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CVR Refining Reports Third Quarter 2018 Results and Announces Cash Distribution of 90 Cents

SUGAR LAND, Texas, Oct. 24, 2018 (GLOBE NEWSWIRE) -- CVR Refining, LP (NYSE: CVRR), a refiner and marketer of petroleum fuels, today announced net income of $174 million on net sales of $1,857 million for the third quarter of 2018, compared to net income of $70 million on net sales of $1,386 million for the third quarter of 2017. Adjusted EBITDA for the 2018 third quarter was $221 million compared to adjusted EBITDA of $139 million for the 2017 third quarter.

For the first nine months of 2018, net income was $439 million on net sales of $5,139 million, compared to net income of $118 million on net sales of $4,148 million for the comparable period a year earlier.  Adjusted EBITDA for the first nine months of 2018 was $494 million, compared to adjusted EBITDA of $296 million for the first nine months of 2017.

“CVR Refining reported solid results for the 2018 third quarter,” said Dave Lamp, Chief Executive Officer of CVR Refining’s general partner. “The quarter’s success was driven by stronger crack spreads, reduced Renewable Identification Number (RIN) costs and increased internal RIN generation, wide crude oil differentials and reliable operations.

“Looking forward, we will remain focused on safe and reliable operations while taking advantage of favorable product margins and crude oil spreads,” Lamp said.

Consolidated Operations

Third quarter 2018 combined total throughput was approximately 219,000 barrels per day (bpd). Combined total 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 $15.41 in the 2018 third quarter, compared to $13.05 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 third quarter were $4.17, compared to $5.02 in the third quarter of 2017.

Distributions

CVR Refining also announced today a third quarter 2018 distribution of 90 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 Nov. 12, 2018, to unitholders of record on Nov. 5, 2018. CVR Refining’s third quarter cash distribution brings the cumulative cash distributions paid or declared for the first nine months of 2018 to $2.07 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, RIN costs and cash reserves deemed necessary or appropriate by the board of directors of its general partner.

Third Quarter 2018 Earnings Conference Call

CVR Refining previously announced that it will host its third quarter 2018 Earnings Conference Call on Thursday, Oct. 25, 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 third quarter 2018 Earnings Conference Call will be webcast live and can be accessed on the Investor Relations section of CVR Refining’s website at www.CVRRefining.com. For investors or analysts who want to participate during the call, the dial-in number is (877) 407-8289. The webcast will be archived and available through Nov. 8 at https://edge.media-server.com/m6/p/6g5xcnpz. A repeat of the call can be accessed through Nov. 8 by dialing (877) 660-6853, conference ID 13683848.

Qualified Notice
This 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 Statements
This 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 or spreads; RINs, crude oil, feedstock and product prices; distributions; operating performance; reserves; fourth quarter performance including throughput, production, direct operating expenses, capital spending and depreciation; safe and reliable operations; favorable product margins; 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, LP
Headquartered 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 Finks
CVR Refining, LP
(281) 207-3588
IR@CVRRefining.com

Media Relations:
Brandee Stephens
CVR Refining, LP
(281) 207-3516
MediaRelations@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
September 30,
  Nine Months Ended
September 30,
(In millions, except per unit data)

 
2018   2017   2018   2017
Statement of Operations Data:              
Net sales $ 1,857     $ 1,386     $ 5,139     $ 4,148  
Operating costs and expenses:              
Cost of materials and other 1,544     1,114     4,315     3,524  
Direct operating expenses (1)(2) 85     120     272     308  
Depreciation and amortization

 
33     32     98     97  
Cost of sales 1,662     1,266     4,685     3,929  
Selling, general and administrative expenses (1) 18     19     56     58  
Depreciation and amortization 1     1     3     3  
Loss on asset disposals     1     5     1  
Operating income 176     99     390     157  
Interest expense, net (10 )   (12 )   (32 )   (34 )
Gain (loss) on derivatives, net 5     (17 )   75     (5 )
Other income, net 3         6      
Net income $ 174     $ 70     $ 439     $ 118  
               
Net income per common unit - basic and diluted $ 1.18     $ 0.47     $ 2.97     $ 0.80  
               
Adjusted EBITDA* $ 221     $ 139     $ 494     $ 296  
Available cash for distribution* 133     139     306     139  
               
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 nine months ended September 30, 2018 and 2017 are shown exclusive of depreciation and amortization.

