Par Pacific(PARR) - 2024 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the company Item 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, cash flows, and changes in stockholders' equity, with detailed explanatory notes Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (March 31, 2024 vs. December 31, 2023) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total assets | $3,771,676 | $3,863,950 | $(92,274) | -2.39% | | Total liabilities | $2,460,337 | $2,528,526 | $(68,189) | -2.69% | | Total stockholders' equity | $1,311,339 | $1,335,424 | $(24,085) | -1.80% | | Cash and cash equivalents | $228,298 | $279,107 | $(50,809) | -18.20% | | Inventories | $1,133,069 | $1,160,395 | $(27,326) | -2.35% | | Prepaid and other current assets | $48,320 | $182,405 | $(134,085) | -73.51% | | Obligations under inventory financing agreements | $662,688 | $594,362 | $68,326 | 11.50% | | Other accrued liabilities | $239,027 | $421,762 | $(182,735) | -43.33% | Condensed Consolidated Statements of Operations This statement reports the company's revenues, expenses, and net income or loss over a specific period Condensed Consolidated Statements of Operations (Three Months Ended March 31) | Item | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Revenues | $1,980,835 | $1,685,209 | $295,626 | 17.54% | | Cost of revenues (excluding depreciation) | $1,747,478 | $1,289,020 | $458,458 | 35.57% | | Operating income | $9,515 | $261,402 | $(251,887) | -96.36% | | Net income (loss) | $(3,751) | $237,890 | $(241,641) | -101.58% | | Basic income (loss) per share | $(0.06) | $3.96 | $(4.02) | -101.52% | | Diluted income (loss) per share | $(0.06) | $3.90 | $(3.96) | -101.54% | Condensed Consolidated Statements of Comprehensive Income (Loss) This statement presents net income or loss and other comprehensive income or loss, reflecting all non-owner changes in equity Condensed Consolidated Statements of Comprehensive Income (Loss) (Three Months Ended March 31) | Item | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net income (loss) | $(3,751) | $237,890 | $(241,641) | -101.58% | | Other comprehensive loss, net of tax | $(54) | $(11) | $(43) | 390.91% | | Comprehensive income (loss) | $(3,805) | $237,879 | $(241,684) | -101.60% | Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over a period Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31) | Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net cash provided by operating activities | $25,431 | $139,095 | $(113,664) | -81.71% | | Net cash used in investing activities | $(22,632) | $(2,457) | $(20,175) | 821.12% | | Net cash provided by (used in) financing activities | $(53,606) | $33,754 | $(87,360) | -258.82% | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $(50,807) | $170,392 | $(221,199) | -129.82% | | Cash, cash equivalents, and restricted cash at end of period | $228,639 | $665,318 | $(436,679) | -65.64% | Condensed Consolidated Statements of Changes in Stockholders' Equity This statement details the changes in each component of stockholders' equity over a period, including net income, stock-based compensation, and share repurchases Condensed Consolidated Statements of Changes in Stockholders' Equity (Three Months Ended March 31, 2024) | Item | Balance, Dec 31, 2023 (in thousands) | Stock-based compensation (in thousands) | Purchase of common stock for retirement (in thousands) | Other comprehensive loss (in thousands) | Net loss (in thousands) | Balance, Mar 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------------- | :-------------------------------------- | :--------------------------------------------------- | :------------------------------------ | :---------------------- | :----------------------------------- | | Common Stock (Amount) | $597 | $2 | $(9) | — | — | $590 | | Additional Paid-In Capital | $860,797 | $16,408 | $(4,251) | — | — | $872,954 | | Accumulated Earnings | $465,856 | — | $(32,430) | — | $(3,751) | $429,675 | | Accumulated Other Comprehensive Income | $8,174 | — | — | $(54) | — | $8,120 | | Total Equity | $1,335,424 | $16,410 | $(36,690) | $(54) | $(3,751) | $1,311,339 | - The company repurchased 1,013 thousand shares of common stock for retirement, totaling $36.69 million, during the three months ended March 31, 2024[16] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and additional information supporting the condensed consolidated financial statements Note 1—Overview Par Pacific Holdings, Inc. operates in Refining, Retail, and Logistics segments, supplying fuels to the western US, and holds equity investments in Laramie Energy, YELP, and YPLC - Par Pacific Holdings, Inc. operates in three primary business segments: Refining, Retail, and Logistics[19][20][21] - The company holds a 46.0% equity investment in Laramie Energy, LLC, focused on natural gas development, and through the Billings Acquisition, owns 65% of YELP and 40% of YPLC[22] Note 2—Summary of Significant Accounting Policies This note outlines the company's significant accounting policies, including consolidation principles, GAAP compliance, use of estimates, credit loss allowances, and cost classifications - The condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and include all material adjustments of a normal recurring nature[25] - Cost of revenues (excluding depreciation) includes hydrocarbon-related costs, transportation, crude oil consumed, environmental credit obligations, and derivative gains/losses[30] - Operating expense (excluding depreciation) covers direct labor, maintenance, utilities, property taxes, and environmental compliance costs[31] - No material change in allowances on trade receivables occurred during the three months ended March 31, 2024 or 2023[29] Note 3—Refining and Logistics Equity Investments This note details equity investments in YELP and YPLC, acquired via the Billings Acquisition, accounted for using the equity method - The company acquired a 65% ownership in YELP and a 40% ownership in YPLC on June 1, 2023, as part of the Billings Acquisition[33][37] - YELP operates a cogeneration facility converting petroleum coke into power, while YPLC owns a refined products pipeline from the Montana refinery[33][37] Change in Equity Investment in YELP (Three Months Ended March 31, 2024) | Item | Amount (in thousands) | | :------------------------ | :-------------------- | | Beginning balance | $59,824 | | Equity earnings from YELP | $4,465 | | Depreciation