Earnings call transcript Q3 2022

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Operator

Good day, and welcome to the Par Pacific Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Ms.

Ashimi Patel, Director of Investor Relations. ahead. go Please

Ashimi Patel

Welcome call. operator. Pacific's quarter third Thank to conference earnings you, Par

Joining and Yates, Pate, Richard William and me are today Officer. President and Monteleone, of and Chief Financial Retail; Creamer, Refining Chief Logistics; of Jim EVP Will EVP EVP Officer; Executive

note results comments are future of actual we uncertainties, differ forward-looking events. include They Any to these today performance forward-looking risks forward-looking and guarantees begin, Before are are subject not may materially from statements. subject and statements may to that our change and statements. or

SEC place investors should or information. additional reliance Accordingly, you on filings and statements, for we I the and them. any not to update non-GAAP undue to reconciliations website on investor presentation our our forward-looking and obligation our refer disclaim to revise with

the call to over Pate. and our William Officer, Chief now I'll turn Executive President

William Pate

morning business call the and Thank our our all second you, strong quarter We're announce operating of consecutive to Ashimi. strong financial profitability. segments pleased as to Good conference had results participants.

Third and million. adjusted $X.XX EBITDA per quarter share $XXX was was net adjusted income

a Our agreement logistics posture to million. excited for return growth organization related purchase to and $XXX ExxonMobil's with to our Billings is refinery assets recent

will boost acquisition this mainland noted, and our significantly previously As capacity our refining business. logistics double

fund We with acquisition the expect cash to spring next on hand.

our pump reversed high partially destruction spring when crude prices also the during oil of to segments both prices reported quarter. Retail declining from price we spiked very record portion Retail declines that business quarter, and Logistics in the The the This benefited quarterly gasoline adjusted levels. experienced unit EBITDA. a Retail demand third

throughout due to our to continued system. throughput increasing profitability improve and Logistics sales Our

segment, softened distillate high exposure markets levels. our prices falling second quarter cracks from that Strong product benefited refined and operational reliability, despite crude record to a Refining

distillate approximately a Prompt demand Europe gasoline strong prices barrel significantly, oil prices are in gas and natural prices gas remained to gasoline $XX from distillate in and significant cracks dropped elsewhere. incremental Singapore. due high have to cracks While substitution above

to Forward demand. through remain levels due global rising at XXXX of distillate cracks high the end

The past six our profitability is to GAAP sheet. million boosted our generated business pre-pandemic last the cash book free bolstering $XXX With quarters, of equity over over the our back during balance months, has net levels. of flow income two

Over on Billings the will near and we into closing that focus the our term, business transaction successfully integrating organization.

expect the cash earnings to flow. accretive to operation immediately be and We Billings our

We're also on making renewable energy progress projects. several

We quickly. aviation have attractive Hawaiian joint be a and of outlook Hawaii co-processing the current advancing the levels our operational with small first renewables government fuel support. project to venture is SAF looks scheduled and sustainable market explore to in quarter, investment on very Tacoma in Airlines based

believe policy are we a options While gallon during to time permit $X.XX We capacity. of we than project assessing expect production believe us potential decision less make this of next changes, investment spring. early feedstocks and year would XXXX. annual mindful complete line conversion per ground this at break cautiously operations next our commence government we can final to and We

RINs to all-in enough gas would that in greenhouse Washington cover We're all highly other DXs. and generate our fully emissions units these with be project a hydrogen than a competitive on our of low blending profile. refinery working conjunction projects obligation operations Collectively, our two green with a energy low at would for also cost

to Richard I'll now logistics refining turn the discuss call operations. our and over to

Richard Creamer

Bill. you, Thank

reductions, the worked rates experienced our which average in unplanned hard operational to an rate quarter. below In availability. refineries and maximize third three Hawaii, availability guidance pushed achieving for XX.X% the Our of we quarter

conversion fourth running quarter per XX,XXX barrel. XX,XXX day is well gasoline to planned related The of and day. rates to our throughput expect products. reduce as secondary is we the Third will reduced in products refinery increasing we barrels quarter costs The throughput were exporting are activities per one purchase in be expected per was units QX that XX,XXX production throughput and maintenance and is to capture barrels on $X.XX

we to Coast per quarter. per were XX,XXX the barrel during extremely expected throughput related per peak throughput is XX,XXX be barrels and XX,XXX West Washington, and to Fourth costs Production margins captured salvages operated In was barrels $X.XX well quarter to day. day.

