CVR Energy (CVI) 22 Feb 232022 Q4 Earnings call transcript

Greetings, and welcome to the CVR Energy Fourth Quarter 2022 Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Richard Roberts, Vice President of Financial Planning and Analysis and Investor Relations. Thank you, sir.

begin. may You

Lamp, Good of joining Christine. fourth We much Officer; are very XXXX Newman, Officer; Thank Chief our this afternoon, afternoon you Financial Dave today me us call. other Energy Chief for appreciate Executive earnings Dan members you, and With everyone. our management. our quarter CVR

that under to our XXXX may results, securities you remind me conference discussing fourth call year defined Prior that forward-looking contain term laws. as statements let federal quarter and is this full

For this made statements. statements to may any are not during forward-looking that purpose, be this statements be facts call of historical deemed

earnings You are factors with important our cautioned by filings these latest that the Securities be Commission release. affected forth Exchange in may set and statements our and

actual a differ results may information, result, of a to materially statements. undertake results as or in future discussed or extent update except no operations whether result law. the publicly statements, We to by obligation forward-looking the the otherwise, required new events forward-looking from any As

are basis. also that unit reverse on a CVR XX a for common X its this of adjusted split XX, you me on call made XXXX. split Any November remind references Partners per completed Let on units

XXXX during and This the will and the quarter to most with including our for The reconciliation are earnings discussed includes directly measures, filed non-GAAP to release XX-K we SEC comparable disclosures call fourth call. also such the financial in be measures. included the various that related non-GAAP measures, Form GAAP period financial

over to That Dave. said, call I'll turn the

for you and call. Richard. earnings Thank everyone, you, Good our thank afternoon, joining

Petroleum per of of of and reported generated $XXX of segment. At we segment $X.X at $X.XX million level, at $XXX XXXX, EBITDA million and of million, consolidated a year the Fertilizer EBITDA EBITDA full net of the $XXX the the segment we billion. an income share earnings For

across improvement reduction total in our in with we to safety and and our also proud the are rate the continued metrics a to events we XX% incident and spring during environmental improve to completed environmental the XXXX, for renewable in strong budget, and year-over-year the continue which the unit. recordable up addition -- Wynnewood X% on report startup that on the decline company. -- health In turnaround in completed results we planned time We refinery at started year, the we in diesel completed a

enable With the Wynnewood's conversion to it efficiently reconfigured renewable of XXX% shale run service, to the diesel hydrocracker we oil. of refinery to

at quarter budget. production completed ammonia also the month in We on We turnarounds Dubuque East on rates of December. both the at for third both with saw fertilizer our strong fourth record time and utilization achieving in the plants the quarter, fertilizers

external report We in also website. published ESG our is December, our on available first which

per quarter and $XXX $X.XX. the for $XXX Fourth earnings share EBITDA income million. million quarter was net was consolidated were

Our for both our businesses, and nitrogen Fertilizer and with solid fertilizers. high products pricing results strong refined all the quarter for across along Refining with were facilities, driven utilization by

to $X.XX that market in has shareholders dividend XXXX, will XXXX. March March XX, share, at fourth Board per a authorized announce on Directors to X, XX% pleased of quarter close on increase are We record which the paid the the be regular of of to

operating dividends total shareholder year. payout full authorized a totaling the the of for Total flow the and for XXXX, -- ratio for was dividends, XXX%. including ratio Board regular cash a For XXXX, special return of per year payout generated $X.XX approximately share XX%

and above the we during X-X-X continue $XX.XX crack the quarter, XXX XXX,XXX product averaging XXXX processed. X quarter, a In the max yield of day. was utilization remained Group crack segment, fourth crude for the nameplate the quarter barrel. barrels Benchmark approximately quarter Distillate oil light operate capacity Petroleum of fourth distillate combined cracks on to for the the refineries significantly total XX% in our was was remained per Crude throughput in elevated approximately mode. and with gasoline

RIN stubbornly prices a continued to be fourth high the at barrel $X.XX for quarter.

between RVOs another to significant point in RFS. focus The blenders. early opportunity -- bottom Liquid December, earn EV EPA retailers the the and the remains With neutral. mismanagement another and nowhere the is reduction. EPA's just RFS the yet which pump to that a carbon because Fuels align and more near modernize missed are enabling under the be to American of the on issue RFS is also for is The the industry, Regulation rents subsidy The EVs of at obligation of line incentives RFS refiners, release is to changed proposed should consumers a carbon subsidies paid of large

Circuit, We misguided of judicial have and petitions review the XXXX in EPA's Fifth exemptions filed Wynnewood's small of through denial refinery seeking ridiculous for XXXX.

