Par Pacific Holdings Reports Third Quarter 2019 Results

HOUSTON, Nov. 04, 2019 (GLOBE NEWSWIRE) -- Par Pacific Holdings, Inc. PARR ("Par Pacific" or the "Company") today reported its financial results for the quarter ended September 30, 2019.

Third Quarter 2019 Highlights

• Net Loss of $83.9 million, or $(1.65) per diluted share; including an $81.5 million non-cash impairment charge related to Laramie Energy
• Adjusted Net Income of $6.7 million, or $0.13 per diluted share
• Adjusted EBITDA of $49.7 million
• Net cash provided by operations of $74.4 million
• Record Wyoming and Washington refinery profitability
• Record Retail segment profitability
• Hawaii diesel hydrotreater unit completed and fully operational

Par Pacific reported a net loss of $83.9 million, or $(1.65) per diluted share, for the quarter ended September 30, 2019, compared to a net loss of $5.8 million, or $(0.13) per diluted share, for the same quarter in 2018. Third quarter 2019 Adjusted Net Income was $6.7 million, compared to $6.0 million in the third quarter of 2018. Third quarter 2019 Adjusted EBITDA was $49.7 million, compared to $27.6 million in the third quarter of 2018. 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.

"I am pleased to report year-over-year earnings growth across all our operating segments and another quarter of strong free cash flow generation," said William Pate, Par Pacific's President and Chief Executive Officer. "Our Retail segment and Wyoming and Washington refineries reported record profitability and demonstrate the merits of our integrated model and balanced crude exposure. The resiliency of our quarterly results affirms my confidence in our long-term earnings and cash flow generation capability."

Refining

The Refining segment reported operating income of $3.3 million in the third quarter of 2019, compared to operating income of $0.4 million in the third quarter of 2018. Adjusted Gross Margin for the Refining segment was $88.8 million in the third quarter of 2019, compared to $52.9 million in the third quarter of 2018.

Refining Adjusted EBITDA was $25.7 million in the third quarter of 2019, compared to $16.1 million in the third quarter of 2018. Third quarter 2019 Refining results include $5.7 million of net RINs benefit primarily due to our Hawaii and Wyoming refineries obtaining small refinery exemptions for the 2018 compliance year.

Hawaii

The 4-1-2-1 Singapore Crack Spread was $9.36 per barrel in the third quarter of 2019, compared to $7.81 per barrel in the third quarter of 2018. The Hawaii refinery's throughput in the third quarter of 2019, across our two locations, was 95 thousand barrels per day (Mbpd). This compares to throughput of 72 Mbpd for the same quarter in 2018, for our original location. Production costs were $4.17 per throughput barrel in the third quarter of 2019, compared to $3.97 per throughput barrel in the same period in 2018.

Washington

The Pacific Northwest 5-2-2-1 Index averaged $14.76 per barrel in the third quarter of 2019. The Washington refinery's throughput was 38 Mbpd and production costs were $4.40 per throughput barrel in the third quarter of 2019.

Wyoming

During the third quarter of 2019, the Wyoming 3-2-1 Index averaged $27.32 per barrel, compared to $26.25 per barrel in the third quarter of 2018. The Wyoming refinery's throughput was 17 Mbpd in the third quarter of 2019, consistent with the third quarter of 2018. Production costs were $6.33 per throughput barrel in the third quarter of 2019, compared to $6.10 per throughput barrel in the same period in 2018.

Retail

The Retail segment reported record operating income of $14.4 million in the third quarter of 2019, compared to $10.7 million in the third quarter of 2018. Adjusted Gross Margin for the Retail segment was $34.6 million in the third quarter of 2019, compared to $29.0 million in the same quarter of 2018.

Retail Adjusted EBITDA was $17.0 million in the third quarter of 2019, compared to $12.5 million in the third quarter of 2018. The Retail segment reported sales volumes of 32.8 million gallons in the third quarter of 2019, compared to 32.2 million gallons in the same quarter of 2018.

Logistics

The Logistics segment reported operating income of $13.6 million in the third quarter of 2019, compared to $9.0 million in the third quarter of 2018. Adjusted Gross Margin for the Logistics segment was $20.9 million in the third quarter of 2019, compared to $12.3 million in the same quarter of 2018.

Logistics Adjusted EBITDA was $18.4 million in the third quarter of 2019, compared to $10.6 million in the third quarter of 2018.

