PARR - Earnings call transcript Q1 2018 | Par Pacific Holdings, Inc.

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Operator

Greetings, and welcome to the Par Pacific Holdings First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matt Vaughn, General Counsel for Par Pacific Holdings. Thank you, Mr. Vaughn.

begin. may You

Matt Vaughn

Good Holdings' Doug. and to welcome Thank quarter morning, XXXX Pacific first earnings Par you, everyone, conference call.

are Chief Joseph Joining Officer; Executive today William and Petroleum. President me Chief Officer, Will Par Monteleone, President Financial Israel, and Officer; and Chief Pate, Executive

with Officer, release, the filings and Chief of press our President presentation investor our at William update call with and forward-looking to and business. federal not begin, any include estimates securities and as be Holdings most the performance factors plans, actual the on our latest risk this, Pacific outlook not statements but note or over place subject results we are Pate. are the financial statements, guarantees laws. our regarding in to, company. found statements XX-Q or information financial forward-looking today a Par please is refer are certain reconciliations term and those I'll Any expectations, measures Forms that and materially our investors we non-GAAP in to should obligation and to differ change filed are some SEC. these comparable of I Such GAAP or not of major you as well what including from forward-looking of SEC Before our Executive detailed or discussion as comments XX-K for the subject events. is now for forward-looking affecting disclaim to limited www.parpacific.com may website concerning our our Because reliance more of operating that revise may may statements uncertainties defined these supplemental and Further under undue the any forward-looking indicated include, the to future figures, risks intention and to statements. information, in turn They statements.

William Pate

offset strong were in quarter to Hawaii, the affected results impact refining, than to these of favorable logistics diffs of an realized in for to when to contributions XX,XXX crude business. share in improved solid challenging The units of gross day quarter nearly of margin was our Wyoming our on exemption due record of Standard the retail Thank the the seasonal and first year-over-year small day first results Renewable XXXX. $X.XX first per barrel quarter We financial spite refinery quarter reported XX,XXX sales compared million XXXX also negatively the quarterly impact $XX per partially our per more Fuel by a in by reported from you, which the per Matt. and the barrels requirements. at differentials barrels XXXX, Wyoming compared earnings Adjusted basis.

season. traditionally summer very into market pleased profile coming the are the strong We with

refining had have have production OPEC also our cost significant of the medium-sour exacerbates the created to healthy Hawaii chain. a Our barrels particularly on The current than XX,XXX in of result and constraints. our are highly operations the impact faced at which per more sales record OPEC day, yields and high crudes continue be supply cuts production on-island differentials also market, a we crude a largely Pacific XX%. backwardated The Hawaii distillate had of

stores on of these at X.X%. X% work declining Sales impact X.X% our year-over-year We related our level. consumption, expense level. retail same-store at a of the of and to fuel sales growth continued and a business conversion volumes retail at believe merchandise variety to adverse are increases factors profitability impact on Hawaii Segment the X% felt well ebbed higher including somewhat trends declining basis. as competition Our the limited street price perform with wages we minimum margin gross down very of with volumes was store

activities Rocky the notable this on and Hawaii several of in acquisition hydrotreater announced the profile. purchase our had to we region. business the quarter. which an mainland at convenience agreement forward to this first budget. enhanced in our the Washington Internally, diversification in end front, accomplishments. strategic I and look regions our and time Northwest the believe pleased We We Mountains XX to great initiatives. the to on I’m our growth and expansion closed project the to are We continues Spokane, of the integration focus business, Pacific of the stores previously be On with distillate

to on we in XXXX demand. the of in project IMO fuel our are incremental other making will this to to finally, working locations Hawaii operating several retail this areas Joseph demand yields unit achieve report In new point, to products distillate progress ongoing in opening meeting We summer increase greater address over distillate call flexibility generated growing expect crude projects we West and the have production Wyoming, to have At standards. I operations. And clean by debottleneck to time and supply to on additional on Honolulu. turn in our

Joseph Israel

overall was Thank first during Pacific XXXX. The first crude of the combined during margin $X.XX In quarter quarter index our pricing. the you, per quarter, environment the barrel Hawaii, in barrel compared per was driven Mid elevated Bill. to relatively $X.XX by weak

