PAR PACIFIC HOLDINGS, INC. 10-Q

Item 1. FINANCIAL STATEMENTS PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except share data) September 30, 2020 December 31, 2019 ASSETS Current assets Cash and cash equivalents $ 127,333 $ 126,015 Restricted cash 2,000 2,413 Total cash, cash equivalents, and restricted cash 129,333 128,428 Trade accounts receivable, net of allowances of $1.1 million and $1.2 million at September 30, 2020 and December 31, 2019, respectively 116,546 228,718 Inventories 493,569 615,872 Prepaid and other current assets 9,678 59,156 Total current assets 749,126 1,032,174 Property, plant, and equipment Property, plant, and equipment 1,184,999 1,146,983 Less accumulated depreciation, depletion, and amortization ( 235,050 ) ( 185,040 ) Property, plant, and equipment, net 949,949 961,943 Long-term assets Operating lease right-of-use assets 366,029 420,073 Investment in Laramie Energy, LLC — 46,905 Intangible assets, net 19,556 21,549 Goodwill 127,997 195,919 Other long-term assets 59,757 21,997 Total assets $ 2,272,414 $ 2,700,560 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Current maturities of long-term debt $ 59,261 $ 12,297 Obligations under inventory financing agreements 470,905 656,162 Accounts payable 128,251 162,402 Deferred revenue 5,994 7,905 Accrued taxes 23,131 30,813 Operating lease liabilities 55,293 79,999 Other accrued liabilities 132,868 84,744 Total current liabilities 875,703 1,034,322 Long-term liabilities Long-term debt, net of current maturities 651,252 599,634 Common stock warrants — 8,206 Finance lease liabilities 6,863 6,227 Operating lease liabilities 315,591 340,909 Other liabilities 43,065 63,020 Total liabilities 1,892,474 2,052,318 Commitments and contingencies (Note 14) Stockholders’ equity Preferred stock, $0.01 par value: 3,000,000 shares authorized, none issued — — Common stock, $0.01 par value; 500,000,000 shares authorized at September 30, 2020 and December 31, 2019, 53,947,364 shares and 53,254,151 shares issued at September 30, 2020 and December 31, 2019, respectively 539 533 Additional paid-in capital 723,929 715,069 Accumulated deficit ( 345,110 ) ( 67,942 ) Accumulated other comprehensive income 582 582 Total stockholders’ equity 379,940 648,242 Total liabilities and stockholders’ equity $ 2,272,414 $ 2,700,560 See accompanying notes to the condensed consolidated financial statements. 1 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Revenues $ 689,981 $ 1,401,638 $ 2,409,365 $ 4,002,382 Operating expenses Cost of revenues (excluding depreciation) 585,289 1,265,755 2,236,778 3,578,329 Operating expense (excluding depreciation) 69,458 83,237 209,876 231,741 Depreciation, depletion, and amortization 22,821 22,227 66,232 65,103 Impairment expense — — 67,922 — General and administrative expense (excluding depreciation) 9,818 11,391 31,823 34,435 Acquisition and integration costs ( 155 ) 623 600 4,325 Total operating expenses 687,231 1,383,233 2,613,231 3,913,933 Operating income (loss) 2,750 18,405 ( 203,866 ) 88,449 Other income (expense) Interest expense and financing costs, net ( 17,523 ) ( 18,348 ) ( 52,611 ) ( 57,336 ) Debt extinguishment and commitment costs — — — ( 9,186 ) Other income, net 610 83 1,089 2,347 Change in value of common stock warrants — ( 826 ) 4,270 ( 3,065 ) Equity losses from Laramie Energy, LLC — ( 85,633 ) ( 46,905 ) ( 84,841 ) Total other income (expense), net ( 16,913 ) ( 104,724 ) ( 94,157 ) ( 152,081 ) Loss before income taxes ( 14,163 ) ( 86,319 ) ( 298,023 ) ( 63,632 ) Income tax benefit (expense) ( 108 ) 2,428 20,855 69,002 Net income (loss) $ ( 14,271 ) $ ( 83,891 ) $ ( 277,168 ) $ 5,370 Income (loss) per share Basic $ ( 0.27 ) $ ( 1.65 ) $ ( 5.20 ) $ 0.11 Diluted $ ( 0.27 ) $ ( 1.65 ) $ ( 5.20 ) $ 0.11 Weighted-average number of shares outstanding Basic 53,374 50,942 53,265 49,973 Diluted 53,374 50,942 53,265 50,071 See accompanying notes to the condensed consolidated financial statements. 2 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 2020 2019 Cash flows from operating activities: Net Income (Loss) $ ( 277,168 ) $ 5,370 Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation, depletion, and amortization 66,232 65,103 Impairment expense 67,922 — Debt extinguishment and commitment costs — 9,186 Non-cash interest expense 5,066 7,064 Non-cash lower of cost or net realizable value adjustment 22,281 2,496 Change in value of common stock warrants ( 4,270 ) 3,065 Deferred taxes ( 21,087 ) ( 69,563 ) Stock-based compensation 5,314 4,646 Unrealized (gain) loss on derivative contracts ( 2,733 ) 6,328 Equity losses from Laramie Energy, LLC 46,905 84,841 Net changes in operating assets and liabilities: Trade accounts receivable 112,177 ( 39,455 ) Prepaid and other assets 50,830 13,838 Inventories 98,830 ( 249,814 ) Deferred turnaround expenditures ( 40,575 ) ( 8,986 ) Obligations under inventory financing agreements ( 124,418 ) 212,862 Accounts payable, other accrued liabilities, and operating lease ROU assets and liabilities 20,647 51,651 Net cash provided by operating activities 25,953 98,632 Cash flows from investing activities: Acquisitions of businesses, net of cash acquired — ( 274,291 ) Proceeds from purchase price settlement related to asset acquisition — 3,226 Capital expenditures ( 42,451 ) ( 64,086 ) Other investing activities 23 864 Net cash used in investing activities ( 42,428 ) ( 334,287 ) Cash flows from financing activities: Proceeds from borrowings 205,950 470,505 Repayments of borrowings ( 120,489 ) ( 207,121 ) Net borrowings (repayments) on deferred payment arrangements and receivable advances ( 60,839 ) 27,783 Payment of deferred loan costs ( 6,266 ) ( 13,450 ) Payments for debt extinguishment and commitment costs — ( 7,142 ) Other financing activities, net ( 976 ) 2,396 Net cash provided by financing activities 17,380 272,971 Net increase in cash, cash equivalents, and restricted cash 905 37,316 Cash, cash equivalents, and restricted cash at beginning of period 128,428 75,819 Cash, cash equivalents, and restricted cash at end of period $ 129,333 $ 113,135 Supplemental cash flow information: Net cash received (paid) for: Interest $ ( 35,697 ) $ ( 35,913 ) Taxes 124 ( 3,974 ) Non-cash investing and financing activities: Accrued capital expenditures $ 10,981 $ 7,207 Value of warrants reclassified to equity 3,936 — ROU assets obtained in exchange for new finance lease liabilities 1,992 198 ROU assets obtained in exchange for new operating lease liabilities 11,974 15,532 ROU assets terminated in exchange for release from operating lease liabilities 7,738 193 Common stock issued for business combination — 36,980 Common stock issued to repurchase convertible notes — 30,055 See accompanying notes to the condensed consolidated financial statements. 3 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) (in thousands) Accumulated Additional Other Common Stock Paid-In Accumulated Comprehensive Total Shares Amount Capital Deficit Income Equity Balance, December 31, 2018 46,984 $ 470 $ 617,937 $ ( 108,751 ) $ 2,673 $ 512,329 Issuance of common stock for business combination 2,364 23 36,957 — — 36,980 Stock-based compensation 246 3 1,532 — — 1,535 Purchase of common stock for retirement ( 44 ) — ( 734 ) — — ( 734 ) Net income — — — 61,092 — 61,092 Balance, March 31, 2019 49,550 496 655,692 ( 47,659 ) 2,673 611,202 Issuance of common stock for convertible notes repurchase, net (1) 1,449 14 17,775 — — 17,789 Issuance of common stock for employee stock purchase plan 37 — 754 — — 754 Stock-based compensation ( 31 ) — 1,550 — — 1,550 Purchase of common stock for retirement ( 2 ) — ( 20 ) — — ( 20 ) Exercise of stock options 21 — 119 — — 119 Net income — — — 28,169 — 28,169 Balance, June 30, 2019 51,024 510 675,870 ( 19,490 ) 2,673 659,563 Stock-based compensation ( 20 ) — 1,448 — — 1,448 Purchase of common stock for retirement ( 6 ) — ( 414 ) — — ( 414 ) Exercise of stock options 170 2 2,802 — — 2,804 Net loss — — — ( 83,891 ) — ( 83,891 ) Balance, September 30, 2019 51,168 $ 512 $ 679,706 $ ( 103,381 ) $ 2,673 $ 579,510 4 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued) (Unaudited) (in thousands) Accumulated Additional Other Common Stock Paid-In Accumulated Comprehensive Total Shares Amount Capital Deficit Income Equity Balance, December 31, 2019 53,254 $ 533 $ 715,069 $ ( 67,942 ) $ 582 $ 648,242 Exercise of common stock warrants 351 3 3,933 — — 3,936 Stock-based compensation 296 3 1,612 — — 1,615 Purchase of common stock for retirement ( 64 ) ( 1 ) ( 1,067 ) — — ( 1,068 ) Net loss — — — ( 222,337 ) — ( 222,337 ) Balance, March 31, 2020 53,837 538 719,547 ( 290,279 ) 582 430,388 Issuance of common stock for employee stock purchase plan 95 1 854 — — 855 Stock-based compensation 10 — 1,794 — — 1,794 Purchase of common stock for retirement — — ( 1 ) — — ( 1 ) Net loss — — — ( 40,560 ) — ( 40,560 ) Balance, June 30, 2020 53,942 539 722,194 ( 330,839 ) 582 392,476 Stock-based compensation 10 — 1,777 — — 1,777 Purchase of common stock for retirement ( 5 ) — ( 42 ) — — ( 42 ) Net loss — — — ( 14,271 ) — ( 14,271 ) Balance, September 30, 2020 53,947 $ 539 $ 723,929 $ ( 345,110 ) $ 582 $ 379,940 (1) The issuance of common stock for the repurchase of a portion of our 5.00 % Convertible Senior Notes in the three months ended June 30, 2019 is presented net of a $ 12.3 million write-off associated with the equity component of the repurchased notes. See accompanying notes to the condensed consolidated financial statements. 5 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 Note 1 — Overview Par Pacific Holdings, Inc. and its wholly owned subsidiaries (“Par” or the “Company”) own and operate market-leading energy and infrastructure businesses. Our strategy is to acquire and develop businesses in logistically-complex markets. Currently, we operate in three primary business segments: 1) Refining - We own and operate four refineries with total throughput capacity of over 200 thousand barrels per day in Hawaii, Wyoming, and Washington. 2) Retail - Our retail outlets in Hawaii, Washington, and Idaho sell gasoline, diesel, and retail merchandise through Hele, “76”, “ Cenex® ,” and “Zip Trip®” branded sites, “nomnom” branded company-operated convenience stores, 7-Eleven operated convenience stores, other sites operated by third parties, and unattended cardlock stations. 3) Logistics - We operate an extensive multi-modal logistics network spanning the Pacific, the Northwest, and the Rockies that primarily transports and stores our crude oil and refined products for our refineries and transports refined products to our retail sites or third-party purchasers. As of September 30, 2020 , we owned a 46.0 % equity investment in Laramie Energy, LLC (“ Laramie Energy ”). Laramie Energy is focused on producing natural gas in Garfield, Mesa, and Rio Blanco Counties, Colorado. Our Corporate and Other reportable segment primarily includes general and administrative costs. Note 2 — Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation The condensed consolidated financial statements include the accounts of Par and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts previously reported in our condensed consolidated financial statements for prior periods have been reclassified to conform with the current presentation. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information, the instructions to Form 10-Q, and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. The condensed consolidated financial statements contained in this report include all material adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the complete fiscal year or for any other period. The condensed consolidated balance sheet as of December 31, 2019 was derived from our audited consolidated financial statements as of that date. These condensed consolidated financial statements should be read together with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019 . Use of Estimates The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the related disclosures. Actual amounts could differ from these estimates. The worldwide spread and severity of a new coronavirus, referred to as COVID-19, and certain developments in the global crude oil markets have impacted our businesses, people, and operations. We are actively responding to these ongoing matters and many uncertainties remain. Due to the rapid development and fluidity of the situation, the full magnitude of the COVID-19 pandemic’s impact on our estimates and assumptions, financial condition, future results of operations, and future cash flows and liquidity is uncertain and has been and may continue to be material. Allowance for Credit Losses We are exposed to credit losses primarily through our sales of refined products. Credit limits and/or prepayment requirements are set based on such factors as the customer’s financial results, credit rating, payment history, and industry and are reviewed annually for customers with material credit limits. Credit allowances are reviewed at least quarterly based on changes in the customer’s creditworthiness due to economic conditions, liquidity, and business strategy as publicly reported and through discussions between the customer and the Company. We establish provisions for losses on trade receivables based on the estimated 6 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 credit loss we expect to incur over the life of the receivable. We did not have a material change in our allowances on trade receivables during the three and nine months ended September 30, 2020 or 2019 . Cost Classifications Cost of revenues (excluding depreciation) includes the hydrocarbon-related costs of inventory sold, transportation costs of delivering product to customers, crude oil consumed in the refining process, costs to satisfy our Renewable Identification Numbers (“RINs”) obligations, and certain hydrocarbon fees and taxes. Cost of revenues (excluding depreciation) also includes the unrealized gains (losses) on derivatives and inventory valuation adjustments. Certain direct operating expenses related to our logistics segment are also included in Cost of revenues (excluding depreciation). Operating expense (excluding depreciation) includes direct costs of labor, maintenance and services, energy and utility costs, property taxes, and environmental compliance costs, as well as chemicals and catalysts and other direct operating expenses. The following table summarizes depreciation and finance lease amortization expense excluded from each line item in our condensed consolidated statements of operations (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Cost of revenues $ 5,479 $ 4,763 $ 15,974 $ 12,579 Operating expense 15,084 13,630 43,650 40,212 General and administrative expense 948 797 2,584 2,341 Recent Accounting Pronouncements There have been no developments to recent accounting pronouncements, including the expected dates of adoption and estimated effects on our financial condition, results of operations, and cash flows, from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019 , except for the following: In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This ASU provides for optional expedients and allowable exceptions to GAAP to ease the potential burden in recognizing the effects of reference rate reform, especially in regards to the cessation of the London Interbank Offered Rate (“LIBOR”). ASU 2020-04 is applicable to contract modifications that meet certain requirements and are entered into between March 12, 2020 and December 31, 2022. We have several contracts that reference LIBOR, some of which terminate after LIBOR is anticipated to cease being reported in 2021. We are currently reviewing the effect that the election of ASU 2020-04 would have on our financial condition, results of operations, and cash flows. Accounting Principles Adopted On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , as amended by other ASUs issued since June 2016 (“ASU 2016-13”), using the modified retrospective transition method. Under this optional transition method, information presented prior to January 1, 2020 has not been restated and continues to be reported under the accounting standards in effect for the period. There was no adjustment to our opening retained earnings as a result of the adoption of this ASU. ASU 2016-13 requires expected credit losses on financial instruments to be recorded over the estimated life of the financial instrument. Prior to this ASU, the guidance required recording of credit losses when those losses were incurred. ASU 2016-13 is applicable to credit losses and allowances on loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and certain other financial assets, but excludes derivative assets under FASB ASC Topic 815 “Derivatives and Hedging.” Our adoption of ASU 2016-13 did not have a material impact on our financial condition, results of operations, cash flows, or related disclosures. On January 1, 2020, we adopted ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminated Step 2 from the current goodwill impairment test. Under ASU 2017-04, an entity is no longer required to determine a goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. This ASU changed the policy under which we perform our goodwill impairment assessments by eliminating Step 2 of the test. 7 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 On January 1, 2020, we adopted ASU No. 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ( “ ASU 2018-13”). This ASU amended, added, and removed certain disclosure requirements under FASB ASC Topic 820 “Fair Value Measurement.” The adoption of ASU 2018-13 did not have a material impact on our financial condition, results of operations, cash flows, or related disclosures. On January 1, 2020, we adopted ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract ( “ ASU 2018-15”), using the prospective method and information that was presented prior to January 1, 2020 has not been restated and continues to be reported under the accounting standards in effect for that period. This ASU required entities to account for implementation costs incurred in a cloud computing agreement that is a service contract under the guidance in FASB ASC Topic 350, “Goodwill and Intangible Assets,” which results in a capitalized and amortizable intangible asset. The adoption of ASU 2018-15 did not have a material impact on our financial condition, results of operations, or cash flows. Note 3 — Investment in Laramie Energy, LLC As of September 30, 2020 , we had a 46.0 % ownership interest in Laramie Energy . Laramie Energy is focused on producing natural gas in Garfield, Mesa, and Rio Blanco Counties, Colorado. Laramie Energy has a $ 400 million revolving credit facility with a borrowing base currently set at $ 200.9 million that is secured by a lien on its natural gas and crude oil properties and related assets. As of September 30, 2020 , the balance outstanding on the revolving credit facility was approximately $ 200.0 million . We are guarantors of Laramie Energy ’s credit facility, with recourse limited to the pledge of our equity interest in our wholly owned subsidiary, Par Piceance Energy Equity, LLC. Under the terms of its credit facility, Laramie Energy is generally prohibited from making future cash distributions to its owners, including us. On April 23, 2020, Laramie Energy extended the credit facility from its original maturity date of December 15, 2020 to December 15, 2021. At March 31, 2020, we conducted an impairment evaluation of our investment in Laramie Energy because of (i) the global economic impact of the COVID-19 pandemic, (ii) an increase in the weighted-average cost of capital for energy companies, and (iii) continuing declines in natural gas prices through the first quarter of 2020. Based on our evaluation, we determined that the estimated fair value of our investment in Laramie Energy was $ 1.9 million , compared to a carrying value of $ 47.2 million at March 31, 2020. The fair value estimate was determined using a discounted cash flow analysis based on natural gas forward strip prices as of March 31, 2020 for the years 2020 and 2021 of the forecast, and a blend of forward strip pricing and third-party analyst pricing for the years 2022 through 2028. Other significant inputs used in the discounted cash flow analysis included proved and unproved reserves information, forecasts of operating expenditures, and the applicable discount rate. As a result, we recorded an other-than temporary impairment charge of $ 45.3 million in Equity earnings (losses) from Laramie Energy, LLC on our condensed consolidated statement of operations for the three months ended March 31, 2020. The change in our equity investment in Laramie Energy is as follows (in thousands): Nine Months Ended September 30, 2020 Beginning balance $ 46,905 Equity earnings from Laramie Energy (1) ( 1,611 ) Impairment of our investment in Laramie Energy ( 45,294 ) Ending balance $ — ______________________________________________________ (1) As of June 30, 2020, we have discontinued the application of the equity method of accounting for our investment in Laramie Energy because the book value of such investment has been reduced to zero . 8 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 Summarized financial information for Laramie Energy is as follows (in thousands): September 30, 2020 December 31, 2019 Current assets $ 23,808 $ 23,367 Non-current assets 366,610 393,575 Current liabilities 23,714 229,687 Non-current liabilities 291,138 85,287 Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Natural gas and oil revenues $ 28,257 $ 38,967 $ 86,515 $ 150,161 Loss from operations ( 3,443 ) ( 10,028 ) ( 10,773 ) ( 4,490 ) Net loss ( 12,643 ) ( 12,586 ) ( 26,418 ) ( 18,139 ) Laramie Energy ’s net loss for the three and nine months ended September 30, 2020 includes $ 9.0 million and $ 28.3 million of depreciation, depletion, and amortization (“DD&A”) and $ 5.9 million and $ 7.6 million of unrealized losses on derivative instruments, respectively. Laramie Energy ’s net loss for the three and nine months ended September 30, 2019 includes $ 20.7 million and $ 63.1 million of DD&A and $ 4.3 million of unrealized losses and $ 6.8 million of unrealized gains on derivative instruments, respectively. Note 4 — Acquisitions Washington Acquisition On November 26, 2018 , we entered into a Purchase and Sale Agreement to acquire U.S. Oil & Refining Co. and certain affiliated entities (collectively, “ U.S. Oil ”), a privately-held downstream business (the “ Washington Acquisition ”). The Washington Acquisition included a 42 Mbpd refinery, a marine terminal, a unit train-capable rail loading terminal, and 2.9 MMbbls of refined product and crude oil storage. The refinery and associated logistics system are strategically located in Tacoma, Washington, and currently serve the Pacific Northwest market. On January 11, 2019 , we completed the Washington Acquisition for a total purchase price of $ 326.5 million , including acquired working capital, consisting of cash consideration of $ 289.5 million and approximately 2.4 million shares of Par’s common stock with a fair value of $ 37.0 million issued to the seller of U.S. Oil. The cash consideration was funded in part through cash on hand, proceeds from borrowings under a new term loan facility entered into with Goldman Sachs Bank USA, as administrative agent, of $ 250.0 million (the “ Term Loan B ”), and proceeds from borrowings under a term loan from the Bank of Hawaii of $ 45.0 million (the “ Par Pacific Term Loan ”). Please read Note 10—Debt for further information on the Term Loan B and Par Pacific Term Loan . In January 2019, we incurred $ 5.4 million of commitment fees associated with the funding of the Washington Acquisition . Such commitment fees are presented as Debt extinguishment and commitment costs on our condensed consolidated statements of operations for the nine months ended September 30, 2019. In connection with the consummation of the Washington Acquisition , we assumed the Washington Refinery Intermediation Agreement with Merrill Lynch Commodities, Inc. (“MLC”) that provides a structured financing arrangement based on U.S. Oil ’s crude oil and refined products inventories and associated accounts receivable. Please read Note 9—Inventory Financing Agreements for further information on the Washington Refinery Intermediation Agreement . We accounted for the Washington Acquisition as a business combination whereby the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values on the date of the acquisition. Goodwill recognized in the transaction was attributable to opportunities expected to arise from combining our operations with those of the Washington refinery and the utilization of our net operating loss carryforwards, as well as other intangible assets that do not qualify for separate recognition. Goodwill recognized as a result of the Washington Acquisition is not expected to be deductible for income tax reporting purposes. 