PARR - Earnings call transcript Q3 2021 | Par Pacific Holdings, Inc.

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Operator

Good day and welcome to the Par Pacific Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ashimi Patel, Senior Manager, Investor Relations. Please go ahead.

Ashimi Patel

Thank you, Drew. third conference Pacific’s Par to quarter call. earnings Welcome

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

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

William Pate

Thank Good conference our you, call morning Ashimi. participants. to

quarters levels. benefit the unit experienced logistics summer to charge business the little strong include impact excellent compliance. a its of mark-to-market improve, recorded during crude profits and product product was international net variant as crude Unlike ever, the notable improvements reforms increasing decline $XX prices pleased per Chinese is very prior These accelerating. The so execution to our refining profitable, million lag increases results regional air price one supply, about refined are in were units million with inventory and winter in year’s drove for and profitable RFS with our All in significant to prior Adjusted most sales quarter the we logistics adjusted due $X.XX steady, market financial retail refining our profits. fourth Asian EBITDA operational have particularly and are non-cash demand business record significant despite and Wyoming and refining segments our were concerns generate cracks income volumes. quarter. oil logistics were continued was quarter, results. outbreak. third $XX of We product bolstered travel. share. very quarters, the In delta Singapore sales tourism continued commercial profitability Global demand Hawaii tax diminished and

very as crude As have well with tracks at tighter market improvement outlook cracks oil as These close forward prices quarter a product administrative and affirm believe oil to the cracks. a market refinery also our offset RVO are current result, backwardation. to, above and the small factors the volatile the Singapore crude renewable and XXXX mid-cycle. high Higher comments EPA contributed times, act significant obligation and differentials levels. increased product the were the rumors quickly reacted fuel RINs standard. on highly applications outstanding to to exemption to conflicting address to We during needs as in

the Reducing quarter. most secured growing were capital the a to liquidity, highest senior priority, notes are of presently reduction We debt remains effort. amount to our options. and our cost important our of able and profitability allocation capital of With this return reviewing is small our element this we repurchase

local few comments managing also a the growth make structure, I’d our evaluating opportunities this transition. our to addition capital In regard, to we’re in In like about markets. energy

address opportunities costs leverage mitigation strengths, leveraging each strategies feedstocks. markets, continue local and Hawaii the regional to of Washington we’re cost exploring various in the high in are is that a Nonetheless, demands resources exploring the end, of market and longer-term electricity in consider we lack state’s focus a needs different incentive, carbon and fairly particular. needs. market actively renewable we’ll we To and and this transition concepts and our energy market given for high on solution. difficult the As initiatives, any our position, complexity Hawaii local

has Washington with trade benefits electricity of Furthermore, carbon also hand, incentives due operation from delivery The inexpensive other to an region system. the and/or renewable hydroelectric a low provided cap the fuels fuel significant feedstocks. On power. emission passage and attractive standard a and point for carbon is low-carbon abundant our

amount these But Given in and support. hydrogen public to of position focus features, We’ll continue this and a a agencies to working effort of requirements. on and as smaller leader with will we infrastructure. capital limited with development are developers local the try take Tacoma considerable projects more time

and as capital, also be pleased high-return Our employees small our report. our This refineries respect operational our energy community that on to we standards. enhancing turn environment, built for ESG expense. the the time, while our Joseph to efforts as our important yields significant we it’s as and reducing communities, and demonstrate energy operating illustrates am our projects call that focus At and this sustainability announce to profile I With report inaugural within transition published will our corporate culture discuss strong adherence performance. the we I our integrity on to needs, well on focus most others. will over reducing carbon our commitment

Joseph Israel

board. our safely the was reliably demand approximately third mark-to-market of improved index X-X-X Thank conditions quarter, In $XX.XX period in crack gross third you, driven system across quarter our margin the gasoline was barrels the perform barrel, as continued quarter, our per prior barrel. spreads and Bill. Starting day Wyoming, by in per XX,XXX in our market. the and benefit $XX.XX excluding in strong realized to throughput per market adjusted and Refinery

