Par Pacific Holdings, Inc. (NYSE: PARR) (“Par
Pacific” or the
“Company”) today reported
its financial results for the quarter ended June 30, 2020.
Par Pacific reported a net loss of $40.6
million, or $(0.76) per diluted share, for the quarter ended
June 30, 2020, compared to net income of $28.2 million, or
$0.56 per diluted share, for the same quarter in 2019. Second
quarter 2020 Adjusted Net Loss was $90.8 million, compared to
Adjusted Net Income of $22.4 million in the second quarter of 2019.
Second quarter 2020 Adjusted EBITDA was $(50.3) million, compared
to $68.5 million in the second quarter of 2019. A
reconciliation of reported non-GAAP financial measures to their
most directly comparable GAAP financial measures can be found in
the tables accompanying this news release.
“We are pleased with the record results
from our Retail operations, and the positive Adjusted
EBITDA contribution from our Washington and Wyoming
Refining & Logistics business units. However, Hawaii
Refining & Logistics was extremely challenged by the pandemic,”
said William Pate, President and Chief Executive Officer. “With the
multiple actions that we have taken, we believe we are
well-positioned to manage effectively during a lengthy
pandemic and to thrive as economic activities resume.”
Refining
The Refining segment reported an operating loss
of $36.8 million in the second quarter of 2020, compared to
operating income of $33.2 million in the second quarter of 2019.
Adjusted Gross Margin for the Refining segment was $(22.3) million
in the second quarter of 2020, compared to $98.2 million in the
second quarter of 2019.
Refining Adjusted EBITDA was $(71.7) million in
the second quarter of 2020, compared to $42.8 million in the second
quarter of 2019.
HawaiiThe 3-1-2 Singapore Crack Spread was
$(0.14) per barrel in the second quarter of 2020, compared to $9.39
per barrel in the second quarter of 2019. The Hawaii refineries’
throughput in the second quarter of 2020 was a combined 67 thousand
barrels per day (Mbpd), compared to 116 Mbpd for the same quarter
in 2019. Production costs were $4.45 per throughput barrel in the
second quarter of 2020, compared to $2.82 per throughput barrel in
the same period in 2019.
WashingtonThe Pacific Northwest 5-2-2-1 Index
averaged $11.92 per barrel in the second quarter of 2020, compared
to $17.14 per barrel in the second quarter of 2019. The Washington
refinery’s throughput was 36 Mbpd in the second quarter of 2020,
compared to 39 Mbpd in the second quarter of 2019. Production costs
were $3.76 per throughput barrel in the second quarter of 2020,
compared to $4.42 per throughput barrel in the same period in
2019.
WyomingDuring the second quarter of 2020, the
Wyoming 3-2-1 Index averaged $17.39 per barrel, compared to $28.89
per barrel in the second quarter of 2019. The Wyoming refinery’s
throughput was 13 Mbpd in the second quarter of 2020, compared to
18 Mbpd in the second quarter of 2019. Production costs were $7.72
per throughput barrel in the second quarter of 2020, compared to
$5.58 per throughput barrel in the same period in 2019.
The Wyoming refinery's Adjusted Gross
Margin of $6.22 per barrel during the second quarter of 2020
reflects a FIFO (First in, First out) benefit of
approximately $3.3 million, or $2.79 per barrel.
Retail
The Retail segment reported an operating income
of $16.2 million in the second quarter of 2020, compared to
$12.0 million in the second quarter of 2019. Adjusted Gross
Margin for the Retail segment was $34.2 million in the second
quarter of 2020 and $31.0 million in the same quarter of 2019.
Retail Adjusted EBITDA was a record
$18.8 million in the second quarter of 2020, compared to
$14.6 million in the second quarter of 2019. The Retail
segment reported sales volumes of 22.6 million gallons in the
second quarter of 2020, compared to 31.8 million gallons in
the same quarter of 2019.
Logistics
The Logistics segment reported operating income
of $6.3 million in the second quarter of 2020, compared to
$16.4 million in the second quarter of 2019. Adjusted Gross
Margin for the Logistics segment was $14.5 million in the second
quarter of 2020, compared to $23.4 million in the same quarter
of 2019.
Logistics Adjusted EBITDA was $12.2 million
in the second quarter of 2020, compared to $20.4 million in the
second quarter of 2019.
Laramie Energy
Equity losses from Laramie in the second quarter
of 2020 were $1.9 million, compared to equity earnings of
$0.5 million in the second quarter of 2019. Laramie’s total
net loss was $14.3 million in the second quarter of 2020, compared
to net loss of $2.6 million in the second quarter of 2019.
Laramie’s total Adjusted EBITDAX was $5.4 million in the second
quarter of 2020, compared to $14.2 million in the second quarter of
2019.
Liquidity
Net cash provided by operations totaled $19.3
million for the three months ended June 30, 2020, compared to
$81.0 million for the three months ended June 30, 2019. Net
cash used in investing activities totaled $15.2 million for
the three months ended June 30, 2020, compared to $23.5 million for
the three months ended June 30, 2019. Net cash provided by
financing activities totaled $76.7 million for the three months
ended June 30, 2020, compared to net cash used in financing
activities of $9.9 million for the three months ended June 30,
2019. At June 30, 2020, Par Pacific’s cash balance totaled
$142.9 million, long-term debt totaled $712.4 million, and total
liquidity was $203.8 million.
Conference Call Information
A conference call is scheduled for Monday,
August 10, 2020 at 9:00 a.m. Central Time (10:00 a.m. Eastern
Time). To access the call, please dial 1-877-407-3982 inside the
U.S. or 1-201-493-6780 outside of the U.S. and ask for the Par
Pacific call. Please dial in at least 10 minutes early to register.
The webcast may be accessed online through the Company’s website at
http://www.parpacific.com on the Investor Relations page. A
telephone replay will be available until August 24, 2020 and may be
accessed by calling 1-844-512-2921 inside the U.S. or
1-412-317-6671 outside the U.S. and using the conference ID
13707235.