SRE to encouraged ruling the other EPA's XXXX Circuit are We the Fifth by denial small law. the contrary likely of noting was stay recent to June compliance refiners after obligations X

continue we our for fight We Wynnewood in filed Fifth motion day and Circuit. we to, to yesterday, rights is the believe entitled first the own

for remedies. also we to liability on a continue Wynnewood related refinery XXXX obligations, Wynnewood's accrue RFS balance to our petition at we pursue to filed small exemption expect We our while sheet legal and in December,

averaged decline vegetable the to renewable prices outpaced the HOBO first for oil a in We approximately of third as Wynnewood catalyst quarter, The negative change soybean the per XX completed from our increases million which gallons the prices diesel unit diesel quarter, gallon quarter fourth a quarter. for spread feedstocks. $X.XX processing at limited the

Corporate and As a segment. business is renewable reminder, diesel in our reported currently our Other

to in the following quarter, Fertilizer in and facilities advantage both prices prices have prices. at turnarounds some conditions increased segment, fourth Fertilizer the the our took recently. completion and than first Fertilizer we softened quarter tight attractive sell of the production our market also quarter. half fourth third of planned production of well quarter ran In more

farmer economics. we and demand prices strong due fertilizer However, continue expect grain the to spring to in strong

our to the turn over call financial discuss me Let Dan to now highlights.

good Thank afternoon, Dave, you, and everyone.

net our per XXXX, of earnings shareholders was was quarter attributable CDI $XXX million, to was $XXX fourth income million. share and EBITDA $X.XX the For

million, valuation estimated results Our negative quarter derivative an of on outstanding unrealized fourth million a mark-to-market $XX $XX rent included unfavorable our of of million. and losses $XX obligation impact inventory

above-mentioned for Excluding EBITDA share was $XXX $X.XX. the per and items, was earnings quarter adjusted million adjusted the

was Mid-Con. the our $XXX for in high strong Petroleum quarter, EBITDA product at Adjusted fourth and the segment refineries the rates million driven cracks by in utilization

barrel, a RIN impacts the RINs was quarter rate for Our losses fourth valuation, expense quarter Group rate capture barrel, $XXX quarter, mark-to-market capture for on the per inventory negatively impact, impacted our or million X XX% derivative the XX%. X-X-X realized margin excluding $XX.XX the unrealized adjusted approximately for mark-to-market was representing per and which by benchmark. $X.XX

mark-to-market the at estimated sheet $X.XX. million The average accrued XX, million at $XXX RFS balance obligation $XXX of price representing an was on December RINs

As outstanding estimated reminder, excludes a obligation the RIN impact our exemptions. any of refinery small

for to operating in were Direct quarter maintenance $X.XX per personnel in barrel costs. per the repair higher expenses expenses, XXXX. due stock-based the compared fourth to was to of costs Petroleum segment the and electricity barrel in increased natural $X.XX and gas quarter increase primarily direct and fourth operating expenses The compensation due

ammonia. quarter both $XX.XX XXXX. of declared Fertilizer strong for facilities results in segment the and common Partnership of EBITDA the unit at by a for with quarter UAN the utilization high and driven million distribution the fourth increased fourth per pricing $XXX was Adjusted for

common approximately cash XX% CVR units, we As approximately of of distribution a million. Partners will CVR owns receive proportionate $XX Energy

addition purchases, and spending, Cash capital dividends. $XXX by XXXX fourth of provided $XX free interest, for million quarter cash in cash million $XX the cash the RIN Material million turnaround $XX million was operations and paid $XX taxes $XXX flow quarter CBI of and of third quarter to and million of of regular cash uses of special included million, was million. for the $XX in

$XX capital and the million, $XXX pretreater. million Petroleum the million full was Fertilizer $XX in consolidated $XX segment for Total spending on segment, RDU the included million which the in XXXX the year and

full year to the approximately XXXX, approximately million estimate spending to to be total For $XXX be $XXX and million. $XX consolidated $XX capital to spending turnaround million million we

which CVR million, sheet. cash was primarily $XX and of under to We liquidity of $XXX was ABL the Turning in as includes $XXX facility the consolidated excluding of Partners, of Total Fertilizer million of cash which balance million the cash of XX, comprised availability the million. a balance $XXX segment. $XXX with quarter approximately December million, ended

throughput $XXX quarter. between to the million million, Looking total ahead expenses XXXX, be which to day, first approximately $XX total to per and to between $XX to and Coffeyville capital barrels million. turnaround quarter turnaround the to spending the XXX,XXX $XX million spending $XX direct $XX million and of XXX,XXX and impacted estimate planned be in million segment, be We between estimate by operating Petroleum range for at be we our will