of basis difference | $(348) | | Dividends received | $(5,265) | | Ending balance | $58,676 | Change in Equity Investment in YPLC (Three Months Ended March 31, 2024) | Item | Amount (in thousands) | | :------------------------ | :-------------------- | | Beginning balance | $27,662 | | Equity earnings from YPLC | $1,939 | | Accretion of basis difference | $38 | | Ending balance | $29,639 | Note 4—Investment in Laramie Energy This note details the company's 46.0% equity investment in Laramie Energy, covering its term loan, cash distribution, and equity method accounting - As of March 31, 2024, the company owned a 46.0% interest in Laramie Energy, with an investment balance of $18.8 million, up from $14.3 million at December 31, 2023[39] - Laramie Energy entered a new $205 million term loan agreement in February 2023, allowing future cash distributions, from which the company received $10.7 million in March 2023[40][41] - The company resumed equity method accounting for Laramie Energy effective February 21, 2023, with its equity in net assets exceeding the carrying value by approximately $69.5 million due to prior impairments[42] Change in Equity Investment in Laramie Energy (Three Months Ended March 31, 2024) | Item | Amount (in thousands) | | :-------------------------------- | :-------------------- | | Beginning balance | $14,279 | | Equity earnings (losses) from Laramie Energy | $2,949 | | Accretion of basis difference | $1,614 | | Ending balance | $18,842 | Note 5—Acquisitions This note details the Billings Acquisition, completed June 1, 2023, including the purchase price, asset allocation, and pro forma financial information - The Billings Acquisition was completed on June 1, 2023, for approximately $625.4 million, including acquired working capital[45] - The acquisition included a high-conversion refinery in Billings, Montana, associated logistics assets, a 65% equity interest in YELP, and a 40% equity interest in YPLC[45] Fair Value of Assets Acquired and Liabilities Assumed (Billings Acquisition) | Item | Fair Value (in thousands) | | :-------------------------------- | :------------------------ | | Total assets | $654,907 | | Total liabilities | $29,487 | | Total purchase price | $625,420 | - The company incurred $5.3 million in acquisition costs for the three months ended March 31, 2023[47] Unaudited Pro Forma Financial Information (Three Months Ended March 31, 2023) | Item | Amount (in thousands) | | :---------------- | :-------------------- | | Revenues | $2,198,921 | | Net income | $311,610 | Note 6—Revenue Recognition This note provides information on receivables, deferred revenues, and disaggregated revenue by major product line and segment - Receivables from contracts with customers were $373.1 million as of March 31, 2024, up from $311.1 million at December 31, 2023[51] - Deferred revenue increased to $21.6 million as of March 31, 2024, from $15.2 million at December 31, 2023[51] Disaggregated Revenue by Segment (Three Months Ended March 31, 2024 vs. 2023) | Segment | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Refining | $1,926,616 | $1,615,412 | $311,204 | 19.26% | | Logistics | $71,842 | $52,388 | $19,454 | 37.13% | | Retail | $140,134 | $135,572 | $4,562 | 3.37% | Note 7—Inventories This note details inventory composition, including crude oil, refined products, RINs, environmental credits, and LIFO carrying value differences Inventories (March 31, 2024 vs. December 31, 2023) | Inventory Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Crude oil and feedstocks | $413,438 | $343,856 | $69,582 | 20.24% | | Refined products and blendstock | $501,491 | $491,920 | $9,571 | 1.95% | | Warehouse stock and other | $218,140 | $324,619 | $(106,479) | -32.79% | | Total Inventories | $1,133,069 | $1,160,395 | $(27,326) | -2.35% | - Inventories include $128.7 million in RINs and environmental credits as of March 31, 2024, a decrease from $237.6 million at December 31, 2023[56] - The current replacement cost exceeded the LIFO inventory carrying value by approximately $42.8 million as of March 31, 2024, an increase from $36.1 million at December 31, 2023[57] Note 8—Prepaid and Other Current Assets This note breaks down prepaid and other current assets, including advances to suppliers, derivative collateral, and prepaid environmental credits Prepaid and Other Current Assets (March 31, 2024 vs. December 31, 2023) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Advances to suppliers for crude purchases | $0 | $65,531 | $(65,531) | -100.00% | | Collateral posted with broker for derivative instruments | $5,855 | $21,763 | $(15,908) | -73.01% | | Derivative assets | $16,230 | $43,356 | $(27,126) | -62.56% | | Prepaid environmental credits | $0 | $20,756 | $(20,756) | -100.00% | | Total | $48,320 | $182,405 | $(134,085) | -73.51% | Note 9—Inventory Financing Agreements This note summarizes inventory financing agreements, including the Supply and Offtake Agreement and LC Facility, detailing obligations, capacities, and associated costs - Obligations under inventory financing agreements increased to $662.7 million as of March 31, 2024, from $594.4 million at December 31, 2023[59] - The Supply and Offtake Agreement, supporting Hawaii refining operations, expires on May 31, 2024[62] - The LC Facility due 2024, an uncommitted credit agreement, matures on July 25, 2024, with a borrowing capacity of $120 million[63][64] Inventory Intermediation Fees and Interest Expense (Three Months Ended March 31) | Item | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Supply and Offtake Agreement - Inventory intermediation fees | $19,038 | $13,999 | $5,039 | 36.00% | | Supply and Offtake Agreement - Interest expense and financing costs, net | $1,784 | $1,725 | $59 | 3.42% | | LC Facility due 2024 - Interest expense and financing costs, net | $618 | $0 | $618 | NM | Note 10—Other Accrued Liabilities This note details other accrued liabilities, including payroll, environmental credit obligations, derivative liabilities, and deferred revenue Other Accrued Liabilities (March 31, 2024 vs. December 31, 2023) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Accrued payroll and other employee benefits | $19,998 | $40,533 | $(20,535) | -50.66% | | Environmental credit obligations | $134,493 | $286,904 | $(152,411) | -53.12% | | Derivative liabilities | $22,579 | $27,725 | $(5,146) | -18.56% | | Deferred revenue | $21,553 | $15,220 | $6,333 | 41.61% | | Other | $40,404 | $51,380 | $(10,976) | -21.36% | | Total | $239,027 | $421,762 | $(182,735) | -43.33% | - A portion of environmental credit obligations is expected to be settled with RINs assets and other environmental credits, which had a carrying value of $128.7 million as of March 31, 2024[69] Note 11—Debt This note summarizes outstanding debt, including the ABL Credit Facility and Term Loan Credit Agreement, detailing balances, refinancing, and amendments Outstanding Debt (March 31, 2024 vs. December 31, 2023) | Debt Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | ABL Credit Facility due 2028 | $105,000 | $115,000 | $(10,000) | -8.70% | | Term Loan Credit Agreement due 2030 | $544,500 | $545,875 | $(1,375) | -0.25% | | Other long-term debt | $4,589 | $4,746 | $(157) | -3.31% | | Total debt, net of unamortized discount and deferred financing costs | $639,509 | $650,858 | $(11,349) | -1.74% | - The ABL Credit Facility was amended on March 22, 2024, increasing the total revolver commitment to $1.4 billion[73] - The Term Loan Credit Agreement, entered into on February 28, 2023, for $550 million, was used to refinance existing debt and matures on February 28, 2030[74][75] - In February and March 2023, the company repurchased and cancelled all outstanding 7.75% Senior Secured Notes and 12.875% Senior Secured Notes, incurring $17.7 million in debt extinguishment costs[76][80] Note 12—Derivatives This note describes the company's use of commodity and interest rate derivatives to manage market risks, detailing open contracts, fair values, and net income impact - As of March 31, 2024, the company had net open commodity derivative contracts representing 7,414 thousand barrels (44,156 thousand barrels in purchases and 51,570 thousand barrels in sales), expiring by March 2025[84] - The company uses option collars to economically hedge internally consumed fuel at refineries, with total open option collars of 1,175 thousand barrels as of March 31, 2024[86] - An interest rate collar transaction was entered on April 12, 2023, with a notional amount of $300 million, to manage interest rate risk related to the Term Loan Credit Agreement, expiring May 31, 2026[87] Pre-tax Gains (Losses) from Derivatives (Three Months Ended March 31) | Derivative Type | Statement of Operations Location | 2024 (in thousands) | 2023 (in thousands) | | :-------------------------------- | :----------------------------------- | :------------------ | :------------------ | | Commodity derivatives | Cost of revenues (excluding depreciation) | $(27,360) | $(624) | | J. Aron repurchase obligation derivative | Cost of revenues (excluding depreciation) | $(21,816) | $13,380 | | MLC terminal obligation derivative | Cost of revenues (excluding depreciation) | $0 | $(17,023) | | Interest rate derivatives | Interest expense and financing costs, net | $844 | $0 | Note 13—Fair Value Measurements This note outlines fair value measurements for assets and liabilities, distinguishing between nonrecurring and recurring measurements, and detailing valuation techniques and hierarchy - The fair values of assets acquired and liabilities assumed in the Billings Acquisition were estimated as of June 1, 2023, using various valuation techniques, including cost and market approaches for property, plant, and equipment, and income/market approaches for equity investments[92][95] - Derivative instruments are classified into Level 1 (exchange-traded futures), Level 2 (OTC swaps and options), and Level 3 (embedded derivatives related to J. Aron repurchase obligation due to unobservable contractual price differentials)[95][98] - Gross environmental credit obligations are classified as Level 2 instruments, valued using market prices for RINs and other environmental credits[99] Fair Value of Derivative Instruments and Environmental Obligations (March 31, 2024) | Item | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Gross Fair Value (in thousands) | Net Carrying Value (in thousands) | | :-------------------------------- | :--------------------- | :--------------------- | :--------------------- | :------------------------------ | :------------------------------ | | Commodity derivatives (Assets) | $160,737 | $168,836 | $0 | $329,573 | $16,048 | | Interest rate derivatives (Assets) | $0 | $23 | $0 | $23 | $23 | | Commodity derivatives (Liabilities) | $(144,686) | $(190,854) | $0 | $(335,540) | $(22,015) | | J. Aron repurchase obligation derivative (Liabilities) | $0 | $0 | $(22,208) | $(22,208) | $(22,208) | | Gross environmental credit obligations (Liabilities) | $0 | $(13,439) | $0 | $(13,439) | $(13,439) | Note 14—Leases This note provides information on finance and operating lease liabilities, ROU assets, lease terms, discount rates, costs, and future undiscounted cash flows Right-of-Use Assets and Liabilities (March 31, 2024 vs. December 31, 2023) | Item | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total right-of-use assets | $359,238 | $362,506 | $(3,268) | -0.90% | | Total lease liabilities | $367,315 | $369,608 | $(2,293) | -0.62% | | Weighted-average remaining finance lease term | 10.75 years | 11.02 years | -0.27 years | -2.45% | | Weighted-average remaining operating lease term | 8.57 years | 8.67 years | -0.10 years | -1.15% | | Weighted-average finance discount rate | 7.11% | 8.04% | -0.93% | -11.57% | | Weighted-average operating discount rate | 7.25% | 7.24% | 0.01% | 0.14% | Lease Costs and Income (Three Months Ended March 31) | Lease Cost (Income) Type | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Finance lease cost | $788 | $620 | $168 | 27.10% | | Operating lease cost | $25,817 | $23,869 | $1,948 | 8.16% | | Variable lease cost | $1,962 | $1,442 | $520 | 36.06% | | Short-term lease cost | $2,058 | $2,627 | $(569) | -21.66% | | Net lease cost | $30,625 | $28,558 | $2,067 | 7.24% | | Operating lease income | $(3,865) | $(3,427) | $(438) | 12.78% | Estimated Future Undiscounted Cash Flows for Leases (as of March 31, 2024) | For the year ending December 31, | Finance leases (in thousands) | Operating leases (in thousands) | Total (in thousands) | | :-------------------------------- | :---------------------------- | :------------------------------ | :------------------- | | 2024 (April 1 - Dec 31) | $2,208 | $72,838 | $75,046 | | 2025 | $3,068 | $67,592 | $70,660 | | 2026 | $2,618 | $60,964 | $63,582 | | 2027 | $2,416 | $59,654 | $62,070 | | 2028 | $1,587 | $55,234 | $56,821 | | 2029 | $1,563 | $15,798 | $17,361 | | Thereafter | $8,445 | $118,978 | $127,423 | | Total lease payments | $21,905 | $451,058 | $472,963 | Note 15—Commitments and Contingencies This note outlines legal, tax, and environmental matters, including tax appeals, environmental consent decrees, and compliance obligations for various fuel standards - The company is appealing a $1.4 million tax assessment from the Washington Department of Revenue and is involved in audits and a complaint related to Hawaii foreign trade zone tax exemptions[118][120] - The Hawaii refinery is subject to a 2016 EPA consent decree, with a recent letter from EPA alleging violations of air emission limits, potentially leading to material financial penalties or capital expenditure requirements[123] - The Wyoming refinery has accrued $13.7 million for environmental remediation efforts and expects approximately $11.6 million in costs for a new wastewater treatment system[124][125] - The company is exposed to compliance costs and uncertainties related to the Washington Climate Commitment Act, Clean Fuel Standard, and the federal Renewable Fuel Standard (RFS), which may require purchasing compliance credits or RINs[127][129][130][132] Note 16—Stockholders' Equity This note details the share repurchase program and incentive plans, including authorization expansion, shares repurchased, and stock-based compensation expenses - The Board expanded the share repurchase authorization from $50 million to $250 million on August 2, 2023, with $149.4 million remaining as of March 31, 2024[133] - During the three months ended March 31, 2024, 906 thousand shares were repurchased for $32.4 million under the program[133] Stock-Based Compensation Costs (Three Months Ended March 31) | Award Type | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Restricted Stock Awards | $4,196 | $1,395 | $2,801 | 200.79% | | Restricted Stock Units | $2,721 | $508 | $2,213 | 435.63% | | Stock Option Awards | $9,493 | $414 | $9,079 | 2193.00% | - The company recorded $13.1 million in stock-based compensation expenses for the three months ended March 31, 2024, due to accelerated vesting and modification of equity awards related to the CEO transition[134] Note 17—Income (Loss) per Share This note presents the computation of basic and diluted income (loss) per share, highlighting the net loss and anti-dilutive effect of equity instruments Income (Loss) per Share (Three Months Ended March 31) | Item | 2024 (in thousands, except per share) | 2023 (in thousands, except per share) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Net income (loss) | $(3,751) | $237,890 | | Basic weighted-average common stock shares outstanding | 58,992 | 60,111 | | Diluted weighted-average common stock shares outstanding | 58,992 | 61,047 | | Basic income (loss) per common share | $(0.06) | $3.96 | | Diluted income (loss) per common share | $(0.06) | $3.90 | - For the three months ended March 31, 2024, potential common shares were excluded from diluted EPS computation due to a net loss, making their effect anti-dilutive[139] Note 18—Income Taxes This note explains the company's income tax provision calculation method, effective tax rate factors, and state tax liabilities - Effective for Q1 2024, the company adopted the estimated annual effective tax rate method for income tax provision, citing sustained profitability and confidence in future earnings[140] - The effective tax rate for Q1 2024 differed from statutory rates primarily due to differing state income tax apportionment rates and an adjustment for equity compensation[141] - The company expects to incur state tax liabilities in connection with its refining, retail, and logistics operations, as NOL carryforwards may not offset taxable income apportioned to all states[142] Note 19—Segment Information This note provides summarized financial information for the Refining, Retail, Logistics, and Corporate and Other segments, detailing revenues, operating income, and capital expenditures Segment Revenues and Operating Income (Loss) (Three Months Ended March 31, 2024) | Segment | Revenues (in thousands) | Operating Income (Loss) (in thousands) | | :-------------------------- | :---------------------- | :------------------------------------- | | Refining | $1,926,616 | $22,600 | | Logistics | $71,842 | $20,374 | | Retail | $140,134 | $10,996 | | Corporate, Eliminations and Other | $(157,757) | $(44,455) | | Total | $1,980,835 | $9,515 | Segment Revenues and Operating Income (Loss) (Three Months Ended March 31, 2023) | Segment | Revenues (in thousands) | Operating Income (Loss) (in thousands) | | :-------------------------- | :---------------------- | :------------------------------------- | | Refining | $1,615,412 | $263,137 | | Logistics | $52,388 | $12,608 | | Retail | $135,572 | $13,474 | | Corporate, Eliminations and Other | $(118,163) | $(27,817) | | Total | $1,685,209 | $261,402 | Segment Capital Expenditures (Three Months Ended March 31) | Segment | 2024 (in thousands) | 2023 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Refining | $16,296 | $7,654 | | Logistics | $4,770 | $881 | | Retail | $1,300 | $4,150 | | Corporate, Eliminations and Other | $276 | $528 | | Total | $22,642 | $13,213 | Note 20—Subsequent Events This note discloses a subsequent event: the Term Loan Credit Agreement was amended on April 8, 2024, reducing the Applicable Margin and eliminating the Term SOFR Adjustment - On April 8, 2024, Amendment No. 1 to Term Loan Credit Agreement reduced the Applicable Margin by 50 basis points and eliminated the Term SOFR Adjustment of 10 basis points[147] Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's discussion and analysis of financial condition and results of operations, covering market events, financial performance, operating statistics, non-GAAP measures, liquidity, and critical accounting estimates Overview Par Pacific Holdings, Inc. is a Houston-based energy company supplying renewable and conventional fuels to the western United States through its refining, retail, and logistics segments - Par Pacific Holdings, Inc. is an energy company providing renewable and conventional fuels to the western United States[149] - The company operates in Refining, Retail, and Logistics segments, as detailed in Note 1[149] Recent Events Affecting Comparability of Periods This section discusses market conditions and geopolitical events