CVR Energy Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report (Form 8-K) covers the event date of December 31, 2007, and was signed on January 7, 2008. The filing reports the entry into a material definitive agreement by Coffeyville Resources Refining & Marketing, LLC ("CRRM"), a wholly-owned subsidiary of CVR Energy, Inc.
Key Financial Metrics and Agreements
The filing does not provide consolidated revenue, profit, cash flow, or margin data for the reporting period. However, it discloses specific financial terms related to derivative arrangements:
- Deferred Obligation: Approximately $123.7 million (plus accrued interest) owed by a subsidiary (Coffeyville Resources, LLC) to J. Aron & Company under "Cash Flow Swap" agreements was deferred to August 31, 2008.
- Supply Fee Structure: CRRM pays J. Aron a fixed supply service fee per barrel over the negotiated cost of crude oil purchased.
Material Changes and New Agreements
On December 31, 2007, CRRM entered into an Amended and Restated Crude Oil Supply Agreement with J. Aron & Company, replacing the prior agreement dated December 23, 2005. Key terms include:
- Term: Initial term of one year, with an automatic one-year extension unless either party elects not to extend.
- Scope: J. Aron will supply all crude oil for the Company's refinery, excluding crude acquired in Kansas, Missouri, Oklahoma, Wyoming, and adjacent states.
- Role: J. Aron executes third-party sourcing transactions and provides transportation/logistical services.
Related Party Transactions and Risks
Affiliate Relationship: J. Aron is an affiliate of The Goldman Sachs Group, Inc. ("Goldman"). Goldman Funds beneficially own approximately 36.1% of CVR Energy's common stock and designate two of the eight members of the Company's board of directors.
Derivative Risk: The Company maintains "Cash Flow Swap" agreements with J. Aron. These swaps involve payments based on crack spreads falling below or rising above a fixed level. The deferral of the $123.7 million payment represents a significant liquidity contingency.
Investor Verification Checklist
- Verify the impact of the $123.7 million deferred payment on the Company's liquidity and interest expense through August 2008.
- Review the specific "fixed supply service fee" per barrel to assess cost implications compared to the prior agreement.
- Confirm the extent of Goldman Sachs' influence on board decisions regarding future supply contracts.
- Monitor the performance of the "Cash Flow Swap" agreements against current crack spread market levels.