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A service for energy industry professionals · Friday, November 15, 2019 · 502,249,122 Articles · 3+ Million Readers

CVR Energy Reports Third Quarter 2019 Results and Announces Cash Dividend of 80 Cents

/EIN News/ -- SUGAR LAND, Texas, Oct. 23, 2019 (GLOBE NEWSWIRE) -- CVR Energy, Inc. (NYSE: CVI) today announced net income of $119 million, or $1.18 per diluted share, on net sales of $1,622 million for the third quarter of 2019, compared to net income of $81 million, or 85 cents per diluted share, on net sales of $1,935 million for the third quarter of 2018. Third quarter 2019 EBITDA was $235 million, compared to third quarter 2018 EBITDA of $235 million.

“CVR Energy reported solid results for the third quarter 2019, driven by safe and reliable operations, improved capture rates, higher throughput volumes and increased fertilizer sales volumes and pricing,” said Dave Lamp, CVR Energy’s Chief Executive Officer. “We’re pleased to report that our Board of Directors has approved a 7 percent increase in our dividend, raising it to 80 cents per quarter, or $3.20 on an annualized basis. In addition, it authorized a four-year, $300 million stock repurchase program, giving us another potential way to return excess cash to stockholders. We also have concluded the formal bank process that we announced in May 2019 for the potential sale of the Company, though we continue to evaluate various revenue diversification and value creation opportunities.

“CVR Partners had strong production for the 2019 third quarter and announced a 7 cents per unit cash distribution,” Lamp said. “In addition, the East Dubuque plant completed its planned turnaround in October and is now coming back up to full production.”

Petroleum

The petroleum segment reported third quarter 2019 operating income of $173 million on net sales of $1,535 million, compared to operating income of $167 million on net sales of $1,857 million in the third quarter of 2018.

Refining margin per total throughput barrel was $16.34 in the third quarter of 2019, compared to $15.70 during the same period in 2018. Crude oil pricing during the quarter led to an inventory valuation impact of $1 million, or 3 cents per total throughout barrel, compared to $3 million, or $0.12 per total throughput barrel, in the third quarter of 2018. Impacting refining margin was a reduction to the 2018 renewable volume obligation, which led, in part, to a $22 million decrease in RINs expense for the third quarter of 2019 relative to the same period in 2018. The petroleum segment also recognized a third quarter 2019 derivative gain of $18 million, or 90 cents per total throughput barrel, compared to a gain of $5 million, or 28 cents per total throughput barrel, for the third quarter of 2018. Included in the total derivative gain for the third quarter of 2019 was an unrealized gain of $14 million, compared to an unrealized loss of $4 million for the third quarter of 2018.

Third quarter 2019 combined total throughput was approximately 222,000 barrels per day (bpd), compared to approximately 221,000 bpd of combined total throughput for the third quarter of 2018.

Fertilizer

The nitrogen fertilizer segment reported an operating loss of $8 million on net sales of $89 million for the third quarter of 2019, compared to operating income of $3 million on net sales of $80 million for the third quarter of 2018.

For the third quarter of 2019, CVR Partners’ consolidated average realized gate prices for urea ammonia nitrate (UAN) improved over the prior year, up 7 percent to $182 per ton, while ammonia was up 13 percent over the prior year to $337 per ton. Average realized gate prices for UAN and ammonia were $170 per ton and $297 per ton, respectively, for the third quarter of 2018.

CVR Partners’ fertilizer facilities produced a combined 196,000 tons of ammonia during the third quarter 2019, of which 56,000 net tons were available for sale while the rest was upgraded to other fertilizer products, including 318,000 tons of UAN. During the third quarter 2018, the fertilizer facilities produced 212,000 tons of ammonia, of which 63,000 net tons were available for sale while the remainder was upgraded to other fertilizer products, including 338,000 tons of UAN.

