CVR Refining, LP (NYSE:CVRR), a refiner and marketer of petroleum
fuels, today announced net income of $118 million on net sales of
$1,824 million for the second quarter of 2018, compared to a net
loss of $19 million on net sales of $1,338 million for the second
quarter of 2017. Adjusted EBITDA, a non-GAAP financial measure, for
the 2018 second quarter was $147 million compared to adjusted
EBITDA of $43 million for the 2017 second quarter.
For the first six months of 2018, net income was $265 million on
net sales of $3,282 million, compared to net income of $48 million
on net sales of $2,762 million for the comparable period a year
earlier. Adjusted EBITDA for the first six months of 2018 was
$273 million, compared to adjusted EBITDA of $158 million for the
first six months of 2017.
“CVR Refining reported another period of solid results for the
2018 second quarter,” said Dave Lamp, Chief Executive Officer of
CVR Refining's general partner. “The quarter’s success was
attributable to a $4.88 increase in Group 3 crack spreads, low
Renewable Identification Number (RIN) prices and wide crude oil
differentials compared to the same period last year.
“Looking ahead, CVR Refining is off to a good start in the third
quarter,” Lamp said. "While crack spreads have moderated in July,
crude oil differentials are strong and RIN prices remain low."
Consolidated Operations
Second quarter 2018 combined crude oil throughput was
approximately 206,000 barrels per day (bpd). Combined crude oil
throughput was approximately 214,000 bpd for the same period in
2017.
Refining margin adjusted for FIFO impact per combined total
throughput, a non-GAAP financial measure, was $12.61 in the 2018
second quarter, compared to $7.21 during the same period in 2017.
Direct operating expenses (exclusive of depreciation and
amortization), excluding major scheduled turnaround expenses, per
combined total throughput, for the 2018 second quarter were $4.76,
compared to $4.13 in the second quarter of 2017.
Distributions
CVR Refining also announced today a second quarter 2018
distribution of 66 cents per common unit. The distribution, as set
by the board of CVR Refining GP, LLC, the general partner of CVR
Refining, will be paid on Aug. 13, 2018, to unitholders of record
on Aug. 6, 2018. CVR Refining's second quarter cash distribution
brings the cumulative cash distributions paid or declared for the
first six months of 2018 to $1.17 per common unit.
CVR Refining is a variable distribution master limited
partnership. As a result, its distributions, if any, will vary from
quarter to quarter due to several factors, including, but not
limited to, its operating performance, fluctuations in the prices
paid for crude oil and other feedstocks, as well as the prices
received for finished products, RINs’ costs and cash reserves
deemed necessary or appropriate by the board of directors of its
general partner.
Second Quarter 2018 Earnings Conference
Call
CVR Refining previously announced that it will host its second
quarter 2018 Earnings Conference Call for analysts and investors on
Thursday, July 26, at 1 p.m. Eastern. The Earnings Conference Call
may also include discussion of the partnership’s developments,
forward-looking information and other material information about
business and financial matters.
The Earnings Conference Call will be broadcast live over the
Internet athttps://edge.media-server.com/m6/p/w32e2qev. For
investors or analysts who want to participate during the call, the
dial-in number is (877) 407-8289.
For those unable to listen live, the webcast will be archived
and available for 14 days
athttps://edge.media-server.com/m6/p/w32e2qev. A repeat of the
conference call can be accessed by dialing (877) 660-6853,
conference ID 13681418.
Qualified NoticeThis release serves as a
qualified notice to nominees and brokers as provided for under
Treasury Regulation Section 1.1446-4(b). Please note that 100
percent of CVR Refining’s distributions to foreign investors are
attributable to income that is effectively connected with a United
States trade or business. Accordingly, CVR Refining’s distributions
to foreign investors are subject to federal income tax withholding
at the highest effective tax rate.
