Par Pacific Holdings Reports First Quarter 2018 Results

HOUSTON, May 8, 2018 /PRNewswire/ -- Par Pacific Holdings, Inc. (NYSE: PARR) ("Par Pacific" or the "Company") today reported its financial results for the quarter ended March 31, 2018.

First Quarter 2018 Highlights

• Net Income of $15.2 million, or $0.33 per diluted share
• Adjusted Net Income of $8.2 million, or $0.18 per diluted share
• Adjusted EBITDA of $26.1 million
• Record sales of 18,272 barrels per day for the Wyoming refining business
• Record on-island sales of 69,420 barrels per day in Hawaii
• Closed acquisition of 33 Cenex^® ZipTrip retail outlets, expanding our footprint in the attractive Northwest market

Par Pacific reported net income of $15.2 million, or $0.33 per diluted share, for the quarter ended March 31, 2018, compared to net income of $27.8 million, or $0.58 per diluted share, for the same quarter in 2017. First quarter 2018 Adjusted Net Income was $8.2 million, compared to Adjusted Net Income of $10.0 million in the first quarter of 2017. First quarter 2018 Adjusted EBITDA was $26.1 million, compared to Adjusted EBITDA of $32.3 million in the first quarter of 2017.

First quarter 2018 net income includes $13.2 million of RINs benefit primarily due to our refineries obtaining a Small Refinery Exemption, offset in part by a $10.5 million expense related to a settlement payment made to the former owner of our Hawaii refinery business to resolve the Tesoro Earnout Dispute, a description of which can be found in our 2017 Form 10-K - see "Tesoro Earnout Dispute" under "Management's Discussion and Analysis of Financial Condition and Results of Operations." First quarter 2018 Adjusted Net Income and Adjusted EBITDA exclude the charge associated with the settlement payment.  Further, Par Pacific no longer includes its share of Laramie Energy's unrealized derivative gains and losses in the calculation of Adjusted Net Income. Accordingly, the presentation of first quarter 2017 Adjusted Net Income has been recast to exclude a $10.2 million gain that was previously included in the calculation.  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.

"Our strong retail, logistics, and Wyoming refinery financial results and other accomplishments during the first quarter demonstrate the benefit of having a diversified business and the team's ability to execute on our strategy of expanding into attractive markets," said William Pate, Par Pacific's President and Chief Executive Officer. "The successful addition of 33 Cenex^® ZipTrip retail outlets in the Northwest is another important step towards improving our earnings and cash generation capabilities while mitigating the impact of challenging margins in our cyclical Hawaii refining business. Looking ahead, while rising crude prices will keep the team focused on optimizing refinery gross margins and prudently managing our financial position, we remain committed to pursuing growth opportunities that will create long-term value for our shareholders."

Refining

The Refining segment generated operating income of $26.1 million for the first quarter of 2018, compared to operating income of $27.4 million for the first quarter of 2017. Adjusted Gross Margin for the Refining segment was $56.4 million inclusive of the RINs benefit in the first quarter of 2018, compared to $61.0 million in the first quarter of 2017.

Refining Adjusted EBITDA was $19.0 million in the first quarter of 2018 inclusive of the RINs benefit, compared to Refining Adjusted EBITDA of $25.1 million in the first quarter of 2017.

Hawaii Refinery

The combined Mid Pacific Index was $7.40/bbl in the first quarter of 2018, compared to $8.90/bbl in the first quarter of 2017. The Hawaii refinery's throughput in the first quarter of 2018 was 76 thousand barrels per day (Mbpd). This compares to 77 Mbpd throughput for the same quarter in 2017. Production costs were $3.64 per throughput barrel in the first quarter of 2018, compared to $3.71 per throughput barrel in the same period in 2017.

Wyoming Refinery

During the first quarter of 2018, the Wyoming 3-2-1 Index averaged $15.65/bbl, compared to $16.51/bbl in the first quarter of 2017. The Wyoming refinery's throughput was 17 Mbpd in the first quarter of 2018. This compares to 14 Mbpd throughput for the same quarter in 2017. Production costs were $7.74 per throughput barrel in the first quarter of 2018. This compares to $7.46 per throughput barrel for the same quarter in 2017.

