more interest from folks to see if we could get actually into the heart of Los Angeles distribution system. there was a lot of interest in that but there was more interest from folks to see if we could get actually into the heart of los angeles distribution system We opened up a second season to extend the delivery into Central L.A., the Watson area, if you're familiar with that, and also opened up origination location from the Gulf Coast, which was also a lot of feedback we got on the first open season. we opened up a second season to extend the delivery into central l.a the watson area if you're familiar with that and also opened up origination location from the gulf coast which was also a lot of feedback we got on the first open season That second open season's in progress right now and should close here March, April, early April timeframe. that second open season's in progress right now and should close here march april early april timeframe We're very hopeful. we're very hopeful We've got a lot of positive interest in this, and we're very hopeful that this then eventually moves to a final investment decision somewhere second, third quarter of this year. we've got a lot of positive interest in this and we're very hopeful that this then eventually moves to a final investment decision somewhere second third quarter of this year We will be in a position now to supply from our core assets in the MidCon to the West Coast. We will be in a position now to supply from our core assets in the MidCon to the West Coast. we will be in a position now to supply from our core assets in the midcon to the west coast

Speaker 1: I would just add that the way the company was run previously, I'm not sure we could have come up with this project and gotten it to where it is because by its nature, this is an integrated project. We'll see ultimately we'll see benefits in refining, in midstream, and in marketing. All of our primary operating segments will be beneficiaries of a project that I'm not sure we could have done it in the old world when we were very much silo-focused and nobody was incentivized to come up with integration opportunities. Thank you. I wanna touch on a couple other quick things on refining. We came into the year, at the start of the year, and it was all Venezuela all the time, right? I would just add that the way the company was run previously, I'm not sure we could have come up with this project and gotten it to where it is because by its nature, this is an integrated project. i would just add that the way the company was run previously i'm not sure we could have come up with this project and gotten it to where it is because by its nature this is an integrated project We'll see ultimately we'll see benefits in refining, in midstream, and in marketing. we'll see ultimately we'll see benefits in refining in midstream and in marketing All of our primary operating segments will be beneficiaries of a project that I'm not sure we could have done it in the old world when we were very much silo-focused and nobody was incentivized to come up with integration opportunities. all of our primary operating segments will be beneficiaries of a project that i'm not sure we could have done it in the old world when we were very much silo-focused and nobody was incentivized to come up with integration opportunities Thank you. thank you I wanna touch on a couple other quick things on refining. i wanna touch on a couple other quick things on refining We came into the year, at the start of the year, and it was all Venezuela all the time, right? we came into the year at the start of the year and it was all venezuela all the time right

Speaker 3: It was, you know, one of the biggest themes in refining was widening of crude differentials, right? There's gonna be crude diff, more Venezuelan barrels. Heavy, medium sour differentials are gonna widen out. The current issues in the Middle East probably have, you know, somewhat of a opposite effect on crude diffs. How do you think about these balancing factors? Where are we going in terms of crude differentials from here, and how do you think about how that impacts your system and your portfolio? It was, you know, one of the biggest themes in refining was widening of crude differentials, right? it was you know one of the biggest themes in refining was widening of crude differentials right There's gonna be crude diff, more Venezuelan barrels. there's gonna be crude diff more venezuelan barrels Heavy, medium sour differentials are gonna widen out. heavy medium sour differentials are gonna widen out The current issues in the Middle East probably have, you know, somewhat of a opposite effect on crude diffs. the current issues in the middle east probably have you know somewhat of a opposite effect on crude diffs How do you think about these balancing factors? how do you think about these balancing factors Where are we going in terms of crude differentials from here, and how do you think about how that impacts your system and your portfolio? where are we going in terms of crude differentials from here and how do you think about how that impacts your system and your portfolio

