CVR Energy(CVI) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section covers CVR Energy's financial statements, notes, and management's analysis of performance Item 1. Financial Statements This section presents CVR Energy's unaudited condensed consolidated financial statements and related notes Condensed Consolidated Balance Sheets Total assets decreased from $4,707 million at December 31, 2023, to $4,003 million at June 30, 2024, driven by reduced current liabilities | Metric | June 30, 2024 ($ millions) | December 31, 2023 ($ millions) | | :------------------------------------------------ | :-------------------------- | :----------------------------- | | Total Assets | 4,003 | 4,707 | | Total Current Liabilities | 1,022 | 1,682 | | Total Long-Term Liabilities | 1,940 | 1,987 | | Total Equity | 1,041 | 1,038 | - Current portion of long-term debt and finance lease obligations significantly decreased from $606 million to $8 million due to the 2025 Notes redemption[176] Condensed Consolidated Statements of Operations The company experienced a substantial decline in net sales and operating income for both the three and six months ended June 30, 2024 | Metric | Three Months Ended June 30, 2024 ($ millions) | Three Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net Sales | 1,967 | 2,236 | 3,829 | 4,523 | | Operating Income | 27 | 224 | 149 | 554 | | Income Before Income Tax Expense | 12 | 212 | 118 | 528 | | Net Income | 38 | 168 | 128 | 427 | | Net Income Attributable to CVR Energy Stockholders | 21 | 130 | 103 | 325 | | Basic and Diluted Earnings Per Share | 0.21 | 1.29 | 1.02 | 3.23 | Condensed Consolidated Statements of Changes in Equity Total equity slightly increased from $1,038 million at December 31, 2023, to $1,041 million at June 30, 2024 | Metric | Balance at Dec 31, 2023 ($ millions) | Balance at June 30, 2024 ($ millions) | | :----------------------------------- | :----------------------------------- | :---------------------------------- | | Total CVR Stockholders' Equity | 847 | 849 | | Noncontrolling Interest | 191 | 192 | | Total Equity | 1,038 | 1,041 | - Net income attributable to CVR Energy stockholders for the six months ended June 30, 2024, was $103 million, compared to $325 million for the same period in 2023[7][179] - Dividends paid to CVR Energy stockholders totaled $100 million for the six months ended June 30, 2024, consistent with the prior year[179] Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly decreased, and cash used in financing activities increased due to debt redemption | Cash Flow Activity | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :---------------------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net Cash Provided by Operating Activities | 258 | 614 | | Net Cash Used in Investing Activities | (129) | (130) | | Net Cash Used in Financing Activities | (729) | (243) | | Net (Decrease) Increase in Cash, Cash Equivalents, Reserved Funds and Restricted Cash | (600) | 241 | - The $600 million redemption of the 2025 Notes was the primary driver for the increase in cash used in financing activities[181][383] Notes to the Condensed Consolidated Financial Statements These notes detail the company's organization, accounting policies, financial instruments, debt, and segment reporting (1) Organization and Nature of Business CVR Energy is a diversified holding company operating in petroleum refining and nitrogen fertilizer manufacturing - CVR Energy operates in two main segments: Petroleum and Nitrogen Fertilizer[157] - IEP owned approximately 66% of CVR Energy's outstanding common stock as of June 30, 2024[157] - CVR Services held approximately 37% of CVR Partners' outstanding common units and 100% of its general partner interest as of June 30, 2024[158] (2) Basis of Presentation Financial statements are prepared under GAAP and SEC rules, consolidating CVR Energy and its majority-owned subsidiaries - Financial statements are prepared in accordance with GAAP and SEC rules, consolidating CVR Energy and its majority-owned direct and indirect subsidiaries[160] - CVR Partners is consolidated as a variable interest entity (VIE), with CVR Energy identified as the primary beneficiary[161] - The company is evaluating new accounting standards ASU 2023-09 (Income Taxes) and ASU 2023-07 (Segment