Forward-Looking StatementsThis news release
contains forward-looking statements. Statements concerning current
estimates, expectations and projections about future results,
performance, prospects, opportunities, plans, actions and events
and other statements, concerns, or matters that are not historical
facts are “forward-looking statements,” as that term is defined
under the federal securities laws. These forward-looking
statements include, but are not limited to, statements regarding
future: crude oil differentials; RINs, crude oil, feedstock and
product prices; distributions; operating performance; reserves;
third quarter performance including throughput, production, direct
operating expenses, capital spending and depreciation; and other
matters. You can generally identify forward-looking statements by
our use of forward-looking terminology such as “outlook,”
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,”
“should,” or “will,” or the negative thereof or other variations
thereon or comparable terminology. These forward-looking statements
are only predictions and involve known and unknown risks and
uncertainties, many of which are beyond our control. Investors are
cautioned that various factors may affect these forward-looking
statements, including (among others) price volatility of crude oil,
other feedstocks and refined products; our ability to make cash
distributions; potential operating hazards; costs of compliance
with existing, or compliance with new, laws and regulations and
potential liabilities arising therefrom; and other risks. For
additional discussion of risk factors which may affect our results,
please see the risk factors and other disclosures included in our
most recent Annual Report on Form 10-K, any subsequently filed
Quarterly Reports on Form 10-Q and our other SEC filings. These
risks may cause our actual results, performance or achievements to
differ materially from any future results, performance or
achievements expressed or implied by these forward-looking
statements. Given these risks and uncertainties, you are cautioned
not to place undue reliance on such forward-looking statements. The
forward-looking statements included in this news release are made
only as of the date hereof. CVR Refining disclaims any intention or
obligation to update publicly or revise its forward-looking
statements, whether as a result of new information, future events
or otherwise, except to the extent required by law.
About CVR Refining, LPHeadquartered in Sugar
Land, Texas, CVR Refining, LP is an independent downstream energy
limited partnership that owns refining and related logistics assets
in the Midcontinent United States. CVR Refining’s subsidiaries
operate a complex full coking medium-sour crude oil refinery with a
capacity of 132,000 barrels per calendar day (bpcd) in Coffeyville,
Kansas, and a complex crude oil refinery with a capacity of 74,500
bpcd in Wynnewood, Oklahoma. CVR Refining’s subsidiaries also
operate and invest in supporting logistics assets, including
approximately 570 miles of owned, leased and joint venture
pipelines, approximately 130 crude oil transports, a network of
strategically located crude oil gathering tank farms, and
approximately 6.4 million barrels of owned and leased crude oil
storage capacity.
For further information, please contact:
Investor Contact:Jay FinksCVR Refining, LP(281)
207-3588IR@CVRRefining.com
Media Relations:Brandee StephensCVR Refining,
LP(281) 207-3516MediaRelations@CVRRefining.com
CVR Refining, LP
Financial and Operational Data (all information in this
release is unaudited other than the balance sheet data as of
December 31, 2017).
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(in millions, except per unit
data) |
Statement of
Operations Data: |
|
|
|
|
|
|
|
Net sales |
$ |
1,824 |
|
|
$ |
1,338 |
|
|
$ |
3,282 |
|
|
$ |
2,762 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
Cost of materials and
other |
1,553 |
|
|
1,208 |
|
|
2,771 |
|
|
2,409 |
|
Direct operating
expenses(1)(2) |
94 |
|
|
86 |
|
|
187 |
|
|
188 |
|
Depreciation and
amortization |
32 |
|
|
31 |
|
|
65 |
|
|
65 |
|
Cost of
sales |
1,679 |
|
|
1,325 |
|
|
3,023 |
|
|
2,662 |
|
Selling, general and
administrative expenses(1) |
22 |
|
|
19 |
|
|
38 |
|
|
40 |
|
Depreciation and
amortization |
1 |
|
|
1 |
|
|
2 |
|
|
1 |
|
Loss on asset
disposals |
5 |
|
|
— |
|
|
5 |
|
|
— |
|
Operating
income (loss) |
117 |
|
|
(7 |
) |
|
214 |
|
|
59 |
|
Interest expense,
net |
(11 |
) |
|
(12 |
) |
|
(22 |
) |
|
(23 |
) |
Gain on derivatives,
net |
10 |
|
|
— |
|
|
70 |
|
|
12 |
|
Other income, net |
2 |
|
|
— |
|
|
3 |
|
|
— |
|
Net
income (loss) |
$ |
118 |
|
|
$ |
(19 |
) |
|
$ |
265 |
|
|
$ |
48 |
|
|
|
|
|
|
|
|
|
Net income (loss) per
common unit - basic and diluted |
$ |
0.80 |
|
|
$ |
(0.13 |
) |
|
$ |
1.80 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA* |
$ |
147 |
|
|
$ |
43 |
|
|
$ |
273 |
|
|
$ |
158 |
|
Available cash for
distribution* |
$ |
97 |
|
|
$ |
— |
|
|
$ |
173 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
Weighted average,
number of common units outstanding: |
|
|
|
|
|
|
|
Basic and
diluted |
147.6 |
|
|
147.6 |
|
|
147.6 |
|
|
147.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
______________________________ *
See “Use of Non-GAAP Financial Measures” below.