Retail

The Retail segment reported operating income of $5.7 million in the first quarter of 2018, compared to $6.1 million in the first quarter of 2017. Adjusted Gross Margin for the Retail segment was $19.4 million in the first quarter of 2018, compared to $17.9 million in the same quarter of 2017.

Retail Adjusted EBITDA was $7.6 million in the first quarter of 2018, consistent with $7.6 million in the first quarter of 2017. The Retail segment reported sales volumes of 22.2 million gallons in the first quarter of 2018, compared to 22.1 million gallons in the same quarter of 2017.

Logistics

For the first quarter of 2018, the Logistics segment generated operating income of $8.8 million, compared to $9.4 million for the first quarter of 2017. Adjusted Gross Margin for the Logistics segment was $12.3 million in the first quarter of 2018, compared to $14.7 million in the same quarter of last year.

Logistics Adjusted EBITDA was $10.4 million in the first quarter of 2018, compared to $10.9 million in the first quarter of 2017.

Laramie Energy

Equity earnings from Laramie in the first quarter of 2018 were $5.6 million, compared to equity earnings of $8.7 million in the first quarter of 2017. As previously communicated, Laramie completed the acquisition of a small in-basin operator in the quarter.  First quarter 2018 earnings attributable to Par Pacific's 39.1% ownership interest in Laramie included $2.0 million in unrealized gains on derivative instruments compared to $10.2 million in unrealized gains on derivative instruments during the first quarter of 2017.

Laramie averaged 173 million cubic feet equivalent per day (MMcfed) of production during the first quarter of 2018 and exited the quarter with production of 190 MMcfed.

Liquidity

Net cash provided by operations totaled $12.6 million for the three months ended March 31, 2018, compared to $25.0 million provided by operations during the three months ended March 31, 2017. At March 31, 2018, Par Pacific's cash balance totaled $65.0 million, long-term debt totaled $386.5 million, and total liquidity was $122.6 million. Par Pacific's cash balance declined by $53.4 million in the quarter, primarily due to acquisition activity and the resolution of the Tesoro Earnout Dispute, offset by cash provided from operations.

Conference Call Information

A conference call is scheduled for Wednesday, May 9, 2018 at 11:00 a.m. Central Time (12:00 p.m. Eastern Time). To access the call, please dial 1-877-404-9648 inside the U.S. or 1-412-902-0030 outside 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 Investor Relations page. A telephone replay will be available until May 16, 2018 and may be accessed by calling 1-877-660-6853 inside the U.S. or 1-201-612-7415 outside the U.S. and using the conference ID 13678423#.

About Par Pacific

Par Pacific Holdings, Inc., based in Houston, Texas, owns, manages and maintains interests in energy, related retailing and infrastructure businesses. Par Pacific's strategy is to identify, acquire and operate energy, related retailing and infrastructure businesses with attractive competitive positions. Par Pacific owns and operates one of the largest energy infrastructure networks in Hawaii with a 94,000-bpd refinery, a logistics network supplying the major islands of the state and 91 retail locations. In Wyoming, Par Pacific owns a refinery and associated logistics network in a niche market. In Idaho and Washington, Par Pacific owns and operates a total of 33 retail locations. Par Pacific also owns 39.1% of Laramie Energy, LLC which has natural gas operations and assets concentrated in the Piceance Basin 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; expected refinery throughput; anticipated capital expenditures, including major maintenance costs, and their effect on our financial and operating results, including earnings per share; 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 on them; the uncertainty inherent in estimating natural gas and oil reserves; our ability to identify, acquire and operate energy, related retailing and infrastructure companies with attractive competitive positions; the anticipated synergies and other benefits of the CHS Inc. retail acquisition (the "Northwest Retail Acquisition"); the anticipated financial and operating results of the Northwest Retail Acquisition and the effect on Par Pacific's cash flows and profitability (including free cash flow and Adjusted earnings per share); and other risks and uncertainties detailed in Par Pacific's Annual Report on Form 10-K, quarterly reports on Form 10-Q and any other documents that Par Pacific files with the Securities and Exchange Commission (SEC). Additionally, forward looking statements are subject to certain risks, trends, and uncertainties, such as changes to financial condition and liquidity; the volatility of crude oil and refined product prices; operating disruptions at our refineries resulting from unplanned maintenance events; uncertainties inherent in estimating oil, natural gas and NGL reserves; environmental risks; and risks of political or regulatory changes. Par Pacific 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. Par Pacific does 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. The Company further expressly disclaims any written or oral statements made by a third party regarding the subject matter of this news release.