Brent levels, mid Global quarter, average basis, of inventory years in to favorable. distillates front fuel market crack and per X-X-X-X oil is $X.XX compared spread, especially low. the demand conditions was for five a per and strong barrel, On products are on $X.XX the pacific are barrel.

oil to backwardated market Bill crude oil, the discipline, support economy OPEC dynamics, strong side, high on demand for However, oil a structure. mentioned, strong in with combined production as prices geo-political continue and

in per result, As five barrel per a X Pacific to compared first Brent, $X.XX differential Brent. to discount our quarter cents discount the average crude oil averaged years of Mid to a only barrel

of exemption first net first sold the XX.X% of refinery quarter day with XX,XXX We a in benefit which total per The high RINs XX,XXX was the Hawaii $X granted of for million availability. our quarter sales. for refinery XXXX, EPA calendar Our record approximately on-island XX,XXX resulted barrels Hawaii a refinery quarter, refinery. year small Hawaii the of per bpd, in barrels throughput operational the a day, in including

Our adjusted positive the including gross related RINs per $X.XX was benefit. $X.XX to barrel per barrel, margin

This a negative item per to First quarter we $X.XX following $X.XX per barrel the negative is be $X.XX two associated to export items: driven barrel, capture estimate our timing. by impact with

we a exports. fourth with realized of barrel doubled negative of margin the per quarter, quarter barrel oil first capture, for mainly low value with in quarter In As exports structure, reminder, the drove $X associated elevated The the mainly compared XXXX XX-XX approximately of down. to XXXX we our left shipping market quarter. rates, crude per our low positive almost in realized the and fourth adjusted related gross to processed the cents products, backwardated which is the

cost production $X.XX was barrel. in Our quarter per the

our the $X.XX So improving quarter, for per differentials barrel combined oil by crude quarter in far purchases. Mid-Pacific our index second with approximately approximately crude barrel, is per third $X.XX

record day XX,XXX Our first was during $XX.XX Wyoming, per barrels second X-X-X the throughput In is high benefit resulted the of $XX.XX our barrel refinery in refinery XXXX, quarter quarter This for our first with index day we calendar granted XX.XXXX small barrels in quarter. is $X during RINs planned net barrels Wyoming The range. XXXX. Wyoming year of exemption the throughput a quarter, averaged a first and EPA barrel per availability which refinery our In approximately quarter the XX,XXX per also to XX.X% to the our sold per million day. refinery. for per XX,XXX operational of compared

the Bbl was compared Our quarter in per adjusted to $X.XX barrel, gross per margin first $XX.XX in of XXXX. the quarter

represent quarter barrel approximately increased strong operational for Excluding per of strong over flexibility. $X.XX $X.XX rate We net RINs of barrel the approximately a performance. attribute our this commercial benefit, capture historical to our and results capture per

to to our barrels the our is outside with distillates day, support now thousand profitability. Mountains our refinery X.X over yields we gasoline In cents gasoline barrel, products and the were past, sales to to in in distillates our flexibility, low represented first our ability our improved inventory this of truck incremental $X.XX rail reported and seasonality Rocky gasoline inventory. and Production smooth-out our over is premium season improving adjustments. to related rate, enhance close barrel mid-cycle as sales. per run XX% environment market approach inventory of $X.XX quarter, per produced per approximately and mainly record with Wyoming high gasoline costs of and demand critical the As oil Market $X.XX total

for $XX.XX the I’ll So financial averaged quarter. far to in is day now, index the XX,XXX our Will second highlights. quarter, Wyoming our per review approximately barrel, And Wyoming call throughput and per to barrels results Laramie in over the turn target X-X-X has and

Will Monteleone

you, Thank Joseph.

