CVR Energy, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet amounts are as of March 31, 2024. CVR Energy operates petroleum refining and marketing, nitrogen fertilizer manufacturing through CVR Partners, and renewable diesel activities. Icahn Enterprises and affiliates owned approximately 66% of CVR Energy.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Net sales | $1.863 billion | $2.286 billion |
| Operating income | $123 million | $330 million |
| Net income | $90 million | $259 million |
| Net income attributable to CVR Energy stockholders | $82 million | $195 million |
| Diluted earnings per share | $0.81 | $1.94 |
| Operating cash flow | $177 million | $247 million |
| Capital expenditures and turnaround expenditures | $59 million | $53 million |
Consolidated EBITDA was $203 million versus $401 million; adjusted EBITDA, a non-GAAP measure, was $99 million versus $334 million. The filing reports no consolidated gross-margin percentage; Petroleum Segment refining margin was $290 million ($16.29 per throughput barrel), down from $411 million ($23.24 per barrel). Refining margin adjusted for inventory valuation impacts was $253 million versus $423 million.
Segments and material changes
- Petroleum: Operating income was $118 million versus $237 million; net sales were $1.722 billion versus $1.993 billion. Lower gasoline and distillate crack spreads and unfavorable derivatives affected results, partly offset by lower RFS-related expenses and favorable inventory valuation. Refinery throughput was broadly steady at 195,792 barrels per day versus 196,494.
- Nitrogen Fertilizer: Operating income was $20 million versus $109 million; net sales were $128 million versus $226 million. Lower ammonia and UAN prices and reduced UAN volumes weighed on performance. A planned 14-day Coffeyville facility outage reduced utilization to 90% from 105%. Lower natural gas and pet coke costs partly offset the revenue decline.
- Consolidated sales fell 18%, operating income fell 63%, and attributable net income fell 58% year over year. Management cited weaker refining margins and fertilizer prices, alongside the fertilizer facility outage.
Cash, debt and capital allocation
- Cash and cash equivalents were $644 million at quarter-end, compared with $581 million at December 31, 2023. Total available liquidity was approximately $938 million, including $294 million of undrawn ABL capacity.
- Total debt and finance lease obligations were $1.585 billion, including $1.542 billion of debt. CVR redeemed its $600 million 5.25% notes due 2025 on February 15, using proceeds reserved from its 2023 issuance of 8.50% notes due 2029. The company reported compliance with debt covenants.
- Cash from operations was $177 million; investing activities used $55 million and financing activities used $664 million. Financing outflow included the $600 million note redemption, $50 million of dividends to CVR Energy shareholders and $11 million of CVR Partners distributions to noncontrolling holders.
- Q1 2024 capital spending was $51 million, excluding turnaround expenditures. Estimated 2024 capital expenditures are $225–$250 million. The Wynnewood refinery turnaround began in February and was completed in March.
- CVR declared a $0.50-per-share Q1 dividend, totaling approximately $50 million, payable May 20, 2024. CVR Partners declared a $1.92-per-unit distribution, totaling approximately $20 million, also payable May 20.
Outlook, risks and notable items
- Management said cash from operations, cash on hand and available borrowings are expected to cover anticipated operating needs for at least 12 months. It cautioned that future spending could exceed estimates, including because of labor and material costs, RFS compliance and litigation outcomes.
- Management described refining crack spreads as normalized and just above mid-cycle levels, while noting lower product demand and prices, global capacity additions, commodity volatility and geopolitical uncertainty. It expects RFS-related costs to remain significant through 2024 and beyond; the RFS liability was $294 million at March 31.
- CVR and Icahn Enterprises are considering potential strategic transactions, including refining asset acquisitions and options involving CVR Partners. The filing says there is no assurance any transaction will be pursued or completed.
- A fire occurred at the Wynnewood Refinery on April 28, 2024. It was extinguished that morning, no injuries were reported, and portions of the refinery began restart procedures. Management did not then expect a material overall financial impact, but its assessment was ongoing.
- RFS small-refinery-exemption petitions and related litigation remain unresolved. The company says an adverse outcome could materially affect financial position, results or cash flows. A separate insurer-coverage dispute remains pending; management does not expect a material adverse impact from that matter.
- The 45Q carbon oxide transaction carries potential fees of up to $15 million per year, subject to a $45 million cap, if minimum supply quantities are not met. The company also disclosed a $136 million Wynnewood alkylation project and a board-approved distillate-yield project expected to cost less than $15 million and finish in the first half of 2025.
- Management reported effective disclosure controls and no material changes to internal control over financial reporting. The filing disclosed no material changes to previously reported risk factors.
Important facts for investors to verify
- Whether refining margins, product demand and derivatives performance recover, and whether the Wynnewood fire has any subsequent material operating or financial effects.
- How EPA decisions and pending RFS litigation affect exemptions, compliance costs and the $294 million recorded RFS liability.
- Fertilizer pricing, sales volumes and utilization following the Coffeyville outage, including effects of global supply and crop conditions.
- Execution, timing and final costs of the announced capital projects and the 2024 capital-spending estimate.
- Any developments in potential strategic transactions involving CVR Energy, Icahn Enterprises or CVR Partners, including financing terms and governance implications.
- Whether liquidity, debt-service capacity and discretionary dividends remain consistent with management’s outlook as operating conditions change.