About Par Pacific
Par Pacific Holdings, Inc. (NYSE: PARR),
headquartered in Houston, Texas, owns and operates
market-leading energy, infrastructure, and retail
businesses. Par Pacific’s strategy is to acquire and develop
businesses in logistically complex markets. Par Pacific owns
and operates one of the largest energy networks in Hawaii with
148,000 bpd of combined refining capacity, a logistics system
supplying the major islands of the state and 91 retail locations.
In the Pacific Northwest and the Rockies, Par Pacific owns and
operates 60,000 bpd of combined refining capacity, related
multimodal logistics systems, and 33 retail locations. Par
Pacific also owns 46% of Laramie Energy, LLC, a natural gas
production company with operations and assets concentrated in
Western Colorado. More information is available at
www.parpacific.com.
Forward-Looking Statements
This news release (and oral statements regarding
the subject matter of this news release, including those made on
the conference call and webcast announced herein) includes certain
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to
qualify for the “safe harbor” from liability established by the
Private Securities Litigation Reform Act of 1995. All statements
other than statements of historical fact are forward-looking
statements. Forward-looking statements include, without limitation,
statements about: expected market conditions; expected refinery
throughput; anticipated capital expenditures, including major
maintenance costs, and their effect on our financial and operating
results, including earnings per share and free cash flow;
anticipated retail sales volumes and on-island sales; the
anticipated financial and operational results of Laramie Energy,
LLC; the amount of our discounted net cash flows and the impact of
our NOL carryforwards thereon; our ability to identify, acquire and
operate energy, related retailing and infrastructure companies with
attractive competitive positions; the timing and expected results
of certain development projects, including Par Pacific’s investment
in an isomerization unit and diesel hydrotreater, as well as the
impact of such investments on Par Pacific’s product mix and
on-island sales; our expectations regarding the impact of COVID-19
on our business, including turnaround delay and an anticipated
reduction in cash outlays, operating expenses, capital expenses and
cost of sales; and other risks and uncertainties detailed in Par
Pacific’s Annual Report on Form 10-K, Quarterly Reports on Form
10-Q and any other documents that Par Pacific files with the
Securities and Exchange Commission (SEC). Additionally, forward
looking statements are subject to certain risks, trends, and
uncertainties, such as changes to financial condition and
liquidity; the volatility of crude oil and refined product prices;
operating disruptions at our refineries resulting from unplanned
maintenance events or natural disasters; uncertainties inherent in
estimating oil, natural gas and NGL reserves; environmental risks;
and risks of political or regulatory changes. Par Pacific cannot
provide assurances that the assumptions upon which these
forward-looking statements are based will prove to have been
correct. Should one of these risks materialize, or should
underlying assumptions prove incorrect, actual results may vary
materially from those expressed or implied in any forward-looking
statements, and investors are cautioned not to place undue reliance
on these forward-looking statements, which are current only as of
this date. Additionally, significant uncertainties remain with
respect to COVID-19 and its economic effects. Due to the
unpredictable and unprecedented nature of the COVID-19 pandemic, we
cannot identify all potential risks to, and impacts on, our
business, including the ultimate adverse economic impact to the
Company’s results of operations, financial position and liquidity.
However, the adverse impact of COVID-19 on the Company has been and
will likely continue to be material. There can be no guarantee that
the operational and financial measures the Company has taken, and
may take in the future, will be fully effective. Par Pacific does
not intend to update or revise any forward-looking statements made
herein or any other forward-looking statements as a result of new
information, future events or otherwise. The Company further
expressly disclaims any written or oral statements made by a third
party regarding the subject matter of this news release.
Contact:Ashimi PatelManager, Investor
Relations(832) 916-3355apatel@parpacific.com
Condensed Consolidated Statements of
Operations(Unaudited)(in
thousands, except per share data)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues |
$ |
515,301 |
|
|
$ |
1,409,409 |
|
|
$ |
1,719,384 |
|
|
$ |
2,600,744 |
|
Operating expenses |
|
|
|
|
|
|
|
Cost of revenues (excluding depreciation) |
441,278 |
|
|
1,251,842 |
|
|
1,651,489 |
|
|
2,312,574 |
|
Operating expense (excluding depreciation) |
67,027 |
|
|
74,830 |
|
|
140,418 |
|
|
148,504 |
|
Depreciation, depletion, and amortization |
22,128 |
|
|
21,919 |
|
|
43,411 |
|
|
42,876 |
|
Impairment expense |
— |
|
|
— |
|
|
67,922 |
|
|
— |
|
General and administrative expense (excluding depreciation) |
10,221 |
|
|
11,379 |
|
|
22,005 |
|
|
23,044 |
|
Acquisition and integration costs |
90 |
|
|
818 |
|
|
755 |
|
|
