Pbf Energy Inc (NYSE: PBF) Q2 2025 Earnings Call dated Jul. 31, 2025
Corporate Participants:
Unidentified Speaker
Colin Murray — Vice President-Investor Relations
Paul Davis — Senior Vice President-Supply, Trading and Optimization
Michael A. Bukowski — Senior Vice President-Head Refining
Thomas L. O’Connor — Senior Vice President-Commodity Risk and Strategy
Karen Davis — Senior Vice President and Chief Financial Officer
Matthew C. Lucey — President, Chief Executive Officer and Director
Analysts:
Unidentified Participant
Paul Cheng — Analyst
Ryan Todd — Analyst
Jason Gabelman — Analyst
Conor Fitzpatrick — Analyst
Joe Laetsch — Analyst
Manav Gupta — Analyst
Neil Mehta — Analyst
Doug Leggate — Analyst
Presentation:
operator
Good day everyone and welcome to the PBF second quarter 2025 earnings conference call and webcast. At this time, all participants have been placed in a listen only mode and the floor will be open for questions following management’s prepared remarks. If anyone should require operator assistance during the conference, please press Star0 on your telephone keypad. Please note this conference is being recorded. It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.
Colin Murray — Vice President-Investor Relations
Thank you, Mike. Good morning and welcome to Today’s Call. With me today are Matt Lucey, our President and CEO, Mike Bukowski, our Senior Vice President and Head of Refining, Karen Davis, our CFO and several other members of our management team. Copies of today’s earnings Release and our 10Q filing, including supplemental information, are available on our website. Before getting started, I’d like to direct your attention to the Safe harbor statement contained in today’s press release. Statements that express the company’s or management’s expectations or predictions of the future are forward looking statements intended to be covered by the Safe harbor provisions under federal securities laws consistent with our prior periods.
We’ll discuss our results excluding special items which are described in today’s press release. Also included in the press release is forward looking guidance information for any questions on these items or other follow up questions. Please contact Investor Relations for reconciliations of any non GAAP measures mentioned on today’s call. Please refer to the supplemental tables provided in the press release. I’ll now turn the call over to Matt Lucey.
Matthew C. Lucey — President, Chief Executive Officer and Director
Thanks Colin. Good morning everyone and thank you for joining our call. While PDF’s second quarter was a marked improvement over the prior few quarters, we definitively see constructive tailwinds ahead. Specifically on the crude side. The Martinez refinery was partially restarted in late April and now with much better discovery, we’re working towards a full restart by the end of this year. The work our team in Martinez is doing is commendable. They continue to work diligently to maintain safe operations and produce much needed products for the California market, while at the same time managing the significant project to restore full operations.
The rest of our refining system has largely operated to plan. Second quarter product margins were supported by strong demand while the light heavy crude differentials continue to be a significant challenge. Close to 4 million barrels of medium and heavy crude were taken off the market between 22, 2022 and 2023 timeframe. Based on announcements to date and projecting forward, we should see between 2 and 2.5 million barrels per day coming back by this autumn which will coincide with seasonal refinery maintenance. With this, we expect to see light heavy spreads widen out as we move deeper into the third and fourth quarters.
Looking ahead, the product markets are looking attractive. Distillate in particular looks quite strong. Global distillate supply and demand balances remain in deficit and with low inventory, distillate cracks should remain supported. With already high refinery utilization, it will be difficult for distillates to restock with continuing strong demand. Longer term, we continue to see incremental product demand growth exceeding net refining capacity additions. Recent research indicated only approximately 500,000 barrels a day of net refinery capacity additions in 2025. This does not keep up with growing global demand and as we have seen, capacity rationalization can happen quickly and unexpectedly.
