CVR Energy (CVI) 30 Apr 242024 Q1 Earnings call transcript

Greetings, and welcome to the CVR Energy First Quarter 2024 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 FP&A and Investor Relations. Thank you, sir.

You may begin.

Christine. you, Thank everyone. Good afternoon, much our appreciate this very joining you Energy First for CVR Call. afternoon Quarter We us XXXX Earnings today our Lamp, our and are Officer; members me other Neumann, Officer; Chief Chief management. of Dane Financial With Executive Dave XXXX may to call federal let this forward-looking securities defined under statements as laws. quarter me Prior first results, you remind our that is discussing contain conference that term

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

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

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

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

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

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

early of portions refinery. we over employees area. are that the extinguished weekend, beginning want an the No that injured incident later later address and was contractors Wynnewood the a the quarter, morning, at weather restarting or of of process to fire discuss refinery I refinery experienced the morning. in I Before Wynnewood that results for occurred the our during The the in Sunday severe were

the We available. are additional still when details the to they're provide of damage, and expect extent we assessing

million earnings results. EBITDA our $XXX reported income share million. was we net and of per to of consolidated first Yesterday, a quarter $XX $X.XX, Turning

lower prices the to declines the oil crack and increased were the were of the prices spreads crude driven for by in results by and quarter solid prices refined offset RINs fertilizer Our in continued period. product and prior quarter, relative

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

yield remains Our independent best-in-class price, X% refineries. annualized on closing dividend of based among yesterday's the approximately yesterday,

processed. our product combined and approximately for total In Petroleum segment, day was oil XXX% first throughput barrels yield quarter late XXXX per the was crude of on XXX,XXX

XXXX, have we currently the the Wynnewood cat turnaround completed alky spring X-X-X crude the planned group $XX.XX to unit quarter and a We the 'XX. at 'XX. do barrel During scheduled of turnarounds X of quarter, per compared until $XX.XX refinery. with during units associated per first Group turnaround currently cracker Benchmark the quarter other planned -- not the any cracks for for the softened barrel Coffeyville's averaging and fourth additional on the

the on at RVO average fourth prices quarter declined and the First quarter weighted from approximately quarter $X.XX an ended basis. RIN

XXXX has of refinery November petitions They continues. petitioned egregious and for have petitions in of issuance small have XXXX EPA's decision XXXX Circuit's small exemption vacating Wynnewood's acted Circuit exemptions EPA's ruled still on the Fifth since the Fifth with thrilled though month. the Wynnewood's EPA refinery exemption due days not for last small EPA's nor XXXX, XX passed on through conduct through mandate, petitions we're those refinery for EPA. to While denial back reprimanded XXXX

few arguments heard Court other a cases a small -- for court We law. our push for denial will continue few to all ago. in the to small EPA D.C. of and to force ruling do job refinery follow a refineries the its Appeals exemption The weeks

time, some were take went. the we While with will how pleased hearing the we expect ruling

to believe who court. parties non-obligated obligations EPA petition not need We profit RIN their petition, clear it our law once only written. sell law RINs the for We rule-making will RINs the obligated them they excess not just RFS. market to that parties related we for exploit is for response can EPA also the generate RINs that to regarding with continue violates who for a overcomply the RFS the our may and again, That EPA to respond as compliance. the does It's to see only those wrong, in from wait other is wrong. allows If obligated parties just

quarter million renewable Wynnewood planned of the vegetable oil a quarter first by throughput catalyst change. impacted and X feedstocks the processed XXXX, the gallons diesel unit, our of approximately we For at in

The of quarter X HOBO for remain of 'XX, prices, fourth lower soybean prices the improved RFS continued mismanagement the from although RINs of but a oil as spread EPA's depressed program. these result

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

fairly the quarter weather we of segment, during first pricing. with of ammonia which a XXXX is some utilization our planned ammonia And quarter for quarter XXXX steady In saw in fertilizer Nitrogen conditions fourth remained demand quarter favorable strong of of fourth consolidated by the quarter. in -- XX%, for achieved prices impacted with the the we plant facility. downtime at Fertilizer the also Coffeyville