3,702 |
|
Total operating expenses |
540,744 |
|
|
1,360,788 |
|
|
1,926,000 |
|
|
2,530,700 |
|
Operating income
(loss) |
(25,443 |
) |
|
48,621 |
|
|
(206,616 |
) |
|
70,044 |
|
Other income
(expense) |
|
|
|
|
|
|
|
Interest expense and financing costs, net |
(16,414 |
) |
|
(20,278 |
) |
|
(35,088 |
) |
|
(38,988 |
) |
Debt extinguishment and commitment costs |
— |
|
|
(3,690 |
) |
|
— |
|
|
(9,186 |
) |
Other income, net |
455 |
|
|
2,177 |
|
|
479 |
|
|
2,264 |
|
Change in value of common stock warrants |
— |
|
|
(957 |
) |
|
4,270 |
|
|
(2,239 |
) |
Equity earnings (losses) from Laramie Energy, LLC |
(1,874 |
) |
|
491 |
|
|
(46,905 |
) |
|
792 |
|
Total other income (expense),
net |
(17,833 |
) |
|
(22,257 |
) |
|
(77,244 |
) |
|
(47,357 |
) |
Income (loss) before income
taxes |
(43,276 |
) |
|
26,364 |
|
|
(283,860 |
) |
|
22,687 |
|
Income tax benefit (expense) |
2,716 |
|
|
1,805 |
|
|
20,963 |
|
|
66,574 |
|
Net income (loss) |
$ |
(40,560 |
) |
|
$ |
28,169 |
|
|
$ |
(262,897 |
) |
|
$ |
89,261 |
|
Weighted-average
shares outstanding |
|
|
|
|
|
|
|
Basic |
53,265 |
|
|
49,960 |
|
|
53,246 |
|
|
49,529 |
|
Diluted |
53,265 |
|
|
50,074 |
|
|
53,246 |
|
|
55,580 |
|
|
|
|
|
|
|
|
|
Income (loss) per
share |
|
|
|
|
|
|
|
Basic |
$ |
(0.76 |
) |
|
$ |
0.56 |
|
|
$ |
(4.94 |
) |
|
$ |
1.78 |
|
Diluted |
$ |
(0.76 |
) |
|
$ |
0.56 |
|
|
$ |
(4.94 |
) |
|
$ |
1.75 |
|
Balance Sheet
Data(Unaudited)(in
thousands)
|
June 30, 2020 |
|
December 31, 2019 |
Balance Sheet
Data |
|
|
|
Cash and cash equivalents |
$ |
142,869 |
|
|
$ |
126,015 |
|
Working capital (1) |
(171,184 |
) |
|
(115,866 |
) |
Debt, including current
portion |
712,446 |
|
|
611,931 |
|
Total stockholders’
equity |
392,476 |
|
|
648,242 |
|
________________________________________
(1) |
Working capital is calculated as (i) total current assets,
excluding cash and cash equivalents less (ii) total current
liabilities, excluding current portion of long-term debt. Total
current assets include inventories stated at the lower of cost or
net realizable value. |
Operating StatisticsThe
following table summarizes key operational data:
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Total Refining
Segment |
|
|
|
|
|
|
|
Feedstocks Throughput (Mbpd)
(1) |
115.5 |
|
|
172.9 |
|
|
133.5 |
|
|
167.6 |
|
Refined product sales volume
(Mbpd) (1) |
119.3 |
|
|
176.4 |
|
|
149.5 |
|
|
171.1 |
|
|
|
|
|
|
|
|
|
Hawaii
Refineries |
|
|
|
|
|
|
|
Combined
Feedstocks Throughput (Mbpd) |
66.5 |
|
|
116.2 |
|
|
80.7 |
|
|
114.6 |
|
Par East Throughput (Mbpd) |
66.5 |
|
|
75.8 |
|
|
68.1 |
|
|
74.2 |
|
Par West Throughput (Mbpd) |
— |
|
|
40.4 |
|
|
12.6 |
|
|
40.4 |
|
|
|
|
|
|
|
|
|
Yield (%
of total throughput) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
23.6 |
% |
|
23.1 |
% |
|
24.3 |
% |
|
22.9 |
% |
Distillates |
40.8 |
% |
|
44.5 |
% |
|
45.1 |
% |
|
43.7 |
% |
Fuel oils |
29.0 |
% |
|
24.3 |
% |
|
26.4 |
% |
|
26.6 |
% |
Other products |
2.9 |
% |
|
5.2 |
% |
|
0.2 |
% |
|
3.5 |
% |
Total yield |
96.3 |
% |
|
97.1 |
% |
|
96.0 |
% |
|
96.7 |
% |
|
|
|
|
|
|
|
|
Refined
product sales volume (Mbpd) |
|
|
|
|
|
|
|
On-island sales volume |
69.1 |
|
|
113.5 |
|
|
94.3 |
|
|
110.2 |
|
Exports sales volume |
— |
|
|
4.4 |
|
|
— |
|
|
5.0 |
|
Total refined product sales volume |
69.1 |
|
|
117.9 |
|
|
94.3 |
|
|
115.2 |
|
|
|
|
|
|
|
|
|
Adjusted Gross Margin per bbl ($/throughput bbl) (2) |
$ |
(6.96 |
) |
|
$ |
3.46 |
|
|
$ |
(2.73 |
) |
|
$ |
3.60 |
|
Production costs per bbl ($/throughput bbl) (3) |
4.45 |
|
|
2.82 |
|
|
3.81 |
|
|
2.82 |
|
DD&A per bbl ($/throughput
bbl) |
0.48 |
|
|
0.43 |
|
|
0.39 |
|
|
0.43 |
|
|
|
|
|
|
|
|
|
Washington Refinery |
|
|
|
|
|
|
|
Feedstocks Throughput (Mbpd) (1) |
35.9 |
|
|
39.1 |
|
|
38.4 |
|
38.2 |
|
|
|
|
|
|
|
|
|
Yield (%
of total throughput) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
23.4 |
% |
|
24.1 |
% |
|
23.7 |
% |
|
24.1 |
% |
Distillate |
34.9 |
% |
|
35.2 |
% |
|
35.7 |
% |
|
35.8 |
% |
Asphalt |
19.2 |
% |
|
18.8 |
% |
|
18.8 |
% |
|
17.6 |
% |
Other products |
18.3 |
% |
|
19.2 |
% |
|
19.2 |
% |
|
19.9 |
% |
Total yield |
95.8 |
% |
|
97.3 |
% |
|
97.4 |
% |
|
97.4 |
% |
|
|
|
|
|
|
|
|
Refined
product sales volume (Mbpd) (1) |
36.9 |
|
|
40.9 |
|
|
40.3 |
|
|
40.9 |
|
|
|
|
|
|
|
|
|
Adjusted
Gross Margin per bbl ($/throughput bbl) (2) |
$ |
3.78 |
|
|
$ |
9.76 |
|
|
$ |
7.06 |
|
|
$ |
9.81 |
|
Production costs per bbl ($/throughput bbl) (3) |
3.76 |
|
|
4.42 |
|
|
3.57 |
|
|
4.63 |
|
DD&A
per bbl ($/throughput bbl) |
1.49 |
|
|
1.50 |
|
|
1.46 |
|
|
1.67 |
|
|
|
|
|
|
|
|
|
Wyoming
Refinery |
|
|
|
|
|
|
|
Feedstocks Throughput (Mbpd) |
13.1 |
|
|
17.6 |
|
|
14.4 |
|
|
16.9 |
|
|
|
|
|
|
|
|
|
Yield (%
of total throughput) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
45.7 |
% |
|
48.0 |
% |
|
48.6 |
% |
|
50.2 |
% |
Distillate |
47.8 |
% |
|
45.5 |
% |
|
46.1 |
% |
|
43.7 |
% |
Fuel oils |
2.1 |
% |
|
1.6 |
% |
|
1.8 |
% |
|
1.7 |
% |
Other products |
2.0 |
% |
|
2.8 |
% |
|
1.2 |
% |
|
1.9 |
% |
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Wyoming Refinery
(continued) |
|
|
|
|
|
|
|
Total yield |
97.6 |
% |
|
97.9 |
% |
|
97.7 |
% |
|
97.5 |
% |
|
|
|
|
|
|
|
|
Refined
product sales volume (Mbpd) |
13.3 |
|
|
17.6 |
|
|
14.9 |
|
|
17.3 |
|
|
|
|
|
|
|
|
|
Adjusted
Gross Margin per bbl ($/throughput bbl) (2) |
$ |
6.22 |
|
|
$ |
16.78 |
