Q4 2023 Par Pacific Holdings Inc Earnings Call

Operator: Good day, and welcome to the Par Pacific fourth quarter 2023 earnings conference call. All participants will be in a listen-only mode.

Good day and welcome to the par Pacific fourth quarter 2023 earnings Conference call.

All participants will be in a listen only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then one on a touchtone phone.

Should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on a touchtone phone to withdraw your question. Please press Star then two please.

Operator: To withdraw your question, please press the star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Ashimi Patel, Director of Investor Relations. Please go ahead.

Please note this event is being recorded.

I would now like to turn the conference over to a Shimmy Patel director of Investor Relations. Please go ahead.

Shimmy Patel: Thank you Betsy welcome to par Pacific's fourth quarter earnings Conference call. Joining me today are William Pate, Chief Executive Officer, well monthly on President, Sean Flores, SVP, and Chief Financial Officer, and Jeff Polish SVP and General Counsel.

Ashimi Patel: Thank you, Betsy. Welcome to Par Pacific's fourth quarter earnings conference call. Joining me today are William Pate, Chief Executive Officer; Wilmont Leon, President; Sean Flores, SVP and Chief Financial Officer; and Jeff Hollis, SVP and General Counsel. Before we begin, please note that our comments today may include forward-looking statements. Any forward-looking statements are subject to change and are not guarantees of future performance or events. They are subject to risks and uncertainties, and actual results may differ materially from those projected.

Shimmy Patel: Before we begin note that our comments today may include forward looking statements any forward looking statements are subject to change and are not guarantees of future performance whereabouts are subject to risks and uncertainties and actual results may differ materially from these forward looking statements accordingly investors should not place undue reliance on forward looking statements and we disclaim any obligation to update or revise them.

Ashimi Patel: Accordingly, investors should not place undue reliance on forward-looking statements, and we disclaim any obligation to update or revise them. I refer you to our investor presentation on our website and to our filings with the SEC for non-GAAP reconciliations and additional information. I'll now turn the call over to our Chief Executive Officer, William Pace. Thank you, Ashimi, and good morning, everyone.

Shimmy Patel: I refer you to our investor presentation on our website and to our filings with the SEC for non-GAAP reconciliations and additional information.

Shimmy Patel: Now I'll turn the call over to our Chief Executive Officer, William Pate. Thank.

William Pate: You would see me and good morning, everyone.

William Pate: I'd like to take a moment to reflect on Par Pacific's 2023 achievement. Our company thrived last year, achieving record-breaking financial results. 2023 adjusted EBITDA reached $696 million, and adjusted net income was $8.21 per share, a 3% increase over 2022. We achieved earnings growth despite a 23% decline in our market indices last year.

William Pate: Like to take a moment to reflect on par Pacific's 2023 achievements our company thrive last year, achieving record breaking financial results call.

William Pate: 23, adjusted EBITDA reached $696 million and adjusted net income was $8 21 per share.

William Pate: A 3% increase over 2022's results.

Shimmy Patel: We achieved earnings growth, despite a 23% decline in our market indices last year.

Shimmy Patel: This financial success is underscored by our strong year end liquidity position of nearly $650 million, which we reached even after completing the $310 million billings acquisition in June.

William Pate: This financial success is underscored by our strong year-end liquidity position of nearly $650 million, which we reached even after completing the $310 million billings acquisition in June. We also lowered our cost of capital with the refinancing of one of our intermediation facilities. And finally, we repurchased over $62 million of common stock last year at an average cost well below our current share price.

Shimmy Patel: We also lowered our cost of capital with the refinancing of one of our intermediation facilities.

Shimmy Patel: And finally, we repurchased over $62 million of common stock last year at an average cost well below our current share price.

Shimmy Patel: Over the last two years, we've generated $17 per share and cash from operations.

William Pate: Over the last few years, we've generated $17 per share in cash from operations. Given our refinery configurations, we have relatively low maintenance and turnaround capital requirements, heightening the conversion of cash from operations to free cash flow. Our retail and logistics business segments have even better cash flow conversion characteristics. Consequently, more of our cash from operations is available for growth opportunities and capital structure improvement. Other than the building acquisition, much of the free cash flow has gone to bolster liquidity and reduce debt. Sean will cover these changes in more detail.

Shimmy Patel: Given our refineries configurations, we have relatively low maintenance and turnaround capital requirements heightening the conversion of cash from operations to free cash flow.

Shimmy Patel: Our retail and logistics business segments have even better cash flow conversion characteristics.

Shimmy Patel: Sequentially more of our cash from operations is available for growth opportunities and capital structure improvements.

Shimmy Patel: Other than the billings acquisition much of the free cash flow has gone to bolster liquidity and reduce debt.

Shimmy Patel: John will cover these changes in more detail.

Shimmy Patel: In our industry financial excellence starts with safety environmental compliance and reliability.

