Par Pacific Holdings Reports Strong Second Quarter 2023 Results

Par Pacific Holdings Reports Strong Second Quarter 2023 Results

HOUSTON, Aug. 07, 2023 (GLOBE NEWSWIRE) -- Par Pacific Holdings, Inc. (NYSE: PARR) (“Par Pacific” or the “Company”) today reported its financial results for the quarter ended June 30, 2023.

  • Net Income of $30.0 million, or $0.49 per diluted share
  • Adjusted Net Income of $105.6 million, or $1.73 per diluted share
  • Adjusted EBITDA of $150.8 million
  • Exceptional operational and financial results from Billings in the first month after closing

Par Pacific reported net income of $30.0 million, or $0.49 per diluted share, for the quarter ended June 30, 2023, compared to net income of $149.1 million, or $2.50 per diluted share, for the same quarter in 2022. Second quarter 2023 Adjusted Net Income was $105.6 million, compared to an Adjusted Net Income of $197.2 million in the second quarter of 2022. Second quarter 2023 Adjusted EBITDA was $150.8 million, compared to $242.1 million in the second quarter of 2022. The strong results are due to excellent operational and commercial execution, especially when considering market cracks during the second quarter of 2023, which are materially below the record market cracks realized during the second quarter of 2022. A reconciliation of reported non-GAAP financial measures to their most directly comparable GAAP financial measures can be found in the tables accompanying this news release.

“We closed the Billings acquisition on June 1 and are making significant progress on the integration as well as our renewables initiative,” said
William Pate, Chief Executive Officer. “We are pleased with the immediate contribution from Billings and our strong earnings during the second quarter. At this stage in our company’s evolution, our healthy balance sheet and strong liquidity permit us to achieve our growth objectives while also creating value by repurchasing our common stock at attractive prices.”

Refining

The Refining segment reported operating income of $44.1 million in the second quarter of 2023, compared to operating income of $168.8 million in the second quarter of 2022. Adjusted Gross Margin for the Refining segment was $205.6 million in the second quarter of 2023, compared to $287.3 million in the second quarter of 2022.

Refining segment Adjusted EBITDA was $128.6 million in the second quarter of 2023, compared to $228.2 million in the second quarter of 2022.

Hawaii
The 3-1-2 Singapore Crack Spread was $13.72 per barrel in the second quarter of 2023, compared to $36.80 per barrel in the second quarter of 2022. Throughput in the second quarter of 2023 was 84 thousand barrels per day (Mbpd), compared to 84 Mbpd for the same quarter in 2022. Production costs were $4.33 per throughput barrel in the second quarter of 2023, compared to $4.50 per throughput barrel in the same period of 2022.

The Hawaii refinery’s Adjusted Gross Margin was $12.08 per barrel during the second quarter of 2023, including a net price lag benefit of approximately $6.7 million, or $0.88 per barrel, compared to $18.71 per barrel during the second quarter of 2022.

Montana
Since our acquisition of the Montana refinery on June 1, 2023 through the end of the second quarter of 2023, the RVO Adjusted USGC 3-2-1 Index averaged $23.20. Throughput from the date of acquisition was 62.6 Mbpd and production costs were $8.07 per throughput barrel.

The Montana refinery’s Adjusted Gross Margin was $30.98 per barrel during this period.

Washington
The RVO Adjusted Pacific Northwest 3-1-1-1 Index averaged $25.13 per barrel in the second quarter of 2023, compared to $47.23 per barrel in the second quarter of 2022. The Washington refinery’s throughput was 41 Mbpd in the second quarter of 2023, compared to 41 Mbpd in the second quarter of 2022. Production costs were $3.98 per throughput barrel in the second quarter of 2023, compared to $3.40 per throughput barrel in the same period of 2022.

The Washington refinery’s Adjusted Gross Margin was $6.37 per barrel during the second quarter of 2023, compared to $20.50 per barrel during the second quarter of 2022.

Wyoming

The RVO Adjusted USGC 3-2-1 Index averaged $21.65 per barrel in the second quarter of 2023, compared to $42.24 per barrel in the second quarter of 2022. The Wyoming refinery’s throughput was 17 Mbpd in the second quarter of 2023, compared to 17 Mbpd in the second quarter of 2022. Production costs were $8.30 per throughput barrel in the second quarter of 2023, compared to $6.97 per throughput barrel in the same period of 2022.

The Wyoming refinery's Adjusted Gross Margin was $20.56 per barrel during the second quarter of 2023, including a FIFO impact of approximately $(3.3) million, or $(2.19) per barrel, compared to $43.34 per barrel during the second quarter of 2022.