(2) Direct operating expenses includes $1 million and $1 million of major turnaround expenses during the three and nine months ended September 30, 2018, respectively. Direct operating expenses includes $22 million and $37 million of major turnaround expenses during the three and nine months ended September 30, 2017, respectively.

(In millions)

 
As of September 30, 2018   As of December 31, 2017
Balance Sheet Data:      
Cash and cash equivalents $ 398     $ 174  
Working capital 482     218  
Total assets 2,505     2,270  
Total debt, including current portion 539     541  
Total partners’ capital 1,446     1,247  


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(In millions)

 
2018   2017   2018   2017
Cash Flow Data:              
Net cash flow provided by (used in):              
Operating activities $ 256     $ 63     $ 514     $ 314  
Investing activities (18 )   (18 )   (49 )   (67 )
Financing activities (98 )       (241 )   (1 )
Net increase in cash and cash equivalents $ 140     $ 45     $ 224     $ 246  
               
Capital expenditures for property, plant and equipment:              
Maintenance $ 16     $ 15     $ 39     $ 58  
Growth 2     4     11     8  
Total capital expenditures $ 18     $ 19     $ 50     $ 66  

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
September 30,
  Nine Months Ended
September 30,
(In dollars per total throughput barrel) 2018   2017   2018   2017
Key Operating Statistics:              
Gross profit $ 9.70     $ 6.07     $ 7.99     $ 3.61  
Refining margin* $ 15.54     $ 13.81     $ 14.50     $ 10.32  
FIFO impact, (favorable) unfavorable $ (0.13 )   $ (0.76 )   $ (0.79 )   $ 0.01  
Refining margin adjusted for FIFO impact* $ 15.41     $ 13.05     $ 13.71     $ 10.33  
Direct operating expenses and major turnaround expenses $ 4.23     $ 6.12     $ 4.79     $ 5.11  
Direct operating expenses excluding major turnaround expenses $ 4.17     $ 5.02     $ 4.77     $ 4.49  

______________________________
      * See “Use of Non-GAAP Financial Measures” below.

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(In dollars per barrel) 2018   2017   2018   2017
Market Indicators:              
West Texas Intermediate (WTI) NYMEX $ 69.43     $ 48.20     $ 66.79     $ 49.36  
Crude Oil Differentials:              
WTI less WTS (light/medium sour) 14.26     0.97     8.14     1.15  
WTI less WCS (heavy sour) 27.76     10.48     23.77     11.42  
WTI less Condensate 0.37     0.12     0.40     0.12  
Midland Cushing Differential 14.33     0.79     7.69     0.54  
NYMEX Crack Spreads:              
Gasoline 16.96     20.42     17.69     17.74  
Heating Oil 22.03     21.05     21.59     17.24  
NYMEX 2-1-1 Crack Spread 19.50     20.73     19.64     17.49  
PADD II Group 3 Basis:              
Gasoline (0.13 )   (1.18 )   (2.16 )   (2.37 )
Ultra Low Sulfur Diesel 0.89     0.85     0.08     (0.44 )
PADD II Group 3 Product Crack Spread:              
Gasoline 16.83     19.23     15.53     15.37  
Ultra Low Sulfur Diesel 22.92     21.90     21.67     16.80  
PADD II Group 3 2-1-1 $ 19.88     $ 20.57     $ 18.60     $ 16.09  