William Pate: In our industry, financial excellence starts with safety, environmental compliance, and reliability; our refining and logistics team did an excellent job of focusing on these objectives, with our key process and personal safety metrics improving by approximately 40% in 2023. We also remain committed to sustainability and renewable energy, particularly in our Hawaii and Tacoma initiatives. Our learnings on coprocessing and Tacoma lay the groundwork for larger projects.

Shimmy Patel: Our refining and logistics team did an excellent job of focusing on these objectives with our key process and personal safety metrics improving by approximately 40% in 2023.

Shimmy Patel: We also remain committed to sustainability and renewable energy, particularly in our Hawaii and Tacoma initiatives.

Shimmy Patel: Our learnings on co processing in Tacoma lay the groundwork for larger projects.

William Pate: We will continue to focus on lower capital, higher return opportunities, like our $90 million Hawaii SAF conversion project. We plan to begin production in 2025 from this unit, which will be among the lowest capital cost SAF projects in the world. In addition to renewables processing, we're also actively working on advantage solutions in sourcing and pre-treating feedstock. Finally, two of our four refineries were ENERGY STAR certified by the EPA, illustrating our organizational commitment to energy efficiency and low greenhouse gas emissions in our operations.

Shimmy Patel: We will continue to focus on lower capital higher return opportunities like our 90 million dollar Hawaii Saf conversion project.

Shimmy Patel: We plan to begin production in 2025 from this unit, which will be among the lowest capital cost Saf projects in the world.

Shimmy Patel: In addition to renewables processing, we're also actively working on advantaged solutions in sourcing and pre treating feedstocks.

Shimmy Patel: Finally, two of our four refineries, where energy star certified by the EPA illustrating our organizational commitment to energy efficiency and low greenhouse gas emissions in our operations.

William Pate: With the first couple of months of the year behind us, we are optimistic about the market outlook. Singapore cracks remain robust as Asian inventories remain constructive, and high freight costs generally favor local producers like us. Given the level of spring turnaround activity and reasonable U.S. inventories, we expect the mainland market to improve rapidly as we approach the summer driving season. Last year, we demonstrated an ability to increase our financial results in the face of a declining market. This year, we will focus on improving reliability, ensuring that we capitalize on market strength, and keeping our markets well supplied. Our company was built on a string of successful acquisitions, so we will also continue to seek opportunities to grow our footprint in contiguous markets and increase our presence in existing markets. Before I pass the floor to Will, I want to speak about my decision to step down as chief executive officer at this spring's annual meeting and congratulate Will on his promotion to the role of president and CEO.

Shimmy Patel: But the first couple of months or 24 behind US we are optimistic about the market outlook, Singapore cracks remain robust as Asian inventories remain constructive and high freight costs generally favor local producers like us.

Shimmy Patel: Given the level of spring turnaround activity and reasonable U S inventories, we expect the mainland market to improve rapidly as we approach summer driving season last year, we demonstrated an ability to increase our financial results in the face of a declining market.

Shimmy Patel: This year, we will focus on improving reliability, ensuring that we capitalize on market strength and keeping our markets well supplied.

Shimmy Patel: Our company was built on a string of successful acquisitions. So we will also continue to seek opportunities to grow our footprint and contiguous markets and increase our presence in existing markets.

Speaker Change: Before I pass the Florida will I wanted to speak about my decision to step down as Chief Executive Officer at this spring's annual meeting and congratulate will on his promotion to the role of President and CEO.

Speaker Change: Most of you know that will and Ive worked together for nearly 15 years and for many of those years. We've collaborated on the development of par Pacific.

William Pate: Most of you know that Will and I have worked together for nearly 15 years, and for many of those years, we've collaborated on the development of Par Pacific. When I took this job, my primary objectives were to ensure that we established a successful and growing enterprise, a differentiated strategy, and, most importantly, an organization that could rapidly pursue market opportunities and avoid emerging risks. While leaving this company as CEO, I retained my shareholder and director status, confident that Will and his team could expertly manage and grow our business while always preserving local market leadership. Well, the floor is yours.

Speaker Change: When I took this job my primary objectives were to ensure that we establish a successful and growing enterprise a differentiated strategy and most importantly, an organization that can rapidly pursue market opportunities and avoid emerging risks.

Speaker Change: While leaving this company as CEO I retain my shareholder and director status confident that will and his team can expertly manage and grow our business, while always preserving local market leadership.

Speaker Change: Well the floor is yours.

Will Monpillon: Thank you, Bill. Before diving into operational details, I want to take a moment to congratulate and thank the entire team for the significant personal and process safety improvements this year. It takes unwavering discipline, alertness, and care to deliver these improvements.

Speaker Change: Thank you Bill.

Speaker Change: Before diving into operational details I want to take a moment to congratulate and thank the entire team for the significant personal and process safety improvements this year.