Retail

The Retail segment reported operating income of $15.2 million in the second quarter of 2023, compared to $5.5 million in the second quarter of 2022. Adjusted Gross Margin for the Retail segment was $39.2 million in the second quarter of 2023, compared to $27.6 million in the same quarter of 2022.

Retail segment Adjusted EBITDA was $18.0 million in the second quarter of 2023, compared to $8.1 million in the second quarter of 2022. The Retail segment reported sales volumes of 29.4 million gallons in the second quarter of 2023, compared to 25.9 million gallons in the same quarter of 2022. Second quarter 2023 same store sales fuel volumes and merchandise revenue increased by 10.6% and 12.0%, respectively, compared to the second quarter of 2022.

Logistics

The Logistics segment reported operating income of $20.7 million in the second quarter of 2023, compared to $15.9 million in the second quarter of 2022. Adjusted Gross Margin for the Logistics segment was $29.6 million in the second quarter of 2023, compared to $24.9 million in the same quarter of 2022.

Logistics segment Adjusted EBITDA was $26.0 million in the second quarter of 2023, compared to $21.1 million in the second quarter of 2022.

Liquidity

Net cash provided by operations totaled $173.1 million for the three months ended June 30, 2023, compared to $35.3 million for the three months ended June 30, 2022. Net cash used in investing activities totaled $(623.6) million for the three months ended June 30, 2023, including $(280.0) million for the remaining Billings Acquisition base purchase price, $(328.2) million for the purchase of Billings estimated hydrocarbon inventory value and other working capital items, and $(17.5) million in capital expenditures, compared to $(12.7) million for the three months ended June 30, 2022. Net cash used in financing activities totaled $(19.9) million for the three months ended June 30, 2023, compared to net cash provided by financing activities of $22.6 million for the three months ended June 30, 2022.

At June 30, 2023, Par Pacific’s cash balance totaled $191.0 million, gross debt was $594.7 million, and total liquidity was $464.4 million. Net debt was $403.7 million at June 30, 2023. In August 2023, the Company’s Board of Directors authorized management to repurchase up to $250 million of common stock, with no specified end date. This replaces the prior authorization to repurchase up to $50 million of common stock.

Conference Call Information

A conference call is scheduled for Tuesday, August 8, 2023 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time). To access the call, please dial 1-833-974-2377 inside the U.S. or 1-412-317-5782 outside of the U.S. and ask for the Par Pacific call. Please dial in at least 10 minutes early to register. The webcast may be accessed online through the Company’s website at http://www.parpacific.com on the Investors page. A telephone replay will be available until August 22, 2023 and may be accessed by calling 1-877-344-7529 inside the U.S. or 1-412-317-0088 outside the U.S. and using the conference ID 2594912.

About Par Pacific

Par Pacific Holdings, Inc. (NYSE: PARR), headquartered in Houston, Texas, is a growing energy company providing both renewable and conventional fuels to the western United States. In the Pacific Northwest and the Rockies, Par Pacific owns and operates 124,000 bpd of combined refining capacity across three locations and an extensive energy infrastructure network, including 7.6 million barrels of storage, and marine, rail, rack, and pipeline assets. In addition, Par Pacific operates the “nomnom” convenience store chain and supplies ExxonMobil-branded fuel retail stations in the region. Par Pacific owns and operates one of the largest energy infrastructure networks in Hawaii with 94,000 bpd of operating refining capacity, a logistics system supplying the major islands of the state and Hele-branded retail locations. Par Pacific also owns 46% of Laramie Energy, LLC, a natural gas production company with operations and assets concentrated in Western Colorado. More information is available at www.parpacific.com.

Forward-Looking Statements

This news release (and oral statements regarding the subject matter of this news release, including those made on the conference call and webcast announced herein) includes certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements include, without limitation, statements about: expected market conditions; anticipated free cash flows; anticipated refinery throughput; anticipated cost savings; anticipated capital expenditures, including major maintenance costs, and their effect on our financial and operating results, including earnings per share and free cash flow; anticipated retail sales volumes and on-island sales; the anticipated financial and operational results of Laramie Energy, LLC; the amount of our discounted net cash flows and the impact of our NOL carryforwards thereon; our ability to identify, acquire, and develop energy, related retailing, and infrastructure businesses; the timing and expected results of certain development projects, as well as the impact of such investments on our product mix and on-island sales; the anticipated synergies and other benefits of the Billings refinery and associated marketing and logistics assets (“Billings Acquisition”), including renewable growth opportunities, the anticipated financial and operating results of the Billings Acquisition and the effect on Par Pacific's cash flows and profitability (including Adjusted EBITDA and Adjusted Net Income and Free Cash Flow per share), and other risks and uncertainties detailed in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any other documents that we file with the Securities and Exchange Commission. Additionally, forward-looking statements are subject to certain risks, trends, and uncertainties, such as changes to our financial condition and liquidity; the volatility of crude oil and refined product prices; the conflict between Russia and Ukraine and its potential impacts on global crude oil markets and our business; operating disruptions at our refineries resulting from unplanned maintenance events or natural disasters; environmental risks; changes in the labor market; and risks of political or regulatory changes. We cannot provide assurances that the assumptions upon which these forward-looking statements are based will prove to have been correct. Should one of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expressed or implied in any forward-looking statements, and investors are cautioned not to place undue reliance on these forward-looking statements, which are current only as of this date. We do not intend to update or revise any forward-looking statements made herein or any other forward-looking statements as a result of new information, future events or otherwise. We further expressly disclaim any written or oral statements made by a third party regarding the subject matter of this news release.