We are seeing more rationalizations than expected in 2025 and 2026 with fewer new additions as we look further out. Europe recently lost 113,000 barrel a day Lindsay refinery in the UK and we still have the pending shutdowns of Field 66, Los Angeles and Valero’s Benicia plant over the next 10 months or so. This is a constructive setup for the global refining environment. PBF remains focused on controlling the aspects of our business that we can control. As Mike will update shortly, I’m very pleased with our progress on the business improvement initiatives that we’ve initiated. This effort will result in improved efficiency reliability across our system, which should in turn drive superior refining performance.
To be successful and enhance value for our investors, we must operate safely, must operate reliably and responsibly, but we must do it as efficiently as possible. With that, I’ll turn the call over to Mike Bukowski for comments and operations.
Michael A. Bukowski — Senior Vice President-Head Refining
Thank you Matt. Good morning everyone. Before updating on the progress we’ve made on a refining business improvement program, RBI for short, I’ll provide a few comments on second quarter operations on the West Coast. We continue to progress with the full repair and restart of Martinez. We are managing a number of work streams including running the available elements of the refinery and building the damaged areas. At this point, we’ve completed the demolition of the damaged areas. As we progressed through the demolition and deeper into those areas, we identified additional elements that need to be addressed in the rebuild process, which has expanded our previous scope of work and adjusted the timeline to reflect an expected restart by year end.
Torrance is currently conducting a hydro cracker turnaround and we expect it to be complete by the beginning of September. Aside from a few minor issues, the rest of our system operated reasonably well in the quarter and we have no major turnaround work for the remainder of the year. Shifting Topics to RBI Last quarter we announced that we expected to recognize $230 million of annualized run rate savings by the end of 2025 and $350 million of run rate savings by the end of 2026. We are currently on track to exceed those stated targets. We currently have over $125 million of run rate savings implemented so far.
The savings will materialize as we implement the programs in refining operating expenses, capital and turnaround budgets, and general and administrative expenses. As a reminder, we will realize the full value of these savings in 2026 and a prorated portion in 2025 as we move through implementation. We started the process with the East Coast Torrance Procurement and our top to bottom organizational review from headquarters to the refineries. This is a continuous improvement effort. In addition to the ongoing work streams, we are now working at Martinez and Chalmette to generate additional actionable ideas that will translate to real cost savings.
We have a number of positive initiatives going on across our organizations, but our main priority will always be the focus on safe, reliable and responsible operations across our systems. I’ll turn the call over to Karen Davis for our financial overview.
Karen Davis — Senior Vice President and Chief Financial Officer
Thanks, Mike. For the second quarter we reported an adjusted net loss of $1.03 per share and adjusted EBITDA of 61.8 million. Our discussion of second quarter results excludes the net effect of four special items including 30.4 million in incremental OpEx related to the Martinez refinery incident, a $189 million gain on insurance recoveries, an 8 million gain related to PBF’s 50% share of SBIR’s lower of cost or market adjustment for the quarter and approximately 13.6 million of severance and other charges associated with the RBI initiative. The 189 million gain on insurance recoveries related to the Martinez fire is a result of the initial unallocated payment of 250 million that we received from our insurance underwriters.
In the second quarter, 61 million of the total proceeds from was applied to the insurance receivable that was recorded in Q1 and the remaining 180 million was recorded as a gain on insurance recovery for the quarter. We expect that we will negotiate additional interim payments. However, the timing and amount of any agreed upon future payments will be dependent on the amount of covered expenditures that we actually incur plus calculated business interruption losses. Our Q2P and L reflects incremental OpEx at Martinez of 30.4 million that we are reflecting as a special item because it relates to construction of temporary equipment to restart undamaged units, costs incurred to address impacts to fire on the units that were being prepared for turnaround, and other fire related impacts.
We anticipate recovering a portion of this amount through insurance, but the specific amount of the recovery will be determined as we progress further into the claims process. Generally speaking, any insurance proceeds that we receive in future periods will be reflected as gain on insurance recoveries on our income statement and reported as a special item shifting back to our normal quarterly results. Discussion Also included in our Results is a $4.3 million loss related to PBF’s equity investment in St. Bernard Renewables. SBR produced an average of 14,200 barrels per day of renewable diesel in the second quarter after completing a planned catalyst change that began in March and ended in April third quarter.