Laramie Energy

Equity losses from Laramie in the third quarter of 2019 were $85.6 million, including a non-cash impairment charge of $81.5 million, compared to equity earnings of $1.1 million in the third quarter of 2018. Laramie's total net loss was $12.6 million in the third quarter of 2019, compared to a net loss of $0.2 million in the third quarter of 2018. Laramie's total Adjusted EBITDAX was $18.6 million in the third quarter of 2019, compared to $29.2 million in the third quarter of 2018.

At September 30, 2019, we conducted an impairment evaluation of our investment in Laramie Energy because of the significant decline in natural gas prices over the second quarter of 2019 and continued deterioration in the third quarter of 2019. As a result, we have recorded a non-cash impairment charge of $81.5 million in the third quarter of 2019.

Liquidity

Net cash provided by operations totaled $74.4 million for the three months ended September 30, 2019, compared to $20.6 million during the three months ended September 30, 2018. At September 30, 2019, Par Pacific's cash balance totaled $110.7 million, long-term debt totaled $642.4 million, and total liquidity was $175.3 million.

Conference Call Information

A conference call is scheduled for Tuesday, November 5, 2019 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 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 November 19, 2019 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 13695219.

About Par Pacific

Par Pacific Holdings, Inc. PARR, headquartered in Houston, Texas, owns and operates market-leading energy and infrastructure businesses. Par Pacific's strategy is to acquire and develop energy and infrastructure 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; anticipated synergies and other benefits of the Island Energy Services transaction and the U.S. Oil & Refining Co. transaction; the anticipated financial and operating results of the assets acquired in the Island Energy Services transaction and the U.S. Oil & Refining Co. transaction and their effect on Par Pacific's cash flows and profitability (including free cash flow and earnings per share); 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. 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:
Suneel Mandava
SVP, Finance
(713) 969-2136
smandava@parpacific.com

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 obligations, and purchase price allocation adjustments); DD&A; RINs loss (gain) in excess of net obligation (see definition below); 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 Renewable Identification Numbers ("RINs") 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 fourth quarter of 2018, Adjusted Net Income (loss) excludes RINs loss (gain) recorded in excess of our net RINs obligation ("RINs loss (gain) in excess of net obligation"). Our RINs obligations to comply with Renewable Fuels Standards are recorded as liabilities and measured at fair value as of the end of the reporting period. Our RINs assets, which include RINS purchased in on the open market and RINs generated by blending biofuels as part of our refining process, are stated at the lower of cost or net realizable value (NRV) as of the end of the reporting period. During periods of rising RINs market prices, we recognize unrealized losses associated with the increase in the fair value of our RINs liabilities. We do not adjust the carrying value of our RINs assets because such assets are stated at the lower of cost or NRV under GAAP. This adjustment represents the income statement effect of reflecting our RINs liability on a net basis, as the settlement of any open obligation would first be offset by RINs assets rather than purchasing such RINs obligations at market prices. We have recast the non-GAAP information for the three and nine months ended September 30, 2018 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 potential 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.

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, release of tax valuation allowance, inventory valuation adjustment, severance costs, impairment expense, (gain) loss on sale of assets and Par's share of Laramie Energy's unrealized loss (gain) on derivatives. Beginning in the fourth quarter of 2018, Adjusted Net Income (Loss) excludes RINs loss (gain) in excess of net obligation (as defined in the Adjusted Gross Margin section above). Beginning in 2019, Adjusted Net Income (Loss) also excludes impairment expense associated with our investment in Laramie Energy.

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. Beginning in 2019, equity losses (earnings) from Laramie Energy also excludes impairment of Par's investment. We have recast the non-GAAP information for the three and nine months ended September 30, 2018 to conform to the current period presentation.

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.

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, and severance costs. Beginning in the fourth quarter of 2018, Adjusted EBITDA by segment also excludes RINs loss (gain) in excess of net obligation (as defined in the Adjusted Gross Margin section above). We have recast the non-GAAP information for the three and nine months ended September 30, 2018 to conform to the current period presentation. 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.

Free Cash Flow

Free Cash Flow is defined as cash provided by (used in) operations less capital expenditures. We believe Free Cash Flow is a useful supplemental financial measure to evaluate our ability to generate cash to repay our indebtedness or make discretionary investments. Free Cash Flow should be considered in addition to, rather than as a substitute for, net income as a measure of our financial performance and net cash provided by (used in) operations as a measure of our liquidity. Free Cash Flow presented by other companies may not be comparable to our presentation as other companies may define these terms differently.

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.