CVR Energy (CVI) 2 May 232023 Q1 Earnings call transcript

Greetings, and welcome to the CVR Energy, Inc.

First Quarter 2023 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. first We much Officer; are very XXXX Neumann, Officer; Thank Chief our this afternoon, afternoon you Financial Dave today me us call. other Energy Chief for appreciate Executive earnings Dane members you, and With everyone. our management. our quarter CVR

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

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

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

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

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

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

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

per share EBITDA reported we consolidated $X.XX. of $XXX quarter of first Yesterday, earnings the and net million. quarter million for $XXX income

in quarter segment, segment. record and cracks Refining diesel for Fertilizer and Our gas strong volumes in production quarter were driven the high by results high the the

May of paid per the Board on XXnd the shareholders on share, close of market first that which announce quarter Directors of to on be the pleased has of are the to XXth. record May will authorized $X.XX dividend We

class independent yield dividend X%, remains approximately price among refiners. annualized best closing on of based yesterday’s in Our

turnaround light approximately for day, in work of XXX,XXX and Petroleum our the was began on crude first XXXX early at of coker and segment, product barrels XXX% In the yield oil end We quarter Coffeyville completed April. per combined was planned at was processed. total throughput February, the

Benchmark above distillate in quarter, quarter, have Group crack $XX.XX with the the remained although The crack per averaging improved elevated remained barrel. gas gas cracks first X recently. during significantly first cracks X-X-X

the the While in ability the to production we operate max if from dictate. mode, incentive distillate have XX%, group swing in by gasoline still to is to X% distillate to economics approximately refineries

slightly quarter at that Fifth fourth petitions from last in prices stubbornly earnings I to our RIN of of June compliance EPA’s fourth high XXXX. misguided call, On EPA’s $X to per -- likely I barrel. exemptions ridiculous review Wynnewood’s seeking Wynnewood’s the the judicial contrary law. Fifth pleased with small the declined but XXXX highlighted Circuit Circuit and to the the remained quarter, stay small filed denial that for noting announce recently am refinery ruled exemption after obligation refinery through XXXX was denial we

Fifth, being compliance have Eleventh so refineries for and far Small small the filed the similar across circuits. country certain days in with refineries DC lawsuits granted

As absurdly Wynnewood by is we rights harm regulation we high to will protect past, RIN in and like our many was for continue refineries the believe we RFS to economic that from have small times disproportionate entitled caused Wynnewood the prices, stated fight written to.

the to throughput gallons of of volumes quarter the fourth first XXXX. spread $X.XX diesel the improved million approximately quarter of and spread quarter unit and at in improved the processing of rates The Wynnewood combination the increase gallon higher quarter, improved results from We relative drove HOBO our throughput for per XXXX fourth by vegetable HOBO feedstock. oil XX continued approximately to renewable

corporate and diesel reminder, a our renewable is currently business As segment. reported in our other

the consolidated during well first In ammonia Fertilizer the declined of XXX%. utilization with quarter. record facilities prices Fertilizer the both ran quarter during segment,

our half another than quarter production strong sold first we fourth XXXX decline. posted we since more results of However, in quarter prices to of the before of began quarter

healthy season expect farmer fertilizer due for to grain continue prices and the strong planting in to demand economics. We

to Now, discuss let me our turn the call highlights. Dane over to financial

you, good afternoon, Thank Dave, everyone. and

For our quarter and million, million. XXXX, share was of $XXX earnings EBITDA was was income consolidated the per first net $XXX $X.XX,

derivative include outstanding million, $XX Our impact on RIN an million, estimated obligation and first of $XX quarter valuation of million. our positive mark-to-market unrealized results unfavorable gains a of $XX inventory

$XXX first cracks in in Excluding was adjusted EBITDA items, million by per the the for Petroleum for $X.XX. was adjusted above-mentioned and the driven EBITDA the Mid-Con. quarter, quarter $XXX the was Adjusted million segment earnings product share strong