results impacted items as are reported our that follows. Some QX

$X Retail million to from position. Net $XX.X a accounting, impacted acquisition positively and million totaled expense Our Northwest Net We debt Net Subject rate interest $XX totaled $X during we earnout, Adjusted which did quarter our from the we will of annual and $XX.X million incurred XX-month our Income benefit. Income forma quarter. the or settling a rate not DD&A EBITDA. for million period. for quarterly to Pro were approximately charge expense was charge by million. $X roughly $XXX interest the $XX Adjusted Adjusted have EBITDA XX% liquidity this an was GAAP approximately -- benefit included an to expect net run million DD&A capitalization Income price Net Cash Adjusted finalizing derivative increase a impact million. associated with RINS the million total by $X.X on a expect additional purchase during each million operations

between the the with expect for our be to $XX totaled $XX our $XX capital capital we comments, expenditures expenditures and million During prior million quarter, year. Consistent million.

the communications, with generated in now activity. million EBITDAX gains Laramie. to impact in derivative Laramie million impact in of including income reduction $XX unrealized net prior Moving Consistent of to gains minimal losses income net of to the derivative are adjusted derivative derivative and adjusted for our and net period. realized a $X contribution net income approximately the million excluding Removing our $X $X share. million and unrealized unrealized income the we from Laramie’s per and adjusted resulted

the day in available equivalent of contribution water which acquired wells. quarter, result been XX largely was day of during resolved cubic a wells but feet delays in a XXX finishing and a spud XX Laramie million completed exit feet million During production April. including was The XX cubic wells, equivalent increase approximately drilled but drilled the properties. with has supplies uncompleted uncompleted XX March

prices continue at While under pressure, price gas remain to the gas offset contributions more liquids than weakness. wellhead

liquids encouraging results. $XXX realizations balance roughly gas drilled debt-to-EBITDAX Bcfe that million Recently gas approximately leaving the completed approximately data as type recent spacing are condensate revolver March wells were a Laramie on natural and of total X.X per the Capital per X.Xx. price of XX% columns a curve. and wells revenues. $XX yielding of and Through quarter barrel. following approximately million natural the Unhedged completions well represented of $XX of gallon $X.XX Mcf, $X.XX XX per X XX During revenues production of Expenditures and totaled per averaging has end are on XXXX April $X,XXX,XXX liquids, support

Laramie to remain Given June. production outlook, X expected. current rig program consistent plans are changes and with move Completion planned price outlook no to in in is plans to activity a prior

However, to capital million $XXX are for towards concludes million expenditures down year. back be remarks. and maintain provided than Laramie to debt-to-EBITDA. quarter by XXXX Q&A. full generation and $XXX the between $XXX to it to reduction free drive CapEx you This Operator, turn I’ll X.Xx is the expected for $XXX of in cash million expected planned million fourth flow This from prepared our previously less

Operator

[Operator gentlemen, Thank and you. question-and-answer now session. be Instructions]. Ladies are conducting a we

the question Please Pickering, your Tudor, comes first proceed with line Our of with question. Blair Company. Matthew from & Holt

Matthew Blair

Hawaiian back refinery. to discussion to want turn for just your on crude the I differentials

like your which a you what in led approximately Looking at premium about to high looks Brent, surprising you considering and share might you could quarter, expect to forward a was what Hawaii was going XX% ANS at just there? it us materials, the the ANS to talk little know ANS

Joseph Israel

at XX% a with morning it's model ANS on us of be Joseph. both is Good XX% to the our the yields. and other Like the Matt, what optimized crude like based giving mix the an Africa LP us optimize and included and crude happened plate every we gave optimization quarter

Beyond into won't that details. I more go commercial

Matthew Blair

side considering could you in Okay, more hoping result you pretty on in color strong the quarter. that thought be attribute the was us would environment. more or I more retail a the you actual rising great and crude of then were was some fuel of Would strength I guess both? side there. price I the Any offer merchandise more maybe to the or details

William Pate

habits difficult actually the there while lot it on on was was prices rising activity quarter. within Also, side and Bill, with environment volume store This is the our because pump our a margins would retailers. you I can you as prices, in network to towards high-volume rising terms the fuel parts value-oriented during fuel brands were say going that some sales Generally of a good do at and retail mainly brands of have the migrate and see you well. of spread in impacted when customer tend changes business I XX speaking, see pump as premium believe also between widen such the customers

believe we question? sales So, retailers Hele also there increased your then that at our brand. at and are sales increased high-volume That value-themed answer

