PARR - Earnings call transcript Q2 2020 | Par Pacific Holdings, Inc.

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Operator

Greetings, and welcome to the Par Pacific Holdings Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ashimi Patel, Manager, Investor Relations for Par Pacific Holdings. you. Thank Ms. begin. may you Patel,

Ashimi Patel

you, Melissa. conference second earnings Par Welcome to call. Pacific's quarter Thank

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

that on future begin, today comments materially any They risks our should the reconciliations subject information. I'll performance revise forward-looking investor our or or over and note Executive statements. and are the to forward-looking to our and and them. may to to actual additional Officer, differ are to Pate. events. from subject reliance Before Bill on with statements. statements, non-GAAP and website we obligation change forward-looking results to uncertainties, not call President Any for turn presentation Accordingly, you our place we not now include and our statements forward-looking guarantees may disclaim I and Chief of these refer are investors filings update undue SEC

William Pate

the hit morning, Ashimi. furthermore, Hawaii's in pandemic air COVID sector pandemic our of call reliance conference and challenges you, to more many all economy been and most has and on The travel Thank brought Like industries, world. the than almost has high every participants. serious the pretty to person given hard, has welcome impacted energy the Good regions, tourism.

to impact diversity offset conditions. While our unprecedented market integration results in helped the second our geographic quarter Hawaii, difficult reflect and has vertical operations on our

to principally significant builds EBITDA refining to throughput has $XX continues net cut loss negative negative These in the and per second unit, most products, our some million, of reported been an near throughput global During results by adjusted of $XX adjusted to Hawaii in margin. share. quarter, demand, had inventory yet gross minimum supply demand resulting refining adjusted response in EBITDA due outpace for of rates, $X.XX losses low which we to In million the weak were refined driven and negative realized history. of and

refineries this For which same refineries U.S. is well-positioned have the like permanently in their reason, ours. and operations, promising many shut for elsewhere

virtual the into has to fuel are Consequently, Refiners currently distillate are dropped possible lows. record traffic, air all demand commercial jet dropping halt years. diesel. level XX highest at With of jet inventories in the

in reduced of Finally, California the that and areas from reopening case greatly the gasoline part in Rising increase place partial the restrictions have levels mobility on early major the summer. demand. have the U.S. the like stifled in demand taken had Texas

crude waterborne extreme On both side, and the supply inland crude experienced volatility. differentials

and reversed unprofitable reflect lows tightened While all of persisted crude historic of as margins oil, the differentials have these initially refineries. refining levels factors dropped widened this crude to physical trend most for market. rapidly surplus together, to Taking a circumstances at other have

decline. While refined challenges compared product diffs begun and have cracks us. to have inventories and remain, quarter, product when believe we the improved the Crude prior worst to behind modestly is

our utilization stronger environment of in is The note, results our million, under from will of activities in control, to during increase business, $XX improve completing XX% how terms Despite by during three finally, we business. or markets, opportunity. diversification with this the We're valuable retail minimal and reported we and these time on by We manage cautious also additional the those EBITDA we're In to turnarounds, refurbish very our our will second network to network. enterprise. very emerge confident business capture franchises concentrated enter aspects seems flow our having logistics A we our have when resumption evident refining travel that nearly liquidity have present. Throughout also the adjusted that economic in cuts downturns increased decline us We demand. quarter. effectively we with cash despite million better structural air contracts have most which improvement a so the forward. period, position making economy And high major like in on pandemic help unit nine we Hawaii, extended the record with to identified no strong an pleased fully will quarter than our in local I'd quick a lost the cost this resume. afforded $XX the in market An of have thrive which going and retail operate our remain we losses, turnarounds. economic focused Therefore, there's significantly several improved to like weak next to with remain financial our we profitability in in our Hawaii the state unlikely. of months, fuel a

over and for call the employees Joseph, to efficiently. and execute to Joseph operations, is their for dedication yours. turning the to Before continuing our I our thank floor to safely review want