impacting financial period comparability, noting stable crude oil prices, decreased crack spreads, OPEC cuts, and escalating geopolitical tensions - Brent crude oil pricing remained relatively stable, averaging $81.76/barrel in Q1 2024 compared to $82.10/barrel in Q1 2023[150] - Refined product crack spreads decreased in Q1 2024 compared to Q1 2023[150] - OPEC announced extensions of voluntary production cuts through June 2024, and geopolitical tensions in the Middle East escalated, putting upward pressure on prices[150] - The overall energy price index increased 2.1% year-over-year as of March 31, 2024, but inflation is not believed to have had a material effect on the company's Q1 2024 results[150] Results of Operations The company experienced a significant decline in Q1 2024 financial performance, moving to a net loss primarily due to decreased refining operating income and increased G&A expenses Net Income (Loss) This section analyzes the drivers behind the company's net income or loss for the period - Net income declined from $237.9 million in Q1 2023 to a net loss of $3.8 million in Q1 2024, a decrease of $241.6 million[151] - The decrease was primarily driven by a $240.5 million decrease in refining segment operating income, including a $94.7 million decrease from RINs settlements, a $22.5 million increase in G&A, and a $6.1 million decrease in Laramie equity earnings[151] - Partially offsetting factors included a $17.7 million loss on termination of financing agreements in 2023 (no similar activity in 2024), a $7.8 million improvement in logistics operating income, and a $5.1 million decrease in acquisition costs[151] Adjusted EBITDA and Adjusted Net Income This section presents and explains the company's non-GAAP measures of Adjusted EBITDA and Adjusted Net Income Adjusted EBITDA and Adjusted Net Income (Three Months Ended March 31) | Metric | 2024 (in millions) | 2023 (in millions) | Change (in millions) | % Change | | :---------------- | :----------------- | :----------------- | :------------------- | :------- | | Adjusted EBITDA | $94.7 | $167.6 | $(72.9) | -43.50% | | Adjusted Net Income | $41.7 | $137.5 | $(95.8) | -69.67% | - The decrease in Adjusted EBITDA was primarily due to a $71.4 million decrease in the refining segment, a $9.5 million decrease in corporate and other, and a $2.5 million decrease in retail, partially offset by a $10.5 million increase in logistics[152] - The decline in Adjusted Net Income was related to the Adjusted EBITDA factors, an $8.3 million increase in D&A, and a $2.5 million increase in interest expense, partially offset by a $2.6 million income tax benefit in 2024[153] Consolidated Results of Operations This section provides a consolidated overview of the company's revenues, costs, and operating income Consolidated Results of Operations (Three Months Ended March 31) | Item | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Revenues | $1,980,835 | $1,685,209 | $295,626 | 18% | | Cost of revenues (excluding depreciation) | $1,747,478 | $1,289,020 | $458,458 | 36% | | Operating expense (excluding depreciation) | $153,260 | $83,120 | $70,140 | 84% | | Depreciation and amortization | $32,656 | $24,360 | $8,296 | 34% | | General and administrative expense (excluding depreciation) | $41,755 | $19,286 | $22,469 | 117% | | Equity earnings from refining and logistics investments | $(6,094) | $0 | $(6,094) | NM | | Acquisition and integration costs | $243 | $5,271 | $(5,028) | -95% | | Operating income | $9,515 | $261,402 | $(251,887) | -96% | | Net income (loss) | $(3,751) | $237,890 | $(241,641) | -102% | Operating Income (Loss) by Segment This section breaks down the operating income or loss for each of the company's reportable segments Operating Income (Loss) by Segment (Three Months Ended March 31, 2024 vs. 2023) | Segment | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Refining | $22,600 | $263,137 | $(240,537) | -91.41% | | Logistics | $20,374 | $12,608 | $7,766 | 61.60% | | Retail | $10,996 | $13,474 | $(2,478) | -18.39% | | Corporate, Eliminations and Other | $(44,455) | $(27,817) | $(16,638) | 59.81% | | Total | $9,515 | $261,402 | $(251,887) | -96.36% | Summary of Key Operating Statistics for Refining Segment This section provides key operating statistics for the refining segment, including throughput, sales volume, Adjusted Gross Margin, and production costs per barrel for each refinery Total Refining Segment Key Operating Statistics (Three Months Ended March 31) | Metric | 2024 | 2023 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Feedstocks Throughput (Mbpd) | 180.9 | 132.8 | 48.1 | 36.22% | | Refined product sales volume (Mbpd) | 192.9 | 149.1 | 43.8 | 29.38% | Hawaii Refinery Key Operating Statistics (Three Months Ended March 31) | Metric | 2024 | 2023 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Feedstocks Throughput (Mbpd) | 79.4 | 76.3 | 3.1 | 4.06% | | Refined product sales volume (Mbpd) | 87.6 | 90.4 | -2.8 | -3.10% | | Adjusted Gross Margin per bbl ($/throughput bbl) | $14.00 | $19.11 | $(5.11) | -26.74% | | Production costs per bbl ($/throughput bbl) | $4.89 | $4.54 | $0.35 | 7.71% | Montana Refinery Key Operating Statistics (Three Months Ended March 31) | Metric | 2024 | 2023 | | :-------------------------------- | :----- | :----- | | Feedstocks Throughput (Mbpd) | 53.1 | — | | Refined product sales volume (Mbpd) | 51.5 | — | | Adjusted Gross Margin per bbl ($/throughput bbl) | $13.82 | — | | Production costs per bbl ($/throughput bbl) | $12.44 | — | Washington Refinery Key Operating Statistics (Three Months Ended March 31) | Metric | 2024 | 2023 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Feedstocks Throughput (Mbpd) | 31.4 | 39.6 | -8.2 | -20.71% | | Refined product sales volume (Mbpd) | 36.3 | 40.7 | -4.4 | -10.81% | | Adjusted Gross Margin per bbl ($/throughput bbl) | $6.13 | $11.07 | $(4.94) | -44.62% | | Production costs per bbl ($/throughput bbl) | $6.07 | $4.25 | $1.82 | 42.82% | Wyoming Refinery Key Operating Statistics (Three Months Ended March 31) | Metric | 2024 | 2023 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Feedstocks Throughput (Mbpd) | 17.0 | 16.9 | 0.1 | 0.59% | | Refined product sales volume (Mbpd) | 17.5 | 18.0 | -0.5 | -2.78% | | Adjusted Gross Margin per bbl ($/throughput bbl) | $14.84 | $27.54 | $(12.70) | -46.11% | | Production costs per bbl ($/throughput bbl) | $7.86 | $7.41 | $0.45 | 6.07% | Market Indices (Average $ per barrel) (Three Months Ended March 31) | Index | 2024 | 2023 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | 3-1-2 Singapore Crack Spread | $18.67 | $21.22 | $(2.55) | -12.02% | | RVO Adjusted Pacific Northwest 3-1-1-1 | $20.48 | $25.30 | $(4.82) | -19.05% | | RVO Adjusted USGC 3-2-1 | $21.34 | $26.55 | $(5.21) | -19.62% | | Brent Crude Oil Prices | $81.76 | $82.10 | $(0.34) | -0.41% | Summary of Key Operating Statistics for Retail Segment This section provides key operating statistics for the retail segment, focusing on retail sales volumes for the three months ended March 31 Retail Sales Volumes (Three Months Ended March 31) | Metric | 2024 (thousands of gallons) | 2023 (thousands of gallons) | Change (thousands of gallons) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :---------------------------- | :------- | | Retail sales volumes | 29,431 | 27,123 | 2,308 | 8.51% | Non-GAAP Performance Measures This section defines and reconciles non-GAAP financial measures, including Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA, outlining recent calculation modifications - Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA are non-GAAP measures used to assess financial performance, excluding volatile commodity prices, non-cash items, and timing differences[165] - Beginning Q2 2023, these measures exclude the company's portion of interest, taxes, and depreciation expense from refining and logistics investments acquired in the Billings Acquisition[166] - Beginning Q4 2023, Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA exclude hedge losses/gains on Washington ending inventory and LIFO layer impacts, and environmental obligation mark-to-market adjustments were modified[167] - Beginning Q1 2024, Adjusted Net Income (loss) also excludes other non-operating income and expenses to improve comparability[169] Adjusted Gross Margin This section presents the Adjusted Gross Margin by segment, a non-GAAP measure of profitability Adjusted Gross Margin by Segment (Three Months Ended March 31, 2024 vs. 2023) | Segment | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Refining | $207,110 | $211,629 | $(4,519) | -2.14% | | Logistics | $31,950 | $21,089 | $10,861 | 51.50% | | Retail | $37,082 | $37,344 | $(262) | -0.70% | Adjusted Net Income (Loss) and Adjusted EBITDA This section reconciles Net Income (Loss) to Adjusted Net Income (Loss) and Adjusted EBITDA, providing non-GAAP performance metrics Adjusted Net Income (Loss) and Adjusted EBITDA Reconciliation (Three Months Ended March 31) | Item | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Net Income (Loss) | $(3,751) | $237,890 | $(241,641) | -101.58% | | Inventory valuation adjustment | $625 | $20,858 | $(20,233) | -96.99% | | Environmental obligation mark-to-market adjustments | $(10,263) | $(133,301) | $123,038 | -92.30% | | Unrealized loss (gain) on derivatives | $43,848 | $(13,670) | $57,518 | -420.76% | | Acquisition and integration costs | $243 | $5,271 | $(5,028) | -95.39% | | Debt extinguishment and commitment costs | $0 | $17,720 | $(17,720) | -100.00% | | Severance costs and other non-operating expense | $16,138 | $0 | $16,138 | NM | | Adjusted Net Income | $41,668 | $137,518 | $(95,850) | -69.69% | | Depreciation and amortization | $32,656 | $24,360 | $8,296 | 34.06% | | Interest expense and financing costs, net, excluding unrealized interest rate derivative loss (gain) | $18,728 | $16,250 | $2,478 | 15.25% | | Adjusted EBITDA | $94,698 | $167,635 | $(72,937) | -43.51% | Factors Impacting Segment Results This section analyzes key factors impacting operating income and Adjusted Gross Margin for Refining, Logistics, and Retail segments, highlighting crack spreads, environmental costs, and acquisition contributions Refining This section details the factors influencing the financial performance of the refining segment - Refining operating income decreased by $240.5 million, primarily due to $131.8 million from decreased crack spreads and $125.9 million from increased environmental costs (including a $102.1 million gain in 2023 not repeated in 2024)[174][175] - Refining Adjusted Gross Margin decreased by $4.5 million, driven by lower crack spreads ($131.8 million), lower sales volumes ($17.7 million), and higher feedstock costs ($17.3 million)[178] - Offsetting factors for Adjusted Gross Margin included a $66.8 million contribution from the Montana refinery (Billings Acquisition), $52.4 million from lower purchased product costs, $25.8 million from favorable derivative changes, and $21.0 million from favorable FIFO adjustments[178] - Hawaii refinery's Adjusted Gross Margin per barrel decreased by $5.11 to $14.00, Washington refinery's by $4.94 to $6.13, and Wyoming refinery's by $12.70 to $14.84, mainly due to declining crack spreads[181] Logistics This section details the factors influencing the financial performance of the logistics segment - Logistics operating income increased by $7.8 million to $20.4 million, primarily due to a $7.7 million contribution from the Billings Acquisition logistics assets[176] - Logistics Adjusted Gross Margin increased by $10.9 million to $32.0 million, entirely due to the Billings Acquisition logistics assets[179] Retail This section details the factors influencing the financial performance of the retail segment - Retail operating income decreased by $2.5 million to $11.0 million, mainly due to a $2.2 million increase in operating expenses from higher employee costs[177] - Retail Adjusted Gross Margin decreased slightly by $0.2 million to $37.1 million, as a 12% decrease in fuel margins was largely offset by 9% higher fuel sales volumes and 11% higher merchandise sales margins[180] Discussion of Consolidated Results This section discusses consolidated financial results, explaining drivers behind changes in revenues, costs, operating expenses, equity earnings, and income taxes Revenues This section analyzes the changes and drivers of the company's consolidated revenues - Revenues increased by $0.3 billion to $2.0 billion, primarily due to a $0.5 billion contribution from the Billings Acquisition[182] - This increase was partially offset by a 5% decrease in refining sales volumes across legacy refineries and a decline in average product crack spreads (Singapore 3-1-2, Pacific Northwest 3-1-1-1, and USGC 3-2-1 declined 12%, 19%, and 20% respectively)[182] Cost of Revenues (Excluding Depreciation) This section