Reporting), with expected additional disclosures for annual and interim reporting periods beginning December 31, 2024[165][166] (3) Inventories Total inventories decreased from $604 million at December 31, 2023, to $543 million at June 30, 2024 | Inventory Type | June 30, 2024 ($ millions) | December 31, 2023 ($ millions) | | :---------------------- | :-------------------------- | :----------------------------- | | Finished goods | 249 | 260 | | Raw materials | 158 | 226 | | In-process inventories | 34 | 21 | | Parts, supplies and other | 102 | 97 | | Total inventories | 543 | 604 | (4) Property, Plant, and Equipment Net property, plant, and equipment decreased slightly to $2,192 million at June 30, 2024 | Asset Category | June 30, 2024 ($ millions) | December 31, 2023 ($ millions) | | :-------------------------------- | :-------------------------- | :----------------------------- | | Machinery and equipment | 4,404 | 4,287 | | Buildings and improvements | 143 | 124 | | Construction in progress | 136 | 193 | | Total property, plant, and equipment, net | 2,192 | 2,221 | - Depreciation and amortization expense was $58 million for Q2 2024 and $114 million for YTD Q2 2024, compared to $55 million and $105 million for the respective periods in 2023[99] (5) Equity Method Investments The company holds stable equity method investments in CVRP JV, Enable JV, and Midway JV - CVR Energy holds equity method investments in CVRP JV (50%), Enable JV (40%), and Midway JV (50%)[143] | Investment | Balance at Dec 31, 2023 ($ millions) | Balance at June 30, 2024 ($ millions) | | :----------- | :----------------------------------- | :---------------------------------- | | CVRP JV | 25 | 21 | | Enable JV | 5 | 5 | | Midway JV | 70 | 70 | | Total | 100 | 96 | (6) Leases The company maintains operating and finance leases, with a new finance lease for the Coffeyville Fertilizer Facility expected in H2 2024 | Lease Type | June 30, 2024 ($ millions) | December 31, 2023 ($ millions) | | :-------------------------------- | :-------------------------- | :----------------------------- | | Operating ROU assets, net | 57 | 53 | | Finance ROU assets, net | 28 | 31 | | Operating lease liability | 54 | 49 | | Finance lease liability | 41 | 44 | | Lease Expense Component | Three Months Ended June 30, 2024 ($ millions) | Three Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Operating lease expense | 5 | 5 | 9 | 9 | | Amortization of ROU asset (Finance) | 2 | 2 | 3 | 3 | | Interest expense on lease liability (Finance) | 1 | 1 | 2 | 2 | | Short-term lease expense | 3 | 2 | 6 | 5 | - A new finance lease for the Coffeyville Fertilizer Facility is expected to be capitalized at an estimated $20 million to $25 million upon commencement in the second half of 2024[171] (7) Other Current Liabilities Total other current liabilities decreased to $491 million at June 30, 2024, primarily due to reduced RFS obligations | Liability Type | June 30, 2024 ($ millions) | December 31, 2023 ($ millions) | | :------------------------------------------------ | :-------------------------- | :----------------------------- | | Accrued Renewable Fuel Standard ("RFS") obligation | 312 | 329 | | Accrued taxes other than income taxes | 48 | 47 | | Personnel accruals | 34 | 51 | | Accrued interest | 32 | 26 | | Share-based compensation | 19 | 13 | | Operating lease liabilities | 15 | 14 | | Accrued income taxes | 8 | 25 | | Deferred revenue | 8 | 16 | | Derivatives | 2 | — | | Other accrued expenses and liabilities | 13 | 25 | | Total other current liabilities | 491 | 546 | (8) Long-Term Debt and Finance Lease Obligations Total long-term debt significantly decreased to $1,584 million due to the redemption of the 2025 Notes | Debt Instrument | June 30, 2024 ($ millions) | December 31, 2023 ($ millions) | | :------------------------------------------------ | :-------------------------- | :----------------------------- | | CVR Energy 5.75% Senior Notes, due February 2028 | 400 | 400 | | CVR Energy 8.50% Senior Notes, due January 2029 | 600 | 600 | | Nitrogen Fertilizer Segment 6.125% Senior Secured Notes, due June 2028 | 550 | 550 | | Total long-term debt and finance lease obligations, including current portion | 1,584 | 2,185 | - The company redeemed $600 million of 2025 Notes on February 15, 2024, using proceeds from