Q2 2025 CVR Energy Inc Earnings Call
Greetings and welcome to the CVR Energy second quarter 2025 earnings Conference call.
At this time all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation.
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It is now my pleasure to introduce your host Richard Roberts, Vice President financial planning and analysis and Investor Relations. Thank you Sir you may begin.
Thank you Christine good afternoon, everyone. We very much appreciate you joining us this afternoon for our CVR energy second quarter 2025 earnings call with me today are Dave lamp, our Chief Executive Officer, Dan Newman, Our Chief Financial Officer, and other members of management.
Prior to discussing our 2025 second quarter results. Let me remind this conference call may contain forward looking statements that term is defined under federal securities laws for this purpose any statements made during this call that are not statements of historical facts may be deemed to be forward looking statements.
Youre cautioned that these statements may be affected by important factors set forth in our proxy Securities and Exchange Commission and in our latest earnings release.
As a result actual operations or results may differ materially from the results discussed in the forward looking statements and we undertake no.
The obligation to publicly update any forward looking statements, whether as a result of new information future events or otherwise except to the extent required by law.
This call also includes various non-GAAP financial measures and disposals related to such non-GAAP measures, including reconciliation to the most directly comparable GAAP financial measures are included in our 2025 second quarter earnings release that we filed with the SEC and Form 10-Q for the period and will be discussed during the call with that said I'll turn the call over to Dave. Thank.
Thank you Richard and good afternoon, everyone and thank you for joining our earnings call.
Yesterday, we reported a second quarter consolidated net loss of $90 million and a loss per share of $1 14, EBITDA was a loss of $24 million, although if crack spreads increased in the quarter. Our results were impacted by an unfavorable mark to market impact of our outstanding rent obligation.
And reduced throughput following the completion of the planned turnaround at Coffeyville.
In our petroleum segment.
Combined total throughput for the second quarter of 2025 was approximately 172000 barrels per day with light product yield of 99% on crude oil processed.
The planned turnaround at Coffeyville was completed in April and we ramp.
At a reduced crude rates for most of the quarter as we drew down intermediate inventories built during the turnaround.
We resumed full operating rates at Coffeyville in July and we do not currently have any additional turnarounds planned for the refining segment for the duration of 2025 and 26.
We currently expect our next planned turnaround to be at winning one in 2027.
Group 3211, benchmark cracks averaged $24 <unk> per barrel for the second quarter compared to $18 83 per barrel for the second quarter last year.
Average RIN prices for the quarter or.
Second quarter of 2025 were approximately a $1 11 on an RVO weighted basis, an increase of over 70% from the prior year period.
On a per barrel basis rents were approximately $6 eight per barrel more than 25% of the group 3211 crack spread for the quarter.
Regarding our RFS the Supreme Court ruled on the venue case in the second quarter.
Finding that venue for challenges of EPA is 2022 denial.
Denial of certain.
Small refinery exemptions lives exclusively of the DC circuit.
This ruling should make little difference in our case since the DC circuit like the fifth circuit before it also held that EPA is denials of the small refinery.
Exemptions were arbitrary capricious and contrary to law.
The comment period for the proposed 2026 and 27 renewable.
Renewable volume obligation ends in August and EPA has indicated it intends to rule on the 2020 for SRT applications before finalizing the RV OS.
In the meantime, we have already filed our 2025 sorry petition.
And this will be a true test to see if EPA can finally meet its 90 days statutory deadline to rule on SC SRV petitions.
Given the EPA has indicated it intends to clear the backlog of outstanding now sorry.
<unk>, we are holding back for now on filing additional lawsuits against the P. A.
So we will be prepared to respond.
To rapidly respond if appropriate.
We remain hopeful under President Trump's leadership EPA will see the critical role small refineries like ours plays in supporting rural communities across America.
Exactly why Congress included a small refinery exemption in the renewable fuels legislation.
For the second quarter of 2025.
<unk> approximately 14 billion gallons of vegetable fuel oil in the renewable diesel unit at <unk>, which was impacted by some unplanned downtime in may.
Gross margin was approximately 38 cents per gallon for the second quarter of 2025 compared to <unk> 43 cents per gallon for the second quarter of 2024.
As we did due to wait for final regulations. They are S. We did not recognize any PTC.
Benefits in the quarter.
As a reminder, we believe we would we would have the ability to retroactively claim credits once the regulations are fun finalized.
In the fertilizer segment.
We had some we had some planned and unplanned downtime at both facilities during the quarter, which resulted in an ammonia utilization rate of 91% nitrogen.
