Q1 2025 Par Pacific Holdings Inc Earnings Call
Speaker Change: Good day and welcome to the Par Pacific First Quarter 2025 earnings conference call. All participants will be in listen only mode. Should you need assistance please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star than one on a touch-tone phone.
To withdraw your question, you may press star then two.
Speaker Change: Please note this event is being recorded. I would like now to turn the conference over to Ashimi Patel, Vice President of Investor Relations. Please go ahead.
Ashimi Patel: Thank you, Alan. Welcome to Par Pacific's first quarter-earning conference call. Joining me today are Will Monteleone, President and Chief Executive Officer, Richard Creamer, EVP of Refining and Logistics, and Shawn Flores, SVP and Chief Financial Officer.
Ashimi Patel: Before we begin, note that our comments today may include forward-looking statements. Any forward-looking statements are subject to change in our not guarantees of future performance or events. There are subject to risks and uncertainties and actual results made different materially from these forward-looking statements.
Ashimi Patel: Accordingly, investors should not place undue reliance on for-looking statements and we display 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.
Ashimi Patel: I'll now turn the call over to our president and chief executive officer, Will Monteleone.
Thank you, Ashimi. Good morning, everyone.
Ashimi Patel: First quarter, adjusted EBITDA was $10 million and adjusted net loss was $0.94 per share.
Ashimi Patel: First quarter results reflect off season conditions and the impacts of the Wyoming
Ashimi Patel: Market conditions are improving and our combined index is up by $6 per barrel so far this quarter.
Ashimi Patel: The Asian market remains nearly balanced in our outlook for a whole lot of finding businesses strong.
Ashimi Patel: Meanwhile, the West Coast is benefiting from reduced supply from plant and unplanned maintenance, which is also tightening the Western portions of the Roxamountain region.
Ashimi Patel: As we near completion of the Montana turnaround, we are focused on safely and reliably increasing reach for the summer driving season.
The retail business continues to deliver solid results.
Ashimi Patel: Quarterly, same store, fuel, and in-store revenue increased by 0.5%, and 1.8% compared to the first quarter of 2024.
Ashimi Patel: Underline profitability also improved as demonstrated by our last 12 months total We will adjust to the exceeding $80 million for the first time.
Ashimi Patel: to make considerable progress on key strategic objectives during the quarter and opportunistically reduced our shares outstanding by 5% compared to the end of 2024.
Ashimi Patel: We are well on our way to achieving our strategic priorities for the year.
Ashimi Patel: and Montana. We remain on time and on budget in our nearing mechanical completion of the turnaround.
Ashimi Patel: This outage reflects Montana's last major plane turnaround for the next four to five years.
Ashimi Patel: It also signals the transition of our efforts for its enhancing flexibility and competitiveness.
Ashimi Patel: and Wyoming. I would like to recognize the efforts of the team and safely bringing the facility back to full rates approximately one month early compared to our initial plans. Thank you all.
Ashimi Patel: and Hawaii. SAF project construction is progressing to plan and remain scheduled for start-up in the second half of the year.
Ashimi Patel: We have received and set major equipment and are proceeding with on-site work to complete the project.
Ashimi Patel: Despite policy uncertainty, our outlook to the project remains constructive due to the flexibility and structural advantages of the project.
Ashimi Patel: on island commercial interest from airlines and other customers is encouraging as we move towards commissioning the project.
Ashimi Patel: And finally, we have progressed cross reduction efforts in our confident and achieving our previously stated targets.
Ashimi Patel: We remain in an excess capital position with ending liquidity of 525 million after completing share repurchases and progressing our major strategic items in the quarter.
Ashimi Patel: Our current share count is now below 52 million, the level we haven't seen since 2019.
Ashimi Patel: Since then, our business is fundamentally stronger. We benefit from structural earnings improvements in places like Hawaii, a broader geographic footprint, and business segment diversity, all of which contribute to more durable earnings profile.
Ashimi Patel: We are well positioned to manage the business, the range of environments, while creatively growing our pressure on East Tower.
Ashimi Patel: A free cashflow outlook is improving due to solid demand in our niche markets and a significant decline in the capital requirements in the second half of the year.
Ashimi Patel: I'll now turn the call over to Richard to discuss our refining logistics operations.
Richard Creamer: Thank you, Will. First quarter combined throughput was 176,000 barrels per day, and Hawaii throughput was 79,000 barrels per day, and production costs were $4.81 per barrel.