|
|
$ |
2.39 |
|
|
$ |
15.72 |
|
Production costs per bbl ($/throughput bbl) (3) |
7.72 |
|
|
5.58 |
|
|
7.06 |
|
|
6.59 |
|
DD&A per bbl ($/throughput
bbl) |
4.13 |
|
|
2.97 |
|
|
3.73 |
|
|
2.82 |
|
|
|
|
|
|
|
|
|
Market Indices ($ per barrel) |
|
|
|
|
|
|
|
3-1-2 Singapore Crack Spread (4) |
$ |
(0.14 |
) |
|
$ |
9.39 |
|
|
$ |
3.99 |
|
|
$ |
9.27 |
|
Pacific Northwest 5-2-2-1 Index (5) |
11.92 |
|
|
17.14 |
|
|
12.58 |
|
|
14.31 |
|
Wyoming 3-2-1 Index (6) |
17.39 |
|
|
28.89 |
|
|
16.62 |
|
|
22.03 |
|
|
|
|
|
|
|
|
|
Crude Prices |
|
|
|
|
|
|
|
Brent crude price |
$ |
33.39 |
|
|
$ |
68.47 |
|
|
$ |
42.10 |
|
|
$ |
66.16 |
|
WTI crude price |
28.00 |
|
|
59.91 |
|
|
36.99 |
|
|
57.42 |
|
ANS |
28.17 |
|
|
69.40 |
|
|
40.22 |
|
|
66.76 |
|
Bakken Clearbrook |
24.63 |
|
|
58.49 |
|
|
33.65 |
|
|
56.68 |
|
WCS Hardisty |
18.40 |
|
|
47.35 |
|
|
23.18 |
|
|
45.82 |
|
Brent M1-M3 |
(2.19 |
) |
|
1.42 |
|
|
(1.37 |
) |
|
0.75 |
|
|
|
|
|
|
|
|
|
Retail Segment |
|
|
|
|
|
|
|
Retail sales volumes (thousands of gallons) |
22,586 |
|
|
31,810 |
|
|
51,027 |
|
|
61,544 |
|
|
|
|
|
|
|
|
|
________________________________________
(1) |
Feedstocks throughput and sales volumes per day for the Washington
refinery for the three and six months ended June 30, 2019 are
calculated based on the 91 and 171-day periods for which we owned
the Washington refinery in 2019, respectively. As such, the amounts
for the total refining segment represent the sum of the Hawaii
and Wyoming refineries’ throughput or sales volumes averaged over
the three and six months ended June 30, 2019 plus the
Washington refinery’s throughput or sales volumes averaged over the
periods from April 1, 2019 to June 30, 2019 and
January 11, 2019 to June 30, 2019, respectively. The 2020
amounts for the total refining segment represent the sum of the
Hawaii, Washington, and Wyoming refineries’ throughput or sales
volumes averaged over the three and six months ended June 30,
2020. |
(2) |
We calculate Adjusted Gross Margin per barrel by dividing Adjusted
Gross Margin by total refining throughput. Adjusted Gross Margin
for our Washington refinery is determined under the last-in,
first-out (“LIFO”) inventory costing method. Adjusted Gross Margin
for our other refineries is determined under the under the
first-in, first-out (“FIFO”) inventory costing method. Please see
discussion of Adjusted Gross Margin below. |
(3) |
Management uses production costs per barrel to evaluate performance
and compare efficiency to other companies in the industry. There
are a variety of ways to calculate production costs per barrel;
different companies within the industry calculate it in different
ways. We calculate production costs per barrel by dividing all
direct production costs, which include the costs to run the
refinery including personnel costs, repair and maintenance costs,
insurance, utilities, and other miscellaneous costs, by total
refining throughput. Our production costs are included in Operating
expense (excluding depreciation) on our condensed consolidated
statement of operations, which also includes costs related to our
bulk marketing operations. |
(4) |
After completing the acquisition of certain refining units from
Island Energy Services on December 19, 2018, we began shifting our
Hawaii production profile to supply the local utilities with low
sulfur fuel oil and significantly reduced our high sulfur fuel oil
yield. In 2020, following the implementation of IMO 2020, we
established the 3-1-2 Singapore Crack Spread, or three barrels of
Brent crude oil converted into one barrel of gasoline and two
barrels of distillates (diesel and jet fuel), as a new benchmark
for our Hawaii operations. By removing the high sulfur fuel oil
reference in the index, we believe the 3-1-2 Singapore Crack Spread
is the most representative market indicator of our current
operations in Hawaii. |
(5) |
We believe the Pacific Northwest 5-2-2-1 Index is the most
representative market indicator for our operations in Tacoma,
Washington. The Pacific Northwest 5-2-2-1 Index is computed by
taking two parts gasoline (sub-octane), two parts middle
distillates (ULSD and jet fuel), and one-part fuel oil as created
from a barrel of Alaskan North Slope crude. The 2019 price for the
three and six months ended June 30, 2019 represents the price
averaged over the period from April 1, 2019 to June 30,
2019 and January 11, 2019 to June 30, 2019,
respectively. |
(6) |
The profitability of our Wyoming refinery is heavily influenced by
crack spreads in nearby markets. We believe the Wyoming 3-2-1 Index
is the most representative market indicator for our operations in
Wyoming. The Wyoming 3-2-1 Index is computed by taking two parts
gasoline and one-part distillate (ULSD) as created from three
barrels of West Texas Intermediate Crude Oil (“WTI”). Pricing is
based 50% on applicable product pricing in Rapid City, South
Dakota, and 50% on applicable product pricing in Denver,
Colorado. |
Non-GAAP Performance Measures
Management uses certain financial measures to
evaluate our operating performance that are considered non-GAAP
financial measures. These measures should not be considered a
substitute for, or superior to, measures of financial performance
prepared in accordance with GAAP and our calculations thereof may
not be comparable to similarly titled measures reported by other
companies.
