Joseph Israel

Thank you, Avigal. We operated well in a low margin environment and remain focused on our strategic initiatives to support future capture and cash flow generation across our system. In Tyler total throughput in the third quarter was approximately 75,000 barrels per day.
Production margin in the quarter was $7.48 per barrel and operating expenses were $4.61 per barrel for the fourth quarter. The estimated total throughput in Tyler is in the 67,000 to 69,000 barrels per day range. In El Dorado total throughput in the quarter was approximately 78,000 barrels per day.
Our production margin was $0.66 per barrel including an unfavorable estimated $0.65 per barrel impact from outages in the FCC and Penex units operating expenses were $5.01 per barrel including approximately $0.35 per barrel of unfavorable impact related to those outages. Estimated throughput for the fourth quarter is in the 77,000 to 80,000 barrels per day range on a strategic level.
The refinery is well positioned from a configuration standpoint to compete and operationally, the team has demonstrated safe and reliable operations on a consistent basis. As Avigal, mentioned, the $100 million run rate benefits generated by the self-help initiatives include $50 million to $80 million contribution in the refining segment. These initiatives are mostly around process optimization product offering as well as expanding the market footprint. All related upgrades are planned with minimal capital outlay.
Approximately $50 million of the expected benefits are in the rail system with an estimated $20 million in the refinery gross margin leaving approximately $30 million for the products and commercial optimization. An incremental to the 2 barrel of net margin will support El Dorado cash flow generation through the cycle timing.
As Avigal, mentioned, we are expecting the improvements to be in place by mid next year in big spring total throughput for the quarter was approximately 73,000 barrels per day. Our production margin was $6.82 per barrel and operating expenses were $6.08 per barrel.
We are proud with our progress in big spring as we achieve our goals and as importantly build this improvement in a sustainable manner. Estimated throughput for the fourth quarter is in the 71,000 barrels to 74,000 barrels per day range, in cross springs total throughput was approximately 82,000 barrels per day. Our production margin was $4.80 per barrel and operating expenses in the quarter was $4.82 per barrel.
We are executing our turnaround per plan and all units are scheduled to get back to normal operations by the end of the month. As a result plans throughput for the fourth quarter is in the $50,000 to $53,000 per day range.
Our employed system to target for the fourth quarter is in the 265,000 to 276,000 barrels per day range.
Moving on to the commercial front in the third quarter, supply marketing contribution was $11 million of that. Approximately $13 million was generated by wholesale marketing partially offset by a with a $2 million loss. In summary, we continue to execute well on the fundamentals of our business. After successfully addressing reliability gaps, our teams continue to focus on operational excellence and commercial optimization initiatives for each one of our sites.
I will now turn the call over to Robert, for the financial variants.

Robert Wright

Thank you, Joseph. I'll start by referring to slide 13 for the second quarter. Delek had a net loss of $77 million or negative $1.20 per share.
Adjusted net loss was $93 million or negative $1.45 per share and adjusted EBITDA was $71 million. Slide 14 shows a comparison of adjusted EBITDA in the third quarter of 2024 to the second quarter of 2024. The primary variance between the quarters was a $32 million decrease in refining, which is primarily due to a lower margin environment. After the logistics segment, we had another strong quarter delivering $106 million in adjusted EBITDA.
Moving to slide 15 to discuss cash flow, cash from operations was a use of $22 million. But this amount is our net loss for the period. An inflow of $33 million relating to working capital movements and an outflow of $21 million tied to transaction related expenses.
Investing activities of $78 million includes the proceeds from the sale of retail, partially offset by the addition of capital expenditures for the period of $119 million. And the acquisition of H2O financing activities of $323 million reflects the 2029 DKL tax on offering and timing of accruals. This also includes $20 million in share repurchases $16 million in dividend payments and $14 million in distribution payments.
On slide 16, we have the actual results of the 2024 capital program and full year 2024 forecast. Third quarter, capital expenditures were $78 million. Approximately half of this spend was in refining primarily addressing sustaining and regulatory projects including the [KSR] turnaround that commenced in the fourth quarter for 2024. The original capital plan continues to track on plan at $330 million excluding the levy two gas plant construction, which was announced earlier this year after our current year's capital outlook was set.
Our net cash position is broken out between Delek, and Delek Logistics on slide 17. During the year, we built $215 million of cash primarily due to the sale of retail which occurred on September 30, consolidated long term debt increased during the year by $190 million. Most of which was at the DKL level and was used to finance the H2O acquisition which closed on September 11.
Moving now to slide 18 where we cover outlook items. In addition to the guidance Joseph provided for the fourth quarter of 2024 we expect operating expenses to be between $177 million and $188 million G&A to be between $53 million and $58 million D&A is expected to be between $95 million and $105 million and net interest expense to be between $75 million and $80 million. We will now open the call for questions.