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2018   2017   2018   2017
      %       %       %       %
Refining Throughput and Production Data (bpd):                              
Throughput:                              
Condensate 8,425     3.8     1     -     13,156     6.3     2,893     1.3  
Sweet 193,727     88.5     196,341     91.9     179,964     86.5     195,857     88.5  
Heavy sour 6,746     3.1     6,751     3.2     4,518     2.2     11,643     5.3  
Total crude oil throughput 208,898     95.4     203,093     95.1     197,638     95.0     210,393     95.1  
All other feedstocks and blendstocks 10,008     4.6     10,513     4.9     10,454     5.0     10,943     4.9  
Total throughput 218,906     100.0     213,606     100.0     208,092     100.0     221,336     100.0  
Production:                              
Gasoline 111,087     50.8     105,712     49.5     103,258     49.6     112,268     50.6  
Distillate 94,157     43.0     89,655     42.0     89,325     42.9     92,046     41.5  
Other (excluding internally produced fuel) 13,497     6.2     18,107     8.5     15,486     7.5     17,385     7.9  
Total refining production (excluding internally produced fuel) 218,741     100.0     213,474     100.0     208,069     100.0     221,699     100.0  


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2018   2017   2018   2017
      %       %       %       %
Coffeyville Refinery Throughput and Production Data (bpd):                              
Throughput:                              
Condensate 273     0.2     1     -     6,448     5.1     2,893     2.1  
Sweet 127,792     90.3     121,709     89.6     109,937     86.4     116,468     83.7  
Heavy sour 6,746     4.8     6,751     5.0     4,518     3.6     11,643     8.4  
Total crude oil throughput 134,811     95.3     128,461     94.6     120,903     95.1     131,004     94.2  
All other feedstocks and blendstocks 6,664     4.7     7,415     5.4     6,238     4.9     8,124     5.8  
Total throughput 141,475     100.0     135,876     100.0     127,141     100.0     139,128     100.0  
Production:                              
Gasoline 72,337     50.7     67,598     49.1     62,543     48.7     70,697     50.1  
Distillate 60,521     42.4     57,654     41.9     54,914     42.7     58,927     41.7  
Other (excluding internally produced fuel) 9,900     6.9     12,355     9.0     11,066     8.6     11,619     8.2  
Total refining production (excluding internally produced fuel) 142,758     100.0     137,607     100.0     128,523     100.0     141,243     100.0  


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2018   2017   2018   2017
      %       %       %       %
Wynnewood Refinery Throughput and Production Data (bpd):                              
Throughput:                              
Condensate 8,152     10.5     -     -     6,708     8.3     -     -  
Sweet 65,936     85.2     74,632     96.0     70,026     86.5     79,389     96.6  
Total crude oil throughput 74,088     95.7     74,632     96.0     76,734     94.8     79,389     96.6  
All other feedstocks and blendstocks 3,344     4.3     3,098     4.0     4,216     5.2     2,819     3.4  
Total throughput 77,432     100.0     77,730     100.0     80,950     100.0     82,208     100.0  
Production:                              
Gasoline 38,750     51.0     38,114     50.2     40,715     51.2     41,571     51.6  
Distillate 33,636     44.3     32,001     42.2     34,411     43.2     33,119     41.2  
Other (excluding internally produced fuel) 3,597     4.7     5,752     7.6     4,420     5.6     5,766     7.2  
Total refining production (excluding internally produced fuel) 75,983     100.0     75,867     100.0     79,546     100.0     80,456     100.0  

Use of Non-GAAP Financial Measures

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

Performance and Liquidity Measures

We use the following performance and liquidity measures:

EBITDA is a performance measure representing net income 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 of 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 Statements 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 required 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 to EBITDA and EBITDA to Adjusted EBITDA for the three and nine months ended September 30, 2018 and 2017 is as follows:

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(In millions)

 
2018   2017   2018   2017
Net income $ 174     $ 70     $ 439     $ 118  
Add:              
Interest expense, net 10     12     32     34  
Depreciation and amortization 34     33     101     100  
EBITDA 218     115     572     252  
Add:              
FIFO impact, (favorable) unfavorable (3 )   (15 )   (45 )   1  
Major turnaround expenses 1     22     1     37  
Gain (loss) on derivatives, net (5 )   17     (75 )   5  
Current period settlements on derivative contracts (1) 10         41     1  
Adjusted EBITDA $ 221     $ 139     $ 494     $ 296  

   _________________________

  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. Upon settlement there is no cost recovery associated with these contracts.