$XX to total spending ammonia utilization XXXX direct our For between million the million, segment, and expenses inventory to and we capital excluding be Fertilizer approximately XX% million to operating and impacts, XXX%, first quarter $XX $X $XX million. between estimate rate be to be

renewables, XX For XXXX will to between spending Dave, over operating capital that, between be $X million. total you. million million throughput to and to first to and approximately to it turn estimate million expenses million be $XX total With back I quarter we gallons, $XX direct XX be million $X and

strong Refining Thank both you, solid Fertilizer we Dan. quarter In segments. another with had summary, from and contributions

down refining trend diesel near-term Although relative are the year, the the about that bucked XXXX. end refining flat refining, of demand U.S. essentially higher with with demand to is levels, has conditions product we Group compared the gasoline to in although pre-COVID X overall, towards the softened demand optimistic market cautiously Starting outlook. market and

X-year season, winter has seasonally by been much operating jet fuel across of RVP problems the of cracks. for Inventories high activity industry. partially the gasoline, -- despite have diesel, all for which cracks at low the supportive driven averages, high strong turnaround the end of are weather-related been and Gasoline

crude average commercial X-year recovered the side range. equation, inventories of On to the crude have within the

the end reserve include are significantly oil the the in U.S. of Crude slowly. X-year Although you the increase if range. below continuing productivity strategic low draws, to [indiscernible] is inventories

exports the clear per since crude decreased. exports. continue the markets that has barrel discounts, to crude or by are need $X exports via we is However, oil -- the to that and needs to incremental the will higher of driven oil significantly oil believe continuing fuel barrel United be differentials in has States to spread bBrent-TI rise, inventory DUCs like Crude influenced the produced which mid-XXXX. high-sulfur the and Crude

the per by impacted on system weather-related volumes barrels which quarter, Our day averaged outages. approximately fourth have for gathering the was somewhat XXX,XXX

few expect We over pick gathering months. up see next volumes our the to

Turning was which completed to segment. both of quarter. fourth were quarter out strong at the Fertilizer in the in turnaround, Production coming third the facilities

fertilizer corn planted million acreage an in As with of we analysts, ag expect increase X acres. planting we projecting to be to strong, for approximately the X season, spring demand approach million currently

with proceeds credits equity which tax are related to tax credits facility. the with early up to January, generate close million received could the XXXQ certain Partners next met. -- CVR -- to $XX about -- X of over and investors we the initial In the that transaction, closed $XX of Coffeyville net transaction tax on years and additional an million related generated at conditions XXQ payment could if cash

our renewable to business. Moving

recent we With renewable Wynnewood change, yields the catalyst for design diesel the demonstrated rates and have unit.

we the a the unit internal We to business third as provide contemplate us next capital years. completion at our Wynnewood, expected renewables at early optionality few announce restructuring at renewable completed cost the more pretreater quarter the I'm continue to flexibility and have approximately transaction that happy business. of make should still with $XX the over the progress our million. growing to on company with be This and -- to segregate Wynnewood we of

spread Group of a negative Fertilizer quarter-to-date somewhat prices per per and and the spread have while follows: RINs with $XXX WTI $XXX as XXXX, at from XXXX ton. $XX with Looking prices a metrics cracks UAN under -- $X.XX over have averaged WCS first differential gallon, prices quarter-to-date the ammonia have barrel, DX differential averaged prices $X.XX. the $XX.XX, averaged the LCFS $X.XX quarter $X.XX. over ton over The softened levels, a X-X-X averaged are HOBO TI. ton, fourth the at per Midland at Brent-TI $XX.XX A and have Midland quarter has

per under As a per $X.XX ton WTI. barrel. shipment, The yesterday, and prices X-X-X-X were gallon. HOBO Ammonia spring $XX.XX $XXX $XXX $X.XX per approximately were spread of prices Brent-TI per and cracks barrel approximately the was was Group UAN $X.XX for were and per was $XX.XX negative were RINs barrel, per approximately WCS ton.

