Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Jeff Dietert – Simmons & Company International.
Jeff Dietert – Simmons & Company International
You talked about in the refining segment using about 2,100 barrels a day of ethanol. Were you blending in the retail segment as well or is the blending that you’re doing primarily at Tyler?
Ezra Uzi Yemin
As we said we blended 40% of our fuel in the first quarter and we do expect to grow this to almost call it 60% with the retail. Now, we didn’t mention it here but the West Texas market but we are working on blending ethanol in West Texas and we expect to start blending very soon, in terms of dates.
Jeff Dietert – Simmons & Company International
And as far as the blending subsidy are you basically keeping 100% of the blending subsidy?
Ezra Uzi Yemin
It depends on the customer and on the market. Just to give you a point of reference, as we said effective May 1 everything that we sell across the rack is being blended with ethanol. Our cost, including the tax benefit is $0.85 to $0.90 below [inaudible] and we give our customer in average between $0.025 and $0.03 so if we talk about 2,100 barrels for the first quarter we estimate the contribution margin between $4 to $5 million.
Obviously now we’re going to blend close to 3,000 barrels so we need to increase that number as well as the West Texas increasing the ethanol blending of the stores. We feel that the ethanol program as we told you a quarter ago or three months ago is really working for us. I would ignore the mark-to-market for us because of accounting but at the same time we do have almost call it 75% of our fuel being blended and most of it is with vendors and not through the market. So, for me mark-to-market, yes it’s positive but the main idea is to keep blending and keep enjoying those $0.60, $0.70, $0.80, depends on the market and on the customer.
Jeff Dietert – Simmons & Company International
You talked through some of your hedges on the fourth quarter call, any updates or changes to the hedging of the ethanol price?
Ezra Uzi Yemin
By the end of the quarter it was up, it moves with crude oil. I wouldn’t read too much in to the $2.8, $2.9 million. I wish we could make it a perfected hedge, we didn’t manage to do that because of correlation. We’ll try to do that in the next few quarters but for us, the main idea was to lock in that differential which we did and we mainly did that on the cash market and not the paper markets.
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