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

Dave, afternoon, and everyone. you, Thank good

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

$XX on losses quarter reduction expense RFS of million. unrealized outstanding due to impact favorable mark-to-market include to $XX inventory quarterly and impact obligation RINs $XX first million, a a of results a our derivative estimated of Our million valuation

segment and by Group the $X.XX. quarter, $XX Adjusted earnings period, EBITDA million the in product year was EBITDA the the for $XX adjusted items, cracks per quarter above-mentioned the X. Petroleum adjusted share decline was prior first primarily million the lower for was driven in from Excluding with

benchmark. per barrel, impacts representing for $XX.XX valuation, X-X-X Our a realized was and first the on quarter inventory rate margin losses RIN XX% derivative capture adjusted Group X unrealized mark-to-market

excluding XX%. RFS $XXX accrued per was or rate impact an for obligation million $X.XX XXX at million capture on mark-to-market $XX at expense the which estimated the mark-to-market quarter the barrel, XX, sheet March price impacted average balance was The negatively RINs RINs by of representing million our the $X.XX. for quarter, approximately

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

On primarily Direct in operating natural expenses decrease in per as quarter planned a quarter $X.XX to prior barrel turnarounds. period Petroleum operating year of and the barrel operating to throughput first segment XXXX. direct per our in expenses elevated to barrel expenses lower quarter per result the XXXX rates and of the electricity gas for lower of first the prices. $X.XX were first basis, The compared was the due a direct were due in

the year first partnership with Adjusted a segment expenses, EBITDA distribution and the period. lower common of somewhat $XX declared the of million first was the to unit direct costs in the decline offsetting $X.XX for The relative quarter, per operating prior for feedstock in XXXX. Fertilizer prices quarter

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

spending quarter which Turnaround million spending, was the related for the in uses cash $XX XXXX distribution. million was approximately of million segment, segment the and noncontrolling was regular the cash Cash CVR Significant $XX provided for million, pretreatment Petroleum fourth in XXXX $XX by million. quarter free capital and dividend first interest, $XXX quarter quarter for paid $XXX flow $XX the in the cash million to taxes fourth Total for Partners' interest XXXX turnaround capital quarter $XX included the unit. $X million, and million the consolidated the spending $X of and and operations primarily million. million included $XX of first million was for Fertilizer portion in RDU, $XX the of

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

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

XXXX. ahead the quarter second Looking of to

the still damage Wynnewood. mentioned, we of of Dave As extent from are assessing the the fire

an The and the of continues Petroleum renewable the provide refinery determined. segment planned. outlook diesel the once Coffeyville impact incident the is will unit We for to updated operate as

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

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

been were refining, characterize quarter, In weak with the Thank elevated particularly spreads depressed demand market into you, industrial of current XXXX were inventories elevated downtime in attacks supply a crack activity much past global just States, We Dane. and additional recent as in the challenging would drone unplanned there's refined refineries the diesel a winter up for work wildcard. and distillate over clean mid-cycles. Starting to inventories, warm above Europe conditions inventories, the with has as activity. maintenance first the be Asia, and and helped Petroleum completed and or States We to gasoline few remains coming with segment summary, product believe the United X-year both on in months maintenance from below averages. impacts refining near the and yet United Russian

offset global expected some the this We the supply refining discussed. which impacts also start-up continue of new monitor year, could just of to capacity

demand of above average the On the and remained side levels is steady trending the demand in X-year equation, U.S. recently. gasoline

remains demand distillate soft. While

refined the U.S. remained Group Looking relative Mid-Con, elevated more at inventory although specifically has whole. X product are as levels in to the a demand steady

shale oil per and our this been range, day. fuel new averaging $X oil As Group X of prices differential continued expect averaged in so barrel should through to in a for supported The Brent-TI have facility the gathering over which West increasing Coffeyville. the at we volumes barrels business. far million wide our the is crude crude in shipments be volumes $XX With export has nearly gasoline oil year, production rail result, by crude our supportive strength per the barrel transload by unusually X a basis we

we quarter, in the day. of our barrels were neat is an barrels bringing the This gathering by to uplift first XXX,XXX crude the For part experience usually gates. per oil volumes strategy refinery our given approximately important

of the million. $XX turnaround Wynnewood and yield work Wynnewood's at -- the believe tower vacuum refinery. be in product distillate Through distillate production diesel improvement that to less recently some We during in than final a to refinery project, day. unit, recent approximately project project we'll at the barrels a announce increase first to pleased yield capital the hydrotreating half by modifications we Wynnewood I'm for per our completion the X,XXX XXXX completed expect able the at approved of currently cost we Board tie-in

also are a successfully Board in We Coffeyville, and by the if at implemented project approved studying be similar could completed which XXXX.