(1) Direct operating expenses and selling, general and
administrative expenses for the three and six months ended
June 30, 2018 and 2017 are shown exclusive of depreciation and
amortization, which amounts are presented separately below direct
operating expenses and selling, general and administrative
expenses.
(2) Direct operating expenses includes $0 million and $0
million of major turnaround expenses during the three and six
months ended June 30, 2018, respectively. Direct operating
expenses includes $3 million and $16 million of major turnaround
expenses during the three and six months ended June 30, 2017,
respectively.
|
|
As of June 30, 2018 |
|
As of December 31, 2017 |
|
|
|
(audited) |
|
(in millions) |
Balance Sheet
Data: |
|
|
|
Cash and cash
equivalents |
$ |
258 |
|
|
$ |
174 |
|
Working capital |
391 |
|
|
218 |
|
Total assets |
2,366 |
|
|
2,270 |
|
Total debt, including
current portion |
540 |
|
|
541 |
|
Total partners’
capital |
1,370 |
|
|
1,247 |
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(in millions) |
Cash Flow
Data: |
|
|
|
|
|
|
|
Net cash flow provided
by (used in): |
|
|
|
|
|
|
|
Operating
activities |
$ |
242 |
|
|
$ |
135 |
|
|
$ |
258 |
|
|
$ |
252 |
|
Investing
activities |
(15 |
) |
|
(28 |
) |
|
(31 |
) |
|
(49 |
) |
Financing
activities |
(76 |
) |
|
(1 |
) |
|
(143 |
) |
|
(1 |
) |
Net
increase in cash and cash equivalents |
$ |
151 |
|
|
$ |
106 |
|
|
$ |
84 |
|
|
$ |
202 |
|
|
|
|
|
|
|
|
|
Capital expenditures
for property, plant and equipment: |
|
|
|
|
|
|
|
Maintenance capital expenditures |
$ |
11 |
|
|
$ |
25 |
|
|
$ |
23 |
|
|
$ |
43 |
|
Growth
capital expenditures |
5 |
|
|
2 |
|
|
9 |
|
|
5 |
|
Total
capital expenditures |
$ |
16 |
|
|
$ |
27 |
|
|
$ |
32 |
|
|
$ |
48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Data
The following tables set forth information about our
consolidated operations and our Coffeyville and Wynnewood
refineries. Reconciliations of certain non-GAAP financial measures
are provided under “Use of Non-GAAP Financial Measures” below.
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Key Operating
Statistics (dollars per barrel): |
|
|
|
|
|
|
|
Per total throughput
barrel: |
|
|
|
|
|
|
|
Gross
profit |
$ |
7.29 |
|
|
$ |
0.60 |
|
|
$ |
7.05 |
|
|
$ |
2.43 |
|
Refining
margin* |
13.71 |
|
|
6.45 |
|
|
13.93 |
|
|
8.64 |
|
FIFO
impact, (favorable) unfavorable |
(1.10 |
) |
|
0.76 |
|
|
(1.15 |
) |
|
0.39 |
|
Refining
margin adjusted for FIFO impact* |
12.61 |
|
|
7.21 |
|
|
12.78 |
|
|
9.03 |
|
Direct
operating expenses and major turnaround expenses |
4.76 |
|
|
4.27 |
|
|
5.10 |
|
|
4.62 |
|
Direct
operating expenses excluding major turnaround expenses |
4.76 |
|
|
4.13 |
|
|
5.10 |
|
|
4.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
______________________________ *
See “Use of Non-GAAP Financial Measures” below.
