PAR PACIFIC HOLDINGS, INC. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Operational performance was strong with record quarterly refining throughput, record Logistics adjusted EBITDA, and Retail merchandise sales growth.
• Target to reduce 2025 fixed operating expenses by $30 million to $40 million.
• Groundbreaking on Hawaii SAF project, on track for startup in H2 2025.
• Billings reliability initiatives with focus on cost reduction while planning 2025 turnaround.
• Washington refinery as low-cost player with capital efficiency and feedstock advantages, able to participate in margin upside during better market conditions.

Segment Performance

• Refining: Third quarter adjusted EBITDA was $51 million. Refining segment reported adjusted EBITDA of $20 million compared to $60 million in the second quarter. Hawaii had throughput of 81,000 barrels per day with production cost $4.58 per barrel; Wyoming had 19,000 bpd and production cost $7 per barrel; Washington had 41,000 bpd and production cost $3.50 per barrel; Billings had 57,000 bpd with production cost $11.61 per barrel.
• Logistics: Adjusted EBITDA was $33 million in the third quarter compared to $26 million in the second quarter, driven by record refining throughput of nearly 200,000 barrels per day and over 216,000 barrels per day of product sales.
• Retail: Adjusted EBITDA was $21 million in the third quarter compared to $19 million in the second quarter. Same-store fuel volumes declined by 1.4%, while merchandise sales grew by 3.8% compared to Q3 2023.

Guidance

• Increased Hawaii benchmark capture guidance to a range between 100% and 110% incorporating over $20 million of annual margin improvement.
• Expect Hawaii crude differentials to land between $5.75 and $6.25 per barrel in Q4.
• Billings feedstock costs expected to improve in Q4 as returning to heavier crude diet.
• Logistics mid-cycle guidance $115 million annualized.
• 2025 CapEx guidance includes $80 million to $100 million turnaround expenditures and $30 million to $40 million on Hawaii renewable conversion project.

Risks

• Refining margin environment testing breakeven levels, driving supply rationalization starting in 2025.
• Market dynamics in the Pacific Northwest weighing on clean product netbacks in Eastern Washington.
• FIFO impacts on margins in Billings and Wyoming.
• Softening product tanker rates in Hawaii, though still elevated versus history.

Question and Answer

Q: On share buybacks, how should we think about the buybacks in light of a worsening crack environment?

A: Shawn Flores says liquidity position remains strong at $630 million, will maintain opportunistic approach to share buybacks based on medium-term cash flow and liquidity outlook.

Q: Can we expect Logistics to do $30 million-plus of EBITDA in low-90%s utilization environment?

A: Shawn Flores says Logistics mid-cycle guidance is $115 million annualized, with Q2/Q3 typically higher due to summer utilization.

Q: Long-term outlook for Washington refinery?

A: Will Monteleone says Washington is a low-cost player with capital efficiency and feedstock advantage, will participate in margin upside during better market conditions.

Q: Hawaii asset performance despite Asian margin concerns?

A: Will Monteleone says cost structure and commercial agreements sustain Hawaii's performance.

Q: One-time dynamics in Washington refinery?

A: Will Monteleone talks about jet and VGO market dynamics, with Washington's low-cost positioning sustaining it over time.

Q: Billings refinery inventory dynamics?

A: Will Monteleone says pleased with Billings, working towards 50,000 bpd target, operating expenses higher but improving.

Q: CapEx spend 2024-2025?

A: Shawn Flores says 2024 CapEx near low end of guidance, 2025 guidance includes turnaround and Hawaii project spend.

Q: Hawaii crude differentials outlook?

A: Will Monteleone says directional improvement in landed crude differentials.

Q: Hawaii product tanker rates?

A: Will Monteleone says softening, stabilizing at current levels