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Par Pacific(PARR) - 2023 Q3 - Earnings Call Transcript
PARRPar Pacific(PARR)2023-11-08 01:14
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Financial Data and Key Metrics Changes - The company reported record quarterly adjusted EBITDA of 256million,withadjustednetincomeof256 million, with adjusted net income of 3.15 per share, a 10% increase compared to the same period in 2022 [4][19] - The refining segment achieved record quarterly adjusted EBITDA of 234million,upfrom234 million, up from 129 million in the previous quarter [19] - Cash provided by operations totaled 269million,withstrongfreecashflowleadingtorecordendingliquidityof269 million, with strong free cash flow leading to record ending liquidity of 778 million [22] Business Line Data and Key Metrics Changes - The refining and logistics business units delivered total throughput of 198,000 barrels per day, including a full quarter contribution from Billings of 55,000 barrels per day [9] - The logistics segment reported adjusted EBITDA of 29million,anincreasefrom29 million, an increase from 26 million in the previous quarter [20] - The retail segment generated adjusted EBITDA of 17million,slightlydownfrom17 million, slightly down from 18 million in the second quarter, but showed strong profitability on growing fuel volumes and merchandise revenue [21] Market Data and Key Metrics Changes - In Hawaii, third quarter throughput was 82,000 barrels per day, with production costs at 4.50perbarrel[9]−ThequarterlySingaporeIndexaveraged4.50 per barrel [9] - The quarterly Singapore Index averaged 23.39 per barrel, while the U.S. Gulf Coast index was 29.65perbarrel[9][12]−ThecompanyexpectsHawaiicrudedifferentialstoaveragebetween29.65 per barrel [9][12] - The company expects Hawaii crude differentials to average between 6 and 6.50perbarrelinthefourthquarter[11]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonlow−cost,high−returnrenewableprojects,withongoinginitiativesinTacomaandHawaii[7][8]−Thestrategicgrowthinitiativesincludeinvestinginrefiningreliabilityandexpandingretaillocations,withagoalofachievingannualthroughputof200,000barrelsperdayormore[16][50]−Thecompanyaimstorunconsistentlyabove60,000barrelsperdayandislayinggroundworkforimprovedreliability[14]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedstrongdistillatecracksacrossmarkets,whilegasolinecrackshavedeclinedpost−summerdrivingseason[8]−Thecompanyremainsoptimisticaboutitsoperationalperformanceandthepotentialforfuturegrowth,particularlyinrenewablefuels[17][50]−Managementexpressedconfidenceintheabilitytonavigateseasonaldemandfluctuationswithoutstructuralissuesimpactinggasolinedemand[61]OtherImportantInformation−Thecompanyrepurchased6.50 per barrel in the fourth quarter [11] Company Strategy and Development Direction - The company is focused on low-cost, high-return renewable projects, with ongoing initiatives in Tacoma and Hawaii [7][8] - The strategic growth initiatives include investing in refining reliability and expanding retail locations, with a goal of achieving annual throughput of 200,000 barrels per day or more [16][50] - The company aims to run consistently above 60,000 barrels per day and is laying groundwork for improved reliability [14] Management's Comments on Operating Environment and Future Outlook - Management noted strong distillate cracks across markets, while gasoline cracks have declined post-summer driving season [8] - The company remains optimistic about its operational performance and the potential for future growth, particularly in renewable fuels [17][50] - Management expressed confidence in the ability to navigate seasonal demand fluctuations without structural issues impacting gasoline demand [61] Other Important Information - The company repurchased 27 million of common stock during the quarter and has a strong balance sheet with limited financial obligations [6][25] - The company has terminated prior year rent obligations and closed a 120 million letter of credit facility to support its Hawaii refinery [23][24] Q&A Session Summary Question: Thoughts on margin capture and directional trends for the fourth quarter - Management indicated that WCS widening will boost capture, while secondary product market headwinds, particularly asphalt, remain a concern [26][27] Question: Priorities for cash use going forward - Management highlighted flexibility in the balance sheet, focusing on growth investments and share repurchases based on market conditions [31][32] Question: Running at 55,000 barrels per day versus the original target - Management emphasized reliability improvements rather than expanding capabilities, focusing on reducing unplanned outages [35][36] Question: Drivers of same-store sales growth - Management attributed growth to recovering demand in Hawaii and successful rebranding efforts in the Pacific Northwest [37][38] Question: Outlook for refining in China and its impact on supply - Management discussed the balanced production changes in China and the government's management of the refining complex [39][40] Question: Interest expense outlook and quarterly run rate - Management expects the quarterly run rate for interest expense to be around 15 million to $16 million going forward [44][45] Question: Opportunities for M&A in the current market - Management noted that the current strong market makes it challenging to find non-strategic refinery assets for acquisition [48][49] Question: Impact of refinery closures on West Coast market - Management expressed confidence in participating in changes in supply and demand due to potential refinery closures [59] Question: Structural issues for gasoline demand - Management indicated no structural issues, with seasonal trends consistent with historical patterns [61] Question: Green hydrogen project details - Management is developing a facility co-located with the Tacoma refinery to produce green hydrogen and sustainable aviation fuel [64]