Nitrogen fertilizer prices for the second quarter of 2025 were higher for both UAS and ammonia compared to the second quarter of 2024, and we saw strong demand for both products through the spring planting season.
Now, let me turn the call over to Dave to discuss our financial highlights. Thank you, Dave and good afternoon, everyone for the second quarter of 2025, our consolidated net loss was $90 million losses per share were $1 14 and.
And EBITDA was a loss of $24 million.
Our second quarter results include a negative mark to market impact on our outstanding RFS obligation of $89 million and unfavorable inventory valuation impact of 32 million and unrealized derivative losses of $2 million.
Coding the above mentioned items adjusted EBITDA for the quarter was $99 million and adjusted loss per share was 23.
Adjusted EBITDA in the Petroleum segment was $38 million for the second quarter with a slight increase from the prior year period, driven by the increase in group three crack spreads offset by increased rins prices and lower throughput volumes.
Our second quarter realized margin adjusted for rent Mark to market impacts inventory evaluation and unrealized derivative losses was $9 95 per barrel, representing a 41% capture rate on the group 3211 benchmark.
Capture rate for the second quarter was negatively impacted by the timing of product sales as coffee, who will feel coming out of turnaround and running through expensive feedstocks in April when cracks were at their highest and our sales volumes were most weighted towards June when cracks were at the lowest levels in the quarter.
Net <unk> expense for the quarter, excluding mark to market impact was 62 million or $3 93 per barrel, which negatively impacted our capture rate for the quarter by an additional 20%.
The estimated accrued RFS obligation on the balance sheet was 548 million at June 30, representing 508 million Rins Mark to market at an average price of $1.08. As a reminder, our estimated outstanding rent obligation excludes the impact of any small refinery exemptions.
Direct operating expenses in the petroleum segment were $6 45 per barrel for the second quarter compared to $6 94 per barrel in the second quarter of 2020 for.
The decrease in direct operating expense per barrel was primarily primarily due to lower repair and maintenance expenses.
Adjusted EBITDA in the renewable segments was a loss of $4 million for the second quarter and.
The decline from the second quarter of 2024, adjusted EBITDA loss of $2 million.
The decrease in adjusted EBITDA was driven by a combination of a decline in the hobo spread due to higher soybean prices and lower diesel prices along with the loss of the BTC and nothing booked for the PTC, while we await final regulations from the IRS.
Adjusted EBITDA in the fertilizer segment was $67 million for the second quarter with higher <unk> and ammonia sales pricing and volumes driving the increase relative to the prior year period.
The partnership declared a distribution of $3 89 per common unit for the second quarter of 2025.
CVR energy owns approximately 37% of CVR partners common units, we will receive a proportionate cash distribution of approximately $15 million.
Cash flow from operations for the second quarter of 2025 was 176 million and free cash flow was a use of $12 million.
Significant uses of cash in the quarter included $189 million of capital and turnaround spending of $70 million prepayment on the term loan.
$26 million for cash interest at $15 million paid for the Noncontrolling interest portion of the CVR partners first quarter 2025 distribution.
Working capital was a cash source, partially associated with crude oil and feedstock inventory draws following the coffeyville turnaround.
Total consolidated capital spending on an accrual basis was 36 million, which included <unk> 3 million in the petroleum segment 10 million in the fertilizer segment and $2 million in the renewable segment.
Turnaround spending on an accrual basis in the second quarter was approximately $24 million for.
For the full year 2025, we estimate total consolidated capital spending to be approximately $165 million to $200 million and turnaround spending to be approximately $190 million.
Turning to the balance sheet, we ended the quarter with a consolidated cash balance of $596 million, which includes $114 million of cash in the fertilizer segment.
Total liquidity as of June 30, excluding CVR partners was approximately $759 million, which was comprised primarily of $482 million of cash and availability under the ABL facility of $277 million.
During the quarter, we paid down $70 million on the term loan and subsequent to quarter end, we repaid an additional $20 million in total representing a 28% reduction and leaving the current principal balance at approximately $235 million.
Looking ahead to the third quarter of 2025 for our Petroleum segment, we estimate total throughput to be approximately 200 to 215000 barrels per day direct operating expenses to range between 105 and $115 million in total capital spending to be between 25% and $30 million.
For the fertilizer segment, we estimate our ammonia utilization rate to be between 93% to 98% with some downtime plant at east Dubuque for control system upgrades, we expect direct operating expenses, excluding inventory impacts to be between 60% and 65 million and total capital spending to be between 20 and $25 million.
For the renewable segment, we estimate third quarter 2025, total throughput to be approximately 16 to 20 million gallons direct operating expenses to range between eight and $10 million and total capital spending to be between one and $3 million with that Dave I'll turn it back over to you.