9 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 A summary of the fair value of the assets acquired and liabilities assumed is as follows (in thousands): Cash $ 16,146 Accounts receivable 34,954 Inventories 98,367 Prepaid and other assets 5,320 Property, plant, and equipment 412,766 Operating lease right-of-use assets 62,337 Goodwill (1) 42,522 Total assets (2) 672,412 Obligations under inventory financing agreements ( 116,873 ) Accounts payable ( 55,357 ) Current operating lease obligations ( 21,571 ) Other current liabilities ( 18,411 ) Long-term operating lease obligations ( 40,766 ) Deferred tax liability ( 92,103 ) Other non-current liabilities ( 804 ) Total liabilities ( 345,885 ) Total $ 326,527 ______________________________________________ (1) We allocated $ 24.7 million and $ 17.8 million of goodwill to our refining and logistics segments, respectively. (2) We allocated $ 403.9 million and $ 268.5 million of total assets to our refining and logistics segments, respectively. As of December 31, 2019, we finalized the Washington Acquisition purchase price allocation. We incurred $ 2.2 million of acquisition costs related to the Washington Acquisition for the nine months ended September 30, 2019. These costs are included in Acquisition and integration costs on our condensed consolidated statement of operations. The results of operations of U.S. Oil were included in our results beginning on January 11, 2019 . For the three and nine months ended September 30, 2019, our results of operations included revenues of $ 300.0 million and $ 855.6 million and income before income taxes of $ 29.4 million and $ 49.5 million related to U.S. Oil , respectively. The following unaudited pro forma financial information presents our consolidated revenues and net income (loss) as if the Washington Acquisition had been completed on January 1, 2018 (in thousands except per share information): Nine Months Ended September 30, 2019 Revenues $ 4,030,290 Net loss ( 72,544 ) Loss per share Basic $ ( 1.45 ) Diluted $ ( 1.45 ) These pro forma results were based on estimates and assumptions that we believe are reasonable. They are not necessarily indicative of our consolidated results of operations in future periods or the results that actually would have been realized had we been a combined company during the periods presented. The pro forma results for the nine months ended September 30, 2019 include adjustments to remeasure U.S. Oil ’s LIFO inventory reserve as if the Washington Acquisition had been completed on January 1, 2018, record interest and other debt extinguishment costs related to issuance of the Term Loan B and Par Pacific Term Loan , and to adjust U.S. Oil ’s historical depreciation expense as a result of the fair value adjustment to Property, plant, and 10 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 equipment, net. Additionally, the pro forma results include the elimination of the $ 67.0 million tax benefit that was recognized by the Company in connection with the Washington Acquisition . Note 5 — Revenue Recognition As of September 30, 2020 and December 31, 2019 , receivables from contracts with customers were $ 110.2 million and $ 214.5 million , respectively. Our refining segment recognizes deferred revenues when cash payments are received in advance of delivery of products to the customer. Deferred revenue was $ 6.0 million and $ 7.9 million as of September 30, 2020 and December 31, 2019 , respectively. The following table provides information about disaggregated revenue by major product line and includes a reconciliation of the disaggregated revenues to total segment revenues (in thousands): Three Months Ended September 30, 2020 Refining Logistics Retail Product or service: Gasoline $ 219,849 $ — $ 59,344 Distillates (1) 213,448 — 7,847 Other refined products (2) 188,586 — — Merchandise — — 24,010 Transportation and terminalling services — 41,722 — Other revenue 4,543 — 535 Total segment revenues (3) $ 626,426 $ 41,722 $ 91,736 Three Months Ended September 30, 2019 Refining Logistics Retail Product or service: Gasoline $ 399,543 $ — $ 86,941 Distillates (1) 625,080 — 10,857 Other refined products (2) 311,724 — — Merchandise — — 24,098 Transportation and terminalling services — 49,623 — Other revenue 604 — 338 Total segment revenues (3) $ 1,336,951 $ 49,623 $ 122,234 Nine Months Ended September 30, 2020 Refining Logistics Retail Product or service: Gasoline $ 641,817 $ — $ 179,348 Distillates (1) 986,916 — 24,939 Other refined products (2) 581,839 — — Merchandise — — 68,421 Transportation and terminalling services — 143,004 — Other revenue 19,281 — 1,462 Total segment revenues (3) $ 2,229,853 $ 143,004 $ 274,170 11 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 Nine Months Ended September 30, 2019 Refining Logistics Retail Product or service: Gasoline $ 1,060,095 $ — $ 242,952 Distillates (1) 1,827,879 — 30,413 Other refined products (2) 941,109 — — Merchandise — — 68,176 Transportation and terminalling services — 144,978 — Other revenue 1,489 — 1,273 Total segment revenues (3) $ 3,830,572 $ 144,978 $ 342,814 _______________________________________________________ (1) Distillates primarily include diesel and jet fuel. (2) Other refined products include fuel oil, gas oil, asphalt, and naphtha. (3) Refer to Note 18—Segment Information for the reconciliation of segment revenues to total consolidated revenues. Note 6 — Inventories Inventories at September 30, 2020 consisted of the following (in thousands): Titled Inventory Supply and Offtake Agreements (1) Total Crude oil and feedstocks $ 132,659 $ 131,957 $ 264,616 Refined products and blendstock 85,624 76,286 161,910 Warehouse stock and other (2) 67,043 — 67,043 Total $ 285,326 $ 208,243 $ 493,569 Inventories at December 31, 2019 consisted of the following (in thousands): Titled Inventory Supply and Offtake Agreements (1) Total Crude oil and feedstocks $ 117,717 $ 148,303 $ 266,020 Refined products and blendstock 127,966 158,737 286,703 Warehouse stock and other (2) 63,149 — 63,149 Total $ 308,832 $ 307,040 $ 615,872 ________________________________________________________ (1) Please read Note 9—Inventory Financing Agreements for further information. (2) Includes $ 20.8 million and $ 19.1 million of RINs and environmental credits, reported at cost, as of September 30, 2020 and December 31, 2019 , respectively. RINs and environmental obligations of $ 87.1 million and $ 22.8 million , reported at market value, are included in Other accrued liabilities on our condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019 , respectively. As of September 30, 2020 , there was a $ 22.3 million reserve for the lower of cost or net realizable value of inventory. As of December 31, 2019 , there was no reserve for the lower of cost or net realizable value of inventory. Our last-in, first-out (“LIFO”) inventories, net of the lower of cost or net realizable reserve, were equal to current cost as of September 30, 2020 . As of December 31, 2019 , the excess of current replacement cost over the LIFO inventory carrying value at the Washington refinery was approximately $ 6.4 million . 12 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 Note 7 — Prepaid and Other Current Assets Prepaid and other current assets at September 30, 2020 and December 31, 2019 consisted of the following (in thousands): September 30, 2020 December 31, 2019 Advances to suppliers $ — $ 27,635 Collateral posted with broker for derivative instruments (1) 2,986 10,306 Prepaid insurance — 13,536 Derivative assets 2,963 2,075 Other 3,729 5,604 Total $ 9,678 $ 59,156 _________________________________________________________ (1) Our cash margin that is required as collateral deposits on our commodity derivatives cannot be offset against the fair value of open contracts except in the event of default. Please read Note 11—Derivatives for further information. Note 8 — Goodwill During the nine months ended September 30, 2020 , the change in the carrying amount of goodwill was as follows (in thousands): Balance at December 31, 2019 $ 195,919 Impairment expense ( 67,922 ) Balance at September 30, 2020 $ 127,997 At March 31, 2020, we performed a quantitative goodwill impairment test of all of our reporting units due to (i) the global economic impact of the COVID-19 pandemic and (ii) a steep decline in current and forecasted prices and demand for crude oil and refined products. As part of our quantitative impairment test, we compared the carrying value of the net assets of the reporting unit to the estimated fair value of the reporting unit. In assessing the fair value of the reporting units, we primarily utilized a market approach based on observable multiples for comparable companies within our industry. Our refining reporting units in Hawaii and Washington were fully impaired and the goodwill associated with our retail reporting unit in Washington and Idaho was partially impaired, resulting in a charge of $ 67.9 million in our condensed consolidated statement of operations for the nine months ended September 30, 2020 . The goodwill impairment expense was allocated to the Refining segment ( $ 38.1 million ) and to the Retail segment ( $ 29.8 million ). Note 9 — Inventory Financing Agreements Supply and Offtake Agreements On June 1, 2015, we entered into several agreements with J. Aron & Company LLC (“J. Aron”) to support the operations of our Par East Hawaii refinery (the “Supply and Offtake Agreements”). The Supply and Offtake Agreements mature on May 31, 2021 and have a one -year extension option upon mutual agreement of the parties. We are evaluating options to extend or replace the Supply and Offtake Agreements. Under the Supply and Offtake Agreements, J. Aron may enter into agreements with third parties whereby J. Aron will remit payments to these third parties for refinery procurement contracts for which we will become immediately obligated to reimburse J. Aron. As of September 30, 2020 , we had no obligations due to J. Aron under this contractual undertakings agreement. On December 5, 2018 , we amended the Supply and Offtake Agreements to account for additional processing capacity to be provided by the Par West Hawaii refinery. The amendment to the Supply and Offtake Agreements also (i) required us to increase our margin requirements by an aggregate $ 2.5 million by making certain additional margin payments on December 19, 2018 , March 1, 2019 , and June 3, 2019 , and (ii) only allows dividends, payments, or other distributions with respect to any equity interests in Par Hawaii Refining, LLC (“ PHR ”), our wholly owned subsidiary, in limited and restricted circumstances. During the term of the Supply and Offtake Agreements, J. Aron and we will identify mutually acceptable contracts for the purchase of crude oil from third parties. Per the Supply and Offtake Agreements, J. Aron will provide up to 150 Mbpd of crude oil to our Hawaii refineries . Additionally, we agreed to sell and J. Aron agreed to buy, at market prices, refined products produced at our Hawaii refineries . We will then repurchase the refined products from J. Aron prior to selling the refined products to our retail operations or to third parties. The agreements also provide for the lease of crude oil and certain refined product storage 13 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 facilities to J. Aron. Following the expiration or termination of the Supply and Offtake Agreements, we are obligated to purchase the crude oil and refined product inventories then-owned by J. Aron and located at the leased storage facilities at then-current market prices. Though title to the crude oil and certain refined product inventories resides with J. Aron, the Supply and Offtake Agreements are accounted for similar to a product financing arrangement; therefore, the crude oil and refined products inventories will continue to be included in our condensed consolidated balance sheets until processed and sold to a third party. Each reporting period, we record a liability in an amount equal to the amount we expect to pay to repurchase the inventory held by J. Aron based on current market prices. For the three and nine months ended September 30, 2020 , we incurred approximately $ 2.2 million and $ 8.9 million of inventory intermediation fees related to the Supply and Offtake Agreements, respectively, which are included in Cost of revenues (excluding depreciation) on our condensed consolidated statements of operations. For the three and nine months ended September 30, 2019 , we incurred approximately $ 9.1 million and $ 24.7 million of inventory intermediation fees related to the Supply and Offtake Agreements, respectively. For the three and nine months ended September 30, 2020 , Interest expense and financing costs, net , on our condensed consolidated statements of operations includes approximately $ 0.4 million and $ 2.5 million of expenses related to the Supply and Offtake Agreements, respectively. For the three and nine months ended September 30, 2019 , Interest expense and financing costs, net on our condensed consolidated statements of operations includes approximately $ 1.3 million and $ 4.3 million of expenses related to the Supply and Offtake Agreements, respectively. The Supply and Offtake Agreements also include a deferred payment arrangement (“Deferred Payment Arrangement”) whereby we can defer payments owed under the agreements up to the lesser of $ 165 million or 85 % of the eligible accounts receivable and inventory. Upon execution of the Supply and Offtake Agreements, we paid J. Aron a deferral arrangement fee of $ 1.3 million . The deferred amounts under the Deferred Payment Arrangement bear interest at a rate equal to three -month LIBOR plus 3.50 % per annum. We also agreed to pay a deferred payment availability fee equal to 0.75 % of the unused capacity under the Deferred Payment Arrangement. Amounts outstanding under the Deferred Payment Arrangement are included in Obligations under inventory financing agreements on our condensed consolidated balance sheets. Changes in the amount outstanding under the Deferred Payment Arrangement are included within Cash flows from financing activities on the condensed consolidated statements of cash flows. As of September 30, 2020 and December 31, 2019 , the capacity of the Deferred Payment Arrangement was $ 66.5 million and $ 155.5 million , respectively. As of September 30, 2020 and December 31, 2019 , we had $ 51.9 million and $ 97.5 million outstanding, respectively, under the Deferred Payment Arrangements. Under the Supply and Offtake Agreements, we pay or receive certain fees from J. Aron based on changes in market prices over time. In 