Speaker Change: It takes unwavering discipline Ohrt nissen care to deliver these improvements.

Will Monpillon: 2023 was a strong operational year for the refining logistics business unit. Post-billings acquisition, we averaged 194,000 barrels per day of throughput, resulting in 95.5% operational availability. In addition to the Wyoming and Washington EPA Energy Star Awards, recognizing excellence in overall energy efficiency, our Washington operation also achieved one of the lowest carbon emissions intensities in the world based upon industry benchmarking studies.

Speaker Change: 2023, with a strong operational year for the refining logistics business units.

Speaker Change: Post billings acquisition, we averaged 194000 barrels per day of throughput, resulting in a 95, 5% operational availability.

Speaker Change: In addition to the Wyoming, and Washington, EPA Energy Star Awards, recognizing excellence in overall energy efficiency, our Washington Operation also achieved the lowest carbon emissions intensities in the world based upon industry benchmarking studies.

Will Monpillon: Improving energy efficiency is an example of how thoughtful investment and managerial consistency deliver a competitive cost structure while also reducing emissions. Fourth quarter throughput was 186,000 barrels per day, reflecting winter seasonality. October through mid-November market conditions were strong. However, the second half of the quarter saw a deeper than typical seasonal decline for the inland market.

Speaker Change: Improving energy efficiency as an example of how thoughtful investment and managerial consistency delivers a competitive cost structure, while also reducing emissions.

Speaker Change: Fourth quarter throughput was 186000 barrels per day.

Speaker Change: In winter seasonality.

Speaker Change: October through mid November market conditions were strong however, the second half of the quarter saw a deeper than typical seasonal decline the inland markets.

Speaker Change: And Hawaii fourth quarter throughput was 81000 barrels per day.

Will Monpillon: In Hawaii, fourth quarter throughput was 81,000 barrels per day, and production costs were $4.80 per barrel. The quarterly Singapore index averaged $19.44 per barrel, and our landed crew differential was $6.96 per barrel, slightly elevated compared to our guidance. We expect our first quarter Hawaii crude differential to average between $6.50 and $7 per barrel. Fourth quarter capture to the combined index was approximately 134%, reflecting favorable price lag benefits. In Washington, fourth-quarter throughput was 38,000 barrels per day, and production costs were $4.53 per barrel. The PMW Index averaged $17.95 per barrel during the quarter, capture improved to 44%, reflecting an expanding feedstock advantage versus WTI, partially offset by declining asphalt and BGL realizations. Overall throughput was below our targets due to heater system constraints.

Speaker Change: Production costs were $4 80 per barrel.

Speaker Change: Quarterly Singapore index averaged $19.44 per barrel and our landed crude differential was $6.96 per barrel.

Speaker Change: Slightly elevated to our guidance.

Speaker Change: Our first quarter, Hawaii crude differential to average between $6 50 and.

Speaker Change: And $7 per barrel.

Speaker Change: Fourth quarter capture to the combined index was approximately 134%.

Speaker Change: Reflecting favorable favorable price like benefits.

Speaker Change: And Washington fourth quarter throughput was 38000 barrels per day and production costs were $4 53 per barrel.

Speaker Change: BMW index averaged $17 95 per barrel during the quarter.

Speaker Change: <unk> improved to 44%.

Speaker Change: In an expanding feedstock advantage versus W. T I.

Speaker Change: Partially offset by decline in asphalt NGL realizations.

Speaker Change: Overall throughput was below our targets through the heater system constraints.

Will Monpillon: We're planning to address these issues with an approximate 15 day outage beginning in the first quarter. We expect the outage to impact profitability by 5 to $8 million. In 2023, the Wyoming team set an annual throughput record of 17,600 barrels per day. Great job to the team, fourth quarter throughput of 17,000 barrels per day, and production costs of $8.03 a barrel. The quarterly U.S. Gulf Coast Index was $13.71 per barrel, and Wyoming capture was approximately 101%, despite an unfavorable FIFO impact of $8 million. Montana throughput was 50,000 barrels per day.

Speaker Change: We're planning to address these issues with an approximate 15 day outage during the first quarter.

Speaker Change: We expect the outage impact profitability by $5 million to $8 million.

Speaker Change: In 2023, the Wyoming team set an annual throughput record of 17600 barrels per day.

Speaker Change: Great job to the team.

Speaker Change: Fourth quarter throughput was 17000 barrels per day and production costs were $8.03 per barrel.

Speaker Change: The quarterly U S. Gulf Coast Index was $13 71 per barrel in Wyoming capture was approximately 101%. Despite an unfavorable FIFO impact was $8 million.

Speaker Change: On pain of throughput was 50000 barrels per day production costs totaled $12.03 per barrel, which was elevated due to near term reliability projects and seasonally elevated energy costs.