Our our strong production team. execution reflecting per were by barrel, $X.XX costs

over X-X-X slightly averaged XX,XXX per Northwest per our throughput barrel with Planned Wyoming third $XX to relatively So our refinery basis. seasonal strong the XX,XXX demand. quarter, has per And was barrels a fourth in XX,XXX barrel index day on index averaged our Washington, far the quarter In X-X-X-X in is day. Pacific per $XX.XX range. ANS over barrels throughput

benefit margin per gross realized Our $X.XX including excluding an period mark-to-market per barrel, change. $X.XX negative diesel hydrotreater estimated the impact prior from adjusted in barrel quarter, was the catalyst

logistics recently trucks The activity which to in opportunities supports This additional completed is energy cost per production supports increase the to our renewable quarter Our diversification, team exploring rack. ethanol us We upgrades, our the in our refinery the further only not process. the also in but logistics service. business barrel. allow $X.XX transition lower utilization was through positioning logistics and

barrel index X-X-X in averaged our the averaged realized approximately premium quarter, per our day. So throughput Brent and basis, quarter far XX,XXX and under third $XX barrel, $X.XX Singapore per Brent. Hawaii, is good was the per in per fourth X-X-X-X index has the plant for quarter differential our barrels our just barrel In on $X.XX to

our per Our XX,XXX quarter of last yields, year. averaged recovery throughput barrels in compared approximately approximately with XX% yield third best distillate of to only the quarter reflected the in the demand XX% third day in

period gross quarter, excluding prior per benefit in Our margin $X.XX realized the barrel. adjusted mark-to-market was

maintenance production units. the were and per Our barrel, including cogen of costs execution $X.XX barrel in approximately per reformer planned $X.XX

the this Asia. by far significantly to has per in fourth and the barrel, recovery mostly index demand gas Singapore quarter, X-X-X price in driven natural our delayed So improved higher $XX approximately

to and is estimated to reliable per day Our our on safe, XX,XXX range. XX,XXX quarter premium summary, $X.XX in barrels differential fourth the continue and approximately for efficient throughput per to In Brent, operations. we full target is the focus barrel

well-positioned capture there conditions, in opportunities. leave will turn to by mostly the and to Hawaii, review system improved over encouraged the market the are the I to and our consolidated We call results. Will is it

Will Monteleone

Thank you, Joseph.

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

XXXX on and Focusing include refining $XX accounting mark-to-market items RFS to XXXX compliance shares. non-cash first, million related results the a gain

pre-COVID mark-to-market to results, EBITDA while million and approximately volumes was $X.XX retail up the compared segment to during $XX of adjusted $XX flat to adjusted our adjusted million third second quarter XXXX. Steady adjusted contribution roughly of RINs the million million. assets $XX Logistics was X.X% the reflecting per quarter EBITDA share $XX second of the XX% levels, compared $XX of volumes Same-store compared million, segment Excluding volumes Oahu. third and quarter adjusted arrivals, approximately respectively. the tourist second lower contribution up approximately The levels our segment was particularly segment sales of were on per XXXX. well share, of quarter adjusted of international to merchandise quarter XXXX. utilized to compared recorded quarter. loss our kept fuel XX%, EBITDA million Shifting EBITDA sales benefit, EBITDA logistics the earnings roughly Hawaii during were fuel were $XX refining

a EBITDA adjusted profitable $XX mark-to-market was to million. compared $X quarter million returned RIN to All impacts, loss second units levels. of refining the Excluding segment

Focusing improvement in upon adjusted mark-to-market, the gross RIN slightly Hawaii market conditions. excluding margin, first, exceeded

increased the approximately per approximately The $X third per gross adjusted quarter, second Hawaii mark-to-market increased to margin, while barrel. excluding quarter compared RIN X-X-X barrel $X.XX

price capture last key been changes impacted oil. One adjusted quarters several has the of gross the the issues margin flat over of has that rapid rates in

Third quarter to flat minimal, was especially the last X change months. price compared

Looking with in October forward, X-X-X market quarter. compared $XX averaging per continue $X.XX to barrel the to the conditions for the third improve

up Brent average. compared nearly September barrel per $X was October the ICMA month However, to calendar

backwardation margin, asphalt, slightly to cost of mark-to-market, backwardation. steepen, declines In our to on rising excluding protecting offset in continues addition, increasing RIN due adjusted balance the improved from Washington levels second improved quarter gross the price. by flat partially sheet from netbacks

rising price price compress tend in during margins widen to falling Asphalt environments and environments.