Renewable diesel production is expected to be 16 to 18,000 barrels per day. Cash flow from operations for the quarter was 191.1 million, which includes a working capital benefit of approximately 79 million, primarily related to an approximately 2 million barrel reduction in inventory during the quarter as compared to March 31 levels when inventories were elevated as a result of the Martinez fire. This benefit was partially offset by a decrease in our payables position. Also included in our operating cash flow is 118 million of the $250 million in total insurance proceeds received in the quarter. Cash invested in consolidated CapEx for the quarter was 154.7 million, which includes refining, corporate and logistics.
This amount excludes second quarter capital expenses of approximately 104 million related to the Martinez incident. Year to date rebuild capital expenses at Martinez are approximately 132 million. Additionally, our board of Directors approved a regular quarterly dividend of 27.5 cents per share. We ended the quarter with approximately 590.7 million in cash and approximately 1.8 billion of net debt. Maintaining our firm financial footing and a resilient balance sheet remain priorities. At quarter end our net debt to cap was 30% and our current liability current liquidity is approximately 2.3 billion based on cash balances of approximately 590 million and borrowing capacity under our ablation, our liquidity position is ample.
The anticipated receipt of a $70 million tax refund plus the receipt of the proceeds from the pending sale of the Knoxville and Philadelphia terminals that we reported last quarter should bolster our liquidity position further this quarter. As we look ahead, we expect to use periods of strength to focus on deleveraging Preserving the balance sheet. Operator. We’ve completed our opening remarks and we’d be pleased to take questions.
Questions and Answers:
operator
We will open the call to question. The company requests that all callers limit each turn to one question and one follow up. You may rejoin the QE with additional questions. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.
Your first question comes from Dog Legate from Wolf Research. Please go ahead.
Doug Leggate
Thanks. Good morning, guys. Appreciate you taking my questions. Matt, the the cost cutting targets are obviously gathering pace. I wonder if you could help us understand how to track those in terms of where it’s going to show up, whether it be capital, operating cost, capture rate, because obviously 350 million run rate, I guess it’s about 75 cents a barrel. Putting it here, if it’s sustainable.
Matthew C. Lucey
The last. You broke up the last second. Is it going to be sustainable?
Doug Leggate
Yeah, I’m basically saying I’m trying to understand how we track it, how do we model it, how do we bake it into what we think is a go forward part of your evaluation.
Matthew C. Lucey
I’ll pass it over to Mike briefly. But just so, just so we’re clear, we are taking extensive steps to make sure that everything that we do is absolutely sustainable and resilient going forward. There is going to be some amount that is on the capital side and turnaround side. So it may at times be forensically difficult to tick and tie. But we’re here to illuminate where it all resides. And so, you know, it will be in the dollars per barrel on the OPEX side, but also reduction on the capital side that might want you to expand.
Michael A. Bukowski
Yeah, Doug, thanks for the question. At a high level, it’s about 70%, it’s going to be an OPEX and about 30% is going to be on the capital side. And with regard to, you know, I’ll explain a little bit more about the sustainability piece and the reliability piece. So we’ve called this the refining business improvement initiative, not just cost reduction. And so sustainability is just as important for us as the cost reductions and because that’s also going to drive business improvement in all facets and operational excellence and our safety, performance and our reliability. So for instance, on the turnaround capital side, there’s extensive processes that we’re putting in place that are helping us to optimize our scope when it comes to our sustaining capital, optimize our scope when it comes to turnarounds, improve our productivity when it comes to turnarounds and optimize our intervals, and so to making sure that where we spend our capital, we get the biggest bang for our buck with the highest return.