As safe, We'll in about focus for I business cautiously a environmental refining -- renewables and fertilizer optimistic to plants our opportunities our we are and to reliable and in continue in in project on Wynnewood the for mentioned, operating outlook intended the HF continue on XXXX. high-return approved at replace In alky the refinery. invest while Board manner, fourth quarter, business. projects the unit acid responsible looking across a our the to

cost the we We -- day estimate over $XXX and expect will once our million and we online. years, will approximately barrels project per capacity -- X,XXX alky to this next we'll increase X by

We on details yield and projects. project expansions are progress work the improvement also as additional design we discussed the and fertilizer previously, we providing these to have forward diesel engineering continuing improvement brownfield look

Finally, we cash believe as fourth our it's increased by important dividend for quarter. to demonstrated to regular return shareholders the

Board We uses forward. and to of investing best how returning will our to continue cash shareholders in going the the prioritize to evaluate with between business

With ready that, operator, we're for questions.

line Neil the Mehta Instructions] Sachs. first Goldman with comes [Operator question of Our from

that. a capital. quarter, on see $X.XX share Great guess was dividend I to first the a of around return congrats back to so the question just

Just, then going how do about the to sheet? $X.XX think Dave, decision bump the and $X.XX. given the the also, about balance dividend special it from talked you And environment to forward

on think regular I we we're business ourselves we our returns do, Neil, described and That's shareholders basis. for a generate -- Well, what machine. we've That's a I for. what cash in always as described

the reason think at the we because and we were cracks the was specials as I that unusual did sustainable. Looking not that experiencing specials, somewhat we viewed

cautiously view experiencing of execute were where of industry And out shortage deals. onetime the backlog at, we're optimistic to a that We that with they're the outlook. there, the bit today they turnarounds that, yet of so capacity is refining the and little the inventories

that's So had regular I that dividend reason should pretty confidence the be think the Board the good increased. that

obligation. cash. spend heavy drain was our up quarter line because have did out Coffeyville were with But this fourth a on not always on but spending we We is on RINs quarter in catching of capital normal, some the

So that's the around dividend. the thoughts

Dave. around And then monetizing the and that's business. fertilizer UA just is Yes, helpful, follow-up the

Recognize but sense to You around stand last there least just and are you announced you then step that some exploring year, probably the late where big picture you're makes could spin-off, back process? sensitivities, around you why about it options it. talk maybe at and think explore

separate that getting quite we that is of can is the of potential value and off Well, the parts not the shown it in going of I lot whole a no upgrade is try think the the around just that the to to and that cycle in -- business is, it company, to much has get think as sufficient as really higher CVI? probably so. is But sum idea spin out evaluating it us multiple as -- yet. be purpose could made doing business fertilizer fertilizer better concept, of the within we or has on, is And of a that work a still stocks for of the been both is is conclusion

John of with the Our comes from next line question Royall JPMorgan.

will have you an turnaround Wynnewood that realized on you at did Coffeyville, throughput at there? I just for So year. XQ the straddle impact looking XQ, throughput know then I And your last guidance have and

expect be maintenance? should half a side relatively So we with to perspective no second from full on rate the run the major throughput

Yes.

think have excuse is Coffeyville, -- the is and another me. a the other that we is probably and turnaround this I -- a of equipment. catalyst small in or main couple auxiliary coker piece But the planned on quarter. the of few turnaround It's call at -- the sometime the other at kind the only we hydrotreaters renewable Wynnewood what really a this second diesel change of in than

That what last So from in turnaround. mini year. of alky turnaround main it's was a a cat Wynnewood did standpoint we the

the But have that's really all So maintenance we is impact kind planned. muted. the of

fertilizer on mentioned come have the you Great. then And planting side, on down and Okay. view bullish -- you but has pricing the do a season.

natural due year to So in how to past similar we a gas pricing see to do And price helping the high expect I you've from in think refining. up about costs, shape breakevens overall perspective? European spoken you what the

that seeing gas low you with prices? opposite are the of So now

Yes.

degree that was some responded fertilizer. And to I $X.XX, pretty have natural prices low. think, to yesterday, in gas that's and

farmers go year. prices experienced I the that were -- due we high and I where where down UAN is are towards -- where I Europe. not that due is to is found to it stop start the over near warm as alternatives. don't winter. think the in the it yet. buying And think other we know see thing that $XXX certainly don't I'd end economics demand I a mainly fact of pretty think they still and mention farmer to is. cycle last find that this other strong -- But -- as high a so They're are you around And

of question Cheng the Our with from comes next Scotiabank. Paul line

Dave, maybe some cash to big the that may or approach that of is for return, talking you consider? not, not there the shareholders. Is in this about return would any that be CVR? of XX% And a, have your peers if guys maybe set something to reason will applicable XX% cash