Joseph Israel

you, customers’ mitigate meet our and Thank efficiently COVID-XX and everyone. In the demand safely to good headwinds. the market Bill, quarter, and operated second morning, system

Our $X refining under the refineries with our for expenses. Wyoming. market average the reflect XX% In quarter, second million, control structure are was operating quarterly to cost well our or the refineries Starting reliability strong tuned our segment team. cost continues approximately by three XXXX our combined needs, to and and produce what expense

barrels Our day. second averaged refinery quarter throughput approximately per XX,XXX

margin barrel, X-X-X Our $X.XX $XX.XX realized per barrel. for gross our was the was per adjusted Index and quarter second

production. price was when Wyoming Rapid City couldn't products the Our in in support capture and pricing diffs crude impacted by elevated quarter the in negatively oil early

in On capture by the barrel. our per margin approximately other $X.XX FIFO Wyoming hand, increased

in PADD production the with in last market demand Rocky utilization the $X.XX challenged Wyoming in have July quarter well increase Improved of costs the gasoline year. per distillate July, in refining second IV, were XX% barrel. to Our supported up Mountains XXX% below in

So far in has per quarter, averaged Index the the $XX barrel. X-X-X under just

team start to cycle is is mid-September prepared scheduled scope. in is well per a Our to execute our Wyoming plan. turnaround, XX a five-year and This days turnaround major

throughput second averaged range. our per quarter the the impact barrels including XX,XXX target throughput barrels quarter, for Our the Washington, XX,XXX per in day. In refinery to is third turnaround XX,XXX day approximately

strong XX% Our second average the quarter refineries. implies V a relatively for PADD capacity XX% utilized compared throughput to

yield us has to Our to maintain niche integrated market minimum Tacoma marketing allowed operations close demand and presence with normal into COVID-XX impact.

for be diesel Our third quarter. were second in per $XX.XX averaged barrel market. in the costs And Coast Pacific demand Pacific was on just Index X-X-X-X $XX.XX so far the per the Northwest under gross basis. and jet gasoline West adjusted X-X-X-X has continues ANS barrel. barrel. with per our slowly fuel improving quarter per Northwest margin $X.XX And Production was to weak barrel $X.XX Demand ANS

approximately to per XX,XXX have per on Asphalt target extremely second our demand weak stable day. quarter crack refinery and negative third Singapore Singapore been barrel through continues Index be quarter the our product Hawaii, throughput for Brent our day. approximately base. these X-X-X spreads throughput barrels pandemic and was XX,XXX per refinery In $X.XX barrels is was

quarter $X.XX differentials barrel. gross were Brent were barrel crude oil was per second negative for costs Production $X.XX adjusted premium and per per Our barrel. a $X.XX Hawaii margin our in realized

and site. prepared planned the for days the equipment with turnaround our on is Hawaii contractors major this and cycle over started has weekend well XX catalyst Our team at turnaround full-year

slightly So demand pre-COVID-XX XX% for respectively approximately following demand has level. quarter, the of improved in to and jet XX% third and gasoline Hawaii

and driven per favorable approximately are has Our to approximately X-X-X barrel, and and $X.XX quarter crude Singapore to Index rates. third more $X improved oil structure global barrel shipping improve market expected dynamics differentials to our per by the

the coal differential our employees, impact In is reminder, these commitments in days through and on remain the estimates on from Hawaii a COVID-XX. and As estimates latest throughput per summary, all we are approximately barrels focused quarter for the costing. the implied navigate all Target sales as plant, customer we XX,XXX including safety our community goods based day. turnaround

a on In Hawaii turnaround addition, we of Wyoming. execution our efficient and in are safe and all focused

We have And strong to results. and financial and future to system. with operations meet demand about over remain call will our our turn as excited review our competitive I efficiency now successfully a maximum optimistic Will matched and the to

Will Monteleone

Joseph. you, Thank

adjusted EBITDA million loss $X.XX $XX or diluted adjusted share. of and were quarter Second per fully earnings and $XX million

items accounting accounting FIFO Focusing results first, an million $X refining on approximate benefits. Wyoming include

