CITGO Reports Third Quarter 2023 Results

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Nov 09, 2023, 10:15 ET

Net income of $567 million and EBITDA¹ of $895 million, compared to net income of $380 million and EBITDA of $642 million for the second quarter of 2023
Adjusted EBITDA¹ for the third quarter was approximately $833 million, which included two special items related to a legal settlement and a gain on the sale of the Vicksburg terminal
Occupational and process safety indexes remained better than the latest reported industry average indexes, and environmental performance is on track to be the second-best result in the last six years
Crude oil processing in the third quarter was 765,000 barrels-per-day (bpd) with a crude capacity utilization of 95%, compared with 761,000 bpd and crude capacity utilization of 94% in the second quarter of 2023
CITGO issued $1.10 billion of Senior Secured Notes due 2029 in September 2023 and paid dividends to CITGO Holding of $1.12 billion to fund the redemption in full of $1.29 billion aggregate principal amount of CITGO Holding's senior secured notes due 2024
Liquidity of $3.86 billion at quarter end, including full availability under CITGO's $500 million accounts receivable securitization facility

HOUSTON, Nov. 9, 2023 /PRNewswire/ -- CITGO Petroleum Corporation ("CITGO") today reported its 2023 third quarter financial and operational results.

A strong pricing environment and solid operational and commercial results contributed to third quarter net income of $567 million and EBITDA of $895 million, compared with net income of $380 million and EBITDA of $642 million for the second quarter of 2023. Adjusted EBITDA for the third quarter was approximately $833 million, which included two special items related to a legal settlement and a gain on the sale of the Vicksburg terminal. Through the first nine months of 2023, net income was nearly $1.9 billion, and EBITDA was nearly $2.9 billion, compared with net income of $2.0 billion and EBITDA of nearly $3.2 billion for the first nine months of 2022.

"Strong reliability in a favorable margin environment allowed us to build liquidity, fund capital expenditures and turnarounds, and pay dividends to CITGO Holding," said CITGO President and CEO Carlos Jordá, "We delivered another solid quarter both operationally and financially."

Jordá also noted the company's response to the late-August fuel contamination incident in Florida. "We successfully restored operations after the Tampa, Fla. fuel contamination event and have been working with affected customers to quickly process their claims through our Good Gas Guarantee program. We stand by the quality of our fuels and will continue working to ensure customer confidence in our products and the CITGO brand."

Third Quarter Highlights:

Strategic and Operational

Throughput – Total throughput for the third quarter was 802,000 bpd, of which crude runs were 765,000 bpd, with a total crude utilization rate of 95%. This compares to total throughput of 804,000 bpd, of which crude runs were 761,000 bpd, with a total crude utilization rate of 94% in the second quarter of 2023. This quarter marks the fourth consecutive quarter with crude runs over 760,000 bpd.
Operational Excellence – Completed the third quarter with a continued focus on maintaining strong safety and operational standards among employees and contractors. Other highlights include:
- The company is on track to have the best process safety performance since 2010. Additionally, Terminals and Pipelines (TPL) achieved one year without an OSHA Recordable incident.
- The Lemont Refinery, Lubricants and TPL delivered strong environmental performance for the quarter, with no incidents resulting from the restoration activities associated with the Tampa, Fla. fuel contamination matter. Additionally, the Charlotte, N.C. terminal was awarded the Air Compliance Excellence Award from Mecklenburg County.
- Refinery reliability remained strong at 3.52 equivalent down time days across the CITGO refining system. Despite turnaround activities in September and an unplanned unit outage in August, the Lake Charles Refinery achieved a crude capacity utilization rate of 95% for the quarter. The Lemont refinery achieved a crude capacity utilization rate of 96% for the quarter, with both planned and unplanned outages, and set a new distillate processing record in August. The Corpus Christi refinery was affected by several unplanned events during the quarter, resulting in a crude capacity utilization rate of 92% for the quarter.
Commercial Excellence – Domestic branded and unbranded sales volume was 418,000 bpd for the third quarter. Export volume was 157,000 bpd for the third quarter, an increase of 13% relative to second quarter volume. Additionally, CITGO's Light Oils Marketing and Lubricants business units delivered strong margins for the quarter, while Lubricants continued investing in optimizing and modernizing operational and supply chain processes.

Financial

During the third quarter, CITGO invested $59 million in turnaround and catalysts and an additional $82 million that primarily consisted of direct capital expenditures.
CITGO issued $1.10 billion of Senior Secured Notes due 2029 in September 2023 and paid dividends to CITGO Holding of $1.12 billion to fund the redemption in full of $1.29 billion aggregate principal amount of CITGO Holding's senior secured notes due 2024.
At the end of the quarter, liquidity was $3.86 billion, including full availability under CITGO's $500 million accounts receivable securitization facility.

EBITDA and Adjusted EBITDA are a non-GAAP financial measure. Adjusted EBITDA is defined as EBITDA adjusted by non-recurring items (special items) for the applicable period. For additional information, please see the information under "General Information – Non-GAAP Financial Measures" on page 3 of this press release and the reconciliation on page 4 of this press release.

About CITGO
CITGO owns and operates three large-scale, highly complex petroleum refineries with a total rated crude oil refining capacity of approximately 807,000 bpd, located in Lake Charles, Louisiana, Corpus Christi, Texas and Lemont, Illinois. Our refining operations are supported by an extensive distribution network, which provides reliable access to our refined product end-markets. We own 29 active refined product terminals with a total storage capacity of 7.6 million barrels and have equity ownership of an additional 3.5 million barrels of refined product storage capacity through our joint ownership of an additional 8 terminals, spread across 21 states. In addition, we own or have an equity interest in four additional terminals, consisting of approximately 1 million barrels of refined storage capacity, which are currently inactive or only utilized to store feedstocks used in refining operations. We also have access to more than 150 active third-party and related-party terminals through exchange, terminalling and similar arrangements. Our retail network consists of approximately 4,200 independently owned and operated CITGO-branded retail outlets located east of the Rocky Mountains. We and our predecessors have had a recognized brand presence in the U.S. for over 100 years.

