Keith Johnson - VP, IR Assi Ginzburg - CFO Danny Norris - CAO Fred Green - EVP Uzi Yemin - President and CEO.

Doug Leggett - Bank of America Merrill Lynch Ryan Todd - Deutsche Bank Evan Calio - Morgan Stanley Roger Read - Wells Fargo Brad Heffern - RBC Capital Paul Cheng - Barclays Capital Blake Fernandez - Howard Weil Paul Sankey - Wolfe Research Jeff Dietert - Simmons International.

Good morning. My name is Valerie and I will be your conference operator today. At this time, I would like to welcome everyone to the Delek U.S. Third Quarter 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, Mr.

Johnson; you may begin your conference..

Thank you, Valerie. Good morning. I would like to thank everyone for joining us on today’s conference call and webcast to discuss Delek U.S. Holdings’ third quarter 2014 financial results.

Joining me on today’s call will be Uzi Yemin, our Chairman, President and CEO; Assi Ginzburg, our CFO; Fred Green, our Executive VP and President of Refining; 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 our 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.

Today’s call is being recorded and will be available for replay beginning today and ending February 6, 2015 by dialing 855-859-2056 with the confirmation ID number 17088963. An online replay may also be accessed for the next 90 days at the Company’s website at delekus.com.

Last night, we distributed a press release that provides a summary of our third quarter 2014 results. This press release is available on our corporate website and through various news outlets. 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 Fred, who will discuss initiatives in our Refining segment. Then Uzi will offer a few closing strategic comments. With that, I’ll turn the call over to Assi..

Thanks, Keith. Our third quarter 2014 results benefited from wider crude differential and improved Gulf Coast 5-3-2 to crack spread and increased throughput at our El Dorado refinery. During the quarter, our operations generated approximately $150 million of EBITDA.

Our financial position remain strong and we ended the third quarter with approximately $500 million of cash on a consolidated basis and $96.5 million of net debt. Excluding debt and cash at Delek Logistics, we had net cash position of $133 million at Delek U.S. We continue to focus on allocating our capital to create long-term value in our business.

During the third quarter 2014, we purchased approximately $34 million of stock and for the first nine months of 2014, we purchased approximately $42 million under our $100 million share repurchase authorization. In addition, as my friend Fred will discuss later in the call, we continue to work on our project to extend our Tyler Texas refinery.

Now I will turn it over to Danny to discuss additional financial details..

Thank you, Assi. For the third quarter of 2014, Delek U.S. reported net income or $72.5 million or $1.22 per diluted share. This compares to a net loss of $1.7 million or $0.03 per basic share in the third quarter last year.

The change in year-over-year earnings in the third quarter was driven primarily by improved margins in our Refining segment due to a wider discount between Midland WTI and Cushing WTI, which averaged $9.85 per barrel in the third quarter of 2014, compared to $0.28 per barrel in the prior year period.

In addition, our El Dorado refinery ran at higher utilization rates on a year-over-year basis due to the turnaround and light crude flexibility projects completed in the first quarter this year. Also the Gulf Coast 5-3-2 crack spread averaged $15.05 per barrel in the third quarter this year increasing from $12.30 per barrel in the prior year period.

During the third quarter of 2014, we benefitted from $29.7 million hedging gain that was partially offset by an approximate $17 million reduction in gross margin due to the impact of a decline in market prices and a backward dated market structure on our inventory value. Now I'd like to discuss a few additional items on the income statement.

General and administrative expenses increased to $36 million in the third quarter of this year, compared to $24 million in the prior year period. This increase was primarily due to employee related expenses and professional services. Our total accrual for incentive based compensation was $4.8 million higher than the second quarter of this year.

Depreciation expense was $29.2 million in the third quarter 2014, compared to $20.6 million in the third quarter of last year. This increase was primarily due to capital spending in the first quarter of this year for turnaround and other capital projects at the El Dorado refinery.