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

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

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

distribution EBITDA the the for fertilizer declared Adjusted prices XXXX. with of to the in of $XX.XX were the segment expenses unit first for the direct $XXX costs. operating to per in nitrogen $X.XX primarily at first $X.XX relative XXXX. was The due turnaround repair quarter decline and for per coker in strong barrel of operating to The somewhat the the Coffeyville, quarter compared million Petroleum higher for gas barrel related the per expenses natural partnership production first in quarter, a Fertilizer by quarter of common the expenses offset offsetting first increase quarter maintenance first segment Direct XXXX. the to quarter in lower was

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

of in the for net $XX free quarter quarter million cash $XX of of $XX and of addition was cash in paid included XXXX paid of quarter million purchases, CVR by million flow CVI portion million, $XX for $XX spending cash Significant the the and provided operations dividend. million. interest, for million interest million Cash $XXX capital non-controlling the distribution to uses Partners’ $XXX fourth was turnaround quarter of first the and RIN fourth and

Total in $X the $XX for unit which quarter $XX in the Petroleum consolidated spending Fertilizer included million, pretreatment on million. capital in RDU. million spending and Turnaround segment, was million was the million the first $XX segment $XX the

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

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

we be and ahead quarter and $XX for to throughput between our Looking XXX,XXX segment, capital total XXX,XXX be Petroleum estimate the $XX range to direct total and XXXX, $XX of between $XXX barrels to to per day, approximately million spending million, second to million. operating expenses million

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

we XX due quarter approximately gallons million renewables, million for to to throughput the catalyst XX second For estimate be change. quarter planned total to XXXX

are the expenses second expected and operating for between be million. $X Direct to million quarter $X

With I that, turn it over back Dave, you. will to

Dane. you, Thank

results our we segments, summary, solid driven in and contributions saw we In quarter Refining renewable and had improved as strong business Fertilizer another by well. from both, diesel

cautiously about As we underlying the our the optimistic business, near-term outlook. remain at look fundamentals we driving

Refining, average strong spreads with start, off XXXX first in highest Starting crack history. the recent to got a with quarter

in the quarter, has been cracks softened somewhat gas in somewhat, inventories planting the of refined fall product time demand the gas the across by during of low quarter, with to first the leading first and cracks. U.S. below industry products drove five-year Turnaround diesel diesel While inventories for been diesel are hard strong, offset has for but and high pulling levels. year of high have diesel the liftings were average activities increased season. this In for agricultural strength the much this Mid-Con, particularly in to

to across biofuels generation. quarter, which Premium and in allows up as the our gasoline additional to compared our RIN internal a premium. our of averaged XX% production margins first quarter our which products rates blend first increase of capture gasoline racks us are XXXX, Refined approximately gallon is X% volumes helps the $X.XX approximately

allowing environment XXXX. the gasoline these our the the us are to early a of -- XX% Given on elevated for approximately XX% for money We are production production. up of approximately in in swaps derivatives locked swaps expected crack spread currently January, QX in early first -- our crack dividend partially all hedges expected of putting XXXX program, which to have our XXXX hedging into for through the and reflected currently those in enter expected on quarter. QX we gain and production hedges, for and spread crack Board diesel our partially which and unrealized was of authorized We XXXX the or of began year, X% in

our attributed which On five-year also partially which, the slowly, continues crude in diesel have have in Shale and barrels are oil been our the XXXX. averages decline to be in seen in inventories elevated increased to narrowing, activity equation, day cracks, activity. to hurting production along to gathering the to levels, systems the turnaround March drilling Heavy due increase with grow crude coker in oil far can spreads economics recently. XXX,XXX nearly per States so increased volumes side closer of we United

of Brent-TI at levels, supportive narrowed differential believe exports some sustained which spread. Although we of Midland the continuing should has Brent-TI WTI recently, be are record the

to segment. this Europe, a declined are in nitrogen attractive, bode to and the for prices and prices spring. in Nitrogen fertilizer the Asia farmer demand first U.S. quarter, prices in economics in and decline Turning Grain part fertilizer Fertilizer in significant remain natural gas well strong should due