the issuance of 2029 Notes[208][226][378] - CVR Energy and its subsidiaries were in compliance with all debt covenants as of June 30, 2024[198][395] (9) Revenue Total revenue for the six months ended June 30, 2024, decreased to $3,829 million due to lower sales in both segments | Revenue Category | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Petroleum Segment Total Revenue | 3,517 | 3,993 | | Nitrogen Fertilizer Segment Total Revenue | 261 | 409 | | Total Consolidated Revenue | 3,829 | 4,523 | - Petroleum Segment net sales decreased due to lower refined product prices and reduced demand, exacerbated by the Wynnewood Fire[42] - Nitrogen Fertilizer Segment net sales decreased due to unfavorable UAN and ammonia sales prices and volumes[50][52] (10) Derivative Financial Instruments The company uses commodity derivatives to manage price risk in its Petroleum Segment, with significant changes in notional positions | Commodity Derivative | June 30, 2024 (thousands of barrels) | December 31, 2023 (thousands of barrels) | | :-------------------- | :----------------------------------- | :--------------------------------------- | | Crude Forwards | 274 | 247 | | NYMEX Diesel Cracks Swaps | — | (6,780) | | NYMEX RBOB Cracks Swaps | — | (1,275) | | NYMEX 2-1-1 Cracks Swaps | — | (3,030) | | Crude Futures | (50) | — | - The cost of materials and other included $23 million from commodity derivative instruments for the three months ended June 30, 2024, compared to a benefit of $4 million in the prior year[215] (11) Fair Value Measurements The company measures commodity derivatives and RFS obligations at fair value, primarily using Level 2 inputs | Fair Value Item | June 30, 2024 ($ millions) | December 31, 2023 ($ millions) | | :-------------------------------- | :-------------------------- | :----------------------------- | | Commodity derivative instruments (assets) | 25 | 31 | | Commodity derivative instruments (liabilities) | 7 | 6 | | RFS (liabilities) | 312 | 329 | | Long-term debt (fair value) | 1,500 | 2,100 | - The Petroleum Segment's commodity derivative contracts and RFS obligations are measured at fair value using market approaches based on broker quoted prices (Level 2)[216] - A non-recurring Level 3 fair value measurement of $46 million was determined for the equity interest received in the 45Q Transaction in January 2023[243] (12) Share-Based Compensation Total share-based compensation expense decreased for both the three and six months ended June 30, 2024 | Metric | Three Months Ended June 30, 2024 ($ millions) | Three Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Total share-based compensation expense | 1 | 6 | 10 | 15 | (13) Commitments and Contingencies The company is involved in various legal proceedings, including RFS disputes and insurance coverage lawsuits, and has a crude oil supply agreement - The Petroleum Segment has a crude oil supply agreement with Gunvor USA LLC, effective January 1, 2024, covering approximately 20-21% of total crude oil purchases[219][278] - The company recognized an RFS compliance expense of $30 million for Q2 2024 and a benefit of $21 million for YTD Q2 2024, with an estimated liability of $312 million as of June 30, 2024[280] - Ongoing litigation includes RFS disputes with the EPA regarding SRE denials and lawsuits related to insurance coverage for a prior settlement[222][223][250] (14) Business Segments Both segments experienced declines in net sales and operating income for the six months ended June 30, 2024 | Metric (Six Months Ended June 30) | Petroleum Segment 2024 ($ millions) | Nitrogen Fertilizer Segment 2024 ($ millions) | Consolidated 2024 ($ millions) | Petroleum Segment 2023 ($ millions) | Nitrogen Fertilizer Segment 2023 ($ millions) | Consolidated 2023 ($ millions) | | :---------------------------------- | :---------------------------------- | :-------------------------------------------- | :----------------------------- | :---------------------------------- | :-------------------------------------------- | :----------------------------- | | Net Sales | 3,517 | 261 | 3,829 | 3,993 | 409 | 4,523 | | Operating Income (Loss) | 128 | 54 | 149 | 408 | 176 | 554 | | Depreciation and Amortization | 92 | 39 | 149 | 91 | 35 | 141 | | Capital Expenditures | 69 | 10 | 92 | 53 | 10 | 97 | | Total