GAAP reversal market approximately charge non-cash compared results. to XX% XX% by was $X approximately up XX% Shifting million $XX of quarter of $XXX of Same-store quarter in of second record rebounded to by demand from steady EBITDA down margins troughs million. April XXXX. the prior a prior-year solely approximately driven has of cost while In X% segment impacting were range. Gasoline fuel lower from exceeding increased fuel sales volumes the the merchandise roughly to approximately the addition, was our and income contribution margins Retail net segment's adjusted merchandise million. were sales

make stronger elevated segment of social have segment locations measures $XX sales XXXX $X contribution customers with times million stores adjusted at QX impact Wyoming EBITDA paired throughput performed loss with results differentials crude from record differentials segment in a decline. locations QX of merchandise million, logistics Our was been to with The most larger this format causing much The Washington sales. the Hawaii line turn the in crack cumbersome and crude average reduced recorded throughput down of and more as peaks. when Hawaii EBITDA retail Hawaii our refining quarterly reflect from $XX adjusted to low spreads. access. distancing million. declined

crude a after procured sales procured the the increased slowing and However pandemic. cost before FIFO pandemic versus profile the crudes higher weighting of cheaper accounting

make adjusted Wyoming As partially to $X $XX Washington we flexibility turnaround, Net for our approximately and generated million loss due quarter, contributions of of the XX to results the allow reduced million our breakeven net us million. mitigate our Laramie's up interest, close lose quarter. earnings for $X manufacturing the to days we both second Laramie expect to and gross look capacity of loss the were margin. adjusted to forward by a activity quarter. and to while third EBITDAX storage manufacturing

deferred liquidity and to up accrued by cost partially quarter down pay approximately equal reflects in of by of We and good which on goods reduced approximately secured We Capital million. capital progress source net offset cash and turnaround expenses outlays outlays. the completion totaled working structure of totaled was turnaround facility funds senior facility. it and logistics achieving operating ending operations additional liquidity $XX objectives. Moving to annual run to With capital increase million. made remarks. This to of The million We expect range of of by availability. consumed million in provided front, a capital $XX excluding principally $XXX expenditures million $XX $XX in approximately $XX reduction $X the of Operator, our reductions impacts our an I million million and previously from to cash $XXX after intermediation conducted the Working used capital cash offering and $XX million on million during of for payment basis. will our the from the liquidity to Q&A. the about in cost was about notes prepared we be non-cash lower-end balance of made reduce $XXX and rate million the you turn generated May, revaluation $XX our turnaround outlays sold identified, expenditures cash interest on million. back concludes our included

Operator

Instructions] proceed you. time, comes Sachs. a question-and-answer [Operator Neil Please be Goldman question. from At Mehta Our of with your the Thank line conducting first this question we'll with session.

Neil Mehta

you me hear guys Can okay? Great.

William Pate

Neil. Yes. Good morning,

Neil Mehta

margin with you right in you we the the start Hawaii pace recovery? And the make Hawaii, talking if you think results first surprisingly, crude that, very off right economic you to second talk scale related how has is environment maybe by for recovery, – the Good not when and business and you think demand of or the And think Bill, comments around question also could you to side. but business right-size also long-term? Well, this the and some morning. whether you consistent the about about the need then the capacity challenging quarter, differentials. could side, about obviously, about the have

William Pate

Sure.

in wouldn't helps, resumption with business well, start some of have impact Par probably more by the it volume. our on as think West. crack, contracts dealing in as refining Volume that me help so actually that, to I Let the travel relate a air shutdown to would our with significant mentioned, issues which principally logistics Hawaii than obviously network, obviously relate I saying we're

fuel flexibility from We our actually is the the when crude but the of with the current run unit with run units. demand in quite for to shutdown jet have existing unit, that environment – we that can efficiently high,

and do pandemic, took that to cracks really to for continue the cracks And are determined so then the largely perspective global happen. to when and come by given becomes you can't back. question inventories, going We believe the wait that the be