Finally our income tax right excluding the minority interest associated with Delek Logistics of $5.7 million was 31.1% in the third quarter of this year, which was lower than our previous guidance due to increased tax credit, domestic production activity deductions and more favorable state apportionment that lowered the state effective tax rate.

We expect the income tax rate for 2014 to be 34.5% to 35.5% excluding the minority interest. Turning now to capital spending, our capital expenditures during the period were $39.9 million compared to $52.8 million in the third quarter of 2013.

During the third quarter of this year, we spent $30 million in our refining segment, $800,000 in logistics segment, $6.9 million in our retail segment and $2.2 million at the corporate level. Our 2014 capital expenditures or forecast to be approximately $277.7 million.

This amount includes $217.8 million in our refining segment, $9.9 million in our logistics segment, $28.8 million in our retail segment and $21.2 million at the corporate level. This is a decrease from $290.3 million in our previous projection due to timing of projects.

Now segment, as mentioned earlier, performance benefited from a wider discount for Midland WTI. Our refining segment contribution margin was $151.1 million during the third quarter of 2014, which accounted for approximately 81% of the consolidated contribution margin. This is an increase from $29.1 million in the prior year period.

El Dorado contribution margin was $64.4 million compared to $6 million in the third quarter of last year. Our Tyler refinery contribution margin was $86.0 million in third quarter of this year compared to $19.6 million in the same period last year.

Now I would like to review our logistics segment which is comprised of the results from Delek Logistics partners. Our Logistics segment contribution margin was $23.7 million in the third quarter of this year compared to $16.1 million in the prior year period.

Results benefited primarily from acquisitions completed by Delek Logistics over the past year, increased volumes on the Lion pipeline system as the El Dorado refinery increased throughputs, year-over-year and an improved margin in the West Texas wholesale business. Delek U.S.

sold substantially all of the storage tanks in the product terminal at both Tyler refinery and the El Dorado refinery in late July 2013 and February of 2014 respectively to Delek Logistics.

Moving on to the retail segment; Retail’s contribution margin was $16.4 million in the third quarter of this year compared to $16.6 million in the third quarter of last year. This change was primarily due to our operating expenses which were partially offset by higher merchandise sales and fuel volumes on a year-over-year basis.

We continue to focus on our initiative building large format stores. We completed four during the third quarter of 2014 and plan to complete an additional store before the end of this year. At the end of the third quarter of this year, we had 63 large format stores of our total store count of $366.

I will now turn the call over to Fred, to review initiatives in our refining segment..

Thanks Danny. I would like to discuss our third quarter 2014 performance at the refineries and our plans for the Tyler refinery turnaround and expansion. El Dorado has continued to perform well as we processed approximately 80,270 barrels per day of mostly like crude. Our asphalt yield was 9.0% during the third quarter.

This compares to 66,920 barrels per day of crude in third quarter of 2013, which had an asphalt yield of approximately 9.9%. At Tyler we processed approximately 59,980 barrels per day of crude, compared to approximately 60,590 barrels per day reached in the third quarter of 2013.

At our Tyler refinery planning continued for the turnaround scheduled for the first quarter of 2015. In addition to the turnaround work, we’re planning to replace the FCC reactor at Tyler with state of art technology. The refinery will be going down in late January and is expected to return to normal production in mid-March.

Forecast continued on a project to expand crude nameplate capacity at the Tyler refinery to 75,000 barrels per day and we are on track to complete it during the turnaround. This expansion project is expected to cost approximately $70 million of which an estimated $53 million is to be spent during 2014.

Through the end of the third quarter we have spent approximately $34 million. During first quarter 2015, we expect to spend $70 million for the turnaround completion of the expansion projects and the SEC related projects.

To support this expansion, we have improved our light product distribution options to give us the ability to shift incremental products to the Dallas market using a combination of trucks and third-party pipelines.

In addition, we have the ability to shift products to Delek Logistics' recently acquired Mount Pleasant terminal and expect -- during the third quarter, we identified an avenue to supply additional Midland through to Tyler by using existing pipeline infrastructure, which should be in place by early 2015.