Richard Creamer: Crewfoot was impacted by a planned maintenance outage that included making final pions for the Hawaii SAF project, the Reformer Regeneration, and other routine
Richard Creamer: The completed activities paid the runway for our mid-year 2026 turnaround.
Richard Creamer: Washington Throughput was 39,000 barrels per day and production cost for $4.16 for barrel. Washington completed a reformer outage in Q1 and throughput is reflective of seasonal demand on the West Coast.
Richard Creamer: Shifting to Wyoming, I'm very pleased to report that the refineries safely return to normal operations in late April following the mid-figurary furnace incident.
Speaker Change: The Return to Refinery Operations is a full month ahead of our previous guidance of Lake May. In addition to Will's comments, I want to take a moment to acknowledge the local team in Newcastle and the various support groups for their NYU Green Commitment, the rebuilding and returning to operations safely and efficiently.
Speaker Change: Truffle in the first quarter was 6,000 barrels per day, and OptX was elevated by $6 million due to the outage. We expect an additional 4 million in the second quarter.
Speaker Change: Finally, in Montana, first quarter-three-foot was $52,000 barrels per day and production costs were $10.56 per barrel.
Speaker Change: As previously mentioned, the refinery team began the FCC and Hockey turnaround in early April , and are now nearing mechanical completion with three-start forthcoming
Speaker Change: There have been a minimal amount of discovery items and critical path objectives have tracked the schedule. I can report that the turnaround is wrapping up on schedule and within cost targets.
Speaker Change: Oil Land Restart should occur in Mid Bay ahead of the summer driving season in the Rockies.
Speaker Change: Following the Montana activities, we have no major maintenance across our system for the remainder of the year. We are pleased with our progress today on completing our first half focus on turnaround some projects.
Speaker Change: This is setting the stage for the second half of reduced spending and a focus on building flexibility and reliability.
Speaker Change: Looking ahead to the second quarter, we expect to y-3-foot between 81 and 85,000 barrels per day, Washington between 40 and 42, Wyoming between 13 and 15, and Montana between 44 and 47,000 barrels per day, which reflects reduced rates during the turnaround.
Speaker Change: This results in a system-wide throughput between 178 and 189,000 barrels per day. I'll now turn the call over to Shawn to cover our financial results.
Shawn Flores: Thank you, Richard. First quarter, Adjusted Ibra, and Adjusted Arnings were 10 million and a loss of 15 million or 95, 94 cents per share. For a finding segment reported, Adjusted Ibra loss of 14 million in the first quarter compared to a loss of 22 million in the fourth quarter.
Shawn Flores: In Hawaii, the Singapore 312 average $13.12 per barrel, and our career differential was $4.99 resulting in a Hawaii index of $8.13 per barrel.
Shawn Flores: So why margin capture was 109% including a combined 4 million benefit from price lag and product
Shawn Flores: Looking to the second quarter, our Hawaii Creek differential is expected to land between 0.5 and 5.50 per barrel
Shawn Flores: and Wyoming, our index average $20.31 per barrel, in capsule is 98% near the top end of our guidance range.
Shawn Flores: Parable Capture reflects higher sales volumes relative to throughput driven by a drawdown of a refined product inventory during the outage.
Shawn Flores: Under five foot counting, the capture impacts of the refinery downtime will be primarily reflected in our gross margin from early March to mid-May.
Shawn Flores: In Montana, our index average $7.7 per barrel and capture was 71 percent driven by lower product yields as we approach the turnaround.
Shawn Flores: Looking to the second quarter, we expect the margin capture impacts of the FCC and Alki turn around to be partially mitigated by a drawdown of clean product inventories.
Shawn Flores: Lastly, our Washington index averaged $4.15 per barrel and capture was 50 percent.
Shawn Flores: Increased refinery maintenance to blow average product inventory levels have lifted margins in the Pacific Northwest and Northern Rockies.
Shawn Flores: Porter today are Washington and Montana market indices have improved by approximately $8 and $14 per barrel respectively compared to the first quarter.
Shawn Flores: Moving to the logistic segment, first quarter of just the event hall was 30 million in line with our mid-cycle run rate guidance.
Shawn Flores: Strong system utilization in Hawaii and Montana offset lower pipeline throughput in Wyoming.