From a reliability perspective, those things will drive sustainability. On the OPEX side, every initiative that’s put in place has a sustainability plan. And so in other words, it’s a set of KPIs. We’re using some technology to help get that information out into the refineries. And so that those initiatives and those KPIs will be tracked on a routine basis. I’m going to be tracked on a daily basis, depending upon what they are. Some will be tracked on a monthly basis, but we will know where we are going forward and be able to keep our eye on the ball.
And it also is a springboard for continuous improvement because we don’t see this initiative really ever ending. It’s just the start of a continuous improvement exercise.
Doug Leggate
I appreciate it, guys, thank you. So just to be clear, there’s nothing in the capture rate. This is all opex. OPEX and capex.
Michael A. Bukowski
I mean, this initiative so far is focused on OPEX and capital. Nothing in the capture rate.
Doug Leggate
Got it. Thank you, Matt. I wonder if I could also just ask you to follow up on your comments about the light heavy differential. Obviously, as you pointed out, there’s supposedly a bunch of new barrels coming back onto the market. Chevron’s back in Venezuela again. But the punchline is we haven’t seen the physical barrels show up. Are you seeing evidence of light heavy spreads widening on your feedstock opportunities or no?
Matthew C. Lucey
I think we’re just starting to see it now. I’d sort of just back up. And when you think about light heavy differential and sort of the disruptions to the market, whether they were voluntary or involuntary, you know, through OPEC or other geopolitical events, there’s been no refining company that’s been impacted more than pbf. That’s the bad news. The good news is going forward as these things correct, and these barrels come back in the market, there’s no bigger beneficiary of that differential widening out. And so when I take a look at the refining market, the first thing you look at, the first thing you want to see is reasonable demand.
And that resides in attractive cracks which we have. So I think the backdrop on, you know, and the real Driver of the business on the demand side looks good and constructive. The big flywheel for PBF and a huge tailwind going forward as these barrels come into the market will be lowering our cost of feed, which has a dollar for dollar impact to our bottom line. But Tom, do you want to talk about specifics? Yeah, hey Doug, it’s Tom. I mean, just to expand a little bit. I mean, I think in terms of, you know, why it’s been masked at this point is just really kind of seasonality, right? We got, you know, very high run environment.
You know, it also combined with, you know, seasonal demand for, you know, crude and fuel burn in the Middle East. So as production has been increasing, it hasn’t necessarily turned into increased exports yet. You know, it certainly are expectations that that would be seen in the next few waterborne trade cycles as we proceed into there. And obviously combines with, you know, just the seasonal aspect that turnarounds will start commencing in that time frame as well.
Doug Leggate
All right, thanks for the detailed answers. I appreciate it.
Matthew C. Lucey
Thanks, Chuck.
operator
Your next questions come from Neil Mechta from Goldman Sachs. Please go ahead.
Neil Mehta
Yeah, good morning Matt and team. Thanks for all the color here. We just want to spend some time on the Martinez refinery. You got limited operations that were restored in the second quarter. But you talk a little bit about the path to restart different units. And so can you just go through the logistics between now and year end? What are the gating items? What are the things that we critical path items that we as an investment community should be monitoring.
Michael A. Bukowski
So first of all, thanks Neil for the question. First of all, I just want to do a shout out to the Martinez folks. I mean, they’ve done tremendous work to be able to recover, get the units back up safely. And then all through the work that we’ve done so far with the demolition and clearing, the getting access to the area has been done extremely well. So I just wanted to share that. So that actually was the first milestone was getting the demolition done and we’re finished with that. And it’s given us a clear pathway to understand and finalize the scope.
We have some additional scope items that we need to finish. Most of our, all of our long lead procurement activities have been completed at this point. We actually finished that prior to demolition because we knew kind of immediately what they were. We are starting to see some pressure on some of those delivery timings which is added to our concern and has forced us to push that back startup time towards the end of the year. But we continue to monitor that on a continuous basis. We started operations like the civil work, and we actually started receiving some modules and equipment and we’re getting close to being ready to install them.
