Par Pacific(PARR)2021-11-06 04:36Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2021 was $85 million, with adjusted net income at $0.76 per share, including a $29 million non-cash mark-to-market benefit for RFS compliance [6][22] - Excluding the mark-to-market benefit, adjusted EBITDA was $56 million and adjusted earnings per share was $0.27 [22] - Cash flow from operations was $53 million, with capital expenditures and turnaround outlays totaling $8 million [27] Business Line Data and Key Metrics Changes - Retail segment adjusted EBITDA contribution was $14 million, with same-store sales fuel volumes up approximately 12% and merchandise sales up about 3.5% compared to Q3 2020 [23] - Logistics segment adjusted EBITDA was $19 million, slightly down from $20 million in Q2 2021 [23] - Refining segment recorded adjusted EBITDA of $64 million, a significant recovery from a loss of $29 million in Q2 2021 [23][24] Market Data and Key Metrics Changes - Wyoming's 3-2-1 index was $41.78 per barrel, with refinery throughput at approximately 18,000 barrels per day [14] - Washington's Pacific Northwest 5-2-2-1 index was $18.59 per barrel, with throughput averaging slightly over 38,000 barrels per day [15] - Hawaii's Singapore 3-1-2 index was $6.20 per barrel, with throughput averaging approximately 81,000 barrels per day [17] Company Strategy and Development Direction - The company is focused on debt reduction as a top priority while exploring small capital projects for future growth [9][32] - In terms of energy transition, the company is exploring opportunities in Hawaii and Washington, with a focus on local needs and leveraging regional strengths [10][11] - The company published its inaugural sustainability report, emphasizing its commitment to strong ESG standards [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving market conditions, particularly in Hawaii, and noted that the system is well-positioned to capture opportunities [20] - The company highlighted the need for the EPA to act on small refinery exemption applications and RVO obligation levels [8] - Management acknowledged the volatility in RIN prices and the impact of crude oil market conditions on profitability [7] Other Important Information - The company is reviewing capital allocation options, with a focus on reducing the cost of capital and evaluating growth opportunities in local markets [9] - The company expects annual cash interest expense to be between $50 million and $55 million, with liquidity totaling $277 million at the quarter's end [28] Q&A Session Summary Question: Capital allocation strategy moving into 2022 - Management emphasized that debt reduction remains the primary focus, with no significant limitations on equity repurchases or dividends at this time [32] Question: OpEx and impact of higher natural gas prices - Management noted that production costs in Hawaii were higher due to maintenance and utility costs, but overall sensitivity to natural gas price changes is low compared to typical refiners [33] Question: Hawaii's crude differential and capturing crack spread uplift - Management acknowledged potential headwinds in capturing crack spread uplift due to price lag and rising backwardation but remained optimistic about market conditions [36] Question: 2022 CapEx guidance - Management indicated that maintenance CapEx is expected to be in the $35 million to $40 million range, with additional planned turnaround activities [37] Question: M&A interest in niche markets - Management confirmed ongoing evaluation of M&A opportunities, particularly in PADD 4 and upper PADD 5, while maintaining a disciplined approach [38] Question: Update on Laramie's profitability and drilling plans - Management reported improved profitability at Laramie but indicated a focus on debt reduction and minimal CapEx for the time being [42] Question: RIN liabilities and 2021 obligations - Management confirmed that after the expected $30 million outflow in Q4, the company would be fully accrued on its 2021 RIN obligations [49]