This will give us an additional 10,000 barrels per day in Midland sourced crude to support our expansion project.

Before I turn the call over to Uzi, I wanted to discuss our crude throughput for the El Dorado refinery during October, which averaged approximately 63,500 barrels per day due to unplanned maintenance and a disruption in crude deliveries resulting from a third-party crude oil pipeline leak.

Our team was able to respond quickly to the pipeline outage by managing our crude oil inventory position and by increasing the amount of crude delivered by truck. During this time, we’re able to continue to supply our customers with a combination of inventory on hand and production. On October 27th, we return the refinery to normal operations.

Now I’ll turn the call over to Uzi for his closing remarks..

Thank you, Fred. Our operations performed very well during the third quarter and we benefitted from our access to cost advantaged growth in our refining system and increased throughput at El Dorado. In addition to higher earnings from refining, our Logistic segment contribution margin increased on a year-over-year basis.

In our Retail segment, we continue to extend our large former stores and experienced a 5.1% increase in same-store fuel gallons sold and a 2.5% increase in merchandised sales year-over-year. During the third quarter, we took steps that should further enhance the performance of our Tyler expansion project.

Access to Midland crude has been identified to support this project, which would give us the ability to use either Cushing or Midland crude base based on market condition. With this additional crude supply early in 2015, it should increase our access to Midland crude to 97,000 barrels per day in our refining system.

In addition, large product distribution flexibility has been improved allowing access to new markets. Once the Tyler turnaround and expansion project has been completed at the end of the first quarter of 2015, both of our refineries would have completed turnaround over the past year.

The FCC reactor will have been replaced at both refineries, improving overall efficiencies and our crude name place capacity should increase from 140,000 barrels per day to 165,000 barrels per day. On a year-to-date basis, we have generated $474 million of contribution margin through the third quarter.

This compares to $367 million on a year-to-date basis 2013. We have continued to invest in our business by spending approximately $193 million on capital expenditure year-to-date, while returning $87 million after shareholders through dividends and share repurchases during that period.

Our financial position remains strong and we remained focus on our capital allocation strategy to support investment in our business and return on cash to our shareholders.

With that Valerie will you please open the call for questions?.

(Operator Instructions) You have a question from the line of Doug Leggett with Bank of America Merrill Lynch..

Uzi, we've seen quite a change I guess in the Midland market since the last call. I'm just curious if you could give us your perspectives on how you see things playing out now that we are seeing infrastructure catching up? And my follow-up, if I may, is specific to Tyler.

I think we're all aware that the guidance you've given us on the potential contribution from the project; maybe a project update would be good as well in terms of completion, but the contribution is fairly conservative.

I'm just wondering in a more moderate kind of differential environment, if you could give us an update as to how you see that $30 million, what you think a reasonable range could be for that? And I'll leave it there, thank you..

Well these are two great questions Doug. I’ll take the first one and then Assi will take the other one as we have ran our model yesterday, actually third-party ran our model yesterday and we can give you some numbers in regard to the project after the Midland exposure. All along we thought that Midland $9 is not sustainable.

We actually took steps to see if we can lock some of it going forward, which obviously for confidential reasons we don’t disclose that much, but that’s part of what you see in the hedging. But all along we feel that $9, $8, $7 is not sustainable. We enjoy it, it's a great number, but our long-term number is anywhere between $3 to $4.

And so now we see $3, $3.50, $4. That’s our long term number. It doesn’t mean that there would not be some days or months that gaps will be wider than that but we don’t run our company based on $9. We feel that $4 is a wonderful number or $3 is a wonderful number, we feel comfortable about that.

In regard to the second question, Assi you want to take that one..

Sure, good morning. We’ve look at numbers as of yesterday and assuming a $16 crack spread for next year, which we think it’s a conservative number and basically the $4 that Uzi mentioned on Midland, running it on 10,000 barrels a day of incremental barrels, we think we can achieve around $40 million a year of incremental EBITDA.