2017, we fixed the market fee for the period from June 1, 2018 through May 2021 for $ 2.2 million . In 2020, we fixed the market fee for the period from February 1, 2020 through April 1, 2021 for an additional $ 0.8 million to be settled in fifteen payments. The receivable from J. Aron was recorded as a reduction to our Obligations under inventory financing agreements as allowed under the Supply and Offtake Agreements. As of September 30, 2020 and December 31, 2019 , the receivable was $ 0.8 million and $ 0.5 million , respectively. Washington Refinery Intermediation Agreement In connection with the consummation of the Washington Acquisition , we became a party to the Washington Refinery Intermediation Agreement with MLC that provides a structured financing arrangement based on U.S. Oil ’s crude oil and refined products inventories and associated accounts receivable. Under this arrangement, U.S. Oil purchases crude oil supplied from third-party suppliers and MLC provides credit support for such crude oil purchases. MLC ’s credit support can consist of either providing a payment guaranty, causing the issuance of a letter of credit from a third-party issuing bank, or purchasing crude oil directly from third parties on our behalf. U.S. Oil holds title to all crude oil and refined products inventories at all times and pledges such inventories, together with all receivables arising from the sales of the same, exclusively to MLC . On November 1, 2019 , we and MLC amended the Washington Refinery Intermediation Agreement and extended the term through June 30, 2021 , with an option for us to early terminate as early as March 31, 2021 . We are evaluating options to extend or replace the Washington Refinery Intermediation Agreement . During the remaining term of the Washington Refinery Intermediation Agreement , MLC will make receivable advances to U.S. Oil based on an advance rate of 95 % of eligible receivables, up to a total receivables advance maximum of $ 90.0 million (the “ MLC receivable advances ”), and additional advances based on crude oil and products inventories. Changes in the amount outstanding under the MLC receivable advances are included within Cash flows from financing activities on the condensed consolidated statements of cash flows. The MLC receivable advances bear interest at a rate equal to three -month LIBOR plus 3.25 % per annum. We also agreed to pay an availability fee equal to 1.50 % of the unused capacity under the MLC receivable advances . As part of the November 1, 2019 amendment, the availability fee was amended to equal 0.75 % of the unused capacity 14 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 under the MLC receivable advances. As of September 30, 2020 and December 31, 2019 , our outstanding balance under the MLC receivable advances was equal to our borrowing base of $ 48.5 million and $ 63.8 million , respectively. Additionally, as of September 30, 2020 and December 31, 2019 , we had approximately $ 71.3 million and $ 127.2 million in letters of credit outstanding through MLC ’s credit support, respectively. For the three and nine months ended September 30, 2020 , we incurred approximately $ 1.0 million and $ 3.1 million of inventory intermediation fees, respectively, related to the Washington Refinery Intermediation Agreement , which are included in Cost of revenues (excluding depreciation) on our condensed consolidated statements of operations. For the three and nine months ended September 30, 2019 , we incurred approximately $ 0.9 million and $ 2.7 million of inventory intermediation fees related to the Washington Refinery Intermediation Agreement , respectively. For the three and nine months ended September 30, 2020 , Interest expense and financing costs, net on our condensed consolidated statements of operations includes approximately $ 0.5 million and $ 2.2 million of expenses related to the Washington Refinery Intermediation Agreement , respectively. For the three and nine months ended September 30, 2019 , Interest expense and financing costs, net on our condensed consolidated statements of operations includes approximately $ 2.0 million and $ 4.8 million of expenses related to the Washington Refinery Intermediation Agreement , respectively. The Supply and Offtake Agreements and the Washington Refinery Intermediation Agreement also provide us with the ability to economically hedge price risk on our inventories and crude oil purchases. Please read Note 11—Derivatives for further information. Note 10 — Debt The following table summarizes our outstanding debt (in thousands): September 30, 2020 December 31, 2019 5.00% Convertible Senior Notes due 2021 $ 48,665 $ 48,665 7.75% Senior Secured Notes due 2025 300,000 300,000 ABL Credit Facility — — Mid Pac Term Loan 1,408 1,433 Term Loan B 231,250 240,625 Retail Property Term Loan 42,880 44,014 PHL Term Loan 5,882 — 12.875% Senior Secured Notes due 2026 105,000 — Principal amount of long-term debt 735,085 634,737 Less: unamortized discount and deferred financing costs ( 24,572 ) ( 22,806 ) Total debt, net of unamortized discount and deferred financing costs 710,513 611,931 Less: current maturities ( 59,261 ) ( 12,297 ) Long-term debt, net of current maturities $ 651,252 $ 599,634 As of September 30, 2020 and December 31, 2019 , we had $ 0.1 million and $ 0.2 million in letters of credit outstanding under the ABL Credit Facility , respectively, and $ 3.6 million in cash-collateralized letters of credit and surety bonds outstanding. Under the ABL Credit Facility , the indentures governing the 7.75% Senior Secured Notes and 12.875% Senior Secured Notes , and the Term Loan B Facility , our subsidiaries are restricted from paying dividends or making other equity distributions, subject to certain exceptions. 7.75% Senior Secured Notes Due 2025 On December 21, 2017 , Par Petroleum, LLC and Par Petroleum Finance Corp. (collectively, the “Issuers”), both our wholly owned subsidiaries, completed the issuance and sale of $ 300 million in aggregate principal amount of 7.75% Senior Secured Notes in a private placement under Rule 144A and Regulation S of the Securities Act of 1933, as amended. The net proceeds of $ 289.2 million (net of financing costs and original issue discount of 1 % ) from the sale were used to repay our previous credit facilities and the forward sale agreement with J. Aron and for general corporate purposes. The 7.75% Senior Secured Notes bear interest at a rate of 7.750 % per year (payable semi-annually in arrears on June 15 and December 15 of each year, beginning on June 15, 2018) and will mature on December 15, 2025 . 15 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 ABL Credit Facility On December 21, 2017 , in connection with the issuance of the 7.75% Senior Secured Notes , Par Petroleum, LLC , Par Hawaii, LLC (“PHL,” formerly known as Par Hawaii, Inc. and includes the assets previously owned by the dissolved entities Mid Pac Petroleum, LLC and HIE Retail, LLC), Hermes Consolidated, LLC, and Wyoming Pipeline Company (collectively, the “ ABL Borrowers ”), entered into a Loan and Security Agreement dated as of December 21, 2017 (the “ ABL Credit Facility ”) with certain lenders and Bank of America, N.A., as administrative agent and collateral agent. The ABL Credit Facility provides for a revolving credit facility that provides for revolving loans and for the issuance of letters of credit (the “ ABL Revolver ”). On July 24, 2018 , we amended the ABL Credit Facility to increase the maximum principal amount at any time outstanding of the ABL Revolver by $ 10 million to $ 85 million , subject to a borrowing base. As of September 30, 2020 , the ABL Revolver had no outstanding balance and a borrowing base of approximately $ 48.8 million . 5.00% Convertible Senior Notes Due 2021 As of September 30, 2020 , the outstanding principal amount of the 5.00% Convertible Senior Notes was $ 48.7 million , the unamortized discount and deferred financing cost was $ 2.0 million , and the carrying amount of the liability component was $ 46.6 million . During May, June, and December 2019, we entered into privately negotiated exchange agreements with a limited number of holders (the “Noteholders”) to repurchase $ 66.3 million in aggregate principal amount of the 5.00% Convertible Senior Notes held by the Noteholders for an aggregate of $ 18.6 million in cash and approximately 3.2 million shares of our common stock with a fair value of $ 74.3 million . We recognized a loss of approximately $ 3.7 million related to the May and June extinguishments of the repurchased 5.00% Convertible Senior Notes in the nine months ended September 30, 2019. Term Loan B Facility On January 11, 2019 , Par Petroleum, LLC and Par Petroleum Finance Corp. entered into a new term loan facility with Goldman Sachs Bank USA, as administrative agent, and the lenders party thereto from time to time (the “ Term Loan B Facility ”), pursuant to which the lenders made the Term Loan B to the borrowers in the principal amount of $ 250.0 million on the closing date. The net proceeds from Term Loan B totaled $ 232.0 million after deducting the original issue discount, deferred financing costs, and commitment and other fees and were used to finance the Washington Acquisition . Loans under the Term Loan B bear interest at a rate per annum equal to Adjusted LIBOR (as defined in the Term Loan B Facility ) plus an applicable margin of 6.75 % or at a rate per annum equal to Alternate Base Rate (as defined in the Term Loan B Facility ) plus an applicable margin of 5.75 % . In addition to the quarterly interest payments, Term Loan B requires quarterly principal payments of $ 3.1 million . Term Loan B matures on January 11, 2026 . Par Pacific Term Loan Agreement On January 9, 2019 , we entered into a loan agreement (the “ Par Pacific Term Loan Agreement ”) with Bank of Hawaii (“BOH”), pursuant to which BOH made a loan to the company in the principal amount of $ 45.0 million , the net proceeds of which were used to finance the Washington Acquisition . During the term of the Par Pacific Term Loan , the interest payments were due monthly and were based on the outstanding principal balance multiplied by a floating rate equal to 3.50 % above the applicable LIBOR rate (as defined in the Par Pacific Term Loan Agreement ) subject to an increased default interest rate in the event of a default. The Par Pacific Term Loan Agreement was originally scheduled to mature on July 9, 2019 . We terminated and repaid all amounts outstanding under the Par Pacific Term Loan Agreement on March 29, 2019 using the proceeds of the Retail Property Term Loan (as defined below). We recognized approximately $ 0.1 million of debt extinguishment costs related to the unamortized deferred financing costs associated with the Par Pacific Term Loan Agreement in the nine months ended September 30, 2019. Retail Property Term Loan On March 29, 2019 , Par Pacific Hawaii Property Company, LLC (“ Par Property LLC ”), our wholly owned subsidiary, entered into a term loan agreement (the “ Retail Property Term Loan ”) with BOH, which provided a term loan in the principal amount of $ 45.0 million . The proceeds from the Retail Property Term Loan were used to repay and terminate the Par Pacific Term Loan Agreement . The Retail Property Term Loan bears interest based on a floating rate equal to the applicable LIBOR for a one-month interest period plus 1.5 % . Principal and interest payments are payable monthly based on a 20 -year amortization schedule, principal prepayments are allowed subject to applicable prepayment penalties, and the remaining unpaid principal, plus any unpaid interest or other charges, is due on April 1, 2024 , the maturity date of the Retail Property Term Loan . 