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Market
Indicators (dollars per barrel): |
|
|
|
|
|
|
|
West Texas Intermediate
(WTI) NYMEX |
$ |
67.91 |
|
|
$ |
48.15 |
|
|
$ |
65.46 |
|
|
$ |
49.95 |
|
Crude Oil
Differentials: |
|
|
|
|
|
|
|
WTI less
WTS (light/medium sour) |
8.50 |
|
|
1.06 |
|
|
5.05 |
|
|
1.24 |
|
WTI less
WCS (heavy sour) |
18.02 |
|
|
10.00 |
|
|
21.81 |
|
|
11.88 |
|
WTI less
Condensate |
0.46 |
|
|
0.15 |
|
|
0.42 |
|
|
0.12 |
|
Midland
Cushing Differential |
8.12 |
|
|
0.83 |
|
|
4.34 |
|
|
0.41 |
|
NYMEX Crack
Spreads: |
|
|
|
|
|
|
|
Gasoline |
20.63 |
|
|
18.07 |
|
|
18.06 |
|
|
16.39 |
|
Heating
Oil |
22.22 |
|
|
15.11 |
|
|
21.36 |
|
|
15.32 |
|
NYMEX
2-1-1 Crack Spread |
21.43 |
|
|
16.59 |
|
|
19.71 |
|
|
15.85 |
|
PADD II Group 3
Basis: |
|
|
|
|
|
|
|
Gasoline |
(4.44 |
) |
|
(3.95 |
) |
|
(3.19 |
) |
|
(2.96 |
) |
Ultra Low
Sulfur Diesel |
(0.05 |
) |
|
(0.62 |
) |
|
(0.33 |
) |
|
(1.10 |
) |
PADD II Group 3 Product
Crack Spread: |
|
|
|
|
|
|
|
Gasoline |
16.19 |
|
|
14.12 |
|
|
14.87 |
|
|
13.42 |
|
Ultra Low
Sulfur Diesel |
22.17 |
|
|
14.49 |
|
|
21.03 |
|
|
14.23 |
|
PADD II Group 3
2-1-1 |
19.18 |
|
|
14.30 |
|
|
17.95 |
|
|
13.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
Refining
Throughput and Production Data (bpd): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Throughput: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensate |
9,127 |
|
|
4.2 |
|
|
1,258 |
|
|
0.6 |
|
|
15,560 |
|
|
7.7 |
|
|
4,363 |
|
|
1.9 |
|
Sweet |
190,595 |
|
|
88.0 |
|
|
200,812 |
|
|
90.4 |
|
|
172,969 |
|
|
85.4 |
|
|
195,610 |
|
|
86.9 |
|
Heavy
sour |
6,249 |
|
|
2.9 |
|
|
11,771 |
|
|
5.3 |
|
|
3,385 |
|
|
1.7 |
|
|
14,130 |
|
|
6.3 |
|
Total
crude oil throughput |
205,971 |
|
|
95.1 |
|
|
213,841 |
|
|
96.3 |
|
|
191,914 |
|
|
94.8 |
|
|
214,103 |
|
|
95.1 |
|
All other
feedstocks and blendstocks |
10,694 |
|
|
4.9 |
|
|
8,113 |
|
|
3.7 |
|
|
10,681 |
|
|
5.2 |
|
|
11,161 |
|
|
4.9 |
|
Total
throughput |
216,665 |
|
|
100.0 |
|
|
221,954 |
|
|
100.0 |
|
|
202,595 |
|
|
100.0 |
|
|
225,264 |
|
|
100.0 |
|
Production: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gasoline |
106,431 |
|
|
49.1 |
|
|
112,284 |
|
|
50.4 |
|
|
99,279 |
|
|
49.0 |
|
|
115,600 |
|
|
51.2 |
|
Distillate |
94,784 |
|
|
43.7 |
|
|
96,578 |
|
|
43.4 |
|
|
86,870 |
|
|
42.9 |
|
|
93,260 |
|
|
41.3 |
|
Other
(excluding internally produced fuel) |
15,609 |
|
|
7.2 |
|
|
13,775 |
|
|
6.2 |
|
|
16,495 |
|
|
8.1 |
|
|
17,019 |
|
|
7.5 |
|
Total
refining production (excluding internally produced fuel) |
216,824 |
|
|
100.0 |
|
|
222,637 |
|
|
100.0 |
|
|
202,644 |
|
|
100.0 |
|
|
225,879 |
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
Coffeyville
Refinery Throughput and Production Data (bpd): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Throughput: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensate |
1,547 |
|
|
1.1 |
|
|
1,258 |
|
|
0.9 |
|
|
9,586 |
|
|
8.0 |
|
|
4,363 |
|
|
3.1 |
|
Sweet |
120,975 |
|
|
89.3 |
|
|
120,790 |
|
|
86.4 |
|
|
100,863 |
|
|
84.2 |
|
|
113,804 |
|
|
80.9 |
|
Heavy
sour |
6,249 |