When you add to the fact that we can actually run the plant potentially by another 5,000 barrels a day, all of that can be incremental EBITDA to the $40 million that I just described and if it will come from Midland, that numbers can be somewhere another $10 million to $20 million.

So as we’re sitting right now with a $70 million investment, $75 million that was already invested and it’s out of the cash, this is a very good project for us..

Assi, where are you at in terms of completion now? And what was your latest in terms of -- how much of that have you already spent? And when do you expect start up now?.

Sure Doug. I'll let my friend Fred here discuss the completion of the project..

Yes, hey Doug. We are in the final stages of getting our pre-turnaround capital work completed. Our turnaround contractor is going to do the final tie-in work and all the expansion. So that will happen during the turnaround.

We’ve got -- our integrated schedule is almost complete to optimize the work flow but right now we’re not seeing any issues that would impact our ability to start the entire refinery back up at the end of turnaround and ramp it up to full rates..

Your next question comes from the line of Ryan Todd with Deutsche Bank..

A couple questions regarding cash and balance sheet. You're going to see a significant drop in capital expenditures next year and a ramp in cash flow into 2015. So a large amount of growth in free cash flow.

Can you talk a little bit about maybe the balance between -- do you see between cash returned to shareholders, potential acquisitions, organic investment, and then I've got one follow up on the midstream as well. .

A couple of questions. So let me start with the first one. You’re right. By the end of second quarter of next year, the CapEx is dropping significantly. We still have one project to complete during the third quarter of next year but after that you’re absolutely right, we’ll have free cash flow.

With the drop in crude oil and some potential people getting into trouble with that, we think that this will open the market for some opportunity for acquisitions. However, we are always very conservative in -- with our approach to acquisition.

So if there is no right opportunity then there is no reason to believe that our dividend and repurchase program won’t continue and expand next year while we’re finishing our CapEx program. Obviously we believe that the CapEx program I was asked to discuss start earlier is very accretive to shareholders.

If we rerun 15,000, which this is how we’re planning to run the refinery that we are close to a target of one time EBITDA. So, that’s obviously something that is much better than just paying dividend or repurchase. If we identify projects like that we’ll notify the market and perform these projects.

Until two quarters ago the market didn’t know that we had that Tyler project. So we’re looking at as many other projects to do that. One thing that I’m very proud personally is our ability to move another 10,000 barrels of Midland.

I know that everybody is not as excited anymore about Midland because of its drop $3 to $4 but we’ll look at it long term and that makes that project very, very accretive. I hope I answer that question..

Yes. That's helpful. And then if I could maybe ask one on the midstream. I know you've targeted getting to an EBITDA of $150 million at DKL and it would seem like there's probably a little bit of a gap, I think maybe between the $120 million near-term outlook and the $150 million target.

Can you talk about the need to do or the opportunity to do a potential acquisition to bridge that gap? What type of whether -- it would need to be constrained to the current geography, as you look at it right now? And what role Delek might play in facilitating a potential acquisition?.

That’s another great question. So, I’ll answer it in pieces. First of all we just showed the market our ability to buy assets, with buying the terminal on Mount Pleasant, actually two terminals Greenville and Mount Pleasant. The Mount Pleasant is actually a terminal that shows third party. We paid seven times EBITDA. Now it's the small acquisition.

So our target for acquisition is not more than seven to nine times. It needs to be probably in our geographic area, but it doesn't need to serve DK necessarily. In that regard we do have in our head the gap -- to be close if you will.

Obviously our contract that we announced to the market only when acquisitions or projects are signed, we want to be conservative but we do have roadmap. And in fact to achieve these $150 million, obviously it stays a goal. Always something can happen but we do have a path to achieve that goal..

And is there a role that -- should this be seen as purely maybe an acquisition at the DKL level, or is there a role that Delek, the parent is going to play in this potentially?.

Well it depends on the specific acquisition. It can be either way or combined. It depends on the asset itself. .