Speaker 2: Yeah. Maybe what I'll do is let me start. There's a lot going on right now. Let's set the Middle East activity aside for a moment, and I'll talk a little bit about how we saw the supply and demand balances working out here over this year and next year. With the Middle East activity set aside, we saw strong crude deliveries, strong crude supply into the marketplace. We also saw strong distillate and jet demand through the system. We saw gasoline flat in the U.S., maybe slightly growing worldwide. There was a little bit of growth on the gasoline front. Yeah. yeah Maybe what I'll do is let me start. maybe what i'll do is let me start There's a lot going on right now. there's a lot going on right now Let's set the Middle East activity aside for a moment, and I'll talk a little bit about how we saw the supply and demand balances working out here over this year and next year. let's set the middle east activity aside for a moment and i'll talk a little bit about how we saw the supply and demand balances working out here over this year and next year With the Middle East activity set aside, we saw strong crude deliveries, strong crude supply into the marketplace. with the middle east activity set aside we saw strong crude deliveries strong crude supply into the marketplace We also saw strong distillate and jet demand through the system. we also saw strong distillate and jet demand through the system We saw gasoline flat in the U.S., maybe slightly growing worldwide. we saw gasoline flat in the u.s maybe slightly growing worldwide There was a little bit of growth on the gasoline front. there was a little bit of growth on the gasoline front In refining, we saw refining capacity that was tight, but new plants on, still, you know, still going through some startup, and some additional capacity in Asia coming on in the back half of 2007. When we looked at all of those, very bullish on refining because refining was a bit of the bottleneck in that whole supply chain for transportation fuels. Now let's layer in the current activity. This year's been really a tale of two tapes. Originally started with the Venezuela action, which, for us, increased the heavy crude supply to the market in North America. That put pressure on the heavy crude price. It opened up the light-heavy spread on crude. We saw that. It was starting to move from $20 or $25. In refining, we saw refining capacity that was tight, but new plants on, still, you know, still going through some startup, and some additional capacity in Asia coming on in the back half of 2007. in refining we saw refining capacity that was tight but new plants on still you know still going through some startup and some additional capacity in asia coming on in the back half of 2007 When we looked at all of those, very bullish on refining because refining was a bit of the bottleneck in that whole supply chain for transportation fuels. when we looked at all of those very bullish on refining because refining was a bit of the bottleneck in that whole supply chain for transportation fuels Now let's layer in the current activity. now let's layer in the current activity This year's been really a tale of two tapes. this year's been really a tale of two tapes Originally started with the Venezuela action, which, for us, increased the heavy crude supply to the market in North America. originally started with the venezuela action which for us increased the heavy crude supply to the market in north america That put pressure on the heavy crude price. that put pressure on the heavy crude price It opened up the light-heavy spread on crude. it opened up the light-heavy spread on crude We saw that. we saw that It was starting to move from $20 or $25. it was starting to move from $20 or $25 It was running around $12-13, and it started moving up into the $13-14 dollar range and maybe even bouncing off the $15 dollar range when the Venezuelan crude came on the market. Now the activity occurs in Iran, the Middle East, that closes off the Saudi barrels coming into the market with the medium sours and heavies. That basically reversed that activity with Venezuela, and we saw the light-heavy spread then move back to essentially where it was last year, $20-25 in that $12 dollar range. Hopefully, this is short-lived, right? This activity eventually solves itself out. The strait gets reopened here in the not too distant future. It was running around $12-13, and it started moving up into the $13-14 dollar range and maybe even bouncing off the $15 dollar range when the Venezuelan crude came on the market. it was running around $12-13 and it started moving up into the $13-14 dollar range and maybe even bouncing off the $15 dollar range when the venezuelan crude came on the market Now the activity occurs in Iran, the Middle East, that closes off the Saudi barrels coming into the market with the medium sours and heavies. now the activity occurs in iran the middle east that closes off the saudi barrels coming into the market with the medium sours and heavies That basically reversed that activity with Venezuela, and we saw the light-heavy spread then move back to essentially where it was last year, $20-25 in that $12 dollar range. that basically reversed that activity with venezuela and we saw the light-heavy spread then move back to essentially where it was last year $20-25 in that $12 dollar range Hopefully, this is short-lived, right? hopefully this is short-lived right This activity eventually solves itself out. this activity eventually solves itself out The strait gets reopened here in the not too distant future. the strait gets reopened here in the not too distant future There's been no significant impact to the global GDP, and things start to iron out to back to where we were projecting them, where these barrels start coming onto the market. We see the light-heavy spread open up a little bit more, which is very favorable for our kit that we operate, puts some pressure on the Western Canadian Select crude, which we think the incremental barrel clears through the Gulf Coast because the TMX to the West pipeline is essentially full. Those barrels are clearing through the West Coast with the Venezuelan oil barrels coming in and the Saudi barrels coming in. There's been no significant impact to the global GDP, and things start to iron out to back to where we were projecting them, where these barrels start coming onto the market. there's been no significant impact to the global gdp and things start to iron out to back to where we were projecting them where these barrels start coming onto the market We see the light-heavy spread open up a little bit more, which is very favorable for our kit that we operate, puts some pressure on the Western Canadian Select crude, which we think the incremental barrel clears through the Gulf Coast because the TMX to the West pipeline is essentially full. we see the light-heavy spread open up a little bit more which is very favorable for our kit that we operate puts some pressure on the western canadian select crude which we think the incremental barrel clears through the gulf coast because the tmx to the west pipeline is essentially full Those barrels are clearing through the West Coast with the Venezuelan oil barrels coming in and the Saudi barrels coming in. those barrels are clearing through the west coast with the venezuelan oil barrels coming in and the saudi barrels coming in We see pressure on that light-heavy spread, which is favorable to our refining kit, which also plays into the heavy distillate and jet demand because this crude definitely shifts your profile, your yield profile to distillate and jet as well. It all comes together nicely for us with the way we see it over the next two years. We see pressure on that light-heavy spread, which is favorable to our refining kit, which also plays into the heavy distillate and jet demand because this crude definitely shifts your profile, your yield profile to distillate and jet as well. we see pressure on that light-heavy spread which is favorable to our refining kit which also plays into the heavy distillate and jet demand because this crude definitely shifts your profile your yield profile to distillate and jet as well It all comes together nicely for us with the way we see it over the next two years. it all comes together nicely for us with the way we see it over the next two years