Will Monpillon: Production costs totaled $12.03 per barrel, which was elevated due to near-term reliability projects and seasonally elevated energy costs captured for our Gulf Coast Index were 84% in line with winter seasonal expectations. During the quarter, prompt Canadian crude differentials widened, however, a combination of slower inventory turns and FIFO accounting delayed the realization of these benefits. For the first quarter, we expect Hawaii to run between 80 and 84,000 barrels per day, Montana between 50 and 55, Washington between 30 and 32, and Wyoming between 16 and 17,000 barrels per day.

Speaker Change: Captured through our Gulf Coast Index was 84% in line with winter seasonal expectations.

Speaker Change: During the quarter prompt Canadian crude differentials widened however, a combination of slower inventory turns and FIFO accounting lay the realization of these benefits.

Speaker Change: For the first quarter, we expect Hawaii to run between 80, and 84000 barrels per day on Pan out between $15 55.

Speaker Change: Washington between 30, and 32 in Wyoming between 16, and 17000 barrels per day.

Speaker Change: The retail segment delivered a record result for 2023, adjusted EBITDA was $68 million driven by impressive same store sales fuel and merchandise sales growth of eight 8% and seven 8% respectively.

Will Monpillon: The retail segment delivered a record result for 2023 adjusted EBITDA of $68 million, driven by impressive same store fuel and merchandise sales growth of 8.8% and 7.8% respectively. Fourth quarter same store sales continue the annual trend, fuel and merchandise growth of 7.3% and 4.2% respectively. In addition, we opened two new to industry locations in Spokane and Hawaii that are delivering encouraging results in their first months of operation. On the renewables front, our Hawaii SAF project is progressing well. We have broken ground on two renewable feedstock tanks, filed permits, and started ordering long-lead time equipment for the project. As we look forward to 2024, we are focused on the crisp execution of our turnarounds, delivering safe and reliable operations in the Hawaii SAF Capital Project. Our retail brands remain focused on delighting the customer and improving the in-store experience via an active remodel and rebuild program. I'll now turn it over to Sean to review our financial results. Thank you, Will. Fourth quarter adjusted EBITDA and adjusted earnings were $122,065,001, or $1.08 per share. Full year adjusted EBITDA and adjusted earnings were $696,501,000, or $8.21 per share.

Speaker Change: Fourth quarter same store sales continued the annual trend.

Speaker Change: With fuel and merchandise growth of seven 3% and four 2% respectively.

Speaker Change: In addition, we opened two new to industry locations in Spokane in Hawaii that are delivering encouraging results in the first months of operation.

Speaker Change: On the renewables front, our Hawaii Saf project is progressing well.

Speaker Change: We have broken ground on two renewable feedstock. Thanks, all permits and started ordering long lead time equipment for the project.

Speaker Change: As we look forward to 2024, we're focused on crisp execution of our turnarounds delivering safe and reliable operations and Hawaii Saf capital project.

Speaker Change: Our retail brands remain focused on delighting, the customer and improving the in store experience, we have an active remodel and rebuild program.

Speaker Change: I'll now turn it over to Sean to review our financial results.

Sean Flores: Fourth quarter, adjusted EBITDA, and adjusted earnings were $122 million and $65 million or $1.08 per share.

Sean Flores: Full year, adjusted EBITDA, and adjusted earnings were $696 million and $501 million or $8 21 per share.

Sean Flores: The Refining segment reported $107 million of adjusted EBITDA in the fourth quarter, compared to $234 million in the third quarter. Fourth quarter results include a net price lag benefit in Hawaii of $21 million, offset by a negative FIFO impact in Wyoming of $8 million and a product crack hedge loss in Hawaii of $4 million. We have continued our crack hedging framework in Hawaii with approximately 28% of our first quarter sales hedged at $20 over Brent. The Logistics segment reported $24 million of adjusted EBITDA in the fourth quarter, compared to $29 million in the third quarter. The softer fourth-quarter results were driven by elevated tank and pipeline maintenance costs of $5 million in Montana and Washington. Our retail segment reported $17 million of adjusted EBITDA during the fourth quarter, consistent with third-quarter results. Cash provided by operations during the fourth quarter totaled $130 million, excluding a net working capital outflow of $132 million. The primary component of the net working capital outflow was associated with a cash settlement of prior periods environmental credit. Cash outflows from investing activities during the fourth quarter totaled $27 million, primarily driven by capital expenditures.

Sean Flores: The refining segment reported 107 million of adjusted EBITDA in the fourth quarter compared to 234 million in the third quarter.

Sean Flores: Fourth quarter results include a net price lag benefit in Hawaii of $21 million offset by a negative FIFO impact in Wyoming of $8 million and our product crack hedge loss in Hawaii, a $4 million.

Sean Flores: We have continued our crack hedging from work in Hawaii for approximately 28% of our first quarter sales hedge at $20 over Brent.