And so we’re just in the mode right now. You know, this is not a normal project, as you can understand. We’re doing things in parallel as much as possible. So I’d say the next major milestone for us is the start of the major construction activities.
Neil Mehta
That’s really helpful. And then just in terms of some of those gating items, I guess you talk about regulatory permitting and approvals. Can you just remind us again what those are? And then the certain critical equipment and components. It sounds like, based on the comments that you just made, some of those are coming to the site. But again, remind us what those are as well.
Michael A. Bukowski
So on the regulatory side, it’s essentially a permit to operate, which is a typical permit for any project of this size. And we’ve maintained a real strong relationship with the air district in the Bay Area. And they are working with us hand in glove to understand what we’re understanding what their requirements are to give us a temporary approval to construct. And we’re working sure that we meet those requirements. And so we expect to get that permit very soon, which will allow all major activities to start. And again, our relationship has been really strong with that.
In terms of the long lead items, I mean, there’s. It’s like a handful of things, but they were driving the same, driving the schedule. I mean, ultimately it comes down to some major process vessels and some major rotating equipment, pieces of rotating equipment. But like I said, we knew based on where the damage was, immediately where they were, and we got them on order real quick within. Within about six weeks of the fire.
Neil Mehta
Great. And then my follow up is just around Delaware City. You guys have excess real estate. There’s talk about potentially given the power length there, is that a natural place to build data centers and so on. So just your perspective on that, is that something that we as an investment community should be spending time on?
Matthew C. Lucey
Thanks, Neil. Well, we’ve been talking about for quite some time. We’re blessed with tremendous amount of land around our Delaware City refinery that has not been commercialized and has not the value of which has not been maximized. And as everything we own, we want to maximize the value of it. So as I’ve discussed in the past, we’re looking at ways to do just that and we’re exploring opportunities. And to the extent that we can maximize value there, we’re absolutely going to look to do it. And so we’ve been Working with some counterparties, with some subject matter experts.
And I do believe there’s going to be an opportunity to really create Win, win, Win where you can have incremental investment, incremental jobs and incremental value created around a refinery in Delaware.
Neil Mehta
Thanks, Matt.
operator
Thank. Thank you. Your next question comes from Manav Gupta from ubs. Please go ahead.
Manav Gupta
Hi guys. So my first question is around the cash position. I’m trying to understand. It looks like you did not born any cash in 2Q but going ahead 3Q by the time you actually restart your refinery, what could be the cash position? And do you expect to be within your means in terms of not looking to raise more debt or any other form of financing? And can you continue to work within the means by year end? Because most likely by year end, once Martinez comes back, you should be fine.
Karen Davis
Thank you for the question, Manav. You know, we are always looking at ways to properly capitalize our company. And the $800 million unsecured notes offering that we did earlier in the year we think has positioned us well. We do believe that we have ample liquidity going forward. Our current net debt position is at 30%. I’m sorry, net debt to cap position. We target being under 35% at the moment. Our cash burn, as you saw in the first quarter was fairly neutral. So we believe we are well positioned to weather what comes.
Matthew C. Lucey
I would just add that the relationship and the working relationship with the insurance market and providers has been very constructive so far. And so we’ve got a whole team that works with them hand to glove. And so any working capital swings as a result of expenditures and receipts from the Martinez project is mitigated to some degree to the extent that we can continue working as collaboratively as we have with the insurance providers.
Manav Gupta
Thank you. And going back a little, I think Lis didn’t miss this one. But there was a filing on Starwood Digital Ventures. Looks like they are looking to build a massive data center. And one of the companies they’re working with is Newcastle Campus Development, which is an entity linked to you. So I’m just trying to understand this filing a little better, what opportunities it creates for you guys. And would you be only the land provider? Could you be also providing some electricity? How can you collaborate with Starwood to bring forward this project? Thank you.