Question and Answer Session

Operator

(Operator Instructions)
Neil Mehta, Goldman Sachs.

Neil Mehta

Yeah. Good morning team. And thanks for the run down here. So that the first question is really on El Dorado. And as you indicated that the margins did come in a little bit softer than expected. Is there anything more one time in nature? And can you talk, spend more time talking about how you see this progressing from year in the path for improvement?

Avigal Soreq

Hey, Neil, good morning. How are you? Thank you for joining us today. So yeah, El Dorado to answer that specifically. First of all, it's a very good complexity refinery in Nelson standpoint and there is a lot of flexibility around that asset. I've been around that asset for a long time and this is the best I've ever seen it done from an operational standpoint. And Joseph will provide more details about the exact specific action we are doing to improve that over time. Joseph.

Joseph Israel

Thank you, Avigal mentioned, the refinery is well positioned from asset configuration and also operations excellence 10.2 compete. So having this too, we feel now is the perfect time to address the market access gaps and take profitability really up to its potential. We have discussed those gaps in the past and more importantly, took our time to plan and design solutions which we are already in full execution mode. As mentioned in our remarks.
By mid-next year, we will have in place new and robust process, logistics and marketing tools in our kit to support future cash flow contribution with an incremental $2 per barrel of net margins. And I want to be a little bit more specific.
So on the refinery level, we will connect to existing times in our good unit to draw approximately 3,000 barrels per day of jet fuel. We have yield and liquid recovery initiatives mainly around the FCC vacuum tower and asphalt.
And then on the commercial front, the team is working really contract to utilize the new logistics capabilities and move our products to additional markets for a better netback. I hope it helps.

Neil Mehta

That's great color -- that the follow up is you guys have made a lot of progress since the last call in terms of getting cash in the door, the $390 million. And so the question we get a lot is the pace of the share repurchase program and how aggressive can you guys be? Especially if you believe the slide in here, I think slide 8 that talks about the discount that you trade at relative to what your illustrative value.
So let's talk about how you think about the pacing of the buyback. And are you well positioned to take advantage of this dislocation? And what are some of the factors that could slow down that pace relative to some of the upside scenarios?

Avigal Soreq

Yeah, absolutely. I will take it. So with your permission, I will answer the question more broadly about capital allocation, right? So first, our priority is to maintain strong dividend through the cycle. And we are committed to that. We have demonstrated, we will keep demonstrate that that's something we are committed. We feel very comfortable with that and we are very pleased Neil with the sale of the retail on the right timing and the right value.
I think everyone understands those two points. Now, more than ever, the third point I would like you to make come across the EOP which will bring us the $100 million with a combination of a relatively strong market condition, right? We see the inventory low, we see demand relatively strong, get us to a point that we are comfortable where we are.
As I said in the past, we have a balanced approach between balance sheet and buyback and we're going to stick to the balanced approach around buyback. We see tremendous amount of value in our equity just to make it very clear, we did buy back in Q3 and we are doing actively doing buyback in Q4 and I will leave it to that.

Neil Mehta

All right. Well, thanks team. I appreciate it

Joseph Israel

Thank you.

Operator

Manav Gupta, UBS.

Manav Gupta

Hi guys, help us understand a little better, you're looking for, you know, multiple growth projects in the midstream space. So as we look at DKL, in your opinion, some I'm not asking for exact guidance, but how should we look at, you know, exit rate EBITDA maybe year 2025 or something like DKL.

Avigal Soreq

So we didn't give guidance on DKL for 2025. We obviously have exciting time. We think we can have a good around the market, but we are not going to give guidance for the end of 2025. We are in a comfortable and great situation and Mohit can give more color around it.

Mohit Bhardwaj

So what we have said in the past, if you remember on our last earnings call that based upon the investments that we are making a net addition of $70 million in midstream EBITDA. And I think that should give you some color on, you know, how based upon our EBITDA is today and that net addition of $70 million in EBITDA where that will take DKL to you. But as Avigal mentioned, DKL has not provided a 2025 guidance just yet.