Speaker 3: Maybe one last thing before we leave refining. There's been, you know, chatter in the news over the, you know, on and off over the last week about possible export bans or lifting of the Jones Act. What are you seeing? What do you, what do you think about the possibility there? Are these real possibilities? If so, what would be the impact? Maybe one last thing before we leave refining. maybe one last thing before we leave refining There's been, you know, chatter in the news over the, you know, on and off over the last week about possible export bans or lifting of the Jones Act. there's been you know chatter in the news over the you know on and off over the last week about possible export bans or lifting of the jones act What are you seeing? what are you seeing What do you, what do you think about the possibility there? what do you what do you think about the possibility there Are these real possibilities? are these real possibilities If so, what would be the impact? if so what would be the impact

Speaker 2: Yeah. Well, who knows what's possible. I don't want to predict politics, that's for sure. There's a reason I'm not in politics. But you know, we've been through the no export scenario just not too terribly long ago. Under the previous administration, there was a lot of talk about no more exporting products or. I think we were successful in educating the administration on the total impacts of that. We will do the same thing with the current administration if that's one of the proposals. The Jones Act, it's a real possibility, right? That is one that essentially opens up more marine equipment available to ship supplies around in the U.S. Yeah. yeah Well, who knows what's possible. well who knows what's possible I don't want to predict politics, that's for sure. i don't want to predict politics that's for sure There's a reason I'm not in politics. there's a reason i'm not in politics But you know, we've been through the no export scenario just not too terribly long ago. but you know we've been through the no export scenario just not too terribly long ago Under the previous administration, there was a lot of talk about no more exporting products or. under the previous administration there was a lot of talk about no more exporting products or I think we were successful in educating the administration on the total impacts of that. i think we were successful in educating the administration on the total impacts of that We will do the same thing with the current administration if that's one of the proposals. we will do the same thing with the current administration if that's one of the proposals The Jones Act, it's a real possibility, right? the jones act it's a real possibility right That is one that essentially opens up more marine equipment available to ship supplies around in the U.S. that is one that essentially opens up more marine equipment available to ship supplies around in the u.s The markets that will benefit from that will be the ones that are generally short product, right? You got the West Coast, and then you've got the East Coast. The barrels would move into those markets, likely out of the Gulf Coast, is where that would come. It makes a lot of sense to move that around. However, there's always been traditionally very strong resistance to any significant Jones Act waivers because of the underlying I guess points of view on that particular act. You know, there's also been some talk around, you know, RVP waivers and things like that. We'll see how that all plays out. The markets that will benefit from that will be the ones that are generally short product, right? the markets that will benefit from that will be the ones that are generally short product right You got the West Coast, and then you've got the East Coast. you got the west coast and then you've got the east coast The barrels would move into those markets, likely out of the Gulf Coast, is where that would come. the barrels would move into those markets likely out of the gulf coast is where that would come It makes a lot of sense to move that around. it makes a lot of sense to move that around However, there's always been traditionally very strong resistance to any significant Jones Act waivers because of the underlying I guess points of view on that particular act. however there's always been traditionally very strong resistance to any significant jones act waivers because of the underlying i guess points of view on that particular act You know, there's also been some talk around, you know, RVP waivers and things like that. you know there's also been some talk around you know rvp waivers and things like that We'll see how that all plays out. we'll see how that all plays out when you have to rack and stack the options that are in front of the administration, you're likely gonna see the ones that administrative executive orders can take the action first, and that would be the Jones Act or the RVP activity. It gets increasingly more difficult because you have congressional action required for some of the other things that are on the list, and that is more and more unlikely that would occur. when you have to rack and stack the options that are in front of the administration, you're likely gonna see the ones that administrative executive orders can take the action first, and that would be the Jones Act or the RVP activity. when you have to rack and stack the options that are in front of the administration you're likely gonna see the ones that administrative executive orders can take the action first and that would be the jones act or the rvp activity It gets increasingly more difficult because you have congressional action required for some of the other things that are on the list, and that is more and more unlikely that would occur. it gets increasingly more difficult because you have congressional action required for some of the other things that are on the list and that is more and more unlikely that would occur