Matthew C. Lucey
Thanks. You know, as I said, we’re exploring ways in which we can maximize value for our shareholders. We have been working with Starwood, who has been an excellent subject matter expert. They’ve done such projects in the past. We don’t have anything formal to announce at the moment, but we’ll continue to develop opportunities at Delaware and do it in a way in which we can, like I say, absolutely drive the best value for our shareholders. And so we are actively working that project, but we don’t have anything definitive to report at this time.
Manav Gupta
Thank you so much.
operator
Thank you. Your next question comes from Brian Todd from Piper Sandler. Please go ahead.
Ryan Todd
Great, thanks. Maybe one on the west coast after a very strong second quarter, margins on the west coast have softened a little bit of late. Can you maybe talk about what you’re seeing in terms of market dynamics there in the western half of the US and any outlook from there going forward?
Matthew C. Lucey
Yeah, again from a very high level. And you know, we’re just in the midst of a refinery shutting down in Los Angeles that, you know, I think will sort of happen over the next, you know, six, eight weeks. Indeed. I think we’re actually having some new employees from that facility.
But structurally, looking at California sort of in a post lar shutdown, even ignoring the reduction from Martinez, you’re going to be short gasoline by, you know, upwards of 150,000 barrels a day. And then, you know, other announced closure in San Francisco will increase that by another 100,000 barrels a day. You know, upwards of 250,000 barrels a day. When you rely on imports, they do not come in perfectly ratable. And so you do have periods where a significant amount of product is brought in. And so you have a little bit of a up and down where the market has to escalate to a point where it’s going to attract those imports and then they’ll arrive in, you know, sort of a large size and then it brings the market off going forward.
It’s our belief that the market’s going to be very constructive just based on the amount of product that they have to import, that our refineries are very well positioned to be the low cost provider for California who will be desperate to be able to attract the fuels necessary for their society to prosper as it has. So I think California is set up in a very constructive manner. Paul, do you want to talk to the micro in regards to what we’re seeing now?
Paul Davis
Sure. I mean, Ryan, I mean, if you take a look at what came in during the second quarter, it’s about 120,000 barrels a day of products. That’s about where the market’s short currently with all the refinery activity that’s going on. But Matt mentioned it. Right. It comes in all at once and Then it bleeds into the systems across a given month. And so there’s a tremendous amount of pricing volatility that we see in that marketplace. Because of that, ARBs are opening and closing based on that volatility. So just as an example, I take a look in August, we’re going to have a very limited import market into the state during the course of August because of the closed arbitrages to support the business there.
End of the day, the market’s going to price itself to balance. We anticipate that. It costs a lot of money to bring products into that state from abroad. Molecules will show up, they will get there, but it will be an expensive adventure for everybody to balance.
Ryan Todd
Great, thank you. And then maybe one question on the renewable diesel side. Can you talk about during the second quarter, how much were you able to monetize in terms of credits from the ptc and should we expect further tailwinds from that as we look into the second half of 2025? And maybe any broader thoughts on what you’re seeing in terms of the macro in the near term there on renewable diesel?
Karen Davis
Hi, Brian. We don’t give details on specific credits. I will tell you that we did accrue 45Z revenue due during both the first and the second quarters based on the preliminary treasury guidance and in conjunction with our qualifying sales of renewable diesel. What we did see in Q2 though is with RINS pricing increasing, we did come close to offsetting the decline in revenue from the BTC to PTC switch.
Ryan Todd
Okay, great. Thank you.
operator
Thank you. Your next question comes from Joe Lych from Morgan Stanley. Please go ahead.
Joe Laetsch
Hey, good morning, Matt team. Thanks for taking my questions. So, on the California landscape, can you talk to how recent discussions have been with the state? It seems like, at least from a headline perspective, government officials have begun to realize the importance of refined product and impact of upcoming refinery closures. Thank you.