16 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 PHL Term Loan On April 13, 2020 , PHL , our wholly owned subsidiary, entered into a Term Loan Agreement (“ PHL Term Loan ”) with American Savings Bank F.S.B., which provided a term loan in the principal amount of approximately $ 6.0 million . The proceeds from the PHL Term Loan were used to finance PHL’s equity in certain real property. The PHL Term Loan bears interest at a fixed rate of 2.750 % per annum. Principal and interest payments are payable monthly based on a 25 -year amortization schedule, principal prepayments are allowed with no prepayment charge, and the remaining principal, plus any unpaid interest or other charges, is due on April 15, 2030 , the maturity date of the PHL Term Loan . The PHL Term Loan is guaranteed by Par Petroleum, LLC. 12.875% Senior Secured Notes Due 2026 On June 5, 2020 , the Issuers completed the issuance and sale of $ 105 million in aggregate principal amount of 12.875% Senior Secured Notes in a private placement under Rule 144A and Regulation S of the Securities Act of 1933, as amended. The net proceeds of $ 98.8 million from the sale were used for general corporate purposes. The 12.875% Senior Secured Notes bear interest at an annual rate of 12.875 % per year (payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2021) and will mature on January 15, 2026 . The indenture for the 12.875% Senior Secured Notes also allows for optional early redemptions, some of which require the Issuers to pay a premium and some of which have certain other restrictions related to timing and the maximum redeemable principal amount. The obligations of the borrowers under the 12.875% Senior Secured Notes are guaranteed by the Issuers’ existing and future direct or indirect domestic subsidiaries (other than Par Petroleum Finance Corp.) and by Par Pacific Holdings, Inc. , with respect to principal and interest only. The 12.875% Senior Secured Notes are secured on a pari passu basis by first priority liens (subject to the relative priority of permitted liens) on substantially all of the property and assets of the Issuers and the subsidiary guarantors, but excluding certain assets which are collateral under the ABL Credit Facility , the Supply and Offtake Agreements, and the Washington Refinery Intermediation Agreement . Cross Default Provisions Included within each of our debt agreements are affirmative and negative covenants, and customary cross default provisions, that require the repayment of amounts outstanding on demand unless the triggering payment default or acceleration is remedied, rescinded, or waived. As of September 30, 2020 , we were in compliance with all of our debt instruments. Guarantors In connection with our shelf registration statement on Form S-3, which was filed with the Securities and Exchange Commission (“SEC”) on February 6, 2019 and declared effective on February 15, 2019 (“Registration Statement”), we may sell non-convertible debt securities and other securities in one or more offerings with an aggregate initial offering price of up to $ 750.0 million . Any non-convertible debt securities issued under the Registration Statement may be fully and unconditionally guaranteed (except for customary release provisions), on a joint and several basis, by some or all of our subsidiaries, other than subsidiaries that are “minor” within the meaning of Rule 3-10 of Regulation S-X (the “Guarantor Subsidiaries”). We have no “independent assets or operations” within the meaning of Rule 3-10 of Regulation S-X and certain of the Guarantor Subsidiaries may be subject to restrictions on their ability to distribute funds to us, whether by cash dividends, loans, or advances. Note 11 — Derivatives Commodity Derivatives We utilize commodity derivative contracts to manage our price exposure in our inventory positions, future purchases of crude oil, future purchases and sales of refined products, and crude oil consumption in our refining process. The derivative contracts that we execute to manage our price risk include exchange traded futures, options, and over-the-counter (“OTC”) swaps. Our futures, options, and OTC swaps are marked-to-market and changes in the fair value of these contracts are recognized within Cost of revenues (excluding depreciation) on our condensed consolidated statements of operations. We are obligated to repurchase the crude oil and refined products from J. Aron at the termination of the Supply and Offtake Agreements. Our Washington Refinery Intermediation Agreement contains forward purchase obligations for certain volumes of crude oil and refined products that are required to be settled at market prices on a monthly basis. We have determined that these obligations under the Supply and Offtake Agreements and Washington Refinery Intermediation Agreement contain embedded derivatives. As such, we have accounted for these embedded derivatives at fair value with changes in the fair value recorded in Cost of revenues (excluding depreciation) on our condensed consolidated statements of operations. 17 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 We have entered into forward purchase contracts for crude oil and forward purchases and sales contracts of refined products. We elect the normal purchases normal sales (“NPNS”) exception for all forward contracts that meet the definition of a derivative and are not expected to net settle. Any gains and losses with respect to these forward contracts designated as NPNS are not reflected in earnings until the delivery occurs. Our condensed consolidated balance sheets present derivative assets and liabilities on a net basis. Please read Note 12—Fair Value Measurements for the gross fair value and net carrying value of our derivative instruments. Our cash margin that is required as collateral deposits cannot be offset against the fair value of open contracts except in the event of default. Our open futures and OTC swaps expire at various dates through December 2020 . At September 30, 2020 , our open commodity derivative contracts represented (in thousands of barrels): Contract type Purchases Sales Net Futures 450 — 450 Swaps 3,000 ( 5,300 ) ( 2,300 ) Total 3,450 ( 5,300 ) ( 1,850 ) At September 30, 2020 , we also had option collars of 75 thousand barrels of crude oil per month that expire in December 2020 and 25 thousand barrels of crude oil per month that commence in January 2021 and expire in December 2021 to economically hedge our internally consumed fuel at our Hawaii refineries . These option collars have a weighted-average strike price ranging from a floor of $ 48.77 per barrel to a ceiling of $ 65.00 per barrel and from a floor of $ 36.50 per barrel to a ceiling of $ 60.00 per barrel, respectively. Interest Rate Derivatives We are exposed to interest rate volatility in our ABL Revolver , Term Loan B Facility, Retail Property Term Loan , Supply and Offtake Agreements, and Washington Refinery Intermediation Agreement . We may utilize interest rate swaps to manage our interest rate risk. As of September 30, 2020 , we had entered into an interest rate swap at an average fixed rate of 3.91 % in exchange for the floating interest rate and on the notional amounts due under the Retail Property Term Loan . This swap expires on April 1, 2024 , the maturity date of the Retail Property Term Loan . Our 5.00% Convertible Senior Notes include a redemption option and a related make-whole premium which represent an embedded derivative that is not clearly and closely related to the 5.00% Convertible Senior Notes . As such, we have accounted for this embedded derivative at fair value with changes in the fair value recorded in Interest expense and financing costs, net , on our condensed consolidated statements of operations. As of September 30, 2020 , this embedded derivative was deemed to have a de minimis fair value. The following table provides information on the fair value amounts (in thousands) of these derivatives as of September 30, 2020 and December 31, 2019 and their placement within our condensed consolidated balance sheets. Balance Sheet Location September 30, 2020 December 31, 2019 Asset (Liability) Commodity derivatives (1) Prepaid and other current assets $ 2,963 $ 2,075 Commodity derivatives Other accrued liabilities ( 1,915 ) ( 5,534 ) J. Aron repurchase obligation derivative Obligations under inventory financing agreements ( 12,286 ) 173 MLC terminal obligation derivative Obligations under inventory financing agreements 6,991 ( 14,717 ) Interest rate derivatives Other accrued liabilities ( 942 ) ( 314 ) Interest rate derivatives Other liabilities ( 2,340 ) ( 1,113 ) _________________________________________________________ (1) Does not include cash collateral of $ 3.0 million and $ 10.3 million recorded in Prepaid and other current assets and $ 9.5 million and $ 9.5 million in Other long-term assets as of September 30, 2020 and December 31, 2019 , respectively. 18 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 The following table summarizes the pre-tax gains (losses) recognized in Net income (loss) on our condensed consolidated statements of operations resulting from changes in fair value of derivative instruments not designated as hedges charged directly to earnings (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Statement of Operations Location 2020 2019 2020 2019 Commodity derivatives Cost of revenues (excluding depreciation) $ 1,860 $ ( 4,836 ) $ ( 54,160 ) $ ( 8,095 ) J. Aron repurchase obligation derivative Cost of revenues (excluding depreciation) 44,556 ( 2,638 ) ( 12,459 ) ( 6,558 ) MLC terminal obligation derivative Cost of revenues (excluding depreciation) 6,000 4,656 62,076 1,317 Interest rate derivatives Interest expense and financing costs, net 2 ( 415 ) ( 2,310 ) ( 1,885 ) Note 12 — Fair Value Measurements Assets and Liabilities Measured at Fair Value on a Recurring Basis Common Stock Warrants As of December 31, 2019 , we had 354,350 common stock warrants outstanding. We estimated the fair value of our outstanding common stock warrants using the difference between the strike price of the warrant and the market price of our common stock, which is a Level 3 fair value measurement. As of December 31, 2019 , the warrants had a weighted-average exercise price of $ 0.09 and a remaining term of 2.67 years . The estimated fair value of the common stock warrants was $ 23.16 per share as of December 31, 2019 . During January and March 2020 , one of our stockholders and its affiliates exercised 354,350 common stock warrants with a fair value of $ 3.9 million . As a result of this cashless transaction, 350,542 shares of common stock were issued. As of September 30, 2020 , we had no common stock warrants outstanding. Derivative Instruments We utilize commodity derivative contracts to manage our price exposure to our inventory positions, future purchases of crude oil, future purchases and sales of refined products, and cost of crude oil consumed in the refining process. We may utilize interest rate swaps to manage our interest rate risk. We classify financial assets and liabilities according to the fair value hierarchy. Financial assets and liabilities classified as Level 1 instruments are valued using quoted prices in active markets for identical assets and liabilities. These include our exchange traded futures. Level 2 instruments are valued using quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability. Our Level 2 instruments include OTC swaps and options. These derivatives are valued using market quotations published by commodity exchanges. Level 3 instruments are valued using significant unobservable inputs that are not readily observable in the market. The valuation of the embedded derivatives related to our J. Aron repurchase and MLC terminal obligations is based on estimates of the prices and differentials assuming settlement at the end of the reporting period. Estimates of the J. Aron and MLC settlement prices are based on observable inputs, such as Brent/WTI indices, and contractual price differentials as defined in the Supply and Offtake Agreements and Washington Refinery Intermediation Agreement . Such contractual differentials vary by location and by the type of product and range from a discount of $ 6.05 per barrel to a premium of $ 15.43 per barrel as of September 30, 2020 . Contractual price differentials are considered unobservable inputs; therefore, these embedded derivatives are classified as Level 3 instruments. We do not have other commodity derivatives classified as Level 3 at September 30, 2020 or December 31, 2019 . Please read Note 11—Derivatives for further information on derivatives. 19 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 Financial Statement Impact Fair value amounts by hierarchy level as of September 30, 2020 and December 31, 2019 are presented gross in the tables below (in thousands): September 30, 2020 Level 1 Level 2 Level 3 Gross Fair Value Effect of Counter-Party Netting Net Carrying Value on Balance Sheet (1) Assets Commodity derivatives $ 219 $ 16,233 $ — $ 16,452 $ ( 13,489 ) $ 2,963 Liabilities Commodity derivatives $ ( 302 ) $ ( 15,102 ) $ — $ ( 15,404 ) $ 13,489 $ ( 1,915 ) J. Aron repurchase obligation derivative — — ( 12,286 ) ( 12,286 ) — ( 12,286 ) MLC terminal obligation derivative — — 6,991 6,991 — 6,991 Interest rate derivatives — ( 3,282 ) — ( 3,282 ) — ( 3,282 ) Total $ ( 302 ) $ ( 18,384 ) $ ( 5,295 ) $ ( 23,981 ) $ 13,489 $ ( 10,492 ) December 31, 2019 Level 1 Level 2 Level 3 Gross Fair Value Effect of Counter-Party Netting Net Carrying Value on Balance Sheet (1) Assets Commodity derivatives $ 4,595 $ 2,075 $ — $ 6,670 $ ( 4,595 ) $ 2,075 Liabilities Common stock warrants $ — $ — $ ( 8,206 ) $ ( 8,206 ) $ — $ ( 8,206 ) Commodity derivatives ( 10,129 ) — — ( 10,129 ) 4,595 ( 5,534 ) J. Aron repurchase obligation derivative — — 173 173 — 173 MLC terminal obligation derivative — — ( 14,717 ) ( 14,717 ) — ( 14,717 ) Interest rate derivatives — ( 1,427 ) — ( 1,427 ) — ( 1,427 ) Total $ ( 10,129 ) $ ( 1,427 ) $ ( 22,750 ) $ ( 34,306 ) $ 4,595 $ ( 29,711 ) _________________________________________________________ (1) Does not include cash collateral of $ 12.5 million and $ 19.8 million as of September 30, 2020 and December 31, 2019 , respectively, included within Prepaid and other current assets and Other long-term assets on our condensed consolidated balance sheets. 