Par Pacific(PARR) - 2021 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements This section presents Par Pacific Holdings, Inc.'s unaudited condensed consolidated financial statements for Q2 2021, including balance sheets, income, and cash flow statements, with notes on key transactions Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $1,030,679 | $636,469 | | Total Assets | $2,524,380 | $2,133,861 | | Total Current Liabilities | $1,369,690 | $878,680 | | Total Liabilities | $2,354,688 | $1,887,587 | | Total Stockholders' Equity | $169,692 | $246,274 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,217,525 | $515,301 | $2,106,205 | $1,719,384 | | Operating Loss | ($84,501) | ($25,443) | ($129,163) | ($206,616) | | Net Loss | ($108,958) | ($40,560) | ($171,185) | ($262,897) | | Diluted Loss per Share | ($1.84) | ($0.76) | ($3.01) | ($4.94) | - Net cash from operating activities for the six months ended June 30, 2021, significantly decreased to $1.8 million from $33.8 million year-over-year, while investing activities provided $88.8 million due to asset sales, reversing a $30.2 million outflow[16][270] - The company completed sale-leaseback transactions for 22 retail properties in Q1 2021, generating $112.8 million cash and recognizing a $63.9 million gain[115][116] - An equity offering of 5.75 million common shares in March 2021 generated approximately $87.2 million in net proceeds[146] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2021 financial performance, noting a $109.0 million net loss driven by inventory adjustments and RINs expenses, despite improved Adjusted EBITDA and enhanced liquidity from asset sales and equity offerings - The Q2 2021 net loss widened to $109.0 million from $40.6 million in Q2 2020, primarily due to unfavorable inventory adjustments and increased RINs expenses[177] - Adjusted EBITDA for Q2 2021 improved to a loss of $6.7 million from a $50.3 million loss in Q2 2020, driven by better crack spreads and increased demand[178] - Liquidity was enhanced by a $112.8 million sale-leaseback of 22 retail properties and an $87.2 million equity offering in Q1 2021[173] - As of June 30, 2021, the company's liquidity position stood at $243.5 million, comprising cash on hand and available credit facilities[263] Results of Operations Q2 2021 revenues increased to $1.2 billion due to higher crude prices and refining volumes, but operating loss widened to $84.5 million due to increased costs, RINs expenses, and unfavorable inventory adjustments Segment Operating Income (Loss) (in thousands) | Segment | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Refining | ($99,119) | ($36,757) | | Logistics | $14,542 | $6,303 | | Retail | $12,651 | $16,180 | - The Refining segment's Q2 2021 operating loss increased by $62.3 million year-over-year, mainly due to a $50.3 million rise in RINs expenses and a $158.4 million unfavorable inventory adjustment[208] - The Retail segment's Q2 2021 operating income decreased by $3.5 million year-over-year, driven by a 31% drop in fuel margins despite a 28% increase in fuel sales volumes[210] Liquidity and Capital Resources As of June 30, 2021, the company's liquidity was $243.5 million, bolstered by Q1 2021 sale-leaseback and equity offerings, with a 2021 capital expenditure budget of $35 million to $45 million Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,815 | $33,767 | | Net cash provided by (used in) investing activities | $88,847 | ($30,160) | | Net cash provided by financing activities | $15,358 | $13,247 | - The 2021 capital expenditure and deferred turnaround cost budget ranges from $35 million to $45 million, primarily for the Washington refinery turnaround and sustaining maintenance[273] - Proceeds from the March 2021 equity offering were used to repay $48.7 million of 5.00% Convertible Senior Notes and $36.8 million of 12.875% Senior Secured Notes[266] Quantitative and Qualitative Disclosures About Market Risk The company faces significant market risks from commodity price volatility, with a $1 per barrel refining margin change impacting annualized operating income by $50.7 million, and interest rate risk on $221.9 million of floating-rate debt - A $1 per barrel change in average gross refining margins would impact annualized operating income by approximately $50.7 million[281] - The company is exposed to interest rate risk on $221.9 million of floating-rate debt, where a 1% rate increase would raise annual costs by approximately $3.3 million for Cost of Revenues and $3.5 million for Interest Expense[286] - The company faces market risk from the price volatility of Renewable Identification Numbers (RINs) for Renewable Fuel Standard (RFS) compliance, with 2021 RVO percentages yet to be set by the EPA[285] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during Q2 2021 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2021[289] - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2021[290] PART II OTHER INFORMATION Legal Proceedings The company may be involved in litigation arising from normal business operations, with details on commitments and contingencies provided in Note 13 of the financial statements - The company is party to various lawsuits and contingent matters in the ordinary course of business, with accruals established when an unfavorable outcome is probable and estimable[119][292] Risk Factors The company's business and financial condition continue to be adversely affected by the COVID-19 pandemic, with its ultimate impact remaining uncertain and potentially amplifying other risks - The company's business and financial results have been adversely affected by the COVID-19 pandemic, leading to a global economic slowdown and decreased demand for crude oil and refined products[294] - The ultimate impact of the COVID-19 pandemic on operations and financial condition remains uncertain, depending on evolving factors beyond the company's control[294] - The pandemic could precipitate or aggravate other risk factors identified in the company's 2020 Annual Report on Form 10-K[295] Unregistered Sales of Equity Securities and Use of Proceeds The company has not paid and does not plan to pay common stock dividends due to debt restrictions, and repurchased a small number of shares for employee tax obligations - The company has not paid dividends and does not expect to, as subsidiaries are restricted by ABL Credit Facility and Senior Secured Notes indentures[296] Stock Repurchases - Quarter Ended June 30, 2021 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - April 30, 2021 | 146 | $14.78 | | May 1 - May 31, 2021 | — | — | | June 1 - June 30, 2021 | — | — | | Total | 146 | $14.78 | Defaults Upon Senior Securities This item is reported as not applicable for the period - Not applicable[299] Mine Safety Disclosures This item is reported as not applicable for the period - Not applicable[300] Other Information This section indicates that there is no other information to report for the period - None[301] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate agreements, amendments, indentures, and CEO/CFO certifications - Exhibits include key agreements such as the Second Amended and Restated Supply and Offtake Agreement with J. Aron & Company LLC[305] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are included[306]