the over EBITDAX between aggregate, accelerated income cash price million. modest of XX% production Pacific’s pricing and Wyoming impacted impact million. Par on XX quarter. Laramie of ability to expenditures across million million. across of loss totaling adjusted their $XX receiving was local of XXX Laramie’s less As debt. $XXX results environment. production pricing net reflect $XX back for from XX. XXXX. Shifting the completed Stronger third generated change summer $XXX net million quarter $XX during season the Par been third unrealized statement, cash was Year-to-date day in a previously and quarter Laramie the mentioned, net next Laramie’s have refining than third Pacific $XX the market driving from Year-to-date, and adjusted XX Laramie $XX of between was a flow market generated $X is to flow million improved capture has of prompt minimal quarter debt flat $X July negatively as with September million year-to-date volatile a Laramie by quarter loss the September cubic equivalent. in of operations was strong to months, net that Laramie refinancing XX% losses There exit spot months. while million a the the of attractive million feet derivative EBITDAX million. capital to reduce FIFO was

an outlays Capital expenditures cash capital million. $XX quarter. the funds was expense the $XX equaled turnaround mark-to-market, Excluding Accrued RIN and source $X during million. approximate of working million were interest

million $XXX RIN totaled upon shares compliance RFS XXXX $X.XX and XXXX per based the for liability net Our unit.

expect XXXX in million We to outflows $XX working be to of capital the approximately price fourth commitments related there fixed the RIN quarter.

be we quarter cash interest forward, be $XX GAAP interest $XX Looking million annual our and to $XX million to in million expense per the expense expect to range.

to commentary, outlays addition, $XX million In with CapEx annual consistent be XXXX turnaround prior between we $XX our and expect million. and

end of million Our totaled availability. quarter million $XX million, made in up cash $XXX $XXX liquidity in and

alternatives Our remains and provides consider our to reduce funding liquidity on-hand strong costs. flexibility to

referenced, our remarks. Q&A. you remains top reduction. prepared This priority Bill turn concludes it capital I’ll back Operator, As debt to our allocation for

Operator

question go Sachs. first Davenport Please, with Instructions] comes The Goldman from [Operator Carly ahead.

Carly Davenport

on good allocation. quarter. strong just Congrats capital My around first high-level Hi, question was morning. the

XXXX constructive looks into With setup perspective macro our improved, the as we go having the here. from

has So uses relative focus. continue incremental about of the when to has if some about year, you as that is a of also that think next parts, where generate you what returns into you leverage here? curious capital I to been the been key know cash? path But to if stock think do how there trading the a cash

William Pate

Carly, it’s Bill.

capital our help exploring and or some for to, equity this either focused remarks, on significant will reducing have distributing I As debt to be position repurchasing will declaring repurchasing continue any focus debt. at mentioned We these And prepared going we’re that small then us point, But my limitations limitation, equity equity, on growth or reduction. think we I projects in in don’t of Will dividend. say, obviously, alluded our be to the think the a future. on I’d

Carly Davenport

and or XQ that moving the the frame forward of gas just higher some talked moving at then higher was the of during pieces into natural and some perhaps being thank you. looking just sold prices bit Hawaii cost have goods Joseph Great, in ‘XX can you OpEx, talk But just And quarter. could the the on follow-up a pieces about and of near-term? around the impact OpEx about

Joseph Israel

a I Yes. $X.XX reported barrel per OpEx.

is explained So to higher our prepared barrel we production In regeneration about per barrel the half guidance. is cost the average in $X.XX $X.XX of and remarks, it, our the Hawaii maintenance. per than cogen of related

really The cost. other with is utility associated $X.XX per barrel gap

was it fuels our related buy by When of of steam burn less power don’t Some we price to the the is the it cogen some we from we way operate grid. to have and maintenance. we cogen,

The other for in especially OpEx in farm. in quarter maintenance, aspect Hawaii, third tank our timing is the in

believe forward a do million going guidance. the $X.XX we So is good

was about question and answer entire second system. the Your gas I for natural sensitivity, will

because Our low per Washington burn start production natural refiner, in has zero don’t million Wyoming in sensitivity typical cost gas per change Wyoming. sensitivity sensitivity and gas. compared $X.XX for barrel dollar has pretty have in is natural per Hawaii, only very to the much we BTU Every with barrel $X.XX

