Earnings call transcript Q1 2023

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Operator

Good day and welcome to the Par Pacific’s First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, today’s event is being recorded. I would now like to turn the conference over to Ashimi Patel, Director of Investor Relations. Please go ahead.

Ashimi Patel

Thank you, Rocco. first conference Pacific’s Par to quarter call. earnings Welcome

& Pate, Officer; and Will me of Financial today President; Executive William are Refining EVP Creamer, SVP Joining Monteleone, Chief Shawn and Richard Logistics. Officer; Chief Flores,

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

the will William Officer, now to I Executive turn our Chief Pate. call over

William Pate

Ashimi. you, Thank

morning of We quarter are another this to pleased discuss performance. strong

sheet. into in detail, with debt for our million income per to we share. adjusted improve will quarter’s time. our more on quarter our net $XX.XX million EBITDA more ended exceeds liquidity the of to $XXX Our These our per earnings, funded we income robust Shawn last XX-month adjusted but bring was and was With first results than share. $X.XX adjusted quarter cash $XXX balance which continue go net hand, the first this

to well leaves June sheet balance acquisition positioned us the X. Billings of Our on close ExxonMobil’s refinery

board summer operating remain in year operating The transaction the Rockies the network expand conditions profitable on bringing the region. our be also significantly assets, a This experienced focused few Logistics the entering in successful team. team on of our been Billings and well will the will has Mountain Rocky During integration season. including refinery this next months, the

to builds. with of well Global presently little product balanced sign inventories low are significant inventory

declined China within refinery an Chinese factors, of to increasing these falling movement and related continues in economic gas to increase. rising in travel prices due to Despite reduced Europe. economy the concerns well increased and to is due market global as costs reopening April demand positive cracks the as air Asian natural slowdown global over

mid-cycle refineries We cracks no our we’re local change supplying to the focused imported debottlenecking With profiles, debottlenecks profitability products our profitable, small our remain levels, on generate due and see demand approaching and of these amount projects. markets. significant in

us also lowers allowing response credit are projects continue to locations, We flexibility and given us working people, technology existing our these our All provide near changing and to affords and projects are our pricing designed projects small-scale government dynamics. that fuel of cost to advance on uncertainty and maximum flex to renewable initiatives market production This sourcing, ability leverage feedstock conditions. diligently surrounding an our in market the infrastructure.

well Last below week, gallon details be further refinery’s less is to a is Hawaii commissioned aviation by million year fuel in on XX metrics which projects. pretreatment we expected XXXX of production with sustainable cost $X.XX turnaround. announced This annual gallon be our completed capacity, unit. is including renewable for fuel conjunction project forecast to the implied feedstock industry than per recent This per project,

to power and plants and LPGs are seeking availability an naphtha energy supply low-carbon to other Hawaii low will and costs of underutilized This decarbonize customers unit project Hawaii due unit sector. The produce the the hydrogen Logistics. also to established local

to agricultural oilseed with We’re develop also working crops. Hawaii locally grown entities

foreign in refinery the addition, tariff-free vegetable oils received permission Hawaii zone, our trade is In which import we’ve located. into to

performance. I commercial to will turn our now Will call the discuss over operating to and

Will Monteleone

constraints, was reduced strong. which quarter XX,XXX throughput we Refining day per was Total during downstream barrels and market remained backdrop of The first throughput Bill. Hawaii early unit April you, per outage. Refining Thank addressed day XXX,XXX seasonally and Logistics due an barrels to

We are currently day. closer XX,XXX per barrels to running

and in our $X.XX quarter, Wyoming. production in $X.XX $X.XX barrel the were Hawaii, costs During per in Washington

The Index first to quarter Singapore X-X-X declined barrel. approximately $XX.XX $X.XX per

costs to and X-X-X feedstock of quarter. the Combining $X initially estimate compared to the Landed overall versus feedstock to environment $X.XX. approximately Brent provided premium fourth indexes, were margin flat $X.XX the the was

strong nearly adjusted softening barrel, Hawaii driven of margin commercial $X execution. and combined However, gross resulting a index. by XXX% expanded the capture backwardation by in per strong of was The capture