20 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 A roll forward of Level 3 derivative instruments measured at fair value on a recurring basis is as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Balance, at beginning of period $ ( 66,098 ) $ ( 12,720 ) $ ( 22,750 ) $ ( 922 ) Settlements 10,247 3,777 ( 36,432 ) ( 4,121 ) Acquired — 6,201 — 3,900 Total gains (losses) included in earnings 50,556 ( 3,463 ) 53,887 ( 5,062 ) Balance, at end of period $ ( 5,295 ) $ ( 6,205 ) $ ( 5,295 ) $ ( 6,205 ) The carrying value and fair value of long-term debt and other financial instruments as of September 30, 2020 and December 31, 2019 are as follows (in thousands): September 30, 2020 Carrying Value Fair Value 5.00% Convertible Senior Notes due 2021 (1) (3) $ 46,646 $ 44,706 7.75% Senior Secured Notes due 2025 (1) 292,968 267,750 Mid Pac Term Loan (2) 1,408 1,408 Term Loan B Facility (1) 222,407 203,500 Retail Property Term Loan (2) 42,231 42,231 PHL Term Loan (2) 5,833 5,833 12.875% Senior Secured Notes due 2026 (1) 99,020 109,284 December 31, 2019 Carrying Value Fair Value 5.00% Convertible Senior Notes due 2021 (1) (3) $ 44,783 $ 66,477 7.75% Senior Secured Notes due 2025 (1) 292,015 309,375 Mid Pac Term Loan (2) 1,433 1,433 Term Loan B Facility (1) 230,474 240,625 Retail Property Term Loan (2) 43,226 43,226 Common stock warrants (2) 8,206 8,206 _________________________________________________________ (1) The fair value measurements of the 5.00% Convertible Senior Notes , 7.75% Senior Secured Notes , Term Loan B Facility, and 12.875% Senior Secured Notes are considered Level 2 measurements in the fair value hierarchy as discussed below. (2) The fair value measurements of the common stock warrants, Mid Pac Term Loan , Retail Property Term Loan , and PHL Term Loan are considered Level 3 measurements in the fair value hierarchy. (3) The carrying value of the 5.00% Convertible Senior Notes excludes the fair value of the equity component, which was classified as equity upon issuance. The fair value of the 5.00% Convertible Senior Notes was determined by aggregating the fair value of the liability and equity components of the notes. The fair value of the liability component of the 5.00% Convertible Senior Notes was determined using a discounted cash flow analysis in which the projected interest and principal payments were discounted at an estimated market yield for a similar debt instrument without the conversion feature. The equity component was estimated based on the Black-Scholes model for a call option with strike price equal to the conversion price, a term matching the remaining life of the 5.00% Convertible Senior Notes , and an implied volatility based on market values of options outstanding as of September 30, 2020 . The fair value of the 5.00% Convertible Senior Notes is considered a Level 2 measurement in the fair value hierarchy. The fair value of the 7.75% Senior Secured Notes , Term Loan B Facility, and 12.875% Senior Secured Notes were determined using a market approach based on quoted prices. The inputs used to measure the fair value are classified as Level 2 21 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 inputs within the fair value hierarchy because the 7.75% Senior Secured Notes , Term Loan B Facility, and 12.875% Senior Secured Notes may not be actively traded. The Retail Property Term Loan is subject to a market-based floating interest rate. The Mid Pac Term Loan and PHL Term Loan are subject to fixed interest rates of 4.375 % and 2.750 % , respectively. The carrying values of our Retail Property, Mid Pac, and PHL Term Loans were determined to approximate fair value as of September 30, 2020 and December 31, 2019 . The fair value of all non-derivative financial instruments recorded in current assets, including cash and cash equivalents, restricted cash, and trade accounts receivable, and current liabilities, including accounts payable, approximate their carrying value due to their short-term nature. Note 13 — Leases We have cancelable and non-cancelable finance and operating lease obligations for the lease of land, vehicles, office space, retail facilities, and other facilities used in the storage and transportation of crude oil and refined products. Most of our leases include one or more options to renew, with renewal terms that can extend the lease term from one to 30 years or more. There are no material lease arrangements where we are the lessor and no material residual value guarantees associated with any of our leases. The following table provides information on the amounts (in thousands, except lease term and discount rates) of our right-of-use assets (“ROU assets”) and liabilities as of September 30, 2020 and December 31, 2019 and their placement within our condensed consolidated balance sheets: Lease type Balance Sheet Location September 30, 2020 December 31, 2019 Assets Finance Property, plant, and equipment $ 13,543 $ 11,552 Finance Accumulated amortization ( 5,978 ) ( 4,447 ) Finance Property, plant, and equipment, net $ 7,565 $ 7,105 Operating Operating lease right-of-use assets 366,029 420,073 Total right-of-use assets $ 373,594 $ 427,178 Liabilities Current Finance Other accrued liabilities $ 1,555 $ 1,784 Operating Operating lease liabilities 55,293 79,999 Long-term Finance Finance lease liabilities 6,863 6,227 Operating Operating lease liabilities 315,591 340,909 Total lease liabilities $ 379,302 $ 428,919 Weighted-average remaining lease term (in years) Finance 5.67 5.69 Operating 10.64 10.26 Weighted-average discount rate Finance 7.45 % 6.68 % Operating 7.63 % 7.88 % 22 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 The following table summarizes the lease costs recognized in our condensed consolidated statements of operations (in thousands): Three Months Ended September 30, Nine Months Ended September 30, Lease cost type 2020 2019 2020 2019 Finance lease cost Amortization of finance lease ROU assets $ 518 $ 479 $ 1,532 $ 1,380 Interest on lease liabilities 156 128 487 392 Operating lease cost 26,514 24,259 80,644 72,237 Variable lease cost 2,185 2,799 7,842 8,689 Short-term lease cost 820 1,067 1,662 1,483 Net lease cost $ 30,193 $ 28,732 $ 92,167 $ 84,181 The following table summarizes the supplemental cash flow information related to leases as follows (in thousands): Nine Months Ended September 30, Lease type 2020 2019 Cash paid for amounts included in the measurement of liabilities Financing cash flows from finance leases $ 1,508 $ 1,571 Operating cash flows from finance leases 493 559 Operating cash flows from operating leases 76,536 71,181 Non-cash supplemental amounts ROU assets obtained in exchange for new finance lease liabilities 1,992 198 ROU assets obtained in exchange for new operating lease liabilities 11,974 15,532 ROU assets terminated in exchange for release from operating lease liabilities 7,738 193 The table below includes the estimated future undiscounted cash flows for finance and operating leases as of September 30, 2020 (in thousands): For the year ending December 31, Finance leases Operating leases Total 2020 (1) $ 585 $ 27,018 $ 27,603 2021 1,973 72,824 74,797 2022 1,765 68,123 69,888 2023 1,752 54,228 55,980 2024 1,441 44,478 45,919 2025 1,202 42,907 44,109 Thereafter 1,660 201,059 202,719 Total lease payments 10,378 510,637 521,015 Less amount representing interest ( 1,960 ) ( 139,753 ) ( 141,713 ) Present value of lease liabilities $ 8,418 $ 370,884 $ 379,302 _________________________________________________________ (1) Represents period from October 1, 2020 to December 31, 2020 . Additionally, the Company has $ 8.9 million and $ 1.1 million in future undiscounted cash flows for operating leases and finance leases that have not yet commenced, respectively. These leases are expected to commence when the lessor has made the equipment or location available to the Company to operate or begin construction, respectively. 23 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 Note 14 — Commitments and Contingencies In the ordinary course of business, we are a party to various lawsuits and other contingent matters. We establish accruals for specific legal matters when we determine that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. It is possible that an unfavorable outcome of one or more of these lawsuits or other contingencies could have a material impact on our financial condition, results of operations, or cash flows. Environmental Matters Like other petroleum refiners, our operations are subject to extensive and periodically-changing federal, state, and local environmental laws and regulations governing air emissions, wastewater discharges, and solid and hazardous waste management activities. Many of these regulations are becoming increasingly stringent and the cost of compliance can be expected to increase over time. Periodically, we receive communications from various federal, state, and local governmental authorities asserting violations of environmental laws and/or regulations. These governmental entities may also propose or assess fines or require corrective actions for these asserted violations. For example, on September 30, 2020, we entered into a consent agreement with the U.S. Environmental Protection Agency (“EPA”) stemming from the EPA’s claim that we failed to comply with certain statutorily required operating procedures and management system and process safety requirements at our Par West refinery. As a result of that consent agreement, we agreed to pay the EPA a penalty of $ 123,461 . We intend to respond in a timely manner to all such communications and to take appropriate corrective action. Except as disclosed below, we do not anticipate that any such matters currently asserted will have a material impact on our financial condition, results of operations, or cash flows. Wyoming Refinery Our Wyoming refinery is subject to a number of consent decrees, orders, and settlement agreements involving the EPA and/or the Wyoming Department of Environmental Quality, some of which date back to the late 1970s and several of which remain in effect, requiring further actions at the Wyoming refinery. The largest cost component arising from these various decrees relates to the investigation, monitoring, and remediation of soil, groundwater, surface water, and sediment contamination associated with the facility’s historic operations. Investigative work by Hermes Consolidated LLC, and its wholly owned subsidiary, Wyoming Pipeline Company (collectively, “WRC” or “Wyoming Refining”) and negotiations with the relevant agencies as to remedial approaches remain ongoing on a number of aspects of the contamination, meaning that investigation, monitoring, and remediation costs are not reasonably estimable for some elements of these efforts. As of September 30, 2020 , we have accrued $ 15.8 million for the well-understood components of these efforts based on current information, approximately one-third of which we expect to incur in the next five years and the remainder to be incurred over approximately 30 years . Additionally, we believe the Wyoming refinery will need to modify or close a series of wastewater impoundments in the next several years and replace those impoundments with a new wastewater treatment system. Based on current information, reasonable estimates we have received suggest costs of approximately $ 11.6 million to design and construct a new wastewater treatment system. Finally, among the various historic consent decrees, orders, and settlement agreements into which Wyoming Refining has entered, there are several penalty orders associated with exceedances of permitted limits by the Wyoming refinery’s wastewater discharges. Although the frequency of these exceedances has declined over time, Wyoming Refining may become subject to new penalty enforcement action in the next several years, which could involve penalties in excess of $ 100,000 . Regulation of Greenhouse Gases The EPA regulates greenhouse gases (“GHG”) under the federal Clean Air Act (“CAA”). New construction or material expansions that meet certain GHG emissions thresholds will likely require that, among other things, a GHG permit be issued in accordance with the federal CAA regulations and we will be required, in connection with such permitting, to undertake a technology review to determine appropriate controls to be implemented with the project in order to reduce GHG emissions. Furthermore, the EPA is currently developing refinery-specific GHG regulations and performance standards that are expected to impose GHG emission limits and/or technology requirements. These control requirements may affect a wide range of refinery operations. Any such controls could result in material increased compliance costs, additional operating restrictions for our business, and an increase in the cost of the products we produce, which could have a material adverse effect on our financial condition, results of operations, or cash flows. Additionally, the EPA ’s final rule updating standards that control toxic air emissions from petroleum refineries imposed additional controls and monitoring requirements on flaring operations, storage tanks, sulfur recovery units, delayed coking units, 24 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 and required fenceline monitoring. Compliance with this rule has not had a material impact on our financial condition, results of operations, or cash flows to date. In 2007, the State of Hawaii passed Act 234, which required that GHG emissions be rolled back on a statewide basis to 