Par Pacific Holdings, Inc. — FY2019 Form 10-K
Business context and reporting period. The filing covers the fiscal year ended December 31, 2019; it is an annual report, not a standalone Q4 filing. Par Pacific operates refining, retail and logistics businesses in Hawaii, Washington, Wyoming and Idaho, and owns a 46% equity interest in natural-gas producer Laramie Energy. The year includes Washington refinery and logistics results from the January 11, 2019 acquisition; comparisons with 2018 are therefore not fully like-for-like.
Key financial and operating metrics
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | $5.402 billion | $3.411 billion |
| Operating income | $148.0 million | $81.9 million |
| Net income | $40.8 million | $39.4 million |
| Diluted EPS | $0.80 | $0.85 |
| Adjusted EBITDA (non-GAAP) | $260.4 million | $132.1 million |
| Cash from operations | $105.6 million | $90.6 million |
| Capital expenditures | $83.9 million | $48.4 million |
| Cash and cash equivalents at year-end | $126.0 million | $75.1 million |
| Debt, net of unamortized costs | $611.9 million | $392.6 million |
- FY2019 operating income by segment: Refining $93.8 million, Logistics $59.1 million, and Retail $49.2 million; corporate, eliminations and other were a $54.1 million operating loss.
- Refining Adjusted Gross Margin (non-GAAP) was $403.2 million, versus $238.2 million. Hawaii’s was $3.30 per throughput barrel; Washington’s was $11.37 and Wyoming’s was $18.82. These segment metrics are affected by different acquisition periods and operating conditions.
- Year-end current assets were $1.032 billion and current liabilities $1.034 billion. Current liabilities included $656.2 million of inventory-financing obligations. The company reported $241.4 million of liquidity, including cash and access to financing arrangements.
- FY2019 Q4 revenue was $1.399 billion, operating income $59.5 million and net income $35.4 million. Q3 included an $83.9 million net loss, primarily reflecting the Laramie-related impairment.
Material changes versus prior period
- Revenue increased about 58%, mainly from the Washington acquisition and higher Hawaii sales volumes following the Par West acquisition. Washington contributed $1.2 billion of revenue and $53.3 million of refining operating income from acquisition through year-end.
- Adjusted EBITDA nearly doubled, with contributions from Washington, higher Hawaii volumes, improved Wyoming crude differentials and retail fuel margins. Hawaii’s higher feedstock costs and unplanned maintenance partly offset these gains; maintenance caused about 11 lost throughput days and $2.6 million of added operating expense.
- GAAP net income rose only modestly. A $69.7 million income-tax benefit, including a $64.2 million partial valuation-allowance release associated with the Washington acquisition, and higher operating income were substantially offset by an $81.5 million impairment of the Laramie investment, higher interest expense and debt-related costs. Interest expense and financing costs increased to $74.8 million from $39.8 million.
- Cash from operations increased to $105.6 million, while investing cash use rose to $353.2 million, principally due to $273.4 million of acquisition spending and capital expenditures. Financing activities provided $300.2 million.
Outlook, risks, contingencies and unusual items
- Management expected operating cash flow and available capital resources to cover current capital, turnaround, working-capital and debt-service needs for the next 12 months. The 2020 capital-expenditure and deferred-turnaround budget was $120–$135 million. Major turnarounds were scheduled for the Wyoming and Par East refineries in 2020 and Washington in 2021.
- The company estimated 2020 Renewable Fuel Standard compliance costs of approximately $10–$20 million, before offsets from RINs generated through blending. RIN prices, mandates and litigation affecting past-year standards could change costs.
- Par reported $611.9 million of net debt at year-end, including a $300 million 7.75% secured note issue due 2025, $240.6 million outstanding on Term Loan B due 2026, and $48.7 million principal on convertible notes due 2021. It was in compliance with debt instruments at year-end. The ABL revolver had no borrowings and a $57.6 million borrowing base. Financing and inventory-intermediation agreements carry covenants, variable-rate exposure and renewal/termination risks.
- Laramie reported a $380.5 million net loss for 2019, including a $355.2 million impairment of its proved reserves. Par recorded an $81.5 million impairment of its investment; its remaining carrying value was $46.9 million. Laramie’s $400 million revolving facility, with $201.2 million outstanding and a $220 million borrowing base, matured December 15, 2020; distributions to owners were generally prohibited. Laramie had ceased drilling because of unfavorable natural-gas prices.
- Environmental exposures include $16.5 million accrued for identified Wyoming refinery remediation work and an estimated $11.6 million for a replacement wastewater-treatment system; other remediation costs were not reasonably estimable. The company also faces ongoing regulatory, spill, operational, weather, labor, commodity-price and cybersecurity risks. COVID-19 was identified as a possible source of market volatility; the filing did not quantify its financial impact.
- Par’s $1.4 billion of federal net operating loss carryforwards are subject to limitations and potential ownership-change rules; substantially all net deferred tax assets remained subject to a valuation allowance. No near-term common-stock dividends were anticipated.
Most important facts for investors to verify
- How much of the increase in 2019 revenue, segment earnings and Adjusted EBITDA reflects acquired operations versus comparable underlying performance; review the company’s non-GAAP reconciliations.
- Whether the reported liquidity measure remains available under borrowing-base, covenant and counterparty terms, particularly given inventory-financing obligations and agreements extending into 2021.
- Whether Laramie can refinance or extend its December 2020 facility, and how gas prices, revised reserve estimates and drilling plans affect Par’s investment and guarantee exposure.
- Actual 2020 turnaround spending, downtime and refinery performance relative to the $120–$135 million budget and scheduled maintenance program.
- Final RIN compliance costs, environmental remediation requirements and any material developments in outstanding bankruptcy-related claims or regulatory matters.