and debottleneck able been throughput than our by has capacity more yield Our during to turnaround investment crude increase we've total heavy XXXX to been XX%. successful,

per third in July was Wyoming. day. change catalyst quarter. associated with throughput to Production barrel peak XX,XXX a has includes to forecast day $X.XX completed. during is achieved barrels throughput be quarter Shifting barrels the to Fourth day. been were October XX,XXX expected costs of We rate per and This out the that XX,XXX monthly successfully XX,XXX per per barrels downtime

I'll to now Jim to the results. turn discuss call retail over the

Jim Yates

you, Thank Richard.

mentioned, Bill of to adjusted quarter compared quarter the in segment $XX third As million for the reported of XXXX. record Retail EBITDA $XX the million

compares Merchandise of which X%. industry to than volumes third decreases increased favorably the sales over of same-store by revenue Our quarter reported more by X.X%, X.X% XXXX. decreased

these resilient sales COVID counts than related Store continuing headwinds and margins. both on pressure While offset transaction impacts year-over-year. X% continue recover higher to by approximately suggesting more volumes, recent were promotional fuel indicators by with kept merchandise visits efforts and

robust suggest offer early Our to fourth continue profitability. results margins quarter strong

acquire entered market. in three early acquisition Greater anticipate as store our an we stores We agreement Spokane portfolio existing this closing in the upgrade to to December. Initiatives into continue

also two to locations the We quarter. expect new on break ground fourth in

year. location of in non-branded in facility a convenience by second, third and to the of store and fuel open a fueling Hawaii locations We flagship hope both these Spokane. quarter first next The the

to now the company results. I'll address over call Will financial turn to

William Monteleone

Jim. you, Thank

flow million working share. by operations We $X.XX earnings. adjusted $XXX were record strong from generated quarterly Third $XXX and and EBITDA per $XXX quarter million, cash or fully capital million with driven of combination earnings diluted in adjusted normalizing

in to second Logistics million, EBITDA second $X million from the million adjusted segment $XXX was $XX by $XXX approximately segment adjusted million. sequentially the was quarter up contribution quarter. Refining EBITDA compared

on first. Focusing Hawaii

second Feedstocks X.X.X to premium versus approximately $X.XX to X.X.X quarter. The $XX Brent. per the declined were and about costs quarter, margin environment Combining overall indexes, Singapore the third per approximately feedstocks $XX.XX. barrel $XX barrel compressed

relatively able flat However, per the the quarter adjusted both lag hedging are quarters. prices contracts. second compared a in Product to margin our capture of $XX third crack in million cost barrel quarter Declining impact. we modest also priced $XX to was on a gross improved maintain drove

and a gross barrel $X strong versus anticipate barrel. $XX On will to improved XXX% differentials over fourth the ICE approximately remained market We percentage backwardation quarter freight averaging costs. reflecting Brent, conditions market landed indicators. basis, per $X.XX per the adjusted October X.X.X margin and combined with crude between be increasing of steep

and continued framework XX% to We XX% consistent crack currently hedged have market hedging levels sales current approximately our of our with conditions. QX have at

to we that XXX,XXX As Richard some have by barrels we quarter. the approximately reduce maintenance production gasoline planned finished referenced, during activities expect

environment. partial netbacks per were discounts largely offset by nearly Washington, roughly declining Improving strong increased In improvements. despite we to barrel. flat seasonally at like market capture remains this but approximately declined asphalt relative remained at Much margins conditions by $XX at crude per drop conditions, per and $XX. to index, $XX sales, driven improving in rates Hawaii, market ANS Backwardation approximately a strong wider to adjusted price in the these barrel gross $XX barrel, maintain able are VGO inland

benefits ANS. continue PNW forward, of X-X-X-X an to to barrel. Looking with regional additional differentials feedstock providing volatile approximately has refining WCS $XX widen, compared October been outages average per driving