the completed first the quarter ran turnarounds in well third the XXXX, both in utilization at plants high our the of facilities quarter. with Since of

further next to lower for plan both footprint and their intended additional invest facilities. prepare capital some in carbon Over their two one reliability, capacity we the or plants, expansions potential years, fertilizer the in to improve

the also continuing and I interests are look Partners, to We you at time. LP in additional details GP transaction off potential to to CVR the and our spin providing appropriate forward evaluate

production up processing Wynnewood renewable renewables, on we XX in feedstock ramp Finally, to diesel continue of first over quarter. at unit million the the gallons in

yield to second -- are late improvements expecting date are expecting the third late and to diesel PTU we progressing, we installed. -- in renewable significant of is to the and planned in-service We see XXXX. change, an mid completing of Construction our with catalyst this new catalyst quarter are currently new

we the by renewable margin to expect of PTU, addition XX%. see diesel improved approximately the With capture

WTI X Group at follows: the $X.XX barrel cracks over $XX.XX barrel WTI. ammonia at UAN. under as differential differential the differential X-X-X under Looking $XX.XX The fertilizer prices quarter ton metrics of averaged averaged per WTL for are and Brent-TI XXXX, quarter-to-date WCS per has $XXX with and $X.XX spread per the barrel, have at second WTI. $X.XX per WTI approximately averaged are $XXX has per for Prompt and Midland barrel

yesterday, WCS Group $X.XX was of $X.XX per WTI. $XX.XX $XX.XX, under $X.XX X-X-X were -- and was X As cracks barrel. approximately barrel were Brent-TI excuse were per me, RINs

We strive explore and our reliable and grow operate business. environmentally responsible our a to renewable plants manner opportunities continue in safe, to to to

maximizing free to which dividend our continue underpins flow, on peer-leading focus will yield. We cash

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

comes the Manav [Operator UBS. with first Our question Instructions] line from of Gupta

Again, you smart Very rest your would that for the Would go difficult strategy. definitely put move we year, have and on find in hedging to the this we the giving money as it part. think would in be mean the ahead it? because the capture propping would you that your model margins the way right to along? rate on of going up Congrats be hedges about

right, Manav. that’s think I

was You and fourth. them or and what the leave price probably that bought don’t going know our third second results to at, affect but say what it we the quarter our -- to it’s we’re at strike in materially

system, done, PTU have this more know, get diesel competitive coming My here once would Perfect. $X, up quarter whatever are I running, year, maybe change is also you number and margin and see the or your should the of benchmarks the renewable catalyst your by done catalyst fourth Dave, capture we lot there you XQ? once of you assume is. the that out follow-up, we with $X.XX as be, PTU this well quick -- with we change your late should that but don’t line results out assume competitive But on as a

probably capture rate. as And two to predicting add, us will the that’s bring about XX% has on it Yes, X low-XXs should itself we’re far, to running so change it. than we’re times PTU also been Run a what capture. think length, and assumption. or the yield Today, up The catalyst be better getting elements I to we’ve on I The think good our XX. improves substantially. mentioned, that distillate we in X

So, that up will move capture also.

quarter a smart Perfect. good strategy. Congrats very and the congrats on hedging on

you. Thank

Goldman Our next question of comes line Neil from Sachs. Mehta the with

unique given sit economy the individual and just you of and on perspective a some do on demand, love trending? your I’d just see in industrial got stuff you’ve perspective Dave, distillate assets what’s on where your of the where higher leverage. your end markets going the

we’re I at different the if the little than you of low United what levels. looks think mean, the like. I it’s bit Neil, look rest Well, a Mid-Con, of at kind States

years, is five on time the this we’re low of unusual look back gas, If extremely very inventory which on year. you

tells has similar system even you at it been, in they’ve in the look what all And very me good. are it, been if demand way always liftings the fact, pre-COVID, to So, through. post-COVID, Magellan

distillate, the for NYMEX extremely most been basis of The distillate On strong. has been quarter. teens has the in over the again,

and turnaround a though that in we it had high fairly Even on first a turnaround, Sometimes as coker, good going it the was the from other had turnarounds $X.XX, the lot and -- very, a competitors quarter. which we in were a our just there hit system. tells even of it’s and refiners cut was very though of back small rates still a me quarter that interruptions was it still on as lot