|
|
4.6 |
|
|
11,771 |
|
|
8.4 |
|
|
3,385 |
|
|
2.8 |
|
|
14,130 |
|
|
10.0 |
|
Total
crude oil throughput |
128,771 |
|
|
95.0 |
|
|
133,819 |
|
|
95.7 |
|
|
113,834 |
|
|
95.0 |
|
|
132,297 |
|
|
94.0 |
|
All other
feedstocks and blendstocks |
6,671 |
|
|
5.0 |
|
|
6,077 |
|
|
4.3 |
|
|
6,022 |
|
|
5.0 |
|
|
8,482 |
|
|
6.0 |
|
Total
throughput |
135,442 |
|
|
100.0 |
|
|
139,896 |
|
|
100.0 |
|
|
119,856 |
|
|
100.0 |
|
|
140,779 |
|
|
100.0 |
|
Production: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gasoline |
66,577 |
|
|
48.6 |
|
|
70,032 |
|
|
49.3 |
|
|
57,565 |
|
|
47.5 |
|
|
72,271 |
|
|
50.5 |
|
Distillate |
59,797 |
|
|
43.7 |
|
|
59,703 |
|
|
42.1 |
|
|
52,064 |
|
|
42.9 |
|
|
59,573 |
|
|
41.6 |
|
Other
(excluding internally produced fuel) |
10,500 |
|
|
7.7 |
|
|
12,146 |
|
|
8.6 |
|
|
11,657 |
|
|
9.6 |
|
|
11,246 |
|
|
7.9 |
|
Total
refining production (excluding internally produced fuel) |
136,874 |
|
|
100.0 |
|
|
141,881 |
|
|
100.0 |
|
|
121,286 |
|
|
100.0 |
|
|
143,090 |
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
Wynnewood
Refinery Throughput and Production Data (bpd): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Throughput: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensate |
7,580 |
|
|
9.3 |
|
|
— |
|
|
— |
|
|
5,974 |
|
|
7.2 |
|
|
— |
|
|
— |
|
Sweet |
69,620 |
|
|
85.7 |
|
|
80,022 |
|
|
97.5 |
|
|
72,106 |
|
|
87.1 |
|
|
81,806 |
|
|
96.8 |
|
Total
crude oil throughput |
77,200 |
|
|
95.0 |
|
|
80,022 |
|
|
97.5 |
|
|
78,080 |
|
|
94.3 |
|
|
81,806 |
|
|
96.8 |
|
All other
feedstocks and blendstocks |
4,023 |
|
|
5.0 |
|
|
2,036 |
|
|
2.5 |
|
|
4,659 |
|
|
5.7 |
|
|
2,679 |
|
|
3.2 |
|
Total
throughput |
81,223 |
|
|
100.0 |
|
|
82,058 |
|
|
100.0 |
|
|
82,739 |
|
|
100.0 |
|
|
84,485 |
|
|
100.0 |
|
Production: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gasoline |
39,854 |
|
|
49.8 |
|
|
42,252 |
|
|
52.3 |
|
|
41,714 |
|
|
51.3 |
|
|
43,329 |
|
|
52.3 |
|
Distillate |
34,987 |
|
|
43.8 |
|
|
36,875 |
|
|
45.7 |
|
|
34,806 |
|
|
42.8 |
|
|
33,687 |
|
|
40.7 |
|
Other
(excluding internally produced fuel) |
5,109 |
|
|
6.4 |
|
|
1,629 |
|
|
2.0 |
|
|
4,838 |
|
|
5.9 |
|
|
5,773 |
|
|
7.0 |
|
Total
refining production (excluding internally produced fuel) |
79,950 |
|
|
100.0 |
|
|
80,756 |
|
|
100.0 |
|
|
81,358 |
|
|
100.0 |
|
|
82,789 |
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of Non-GAAP Financial Measures
To supplement our actual results in accordance with accounting
principles generally accepted in the United States of America
("GAAP") for the applicable periods, CVR Refining, LP (the
"Partnership") also uses the non-GAAP financial and operational
measures noted above, which are reconciled to our GAAP-based
results below. These non-GAAP financial and operational measures
should not be considered an alternative for GAAP results. The
adjustments are provided to enhance an overall understanding of the
Partnership’s financial performance for the applicable periods and
are indicators management believes are relevant and useful for
planning and forecasting future periods.