Matthew C. Lucey
Yeah, you could be more spot on in that regard. And it’s the famous, you know, nothing focuses in mind like a pending crisis, I guess. But quite honestly, our outreach with the state of California over the last couple years, there’s been a definitive shift and it’s been a real focus for us, quite honestly. We’ve been spending a fair amount of time over the last couple years simply trying to educate all the different sort of regulatory agencies and groups that you work with within the state. You know, not only, you know, the importance of our products, but also, you know, the cost of what market disruptions look like and such.
And so there has been Some constructive dialogue with the state. I think there’s some of it has yet to be proven. Nice conversations are nice, but actual reality is an important thing. And so as the legislature sort of works through some things in August, as the governor’s staff works through things and the CEC and all the different constituents, I think there is a recognition of the potential crisis that lies ahead. And we, as I said, work with them very, very closely. I’ve been pleased with the collaborative nature of that discussion. It does have to result in tangible improvements and that still lies ahead.
Joe Laetsch
Thanks, Matt. That’s helpful. And then shifting gears a little bit, there’s been several refinery closures that have occurred or been announced in Europe. Could you give your perspective on the East Co and implications that you’re seeing on transatlantic flows? Thank you.
Matthew C. Lucey
Yeah, it’s a developing story to some degree, but we’ve seen a real drop off in imports from Europe. Where historically had one was a dumping ground, Europe would send product to the US east coast because they needed to get rid of it. And now it would appear that the US east coast has to elevate to a point to attract barrels as opposed to simply receiving them regardless of the market. So to say it’s a developing story is somewhat of an understatement. You know, obviously, you know, we had that refinery in the UK shutter just last over the last couple weeks.
That was somewhat of a surprise. But yeah, it’s there’s tides are shifting to a great deal whether you’re talking about California or Europe. And we’ve seen much less imports coming over from Europe recently.
Joe Laetsch
Great, that’s helpful. Thank you.
operator
Thank you. Your next question comes from Paul Chang from Scotiabank. Please go ahead.
Paul Cheng
Hey guys. Good morning. Hey Matt. On the rbi, if we look at trying to put it together and see how that is going to look like in your refining OPEX going forward. And so can you give us some idea that by the end of this year what will you will be a reasonable refining opex? We can assume using a $4 natural gas price and by the end of 2006, what that number may look like? That’s the first question.
Matthew C. Lucey
Well, I think Mike alluded to it before. You know, if you take what we’re saying is run rate savings, you know, $240 million, 70% should reside in OPEX and that.
Paul Cheng
But I mean is there any other factor that offsetting like the inflation and all the other factors that we should take into consideration?
Matthew C. Lucey
No.
Paul Cheng
So you think that that would be a net saving on that?
Michael A. Bukowski
Yes.
Paul Cheng
Okay. Second Question real quick on SBL is a little bit surprised that you will be targeting a 16 to 18,000 bill per day run given the current market condition. I think a lot of your competitor is talking about reduced run. So trying to understand that what is the rationale behind and how the decision making process on that, that’s no different.
Matthew C. Lucey
Than anything else we run. We run to maximize profit. And so you can’t look at all RD manufacturing the same. Obviously your location plays a significant part in it. And so one of the things that we touted when we got SPR off the ground was the optionality that exists for the plant with its location in the Gulf coast and specifically at the mouth of the Mississippi River. And so for us, we have great optionality in regards to feedstocks and then also great optionality in regards to where the product is destined coming out of the plant.
We completed a catalyst change in Q2. And so every day in the third quarter we’ll run to an optimized economic outcome. And as you said, you have our estimate going forward.
Paul Cheng
Hey Matt, are you guys making money right now in spr?
Matthew C. Lucey
I would characterize it as somewhat break even.
Paul Cheng
I see. Okay, thank you.