Contact:
Suneel Mandava
SVP, Finance
(713) 969-2136
[email protected]

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 a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP and our calculations thereof may not be comparable to similarly titled measures reported by other companies.

Adjusted Gross Margin

Adjusted Gross Margin is defined as (i) operating income (loss) plus operating expense (excluding depreciation), depreciation, depletion, and amortization ("DD&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 obligation, and purchase price allocation adjustments), and unrealized losses (gains) on derivatives or (ii) revenues less cost of revenues (excluding depreciation) plus inventory valuation adjustments and unrealized losses (gains) on derivatives. We define cost of revenues (excluding depreciation) as the hydrocarbon-related costs of inventory sold, transportation costs of delivering product to customers, crude oil consumed in the refining process, costs to satisfy our Renewable Identification Numbers ("RINs") obligations, and certain hydrocarbon fees and taxes. Cost of revenues (excluding depreciation) also includes the unrealized gains (losses) on derivatives and inventory valuation adjustments that we exclude from Adjusted Gross Margin.

Management believes Adjusted Gross Margin is an important measure of operating performance and uses Adjusted Gross Margin per barrel to evaluate operating performance and compare profitability to other companies in the industry and to industry benchmarks. Management believes Adjusted Gross Margin 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 agreement and lower of cost or 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, depletion, and amortization.

Adjusted Gross Margin should not be considered an alternative to operating income (loss), net cash flows from operating activities, or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted Gross Margin presented by other companies may not be comparable to our presentation since each company may define this term differently as they may include other manufacturing costs and depreciation expense in cost of revenues.

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):

Adjusted Net Income (Loss) and Adjusted EBITDA

Adjusted Net Income (Loss) is defined as net income (loss) excluding changes in the value of contingent consideration and common stock warrants, acquisition and integration expense, unrealized (gains) losses on derivatives, loss on termination of financing agreements, release of tax valuation allowance, inventory valuation adjustment, and severance costs. Beginning in 2018, Adjusted Net Income (Loss) also excludes Par's share of Laramie Energy's unrealized loss (gain) on derivatives. The exclusion of Par's share of Laramie Energy's unrealized loss (gain) on derivatives from Adjusted Net Income (Loss) is consistent with our treatment of Par's unrealized (gains) losses on derivatives, which are also excluded from Adjusted Net Income (Loss). We have recast the non-GAAP information for three months ended March 31, 2017 to conform to the current period presentation.

Adjusted EBITDA is Adjusted Net Income (Loss) excluding interest expense and financing costs, taxes, DD&A, and equity losses (earnings) from Laramie Energy (excluding Par's share of unrealized loss or gain on derivatives). We believe Adjusted Net Income (Loss) and Adjusted EBITDA 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.

Adjusted Net Income (Loss) and Adjusted EBITDA should not be considered in isolation, or as a substitute for, operating income (loss), net income (loss), cash flows provided by operating, investing, and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. Adjusted Net Income (Loss) and Adjusted EBITDA presented by other companies may not be comparable to our presentation as other companies may define these terms differently.

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):    

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

Adjusted EBITDA by Segment

Adjusted EBITDA by segment is defined as operating income (loss) by segment excluding unrealized (gains) losses on derivatives, inventory valuation adjustment, severance costs, and depreciation, depletion, and amortization expense. We believe Adjusted EBITDA by segment 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.

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

SOURCE Par Pacific Holdings, Inc.

Related Links

http://www.parpacific.com

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