Par Pacific(PARR) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2022, the company achieved an adjusted EBITDA of $643 million and an adjusted net income of $475 million, translating to $7.93 per share, with nearly all adjusted net income converted into cash from operations [7][29] - For Q4 2022, adjusted EBITDA was $175 million and adjusted earnings were $133 million, or $2.20 per share, compared to $188 million in Q3 2022 [29] - The company paid down nearly $65 million in funded debt and increased cash on hand by over $375 million, resulting in a year-end net debt of approximately $25 million [8] Business Line Data and Key Metrics Changes - The Refining segment reported $146 million of adjusted EBITDA in Q4 2022, down from $188 million in Q3 2022, impacted by a net price lag benefit and a negative FIFO impact [29] - The Logistics segment's adjusted EBITDA decreased to $16 million in Q4 from $22 million in Q3, primarily due to one-time pipeline maintenance activities [29] - The Retail segment achieved record quarterly adjusted EBITDA of $25 million in Q4, up from $20 million in Q3, driven by increased margins in fuel and merchandise sales [31] Market Data and Key Metrics Changes - Total refining throughput was 134,000 barrels per day, representing 86% utilization in Q4 2022 [17] - The Singapore 3-1-2 index declined by approximately $4 per barrel to $22.84, while the Washington market conditions remained strong at $28 per barrel despite a $5 drop [19][20] - In Hawaii, production costs per barrel were $5.42, influenced by minor planned maintenance activities [17] Company Strategy and Development Direction - The company is focused on maintaining strong operational reliability, integrating the Billings acquisition, growing retail brands, and progressing renewable projects [27] - The strategy includes targeting a June 1 closing for the Billings transaction and achieving synergy targets [27] - The company is also investing in smaller-scale renewable projects to maximize flexibility amid market uncertainties [11] Management's Comments on Operating Environment and Future Outlook - Management noted that global product cracks remain strong due to increasing demand, particularly from China, which has abandoned its zero COVID lockdown policy [9] - The company expects Hawaii production costs to remain competitive in the current market environment, with no major planned maintenance activities in 2023 [18] - Management expressed confidence in the sustainability of recent capture rates in Hawaii refining, supported by strong market conditions [39] Other Important Information - The company completed a refinancing of its funded debt, reducing its cost of capital and enhancing liquidity [8][33] - Total liquidity at year-end was $577 million, consisting of $491 million in cash and $86 million in availability [32] Q&A Session Summary Question: Key factors to consider ahead of the Billings transaction close - Management highlighted the importance of the carveout audit and technology setup, expressing confidence in achieving synergy targets [37] Question: Factors driving higher capture rate outlook for Hawaii refining - Management noted strong refined products market conditions and a rebound in Chinese demand as key drivers [38] Question: Future distributions from Laramie based on profitability - Management indicated that distributions would depend on asset coverage ratios and drilling investment levels, with expectations for annual distributions [41] Question: Impact of Washington's clean fuel standard on refining capture rate - Management stated that the clean fuel standard would primarily impact rack pricing rather than capture rates, with a focus on managing environmental credit balances [43][44] Question: Maintenance and CapEx expectations post-Billings - Management outlined a consistent maintenance cycle with an annual spend of about $60 million for existing assets, with Billings adding approximately $100 million in normalized maintenance and turnaround requirements [48][49] Question: Dynamics driving retail strength and tourism recovery - Management noted gradual recovery in Japanese tourism to Hawaii and positive macro trends supporting retail performance [50] Question: Capital allocation priorities post-Billings - Management emphasized a growth-oriented approach, focusing on integrating Billings and identifying attractive opportunities before considering returning capital to shareholders [52][55]