Assets | June 30, 2024 ($ millions) | December 31, 2023 ($ millions) | | :-------------------------- | :-------------------------- | :----------------------------- | | Petroleum Segment | 2,944 | 2,978 | | Nitrogen Fertilizer Segment | 960 | 975 | | Other, including intersegment eliminations | 99 | 754 | | Total Assets | 4,003 | 4,707 | (15) Supplemental Cash Flow Information Cash, cash equivalents, reserved funds, and restricted cash significantly decreased due to the 2025 Notes redemption | Metric | June 30, 2024 ($ millions) | December 31, 2023 ($ millions) | | :---------------------------------------------------------------- | :-------------------------- | :----------------------------- | | Cash and cash equivalents | 586 | 581 | | Reserved funds | — | 598 | | Restricted cash | — | 7 | | Cash, cash equivalents, reserved funds and restricted cash | 586 | 1,186 | - Capital expenditures included in accounts payable were $2 million for the six months ended June 30, 2024, compared to $(3) million in 2023[254] (16) Related Party Transactions Related party transactions include CO sales, transportation reimbursements, and dividends paid to IEP and CVR Partners' unitholders | Related Party Activity (Six Months Ended June 30) | 2024 ($ millions) | 2023 ($ millions) | | :------------------------------------------------ | :---------------- | :---------------- | | Sales to CVRP JV CO Contract | 1 | 2 | | Purchases from Enable Joint Venture Transportation Agreement | 6 | 6 | | Purchases from Midway Joint Venture Agreement | 13 | 10 | | Dividends paid to IEP | 67 | 71 | | CVR Energy Quarterly Dividends (2024) | Per Share | Public Stockholders ($ millions) | IEP ($ millions) | Total ($ millions) | | :------------------------------------ | :-------- | :------------------------------- | :--------------- | :----------------- | | Q4 2023 (Paid March 11, 2024) | $0.50 | 17 | 33 | 50 | | Q1 2024 (Paid May 20, 2024) | $0.50 | 17 | 33 | 50 | | Total 2024 quarterly dividends | $1.00 | 34 | 67 | 101 | | CVR Partners Quarterly Distributions (2023) | Per Common Unit | Public Unitholders ($ millions) | CVR Energy ($ millions) | Total ($ millions) | | :------------------------------------------ | :-------------- | :------------------------------ | :-------------------- | :----------------- | | Total 2023 quarterly distributions | $26.62 | 178 | 104 | 281 | - For Q2 2024, CVR Energy declared a cash dividend of $0.50 per share ($50 million total), with IEP receiving $33 million[289][380] - For Q2 2024, CVR Partners declared a distribution of $1.90 per common unit ($20 million total), with CVR Energy receiving approximately $7 million[261][381] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses CVR Energy's financial condition, operational results, and key factors impacting its segments Important Information Regarding Forward-Looking Statements This section cautions that forward-looking statements are subject to various risks and uncertainties beyond the company's control - Forward-looking statements are subject to risks including volatile margins, commodity prices, regulatory changes, geopolitical conflicts (Russia-Ukraine, Middle East), and operational disruptions[195][205] - The company undertakes no obligation to publicly update or revise forward-looking statements[173] Information About Us SEC filings and investor information are accessible on the company's website, www.CVREnergy.com - SEC filings and investor information are available on www.CVREnergy.com[4](index=4&type=chunk)[174] Company Overview CVR Energy is a diversified holding company with Petroleum and Nitrogen Fertilizer segments, also producing renewable diesel - CVR Energy is a diversified holding company with Petroleum and Nitrogen Fertilizer segments[16][263][294] - The Petroleum Segment is an independent refiner of high-value transportation fuels, while the Nitrogen Fertilizer Segment produces urea ammonium nitrate (UAN) and ammonia[16] - Renewable diesel operations are not allocated or aggregated to the reportable segments[16] Strategy and Goals CVR Energy aims to be a top-tier North American renewable fuels, petroleum refining, and nitrogen-based fertilizer company, focusing on decarbonization - Mission: To be a top-tier North American renewable fuels, petroleum refining, and nitrogen-based