Sean Flores: The logistics segment reported $24 million of adjusted EBITDA in the fourth quarter compared to $29 million in the third quarter. The softer fourth quarter results were driven by elevated tank and pipeline maintenance costs of $5 million in Montana in Washington.

Sean Flores: Our retail segment reported 17 million of adjusted EBITDA during the fourth quarter consistent with third quarter results.

Sean Flores: Cash provided by operations during the fourth quarter totaled $130 million, excluding a net working capital outflow of $132 million.

Sean Flores: The primary component of the net working capital outflow was associated with a cash settlement of prior periods environmental credits.

Sean Flores: Cash outflows from investing activities during the fourth quarter totaled $27 million, primarily driven by capital expenditures.

Sean Flores: Total liquidity at year end was $644 million, made up of $279 million in cash and $365 million in availability. As Bill mentioned, our company has demonstrated exceptional performance over the past two years, generating over $1 billion in cash flow from operations. During this period, we successfully completed the highly accretive billings acquisition for $310 million, improved liquidity by more than $465 million, strategically repurchased $68 million of common stock at an average price of less than $30 per share, and fully retired our legacy rent obligations. We also completed a comprehensive refinancing last year, consolidating multiple tranches of high-cost debt into a single-term loan. In October, we further optimized working capital financing for the termination of the Tacoma Intermediation Facility and simultaneous upsize of our AVL to $900 million. We expect our streamlined capital structure to reduce cash funding costs by more than $10 million this year.

Sean Flores: Total liquidity at year end was 644 million made up of $279 million in cash and $365 million in availability.

Sean Flores: As Bill mentioned, our company has demonstrated exceptional performance over the past two years generating over $1 billion in cash flow from operations. During this period, we successfully completed the highly accretive billings acquisition for $310 million improved liquidity by more than $465 million strategically repurchase.

Sean Flores: $68 million of common stock at an average price of less than $30 per share.

Sean Flores: Fully retired or legacy rent obligations.

Sean Flores: We also completed a comprehensive refinancing last year consolidating multiple tranches of high cost debt into a single term loan and our.

Sean Flores: Tober, we further optimize our working capital financing for the termination of the Tacoma intermediation facility and simultaneous upsize of our ABL to $900 million.

Sean Flores: We expect our streamlined capital structure to reduce cash funding costs by more than $10 million. This year.

Operator: With nearly $650 million in liquidity and a promising outlook into 2024, we stand well positioned to achieve our strategic growth objectives and remain committed to opportunistically repurchasing our stock at attractive prices. This concludes our prepared remarks. Operator, we'll turn it to you for Q&A. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone.

Sean Flores: The nearly $650 million liquidity and our promising outlook into 2024, we stand well positioned to achieve our strategic growth objectives and remain committed to opportunistically repurchasing our stock at attractive prices.

Speaker Change: This concludes our prepared remarks, operator, we will turn it to you for Q&A.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.

Operator: If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Matthew Blair with Tudor Pickering Holt. Please go ahead. Thank you and good morning.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we'll pause momentarily to assemble our roster.

Speaker Change: The first question today comes from Matthew Blair with Tudor Pickering Holt. Please go ahead.

Matthew Blair: Thank you and good morning, and Bill and will congrats on your.

Will Monpillon: And Bill and Will, congrats on your respective moves. I had a question about the M&A market, which you indicated that the PAR would still be interested in. Is deal flow picking up with the prospect of just a lower interest rate environment later this year? And could you also talk about what kind of opportunities are attractive, both by business line as well as by geography? Sure, Matthew. It's Will.

Matthew Blair: Respective moves.

Matthew Blair: I had a question about the M&A market.

Matthew Blair: Which you indicated that the par would still be interested in is deal flow picking up with the prospects of just the lower interest rate environment. Later this year and could you also talk about what kind of opportunities to be attractive both by business line as well as by geography.

Will: Sure Matthew it's will thanks for the question.

Will Monpillon: Thanks for the question; I appreciate your comments. So, in general, M&A has been a key part of our strategy as we've grown. That said, I think on the refining side of the market, given the strength that we've seen in market conditions over the last 24 months, you know, I think it's definitely a challenging environment to try and get a deal done. Again, I think seller expectations are high, and I think that's going to be a major factor. So I think that's really the backdrop.

Speaker Change: I appreciate your comments.

Speaker Change: So I think in general M&A.

Speaker Change: M&A has been a key part of our strategy as we've grown.

Speaker Change: So that said I think on the refining side of the market given the strength that we've seen on market conditions over the last 24 months.

Speaker Change: I think it's definitely a challenging environment to try and get a deal done again, I think seller expectations are high.

Speaker Change: And I think that's going to be a major factor.

Speaker Change: So I think that's really the backdrop I think when you think about geography, it's really the focus that we've had previously I think we're focused on western United States.