So our our without with And us. as ensure to with we the have profitability even a rolled we've that is sales the community. resumption I over, get with And the been working associated cracks. been contracts customers in we working aggressively in economics worst customers additional think have behind improve to our

I The beginning very they have of of were to going going think other at other actually IMO we're – is – the XXXX. the advantage, year the into the calendar because diffs high year, see

noted, were FIFO consuming crude, basis, behind essentially cost Will sales that's a As when some we on down, us. the slowed largely higher

improved from QX. our materially of QX diffs over that noticed, QX course Joseph have As and from QX, over

unit already West which in then quickly, units, our the in the I've And the point is the restart terms capacity, but capacity so us going that it, to the the there, think crude but is I to crude to me help of the that mean ability restart ramps address out of let for And well. environment. relate going that's determination think going I answered if up the to with would I two be just unit to economic, cracks I is as real

Neil Mehta

That's for just follow-up very those clear, on the comments. Bill. side. retail Thank The you is

these whatever just but your quarter in below represent You a business great retail. had how people can value trading stock of of anything value at you levels, think of some stock you for which the you the of the continue when and there the is lot often and a do unlocking share, illuminate the it's refining worth. We think there Because to Is large that think value is driver a to $X about in highlights worth do might the departures retail retail? the there’s and a highlight as retail there? value of first second business level

William Pate

Yes.

significant to operator it's the be our retail the We cash with that in to second very continue we in niche profitability Hawaii, our to retail of not business free million, we but systems franchise we the is profitability certainly, grow our business, to was but our business also of line good downstream want Pacific markets, that's strong EBITDA integrated. a believe as And Northwest. important have as strong And quarter; we a $XX we very in of in just had grow believe in trailing with north and it, enterprise. a contributor franchise flow overall very

we will the flow. in global And So as of for us, hand, we know of the flow think going these the value ultimately the cash is why with recognized. a a through that of realized getting and economy. be that I turnarounds be free is to the be I resumption enterprise really think don't producer shouldn't cash significant free key And

Neil Mehta

Thanks, guys. I appreciate it.

Operator

Thank you.

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

Matthew Blair

okay? me you hear Bill guys morning, Can good Hey, Will. and

William Pate

Clearly. Yes.

Will Monteleone

Good morning.

Matthew Blair

Great, great.

some Coast your on for could fundamentals the the impact West I perspective demand seen Rockies. you refinery long-term that as in just we've So well the as provide supply markets. and your might closures was hoping how short-term the both in

William Pate

spring I and Yes. it, running the through closure refinery closed Cheyenne I ago, then though months, mean several last you had that if this the in was we've refineries think had the last XX last actual in place because think Dickinson their days. years two have took even think crude the about announced obviously, I six

our So impact operations. that an will Wyoming have on

more impact refineries terms, have has We you've decline to I because same shutdown converted the R&D significant for seen that fuels. been producing of be longer significant And those that's that not seen announcement no West Coast, refineries. Marathon's while, shutdown a the frankly probably much in the demand of yet. the near impact, than Martinez the has overall on thing think to down and carbon-based a and the nationally will facility a in But those an haven't be – to going going

already Joseph? opportunities reflects the I demand it think just export going America, refineries to and just see this to is you're pick going was into to the more draw, namely, on West and X.X and will that said as South long-term on market. in up you're that But long, of a market. think that. particular X is have think you'd baked when know the the you in West the Coast think tightness People more Coast to see I up, as I I West have anything that, Coast always I don't the add if picks

Joseph Israel

patient right, demand impact be short-term, the No, for will I Will long-term for to back. the waiting is industry, we think come

Matthew Blair

And then Hawaii. at differential Sounds good. recap the crude on to just

So have quarter guess, any, $X.XX guidance benefit? like? the I indication might at early on quarter, third look And was fourth your do the what you

Joseph Israel

we guidance so third market this we many our fourth at is our can give quarter $X.XX is quarter, Yes, crude. as a don't for and things volatile estimate, purchase change point, and the

So it premature. we find

Matthew Blair

it. Got

you very thank much. Okay,

William Pate

Thank you, Matthew.

