CVR Energy(US:CVI)2023-05-02 19:14Financial Data and Key Metrics Changes - The company reported consolidated net income of $259 million and earnings per share of $1.94 for the first quarter of 2023, with EBITDA at $401 million [36][40] - Adjusted EBITDA for the quarter was $334 million, with adjusted earnings per share at $1.44 [19] - Cash provided by operations was $247 million, and free cash flow was $213 million [21] Business Line Data and Key Metrics Changes - In the Petroleum segment, adjusted EBITDA was $210 million, driven by strong product cracks in the Mid-Con [19] - Direct operating expenses in the Petroleum segment increased to $5.90 per barrel compared to $5.57 per barrel in the first quarter of 2022 [10] - The Fertilizer segment achieved adjusted EBITDA of $124 million, with strong production offsetting a decline in nitrogen fertilizer prices [10] Market Data and Key Metrics Changes - Group 3 2-1-1 cracks averaged $34.16 per barrel in the first quarter, while the average for the second quarter to date is $32.32 per barrel [17][29] - RIN prices remained high at $8 per barrel, with an estimated accrued RFS obligation of $582 million as of March 31 [6][9] - Fertilizer prices are approximately $500 for ammonia and $300 per ton for UAN [29] Company Strategy and Development Direction - The company plans to invest additional capital in fertilizer plants to improve reliability and lower carbon footprint [28] - A hedging program was authorized to enter into crack spread swaps for up to 30% of expected gasoline and diesel production for Q2 through Q4 of 2023 and all of 2024 [26] - The company is evaluating a potential transaction to spin off its GP and LP interests in CVR Partners [28] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the near-term outlook, driven by solid contributions from both refining and fertilizer segments [47] - The company noted that while diesel cracks have softened, increased gas cracks have somewhat offset this decline [25] - Management highlighted strong demand for fertilizer due to favorable grain prices and farmer economics [39] Other Important Information - The Board of Directors authorized a first-quarter dividend of $0.50 per share, with an annualized dividend yield of approximately 7% [16] - Total consolidated capital spending for 2023 is estimated to be between $200 million and $226 million [11] Q&A Session Summary Question: Will the hedging strategy affect the modeling of capture rates? - Management acknowledged that the hedges would likely support margins and affect results materially in the upcoming quarters [31][54] Question: What is the outlook for distillate demand? - Management indicated that distillate demand has been strong, but there are signs of a slowdown in the industrial economy [71] Question: Can the $0.50 dividend be sustained? - Management stated that the dividend is evaluated quarterly, and while they aim to maintain it, market conditions will dictate future decisions [58] Question: What are the expected impacts of the E15 blend waiver? - Management believes the E15 waiver will generate more D6 RINs but does not expect it to have a significant impact on gasoline demand [79] Question: What is the sustaining CapEx for the corporation? - Management indicated that sustaining CapEx is estimated to be between $80 million and $100 million [82]