Bill: I think when you think about geography, it's really the focus that we've had previously. I think we're focused on the Western United States, largely because it fits our strategy of serving communities, you know, with liquid conventional and renewable fuels that are really in niche locations. And so I think that's going to be our focus, and that's going to be true across both refining logistics and retail. Sounds good. And then you mentioned that this rising freight rate environment is helpful for PAR. Could you just walk through the moving parts there?

Speaker Change: Largely because it fits our strategy of serving communities with liquid conventional and renewable fuels.

Speaker Change: That are really in niche locations and so I think that's going to be our focus and that's going to be true across both refining logistics and retail.

Speaker Change: Sounds good and then you mentioned that it's rising freight rate environment is helpful. For park could you just walk through the moving parts, there, but because the marginal sources supplier comedians who.

Bill: Is that because the marginal source of supply coming into Hawaii is an imported barrel from Asia? Matt, this is Bill. That's one of the factors. I mean, generally, in Asia, you know, despite weak economic news, inventories have been pretty supportive. And I think one of the reasons for the stronger cracks is that a lot of the export refineries, their spot streams have to factor in higher freight costs. So when you, there's less movement, and the refineries tend to focus more on the local production environment, where it's harder to move things around. And when you're also dealing with some of the restrictions in the Red Sea and restrictions, even in the Panama Canal product movement, just slow down.

Speaker Change: It is an imported barrel from Asia.

Bill: Matt. This is bill that's one of the factors I mean generally in Asia. Despite weak economic news inventories have been pretty supportive and I think one of the reasons of stronger cracks.

Speaker Change: One of the reasons that a lot of the export refineries there spot streams.

Speaker Change: You have to factor in a higher freight costs. So when you hear us.

Speaker Change: Less movement in the refineries tend to focus more on local production environment, where it's harder to move things around and when you're also with some of the restrictions in the Red Sea and restrictions even in the Panama Canal.

Speaker Change: Product movement, just slow down.

Bill: And we're fortunate to have refineries that are sitting right on top of our market. And Matt, the only thing I'd add to that is, just in general, when you think about both the West Coast, you know, and Hawaii, particularly for the distillate pool, the marginal barrel is moving in, typically on MR freight from Northeast Asia. So I think, particularly when you think about diesel and jet fuel, that's a major factor for the marginal barrel.

Speaker Change: And we're fortunate to have refineries that are sitting right on top of our markets.

Speaker Change: And Matt the only thing I'd add to that is just in general when you think about both the west coast and Hawaii, particularly for the distillate pool the marginal barrel is moving in.

Speaker Change: Typically on EMR freight from northeast Asia.

Matt: So I think I'm, particularly when you think about diesel and jet that's a major factor for the marginal barrel.

Great: Great. Thanks for your comments.

Sean Flores: Great. Thanks for your comments. The next question comes from John Royal with J.P. Morgan. Please go ahead. Hi, good morning.

Great: The next question comes from John Royall with Jpmorgan. Please go ahead.

John Royall: Hi, Good morning, Thanks for taking my question and congratulations to bill as well.

Will Monpillon: Thanks for taking my question and congratulations to Bill and Will. So my first question is on billings. Can you speak to the reliability work that you'll be doing with the turnaround this year? I know the goal is to get up consistently around that 60 KBD plus level.

John Royall: So my first question is on billings can you speak to the reliability work that you'll be doing.

John Royall: With the turnaround this year I know the goal is to get up consistently around that 60 kv D plus level.

Will Monpillon: How does this work enable that, and is there a numerator impact on OPEX per barrel of the work you'll be doing, or is it really just about raising throughput? Sure, John. This is Will. So we're really focused on, you know, summer reliability and billings. I think that's first and foremost, and as you saw from the third quarter contribution last year in a strong market environment, that's really when you've got the opportunity to generate significant cash flows. So I think the focus of our turnaround this year is really on the crude unit and ultimately getting to a better reliability position there, probably adding some additional alloy to ensure that we're well positioned to reduce corrosion risk. And then, ultimately, when you think about the OPEX impact. Again, I think our objectives remain targeting that $10 per barrel number. Again, I think that's, you know, as we push towards the 60 KBD number, that's going to be more achievable.

John Royall: How does this work enable that and is there a numerator impact on opex per barrel with the work you'll be doing or is it really just about raising throughput.

Will: Sure John This is will.

John: So we're really focused on.

Will: Summer reliability and billings I think that's first and foremost and as you saw from the third quarter contribution last year and a strong market environment, that's really when you've got the.

Will: <unk> need to generate significant cash flows.

Speaker Change: So I think the focus on our turnaround this year is really on the crude unit.

Speaker Change: And ultimately.

John: I'm getting to a better reliability position, there probably adding some additional alloy to ensure that we're well positioned to reduce corrosion risks.

John: And then ultimately when do you think about the Opex impacts.

John: Again, I think our objectives remain targeting that $10 per barrel number again I think that's you know as we push towards the 60 <unk> number that's gonna be more achievable. So again, that's really the focus of this year's turnaround activities and it's all about summer reliability.