Cash, Debt and Dividend

Consolidated cash and cash equivalents was $692 million at Sep. 30, 2019. Consolidated total debt and finance lease obligations was $1,195 million at Sep. 30, 2019, with no debt other than the Petroleum and Fertilizer segments’ debt.

CVR Energy also announced a third quarter 2019 cash dividend of 80 cents per share, which represents a 7 percent increase from the prior quarter. The dividend, as declared by CVR Energy’s Board of Directors, will be paid on Nov. 12, 2019, to stockholders of record as of the close of market on Nov. 4, 2019. The annualized dividend of $3.20 per share represents an industry leading dividend yield of 7 percent based on the Oct. 22, 2019, closing stock price.

On Oct. 23, 2019, CVR Partners announced that the Board of Directors of its general partner declared a third quarter 2019 cash distribution of 7 cents per common unit, which will be paid on Nov. 12, 2019, to common unitholders of record as of the close of market on Nov. 4, 2019.

Also on Oct. 23, 2019, CVR Energy’s Board of Directors approved a four-year, $300 million stock repurchase program (the “Stock Repurchase Program”), and the Company announced its conclusion of the formal bank process it announced in May 2019 relating to the evaluation of potential strategic alternatives, including a potential sale.

The Stock Repurchase Program would enable the Company to repurchase up to $300 million of its common stock, giving the Company another potential mechanism for returning cash to stockholders. Stock repurchases may be made from time-to-time through open market transactions, block trades, privately negotiated transactions or otherwise, and are subject to market conditions, as well as corporate, regulatory and other considerations. The Stock Repurchase Program currently has a duration of four years; however, it does not obligate the Company to acquire any stock and may be terminated by the Board of Directors at any time.

Third Quarter 2019 Earnings Conference Call

CVR Energy previously announced that it will host its third quarter 2019 Earnings Conference Call on Thursday, Oct. 24, at 1 p.m. Eastern. The Earnings Conference Call may also include discussion of Company developments, forward-looking information and other material information about business and financial matters.

The third quarter 2019 Earnings Conference Call will be webcast live and can be accessed on the Investor Relations section of CVR Energy’s website at www.CVREnergy.com. For investors or analysts who want to participate during the call, the dial-in number is (877) 407-8291. The webcast will be archived and available for 14 days at https://edge.media-server.com/mmc/p/cxp42k6f. A repeat of the call also can be accessed for 14 days by dialing (877) 660-6853, conference ID 13695154.

Forward-Looking Statements
This news release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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: dividends and distributions including the timing, payment and amount (if any) thereof; excess cash and return thereof to stockholders; restart and production at the East Dubuque plant; derivative gains or losses; ability to increase stockholder value; stock repurchases of $300 million or at all; strategic alternatives; revenue diversification and value creation opportunities; refinery throughput, direct operating expenses, capital spending, depreciation and amortization and turnaround expense; continued safe and reliable operations; ammonia utilization rates including impact of turnarounds; inventory adjustments; and other matters. You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “explore,” “evaluate,” “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; the ability of CVR Partners to make cash distributions; potential operating hazards; costs of compliance with existing, or compliance with new, laws and regulations and potential liabilities arising therefrom; impacts of planting season on CVR Partners; general economic and business conditions; 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 and other 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 Energy disclaims any intention or obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.

About CVR Energy, Inc.
Headquartered in Sugar Land, Texas, CVR Energy is a diversified holding company primarily engaged in the petroleum refining and marketing business through its interest in CVR Refining and the nitrogen fertilizer manufacturing business through its interest in CVR Partners, LP. CVR Energy subsidiaries serve as the general partner and own 34 percent of the common units of CVR Partners.

For further information, please contact:

Investor Contact:
Richard Roberts
CVR Energy, Inc.
(281) 207-3205
InvestorRelations@CVREnergy.com

Media Relations:
Brandee Stephens
CVR Energy, Inc.
(281) 207-3516
MediaRelations@CVREnergy.com

Non-GAAP Measures

Our management uses certain non-GAAP performance measures to evaluate current and past performance and prospects for the future to supplement our GAAP financial information presented in accordance with U.S. GAAP. These non-GAAP financial measures are important factors in assessing our operating results and profitability and include the performance and liquidity measures defined below.