$XX per Wyoming to FIFO declined per market quarter Wyoming $X barrel. $XX.X second or which conditions the the of market Adjusted barrel. per barrel. expense margin approximately per $XX remained declined million with barrel barrel, compared $X.XX per gross strong averaging conditions $XX X.X.X approximately approximately October includes

hedge quarter. approximately EBITDAX income, equivalent. a production unrealized million, XX Capital XXX million for million expenditures totaled day of generated $XX cubic of and EBITDAX derivatives adjusted third exit million, unhedged $XX excluding of feet $XX of Laramie the million adjusted as and September $XX was net

improved debt During million. the to down $XX million, quarter, $XX by net

levels $X balances relative reduced the cash Shifting from support flow posting expected turnarounds, as to the of hedging statement. activity expenditures Working were $XX The Pacific's Pacific capital, Par million. with cash third working inflow an capital largest commercial operations, excluding funding, $XXX driver reversed quarter collateral normalizing flow Par turnaround back Capital million. million. to inflow was excluding and totaled activities. AR and to to

During our Billings capitalized cash and approximately approximately including face million $XX market by million repurchases our $XXX open grew at to reduced we announced $XX totaling $XXX by million, quarter, us sits position the gross million well debt transaction. recently value. the leaves approximately Gross debt and complete

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

With to of funding anticipation continue the Billings XXXX. market expect building backdrop, in liquidity the in acquisition strong we

forward debt the thinking. million based target As previously to between Billings $XXX contribution into Logistics we our gross our revising million of debt incorporating on term are to $XXX messaged,

This you remarks. Q&A. I'll concludes for our it prepared turn to Operator, back

Operator

Thank you.

question-and-answer the begin Instructions] now will We [Operator session.

come will Tudor, from question Pickering Blair go and first Matthew Holt. ahead. with the And Please

Matthew Blair

Will. the on and results. Bill morning, Congrats good Hey,

William Pate

Thanks.

Matthew Blair

Hawaii Just extremely about the cover should I in all I looking just the that go in parts Could margins but you moving for kind could through talked lag? Hawaii, how the Will. the again. you oil QX? parts at you realize fuel of think impact, hedging the from moving there's And What guess did a here? in we maybe strong you about benefit question think

William Monteleone

Sure.

Matthew, three think, I to about. think So, buckets

to crack $X.XX we hedging was compared improvement out So, benefit. quarter. the product That roughly barrel called per second the

prices falling referenced we I approximately flat was think during and that in it's the a was that the price I per lag prices, roughly saw barrel factor lag. barrel improvement $XX price with the the quarter, benefit decline in per second $X.XX

second quarter, So, in had again, mind, rising prices. keep you

quarter, Third prices. had falling you

end barrel quarter. then by benefit combined was $X.XX two per again, during backwardation costs higher up quarter. this roughly with third a third partially in the those again, So, offset the And $X.XX

pieces moving think the So, all-in-all, on the strong the are during I results. drove those and capture big quarter

Matthew Blair

about been China. you good. issue the exports Hawaii risk of Par's prospects a product you're amount to margins? out chatter rising the And about how of then, and for talk Sounds there's on that thinking industry fair Could

William Pate

a mean, overall, haven't I changes. and they as market But supplying ships that with the disciplined. jets affect they're of leaving an do length. also I demand the more there, the fairly so XXXX. domestic they Yeah. any really a probably hasn't know, changed they've want Chinese that lot supply end mind exports rumors. of Matthew, Certainly you conversation, which the their refining to capacity They their that this to tanks that to to have seen into the also disclosed into policy, that they and going of export. is because been the we lot by that But of think far, internalize lot zero they're markets. in a exports But are the the they've COVID actually extent major as keep of Bill. obviously, does count -- is are eliminate and it in have much, market, And policy been

think, So, this I it's rumor point. all at

entire creating that rising demand think central to date, market. really more conditions I needs on be interest decline in focused the and the of to banks the are nothing. rates industry global economic whether and that But how seen impacts the we've the face

seen in to and haven't mentioned to is the heating is the in Our market, spread the The be which to demand and at historic and concerns really the any distillate is strong, really that levels, think changes really the in and I gasoline we change strong, winter. continues war biggest demand markets oil between relates about I date. as

Matthew Blair

There's that would banned. to widen. talk Would product you be spread that Russia exports expect

diesel would million think also diesel. that X about in barrels of XXXX? cracks day I a for that, exports would I be constructive Russia imagine

William Pate

Yeah.

would I cooling keep off. just economy you're that I be -- the may but mind in think right, also

for think not And to is market. factor, COVID And a the whole for in biggest zero factor the policy going really if the just going is global to And I demand. that's Chinese Basin any be starts the demand Pacific amended be supply to have you're come is to to really Chinese near-term just I a to that's issue degree up, I world. think real when the down to then, and way days. going going challenge think pick the

Matthew Blair

good. for Sounds the Thanks color.