Thanks, Dan.
Refining market.
Refining market conditions continue to improve in the second quarter combination of the heavy spring maintenance season, and the closure of one U S refinery <unk>.
Decline in refined products inventories, particularly diesel inventories, which are nearly 15% below 2021 to 24 averages.
<unk> product demand in the U S remained steady with year to date gasoline and diesel demand both in line with 2021 to 2024 averages.
Within the mid Con, where we operate we're seeing similar trends with gasoline and diesel inventories at or below recent historical averages and demand remained steady.
<unk> seen strong premium price premium gasoline pricing in the group III, which benefits our system as premium typically makes up 15% of our guests gasoline pool.
The alkylation project when he would should further increase our ability to make premium gasoline as well.
This project is currently 40% complete and expected to come online in 2027.
We are also in the process of revamping tankage and pipelines to allow us to produce jet jet fuel out of Coffeyville, where we've already made some progress on the commercial front.
With higher RIN prices and jet demand.
The arb between versus diesel is open.
Overall, we are cautiously optimistic about near and medium term outlook for the refining sector as I mentioned refined product inventories are relatively low and there are still several refineries in the U S and Europe that are scheduled to shut down.
In addition, the forward curve for diesel remains backward dated.
Providing no incentive to increase inventories in the near term.
Outside of the startup of new refineries in Mexico and Nigeria.
There are few new refineries under construction around the world that will be starting up over the next few years.
Meanwhile, for refining demand.
Refined product demand appears stable and a pro growth initiatives from the big beautiful Bill should be a positive for GDP growth and demand for transportation fuels in the United States.
In the renewable segment, we've been near breakeven on an adjusted EBITDA basis year to date with the loss of the blenders tax credit and increase in soybean oil pricing, mostly being offset by increased RIN prices.
Sumit.
We book the PTC in line with <unk>.
Proposed regulations are year to date adjusted EBITDA in the renewable segment would have increased approximately $6 million.
We have ordered our next load of renewable diesel catalysts and we currently plan to remain in diesel and renewable diesel production as we wait to see how credits line out with the PTC and.
And other potential positive changes to come out of the big Beautiful Bill.
We will also continue to weigh our options for the future of our renewable business.
As we have stated in our last few earnings call, we remain fully willing to participate in the renewable space, but we cannot invest in additional time or capital with other ship further assurances from the government.
The government will support the business that created.
In the fertilizer segment.
The spring planting season went well and demand for nitrogen fertilizer is strong.
With corn acres planted increasing 4% over 2024 levels.
Recent USDA estimates are calling for an inventory carryout levels for corn, soybean and soybeans at 10% or less for 2026, which are below the 10 year averages.
Between robust demand in the spring and tight supplies of nitrogen.
Nitrogen fertilizer in the U S and globally, we are seeing continued support for pricing and the normal seasonal pricing declines for the summer fill.
Yeah default prepay of UA and have been much narrow this year than past.
Looking at the third quarter of 2025 quarter to date metrics are as follows group.
Group 211 cracks have averaged $25 $52 57 per barrel, Brent Ti spread at $2 28 per barrel and the WCS differential at $10 73.
Per barrel under WTO hobo spread has averaged a negative $1 75.
As of yesterday group 3211 cracks were $25 per barrel.
Brent Ti was $3 24 per barrel and WCS was $11 65 under W. T.
The hobo spread was a negative $1 85 per gallon and Rins were approximately $6 90 per barrel.
Prompt fertilizer prices are approximately $600 per ton for ammonia and $300 for U a N.
In conjunction with improving refining fundamentals and the completion payments.
Of the Coffeyville turnaround in the second quarter, we were pleased to begin making progress on our deleveraging strategy by paying $90 million of the principal on the term loan between the second and third quarters.
Returning our balance sheet to target leverage levels is key for us in the near in the near term. In addition to our constant focus on safe and reliable operations of our facilities.
We will also continue to look for ways to improve capture reduce costs and ultimately grow our business profitably.
Finally as mentioned in our earnings release, I have announced my intention to retire as president and CEO at the end of the year.
It's been a privilege to have spent the past 45 years boiling oil boiling oil industry in the boiler and oil industry that I love I truly enjoy working with the talented CVR team and look forward to continuing to serve as a member of its sports.
Mark <unk> has done great things for both our companies and I look forward to watching him lead CVR energy into the future.
With that operator, we're ready for questions.
Thank you.
We'll now be conducting a question and answer session.
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Thank you. Our first question comes from the line of Paul Cheng with Scotiabank. Please proceed with your question.