analyzes the changes and drivers of the company's consolidated cost of revenues, excluding depreciation - Cost of revenues (excluding depreciation) increased by $0.4 billion to $1.7 billion, primarily driven by a $0.4 billion contribution from the Billings Acquisition[183] Operating Expense (Excluding Depreciation) This section analyzes the changes and drivers of the company's consolidated operating expenses, excluding depreciation - Operating expense (excluding depreciation) increased by $70.2 million to $153.3 million, driven by a $60.7 million contribution from the Billings Acquisition, a $4.3 million increase in consulting services, and a $2.5 million increase in repairs and maintenance[184] Depreciation and Amortization This section analyzes the changes and drivers of the company's consolidated depreciation and amortization expenses - Depreciation and amortization increased by $8.3 million to $32.7 million, primarily due to $8.5 million attributable to the Billings Acquisition[185] General and Administrative Expense (Excluding Depreciation) This section analyzes the changes and drivers of the company's consolidated general and administrative expenses, excluding depreciation - General and administrative expense (excluding depreciation) increased by $22.5 million to $41.8 million, mainly due to a $15.9 million increase in employee costs (including $13.1 million for CEO transition stock-based compensation) and a $4.2 million increase in renewable development expense[186] Equity earnings from refining and logistics investments This section analyzes the equity earnings derived from the company's refining and logistics investments - Equity earnings from refining and logistics investments were $6.1 million in Q1 2024, related to YELP ($4.5 million) and YPLC ($1.9 million), following their acquisition in June 2023[187] Acquisition and Integration Expense This section analyzes the acquisition and integration costs incurred by the company - Acquisition and integration costs were immaterial in Q1 2024, a significant decrease from $5.3 million incurred in Q1 2023 related to the Billings Acquisition[188] Par West redevelopment and other costs This section analyzes the redevelopment and other costs associated with the Par West project - Par West redevelopment and other costs decreased by $0.8 million to $2.0 million, primarily due to reduced redevelopment activities[189] Interest Expense and Financing Costs, Net This section analyzes the company's net interest expense and financing costs - Interest expense and financing costs, net, increased by $1.6 million to $17.9 million, driven by a $2.9 million increase in interest expense from higher outstanding debt balances, partially offset by a $1.2 million increase in interest income[190] Debt Extinguishment and Commitment Costs This section analyzes the costs associated with debt extinguishment and commitment - No debt extinguishment and commitment costs were incurred in Q1 2024, compared to $17.7 million in Q1 2023 related to long-term debt refinancing[191] Income Taxes This section analyzes the company's income tax expense or benefit for the period - The company recorded an income tax benefit of $2.6 million in Q1 2024 due to a pre-tax net loss, contrasting with an income tax expense of $0.2 million in Q1 2023[192] Consolidating Condensed Financial Information This section provides supplemental condensed consolidating financial information, segregating accounts for the Parent Guarantor, Par Borrower, and non-guarantor subsidiaries, including an Adjusted EBITDA reconciliation Non-GAAP Financial Measures This section provides a reconciliation of non-GAAP financial measures, specifically Adjusted EBITDA, by entity Adjusted EBITDA Reconciliation by Entity (Three Months Ended March 31, 2024) | Item | Parent Guarantor (in thousands) | Par Borrower and Subsidiaries (in thousands) | Non-Guarantor Subsidiaries and Eliminations (in thousands) | Par Pacific Holdings, Inc. and Subsidiaries (in thousands) | | :------------------------------------------ | :------------------------------ | :------------------------------------------- | :------------------------------------------------------- | :------------------------------------------------------- | | Net income (loss) | $(3,752) | $1,203 | $(1,202) | $(3,751) | | Inventory valuation adjustment | $0 | $625 | $0 | $625 | | Environmental obligation mark-to-market adjustments | $0 | $(10,263) | $0 | $(10,263) | | Unrealized loss on derivatives | $0 | $43,848 | $0 | $43,848 | | Acquisition and integration costs | $0 | $243 | $0 | $243 | | Par West redevelopment and other costs | $0 | $1,971 | $0 | $1,971 | | Severance costs and other non-operating expense | $8,306 | $7,832 | $0 | $16,138 | | Loss (gain) on sale of assets, net | $0 | $51 | $0 | $51 | | Equity earnings from Laramie Energy, LLC, excluding cash distributions | $0 | $0 | $(4,563) | $(4,563) | | Depreciation and amortization | $349 | $32,260 | $47 | $32,656 | | Interest expense and financing costs, net, excluding unrealized interest rate derivative loss (gain) | $(30) | $18,848 | $(90) | $18,728 | | Equity losses (income) from subsidiaries | $(14,360) | $0 | $14,360 | $0 | | Par's portion of interest, taxes, and depreciation expense from refining and logistics investments | $0 | $0 | $1,646 | $1,646 | | Income tax expense (benefit) | $0 | $(189) | $(2,442) | $(2,631) | | Adjusted EBITDA | $(9,487) | $96,429 | $7,756 | $94,698 | Liquidity and Capital Resources This section discusses the company's liquidity position, capital requirements, and cash flow activities, highlighting sources, uses, and sufficiency of resources - As of March 31, 2024, liquidity was $575.0 million, comprising $228.3 million in cash and cash equivalents, $344.8 million available under the ABL Credit Facility, and $1.9 million from the J. Aron Discretionary Draw Facility[205] - The Supply and Offtake Agreement with J. Aron, used to finance Hawaii refinery inventory, expires on May 31, 2024, and the LC Facility matures on July 25, 2024[207] - The ABL Credit Facility was amended in Q1 2024 to increase its capacity to $1.4 billion for refinancing the existing Hawaii intermediation facility[207] - Management believes cash flows from operations and available capital resources will be sufficient to meet capital, turnaround, working capital, and debt service requirements for the next 12 months[207] Cash Flows This section provides a detailed