quarter earlier to We farmers the allowing conditions, Fertilizer weather apply the the year. had segment. ammonia in good in with Turning favorable to first ammonia sales

We any do not acres planning strong XX for for and million for fertilizer We XX soybeans. expect currently downtime until corn for demand XXXX. expectations currently facilities with at spring acres either million have additional planned

The during pretreater rates production first we quarter. for quarter, in and planned the renewable expect unit began operations the the second diesel to reap

improvements We product are and -- plus renewable in the catalyst resulting economics. diesel load unit with life optimistic when catalyst yield, of combination operational, in PTU would and the the new result RD in improved our

diesel conversion currently of to potential continue to and up space the renewable to unit are related XXX% the explore SAF. in in We the renewable opportunities Wynnewood discussions

would discussed could the justify the of that have our we such the a significantly agreement this capital invest. project derisk is be focus we As in margin exploring offtake structure previously, to that need would

at there a we be EPA's mismanagement the scope, larger and project market still a expect renewable market ready continued believe to the RFS We to project development and the Coffeyville, by year. have diesel end going for On cost take of sustainable aviation potential the plan despite the to forward of will regulation.

Partners. CVR X-K currently we strategic refining Finally, and considering both related routinely considered announcing that were and potential we transactions in Form issued potentially March, a to in

While provide CVR opportunities there some transactions, no business any and we close nothing out disclose and certainly such could successfully to assurances we have interesting and there that very our Partners. both for are transformative refining

barrel have the metrics barrel of as $X.XX at the and WTI. differential Brent-TI XXXX, cracks second quarter Midland per and $XX.XX follows: X-X-X of at Looking spread per quarter-to-date over $X.XX Group averaged are

and ammonia Prompt approximately for ton fertilizer ton are prices $XXX UAN. for per $XXX per

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

approximately RINs were per $X.XX barrel.

and to a in continue and environmentally responsible As renewables plants opportunities to our to to our explore operate always, business. safe, we strive manner, reliable grow

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

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

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

and a still the that it? considered are weekend what You which weather-related help over safe but a little some the what operator, you're I caused issues weekend, went is bit what event, happened exactly understand good evaluating seeing? and A wrong you're us understand of the over

know but of we we the hit process little Well, caused don't fire our lightning one facts got areas. bit all Manav, exactly in it it as lightning like appears spread And and then that yet got hot. a by the impending that

excellent unfortunate it and our event we're that standpoint, community to contractor was exposed a response it's our an employee's from think But standpoint to. sometimes I standpoint.

that very bad bad we be so Sulphur, night, but which direct lightning took probably, That you a fast. I the the XX as was place, it from happens don't were all a flying us and storms miles know, can hit, is you really experienced over tornado. never we and think If of sure recall, town

Right.

So done about trying would there's to you was literally it, nothing So sure. have right? make just

soybean question -- transform what looks is -- running make that to from running to renewable your PTU oil? And at stuff? you does you us looking refined my up a how profitability? your difference going tallow to is unrefined facility. diesel be soybean and RD material are And is to you do looking Help to and understand do think some oil like now Are your second

but had a we've without pretty PTU. -- of runs very it, buying lot been this We're and the looked point. of on actual yields, with feed looking unit diesel, the in up. starved a or Well, other impurities the the degummed XX-plus byproducts phosphorus with refined And we run deodorized poor of and We've that. very this encouraged less feed even And yields there's call no still pretreater good had is short renewable seen and diesel. already I'll starting with that things. renewable it And the doubt the on had percent good the treated in catalyst forms at metals really performance pretreater of results much we're and before catalyst that and

run that we're pick untreated and we'll oil for not maybe but optimistic really other right I'm now, So really other to corn focused But some soybean up options only ability some right oil, a as margin per the the soybean range on in on oil. pretreated we now the And that probably is the basis. corn a gallon $X.XX oil for substitute think on that things.

-- of gallon, So at margin if still we look the a more first probably quarter, profit had could -- $X.XX a on have unit. we would a which we shown ended we run that barrels, about we if we have

of were As just it we kind is, breakeven.

