Good morning. My name is Christina and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek US Holdings Q2 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Keith Johnson, Investor Relations, you may begin your conference.

Thank you, Christina. Good morning. I would like to thank everyone for joining us on today's conference call and webcast to discuss Delek US Holdings second quarter 2016 financial results. Joining me on today's call will be Uzi Yemin, our Chairman, President and CEO; Assi Ginzburg, our CFO; Danny Norris, our CAO; as well as other members of our management team. As a reminder, this conference call may contain forward-looking statements, as that term is defined under Federal Securities laws. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements. You are cautioned that these statements may be affected by important factors set forth in our filings with the Securities and Exchange Commission and in our latest earnings release. As a result, actual operations or results may differ materially from the results discussed in the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. On today's call, Assi will begin with a few opening remarks on financial performance for the quarter. Danny will cover additional financial details before turning it over to Uzi to offer few closing strategic remarks. With that, I'll turn the call over to Assi.

Thanks, Keith. For the second quarter 2016, Delek US reported an adjusted net loss of $5.1 million or $0.08 per basic share, compared to adjusted net income of $37.8 million or $0.62 per diluted share in the prior year period. We ended the second quarter with approximately $377 million of cash on a consolidated basis and $564 million of net debt, which is a $48 million decline from net debt as of March 31, 2016, and $109 million decline from the net debt at December 31 2015. Excluding Delek Logistics, we had net debt of $202 million at Delek US as of June 30, 2016. Now I will turn it over to Danny to discuss additional financial detail.

Thank you, Assi. For the second quarter of 2016, Delek US reported a net loss of $7 million or $0.11 per basic share compared to net income of $48.3 million or $0.79 per diluted share in the second quarter last year. A reconciliation of reported results to adjusted results is included in the financial tables of our press release. The primary driver of the change on a year-over-year basis was reduced performance in our refining segment due to a lower crack spread environment and narrowing of crude oil price differentials. Higher RINs cost was a factor in the year-over-year change as well. Our 48% investment in Alon USA resulted in a pretax loss of approximately $10.4 million in the second quarter of 2016. We also incurred approximately $3.8 million in interest cost during the period related to borrowings associated with the acquisition of the Alon USA shares in May of 2015. The combination of the pretax loss and associated interest expense reduced second quarter 2016 after-tax results by approximately $0.15 per basic share using a 35% marginal tax rate. Our operating expenses declined about $15.7 million compared to the second quarter of 2015. This decline was driven by approximately $2.5 million of variable costs, $2.7 million of lower insurance, and $4 million resulting from reduced outside services, and maintenance expenses partially driven by cost reduction programs and improved reliability. Also, the prior year period included approximately $4.2 million of pipeline related costs in refining related to project work and oil spill remediation expenses. General and administrative expenses declined on a year-over-year basis primarily due to lower employee costs. Finally, our income tax rate, excluding the non-controlling interest income associated with Delek Logistics of $6.4 million was 56% in the second quarter of 2016. The increase in our effective tax rate…

Thank you, Danny. Market conditions remained challenging during the second quarter as the high product inventory position in the United States played a role in the crack spread environment as experienced – I am sorry, in the crack spread environment we experienced on a year-over-year basis. As always, we remain focused on the factors that are under our control as we work to create long term value for our shareholders. Initiatives to reduce costs and improve our operations benefitted performance during the second quarter 2016. This was a factor in achieving an operating expenses of $3.41 per barrel in the refining segment in the period. Our capture rates -- the rate on Tyler improved compared to the first quarter 2016 as we matched production to demand and made progress on commercial initiatives. In addition, during the third quarter we’re adding crude supply flexibility in refining system beginning August to provide access to Gulf Coast crude for our El Dorado refinery. Higher RINs expenses were the headwind in the refining segment during the quarter due to the required blending obligations. Unless there are changes made by the EPA, this may continue to be a factor in margins. We continue to minimize RINs exposure to our commercial initiatives. The combination of these efforts, managing our capital expenditures and the cash inflows from tax refunds have allowed us to continue to reduce our net debt position. We continue to make progress to unlock the value of our retail assets and plan to use the additional financial flexibility as we evaluate the strategic opportunities ahead of us. With that, operator, would you please open the call for questions.