$X.XX local enhance Capture index, changes to the capture or quarter XXXX our to correlations, capture made hit, XX% barrel impact XX%. in XXXX was impacted switching by is to FIFO in benchmark Washington to X-X-X-X in the of quarter. historical range. capture the Wyoming and capture historical asphalt Wyoming Wyoming, Index in XXX% Adjusted winter XX% narrowing market XX% is and XXX% results excluding to reflect for in Adjusted XXXX for RVO PNW was first was capture RVO U.S. capture results Using quarter and XX% XX%, recently indices first first margins, We historical Washington periods. a year in Coast the range. per the the XXX% X-X-X to switching conditions Washington, typical new negatively Gulf the the and full percentages

and XX,XXX these barrels performing, far, Hawaii, incorporated XX XX the the Minor first In estimates. $XX the X% In location maintenance barrels total, XX,XXX the we throughput. Singapore throughput up we run ahead work second between barrels QX expect each from Looking expect barrel. and planned per midpoint averaged and X-X-X day, thus quarter per XXX,XXX into despite is of are to has a per Hawaii we between between quarter, day, Wyoming and at day. XX,XXX to per XX,XXX Washington

quarter. European prior the offsetting second versus factor indices and Europe to quarter while $X.XX and our indices, Over improvement distillate $X cracks, between course spread Partially land we per crude market impacting Singapore market Brent, largest the has an the between barrel expect average actually April, $X declining been has narrowed. of the approximate declining the versus

strong generated with and another segment Retail volumes financial merchandise fuel growing revenues. quarter The expanding

on nicely, new-to-industry and XXXX up versus our ramped construction well track for fuel X same-store X.X% volumes sites. store merchandise gone respectively, XX%, has The and X quarter is acquisition levels. of our integration and First sales,

Billings refinery to track June X. acquisition on The close remains on

we’re encouraged supporting refinery. of growth the are conditions recent and of look to strong and across We closely assumptions. supportive early, the underwriting operating forward teams Current by operational the with Exxon Billings market While of working the Rockies. the performance the brand favorable our

In Hawaii are Billings, addition project. SAF the we to progressing

We our example expect redevelop returns part and the and creativity our of this excellent of team as strong an of refinery. to underutilize highlight

emerging low the in are We and carbon products are strong solutions working for confident intensity our for offtake these demand fuels.

our it turn to to review financial now results. Shawn over will I

Shawn Flores

Will. you, Thank

$X.XX earnings First million share. adjusted Net the quarter EBITDA share. and $XXX $XXX and $XXX income was during adjusted million million per or were or quarter per first $X.XX

Our a related adjustment RIN on the million, our $XX first of and of $XX affiliate mark-to-market cash gain estimated prior quarter results included of RINs year gain to positive Upstream the a million. Laramie related our settlement obligation of from to a million, GAAP $XX distribution

of partially segment $X EBITDA price in in of Wyoming. product offset million quarter of in gain reported of impact $X in negative Hawaii, adjusted Refining net Refining include million first benefit lag $XXX million the compared million, million $X by a The FIFO a results a crack quarter. hedge the to fourth $XXX

second our we a position current volumes quarter. expect gross Singapore We framework product during quarter capture generate hedged. the sales second hedging nice to Cracks, with of for in have continued hedge our our crack At XX% margin Hawaii tailwind approximately

increased in fourth in driven reported Logistics sequential by million first fourth retail the of Our million quarter. segment in improvement and the of $XX The was the million $XX compared The segment to adjusted Hawaii. to first quarter costs EBITDA reported Tacoma reduction movements bulk EBITDA $XX maintenance quarter. compared the adjusted for in in quarter in $XX million product

gasoline reminder, a and third and by price year segment the environment rapidly flat Retail last for our record As diesel. a quarters declining fourth were during supported results wholesale

the first prices Our street margins stabilize. as moderated fuel wholesale quarter during

retail Our to the and first $XX $XX compared of generate in excess EBITDA of Corporate year run were rate million adjusted to quarter quarterly mid-cycle a continued in our expenses million. network expectations. last profitability

costs, consulting nonrecurring and include renewable million expenses development potential $X engagements to quarter million including related investments. research on First $X.X and of