Manav Gupta

My follow up is on slide 7, obviously the $100 million target, it looks pretty good. And I'm just trying to understand like let's say the margins remain depressed for some time. Using the $100 million benefits, would you be very close to cash break? Even if margins are below mid cycle? Because you are pushing through all these initiatives.

Avigal Soreq

That's absolutely right. And I can give you some more color around what we call here, the enterprise optimization plan Manav. So let me be very clear, the EOP plan is not related to market conditions. It's self-help. It's an area that we feel that we can do better and its funding. We have a few frontline with that project. One, on the G&A side, the team was doing a great job over the last three years in order to build system and processes around it. And now we are basically taking that to the next level and bringing that to the bottom line. That's $30 million to $40 million efficiencies. We're going to create around all of those processes.
Second, is OpEx, safe and reliable operation will bring and is bringing efficiencies on operation. And that's key. Once we are doing that, we see our ability to drive more value from them.
And third is the margin, once we have safe and reliable operations, we can move from defense to offense and to plan accordingly and to sell the right product on the right market we believe that all of that will bring us at least $100 million on a combined basis. And all of that is going to go to the free cash flow, on the top of that, we reduce our CapEx guidance as you probably see for next year versus this year by around $80 million to $100 million. That's a huge number.

Manav Gupta

Thank you guys.

Operator

Matthew Blair, TPH.

Matthew Blair

Thank you, and good morning, maybe we could stick on the CapEx cut for 2025. Could you talk about what's rolling off relative to this year? And then that, that mid-point 160 should we think of that as your minimum level going forward or would you expect to have some catch up in 2026?

Avigal Soreq

So we are not going to change our overall guidance for the year. Obviously, we are putting in management that we see a low margin environment and we have the opportunity to have a low CapEx on the refining side and that's what we are doing on a sustainable basis.
The way I think about it that we are seeing around $25 million in each one of our refineries in a year that we don't have turnaround, turnaround cost around $100 million. And we are doing that on our four asset every five years. So that's a good way to look about the long term CapEx of refining.

Matthew Blair

Sounds good. And then I wanted to touch on the improvement in supply and marketing in the third quarter, relative to the second-quarter, it looks like a lot of this came from the wholesale marketing. You mentioned it was up $13 million in Q3, I believe it was down $17 million in Q2.
What exactly changed there was that just a function of falling crude prices or was there some regional product basis differentials that help you out? And also what's the outlook for supply and marketing into the fourth quarter? Thanks.

Avigal Soreq

Absolutely. So, first of all, I'm pleased with the progress we are making with the commercial team. We see that we saw the benefit in Q3 and some of our actions, we also had some seasonal benefit over the quarter. And what we saw in Q3 is a good combination of those two and I expect to see more progress in the future and I'm going to let Joseph give some more comments around it.

Joseph Israel

Yeah, thank you, Avigal, and thank you Matt. We have shifted gears with new strategies to enhance our commercial business and leverage some new tools in our kit, right? So the improved reliability from refining will help to eliminate some of the noise.
The new logistics optionality is helping us accessing brand new markets mainly from El Dorado and Thailand with improved net impact and then product offering. We now have a jet fuel in El Dorado to work with and we have some great ideas around the high octane products mainly in Big Spring and Tyler that we can work with.
So we believe this strong momentum and improved positioning will help us to reduce volatility and improve future impacts through the cycles and seasonal trends. We also think it's sustainable. We can't control obviously the market impact, but we are confident the controllable piece of our improvement will remain there.

Matthew Blair

Great. Thanks for the color.

Joseph Israel

Thank you, Matt.

Operator

Joe Laetsch, Morgan Stanley.

Joe Laetsch

Hey, good morning team. And thanks for taking my questions. So I wanted to ask on slide 8, which is the midcycle EBITDA slide. Can you just unpack the path to achieving that? Around $550 million of mid cycle refining EBITDA number cracks are of course a driver and it looks like a piece of that is also running better. I'm getting to an implied throughput of around 315,000 barrels a day. So if you just touch on some of the steps to realize that that uplift, that would be great. Thank you.

Avigal Soreq

Yeah, absolutely, Joe. Thank you for joining us today. And so obviously, a key part of that understanding that slide is we are wanting to demonstrate the cash flow generate on DK solo and to show the combination between Delek solo and DKL and enhance our great position.
EOP going to be a key part of that we gave some color on EOP, EOP is the combination of what we can control, which is market agnostic. We got the team behind this idea and we are well in the execution phase and we are very optimistic about that around exactly modeling and et cetera. I would like maybe you have a post call with Mohit and go over the details that you can model all of all of that to your benefit. But that's the essence of that slide.