[Operator Instructions] Your first question comes from Ed Westlake from Credit Suisse.

Good morning. Uzi, I guess your opened yourself up to the question with that statement in the release about FERC [ph] on retail, maybe just give us an extra color on that?

Well good morning Ed. Thanks for the question. Actually we got good news early this week, I believe, Assi talked about that, but as we work with third party experts on the tax situation – and Danny and the team did a great job with that. We concluded or we're going to conclude probably that there's no tax impact if we decide to go drop down retail in some kind of variation. So there will be no tax impact but obviously it will be impacted by the depletion over years. But the cash flow will be straight cash flow coming from the retail. So that opens the door for our next step in that area and as we said to the market, our goal is to unlock this segment that we don't think is being reflected in our share price. Assi, I don’t know if you want to add something to the work we have done.

No. As Uzi said tax should be – tax work is basically completed. We are very encouraged with the retail results in the second quarter which has even more transaction because the value of our retail continues to go up as our results are much better than last year.

And then second question on cash, both obviously at DK and then say post [ph] there was any transaction with ALJ of the combined entity, any changes in your thoughts about how much cash you should retain on the balance sheet given the weakness that we've seen in refining this year?

That's another great question, ED. First, I must say and I know that I'm going to get a lot of questions this morning about ALJ. As you know we signed the CA with ALJ. So while I'll be probably asked a lot of questions, I'm not sure I can answer this question directly. So I'm going to talk about the cash needs regardless. These are very challenging times as you know and you know that probably better than I do. So cash is important. That's the reason what you see on our balance sheet is that we grew our cash, our capital project for the year – or CapEx for the quarter was – Assi, correct me if I am wrong – around $9 million. And then we don't expect more than $64 million for the entire year. So we make sure that cash is being preserved on the balance sheet. At the same time we continue to think how to increase the cash at the DK level and with the solid results of DKL and the outlook of the two projects coming online, we think we have room for more borrowing at the DKL level.

Your next question comes from Neil Mehta from Goldman Sachs.

Good morning guys. Just wanted your perspective on the refining market, you’ve been in this business a long time. And your perspective on the state of the level of inventories as it stands right now. And then do you feel like that we're going to need to see refining margins that are going to incentivize economic run cuts to get inventories back into better balance later this year? Or do you think we can skate by just through stronger demand?

Well demand is strong, there is no doubt in Tyler and that helped the situation. We actually -- because there is everything sold across the rack in Tyler, with little bit going to Big Sandy, we were during the quarter still sold out or very close to be sold out. So demand is very very very strong, we see the same thing with El Dorado and in other places we look around, we see demand very strong. However I believe that because of the fact that Brent TI closed, that invited so far very strong imports. And it depends on -- I think the answer to your question depends on the margins outside the United States as well as the RINs impact. If we continue to see these levels, run cut will come but there won't be to the magnitude that we saw in 2010 and 2011. These margins will go down a little more, then we will see a much bigger run cuts. By the end of the day, this will clear itself I believe probably not this year, this year 2016 is not -- one person's opinion -- to be a great year but 2017 I believe that this situation will clear itself.

Appreciate those comments. And then Uzi, can you just talk about what you're seeing through your retail and wholesale stations, you alluded to it but on a same store sales basis, just so we could have some context? And any color you can provide on where those numbers came out in July?

That's a great question and I actually looked at that. As we built our market share with the new megastores last year we went ahead and we’re very very competitive. This year we decided that we want the retail to enjoy a little better margin but we will be more cautious by giving discounts at the pump. And that's the reason you see higher margins and little lower volume. By the way, July you see the same trend, great margins, July's actually much better than -- I shouldn’t say much better but better EBITDA than versus July of last year on the retail side. So I would say that people are still pumping, demand is as strong as it was in the second quarter. However I don't believe that the demand is as strong as it was in 2015.

Your next question comes from Phil Gresh from JPMorgan.

First question just on the annual CapEx. As you noted you guys spent $10 million a quarter in the first two quarters. Is there something specific in the back half that steps up or is there potentially room for that to even come down more as the year progresses?