Adjusted Gross Margin
Adjusted Gross Margin is defined as (i)
operating income (loss) plus operating expense (excluding
depreciation); impairment expense; inventory valuation adjustment
(which adjusts for timing differences to reflect the economics of
our inventory financing agreements, including lower of cost or net
realizable value adjustments, the impact of the embedded derivative
repurchase and terminal obligations, and purchase price allocation
adjustments); depreciation, depletion, and amortization
(“DD&A”); Renewable Identification Numbers (“RINs”) loss (gain)
in excess of net obligation (which represents the income statement
effect of reflecting our RINs liability on a net basis); and
unrealized loss (gain) on derivatives or (ii) revenues less cost of
revenues (excluding depreciation) plus inventory valuation
adjustment, unrealized loss (gain) on derivatives, and RINs loss
(gain) in excess of net obligation. We define cost of revenues
(excluding depreciation) as the hydrocarbon-related costs of
inventory sold, transportation costs of delivering product to
customers, crude oil consumed in the refining process, costs to
satisfy our RINs and environmental credit obligations, and certain
hydrocarbon fees and taxes. Cost of revenues (excluding
depreciation) also includes the unrealized gain (loss) on
derivatives and the inventory valuation adjustment that we exclude
from Adjusted Gross Margin. Beginning in the second quarter of
2020, Adjusted Gross Margin also includes the contango gains and
backwardation (losses) associated with our Washington inventory and
intermediation obligation. Prior to the second quarter of 2020,
contango gains and backwardation (losses) captured by our
Washington intermediation agreement were excluded from Adjusted Net
Income (as part of the inventory valuation adjustment). This change
in our presentation was made to reflect the favorable or
unfavorable impact of the market structure on the profitability of
our Washington refinery consistent with the presentation of such
impacts on our other refineries. We have recast the non-GAAP
information for the three and six months ended June 30, 2019 to
conform to the current period presentation.
Management believes Adjusted Gross Margin is an
important measure of operating performance and uses Adjusted Gross
Margin per barrel to evaluate operating performance and compare
profitability to other companies in the industry and to industry
benchmarks. Management believes Adjusted Gross Margin provides
useful information to investors because it eliminates the gross
impact of volatile commodity prices and adjusts for certain
non-cash items and timing differences created by our inventory
financing agreements and lower of cost or net realizable value
adjustments to demonstrate the earnings of the business before
other fixed and variable costs, which are reported separately in
Operating expense (excluding depreciation) and Depreciation,
depletion, and amortization.
Adjusted Gross Margin should not be considered
an alternative to operating income (loss), cash flows from
operating activities, or any other measure of financial performance
or liquidity presented in accordance with GAAP. Adjusted Gross
Margin presented by other companies may not be comparable to our
presentation since each company may define this term differently as
they may include other manufacturing costs and depreciation expense
in cost of revenues.
The following tables present a reconciliation of
Adjusted Gross Margin to the most directly comparable GAAP
financial measure, operating income (loss), on a historical basis,
for selected segments, for the periods indicated (in
thousands):
Three months ended June 30, 2020 |
Refining |
|
Logistics |
|
Retail |
Operating income (loss) |
$ |
(36,757 |
) |
|
$ |
6,303 |
|
|
$ |
16,180 |
|
Operating expense (excluding depreciation) |
49,385 |
|
|
2,247 |
|
|
15,395 |
|
Depreciation, depletion, and amortization |
12,706 |
|
|
5,902 |
|
|
2,664 |
|
Inventory valuation adjustment |
(35,979 |
) |
|
— |
|
|
— |
|
RINs loss (gain) in excess of net obligation |
10,738 |
|
|
— |
|
|
— |
|
Unrealized loss (gain) on derivatives |
(22,431 |
) |
|
— |
|
|
— |
|
Adjusted Gross Margin
(1) |
$ |
(22,338 |
) |
|
$ |
14,452 |
|
|
$ |
34,239 |
|
Three months ended June 30, 2019 |
Refining |
|
Logistics |
|
Retail |
Operating income (loss) |
$ |
33,185 |
|
|
$ |
16,371 |
|
|
$ |
12,026 |
|
Operating expense (excluding depreciation) |
55,393 |
|
|
3,028 |
|
|
16,409 |
|
Depreciation, depletion, and amortization |
14,613 |
|
|
3,989 |
|
|
2,532 |
|
Inventory valuation adjustment |
(22,102 |
) |
|
— |
|
|
— |
|
RINs loss (gain) in excess of net obligation |
2,713 |
|
|
— |
|
|
— |
|
Unrealized loss (gain) on derivatives |
14,379 |
|
|
— |
|
|
— |
|
Adjusted Gross Margin
(1) |
$ |
98,181 |
|
|
$ |
23,388 |
|
|
$ |
30,967 |
|
Six Months Ended June 30, 2020 |
Refining |
|
Logistics |
|
Retail |
Operating income (loss) |