Shawn Flores: Our retail segment reported the justice of the above $19 million during the first quarter compared to $22 million in the fourth quarter.
Shawn Flores: The above motorcycle results continue to reflect improving in-store performance in strong fuel margins.
Shawn Flores: Corporate expenses in adjusted EBITDA were 24 million in the first quarter. On our broader cost reduction initiative, we remain on track to achieve 30 to 40 million in annual savings relative to 2024.
Shawn Flores: Excluding the Wyoming Repair Expenses and Solidited Operating Costal, 203 million or a 22 million reduction relative to the first quarter of last year.
Shawn Flores: Turning to cash flows, cash used in operations was 1 million. This includes 28 million of turnaround expenditures and a 42 million working capital inflow primarily driven by reduction in prepaid assets which returned to typical levels during the quarter.
Shawn Flores: Ashu is an investing activities told of 41 million primarily driven by capital expenditures.
Shawn Flores: Shifting the capital allocation, we were purchased 51 million of common stock in the first quarter, reducing basic shares upstanding by 5%.
Shawn Flores: We will maintain an opportunistic approach to share repurchases adapting the changes in our share price in cash flow outlook.
Shawn Flores: Gross Term Data as a March 31st was 642 million or 3.2 times a retail logistics LTMI Bra at the low end of our three to four times leverage target.
Shawn Flores: The 525 million of liquidity as of March 31st, our balance sheet remains well-capitalized with excess liquidity to support our strategic priorities moving forward. This concludes our prepared remarks. Alan, we'll turn it back to you for Q&A.
Shawn Flores: We will now begin the question and answer session. To ask a question, you may pre-star then one on your touch-itone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star then two. At this time we will pause momentarily to assemble our roster.
Speaker Change: Our first question comes from Matthew Blair of Tudor Pickering Holt. Please go ahead.
Speaker Change: Great, thank you, and good morning, and congrats on repairing Wyoming and getting it back up. Could you talk about the factors that came in better than expected and allowed you to restart it or about a month earlier compared to your original guidance?
Speaker Change: Yeah, Matthew, this is Richard. The team there in Wyoming supported with some of the other part resources from other plants.
really stepped up and really drove the activities.
Speaker Change: and also the third-party contractors that we had both on-site and off-site supporting us with materials and resources.
Speaker Change: stepped up in a big way as well. So just an efficient team effort to pull together and respond to the incident and bring it back online. It was a great effort overall.
Speaker Change: Matthew, the only thing I'd add is just a strong response from the team. You know, they're in kind of immediately following the event. You know, we had some really cold weather following that. The team did a great job of stabilizing the plant, preventing any additional damage.
Speaker Change: Sounds good. And then the follow up is on the crude differential picture currently seeing quite tight heavy Canadian discounts. So you talk about the factors driving those tight discounts and what's your outlook for the remainder of the year.
Speaker Change: Sure, Matt. I think at the highest level you're in an excess pipeline capacity position.
Speaker Change: out of Canada for the time being and ultimately I think that's allowing the inland kind of hard-of-the-differentials to reflect.
Speaker Change: You know, I just say a looser than normal transportation situation and so I think, you know, right now there's probably a seven to eight dollar spread between the value of Canadian heavy and hardesty versus on the Gulf Coast and
Speaker Change: That's probably inside pipeline costs at the moment, so I think it suggests a quite tight market as you're mentioning and ultimately I think that's something that's likely to persist until you see production increase sufficiently to absorb the pipeline capacity.
That's in place in Canada.
Great, thank you.
Speaker Change: Our next question comes from Ryan Todd of Piper Sandler. Please go ahead.
Ryan Todd: Good, thanks. So there's been quite a bit of moving pieces looking at West Coast markets and by extension Asian markets.
Ryan Todd: including asset outages and announced closures. Can you talk about what you're seeing in terms of not kind of facts in your West Coast and Rocky's markets and in terms of supply demand and maybe even what you think the potential impact of rising product imports from Asia to California could mean for your Hawaii market?
Sure, Ryan. It's a good question.
Speaker Change: You know, I think overall, you're seeing a need for increased product imports from Asia and I think that has, you know, ultimately pushed the market into sort of persistent import parities and for us, that's a favorable outcome for our West Coast position in Tacoma. It also benefits.
You know, I'll say are...
Speaker Change: Sales profile that's in the Eastern Washington. So again, the kind of Western edges of the Rocky Market, Rocky Mountain Markets, where our Montana business.
as a significant organization.