We we've kept our guidance around $64 million, to be honest, if anything it has the potential to come down and I'll tell you why. We just came from two turnarounds. We picked a lot of things, you knock on wood, you see that the operation is -- the operation of the refiners was solid. No big issues. So as you know we invested hundreds of millions of dollars in these two refineries and that pays off. So I don't believe that during years of no turnarounds, these two refineries will need more than $20 million, $25 five million apiece. Now obviously there will be years that we will need to deal with environmental issues or maybe if we would decide to do big projects but under this environment, $20 million, $25 million is a good number to assume going forward in years there are no turnarounds -- and also if no turnarounds, and no big capital projects, then cash flow should continue to improve.

Okay, second question. Just on the drop path, would you be dropping wholesale even if no other opportunities present themselves in the near term for uses of cash or is it contingent upon other opportunities presenting themselves?

I will dance around that question and say that we probably want to maintain flexibility. Retail, as Assi said, is growing very nicely, the EBITDA of retail is growing very nicely. And we need to think about how to unlock value for shareholders regardless of other events. So that's what we keep in our mind.

So at this stage are you thinking whether it's wholesale or something else that we should see some drops in the back half?

We need to unlock the value for the shareholder in some kind of a fashion. So the answer is we are committed to unlock value for our shareholders, and we will do that.

Last question, it seems like the OpEx trends, you mentioned OpEx and G&A in the release, things you've been doing. How much more do you think there is to go on this front? Do you have a target in dollars or anything like that that you're looking at for cost reduction?

Absolutely. If we can get to $3 that will be great.

Your next question comes from Paul Sankey from Wolfe.

Hi Uzi, can we just go back to your thoughts about the market clearing over the course of next year? I just wanted to clarify -- are you saying that you will be cutting yourselves, so you will be running relatively low rate, or do you expect others to cut?

We need to divide it into two. The margins in Tyler continue to be strong and unlike last year when we gave discounts to customers, in order to get market share, we are now in a position that we have market share. So it went back to normalized margins and that’s the improvement you see. In El Dorado some of the barrels are going to bulk, and obviously when you sell bulk, you don't get the RINs. So if anything we are going to look at that, at El Dorado, are we going to cut runs, it’s going to be -- if we're cutting runs, it will be in the single digits, low double digit percentage. Nobody should expect at this point that we will cut something 25% to 30%.

I guess you share the general view that it's going to be more of a path one or first year kind of correction that we see over the next year?

Yes. I believe that the industry will -- the industry not only in the United States will need to deal with this. And like it happened in the past that probably my third cycle, I think Paul, this is your fourth of this, and there will be some pain but we’ll come out of it, all of us must bear.

Yes, it's interesting. I mean I think that we are not sure about the potential for a return of the most recent cycle where you had this big blowouts at Midland and other things that were very beneficial to you. Having said that it feels like this Q2 result was not a good representation of mid-cycle because you had the Canadian outages. I think I know that you’re fairly neutral on RINs but it seems to be in some special items here that probably won't be sustained even if we are structurally lower level than the boom years of 2010 to 2014?

That is correct, and I'm going to say one more thing here and then we can chat after that if you want. Even the Midland situation being 56% under which we moved from the first quarter being around even if not on normalized. If the pipeline cost is $2.50 or $3 eventually Midland will find the place of the pot that it needs to be and I don't believe that this will happen this year or early next year. But as market conditions for crude will improve, we will find ourselves back to the normalized and obviously not the $10 but the $2.50 that we are missing. Now it doesn't mean that we don't need to do the right thing to drive performance like bringing Gulf Coast crude which we start to bring in, in August, or we’re starting to bring in August. But Midland will go back to some kind of normality in the future.

Finally on the same lines. Do you think the market wouldn’t actually be in contango which as we all know benefits you guys or do you think we're going to live in a more flat world - -Uzi, it would be great to talk by the way?

No problem. It depends on the price of crude or the flat price of WTI or Brent. If we're seeing in this level, yes, the market will stay in contango, if we're going back which I don't believe that we will go and see $60 before another twelve months from now, maybe even 18, maybe 10, we will start thinking about not being in contango.