Contact:
Ashimi Patel
Director, Investor Relations
(832) 916-3355
[email protected]

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

  Three Months Ended June 30,   Six Months Ended June 30,
    2023       2022       2023       2022  
Revenues $ 1,783,927     $ 2,106,332     $ 3,469,136     $ 3,456,625  
Operating expenses              
Cost of revenues (excluding depreciation)   1,574,806       1,808,925       2,863,826       3,159,174  
Operating expense (excluding depreciation)   101,843       80,865       184,963       160,881  
Depreciation and amortization   28,216       25,583       52,576       49,363  
Loss on sale of assets, net         15             15  
General and administrative expense (excluding depreciation)   23,168       15,438       42,454       31,331  
Equity (earnings) from refining and logistics investments   (425 )           (425 )      
Acquisition and integration costs   7,273             12,544       63  
Par West redevelopment and other costs   2,613       1,477       5,363       2,865  
Total operating expenses   1,737,494       1,932,303       3,161,301       3,403,692  
Operating income   46,433       174,029       307,835       52,933  
Other income (expense)              
Interest expense and financing costs, net   (14,909 )     (18,154 )     (31,159 )     (34,548 )
Debt extinguishment and commitment costs   38       (5,672 )     (17,682 )     (5,672 )
Other income, net   379       47       344       49  
Equity earnings from Laramie Energy, LLC               10,706        
Total other expense, net   (14,492 )     (23,779 )     (37,791 )     (40,171 )
Income before income taxes   31,941       150,250       270,044       12,762  
Income tax expense   (1,928 )     (1,125 )     (2,141 )     (688 )
Net income $ 30,013     $ 149,125     $ 267,903     $ 12,074  

Weighted-average shares outstanding              
Basic   60,399         59,479     60,255       59,449  
Diluted   60,993         59,642     61,020       59,644  
               
Income per share              
Basic $ 0.50     $   2.51   $ 4.45     $ 0.20  
Diluted $ 0.49     $   2.50   $ 4.39     $ 0.20  

Balance Sheet Data
(Unaudited)

(in thousands)

  June 30, 2023   December 31, 2022
Balance Sheet Data      
Cash and cash equivalents $ 190,951     $ 490,925  
Debt, including current portion   579,115       505,532  
Total stockholders’ equity   919,311       644,537  

Operating Statistics

The following table summarizes key operational data:

  Three Months Ended June 30,   Six Months Ended June 30,
    2023       2022       2023       2022  
Total Refining Segment              
Feedstocks throughput (Mbpd) (1)   162.3       141.3       147.7       129.8  
Refined product sales volume (Mbpd) (1)   168.8       143.4       159.1       133.0  
               
Hawaii Refinery              
Feedstocks throughput (Mbpd)   84.1       84.1       80.2       83.4  
               
Yield (% of total throughput)              
Gasoline and gasoline blendstocks   26.8 %     22.9 %     26.8 %     24.0 %
Distillates   41.0 %     38.0 %     40.1 %     39.6 %
Fuel oils   28.2 %     33.6 %     28.8 %     31.5 %
Other products   0.8 %     2.4 %     1.2 %     1.4 %
Total yield   96.8 %     96.9 %     96.9 %     96.5 %
               
Refined product sales volume (Mbpd)   87.2       80.2       88.8       79.2  
               
Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 12.08     $ 18.71     $ 15.41     $ 11.22  
Production costs per bbl ($/throughput bbl) (3)   4.33       4.50       4.43       4.45  
D&A per bbl ($/throughput bbl)   0.67       0.66       0.70       0.66  
               
Montana Refinery              
Feedstocks Throughput (Mbpd) (1)   62.6             62.6        
               
Yield (% of total throughput)              
Gasoline and gasoline blendstocks   46.3 %     %     46.3 %     %
Distillates   29.3 %     %     29.3 %     %
Asphalt   13.3 %     %     13.3 %     %
Other products   6.1 %     %     6.1 %     %
Total yield   95.0 %     %     95.0 %     %
               