corporate million, provided per outflows $XX Net million credits. Cash largely driven Pro offsetting facility. financing million. totaled environmental $X totaled resulted costs in from million borrowings the a working $XX activity our quarter first $XX by forma million capital to $XX excluding investing and $XXX Washington Billings, activities changes to activities inflows range Cash during the working with on $XX from distribution million from of we million. expect Cash operations in recurring related mark-to-market million for capital after quarter. by totaled between capital Laramie, cash expenditures $XX inflow

in million our a Loan billings. with comprehensive closing $XXX The X-year $XXX is commitments from basis of our new liquidity facility record for of simplifies to $XXX capital the million completed and Altogether, the including by million of availability. we we $XX cost $XXX revolver In total in cash average structure XXX debt ABL B. reduce $XXX the will we with facility refinancing million term million, asset-based points. In and debt our that Term million credit ended our replaced in expand a a at of legacy first term expected of issuance aggregate new April, February, quarter to

acquisition. our is of the expanded well ahead the and sheet ABL capacity the end Billings $XXX positioned in over With million of the cash quarter, at first balance

announcement to a $XX And renewable to year. lastly, for we CapEx the increasing million are of by of planned $XX Hawaii, $XX total million with XXXX in investment full the fuels guidance our million

spent and early of balance be the expect We of the XXXX approximately million XXXX. throughout $XX to investment

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

Operator

Blair Holt. question Instructions] Thank comes first Pickering, you. Today’s Please at Tudor, go ahead. Matthew from [Operator

Matthew Blair

be are finally, Bill, that an is for have plant? unit get bit want petroleum, idea that you you part production? about and you Could this arrangement? morning, or production at SAF little of you any any you a what diesel be RD are might if I are clarify, think more is is RD to on there Shawn. underutilized and targeting? good And can expected I hope you this redeveloping Hey, talk then Hawaii you Bill intensity the the well. project. refinery. the like score feedstock the to I co-processing And a standalone a on of Will, existing mix to impact you this of carbon the going kind follow-up doing And mentioned on

William Pate

To into renewable very adding Matthew. going two principally we’ll converting unit and RD, that Sure, opportunity that SAF any existing can fuels, create as and unit think – unit, it and not clear, hydrotreater between convert forth a into to distillate some down into the should flex can unit produce a unit high-sulfur That jet. vegetable diesel be components an as on we products we’re and that’s we and and and lost conditions. well be more between process those taking Yes. we market that depending back profit the because today that drop divert will

change we With shouldn’t want at the and cover to have production feedstock, the conventional significant So in feedstock of it a overall respect Will, our you fuels to should be supplemental. unit, our sources?

Will Monteleone

Sure.

feedstock project sourcing, Hawaii Logistics ultimate source the are us footprint, online the the the selection flexibility. with vary range a with respect we scores will unit. Matt, quite got and includes fit would So fats the as good there around bit materials on and pricing is $XX again, oils, those vegetable unit to simultaneously, alternatives given oils, which million a depending the to foreign-sourced of economics pretreatment going tallow for objective feeds. feedstock ability I of CI The be the to pretreatment. a the vegetable think bring allow Tacoma And then our for inland also referenced, and we’ve Again, other that to our

Matthew Blair

do the the integrate for project? online think in on Thanks due good. Sounds do assets? be Billings what of then, details. the you a XXXX a bit you And you after Or little all to SAF are that chances would bring the dividend further think out pushed spending and the

William Pate

about how change our through I will key impact Bill. allocation. don’t think thing we on think the is think at balance to project are integrated requirements ensure view significant capital of for profit capital And SAF enough capital we generation only not not unit that to this It’s operate sense have the point, we our capability at good a I a we fully that for under working our really Billings, options. at Billings what thinking of and our about leadership. want But sheet. the understand that is period Matthew, point, point that that allocation and get start time,

Matthew Blair

Okay.

Sounds good. Thanks.