Your next question comes from Roger Read from Wells Fargo.

Hey Uzi, let's dance around the CA a little bit more. Since the company you have the CA with probably isn't going anywhere anytime soon. And you have either the cash on hand or the potential for the retail drop down. Anything else out there that you would feel you should -- you could go look at or do you feel that you have to do kind of the one that's already sitting in front of you first before you can look elsewhere on the refining acquisition side or even the retail acquisition side?

Again as I said I'm going to stay away from this CA. I'm going to say one more thing though. There are opportunities in the marketplace and we need to evaluate all opportunities in the marketplace. And see, first if we can unlock value for our shareholders and second, if there are opportunities that -- because of the market being in not great shape, we usually bought our assets in general in times like that. So that's when we have our ears and our eyes open versus when crack spread is $27, and you know it won’t stay over there and I leave it to that.

Can't get any more out of you than that. I mean is it fair to say here today you could weigh each opportunity equally or are you somewhat kind of constrained on a broad look for acquisitions?

One day when I hire a lawyer I will take you at my lawyer because you're doing great job grilling me here. So let's stay with this job offer and move on.

Okay. All right, thanks. One question on the operational side. We think it's more specific for Eldorado but Little Rock market seems to be getting a little more competition, that's been a pretty good area for you. Do we need to think about that as having an impact on either product deliveries or margin realizations as we go forward with that unit?

As you know that pipeline started in July, early July. Still too early to draw a conclusion in order to declare victory. But we really don't see impact on us at this point.

Your next question comes from Blake Fernandez from Howard Weil.

Hey guys good morning. I wanted to clarify on the retail. I know there were a couple of variations, you were looking at whether it was wholesale or I believe one scenario maybe included real estate. Have you actually gone so far as to identify exactly what you're contemplating there?

We always look at the two transactions and see what's better for both companies. And we want first to make sure that both transactions can work from a tax perspective. Now that we know that that's the case, we can pick based on the available market to us. As you know, as DKL and I'm going from a DKL level, they're looking for stability and growth, I believe that if we were to grow all of the retail they would have access to both stability and growth, if we drop most of the wholesale they'll see more stability and less growth. So that’s the negotiation that we have right now with the DKL side. The key is that both of those transactions are available to us, and both of them there would be minimal cash outlet for taxes as a result of the transaction.

Assi, while I have you, I wanted to ask about the cash balance. Should we be aware of any kind of working capital changes into 3Q or should we be expecting some kind of negative hit here moving forward?

No.

The last one, I think Uzi, maybe you've already kind of answered this in Roger’s question. But I guess as I sit here and look at the contribution from ALJ, it’s been a drag on underlying net income for DK. And I just didn't know if that was maybe a change in your appetite to kind of move forward with the transaction or maybe sit back and watch the macro environment unfold a little bit more. But it sounds like I guess if I heard you correctly, you have no problem with making countercyclical investment as you have in the past. Is that kind of a fair statement?

I'm going to say it the third time in this call and probably three more coming, that we are under CA with ALJ. So I'm not going to comment on anything with ALJ. However I'm going to say that generally speaking you are right that counter-cyclical is what we are looking for. And in general, that’s unrelated to ALJ.

Your next question comes from Paul Cheng from Barclays.

I am curious in El Dorado, is there any one-off benefit in the quarter we should consider or that this would be a good baseline that to use going forward, is there any sales of inventory, ethanol branding economics that is not typically we can track of from the refining margin standpoint, indicated that benefitted or that this is really as a good baseline from a capture rate going forward that we can use?

I don't know if Assi wants to add something, I'm not aware of anything that is unusual.

The asphalt season and usually Q3 and Q2 we enjoy benefit from asphalt season. I will tell you that at the lower oil prices that benefit is higher. So as we're entering August with the oil back to $40 it’s actually we will see some improvements from an asphalt perspective but that’s the typical seasonality of asphalt.

And for that, I presume you sold from inventory, right because the sales would be higher than your production in the second and third quarter, and also that do you also sell directly to the consumer or that you sell at the rack? In other words, that do you capture the retail piece of the margin? We heard that retail piece is actually -- that is the biggest piece of the margin in the second quarter.