fertilizer company[265] - Core Values: Safety, Integrity, Environmental, Health & Safety (EH&S), Continuous Improvement, and Corporate Citizenship[19][265][266][268][297][298] - Decarbonization efforts include completing the renewable diesel unit and pretreater project at Wynnewood Refinery, and exploring sustainable aviation fuels[264][304] Strategic Objectives The company's strategic objectives focus on reliability, market capture, and financial discipline through efficient operations and capital deployment - Strategic Objectives: Reliability (industry-leading utilization), Market Capture (maximize pricing, reduce costs), and Financial Discipline (low operating costs, disciplined capital deployment)[20][299][53] Potential Strategic Transactions IEP and CVR Energy are exploring potential strategic transactions, including acquisitions and options for CVR Partners - IEP and CVR Energy are exploring potential strategic transactions, including acquisitions of refining assets and options for CVR Partners (e.g., acquiring public common units or selling CVR Energy's interest)[332] Recent Developments Recent developments include a fire at the Wynnewood Refinery and ongoing geopolitical conflicts impacting global markets - A fire at the Wynnewood Refinery in April 2024 is estimated to reduce income before income tax expense by approximately $50 million[333] - Geopolitical conflicts (Middle East, Russia-Ukraine) pose significant risks to global oil, fertilizer, and agriculture markets, potentially causing price volatility and supply disruptions[55] Industry Factors and Market Indicators Petroleum Segment earnings are driven by refined product-to-crude oil price spreads and RFS costs, while Nitrogen Fertilizer earnings depend on product prices and feedstock costs - Petroleum Segment earnings are driven by refined product-to-crude oil price spreads and RFS compliance costs[22] - Nitrogen Fertilizer Segment earnings depend on product prices, utilization, and feedstock costs (pet coke, natural gas)[309] - Crude oil and refined product prices are subject to wide fluctuations due to supply/demand, economic conditions, and government regulations[22][302] Current Market Outlook Refined product demand has declined, crack spreads are below mid-cycle levels, and new EPA emission standards are expected to reduce liquid fuel demand - Refined product demand declined 1% nationwide in Q2 2024 compared to pre-pandemic Q2 2019, with crack spreads just below mid-cycle levels[303] - Average monthly RIN prices decreased 55.7% in Q2 2024 compared to Q2 2023, with a blended barrel cost of $3.39 vs. $7.64[60] - New EPA motor vehicle emission standards for 2027 and beyond are expected to significantly reduce internal combustion engine vehicle use and demand for liquid fuels, with EVs projected to account for 68% of new light-duty vehicles by 2032[30][304] Company Initiatives CVR Energy is pursuing initiatives including renewable diesel unit flexibility, a new renewables project, and refinery upgrades - Wynnewood Refinery's renewable diesel unit can be returned to hydrocarbon processing based on market conditions[304] - Evaluating a potential renewables project near Coffeyville to capture synergies with excess hydrogen capacity and carbon capture[304] - Undertaking a $136 million project to replace hydrofluoric acid catalyst at Wynnewood Refinery, expected to expand alkylation unit capacity by ~2,500 bpd and eliminate HF acid inventory[304] - Approved Distillate Yield Improvement Project at Wynnewood Refinery to increase distillate production by up to ~4,000 bpd, with completion expected in 2026 at a cost under $15 million[304] Market Indicators (Petroleum Segment) NYMEX and Group 3 crack spreads decreased in H1 2024, indicating tightening refining margins - NYMEX 2-1-1 crack spread averaged $27.85/bbl for YTD Q2 2024, down from $35.32/bbl for YTD Q2 2023[306] - Group 3 2-1-1 crack spread averaged $19.17/bbl for YTD Q2 2024, down from $33.10/bbl for YTD Q2 2023[306] - WTI crude oil prices averaged $78.81/bbl for YTD 2024, compared to $77.57/bbl for YTD 2023[62] Nitrogen Fertilizer Segment Market Indicators Long-term fundamentals for the U.S. nitrogen fertilizer industry remain strong despite short-term volatility, influenced by crop acres and input costs - Long-term fundamentals