Refined product sales volume (Mbpd) (1)   59.3             59.3        
               
Adjusted Gross Margin per bbl ($/throughput bbl) (2)   30.98             30.98        
Production costs per bbl ($/throughput bbl) (3)   8.07             8.07        
D&A per bbl ($/throughput bbl) $ 1.85     $     $ 1.85     $  
               
  Three Months Ended June 30,   Six Months Ended June 30,
    2023       2022       2023       2022  
Washington Refinery              
Feedstocks throughput (Mbpd)   40.9       40.5       40.3       30.4  
               
Yield (% of total throughput)              
Gasoline and gasoline blendstocks   24.0 %     24.2 %     23.8 %     24.4 %
Distillate   34.8 %     34.4 %     34.6 %     34.1 %
Asphalt   19.5 %     20.8 %     19.0 %     19.7 %
Other products   18.3 %     17.4 %     18.7 %     18.6 %
Total yield   96.6 %     96.8 %     96.1 %     96.8 %
               
Refined product sales volume (Mbpd)   44.8       44.6       42.8       37.1  
               
Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 6.37     $ 20.50     $ 8.66     $ 14.17  
Production costs per bbl ($/throughput bbl) (3)   3.98       3.40       4.11       4.71  
D&A per bbl ($/throughput bbl)   1.82       2.03       1.81       2.45  
               
Wyoming Refinery              
Feedstocks throughput (Mbpd)   16.7       16.7       16.8       16.0  
               
Yield (% of total throughput)              
Gasoline and gasoline blendstocks   43.7 %     48.1 %     45.6 %     49.1 %
Distillate   48.7 %     43.6 %     47.3 %     43.4 %
Fuel oils   2.6 %     2.2 %     2.5 %     2.3 %
Other products   2.5 %     3.4 %     1.7 %     2.5 %
Total yield   97.5 %     97.3 %     97.1 %     97.3 %
               
Refined product sales volume (Mbpd)   17.3       18.6       17.7       16.7  
               
Adjusted Gross Margin per bbl ($/throughput bbl) (2) $ 20.56     $ 43.34     $ 24.05     $ 34.97  
Production costs per bbl ($/throughput bbl) (3)   8.30       6.97       7.85       7.46  
D&A per bbl ($/throughput bbl)   2.93       2.92       2.85       3.07  
               
Market Indices ($ per barrel)              
3-1-2 Singapore Crack Spread (4) $ 13.72     $ 36.80     $ 17.45     $ 26.56  
RVO Adj. Pacific Northwest 3-1-1-1 Index (5)   25.13       47.23       25.21       35.01  
RVO Adj. USGC 3-2-1 Index (6)   21.65       42.24       24.09       30.31  
               
Crude Oil Prices ($ per barrel)              
Brent $ 77.73     $ 111.98     $ 79.90     $ 104.98  
WTI   73.56       108.52       74.77       101.80  
ANS (7)   78.26       112.17       78.63       104.19  
Bakken Clearbrook (7)   75.37       109.80       77.25       102.86  
WCS Hardisty (7)   60.07       90.25       58.38       85.10  
Brent M1-M3   0.44       4.23       0.48       4.18  
               
Retail Segment              
Retail sales volumes (thousands of gallons)   29,373       25,862       56,572       50,770  

________________________________________
(1) Feedstocks throughput and sales volumes per day for the Montana refinery for the three and six months ended June 30, 2023 are calculated based on the 30-day period for which we owned the Montana refinery in 2023. As such, the amounts for the total refining segment represent the sum of the Hawaii, Washington and Wyoming refineries’ throughput or sales volumes averaged over the three and six months ended June 30, 2023 plus the Montana refinery’s throughput or sales volumes averaged over the period from June 1, 2023 to June 30, 2023. The 2022 amounts for the total refining segment represent the sum of the Hawaii, Washington and Wyoming refineries’ throughput or sales volumes averaged over the three and six months ended June 30, 2022.

(2) We calculate Adjusted Gross Margin per barrel by dividing Adjusted Gross Margin by total refining throughput. Adjusted Gross Margin for our Washington refinery is determined under the last-in, first-out (“LIFO”) inventory costing method. Adjusted Gross Margin for our other refineries is determined under the first-in, first-out (“FIFO”) inventory costing method. The definition of Adjusted Gross Margin was modified beginning with the financial results reported for the second quarter in fiscal year 2022. We have recast Adjusted Gross Margin for prior periods when reported to conform to the current presentation. Please read discussion of Adjusted Gross Margin below.