First, I'll start with the first question. If you look at the total throughput of the El Dorado refinery during the quarter, we had a total throughput with 75,000 barrels a day. And we sold 80,000 barrels a day. So basically during the quarter we did sell more and some of it or most of it is related to asphalt. I will let Uzi answer the questions on the wholesale versus retail margin.

Yeah. Paul, that's a great question. That's one of the things that we're working very hard. Also you didn't ask the question but I will volunteer the answer. We're doing the same thing trying to -- try to minimize bulk of gasoline in El Dorado but our goal and for the most part we're achieving it both on gasoline, and asphalt is to go to the retail.

And Assi, do you have a rough estimate on how much is that benefit that 5000 barrels per day more on the inventory sales of asphalt, that benefit to you in the quarter?

At $50 oil, that’s the environment with it we’re most of the quarter, it wasn’t a big benefit but it's much better than what we see in Q1 and Q4 when we build inventory not even selling it. So I can’t say it’s a big benefit but it's not negative.

And on that basis, the G&A is a good quarter. Is that a good baseline going forward?

Let me take that one. The short answer is yes, it is under this environment, because we want to control costs and there were no unusual items in the quarter. So that should be a good base. With that being said, if the environment improves, then we will probably see a pickup in this but for now this is a good base.

I understand the CA, so I'm not going to directly on that. But just theoretically if you have the two similar operations, let’s call it two retail operations, one sitting in the CCAR in DK, one sitting in the DKL. Will you still be able to extract the synergy and benefit if that from a legal entity standpoint they sit on the two different legal entities?

I'm not going to answer ALJ whatsoever. I'm just going to say that from my experience in any operations -- and I'm not suggesting that we are thinking about that or not thinking about that. By the end of the day, you look to consolidate when two companies merge and again I'm saying that not because we have something or not have something with Alon. But when new two companies merge, usually you should expect the operation to be consolidated.

But I am saying that if one is in the DKL level and one is in DK level but they are a similar type – let’s say if you are two retail operations, can you still be able to, because of the different legal entity, I mean is that going to handcuff your hand in terms of what kind of synergy or maybe cost savings that you can achieve or that rollout the same operating system or computer system or that you don't see that's any constraint?

I must say that this became much more specific than just being thorough [ph] Paul. Si let me -- one day I'll answer all these questions gladly.

And maybe that, Assi, that on the tax you mentioned that there's some one-off benefit. Should we assume those continue into the third and fourth quarter or majority of them is just truly one off in the quarter?

It’s tough to predict what will be the tax rate in the future. With that being said, as you know we have two ongoing bio-diesel plants that generated those credits that basically review some of our tax rate. Also we didn't have any big one-off this quarter, it’s just the regular permanent items in our taxes. Again if the company will be very profitable the impact on the tax rate won’t be as big because when you're in the pennies every million dollars of benefit become 10% of the tax rate. So it was nothing unique but if we're back to high profitability I did not expect this to have a 60% negative or 60% positive tax rate.

You see, should I assume that based on your comments as of this point you are not having any economic run cut at El Dorado?

That is correct.

A final one, just curious. I mean given the second quarter margin it’s not really that the most heartfelt wonderful. I was surprised that you actually have a hedging loss. I mean what hedging loss that relate to, why the heck that you actually would have hedging loss for the gasoline and diesel crack?

As you can see the hedging loss or a very close to the inventory gains on the other side. So it's mainly related to inventory position that we have on the books, not related to crack spread.

Your next question comes from Jeff Dietert from Simmons.

Good morning. It’s Jeff Dietert with Simmons.

By now we know your name. We knew this was you. There was no new analyst coming from Simmons anymore.

A question, you had improved sequential margin capture at both Tyler and especially at El Dorado, which is unique among your peers and impressive given the oil price increase and lower contango and higher RINs prices et cetera and during the quarter. Could you talk about what some of the major drivers were, or are there commercial activities or commercial initiatives that have been put in place to improve capture at El Dorado and/or Tyler?

