CVR Energy, Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023, compared with FY 2022. This filing is an annual report; it does not provide a distinct standalone Q4 income statement or cash flow summary.
Business context
CVR Energy operates petroleum refineries in Coffeyville, Kansas, and Wynnewood, Oklahoma, and manufactures nitrogen fertilizer through its majority-owned CVR Partners, LP. Renewable diesel is included in consolidated results but is not a reportable segment. Icahn Enterprises and affiliates owned approximately 66% of CVR Energy at year-end.
Financial performance and liquidity
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Net sales | $9.247 billion | $10.896 billion |
| Operating income | $1.123 billion | $963 million |
| Net income | $878 million | $644 million |
| Net income attributable to CVR Energy stockholders | $769 million | $463 million |
| Diluted earnings per share | $7.65 | $4.60 |
| Cash provided by operating activities | $948 million | $967 million |
| Capital expenditures and turnaround expenditures | $262 million | $274 million |
- Petroleum: Operating income rose to $982 million from $719 million. Refining margin was $1.658 billion, or $21.82 per throughput barrel, versus $1.431 billion, or $19.09 per barrel. Total refinery throughput averaged 208,219 bpd.
- Nitrogen fertilizer: Operating income fell to $201 million from $320 million; net sales decreased to $681 million from $836 million. Ammonia and UAN realized prices at the gate declined 44% and 36%, respectively, while higher production and sales volumes partly offset the price declines. Ammonia utilization increased to 100% from 81%.
- Cash and liquidity: Year-end cash and cash equivalents were $581 million. A further $598 million was reserved for the 2025 Notes redemption and was not available for general use. Reported available liquidity was approximately $869 million, excluding those reserved funds, comprising cash and availability under revolving credit facilities.
- Debt: Total debt, including the $600 million 2025 Notes classified as current at year-end, was approximately $2.141 billion. CVR issued $600 million of 8.50% notes due 2029 in December 2023; it redeemed the 2025 Notes at par on February 15, 2024. The company reported compliance with applicable debt covenants.
- Dividends: CVR paid $2.00 per share in quarterly dividends and $2.50 per share in special dividends during 2023. A further $0.50 per share fourth-quarter dividend was declared in February 2024.
Material changes versus FY 2022
- Consolidated sales declined 15%, reflecting lower refined-product prices and lower fertilizer prices.
- Operating income increased 17%, primarily because of improved Petroleum Segment results; the fertilizer segment’s operating income declined.
- Petroleum refining margin improved despite a lower average Group 3 2-1-1 crack spread ($32.27 per barrel versus $38.18). Lower RFS-related expense and favorable derivative impacts more than offset weaker market spreads and unfavorable inventory valuation impacts.
- RFS compliance expense shifted substantially: the company recognized a $114 million benefit in 2023, compared with $435 million of expense in 2022. The year-end accrued RFS obligation was $329 million, down from $692 million.
- Operating cash flow was slightly lower despite higher net income, with working-capital movements—including changes in accrued liabilities—an important factor.
Outlook, risks and unusual items
- Management believes cash from operations, existing cash and, as needed, borrowings will meet anticipated operating cash requirements for at least the next 12 months. It cautions that capital and cash needs could rise, including due to RFS outcomes, litigation, and higher labor or material costs.
- Management estimated 2024 capital expenditures of $225 million to $250 million. A Wynnewood refinery turnaround was planned for spring 2024 at an estimated cost of $44 million.
- Management described the NYMEX crack-spread environment as above mid-cycle, but said Group 3 basis conditions were historically wide and forward Group 3 spreads were near or below mid-cycle. It expected RFS compliance costs to remain significant into 2024 and beyond.
- Wynnewood’s renewable feedstock pretreater was mechanically completed in late 2023 at a cost of $94 million but was not yet in service. Renewable diesel economics depend partly on government incentives and credits; the company noted that the unit could potentially return to hydrocarbon service.
- RFS litigation remains consequential. In November 2023, the Fifth Circuit vacated EPA denials of Wynnewood’s 2017–2021 small-refinery exemption petitions and remanded them for reconsideration. EPA action remained pending; the 2023 petition was also unresolved. Outcomes could materially affect compliance costs.
- Other notable matters include an October 2023 strike involving approximately 90 East Dubuque employees, during which the facility continued operating, and a May 2023 explosion and fire at Wynnewood that injured two employees, one of whom later died. The filing said refinery operations were not materially affected.
- Environmental remediation accruals totaled approximately $19 million. The company also cited commodity-price volatility, customer concentration, facility reliability, transportation and supplier dependence, environmental regulation, and geopolitical developments as risks.
Important facts for investors to verify
- Track the RFS liability, RIN prices, and decisions on pending small-refinery exemption petitions and related litigation.
- Assess whether refining margins and Group 3 market conditions support current earnings, and whether 2024 refinery maintenance affects throughput or costs.
- Monitor fertilizer prices, feedstock costs, seasonal demand, and whether high utilization can be sustained.
- Confirm post-redemption debt, unrestricted liquidity, and cash available after capital spending and dividends; distinguish general-purpose cash from reserved debt-payment funds.
- Evaluate the pretreater’s start-up and renewable diesel profitability, including dependence on incentives, feedstock availability, and RIN generation.
- Consider customer concentration, the East Dubuque labor situation, environmental and legal exposures, and CVR’s controlled-company governance structure.