Speaker 3: Shifting to midstream real quickly. You've got a target to hit 4.5 billion in EBITDA by the end of 2027. Can you talk about how you think about the, you know, the drivers and the risk of hitting that number? You haven't talked a lot. You certainly haven't provided targets, but you've got a decent amount of organic growth opportunities that should provide, you know, continued growth in the midstream business even well beyond 2027. Maybe, you know, how confident should we feel in hitting the $4.5 billion number? And how do you think about the opportunity set post-2027? Shifting to midstream real quickly. shifting to midstream real quickly You've got a target to hit 4.5 billion in EBITDA by the end of 2027. you've got a target to hit 4.5 billion in ebitda by the end of 2027 Can you talk about how you think about the, you know, the drivers and the risk of hitting that number? can you talk about how you think about the you know the drivers and the risk of hitting that number You haven't talked a lot. you haven't talked a lot You certainly haven't provided targets, but you've got a decent amount of organic growth opportunities that should provide, you know, continued growth in the midstream business even well beyond 2027. you certainly haven't provided targets but you've got a decent amount of organic growth opportunities that should provide you know continued growth in the midstream business even well beyond 2027 Maybe, you know, how confident should we feel in hitting the $4.5 billion number? maybe you know how confident should we feel in hitting the $4.5 billion number And how do you think about the opportunity set post-2027? and how do you think about the opportunity set post-2027