Matthew Blair

great that's just then more. one Yeah, and

you guess able receive So, for -- retroactively? received year, a a Hawaii if us, if for said apply and XXXX you I waiver you waiver XXXX the I to you RIN did are think can not, remind

William Pate

for comment not XXXX any conversations we're a having with No, and on agencies. waiver we we're not the to did going receive regulatory

Matthew Blair

you Okay more questions. for a couple I'll Thanks. reach

Operator

comes Merrill proceed Bank your Our line of question. with of Please Brody Lynch. the next Gregg from question with America

Unidentified Analyst

is Gregg. on [Shannon] this Hi actually for

to there it's wanted ask, and of Just know in volcano operations I news, eruption occurring an help. color Hawaii still Hawaii earthquakes. in the Does and have your so any as this the on terminals was impact the related yet? would news

William Pate

after, earthquake that there that the on impact the terminal inspected no place would no respect had could reasonably been shortly volcano is we facility close have the We in Sure, have have which only our but probably issues. do it operations. impact to real -- have with no been a taken large to and Hilo,

Unidentified Analyst

Alright, just on sale yesterday's of for thank E-XX allow the year-around. and you, quickly to then decision

that on Just thoughts on your wanted any your to has that get and if impacts business.

William Pate

discussing that. This and is Bill, we're debating still

and warranty issues abide one E-XX on going companies just with the this of automobiles with car the issues deal to big with and by especially I E-XX. whether road are think is the the actually

to We our expect obviously. the any anything do have it impact to will want don't E-XX watch material I market on does Joseph add if you there? shift to business.

Joseph Israel

No. Thanks.

Operator

Seaport proceed line next question Global Securities. Harrison with the from comes from Our of Mike your question. Please

Jacob Schowalter

on This for is Jacob Mike.

Wyoming one volume. on refine Just product sales

guys record hit in you million the XX.X QX. So,

the from number now here? expect go we summer So should season, that where to moving into

Joseph Israel

XX,XXX outside Let to barrels me the rate. correct, just it's million, the in and our season. a great in see not per quarter especially was day sales high XX Wyoming in of record Really that

per sales are in in of will around rest the For planning the we winter. of XX plus type the run year, probably be the rate barrels this the accordingly and XX,XXX day less more summer, slightly

Operator

Our proceed Shapiro next question the of Andrew Management. comes from question. with Lawndale your Capital with line Please

Andrew Shapiro

island where Hawaii I have issues. deal islands the good on in sales us desire islands, and in sales enquiry you do main traffic? due issue an if a losing lot on and they be for problem on-island the a landings is guys queue you on-island think our fuel few experiencing A for would back are jet and where I'll I and landings follow-up would area, our let back aircraft jet the are jet volcano a ash big of more of to the is a the are increased they can. some fuel, sales online Since and that fuel, aircraft jet out other we

William Pate

I’m and keep the other big which that the to sales Kona the the down. most fuel any impact either side of or traffic island jet of respect on not island air Well, is our of is volcano on the in up to with mind aware

area of let people and to are me as the the also activities on not closer the other of in I our much that volcano. driving There move Hilo. tourism all South that over well. Kilauea than on. operating island, stations think island continue And is say East big side to the most on is as

this in So, associated we with at really point. impact don’t the the business see any volcanic eruption

Andrew Shapiro

And Laramie. then regarding

unit Regarding units just issuance is a publicly acquisition in-basin of by the units or be price books if you Par's where at XX.X the gas we the what million equity unit, end share, per valuation an on unit. the numbers did reduced Pacific Laramie And I or I I is specific, of new aggregate think Laramie’s with fractionally valuation above say, oil units, $XXX that greater it on at the of transaction and ownership books? total can Par of was was which The about days. producer unit $XXX in our is available can’t per an value if in was implied wondering this you of think of value least February, they issuing percentage accurately were XX our current for shares the less and