Joe Laetsch

Great. Thank you. And then I just wanted to ask on a Big Spring. So it looked like it ran well during the quarter from a throughput March in an OpEx standpoint. Could you just remind us of what's left to execute on to reach that 550 per barrel OpEx target? Recognizing that it's close to being achieved here. Thank you.

Avigal Soreq

Thank you, Joe. And I'm very pleased with Joseph and his team of the they are doing there and maybe Joseph, if you want to give some more color around it.

Joseph Israel

We told you last year it's going to be a journey and the recovery is going very well. We have done a what we said in the past year and the results have been very consistent with the guidance. Operating expenses are trending down to the $5.50 per barrel target in the fourth quarter with improved reliability and throughput consistently in our guidance range. Really all year long, the focus now is ensuring sustainability of the improved positioning and optimize from here a profitability.

Joe Laetsch

Great. Thanks for the time.

Joseph Israel

Thank you.

Operator

Doug Leggate, Wolfe Research.

Doug Leggate

Thanks guys. I've got two. If I may one, I'm sorry to beat up on the slide 8, but I I have some clarification questions around this just to make sure we understand what's going on. So the $100 million EOP looks like that's the entirety of the standalone midcycle free cash flow. In other words, without the EOP, there is no free cash flow, I just want to make sure that we're interpreting that, interpreting that correctly because ultimately, if we look at the equity value, you're putting a 4 times to 5 times EBITDA multiple $100 million of free cash flow at a 10% annuity discount rate is a billion dollars. So I'm curious how you get the, you know, the valuation that you're showing on this slide for $100 million of free cash flow. That's my first question.
And my second question is at least on our numbers, the entirety of a large part of your value is your interest in Delek logistics. And as you know, there's been some transactions particularly around sour gas injection wells amongst other things, it seems there's a lot of embedded value potentially in DKL that could be released. And I'm just curious, strategically, I think you've talked about it as the [Bazooka] option. What are your options to release value from DKL? So two questions, please.

Avigal Soreq

So I will start with the first one. Then Mohit, will give some more color around that page and then Mark and I will give some more understanding of the market. So we see a lot of value in our asset. You can see the capture rate that we have demonstrated relative to our field is improving on a relative basis. And we are very optimistic around that is a key part of what we are doing. And just to make it very clear on the G&A side, we are well into the execution phase and also in the OpEx in the commercial.
So EOP plan going to execute and as I said on my prepared remarks, and you probably saw that the $100 million is at least I expect to see a higher number than that. So you can expect to see a higher figure than that while we are on the execution phase. So more to come and some of that is already in place.
So we are optimistic around our action and we are confident around the market. So we are very optimistic about the ability of the DK solo to generate significant free cash flow on a mid-cycle basis. Regarding the question of the midstream, we obviously are very encouraged by the transaction we've seen around us. Let's put a very high mark on our asset. I know that Mark is very close to that. So I will have Mark maybe give you some more color.

Mark Hobbs

Yeah, sure. Thanks, Avigal and thanks, Doug for the question, deconsolidation, we spoke about deconsolidation quite a bit over the past year plus and that remains our top strategic priority and we are actively pursuing that as a key component of our sum of the parts efforts. And you mentioned appropriately.
So the recent transactions and the acquisitions on the midstream side, specifically targeting the permanent basin. And look we see that as well and those have been going forward in our estimation, you know, very attractive and premium valuations.
And as you know, at Delek Logistics, you know, we've over the years, we've built a strong third party midstream business in both the Midland Basin via DPG and our recent H2O transaction as well as in the Delaware Basin, where we continue to see attractive growth opportunities given significant activity of our upstream customers. And so we are in a good position. We think that we've built a very attractive and valuable midstream business, as you duly noted through Delek Logistics.
And we think this market backdrop really supports the value that we've built. And as we pursue deconsolidation efforts on slide 5, you know, we put a list of what we see those options potentially available to us and available to us in the market. You know, we believe that this market backdrop really positions us well to maximize value for all our stakeholders. And what I would say about the actual actions that we might take and look at all options are on the table and we continue to evaluate all those options.

Doug Leggate

Great stuff. Thank you fellow. I appreciate the time.

Operator

Roger Read, Wells Fargo.