Hawaii. in gas natural buy can’t So,

$X.XX for sensitivity typical per barrel a refinery there. the weighted sensitivity out average is entire to compared system for $X.XX So, only per our barrel

Carly Davenport

very Thanks taking helpful. That’s Great. questions. the for

Operator

with ahead. comes question Please from next The Phil JPMorgan. Gresh go

Phil Gresh

Yes. Hey, good morning.

the in you a have a spreads that strong just there on with are moving of uplift pieces, is? headwind, like a Hawaii, do I discussed the mean, question, are any bit bit recognizing where capturing fully but crack how a the of headwinds that follow-up feel given you that’s differential quarter, it to be this First $X.XX crack other so will spread, and this crude

Will Monteleone

it’s Phil, Will.

lot the the in was And $X. was have nearly of that we that I see kind out a we relatively a best was as called I that quarter, price factors there prices Obviously, think were of strong. capture where I have rates, again, seen think flat in impacting again, change. minimal third environment we went up October,

price rapid there impact respect it’s us, lag in again, think price. to some crude changes so but transitory And for is I with

And would And factor. declines balance it out. against price. the I I And I flat in of one we think inventory Hawaii. hedge again, think that’s again, Again, protects other our our backwardations call so, then item majority in sheet

is again, so inventory backwardation the And that as going cost have we up. steepen, seen of protecting

roughly impacts the So, costs where heading are to X-X-X the those And price. a you nearly the now. the again, factors, market barrel. quarter $X think I the positively rising up are $X.XX. our fourth we in called but But up think is right see There I some as from out, crude are is inclined are

Phil Gresh

with projects, initial about That do around makes Got it. thinking any these way of of sense. small Will, a you return capital CapEx the the have high ‘XX some thinking magnitude?

Will Monteleone

in I would the quarter’s think But think we will provide the commented. full next year we the items I call is guidance call, historically only I out Phil. have

Our million, Again, to of million that’s the Washington during quarter called a formal historically, out million But have ‘XX. then $XX is the of $XX $XX expectations with maintenance first that range, come been in we $XX planned as that we kind and outlay. we out that. about million will around CapEx activity turnaround

Phil Gresh

of a at one M&A There interest terms capital in announced question Alaska including peer allocation in any well. last the as some just assets opportunities. on are around market, by just My Okay. in is looking

just niche if I have M&A curious So, interest in markets? like you broadly was particular

William Pate

have are I of sharing have Phil, Yes, they certainly the area And we is been its consistent, PADD PADD our been need think about. X interest what I mean assets reaches there strategic kind and of upper of that X. in

that and with think and really very in I as opportunities. we our area. disciplined of kind a and evaluate opportunities flexibility, would evaluating market requires certainly, always obviously have we pandemic, I this also that out liquidity think the the but more we environment are little discriminating we have We But coming – of be

Phil Gresh

Thanks. Great.

Operator

go Pickering, Holt. Please from The ahead. comes Matthew next of Blair Tudor, question

Matthew Blair

everyone. good Hi, morning

your just So, What’s XX% that on a plan terms in big update your forward? monetizing there really you Could on through investment? the is increase profitability overall what’s doesn’t into flow Laramie EPS. here, had the potentially provide an reduction? in And debt update time any of going drilling

Will Monteleone

Will. it’s Matthew,

in Obviously, juncture. you piece down of preferred million. Ultimately, debt about a as flowing our not through results is reported which is $XX There think I is at million step-up So, a million. Laramie senior nice our $XX $XXX equity referenced common to position, this to the net it’s contribution. that is to

refinancing getting structure their objective. remains I so to sustainable And think capital a ultimately, Laramie and more

to running minimal And not now. objectives come the right rig metrics in. to the fundamentals season need current you see so, ultimately, to improving. is think There down are And the continue debt. They pay see principal Their I is I are of credit are ultimately, flow improving, cash the think winter CapEx. are out their focus. de-levering and And kind play the

Matthew Blair

you back going had view? goals more pay $XXX your you circling capital million balance so Can you Sounds to year. much then to down good. How or And to Par, targets down to far need do sheet you paid any this a for get allocation mentioned forward? share normalized in