Operator

Goldman with next go you. ahead. Mehta Neil question comes Thank from And Sachs. our today Please

Nicolette Slusser

the taking for for This morning, Nicolette good Mehta. Hi, thanks time. Neil and is Slusser, on

you into just question, first any provide the remainder on was of for weakness and So the I the can thoughts additional you additional been share if well any seeing margins. the year? as we’ve on outlook insight could wondering Singapore the

William Pate

forward, Yes, the I think really you the Basin, in to margins, price Rotterdam. that almost barrel in continue they’ve war largely the frame, Ukrainian the looking war, the Arbor, the to efficient be can and the marginal I Nicolette, up point. it’s this online, Bill. relatively because then to and in East-West margins think prices following in the anything, the European It’s is determined the barrel the difference have in And if it down margin coming started, margins natural over tightened at building between Atlantic – gas at really floor. price this the given up is Europe. and the and in European set since Singapore And Middle anything, cue go it’s capacity is where fairly became toward what going their actually And If taken East by the which seem time declines to look in think I been what stable. Singapore is Singapore even started European from think in April, happens happened they I be somewhat and the

stable. export We’re of terms seeing been big major which a in factor not Singapore be to margins. used They’ve changes fairly in Chinese activities,

the some factors to last this in the of the nearly seem as up, that the last of year. capacity at – certainly, part As going doesn’t they’ve the and impacting bit added in half year demands last little a on early picked But Europe. much margins as be

the of I impact it’s think that’s the the of year, going in largely so gas on coming be Does that’s And those Suez production through particular, going affect, economic think it we new of how global as European in impact prices remainder and any slowdown, operating to costs. of east And – Suez, and natural go turn goes? the then East online think of the west the where or I to Middle determined.

different are kind in point and at those you today, If pricing to the it’s between indifferent to look Asia. Europe going of where somewhat netbacks going to

Nicolette Slusser

capture follow-up is for you just then color And there. Thank on Great. the the Hawaii Very helpful. the rate.

you saw XXX% there mentioned, commercial a the splitting is provide to it of any on way it from quarter, the the closer think I benefits was the sense you to was and or Can improvement quarter? guys backwardation XXX%. in – capture performance versus that

Will Monteleone

Yes.

the I really long-term, I think the about think, Nicolette, close there over to way target is our still to think XXX%. right it is

quarter. were quarter backwardation prior the fourth benefit again, versus so the I in the was in versus significant a And think the where we quarter improvement

can freight $X let’s I just force think think you the for other captures I right you’re market at $X for ultimately, refined look States. our point per now. $X delivering Coast was rates West product range. just And barrel something that to impacting in factor United products into that to per it’s that today, is the I’d out prewar, clean looking of barrel closer are to higher at a the the is again, that $X pre, And a say,

is is factor again, is a market impacting So also our that capture related. that that

think still XXX% be over the to the and So target about. X is for you right the make, I I’d I are those points think long-term, thinking

Shawn Flores

have $X gain quarter-to-quarter, It out million spread on quarter. And then benefit in is product we crack $X.XX, this prepared I’d my remarks. website. slight headwind which Nicolette, improved last That also our Hawaii. point this was call you quote would was the hedge a the quarter. to I Shawn. It MX-MX a benefited would by that

Nicolette Slusser

Thank helpful. you Very so much.

Operator

next our And you. from go ahead. Thank Piper question with Please Sandler. comes Ryan Todd

Ryan Todd

acquisition, Thanks. you’ve a some can developments Great. walk that of the Billings In You’ve balance advance the new of ABL. sheet through upsized had? you got

got the should kind will of of cash balance the hand. which the on in of fund next then How inventory associated longer facility? much sheet? like lot the close And asset you on to to cash carry acquisition, month. would and the you And over look versus got terms cash of how a you’ve the You’ve Billings credit term acquisition

Shawn Flores

also Sure. inventory a That We had will on and We $XXX.X ABL of $XXX ABL. start refinancing. Retail will really with ABL Shawn. closing. This in that sit Wyoming the ABL, new recent previously $XXX a is the to business. which recently I’ll Billings top cover million out upsized with took million at our million to AR. be That’s

of the funding base we as $XXX Billings the to million about purchase we so of million pre-funded And price June have on deposit. X, sort think $XX up

the million on have $XXX price. we remaining purchase the So base

X.X at about the will market the around But in value to inventory hydrocarbon barrels at close. depend $XXX refined purchased products total commitments June of at is think And million easiest of and it time. X be estimating sort We’re value aggregate be – crude range. of think the to the way on million will ultimately, inventory that I