Speaker Change: I think those are the two areas that are most impactful, and I think there's some knock-on effects to Hawaii as well, but across the board I think a high-to-west coast market benefits us in a number of ways and
Speaker Change: We're really strategically on the periphery of California, but we're not in California and so we try and position ourselves too.
Speaker Change: Participating that market when it is attractive and then ultimately continue to try and operate really low cost assets so that when the market is unattractive, we can ride through and ultimately be ourselves in a great spot to capitalize on the upside.
Speaker Change: Thanks. Yeah, I think probably close to California, but not in California is the ideal place to be.
Speaker Change: Maybe a second question. You bought back $51 million in stock in 1Q, which I think was probably higher than most expected. Can you talk about how you're thinking about capital allocation right now? How much are you willing to utilize the balance sheet?
Speaker Change: And how much did your expectation of a kind of a significant inflection and free cash flow play into how you're approaching it?
[inaudible]
Speaker Change: Non-Papa that I just say are outlooks improving and really those things give us the flexibility to be opportunistic and really that means there's a combination of price and our outlook where you're going to see us be aggressive. Thank you very much.
Speaker Change: and that means in a certain price and outlook environment we're going to reduce our activities and so I think...
Speaker Change: I think that's the key to both capital allocation, is to be dynamic and cooperate the factors and our balance sheets in a really good spot so we can continue to be aggressive if we're given the opportunity.
Okay, thank you.
Alexa Petrick: Our next question comes from Alexa Petrick of Goldman Sachs. Please go ahead.
Alexa Petrick: Hey, good morning team and thank you for taking my question. I know it's still somewhat early, but can you talk about what you're seeing in demand for Q2 so far? Are there any data points around China or Asia more broadly that you can share as we think about the market?
Speaker Change: Yeah, so Lex, I think in general all of our niche markets were seen steady to increasing demand across each one of the product categories.
Chinese exports have remained.
Pretty flat year of year. And ultimately, the Singapore market is...
Speaker Change: Supplying significant portions of the West Coast and other parts of the world and thus you're seeing what I characterized as probably mid-cycle or slightly above mid-cycle margin conditions in the Singapore market.
Speaker Change: and then simultaneous that I think you're seeing a emerging looser waterborne crude market given what OPEX posture shift has been.
Speaker Change: Okay, that's helpful. And then just to follow up on refining any color you can give on how we should think about capture it directionally, just give and turn around in some of these moving pieces.
Speaker Change: Hey, Alex, it's Shawn. Yeah, I'll walk you through each of the sides and sort of out of frame up Q2. I think in Hawaii we continue to sort of reiterate our 100 to 110 percent guidance and the clean product freight rates have held in nicely.
Speaker Change: and as we'll mention, I think there will be some knock-on benefits to a stronger West Coast as really set how it impacts the Y.
Speaker Change: In Tacoma, I think with the improving market conditions, you'll start to see the percentage captured from closer in line with our guidance of 85 to 95% moving forward.
Speaker Change: In Montana, obviously Q2 will be a little noisy with the BFCC in the outgit turnaround.
Speaker Change: But as I mentioned in my prepare remarks, we should be able to mitigate a lot of the sort of lower production and turn on impacts from drawing refined product inventories across our logistics network.
Speaker Change: We've signaled capture of 90 to 100%, and I think it's fair to assume probably slightly lower than that given the turn on activities.
Speaker Change: And in Wyoming, I called out the five-foot gunning impact to the outage.
Speaker Change: We typically have a one-month lag on 5-0 and so the sort of 60 to 70-day downtime that we had will really impact early March, so in Q1 and then extended to mid-May.
That's helpful. Turn it back. Thank you all.
Speaker Change: As a reminder, if you have a question, please press star then one.
Speaker Change: Our next question comes from Jason Gabelman of TD Goan Cohen. Please go ahead.
Hey, morning. Thanks for taking my questions.
Speaker Change: I wanted to follow on maybe on thinking about 2Q and more broadly the company's margin profile in a declining oil environment and I was hoping if you could just remind us
Speaker Change: of some of the moving pieces as oil prices fall. I believe there's...
Speaker Change: A lag effect on diesel pricing in Hawaii. I believe your op-action Hawaii is somewhat tied to crude oil prices.