(3) Management uses production costs per barrel to evaluate performance and compare efficiency to other companies in the industry. There are a variety of ways to calculate production costs per barrel; different companies within the industry calculate it in different ways. We calculate production costs per barrel by dividing all direct production costs, which include the costs to run the refineries including personnel costs, repair and maintenance costs, insurance, utilities, and other miscellaneous costs, by total refining throughput. Our production costs are included in Operating expense (excluding depreciation) on our consolidated statement of operations, which also includes costs related to our bulk marketing operations.

(4) We believe the 3-1-2 Singapore Crack Spread (or three barrels of Brent crude oil converted into one barrel of gasoline and two barrels of distillates (diesel and jet fuel)) is the most representative market indicator for our operations in Hawaii.

(5) We believe the RVO Adjusted Pacific Northwest 3-1-1-1 (or three barrels of WTI crude oil converted into one barrel of Pacific Northwest gasoline, one barrel of Pacific Northwest ULSD and one barrel of USGC VGO, less 100% of the RVO cost for gasoline and ULSD) is the most representative market indicator for our operations in Washington with improved historical correlations to our reported adjusted gross margin compared to prior reported indices.

(6) We believe the RVO Adjusted USGC 3-2-1 (or three barrels of WTI crude oil converted into two barrels of USGC gasoline and one barrel of USGC ULSD, less 100% of the RVO cost) is the most representative market indicator for our operations in Montana and Wyoming with improved historical correlations to our reported adjusted gross margin compared to prior reported indices.

(7) Crude pricing has been updated to reflect simple averages of outright prices during the relevant period.

Non-GAAP Performance Measures

Management uses certain financial measures to evaluate our operating performance that are considered non-GAAP financial measures. These measures should not be considered in isolation or as substitutes or alternatives to their most directly comparable GAAP financial measures or any other measure of financial performance or liquidity presented in accordance with GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies since each company may define these terms differently.

We believe Adjusted Gross Margin (as defined below) provides useful information to investors because it eliminates the gross impact of volatile commodity prices and adjusts for certain non-cash items and timing differences created by our inventory financing agreements and lower of cost and net realizable value adjustments to demonstrate the earnings potential of the business before other fixed and variable costs, which are reported separately in Operating expense (excluding depreciation) and Depreciation and amortization. Management uses Adjusted Gross Margin per barrel to evaluate operating performance and compare profitability to other companies in the industry and to industry benchmarks. We believe Adjusted Net Income (Loss) and Adjusted EBITDA (as defined below) are useful supplemental financial measures that allow investors to assess the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis, the ability of our assets to generate cash to pay interest on our indebtedness, and our operating performance and return on invested capital as compared to other companies without regard to financing methods and capital structure. We believe Adjusted EBITDA by segment (as defined below) is a useful supplemental financial measure to evaluate the economic performance of our segments without regard to financing methods, capital structure, or historical cost basis.

Beginning with financial results reported for periods in fiscal year 2023, Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA also exclude the mark-to-market losses (gains) associated with our net obligation related to the Washington Climate Commitment Act and Clean Fuel Standard effective beginning in 2023. These modifications were made to better reflect our operating performance and to improve comparability between periods.

Beginning with financial results reported for periods in fiscal year 2023, Adjusted Net Income (loss) and Adjusted EBITDA also exclude the redevelopment and other costs for our Par West facility, which was shut down in 2020. This modification improves comparability between periods by excluding expenses incurred in connection with the strategic redevelopment of this non-operating facility. We have recast Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA for prior periods when reported to conform to the modified presentation.

Beginning with financial results report for the second quarter of 2023, Adjusted Gross Margin, Adjusted Net Income (Loss), and Adjusted EBITDA also exclude our portion of interest, taxes, and depreciation expense from our refining and logistics investments.

Adjusted Gross Margin

Adjusted Gross Margin is defined as operating income (loss) excluding:

  operating expense (excluding depreciation);
  depreciation and amortization (“D&A”);
  impairment expense;
  loss (gain) on sale of assets, net;
  inventory valuation adjustment (which adjusts for timing differences to reflect the economics of our inventory financing agreements, including lower of cost or net realizable value adjustments, the impact of the embedded derivative repurchase or terminal obligations, contango (gains) and backwardation losses associated with our Washington inventory and intermediation obligation, and purchase price allocation adjustments);
  LIFO layer liquidation impacts associated with our Washington inventory;
  Environmental obligation mark-to-market adjustments (which represents the income statement effect of reflecting our Renewable Identification Numbers (“RINs”) liability on a net basis; this adjustment also includes the mark-to-market losses (gains) associated with our net RINs liability; beginning with the first quarter of 2023, this also includes our mark-to-market losses (gains) associated with our net obligation associated with the Washington Climate Commitment Act and Clean Fuel Standard);
  unrealized loss (gain) on derivatives.
  Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments

The following tables present a reconciliation of Adjusted Gross Margin to the most directly comparable GAAP financial measure, operating income (loss), on a historical basis, for selected segments, for the periods indicated (in thousands):

Three months ended June 30, 2023 Refining   Logistics   Retail
Operating income $ 44,139     $ 20,691     $ 15,220  
Operating expense (excluding depreciation)   76,971       3,596       21,276  
Depreciation and amortization   19,826       5,059       2,732  
Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments         207        
Inventory valuation adjustment   33,118              
Environmental obligation mark-to-market adjustments   9,343              
Unrealized loss on derivatives   22,178              
Adjusted Gross Margin (1) (2) $ 205,575     $ 29,553     $ 39,228  

Three months ended June 30, 2022 Refining   Logistics   Retail
Operating income $ 168,798     $ 15,898     $ 5,525  
Operating expense (excluding depreciation)   59,101       3,797       19,444  
Depreciation and amortization   16,979       5,211       2,600  
Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments                
Gain on sale of assets, net         (12 )      
Inventory valuation adjustment   (7,557 )            
Environmental obligation mark-to-market adjustments   78,548              
Unrealized gain on derivatives   (28,607 )            
Adjusted Gross Margin (1) $ 287,262     $ 24,894     $ 27,569  

Six Months Ended June 30, 2023 Refining   Logistics   Retail
Operating income $ 307,276     $ 33,299     $ 28,694  
Operating expense (excluding depreciation)   135,853       7,043       42,067  
Depreciation and amortization   35,549       10,093       5,811  
Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments         207        
Inventory valuation adjustment   53,976              
Environmental obligation mark-to-market adjustments   (123,958 )            
Unrealized loss on derivatives   8,508              
Adjusted Gross Margin (1) (2) $ 417,204     $ 50,642     $ 76,572  

Six Months Ended June 30, 2022 Refining   Logistics   Retail
Operating income $ 50,473     $ 25,750     $ 9,570  
Operating expense (excluding depreciation)   117,401       7,570       38,775  
Depreciation and amortization   32,312       10,298       5,291  
Par’s portion of interest, taxes, and depreciation expense from refining and logistics investments                
Gain on sale of assets, net         (12 )      
Inventory valuation adjustment   73,096              
Environmental obligation mark-to-market adjustments   89,850              
Unrealized gain on derivatives   (13,155 )            
Adjusted Gross Margin (1) $ 349,977     $ 43,606     $ 53,636  

________________________________________
(1) There was no LIFO liquidation adjustment or impairment expense for the three and six months ended June 30, 2023 and 2022.
(2) There was no (gain) loss on sale of assets for the three and six months ended June 30, 2023.

Adjusted Net Income (Loss) and Adjusted EBITDA

Adjusted Net Income (Loss) is defined as Net income (loss) excluding:

  inventory valuation adjustment (which adjusts for timing differences to reflect the economics of our inventory financing agreements, including lower of cost or net realizable value adjustments, the impact of the embedded derivative repurchase or terminal obligations, contango (gains) and backwardation losses associated with our Washington inventory and intermediation obligation, and purchase price allocation adjustments);
  the LIFO layer liquidation impacts associated with our Washington inventory;
  Environmental obligation mark-to-market adjustments (which represents the income statement effect of reflecting our Renewable Identification Numbers (“RINs”) liability on a net basis; this adjustment also includes the mark-to-market losses (gains) associated with our net RINs liability; beginning with the first quarter of 2023, this also includes our mark-to-market losses (gains) associated with our net obligation associated with the Washington Climate Commitment Act and Clean Fuel Standard);
  unrealized (gain) loss on derivatives;
  acquisition and integration costs;
  redevelopment and other costs related to Par West;
  debt extinguishment and commitment costs;
  increase in (release of) tax valuation allowance and other deferred tax items;
  changes in the value of contingent consideration and common stock warrants;
  severance costs;
  (gain) loss on sale of assets;
  impairment expense;
  impairment expense associated with our investment in Laramie Energy and our share of Laramie Energy’s asset impairment losses in excess of our basis difference; and
  Par’s share of Laramie Energy’s unrealized loss (gain) on derivatives.

Adjusted EBITDA is defined as Adjusted Net Income (Loss) excluding:

  D&A;
  interest expense and financing costs;
  equity losses (earnings) from Laramie Energy excluding Par’s share of unrealized loss (gain) on derivatives, impairment of Par’s investment, and our share of Laramie Energy’s asset impairment losses in excess of our basis difference;
  Par's portion of interest, taxes, and depreciation expense from refining and logistics investments; and
  income tax expense (benefit) excluding the increase in (release of) tax valuation allowance.