Effective January 1, 2019, the Company revised its accounting policy method for the costs of planned major maintenance activities (turnarounds) specific to the Petroleum Segment from being expensed as incurred (the direct expensing method) to the deferral method. See Note 3 (“Recent Accounting Pronouncements and Accounting Changes”) in the notes to our condensed consolidated quarterly financial statements for a further discussion of the impacts of this change in accounting policy. As a result of this change in accounting policy, the non-GAAP measures of Adjusted EBITDA, Petroleum Adjusted EBITDA, Nitrogen Fertilizer Adjusted EBITDA, Adjusted Net Income (Loss) and Direct Operating Expenses per Total Throughput Barrel net of Turnaround Expense are no longer being presented.

The following are non-GAAP measures that continue to be presented for the period ended September 30, 2019:

EBITDA - Consolidated net income (loss) before (i) interest expense, net, (ii) income tax expense and (iii) depreciation and amortization expense.

Petroleum EBITDA and Nitrogen Fertilizer EBITDA - Segment net income (loss) before segment (i) interest expense, net, (ii) income tax expense (benefit), and (iii) depreciation and amortization.

Refining Margin - The difference between our Petroleum Segment net sales and cost of materials and other.

Refining Margin adjusted for Inventory Valuation Impact - Refining Margin adjusted to exclude the impact of current period market price and volume fluctuations on crude oil and refined product inventories recognized in prior periods. We record our commodity inventories on the first-in-first-out basis. As a result, significant current period fluctuations in market prices and the volumes we hold in inventory can have favorable or unfavorable impacts on our refining margins as compared to similar metrics used by other publicly-traded companies in the refining industry. The inventory valuation impact is calculated based upon inventory values at the beginning of the accounting period and at the end of the accounting period.

Refining Margin and Refining Margin adjusted for Inventory Valuation Impact, per Throughput Barrel - Refining Margin adjusted to exclude the impact of current period market price and volume fluctuations on crude oil and refined product inventories recognized in prior periods, divided by the total throughput barrels during the period, which is calculated as total throughput barrels per day times the number of days in the period.

Direct Operating Expenses per Throughput Barrel - Direct operating expenses for our Petroleum Segment divided by total throughput barrels for the period, which is calculated as total throughput barrels per day times the number of days in the period.

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. See “Non-GAAP Reconciliations” section included herein for reconciliation of these amounts. Due to rounding, numbers presented within this section may not add or equal to numbers or totals presented elsewhere within this document.

CVR Energy, Inc.
(all information in this release is unaudited)

Financial and Operational Data

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in millions, except share data) 2019   2018   2019   2018
Consolidated Statement of Operations Data              
Net sales $ 1,622     $ 1,935     $ 4,794     $ 5,386  
Operating costs and expenses:              
Cost of materials and other 1,221     1,556     3,589     4,295  
Direct operating expenses (exclusive of depreciation and amortization as reflected below) 139     119     397     390  
Depreciation and amortization 69     63     210     196  
Cost of sales 1,429     1,738     4,196     4,881  
Selling, general and administrative expenses (exclusive of depreciation and amortization as reflected below) 29     27     85     83  
Depreciation and amortization 2     3     7     8  
Loss (gain) on asset disposals 3     1     (5 )   5  
Operating income 159     166     511     409  
Other (expense) income:              
Interest expense, net (26 )   (26 )   (77 )   (79 )
Other income, net 5     3     10     6  
Income before income tax expense 138     143     444     336  
Income tax expense 34     33     110     65  
Net income 104     110     334     271  
Less: Net income (loss) attributable to noncontrolling interest (15 )   29     (2 )   86  
Net income attributable to CVR Energy stockholders $ 119     $ 81     $ 336     $ 185  
               