for the U.S. nitrogen fertilizer industry are supported by increasing global population, decreasing arable land, and evolving diets[31] - Estimated 91 million corn acres planted in spring 2024 (down 3% YoY) and 86 million soybean acres (up 3% YoY), with economics favoring corn planting[344] - Natural gas prices and third-party pet coke prices have declined into 2024 after being elevated in 2022[346] CVR Partners Initiatives CVR Partners is studying the potential to use natural gas as an optional feedstock at its Coffeyville Fertilizer Facility - CVR Partners is studying the potential to use natural gas as an optional feedstock at its Coffeyville Fertilizer Facility, aiming for feedstock flexibility[314] Results of Operations (Consolidated) Consolidated operating income and net income significantly decreased for both the three and six months ended June 30, 2024 | Metric | Three Months Ended June 30, 2024 ($ millions) | Three Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Operating Income | 27 | 224 | 149 | 554 | | Net Income | 38 | 168 | 128 | 427 | | Net Income Attributable to CVR Energy Stockholders | 21 | 130 | 103 | 325 | - Income tax benefit for YTD Q2 2024 was $10 million, compared to an expense of $101 million for YTD Q2 2023, primarily due to decreased pretax earnings[72] Petroleum Segment Financial Highlights The Petroleum Segment experienced a significant decline in operating income and net income due to decreased crack spreads, reduced production, and the Wynnewood Fire | Metric | Three Months Ended June 30, 2024 ($ millions) | Three Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Operating Income | 10 | 171 | 128 | 408 | | Net Income | 18 | 194 | 145 | 453 | | Refining Margin | 185 | 333 | 476 | 744 | | Refining Margin per Throughput Barrel | $10.94 | $18.21 | $13.68 | $20.68 | - The Wynnewood Fire contributed to decreased production and increased maintenance, impacting financial results[74][321] - RFS related expense declined by $51 million for Q2 2024 and $136 million for YTD Q2 2024, including favorable RINs revaluation adjustments[77][323] - Direct operating expenses per total throughput barrel increased to $6.94 for Q2 2024 and $6.34 for YTD Q2 2024, from $5.46 and $5.68 respectively in 2023, due to increased maintenance and decreased throughput[356][370] Nitrogen Fertilizer Segment Financial Highlights The Nitrogen Fertilizer Segment's operating and net income decreased significantly due to lower product sales prices, despite mixed utilization trends | Metric | Three Months Ended June 30, 2024 ($ millions) | Three Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Operating Income | 34 | 67 | 54 | 176 | | Net Income | 26 | 60 | 39 | 162 | | Net Sales | 133 | 183 | 261 | 409 | | Production/Sales Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Consolidated Ammonia Utilization | 102 % | 100 % | 96 % | 103 % | | Ammonia Production (gross produced, thousands of tons) | 221 | 219 | 414 | 442 | | UAN Production (thousands of tons) | 337 | 339 | 643 | 705 | | Ammonia Sales Volume (thousands of tons) | 43 | 79 | 113 | 121 | | UAN Sales Volume (thousands of tons) | 330 | 329 | 614 | 688 | | Ammonia Product Pricing at Gate ($/ton) | 520 | 707 | 525 | 770 | | UAN Product Pricing at Gate ($/ton) | 268 | 316 | 268 | 390 | - Decreases in operating and net income were primarily driven by lower product sales prices attributable to reduced natural gas prices impacting input costs and market prices[49][328][330][331] - Cost of materials and other decreased due to lower natural gas and refinery pet coke prices[85] Non-GAAP Measures The company utilizes non-GAAP measures like EBITDA and Refining Margin to evaluate performance and liquidity, supplementing GAAP results - Non-GAAP measures include EBITDA, Adjusted EBITDA, Petroleum EBITDA, Nitrogen Fertilizer EBITDA, and Refining Margin[117][118][119][388][389] | Metric | Three Months Ended June 30, 2024 ($ millions) | Three Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Net Income | 38 | 168 | 128 | 427 | | EBITDA | 103 | 300 | 306 | 701 | | Adjusted EBITDA | 87 | 347 | 186 | 680 | | Metric | Three Months Ended June 30, 2024 ($ millions) | Three Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Nitrogen Fertilizer net income | 26 | 60 | 39 | 162 | | Nitrogen Fertilizer EBITDA and