Performance and Liquidity Measures
EBITDA is a performance measure representing net income (loss)
before (i) interest expense and other financing costs, net of
interest income, (ii) income tax expense and (iii) depreciation and
amortization.
Adjusted EBITDA. Adjusted EBITDA is a performance measure
representing EBITDA adjusted for (i) (favorable) unfavorable FIFO
impacts associated with our crude oil and refined product
inventories, (ii) major turnaround expenses (that many of our
competitors capitalize and thereby exclude from their measures of
EBITDA and adjusted EBITDA), (iii) (gain) loss on derivatives, net
and (iv) current period settlements on derivative contracts.
Adjusted EBITDA represents the starting point for determining
available cash for distribution. Refer to discussion below for the
Refining margin, adjusted for FIFO impact non-GAAP measure for
discussion of why management adjusted for the FIFO impact of our
inventories. We exclude major turnaround expenses because these
amounts are required expenditures for our refineries, are not
closely related to current period operations and many of our peer
companies capitalize these amounts thereby excluding these amounts
from their EBITDA-related measures. For derivatives, we adjust
EBITDA to exclude the unrealized or non-cash portion of our
derivative gain or loss from our results in order to arrive at our
starting point for available cash for distribution.
Refining margin. This performance measure represents the
difference between net sales and cost of materials and other as
reported on our Condensed Consolidated Statement of Operations.
Refining margin, adjusted for FIFO impact. This performance
measure represents our refining margin adjusted to exclude the
impact of price changes in our crude oil and refined products
inventories. Under our FIFO accounting method for crude oil and
refined products, changes in crude oil prices can cause
fluctuations in the inventory valuation of our raw material, work
in process and finished good inventories, thereby resulting in a
favorable FIFO impact when crude oil prices increase and an
unfavorable FIFO impact when crude oil prices decrease. In periods
of significant price volatility, these price changes have a
significant impact on the valuation on our inventories and thus our
results.
Available cash for distribution. This performance and liquidity
measure is equal to Adjusted EBITDA reduced for cash needed for (i)
debt service, (ii) reserves for environmental and maintenance
capital expenditures, (iii) reserves for major turnaround expenses
and, to the extent applicable, (iv) reserves for future operating
or capital needs that the board of directors of our general partner
deems necessary or appropriate, if any. Available cash for
distribution may be increased by the release of previously
established cash reserves, if any, and other excess cash, at the
discretion of the board of directors of our general partner.
Operating Metrics
During the second quarter of 2018, we changed the metrics
discussed below from a crude oil throughput barrel basis to a total
throughput barrel basis. Prior period information has been revised
to conform to current presentation.
Refining margin and refining margin adjusted for FIFO impact per
total throughput barrel. For both refining margin and refining
margin adjusted for FIFO impact, we present these measures on a per
total throughput barrel basis. In order to calculate these non-GAAP
operating metrics, we utilize the total dollar figures for refining
margin and refining margin adjusted for FIFO impact, as derived
above and divide by the applicable number of total throughput
barrels for the period.