Basic and diluted earnings per share $ 1.18     $ 0.85     $ 3.34     $ 2.05  
Dividends declared per share $ 0.75     $ 0.75     $ 2.25     $ 2.00  
               
EBITDA* $ 235     $ 235     $ 738     $ 619  
               
Weighted-average common shares outstanding - basic and diluted 100.5     95.8     100.5     89.8  
                       

_______________
* See “Non-GAAP Reconciliations” section below.

Selected Balance Sheet Data

(in millions) September 30, 2019   December 31, 2018
Cash and cash equivalents $ 692     $ 668  
Working capital 737     797  
Total assets 3,962     4,000  
Total debt and finance lease obligations 1,195     1,170  
Total liabilities 2,237     2,057  
Total CVR stockholders’ equity 1,429     1,286  
           

Selected Cash Flow Data

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in millions) 2019   2018   2019   2018
Net cash flow provided by (used in):              
Operating activities $ 269     $ 288     $ 653     $ 526  
Investing activities (30 )   (24 )   (73 )   (74 )
Financing activities (87 )   (96 )   (556 )   (232 )
Net increase in cash and cash equivalents $ 152     $ 168     $ 24     $ 220  
                               

Selected Segment Data

(in millions) Petroleum   Nitrogen Fertilizer   Consolidated
Three Months Ended September 30, 2019          
Net sales $ 1,535     $ 89     $ 1,622  
Operating income (loss) 173     (8 )   159  
Net income (loss) 170     (23 )   104  
EBITDA* 228     11     235  
           
Capital expenditures (1)          
Maintenance capital expenditures $ 25     $ 6     $ 31  
Growth capital expenditures 2     1     3  
Total capital expenditures $ 27     $ 7     $ 34  
           
Nine Months Ended September 30, 2019          
Net sales $ 4,484     $ 318     $ 4,794  
Operating income 492     36     511  
Net income (loss) 478     (10 )   334  
EBITDA* 653     97     738  
           
Capital expenditures (1)          
Maintenance capital expenditures $ 58     $ 11     $ 73  
Growth capital expenditures 7     1     8  
Total capital expenditures $ 65     $ 12     $ 81  
                       


(in millions) Petroleum   Nitrogen Fertilizer   Consolidated
Three Months Ended September 30, 2018          
Net sales $ 1,857     $ 80     $ 1,935  
Operating income 167     3     166  
Net income (loss) 160     (13 )   110  
EBITDA* 219     19     235  
           
Capital expenditures (1)          
Maintenance capital expenditures $ 17     $ 4     $ 22  
Growth capital expenditures 5     1     6  
Total capital expenditures $ 22     $ 5     $ 28  
           
Nine months ended September 30, 2018          
Net sales $ 5,139     $ 253     $ 5,386  
Operating income (loss) 424     (2 )   409  
Net income (loss) 398     (49 )   271  
EBITDA* 576     51     619  
           
Capital expenditures (1)          
Maintenance capital expenditures $ 39     $ 13     $ 55  
Growth capital expenditures 12     3     15  
Total capital expenditures $ 51     $ 16     $ 70  
                       

_______________
* See “Non-GAAP Reconciliations” section below.

(1) Capital expenditures are shown exclusive of turnaround costs.

Selected Balance Sheet Data

(in millions) Petroleum   Nitrogen Fertilizer   Consolidated
September 30, 2019          
Cash and cash equivalents $ 553     $ 84     $ 692  
Total assets 3,076     1,180     3,962  
Total debt and finance lease obligations 564     632     1,195  
           
December 31, 2018          
Cash and cash equivalents $ 353     $ 62     $ 668  
Total assets 2,453     1,254     4,000  
Total debt and finance lease obligations 541     629     1,170  
                 