Adjusted EBITDA | 54 | 87 | 93 | 177 | | Metric | Three Months Ended June 30, 2024 ($ millions) | Three Months Ended June 30, 2023 ($ millions) | Six Months Ended June 30, 2024 ($ millions) | Six Months Ended June 30, 2023 ($ millions) | | :------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | | Petroleum net income | 18 | 194 | 145 | 453 | | Petroleum EBITDA | 56 | 220 | 227 | 505 | | Petroleum Adjusted EBITDA | 37 | 258 | 104 | 468 | Factors Affecting Comparability of Our Financial Results Capitalized expenditures from planned turnarounds impact financial comparability, with the next turnaround scheduled for 2025 - Capitalized expenditures for turnarounds impact comparability of financial results[89][120] - Total capitalized expenditures were $42 million for YTD Q2 2024, compared to $51 million for YTD Q2 2023[89] - The next planned turnaround is scheduled for 2025 at the Coffeyville Refinery[89][401] Liquidity and Capital Resources The company's liquidity, primarily from operations, was approximately $887 million as of June 30, 2024, supporting capital allocation and cost management - Primary source of liquidity is cash from operations[124][371] - Total liquidity as of June 30, 2024, was approximately $887 million, including $586 million in cash and cash equivalents, $251 million available under CVR Energy ABL, and $50 million under CVR Partners ABL[126] - The company focuses on maintaining adequate liquidity, disciplined capital allocation to high-return assets, and managing operational and general and administrative costs[93][394] Cash Requirements Cash requirements include maintenance and growth capital spending, with the 2025 Notes redeemed in February 2024 | Capital Spending Category (Six Months Ended June 30, 2024) | Actual Maintenance ($ millions) | Actual Growth ($ millions) | Total Actual ($ millions) | | :------------------------------------------------------- | :------------------------------ | :------------------------- | :------------------------ | | Petroleum | 44 | 25 | 69 | | Nitrogen Fertilizer | 9 | 1 | 10 | | Other | 4 | 9 | 13 | | Total | 57 | 35 | 92 | - The 2025 Notes were redeemed on February 15, 2024, for $600 million plus $16 million in accrued interest[378] - The Board declared a $0.50 per share quarterly cash dividend for Q2 2024, totaling $50 million[380] Critical Accounting Estimates No material changes were made to critical accounting estimates during the three and six months ended June 30, 2024 - No material changes to critical accounting estimates during the reporting period[407] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the company's market risks as of and for the three and six months ended June 30, 2024 - No material changes to market risks as of and for the three and six months ended June 30, 2024[150] Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2024, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective as of June 30, 2024[385] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2024[409] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, other information, and exhibits Item 1. Legal Proceedings Legal proceedings are detailed in Note 13 ('Commitments and Contingencies') of Part I, Item 1 of this report - Legal proceedings are detailed in Note 13 ('Commitments and Contingencies') of Part I, Item 1[410] Item 1A. Risk Factors No material changes have occurred from the risk factors previously disclosed in the 2023 Form 10-K - No material changes from previously disclosed risk factors in the 2023 Form 10-K[108] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2024 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2024[140] Item 6. Exhibits This section lists the exhibits filed with the report, including various certifications and Inline XBRL financial information - Exhibits include Rule 13a-14(a)/15(d)-14(a) Certifications from President and CEO, EVP, CFO, Treasurer and Assistant Secretary, and VP, Chief Accounting Officer and Corporate Controller[411] - Includes Section 1350 Certification and Inline XBRL financial information[411] SIGNATURES The report is duly signed by Dane J. Neumann and Jeffrey D. Conaway on July 30, 2024 - Report signed by Dane J. Neumann (Principal Financial Officer) and Jeffrey D. Conaway (Principal Accounting Officer) on July 30, 2024[142][155][413]