Your next question comes from the line of Evan Calio with Morgan Stanley..

Some of the bigger questions, strategic were asked.

But so what should we expect the duration of your Tyler turnaround in 1Q? Should we expect that's more extensive because of the expansion of the FCC? Or is that more of a typical 30-day turnaround event?.

It's just over 40 days oil to oil..

Great. A question on retail. It was flattish sequentially, which is below most of your peers.

Is that -- maybe any color? Is that due to local turnarounds that may have impacted retail margins? And kind of any color outlook there into the fourth quarter given crude weakness?.

Well fourth quarter obviously will be there. Just looking at the flat margins that everybody sees. But strategically, more than just the fourth quarter or any specific quarter. We are building mega stores and we open them -- and we open them I believe four in this quarter. You have tremendous amount of startup expenses.

So if you eliminate the new stores, actually our EBITDA is much higher than that. And we explained that in the past. We have more and more new stores that it takes time to rent them up. They are absolutely meeting our expectations and in some cases exceed our expectations. That's not a mature business.

So we expect the growth while building all of these megastores and changing the fleet to something state-of-the-art, it's just not realistic. So we don't look at it quarter-to-quarter, we look at it in terms of years and we feel great about our retail position..

Maybe one last small one for me, can you quantify that hedging gain in the quarter?.

Yes, I am going to say something about the hedging because I saw your note and others. And that hedging, we said it a year ago. We are going to take a long-term view on the market. And if we believe that there is value for our shareholders, we're going just to lock in that value. In the quarter that was around $30 million.

Out of the $30 million just to give you the magnitude, $26 million was realized. So it's not that we are having something I can change or anything can change but it's not that it's something that belongs to 2017 all of a sudden. Now against that $30 million we did have one time events. Obviously everybody spoke about inventory.

We did suffer $17 million of loss on inventory. But on top of that, there were other things that offset the hedging in our minds and for example we had lots of opportunities in Tyler. If you look, we ran only 57,000 barrels against 62,000 barrels the facility used to run under normal circumstances.

That by itself is another $10 million of offset to the hedging. However, going back to your comment about hedging, we look at hedging as part of the program, as part of our business.

If market is in backwardation and if we have opportunity to lock in value for our shareholders, we continue to that and third quarter or fourth quarter are not much different in that regard. .

Great. If I could one more, I know you mentioned ML payable EBITDA and it is droppable in the $7 million to $8 million.

I believe some of that's inside the refinery fence, but I mean what -- not just to trying to determine when it will be dropped, but what needs to be done on your end before it is droppable? I'm just trying to understand when you could potentially drop those assets? Thanks..

Evan this is Assi. We plan to drop by the end of March 2015, the assets that you just spoke, which is it's not exactly inside the fence. It's the railcar facility that is outside the Eldorado. Finally it's a brand new tank that we built in order to support the Tyler growth.

So right now we are just doing all the typical board approvals, evaluations, fairness opinions, but from a bank perspective and others we already have all the approval needed..

Your next question comes from the line of Roger Read with Wells Fargo..

I guess maybe to go down the line, since it seems to be a consistent topic here; acquisitions and there's been quite a lot of talk about possible assets available on the refining side and then maybe not available and then back available again. And then you've obviously highlighted the logistics side.

I was just curious, as you talked earlier about EBITDA multiples that you would be looking to pay, how maybe some of the refining assets that have or maybe still are on the market compare in terms of those evaluations to logistics? Is it a in a sense no-brainer to go to the logistics side, or does the refining acquisition still look attractive?.

Well Roger, I’ll take that in two part if you will. Let's start with the logistics. Anybody can write fat check of big multiple. We can do it tonight. The trick for us is we want to be conservative and if you look, our balance sheet is probably the most conservative balance sheet or one of the most conservative. I don’t know if the most.

Even on the logistics side, we are 2.5 times. So we have the power to buy. However, we target on the logistics and we're going to be very, very conservative about that or very diligent about that. We are not going to pay more than seven to nine times.

