CVR ENERGY INC Q4 FY2024 earnings call

Management Statement and Operational Highlights: - Full year 2024 consolidated net income was $45 million and EBITDA was $394 million. - Fourth quarter consolidated net income was $40 million and EBITDA was $122 million. - Petroleum segment: Fourth quarter throughput ~214,000 bbl/day, crude utilization ~94% despite December run cuts, light product yield 103%, benchmark cracks softened, RIN prices increased. - Fertilizer segment: Both facilities ran well with 96% ammonia utilization, good demand and strong shipments. - Renewables segment: Began separately reporting results, $9 million EBITDA in Q4 2024, margin $0.79 per gallon in Q4, reduced rated capacity of renewable diesel unit due to catalyst limitations. - Liquidity: Ended Q4 with $987 million cash balance, completed term loan issuance and Midway pipeline sale to increase liquidity.

For the full year 2024, CVR Energy's petroleum segment generated $223 million of EBITDA, the fertilizer segment generated $179 million of EBITDA, and the renewables segment generated $3 million of EBITDA. For the fourth quarter, consolidated net income was $40 million and EBITDA was $122 million. In the petroleum segment, fourth quarter combined total throughput was approximately 214,000 barrels per day, crude utilization was approximately 94% of nameplate capacity despite planned run cuts in December, and light product yield was 103% on crude oil processed. In the fertilizer segment, both facilities ran well with 96% ammonia utilization. The renewables segment had adjusted EBITDA of $9 million in the fourth quarter, a significant improvement from the prior year.

Guidance: - For full year 2025, estimated total consolidated capital spending to be approximately $165 to $205 million and turnaround spend to be approximately $170 to $185 million. - First quarter 2025 petroleum segment: Estimated throughput 120,000 - 135,000 bbl/day, impacted by Coffeyville turnaround. - Fertilizer segment: First quarter ammonia utilization 95% - 100%, direct operating expenses ~$55 - $65 million. - Renewables segment: First quarter throughput ~13 - 16 million gallons, impacted by catalyst change in January.

Risks: - EPA denied Wynnewood's 2023 small refinery exemption petition, considered ludicrous and illegal. - Renewable segment reliant on government subsidies, uncertainty of regulations and subsidies. - Refining market conditions challenging with oversupply, potential near-term weakness.

Q: Morning, Dave and team. You did generate about $40 million in free cash flow in the fourth quarter. Obviously, in the first quarter, you are doing this big turnaround, but in line with the comments you made, it looks like by the second quarter, things would be even in a better position. And so if you do continue to generate free cash post your Coffeyville turnaround, just trying to understand what would be a better use in your mind, just to pay down debt or is at some point you could rethink about instituting a dividend here?

A: Payment off. Yeah. As we said in our prepared remarks, one of the key focuses we do want to work on is the delevering. Comfortable with the original billion, we want to work off the term loan. I do not think it should be a scenario where we should expect to see the term loan fully gone before a dividend were potentially to return. But we would want to see some sustained strength in the market as well. So look to take a balanced approach and see how things develop as we go forward.

Q: Good afternoon, team, and thank you for taking my questions. First one is just on how you guys think about the operating footprint of the company. I know probably more of a near-term focus on the big turnaround going on right now and then the balance sheet. But in the past, you've talked about looking to potentially diversify the company's refining operating footprint from the Mid-Con into other regions. Just wanted to get your latest views here. If you think there are any regions of focus we should be mindful of, and then anything on a potential timeline there?

A: Well, Adam, I think we've mentioned many times, we look at everything that comes on the market. Bid-ask has been too wide for us to even consider a lot of these deals that have come up. But we'll continue to look for everything. Our biggest weakness as a company is really our concentration in the Group 3 market in the Mid-Con PAD 2. And, you know, anything that can diversify us from that is a benefit. That said, you know, our focus is more inland and going west than it is going south or east. Might consider going north if the right deal ever came up, but you know, again, we want to diversify out of PAD 2 as much as possible.

Q: Yeah. Good afternoon, team, and thank you for taking my questions. First one is on asset sales. And maybe a two-parter if I can. First, can you tell us the tax implications of the $90 million Midway pipeline sale and have the taxes been paid out yet? And then secondly, how should we think about asset sales from here and if other assets could potentially shake loose, does a better environment in refining maybe change your thinking on raising cash via asset sales?

A: Good afternoon, John. Yeah. So on the Midway sale, $90 million proceeds, there will be a tax impact. Say our tax basis in that joint venture was call it $15 million, so the remaining would be exposed to tax. Has not been paid, but anticipate paying that as we move through the beginning of 2025 here. As far as other logistics assets, we have we used to advertise $80 million, which was kind of an aggressive EBITDA content that included, if we were to spin off our logistics as a separate MLP. We think that revised number is more realistic around $20 million. That's post the sale of Midway. So there's a few out there, but not near as much as we originally advertised, John. So hopefully, that answers your question.

Q: Good morning. The refining capture improved quarter over quarter, which seems pretty good in the context of a higher RVO and perhaps some other challenges. Can you talk about the tailwinds to capture in the fourth quarter and then also discuss any major moving parts on capture we should be thinking about for the first quarter?

A: Hey, Matt. Yeah. So tailwinds to capture, I would say, two things. Not massive contributors, but with the run cuts we did enact in December, that kind of drove our margin to a higher per barrel number on the cracks earlier in the period relative to the average across the quarter when they fell off in December. There's some small inventory benefits, you know, call it $0.30 to $0.50 a barrel also in there. Not a big number, but on a depressed crack, it does give you a little bit of a benefit. Other than that, not a lot of unusual things to report. And then as we look to the first quarter, again, I think it's going to be more a function of just getting back to normal operations and having a lower percentage of the crack being taken up by fixed cost if the crack stays elevated here.