A reconciliation of Adjusted EBITDA to Available cash for distribution is as follows:

 

(In millions, except per unit data)

 
Three Months Ended
September 30, 2018
  Nine Months Ended
September 30, 2018
Adjusted EBITDA $ 221     $ 494  
Adjustments:      
Less:      
Cash needs for debt service (10 )   (30 )
Reserves for environmental and maintenance capital expenditures (25 )   (75 )
Reserves for major turnaround expenses (15 )   (45 )
Reserves for projects (38 )   (38 )
Available cash for distribution $ 133     $ 306  
       
Distribution declared, per common unit $ 0.90     $ 2.07  
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 nine months ended September 30, 2018 and 2017 is as follows:

Consolidated Operating Data              
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(In millions)

 
2018   2017   2018   2017
Net sales $ 1,857     $ 1,386     $ 5,139     $ 4,148  
Cost of materials and other 1,544     1,114     4,315     3,524  
Direct operating expenses (exclusive of depreciation and amortization as reflected below) 85     120     272     308  
Depreciation and amortization 33     32     98     97  
Gross profit 195     120     454     219  
Add:              
Direct operating expenses (exclusive of depreciation and amortization as reflected below) 85     120     272     308  
Depreciation and amortization 33     32     98     97  
Refining margin 313     272     824     624  
FIFO impact, (favorable) unfavorable (3 )   (15 )   (45 )   1  
Refining margin adjusted for FIFO impact $ 310     $ 257     $ 779     $ 625  


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2018   2017   2018   2017
Total throughput barrels per day 218,906     213,606     208,092     221,336  
Days in the period 92     92     273     273  
Total throughput barrels 20,139,352     19,651,752     56,809,116     60,424,728  


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(In millions, except for per throughput barrel data)
2018   2017   2018   2017
Refining margin $ 313     $ 272     $ 824     $ 624  
Divided by: total throughput barrels 20     20     57     60  
Refining margin per total throughput barrel $ 15.54     $ 13.81     $ 14.50     $ 10.32  


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(In millions, except for per throughput barrel data)
2018   2017   2018   2017
Refining margin adjusted for FIFO impact $ 310     $ 257     $ 779     $ 625  
Divided by: total throughput barrels 20     20     57     60  
Refining margin adjusted for FIFO impact per total throughput barrel $ 15.41     $ 13.05     $ 13.71     $ 10.33  


  Three Months Ended
September 30,
  Nine Months Ended
September 30,
(In millions, except for per throughput barrel data)
2018   2017   2018   2017
Direct operating expenses (exclusive of depreciation and amortization) $ 85     $ 120     $ 272     $ 308  
Major turnaround expenses 1     22     1     37  
Direct operating expenses (1) $ 84     $ 98     $ 271     $ 271  
Divided by: total throughput barrels 20     20     57     60  
Direct operating expenses, excluding major turnaround expenses, per total throughput barrel $ 4.17     $ 5.02     $ 4.77     $ 4.49  

Q4 2018 Outlook. The table below summarizes our outlook for certain refining statistics and financial information for the fourth quarter of 2018. See “forward looking statements.”

  Q4 2018
  Low   High
Refinery Statistics:      
Total throughput (bpd) 215,000     225,000  
       
Direct operating expenses (1) (in millions) 85     95  
       
Total capital spending (in millions) 30     40  

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

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CVR Refining, LP