Direct operating expenses, excluding major turnaround expenses,
per total throughput barrel. We provide this performance measure to
exclude major turnaround expenses from the reported amounts of
direct operating expense during a given period. Major turnaround
expenses are not directly correlated to our current period
operations and thus excluding them provides investors and analysts
with the current period cost, exclusive of depreciation and
amortization, we incur to convert a barrel of crude oil into
refined product.
We present these measures because we believe they may help
investors, analysts, lenders and ratings agencies analyze our
results of operations and liquidity in conjunction with our U.S.
GAAP results, including but not limited to our operating
performance as compared to other publicly traded companies in the
refining industry, without regard to historical cost basis or
financing methods and our ability to incur and service debt and
fund capital expenditures. Non-GAAP measures have important
limitations as analytical tools, because they exclude some, but not
all, items that affect net earnings and operating income. These
measures should not be considered substitutes for their most
directly comparable U.S. GAAP financial measures.
A reconciliation of net income (loss) to EBITDA and EBITDA to
Adjusted EBITDA for the three and six months ended June 30,
2018 and 2017 is as follows:
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(in millions) |
Net
income (loss) |
$ |
118 |
|
|
$ |
(19 |
) |
|
$ |
265 |
|
|
$ |
48 |
|
Add: |
|
|
|
|
|
|
|
Interest
expense, net |
11 |
|
|
12 |
|
|
22 |
|
|
23 |
|
Depreciation and amortization |
33 |
|
|
32 |
|
|
67 |
|
|
66 |
|
EBITDA |
162 |
|
|
25 |
|
|
354 |
|
|
137 |
|
Add: |
|
|
|
|
|
|
|
FIFO
impact, (favorable) unfavorable |
(22 |
) |
|
15 |
|
|
(42 |
) |
|
16 |
|
Major
turnaround expenses |
— |
|
|
3 |
|
|
— |
|
|
16 |
|
Gain on
derivatives, net |
(10 |
) |
|
— |
|
|
(70 |
) |
|
(12 |
) |
Current
period settlements on derivative contracts(1) |
17 |
|
|
— |
|
|
31 |
|
|
1 |
|
Adjusted EBITDA |
$ |
147 |
|
|
$ |
43 |
|
|
$ |
273 |
|
|
$ |
158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_________________________
(1) Represents the portion of (gain) loss on derivatives,
net related to contracts that matured during the respective periods
and settled with counterparties. There are no premiums paid or
received at inception of the derivative contracts and upon
settlement, there is no cost recovery associated with these
contracts.
A reconciliation of Adjusted EBITDA to Available cash for
distribution is as follows:
|
|
|
|
|
Three Months Ended June 30,
2018 |
|
Six Months Ended June 30,
2018 |
|
(in millions, except per unit
data) |
Adjusted EBITDA |
$ |
147 |
|
|
$ |
273 |
|
Adjustments: |
|
|
|
Less: |
|
|
|
Cash
needs for debt service |
(10 |
) |
|
(20 |
) |
Reserves
for environmental and maintenance capital expenditures |
(25 |
) |
|
(50 |
) |
Reserves
for major turnaround expenses |
(15 |
) |
|
(30 |
) |
Available cash for
distribution |
$ |
97 |
|
|
$ |
173 |
|
|
|
|
|
Distribution declared,
per common unit |
$ |
0.66 |
|
|
$ |
1.17 |
|
Common units
outstanding |
147.6 |
|
|
147.6 |
|
|
|
|
|
|
|
The calculation of refining margin, refining margin adjusted for
FIFO impact, refining margin per total throughput barrel, refining
margin adjusted for FIFO impact per total throughput barrel and
direct operating expenses (exclusive of depreciation and
amortization and major turnaround expenses) per total throughput