The following table presents a reconciliation of Adjusted Net Income (Loss) and Adjusted EBITDA to the most directly comparable GAAP financial measure, net income (loss), on a historical basis for the periods indicated (in thousands):        

  Three Months Ended June 30,   Six Months Ended June 30,
    2023       2022       2023       2022  
Net income $ 30,013     $ 149,125     $ 267,903     $ 12,074  
Inventory valuation adjustment   33,118       (7,557 )     53,976       73,096  
Environmental obligation mark-to-market adjustments   9,343       78,548       (123,958 )     89,850  
Unrealized loss (gain) on derivatives   22,178       (28,607 )     8,508       (13,155 )
Acquisition and integration costs   7,273             12,544       63  
Par West redevelopment and other costs   2,613             5,363        
Debt extinguishment and commitment costs   (38 )     5,672       17,682       5,672  
Severance costs   1,070       35       1,070       2,263  
Loss on sale of assets, net         15             15  
Adjusted Net Income   105,570       197,231       243,088       169,878  
Depreciation and amortization   28,216       25,583       52,576       49,363  
Interest expense and financing costs, net   14,909       18,154       31,159       34,548  
Equity losses (earnings) from Laramie Energy, LLC, excluding Par’s share of unrealized loss (gain) on derivatives and impairment losses               (10,706 )      
Par's portion of interest, taxes, and depreciation expense from refining and logistics investments   207             207        
Income tax expense   1,928       1,125       2,141       688  
Adjusted EBITDA (1) $ 150,830     $ 242,093     $ 318,465     $ 254,477  

___________________________________
(1) For the three and six months ended June 30, 2023 and 2022, there was no LIFO liquidation adjustment, change in value of contingent consideration, change in valuation allowance and other deferred tax items, change in value of common stock warrants, impairment expense, impairments associated with our investment in Laramie Energy, our share of Laramie Energy’s asset impairment losses in excess of our basis difference, or our share of Laramie Energy’s unrealized loss (gain) on derivatives.

The following table sets forth the computation of basic and diluted Adjusted Net Income (Loss) per share (in thousands, except per share amounts):

  Three Months Ended June 30,   Six Months Ended June 30,
    2023       2022       2023       2022  
Adjusted Net Income $ 105,570     $ 197,231     $ 243,088     $ 169,878  
Plus: effect of convertible securities                      
Numerator for diluted income per common share $ 105,570     $ 197,231     $ 243,088     $ 169,878  
               
Basic weighted-average common stock shares outstanding   60,399       59,479       60,255       59,449  
Add dilutive effects of common stock equivalents   594       163       765       195  
Diluted weighted-average common stock shares outstanding   60,993       59,642       61,020       59,644  
               
Basic Adjusted Net Income per common share $ 1.75     $ 3.32     $ 4.03     $ 2.86  
Diluted Adjusted Net Income per common share $ 1.73     $ 3.31     $ 3.98     $ 2.85  

Adjusted EBITDA by Segment

Adjusted EBITDA by segment is defined as Operating income (loss) excluding:

  D&A;
  inventory valuation adjustment (which adjusts for timing differences to reflect the economics of our inventory financing agreements, including lower of cost or net realizable value adjustments, the impact of the embedded derivative repurchase or terminal obligations, contango (gains) and backwardation losses associated with our Washington inventory and intermediation obligation, and purchase price allocation adjustments);
  the LIFO layer liquidation impacts associated with our Washington inventory;
  Environmental obligation mark-to-market adjustments (which represents the income statement effect of reflecting our Renewable Identification Numbers (“RINs”) liability on a net basis; this adjustment also includes the mark-to-market losses (gains) associated with our net RINs liability; beginning with the first quarter of 2023, this also includes our mark-to-market losses (gains) associated with our net obligation associated with the Washington Climate Commitment Act and Clean Fuel Standard);
  unrealized (gain) loss on derivatives;
  acquisition and integration costs;
  redevelopment and other costs related to Par West;
  severance costs;
  (gain) loss on sale of assets;
  impairment expense; and
  Par's portion of interest, taxes, and depreciation expense from refining and logistics investments

Adjusted EBITDA by segment also includes Gain on curtailment of pension obligation and Other income (loss), net, which are presented below operating income (loss) on our condensed consolidated statements of operations.

