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Par Pacific(PARR) - 2021 Q3 - Earnings Call Transcript
PARRPar Pacific(PARR)2021-11-06 04:36
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Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2021 was 85million,withadjustednetincomeat85 million, with adjusted net income at 0.76 per share, including a 29millionnon−cashmark−to−marketbenefitforRFScompliance[6][22]−Excludingthemark−to−marketbenefit,adjustedEBITDAwas29 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]−Cashflowfromoperationswas0.27 [22] - Cash flow from operations was 53 million, with capital expenditures and turnaround outlays totaling 8million[27]BusinessLineDataandKeyMetricsChanges−RetailsegmentadjustedEBITDAcontributionwas8 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 19million,slightlydownfrom19 million, slightly down from 20 million in Q2 2021 [23] - Refining segment recorded adjusted EBITDA of 64million,asignificantrecoveryfromalossof64 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 41.78perbarrel,withrefinerythroughputatapproximately18,000barrelsperday[14]−Washington′sPacificNorthwest5−2−2−1indexwas41.78 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 6.20perbarrel,withthroughputaveragingapproximately81,000barrelsperday[17]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedondebtreductionasatopprioritywhileexploringsmallcapitalprojectsforfuturegrowth[9][32]−Intermsofenergytransition,thecompanyisexploringopportunitiesinHawaiiandWashington,withafocusonlocalneedsandleveragingregionalstrengths[10][11]−Thecompanypublisheditsinauguralsustainabilityreport,emphasizingitscommitmenttostrongESGstandards[12]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutimprovingmarketconditions,particularlyinHawaii,andnotedthatthesystemiswell−positionedtocaptureopportunities[20]−ThecompanyhighlightedtheneedfortheEPAtoactonsmallrefineryexemptionapplicationsandRVOobligationlevels[8]−ManagementacknowledgedthevolatilityinRINpricesandtheimpactofcrudeoilmarketconditionsonprofitability[7]OtherImportantInformation−Thecompanyisreviewingcapitalallocationoptions,withafocusonreducingthecostofcapitalandevaluatinggrowthopportunitiesinlocalmarkets[9]−Thecompanyexpectsannualcashinterestexpensetobebetween6.20 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 55million,withliquiditytotaling55 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 35millionto35 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]