And even what we pay nine times if you see some of things that we paid three years ago pay line used to be a nine, 9.5 times. Obviously starting next year it will not be even close to that multiple. So, that’s one thing on the logistic side.

On the refining side, we believe that our value -- there were assets that bring value to our shareholders we would have already looked at them. But still need to come down for us to feel that these are attractive assets and we want to be very patient and take our time because we have other ways to spend money.

Our CapEx program is just we believe very good to our shareholders, the dividend as well as the buyback. We think that our stock has an opportunity for buyback as well. So, we want to be very patient and diligent about refining assets..

Okay, that's helpful. And then just back real quick on the operational side.

I missed it as I was pulled away temporarily, on the El Dorado description of the pipeline being down, did you all offer a $1 impact of that, or is it something that will fall out in the wash as you go through the quarter?.

We didn’t offer that. We just said that during the month it was 17,000 barrels below our normal rate of 80,000 and you can calculate probably the crack spread for something big that to do. And also with this stage that we are back to normal and we have access to every Midland barrel that we used to have before the shutdown of the pipe..

Operator:.

Your next question comes from the line of Brad Heffern with RBC Capital..

On the 10,000 additional Midland barrels you guys are bringing in, is that a similar laid in cost to the other Midland that you get? Or are you having to pay more to get those incremental barrels?.

Uzi Yemin:.

That’s a great question, this mechanism is coming – or these 10,000 barrels are coming from existing pipe. Nobody is building pipe for us. And we are not building that pipe for ourselves either. So these are commercial agreement that are for the most part very similar to what we had so far.

For confidential reasons if you will, we don’t disclose the exact amount because we have counter party that we agreed not to talk about numbers here. But if you assume that substantially these are the same to what we had with other 87,000 barrels in Midland barrels..

Okay, perfect. And then you mentioned that you could decide to take Cushing or Midland, depending on where the spreads are.

If we were sitting here at $2 when you bought the new capacity online, would you be using Cushing or would you be using Midland?.

With $2 we'll use Midland..

It was $2 last time I looked; $2.20, $2.30..

This morning when I looked, it was $2.75. Maybe I am wrong..

Okay.

At $2.75 then?.

Yes, with Midland. You ask about $2, even with $2 it will be Midland..

Your next question comes from the line of Paul Cheng with Barclays..

Number of quick questions. First one for Fred.

Fred, Tyler, the 1Q turnaround, during the 40 day is it going to be totally shut or is it going to be run partially? If it is run partially what kind of throughput rate we should assume during that time?.

Yes, the entire refinery will be down Paul. So no throughput during the period. Now we’ll start up units as they become available coming out of turnaround but I think the production would be minimal to zero until the turnaround is finally complete..

And in October when the Midland is down, how that impact in terms of where you're crew sleep and your crew transportation course as well as your products? You're saying that you're running about 63,000, 64,000 barrels per day.

But is there still a similar grade of oil as what you want in the third quarter or end of that you are replacing it with more of the Mars? How should we look at that?.

Paul, you’re seeing to the pipeline leak that impacted El Dorado?.

That's correct. I'm sorry. In October when Midland at their pipeline having problems that you reduced your run.

So we assume that all you did is that you reduced the run so you're still running the similar type of oil as what you did in the third quarter? Or that the type of oil that you run is actually also be changed and substituting some of that light oil that you've been getting with maybe some Gulf oil such as Mars? And how that your overall transportation core on your crew have changed as well as your product's name may have changed comparing to the third quarter?.

Okay, well let me take that one Paul. These were three parts. First of all, as I said earlier, as we said earlier, we don’t lose even one drop of Midland barrel. So, let’s just start with that. And going forward, unless there's another rupture, we know the program we’re not losing any Midland.

So what we back off is pipeline delivery, which is we basically used truck for a portion of time to move the barrels from Longview to El Dorado. That’s an 80, 90 miles distance. So there was some extra cost. If it was material we would have already notified you.