ADDITIONAL INFORMATION
General:

CITGO publishes financial and other information on its website, including reports of quarterly and annual results of operations and financial condition. While CITGO's historical financial information is presented in accordance with U.S. generally accepted accounting principles ("GAAP"), CITGO is not an SEC reporting company and does not report all information required of SEC reporting companies. In addition, CITGO publishes certain non-GAAP financial information, including EBITDA, as discussed below.

Forward-Looking Statements:
This press release contains "forward-looking statements" regarding financial and operating items relating to the CITGO business. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties many of which are beyond CITGO's control, that could result in expectations not being realized or could otherwise materially and adversely affect CITGO's business, financial condition, results of operations and cash flows. This press release may also contain estimates and projections regarding market and industry data that were obtained from internal company estimates, as well as third-party sources believed to be generally reliable. However, market data is subject to change and cannot always be verified with certainty due to limits on the availability and reliability of raw data and other limitations and uncertainties inherent in any statistical survey, interpretation or presentation of market data and management's estimates and projections. The forward-looking statements contained in this press release are made only as of the date of this press release. For additional information, please see CITGO's most recent annual report and other reports to CITGO noteholders, including the information set forth under the caption "Risk Factors." CITGO disclaims any duty to update any such forward-looking statements.

Operational Metrics and Non-GAAP Financial Measures:
This press release also contains operational metrics and non-GAAP financial information, including EBITDA and Adjusted EBITDA, that have not been audited and are based on management's estimates, which may be difficult to verify. These non-GAAP financial measures are presented in addition to and should not be viewed as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. In addition, CITGO's non-GAAP financial measures may differ from non-GAAP measures used by other companies in our industry. We believe these non-GAAP financial measures, when presented in conjunction with comparable GAAP measures, provide useful supplemental information regarding underlying trends in the Company's operating performance by excluding items that may not be indicative of the Company's core operating performance. These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP. Please see the reconciliation of EBITDA and Adjusted EBITDA to the most directly comparable GAAP measure set forth on page [4] of this press release, as well as the reconciliation of Refinery EBITDA Estimates to consolidated EBITDA set forth on page [5] of this press release.

Reconciliation of net income to EBITDA ⁽¹⁾ (unaudited, in millions of U.S. dollars)

		Three Months Ended				Nine Months Ended
		September 30, 2023		June 30, 2023		September 30, 2023		September 30, 2022
		($ in millions)

Net income	$	567	$	380	$	1,885	$	2,008
Excluding the impacts of:
Interest expenses, net ⁽²⁾		(4)		(4)		(1)		167
Income tax expense		164		109		542		561
Depreciation and amortization		168		157		473		441
EBITDA ⁽³⁾	$	895	$	642	$	2,899	$	3,177
Legal settlement		(54)		-		(54)		-
Vicksburg Terminal sale		(8)		-		(8)		-
Adjusted EBITDA ⁽³⁾	$	833	$	642	$	2,837	$	3,177


⁽¹⁾	EBITDA and Adjusted EBITDA are non-GAAP financial measures. The reconciliation of net income (loss), the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA is presented in the table above.
⁽²⁾	Effective as of January 1, 2023, interest expense is shown on a net basis, which includes interest income.
⁽³⁾	EBITDA and adjusted EBITDA for the periods prior to January 1, 2023, have been adjusted to present interest expense on a net basis.

Reconciliation of Refinery EBITDA Estimates to Consolidated EBITDA (unaudited, in millions of U.S. dollars)

		Three Months Ended				Nine Months Ended
		September 30, 2023		June 30, 2023		September 30, 2023		September 30, 2022
	($MM)
Refinery EBITDA Estimate
Lake Charles		491		365		1,582		1,877
Corpus Christi		206		74		489		738
Lemont		169		225		756		721
Total Refinery EBITDA Estimate ⁽¹⁾	$	866	$	664	$	2,827	$	3,336

Marketing		37		30		103		96
Lubricants		6		14		32		22
Terminals & Pipelines		32		30		95		103
Product Supply ⁽²⁾		(70)		2		16		(148)
Total Non-Refining Businesses EBITDA Estimate	$	5	$	76	$	246	$	73
Corporate EBITDA Estimate ⁽³⁾		24		(98)		(174)		(232)
Total CITGO EBITDA ⁽⁴⁾	$	895	$	642	$	2,899	$	3,177

⁽¹⁾	Refinery EBIT/EBITDA Estimates are non-GAAP financial measures. This appendix also includes further detail regarding information presented on a by Refinery basis and the components of the Refinery EBIT/EBITDA Estimates. Also reflects hedging activities associated with procuring crude and feedstocks for the refineries.
⁽²⁾	Includes activities related to selling refinery production both externally and to the CITGO Marketing function, along with any associated hedging activities. Includes immaterial reallocation of activity from Product Supply to Refinery EBTIDA in prior periods.
⁽³⁾	Includes corporate staff and overhead costs, other corporate-related items and corporate-level derivative activity, if any. No longer includes results of the Pipelines business unit, which is now shown in the Terminals & Pipelines line. Includes immaterial reallocation of activity from Corporate EBITDA to Refinery EBTIDA in prior periods.
⁽⁴⁾	EBITDA figures have been revised to reflect interest expense being shown on a net basis.