1990 levels by the year 2020. In June of 2014, the Hawaii Department of Health (“DOH”) adopted regulations that require each major facility to reduce CO 2 emissions by 16% by 2020 relative to a calendar year 2010 baseline (the first year in which GHG emissions were reported to the EPA under 40 CFR Part 98). The Hawaii refineries ’ capacity to materially reduce fuel use and GHG emissions is limited because most energy conservation measures have already been implemented over the past 20 years. The regulation allows for “partnering” with other facilities (principally power plants) that have already dramatically reduced greenhouse emissions or are on schedule to reduce CO 2 emissions in order to comply independently with the state’s Renewable Portfolio Standards. Accordingly, our Hawaii refineries submitted a GHG reduction plan that incorporates the partnering provisions and demonstrates that additional reductions are not cost-effective or necessary because of the Hawaii refineries’ shared baseline allocation and because the State of Hawaii has already reached the 1990 levels according to a report prepared by the DOH in January 2019. In 2007, the U.S. Congress passed the Energy Independence and Security Act (the “EISA”) which, among other things, set a target fuel economy standard of 35 miles per gallon for the combined fleet of cars and light trucks in the U.S. by model year 2020 and contained an expanded Renewable Fuel Standard (the “RFS”). In August 2012, the EPA and National Highway Traffic Safety Administration (“NHTSA”) jointly adopted regulations that establish an average industry fuel economy of 54.5 miles per gallon by model year 2025. On August 8, 2018, the EPA and NHTSA jointly proposed to revise existing fuel economy standards for model years 2021-2025 and to set standards for 2026 for the first time. On March 31, 2020, the agencies released updated fuel economy and vehicle emissions standards, which provide for an increase in stringency by 1.5% each year through model year 2026, as compared with the standards issued in 2012 that required 5% annual increases. Higher fuel economy standards have the potential to reduce demand for our refined transportation fuel products. Under EISA, the RFS requires an increasing amount of renewable fuel to be blended into the nation’s transportation fuel supply, up to 36 billion gallons by 2022. In the near term, the RFS will be satisfied primarily with fuel ethanol blended into gasoline. We, and other refiners subject to the RFS, may meet the RFS requirements by blending the necessary volumes of renewable fuels produced by us or purchased from third parties. To the extent that refiners will not or cannot blend renewable fuels into the products they produce in the quantities required to satisfy their obligations under the RFS program, those refiners must purchase renewable credits, referred to as RINs, to maintain compliance. To the extent that we exceed the minimum volumetric requirements for blending of renewable fuels, we have the option of retaining these RINs for current or future RFS compliance or selling those RINs on the open market. The RFS may present production and logistics challenges for both the renewable fuels and petroleum refining and marketing industries in that we may have to enter into arrangements with other parties or purchase D3 waivers from the EPA to meet our obligations to use advanced biofuels, including biomass-based diesel and cellulosic biofuel, with potentially uncertain supplies of these new fuels. In October 2010, the EPA issued a partial waiver decision under the federal CAA to allow for an increase in the amount of ethanol permitted to be blended into gasoline from 10% (“E10”) to 15% (“E15”) for 2007 and newer light duty motor vehicles. In 2019, the EPA approved year-round sales of E15. There are numerous issues, including state and federal regulatory issues, that need to be addressed before E15 can be marketed on a large scale for use in traditional gasoline engines; however, increased renewable fuel in the nation’s transportation fuel supply could reduce demand for our refined products. In March 2014, the EPA published a final Tier 3 gasoline standard that requires, among other things, that gasoline contain no more than 10 parts per million (“ppm”) sulfur on an annual average basis and no more than 80 ppm sulfur on a per-gallon basis. The standard also lowers the allowable benzene, aromatics, and olefins content of gasoline. The effective date for the new standard was January 1, 2017, however, approved small volume refineries had until January 1, 2020 to meet the standard. The Par East Hawaii refinery was required to comply with Tier 3 gasoline standards within 30 months of June 21, 2016, the date it was disqualified from small volume refinery status. On March 19, 2015, the EPA confirmed the small refinery status of our Wyoming refinery. The Par East Hawaii refinery, our Wyoming refinery, and our Washington refinery, acquired in January 2019, were all granted small refinery status by the EPA for 2018. As of January 1, 2020, all four of our refineries were compliant with the final Tier 3 gasoline standard. Beginning on June 30, 2014, new sulfur standards for fuel oil used by marine vessels operating within 200 miles of the U.S. coastline (which includes the entire Hawaiian Island chain) were lowered from 10,000 ppm (1%) to 1,000 ppm (0.1%). The sulfur standards began at the Hawaii refineries and were phased in so that by January 1, 2015, they were to be fully aligned with the International Marine Organization (“IMO”) standards and deadline. The more stringent standards apply universally to both U.S. and foreign-flagged ships. Although the marine fuel regulations provided vessel operators with a few compliance options such as installation of on-board pollution controls and demonstration unavailability, many vessel operators will be forced to switch 25 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 to a distillate fuel while operating within the Emission Control Area (“ECA”). Beyond the 200 mile ECA, large ocean vessels are still allowed to burn marine fuel with up to 3.5% sulfur. Our Hawaii refineries are capable of producing the 1% sulfur residual fuel oil that was previously required within the ECA. Although our Hawaii refineries remain in a position to supply vessels traveling to and through Hawaii, the market for 0.1% sulfur distillate fuel and 3.5% sulfur residual fuel is much more competitive. In addition to U.S. fuels requirements, the IMO has also adopted newer standards that further reduce the global limit on sulfur content in maritime fuels to 0.5% beginning in 2020 (“IMO 2020”). Like the rest of the refining industry, we are focused on meeting these standards and may incur costs in producing lower-sulfur fuels. There will be compliance costs and uncertainties regarding how we will comply with the various requirements contained in the EISA, RFS, IMO 2020, and other fuel-related regulations. We may experience a decrease in demand for refined petroleum products due to an increase in combined fleet mileage or due to refined petroleum products being replaced by renewable fuels. Environmental Agreement On September 25, 2013 , Par Petroleum, LLC (formerly Hawaii Pacific Energy, a wholly owned subsidiary of Par created for purposes of the PHR acquisition), Tesoro Corporation (“Tesoro,” which changed its name to Andeavor Corporation before being purchased by Marathon Petroleum Company in October 2018), and PHR entered into an Environmental Agreement (“Environmental Agreement”) that allocated responsibility for known and contingent environmental liabilities related to the acquisition of PHR , including the Consent Decree as described below. Consent Decree On July 18, 2016, PHR and subsidiaries of Tesoro entered into a consent decree with the EPA, the U.S. Department of Justice (“DOJ”), and other state governmental authorities concerning alleged violations of the federal CAA related to the ownership and operation of multiple facilities owned or formerly owned by Tesoro and its affiliates (“Consent Decree”), including the Par East Hawaii refinery. As a result of the Consent Decree, PHR expanded its previously-announced 2016 Par East Hawaii refinery turnaround to undertake additional capital improvements to reduce emissions of air pollutants and to provide for certain nitrogen oxide and sulfur dioxide emission controls and monitoring required by the Consent Decree. Tesoro is responsible under the Environmental Agreement for directly paying, or reimbursing PHR, for all reasonable third-party capital expenditures incurred pursuant to the Consent Decree to the extent related to acts or omissions prior to the date of the closing of the PHR acquisition. Tesoro is obligated to pay all applicable fines and penalties related to the Consent Decree. Indemnification In addition to its obligation to reimburse us for capital expenditures incurred pursuant to the Consent Decree, Tesoro agreed to indemnify us for claims and losses arising out of related breaches of Tesoro’s representations, warranties, and covenants in the Environmental Agreement, certain defined “corrective actions” relating to pre-existing environmental conditions, third-party claims arising under environmental laws for personal injury or property damage arising out of or relating to releases of hazardous materials that occurred prior to the date of the closing of the PHR acquisition, any fine, penalty, or other cost assessed by a governmental authority in connection with violations of environmental laws by PHR prior to the date of the closing of the PHR acquisition, certain groundwater remediation work, fines, or penalties imposed on PHR by the Consent Decree related to acts or omissions of Tesoro prior to the date of the closing of the PHR acquisition, and claims and losses related to the Pearl City Superfund Site. Tesoro’s indemnification obligations are subject to certain limitations as set forth in the Environmental Agreement. These limitations include a deductible of $ 1 million and a cap of $ 15 million for certain of Tesoro’s indemnification obligations related to certain pre-existing conditions, as well as certain restrictions regarding the time limits for submitting notice and supporting documentation for remediation actions. Recovery Trusts We emerged from the reorganization of Delta Petroleum Corporation (“Delta”) on August 31, 2012 (“Emergence Date”), when the plan of reorganization (“Plan”) was consummated. On the Emergence Date, we formed the Delta Petroleum General Recovery Trust (“General Trust”). The General Trust was formed to pursue certain litigation against third parties, including preference actions, fraudulent transfer and conveyance actions, rights of setoff and other claims, or causes of action under the U.S. Bankruptcy Code and other claims and potential claims that Delta and its subsidiaries (collectively, “Debtors”) hold against third parties. On February 27, 2018, the Bankruptcy Court entered its final decree closing the Chapter 11 bankruptcy cases of Delta and the other Debtors, discharging the trustee for the General Trust, and finding that all assets of the General Trust were resolved, abandoned, or liquidated and have been distributed in accordance with the requirements of the Plan. In addition, the final decree 26 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 required the Company or the General Trust, as applicable, to maintain the current accruals owed on account of the remaining claims of the U.S. Government and Noble Energy, Inc. As of September 30, 2020 , two related claims totaling approximately $ 22.4 million remained to be resolved and we have accrued approximately $ 0.5 million representing the estimated value of claims remaining to be settled which are deemed probable and estimable at period end. One of the two remaining claims was filed by the U.S. Government for approximately $ 22.4 million relating to ongoing litigation concerning a plugging and abandonment obligation in Pacific Outer Continental Shelf Lease OCS-P 0320, comprising part of the Sword Unit in the Santa Barbara Channel, California. The second unliquidated claim, which is related to the same plugging and abandonment obligation, was filed by Noble Energy Inc., the operator and majority interest owner of the Sword Unit. We believe the probability of issuing stock to satisfy the full claim amount is remote, as the obligations upon which such proof of claim is asserted are joint and several among all working interest owners and Delta, our predecessor, only owned an approximate 3.4 % aggregate working interest in the unit. The settlement of claims is subject to ongoing litigation and we are unable to predict with certainty how many shares will be required to satisfy all claims. Pursuant to the Plan, allowed claims are settled at a ratio of 54.4 shares per $1,000 of claim. Note 15 — Stockholders’ Equity Incentive Plans The following table summarizes our compensation costs recognized in General and administrative expense (excluding depreciation) and Operating expense (excluding depreciation) under the Amended and Restated Par Pacific Holdings, Inc. 2012 Long-term Incentive Plan and Stock Purchase Plan (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Restricted Stock Awards $ 1,011 $ 789 $ 2,962 $ 2,589 Restricted Stock Units 327 279 971 841 Stock Option Awards 439 380 1,253 1,103 During the three and nine months ended September 30, 2020 , we granted 22 thousand and 310 thousand shares of restricted stock and restricted stock units with a fair value of approximately $ 0.2 million and $ 5.5 million , respectively. As of September 30, 2020 , there were approximately $ 8.3 million of total unrecognized compensation costs related to restricted stock awards and restricted stock units, which are expected to be recognized on a straight-line basis over a weighted-average period of 1.8 years . During the nine months ended September 30, 2020 , we granted 279 thousand stock option awards with a weighted-average exercise price of $ 19.73 per share and no grants were made for the three months ended September 30, 2020 . As of September 30, 2020 , there were approximately $ 3.2 million of total unrecognized compensation costs related to stock option awards, which are expected to be recognized on a straight-line basis over a weighted-average period of 1.7 years . During the nine months ended September 30, 2020 , we granted 47 thousand performance restricted stock units to executive officers and no grants were made for the three months ended September 30, 2020 . These performance restricted stock units had a fair value of approximately $ 0.9 million and are subject to certain annual performance targets based on three-year-performance periods as defined by our Board of Directors. As of September 30, 2020 , there were approximately $ 1.2 million of total unrecognized compensation costs related to the performance restricted stock units, which are expected to be recognized on a straight-line basis over a weighted-average period of 1.9 years . 