Alright. Thanks.
Good morning, good afternoon.
First just want to congratulate you and best of luck.
<unk> pending retirement, how are we near a P <unk> <unk>.
Yes, Neal insight and very keen to commence when they are.
Appreciate that.
Thank you Paul.
I guess two questions one on cost of just curious Dan.
<unk>.
From a planning standpoint.
We made necessary that too to have all of this excess inventory and then Dan.
Do you get into a situation when when Martin was very strong, but Q1 yet.
Because you have to work off that inventory I assume that that had some negative.
So the impact in the quarter can you quantify yet and also from a planning standpoint is there any way to do you. So that we can minimize.
That kind of impact in the future.
That's the first question.
Second question.
I know you have the new <unk>, Ken can you maybe think that give us some idea that how 2026 topics that time, Iran that God, yes going to look like.
But you don't have any major turnaround for next year. Thank you.
Paul on your first question is there a way to to to mitigate the inventory we built.
During a turnaround season.
You know there is some we could do there leave it stored in tankage for a period of time, but the problem with that is if you have another problem.
Nowhere to go.
So you know.
Most of our strategy is to pull inventory back towards target. So we have some degrees of freedom should some other incident occur like weather or something else.
We can't control.
Okay.
Second part of your question on the first question I can't remember now.
Hi.
The financial impact in the quarter because of that.
Yeah.
Cover the capture overall, so obviously, 41% was a decline from.
The first quarter's performance the draw definitely had an impact.
As I mentioned in sales timing, while we were at lower throughput and drawing that inventory cracks were at their best of the quarter Rolling into June when we got back to full rates cracks were depressed. In addition that feedstock draw that we had was more heavily weighted towards gasoline, which relative to the crack was also obviously disadvantage against diesel.
Kind of pulling all of those together our estimate is call it 7% to 9% on capture what it pushes closer to 50%.
Paul on the second question about the Capex that antenna wrongful and next year.
Yes, so Paul for 26, obviously, we wait till later in the year to give guidance on capital.
I don't think Theres anything at this time, that's going to say, it's going to be an exceptional year from the past years.
The prepared remarks, we did mentioned we don't have any planned turnarounds to help potentially with a <unk> turnaround in 2007, and depending on timing of when that turnaround would happen there could be some pre spending towards the end of the year, but if it happens later in the year I wouldn't expect that either.
Yeah.
Okay. Thanks Pat.
Thank you.
Our next question comes from the line of Neil Mehta with Goldman Sachs. Please proceed with your question, yes. Good afternoon, Dave. Thanks, Thanks for all the guidance over the years and we're going to Miss you very much.
Thanks, Thanks Neal.
Well you know me.
Maybe that's a good place to start with kids as Marc stepped into the role or are there areas of strategic focus that you'd think CVI should really be focused on and how do you think about this being.
Continuation of the existing strategy or whether whether there are some of the white space that you want.
You want the business to move towards.
Well I think Neal that you've probably heard me say this before you know our biggest issue is we're in one single market with one single basically one single driver.
In terms of the correct.
You know what.
I hope in the future the bid ask narrow somewhat on on new assets that were.
We can either acquire something that diversify us to some degree or even be acquired by someone to to accomplish that same same function. So.
That's nothing new in our in our repertoire. So you.
What we ended up doing from a fertilizer standpoint. So that's an interesting question theres a lot of value there.
Fertilizer appears to be very short.
There's geopolitical things that are happening that could make that even worse.
So I'm sure Paul.
Mark will have his hands full trying to figure all that out going down the down the road.
And David as you think about a little bit of a longer term question.
Always had a very good perspective on the refining cycle is.
Is it rich debate out right now whether.
Whether we're in a in a new refining upcycle.
Given the limited capacity adds or we're still going to go through a tough period, given crude differentials the demand uncertainty.
Your multiyear outlook for refining.
Well I think there is no new construction that I can find.
Worldwide until 2030.
<unk> is still.
We can call it growing rapidly, but I'm, hoping with a big beautiful build that demand will take off to some degree just from GDP growth.
Just the demand for our products, so and I think.
Theres no question Theres, a lot of a lot of countries that are.
Envy the kind of consumption that the U S enjoys.
The standard of living so that constant pressures there and the alternatives are not particularly attractive, especially when you have crude in a in a $50 to $70 range.
So I think it's a very positive just from the standpoint that.
There's a reason that oil.
Enjoys the market share it does is because there's nothing better.
Out there so from.
From that standpoint, I think it's still a bright future and we will.
Indeed, this industry for many many years.
Alright, Thanks Meredith.
