So we’re in good shape there. And on the dividend, we maintain a dividend is competitive, growing and sustainable through the cycle. And we feel like we’re in a reasonable range now. I wouldn’t want to get into more specific on timing or potential dividend increases at this time. And then that brings us to buyback and you know our post to buybacks is to have the annual target of 40% to 50% of adjusted net cash from operations, and we view the buyback as a flywheel supplementing our dividend to hit whatever our target is for the year. In the third quarter, we had a 68% payout year-to-date through the third quarter, we’re at 58%. So I would say, under these conditions, even given the softer seasonality in the fourth quarter, you should definitely expect us to pay out over 50% for the year.
And as you may recall, the pandemic, that was a fairly regular practice of 5 years before the pandemic, I think we averaged like a 57% payout. So in these periods where we have greatly above-average free cash generation, that will probably continue to be our practice.
Doug Leggate: Clarification, Lane, if you don’t mind, the fact you’re already above 50%, the high end of your payout, does that preclude stepping into additional buybacks for the balance of this year?
Jason Fraser: No, no, it does. We look at it on an annual basis, and I would think we’ll be over 50% for the year. So it definitely does…
Operator: The next question is coming from Ryan Todd of Piper Sandler.
Ryan Todd: Maybe could you talk through a little bit about what you’re seeing in renewable diesel markets. 2Q margins were obviously quite soft indicators been weak. Can you talk — was there any impact from hedging losses in the quarter and maybe could you help us if there were kind of a rough estimate of maybe what that was? And then can you just more broadly talk about what you’re seeing in terms of supply demand in the marketplace impact of RIN pricing and RVO limitations, et cetera?
Eric Fisher: Sure, Ryan, this is Eric. I think we saw the RIN prices drop pretty quickly kind of in that September and into October. And really, as you stare at that drop, it was kind of on the news that there was the anticipation of a couple of big start-ups at the end of the year that have now been delayed. It was also in the news that there was going to be with Russia freezing out its exports that it would force the U.S. to export more, therefore, drop the obligation. So the combination of all that news kind of caused a precipitous drop in the RINs kind of right at the end of the quarter and into the beginning of the fourth quarter. The real margin loss there is really because as fat prices have since adjusted in the spa [ph] market but obviously, there’s a lag of our fat prices that kind of carried on that have since started to catch up with this drop in credit prices.
But we’ll see that continue to carry through, through the fourth quarter. But overall, I think that’s really what we’re seeing. The spot margin is cleaned back up. Fat prices continue to come off. You really see all of that being kind of a return to profitability here in the fourth quarter. So that’s really what we see going on in the RD market.
Ryan Todd: Okay. And then maybe switching on the refining side, as we think about PADD 5, it was really quite strong through third quarter on a relative basis across the country and into the early part of the fourth quarter. Can you talk maybe about what you’re seeing overall in terms of kind of supply/demand in PADD 5 across your operations there? There’s a lot of moving pieces with some refineries that are — that have transitioned off the market from conversions right now. So how do you — as you look forward on the next — do you expect that market to stay relatively tight for the foreseeable future? And how do you think about it relative to your operations there?
Gary Simmons: Ryan, this is Gary. I think our view of PADD 5 is that with the renewable diesel coming into the market, the market should be well supplied on the distillate side but it’s going to be very tight on gasoline. You just don’t have the gasoline production that you used to have with the refinery conversions. And so when one refinery goes down, it’s going to create a lot of shortness in the market.
Operator: The next question is coming from Manav Gupta of UBS.
Manav Gupta: Guys, you are known for your capital discipline and you look at a lot of projects and in the end, very few actually make it through the funnel. We are somewhere in October. You guys haven’t talked about a major project yet. And I’m just wondering if 2024 would then be more of a quick hit projects. I mean, coker has already come online. So when I look at 2024, should we think for the year where you could be doing more quick hit projects versus a mega project, which generally can go on for 3 to 4 years?
Lane Riggs: This is Lane. So the way I would — I agree with you, and that’s — we still believe we can — we’ll spend somewhere between $0.5 billion to $1 billion a year of strategic capital. But when you look at sort of what’s the nature of those, certainly on the refining side, they are going to be shorter cash cycle types of projects instead of a big like a coker type project there’ll be a series of small projects. And then when you further drill down and what do we look for? We look for refining projects to lower our cost to produce. We also like projects and improve our reliability and then, of course, we like to hold renewable line in terms of its ability for us to drop the carbon intensity of our fuels. And as you also said, we’re very careful about our communication on projects. We’d like to be a little closer to FID or at FID before we really talk about them.
Manav Gupta: Perfect. Just a quick follow-up. We have seen some sanction relief on the Venezuelan side. You were buying from Chevron even before that and Chevron had been giving the indications that they could ramp up over there. So can you help us understand like what kind of volume — incremental volumes could come to the market from the Venezuelan side in probably next 2 or 3 years?