Well, I -- return shareholders. to on focus because think, is decisions making that the to Paul, I Board we're X we don't or number invest to on in the business whether know

back with set they it will us. target, So on just that think how and depends have that a and number I don't in up I go we the want down know to business. put much

of I mean, not read a that early and entity the so I evaluating result in want And or far, [Audi] set growth -- number know you to be business the and of that parts and that up think how Do kind is -- have that's really have you you engine have for that what that that think any business. great. I are Okay. you structure going moving still been But business. the the I do that that legal the a -- that we to

So your how longer-term would business? view that of that impact the about thinking

it's intriguing us. Paul, a Yes, I for area -- it's think still very

and that continue we've on going to advantages mitigation invest of capital But and And money in better capacity, our for we're we've to most a will stated not have. and situation going is to and going renewables. forward, go sense at in rates other RINs refining assets think maintain a interesting for we the I where and but before think some got we're not barrel capture don't new lot made competitive of the new upgrading certainly I to of higher where invest blending really assets it that our others factors.

give some me you Let examples.

One, we're in the ag belt.

All of in plants belt. the ag are our

We use diesel, -- infrastructure get And that how we use our to have is, that's to today. and today synergies of really ammonia fertilizer what with that renewable COX can the one gasifiers and to basically where only we really the CI negative the in probably exploring gasifiers fertilizer really accomplish to Coffeyville. own to sequester at on in service that our to some business that that use make frankly, that to business the money hydrogen we're blue is provide X off process infrastructure

where are on We're diesel pretty we renewable happy with at Wynnewood.

potentially that business. If to the a positioned big think what but and with the can $XX the they're And that crack. if we thinking get project to make off at the $X scale scale out that happen. you And break more pretreater, a If get build range. that we're we to is uniquely that $X.XX renewables without of Convert then a we're what in refining you is to probably it, our Doesn't you that's a to And to spin enough have pretreater with in part we can $X.XX today, a look to similar $XX fertilizer also. business in some matters. to $X.XX comparable margins could something business a the refining, range. to low they're gallon CI,

that's ultimate So long-term plan. the

partner Is guys? high you go a a will And or that whether price you that really still one the not to good role that's that have that consider? trying you into Or of see your unit guys pretty under peers how can find recently a is their you construction. and got for for

that I the interested the just is whole in the partner I'd sense. We that we're make of We're from -- say, concept No, not I access. renewables think best part the they breaking think Mid-Con. out in we're in don't is we're standpoint just partnerships of the have if world, water

are the at deals plant to continued these that of Some in feedstock The particularly, And did have renewable Wynnewood, that think Marathon I were for and that. case, our gallon what, sold really about, our in very did multiples that a And $XXX out impressive. came roughly. bringing on we PBF that's other diesel $X.XX effectively. play. of

a $X.XX, conversion think it I pretty was. But we're maybe lose. number and that's that's hefty a like that around ours number, just

we're So is the the difference not on Coast. Gulf

whatever, low plenty material feedstock still of already in into in it or need there, we there's and we'll is will ultimately over and prices. trade materials the Coast however said, our go, and take have market. that or still And back that imports But we trade CI the the to CI will view area, -- where the for frankly, Gulf freight

the So there. we that get that is the negative I future think just be CI, If better. would much can all right

question, I clarification. think final A just for it's [indiscernible] Right.

So to apologize. I have

of have your next pay sheet much you at that set and the the [indiscernible] year? this go have year? RVO year think whether balance what for you you end a also view is for I or schedule, how And through on to time

Yes.

liability to balance Paul, the million. or for million on So XXX million That we reiterate, the just RINs. as $XXX.X was of year-end, sheet had $XXX

prior the reminder the terms is the just is a for Wynnewood -- years. that In for predominant schedule, short of amount short X of that, that

for remainder dates. need you we and So was Wynnewood by really that back X that with come of what assumed compliance to settle can up out year-end, that Coffeyville at to obligation the years the

the session. for like of over turn management to now the I floor the reached back have question-and-answer to would We closing comments. end

CVR Again, Energy. I'd like in to interest thank your for you all

during We XXXX towards first next for reviewing Additionally, our earnings responsible thank operations. forward we'd to like commitment and our look Thank hard results you. their quarter work, reliable employees call. to safe, our

today's this does gentlemen, and Ladies conclude teleconference.

may have a Thank day. your You lines disconnect participation, your wonderful this at and for you time.