$ |
(205,327 |
) |
|
$ |
25,079 |
|
|
$ |
(1,929 |
) |
Operating expense (excluding depreciation) |
101,629 |
|
|
6,518 |
|
|
32,271 |
|
Depreciation, depletion, and amortization |
25,700 |
|
|
10,569 |
|
|
5,463 |
|
Impairment expense |
38,105 |
|
|
— |
|
|
29,817 |
|
Inventory valuation adjustment |
39,345 |
|
|
— |
|
|
— |
|
RINs loss (gain) in excess of net obligation |
17,340 |
|
|
— |
|
|
— |
|
Unrealized loss (gain) on derivatives |
445 |
|
|
— |
|
|
— |
|
Adjusted Gross
Margin |
$ |
17,237 |
|
|
$ |
42,166 |
|
|
$ |
65,622 |
|
Six Months Ended June 30, 2019 |
Refining |
|
Logistics |
|
Retail |
Operating income |
$ |
47,548 |
|
|
$ |
28,790 |
|
|
$ |
22,090 |
|
Operating expense (excluding depreciation) |
110,648 |
|
|
5,392 |
|
|
32,464 |
|
Depreciation, depletion, and amortization |
28,491 |
|
|
7,885 |
|
|
4,906 |
|
Inventory valuation adjustment |
(18,804 |
) |
|
— |
|
|
— |
|
RINs loss (gain) in excess of net obligation |
(1,799 |
) |
|
— |
|
|
— |
|
Unrealized loss (gain) on derivatives |
20,677 |
|
|
— |
|
|
— |
|
Adjusted Gross Margin
(1) |
$ |
186,761 |
|
|
$ |
42,067 |
|
|
$ |
59,460 |
|
________________________________________
(1) |
There were no impairment losses recorded in Operating income (loss)
by segment for the three months ended June 30, 2020 and the
three and six months ended June 30, 2019. |
Adjusted Net Income (Loss) and Adjusted
EBITDA
Adjusted Net Income (Loss) is defined as Net
income (loss) excluding changes in the value of contingent
consideration and common stock warrants, acquisition and
integration costs, unrealized (gain) loss on derivatives, debt
extinguishment and commitment costs, increase in (release of) tax
valuation allowance and other deferred tax items, inventory
valuation adjustment, severance costs, impairment expense, (gain)
loss on sale of assets, Par’s share of Laramie Energy’s unrealized
loss (gain) on derivatives, RINs loss (gain) in excess of net
obligation, and impairment expense associated with our investment
in Laramie Energy and our share of Laramie Energy’s asset
impairment losses in excess of our basis difference. As noted
above, beginning in the second quarter of 2020, Adjusted Net Income
(Loss) also includes the contango gains and backwardation (losses)
associated with our Washington inventory and intermediation
obligation. Prior to the second quarter of 2020, contango gains and
backwardation (losses) captured by our Washington intermediation
agreement were excluded from Adjusted Net Income (as part of the
inventory valuation adjustment). This change in our presentation
was made to reflect the favorable or unfavorable impact of the
market structure on the profitability of our Washington refinery
consistent with the presentation of such impacts on our other
refineries. We have recast the non-GAAP information for the three
and six months ended June 30, 2019 to conform to the current period
presentation.
Adjusted EBITDA is Adjusted Net Income (Loss)
excluding interest expense and financing costs, income taxes,
DD&A, and equity losses (earnings) from Laramie Energy,
excluding Par’s share of Laramie’s unrealized loss (gain) on
derivatives, the impairment of Par’s investment, and our share of
Laramie Energy’s asset impairment losses in excess of our basis
difference.
We believe Adjusted Net Income (Loss) and
Adjusted EBITDA are useful supplemental financial measures that
allow investors to assess:
- The financial performance of our assets without regard to
financing methods, capital structure, or historical cost
basis;
- The ability of our assets to generate cash to pay interest on
our indebtedness; and
- Our operating performance and return on invested capital as
compared to other companies without regard to financing methods and
capital structure.
Adjusted Net Income (Loss) and Adjusted EBITDA
should not be considered in isolation, or as a substitute for,
operating income (loss), net income (loss), cash flows provided by
operating, investing, and financing activities, or other income or
cash flow statement data prepared in accordance with GAAP. Adjusted
Net Income (Loss) and Adjusted EBITDA presented by other companies
may not be comparable to our presentation as other companies may
define these terms differently.
The following table presents a reconciliation of
Adjusted Net Income (Loss) and Adjusted EBITDA to the most directly
comparable GAAP financial measure, net income (loss), on a
historical basis for the periods indicated (in
thousands):
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net income (loss) |
$ |
(40,560 |
) |
|
$ |
28,169 |
|
|
$ |
(262,897 |
) |
|
$ |
89,261 |
|
Inventory valuation adjustment |
(35,979 |
) |
|
(22,102 |
) |
|
39,345 |
|
|
(18,804 |
) |
RINs loss (gain) in excess of net obligation |
10,738 |
|
|
2,713 |
|
|
17,340 |
|
|
(1,799 |
) |
Unrealized loss (gain) on derivatives |
(22,431 |
) |
|
14,335 |
|
|
445 |
|
|
20,677 |
|
Acquisition and integration costs |