27 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 Note 16 — Income (Loss) per Share Basic income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the sum of the weighted-average number of common shares outstanding and the weighted-average number of shares issuable under the common stock warrants, representing 82 thousand shares during the nine months ended September 30, 2020 and 354 thousand shares during the three and nine months ended September 30, 2019 , respectively. The common stock warrants are included in the calculation of basic income (loss) per share because they were issuable for minimal consideration. As of March 31, 2020, the previously outstanding common stock warrants had been exercised for common stock and no warrants were outstanding. The following table sets forth the computation of basic and diluted income (loss) per share (in thousands, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Net income (loss) $ ( 14,271 ) $ ( 83,891 ) $ ( 277,168 ) $ 5,370 Less: Undistributed income allocated to participating securities (1) — — — 59 Net income (loss) attributable to common stockholders ( 14,271 ) ( 83,891 ) ( 277,168 ) 5,311 Plus: Net income effect of convertible securities — — — — Numerator for diluted income (loss) per common share $ ( 14,271 ) $ ( 83,891 ) $ ( 277,168 ) $ 5,311 Basic weighted-average common stock shares outstanding 53,374 50,942 53,265 49,973 Plus: dilutive effects of common stock equivalents (2) — — — 98 Diluted weighted-average common stock shares outstanding 53,374 50,942 53,265 50,071 Basic income (loss) per common share $ ( 0.27 ) $ ( 1.65 ) $ ( 5.20 ) $ 0.11 Diluted income (loss) per common share $ ( 0.27 ) $ ( 1.65 ) $ ( 5.20 ) $ 0.11 ________________________________________________________ (1) Participating securities include restricted stock that had been issued but had not yet vested during the three and nine months ended September 30, 2019 . These participating securities were fully vested as of December 31, 2019 . (2) Entities with a net loss from continuing operations are prohibited from including potential common shares in the computation of diluted per share amounts. We have utilized the basic shares outstanding to calculate both basic and diluted loss per common share for the three and nine months ended September 30, 2020 and the three months September 30, 2019. For the nine months ended September 30, 2019 , our calculation of diluted shares outstanding excluded 160 thousand shares of unvested restricted stock and 1.8 million stock options. As discussed in Note 10—Debt , we have the option of settling the 5.00% Convertible Senior Notes in cash or shares of common stock, or any combination thereof, upon conversion. For the nine months ended September 30, 2019 , diluted income per share was determined using the if-converted method. Our calculation of diluted shares outstanding for the nine months ended September 30, 2019 excluded 5.5 million common stock equivalents, respectively, as the effect would be anti-dilutive. Note 17 — Income Taxes In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management continues to conclude that we did not meet the “more likely than not” requirement in order to recognize deferred tax assets on the remaining amounts and a valuation allowance has been recorded for substantially all of our net deferred tax assets at September 30, 2020 and December 31, 2019 . We believe that any adjustment to our uncertain tax positions would no t have a material impact on our financial statements given the Company’s deferred tax and corresponding valuation allowance position as of September 30, 2020 and December 31, 2019 . 28 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 As of December 31, 2019 , we had approximately $ 1.4 billion in net operating loss carryforwards (“NOL carryforwards”); however, we currently have a valuation allowance against this and substantially all of our other deferred taxed assets. Our net taxable income must be apportioned to various states based upon the income tax laws of the states in which we derive our revenue. Our NOL carryforwards will not always be available to offset taxable income apportioned to the various states. The states from which our refining, retail, and logistics revenues are derived are not the same states in which our NOLs were incurred; therefore, we expect to incur state tax liabilities in connection with our refining, retail, and logistics operations. Note 18 — Segment Information We report the results for the following four reportable segments: (i) Refining , (ii) Retail , (iii) Logistics , and (iv) Corporate and Other. Summarized financial information concerning reportable segments consists of the following (in thousands): Three Months Ended September 30, 2020 Refining Logistics Retail Corporate, Eliminations and Other (1) Total Revenues $ 626,426 $ 41,722 $ 91,736 $ ( 69,903 ) $ 689,981 Cost of revenues (excluding depreciation) 568,051 26,411 60,725 ( 69,898 ) 585,289 Operating expense (excluding depreciation) 49,972 3,364 16,122 — 69,458 Depreciation, depletion, and amortization 13,509 5,513 2,829 970 22,821 General and administrative expense (excluding depreciation) — — — 9,818 9,818 Acquisition and integration costs — — — ( 155 ) ( 155 ) Operating income (loss) $ ( 5,106 ) $ 6,434 $ 12,060 $ ( 10,638 ) $ 2,750 Interest expense and financing costs, net ( 17,523 ) Other income, net 610 Equity losses from Laramie Energy, LLC — Loss before income taxes ( 14,163 ) Income tax expense ( 108 ) Net loss $ ( 14,271 ) Capital expenditures $ 9,281 $ 2,216 $ 392 $ 397 $ 12,286 29 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 Three Months Ended September 30, 2019 Refining Logistics Retail Corporate, Eliminations and Other (1) Total Revenues $ 1,336,951 $ 49,623 $ 122,234 $ ( 107,170 ) $ 1,401,638 Cost of revenues (excluding depreciation) 1,256,569 28,712 87,631 ( 107,157 ) 1,265,755 Operating expense (excluding depreciation) 63,041 2,553 17,643 — 83,237 Depreciation, depletion, and amortization 14,088 4,798 2,523 818 22,227 General and administrative expense (excluding depreciation) — — — 11,391 11,391 Acquisition and integration costs — — — 623 623 Operating income (loss) $ 3,253 $ 13,560 $ 14,437 $ ( 12,845 ) $ 18,405 Interest expense and financing costs, net ( 18,348 ) Other income, net 83 Change in value of common stock warrants ( 826 ) Equity losses from Laramie Energy, LLC ( 85,633 ) Loss before income taxes ( 86,319 ) Income tax benefit 2,428 Net loss $ ( 83,891 ) Capital expenditures $ 6,672 $ 14,759 $ 765 $ 486 $ 22,682 ________________________________________________________ (1) Includes eliminations of intersegment revenues and cost of revenues of $ 69.9 million and $ 107.2 million for the three months ended September 30, 2020 and 2019 , respectively. Nine Months Ended September 30, 2020 Refining Logistics Retail Corporate, Eliminations and Other (1) Total Revenues $ 2,229,853 $ 143,004 $ 274,170 $ ( 237,662 ) $ 2,409,365 Cost of revenues (excluding depreciation) 2,211,371 85,527 177,537 ( 237,657 ) 2,236,778 Operating expense (excluding depreciation) 151,601 9,882 48,393 — 209,876 Depreciation, depletion, and amortization 39,209 16,082 8,292 2,649 66,232 Impairment expense 38,105 — 29,817 — 67,922 General and administrative expense (excluding depreciation) — — — 31,823 31,823 Acquisition and integration costs — — — 600 600 Operating income (loss) $ ( 210,433 ) $ 31,513 $ 10,131 $ ( 35,077 ) $ ( 203,866 ) Interest expense and financing costs, net ( 52,611 ) Other income, net 1,089 Change in value of common stock warrants 4,270 Equity losses from Laramie Energy, LLC ( 46,905 ) Loss before income taxes ( 298,023 ) Income tax benefit 20,855 Net loss $ ( 277,168 ) Capital expenditures $ 26,529 $ 12,406 $ 2,253 $ 1,263 $ 42,451 30 PAR PACIFIC HOLDINGS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Interim Periods Ended September 30, 2020 and 2019 Nine Months Ended September 30, 2019 Refining Logistics Retail Corporate, Eliminations and Other (1) Total Revenues $ 3,830,572 $ 144,978 $ 342,814 $ ( 315,982 ) $ 4,002,382 Cost of revenues (excluding depreciation) 3,563,503 82,000 248,751 ( 315,925 ) 3,578,329 Operating expense (excluding depreciation) 173,689 7,945 50,107 — 231,741 Depreciation, depletion, and amortization 42,579 12,683 7,429 2,412 65,103 General and administrative expense (excluding depreciation) — — — 34,435 34,435 Acquisition and integration costs — — — 4,325 4,325 Operating income (loss) $ 50,801 $ 42,350 $ 36,527 $ ( 41,229 ) $ 88,449 Interest expense and financing costs, net ( 57,336 ) Debt extinguishment and commitment costs ( 9,186 ) Other income, net 2,347 Change in value of common stock warrants ( 3,065 ) Equity losses from Laramie Energy, LLC ( 84,841 ) Loss before income taxes ( 63,632 ) Income tax benefit 69,002 Net income $ 5,370 Capital expenditures $ 25,555 $ 32,217 $ 5,042 $ 1,272 $ 64,086 ________________________________________________________ (1) Includes eliminations of intersegment revenues and cost of revenues of $ 237.7 million and $ 316.0 million for the nine months ended September 30, 2020 and 2019 , respectively. Note 19 — Related Party Transactions Equity Group Investments (“EGI”) - Service Agreement On September 17, 2013 , we entered into a letter agreement (“Services Agreement”) with Equity Group Investments (“EGI”), an affiliate of Zell Credit Opportunities Fund, LP (“ZCOF”), which owns 10 % or more of our common stock directly or through affiliates. Pursuant to the Services Agreement, EGI agreed to provide us with ongoing strategic, advisory, and consulting services that may include (i) advice on financing structures and our relationship with lenders and bankers, (ii) advice regarding public and private offerings of debt and equity securities, (iii) advice regarding asset dispositions, acquisitions, or other asset management strategies, (iv) advice regarding potential business acquisitions, dispositions, or combinations involving us or our affiliates, or (v) such other advice directly related or ancillary to the above strategic, advisory, and consulting services as may be reasonably requested by us. EGI does not receive a fee for the provision of the strategic, advisory, or consulting services set forth in the Services Agreement, but may be periodically reimbursed by us, upon request, for (i) travel and out-of-pocket expenses, provided that, in the event that such expenses exceed $ 50 thousand in the aggregate with respect to any single proposed matter, EGI will obtain our consent prior to incurring additional costs, and (ii) provided that we provide prior consent to their engagement with respect to any particular proposed matter, all reasonable fees and disbursements of counsel, accountants, and other professionals incurred in connection with EGI’s services under the Services Agreement. In consideration of the services provided by EGI under the Services Agreement, we agreed to indemnify EGI for certain losses relating to or arising out of the Services Agreement or the services provided thereunder. The Services Agreement has a term of one year and will be automatically extended for successive one -year periods unless terminated by either party at least 60 days prior to any extension date. There were no costs incurred related to this agreement during the three and nine months ended September 30, 2020 or 2019 . 31