Par Pacific(PARR) - 2023 Q4 - Annual Report

PART I Item 1. Business Par Pacific Holdings is a growth-oriented energy company operating in the western United States through its Refining, Retail, and Logistics segments - The company's business is organized into three primary segments: Refining, Retail, and Logistics[13][14][15] Refinery Operating Capacity | Refinery Location | Throughput Capacity (Mbpd) | | :--- | :--- | | Kapolei, Hawaii | 94 | | Billings, Montana | 63 | | Tacoma, Washington | 42 | | Newcastle, Wyoming | 20 | | Total | 219 | - The company holds a 46% equity investment in Laramie Energy, LLC, a natural gas producer, and through the Billings Acquisition, owns a 65% interest in YELP and a 40% interest in YPLC[16][57][58] - Macroeconomic factors such as inflation, the aftermath of the COVID-19 pandemic, and geopolitical conflicts significantly affect the company's operations by influencing energy prices, demand, and supply chain logistics[18][19][20] Workforce Composition as of December 31, 2023 | Operating Segment | Number of Employees | | :--- | :--- | | Refining and Logistics | 1,064 | | Retail | 574 | | Corporate | 176 | | Total | 1,814 | - As of December 31, 2023, 331 employees (18% of the total workforce) at the Hawaii, Washington, and Montana refineries were represented by the United Steelworkers Union (USW) with agreements effective through January 31, 2026[93] Item 1A. Risk Factors The company faces a high degree of risk across its operations, regulatory environment, business strategy, and common stock - Operational risks include hazards inherent in refining, such as fires and explosions, and volatility in crude oil and refined product prices (crack spreads), which are influenced by global supply and demand[105][106] - Regulatory risks are substantial, with evolving environmental laws (e.g., GHG emissions, RFS program) potentially increasing operating costs, requiring significant capital investment, and reducing demand for petroleum products[121][122][123] - The company has a substantial level of indebtedness ($650.9 million as of Dec 31, 2023), which requires significant interest payments ($72.5 million for FY2023) and could adversely affect financial condition and flexibility[153] - The Supply and Offtake Agreement with J. Aron, which terminates on May 31, 2024, exposes the company to counterparty credit risk and includes an obligation to repurchase all crude oil and refined product inventories at termination, which could materially impact financial condition[149] - The company's ability to utilize its approximately $0.9 billion of net operating loss (NOL) tax carryforwards could be substantially reduced or eliminated by an "ownership change" under Section 382 of the Internal Revenue Code[161] - A significant portion of the refining workforce is unionized (331 employees under collective bargaining agreements), posing a risk of labor disruptions that could interfere with operations[165] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[182] Item 1C. Cybersecurity The company maintains a cybersecurity program designed to protect its information systems, overseen by the Audit Committee - The Audit Committee of the Board of Directors oversees the company's enterprise risk management process, including cybersecurity threats, and receives quarterly reports from the Chief Information Officer (CIO)[184] - The cybersecurity program is based on recognized best practices, including the National Institute of Standards and Technology (NIST) Cybersecurity Framework[186] - Cybersecurity threats and related incidents have not had a material impact on the company to date[187] Item 2. Properties The company's properties for its refining, logistics, and retail segments are detailed in Item 1, with corporate headquarters in Houston, Texas - The company's principal executive office is located at 825 Town & Country Lane, Suite 1500, Houston, Texas 77024[188] - Assets held by Laramie Energy are located in Garfield, Mesa, and Rio Blanco counties, Colorado, with natural gas produced primarily from the Mesaverde formation[189] Item 3. Legal Proceedings The company is involved in litigation from time to time, with no pending proceedings expected to have a materially adverse effect - Except as described in Note 18—Commitments and Contingencies, no legal proceedings are pending that are expected to have a materially adverse effect on the company[191] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[192] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE under "PARR", with an active share repurchase program and no dividend policy - The company's common stock trades on the New York Stock Exchange (NYSE) under the ticker symbol "PARR"[194] - The company has not paid dividends on its common stock and does not expect to do so in the foreseeable future[195] Q4 2023 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Max Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | Oct 2023 | 230,236 | $32.69 | 229,263 | $206,060,840 | | Nov 2023 | 438,141 | $33.46 | 438,141 | $191,400,332 | | Dec 2023 | 284,379 | $33.66 | 284,261 | $181,831,998 | | Total Q4 | 952,756 | $33.33 | 951,665 | $181,831,998 | - On August 2, 2023, the Board expanded the share repurchase authorization from $50 million to $250 million; during the year ended December 31, 2023, 1.841 million shares were repurchased for a total of $62.1 million[201] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial performance, liquidity, capital resources, and critical accounting estimates, highlighting significant net income growth in 2023 Results of Operations Net income increased significantly in 2023 to $728.6 million, driven by improved refining segment income and a substantial income tax benefit Consolidated Results of Operations (in thousands) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenues | $8,231,955 | $7,321,785 | $4,710,089 | | Operating income (loss) | $680,006 | $437,903 | $(7,619) | | Net income (loss) | $728,642 | $364,189 | $(81,297) | Operating Income by Segment (in thousands) | Segment | 2023 | 2022 | | :--- | :--- | :--- | | Refining | $676,161 | $401,901 | | Logistics | $69,744 | $54,049 | | Retail | $56,603 | $49,238 | | Corporate, Eliminations and Other | $(122,502) | $(67,285) | Non-GAAP Performance (in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Adjusted EBITDA | $696,247 | $643,435 | | Adjusted Net Income | $501,168 | $474,668 | - The increase in refining operating income in 2023 was primarily driven by a $140.0 million decrease in environmental credit costs, a $56.9 million contribution from the Billings Acquisition, and a $79.5 million favorable change in step-out obligations, partially offset by a $112.9 million decrease related to declining crack spreads[236][239] Liquidity and Capital Resources As of December 31, 2023, the company reported strong liquidity of $644.5 million, with significant cash uses for acquisitions and share repurchases - Total liquidity as of December 31, 2023, was $644.5 million, consisting of $279.1 million of cash, $355.0 million of availability under the ABL Credit Facility, and $10.4 million of availability under the J. Aron Discretionary Draw Facility[291] Cash Flow Summary (Year ended Dec 31, 2023, in thousands) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash provided by operating activities | $579,156 | | Net cash used in investing activities | $(659,039) | | Net cash used in financing activities | $(135,597) | - Major cash uses in 2023 included $595.4 million for the Billings Acquisition, $82.3 million in capital expenditures, and $67.8 million for common stock repurchases[300][301] - The company's capital expenditures and deferred turnaround costs budget for 2024 is approximately $220 million to $250 million[309] Critical Accounting Estimates Management identifies several critical accounting estimates, including inventory valuation, fair value measurements, impairment testing, environmental liabilities, and income taxes - Key critical accounting estimates include: Inventory and Obligations Under Inventory Financing Agreements, Fair Value Measurements, Business Combinations, Impairment of Goodwill and Long-lived Assets, Environmental Matters and Asset Retirement Obligations, and Income Taxes[316] - In Q4 2023, management determined it had sufficient positive evidence to release a majority of the valuation allowance against federal net deferred tax assets, resulting in a non-cash deferred tax benefit of $277.7 million for the year[330][667] - The company changed its estimation method for environmental credit obligations in Q4 2023, resulting in net income being $9.0 million higher than it would have been under the previous method[421] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company is significantly affected by commodity price risk, interest rate risk, and compliance program price risk - A $1 per barrel change in average gross refining margins would change annualized operating income by approximately $61.3 million, based on 2023 throughput[331] - The company is exposed to market risk from the volatility in the price of RINs required for RFS compliance and credits for Washington's Climate Commitment Act and Clean Fuel Standard[335][336] - As of December 31, 2023, the company had $665.6 million of indebtedness subject to floating interest rates; a 1% increase in the variable rate would increase annual interest expense by approximately $7.3 million[337] Item 8. Financial Statements and Supplementary Data This section indicates that the consolidated financial statements and supplementary data required are provided starting on page F-1 of the report - The consolidated financial statements and schedule required by this item are set forth beginning on page F-1[340] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - None[341] Item 9A. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2023, excluding the newly acquired Billings business operations - Management concluded that disclosure controls and procedures were effective as of December 31, 2023[342] - The Billings Acquisition, completed on June 1, 2023, was excluded from the scope of management's assessment of internal control over financial reporting for the year ended December 31, 2023, as permitted by SEC guidance[342][347] Item 9B. Other Information During the fourth quarter of 2023, no director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended December 31, 2023[358] PART III Item 10. Directors, Executive Officers, and Corporate Governance Information for this item will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the registrant's definitive proxy statement[360] Item 11. Executive Compensation Information for this item will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the registrant's definitive proxy statement[361] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the registrant's definitive proxy statement[362] Item 13. Certain Relationships and Related Transactions, and Director Independence Information for this item will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the registrant's definitive proxy statement[363] Item 14. Principal Accountant Fees and Services Information for this item will be incorporated by reference from the company's definitive proxy statement - Information is incorporated by reference from the registrant's definitive proxy statement[364] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists the documents filed as part of the Form 10-K, including consolidated financial statements and various exhibits - This section lists all exhibits and financial statement schedules filed with the report, including the Consolidated Financial Statements which are indexed on page F-1[366] Item 16. Form 10-K Summary This item is not applicable - None[690]