Speaker Change: I imagine some of the headwinds around asphalt and co-products may improve a bit with declining crude prices and then also the impact of a market moving from backwardation to contango. Thanks.
Speaker Change: Hey, Jason yet, Shawn. I think that there's more tailwinds and headwinds in a falling flat price environment. You noted the price like exposure we have in Hawaii on our utility sales.
Speaker Change: A pretty significant cost component in all of our refineries is fuel burn and that's really costed at the sort of flat price of crude and so that will decrease in a lower flat price environment.
Speaker Change: asphalt netbacks to an improved and falling flat prices just given the stickiness of also in retail asphalt prices.
Speaker Change: On the risk management side, just keep in mind, we maintain a fully hedge position on our hydrocarbon inventory and, so, typically,
Speaker Change: Maybe across the industry, and you would see headwinds in a falling flat prize, but were well hedged and not expecting significant no-work in capital noise in Q2 related to the flat prize.
Okay, great, that's all. Hope of color.
Speaker Change: My other question is just on the SAF project as you approach startup and I imagine you'll have a ramp up in the second half of the year. You know, some of your larger peers have discussed.
Some weakness in SAF, particularly in the European market. Just wondering if that...
Speaker Change: You know, market is developing in line with your expectations if you're positioned on how I give you unique opportunity to capture margin that others won't be able to and just overall thoughts on the earnings profile of that of that project. Thanks.
Speaker Change: Yeah, Jason, it's will, you know, I would say, you know, notwithstanding, I think a lot of policy uncertainty that's in the space right now, we're remaining constructive on the Hawaii project and it really has more to do with our view on.
Speaker Change: Cost Positioning in the space of the hall, and that's really three items I'd point to. So one, this is...
Speaker Change: The operating expense profile is going to be very competitive, relative to our peers given that it's inside the plant.
Speaker Change: and we're able to leverage our existing infrastructure resources in personnel there. I think the second really is on the capital cost side, right? We're roughly $1.50 per gallon constructed, which I think is...
Speaker Change: One of the lowest I've seen in the space and the third is really on the transportation side.
Speaker Change: Given we have available logistics, we're able to efficiently distribute to...
Customers in Hawaii for the very low incremental cost.
Speaker Change: and then, alternatively, and we have our own distribution network in Washington that allows us to monetize product over our own infrastructure, which is an inviable position to be in. So, again, I think we've got a number of.
Speaker Change: Options there and then broadly on the customer side I would say we're seeing encouraging interest from international airlines, principally in the Asia Pacific region, and that's a little bit of a differentiated solution than placing staff into Europe right now.
Thank you. Thank you. Thank you.
Okay, un-understood. Thanks for the answers.
Thank you.
Speaker Change: Our next question comes from Manav Gupta of UBS. Please go ahead.
Manav Gupta: Good morning. You know, you have been a company which has grown through very...
Manav Gupta: Mark MNA, and I was just wondering if we ignore refining for a minute because that's where things can be tricky, would you be open to small bolt-on deals that can glow your logistics business as well as your retail business or the right price and the right threshold?
Manav Gupta: Yamano, this as well. I mean, what I would say is…
Manav Gupta: There's very few opportunities that we've seen that come close to competing with the Catholic Publication Alternative Repurchase in our stock.
Manav Gupta: and I think the single best capital allocation alternative we have is in that area today.
Manav Gupta: So that's, you know, kind of how we think about the market at this, at this moment.
Speaker Change: My second question is again on the retail side. We are in a uncertain macro. Are there any signs of...
Speaker Change: Recessionally Demand that you have seen out there in any region which it's early but are you seeing underlying demand to be totally resilient despite these macro headwinds or there are some signs of weakness and some market. Thank you, Haldanator.
Sure, Mono.
Shermano: Yeah, we've really not seen any reductions in demand across any of our markets. We operate in some different niches, but I think that's kind of the broad sense right now as it's flat.
Shermano: And on the retail side, I just point out that it can be a little bit counter-cyclical where the retail business tends to outperform in any type of a down market. So I would just probably characterize the man but in the store and at the pump as as flat to slightly up.
[inaudible]
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Mr. Will Monteleone for any closing remarks.
Great. Thank you, Alan.
Speaker Change: We're encouraged by the improving market backdrop and remain focused on execution as the key to driving shareholder value. Thank you for joining us today.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
John Royall, John Royall, John Royall,