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

Coast. comments mentioned your I gasoline you wanted I to follow railing think on up the something to West regarding about

you just we what California spec? And So volumes gasoline capitalizing Or blended kind I just here? curious, is it talking space? to in also wanted that can And and railing a you of the to spec? confirm that are make about are on higher margins that, carb that

Sure.

the go we'll But transloader. capability I month have our tariffs. able California. we to mentioned, As in to West, said our XXX,XXX margins I are of not party we the of to load the -- But transloading that's probably put But it and is be a third put to per best. with and in, ahead the to we're barrels up facility underwriting it plan wherever necessarily no,

yet. and pretty much, But make shorter attractive gone some other segregated get to be move. City had far if could to If Lake the although we degree that of on is haven't it Grand far continues some the But making such carb, we areas at we like probably arb we shorter, other as as a really might and places and occasion. to occasionally tankage. an Junction Phoenix haven't that open Denver Salt California As sure looked I'm it even

focused we're where there's So mostly.

Is maybe that, barrel with $X.XX thumb rail like a rule for there $X.XX of a or -- a sorry, associated or the costs good gallon?

$X move time it's barrel. any rail, normally, to Well, by $X per anything you

good depends how thumb. go. a of go you that's rule far and where you It So on

fees So on front have side. you loading unloading and fees the then

of So -- thumb. but that's a good rule

follow-up, end to production might you the WCS as this be TMX widens a it in ramps? the pipeline. exposure one good. same out at the -- futures barrel from And about anything curve, Canada? on to volumes you do do expectations my by your of will and other then continuing on think Express it's think that -- Sounds change receive we've the Is expect noticed year. that Or There I growth just least WCS of $XX

Yes.

little I is would to the million barrels it now right the is taking, to seeing complete. barrels were it off range a out is $XX today. replaced expect Mexico. brings line down permanently. the to that what, market be fill And of at back I the you're which are that widen going of what fill, going And think the what don't of are think most the mostly once -- which think line I I bit that's it X.X out is the Gulf offshore ones

We can anticipate getting So run all any we move on pipes. don't barrels. I problems the don't

bit So up Cushing. in quite we selling end a

production to it effort. reason plan don't is wouldn't I today. any see that continue where we And why the continue

Canadian future, in Keystone crude have that to West of will the the unfortunately, world. would to think more that the outlet I there, than Canadian canceled, effect is the capacity the and TMX But still, they really an the however, which think And be rest future. I shipping benefit United States the it means rather didn't and of real the for that the before. given gives producers the have got

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

light organic refining in an done was some color otherwise the at additional the of Is the with considering on I time? RD? of impact X-K. could either/or particularly the on the projects bigger be you're things of hoping both side, thinking or same you would about Could some that with for M&A M&A do sort it So

diesel RD our of project, larger contribution want that Wynnewood is remember our John, however banked being Well, SAF. our really project, SAF renewable it, our operation on you call to or

not without land, the are in that whatever. interested is eventual providing, the design, company in do location, that an the strategy. would what all is it and the the strategic we for operate we project rest space, the permits, with the or we're doing that What is, will IPO equity the nature will a we out as partner But exit idea

far it as As everything, company there's there at as as we've we I at I everything. transformative other are pencil the very M&A, well and look intriguing And that refining and said, some continue out again. that as at to in pick we some like us said, others. up our for look unique opportunities And really our deals think space always look made again

come more So to on that.

follow-up, Great. X-K. with And then a sticking the

I On is the looked you at year something know potential about options about for maybe a this ago. UAN, strategic

of like for Now potentially equity other place the being now coming bit? there changed it looking in separating what's idea Or terms transaction and docket. back there? fertilizer? Is just drivers? then between a take little the and some the the back at Can is of parts about of of are back on potentially the it UAN could the looks that type talk you And

-- it today. twice you yet, pretty it's Wever of closed or is think with a of UAN been heard much I for occurred OCI pretty that's what the hasn't the kind mark-to-market about the but value proposed transaction Well, with value, plant big probably that recent

might it So opportunities we're exploring in going of that, that's and kind that what forward. incur just interest the sparked

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

of packages you a assets? consider and be context comments would refining Just on the that the you single that success different you potential by in you it's versus regions? whether say framework the a transaction for define you made preference for have do successful you trying get options. just think X-K. Dave, And M&A as evaluate characteristics which building to the about a have specific Are as M&A, there on M&A you side, what

Yes. Sure, Neil.