Will Monteleone

That’s a doing cash to as it exchange premium receiving units. well value, Sure. for imply correct you’re in of I and math properties our juncture. the of that at correct. the And implied this as that Laramie mean Laramie transaction a approximately inside issued sounds was The valuation Andrew. combination carrying newly would slight

Andrew Shapiro

And an the include what adjusted longer your and derivative will income? of in Pacific reason share that something losses no realized is of was or its net and accounting Par there principle else, calculation Laramie's gains

Will Monteleone

make think market primary quarter-over-quarter unrealized think with it period-over-period make our so make want contribution adjusted changes was a existing to income economic in that so recall that activities economic we operations, Laramie. seeing from to I a skewing their overall the large on the benefit was in accurate we’re basis, derivative like the the positions trend positive Laramie more objective of exclude reflection our operations was we to would mark of to some it if our reporting so consistent and respect Our net own to also from comparable with derivative you’d we felt and it I

Andrew Shapiro

last last queue on of or debt are acquisition, tuck in the is a prices few so additional what the others, in any months, as attractive with it's in and call back before acquired getting question the and and there’s back of things is my have to larger the a shift really areas getting in acquisitions whether light where coming do acquired last strengthened, Laramie And much be down, there queue finding in have areas been has respect that it's where the of gone and it kind crude you time, are focus? to hopefully may additional -- focus you you've have but as then other question still before in versus things some retail, obviously has the and six not I tuck the

William Pate

Andrew very we our Wyoming and to think in We respect two some we are including our focus multiple have we to with we’ll that Rocky the continue an new opportunities in obviously activities then remains continue Spokane. added mainland investment. same. the in have the we synergies existing have three, position, toehold And to which think Laramie terms that for opportunities where franchises, of good assets. really we've there In grow and retail a we Hawaii to pursue, is with growth our associated Mountains with in franchise that region are where there our

Operator

the of Our [Rich comes with next question. line Thomas] question with from Please Varde your Partners. proceed

Unidentified Analyst

relates decline I I you quarter if down the crack down is so strip amount from just looking which spread, if out had clarification so apples-to-apples think attributed was at of trying prior of just XX, year a the to could? to little XX, that Just lower the than and it on RIMS, in which refining, some to question the to to that comparison just as a EBITDA kind bridge bit six, you

Joseph Israel

basically have Brent spoke the $X.XX our which broke And to compared And differential, a trends index this prepared quarter, quarter. look see this export, prepared about index. associated we gross it $X.XX a We we barrel it at we -- realized much the was combined in year, low timing to which noise. last in typically environment barrels they the of is we is traded per had it’s our margin. have down that need the the crude a is exported per previous remarks, was We negative flat, market our quarter in export with of the some bigger But follow the our this we remarks and index, quarter. and capture almost X.X down million product, the barrel half value in quarter

The noise and ranges. are So, had to there this shipping and backwardation this historical already about back the to then rate still we backwardation is the face spoke and the that shipping we is rates in quarter.

Operator

Our comes with the next Blair Tudor, Pickering, Holt your with proceed question from question. & Matt of Please line Company.

Matthew Blair

cracks but on seeing weakened the Has at gasoline If basis if fine side I here? has side cracks, and anything where diesel the more is coming The Midcon side. weakened. that on from? City Rapid the is gasoline really look this really you it’s competition gasoline year between changed structurally so, Are and

Joseph Israel

try Chicago quarter. way the landscape want. on it's be and better we the competitive alternative will Rocky another the like it to demand We will drive based we continue between Obviously, a and, supply the the and days, you supply than opportunities. and don’t market it it move just down on where to an under We dynamics Midwest. see continue and don’t much we market change, be market Mountains participate demand some twofold interface and have with the in And sometimes up will cannot this

Matthew Blair

not impact Joseph, think fuel cracks is it’s there in fuel Hawaii, business, much of actually or do huge oil another this you part but IMO your in low weaker starting over XXXX oil the explanation? then inventories Okay. some pricing are into fairly And year today despite Do a to fuel Singapore creep you oil produce there. is