I think, volumes in down. general, trucking are

barrels indicators the just the shows some did market there coming. that real all on saw And the looks world to from. standpoint, come think on. -- be the somewhat X of the come because start-ups about refining we it’s of to is distillate. about And there’s million are industrial but world the the refineries. U.S. going employed strong. the of that’s new is we are of with that’s capacity incremental data it’s those a I that. reason an From main flat mean,, to around me The shutdowns, export the not and down rest that’s capacity lot that still to And hedges I we all where

seeing slow. strong, So, our I the it’s a world a bit -- is of think though is even demand

a $X.XX close on dividend, a X%. Helpful the perspective. The follow-up dividend quarters is, of now stock just on the been share, where implied to been Dave, and it’s it’s the couple yield now is

down. environment? You like haven’t and do sustain been But afraid current dividend that that feel market you just from to something quarter is you you move in where a can $X.XX sit, the up the

We machine. unless -- a do dividend effect change Well, think I the because the I we that’s that I a we’re that’s If be spin-off. bit. either at necessarily as out to we we’re give we That’s think buybacks dividends our really just And of stock little specials. to think a interest But don’t the the restructure we’ll for. will just regular because many don’t of spin-off, we the And best cash look doing going it have shareholders. here corporation think give don’t back we’re again do or what in or special.

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

on thoughts discussion a some that last you just just follow-up could give the maybe updated us So, specials. for on dividends. on Maybe potential

free tax in referred the as million Dave call, some prior kind and from you’ve future. $XXX you think including correct me of if have to year XQ, over mischaracterizing the the and I conference did locked payment, in But hedges specials that. on cash the I’m in UAN last of one-offs

pay with special the on propensity the to And forward? so going any thoughts some that of out updated

the unique the been I’ve cracks mentioned really I’ve think and a think here. as business was in I because for market I think regular a this around Well, before, specials, a of We of And is never time, they And were it where same about set XXXX. conditions. pretty seen sustainable. didn’t long I that situation we that’s raising was didn’t the period sustained time why specials. we did think up to in

we’re closely. at take quarter know, you Board and to As by the looks very it quarter going it

revolver we to point managing to. we have. have to absolutely We’re we we our And of view need unless cash levels the that’s think avoid just using

So, there cash if specials dividend the have will we market and -- on remarkable, come balance and the go sheet to we will. is the out,

helpful. do up? in giving and you at should the potential That’s payments general? And cash And what the -- impact payment the timing for XQ, in the about think how at future you’re terms we Great. $XX flows then of in do monetization of on And do million those future how credits they work then, tax how how following there? UAN UAN,

take I’ll one. this Yes.

in contract we to credits we’re counterparty. And with And claim tax we activity. for was So that contract the really, with as sales equity COX sales existing counterparty. what result, JV those receiving place up had contributing sequestration investor that it to the ended a allows previously an same a a the

deemed contract million, our So deferred receipt is down was it method And million. to what balance some sheet revenue occurred just The payments in with was receive was $XX of equity the We cash the we of the as the associated million that first $XX of really million. expect and investment. string recognized investment value put an of net fees, on a payment of the that $XX method $XX of payment JV. equity drew

opportunity income million off there balance well segment, $X periodic go-forward $X.X income will be payments basis, into our consideration it cash their as each sheet other they be the recognize a from million, are And CVR quarter receive will going in Partners’ deferred as cash. we will a difference take Fertilizer that looking we that at perspective, call revenue and There quarter. On available. through annually. each our when obviously, for they’ll what into payments milestone for But what’s between

next with Holt. Matthew question the Our Pickering, Tudor, of comes line from Blair

morning. Dave. Good Hey.