Since it’s not material and it’s part of our operation if you will, there is nothing to get excited about. We didn’t move any Gulf Coast barrels up and you shouldn’t expect a big change with the crude slate in October versus the normal program..

Okay.

Uzi, on the hedging for the third quarter, is that all related to the Midland spread patch or is that related to other things also?.

We have different programs Paul. We are not -- that a program that is -- we protect it very hard because we believe that some of the things that we’re doing are very important to our Company and strategically we want to be protective of that.

I just want to say that this was not only Midland but we did take view and we do take view even for the fourth quarter. If you look two months ago Midland was for the fourth quarter $9, we didn’t believe that $9 will sustainable.

So for the fourth quarter obviously we looked at that as well or we didn’t believe that ethanol can stay $1.50 for long time as ethanol move from $1.50 to $2 only in the last three weeks.

So our job here on the table is to make sure that shareholders gaining the return they’re expecting, when we have opportunities and we see abnormal situation in the market in our mind we act. So, to answer your question it is not absolutely not only Midland even though Midland is some of it..

Okay.

And can you tell us, do you have a similar magnitude of the hedging positions still existing in the fourth quarter? Or that the hedging position is much less than what you have in the third?.

I'll be stupid to give a number right now. However, I’m going to tell you that we see, we obviously have the number as of this morning. As we see these numbers, the market structure that we protected in the third quarter continue to go the same way. So, so far for the quarter our hedging program is positive..

Okay.

Uzi what is your -- based on your existing configuration, what is the sustaining capital level today?.

I’m sorry I missed that one..

What is the sustaining capital? Means that if I strip out all the growth just to maintain the business as it is including the integrity or the regulatory, everything?.

I got it. We had nothing in our mind the way, each refinery between $25 million to $30 million. Just call it $30 million, DKL logistics around $10 million or $15 million and corporate call it another $15 million to $20 million and the C-stores assume roughly $30,000 per store. This is sustainable.

So as you put it all together, it’s around $100 million..

Okay, perfect. A final one. Just curious what is your view? Sunrise have not started yet, so it's a little bit surprising to me that Midland is going to actually drop below five, especially given in October that Midland is having problems.

Any particular insight you can share? Why did discount have narrowed so quickly in over the last two months? We thought that the discount may be a bit wider through until the first quarter of next year initially..

In my mind, again it's one person's opinion. But in our mind, the expectation for Sunrise to come and its coming I think early December and people are preparing themselves for that, pull the differential down a little bit.

And if you remember two quarters ago we said that over the fourth quarter, the end of the fourth quarter, the differentials will come down. We do believe that some oversold market here if you will -- it will bounce back a little bit. Now on top of that, the growth crude price takes some of the incentives from the producers to give these side discount.

However, and this is a one person's projection. We do believe that towards the third quarter and especially fourth quarter next year, that differential will widen back up to something healthy, similar to what we saw a couple of months ago..

Your next question comes from the line of with Blake Fernandez with Howard Weil..

I was hoping on that hedging gain, can you just confirm the $30 million, is that a pretax number or after tax number?.

That's a pretax number..

Pretax? Okay, thanks. Uzi, back on the retail, it looks like the same store sales are surprisingly strong year-over-year, up 5%. That seems well above some of the DOE stats that we're seeing on a nationwide basis.

Can you just talk, is that more of a regional phenomenon, or is there just gaining market share? What's driving that?.

Honestly, I think that this is more related to us than to others. We are coming with these mega stores and as we ramp them up and people get used to how comfortable it is to pull in and out of these stores. We are enjoying in these stores not 5%, but sometimes 15% and 20%. This continues into fourth quarter actually.

And as we ramp up our stores, our strategy is to put people in with these gasoline sales. So I don't know that this is something that you can see [indiscernible] market I believe that just belongs to us in gaining market share..

Okay, great. And then onto the buybacks. If I'm not mistaken your authorization is for $100 million through year end. You're at about 42. So I guess it looks like you're going to have trouble meeting that or fully executing the program unless you're going to significantly ramp up here.