Sean Flores: So again, that's really the focus of this year's turnaround activities, and it's all about summer reliability. Great, thank you. And then my second question is on the buyback. Really strong case in the second half of 23 after you completed billings. But this year will be a little bit different from a CapEx and a maintenance perspective. But you also don't have to de-lever.

Speaker Change: Great. Thank you and then my second question is on the buyback.

John: Really strong pace in the second half of 'twenty three after you completed billings.

John: But this year it'll be a little bit different from a capex and a maintenance perspective.

Speaker Change: But you don't also you also don't have to Delever. So some moving pieces in both directions, how shall we think about kind of the run rate going forward relative to that two eight run rate, where you had strong cracks and no turnarounds.

Sean Flores: So some moving pieces in both directions. How should we think about the run rate going forward relative to that 2H run rate where you had strong cracks and no turnaround? Hi, John. Hey, this is Sean.

John: Yes, John Hi, This is Sean you know I think we've.

Sean Flores: You know, I think we've demonstrated sort of our buyback cadence in the recent quarters of 27 and Q3 and 32 and Q4. Look, I think our liquidity is strong. We've got excess capital today, so I suspect we'll be able to fund our capital requirements within cash flow. So, we've got ample capacity on the balance sheet to continue the buyback program. Obviously, we want to be opportunistic, and as you see, if and when you see our share price pull back in a weaker market, we're going to get more aggressive on our cadence of buybacks. So, our approach there has not changed. The next question comes from Neil Mehta with Goldman Sachs. Please go ahead. Hi, good morning. Thank you for taking the time. This is Nicolette Slusser on behalf of Neil Mehta.

Sean Flores: Demonstrated sort of our buyback cadence in the recent quarters is <unk> 27 in Q3 and 32 in Q4.

Sean Flores: Look I think our liquidity is strong we've got excess capital today.

Sean Flores: I suspect, we'll be able to fund our capital requirements within cash flow. So we've got.

Speaker Change: Ample capacity on the balance sheet to continue the buyback program, obviously, we want to be opportunistic and as you see if and when you see our share price.

Speaker Change: Pulled back in a in a weaker market, we're going to get more aggressive on our on our cadence of buybacks.

Speaker Change: So our approach there has not changed.

Sean Flores: Yeah.

Sean Flores: The next question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Neil Singhvi Mehta: Hi, Good morning. Thank you for taking the time this is Nick <unk> on for.

Neil Singhvi Mehta: Neil made a bill. Thank you for your leadership in all of the contributions over the years and well congratulations on the new role and our first question is when we think about the business mix I think parse it bit more display oriented versus peers that at roughly 50%.

Will Monpillon: Bill, thank you for your leadership and all the contributions over the years. And Will, congratulations on the new role. Our first question is, when we think about the business mix, I think PAR's a bit more distillate-oriented versus peers at roughly 50%. Longer term and mindful of the potential for opportunistic M&A, do you see the 50% distillate yield as the optimal product level for the business?

Neil Singhvi Mehta: Longer term in and mindful of potential for opportunistic M&A do you see that 50% distillate yield is as the optimal product level for the business.

Speaker Change: Sure I think you were going to continue to try and focus on the distillate side of the barrel I think long term that is.

Will Monpillon: Sure. I think you were going to continue to try and focus on the discipline side of the barrel. I think, long term, that is ultimately what the communities we serve need. And ultimately, I think that's going to be a portion of the barrel that's going to pull the weighted average crack over time.

Neil Singhvi Mehta: Ultimately what the communities, we serve need them and ultimately I think that's going to be a portion of the barrel that's going to frankly pull the weighted average crack overtime and so.

Will Monpillon: And so I think you'll continue to see our focus be on this book production and even try to increase flexibility on distal production in places like buildings. Okay, that's great. Thank you. And then the follow-up is just on some of the longer-term opportunities the company is pursuing. Can you just remind us where we stand in regards to the FID expected this year on the longer-term Washington hydrogen and SAF facilities and how you're balancing those with the nearer-term renewable oriented projects as well? Sure. So I think we're continuing to pursue the engineering on that front and, simultaneously, I think trying to evaluate capital partners that would be available to pursue that project. Again, there are still certain aspects of it that are attractive given its location on the West Coast and favorable jurisdiction.

Neil Singhvi Mehta: I think you'll continue to see our focus be on they're slow production and even trying to increase flexibility on distillate production in places like billings.

Speaker Change: Okay. That's great. Thank you and the follow up is just on some of the longer term opportunities. The company is pursuing can you just remind us where we stand in regards to the F. I do you expected this year on the longer term, Washington, hydrogen and I say, you have facilities and how you're balancing those with with the near term our renewable renewable oriented projects as well.

Speaker Change: Sure.

Speaker Change: So I think we're continuing to pursue the engineering on that front.