Are you speaking about Tyler or El Dorado, or you want me to touch each one of them, Jeff?

Each one of them.

Okay, perfect. Tyler is easy. Last year we tried to build market share and we get discount, you don't do days of customer that hurt us in the second quarter last year. We don't need to do that anymore as we are very well established in Tyler. So we've said all along that we will go back to normality once we establish our market share and I think the team has done great job selling every drop in Tyler without giving major discounts. So Tyler is just back to normal business now. Is it great, the way we want it? Probably not. And we need to work on improving that, that we have some more initiatives and we'll see how it plays in the next quarter or two. In regard to El Dorado, we work very very hard to minimize the bulk as much as we can. We did direct delivery, we did trucking, we did – now we got more feet on one major pipeline and these are all components to try to minimize the RINs costs. And if you see, even though prices of RINs jumped, RINs cost for us stayed about the same. So our goal is to continue to do that and drive that as much as we can. Also, as we mentioned earlier, in August we are starting to bring heavier crude from the Gulf, we’re doing it incrementally. We said that we can do it in three months, that we’re actually doing it now. And we will see how it plays. We will have an opportunity to bring other heavier crude either from the Gulf or from Cushing if we decide that they are economically it makes sense. But at this point we are taking a step at a time. Now I don't want to confuse anybody. These results need to be improved directly, in order to have to go back to the leading position we had a year or year and half ago.

And secondly, on the first quarter conference call it appeared that the retail drop into DKL in cash generation associated with that was tied to trying to make or finalize the other 52% purchase of ALJ, and I believe on the DKL call this morning, you said that these were two separate decisions and not dependent on one another. Did I misinterpret the first quarter message or did the cash improvement, the net debt improvement that you experienced during the second quarter really eliminate or significantly reduce the need to drop retail into DKL as it’s associated with the ALJ potential transaction?

As I mentioned in the earlier call, these are two separate transactions. There is no doubt that one of them will support the other transaction. With that being said, we need to look at the best – what’s best for our shareholders. And for the best thing for our shareholders is to get less money from DKL and then eventually use it to buy back our stock or to buy back a different company, rather than to be alone, would have to do what’s the best for our shareholders. And right now with retail, putting one of its best quarter ever in the last 12 months, probably the best it would seem, it makes sense for us to move ahead and lock some of that and value. If it goes to the DKL all of it, or just wholesale, the key is to unlock the value and what we do with the cash is a separate item.

Your next question comes from Brad Heffern from RBC Capital Markets.

I won’t ask you any long questions, Uzi. So you can –

You know what, I may retire after this call, but go ahead.

I was wondering on the incremental Gulf Coast crude that you're going to have access to soon at El Dorado. Can you quantify what the advantage looks like for those barrels at current spreads over what you're running right now?

I want to stay away from that because really only now we're starting to bring this crude in. Now I'm going to just say if you remember, and you probably do, El Dorado has that flexibility with the crude unit and the configuration of the refinery to run heavy or light crude. And during the heydays of the premium, we decided to run it dry. But there's nothing that prevents us from bringing in heavy freight, I believe that we went into 32 API, the average.

32 API and I think good quarter over 80,000 barrels a day.

So we need to make sure that we have a good market for the balm and that is related to another question that was asked earlier. Right now we sell most everything retail. We don't want to jeopardize the balm of the barrel. So we are going to take incremental steps but we do have access to that dot and we have -- actually if we decide to do something with pay line and we decide to move it north instead of south, and we obviously -- that's not something that we made a decision whatsoever. Then it opens up to many more barrels. So at this point I'd like to stay away from giving numbers, but just to point out that we're moving in that direction.

And then a question on RINs, sort of a bigger picture question, that a lot of your peers have been focused on trying to get the point of obligation move from the refiner to the blender. I was curious how you think about that if you support that. And I'm really thinking about from the standpoint of DK has its RIN obligations but I think you're the only refinery in the position where their MLP generates a lot of the RINs. So how do you think about it from the standpoint of -- it could be good for DK but bad for DKL?