Petroleum Segment

Key Operating Metrics per Total Throughput Barrel

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2019   2018   2019   2018
Refining margin* $ 16.34     $ 15.70     $ 16.18     $ 15.71  
Refining margin adjusted for inventory valuation impact * 16.37     15.57     15.65     14.93  
Direct operating expenses * 4.46     4.13     4.53     4.69  
                       

_______________
* See “Non-GAAP Reconciliations” section below.

Throughput Data by Refinery

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in bpd) 2019   2018   2019   2018
Coffeyville              
Regional crude 41,150     31,244     44,238     29,832  
WTI 80,717     68,659     74,325     65,093  
Midland WTI 1,436     27,889     4,959     15,012  
Condensate 2,378     273     3,588     6,448  
Heavy Canadian 4,555     6,746     5,199     4,518  
Other feedstocks and blendstocks 8,455     7,707     8,608     7,134  
Wynnewood              
Regional crude 61,345     61,618     52,750     55,684  
WTI 13     459     4     3,148  
Midland WTI 11,313     3,858     12,406     11,194  
Condensate 7,435     8,152     7,408     6,708  
Other feedstocks and blendstocks 3,203     4,150     3,579     4,829  
Total throughput 222,000     220,755     217,064     209,600  
                       

Production Data by Refinery

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in bpd) 2019   2018   2019   2018
Coffeyville              
Gasoline 69,122     72,337     71,144     62,543  
Distillate 58,457     60,521     59,008     54,914  
Other liquid products 7,157     4,352     6,808     6,041  
Solids 4,580     5,548     4,886     5,025  
Wynnewood              
Gasoline 42,464     38,750     38,673     40,715  
Distillate 36,555     33,635     32,003     34,410  
Other liquid products 1,756     3,562     3,064     4,374  
Solids 33     35     31     46  
Total production 220,124     218,740     215,617     208,068  
Liquid volume yield (as % of total throughput) 97.1 %   96.6 %   97.1 %   96.8 %
                       


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2019   2018   2019   2018
Market Indicators (dollars per barrel)              
West Texas Intermediate (WTI) NYMEX $ 56.44     $ 69.43     $ 57.10     $ 66.79  
Crude Oil Differentials:              
WTI less WTS (light/medium sour) 0.49     14.26     1.12     8.14  
WTI less WCS (heavy sour) 12.59     27.76     11.93     23.77  
WTI less condensate 0.55     0.37     0.99     0.40  
Midland Cushing Differential 0.26     14.33     1.23     7.69  
NYMEX Crack Spreads:              
Gasoline 16.37     16.96     16.55     17.69  
Heating Oil 23.14     22.03     24.30     21.59  
NYMEX 2-1-1 Crack Spread 19.76     19.50     20.42     19.64  
PADD II Group 3 Basis:              
Gasoline (1.07 )   (0.13 )   (1.89 )   (2.16 )
Ultra Low Sulfur Diesel (1.84 )   0.89     (1.45 )   0.08  
PADD II Group 3 Product Crack Spread:              
Gasoline 15.30     16.83     14.66     15.53  
Ultra Low Sulfur Diesel 21.30     22.92     22.85     21.67  
PADD II Group 3 2-1-1 18.30     19.88     18.76     18.60  
                       

Q4 2019 Petroleum Segment Outlook

The table below summarizes our outlook for certain operational statistics and financial information for the fourth quarter of 2019. See “forward looking statements.”

  Q4 2019
  Low   High
Total throughput (bpd) 205,000     220,000  
       
Direct operating expenses (1) (in millions) $ 90     $ 100  
       
Total capital spending (in millions) $ 50     $ 60  
               

__________
(1) Direct operating expenses are shown exclusive of depreciation and amortization and turnaround expenses.

Nitrogen Fertilizer Segment:

Key Operating Data:

Ammonia Utilization Rates (1) Two Years Ended September 30
(capacity utilization) 2019   2018
Consolidated 93 %   95 %
Coffeyville 95 %   94 %
East Dubuque 91 %   96 %
           

 