the rest talk benefits of premium the these octane on about think gasoline spreads? the wide year? mentioned You for that’s do you Could And your you rolling the drivers system. through for sustainable

into Well, the Explorer didn’t And coming or And come. is big -- of this just It or just been the quarter. off very first shipment premium. to very Either via is real export gets -- are, -- sort be short is group Gulf short. even that bit from our shipments didn’t real terms markets of kind the had in unique just something happen much it back year. happened up little cures gets the the though It’s the usually Tulsa long of but in into what in markets. a a And back the they wide they it’s that pretty Gulf. better of

hand. of it So into kind played our

to We quite make have that the and make low of be And premium $X.XX just margin as our reformers as there. CCR available at the go bit way the we the material anywhere seen $X.XX. to to a I’ve ability -- is It from time. happened to all it to use if could

quarter. $X.XX first saw in we some fact, spreads In the

Okay. X are a on you follow-up on or having buy market the And Tier as those fully credits? gasoline that, the specs, are to you sulfur low in compliant

We credits actually fully sell we’re No, occasionally. compliant. some

Okay.

for demand your production? or blend either gasoline are that think this what will then, have Do you waiver DX a RIN And impact the good. on material summer? thoughts Sounds EXX on

only the convenience think, to I going X% stores offer DXs, to EXX. remember of some Well, even make it’s got But sure. that for more you

but the a don’t So, bar people. if for It’s most $X.XX. expect it, like what into with reason, deduction lot. include buys I a And don’t it typical for to get not burden. it’s it’s you But discount mileage $X.XX, it’s a I loser whole probably who the reach limited its market. is do it you in And the know

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

that hedging. distillate, being Dave, other? XX% I going or more us gasoline both that than tell tell detail them of to not if one know hedged you’re you and of on hedged the can too future is much us the your output being But the

did all. We some we Well, combination some gas. we a did did did think of X-X-Xs, distillate, I we

on price time. to So, And of the it’s details our exact just strike really volumes. wide at what a going not into the I’m variety, depending was get all

-- when include or for want the And $XX the -- generate just that you million RIN that’s you RIN the RD? clarify the in RD to was when quarter, I Okay. RIN the about cost from on the will of excluding generate talking if RIN Dane the that

RIN So, just from that. the market to Paul, an the assuming transaction. $XX is be open the They like buying still have for from million RD refinery’s That’s RD. costed excluding on the obligation, the a RIN the they’re

just I see. XX,XXX WCS the past, also I have I shipping about mean, you of the clarify And to get that, think per that, the just day history and is in them and barrels at you one your Are sold and that the barrels about day, results? in most in bit still XX,XXX getting per a doing included of Cushing [indiscernible]. which little you

on Yes. and the side. contracted quarter. But turnaround the XX X the we’ll the we Keystone run -- we in and will And the side. a of XX Typically, opportunistically. had on it. it’s for it are we Spearhead But first side run If we in course, coker money, Spearhead get -- we’re on

whether where during it it’s what you run in time. not just we the can of it on runs basically Cushing. we minimized a the push And So, are for now and or period that sell spreads

not we’re where through long any next running is. month now. We plan on as it running stays spread the don’t So, the as

the quarter? the it. first now renewable, the the What’s gross And maybe for that Did margin and net sustaining and on CapEx the us Right. Final for you the tell is me. for that -- pretax forward? the one that operation missed going also, what income corporation in I

haven’t we year. or that to segment, at which plan a next as it break of of the start do probably we until out year end We disclosing been the

Okay. And CapEx? about sustaining how

million the for CapEx $XX Sustaining just we’d it’s Yes. $XXX million, say, corporation, to Paul.

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

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

safe, employees second call. and for their great like reviewing and XXXX safety quarter work reliable earnings to next operations. a We to look Additionally, -- hard towards our our responsible during thank Have day. commitment forward environmentally our I’d results

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

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