Roger Read

Yeah, thank you. Good morning. Can we come back to the $100 million of the EOP? Like how did you come up with that number? And what I'm curious is, was it top down, bottom up combination of the two, you've talked obviously about some additional flexibility in it. So if you were to think of a, you know, low level of, hey, this would be successful at, you know, $80 million over the next, you know, 18 to 24 months or it could be $140 million.
Should we think about it as a percentage of total costs as you know, one of the ways to think about success here? I'm just curious, kind of, you know, in the end $100 million is a nice round number. But how do we know it's a solid number based on, you know, a real solid foundation?

Avigal Soreq

Yes. So thank you, Roger for the question. Obviously, the EOP is a bottom up project. It's not something that obviously we rounded it didn't end up $100 million exactly, just to be clear. And, and as I said, in my remarks, the number is at least. So that gave you the comfort level around that.
EOP is market agnostic. As I said in the previous one of the question, the G&A is $30 million to $40 million of that is based upon system that we already did in the past. And the other $50 million to $80 million is a combination of OpEx and the commercial optimization.
The idea basic idea of EOP is the free cash flow and how to generate more free cash flow and agnostic to market conditions. That's the essence of that. And obviously, if you need some more help about modeling, I'm sure that Mohit would love to help you on that. But we have those combination of those two.
Mohit, you want to add into that more.

Mohit Bhardwaj

Just one clarification that the EOP project are -- company Not include the Initiatives or the benefits that we got from other, you know, from other initiatives like their net initiatives, operation initiatives G&A initiatives and they do not do not include the other benefits like intercompany transactions.

Avigal Soreq

Thank you for your question.

Roger Read

Well, can I ask a quick clarification on that? One, is the retail just closed, right? Is any part of this $100 million related to retail? And then as we think about the commercial synergy part. Is there a CapEx component or is that all pretty much with just using the existing system better?

Avigal Soreq

Yeah. So easy question, it's not related to that. We are not trying to do a left pocket [hipo] exercise. We are trying to make our company better and free cash flow. And the second question, there is no capital intensive project here. Everything is in the numbers.

Roger Read

Thank you.

Operator

Jason Gabelman, TD Cowen.

Jason Gabelman

Good morning. Thanks for taking my questions. My first one is on the balance sheet. I just wanted to get an updated view of what your target net debt and cash balances are at the parent following the divestment of the retail sale and all the other recent transactions that you've done.

Avigal Soreq

Yes. So Jason, thank you for the question. Again, our capital strategy is very simple. We want to maintain a strong dividend through the cycle. We want to make sure that we have a balanced approach between the buyback and improving the balance sheet. We have mentioned in previous calls that our target is around $600 million memory serves me right. But that's a longer term, longer term view and we're going to stick to the capital allocation program that we outlined.

Jason Gabelman

Okay. So I mean, I guess the heart of the question is I would think you'd want to have higher cash balances moving forward if you -- than prior target, if you got rid of the steady retail earning stream. But it, it doesn't seem like there's, there's much of a change.

Avigal Soreq

Yeah. So the Jason, The EBITDA of the little over the quarter was around $8 million. I don't think it's moved the needle significant significantly and we are sticking to over time on a long term basis to what we have.

Jason Gabelman

Okay. And then my other question on slide 16, where you provided an update on CapEx, you've excluded capital spending related to the gas processing plant. So, is that $330 million for full year '24? Really supposed to be closer to $430 million?

Avigal Soreq

No, we have not finished spending the capital on the gas plant. The gas plant was something that was done over the years that Robert said on his prepared remarks. The gas plant is an extremely good project and we're starting to look at the DKL CapEx and the DK CapEx separately. That's the reason we gave guidance on the DK CapEx now and we'll give more guidance about the DKL CapEx in Q4.

Jason Gabelman

Okay. But so is that gas processing plant CapEx, that's not necessarily all spent in 2024.

Mohit Bhardwaj

So Jason, hi, this is Mohit. So you are right. So our $330 million does not include the $9200 million of spending on the gas processing plant for 2024.

Jason Gabelman

Okay. Alright. Thanks for those answers.

Avigal Soreq

You bet.

Operator

This concludes our Q&A session. I will now turn the conference back over to President and CEO Avigal Soreq for closing remarks.

Avigal Soreq

Thank you for my colleagues around the room for a great quarter. Thank you for the execution of our strategy, the deconsolidation, the EOP, the return to shareholders. Thank you to the entire the investors that joined the call, our board of directors and mostly our employees that make our company what it is. We'll see you again in the next quarter. Thank you.

Operator

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