Obviously we are -- because the mutual position we don't have much to say about that. I'm just going to say though not in regard to us that the system is broken, and if somebody is making a dollar -- when dollar a gallon or $0.93, I think yesterday it was 91 or something that. And the manufacturers make less than us. I'm getting all the risk environmental operationally, safety. Something is wrong with the system. But from DK standpoint I think we're prudently neutral.

Your next question comes from Chi Chow with Tudor, Pickering & Holt.

Uzi, well done in your cost structure improvements this quarter. On the refining OpEx were there any one time items in the quarter that might have impacted results at either plant and is there a point where the costs are too low from our reliability and safety standpoint?

To answer your first question, though, there was nothing – no special items but no special items means that the operation was pretty smooth. That means that there was no high maintenance. To answer your second question. It depends on how many barrels you run, because if you run it the way you should run it, then you drive it by -- most of your cost is fixed costs or big portion of it. So if you run it smoothly, then you will drive down your cost per barrel.

Right but even the absolute cost came down pretty materially, really at both plants on an absolute basis. So I mean is that level of absolute OpEx per plant sustainable going forward is that what –

We shouldn’t have any one time benefit. What we did is the refinery run well. In most quarters there is always a one here and one there one-time expenses, we usually don't highlight those because those are part of the operation, who can just redo it. If the company will continue to run the operation well, we should expect these levels of expenses. I think we actually have more to do with respect to both the variable expenses and on some of our procurement initiatives today, actually. We expect to drop some of the expenses down even more.

And then I am not sure you can answer or willing to, but back on the Gulf Coast crude sourcing at El Dorado, what's the infrastructure that allows you to bring that crude up from the Gulf and what's the transportation cost on that?

I can answer that and I will answer it in – actually I can in a long way. Right now we're bringing on third party pipeline that is connecting the Gulf to Longview and from there we take it either -- we have different options. So however I want to be clear. As we look at Paline and by no means we have made a decision around that. We – a Paline has 35,000 barrels capacity and that pipeline obviously belong to DKL. So we may enjoy -- we may benefit both end. Now we do need to remember that, if you will, we have an opportunity to bring, maybe WCS if we want to by the end of the -- by drilling of next year as we are connecting in terms of cushion with a five. So that's another opportunity. All this depends on one big thing: our ability to move the balm of the barrel, on the retail side and that’s the reason I want to be cautious about it.

So as of right now, what specific types of heavier crudes are you targeting? Is that Mars type barrel or even heavier than that –

Yes. As Brad said, we can go to 32 API, blended, I guess not. Not 32 just a batch.

It’s either way, but on average the refinery can full capacity at 32.

Setting aside the Paline online. Potential solution any comment on the total transportation costs and bring those barrels up at this point?

You can assume buck fifty.

And any sort of volume you're targeting near term?

I will stay away from that at this point. Let us start working our way up and then we will get back to you.

Your next question comes from Doug with Doug Leggate from of America/Merrill Lynch.

Hey, can I just get you guys to talk about drop downs? So they are multi-markets, seemed like they've opened a little bit. What do you guys see as an acceptable and multiple in this environment? And the follow up on that, can you talk about the liquid that you guys have at DKL and how you look to structure a dropdown and turns out catching you to mix.

So I can tell from a DK perspective, when we look at the multiples of move-downs we’re the looking at our peers. The latest that we've seen in retail was in the 8.5, 8.7 times multiple those types of eight going seven times for us, most people – financial ability of drawdowns at DKL as you probably saw in the DKL list, we will still have close $330 million of capacity on our revolver. We're only leveraged 2.5 and we can go up to 4.7x leverage if we do an acquisition. So there is plenty of room at the DKL level for more drop. And there is plenty of available capacity of DKL to borrow.

Last one for me and I don't know if you'll answer this but the ratio between your shares and ALJ has definitely come in, do you like where it stands here? And I'll leave it there. Thanks.

I'm not going to make a comment on that. I'm sorry. End of Q&A

There are no further questions at this time.

Well, thank you Christina. I'd like to thank our great employees. I'd like to thank my colleagues here, Board of Directors and I'd like to thank you guys, the investors who are trust us to manage your money. Have a great day. We'll talk you soon.

This concludes today's conference call. You may now disconnect.