90 |
|
|
818 |
|
|
755 |
|
|
3,702 |
|
Debt extinguishment and commitment costs |
— |
|
|
3,690 |
|
|
— |
|
|
9,186 |
|
Changes in valuation allowance and other deferred tax items
(1) |
(2,714 |
) |
|
(2,318 |
) |
|
(21,087 |
) |
|
(67,669 |
) |
Change in value of common stock warrants |
— |
|
|
957 |
|
|
(4,270 |
) |
|
2,239 |
|
Severance costs |
96 |
|
|
— |
|
|
245 |
|
|
— |
|
Impairment expense |
— |
|
|
— |
|
|
67,922 |
|
|
— |
|
Impairment of Investment in Laramie Energy, LLC (2) |
— |
|
|
— |
|
|
45,294 |
|
|
— |
|
Par’s share of Laramie Energy’s unrealized loss (gain) on
derivatives (2) |
— |
|
|
(3,859 |
) |
|
(1,110 |
) |
|
(5,090 |
) |
Adjusted Net Income
(Loss) (3) |
(90,760 |
) |
|
22,403 |
|
|
(118,018 |
) |
|
31,703 |
|
Depreciation, depletion, and amortization |
22,128 |
|
|
21,919 |
|
|
43,411 |
|
|
42,876 |
|
Interest expense and financing costs, net |
16,414 |
|
|
20,278 |
|
|
35,088 |
|
|
38,988 |
|
Equity losses (earnings) from Laramie Energy, LLC, excluding Par’s
share of unrealized loss (gain) on derivatives and impairment
losses |
1,874 |
|
|
3,368 |
|
|
2,721 |
|
|
4,298 |
|
Income tax expense (benefit) |
(2 |
) |
|
513 |
|
|
124 |
|
|
1,095 |
|
Adjusted
EBITDA |
$ |
(50,346 |
) |
|
$ |
68,481 |
|
|
$ |
(36,674 |
) |
|
$ |
118,960 |
|
___________________________________
(1) |
Includes increases in (releases of) our valuation allowance
associated with business combinations and changes in deferred tax
assets and liabilities that are not offset by a change in the
valuation allowance. These tax expenses (benefits) are included in
Income tax benefit on our consolidated statements of
operations. |
(2) |
Included in Equity earnings (losses) from Laramie Energy, LLC on
our condensed consolidated statements of operations. |
(3) |
For the three and six months ended June 30, 2020 and 2019,
there was no (gain) loss on sale of assets or change in value of
contingent consideration. |
|
|
The following table sets forth the computation of basic and
diluted Adjusted Net Income (Loss) per share (in thousands, except
per share amounts):
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Adjusted Net Income (loss) |
$ |
(90,760 |
) |
|
$ |
22,403 |
|
|
$ |
(118,018 |
) |
|
$ |
31,703 |
|
Undistributed Adjusted Net
Income allocated to participating securities (1) |
— |
|
|
258 |
|
|
— |
|
|
363 |
|
Adjusted Net Income
attributable to common stockholders |
(90,760 |
) |
|
22,145 |
|
|
(118,018 |
) |
|
31,340 |
|
Plus: effect of convertible
securities |
— |
|
|
2,452 |
|
|
— |
|
|
— |
|
Numerator for diluted income
per common share |
$ |
(90,760 |
) |
|
$ |
24,597 |
|
|
$ |
(118,018 |
) |
|
$ |
31,340 |
|
|
|
|
|
|
|
|
|
Basic weighted-average common
stock shares outstanding |
53,265 |
|
|
49,960 |
|
|
53,246 |
|
|
49,529 |
|
Add dilutive effects of common
stock equivalents (2) |
— |
|
|
5,712 |
|
|
— |
|
|
69 |
|
Diluted weighted-average
common stock shares outstanding |
53,265 |
|
|
55,672 |
|
|
53,246 |
|
|
49,598 |
|
|
|
|
|
|
|
|
|
Basic Adjusted Net Income
(loss) per common share |
$ |
(1.70 |
) |
|
$ |
0.44 |
|
|
$ |
(2.22 |
) |
|
$ |
0.63 |
|
Diluted Adjusted Net Income
(loss) per common share |
$ |
(1.70 |
) |
|
$ |
0.44 |
|
|
$ |
(2.22 |
) |
|
$ |
0.63 |
|
________________________________________
(1) |
Participating securities include restricted stock that has been
issued but has not yet vested during the three and six months ended
June 30, 2019. These shares vested during the year ended
December 31, 2019. |
(2) |
Entities with a net loss from continuing operations are prohibited
from including potential common shares in the computation of
diluted per share amounts. We have utilized the basic shares
outstanding to calculate both basic and diluted Adjusted Net Loss
per common share for the three and six months ended June 30,
2020. |
Adjusted EBITDA by Segment
Adjusted EBITDA by segment is defined as
Operating income (loss) by segment excluding depreciation,
depletion, and amortization expense, inventory valuation
adjustment, unrealized loss (gain) on derivatives, severance costs,
impairment expense, acquisition and integration costs, other
income/expense, and RINs loss (gain) in excess of net obligation.
Adjusted EBITDA for the Corporate and Other segment also includes
Other income, net, which is presented below operating income (loss)
on our consolidated statements of operations. As noted above,
beginning in the second quarter of 2020, Adjusted EBITDA by segment
also includes the contango gains and backwardation (losses)
associated with our Washington inventory and intermediation
obligation. Prior to the second quarter of 2020, contango gains and
backwardation (losses) captured by our Washington intermediation
agreement were excluded from Adjusted EBITDA by segment (as part of
the inventory valuation adjustment). We have recast the non-GAAP
information for the three and six months ended June 30, 2019 to
conform to the current period presentation.