So I guess if you could maybe elaborate a little bit on thoughts around ramping that up? Or is it a function of maybe stock price where your appetite has waned a bit? And then maybe do we have a potential to extend that into 2015?.

First of all we will -- based on what we think right we will recommend to the board to extend that to upsize in '15. We continue with this program and we are active in the market. I guess I don't watch it myself everyday but we are active in the market every day.

There is no reason to believe that we will not continue with this program in the fourth quarter and in the first quarter as we have more cash and the balance sheet is healthy as it is. Expending behind the $100 million we would probably recommend that to our Board and into 2015, and we believe that shareholders should enjoy some of our success. .

Your next question comes from the line of Paul Sankey with Wolfe Research..

Uzi, you've covered a lot of ground here. Just one thing, we thought that the buyback pace would be quicker in Q3. Is it going to accelerate? We were thinking that you'd get through the $100 million by the year end..

It's hard to predict. It depends on the program and the execution of the program. It is hard to predict. I don't want to give prediction on something that I'm not sure right now..

Is there any reason why it wasn't -- looking back is there any reason why it wasn't more aggressive? Is it -- just remind me you do it actively, don't you? You choose when to buy and when not to?.

Well we have some progress. We have open market purchases, we have 10b5-1. And I believe that the people that do that actually try to balance between that, the volume in the market at any given day and has that started performing or not, these are all things that are being felt by others. So it’s -- for me, it's hard to predict.

We probably need to do some due diligence and it's based on market now on a daily basis..

Yes, I understand, but I guess the basic idea is there's no particular reason why it was slower in the quarter than might have been the case if we were looking for the 100 million to be done by year-end? I know it's difficult to talk about it.

The other thing, Uzi, I was wondering would you guys consider a merger with another company as opposed to the acquisition route that people talk about?.

Are we active with that right now? No. but I’ll be stupid to say that while creating value to the shareholders everything is on the table. Do we think that there is an active or there is an opportunity right now sitting on the table, probably not. But if there was the right opportunity, everything is on the table..

(Operator Instructions). You have a question from the line of Jeff Dietert with Simmons..

Good morning. Uzi, I believe the share repurchase program expires at the end of the year.

Is it contemplated that you have a new one for next year? Or what are your thoughts there?.

As we said earlier, that’s not my decision. It's the Board of Directors. We will -- and we sit right now and the market conditions are the way we see them, there's no reason to believe that we will not recommend to the Board to extend and increase that program into 2016..

And secondly I believe I heard you say that Midland differentials, you expect them to widen out late next year? Did I hear that correctly?.

You did..

And that would be post the Permian Express 2 and Cactus pipeline start-ups?.

Well, and you know obviously you tried to put a note together which is a very useful note. We believe that with the local barrels and configurations of the pipelines, some of the pipelines will not be full until they get full.

But that would create a window of opportunity sometime toward the second part of next year for Midland with the growth we see, assuming that the growth doesn’t slow down because of price of crude which I don’t believe $80 will slow it down. Assuming that then we expect that to widen back towards second part of next year..

Got you.

So it's continued production growth but a mismatch in start-up of gathering systems versus long-haul pipeline systems?.

That is correct..

Okay. All right. And last question for me.

Any updates on your gathered volumes? Are those continuing to grow? What are you seeing from the producers behind those systems?.

Yes and we are active both in Midland and other areas and that’s probably one of the biggest initiatives of our Company for 2015 and 2016 to get very close to the barrel and that will be a combined effort if you will between DK and DKL to get close to the barrels..

There are no further questions at this time..

Well, I'd like to thank my colleagues around the table. I would like to thank you investors and analysts for your active interest in our Company and mostly I would like to thank each one of our employees that created this great quarter and we are very optimistic for the fourth quarter and the 2016. Thank you and we’ll talk to you soon..

Thank you for participating in this morning’s conference call. You may now disconnect..