The following table presents a reconciliation of Adjusted EBITDA by segment to the most directly comparable GAAP financial measure, operating income (loss) by segment, on a historical basis, for selected segments, for the periods indicated (in thousands):

  Three Months Ended June 30, 2023
  Refining   Logistics   Retail   Corporate and Other
Operating income (loss) by segment $ 44,139     $ 20,691     $ 15,220     $ (33,617 )
Depreciation and amortization   19,826       5,059       2,732       599  
Inventory valuation adjustment   33,118                    
Environmental obligation mark-to-market adjustments   9,343                    
Unrealized loss on derivatives   22,178                    
Acquisition and integration costs                     7,273  
Par West redevelopment and other costs                     2,613  
Severance costs                     1,070  
Par's portion of interest, taxes, and depreciation expense from refining and logistics investments         207              
Other income, net                     379  
Adjusted EBITDA (1) $ 128,604     $ 25,957     $ 17,952     $ (21,683 )

  Three Months Ended June 30, 2022
  Refining   Logistics   Retail   Corporate and Other
Operating income (loss) by segment $ 168,798     $ 15,898     $ 5,525     $ (16,192 )
Depreciation and amortization   16,979       5,211       2,600       793  
Inventory valuation adjustment   (7,557 )                  
Environmental obligation mark-to-market adjustments   78,548                    
Unrealized gain on derivatives   (28,607 )                  
Severance costs   3       4       22       6  
Loss (gain) on sale of assets, net         (12 )           27  
Other income, net                     47  
Adjusted EBITDA (1) $ 228,164     $ 21,101     $ 8,147     $ (15,319 )

  Six Months Ended June 30, 2023
  Refining   Logistics   Retail   Corporate and Other
Operating income (loss) by segment $ 307,276     $ 33,299     $ 28,694     $ (61,434 )
Depreciation and amortization   35,549       10,093       5,811       1,123  
Inventory valuation adjustment   53,976                    
Environmental obligation mark-to-market adjustments   (123,958 )                  
Unrealized loss on derivatives   8,508                    
Acquisition and integration costs                     12,544  
Severance costs                     1,070  
Par West redevelopment and other costs                     5,363  
Par's portion of interest, taxes, and depreciation expense from refining and logistics investments         207              
Other income, net                     344  
Adjusted EBITDA (1) $ 281,351     $ 43,599     $ 34,505     $ (40,990 )

  Six Months Ended June 30, 2022
  Refining   Logistics   Retail   Corporate and Other
Operating income (loss) by segment $ 50,473     $ 25,750     $ 9,570     $ (32,860 )
Depreciation and amortization   32,312       10,298       5,291       1,462  
Inventory valuation adjustment   73,096                    
Environmental obligation mark-to-market adjustments   89,850                    
Unrealized gain on derivatives   (13,155 )                  
Acquisition and integration costs                     63  
Severance costs   40       4       22       2,197  
Loss (gain) on sale of assets, net         (12 )           27  
Other income, net                     49  
Adjusted EBITDA (1) $ 232,616     $ 36,040     $ 14,883     $ (29,062 )

________________________________________
(1) For the three and six months ended June 30, 2023 and 2022, there was no LIFO liquidation adjustment, impairment expense, or gain on curtailment of pension obligation. For the three and six months ended June 30, 2023, there was no (gain) loss on sale of assets. For the three months ended June 30, 2022, there was no acquisition and integration costs. For the six months ended June 30, 2022, there was no loss (gain) on sale of assets, net. For the three and six months ended June 30, 2022, there was no Par West redevelopment and other costs or Par's portion of interest, taxes, and depreciation expense from refining and logistics investments.

Laramie Energy Adjusted EBITDAX

Adjusted EBITDAX is defined as net income (loss) excluding commodity derivative loss (gain), loss (gain) on settled derivative instruments, interest expense, gain on extinguishment of debt, non-cash preferred dividend, depreciation, depletion, amortization, and accretion, exploration and geological and geographical expense, bonus accrual, equity-based compensation expense, loss (gain) on disposal of assets, phantom units, and expired acreage (non-cash). We believe Adjusted EBITDAX is a useful supplemental financial measure to evaluate the economic and operational performance of exploration and production companies such as Laramie Energy.

The following table presents a reconciliation of Laramie Energy’s Adjusted EBITDAX to the most directly comparable GAAP financial measure, net income (loss) for the periods indicated (in thousands):

  Three Months Ended June 30,   Six Months Ended June 30,
    2023       2022       2023       2022  
Net income (loss) $ 6,709     $ 383     $ 57,527     $ (32,517 )
Commodity derivative income (loss)   (12,384 )     22,357       (34,840 )     73,200  
Loss (gain) on settled derivative instruments   4,411       (11,625 )     (4,208 )     (19,812 )
Interest expense and loan fees   4,974       3,715       8,959       7,871  
Gain on extinguishment of debt               10,098        
Non-cash preferred dividend         2,640       2,910       4,726  
Depreciation, depletion, amortization, and accretion   6,193       5,990       13,217       12,135  
Phantom units   147             746        
Loss on sale of assets, net   58       724       68       724  
Expired acreage (non-cash)   116       44       112       47  
Total Adjusted EBITDAX $ 10,224     $ 24,228     $ 54,589     $ 46,374  


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Source: Par Pacific Holdings, Inc.