Matthew C. Lucey
I mean the market is. There’s obviously a longer RFS story, but you know, you’ve had a big uptick. Rents have essentially doubled, but feeds that costs have gone up and then you’ve got much of unanswered questions on the RFS side as one could possibly imagine.
Paul Cheng
Thank you.
operator
Thank you. Your next question comes from Connor Fitzpatrick from Bank of America. Please go ahead.
Conor Fitzpatrick
Hi everybody. I wanted to follow up on the UK closures, specifically Rangemouth and now Lindsay. Between the two refineries, transatlantic capacity should be down about 57 kilobits of FCC capacity and 12 kilobits of alkylation, which are similar numbers to the capacity you have idling at Paulsboro. Do you think the option to restart those units has become more attractive? VGO feed cost was a barrier last time this possibility was discussed in I think 2022. But that cost has eased a bit since then.
And are there other opportunities to take advantage of PADD1 tightness? Thanks.
Matthew C. Lucey
At the moment we’re not exploring a restart of units at Paulsboro. We’re happy with the system and the equipment we have in place. Obviously, as markets develop, we can look at things in the future. But as of right now, we’re not evaluating the restart of any units.
Conor Fitzpatrick
And what’s your decision making? What’s the. What are the leading factors for not.
Matthew C. Lucey
Looking into That I didn’t say we’re not looking into it. I said that we don’t have any plans to restart it at the moment. We always evaluate every option that we have. But we have no intention at the moment to restart those units. As markets evolve their assets that we own and to the degree that they can be optimized and create long term value, we’ll certainly look to do that. Thanks.
Conor Fitzpatrick
That’s all I had. Thank you.
operator
Your final question comes from Jason Gableman from TD Cowan. Please go ahead.
Jason Gabelman
Yeah, hey. Morning. Thanks for taking my question. I wanted to ask on the sequencing of insurance proceeds and just make sure I understand it correctly. It. It looks like on the cash flow from investing side, insurance is going to offset on a one to one basis capital expenditures to fix Martinez. But then can you just kind of describe on the cash from operating side the insurance proceeds that come in, how much has come in so far to cover the past quarter’s lost profit opportunity and then should we expect to see that roll in on kind of a 1/4 in arrears basis?
Matthew C. Lucey
Yeah, I would answer a couple different ways. So one, we received $250 million in the second quarter. That essentially amounts to $280 million because we retained the first $30 million. It is a fool’s errand to try to go through and forensically dissect the property versus the the business interruption. I would characterize our collection from insurance to our economic cost of the incident as not being ahead or behind. And you have aspects of the property side and aspects of the business interruption side. And so it’s one policy with two discrete ways of calculating sort of loss.
But we’re not going to be able to sort of forensically dissect. Well, this is for business interruption and this is for property. It’s like I said, it’s one policy. And from a very high level I would say to date our collections have sort of matched the impact from the incident.
Jason Gabelman
Okay, so is it fair to say in totality the inflows on one quarter delay should kind of COVID those two buckets, the lost profit and the capital component.
Matthew C. Lucey
We’re working with the insurance company. Obviously we got a payment last quarter. There’s not definitive guidelines in regards to, you know, must pay dates with the insurance policy. But like I said, we’ve been working collaboratively with them and we expect to receive interim payments as we did in the second quarter going forward.
Jason Gabelman
Okay, that was it for me. Thanks.
Matthew C. Lucey
Thank you.
operator
Please go ahead.
Matthew C. Lucey
Yeah, I think I was going to. We were going to say the same thing, which is we’ve reached the end of the questions. So I greatly appreciate it. As I said, we look forward to bright days ahead. We’re very encouraged with, obviously, on the product side, but going forward, it looks like the crude side will be much, much more beneficial. So we appreciate everyone’s attention. Look forward to talking next quarter. Thank you.
operator
This concludes today’s conference, and you may disconnect your line at this time. Thank you for your participation.