Speaker Change: And simultaneously I think trying to evaluate capital partners that would be available.

Speaker Change: Pursue that project again.

Speaker Change: Certain aspects of it that are attractive.

Speaker Change: Given its location on the west coast and a favorable jurisdiction.

Will Monpillon: That said, I think we're mindful of the current renewable backdrop and what that means for returns. And I think we'll continue to be disciplined on our capital allocation framework and how we think about growing the renewables business segment. Thank you very much.

Speaker Change: That said I think we're mindful of the current renewable backdrop and what that means for returns and I think we'll continue to be disciplined on our capital allocation framework and how we think about growing the renewables business segment.

Speaker Change: Thank you very much.

Speaker Change: As a reminder, if you have a question. Please press star then one to be joined into the question queue.

Operator: As a reminder, if you have a question, please press star then 1 to be added to the question queue. The next question comes from Jason Gabelman with Cowan. Please go ahead.

Speaker Change: The next question comes from Jason Gere woman with Cowen. Please go ahead.

Sean Flores: Yeah, hey. Thanks for taking my questions. You noted some pay down in environmental liabilities with forking results, which I'm assuming are related to RINs. Do you have any outstanding RIN obligations?

Jason Gere: Yeah, Hey, Thanks for taking my questions. You noted some pay down and environmental liabilities are with four key results, which I'm assuming are related to a range do you have any outstanding rent obligation.

Sean Flores: that you'll need to pay down moving forward kind of beyond what's kind of the typical annual amount that you would hold. Hey, Jason and Sean. No, we've closed out all of the legacy Wren obligations, and we're just obviously accruing our current obligation and procuring Wrens rateably from here. Got it. And then, can you remind us of your upcoming turnaround schedule? You mentioned the Montana turnaround. Do you have anything else this year and then as you look to 2025? So Jason, I think nothing else major is planned this year. Again, I think you heard my reference to the small 15 day outage we're planning in Washington. Again, that's I think something we're largely looking to try and manage from inventory. There is a profit impact, and you'll see that when you see the reduced throughput expectations for the first quarter.

Jason Gere: Hmm.

Jason Gere: Yeah.

Jason Gere: That you'll need to pay down moving forward kind of beyond what's kind of the typical annual amount of debt that you would hold.

Jason Gere: Hey, Jason as Sean No we've closed out all of the legacy rent obligations.

Jason Gere: And we're just.

Jason Gere: Obviously accruing our current obligation and <unk>.

Jason Gere: Procuring rens ratably from here.

Jason Gere: Got it and then Jim can you remind us of your upcoming turnaround schedule that you mentioned of Montana.

Jim: Turnaround do you have anything else this year and then as you look to 2025.

Jason Gere: Okay.

Jim: So Jason I think nothing else major.

Jim: Playing this year again, I think you heard my reference to the small 15 day outage, we're planning in Washington, again, that's I think something we're largely looking to try and manage from inventory.

Jim: There is some profit impact and you'll see that you see that the reduced throughput expectations for the first quarter.

Will Monpillon: And then again, I think we've discussed in billings that we expect in 24 and 25 to complete really the full turnaround cycle. And so, again, if you look at our guidance, we've signaled really the 18 to 22M dollars per year and the typical cycles 5 to 6 years. And so, again, I think we're, we're looking at completing that full cycle between 24 and 25. OK, great, thank you.

Jim: And then again I think we discussed on billings that we expect in 'twenty four 'twenty five to complete really the full turnaround cycle.

Jim: And so again, if you look at our guidance, we've we've signaled really the $18 million to $22 million per year in the typical cycles five to six years and so again I think we're looking at completing that full cycle between 24 and 25.

Speaker Change: Okay, great. Thank you.

Jim: Thanks.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to <unk> President for any closing remarks.

Will Monpillon: Thanks. This concludes our question and answer session. I would like to turn the conference back over to Will Monpillon, President, for any closing remarks.

Speaker Change: Great. Thank you again for joining us today in closing I'd like to recognize bill for his many contributions to our company's success.

Will Monpillon: Thank you again for joining us today. In closing, I'd like to recognize Bill for his many contributions to our company's success. We're grateful for his inspired leadership, wisdom, and humility. We have a strong business outlook, and our talented management team is hungry to drive the next chapter of our process. I'm excited by the opportunity to lead this growing enterprise into the future. Thank you to our shareholders for your support. Have a nice day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Beachott a stranger in the cold of an Amazon desert. Don't switch the world on your friends and pay the doubledbend. Honey, clear skies and fireflies.

President: We're grateful for his inspired leadership wisdom and humility.

President: We have a strong business outlook and our talented management team is hungry to drive the next chapter of our growth.

President: Excited by the opportunity to lead this growing enterprise into the future.

Speaker Change: To our shareholders for your support and have a nice day.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

President: Okay.

President: Okay.

President: [music].