PAR Pacific Holdings, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are primarily with FY2022. This is an annual report, not a standalone fourth-quarter summary. Par Pacific (NYSE: PARR) operates refining, retail and logistics businesses serving the western United States.
Business context and notable developments
- Operated four refineries with 219,000 barrels per day of stated crude throughput capacity. FY2023 throughput averaged 170,300 barrels per day; refined-product sales averaged 183,100 barrels per day.
- Completed the Billings, Montana refinery and logistics acquisition on June 1, 2023, for approximately $625.4 million, including working capital. Acquired assets contributed $1.5 billion of revenue and $57.9 million of net income from the acquisition date through year-end. The purchase-price allocation remained preliminary at December 31.
- Refinancing replaced prior term debt and secured notes with a term loan due 2030; the company also expanded its asset-based revolving credit facility. It terminated the Washington refinery intermediation agreement in October.
Key financial results
| Metric | FY2023 | FY2022 | Change / context |
|---|---|---|---|
| Revenue | $8.232 billion | $7.322 billion | Up 12%; Billings added revenue, while lower crude prices reduced legacy refining revenue. |
| Operating income | $680.0 million | $437.9 million | Up $242.1 million. |
| Net income | $728.6 million | $364.2 million | More than doubled; FY2023 included a substantial noncash deferred tax benefit. |
| Diluted EPS | $11.94 | $6.08 | Up from the prior year. |
| Adjusted EBITDA | $696.2 million | $643.4 million | Up about 8%; non-GAAP measure. |
| Adjusted net income | $501.2 million | $474.7 million | Up about 6%; non-GAAP measure. |
| Operating cash flow | $579.2 million | $452.6 million | Up $126.6 million. |
| Investing cash flow | $(659.0) million | $(87.3) million | Primarily reflects $595.4 million for the Billings acquisition and $82.3 million of capital expenditures. |
| Cash and cash equivalents | $279.1 million | $490.9 million | Down $211.8 million; year-end cash including restricted cash was $279.4 million. |
| Debt, net of financing costs | $650.9 million | $505.5 million | Up $145.3 million; excludes inventory-financing obligations. |
| Inventory-financing obligations | $594.4 million | $893.1 million | Down $298.7 million. |
Margins and segment performance
- Refining operating income increased to $676.2 million from $401.9 million. Refining adjusted gross margin rose to $995.0 million from $812.8 million, including $246.1 million from Billings. Legacy refining margins faced lower benchmark crack spreads and higher environmental-credit costs.
- Hawaii adjusted gross margin was $15.25 per throughput barrel, versus $13.99. Washington fell to $9.41 from $18.00; Wyoming declined to $25.15 from $26.50. Billings, included from June, reported $21.14 per barrel.
- Logistics operating income rose to $69.7 million from $54.0 million, supported by acquired assets and higher throughput. Retail operating income rose to $56.6 million from $49.2 million; retail sales volume increased 11%.
- Adjusted gross margin, Adjusted EBITDA and Adjusted net income are non-GAAP measures; the filing describes changes to their definitions during 2023. They should be read with the reconciliations and not as substitutes for GAAP results.
Liquidity, debt and capital spending
- Reported available liquidity was $644.5 million at year-end: $279.1 million of cash, $355.0 million available under the ABL facility and $10.4 million under the J. Aron discretionary draw facility. The company also had capacity to issue letters of credit under its separate LC facility.
- Year-end debt principal was $665.6 million, compared with $515.4 million a year earlier. Debt net of unamortized discount and financing costs was $650.9 million. The term loan matures in 2030; the ABL facility matures in 2028.
- FY2023 capital expenditures were $82.3 million; capital expenditures and deferred turnaround costs together totaled approximately $88.1 million. Management budgeted approximately $220–$250 million for these combined items in 2024.
- The company repurchased 1.841 million shares for $62.1 million under its repurchase program during FY2023. The program had $181.8 million of authorization remaining at year-end. No cash dividends are expected in the foreseeable future.
Outlook, unusual items and risks
- Management said operating cash flows and available capital were expected to cover current capital, turnaround, working-capital and debt-service requirements for the next 12 months. The filing provides no quantified earnings or revenue guidance.
- Net income included a $115.3 million income-tax benefit. In the fourth quarter, the company released a majority of its federal deferred-tax valuation allowance, recognizing a $277.7 million noncash deferred-tax benefit, partly offset by other tax expenses. The company retained certain state and foreign tax valuation allowances.
- FY2023 results also included a $102.1 million gain from settling 2020–2022 renewable-fuel obligations, acquisition and integration costs of $17.5 million, Par West redevelopment costs of $11.4 million, and debt extinguishment and commitment costs of $19.2 million.
- The EPA notified the company in September 2023 of alleged violations of the Hawaii refinery consent decree. The resolution could involve material penalties or capital expenditures; the cost was not estimable in the filing.
- Environmental obligations include $14.0 million accrued for certain Wyoming refinery remediation, an estimated $11.6 million for a new wastewater treatment system, and approximately $18.9 million of environmental liabilities assumed with Billings. Some historic Wyoming remediation costs remain unestimable.
- Material business risks include volatile crude and refined-product prices and crack spreads; RIN and Washington climate-credit costs; evolving environmental rules; operational outages, severe weather and cybersecurity; regional market concentration; floating-rate debt; and dependence on third-party transport and financing arrangements. The Hawaii Supply and Offtake Agreement was due to expire May 31, 2024, and the LC facility was due to mature July 25, 2024.
- Management and the auditor reported effective internal control over financial reporting as of year-end, but the acquired Billings business—about 20% of year-end assets and 19% of FY2023 revenue—was excluded from the 2023 controls assessment while integration continued.
Most important facts for investors to verify
- Review the final Billings purchase-price allocation and subsequent integration results; acquisition accounting was preliminary at year-end.
- Check how the May 2024 Supply and Offtake Agreement expiry and July 2024 LC facility maturity were addressed, and assess any inventory repurchase or replacement-financing requirements.
- Track refining margins, especially Washington’s decline, and the effects of RIN and Washington climate-credit obligations on cash costs.
- Monitor the Hawaii EPA consent-decree matter, Wyoming remediation and wastewater projects, and the unresolved scope and cost of environmental liabilities.
- Distinguish recurring operating performance from the tax-valuation-allowance release and other unusual items; reconcile non-GAAP measures to GAAP results.
- Assess liquidity and leverage using both funded debt and inventory-financing obligations, alongside the planned 2024 capital and turnaround budget.