We believe Adjusted EBITDA by segment is a
useful supplemental financial measure to evaluate the economic
performance of our segments without regard to financing methods,
capital structure, or historical cost basis. The following table
presents a reconciliation of Adjusted EBITDA to the most directly
comparable GAAP financial measure, operating income (loss), on a
historical basis, for selected segments, for the periods indicated
(in thousands):
|
Three Months Ended June 30, 2020 |
|
Refining |
|
Logistics |
|
Retail |
|
Corporate and Other |
Operating income (loss) by segment |
$ |
(36,757 |
) |
|
$ |
6,303 |
|
|
$ |
16,180 |
|
|
$ |
(11,169 |
) |
Depreciation, depletion, and
amortization |
12,706 |
|
|
5,902 |
|
|
2,664 |
|
|
856 |
|
Inventory valuation
adjustment |
(35,979 |
) |
|
— |
|
|
— |
|
|
— |
|
RINs loss (gain) in excess of
net obligation |
10,738 |
|
|
— |
|
|
— |
|
|
— |
|
Unrealized loss (gain) on
derivatives |
(22,431 |
) |
|
— |
|
|
— |
|
|
— |
|
Acquisition and integration
costs |
— |
|
|
— |
|
|
— |
|
|
90 |
|
Severance costs |
— |
|
|
— |
|
|
— |
|
|
96 |
|
Other income/expense |
— |
|
|
— |
|
|
— |
|
|
455 |
|
Adjusted EBITDA
(1) |
$ |
(71,723 |
) |
|
$ |
12,205 |
|
|
$ |
18,844 |
|
|
$ |
(9,672 |
) |
|
Three Months Ended June 30, 2019 |
|
Refining |
|
Logistics |
|
Retail |
|
Corporate and Other |
Operating income (loss) by segment |
$ |
33,185 |
|
|
$ |
16,371 |
|
|
$ |
12,026 |
|
|
$ |
(12,961 |
) |
Depreciation, depletion, and
amortization |
14,613 |
|
|
3,989 |
|
|
2,532 |
|
|
785 |
|
Inventory valuation
adjustment |
(22,102 |
) |
|
— |
|
|
— |
|
|
— |
|
RINs loss (gain) in excess of
net obligation |
2,713 |
|
|
— |
|
|
— |
|
|
— |
|
Unrealized loss (gain) on
derivatives |
14,379 |
|
|
— |
|
|
— |
|
|
(44 |
) |
Acquisition and integration
costs |
— |
|
|
— |
|
|
— |
|
|
818 |
|
Other income/expense |
— |
|
|
— |
|
|
— |
|
|
2,177 |
|
Adjusted EBITDA
(1) |
$ |
42,788 |
|
|
$ |
20,360 |
|
|
$ |
14,558 |
|
|
$ |
(9,225 |
) |
|
Six Months Ended June 30, 2020 |
|
Refining |
|
Logistics |
|
Retail |
|
Corporate and Other |
Operating income (loss) by segment |
$ |
(205,327 |
) |
|
$ |
25,079 |
|
|
$ |
(1,929 |
) |
|
$ |
(24,439 |
) |
Depreciation, depletion and
amortization |
25,700 |
|
|
10,569 |
|
|
5,463 |
|
|
1,679 |
|
Inventory valuation
adjustment |
39,345 |
|
|
— |
|
|
— |
|
|
— |
|
RINs loss (gain) in excess of
net obligation |
17,340 |
|
|
— |
|
|
— |
|
|
— |
|
Unrealized loss (gain) on
derivatives |
445 |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and integration
costs |
— |
|
|
— |
|
|
— |
|
|
755 |
|
Severance costs |
88 |
|
|
— |
|
|
— |
|
|
157 |
|
Impairment expense |
38,105 |
|
|
— |
|
|
29,817 |
|
|
— |
|
Other income/expense |
— |
|
|
— |
|
|
— |
|
|
479 |
|
Adjusted
EBITDA |
$ |
(84,304 |
) |
|
$ |
35,648 |
|
|
$ |
33,351 |
|
|
$ |
(21,369 |
) |
|
Six Months Ended June 30, 2019 |
|
Refining |
|
Logistics |
|
Retail |
|
Corporate and Other |
Operating income (loss) by segment |
$ |
47,548 |
|
|
$ |
28,790 |
|
|
$ |
22,090 |
|
|
$ |
(28,384 |
) |
Depreciation, depletion and
amortization |
28,491 |
|
|
7,885 |
|
|
4,906 |
|
|
1,594 |
|
Inventory valuation
adjustment |
(18,804 |
) |
|
— |
|
|
— |
|
|
— |
|
RINs loss (gain) in excess of net
obligation |
(1,799 |
) |
|
— |
|
|
— |
|
|
— |
|
Unrealized loss (gain) on
derivatives |
20,677 |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and integration
costs |
— |
|
|
— |
|
|
— |
|
|
3,702 |
|
Other income/expense |
— |
|
|
— |
|
|
— |
|
|
2,264 |
|
Adjusted EBITDA
(1) |
$ |
76,113 |
|
|
$ |
36,675 |
|
|
$ |
26,996 |
|
|
$ |
(20,824 |
) |
________________________________________
(1) |
There were no impairment losses or severance costs recorded in
Operating income (loss) by segment for the three and six months
ended June 30, 2019. There were no impairment losses recorded
in Operating income (loss) by segment for the three months ended
June 30, 2020. |
Laramie Energy Adjusted
EBITDAX
Adjusted EBITDAX is defined as net income (loss)
excluding commodity derivative loss (gain), loss (gain) on settled
derivative instruments, interest expense, non-cash preferred
dividend, depreciation, depletion, amortization, and accretion,
exploration and geological and geographical expense, bonus accrual,
equity-based compensation expense, loss (gain) on disposal of
assets, pipeline (payment) deficiency accrual, and expired acreage
(non-cash). We believe Adjusted EBITDAX is a useful supplemental
financial measure to evaluate the economic and operational
performance of exploration and production companies such as Laramie
Energy.
The following table presents a reconciliation of Laramie
Energy’s Adjusted EBITDAX to the most directly comparable GAAP
financial measure, net income (loss) for the periods indicated (in
thousands):
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net income (loss) |
$ |
(14,349 |
) |
|
$ |
(2,570 |
) |
|
$ |
(13,775 |
) |
|
$ |
(5,553 |
) |
Commodity derivative loss
(gain) |
1,542 |
|
|
(11,390 |
) |
|
(1,909 |
) |
|
959 |
|
Gain (loss) on settled
derivative instruments |
2,597 |
|
|
3,000 |
|
|
3,634 |
|
|
(12,024 |
) |
Interest expense and loan
fees |
2,217 |
|
|
3,832 |
|
|
4,511 |
|
|
6,824 |
|
Non-cash preferred
dividend |
1,663 |
|
|
(12 |
) |
|
3,270 |
|
|
1,232 |
|
Depreciation, depletion,
amortization, and accretion |
10,714 |
|
|
21,661 |
|
|
20,658 |
|
|
43,650 |
|
Exploration and geological and
geographical expense |
154 |
|
|
166 |
|
|
192 |
|
|
228 |
|
Bonus accrual |
675 |
|
|
(2,554 |
) |
|
284 |
|
|
(1,817 |
) |
Equity-based compensation
expense |
8 |
|
|
71 |
|
|
16 |
|
|
141 |
|
Loss (gain) on disposal of
assets |
21 |
|
|
1,593 |
|
|
182 |
|
|
1,512 |
|
Pipeline (payment) deficiency
accrual |
— |
|
|
— |
|
|
— |
|
|
(1,162 |
) |
Expired acreage
(non-cash) |
126 |
|
|
397 |
|
|
163 |
|
|
419 |
|
Total Adjusted
EBITDAX |
$ |
5,368 |
|
|
$ |
14,194 |
|
|
$ |
17,226 |
|
|
$ |
34,409 |
|
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