Speaker 1: Yeah, we feel very good about the $4.5 billion target. That's an end of 2027 run rate, adjusted EBITDA for midstream. We were at essentially $4 billion end of 2025, and we have organic projects in place that will get us to that number. We brought a new gas plant on last year. The Dos Picos II plant will be up to full year contribution of that facility in 2026. We have another gas plant under construction, the Iron Mesa plant, that comes online early 2027. We're expanding the Coastal Bend pipeline. We acquired the Coastal Bend system, formerly known as EPIC NGL, that NGL system in early 2025. We've completed a first phase expansion of the NGL pipeline at the end of last year. Yeah, we feel very good about the $4.5 billion target. yeah we feel very good about the $4.5 billion target That's an end of 2027 run rate, adjusted EBITDA for midstream. that's an end of 2027 run rate adjusted ebitda for midstream We were at essentially $4 billion end of 2025, and we have organic projects in place that will get us to that number. we were at essentially $4 billion end of 2025 and we have organic projects in place that will get us to that number We brought a new gas plant on last year. we brought a new gas plant on last year The Dos Picos II plant will be up to full year contribution of that facility in 2026. the dos picos ii plant will be up to full year contribution of that facility in 2026 We have another gas plant under construction, the Iron Mesa plant, that comes online early 2027. we have another gas plant under construction the iron mesa plant that comes online early 2027 We're expanding the Coastal Bend pipeline. we're expanding the coastal bend pipeline We acquired the Coastal Bend system, formerly known as EPIC NGL, that NGL system in early 2025. we acquired the coastal bend system formerly known as epic ngl that ngl system in early 2025 We've completed a first phase expansion of the NGL pipeline at the end of last year. we've completed a first phase expansion of the ngl pipeline at the end of last year We're undergoing the second phase of expansion that we'll complete by the end of this year, early next year. We continue to evaluate additional gas plant opportunities as well as additional frac capacity. Our most likely next frac expansion project would be on the Coastal Bend system at Corpus Christi. That will be the most capital efficient frac expansion that we can do. Now, to be clear, that wouldn't be part of the 4.5. That would go beyond that. I'm kind of blending into some of the opportunities that we see as we go beyond 2027. We're undergoing the second phase of expansion that we'll complete by the end of this year, early next year. we're undergoing the second phase of expansion that we'll complete by the end of this year early next year We continue to evaluate additional gas plant opportunities as well as additional frac capacity. we continue to evaluate additional gas plant opportunities as well as additional frac capacity Our most likely next frac expansion project would be on the Coastal Bend system at Corpus Christi. our most likely next frac expansion project would be on the coastal bend system at corpus christi That will be the most capital efficient frac expansion that we can do. that will be the most capital efficient frac expansion that we can do Now, to be clear, that wouldn't be part of the 4.5. now to be clear that wouldn't be part of the 4.5 That would go beyond that. that would go beyond that I'm kind of blending into some of the opportunities that we see as we go beyond 2027. i'm kind of blending into some of the opportunities that we see as we go beyond 2027 With the capital budget we have this year of growth capital for midstream, $700 million budget, we expect it to be about that level for the next couple of years at least. That will get us to the 4.5 as we continue to also, from a commercial standpoint, optimize the flow of molecules around the system and maximize the margin uplift and capture that we can across that full NGL value chain. Then as you look beyond 2027, post the $4.5 billion, if you assume about similar level of capital spend. To be clear, it's not a given that that amount of capital is available to midstream, but if they have the right projects, the right opportunities, that. With the capital budget we have this year of growth capital for midstream, $700 million budget, we expect it to be about that level for the next couple of years at least. with the capital budget we have this year of growth capital for midstream $700 million budget we expect it to be about that level for the next couple of years at least That will get us to the 4.5 as we continue to also, from a commercial standpoint, optimize the flow of molecules around the system and maximize the margin uplift and capture that we can across that full NGL value chain. that will get us to the 4.5 as we continue to also from a commercial standpoint optimize the flow of molecules around the system and maximize the margin uplift and capture that we can across that full ngl value chain Then as you look beyond 2027, post the $4.5 billion, if you assume about similar level of capital spend. then as you look beyond 2027 post the $4.5 billion if you assume about similar level of capital spend To be clear, it's not a given that that amount of capital is available to midstream, but if they have the right projects, the right opportunities, that. to be clear it's not a given that that amount of capital is available to midstream but if they have the right projects the right opportunities that Remember, our priority here is not growing for the sake of scale, it's growing to increase the Return on Capital Employed in that business. All of these projects we do, the ultimate benchmark is this consistent with our objective to grow Return on Capital Employed? With the opportunities we see, you look at projects like Western Gateway, that is further out. That would be a sort of 2029 completion on the assumption that project goes ahead. We feel very good that there's line of sight to continued ratable growth in midstream earnings. Not anything dramatic in terms of significant increases in capital, but just continuing to work away on additional gas plants, pipeline expansion, frac capacity, Western Gateway, and then optimizing around the entire system. Remember, our priority here is not growing for the sake of scale, it's growing to increase the Return on Capital Employed in that business. remember our priority here is not growing for the sake of scale it's growing to increase the return on capital employed in that business All of these projects we do, the ultimate benchmark is this consistent with our objective to grow Return on Capital Employed? all of these projects we do the ultimate benchmark is this consistent with our objective to grow return on capital employed With the opportunities we see, you look at projects like Western Gateway, that is further out. with the opportunities we see you look at projects like western gateway that is further out That would be a sort of 2029 completion on the assumption that project goes ahead. that would be a sort of 2029 completion on the assumption that project goes ahead We feel very good that there's line of sight to continued ratable growth in midstream earnings. we feel very good that there's line of sight to continued ratable growth in midstream earnings Not anything dramatic in terms of significant increases in capital, but just continuing to work away on additional gas plants, pipeline expansion, frac capacity, Western Gateway, and then optimizing around the entire system. not anything dramatic in terms of significant increases in capital but just continuing to work away on additional gas plants pipeline expansion frac capacity western gateway and then optimizing around the entire system

Speaker 3: Right. Thank you. I think that that's all the time we have. Rich, Kevin, thanks so much for being here. Thank you. Right. right Thank you. thank you I think that that's all the time we have. i think that that's all the time we have Rich, Kevin, thanks so much for being here. rich kevin thanks so much for being here Thank you. thank you

Speaker 1: Thank you. Thank you. thank you