_______________
(1) Reflects ammonia utilization rates on a consolidated basis and at each of the Nitrogen Fertilizer facilities. Utilization is an important measure used by management to assess operational output at each of the facilities. Utilization is calculated as actual tons produced divided by capacity. The Nitrogen Fertilizer Segment presents utilization on a two-year rolling average to take into account the impact of current turnaround cycles on any specific period. The two-year rolling average is a more useful presentation of the long-term utilization performance of our plants. Additionally, we present utilization solely on ammonia production rather than each nitrogen product as it provides a comparative baseline against industry peers and eliminates the disparity of plant configurations for upgrade of ammonia into other nitrogen products. With the Nitrogen Fertilizer Segments’ efforts being primarily focused on ammonia upgrade capabilities, this measure provides a meaningful view of how well the facilities operate.

Sales and Production Data

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2019   2018   2019   2018
Consolidated sales (thousand tons):              
Ammonia 33     38     179     156  
UAN 340     310     968     925  
               
Consolidated product pricing at gate (dollars per ton):              
Ammonia $ 337     $ 297     $ 416     $ 329  
UAN $ 182     $ 170     $ 206     $ 169  
               
Consolidated production volume (thousand tons):              
Ammonia (gross produced) 196     212     586     584  
Ammonia (net available for sale) 56     63     168     187  
UAN 318     338     969     919  
               
Feedstock:              
Petroleum coke used in production (thousand tons) 137     117     404     325  
Petroleum coke (dollars per ton) $ 37.75     $ 25.65     $ 36.68     $ 22.89  
Natural gas used in production (thousands of MMBtu) (2) 1,700     2,118     5,210     5,933  
Natural gas used in production (dollars per MMBtu) (2) $ 2.40     $ 3.03     $ 2.88     $ 3.01  
Natural gas in cost of materials and other (thousands of MMBtus) (2) 1,294     1,439     5,487     5,268  
Natural gas in cost of materials and other (dollars per MMBtu) (2) $ 2.46     $ 2.98     $ 3.22     $ 3.03  
                               

_______________
(2) The feedstock natural gas shown above does not include natural gas used for fuel. The cost of fuel natural gas is included in direct operating expense (exclusive of depreciation and amortization).

Key Market Indicators

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2019   2018   2019   2018
Ammonia — Southern Plains (dollars per ton) $ 298     $ 337     $ 369     $ 354  
Ammonia — Corn belt (dollars per ton) 363     398     452     407  
UAN — Corn belt (dollars per ton) 196     203     217     208  
               
Natural gas NYMEX (dollars per MMBtu) $ 2.38     $ 2.87     $ 2.59     $ 2.85  
                               

Q4 2019 Nitrogen Fertilizer Segment Outlook

The table below summarizes our outlook for certain operational statistics and financial information for the fourth quarter of 2019. See “forward looking statements.”

  Q4 2019
  Low   High
Ammonia utilization rates (1)      
Consolidated 95 %   100 %
Coffeyville 95 %   100 %
East Dubuque 95 %   100 %
       
Direct operating expenses (2) (in millions) $ 40     $ 45  
       
Total capital spending (in millions) $ 8     $ 10  
               

_______________

(1) Ammonia utilization rates exclude the impact of Turnarounds.
(2) Direct operating expenses are shown exclusive of depreciation and amortization, turnaround expenses, and impacts of inventory adjustments.

Non-GAAP Reconciliations:

Reconciliation of Net Income to EBITDA

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in millions) 2019   2018   2019   2018
Net income $ 104     $ 110     $ 334     $ 271  
Add:              
Interest expense, net 26     26     77     79  
Income tax expense 34     33     110     65  
Depreciation and amortization 71     66     217     204  
EBITDA $ 235     $ 235     $ 738     $ 619  
                               

Reconciliation of Petroleum Segment Net Income to EBITDA

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in millions) 2019   2018   2019   2018
Petroleum net income $ 170     $ 160     $ 478     $ 398  
Add:              
Interest expense, net 7     10     23     32  
Depreciation and amortization 51     49     152     146  
Petroleum EBITDA $ 228     $ 219     $ 653     $ 576  
                               