of impediments lack one think I stock I of our to our our is biggest diversification. price, think,

desired So that we've I to what and diversity our -- transactions But I and the would don't is of need available and these West scratch and the in pointed the refining we size fleet, our actions any past, is scale itch. area. have of think

When X, So mainly other think we're than the to that's what to you and sit for. the you're you the Mid-Con looking fertilizer. here subject all realms nothing it of that's market Group I with in particularly offset got,

size our fertilizer So rest business look of compared relatively the you -- small. to if the it, of at it's

stock diversification of a any is and benefit to do So shareholders is my the the point there we can view.

follow-up Yes. just distillate. And the is

But mix huge seem be has You over years. through that view? has that part are recently softened turn And tailwind real little here way our It anything seasonal. time say changed have more summer? that bit in last anything your a positive couple heavy seeing to would a structurally bullish as the a distillate work of and you does we here, things of more the has which distillate and been diesel should

we -- of we very off mild Well, winters, two frankly. had came

the is of -- makes think really the had industrial how has me much is goods I said, activity in country States. Some and our movement is mildest But really that around anemic. bigger markets weather wonder the -- the that know was don't just because people say the we if been the some winter ever severe I in of it climate changing. the impact kind just

you X% said, other we're just add of thing now years pool. diesel than if X%, the less in almost renewable X.X That -- I'd the That was to look up ago. to it, at

changing is degree. affecting to California certainly some it and market, but on probably everywhere the it's come really it's So

a -- the trucking in is the industry, you Now EVs far all said, solution. at heavy renewable look that and poor best it's at if by of that's practicality diesel better

activity, and -- kind So little I have pick that's diesel demand kind back don't right think And view. if of bit manufacturing of we that industrial that. our just the handle up. of any will market a It's can't

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

transaction how much should Dave the in will we look or that be balance to Dane, there's refining, willing that good put of if at I -- the a sheet you now in terms event how in mean, of debt the on it?

again, Paul? it repeat you Can

think If really far you. transaction balance will you an stretch for that's that good a How you willing sheet? is good that be acquisition target to your

Yes, earnings Paul, it would target target said be. what that obviously We've and and the ratio. the the kind depend power we're X between Xx levered of on comfortable always would of

So depending on the long target, I don't think our our -- profile debt we want to materially change term.

that So a the I'd benchmark still long use over haul. as

And degree, to our we want equity to use some Paul.

So...

I But the within changed. in say, of that, long-term deal? terms I the XX after are What how level Dane, close willing far you to the mean that, target acceptable is an your within Right. short-term, of months haven't understand go? leverage you you But

there lever of stretch not I'll probably It market. path targets we'd clear of if beyond Is potentially depend current very would but really too Dave what a delevering? off a are. said. where scenario the aggressively on was there our the Yes, depth equity where

Okay.

XX%. because question. And the second Are previously, XXX% at about RD Dane, ] been like of the capacity. for running remaining you the is be you quarter, run talk reaching maybe Dave, the tell you position you've what your more rest Second in that I about think reaching the will talking about hedging us the when [ talking also, can the year?

make on understand comment to sure that. want just your I I So

at of it barrels planning the diesel is compared per run Yes, this we're renewable Paul, X,XXX nameplate to day, RD run of XXX. on our to about of is XX side which

in higher sneak up catalyst And we'll and is find to So trying load that, next here on go in then we're you it there. probably X,XXX, little the and but increasing what right we're from numbers maybe that life said, angle. And we'll optimum explore the the a to that. probably in

question... Your other

Paul. derivative On Yes. open positions,

So thing about and rate I full that Wynnewood. for of to does a gasoline X% run of rate But diesel want at 'XX, production one we're caveat assume is production.

the be production. gasoline-diesel then diesel know of more, what X% is to XXX% we'll associated look production. 'XX, That's have any that adjust we're appropriately -- for we So would able we And downtime total about with like once that's that with of to fire.

production X% diesel So on for 'XX.

Dane diesel, in you diesel, -- say gasoline and X% because so in diesel in it's that's and right? X% all in gasoline, in it's but X% X%

Yes, that's correct.

is is second position now or making money? money for the And the losing right quarter

half. the Making money for second

quarter right the Is now. making quarter money? in position second or is second money the your divested losing For

making in money. right It's we're money Yes, Paul. the now,

you. Thank

We have no over turn closing further floor the back comments. questions like to I at for this would to time. management

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

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

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

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