Operator

you. Thank

of question Brad Please your Capital Heffern Our the proceed next from with line with RBC comes question. Markets.

Brad Heffern

Hey, good morning, for taking Thanks the everyone. question.

William Pate

morning, Brad. Good

Brad Heffern

and goal the curious what if above year, is comments prior was you I'm the you per you're barrel, just on a that environment. some talked improvement that is of the curious, contract different I the in target getting Hawaii sort $X past, that on you obviously, very But the think contract. made But about front of about in set over had? So, this I having

William Pate

of for July those in contracts There business. full and that we'll more contracts will is at contracts over really rolling the amended our substantially on more our that with but it It And are prior effective this component helping June started forecast than late-August. were terms target, have the a $X that – think It's I of think point. I have become XX. QX, – impact are

Brad Heffern

Okay, got then did wouldn't a maybe looks prolonged the be guys obvious And debt now. significantly liquidity downturn, us? liquidity just offering other you if curious are we could good the you that some the front, just pull to it. in and right of are obviously, on levers I'm that what

Will Monteleone

Will. is this Brad, Hey,

most evident Hawaii. estate one handful or locations real assets I the we probably of attractive think the that underlying a in our most is hold

level, that's a have So that company do We but – we hold estate on that I portfolio. believe company the the up that, that's at level think parent assets we real monetize. parent could that debt at some an attractive unencumbered

Brad Heffern

it. got Thank Okay, you.

Operator

Thank you.

from Credit Suisse. Manav comes the Please of your Gupta question with proceed line with next question. Our

Manav Gupta

guys. Hey,

the trying a just and XQ. and On retail retail of has in continued trend change you there both had XQ I'm front, July has good August, Or merchandise the understand to between fuel on of segment? the any need that side? terms versus side

William Pate

a here. when point strong don't – store continues expect in this we're were I'd very been business profitable demand that both up then margins it's demand, say Yes, closer on be segment crude point, prior end is the is the a this year. the and and strong our but about at for lag reduction the there, and XX% is cases very we're in terms the of Hawaii, to April prices changed bottomed some, prior week-by-week in of prior from at those have fuel And And to demand, above demand almost XX% gradually declined so sale. Manav, with of April. in it it really in firmed basis I At strong say, up linear still very of seeing above us. picked retail from bottoming traffic, budget kind Spokane year, Merchandise the in of needless to dramatically and seeing year demand some

Manav Gupta

earnings, activity we follow-up and A more XQ to on last all XQ the Thank throughput, comparable be earnings closer should the side, quick logistics something turnaround year? assume given it lower or should to you. the

Will Monteleone

be Manav, there closely day, Wyoming quarter at in think I Hawaii, activity. the with the again to part modest you as being Joseph's Yes, a then is throughput, turnaround in tied it's XX,XXX by guidance, heard impacted impact but of throughput, going a small to and in we're

the our what you've So second good looks quarter like I lower segment for with a pretty results. throughputs with proxy Logistics think got

Manav Gupta

questions. you my Thank taking for

William Pate

Thank you.

Will Monteleone

you. Thank

Operator

Instructions] Jason line comes Cowen question. with & your you. Our Thank with [Operator the from next Please question of Gabelman Company. proceed

Jason Gabelman

have kind's to some if from forward? now, going amount wanted It working you and was just Thanks. about good the to a could volatility cash reverse morning. sustainable like the can impact or disclose Hey, of is seemed helped amount that capital going if I that a be where what follow-up. I there flow, that ask quarter. that And

William Pate

Sure.

the referenced cash got you, of in just outflows I flow cash my So operating of cash million $XX section we've in of to that sections the prepared statement. roughly remarks flow flow from statement, remind below financing the