Youre welcome.
Our next question comes from the line of Manav Gupta with UBS. Please proceed with your question.
Hey, Dave Congrats on the mentally Canadian appreciate it I'll get insights over the years.
My question here is it looks like you have more constructive on refining and then sometimes you have been in the past.
Also do not have any major planned time around up really king and guests who have lower leverage but at what point do you win the books it together.
Think about rewarding scandal or does it some kind of a dividend reinstatement if you could talk about that.
Sure Manav I think first off I'd just say.
We're well known in the industry to be a dividend machine.
We'd love to return to that as fast as possible.
No I think.
I'm much more optimistic but I was just because I just believe the penetration of Evs has got a slow it has to some degree already.
And Americans will wake up in the rest of the world will wake up that the most versatile and flexible fuel in the world. This is.
As gas and diesel.
And that I'm afraid is very difficult to change and then that makes me much more optimistic.
Reality has come in on the on the energy transition, it's going to be much much different than what it was thought of three four years ago.
So on that basis I think it is.
Hum.
It's got a bright future.
Second part of your question was I forgot now.
No I think you're hoping for a dividend at some stage that you mentioned that you had been known in the industry.
Bill Gats machine so how.
How should we think about the possible dividend in cash.
Well you know the board looks at this all the time so.
I think our strategy has and you saw us make here, just recently and $90 million Paydown.
I can keep that trend going or something love it.
Most likely although the board looks at it all the time.
But I think you know.
Our goal is to get back to a dividend of some reasonable level that we can support long term and when exactly that will happen I can say.
But.
That's the goal.
Well thanks, Mike.
Quick follow up here is on the small refinery exemptions.
Boss General whenever you have been denied <unk> gone all the way to still clean Cook and proven yard Keith but looked at a number of people who have applied for the small refinery exemptions.
Some people may not be having.
As compelling as Keith as you go.
I understand from your view how do you think this plays out then more refinery exemptions on actually given out do you think there would be some kind of location from the top or would it be an all without reallocation. What are you hearing and what's what are your thoughts on that.
Well.
I think.
I've said many times that when he was when he wouldn't refinery as a poster child for an SRA.
Yeah.
I think just the numbers are compelling if you look at them closely.
EPA has had these for years.
And they could see it.
Without a doubt we are disproportionately economically harmed by this RFS rule and it's it's much more of an issue and that runs our hi than it is when renzo low.
And we just went through a cycle here and we're up cycle of RIN price with the BTC gone the PTC sort of a question Mark.
And then a huge RVO increase four 426% and 27.
So.
I don't know that this program ever goes away, but Congress always intended to have a relief valve for small refiners that live in.
Operated in rural areas.
Support those communities I mean, the supply lines are long for a lot of these these small refineries that are in rural areas that just don't have an alternative in the fuel price is going to go up so of Congress to do this EPA has afforded every direction they could almost to absurdity.
Ben.
The courts have ruled arbitrary capricious counter to the law.
But I've always said this this regulation was the law was written poorly it was implemented.
<unk>, it's been managed politically.
And it just doesn't it's.
It's untenable for people that are in the business to to think that.
Youre, just going to deny all small refinery waivers across the United States without any consideration.
When it gets to the point, where you have the department of energy that are does the scoring where they do the scoring so rigorously like it's politically influence did not facing reality.
So we'll be back in court, if if it doesn't go our way without a doubt.
And I think we've had some indications from the from the EPA.
EPA that are including the zelle them.
They're gonna take we look at this and make more sense out of it.
To clear the backlog and get back on time, which means that we're going to test them already with them. We submitted our 25 application and they've done nothing on it yet that we know of but the 90 days aren't up yet so we'll find out if they're if they're really serious with that test on the reallocation.
Comment.
I believe there is nothing in the law that states you have to reallocate SRA is in fact I'm positive there isn't he.
PAA has made that up.
My opinion and.
And they're doing that please.
The other lobby that's against any kind of change to the RFS.
And.
It's sort of a ridiculous position, but it's never been challenged in court that I know of and it might get to that if I was certainly a larger Friday, which I am I'm, a large and small I would take the position that there's nothing in the law requires you to reallocate.
So.
That's kind of card and where we stand.
Thank you so much.
Youre welcome.
We have reached the end of the question and answer session I would now like to turn the floor back over to management for closing comments.
Again I'd like to thank you all for your interest in CVR energy. Additionally, I'd like to thank our employees for their <unk>.
Work and their commitment towards safe reliable environmentally responsible operations, we look forward to reviewing our third quarter results.
25 in our next earnings call. Thank you all very much.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.