Will Monteleone

Matthew. Sure,

I preferred much business think think logistics the of the levered funded day, at point appropriately the type being a flows capital and structure our end about is a very in really financed retail we business equity where by that for offer. with stability our refining and cash those to of

in the think can of again, remains probably even logistics level like again, will and would those have we to are a they we can That monitor give capital. if but a levered. retail continuing our we debt performers attract are the consolidated businesses lower through it conservatively And we I cost the focuses. get key be probably been to the ultimately, us stable of cushion where think I X.Xx And that one where to businesses, we pandemic. range, are So

Matthew Blair

Thank Great. you.

Operator

Jason go from with comes question ahead. Cowen. [Operator Instructions] Gabelman next The Please

Jason Gabelman

liability ask have my taking wanted I for outstanding. to Thanks you about still morning. RIN first question. the Good

related leave your XXXX that second think is does obligations? in I My fixed then these XQ expect on in guess where RINs I something Where there And is you opportunities another material question assets? ‘XX. mentioned, you earnings on on the RIN and Thanks. commitments those a when generate can I you more your net of Washington, where of little $XX also, specific bit elaborate XXXX Can maybe for those low-carbon and XXXX liability You to that is crude million on if on hydrogen your – opportunities? opportunities. are mentioned you Hawaii. and – know don’t from energy But business in to you RIN

William Pate

Jason, it’s Bill.

take to the Will. will opportunities, got the here. has over He energy harder turn RIN’s me and low-carbon question I Let the answer

low-carbon the mentioned to the as very On the have supplies early opportunities, that the municipal the I energy stages hydrogen got as of the distribution that working in and looking marine things authorities, local controlled generally space. infrastructure, fact we have transportation we low-cost hydroelectric But power hydrogen, really into converting for they at infrastructure, leveraging are systems. with such

utilities place hydrogen, that very of have But it’s still the We we that that. community a a of I to is development Tacoma for support the do within of well we can stage, early help lot support the needs of think suited application. dialogue an got pursue something particularly balance But as given Federal take to there. for And the this type mentioned.

potentially where converting position hydrogen carbon us Hawaii, like obviously in hydrogen, more infrastructure. include the on and and Turning a puts refinery any reforming innovative steam some high and cuts it. that there to unit we are naphtha to think a that have And we a we our capture fact use focused are the ways is sequester we really where and electricity into something

Jason Gabelman

Great.

Will Monteleone

really the and on $XX say purchased in outflow liabilities would XXXX on RINs, XXXX, And I fully the once again our at think quarter, million, $XXX be, obligation. to million fourth we XXXX let’s expect Jason, completed is the

effectively we have, where March X I again, leaves where into impact for for EPA the RIN is exemptions, of head sheet. ultimately, – well as the years as which have. aggregate let’s of our from the sort we that as balance of say will position that next and percentages so year, to refinery XXXX be will X of and waiting action And accrued will liability us think years we assets on both then RVO rent with And years small XXXX we respect

think kind the out outflows planned downside incremental I will settlement up for of QX respect to cash case you And RFS the kind timeframe. ultimately, defer consecutive there push of the is XXXX to allows two again, that flows years. XXXX the to with timeframe. to in ultimately, cash And minimal

Jason Gabelman

Got it.

XXXX RIN Just to clear, be XQ fully kind liabilities would so of after these be your you accrued outflows? on

Will Monteleone

the has million. about Again, point And correct. ultimately, point, accrued again, the cash And reflect in the have at outflows not this accrual. we been That’s expense. the at will of settlements there $XX cash time to tune this

you that $XX last about If million recall, quarter. was

in chewed third quarter. of we again, during So about that million $XX the

Jason Gabelman

Super. Thanks. helpful. That’s really

Operator

I to would like the This to concludes over for our question-and-answer Pate closing William turn conference session. remarks. any back

William Pate

the you, I Have Drew. to for from hard work, their want quarter. team our drove Thank record earnings our a thank day. good which business this

Operator

conference Thank today’s for you The presentation. now attending concluded. has

may You disconnect. now

Par Pacific (PARR) 6 Nov 212021 Q3 Earnings call transcript