barrel (each a non-GAAP financial measure), including a
reconciliation to the most directly comparable GAAP financial
measure for the three and six months ended June 30, 2018 and
2017 is as follows:
|
|
|
|
|
|
|
|
Consolidated
Operating Data |
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(in millions) |
Net sales |
$ |
1,824 |
|
|
$ |
1,338 |
|
|
$ |
3,282 |
|
|
$ |
2,762 |
|
Cost of materials and
other |
1,553 |
|
|
1,208 |
|
|
2,771 |
|
|
2,409 |
|
Direct operating
expenses (exclusive of depreciation and amortization as reflected
below) |
94 |
|
|
86 |
|
|
187 |
|
|
188 |
|
Depreciation and
amortization |
32 |
|
|
31 |
|
|
65 |
|
|
65 |
|
Gross
profit |
145 |
|
|
13 |
|
|
259 |
|
|
100 |
|
Add: |
|
|
|
|
|
|
|
Direct operating
expenses (exclusive of depreciation and amortization as reflected
below) |
94 |
|
|
86 |
|
|
187 |
|
|
188 |
|
Depreciation and
amortization |
32 |
|
|
31 |
|
|
65 |
|
|
65 |
|
Refining
margin |
271 |
|
|
130 |
|
|
511 |
|
|
353 |
|
FIFO impact,
(favorable) unfavorable |
(22 |
) |
|
15 |
|
|
(42 |
) |
|
16 |
|
Refining
margin adjusted for FIFO impact |
$ |
249 |
|
|
$ |
145 |
|
|
$ |
469 |
|
|
$ |
369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Total throughput
barrels per day |
216,665 |
|
|
221,954 |
|
|
202,595 |
|
|
225,264 |
|
Days in the period |
91 |
|
|
91 |
|
|
181 |
|
|
181 |
|
Total
throughput barrels |
19,716,515 |
|
|
20,197,814 |
|
|
36,669,695 |
|
|
40,772,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(in millions, except for $ per barrel
data) |
Refining margin |
$ |
271 |
|
|
$ |
130 |
|
|
$ |
511 |
|
|
$ |
353 |
|
Divided by: total
throughput barrels |
20 |
|
|
20 |
|
|
37 |
|
|
41 |
|
Refining
margin per total throughput barrel |
$ |
13.71 |
|
|
$ |
6.45 |
|
|
$ |
13.93 |
|
|
$ |
8.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(in millions, except for $ per barrel
data) |
Refining margin
adjusted for FIFO impact |
$ |
249 |
|
|
$ |
145 |
|
|
$ |
469 |
|
|
$ |
369 |
|
Divided by: total
throughput barrels |
20 |
|
|
20 |
|
|
37 |
|
|
41 |
|
Refining
margin adjusted for FIFO impact per total throughput barrel |
$ |
12.61 |
|
|
$ |
7.21 |
|
|
$ |
12.78 |
|
|
$ |
9.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(in millions, except for $ per barrel
data) |
Direct operating
expenses (exclusive of depreciation and amortization) |
$ |
94 |
|
|
$ |
86 |
|
|
$ |
187 |
|
|
$ |
188 |
|
Major turnaround
expenses |
— |
|
|
3 |
|
|
— |
|
|
16 |
|
Direct operating
expenses(1) |
$ |
94 |
|
|
$ |
83 |
|
|
$ |
187 |
|
|
$ |
172 |
|
Divided by: total
throughput barrels |
20 |
|
|
20 |
|
|
37 |
|
|
41 |
|
Direct
operating expenses, excluding major turnaround expenses, per total
throughput barrel |
$ |
4.76 |
|
|
$ |
4.18 |
|
|
$ |
5.10 |
|
|
$ |
4.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2018 Outlook. The table
below summarizes our outlook for certain refining statistics and
financial information for the third quarter of 2018. See “forward
looking statements.”
|
|
|
Q3 2018 |
|
Low |
|
High |
Refinery
Statistics: |
|
|
|
Total throughput
(bpd) |
200,000 |
|
|
210,000 |
|
Total refining
production (bpd) |
210,000 |
|
|
220,000 |
|
|
|
|
|
Direct operating
expenses(1) (in millions) |
$ |
85 |
|
|
$ |
95 |
|
|
|
|
|
Total capital spending
(in millions) |
$ |
20 |
|
|
$ |
30 |
|
|
|
|
|
|
|
|
|
_________________________(1) Direct operating expenses are shown
exclusive of depreciation and amortization and major turnaround
expenses.
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