And netting And impacts, that's change other working look the and So working $XX there's down related the changes think, the working that's benefit million, if outflow all million capital. one piece, aggregate $XX it's and at I to in again the all of capital component predict the a swings. roughly terms in there. difficult you LCM capital, charges the about to that's forward the impact, in

I draws. refined in builds think price with and product changes and

Jason Gabelman

Yes, I the not? in question was, absent is of to volatility of expected prices course, in the the normal capital reverse crude or some in working spirit XQ benefit guess

William Pate

it don't we imminently. expect think I reverse to

Jason Gabelman

elevated on then is XXXX And my CapEx year an great. clearly this maintenance. just of Okay, follow-up

any the spent environment did spend mean of to this turnaround high is spending? you like does to now. what XXXX firstly, CapEx? there to maintenance what around go the call on given run thoughts was I maintenance toward right Thanks. XXXX exactly, guess So of defer pushing that rate our out said you that take weak more this because year, the Does sustaining or And that then back margin some for

William Pate

Yes, this is Bill.

issues capital, anything, probably out environment, your but financial the I refineries in reduce the of certainly right differ And down. opportunity should CapEx given if to that it, think point, some we in forward. scope to could turnarounds, the the while about our given that's and invest question the this could cases coming to turnarounds, decision think go going these at the three all XXXX, make around yes, that, say me Let and we reduce

have the year We in facility – facilitates requirements major the renewable in a no amount We've movement winter, have With fair fuels out turnarounds the a that next out considerable we or with of post should these late this flow. I when once Tacoma. that Tacoma cash next capital we across would we way, way, have turnarounds. free the of a turnaround invested the of complete period Tacoma our think, time early dock in through high

Jason Gabelman

Thanks. Great.

Operator

Thank you.

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

Andrew Shapiro

guys. Hi,

William Pate

Hey, Andrew.

Andrew Shapiro

me, was for Hawaii mentioned the is little the of same near Pardon well? where it or you dropped what call. if that's remains the XX%. in probably the fuel is is prepared jet XX%, at as in And XX%, to a demand, military similarly, late your comments, Commercial you levels it demand area, kind

William Pate

a now pre-pandemic No and at same is XX% running contractual market, probably about market pre-pandemic when up at right and is of demand XX% bottomed and it the decline military is of in demand. it the in the Hawaii – an military XX% about from XX% demand Hawaii about demand bottom or our Overall was of demand. that's

Andrew Shapiro

been as Okay. timing to government stages of things? the all state reopening And from has there – and the authorities the at guidance

William Pate

the West in in we revolve not question air the that to key have in really don't there. Par the need has I resumption our but more case has, the this customers around is all of earlier, market. contracts and really a unit missed improvements mean, but to and case shutdown our may with of traffic growing Andrew, cracks with volumes, relates been in to generate it's profitability much for full you the It's part going on Hawaii recently of the us There rate dependent and conversation Hawaii rate,

Andrew Shapiro

Okay. Great, thank you.

William Pate

Thank you.

Will Monteleone

you. Thank

Operator

Thank you. Thank you.

comes Please next your the with question Patrick Point proceed Capital Beach of question. line from Our with Sheffield Management.

Patrick Sheffield

Hey answered. guys, have questions My thanks. been

William Pate

Patrick. Thanks,

Operator

Pate and Ladies this back final Mr. floor any our comments. you. turn the I'll question-and-answer for session. concludes gentlemen, to Thank

William Pate

you, Thank Melissa.

in business with and free market over the we once improvement the behalf believe our flow we While employees the for the diversified good upcoming a and day. communities, work. to Have been our see an also I we're their complete thank On and will our future model months, has hard significant for our past turnarounds difficult and customers want of generate and three these well-positioned I management a cash dedication economy. just few global

Operator

you. Thank today's concludes This conference.

at You participation. this may lines disconnect time. you Thank for your

Par Pacific (PARR) 10 Aug 202020 Q2 Earnings call transcript