Reconciliation of Petroleum Segment Gross Profit to Refining Margin and Refining Margin Adjusted for Inventory Valuation Impact (in millions and on per total throughput barrel basis) and Direct Operating Expenses per total throughput barrel

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in millions) 2019   2018   2019   2018
Net sales $ 1,535     $ 1,857     $ 4,484     $ 5,139  
Cost of materials and other 1,201     1,538     3,525     4,240  
Direct operating expenses (exclusive of depreciation and amortization as reflected below) 91     84     269     268  
Depreciation and amortization 51     49     152     146  
Gross profit 192     186     538     485  
Add:              
Direct operating expenses (exclusive of depreciation and amortization as reflected below) 91     84     269     268  
Depreciation and amortization 51     49     152     146  
Refining margin 334     319     959     899  
Inventory valuation impact, (favorable) unfavorable (1) 1     (3 )   (31 )   (45 )
Refining margin adjusted for inventory valuation impact $ 335     $ 316     $ 928     $ 854  
                               

_______________
(1) The Petroleum Segment’s basis for determining inventory value under GAAP is First-In, First-Out (“FIFO”). Changes in crude oil prices can cause fluctuations in the inventory valuation of crude oil, work in process and finished goods, thereby resulting in a favorable inventory valuation impact when crude oil prices increase and an unfavorable inventory valuation impact when crude oil prices decrease. The inventory valuation impact is calculated based upon inventory values at the beginning of the accounting period and at the end of the accounting period. In order to derive the inventory valuation impact per total throughput barrel, we utilize the total dollar figures for the inventory valuation impact and divide by the number of total throughput barrels for the period.

Reconciliation of Petroleum Segment total throughput barrels

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2019   2018   2019   2018
Total throughput barrels per day 222,000     220,755     217,064     209,600  
Days in the period 92     92     273     273  
Total throughput barrels 20,423,972     20,309,500     59,258,366     57,220,863  
                       

Reconciliation of Petroleum Segment Refining Margin (in millions and on per total throughput barrel basis)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in millions, except for per throughput barrel data) 2019   2018   2019   2018
Refining margin $ 334     $ 319     $ 959     $ 899  
Divided by: total throughput barrels 20     20     59     57  
Refining margin per total throughput barrel $ 16.34     $ 15.70     $ 16.18     $ 15.71  
                               

Reconciliation of Petroleum Segment Refining Margin Adjusted for Inventory Valuation Impact (in millions and on per total throughput barrel basis)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in millions, except for throughput barrel data) 2019   2018   2019   2018
Refining margin adjusted for inventory valuation impact $ 335     $ 316     $ 928     $ 854  
Divided by: total throughput barrels 20     20     59     57  
Refining margin adjusted for inventory valuation impact per total throughput barrel $ 16.37     $ 15.57     $ 15.65     $ 14.93  
                               

Reconciliation of Petroleum Segment Direct Operating Expenses (in millions and on per total throughput barrel basis)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in millions, except for throughput barrel data) 2019   2018   2019   2018
Direct operating expenses (exclusive of depreciation and amortization) $ 91     $ 84     $ 269     $ 268  
Divided by: total throughput barrels 20     20     59     57  
Direct operating expenses per total throughput barrel $ 4.46     $ 4.13     $ 4.53     $ 4.69  
                               

Reconciliation of Nitrogen Fertilizer Segment Net Loss to EBITDA

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(in millions) 2019   2018   2019   2018
Nitrogen fertilizer net loss $ (23 )   $ (13 )   $ (10 )   $ (49 )
Add:              
Interest expense, net 16     16     47     47  
Depreciation and amortization 18     16     60     53  
Nitrogen Fertilizer EBITDA $ 11     $ 19     $ 97     $ 51  
                               

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