analysis of the company's cash flow activities from operations, investing, and financing Summary of Cash Activities (Three Months Ended March 31) | Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net cash provided by operating activities | $25,431 | $139,095 | $(113,664) | -81.71% | | Net cash used in investing activities | $(22,632) | $(2,457) | $(20,175) | 821.12% | | Net cash provided by (used in) financing activities | $(53,606) | $33,754 | $(87,360) | -258.82% | - Net cash provided by operating activities in Q1 2024 was $25.4 million, driven by a net loss of $3.8 million, non-cash charges of $86.4 million (unrealized derivative loss, D&A, stock-based compensation), and $57.2 million used for changes in operating assets and liabilities (increase in inventory and accounts receivable)[210][211] - Net cash used in investing activities in Q1 2024 was $22.6 million, primarily for capital expenditures[211] - Net cash used in financing activities in Q1 2024 was $53.6 million, mainly due to $34.1 million in common stock repurchases and $18.6 million in net debt repayments[211] Cash Requirements This section discusses the company's ongoing and future cash requirements - No material changes to cash requirements were disclosed, except for the Third Amendment to the ABL Credit Facility on March 22, 2024, which increased the total revolver commitment to $1.4 billion[216] Critical Accounting Estimates This section states no material changes to critical accounting estimates were reported from the Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to critical accounting estimates were reported for the three months ended March 31, 2024[217] Forward-Looking Statements This section serves as a cautionary statement regarding forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ materially - Forward-looking statements involve known and unknown risks, uncertainties, and other important factors, including geopolitical conflicts, market conditions, and regulatory compliance costs[218] - Actual results may differ materially from anticipated outcomes due to factors described in the Annual Report on Form 10-K and this Quarterly Report[222] - The company does not intend to update or revise any forward-looking statements based on new information or future events[222] Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details the company's exposure to market risks, including commodity price, compliance program price, interest rate, and credit risks, outlining management strategies and potential financial impact Commodity Price Risk This section discusses the company's exposure to commodity price volatility and its management through hedging strategies - The company's earnings, cash flows, and liquidity are significantly affected by commodity price volatility, with revenues fluctuating with refined product prices and cost of revenues with crude oil and feedstock prices[223] - A $1 per barrel change in average gross refining margins would change annualized operating income by approximately $65.1 million, based on Q1 2024 throughput of 181 Mbpd[223] - The company uses exchange-traded futures, OTC options, and OTC swaps to economically hedge commodity price risks, with all open contracts at March 31, 2024, settling by March 2025[224] - A $1 change in crude oil price would result in an approximate $6.6 million change to the fair value of derivative instruments and Cost of revenues (excluding depreciation)[224] Compliance Program Price Risk This section discusses the company's exposure to price volatility in compliance credits for environmental programs - The company is exposed to market risks from volatility in RINs prices for Renewable Fuel Standard (RFS) compliance and compliance credits for Washington CCA and Clean Fuel Standard[227][228] - To mitigate risk, the company may purchase RINs or compliance credits when prices are favorable, with some contracts being derivative instruments recorded at fair value[227][228] Interest Rate Risk This section discusses the company's exposure to interest rate fluctuations on its variable-rate debt and its hedging strategies - As of March 31, 2024, $654.1 million of debt principal was subject to floating interest rates, including the ABL Credit Facility, LC Facility, Term Loan Credit Agreement, and Supply and Offtake Agreement[229] - A 1% increase in the variable interest rate would increase Cost of revenues (excluding depreciation) by approximately $3.8 million and Interest expense and financing costs, net, by approximately $7.2 million annually[229] - The company uses an interest rate collar (cap of 5.50%, floor of 2.30% on three-month SOFR) for $300 million notional amount of the Term Loan Credit Agreement, expiring May 31, 2026, to manage interest rate risk[229] Credit Risk This section discusses the company's exposure to credit risk from nonpayment or nonperformance by counterparties - The company is exposed to credit risk from nonpayment or nonperformance by counterparties and monitors customer creditworthiness and sets credit limits accordingly[230] Item 4. CONTROLS AND PROCEDURES This section reports on the effectiveness of disclosure controls and procedures and changes in internal control over financial reporting, including the integration of Billings Acquisition operations Evaluation of Disclosure Controls and Procedures This section reports on management's evaluation of the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2024[231] Changes in Internal Control over Financial Reporting This section reports on any material changes in the company's internal control over financial reporting - No material changes to internal control over financial reporting occurred during Q1 2024, other than those related to the Billings Acquisition integration[232] - The company is integrating Billings refinery operations, control processes, and information systems into its control environment, expecting to include them in the scope of internal control reporting for the year ending December 31, 2024[232] PART II OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits Item 1. LEGAL PROCEEDINGS This section refers to Note 15 for information on legal proceedings, indicating the company's involvement in litigation arising from normal business operations - The company is involved in litigation in the ordinary course of business, with further details provided in Note 15—Commitments and Contingencies[233] [Item 1A. RISK FACT