Joseph Israel

two more have And than upside crude you’re means, is inventories heavy because which the downside. right, are more environment ago. than is market. refiners an it’s it’s the the low to this of low, are really not [Sing weak, But complex under and slightly reason The it’s historical were average. under on impact a very think slightly is Brent they less years mid-cycle, very inventory have we XX still year X Brent minus just We for early are type to available XXX] minus IMO

have equipment bad also the is Asia market side cannot they crude with in fuel Then oil the into economy demand floor Russians So, strong finish oil, cetera. to the with production. Singapore et more not too

we’re continue there this point. at follow market going an we So, is the and to to think upside

need IMO And I be remember or really four will early and that oil two start concern -- us, products year the it’s if year, then think clean 'XX. not jet IMO market be weaker, over we to if weaker the the maybe low is for both product, more picture. around then is I market may sulfur to every just can I with barrel other can HSFO affect make gasoline next to barrels ultra-low high-sulfur, and IMO refineries. way of complete diesel, going and five the Matt fuel, of to sulfur, that a be fuel for next these in maybe or continue overall

Operator

Our Instructions] your comes Lawndale Capital from next of question [Operator Please the proceed question. with Andrew Management. line Shapiro with

Andrew Shapiro

or of one them left. just few I two have you a answered but thanks, Hi

systems, You the the CapEx Can thing at update company closed there may you us systems, to do to on things of you integration any end to have click information needs Cenex that do, that quarter. any other major have along? or acquisition this payroll the the is

William Pate

really we and of the the look systems with team first our integration, some the are things a maintenance to things and over capital the day all acquisition will We there acquisition, be just but of the did source, the converted going don't job first right very smoothly. respect Andrew week great anticipate normal with good capital in now. the with additional upkeep associated associated any the

Andrew Shapiro

the at expectations And here in the halfway are through and flows better? second operating or cash are we so your May, results quarter, the

William Pate

things are yes. We're with now, the way happy right

Andrew Shapiro

think I last was performance last it of correction I quarter is things it us was, Wyoming in you eye this occurring in the correct, Wyoming? then and competitive had all for area in that shifts on keep an to this somewhat with a or in that, would about is there some and think still landscape call, talked strong the competition thought you indication increased Excellent, the

Joseph Israel

small we the product than the railcars do see any options a target after capability the in also or in Like premium have we past and elevated more the addressed we present to we other in gasoline as had and on don't have other earlier we we landscape or can take put markets. question us ever competitive project we the distillate of doing trucks, make markets change opportunities and Wyoming. and a for so choose, and when HBS we that oil sourced low We call, enhanced and in lot also we have those now, the flexibility octane

more relying flexibility a So, sales. we less we optimize have rapid we're the will on serie as to continue and market

Andrew Shapiro

as to that. refinery to indicator referring want issues, right? refer it value fact return confirm when that, call, not in by seems of of all total shareholder, Last competitive I equity, or shareholder book to just that value year-end referred Yeah, potential were on like you've cap it’s market whether more to made you capital a much acquisitions you doing the of equity call you other of to to debt

Will Monteleone

and of book sort value of basing the we’re not net cap, to equity and the referring of off market that to debt Correct, also value.

Andrew Shapiro

you of you release here And lastly that the road see shows, the etc. guys before press more can advanced we have give on non-deal provide you it? upcoming on calendar, that conferences, foresight us little can a us

Will Monteleone

looking least this think participating Conference, America Bank that’s High Energy the of coming up summer. at I we’re in Yield Credit at

got thing this formally agenda on I we’ve point. at only think probably that’s the the

Operator

the to I’d questions queue, closing further the comments. like hand management no call to There’re for back in

William Pate

Thank you, operator. Thanks for joining us this morning.

pacific dips due overcoming in and to the strong Our team has retail our of unit. in done the results great a crude job Wyoming

with involved contribution to and be Par to success. excited We’re Spokane look team their forward our new Pacific to in

good We we’ll with in Have opportunities on to a build day. continue additional and this to acquisitions base stay see touch.

Operator

participation. this does your you conclude and Thank for Ladies gentlemen, teleconference. today’s

You wonderful disconnect lines and time day. a your at have may this

Par Pacific (PARR) 9 May 182018 Q1 Earnings call transcript