William Pate

Sure.

Operator

go Davenport ahead. from Please come Carly will question Goldman with Sachs. next The

Carly Davenport

idiosyncratic, that the results. Can to good taking the Hey, start of the you talk just about strong be count, I store macro on on was then markets? more plans EBITDA things the in drivers How it wanted increase terms you've to there? you just, of retail forward? much for plans of that factors share on kind of retail market where I views your Hawaii were about reopening talked the strength like Thanks could across say questions. to guess potential forward any And like would morning. the increasing versus going related

William Pate

take me Let one-by-one. those

if QX, think crude to trend. And better to strong talk relative happened mean, to I put market because is Just in I what was to way about drove impacts One probably factor demand trend. rising weak relative about down. think context. it you single was that the just obviously QX QX two and and suppressed were pump oil rising the the prices in yet two turn some was biggest two, it QX. margins together, demand, had destruction in prices, was

we And factor then a quarter, the of had single in that's the and that, third biggest going on. probably reversal

say Hawaii Hawaii to -- year. because in related Mainland there's mind, While reopened been state really reopening substantial demand wouldn't the I pickup of in there's keep been last the in the for a

a So, we're year. actually beyond still -- we're even

more the pickup year, international so they mainland reflect they comparisons we longer. they Japanese to see the haven't still we've visitors XX% strong in started more, are and is visitors. this where spend They kind And the terms demand drive and a Hawaii a of range. And employment. do pretty visitors in And of the really of actually, is -- pickup pre-pandemic year-over-year in Japanese drives seen in which visitors stay

So biggest I the that's that's substantial a trends. factor the probably XQ XQ factor to there. don't in think But

I factors. macro biggest think factors were the to price the related

stores, range. on to second at I new times that cash to assume be that a it's to whether respect an acquisition operating level it's working your question through flow in where investing we're to we're cash or With build, from can X going when Going new stores. you flow the store is X operating a think new

Carly Davenport

buy think Thank refining that forward little on you you've next well, that And recognizing quite the expect can in talk for Brent you you. seen you premium evolve Hawaii on recently? for over crude more $X the then side, a bit. Got just to $X.XX I the of that it. you market a just quarters about to the Great. the mentioned costs in premium bit to fourth helpful. That's couple developments quarter, how And based

William Monteleone

Sure. Yeah.

a I we've little called that the seen peak I fourth soften market differential. think think reflect levels what's quarter -- from that general, of in kind bit

driving the I freight. and think the markets mind differentials trade the time the movements. structure and that around or us spreads Russian then disrupted crude have waterborne are quite today factors also biggest for flows been Keep freight a to by rebalancing down in crude come market bit

And so, think I factors. those biggest are two the

in saw were in quarter And then, that really and in the say, conditions. timeframe tightest where you barrels and saw peak market there, the procured in the the third with are the that highest is price physical bit that kind think since decline. general, consistent that's I fourth been But -- quarter, flat were you've the demand I really a we the flat landing would we're the think consumed consuming softening and I prices seen of of which

an still factors see think we forward. I be to some out. to start crude again, going moving lower laid to given in said, So, That I expect differentials the elevated I market we're think differential waterborne

Carly Davenport

color. the for Thanks Understood.

Operator

from come Royall go will question ahead. John Please next The with JPMorgan.

John Royall

guys. morning, question. taking my Good Thanks for Hey.

during component impact some there through throughput downtime quarter was the If more would you on be on there? a a looks the color just mentioned little It detail of Hawaii. helpful more in like the you that. go So, an and could OpEx just in

William Pate

our reduced crude I'll performed work which units, But and really rates just some drove let the some unplanned that downtime related for and John, on quarter. OpEx. Will handle to that -- the maintenance we was to vacuum some the through

cover… You want to

William Monteleone

continue quarter. unplanned roll-off. the cost. expense On some the quarter, related of crude expense the were had again, it that's increased tank We some were And performing going the I on expect work but the then to that John, during should the biggest fourth there we additional the vacuum side, OpEx really to and in some drivers cleaning third energy units.

quarter, think up the absolute close the is for higher OpEx $XX I our ended us. to So, for on million which side

And those primary so, I think the again, are drivers.

