CVR Energy, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report. CVR Energy operates petroleum refining and marketing, nitrogen fertilizer manufacturing through CVR Partners, and a renewable diesel business that is not a reportable segment. Icahn Enterprises and affiliates owned approximately 71% of CVR Energy at year-end.
Financial performance and liquidity
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Net sales | $10.896 billion | $7.242 billion |
| Operating income | $963 million | $87 million |
| Net income | $644 million | $74 million |
| Net income attributable to CVR Energy stockholders | $463 million | $25 million |
| Diluted earnings per share | $4.60 | $0.25 |
| Net cash from operating activities | $967 million | $396 million |
| Free cash flow (non-GAAP) | $693 million | $167 million |
- Petroleum: Segment sales were $9.919 billion and operating income was $719 million, versus $6.721 billion and an operating loss of $27 million in 2021. Refining margin was $1.431 billion, or $19.09 per throughput barrel, compared with $621 million, or $8.14 per barrel. Higher crack spreads drove the improvement; throughput declined to 205,288 bpd from 209,084 bpd.
- Nitrogen fertilizer: Segment sales were $836 million and operating income was $320 million, versus $533 million and $134 million in 2021. Higher realized prices—UAN $486/ton versus $264 and ammonia $1,024/ton versus $544—more than offset lower sales volumes and higher costs. Ammonia utilization fell to 81% from 92%.
- Margins and costs: Petroleum direct operating expenses rose to $426 million from $369 million. Nitrogen fertilizer direct operating expenses increased to $270 million from $199 million, including higher turnaround, repair, and feedstock costs. The filing does not provide a single consolidated gross-margin percentage.
- Cash, debt and liquidity: Year-end cash was $510 million, total liquidity approximately $797 million, and total debt and finance lease obligations $1.591 billion. The debt total included $1.543 billion of long-term debt; CVR Partners repaid its remaining $65 million of 9.25% notes in February 2022. The company reported compliance with applicable debt covenants.
Material changes versus FY 2021
- Consolidated net sales increased approximately 50%, and operating income rose substantially, primarily reflecting stronger refining margins and fertilizer prices.
- Operating cash flow increased by $571 million; management cited stronger EBITDA, partly offset by a $209 million adverse working-capital change.
- Refining benchmark spreads improved sharply: the Group 3 2-1-1 crack spread averaged $38.18/barrel versus $18.14; the NYMEX 2-1-1 averaged $42.60 versus $19.45.
- RFS compliance expense was $435 million in both years, but the year-end accrued RFS obligation increased to $692 million from $494 million. The 2022 expense included $103 million of RINs generated by renewable diesel operations.
- Other expense, net, was $77 million versus income of $15 million, primarily due to a $79 million charge for settlement of the Call Option Lawsuits. The prior-year result included an $81 million gain on marketable securities; CVR divested its remaining Delek shares in January 2022.
Outlook, management commentary and key risks
- Capital plans: Estimated 2023 capital expenditures are $200 million to $225 million. The Coffeyville refinery turnaround was expected to begin in spring 2023. The Wynnewood renewable-feedstock pretreater was expected to be completed in Q3 2023 at an estimated cost of $95 million.
- Renewables: The Wynnewood renewable diesel unit began operating in 2022 following a $179 million conversion; stated capacity is approximately 100 million gallons annually. Management expects renewable diesel RIN generation to help offset RFS exposure, but results depend on project execution, feedstock economics, credits and regulatory outcomes.
- RFS exposure: At year-end, the company estimated an open position of approximately 397 million RINs for 2020–2022, excluding approximately 34 million net open fixed-price RIN purchase commitments, and recorded a $692 million liability. Management estimated 2023 RFS compliance costs of $230 million to $240 million, net of estimated renewable-diesel RIN generation of $240 million to $250 million, without assuming small-refinery exemptions. RIN prices and pending exemption litigation create substantial uncertainty.
- Fertilizer outlook: Management cited tight global fertilizer supply and elevated crop prices, while noting commodity-cycle volatility. 2022 production was affected by planned turnarounds and unplanned downtime, including outages at the Coffeyville air separation plant.
- Strategic actions: The board authorized exploration of a potential nitrogen fertilizer spin-off in November 2022; completion, timing, tax treatment and benefits are uncertain. In February 2023, CVR completed a restructuring to segregate its renewables business. A January 2023 carbon-capture tax-credit arrangement generated an initial net payment of approximately $18 million, with up to an additional $60 million contingent on milestones through 2030.
- Other material matters: The company accrued $22 million for environmental remediation. Litigation over insurers’ coverage of the Call Option Lawsuits settlement remains ongoing; recovery is uncertain. The company also faces Clean Air Act claims, including a disputed $6.8 million stipulated penalty award under appeal.
- Major risks include volatile refining and fertilizer commodity prices, high and fluctuating RIN costs, operational outages, seasonal and regional concentration, feedstock and transportation availability, environmental regulation and remediation, customer concentration, interest-rate and liquidity risk, and the controlled-company structure. Management stated cash, operating cash flow and available borrowing capacity should cover anticipated needs for at least 12 months, subject to risks and changing requirements.
Most important facts for investors to verify
- Whether the $692 million RFS liability and 2023 compliance-cost estimates change with RIN pricing, EPA rulemaking, or court decisions on small-refinery exemptions.
- Whether the Coffeyville turnaround and Wynnewood pretreater proceed on schedule and within the stated capital estimates, and whether renewable diesel delivers expected volumes and RIN generation.
- Operating reliability and fertilizer production recovery after 2022 outages and turnarounds, alongside the effect of feedstock prices on segment margins.
- Cash availability after dividends, capital spending and debt service; debt maturities, borrowing-base availability and covenant headroom.
- Developments in the potential nitrogen fertilizer spin-off, environmental and insurance litigation, and remediation obligations.
Audit and controls: The auditor issued an unqualified opinion on the financial statements and internal control over financial reporting; no critical audit matters were identified.