$XXX million drawn million ABL estimating then and We’re facility. on $XXX cash the use

Ryan Todd

this thoughts then to I out about said the requirements part time But terms what some maybe are. And what sheet? is in Great. on you’d carry of the wanting of you to and cash mean, balance like much longer-term how had take any earlier figure

Shawn Flores

suspect increases. comfortable aggregate sort manage million liquidity Yes. I and with we mean, of that pre in increase exposure will inventory our I pretty range Typically, think market $XXX pricing million our I of forma $XXX liquidity exposure to the billings. to as we feel pro would billings. sort

level the $XXX So to on but levels, carried. million more point of liquidity to you I we historically than sort we how to million $XXX target that come higher think just

Ryan Todd

With from shifting way Laramie, to decent about the distributions then now, accounting a had And contributions what’s that quarter. equity in to think distribution the Laramie you business on going method Okay. Laramie forward? from or just maybe one right

Shawn Flores

I current that and on your modeling would you suggest would from expect environment exclude market based going minimal Laramie impact of forward. from the sort

I similar year. occur to what evaluated and likely think any will just in be distributions potential future at March year-end spring payouts cash sometime next this occurred will of

Ryan Todd

Great. Thank you.

Operator

And today JPMorgan. next you. comes from Please ahead. Royall our John Thank go question with

John Royall

taking Hi, thanks my good for morning, questions.

costs diffs talk Thanks. $X helpful? it be would in In crude or can you What significant. color the differential? there are you local improvement there? can about crude Hawaii about pretty drivers Is the the any per is shipping barrel landed provide So or just anything

Will Monteleone

Sure, This Will. John. is

landed mind XX XX days keep in So lag. in Hawaii, the is diff crude to

So when you really think QX the back period. about the looking really consumption you’re QX in

the So again, FOB bit sellers time a I and port saw And costs. spreads, then time quite factor softened softened a think the is impacting crude saw in QX bit, effectively, crude at more of quite think of backwardation the the you QX, increased diffs biggest up also freight you receiving frame. ultimately I load

those discounts spreads improvement. So I biggest are think crude. on really just on port barrel $X the the and drivers per It’s for two softening load time

John Royall

follow-up project And on Okay. Hawaii. then Thank SAF you. in is the

gallon you project You per cost. you a $X.XX or provide basis the that and can there in on up an gallon expectations on would EBITDA have anything expect mid-cycle you anything once flows of running? and have at per Is cash or the project earnings maybe of terms

Will Monteleone

Sure, Will. This John. is

part that’s IRR XX% So think And about forward the we’d credit think again, prices it based excited and on something conditions feedstock why of we’re at I close current it. and looking for I be to inputs, that’s with pushing market and project.

a business. to is existing it supplement think our fuels I nice

John Royall

much. you Thank very Great.

Operator

Manav ahead. Gupta today you. Thank comes with from next our question go Please UBS. And

Manav Gupta

morning, guys. Good

part the transaction how the also beginning the It’s Logistics the closes, the better Billings slightly associated about you that benefit we are the us only coming Logistics once deal call, that the Help refinery. is deal? at not infrastructure. give also understand should about think as you I in of assets incremental the highlighted of of

Shawn Flores

are And into the position. $XX if Yes, seven million feeds well million as Logistics you we’re infrastructure refined of that recall, significant acquiring refinery we estimating contribution. product $XX pipeline terminals, as to tankage

our core Logistics is sort nice contribution. So to an of of mid-cycle just addition $XX business. bolt-on sort a base our And a it’s Logistics reminder, million

a incremental this $XX million. So $XX at material is million sizing to

Manav Gupta

basis how So Perfect. new you for the In Also, a second products on question is system, little us Hawaii the a your system, elaborate a into a you unique market. little site of because with unique have such understand help distribution refining you and a demand if have market? could tracking Hawaii position bit is that? a year-over-year on