John Royall

in the million $XXX you. Okay. Thank you XQ. working capital, guys And had headwind Great. then on

You reversal a there. had partial guided to

$XX other in other any have capital? I we working moving Or your But drivers for there went you reversing more and in through You impact any up and pieces that do XQ? moving some know of got about think XQ of about going you price back should the pieces XQ? in would million see remarks. an

William Monteleone

wouldn't that can point that of I sort we specific think we clearly are any to to Yeah. in items reverse. would idiosyncratic point

it's think crude I going the price quarter. to highly on dependent change be in

So don't for have that items quarter any we'd you. referenced this specific

John Royall

Thank you.

Operator

Todd ahead. Ryan from come will go question Please Sandler. next The Piper with

Ryan Todd

the kind balance the means sheet on of Thanks. One cash. of

Your balance huge during sheet took the a quarter. forward third step

$XXX balance end still Can How mean, excess of about you're -- lower -- assume your quarter. I cash to and target of debt. look would the how I approach How this cash the and you Billings will million your upcoming about generating context particularly during forward from you're you'll the gross at you talk You're probably of transaction? a you'll million here? -- $XXX lot still to to of look it the sheet within approach appear potential use going to

William Monteleone

Ryan. Thanks Sure.

think, I cash transaction on point of be position closing date to to in is get our into that. and liquidity build going in to close anticipation our general, finer continue cash and that the as approach a we transaction

I alternatives. alternative cash about we'll deployment begin to think our think

But integrate heard growth I referenced, number well to are position well cash our you've build Billings alternatives and deal capitalized that there be that a of the to the going to Bill be here close think term to objectives and think we're I other funded successfully. medium studying. are

Ryan Todd

-- early of capabilities successful feels here. and maybe yet. growth out one markets? high term a IV about you here? PADD to term, plan those to talk PADD grown could you've announced continue haven't opportunities and mass it But maybe longer growth acquire how think how know closed since particular, your V -- probably your just -- building you've I in and mean, is attractive the Or look I are build critical you series transactions kind you and your as then about And for level, a strategy, from longer right? in Great. might strategies done of just evolve to you

William Pate

are deal going you same on time. of And Well, the to some acquisitions. growing transaction. mentioned, and Billings successfully actually part key strategy. growth closing we've our look as -- of elements the right at be of capital at easier of is take also focus as intend And we projects. as a we a And Jim to tuck-in. closing those We high lot through work. That's have We'll commitment continue to our we said but in a small returns team. time now put both investments on to retail the the that, to our But past, we've intend noted, just demonstrated organic obviously think I That's are company. to we

I we you'll a renewables have us around So, robust we footprint see much think in close and footprint, our Billings. more investing existing once

the We'll our focused to preclude, this which particularly the continue extending be will growing we'll also all number would served not we're communities logistics not additional to of Billings. And I through at substantially at add to retail putting refinery point. building acquisitions with footprint. And system, continue but out look together, that on

Ryan Todd

much. very Thanks

Operator

[Operator Instructions]

will Gabelman with Our from come Jason go Cowen. Please ahead. next question

Jason Gabelman

projects Hey. renewable you're pursuing. taking on Thanks I wanted the to diesel my questions. ask first for

remind And any capacity that? Tacoma. Can you and would And that on you project? earnings quantity on any Thanks. First, be feedstocks then, more co-processing sourcing, on Hawaii details the us project, on potential SAF the any the helpful. could thoughts give at of smaller on the guidance

William Pate

Sure.

barrels get into really unit focused it's that's is we're will that, barrels And Hawaii. probably the on premature I capacity the Hawaii, Thank So, Hawaii. really aviation products we're we that sustainable mind, With other producing It's be SAF but part of that the in and on a Tacoma in project. point about project. X,XXX mean, for that's converting. day about to largely going to day, an to actually keep some RD fuel feedstocks size be at in to with this XXX respect project, based as respect sourcing per you. per of

Jason Gabelman

maybe then of coming major And turnaround turnarounds. Okay. XXXX turnarounds a up quick secondly, year? just next one was you Do have on year any limited you. activity a for

William Pate

No. don't. We

Jason Gabelman

Okay. Super. Thanks.

William Pate

you. Thank

Operator

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

William Pate

I you, a and the situated financial want is for a another environment, to our congratulate we Have and distillate on strong operational quarter. the look really good day. system With Thank current our closing transaction yield, Billings operator. high forward spring. perfectly team to market next

Operator

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

may You disconnect. now

Par Pacific (PARR) 2 Nov 222022 Q3 Earnings call transcript