William Pate

jump this all, market above from basis. generally mainland component. hasn’t they’re can point. anything, you coming of The Will just and They say and in in back a to on in visitor back came They was of track, last Bill, can I’d longer. A And tend spend demand several Southeast really on Japan and lot international up. the XXXX and that speaking, is And basis, is yet to correct. counts, that come a And this tourists market year, year-over-year more. We visitors. ago. significant back ex daily first at the Australia. middle me They more. came big after No, driven of see it’s if tend group drive are stay those a the by the well Japanese really But Asia and years

our that tourist been of economy, be up, be grinding its the drive this based think continue the – mind, barrel with is, think really the been will a Japanese market. Japan. we and until tourists refinery trending it’s back to pre-pandemic driving the to import fully at see it’s I as So from this now. holiday as the we’re from activity And also, of producing this up in way to And related for conversations probably the think point won’t where to demand I the will as in dissuade expectation I’ve coming on and because every are that’s it already which as are factors of had But and Hawaii there’s levels. Hawaii only business increase, right I think, Japanese XX% end strong anything dollar, tends season the participants is the year, back view local much year. arrival. we it’s about has can year, much in continue is while case And XX% and factors demand. would other produce factor into up to we going And that to Keep still a my this

our focus we’re getting increase up So out that has our been increase that throughput, imported in. refined throughput and that on some barrels the we’re bringing the products of manufacturing to back

Manav Gupta

Thank you for the detail response.

Operator

Thank you. [Operator Instructions] Today’s Jason Cowen. Please next question Gabelman comes with from go ahead.

Jason Gabelman

good for price I wanted my tanker to questions. Hey, of kind are crude go and going the that back Thanks taking morning. diff to on. dynamics,

You to diesel impression be economics But that the your Hawaii on can the guess I parity. question that under in impactful to product the tanker is, rates I export priced mentioned was maybe California. import higher

the higher actually think to standpoint from would the a I rates So are product a benefit company. net

can if is logic flawed? maybe just and talk about So that dynamic the you

Will Monteleone

was that was the given statement – of your was higher what for trying pricing. are Hawaii net tanker ultimately message, part import a parity your which our positive capture in clarify, I to the latter to just Jason, rates

Jason Gabelman

in for rates, do to just the you softening level the historical backwardation kind crude second in Thanks back half and year? crude Great. cost of go crude And the to Alright. of clarifying then about talking a that landed market the expect tightening tanker that.

Will Monteleone

is think we’re think you watch in we’re some the factor the level Again, then quickly, we think you today. range probably when broader range closely. worth I market us And at at a again, something QX spreads. the conditions, current we’re will to keep seeing again, think probably following I – are about structure, the think side think for I which today the the production watch or softening cracks to now, right macro I time Jason, and that of But they factors got OPEC market. do. But the lots Obviously, like move help reasonable. freight Yes, – is think, cut then just change that need on conditions, ultimately, the crude, I is down where a in I again the

that’s think you best at I this guidance So probably I moment. can the give

Jason Gabelman

then for the lastly, on outlook just Okay. And turnarounds.

You the or beyond job running is the look as units plants you’re eyeing capture When next of the company? running year. guys high margins this this good for major at you done Thanks. have turnaround year that kind a to

Will Monteleone

Will. it’s Jason, Sure,

and I again, I XXXX. is the in think, to the got firm a Again, frame this still impact run And out going we’re we’ll of clean we’re again, of think work XXXX give I’d we of I the some the contemplating to schedules again, working that So unit. most in we’ve for think everybody And expectations second sense right where ‘XX are half now. any a whether a in be there’d you, close be the and come turnaround there remind time up at for with schedule Billings once juncture. of

Jason Gabelman

lot. Thanks Alright. a

Operator

to this William for to question-and-answer the like gentlemen, closing remarks. any session. I’d and back our Thank turn conference you. concludes Pate over Ladies

William Pate

Thank you, for joining Rocco. I this want to us everyone morning. thank

breaking the be still. ground renewable While certainly everybody. project. not In on we’re we also Have you looking results, Thank we’ll have accretive acquisition next highly day. closing forward good latest standing to record fuel the our and months, financial Billings few a

Operator

thank and this And gentlemen, ladies today. concludes for Thank conference our you. you presentation. today’s call We attending all

You may your have and a wonderful day. lines, now disconnect

Par Pacific (PARR) 4 May 232023 Q1 Earnings call transcript